Beijing Enterprises Water Group Limited - Proxy Solicitation & Information Statement 2021

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Beijing Enterprises Water Group Limited, you should at once hand this circular, together with the enclosed proxy form, to the purchaser(s) or transferee(s) or the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES AND NOTICE OF THE SPECIAL GENERAL MEETING

Independent Financial Adviser

to the Independent Board Committee and the Independent Shareholders

Euto Capital Partners Limited

Capitalised terms used on this cover page shall have the same meanings as those defined in this circular unless otherwise stated.

A notice convening an SGM of the Company to be held at 66th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Monday, 20 December 2021 at 3:00 p.m. is set out on pages 50 to 51 of this circular. A form of proxy for use at the SGM is also enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited (http://www.hkexnews.hk) and the website of the Company (www.bewg.net).

Whether or not you are able to attend the SGM, please complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the Share Registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

PRECAUTIONARY MEASURES FOR THE SGM

To safeguard the health and safety of shareholders of the Company and to prevent the spreading of the novel coronavirus disease (COVID-19) pandemic, the following precautionary measures will be implemented at the SGM, which include without limitation:

(1) Limiting the number of the SGM attendees to avoid over-crowding (2) Maintaining an appropriate social distancing between seats (3) Compulsory body temperature screening/checks (4) Compulsory wearing of surgical face mask (5) No provision of food or beverages and no distribution of gifts For the health and safety of shareholders of the Company, the Company would strongly encourage shareholders of the Company to exercise their right to vote at the SGM by appointing the chairman of the SGM as their proxy and to return their forms of proxy by the time specified above, instead of attending the SGM in person.

30 November 2021

	Page
PRECAUTIONARY MEASURES FOR THE SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . .	19
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . .	21
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
NOTICE OF THE SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50

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PRECAUTIONARY MEASURES FOR THE SGM

In consideration of the control and prevent of spreading of novel coronavirus disease (‘‘COVID-19’’) pandemic, the following precautionary measures will be implemented at the SGM so as to safeguard the health and safety of Shareholders who might be attending the SGM in person:

Voting by proxy in advance of the SGM: The Company does not in any way wish to diminish the opportunity available to Shareholders to exercise their rights and to vote, but is conscious of the pressing need to protect Shareholders from possible exposure to the COVID-19 pandemic. For the health and safety of Shareholders, the Company would strongly encourage Shareholders to exercise their right to vote at the SGM by appointing the chairman of the SGM as their proxy instead of attending the SGM in person. Physical attendance is not necessary for the purpose of exercising Shareholders’ rights. Completion and return of the form of proxy will not preclude Shareholders from attending and voting in person at the SGM or any adjournment thereof should they subsequently so wish.

Completed forms of proxy must be returned to the Share Registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM and any adjourned meeting thereof.

Shareholders are strongly encouraged to cast their votes by submitting a form of proxy and appointing the chairman of the SGM as their proxy.

The Company will limit attendance in person at the SGM venue in compliance with the relevant requirement prevailing at the time of the SGM. Given the limited capacity of the SGM venue and the requirements for social distancing to ensure attendees safety, only Shareholders and/or their representatives and the relevant SGM staff will be admitted to the SGM. Admission to the SGM venue will not be granted in excess of the capacity of the SGM venue.

The Company will implement the following precautionary measures at the SGM to ensure the health and safety of the attendees at the SGM:

(1) Compulsory body temperature screening/checks will be carried out on every attendee before registration at the entrance of 66th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong. The Company reserves the right to deny entry of any person with a body temperature above the reference range quoted by the Department of Health from time to time, or is exhibiting flu-like symptoms into the SGM venue or require such person to leave the SGM venue so as to ensure the health and safety of the attendees at the SGM.
(2) Every attendee will be compulsorily required to wear a surgical face mask throughout the SGM and every attendee will be assigned a designated seat at the time of registration to ensure social distancing.

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PRECAUTIONARY MEASURES FOR THE SGM

(3) No food or beverages will be served and no gifts will also be distributed to attendees at the SGM.
(4) Any other additional precautionary measures in accordance with the prevailing requirements or guidelines of the Government and/or regulatory authorities, or as considered appropriate in light of the development of the COVID-19 pandemic.

Attendees are requested to observe and practise good personal hygiene at all times at the SGM venue.

Shareholders are requested (a) to consider carefully the risk of attending the SGM, which will be held in an enclosed environment, (b) to follow any prevailing requirements or guidelines of the Government relating to COVID-19 pandemic in deciding whether or not to attend the SGM; and (c) not to attend the SGM if they have contracted or are suspected to have contracted COVID-19 or have been in close contact with anybody who has contracted or is suspected to have contracted COVID-19.

Due to the constantly evolving COVID-19 pandemic situation in Hong Kong, the Company may be required to change the SGM arrangements at short notice. Shareholders should check the Company’s website at www.bewg.net for future announcements and updates on the SGM arrangements when necessary.

Appointment of proxy by non-registered Shareholders: non-registered Shareholders whose Shares are held through banks, brokers, custodians or the Hong Kong Securities Clearing Company Limited should consult directly with their banks or brokers or custodians (as the case may be) to assist them in the appointment of proxy.

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

‘‘Announcement’’

the announcement of the Company dated 23 December 2020 in respect of the continuing connected transactions in relation to, among other things, the 2021 Deposit Services Master Agreement and the Existing Annual Caps

‘‘associate’’

has the meaning ascribed to it under the Listing Rules

‘‘BEGCL’’

Beijing Enterprises Group Company Limited*（北京控股集團有限公司）, a company incorporated in the PRC with limited liability and is the ultimate controlling shareholder of each of BEHL and the Company

‘‘BEHL’’

Beijing Enterprises Holdings Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the main board of the Stock Exchange (Stock Code: 392) and is a controlling shareholder of the Company

‘‘BG Finance’’

Beijing Enterprises Group Finance Co., Ltd., a company incorporated in the PRC with limited liability and is an associate of each of BEGCL and BEHL. The Group holds 6.69% equity interest of BG Finance

‘‘Board’’ the board of Directors
‘‘CBIRC’’
China Banking and Insurance Regulatory Commission
‘‘Company’’

Beijing Enterprises Water Group Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange (Stock Code: 371)

‘‘connected person’’
has the meaning ascribed to it under the Listing Rules
‘‘Deposit Services’’

the deposit services to be provided by BG Finance to the Group under the 2021 Deposit Services Master Agreement

‘‘Director(s)’’ director(s) of the Company

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DEFINITIONS

‘‘Existing Annual Caps’’

the maximum amounts of daily outstanding deposits balance placed by the Group with BG Finance (including the corresponding interest accrued thereon) on any given day during the terms of the 2021 Deposit Services Master Agreement

‘‘Group’’ the Company and its subsidiaries
‘‘HK$’’
Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’

the Hong Kong Special Administrative Region of the PRC

‘‘Independent Board Committee’’
an independent committee of the Board, comprising all five independent non-executive Directors, established to advise the Independent Shareholders in respect of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps)
‘‘Independent Financial Adviser’’ or ‘‘Euto Capital’’
Euto Capital Partners Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser of the Company to advise the Independent Board Committee and the Independent Shareholders in relation to the reasonableness and fairness of the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps)
‘‘Independent Shareholder(s)’’
the Shareholders who do not have a material interest in the 2021 Deposit Services Master Agreement, 2021 Supplemental Agreement and the transactions contemplated thereunder
‘‘Latest Practicable Date’’
25 November 2021, being the latest practicable date prior to the publication of this circular for the purpose of ascertaining certain information contained in this circular
‘‘Listing Rules’’
the Rules Governing the Listing of Securities on the Stock Exchange
‘‘PRC’’
the People’s Republic of China, and for the purpose of this circular, excluding Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan

– 4 –

DEFINITIONS

‘‘Revised Annual Caps’’

RMB6,000 million (equivalent to approximately HK$7,296 million), being the revised annual caps proposed in the 2021 Supplemental Agreement and has the meaning ascribed to it under the paragraph headed ‘‘Revised Annual Caps’’ of this circular

‘‘RMB’’

Renminbi, the lawful currency of the PRC

‘‘SFO’’

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

‘‘SGM’’

the special general meeting of the Company to be held at 66th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Monday, 20 December 2021 at 3:00 p.m. to consider and, if appropriate, approve the 2021 Supplemental Agreement and the transactions contemplated thereunder and the Revised Annual Caps, including any adjournment thereof

‘‘Shareholder(s)’’ holder(s) of the issued Share(s)
‘‘Share(s)’’ ordinary share(s) in the capital of the Company
‘‘ShareShare Registrar’’’’

‘‘ShareShare Registrar’’’’ the branch share registrar and transfer office of the Company in Hong Kong, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘subsidiaries’’

has the meaning ascribed to it under the Listing Rules

‘‘substantial shareholder(s)’’ has the meaning ascribed to it under the Listing Rules
‘‘2018 Deposit Services Master Agreement’’

the deposit services master agreement dated 30 October 2017 entered into between the Company and BG Finance for a term of three years from 1 January 2018 to 31 December 2020

‘‘2021 Deposit Services Master Agreement’’

the deposit services master agreement dated 23 December 2020 entered into between the Company and BG Finance for a term of three years from 1 January 2021 to 31 December 2023

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DEFINITIONS

‘‘2021 Supplemental Agreement’’ the supplemental agreement dated 29 October 2021 entered into between the Company and BG Finance to amend and supplement the 2021 Deposit Services Master Agreement, pursuant to which, the annual cap during the remaining term of the 2021 Deposit Services Master Agreement was proposed to change from HK$1,520 million to RMB6,000 million (equivalent to approximately HK$7,296 million) ‘‘%’’ per cent

For the purpose of this circular and for illustrative purpose only, RMB is converted into HK$ at the rate of HK$1:RMB0.82237. No representation is made that any amounts in RMB has been or could be converted at the above rates or at any other rates.

