Yunnan Water Investment : CONTINUING CONNECTED TRANSACTIONS-THE PROCUREMENT MASTER AGREEMENT

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雲南水務投資股份有限公司

Yunnan Water Investment Co., Limited*

(a joint stock limited liability company incorporated in the People's Republic of China)

(Stock code: 6839)

CONTINUING CONNECTED TRANSACTIONS

THE PROCUREMENT MASTER AGREEMENT

Reference is made to the announcement of the Company dated 22 December 2017 (the "Announcement") in relation to the continuing connected transactions under the Original Procurement Master Agreement with Beijing OriginWater and the relevant annual caps for the three years ended 31 December 2020. The Original Procurement Master Agreement expired on 31 December 2020.

The Board is pleased to announce that on 16 April 2021 (after trading hours), the Company entered into the Procurement Master Agreement with Beijing OriginWater, pursuant to which the Group agreed to purchase membrane ancillary materials from the Beijing OriginWater Group during the term of the Procurement Master Agreement commencing from 16 April 2021 to 31 December 2023.

As at the date of this announcement, Beijing OriginWater holds approximately 24.02% of the total issued share capital of the Company (including Domestic Shares and H Shares), and is a substantial shareholder of the Company. Hence, Beijing OriginWater is a connected person of the Company under Chapter 14A of the Listing Rules. In such case, the transactions contemplated under the Procurement Master Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As one or more of applicable percentage ratios (other than the profits ratio) in relation to the Proposed Annual Caps are more than 0.1% but all applicable percentage ratios (other than the profits ratio) are less than 5%, the continuing connected transactions under the Procurement Master Agreement are subject to the reporting, announcement and annual review requirements, but exempt from the requirements of circular and independent shareholders' approval under Chapter 14A of the Listing Rules.

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INTRODUCTION

The Board is pleased to announce that on 16 April 2021 (after trading hours), the Company entered into the Procurement Master Agreement with Beijing OriginWater, pursuant to which the Group agreed to purchase membrane ancillary materials from the Beijing OriginWater Group during the term of the Procurement Master Agreement commencing from 16 April 2021 to 31 December 2023. The principal terms of the Procurement Master Agreement are as follows:

THE PROCUREMENT MASTER AGREEMENT

Date	16 April 2021 (after trading hours)
Parties	(1)	The Company; and
	(2)	Beijing OriginWater
	As	at the date of this announcement,	Beijing	OriginWater
	holds approximately 24.02% of the total issued share capital of
	the	Company (including Domestic Shares	and H	Shares), and
	is a substantial shareholder of the Company. Hence, Beijing
	OriginWater is a connected person of the Company under Chapter
	14A of the Listing Rules.
Subject matter	Members of the Group will procure membrane ancillary materials
	from the Beijing OriginWater Group.
Term and termination	The term of the Procurement Master Agreement commences from
	16 April 2021 and ends on 31 December 2023.
	Any party may terminate the Procurement Master Agreement by
	serving the other party a written notice of not less than 30 days in
	advance.
Price determination and	The price of the products to be procured by the Group shall be
pricing policy	no less favorable than the market price of relevant product at the
	time when the individual procurement agreement is entered into.
	The market price shall be determined in accordance with (i) the
	price and terms of the type of products quoted by no less than
	two	independent suppliers on normal commercial	terms in the

ordinary course of businesses in the PRC; or (ii) in the event that

(i) is inapplicable, it shall be determined by both parties to the Procurement Master Agreement on fair and reasonable basis and on normal commercial terms and credit terms.

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Based on the above, the Directors (except for Mr. Dai Richeng, the non-executive Director) believe that the aforesaid pricing policy and procedure can ensure the relevant continuing connected transactions will be conducted in accordance with the terms under the Procurement Master Agreement and are of the view that the Procurement Master Agreement was entered into on an arm's length basis and on normal commercial terms, and the terms thereof are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

Historical transaction amounts

The historical transaction amounts in respect of the procurement of membrane ancillary materials between the Group and the Beijing OriginWater Group for the year ended 31 December 2018, the year ended 31 December 2019 and the year ended 31 December 2020 are set out below:

	Historical transaction amounts
	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2018	2019	2020
	(RMB'000)	(RMB'000)	(RMB'000)
The historical transaction amounts
- Procurement of membrane
ancillary materials	20,540	3,973	2,893

Historical annual caps

The historical annual caps for the transactions contemplated under the Original Procurement Master Agreement for the year ended 31 December 2018, the year ended 31 December 2019 and the year ended 31 December 2020 are set out below:

Historical annual caps

for the year ended 31 December

201820192020

(RMB'000) (RMB'000) (RMB'000)

Historical annual caps
- Procurement of membrane
ancillary materials	30,000	30,000	30,000

As at the date of this announcement, the actual transaction amounts did not exceed the historical annual caps for the transactions contemplated under the Original Procurement Master Agreement as set out above.

