THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Datang Environment Industry Group Co., Ltd. , you should at once hand this circular together with the accompanying proxy form and reply slip to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the 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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**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1272)

(1) REPORT OF THE BOARD FOR 2016

(2) REPORT OF THE SUPERVISORY COMMITTEE FOR 2016

(3) FINAL FINANCIAL ACCOUNTS FOR 2016

(4) FINANCIAL BUDGET REPORT FOR 2017

(5) INDEPENDENT AUDITOR’S REPORT AND AUDITED FINANCIAL STATEMENTS FOR 2016

(6) PROFIT DISTRIBUTION PLAN FOR 2016 AND THE PROPOSED 2016 FINAL DIVIDEND

(7) RE-APPOINTMENT OF INTERNATIONAL AND DOMESTIC AUDITORS FOR 2017

(8) REMUNERATION REPORT FOR DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY FOR 2016

(9) INVESTMENT PLAN FOR 2017

(10) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION IN RELATION TO FINANCIAL SERVICES AGREEMENT

(11) AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

(12) NOTICE OF 2016 AGM

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

Orient Capital (Hong Kong) Limited

A letter from the Board is set out on pages 1 to 23 of this circular. A letter from the Independent Board Committee is set out on pages 24 to 25 of this circular. A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 26 to 38 of this circular.

A notice convening the 2016 AGM of the Company to be held at 2:00 p.m. on Friday, 30 June 2017 at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, is set out on pages 53 to 56 of this circular.

The proxy form for use at the 2016 AGM is enclosed with this circular and such proxy form is also published on the websites of the Stock Exchange ( www.hkexnews.hk ) and the Company ( www.dteg.com.cn ).

If you intend to appoint a proxy to attend the 2016 AGM, you are required to complete and return the accompanying form of proxy in accordance with the instructions printed thereon. For holders of H Shares, the form of proxy should be returned to the H Share Registrar and for holders of Domestic Shares, the form of proxy should be returned to the Company’s board office in the PRC in person or by post not less than 24 hours before the time fixed for holding the 2016 AGM or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the 2016 AGM or at any other adjourned meeting should you so wish.

If you intend to attend the 2016 AGM in person or by proxy, you are required to complete and return the reply slip (for holders of H Shares) to the H Share Registrar or (for holders of Domestic Shares) to the Company’s board office in the PRC on or before Friday, 9 June 2017.

15 May 2017

For identification purpose only

Page	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . . . . . . . . . . . . . 26
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . . . . . . . . . 39
APPENDIX II – GENERAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . . . . . . . . . . 42
NOTICE OF 2016 AGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	53

– i –

DEFINITIONS

Unless the context otherwise requires, the following expressions shall have the following meanings in this circular:

“2016 AGM” the 2016 annual general meeting of the Company to be held at 2:00 p.m. on Friday, 30 June 2017 at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC
“Articles of Association” the articles of association of the Company (as amended, altered or otherwise supplemented from time to time)
“associate(s)” has the meaning ascribed under the Listing Rules “Board” the board of Directors of the Company “CA” certificate authority “CAGR” compound annual growth rate “CBRC” China Banking Regulatory Commission (中國銀行業監督管理委員會)
“China” or “PRC” the People’s Republic of China excluding, for the purpose of this circular, Hong Kong, Macau Special Administrative Region and Taiwan
“China Datang” China Datang Corporation (中國大唐集團公司), a state-owned enterprise established on 9 April 2003 in accordance with the PRC laws and the controlling shareholder and a promoter of the Company
“China Datang Group” China Datang and its subsidiaries (excluding the Group) “Company” Datang Environment Industry Group Co., Ltd.* (大唐環境產業集團股份有限公司), a joint stock company incorporated in the PRC with limited liability, the H Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1272)
“continuing connected has the meaning ascribed under the Listing Rules transaction(s)”

– ii –

DEFINITIONS

“Continuing Connected the continuing connected transaction(s) under the Financial Transaction(s)” Services Agreement, including loan services, the Deposit Services and the Other Financial Services provided by Datang Finance to the Group
“connected person” has the meaning ascribed under the Listing Rules “controlling shareholder” has the meaning ascribed under the Listing Rules “CSRC” China Securities Regulatory Commission (中國證券業監督管理委員會)
“Datang Finance” China Datang Finance Co., Ltd. (中國大唐集團財務有限公司), a company incorporated in the PRC with limited liability on 10 May 2005, and a non-wholly-owned subsidiary of China Datang
“Datang Huayin” Datang Huayin Electric Power Co., Ltd. (大唐華銀電力股份有限公司), a joint stock limited company established on 22 March 1993 in accordance with the PRC laws and a subsidiary of China Datang, which is listed on the Shanghai Stock Exchange (stock code: 600744)
“Datang Renewable” China Datang Corporation Renewable Power Co., Ltd. (中國大唐集團新能源股份有限公司), a joint stock limited company established on 23 September 2004 in accordance with the PRC laws and a subsidiary of China Datang, which is listed on the Main Board of the Stock Exchange (stock code: 1798)
“Deposit Services” deposit services provided by Datang Finance to the Group under the Financial Services Agreement
“Director(s)” director(s) of the Company
“Domestic Shares” the ordinary shares in the share capital of the Company with a nominal value of RMB1.00 each, which are subscribed for and paid up in RMB and have not been listed on any stock exchanges
“EMC” a business model that the energy conservation companies provide energy-conservation services to customers according to the energy-conservation service contracts entered into with customers, and recover the investment and gain profit from the energy efficiency achieved upon the completion of energy conservation facilities refurbishment

– iii –

DEFINITIONS

“EPC” engineering, procurement and construction, a common form of contracting arrangement whereby the contractor is commissioned by the customer to carry out works, such as design, procurement, construction and trial operations, either through the contractor’s own employees or by subcontracting part or all of the works, and be responsible for the quality, safety, timely delivery and cost of the project

“Financial Services Agreement” the financial services agreement entered into between Datang Finance and the Company on 24 April 2017 “Group” the Company and its subsidiaries “H Share(s)” the overseas listed foreign shares of the Company with a nominal value of RMB1.00 each, which are listed on the Main Board of the Stock Exchange “H Share Registrar” Computershare Hong Kong Investor Services Limited, the H Share registrar of the Company

“Hong Kong” or “HK” Hong Kong Special Administrative Region of the PRC
“IFRSs” International Financial Reporting Standards

“Independent Board Committee” an independent committee of the Board comprising Mr. Ye Xiang, Mr. Mao Zhuanjian and Mr. Gao Jiaxiang, all being independent non-executive Directors

“Independent Financial Adviser” or Orient Capital (Hong Kong) Limited, a corporation licensed “Orient Capital” to carry out type 6 (advising on corporate finance) regulated activities under SFO, and is the independent financial adviser appointed for the purpose of advising the Independent Board Committee and the Independent Shareholders as to the Deposit Services (including the Proposed Caps of the Deposit Services)
“Independent Shareholders” the Shareholders who are not required to abstain from voting at the 2016 AGM for the resolution with respect to the Financial Services Agreement
“Latest Practicable Date” 9 May 2017, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

– iv –

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“major transaction”	has the meaning ascribed under the Listing Rules
Other Financial Services	financial services provided by Datang Finance to the Group under
	the Financial Services Agreement in addition to loan services
	and the Deposit Services, including financial and financing
	consultation and training services, transfer and settlement services,
	insurance agency services, finance leasing, entrustment loan and
	entrustment investment services, note financing services and
	underwriting services for the issuance of corporate bonds to the
	Group
“PBOC”	the People’s Bank of China (中國人民銀行)
“Proposed Cap(s)”	the proposed caps in respect of loan services, the Deposit Services
	and the Other Financial Services under the Financial Services
	Agreement
“Prospectus”	the prospectus of the Company dated 3 November 2016 with
	respect to the listing of the Company on the Main Board of the
	Stock Exchange
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	Domestic Share(s) and/or H Share(s)
“Shareholder(s)”	holder(s) of Share(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiaries”	has the meaning ascribed under the Listing Rules
“Supervisor(s)”	supervisor(s) of the Company
“Supervisory Committee”	the supervisory committee of the Company
“%”	per cent

– v –

LETTER FROM THE BOARD

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**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1272)

Non-executive Directors: Mr. Jin Yaohua Mr. Liu Chuandong Mr. Liu Guangming Mr. Liang Yongpan

Registered Office and Head Office in the PRC: No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC

Executive Directors: Mr. Deng Xiandong Mr. Lu Shengli

Principal Place of Business in Hong Kong: 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong

Independent Non-executive Directors:

Mr. Ye Xiang Mr. Mao Zhuanjian Mr. Gao Jiaxiang

15 May 2017

To the Shareholders

Dear Sir or Madam,

(1) REPORT OF THE BOARD FOR 2016

(2) REPORT OF THE SUPERVISORY COMMITTEE FOR 2016

(3) FINAL FINANCIAL ACCOUNTS FOR 2016

(4) FINANCIAL BUDGET REPORT FOR 2017

(5) INDEPENDENT AUDITOR’S REPORT AND AUDITED FINANCIAL STATEMENTS FOR 2016

(6) PROFIT DISTRIBUTION PLAN FOR 2016 AND THE PROPOSED 2016 FINAL DIVIDEND

(7) RE-APPOINTMENT OF INTERNATIONAL AND DOMESTIC AUDITORS FOR 2017

(8) REMUNERATION REPORT FOR DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY FOR 2016

(9) INVESTMENT PLAN FOR 2017

(10) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION IN RELATION TO FINANCIAL SERVICES AGREEMENT

(11) AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND

(12) NOTICE OF 2016 AGM

For identification purpose only

– 1 –

LETTER FROM THE BOARD

I. INTRODUCTION

The purpose of this circular is to give you notice of the 2016 AGM and provide you with further information regarding the following resolutions to be proposed at the 2016 AGM to enable you to make informed decisions on whether to vote for or against or abstain from voting on such resolutions at the 2016 AGM. Such resolutions and relevant details are set out in this Letter from the Board.