For identification purposes only

– 6 –

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

Executive Directors: Mr. Li Yongcheng (Chairman) Mr. Jiang Xinhao Mr. Zhou Min (Chief Executive Officer) Mr. Li Haifeng Mr. Zhang Tiefu Mr. Ke Jian Ms. Sha Ning Mr. Tung Woon Cheung Eric Mr. Li Li

Non-executive Director: Mr. Zhao Feng

Registered office: Victoria Place, 5th Floor 31 Victoria Street Hamilton HM 10 Bermuda Head office and principal place of business: Rooms 6706-07 67th Floor Central Plaza 18 Harbour Road Wanchai Hong Kong

Independent non-executive Directors: Mr. Shea Chun Lok Quadrant Mr. Zhang Gaobo Mr. Guo Rui Mr. Wang Kaijun Mr. Chau On Ta Yuen

30 November 2021

To the Shareholders for information only,

Dear Sir or Madam,

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES AND

NOTICE OF THE SPECIAL GENERAL MEETING

1. INTRODUCTION

The purpose of this circular is to provide the Shareholders with, among other things, (i) further details of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps); (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (iv) a notice to convene the SGM to approve, among other things, the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps).

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LETTER FROM THE BOARD

2. BACKGROUND

Reference is made to the Announcement.

Save as the aforesaid, all other terms and conditions as set out in the 2021 Deposit Services Master Agreement are substantially the same as those under the 2018 Deposit Services Master Agreement.

Set out below are the key terms of the 2021 Deposit Services Master Agreement:

Date: 23 December 2020

Parties: (i) the Company; and (ii) BG Finance.

Term:

From 1 January 2021 to 31 December 2023 (both days inclusive), which may be renewed, varied or modified by the Company and BG Finance by agreement in writing.

Deposit interests:

The rate at which interest will accrue on any deposit placed by the Group with BG Finance under the 2021 Deposit Services Master Agreement will not be lower than the following:

(a) the benchmark interest rate prescribed by the People’s Bank of China for the same type of deposits of the same period;
(b) the interest rates offered by commercial banks in Hong Kong and the PRC to the Group for the same type of deposits of the same period; and
(c) the interest rates offered by BG Finance to other members of BEGCL for the same type of deposits of the same period.

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LETTER FROM THE BOARD

For details of the internal control to ensure the interest rates on deposits placed by the Group with BG Finance follows the above, please refer to the section headed ‘‘6. INTERNAL CONTROLS AND RISK MANAGEMENT MEASURES’’.

Annual caps:

The cumulative daily outstanding deposits balance placed by the Group with BG Finance (including any interest accrued thereon) during the term of the 2021 Deposit Services Master Agreement will not exceed HK$1,520 million for each of the three financial years ending 31 December 2021, 2022 and 2023, respectively.

3. THE 2021 SUPPLEMENTAL AGREEMENT AND REVISION OF THE EXISTING ANNUAL CAPS

On 29 October 2021, the Company entered into the 2021 Supplemental Agreement with BG Finance, pursuant to which the parties to the 2021 Deposit Services Master Agreement agreed to revise the annual caps in relation to the provision of the Deposit Services for the remaining term of the 2021 Deposit Services Master Agreement. Save as the aforesaid, all other terms and conditions as set out in the 2021 Supplemental Agreement were substantially the same as those under the 2021 Deposit Services Master Agreement.

Set out below are the key terms of the 2021 Supplemental Agreement:

Date: 29 October 2021 Parties: (i) the Company; and (ii) BG Finance.

Term: The 2021 Supplemental Agreement shall be effective from the date of obtaining Independent Shareholders’ approval at the SGM.

There is no change on the term of Deposit Services as set out under the 2021 Deposit Services Master Agreement (i.e. From 1 January 2021 to 31 December 2023 (both days inclusive), which may be renewed, varied or modified by the Company and BG Finance by agreement in writing).

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LETTER FROM THE BOARD

Revised Annual Caps:

The Existing Annual Caps for the remaining term of the 2021 Deposit Services Master Agreement are revised as follows:

For the financial year ending RMB6,000 million 31 December 2021 (equivalent to approximately HK$7,296 million) For the financial year ending RMB6,000 million 31 December 2022 (equivalent to approximately HK$7,296 million) For the financial year ending RMB6,000 million 31 December 2023 (equivalent to approximately HK$7,296 million)

The Revised Annual Caps were determined based on the following factors:

(i) The historical maximum daily balance of deposit placed by the Company with BG Finance

The Directors have taken into consideration the historical maximum cumulative daily balance of deposit placed by the Company with BG Finance for the six months ended 30 June 2021 (i.e. approximately HK$1,513 million) as set out in the table under the section headed ‘‘4. HISTORICAL DEPOSIT BALANCES’’, it is concluded that the Existing Annual Caps have been almost utilised; and

(ii) The latest Group’s cash and cash equivalents balance and the Group’s budgeted available cash resources

As disclosed in the interim report of the Company for the six months ended 30 June 2021, the cash and cash equivalents balance of the Group was approximately HK$14.94 billion. Further, it is anticipated by the Directors after preparation of the budgeted cash flow for the twelve months ending 30 June 2022, having taken into consideration, among others, (i) a stable operating cash inflow of approximately RMB10.3 billion and approximately RMB7.2 billion would be generated for the second half of 2021 and for the first half of 2022, respectively; (ii) approximately RMB5.2 billion would be generated from financing activities, (which generally include proceeds from new bank and other borrowings and issue of corporate bonds) for the cash flow forecast of the Group for the 12 months ended 30 June 2022; and (iii) the level of monthly cash and cash equivalents would maintain at above the Revised Annual Caps during the cash flow forecast of the Group for the 12 months ended 30 June 2022 after the expected cash outflow having been taken into account, that there shall be an available idle cash resources which may lead to an increase in demand for the Deposit Services.

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LETTER FROM THE BOARD

After considering the aforesaid factors, it is proposed that the Revised Annual Caps shall be increased to RMB6,000 million (equivalent to approximately HK$7,296 million) for the financial years ending 31 December 2021, 2022 and 2023.

4. HISTORICAL DEPOSIT BALANCES

The maximum amounts of daily outstanding deposits placed by the Group with BG Finance (including any interest accrued thereon) for the six months ended 30 June 2021 and the Existing Annual Caps for the period were as follows:

As at 30 June 2021 (unaudited) approximately

Historical outstanding balance of the cumulative deposits placed by the Company with BG Finance
RMB1,216 million (equivalent to
approximately HK$1,479 million)

For the six months ended 30 June 2021

(unaudited)

approximately

Maximum amount of cumulative daily RMB1,260 million (equivalent to outstanding deposits balance for the approximately HK$1,513 million with period historical exchange rate HK$1:RMB0.83306 as at 30 April 2021)

HK$1,520 million

The Existing Annual Caps HK$1,520 million Utilisation rate (%) 99.53%

As set out in the table above, the maximum amount of cumulative daily outstanding deposits placed by the Group with BG Finance during the current financial year 2021 (including any interest accrued thereon) was approximately RMB1,260 million (equivalent to approximately HK$1,513 million with historical exchange rate HK$1:RMB0.83306 as at 30 April 2021), of which the utilisation rate on 30 April 2021 was approximately 99.53% of the Existing Annual Caps of HK$1.52 billion. As stated in the aforesaid, the Existing Annual Caps have not been exceeded.

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LETTER FROM THE BOARD

5. REASONS FOR AND BENEFITS OF THE 2021 SUPPLEMENTAL AGREEMENT AND THE REVISED ANNUAL CAPS

The Board noticed that, as of 30 June 2021, the transaction amount of the Deposit Services under the 2021 Deposit Services Master Agreement had reached approximately RMB1,216,324,000 (equivalent to approximately HK$1,479,047,000), representing approximately 97% of the Existing Annual Caps. In addition, in view of the continuous development of the Group’s business and operational scale, it is expected that the Group will continue and deploy more Deposit Services. Hence, the transaction amount of the Deposit Services may exceed the previous estimation. The Board decided to adopt the Revised Annual Caps for the remaining terms of the 2021 Deposit Services Master Agreement so as to provide a better cash resources management of the Group.

As disclosed in the Announcement, the Deposit Services are conducted on normal commercial terms and the deposit interest rates, charges and other conditions offered by BG Finance to the Group will be equal to or more favourable to the Group than those offered by commercial banks in Hong Kong and the PRC to the Group for comparable deposits. Also, the Group expects to be in a better position to manage the security of its funds since BG Finance is not considered to be exposed to any significant capital risk.

For the avoidance of doubt, the 2021 Supplemental Agreement does not preclude the Group from using the services of other financial institutions. The Group still has the freedom to select any major and independent commercial banks in Hong Kong and the PRC as its financial services provider as it thinks fit and appropriate for the benefit of the Group.

The Directors believe that BG Finance is well-positioned to serve the financial needs of the Group because BG Finance has a thorough understanding of its operations and development needs, together with the favourable deposit interest rates as mentioned above, it is expected that the transactions contemplated under the 2021 Deposit Services Master Agreement and the 2021 Supplemental Agreement would be cost-efficient, expedient and beneficial for the Group. In addition, BG Finance is regulated by the CBIRC and is subject to the rules and requirements of such regulatory authority, together with the control as set out under the section headed ‘‘6. INTERNAL CONTROLS AND RISK MANAGEMENT MEASURES’’, which reduce capital risks exposed to the Group in receiving the Deposit Services from BG Finance.

As Ms. Sha Ning, an executive Director of the Company, is a director of BG Finance and has abstained from voting on the relevant board resolutions of the Company approving the 2021 Supplemental Agreement for good corporate governance. Save as above, none of the Directors has material interest in the 2021 Supplemental Agreement, no Director has abstained from voting on the relevant board resolutions of the Company.

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LETTER FROM THE BOARD

Having considered the above, the Directors (including the members of the Independent Board Committee after taking the advice of the Independent Financial Adviser, but excluding executive Director Ms. Sha Ning who also acts as director of BG Finance and therefore has abstained from voting on the relevant board resolutions of the Company for good corporate governance) are of the opinion that, the terms of the 2021 Supplemental Agreement and the Revised Annual Caps are fair and reasonable and are in the interests of the Company and its Shareholders as a whole.