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Proposed Annual Caps

The Proposed Annual Caps for the transactions contemplated under the Procurement Master Agreement for the three years ending 31 December 2023 are set out below:

Proposed Annual Caps

for the year ending 31 December 2021

(from the date of signing the Procurement Master

Agreement)20222023

	(RMB'000)	(RMB'000)	(RMB'000)
Proposed Annual Caps
- Procurement of membrane
ancillary materials	30,000	30,000	30,000

In arriving at the above Proposed Annual Caps, the Directors have taken into account a number of factors, in particular: (i) the size and number of projects expected to be constructed by the Group;

1. the estimated quantity of membrane ancillary materials required by the Group; and (iii) the estimated market price of membrane ancillary materials.

IMPLEMENTATION OF AGREEMENTS

It is expected that the Group will enter into individual procurement agreement with the Beijing OriginWater Group from time to time and as necessary. The individual procurement agreement is expected to contain more detailed terms of the transactions which should reflect the binding principles, guidelines and terms and conditions as provided under the Procurement Master Agreement.

As the individual procurement agreement provides for the purchases and sales of membrane ancillary materials under the Procurement Master Agreement, such individual procurement agreement, when entered into, will not constitute a new category of connected transactions and will be within the scope of the Procurement Master Agreement and the Proposed Annual Caps. The Company will comply with the relevant Listing Rules if and when the amount of transactions contemplated under the Procurement Master Agreement is likely to exceed the Proposed Annuals Caps.

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REASONS FOR ENTERING INTO THE PROCUREMENT MASTER AGREEMENT

The Group has from time to time purchased membrane ancillary materials from the Beijing OriginWater Group. The Beijing OriginWater Group has provided stable supply of membrane ancillary materials in accordance with the quality requirements and standards as required by the Group in order to ensure the product quality of the Group and enhance the recycling efficiency and confidentiality of the Group's technologies. Moreover, after taking into account the prices quoted by the Beijing OriginWater Group as compared to those quoted by independent suppliers, the Directors (except for Mr. Dai Richeng, a non-executive Director) consider that it is in the interests of the Group and the Shareholders as a whole to enter into the Procurement Master Agreement and continue to procure membrane ancillary materials from the Beijing OriginWater Group.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, Beijing OriginWater holds approximately 24.02% of the total issued share capital of the Company (including Domestic Shares and H Shares), and is a substantial shareholder of the Company. Hence, Beijing OriginWater is a connected person of the Company. In such case, the transactions contemplated under the Procurement Master Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As one or more of applicable percentage ratios (other than the profits ratio) in relation to the Proposed Annual Caps are more than 0.1% but all applicable percentage ratios (other than the profits ratio) are less than 5%, the continuing connected transactions under the Procurement Master Agreement are subject to the reporting, announcement and annual review requirements, but exempt from the requirements of circular and independent shareholders' approval under Chapter 14A of the Listing Rules.

The Directors (except for Mr. Dai Richeng, a non-executive Director, but including the independent non-executive Directors) consider that terms of the Procurement Master Agreement (i) are entered into on an arm's length basis; (ii) will be on normal commercial terms or on terms no less favorable than the terms made available from independent suppliers to the Group under the prevailing local market conditions; (iii) are entered into in the usual and ordinary course of business of the Group; and (iv) are fair and reasonable and in the interests of the Company and the Shareholders as a whole; and based on the above, the Proposed Annual Caps for the three years ending 31 December 2023 thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Mr. Dai Richeng, a non-executive Director of the Company, is a director and a shareholder of Beijing OriginWater and is materially interested in the Procurement Master Agreement and have abstained from voting on the relevant Board resolutions approving the Procurement Master Agreement. Except for Mr. Dai Richeng, none of the Directors is materially interested in the Procurement Master Agreement and the transactions contemplated thereunder.

Save for the Original Procurement Master Agreement and the Procurement Master Agreement, to the best knowledge, information and belief of the Directors after having made all reasonable enquiries, none of the members of the Group has entered into other continuing connected transactions with the Beijing OriginWater Group.