II. MATTERS TO BE RESOLVED AT THE 2016 AGM

Ordinary Resolutions

1. Report of the Board for 2016

An ordinary resolution will be proposed at the 2016 AGM to approve the Report of the Board for 2016. The resolution was considered and approved by the Board at the 17th meeting of the first session of the Board. The full text of this report is included in the 2016 annual report of the Company published at the Company’s website and the HKExnews website of the Stock Exchange on 28 April 2017.

2. Report of the Supervisory Committee for 2016

An ordinary resolution will be proposed at the 2016 AGM to approve the Report of the Supervisory Committee for 2016. The resolution was considered and approved by the Supervisory Committee at the 4th meeting of the first session of the Supervisory Committee. The full text of this report is included in the 2016 annual report of the Company published at the Company’s website and the HKExnews website of the Stock Exchange on 28 April 2017.

3. Final Financial Accounts for 2016

An ordinary resolution will be proposed at the 2016 AGM to approve the final financial accounts for 2016 which were audited in accordance with the IFRSs.

The resolution was considered and approved by the Board at the 17th meeting of the first session of the Board. According to the IFRSs, the revenue for 2016 in the Company’s consolidated financial statements amounted to RMB8,156 million; cost of sales amounted to RMB6,483 million; administrative expenses amounted to RMB282 million; other income and gains amounted to RMB114 million; financial expense amounted RMB193 million; profit before tax amounted to RMB1,265 million; and total comprehensive income amounted to RMB1,087 million (comprehensive income attributable to equity owners amounted to RMB1,022 million).

– 2 –

LETTER FROM THE BOARD

4. Financial Budget Report for 2017

An ordinary resolution will be proposed at the 2016 AGM to approve the financial budget report for 2017. The resolution was considered and approved by the Board at the 17th meeting of the first session of the Board. The financial budget report was prepared with reference to the Company’s development goals for 2017 and the principle of the maximisation of values.

5. The Independent Auditor’s Report and the Audited Financial Statements for 2016

An ordinary resolution will be proposed at the 2016 AGM to approve the independent auditor’s report for 2016 and the audited financial statements of the Company for the year ended 31 December 2016. The resolution was considered and approved by the Board at the 17th meeting of the first session of the Board. The full texts of this independent auditor’s report and this audited financial statements are included in the 2016 annual report of the Company published at the Company’s website and the HKExnews website of the Stock Exchange on 28 April 2017.

6. Profit Distribution Plan for 2016 and Proposed 2016 Final Dividend

(1) Proposed distribution of the Proposed 2016 Final Dividend

An ordinary resolution will be proposed at the 2016 AGM to approve the profit distribution plan for 2016. The resolution was considered and approved by the Board at the 17th meeting of the first session of the Board.

The Board has proposed to distribute final dividends of the Company from 1 April 2016 to 31 December 2016 (“ Proposed 2016 Final Dividend ”) at RMB0.125 per Share (before tax) in cash to Shareholders. The Proposed 2016 Final Dividend shall be denominated and declared in RMB. The Proposed 2016 Final Dividend shall be paid by the Company to the holders of Domestic Shares in RMB and shall be denominated in RMB but paid to the holders of H Shares in Hong Kong dollar. The exchange rate of RMB into Hong Kong dollar shall be the average exchange rates as announced by the PBOC for a week prior to the date of 2016 AGM. The Proposed 2016 Final Dividend is subject to the approval of Shareholders at the 2016 AGM on 30 June 2017.

If the proposed profit distribution plan is approved by the Shareholders at the 2016 AGM, the Proposed 2016 Final Dividend is expected to be distributed on or before Wednesday, 23 August 2017 to the Shareholders whose names appear on the register of the Company on Tuesday, 11 July 2017 (the “ Record Date ”).

– 3 –

LETTER FROM THE BOARD

Meanwhile, a resolution will be proposed at the 2016 AGM to grant authority to the Board to execute the above distribution plan.

(2) Closure of register of H Shares for the proposed distribution of the Proposed 2016 Final Dividend

Proposed 2016 Final Dividend will be distributed on or before Wednesday, 23 August 2017 to the Shareholders whose names appear on the register of the Company on Tuesday, 11 July 2017. In order to ascertain the entitlements of the Shareholders to receive the Proposed 2016 Final Dividend, the register of members of the Company will be closed from Thursday, 6 July 2017 to Tuesday, 11 July 2017 (both days inclusive), during which period no transfer of Shares will be effected. To be eligible to receive the Proposed 2016 Final Dividend, all transfer documents must be lodged with the H Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for holders of H Shares), or the Company’s board office in the PRC at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, 100097 (for holders of Domestic Shares), no later than 4:30 p.m. on Wednesday, 5 July 2017.

(3) Tax

According to the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法》) and its implementation regulations (the “ EIT Law ”), the tax rate of the enterprise income tax applicable to the income of a non-resident enterprise deriving from the PRC is 10%. For this purpose, any H Shares registered in the name of non-individual enterprises, including HKSCC Nominees Limited, other agents or trustees, or other organisations or groups, shall be deemed as shares held by nonresident enterprise Shareholders (as defined under the EIT Law). When the Company distributes dividends to non-resident enterprise Shareholders, it is liable to withhold enterprise income tax on their behalf at an interest rate of 10%. Any H Shares registered in the name of non-individual enterprises, including HKSCC Nominees Limited, other agents or trustees, or other organisations or groups, shall be deemed as shares held by non-resident enterprise Shareholders. Therefore, the Company will distribute dividends to such non-resident enterprises Shareholders after withholding 10% of enterprise income tax. If H Shareholders need to change their Shareholder’s status, they shall consult with the agents or trustees on the procedures. In strict compliance with laws and requirements of relevant government authorities, the Company will withhold the enterprise income tax according to the register of members of the H Shares of the Company as at the Record Date.

– 4 –

LETTER FROM THE BOARD

Any resident enterprise (as defined under the EIT Law) which has been legally incorporated in the PRC or which was established pursuant to the laws of foreign countries (regions) but has established effective administrative entities in the PRC, and whose name appears on the register of members of H Share(s) should deliver a legal opinion ascertaining its status as a resident enterprise furnished by a qualified PRC lawyer (with the official chop of the law firm issuing the opinion affixed thereon) and relevant documents to the H Share Registrar, Computershare Hong Kong Investor Services Limited, if they do not wish to have the 10% enterprise income tax withheld and paid on their behalf by the Company.

Pursuant to the Notice on the Issues on Levy and Administration of Individual Income Tax after the Abolishment of Guo Shui Fa [1993] No. 045 Document (《關於國稅發(1993)045號文件廢止後有關個人所得稅徵管問題的通知》) issued by the State Administration of Tax on 28 June 2011, the dividend to be distributed by the PRC non-foreign invested enterprises which have issued shares in Hong Kong to the overseas resident individual shareholders, is subject to the individual income tax with a tax rate of 10% in general.

If the individual H Shareholders are residents of Hong Kong or Macau or those countries which have entered into a tax treaty with the PRC stipulating a dividend tax rate of 10%, the Company will finally withhold and pay individual income tax at the rate of 10% on behalf of these Shareholders. If the individual H Shareholders are residents of those countries which have entered into a tax treaty with the PRC stipulating a dividend tax rate of less than 10%, the Company will make applications on their behalf to seek entitlement of the relevant agreed preferential treatments pursuant to the relevant tax treaty. Under the above circumstances, if the relevant individual H Shareholders want a refund of the extra amount withheld (the “ Extra Amount ”) due to the application of 10% tax rate, the Company can apply for the relevant agreed preferential tax treatment provided that the relevant Shareholders submit the evidence required by the notice of the tax treaty to the H Share Registrar. The Company will assist with the tax refund after receiving approval of the competent tax authority. Should the individual H Shareholders be residents of the countries which have an agreed tax rate of over 10% but less than 20% with the PRC under the tax treaty, the Company will withhold and pay the individual income tax at the agreed actual rate in accordance with the relevant tax treaty. In the case that the individual H Shareholders are residents of the countries which have an agreed tax rate of 20% with the PRC, or which have not entered into any tax treaty with the PRC, or otherwise, the Company will withhold and pay the individual income tax at a rate of 20%.