6. INTERNAL CONTROLS AND RISK MANAGEMENT MEASURES

The Company will adopt the following internal controls and risk management measures on the Deposit Services:

the Group utilises the services of BG Finance on a voluntary, non-exclusive basis and is not obliged to engage BG Finance for Deposit Services. BG Finance is merely one of the financial institutions which provides services to the Group;
before placing a deposit with BG Finance, the treasury department of Group will check the interest rates offered by BG Finance against those provided by at least two to three major independent commercial banks that have established business relationship with the Group through phone or email, with the aim to ensure that the deposit interest rate is not lower than the then applicable interest rate for the same deposit services from other independent domestic commercial banks in the PRC and Hong Kong;
in order to ensure that the deposit terms offered by BG Finance are not less favorable than those offered to other members of BEGCL, the treasury department of the Company or relevant subsidiaries will consult with BG Finance to obtain relevant information under the same conditions including deposit rates, scale and period of the same type;
the treasury department of the Group will report to the management of the Company who will take the best interest rates between BG Finance and the commercial banks;
the treasury department of the Group will closely monitor the aggregate amounts of deposits placed with BG Finance to ensure that the total balance is less than the Revised Annual Caps at all times;
the treasury department of the Group will report the total balance to the management of the Company in a monthly manner;
the treasury department of the Group will semi-annually request BG Finance to provide it with sufficient information on various financial indicators and annual/interim financial statements so that the Company is able to monitor and review the financial conditions of BG Finance;

– 13 –

LETTER FROM THE BOARD

the Group may at any time request for the deposited fund to be withdrawn from BG Finance, partially or fully, at the Group’s discretion, to ensure the liquidity and safety of the deposited fund; and
the Group, as a shareholder of BG Finance, has assigned one director to BG Finance, in order to monitor, inspect, and control the risk management measures of BG Finance from time to time.

BG Finance will perform the following capital risk control obligations for Deposit Services:

BG Finance is a domestic non-bank financial services institute under the supervision of the CBIRC. Competent authority delegated by CBIRC conducts daily supervision on BG Finance and conducts on-site and off-site inspections. BG Finance ensures that it is in strict compliance with the risk control indicators and risk monitoring indicators issued by the CBIRC;
The personnel assigned by BG Finance to undertake the duty of financial services shall possess experiences in financial services and a sense of responsibility and diligently perform their duties. To ensure the security of the payment and settlement of the Group, BG Finance shall establish a mature and efficient online banking system, and strictly execute the operation procedure and control the risk arising out of the information technology;
BG Finance shall not accept the Group to provide entrusted loans and entrusted wealth management to other related members through BG Finance;
BG Finance shall establish a sound internal control system on the basis of business operation, a risk management system covering the entire process and contingency plans devised for diverse risks to ensure security of the deposits placed by the Group and effectively guard against the risks;
BG Finance shall establish a model of fund pooling and usage suitable for the Group, in order to ascertain the transaction caps for connected parties, fulfill the relevant regulatory requirements and prevent the compliance risk of the Company;
BG Finance shall monitor the aggregate amounts of deposits placed by the Group with BG Finance to ensure the total balance is less than the Revised Annual Caps at all times. In the event of the deposits placed by the Group with BG Finance exceeding the limit, BG Finance shall promptly notify the Company and cooperate with the Company to transfer the over-limit deposits to the designated bank account of the Group; and

– 14 –

LETTER FROM THE BOARD

BG Finance will notify the Company on any judicial, legal or regulatory procedures or investigations having material effect on its financial conditions. If the Company considers that any material adverse changes have occurred in the financial conditions of BG Finance, the Company will adopt appropriate measures to safeguard the interests of the Company.

7. INFORMATION ON THE COMPANY, THE GROUP AND BG FINANCE

The Company

The Company is a company incorporated in Bermuda with limited liability whose Shares are listed on the main board of the Stock Exchange. The Company is an investment company and the holding company of the Group.

The Group

The Group is principally engaged in construction of sewage and reclaimed water treatment plants and seawater desalination plants, and provision of construction services for comprehensive renovation projects in the PRC, Malaysia, Australia and Republic of Botswana; provision of sewage and reclaimed water treatment services in the PRC, the Republic of Singapore, Portuguese Republic, Australia and New Zealand; distribution and sale of piped water in the PRC, Portuguese Republic and Australia; provision of technical and consultancy services and sale of machineries related to sewage treatment and construction services for comprehensive renovation projects in the PRC and Australia; and the licensing of technical know-how related to sewage treatment in the PRC.

BG Finance

BG Finance is a company incorporated in the PRC with limited liability. To the best of directors’ knowledge, information and belief, having made all reasonable enquiries, as at the Latest Practicable Date, BG Finance is held by BEGCL, BEHL, the Company, Beijing Gas Group Company Limited（北京市燃氣集團有限責任公司）, Beijing Yanjing Brewery Co., Ltd.（北京燕京啤酒股份有限公司）, Beijing Holdings Investment Management Co., Ltd. （北京京泰投資管理中心）, Beijing General Municipal Engineering Design & Research Institute Co., Ltd.（北京市市政工程設計研究總院有限公司）as to approximately 35.14%, 8.91%, 6.69%, 24.80%, 11.08%, 6.69% and 6.69% equity interests respectively.

BG Finance is held as to 44.79% equity interests in aggregate by BEHL and its subsidiaries and as to 48.52% equity interests in aggregate by BEGCL and its subsidiaries excluding BEHL and its subsidiaries and the Company. Accordingly, each of BEGCL and BEHL beneficially owns not less than 30% equity interest in BG Finance, BG Finance is an associate of each of BEGCL and BEHL. The ultimate beneficial owner of BG Finance is the People’s Government of Beijing Municipality*（北京市人民政府）.

– 15 –

LETTER FROM THE BOARD

The establishment of BG Finance as a non-bank financial services institute has been approved by CBIRC. BG Finance acts as a platform of BEGCL for provision of intra-group facilities through financial products including deposit-taking, money-lending and custodian services, etc.

8. IMPLICATIONS UNDER THE LISTING RULES

As at the Latest Practicable Date, each of BEGCL and BEHL is a connected person of the Company under the Listing Rules by virtue of BEGCL being an ultimate controlling shareholder of each of BEHL and the Company as well as BEHL being a controlling shareholder of the Company. As each of BEGCL and BEHL beneficially owns not less than 30% equity interest in BG Finance, therefore BG Finance is an associate of each of BEGCL and BEHL under the Listing Rules. Accordingly, the transactions contemplated under the 2021 Supplemental Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable ratios (except for the profits ratio which is not applicable) in respect of the Revised Annual Caps under the 2021 Supplemental Agreement exceeds 5%, the transactions contemplated thereunder constitute non-exempt continuing connected transactions under Chapter 14A of the Listing Rules and are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

9. GENERAL

An Independent Board Committee (comprising all independent non-executive Directors) has been established to advise the Independent Shareholders as to whether the 2021 Supplemental Agreement and the transactions contemplated thereunder are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) on terms that are fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendation of the Independent Financial Adviser.

Euto Capital has been approved by the Board as the Independent Financial Adviser to advise the Independent Board Committee in respect of the 2021 Supplemental Agreement and the transactions contemplated thereunder.

10. SGM

A notice convening the SGM to be held at 66th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong at 3:00 p.m. on Monday, 20 December 2021, is set out on pages 50 to 51 of this circular. The SGM will be held for the Independent Shareholders to consider and, if thought fit, pass the resolution to approve, among other things, the 2021 Supplemental Agreement and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you attend and vote at the SGM, you are requested to complete and return the enclosed form of proxy to the Company’s share register, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjourned thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

As both BEGCL and BEHL are considered to have a material interest in the 2021 Supplemental Agreement and the transactions contemplated thereunder, each of BEGCL and BEHL (together with their associates) shall abstain from voting at the SGM on the proposed resolutions to approve, among other things, the 2021 Supplemental Agreement and the transactions contemplated thereunder. Save for the aforesaid and to the best of the information, knowledge and belief of the Directors having made all reasonable enquiries, no other Shareholder is required to abstain from voting at the SGM.

As at the Latest Practicable Date, BEGCL (including its associates) controls or is entitled to control over the entire voting right in respect of 4,153,407,070 Shares (representing approximately 40.98% of the issued share capital of the Company). Therefore, a total of 4,153,407,070 Shares (representing approximately 40.98% of the issued share capital of the Company) shall abstain from voting at the SGM. There is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon BEGCL (including its associates); and (ii) no obligation or entitlement of BEGCL (including its associates) as at the Latest Practicable Date, whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a caseby-case basis.

11. RECOMMENDATIONS

Having considered the reasons set out herein, the Board (including the members of the Independent Board Committee after taking the advice of the Independent Financial Adviser) is of the opinion that the 2021 Supplemental Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms or better and in the ordinary and usual course of business of the Group, and in the interests of the Company and its Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM.

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LETTER FROM THE BOARD

12. ADDITIONAL INFORMATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 19 to 20 of this circular, the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 21 to 40 of this circular and the information set out in the appendix of this circular.

On behalf of the Board Beijing Enterprises Water Group Limited Li Yongcheng Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

30 November 2021

To the Independent Shareholders,

Dear Sir or Madam,

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES

We refer to the circular (the ‘‘Circular’’) dated 30 November 2021 issued by the Company of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless specified otherwise.

We have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and to advise the Independent Shareholders how to vote at the SGM.