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GENERAL INFORMATION OF THE PARTIES TO THE PROCUREMENT MASTER AGREEMENT

The Group is one of the leading integrated service providers in the urban sewage treatment and water supply industry in Yunnan Province, the PRC. Its principal operations include investment, construction and management services in relation to urban water supply, sewage treatment, solid waste treatment and environmental governance projects, equipment sales and other environmental protection related services. The corporate strategy of the Group is to base its business in Yunnan Province and continue to identify investment opportunities to expand its operations gradually into other regions to ensure stable income sources.

Beijing OriginWater, a substantial shareholder of the Company holding 24.02% of the total issued share capital of the Company (including Domestic Shares and H Shares), is a limited liability company established in the PRC on 17 July 2001 and its shares are listed on the Shenzhen Stock Exchange. It is primarily engaged in the design, sales and manufacturing of equipment (particularly membrane) used in urban sewage treatment and solid waste treatment facilities based on EPC and equipment sales and the provision of system integration services.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:

"Beijing OriginWater"	Beijing OriginWater Technology Co., Ltd. ( 北京碧水源科技股
	份有限公司 ), a substantial shareholder of the Company holding
	24.02% of the total issued share capital of the Company (including
	Domestic Shares and H Shares), is a limited liability company
	established in the PRC on 17 July 2001 and its shares are listed on
	the Shenzhen Stock Exchange (stock code: 300070);
"Beijing OriginWater Group"	Beijing OriginWater and its subsidiaries;
"Board"	the board of Directors;
"Company"	Yunnan Water Investment Co., Limited* ( 雲南水務投資股份有限
	公司 ), a joint stock company with limited liability incorporated in
	the PRC, the H Shares of which are listed on the main board of the
	Stock Exchange (stock code: 06839);
"connected person(s)"	has the same meaning ascribed thereto under the Listing Rules;
"Domestic Share(s)"	the issued ordinary shares with a nominal value of RMB1.00 each
	in the share capital of the Company, which are subscribed for or
	credited as fully-paid in RMB;
"Director(s)"	the director(s) of the Company;

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"EPC"	engineering, procurement and construction;
"Group"	the Company and its subsidiaries;
"H Share(s)"	the issued ordinary shares with a nominal value of RMB1.00 each in
	the share capital of the Company, and are listed on the main board
	of the Stock Exchange (stock code: 06839);
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC;
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange, as amended from time to time;
"membrane"	a selective barrier that allows the passage of certain constituents
	and retains other constituents found in the liquid with the degree
	of selectivity of membranes depending on the membrane pore
	size, according to which the membranes can be classified as
	microfiltration, ultrafiltration, nanofiltration and reverse osmosis
	membranes;
"membrane ancillary	any materials, equipment and components in relation to membrane
materials"	production;
"Original Procurement	the agreement dated 22 December 2017 entered into by the
Master Agreement"	Company and Beijing OriginWater relating to the purchase of
	membrane ancillary materials by the Group from the Beijing
	OriginWater Group which expired on 31 December 2020;
"PRC"	the People's Republic of China, which for the purpose of this
	announcement, shall exclude Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan;
"Procurement Master	the agreement dated 16 April 2021 entered into by the Company and
Agreement"	Beijing OriginWater relating to the purchase of membrane ancillary
	materials by the Group from the Beijing OriginWater Group;
"Proposed Annual Caps"	the maximum aggregate annual amounts for the transactions
	contemplated under the Procurement Master Agreement;
"RMB"	Renminbi, the lawful currency of the PRC;
"Share(s)"	Domestic Shares/H Shares;
"Shareholder(s)"	the holders of the Shares;
"substantial shareholder(s)"	has the same meaning ascribed thereto under the Listing Rules;

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"Stock Exchange"	The Stock Exchange of Hong Kong Limited;
"subsidiary(ies)"	has the same meaning ascribed thereto under the Listing Rules; and
"%"	per cent.

By order of the Board

Yunnan Water Investment Co., Limited*

Li Jialong

Chairman

Kunming, the PRC

16 April 2021

As at the date of this announcement, the executive Directors are Mr. Yu Long (Vice-chairman) and Mr. Yang Fang, the non- executive Directors are Mr. Li Jialong (Chairman), Ms. Li Bo, Mr. Dai Richeng and Mr. Chen Yong, and the independent non- executive Directors are Mr. Liu Shuen Kong, Mr. Zhou Beihai and Mr. Zhong Wei.

*  For identification purposes only

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