– 5 –

LETTER FROM THE BOARD

The Company will strictly comply with the laws and requirements of the relevant government authorities and withhold and pay enterprise and individual income tax on behalf of the Shareholders based on the register of members of the H Shares on the Record Date. The Company assumes no liability whatsoever in respect of and will not entertain any claims arising from any delay in, or inaccurate determination of, the status of the Shareholders or any disputes over the mechanism of withholding of enterprise income tax. The Company assumes no liability whatsoever in respect of any claims arising from any delay in, or inaccurate determination of the status of the Shareholders or any disputes over the mechanism of withholding.

7. Re-appointment of International and Domestic Auditors for 2017

An ordinary resolution will be proposed at the 2016 AGM to approve the re-appointment of Ernst & Young and Ernst & Young Hua Ming LLP as international and domestic auditors of the Company for the year of 2017, respectively, with a term of engagement ended upon the conclusion of the 2017 annual general meeting of the Company, and the grant of authority to the Board, which further grants such authority to the senior management of the Company, to determine their remunerations based on the actual auditing works performed by the auditors.

8. Remuneration Report for Directors, Supervisors and Senior Management of the Company for 2016

An ordinary resolution will be proposed at the 2016 AGM to approve the Remuneration Report for Directors, Supervisors and Senior Management of the Company for the year of 2016. The Board considered that the current remuneration policy for Directors, Supervisors and senior management of the Company is reasonable and proposed to continue to implement current remuneration policy.

The above remuneration plan has been considered by the Remuneration and Evaluation Committee under the Board (“ Remuneration Committee ”) and passed at the 17th meeting of the first session of the Board. When the Remuneration Committee and the Board took a vote on the above remuneration plan after consideration, the relevant Directors abstained from voting on matters which conflicted with their interests.

9. Investment Plan for 2017

An ordinary resolution will be proposed at the 2016 AGM to approve the investment plan for the year of 2017. It is estimated that the total investment plan of the Company for the year of 2017 will amount to RMB2,183.54 million.

– 6 –

LETTER FROM THE BOARD

10. Continuing Connected Transactions and Major Transaction in relation to Financial Services Agreement

Reference is made to the announcement of the Company dated 24 April 2017. The Company and Datang Finance entered into a Financial Services Agreement on the same date, with a term commencing from the effective date (the “ Effective Date ”) of this agreement, which is the date on which the Financial Services Agreement is approved by the Shareholders at the 2016 AGM, and ending on 31 December 2019. Transactions contemplated under the Financial Services Agreement constitute continuing connected transactions and a major transaction of the Company and are subject to the reporting, annual review, announcement and/or Independent Shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules, where applicable.

(1) The major contents of the Continuing Connected Transactions

Service Provider: Datang Finance

Service Recipient: The Group Date: 24 April 2017 Term: From the Effective Date to 31 December 2019 Nature of Transaction:

The services to be provided by Datang Finance to the Group include loans services, the Deposit Services, and the Other Financial Services including financial and financing consultation and training services, transfer and settlement services, insurance agency services, finance leasing, entrustment loan and entrustment investment services, note financing services and underwriting services for the issuance of corporate bonds to the Group. Datang Finance has agreed to provide financial services to the Group at the Company’s request or instruction provided that Datang Finance has obtained the relevant approval from the CBRC. Datang Finance shall ensure the stable operation of fund management system to safeguard the fund, and to monitor the credit risk so as to satisfy the payments needs of the Group. The Group, with information of market rates and in view of its own interests, has the discretion to determine whether or not to maintain business relationship with Datang Finance, or to obtain financial services from other financial institutions at the time.

– 7 –

LETTER FROM THE BOARD

Scope of Service:

i. Loan services;
ii. Deposit Services; and
iii. Other Financial Services.

Pricing Policy:

Datang Finance has undertaken to provide the aforementioned financial services to the Group based on the following pricing principles:

i. Loan Services – within the interval for the floating deposit and loan interests rates published by the PBOC and by reference to the benchmark interest rates published by the PBOC, the interest rate for loans granted to the Group by Datang Finance shall not be higher than the equivalent loan interest rate as charged by other financial institutions in the PRC;
ii. Deposit Services – within the interval for the floating deposit and loan interests rates published by the PBOC and by reference to the benchmark interest rates published by the PBOC, the interest rate for the Group’s deposits with Datang Finance shall not be lower than the equivalent deposit interest rate as provided by other financial institutions in the PRC; and
iii. Other Financial Services – the fees charged by Datang Finance for the provision of the Other Financial Services to the Group shall not be higher than the rate charged by the other financial institutions in the PRC for the same or similar type of services.

– 8 –

LETTER FROM THE BOARD

(2) Capital risk control measures

Pursuant to the Financial Services Agreement, Datang Finance undertakes to take the following measures to control the capital risks:

i. Datang Finance will ensure the safe and stable operation of the fund management information system, which has undergone the security test in respect of connection to the online commercial banking and has reached the national security standards for commercial banks. The system is equipped with the model awarded with CA safety certificate to secure the funds of the Group;
ii. Datang Finance will ensure that it is in strict compliance with the risk monitoring indicators for financing companies issued by the CBRC and that its major regulatory indicators such as gearing ratio and liquidity ratio will also comply with the requirement of the CBRC; and
iii. Any balance in the Group’s deposits (after deducting the amount used for making entrusted loans and the loans made to the Group by Datang Finance) will be redeposited into one or more commercial banks in the PRC. The interests for the Group’s call deposits will be settled at the negotiated savings interest rate as announced by the PBOC, which is higher than the interest rate for call deposits that the Group currently secures from other PRC commercial banks.

The Company will also adopt, among others, the following internal control and risk management measures to mitigate the financial risks which may be exposed to the Company under the Financial Services Agreement:

i. Before entering into any transactions with Datang Finance, the Company will obtain and review quotes (i.e. savings interest rate, loan interest rate or fee quotes for the Other Financial Services) from at least four other independent financial institutions and the then savings interest rate, negotiated savings interest rate or loan interest rate as published by PBOC.

– 9 –

LETTER FROM THE BOARD

For the Deposit Services, in the event that the Company notes the then negotiated savings interest rate as announced by PBOC is less than the then savings interest rate as published by PBOC or the then savings interest rate as offered by other independent financial institutions in the PRC, the Company will enter into a supplemental agreement with Datang Finance to ensure the deposit interest rate of the Deposit Services will be no less favourable than the then savings interest rate as published by PBOC or offered by any other independent financial institution in the PRC. In the event that the Company notes that the actual deposit interest rate of the Deposit Services is less than the then negotiated savings interest rate as announced by PBOC or offered by any other independent financial institution in the PRC, the Company will require Datang Finance to compensate the differences to the Company.

For the loan services provided by Datang Finance to the Group under the Financial Services Agreement, in the event that the Company notes that the actual loan interest rate of such loan services is higher than the then loan interest rate as announced by PBOC or charged by any other independent financial institution in the PRC, the Company will require Datang Finance to compensate the differences to the Company.

For the Other Financial Services, in the event that the Company notes that the actual fee standards charged for provision of such services are higher than the then fee standards as offered by other independent financial institutions in the PRC, the Company will require Datang Finance to compensate the differences to the Company.

ii. Before placing deposit, the finance department of the Company will check the outstanding daily balance of the deposits placed with Datang Finance to avoid exceeding the Proposed Caps of the Deposit Service.

Before making any loan, the finance department of the Company will check with Datang Finance to ensure that no security over the assets of the Group will be granted in respect of the loan services provided by Datang Finance to the Group under the Financial Services Agreement.

Before provision of any of the Other Financial Services by Datang Finance, the finance department of the Company will check the transaction amount of the Other Financial Services. The Company will comply with the reporting, announcement and independent shareholders’ approval requirements of the Listing Rules, where applicable, if the transaction amount of the Other Financial Services to be provided by Datang Finance to the Group exceeds the de minimis threshold as stipulated under Rule 14A.76 of the Listing Rules.

– 10 –

LETTER FROM THE BOARD

iii. On a monthly basis, the finance department of the Company will report to the management of the Company of any updates in relation to the Continuing Connected Transactions; and
iv. The independent non-executive Directors and the Company’s auditors will review annually the enforcement of the Continuing Connected Transactions under the Financial Services Agreement and provide annual confirmations in accordance with the Listing Rules that the Continuing Connected Transactions are conducted in accordance with the terms of the Financial Services Agreement, on normal commercial terms and are in the interest of the Company and the Shareholders as a whole.

