WATER INDUSTRY IN CHINA & CHINA WATER AFFAIRS GROUP LIMITED (0855) Liu Ka Ling

Water Shortage in China China is one of the most water-deficient countries in the world According to the World Bank, water resources per capita in China (2,156m3) is only ¼ of the global average while its water consumption (per unit of GDP) is 5.5x the global average Over 400 out of 660 cities suffer from water shortage

Water Pollution in China 50% of the country’s wastewater was released into rivers and seas without treatment, causing ecological problems and substantial loss for fisheries 62% of the water flows from the seven major river basins is non-potable; Over 50% of China’s water resources are non- drinkable Water pollution may cost China up to RMB 199 billion per year Water shortage, insufficient water usage and pollution can cost 8-10% of the China’s GDP

Growth Opportunities Strong government supports RMB 143bn will be spent in urban water supply during

Growth Opportunities Under-penetration -- In China, 54% of households are not connected to water pipelines, 74% are not equipped with bathing facilities and 77% lack proper or any type of lavatories Under-investment -- Majority of water utilities are held by governments Change in water usage patterns due to urbanization and industrialization

China Water Affairs Group Limited China Water Affairs Group (stock code: 0855). one of the largest integrated water affairs operators providing raw water, tap water, hydroelectric power, sewage treatment and related value-added services. The Group’s businesses in mainland China span across 20 cities. The Group has established strong collaboration platforms with the China Ministry of Water Resources

Some Business Review (I) Water Supply Business Analysis In 2009, the revenue from city water supply amounted to approximately HK$385.9 million (2008: HK$255.2 million), representing an increase of 51.2% as compared with last year. The revenue from water supply related installation works amounted to approximately HK$271.0 million (2008: HK$128.7 million), representing an increase of 110.5% as compared with last year.

Some Business Review II) Sewage Business Analysis In 2009, the Group has recorded turnover from sewage treatment business of HK$29.6 million (2008: HK$26.8 million). For the year ended 31 March 2009, the profit after tax and the profit after tax but before amortization of cost of franchise of that sewage treatment business is amounted to approximately HK$11.1 million and HK$17 million, respectively.

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