Euto Capital Partners Limited has been appointed by the Company as the Independent Financial Adviser to advise us and the Independent Shareholders in this regard. Details of the advice from Euto Capital Partners Limited are contained in its letter set out on pages 21 to 40 of the Circular. Your attention is also drawn to the letter from the Board and the additional information set out in appendices to the Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taking into account the terms of the 2021 Supplemental Agreement and the advices from the Independent Financial Adviser, we consider that the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder are (i) in the ordinary and usual course of the business of the Group; (ii) on normal commercial terms; and (iii) on terms that are fair and reasonable and in the interests of the Company and its Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favor of the resolution to be proposed at the SGM to approve the 2021 Supplemental Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of the Independent Board Committee

Mr. Shea Chun Lok Quadrant Mr. Zhang Gaobo Mr. Guo Rui Independent non-executive Independent non-executive Independent non-executive Director Director Director Mr. Wang Kaijun Mr. Chau On Ta Yuen Independent non-executive Independent non-executive Director Director

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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30 November 2021

To the Independent Board Committee and the Independent Shareholders of

Beijing Enterprises Water Group Limited

Dear Sirs and Madams,

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES

INTRODUCTION

We refer to our appointment as the independent financial adviser (the ‘‘Independent Financial Adviser’’) to advise the Independent Board Committee and the Independent Shareholders in respect of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps) (the ‘‘Transaction’’), particulars of which are set out in the section headed ‘‘Letter from the Board’’ (the ‘‘Letter’’) contained in the circular of the Company to the Shareholders dated 30 November 2021 (the ‘‘Circular’’), of which this letter forms part. Unless the contest requires otherwise, capitalized terms used in this letter shall have the same meanings as ascribed to them under the section headed ‘‘Definitions’’ in the Circular.

1. Background of the Transaction

Reference is made to the Letter and the Announcement.

1.1 The 2021 Deposit Services Master Agreement

On 23 December 2020, the Company entered into the 2021 Deposit Services Master Agreement with BG Finance, pursuant to which, among others, (i) the term of the Deposit Services was extended and commenced from 1 January 2021 to 31 December 2023; and (ii) the annual caps under the 2021 Deposit Services Master Agreement were revised to HK$1,520 million for the financial years ending 31 December 2021, 2022 and 2023, respectively. Save as the aforesaid, all other terms and conditions as set out in the 2021 Deposit Services Master Agreement were substantially the same as those under the 2018 Deposit Services Master Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 The 2021 Supplemental Agreement

Save as the said revision, all other terms and conditions of the 2021 Deposit Services Master Agreement remain unchanged.

2. Implications under the Listing Rules

As at the Latest Practicable Date, each of BEGCL and BEHL beneficially owns not less than 30% equity interest in BG Finance, therefore BG Finance is an associate of each of BEGCL and BEHL under the Listing Rules. Each of BEGCL (which is an ultimate controlling shareholder of each of BEHL and the Company) and BEHL (which is a controlling shareholder of the Company) is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the 2021 Supplemental Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all independent non-executive Directors, namely Mr. Shea Chun Lok Quadrant, Mr. Zhang Gaobo, Mr. Guo Rui, Mr. Wang Kaijun and Mr. Chau On Ta Yuen, has been established to consider and advise the Independent Shareholders as to whether the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps) are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) on terms that are fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole, and to advise the Independent Shareholders on how to vote.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In our capacity as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders for the purpose of the Listings Rules, our role is to give an independent opinion to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps) are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) on terms that are fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole, and to advise the Independent Shareholders on how to vote.

OUR INDEPENDENCE

We, Euto Capital Partners Limited (‘‘Euto Capital’’), have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard, and such appointment has been approved by the Independent Board Committee pursuant to the Listing Rules.

Euto Capital is a licensed corporation licensed under the SFO to carry out Type 6 (advising on corporate finance) regulated activity. Euto Capital has been participated in and completed various independent financial advisory transactions since 2015. Mr. Manfred Shiu (‘‘Mr. Shiu’’) and Mr. Felix Huen (‘‘Mr. Huen’’) are the persons jointly signing off the opinion letter from Euto Capital contained in the Circular. Mr. Shiu has been a responsible officer of Type 6 (advising on corporate finance) regulated activity under the SFO since 2009, while Mr. Huen has been a responsible officer of Type 6 (advising on corporate finance) regulated activity under the SFO since 2019. Each of Mr. Shiu and Mr. Huen was participated in and completed various independent financial advisory transactions in Hong Kong.

As at the Latest Practicable Date, we confirmed that there is no relationship or interest between Euto Capital and the Company or any other parties that could be reasonably be regarded as hindrance to Euto Capital’s independence as set out under Rule 13.84 of the Listing Rules to act as the Independent Financial Adviser to the Independent Board Committee and the Shareholders in respect of the Transaction.

We are not associated with and have no significant connection, financial or otherwise, with the Company, its subsidiaries, its associates or their respective substantial shareholders or associates, and accordingly, are eligible to give independent advice and recommendations. Apart from normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, no arrangement exists whereby we will receive any fees from the Company, its subsidiaries, its associates or their respective substantial shareholders or associates. We are not aware of the existence of or change in any circumstances that would affect our independence. Euto Capital did not provide any service to the Company and save as being the Independent Financial Adviser, there is no relationship between the Company and Euto Capital in the last two years. Accordingly, we consider that we are eligible to give independent advice on the terms of the 2021 Supplemental Agreement and the Revised Annual Caps.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION AND RECOMMENDATION

In formulating our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder, we have relied on the information, facts and representations contained or referred to in the Circular and the information, facts and representations provided by, and the opinions expressed by the Directors, management of the Company and its subsidiaries (the ‘‘Management’’). We have assumed that all information, facts, opinions and representations made or referred to in the Circular were true, accurate and complete at the time they were made and continued to be true and that all expectations and intentions of the Directors and the Management, will be met or carried out as the case may be. We have no reason to doubt the truth, accuracy and completeness of the information, facts, opinions and representations provided to us by the Directors and the Management. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed.

We consider that we have been provided with, and we have reviewed sufficient information to reach an informed view, to justify relying on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have no reason to doubt that any relevant material facts have been withheld or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided to us by the Directors and the Management. We have not, however, conducted any independent verification of the information provided, nor have we carried out any independent investigation into the business, financial conditions and affairs of the Company or its future prospects.

Based on the foregoing, we confirm that we have taken all reasonable steps, which are applicable to the Transaction, as referred to in Rule 13.80 of the Listing Rules (including the notes thereof) in formulating our opinion and recommendation.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the terms of the 2021 Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps), except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

– 24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors and reasons:

1. Background of the Transaction

On 29 October 2021, the Company entered into the 2021 Supplemental Agreement with BG Finance.

1.1 Information of the Company and the Group

The Company is a company incorporated in Bermuda with limited liability and the issued Shares of which have been listed on the Main Board of the Stock Exchange. The Company is an investment holding company and the holding company of the Group.

(a) Principal business of the Group

The Group is principally engaged in (i) construction of sewage and reclaimed water treatment plants and seawater desalination plants, and provision of construction services for comprehensive renovation projects in the PRC, Malaysia and Australia and Republic of Botswana; (ii) provision of sewage and reclaimed water treatment services in the PRC, the Republic of Singapore, Portuguese Republic, Australia and New Zealand; (iii) distribution and sale of piped water in the PRC, Portuguese Republic and Australia; (iv) provision of technical and consultancy services and sale of machineries related to sewage treatment and construction services for comprehensive renovation projects in the PRC and Australia; and (v) the licensing of technical know-how related to sewage treatment in the PRC.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Financial position of the Group

Set out below is a summary of the Group’s audited consolidated financial position as at 31 December 2020 and unaudited financial position as at 30 June 2021 as extracted from the announcement of interim results of the Company for the six months ended 30 June 2021 (the ‘‘2021 Interim Results’’).

Non-current assets Current assets – Inventories – Amounts due from contract customers – Receivables under service concession arrangements – Trade receivables – Prepayments, deposits and other receivables – Restricted cash and pledged deposits – Cash and cash equivalents Total current assets Total assets Current liabilities – Trade payables – Other payables and accruals – Income tax payables – Bank and other borrowings – Corporate bonds – Lease liabilities Total current liabilities Net current liabilities Total assets less current liabilities	As at 31 December 2020 HK$000 (audited) 132,953,680 230,871 3,091,651 4,131,424 8,955,073 9,749,686 591,542 14,697,194 41,447,441 174,401,121 26,421,706 9,639,580 1,436,514 6,824,691 7,490,730 108,780 51,922,001 10,474,560 122,479,120	As at 30 June 2021 HK$000 (unaudited) 140,042,535 264,768 2,909,793 4,753,541 8,359,178 10,717,695 564,871 14,941,347
		42,511,193 182,553,728 26,368,709 9,012,042 1,387,736 6,065,748 5,023,211 88,710
		47,946,156 5,434,963 134,607,572

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Non-current liabilities – Other payables and accruals – Bank and other borrowings – Corporate bonds – Notes payable – Lease liabilities – Provision for major overhauls – Deferred income – Deferred tax liabilities Total non-current liabilities Total liabilities Net assets	As at 31 December 2020 HK$000 (audited) 1,325,842 42,808,986 12,517,494 2,379,704 300,144 230,496 1,696,195 4,096,254 65,355,115 117,277,116 57,124,005	As at 30 June 2021 HK$000 (unaudited) 1,293,112 47,657,016 14,425,006 2,408,900 276,808 295,307 1,734,164 4,567,786
		72,658,099 120,604,255 61,949,473

As set out in the table above, we noted that the total cash and cash equivalent of the Group as at 30 June 2021 was approximately HK$14.94 billion, representing an increase of approximately 1.66% when compared to that as at 31 December 2020 of approximately HK$14.70 billion. As disclosed in the 2021 Interim Results, such increase was mainly due to (i) cash proceeds from the issuance of corporate bonds of approximately HK$1.81 billion; (ii) cash proceeds from new bank and other borrowings of approximately HK$8.52 billion and (iii) cash contributions from non-controlling equity holders of approximately HK$2.47 billion.

As further set out in the table above, we noted that the Group recorded an unaudited consolidated net current liabilities of approximately HK$5.43 billion as at 30 June 2021. We understand that such financial position of the Group indicated a material uncertainty that may cast significant doubt on the Group’s ability to continue as going concern, however, we have considered, among others, (i) the continuous profit performance of the Group for recent years; (ii) the listed equity investments of the Group which are able to be realised within a short period of time for liquidity and satisfy the Group’s repayment obligation as and when they fall due; and (iii) the refinancing of existing indebtedness by way of renewing the bank facilities based on the historical practice, we concur with the Directors that there is no liquidity pressure on the Group to meet its liabilities position.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Further, we have also reviewed the cash flow forecast of the Group for the 12 months ended 30 June 2022 (the ‘‘Forecast’’). Based on the Forecast, we noticed that assuming (i) the Group’s operation could generate sufficient cash flow; and (ii) the renewal of certain Group’s existing banking facilities; there is no liquidity problem within the Group and the Group should have sufficient cash resources available for either investment(s) for variable return and/or Deposit Services for a fixed return.