The Directors (excluding the Directors who are required to abstain, but including the independent non-executive Directors) consider that the above capital risk control measures are adequate to cover the risks involved in the Continuing Connected Transactions with Datang Finance.

(3) Proposed Caps and the basis thereof

Loan Services:

In view of the loan services provided by Datang Finance to the Group are on normal commercial terms which are similar to or more favourable than those offered by independent third parties for comparable services in the PRC, and that no security over the assets of the Group will be granted in respect of the loan services, the loan services are exempt from reporting, announcement and independent shareholders’ approval requirements under Rule 14A.90 of the Listing Rules. As such, no cap has been set for such services.

Deposit Services:

The Company estimates that the Proposed Caps of the Deposit Services for the maximum daily deposit balance (including any interest accrued therefrom) with Datang Finance for each of the years ending 31 December 2017, 2018 and 2019 is RMB4,000 million, after taking into account of the following factors:

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LETTER FROM THE BOARD

(a) h i s t o r i c a l a m o u n t s o f c a s h a n d c a s h equivalents of the Group, which increased from approximately RMB708 million to RMB1,195 million (excluding the proceeds from the initial public offering of the Company) during the consecutive four (4) years ended 31 December 2016 (i.e., the historical CAGR was approximately 19%);
(b) the assumed growth of cash and cash equivalents of the Group in the three consecutive years ended 31 December 2019 if the CAGR is no lower than the historical CAGR; and
(c) the amount of net proceeds from the initial public offering of the Company was approximately RMB1,818 million.

The Company estimates that the Proposed Cap of the Deposit Services for the maximum daily deposit balance would not exceed the total sum of (a) , (b) and (c) above, and therefore RMB4,000 million is a reasonable cap for the maximum daily deposit balance with Datang Finance.

In addition, the total amount of cash balance and trade receivables of the Group as at 31 December 2016 had amounted to approximately RMB9,388 million, which is much higher than RMB4,000 million, indicates that the Company has sufficient funds to deposit with Datang Finance. Moreover, the Company may make loans to support the expansion of its business in the future, which may further increase the cash balance of the Group.

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LETTER FROM THE BOARD

Other Financial Services:

The Company expects that each of the percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the total fees payable by the Group to Datang Finance in respect of the Other Financial Services will fall within the de minimis threshold as stipulated under Rule 14A.76 of the Listing Rules, for which the Other Financial Services are exempt from reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. As such, no cap has been set for such services. The Company will comply with the reporting, announcement and independent shareholders’ approval requirements of the Listing Rules, where applicable, if the transaction amount of the Other Financial Services to be provided by Datang Finance to the Group under the Financial Services Agreement exceeds the de minimis threshold as stipulated under Rule 14A.76 of the Listing Rules. Among the Other Financial Services, Datang Finance will provide settlement services to the Group, free of charge, with respect to payment for transactions between the Group and China Datang Group mentioned in the “Connected Transactions” section of the prospectus of the Company dated 3 November 2016. The Company confirms that there will not be any provision of financial assistance by the Company to Datang Finance under this arrangement. The Other Financial Services provided under the Financial Services Agreement will be on normal commercial terms and on terms similar to or even more favourable than those offered by independent third parties for comparable services in the PRC.

(4) Reasons for and benefits of entering into the Financial Services Agreement

The Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company on normal commercial terms and on terms similar to or even more favourable than those available to the Company from independent third parties in the PRC. The Directors (including the independent non-executive Directors) are of the view that such transactions are beneficial to the Group and furthermore, the Group can earn interests or enjoy benefits through such transactions at the terms not less favourable to independent third parties.

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LETTER FROM THE BOARD

Furthermore, due to the long-term relationship among the Group, China Datang and China Datang Group, the Directors (including the independent non-executive Directors) consider that it is beneficial to the Company to enter into continuing connected transactions with companies affiliated to China Datang. They are familiar with the Group’s business operations and requirement on the products and services, and will be able to respond more quickly and in a more cost efficient manner to the requirements that the Group may have as compared with other financial institutions unrelated to China Datang Group.

In addition, as the customers of Datang Finance are limited to entities affiliated to China Datang and its subsidiaries under applicable laws and regulations, it reduces default risk and liquidity the risks that Datang Finance may otherwise be exposed to if its customers include entities unrelated to China Datang. Moreover, the aforementioned risk control measures adopted by Datang Finance are adequate to mitigate default risk and liquidity risk involved in receiving financial services from Datang Finance.

Therefore, the Directors (excluding the Directors who are required to abstain, but including the independent non-executive Directors) believe that the Continuing Connected Transactions under the Financial Services Agreement and the Proposed Caps are fair and reasonable.

(5) Listing Rules implications

As China Datang directly held approximately 78.17% of the issued share capital of the Company as at the Latest Practicable Date, it is a controlling shareholder of the Company. Datang Finance is a subsidiary of China Datang, and is therefore a connected person of the Company. Accordingly, the Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company under the Listing Rules.

In addition, as one or more of the applicable percentage ratio(s) (as defined in Rule 14.07 of the Listing Rules) for the Proposed Cap of the Deposit Services exceed 25% but less than 75%, the Deposit Services contemplated under the Financial Services Agreement also constitute a major transaction of the Company under Chapter 14 of the Listing Rules.

– 14 –

LETTER FROM THE BOARD

Loan Services

The loan services to be provided by Datang Finance to the Group will constitute financial assistance to be provided by a connected person for the benefit of the Group. As such services are on normal commercial terms which are similar to or more favourable than those offered by independent third parties for comparable services in the PRC, and no security over the assets of the Group will be granted in respect of the loan services, the loan services are exempt from reporting, announcement and independent shareholders’ approval requirements under Rule 14A.90 of the Listing Rules.

Deposit Services

In addition, as one or more of the applicable percentage ratios for the Proposed Cap of the Deposit Services exceed 25% but less than 75%, the Deposit Services contemplated under the Financial Services Agreement also constitute a major transaction of the Company under Chapter 14 of the Listing Rules.

Other Financial Services

In respect of the Other Financial Services to be provided by Datang Finance to the Group, each of the percentage ratio(s) is below the de minimis threshold set out in Rule 14A.76 of the Listing Rules, therefore the provision of Other Financial Services by Datang Finance to the Group is exempt from the reporting, announcement and independent shareholders’ approval requirements of the Listing Rules. The Company will comply with the reporting, announcement and independent shareholders’ approval requirements of the Listing Rules, where applicable, if the transaction amount of the Other Financial Services to be provided by Datang Finance to the Group under the Financial Services Agreement exceeds the de minimis threshold as stipulated under Rule 14A.76 of the Listing Rules.

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LETTER FROM THE BOARD

(6) General information on the parties

Information on the Company

The Company is a non-wholly-owned subsidiary of China Datang, and is the sole platform for the development of environmental protection and energy conservation business under China Datang Group, one of the five (5) major state wholly-owned power generation groups in the PRC. The principal business of the Group includes environmental protection facility concession operation, denitrification catalysts, environmental protection facilities engineering, water treatment business, energy conservation business and renewable energy engineering business.

Information on Datang Finance

Datang Finance has been duly established in the PRC as a non-bank financial institution in May 2005, and is a non-wholly owned subsidiary of China Datang. It is regulated by CBRC and in compliance with laws and regulations concerning the non-bank financial institutions. Its primary business scopes are as follows: providing consultancy and agency service in relation to financial advisory, credit, visa and related services; assisting intra-group members in realising receipt and payment of transaction amount; providing approved insurance agency services; serving as guarantees for loans of intra-group members; handling entrusted loan and entrusted investment between intra-group members; handling bill acceptances and discounting for intra-group members; conducting internal transfer settlement between intra-group members and designing of corresponding settlement and liquidation plan; absorbing deposits from intra-group members; dealing with loan and financial leasing for intragroup members; dealing with inter-bank offered credit; issuing finance company bonds upon approval, underwrite corporate bonds of intra-group members, equity investments in financial institutions; and investment in negotiable securities, etc.

Information on China Datang

China Datang is a state-owned enterprise established in the PRC in April 2003 and is the controlling shareholder of the Company and Datang Finance. China Datang is primarily engaged in the development, investment, construction, operation and management of power energy; organisation of power (thermal) production and sales; manufacture, maintenance and commissioning of electric power equipment; power technology development and consultation; contracting and consulting of electric power engineering and environmental protection projects; development of renewable power; and self-operating and being an agent for import and export of any kind of goods and technology save for those where the import or export of the goods and technology are restricted or prohibited by national laws and regulations.

