09:53 DONGJIANG ENV<08230> - Announcement (1) The Stock Exchange of Hong Kong Limited (the "Stock Exchange") takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. For the purpose of this announcement, USD1.00 = HK$7.8. The conversion rate is for the purpose of illustration only and does not constitute a representation that any amounts have been, could have been, or may be exchanged at the aforementioned or any other rates. Shenzhen Dongjiang Environmental Company Limited* (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock Code: 8230) CONNECTED TRANSACTION The Company and Heritage Technologies entered into a joint venture agreement on 16 December 2003 and jointly established a limited liability company named Dongjiang Heritage. The shares of Dongjiang Heritage are 62% held by the Company and 38% held by Heritage Technologies. Details of which has been set out in the circular of the Company dated 2 January 2004. Dongjiang Heritage has been providing sub-standard TBCC to Heritage Technologies since 20 January 2005. Heritage Technologies holds 38% shares of Dongjiang Heritage, which is a substantial shareholder of Dongjiang Heritage and is therefore a connected person of the Company under rule 20.11(5) of the GEM Listing Rules. Pursuant to the sales contracts dated 25 November 2004, 4 January 2005 and 20 February 2005 entered into between Dongjiang Heritage and Heritage Technologies, Heritage Technologies agreed to procure sub-standard TBCC from Dongjiang Heritage. The aggregate sales amount for twelve months prior to the date of this announcement, during the period when the sales amount are treated as if they were one transaction in accordance with rule 20.25 of the GEM Listing Rules, was approximately USD674,298 (approximately equivalent to HK$5,259,524); an aggregate amount of 414 tons of TBCC was procured at an amount of USD175,824 (approximately equivalent to HK$1,371,427), USD205,254 (approximately equivalent to HK$1,600,981) and USD293,220 (approximately equivalent to HK$2,287,116) by Heritage Technologies in three shipments on 20 January 2005, 16 February 2005 and 25 March 2005 respectively . Save as disclosed above, Heritage Technologies has not entered into any other transactions with the Group up to the Latest Practicable Date. The Directors, including the independent non-executive Directors confirm that the Transactions are entered into in the ordinary and usual course of business of the Group and on normal commercial terms, where the applicable percentage ratios of the Company is on an annual basis less than 25 per cent as specified in rule 19.07 of the GEM Listing Rules and the annual consideration of the Transactions is less than HK$10,000,000, under rule 20.34 of the GEM Listing Rules, the Transactions are therefore subject to the reporting and announcement requirements set out in rules 20.45 to 20.47 of the GEM Listing Rules and are exempt from the independent shareholders' approval requirements. The consideration of the first sales contract, which was effective on 25 November 2004, was USD175,824 (approximately equivalent to HK$1,371,427) and therefore exceeded de minimis threshold under rule 20.33(3) of the GEM Listing Rules and should be subject to compliance with GEM Listing Rules obligation arose then. Due to the oversight of the management, the Company failed to take appropriate actions for reporting such connected transaction at that time. The Company's failure to disclose the Transactions when the first sales contract was entered into on 25 November 2004 has constituted a breach of rule 20.34 of the GEM Listing Rules. The Stock Exchange has indicated that it is looking into the matter and reserves the rights to take appropriate actions against the Company and/or the Directors in respect of such breach. To cope with market needs, Dongjiang Heritage may continue to provide TBCC to Heritage Technologies in the future. In that case, Dongjiang Heritage and Heritage Technologies will enter into written contract in compliance with rule 20.04 of the GEM Listing Rules. If the annual consideration of the future transactions between Dongjiang Heritage and Heritage Technologies is expected to exceed HK$10,000,000, the Company will seek the independent shareholders' approval for the transactions and take appropriate actions in compliance with rules 20.35 to 20.41 of the GEM Listing Rules. The Directors, including the independent non-executive Directors, confirm that the Transactions are entered into in the normal and ordinary course of business of the Group upon normal commercial terms and such terms are fair and reasonable so far as the Company and the Shareholders as a whole are concerned. On behalf of the Board Shenzhen Dongjiang Environmental Company Limited Zhang Wei Yang