1.2 Information of the BG Finance

Set out below is the information of the BG Finance which include, among others, (a) shareholding structure of the BG Finance; (b) principal activities of BG Finance; and (c) regulatory environment of BG Finance.

(a) Shareholding structure of the BG Finance

BG Finance is a company established in the PRC with limited liability. As at the Latest Practicable Date, BG Finance is held as to approximately (i) 35.14% by BEGCL; (ii) approximately 8.91% by BEHL; (iii) 6.69% by the Company; (iv) 24.80% by Beijing Gas Group Company Limited（北京市燃氣集團有限責任公司）; (v) 11.08% by Beijing Yanjing Brewery Co., Ltd.（北京燕京啤酒股份有限公司）; (vi) 6.69% by Beijing Holdings Investment Management Co., Ltd.（北京京泰投資管理中心）; and (vii) 6.69% by Beijing General Municipal Engineering Design & Research Institute Co., Ltd.（北京市市政工程設計研究總院有限公司）.

In other words, BG Finance is held as to (i) 44.79% in aggregate by BEHL and its subsidiaries; (ii) 48.52% in aggregate by BEGCL and its subsidiaries (excluding BEHL and its subsidiaries and the Company); and (iii) 6.69% by the Company.

Set out below is the chart illustrating the shareholding structure of BG Finance:

==> picture [317 x 136] intentionally omitted <==

----- Start of picture text -----

BEGCL and its
subsidiaries (excluding
BEHL and its
subsidiaries and the
BEHL and its
The Company subsidiaries Company
6.69% 44.79% 48.52%
BG Finance
----- End of picture text -----

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Principal activities of BG Finance

BE Group Finance is a non-bank financial institution established and commenced business in 2013 with the approval granted by China Banking and Insurance Regulatory Commission（中國銀行保險監督管理委員會）(‘‘CBIRC’’).

As at the Latest Practicable Date, BE Group Finance acts as a platform for members of BEGCL (including the Group) for provision of intra-group facilities through financial products including deposit-taking, money-lending and custodian services, etc.

(c) Rules and regulations relevant to the business of BG Finance

As per the aforesaid, BE Group Finance is a non-bank financial institution in the PRC. Based on the existing regulatory environment of the PRC banking industry, the operations of BE Group Finance is supervised and regulated by CBIRC.

To the best of the Directors knowledge, information and belief, having made all reasonable enquiries, up to the Latest Practicable Date, BG Finance complied with all risk monitoring indicators as imposed by CBIRC, and there is no record of non-compliance with relevant laws, rules and regulations of the PRC applicable to BG Finance.

2. Reasons for and benefits of entering into the 2021 Supplemental Agreement

As set out in the Letter, The Board noticed that, as of 30 June 2021, the transaction amount of the Deposit Services under the 2021 Deposit Services Master Agreement had reached approximately RMB1,216,324,000 (equivalent to HK$1,479,047,000), representing approximately 97% of the Existing Annual Caps. In addition, in view of the continuous development of the Group’s business and operational scale, it is expected that the Group will continue and deploy more Deposit Services. Hence, the transaction amount of the Deposit Services may exceed the previous estimation. The Board decided to adopt the Revised Annual Caps for the remaining terms of the 2021 Deposit Services Master Agreement so as to provide a better cash resources management of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the above, the Directors (excluding the independent non-executive Directors who will express their views after taking into account the advice of the Independent Financial Adviser) are of the opinion that, the terms of the 2021 Supplemental Agreement and the Revised Annual Caps are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

In order to assess and conclude whether the entering into of the 2021 Supplemental Agreement is in the interest of the Company and the Independent Shareholders as a whole, we have taken into consideration the following factors:

(a) The cooperation relationship between the Company and BG Finance

BG Finance has been providing the deposit services to the Group since 2015, which has developed a deep understanding of the capital needs and business model of the Group. In view of the stability and reliability of the Deposit Services offered in previous years, we concur that BG Finance is well-positioned to serve the financial needs of the Group, and it is expected to be cost-efficient, expedient and beneficial for the Group to use the Deposit Services.

(b) The internal control and risk management measures adopted by BG Finance

As mentioned above, BG Finance is a non-banking financial institution under the supervision of the CBIRC. Competent authority delegated by the CBIRC conducts daily supervision on it, including on-site and off-site inspections. BG Finance shall ensure that it is in strict compliance with the risk control indicators and risk monitoring indicators issued by the CBIRC. In any event the major regulatory indicators of BG Finance are found to be non-complied with relevant regulatory requirements and may lead to material risks, the Group will be entitled to discontinue its business with BG Finance.

In addition, BG Finance, as a financial institution regulated by the CBIRC, shall comply with the regulations of applicable laws, provisions and requirements of the CBIRC, which include the Administrative Measures for Enterprise Group Finance Companies（企業集團財務公司管理辦法）(the ‘‘Administrative Measures’’). The Company may only conduct business with BE Group Finance on condition that the risk is confirmed to be controllable.

Based on our review on the Administrative Measures, BG Finance shall meet the following requirements in respect of asset-liability ratio:

(a) the capital adequacy ratio（資本充足率）is not less than 10%;
(b) the balance of the inter-bank borrowing funds（拆入資金比例）shall not exceed the total capital;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) the balance of guarantees（擔保比例）shall not exceed the total capital;
(d) the ratio of short-term securities investment and long-term investments to total capital（短期證券投資及長期投資比例）shall not be more than 70%; and
(e) the self-owned fixed assets to total capital ratio（自有固定資產比例）is not more than 20%.

The Company regularly monitors the operation of BG Finance, such as the above asset-liability ratio requirements, by accessing the audited financial statements and other relevant operating data of BG Finance. To the best knowledge of the Company, BG Finance is in compliance with the applicable requirements as set out in the Administrative Measures. As at the 30 June 2021, for BG Finance, (a) the capital adequacy ratio is 18.29%; (b) the inter-bank borrowing funds ratio is 0%; (c) the guarantees ratio is 0%; (d) the short-term and long-term investment ratio is 63.86%; and (e) the self-owned fixed assets ratio is 0.22%.

In occurrence of any material events in BG Finance which may affect its normal operation, BG Finance shall inform the Group in a timely manner, and if necessary, the Group is entitled to terminate the business in BG Finance, and negotiate the subsequent matters with BG Finance. Based on the above-mentioned, we concur with the Directors that the capital safety at BG Finance could be ensured, controlled and monitored effectivity.

(c) The deposit interest rate offered by BG Finance

Pursuant to the 2021 Deposit Services Master Agreement, the deposit interest rate offered by BG Finance shall not be lower than (i) the benchmark interest rate prescribed by the People’s Bank of China (‘‘PBOC’’) for the same type of deposits of the same period; (ii) the interest rates offered by commercial banks in Hong Kong and the PRC to the Group for the same type of deposits of the same period; and (iii) the interest rates offered by BG Finance to other members of BEGCL for the same type of deposits of the same period. As advised by the Management, during the period from the commencement date of the term of the 2021 Deposit Services Master Agreement to the Latest Practicable Date, all deposits placed by the Group with BG Finance followed the aforesaid conditions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In order to assess and understand whether the deposit interest rate offered by BE Group Finance is favorable to the Group and followed the terms under the 2021 Deposit Services Master Agreement, we have based on the daily outstanding deposit selected balances summary and obtained 3 sample copies of deposit receipts issued by BG Finance which stated with certain information, such as deposit amounts, interest rates and other terms of the Deposit Services. The samples were selected based on the highest outstanding deposit taken by the Group with BG Finance during the period from 1 January 2021 to 30 June 2021. Set out below is a summary of information as stated on the selected sample copies of deposit receipts:

						Interest rate
						offered by
					Benchmark	other
					interest rate	commercial
					prescribed by	banks in
					the PBOC	Hong Kong
					during the	and/or the
		Deposit	Period for		relevant	PRC (if
Deposit receipt number	Deposit date	amount	the deposit	Interest rate	period	applicable)
	(dd/mm/yyyy)	(RMB)	(day)	(%)	(%)	(%)
012021063000570	30/06/2021	530,000,000	1	1.65	1.15	1.00
012021083100141	31/08/2021	470,000,000	1	1.65	1.15	1.00
012021093000118	30/09/2021	530,000,000	8	1.65	1.15	1.00

We have compared, based on the information as listed on the above samples, and noted that the terms offered by BG Finance under the 2021 Deposit Services Master Agreement were more favourable than those offered by other commercial banks in Hong Kong and/or the PRC (if applicable) and the benchmark interest rate prescribed by the PBOC for the same type of deposits of the same period. Also, it is advised that the deposit rate offered by BG Finance to other members of the BEGCL is the same as that of the Group; we therefore concluded that the terms under the 2021 Deposit Services Master Agreement were followed.

(d) The effectiveness of the Group’s internal control measures over the Deposit Services taken by the Group

As set out in the Letter, we understand that the Group has adopted the following internal control measures over the Deposit Services:

(i) the Group utilises the services of the BG Finance on a voluntary, non-exclusive basis and is not obliged to engage the BG Finance for Deposit Services. The BG Finance is merely one of the financial institutions which provide services to the Group;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) before placing a deposit with BG Finance, the treasury department of the Group will check the interest rates offered by BG Finance against those provided by at least two to three major independent commercial banks that have established business relationship with the Group through phone or email, with the aim to ensure that the deposit interest rate is not lower than the then applicable interest rate for the same deposit services from other independent domestic commercial banks in the PRC and Hong Kong;
(iii) in order to ensure that the deposit terms offered by BG Finance are not less favorable than those offered to other members of BEGCL, the treasury department of the Company or relevant subsidiaries will consult with BG Finance to obtain relevant information under the same conditions including deposit rates, scale and period of the same type;
(iv) the treasury department of the Group will report to the management of the Company who will take the best interest rates between the BG Finance and the commercial banks;
(v) the treasury department of the Group will closely monitor the aggregate amounts of deposits placed with BG Finance to ensure that the total balance is less than the Revised Annual Caps at all times;
(vi) the treasury department of the Group will report the total balance to the management of the Company in a monthly manner;
(vii) the treasury department of the Group will semi-annually request BG Finance to provide it with sufficient information on various financial indicators and annual/ interim financial statements so that the Company is able to monitor and review the financial conditions of BG Finance;
(viii) the Group may at any time request for the deposited fund to be withdrawn from BG Finance, partially or fully, at the Group’s discretion, to ensure the liquidity and safety of the deposited fund; and
(ix) the Group, as a shareholder of BG Finance, has assigned one director to BG Finance, in order to monitor, inspect, and control the risk management measures of BG Finance from time to time.