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LETTER FROM THE BOARD

(7) Opinions of the Directors

Mr. Jin Yaohua, Mr. Liu Chuandong, Mr. Liu Guangming and Mr. Liang Yongpan of the Company, being the Directors holding various positions with China Datang (please refer to page 42 of this circular for details), have abstained from voting on the Financial Services Agreement and the Continuing Connected Transactions at the Board meeting. Save as disclosed above, none of the Directors has any material interest in the Continuing Connected Transactions.

The Directors (excluding the Directors who are required to abstain, but including the independent non-executive Directors) are of the view that the Financial Services Agreement and the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Company on normal commercial terms; the Continuing Connected Transactions and Proposed Caps are fair and reasonable and are also in the interest of the Company and the Shareholders as a whole.

The Independent Board Committee has been formed by the Company to advise the Independent Shareholders in connection with the Deposit Services. Your attention is drawn to the letter from the Independent Board Committee on pages 24 to 25 of this circular, which contains their opinion and recommendations in respect of the Deposit Services and the Proposed Caps of the Deposit Services.

Orient Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the Deposit Services. Your attention is drawn to the letter from the Independent Financial Adviser on pages 26 to 38 of this circular, which set out the advice and recommendations of the Independent Financial Adviser to the Independent Board Committee and Independent Shareholders with respect to the Deposit Services and the Proposed Caps of the Deposit Services.

(8) Approval by the Independent Shareholders

In view of the interests of China Datang, which directly held approximately 78.17% of the issued share capital of the Company as at the Latest Practicable Date and thus is a connected person of the Company, in the Continuing Connected Transactions, China Datang and its associates (including China Datang Group Capital Holding Co., Ltd. (中國大唐集團資本控股有限公司)) are required to abstain from voting on the resolution to be proposed at the 2016 AGM to approve the Deposit Services. As at the date of this circular, to the best knowledge, information and belief of the Directors, save as disclosed in this circular, no other Shareholders will be required to abstain from voting in respect of the relevant resolution.

– 17 –

LETTER FROM THE BOARD

Special Resolution

11. Amendments to Articles of Association

A special resolution will be proposed at the 2016 AGM to approve the following amendments to the Articles of Association. The resolution was considered and approved by the Board at the 18th meeting of the first session of the Board.

According to the requirements of the “Notice of Accelerating the Inclusion of General Provisions into the Articles of Association of Central Level State-Owned Enterprises for Party Building” (《關於加快推進中央企業黨建工作總體要求納入公司章程有關事項的通知》) (Guo Zi Dang Wei Dang Jian [2017] No. 1), pursuant to the provisions of the Company Law of the PRC and the actual situation of the Company, the Company proposed below amendments to the Articles of Association, which are subject to approval at the 2016 AGM:

	Before amendment	After amendment
Article 11 (newly added)		In accordance with the provisions o f t h e C o n s t i t u t i o n o f t h e Communist Party of China (《中國共產黨章程》), the Company shall establish an organisation of the Communist Party of China (“Party Committee”). The Party Committee shall play a leading role and function as the political core of the Company, supervising its direction of development, overlooking the whole picture and facilitating implementation. The Company shall equip with sufficient staffs to manage party affairs and provide sufficient working expenses.
Article 116 (newly added)		The Board shall make inquiries with the Party Committee of the Company before making decisions on major issues of the Company.
Chapter 12 Party Committee (newly added)		Chapter 12 Party Committee

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LETTER FROM THE BOARD

	Before amendment	After amendment
Article 135 (newly added)		The Company shall establish the Party Committee consisting of a secretary and several other members. Eligible members of the Party Committee may be considered and appointed as members of the Board, the board of Supervisors and the m a n a g e m e n t t h r o u g h l e g a l procedures. Eligible members in the Board, the board of Supervisors and the management who are members of the Communist Party of China may be considered and appointed as members of the Party Committee in accordance with relevant requirements and procedures. Meanwhile, the discipline inspection committee shall be established as required.
Article 136 (newly added)		Pursuant to the Constitution of the Communist Party of China and other party rules, the Party Committee shall perform the following responsibilities: (1) to guarantee and supervise t h e i m p l e m e n t a t i o n o f guidelines and policies of the Party and the PRC g o v e r n m e n t w i t h i n t h e Company and implement the material strategic decisions of the Communist Party of China Central Committee and the State Council and make deployment for the relevant material works of the Party Committee of State-Owned Assets Supervision and Administration Commission of the State Council and the superior Party Committee;

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LETTER FROM THE BOARD

	Before amendment	After amendment
		(2) to insist on the combination of the principles of management of cadres by the Party and the selection of operation m a n a g e r s b y t h e B o a r d according to laws as well as the right of employment by the operation managers. The Party Committee shall consider and suggest on the candidates proposed by the Board or the general manager, or recommend candidates to the Board or the general m a n a g e r ; a n d , t o g e t h e r with the Board, conduct investigation on the proposed candidates and discuss jointly to provide opinions and suggestions thereon; (3) to study and discuss reform, development and stability of the Company, material operation and management matters and material matters with respect to the immediate interests of staff, and provide opinions and suggestions thereon; and (4) t o u n d e r t a k e t h e m a i n responsibility to overall and strictly administer the party, lead the Company’s ideological and political work, united front work, s p i r i t u a l c i v i l i z a t i o n construction, enterprise cultural construction and the work of organisations such as the labor union and the communist youth league, and lead the construction of the party conduct and of an honest and clean government and support the fulfillment of the supervision responsibility of the discipline inspection committee.

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LETTER FROM THE BOARD

	Before amendment	After amendment
Article 221 (the current Article 217)	Senior management members referred to in the Articles of Association include the general m a n a g e r , d e p u t y g e n e r a l managers, chief accountant, chief engineer, secretary of the Board and other senior management members appointed by the Board. References to “general manager”, “deputy general managers” and “chief accountant” in the Articles of Association are to “manager”, “vice manager” and “financial controller” in the Company Law.	Senior management members referred to in the Articles of Association include the general m a n a g e r , d e p u t y g e n e r a l managers, chief accountant, chief engineer,chief economist, secretary of the Board and other senior management members a p p o i n t e d b y t h e B o a r d . References to “general manager”, “deputy general managers” and “chief accountant” in the Articles of Association are to “manager”, “vice manager” and “financial controller” in the Company Law.

Save for the proposed amendments set out above, the other chapters and articles of the Articles of Association will remain unchanged and be renumbered after the newly added articles.

As advised by the PRC legal advisor of the Company, the proposed amendments to the Articles of Association, in particular, the establishment of the Party Committee, will be in no violation of the original articles in the Articles of Association, will not affect the functions of the Board of Directors and/or the Supervisory Board and will not prevent the Board of Directors and/or the Supervisory Board from performing its respective duties.

As confirmed by the PRC legal advisor of the Company, the proposed amendments to the Articles of Association conform with applicable laws and regulations in the PRC.

III. 2016 AGM AND ITS METHOD OF VOTING

The 2016 AGM is proposed to be held at 2:00 p.m. on Friday, 30 June 2017 at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC by the Company to consider and, if thought fit, to pass the matters set out in the notice of the 2016 AGM. A proxy form and a reply slip have been dispatched to the Shareholders in accordance with the Listing Rules on 15 May 2017. The notice of the 2016 AGM is set out on pages 53 to 56 of this circular.

Whether or not you intend to attend and/or vote at the 2016 AGM, you are requested to complete and return the proxy form in accordance with the instruction printed thereon.

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LETTER FROM THE BOARD

If you intend to attend the 2016 AGM (in person or by proxy), you are required to complete and return the accompanying reply slip to the H Share Registrar (for the holders of H Shares) or the Company’s board office in the PRC (for the holders of Domestic Shares) on or before Friday, 9 June 2017. If the number of voting Shares represented by the Shareholders who intend to attend the meeting reaches no less than one half of the total number of the Company’s voting Shares, the Company may hold the 2016 AGM. If not, the Company shall within five days inform the Shareholders again, by public announcement or otherwise required in the Articles of Association, of the matters to be considered as well as the date and place of the meeting. Upon such notification, the Company may hold the 2016 AGM.

If you intend to appoint a proxy to attend the 2016 AGM, you are required to complete and return the accompanying proxy form in accordance with the instructions printed thereon. For the holder of H Shares, the proxy form should be returned to the H Share Registrar, Computershare Hong Kong Investor Services Limited, and for the holder of Domestic Shares, the proxy form should be returned to the Company’s board office in the PRC in person or by post as soon as possible and in any event not less than 24 hours before the time appointed for holding the 2016 AGM or any adjourned meeting thereof.

Completion and return of the form(s) of proxy will not preclude you from attending and voting in person at the 2016 AGM should you so wish and completion and return of the reply slip do not affect the right of a Shareholder to attend and vote at the 2016 AGM.

Pursuant to Rule 13.39(4) of the Listing Rules, all votes of the Shareholders at the general meetings must be taken by poll. The chairman of the meeting will therefore demand a poll for every resolution put to the vote of the 2016 AGM pursuant to Article 80 of the Articles of Association.

