09:47     CHINA WATER<00855> - Announcement (2)                               

    The Company will contribute its share of the registered                   
    capital of the Joint Venture Company in cash. Pursuant to the             
    Joint Venture Agreement, the Company is required to                       
    contribute 30% of its share of the registered capital to the              
    Joint Venture Company within 10 days of the Joint Venture                 
    Agreement, with the balance being contributed within the                  
    period stipulated by PRC regulation in respect of capital                 
    injection for a sino-foreign joint venture. The Company will              
    fund such investment by the Group's internal resources. The               
    JV Partner will contribute its share of the registered                    
    capital by way of injection of fixed assets in the forms of               
    water supply networks and ancillary water supply equipment.               
    Pursuant to the Joint Venture Agreement, such assets shall be             
    transferred to the Joint Venture Company within three months              
    from the date of the issue of the foreign investment                      
    enterprise business licence to the Joint Venture Company. A               
    PRC qualified accountant will be appointed by the Joint                   
    Venture Company to verify the capital contribution by the                 
    Company and the JV Partner. The terms of the Joint Venture                
    Agreement have been agreed after arm's length negotiations                
    between the parties. The Directors consider that the Joint                
    Venture Agreement is on normal commercial terms and is fair               
    and reasonable and in the interests of the Company and the                
    shareholders of the Company as a whole.                                   
                                                                              
    The Joint Venture Company has a term of 30 years from the                 
    date of issue of its business licence. The board of directors             
    of the Joint Venture Company will comprise 5 directors, 3 of              
    whom will be appointed by the Company and 2 of whom will be               
    appointed by the JV Partner. The Company and the JV Partner               
    will be entitled to share the profit or to bear the loss of               
    the Joint Venture Company in proportion to their respective               
    equity interests in the Joint Venture Company.                            
                                                                              
    Reasons for the proposed investment                                       
                                                                              
    The Group is principally engaged in city water supply and                 
    sewage treatment business in the PRC and the provision of                 
    subcontracting services and manufacturing and sale of                     
    electronic products. It has been the Company's intention to               
    continuously look for business opportunities in the water                 
    supply and waste-treatment sectors in the PRC, as the                     
    Directors believe that the potential investment returns from              
    the water supply and sewage treatment sectors are promising               
    given the increasing demand as a result of the accelerating               
    economic development and urbanization in the PRC. The                     
    Directors consider that the Joint Venture Agreement is in                 
    line with the business strategy of the Company to further                 
    expand its existing water supply business in the PRC.                     
                                                                              
    GENERAL                                                                   
                                                                              
    The Joint Venture Agreement constitutes a discloseable                    
    transaction of the Company. A circular containing details of              
    the Joint Venture Agreement will be despatched to the                     
    shareholders of the Company as soon as practicable.                       
                                                                              
    As at the date of this announcement, the Board comprises of               
    two executive Directors, being Mr. Duan Chuan Liang and Mr.               
    Tsui Chi Kin, three non-executive Directors, being Mr. Zhao               
    Hai Hu, Mr. Chiu Shun Pui, Andrew and Mr. Zhou Wen Zhi and                
    three independent non-executive Directors, being Ms. Huang                
    Shao Yun, Mr. Chen Lizhong and Mr. Chan Chi Shing.                        
                                                                              
    DEFINITIONS                                                               
                                                                              
    "Board"   board of Directors                                              
                                                                              
    "Company"   China Water Affairs Group Limited, a company                  
    incorporated in Cayman Islands and continued in Bermuda with              
    limited liability, whose issued shares are listed on the                  
    Stock Exchange                                                            
                                                                              
    "Directors"   directors of the Company                                    
                                                                              
    "Group"   the Company and its subsidiaries                                
                                                                              
    "Hong Kong"   Hong Kong Special Administrative Region of the PRC          
                                                                              
    "Joint Venture    the joint venture agreement dated 21st                  
      Agreement"   April, 2005 entered into between the Company               
    and the JV Partner for the establishment of the Joint Venture             
    Company                                                                   
                                                                              
    "Joint Venture    *(Jiangxi Water Affairs Company Limited)                
    Company"                                                                  
                                                                              
    "JV Partner"   *(Jiangxi Water Resources and Hydropower Development       
    Company)