We understood from the Management that in order to secure the interests of the Shareholders, the Company had adopted the internal control measures of the Deposit Services mentioned above. We have discussed with the Management and understood that the staff of the treasury department of the Group is aware of and complies with all internal control measures when conducting the transactions contemplated under the 2021 Deposit Services Master Agreement. We have also reviewed the record of such internal control

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

measures, including all monthly outstanding deposit balances in relation to the deposits placed by the Company with BG Finance, and noted that the Existing Annual Caps has not been exceeded.

Based on our review, we concluded that the internal control measures are in place to assist the Company in monitoring, in a reasonable and effective manner, the transactions contemplated under the 2021 Deposit Services Master Agreement and the 2021 Supplemental Agreement.

Conclusion

After considered the above factors, we concur with the Directors’ view that

(i) the Group has to maintain deposits with financial institutions in Hong Kong and the PRC from time to time as part of its treasury activities;
(ii) BG Finance has a good proven service record with the Group in terms of the Deposit Services;
(iii) the Deposit Services have been conducted on normal commercial terms and the terms offered by BG Finance are equal to or favourable to the Group as compared to other financial institutions in Hong Kong and the PRC;
(iv) the terms under 2021 Deposit Services Master Agreement and the 2021 Supplemental Agreement do not preclude the Group from taking the services of other financial institutions. In other words, there is no restriction on the Group to select other financial service providers in any event if the Management considers that it is fit and appropriate and in the interest of the Company as a whole; and
(v) there is a sound internal control to ensure the compliance with applicable Listing Rules and the safeguard of the Group’s interest.

Therefore, we are of the view that, the entering into of the 2021 Supplemental Agreement allows the Company to utilise the Deposit Services with additional capacities given (i) the Existing Annual Caps have been almost utilised; (ii) the terms offered by BG Finance are more favourable; and (iii) the control over the Deposit Services are well established, we conclude that the entering into of the 2021 Supplemental Agreement is in the interest of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Principal terms of the 2021 Deposit Services Master Agreement

Reference is made to the Announcement.

Set out below is the principal terms of the 2021 Deposit Services Master Agreement:

Date: 23 December 2020

Parties: (i) the Company; and

(ii) BG Finance.

Term:

Commence on 1 January 2021 and shall continue up to and including 31 December 2023. Subject to the Listing Rules and/or upon the expiration of the 2021 Deposit Services Master Agreement, it may be renewed, varied or modified by the Company and BG Finance by agreement in writing.

Deposit interests:

The rate at which interest will accrue on any deposit placed by the Group with BG Finance under the 2021 Deposit Services Master Agreement will not be lower than the following:

(a) the benchmark interest rate prescribed by the PBOC for the same type of deposits of the same period;
(b) the interest rates offered by commercial banks in Hong Kong and the PRC to the Group for the same type of deposits of the same period; and
(c) the interest rates offered by BG Finance to other members of BEGCL for the same type of deposits of the same period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Existing Annual caps:

4. Principal terms of the 2021 Supplemental Agreement

Set out below is the principal terms of the 2021 Supplemental Agreement:

Date: 29 October 2021 Parties: (i) the Company; and (ii) BG Finance.

Term: The 2021 Supplemental Agreement shall be effective from the date of obtaining Independent Shareholders’ approval at the SGM (the ‘‘Effective Date’’).

Revised Annual Caps The cumulative daily outstanding deposits balance placed by the Group with BG Finance (including any interest accrued thereon) during the term of the 2021 Deposit Services Master Agreement will not exceed the following caps:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the financial year ending RMB6,000 million 31 December 2023 (equivalent to approximately HK$7,296 million)

As stated in the Letter, the Revised Annual Caps were determined after taking into account (i) the historical maximum daily balance of deposit the Company placed with BG Finance, and (ii) the reference to the latest Group’s cash and cash equivalents available and the Group’s budgeted available cash resources.

Save as the said revision, all other terms and conditions of the 2021 Deposit Services Master Agreement remain unchanged.

5. Basis of the Revised Annual Caps

While determining the Revised Annual Caps, the Directors have considered factors, which include (i) the historical maximum amounts of daily outstanding deposits placed by the Group with BG Finance; and (ii) the Group’s available cash resources as at the Latest Practicable Date.

In order to assess the fairness and reasonableness of the Revised Annual Caps, we have conducted the following work done:

(a) Review on the historical record in connection with the Deposit Services

In order to evaluate the need to revise the Existing Annual Caps, we have discussed with the Management and conducted a review on (i) the historical outstanding balance of the deposit placed by the Company with BE Group Finance as at 31 December 2020 and 30 June 2021; (ii) the maximum amounts of daily outstanding deposits placed by the Group with BG Finance on any given day during each of the aforesaid period; and (iii) the utilization rates of the Existing Annual Caps for each of the aforesaid period.

As at 30 June 2021 (unaudited) approximately Outstanding balance of the deposit placed by the Company RMB1,216 million with BE Group Finance as at the period end (equivalent to approximately HK$1,479 million)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

		For the 6 months
		ended 30 June
		2021
		(unaudited)
		approximately
Maximum amount of daily outstanding deposits	(a)	RMB1,260 million
placed by the Group with BG Finance		(equivalent to
		approximately
		HK$1,513 million with
		historical
		exchange rate HK$1:
		RMB0.83306
		as at 30 April 2021)
Existing Annual Caps	(b)	HK$1,520 million
Utilisation rate (%)	(a)/(b)	99.54

As shown in the table above, the maximum amount of cumulative daily outstanding deposits placed by the Group with BG Finance during the current financial year 2021 (including any interest accrued thereon) was approximately RMB1,260 million (equivalent to approximately HK$1,513 million with historical exchange rate HK$1: RMB0.83306 as at 30 April 2021), of which the utilisation rate on 30 April 2021 was approximately 99.54% of the Existing Annual Caps of HK$1,520 million. The Directors, therefore, confirmed that the Existing Annual Caps have not been exceeded.

(b) Review on the Group’s budgeted available cash resources for the Deposit Services

Apart from the above, we have discussed with the Management and reviewed the Forecast in order to assess the Group’s available cash resources. We noted that while preparing the Forecast, the Directors assumed (i) the Group’s business operation would generate stable cash flow as assumed based on past historical record and the Group’s business plan; (ii) there are proceeds generated from renewal of existing Group’s banking facilities which may have no material uncertainties; and (iii) there is no material unexpected expenses incurred during the Forecast period.

Specifically, as set out in the Forecast, it is anticipated by the Directors that (i) a stable operating cash inflow of approximately RMB10.3 billion and approximately RMB7.2 billion would be generated for the second half of 2021 and for the first half of 2022, respectively; (ii) approximately RMB5.2 billion would be generated from financing activities, (which generally include proceeds from new bank and other borrowings and issue

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of corporate bonds) for the Forecast Period; and (iii) the level of monthly cash and cash equivalents would maintain at above the Revised Annual Caps (i.e. RMB6 billion) during the Forecast period after the expected cash outflow having been taken into account. As a result, the projected cash position during the Forecast Period allows the Group to have room and place additional deposit as part of the treasury management for its idle cash.

Based on the Forecast, despite the fact that the deposit rate offered by BG Finance is lower than the loan rate from bank facilities offered by external financial institution(s), the Directors expect that there will be idle cash from (i) stable cash flow generated from its operating activities; (ii) temporary cash proceeds from loan re-financing. Also, the Group is not under any obligation to place deposits with BG Finance pursuant to the 2021 Deposit Services Master Agreement. It is advised that the setting of the Revised Annual Caps is to accommodate the idle cash generated from its operating activities and the possible drawn down of the loan facilities which could be temporarily deposited under the Deposit Services; and also lower the cost of such temporarily idle cash. Meanwhile, the Group will be entitled to withdraw its deposit placed with BG Finance in full or in part; hence, the Group may, at its sole discretion, finance its cash resources for any possible needs without any restrictions. Given the Deposit Services provide the option, not an obligation, for the Group to deposit its cash with BG Finance under terms better than those offered by other commercial banks, we concur with the Directors that the Revised Annual Caps (i) set at a level with a certain degree of buffer in order to enable the Group with the flexibility to earn interest income through making deposits to BG Finance; (ii) are based on reasonable estimation after due and careful consideration and (iii) are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Conclusion

So far, the Group has almost utilised the Existing Annual Caps during the first half of 2021, based on this, we concur with the Directors that from a strategic standpoint, it would be in the interests of the Company to adjust the Caps and further its relationship with BG Finance.

Having considered (i) the strict compliance with the internal control measures by the Group; (ii) the terms offered by BE Group Finance which are more favourable than those offered by the other PRC commercial banks; and (iii) the long-term relationship with BG Finance to ensure a smooth application procedures for the Deposit Services, we considered that the provision of the Deposit Services are in the interest of the Group as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that the terms of the 2021 Supplemental Agreement are (i) in the ordinary and usual course of business of the Group, (ii) on normal commercial terms; (iii) fair and reasonable; and (iv) in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the resolution to be proposed at the SGM to approve the Transaction and we recommend the Independent Shareholders to vote in favour of the resolutions in this regard.