On a poll, every Shareholder present in person or by proxy (or being a corporation by its duly authorised representative) shall have one vote for each Share registered in his/her name in the register of members of the Company. A Shareholder entitled to more than one vote needs not use all his/her votes or cast all the votes he/she has in the same manner.

IV. CLOSURE OF REGISTER OF MEMBERS

In order to ascertain the entitlements of the Shareholders to attend the 2016 AGM, the register of members of the Company will be closed from Tuesday, 30 May 2017 to Friday, 30 June 2017 (both days inclusive), during which period no transfer of Shares will be effected. To be eligible to attend and vote at the 2016 AGM, all transfer documents must be lodged with the H Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for the holders of H Shares), or the Company’s board office in the PRC at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, 100097 (for the holders of Domestic Shares) no later than 4:30 p.m. on Monday, 29 May 2017.

– 22 –

LETTER FROM THE BOARD

In order to ascertain the entitlements of the Shareholders to receive the Proposed 2016 Final Dividend, the register of members of the Company will be closed from Thursday, 6 July 2017 to Tuesday, 11 July 2017 (both days inclusive), during which period no transfer of Shares will be effected. To be eligible to receive the Proposed 2016 Final Dividend, all transfer documents must be delivered to the H Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for the holders of H Shares), or the Company’s board office in the PRC at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, 100097 (for the holders of Domestic Shares) no later than 4:30 p.m. on Wednesday, 5 July 2017.

V. RECOMMENDATION

The Board (excluding the Directors who are required to abstain, but including independent non-executive Directors) considers that each resolution to be proposed at the 2016 AGM is in the interests of the Company and the Shareholders as a whole, and accordingly, recommends the Shareholders (for the resolutions other than the one in relation to the Financial Services Agreements) or the Independent Shareholders (for the resolution in relation to the Financial Services Agreement) to vote in favour of all the resolutions to be proposed at the 2016 AGM.

Yours faithfully,

By order of the Board

Datang Environment Industry Group Co., Ltd.* Jin Yaohua Chairman

For identification purpose only

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [47 x 48] intentionally omitted <==

**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1272)

15 May 2017

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

We refer to the circular issued by the Company to the Shareholders dated 15 May 2017 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meaning in this letter unless the context otherwise requires.

Under the Listing Rules, the Deposit Services constitute continuing connected transaction and major transaction for the Company and are subject to the approval of the Independent Shareholders at the 2016 AGM.

We have been appointed as members of the Independent Board Committee to consider the terms of the Deposit Services and to advise the Independent Shareholders on whether the Deposit Services and the terms of the Deposit Services (details set out in the Letter from the Board in the Circular) are on normal commercial terms and in ordinary and usual course of business of the Group and are fair and reasonable, whether the Deposit Services are in the interests of the Company and the Shareholders as a whole and whether the Proposed Caps of the Deposit Services are fair and reasonable.

Orient Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the same.

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the Letter from the Board and the Letter from Independent Financial Adviser as set out in the Circular. Having considered the information set out in the Letter from the Board as well as the major factors, reasons and opinion stated in the Letter from the Independent Financial Adviser, we are of the view that the terms of the Deposit Services are on normal commercial terms, in ordinary and usual course of business of the Group and fair and reasonable. We also believe that the Deposit Services are in the interests of the Company and the Shareholders as a whole. We also consider that the terms of the Deposit Services and the Proposed Caps for the average daily deposit balance are fair and reasonable. Our view related to fairness and reasonableness is necessarily based on information, facts and circumstances currently prevailing.

Accordingly, we advise the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the 2016 AGM to approve the transactions and Proposed Caps under the Deposit Services.

Yours faithfully, for and on behalf of

Independent Board Committee

Datang Environment Industry Group Co., Ltd.*

Mr. Ye Xiang Mr. Mao Zhuanjian Independent non-executive Independent non-executive Director Director

Mr. Gao Jiaxiang Independent non-executive Director

For identification purpose only

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter of advice from Orient Capital to the Independent Board Committee and the Independent Shareholders in respect of the Deposit Services contemplated under the Financial Services Agreement for the purpose of incorporation in this circular.

Orient Capital (Hong Kong) Limited

香港中環皇后大道中100號28樓–29樓 28/F–29/F, 100 Queens’s Road Central, Hong Kong Tel: (852) 3519 1188 Fax: (852) 2259 9211 Website: www. dfzq.com.hk 證監會持牌法團編號 CE No.: BDN128

15 May 2017

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs/Madams,

CONTINUING CONNECTED TRANSACTIONS FINANCIAL SERVICES AGREEMENT

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Deposit Services (the “ Deposit Services ”) contemplated under the Financial Services Agreement (including the Proposed Caps of the Deposit Services), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company dated 15 May 2017 (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise. We recommend the Independent Board Committee to advise the Independent Shareholders to read this Circular carefully before they decide to vote for or against the Financial Services Agreement (including the Proposed Caps of the Deposit Services).

On 24 April 2017, the Company entered into the Financial Services Agreement with Datang Finance for a term commencing from the effective date of the Financial Services Agreement, which is the date on which the Financial Services Agreement is approved by the Shareholder at 2016 AGM, to 31 December 2019, pursuant to which Datang Finance has agreed to provide the Group with loan services, Deposit Services and other financial services subject to the terms and conditions provided therein. The Deposit Services thereunder (including the Proposed Caps of the Deposit Services) are conditioned on the approval by the Independent Shareholders at the 2016 AGM.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Letter from the Board, as China Datang directly and indirectly holds approximately 78.96% of the issued share capital of the Company as at the Latest Practicable Date, it is a controlling shareholder as defined under the Listing Rules and thus a connected person of the Company. Datang Finance is a subsidiary of China Datang, and is therefore a connected person of the Company. Accordingly, the Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company under the Listing Rules. As each of the percentage ratio(s) (as defined in Rule 14.07 of the Listing Rules) applicable to the Deposit Services is more than 5%, the Deposit Services are subject to the reporting, annual review, announcement, and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Company will disclose relevant details in the annual report and accounts of the Company to be published in the next year pursuant to the relevant requirements under Rule 14A.71 of the Listing Rules. In addition, as one or more of the applicable percentage ratios for the Proposed Cap of the Deposit Services exceed 25% but less than 75%, the Deposit Services contemplated under the Financial Services Agreement also constitute a major transaction of the Company under Chapter 14 of the Listing Rules. As China Datang is considered to be materially interested in Financial Services Agreement and the transactions contemplated thereunder (including the Proposed Caps of the Deposit Services), China Datang as well as its respective associates will abstain from voting on the resolutions approving the Financial Services Agreement and the transactions contemplated thereunder (including the Proposed Caps of the Deposit Services).

We have been appointed as the independent financial adviser to advise the Independent Board Committee, which comprises all the independent non-executive Directors, namely Mr. Ye Xiang, Mr. Mao Zhuanjian and Mr. Gao Jiaxiang, and the Independent Shareholders in respect of the Deposit Services contemplated under the Financial Services Agreement and the Proposed Caps of the Deposit Services, and to make recommendations as to, among others, whether the Deposit Services contemplated under the Financial Services Agreement and the Proposed Caps of the Deposit Services are conducted in the ordinary and usual course of business of the Company, are on normal commercial terms similar to or more favourable than those offered by independent third parties, are fair and reasonable and in the interest of the Company and the Shareholders as a whole and as to voting in respect of the relevant resolutions at the 2016 AGM.

Orient Capital is a licensed corporation to carry out regulated activities of advising on corporate finance under the SFO. Orient Capital and its affiliates, whose ordinary business involves the trading of, dealing in and the holding of securities, may be involved in the trading of, dealing in, and the holding of the securities of the Company for client accounts.

During the past two years, Orient Capital had no past engagement with the Group or any relationship or interest with the Group or any other parties that could reasonably be regarded as relevant to the independence of Orient Capital as the Independent Financial Adviser. As at the Latest Practicable Date, we were independent from and not connected with the Group under Rule 13.84 of the Listing Rules, and accordingly, are qualified to give independent advice to the Independent Board Committee and the Independent Shareholders in respect of the Deposit Services contemplated under the Financial Services Agreement and the Proposed Caps of the Deposit Services.