Yours faithfully Yours faithfully For and on behalf of For and on behalf of Euto Capital Partners Limited Euto Capital Partners Limited Felix Huen Manfred Shiu Director Director

For identification purpose only and should not be regarded as the official English translation of the Chinese names. In the event of any inconsistency, the Chinese names prevail.

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of each Director and the chief executive of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules (the ‘‘Model Code’’), to be notified to the Company and the Stock Exchange, were as follows:

(i) Long positions in the Shares and underlying Shares

		Approximate
		percentage of the
	Number of	Company’s total
	Shares directly	number of issued
Name of Director	beneficially owned	Shares
Zhou Min	367,190,878	3.6227%
	(Note 1)
Li Haifeng	20,350,544	0.2008%
Zhang Tiefu	224,544	0.0022%
Tung Woon Cheung Eric	144,290	0.0014%
Li Li	1,145,088	0.0113%

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GENERAL INFORMATION

APPENDIX

(ii) Long positions in the shares and underlying shares of the associated corporations of the Company

			Approximate
		Total number of	percentage of the
		ordinary shares of	associated
		the associated	corporation’s total
	Name of associated corporation	corporation	number of issued
Name of Director	of the Company	beneficially owned	share capital
Zhou Min	Beijing Enterprises Clean Energy	1,824,086,800	2.8714%
	Group Limited (‘‘BECEG’’)	(Note 2)	(Note 6)
	Beijing Enterprises Urban Resources	104,820,000	2.9117%
	Group Limited (‘‘BEURG’’)	(Note 3)	(Note 7)
Li Haifeng	BECEG	1,127,175,080	1.7744%
		(Note 4)	(Note 6)
	BEURG	50,800,000	1.4111%
		(Note 5)	(Note 7)

Notes:

Mr. Zhou Min beneficially held 367,190,878 Shares, in which 56,400,000 Shares are personal interests and 310,790,878 Shares are corporate interests. Among all corporate interests, 307,676,110 ordinary shares and 3,114,768 ordinary shares, both of HK$0.10 each Share, as at the Latest Practicable Date, are held by Tenson Investment Limited and Star Colour Investments Limited, respectively, both of which are wholly and beneficially owned by Mr. Zhou Min, an executive director and the chief executive officer of the Company.
This represented the number of ordinary shares of BECEG of HK$0.001 each (‘‘BECEG Ordinary Shares’’) as at the Latest Practicable Date held by Tenson Investment Limited which is wholly and beneficially owned by Mr. Zhou Min, an executive director and the chief executive officer of the Company.
This represented the number of ordinary shares of BEURG of HK$0.1 each (‘‘BEURG Ordinary Shares’’) as at the Latest Practicable Date held by Star Colour Investments Limited which is wholly and beneficially owned by Mr. Zhou Min, an executive director and the chief executive officer of the Company.
This represented the number of BECEG Ordinary Shares as at the Latest Practicable Date held by Maolin Investments Limited which is wholly and beneficially owned by Mr. Li Haifeng, an executive director of the Company.
This represented the number of BEURG Ordinary Shares as at the Latest Practicable Date of which 1,840,000 BEURG Ordinary Shares are beneficially owned by Mr. Li Haifeng and 48,960,000 BEURG Ordinary Shares are held by Maolin Investments Limited which is wholly and beneficially owned by Mr. Li Haifeng, an executive director of the Company.

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GENERAL INFORMATION

APPENDIX

The percentage represented the number of BECEG Ordinary Shares over the total issued shares of BECEG as at the Latest Practicable Date of 63,525,397,057 shares.
The percentage represented the number of BEURG Ordinary Shares over the total issued shares of BEURG as at the Latest Practicable Date of 3,600,000,000 shares.

(iii) Long positions in share options of the Company

At the Latest Practicable Date, the following Directors nevertheless had interests in the share options granted by the Company under the share option scheme adopted by the Company on 28 June 2011:

				Number of
				shares
			Period during which	subject to
		Subscription	Share Options	the Share
	Date of	price per	outstanding	Option
Name of Directors	grant	share	are exercisable	outstanding
		(HK$)
Tung Woon Cheung Eric	24/4/2013	2.244	24/4/2014 – 23/4/2023	9,000,000
				(Note)
Li Li	24/4/2013	2.244	24/4/2015 – 23/4/2023	12,700,000
				(Note)
Zhang Gaobo	24/4/2013	2.244	24/4/2017 – 23/4/2023	800,000
				(Note)
Guo Rui	24/4/2013	2.244	24/4/2018 – 23/4/2023	400,000
				(Note)
Wang Kaijun	24/4/2013	2.244	24/4/2014 – 23/4/2023	2,000,000
				(Note)

Note: The vesting of these share options is subject to the vesting schedules as set out in their respective offer letters.

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GENERAL INFORMATION

APPENDIX

(iv) Long positions in awarded shares of the Company

At the Latest Practicable Date, the following Directors had interests in the awarded shares granted by the Company under the share award scheme adopted by the Company on 17 December 2018:

			Percentage of
		Number of	awarded Shares
Name of Directors	Date of Grant	awarded Shares	to be vested
Li Haifeng	01/11/2021	253,656	100%
Zhang Tiefu	01/11/2021	197,288	100%
Tung Woon Cheung Eric	01/11/2021	140,920	100%

Note: The vesting period for the awarded shares shall be 12-month period from the first anniversary date of the reference date as defined in the share award scheme adopted on 17 December 2018 (or such other periods as determined by the Board).

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares of the Company, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of the Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required, to be notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

So far as the Directors are aware, as at the Latest Practicable Date, the interests or short positions owned by the following parties (other than the Directors or chief executive of the Company) in the Shares and underlying Shares of the Company which were recorded in the register of the Company required to be kept under section 336 of the SFO were as follows:

	Number of ordinary Shares held,	Number of ordinary Shares held,	capacity and nature of interest	capacity and nature of interest
				Approximate
				percentage of
	Directly			the Company’s
	beneficially			total number of
Name of substantial Shareholder	owned	Others	Total	issued Shares
Beijing Enterprises Environmental
Construction Limited (‘‘BE Environmental’’)	4,121,607,070	–	4,121,607,070	40.66%
BEHL (Note 1)	–	4,121,607,070	4,121,607,070	40.66%
Modern Orient Limited (‘‘MOL’’) (Note 2)	–	4,121,607,070	4,121,607,070	40.66%
Beijing Enterprises Investments Limited
(‘‘BEIL’’) (Note 2)	–	4,121,607,070	4,121,607,070	40.66%
Beijing Enterprises Group (BVI) Company
Limited (‘‘BE Group (BVI)’’) (Note 3)	–	4,121,607,070	4,121,607,070	40.66%
BEGCL (Note 4)	–	4,153,407,000	4,153,407,000	40.98%
Three Gorges Capital Holdings (HK) Co., Limited
(‘‘TGC HK’’) (Note 5)	515,952,000	–	515,952,000	5.09%
Three Gorges Capital Holding Co., Ltd (‘‘TGC’’)
(Note 5)	–	515,952,000	515,952,000	5.09%
Yangtze Ecology and Environment (HK)
Investment Limited (‘‘YEE HK’’) (Note 6)	872,121,436	–	872,121,436	8.60%
Yangtze Ecology and Environment Co., Ltd.
(‘‘YEE’’) (Note 6)	–	872,121,436	872,121,436	8.60%
China Three Gorges Corporation
(‘‘CTG’’) (Note 7)	–	1,588,495,436	1,588,495,436	15.67%

Notes:

The interest disclosed comprises the Shares owned by BE Environmental. BE Environmental beneficially holds 4,121,607,070 Shares (representing approximately 40.66% in the share capital of the Company). BE Environmental is a wholly-owned subsidiary of BEHL. Accordingly, BEHL is deemed to be interested in the Shares owned by BE Environmental.
The interest disclosed comprises the Shares owned by BEHL (through BE Environmental). MOL and BEIL are the immediate shareholders of BEHL and collectively hold approximately 20.90% of the issued share capital of BEHL. Accordingly, each of MOL and BEIL is deemed to be interested in the Shares owned by BEHL (through BE Environmental).

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GENERAL INFORMATION

APPENDIX

The interest disclosed comprises the Shares owned by BEIL and MOL (through BEHL and BE Environmental). BEHL is held directly as to approximately 41.06% by BE Group (BVI). MOL is a wholly owned subsidiary of BEIL, which is in turn directly held as to approximately 72.72% by BE Group (BVI). Accordingly, BE Group (BVI) is deemed to be interested in the Shares indirectly owned by BEIL and MOL (through BEHL and BE Environmental).
The interest disclosed comprises the Shares owned by BE Group (BVI) as detailed in note (3) above and 31,800,000 Shares owned by Beijing Holdings Limited (‘‘BHL’’). Both BE Group (BVI) and BHL are wholly-owned subsidiaries of the BEGCL. Accordingly, BEGCL is deemed to be interested in the Shares indirectly owned by BE Group (BVI) and BHL.
The interest disclosed comprises the Shares owned by TGC HK which beneficially holds 515,952,000 Shares (representing approximately 5.09% in the share capital of the Company). TGC HK is a wholly-owned subsidiary of TGC. Accordingly, TGC is deemed to be interested in the Shares owned by TGC HK.
The interest disclosed comprises the Shares owned by YEE HK which beneficially holds 872,121,436 Shares (representing approximately 8.60% in the share capital of the Company). YEE HK is a wholly-owned subsidiary of YEE. Accordingly, YEE is deemed to be interested in the Shares owned by YEE HK.
The interest disclosed comprises (i) 515,952,000 Shares owned by TGC HK, a direct wholly-owned subsidiary of TGC which is in turn directly held as to 70% by CTG and 10% by China Yangtze Power Co., Ltd. (‘‘CYP’’). CYP is directly held as to 57.92% by CTG and 4% by China Three Gorges Projects Developments Co., Ltd., a direct wholly-owned subsidiary of CTG; (ii) 200,422,000 Shares owned by China Yangtze Power International (Hongkong) Co., Ltd., a direct wholly-owned subsidiary of CYP; and (iii) 872,121,436 Shares owned by YEE HK, a direct wholly-owned subsidiary of YEE, which is in turn directly held as to 100% by CTG.
The percentage represented the number of Shares over the total issued Shares of the Company as at the Latest Practicable Date of 10,135,821,871 Shares.

Save as disclosed above, as at the Latest Practicable Date, the Company has not been notified of any other interests or short positions in shares or underlying shares of the Company, which are required to be recorded in the register required to be kept under section 336 of the SFO.

– 46 –

GENERAL INFORMATION

APPENDIX

DIRECTORS OR PROPOSED DIRECTORS BEING A DIRECTOR OR EMPLOYEE IN A COMPANY HAVING AN INTEREST UNDER DIVISIONS 2 AND 3 OF PART XV OF THE SFO

As at the Latest Practicable Date, the following Directors were directors or employees of companies which had an interest in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO:

	Name of company having
	an interest in the Shares and	Position held within such
Name of Director	underlying Shares	companies
Li Yongcheng	BEGCL	Vice Chairman, Executive
		Deputy General Manager
	BE Group (BVI)	Director
	BEIL	Director
	MOL	Director
	BEHL	Director, Chairman
Jiang Xinhao	BEGCL	Vice General Manager
	BE Group (BVI)	Director
	BEIL	Director
	MOL	Director
	BEHL	Director, Vice Chairman
Ke Jian	BEHL	Vice President
Sha Ning	BEHL	Vice President
Tung Woon Cheung	BEHL	Chief Financial Officer and
Eric		General Manager of Finance
		Department
Zhao Feng	YEE HK	Director

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other Director who was a director or employee of a company which had an interest in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

– 47 –

GENERAL INFORMATION

APPENDIX

5. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors and their respective close associates had any interest in any businesses which compete or is likely to compete, either directly or indirectly, with the businesses of the Group.

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service agreement with any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation)).

7. INTERESTS IN CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group (other than those businesses to which the Directors and his/ her associates were appointed to represent the interests of the Company and/or the Group) or have any other conflicts of interest with the Group pursuant to the Listing Rules.

8. DIRECTORS’ INTEREST IN ASSETS

As at the Latest Practicable Date, save as disclosed, none of the Directors had any direct or indirect interest in any asset which had, since 31 December 2020 (the date to which the latest published audited financial statements of the Group were made up), been acquired or disposed of by, or leased to, or which were proposed to be acquired or disposed of by, or leased to, any member of the Group.

9. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there had not been any material adverse change in the financial or trading position of the Group since 31 December 2020, being the date to which the latest published audited consolidated financial statements of the Company were made up.

– 48 –

GENERAL INFORMATION

APPENDIX

10. EXPERT AND CONSENT

The following is the qualification of the expert who has given its opinion which is contained in this circular:

Name

Qualification

Euto Capital

a corporation licensed to carry on business in Type 6 (advising on corporate finance) regulated activity under the SFO

As at the Latest Practicable Date, Euto Capital Partners Limited did not have (i) any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, and (ii) any direct or indirect interest in any assets which had been since 31 December 2020 (being the date to which the latest published audited consolidated financial statements of the Company were made up) acquired or disposed of by or leased to or which were proposed to be acquired or disposed of by or leased to, any member of the Group.

Euto Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its report and reference to its name in the form and context in which it is included.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be published on the websites of the Stock Exchange (http://www.hknews.hk) and the Company (www.bewg.net) for a period of 14 days from the date of this circular:

(a) the 2021 Deposit Services Master Agreement;
(b) the 2021 Supplemental Agreement;
(c) the written consent referred in paragraph headed ‘‘10. Expert and Consent’’ of this appendix; and
(d) the letter of recommendation from the Independent Board Committee;
(e) the letter of advice from Euto Capital; and
(f) this circular.

– 49 –

NOTICE OF THE SGM

==> picture [62 x 60] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’ or ‘‘Meeting’’) of Beijing Enterprises Water Group Limited (the ‘‘Company’’) will be held at 66th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Monday, 20 December 2021 at 3:00 p.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution as an ordinary resolution of the Company. Capitalised terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 30 November 2021, unless otherwise specified.

ORDINARY RESOLUTION

‘‘THAT:

(a) the 2021 Supplemental Agreement in relation to provision of the Deposit Services (details of the 2021 Supplemental Agreement are set out in the Company’s circular dated 30 November 2021 (the ‘‘Circular’’), copies of the 2021 Supplemental Agreement and the Circular have been tabled at the Meeting marked ‘‘A’’ and ‘‘B’’ respectively and signed by the chairman of the Meeting for the purpose of identification), and the transactions contemplated thereunder be hereby approved, confirmed and ratified;
(b) the Revised Annual Caps be hereby approved and confirmed; and
(c) the directors of the Company, acting together, individually or by committee, be and are hereby authorised to take such actions, do all such acts and things and execute all such further documents or deeds as they may consider necessary, appropriate, desirable or expedient for implementation of or giving effect to the 2021 Supplemental Agreement, the Revised Annual Caps and any of the transactions contemplated thereunder.’’

On behalf of the Board

Beijing Enterprises Water Group Limited Li Yongcheng

Chairman

Hong Kong, 30 November 2021

– 50 –

NOTICE OF THE SGM

Notes:

For determining the entitlement of the shareholders to attend and vote at the SGM, the register of members of the Company will be closed from Wednesday, 15 December 2021 to Monday, 20 December 2021 (both days inclusive) during which period no transfer of the shares of the Company will be registered. In order to qualify for entitlement to attend and vote at the SGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar of the Company in Hong Kong, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Tuesday, 14 December 2021.
Any member of the Company entitled to attend and vote at the SGM shall be entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A member who is the holder of two or more shares entitled to attend and vote at the SGM is entitled to appoint more than one proxy to attend and vote instead of him/her. In case of a recognised clearing house, it may authorise such person(s) as it thinks fit to act as its representative(s) and/or proxy(ies) at the SGM and vote in its stead. A proxy need not be a member of the Company.
To be valid, a form of proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or authority, must be lodged with the Company’s branch share registrar of the Company in Hong Kong, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the SGM. Forms of proxy returned electronically or by any other data transmission process will not be accepted.
Completion and return of the proxy form in respect of the proposed ordinary resolution for the SGM will not preclude a member from attending and voting in person at the SGM (or any adjournment thereof) should he/she so wishes and in such event, the proxy form for the SGM will be deemed to have been revoked.
If Typhoon Signal No. 8 or above, or ‘‘extreme conditions’’ caused by super typhoons, or a ‘‘black’’ rainstorm warning is in effect any time after 12:00 noon on the date of the SGM, the meeting will be postponed. The Company will post an announcement on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the website of the Company (www.bewg.net) to notify shareholders of the date, time and place of the rescheduled meeting.
As at the date of this notice, the executive Directors are Mr. Li Yongcheng (Chairman), Mr. Jiang Xinhao, Mr. Zhou Min (Chief Executive Officer), Mr. Li Haifeng, Mr. Zhang Tiefu, Mr. Ke Jian, Ms. Sha Ning, Mr. Tung Woon Cheung Eric and Mr. Li Li; and the non-executive Director is Mr. Zhao Feng; and the independent non-executive Directors are Mr. Shea Chun Lok Quadrant, Mr. Zhang Gaobo, Mr. Guo Rui, Mr. Wang Kaijun and Mr. Chau On Ta Yuen.

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AI assistant

Beijing Enterprises Water Group Limited — Proxy Solicitation & Information Statement 2021

49167_rns_2021-11-29_068e34ed-d41b-4a20-9f7b-29aeccbbd6fd.pdf

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES AND NOTICE OF THE SPECIAL GENERAL MEETING

PRECAUTIONARY MEASURES FOR THE SGM

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

‘‘Revised Annual Caps’’

DEFINITIONS

LETTER FROM THE BOARD

(Stock Code: 371)

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES AND

NOTICE OF THE SPECIAL GENERAL MEETING

1. INTRODUCTION

LETTER FROM THE BOARD

2. BACKGROUND

LETTER FROM THE BOARD

3. THE 2021 SUPPLEMENTAL AGREEMENT AND REVISION OF THE EXISTING ANNUAL CAPS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

4. HISTORICAL DEPOSIT BALANCES

LETTER FROM THE BOARD

5. REASONS FOR AND BENEFITS OF THE 2021 SUPPLEMENTAL AGREEMENT AND THE REVISED ANNUAL CAPS

LETTER FROM THE BOARD

6. INTERNAL CONTROLS AND RISK MANAGEMENT MEASURES

LETTER FROM THE BOARD

7. INFORMATION ON THE COMPANY, THE GROUP AND BG FINANCE

The Company

The Group

BG Finance

LETTER FROM THE BOARD

8. IMPLICATIONS UNDER THE LISTING RULES

9. GENERAL

10. SGM

LETTER FROM THE BOARD

11. RECOMMENDATIONS

12. ADDITIONAL INFORMATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully, For and on behalf of the Independent Board Committee

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE DEPOSIT SERVICES

INTRODUCTION

1. Background of the Transaction

1.1 The 2021 Deposit Services Master Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 The 2021 Supplemental Agreement

2. Implications under the Listing Rules

INDEPENDENT BOARD COMMITTEE

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OUR INDEPENDENCE

BASIS OF OUR OPINION AND RECOMMENDATION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of the Transaction

1.1 Information of the Company and the Group

(a) Principal business of the Group

(b) Financial position of the Group

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 Information of the BG Finance

(a) Shareholding structure of the BG Finance

(b) Principal activities of BG Finance

(c) Rules and regulations relevant to the business of BG Finance

2. Reasons for and benefits of entering into the 2021 Supplemental Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(a) The cooperation relationship between the Company and BG Finance

(b) The internal control and risk management measures adopted by BG Finance

(c) The deposit interest rate offered by BG Finance

(d) The effectiveness of the Group’s internal control measures over the Deposit Services taken by the Group

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Conclusion

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Principal terms of the 2021 Supplemental Agreement

5. Basis of the Revised Annual Caps

(a) Review on the historical record in connection with the Deposit Services

(b) Review on the Group’s budgeted available cash resources for the Deposit Services

Conclusion

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

Beijing Enterprises Water Group Limited Proxy Solicitation & Information Statement 2021