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In formulating our opinion and recommendation, we have reviewed, among other things: (i) the Financial Services Agreement; (ii) the announcement of the Company dated 24 April 2017 (the “ Announcement ”) with respect to the Financial Services Agreement; (iii) the annual report of the Company for the year ended 31 December 2016 (the “ 2016 Annual Report ”); and (iv) prospectus of the Company dated 3 November 2016 (“ Prospectus ”). We have relied, without assuming any responsibility for independent verification, on the information, opinions and facts supplied and representations made to us by the Company, who has assumed full responsibility for the accuracy of the information contained in the Circular and that any information and representations made to us are true, accurate and complete in all material respects as at the date hereof and that they may be relied upon. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company. We have discussed with the management of the Company (the “ Management ”) regarding their plans and prospects of the Company. We have also relied on certain information available to the public and have assumed such information to be accurate and reliable, and we have not independently verified the accuracy of such information. We have studied the relevant market and other conditions and trends relevant to the terms of the Deposit Services. We have also assumed that statements and representations made or referred to in the Circular were accurate at the time they were made and continue to be accurate up to the date of the 2016 AGM. We consider that we have reviewed sufficient information to reach an informed view in order to provide a reasonable basis for our advice. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the business, affairs of future prospects of the Company. Our advice was necessarily based on financial, economic, market and other conditions in effect, and the information made available to us, as at the Latest Practicable Date. As the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, we have not been involved in the negotiations in respect of the terms of the Financial Services Agreement (including the Deposit Services and the Proposed Caps of the Deposit Services).

PRINCIPAL FACTORS AND REASONS CONSIDERED

The principal factors and reasons we have taken into account in assessing the Deposit Services contemplated under the Financial Services Agreement (including the Proposed Caps of the Deposit Services) in giving our recommendation to the Independent Board Committee and the Independent Shareholders are set out below:

Information on the Company

According to the Letter from the Board, the Company is a non-wholly owned subsidiary of China Datang and is the sole platform for the development of environmental protection and energy conservation business under China Datang Group, one of the five major state wholly-owned power generation groups in the PRC. The principal business of the Group includes environmental protection facility concession operation, denitrification catalysts, environmental protection facilities engineering, water treatment business, energy conservation business and renewable energy engineering business.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the extract of the consolidated financial information of the Group for the two years ended 31 December 2016 as extracted from the 2016 Annual Report:

	For the year ended	For the year ended
	31 December 2016	31 December 2015
	RMB’000	RMB’000
	(audited)	(audited)
Revenue	8,156,469	8,609,588
Profit for the year	1,084,730	750,309
	As at	As at
	31 December 2016	31 December 2015
	RMB’000	RMB’000
	(audited)	(audited)
Total Assets	17,935,540	13,978,827

As depicted by the above table, the Group recorded revenue of approximately RMB8,156 million for the year ended 31 December 2016, representing a decrease of approximately 5.3% as compared to that for the year ended 31 December 2015.

The profit of the Group increased approximately RMB334 million, or approximately 44.5% as compared to that for the year ended 31 December 2015.

The total asset of the Group increased approximately RMB3,957 million, or approximately 28.3% as compared to that as at 31 December 2015.

Information on Datang Finance

According to the Letter from the Board, Datang Finance has been duly established in the PRC as a nonbank financial institution in May 2005, and is a non-wholly-owned subsidiary of China Datang. It is regulated by CBRC and in compliance with laws and regulations concerning the non-bank financial institutions. Its primary business scopes are as follows: providing consultancy and agency service in relation to financial advisory, credit, visa and related services; assisting intra-group members in realising receipt and payment of transaction amount; providing approved insurance agency services; serving as guarantees for loans of intra-group members; handling entrusted loan and entrusted investment between intra-group members; handling bill acceptances and discounting for intra-group members; conducting internal transfer settlement between intra-group members and designing of corresponding settlement and liquidation plan; absorbing deposits from intra-group members; dealing with loan and financial leasing

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

for intragroup members; dealing with inter-bank offered credit; issuing finance company bonds upon approval, underwrite corporate bonds of intra-group members, equity investments in financial institutions; and investment in negotiable securities, etc.

Information on China Datang

According to the Letter from the Board, China Datang is a state-owned enterprise established in the PRC in April 2003 and is the controlling shareholder of the Company and Datang Finance. China Datang is primarily engaged in the development, investment, construction, operation and management of power energy; organisation of power (thermal) production and sales; manufacture, maintenance and commissioning of electric power equipment; power technology development and consultation; contracting and consulting of electric power engineering and environmental protection projects; development of renewable power; and self-operating and being an agent for import and export of any kind of goods and technology save for those where the import or export of the goods and technology are restricted or prohibited by national laws and regulations.

Principal Terms of the Deposit Services

Set out below are the principal terms of the Deposit Services contemplated under the Financial Services Agreement:

Date: 24 April 2017

Parties: (i) the Company; and

(ii) Datang Finance

Term: From the effective date of the Financial Services Agreement, which is the date on which the Financial Services Agreement is approved by the Shareholders at 2016 AGM, to 31 December 2019.

Major Terms Regarding the Deposit Services:

We have reviewed the Financial Services Agreement and listed out below the key terms regarding the Deposit Services:

i) The Group can make deposits with Datang Finance at its discretion.
ii) The daily balance (including any interest accrued therefrom) of the Group’s deposits at Datang Finance for each of the years ending 31 December 2017, 31 December 2018 and 31 December 2019 shall not exceed RMB4 billion.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing Policy Regarding the Deposit Services

According to the Letter from the Board and the Financial Services Agreement, the pricing policy regarding the Deposit Services is within the interval for the floating deposit and loan interests rates published by the PBOC and by reference to the benchmark interest rates published by the PBOC, the interest rate for the Group’s deposits with Datang Finance shall not be lower than the equivalent deposit interest rate as provided by other financial institutions in the PRC.

Per discussion with the Management, the Company will adopt, among others, the following internal control and risk management measures (the “ Measures ”) to mitigate the financial risks which may be exposed to the Company, to ensure that the individual deposit transactions with Datang Finance will be conducted on normal commercial terms and within the framework of the Deposit Services contemplated under the Financial Services Agreement and safeguard the interests of the Company and the Shareholders:

i) before entering into any transactions with Datang Finance, the Company will obtain and review quotes (i.e. savings interest rate) from at least four other independent financial institutions and the then savings interest rate, negotiated savings interest rate or loan interest rate as published by PBOC. In the event that the Company notes the then negotiated savings interest rate as announced by PBOC is less than the then savings interest rate as published by PBOC or the then savings interest rate as offered by other independent financial institutions in the PRC, the Company will enter into a supplemental agreement with Datang Finance to ensure the deposit interest rate of the Deposit Services will be no less favourable than the then savings interest rate as published by PBOC or offered by any other independent financial institution in the PRC. In the event that the Company notes that the actual deposit interest rate of the Deposit Services is less than the then negotiated savings interest rate as announced by PBOC or offered by any other independent financial institution in the PRC, the Company will require Datang Finance to compensate the differences to the Company;
ii) before placing deposit, the finance department of the Company will check the outstanding daily balance of the deposits placed with Datang Finance to avoid exceeding the Proposed Caps of the Deposit Services;
iii) on a monthly basis, the finance department of the Company will report to the management of the Company of any updates in relation to the Continuing Connected Transactions; and
iv) the independent non-executive Directors and the Company’s auditors will annually review the enforcement of the Continuing Connected Transactions under the Financial Services Agreement and provide annual confirmations in accordance with the Listing Rules that the Continuing Connected Transactions are conducted in accordance with the terms of the Financial Services Agreement, on normal commercial terms and are in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We concur with the view of the Management that the Measures are sufficient for the Company to monitor the transaction under the Deposit Services.

In light of the above, we are of the view that the principal terms of the Deposit Services contemplated under the Financial Services Agreement are on normal commercial terms, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned.

Reasons for and Benefit of the Deposit Services

According to the Letter from the Board, the Deposit Services will be conducted in the ordinary and usual course of business of the Company on normal commercial terms and on terms similar to or even more favourable than those available to the Company from independent third parties in the PRC. The Directors (including the independent non-executive Directors) are of the view that such transactions are beneficial to the Group and furthermore, the Group can earn interests or enjoy benefits through such transactions at the terms not less favourable to independent third parties.

According to the Letter from the Board, due to the long-term relationship among the Group, China Datang and China Datang Group, the Directors (including the independent non-executive Directors) consider that it is beneficial to the Company to enter into the Deposit Services with companies affiliated to China Datang. They are familiar with the Group’s business operation and requirement on the products and services, and will be able to respond more quickly and in a more cost efficient manner to the requirements that the Group may have as compared with other financial institutions unrelated to China Datang Group. Furthermore, as advised by the Management, as many of the entities affiliated to China Datang obtain financial services provided by Datang Finance, and the major customers of the Group are entities affiliated to China Datang, it is more efficient for the Group to conduct business with its major customers with financial services provided by Datang Finance.

We have also noted that as at the Latest Practicable Date, China Datang held approximately 78.96% of the Company and it was the controlling shareholder of Datang Finance.

We noted from the 2016 Annual Report that the China Datang and its subsidiaries are major customers of the Company. We concur with the view of the Management that entering into the Deposit Services will able the Group to facilitate transactions with their major transaction counter parties in a more convenient and efficient manner given that most entities in the China Datang Group have bank accounts and deposits with Datang Finance, who provide settlement services, free of charge, for the Group with respect to payment for transactions between the Group and the China Datang Group.

According to the Financial Services Agreement and the Letter from the Board, as the customers of Datang Finance are limited to entities affiliated to China Datang and its subsidiaries under applicable laws and regulations, it reduces default risk and liquidity risk that Datang Finance may otherwise be exposed to if its customers include entities unrelated to China Datang. Moreover, the risk control measures as stated below adopted by Datang Finance are adequate to mitigate default risk and liquidity risk involved in receiving financial services from Datang Finance.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the Management, Datang Finance is required to operate in compliance with 《企業集團財務公司管理辦法》(the Administration of the Finance Companies of Enterprise Groups Procedures) (the “ Procedures* ”) issued by the CBRC. We noted that the Procedures set out certain compliance and risk control requirements/measures in relation to the operation of group financing companies, including but not limited to maintaining certain financial ratios at all times, reporting to the CBRC, audit, etc.

We understand that Datang Finance has implemented an effective internal control mechanism which is in compliance with the Procedures and relevant requirement by CBRC (Beijing Bureau) in relation to risk control ratios. The table below sets out the key financial ratio requirements of the Procedures and relevant requirement by CBRC (Beijing Bureau), and the respective financial ratios of Datang Finance for the two years ended 31 December 2016 and period from 1 January 2017 to 30 April 2017, respectively.

Key Financial ratios of Datang Finance

		1 January 2017–	1 January 2016–	1 January 2015–
Financial ratio	Requirements	30 April 2017	31 December 2016	31 December 2015
		(Approximate %)	(Approximate %)	(Approximate %)
		Lowest	during the respective period
Capital adequacy ratio	Not less than 10%	11.33%	11.94%	11.15%
		Highest	during the respective period
Inter-financial institution borrowing	Not more than 100%	71.11%	67.16%	51.72%
balances to total capital ratio
Total amount of outstanding guarantees	Not more than 100%	79.91%	83.75%	70.29%
to total capital ratio
long-term and short-term investment to	Not more than 70%	69%	68%	67%
total capital ratio
Self-owned fixed assets to total capital	Not more than 20%	2.42%	2.01%	2.48%
ratio

As shown in the table above, we note that Datang Finance complied with the relevant financial ratio requirements as set out in the Procedures and relevant requirement by CBRC (Beijing Bureau) for the period from 1 January 2015 to 30 April 2017. We have also reviewed the accountant’s reports of Datang Finance for three years ended 31 December 2016, respectively, which were submitted to the CBRC and we are not aware of any material negative information brought to our attention. As also confirmed by the Management that to the best of their knowledge, up to the Latest Practicable Date, there was no record of non-compliance with relevant laws and regulations of the PRC for Datang Finance.

As advised by the Management and according to the Finance Service Agreement, the Company has also procured Datang Finance to maintain the following guidelines (the “ Guidelines ”) in monitoring the transactions between the Group and Datang Finance under the Financial Services Agreement:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

i) Datang Finance will ensure the safe and stable operation of the fund management information system, which has undergone the security test in respect of connection to the online commercial banking and has reached the national security standards for commercial banks. The system is equipped with the model awarded with CA safety certificate to secure the funds of the Group;
ii) Datang Finance will ensure that it is in strict compliance with the risk monitoring indicators for financing companies issued by the CBRC and that its major regulatory indicators such as gearing ratio and liquidity ratio will also comply with the requirement of the CBRC; and
iii) Any balance in the Group’s deposits (after deducting the amount used for making entrusted loans and the loans made to the Group by Datang Finance) will be redeposited into one or more commercial banks in the PRC. The interests for the Group’s call deposits will be settled at the negotiated savings interest rate as announced by the PBOC, which is higher than the interest rate for call deposits that the Group currently secures from other PRC commercial banks.

We also understood from the Management that the China Datang has undertaken to the CBRC that in the event that Datang Finance is in urgent difficulty in making payment, the China Datang will raise Datang Finance’s capital accordingly based on actual need.

Having considered i) the interest rate under the Deposit Services will be made reference to the interest rate published by PBOC and shall not be less favourable to the similar interest rate the Group obtains from independent commercial banks in the PRC; ii) long business relationship between the Group and China Datang Group; iii) strict compliance of Datang Finance; iv) adequate internal control of Datang Finance; v) it is not mandatory for the Group to enter the Deposit Services with Datang Finance; and vi) The Group has to maintain deposits and other bank balances from time to time as part of its treasury activities and in order to satisfy its business needs in the ordinary and usual course of business, we concur with the view of the Directors that the entering into of the Deposit Services contemplated under the Financial Services Agreement are conducted in the ordinary and usual course of business of the Group, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Proposed Caps of the Deposit Services

Set out below are the Proposed Caps of the Deposit Services for the three years ending 31 December 2019:

	The Proposed Caps of the Deposit Services	The Proposed Caps of the Deposit Services	The Proposed Caps of the Deposit Services
	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2017	2018	2019
Maximum daily balances of the deposits
(including any interest accrued therefrom)	RMB4,000 million	RMB4,000 million	RMB4,000 million

To assess the fairness and reasonableness of the Proposed Caps of the Deposit Services, we have discussed with the Management regarding the basis of determination of the Proposed Caps of the Deposit Services as set out above. With reference to the Letter from the Board, the Proposed Caps of the Deposit Services have been determined after taking into account of the following factors:

i) The Increase of Cash and Cash Equivalent During the Consecutive Four (4) Years Ended 31 December 2016

After the adjustment of the IPO proceeds of approximately RMB1,817,917,000, the cash levels of the Group are as below:

Item	2013	2014	2015	2016*
	RMB’000	RMB’000	RMB’000	RMB’000
Cash and Cash equivalents	707,660	1,072,057	1,443,963	1,194,697

2016 figures were adjusted by deducting the IPO proceeds

According to the table above, we noted that CAGR of increase of cash and cash equivalents from 2013 to 2016 is approximately 19.1%. Based on our calculation, we noted that if the cash level keeps increasing at the rate of no lower than 19.1%, the expected cash level of the Group will reach approximately RMB2,000 million in 2019 and will reach approximately RMB4,000 million if the IPO proceeds (approximately RMB1,818 million) are counted together. In this regard, we concur with the view of the Management that the Proposed Caps of the Deposit Services are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

ii) The Anticipated Outstanding Balances of Deposits of the Group Based on the Cash Balance and Trade Receivables as at 31 December 2016

Set out below are (i) cash and cash equivalents; and (ii) trade and bill receivables of the Group as at 31 December 2016 and 31 December 2015 as extracted from the 2016 Annual Report, respectively:

(i) Cash and cash equivalents (ii) Trade and bills receivables Sum of (i) and (ii) (the “Sum”)	For the year ended 31 December 2016 RMB million 3,013 6,376 9,388	For the year ended 31 December 2015 RMB million 1,444 4,978
		6,422

The Sum increased from RMB6,422 million to RMB9,388 million is mainly due to the net proceeds from the IPO and the increase in revenue. According to the table above, the Proposed Caps of the Deposit Services for the year ending 31 December 2019 (i.e. RMB4,000 million) represents approximately 42.61% of the Sum as at 31 December 2016. As advised by the Management and according to the Financial Services Agreement, the Group can choose to make deposits with Datang Finance pursuant to terms and conditions under the Financial Services Agreement. In this regard, we concur with the view of the Management that the Proposed Caps of the Deposit Services are justifiable if the Company decides to deposit partially cash and cash equivalents as at 31 December 2016 and trade and bill receivables collected during 2017 in Datang Finance.

iii) Anticipated Loans from Datang Finance According to Expected Growth of the Group in Future

According to the Prospectus, we note that in order to maintain its leading position in the environmental protection and energy conservation for China’s electric power industry, the Group planned to continue to expand its desulfurization and denitrification facilities concession operations. The Group expected to put over 31GW of desulfurization and denitrification facilities into concession operation from 2016 to 2020. According to the 2016 Annual Report, as at 31 December 2016, the Group’s cumulative installed capacity in operation for desulfurization concession operations of the Group reached 33.56GW and the cumulative installed capacity in operation for denitrification concession operations reached 27.46GW, which means the cumulative installed capacity of the relevant facilities is expected to continue to increase in the following years.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the Letter from the Board in respect of the loan services (the “ Loan Services ”) contemplated under the Financial Services Agreement, Datang Finance will also provide Loan Services to the Group, which are exempt from reporting, announcement and independent shareholders’ approval requirements under Rule 14A.90 of the Listing Rules. Per discussion with the Management, as the Company has plans to continue to expand its existing facilities and invest in new business opportunities as to increase the return of the Shareholders, the expecting capital expenditure can be large and the Loan Services may serve this purpose.

Our View

Having considered that i) our analysis on future cash position of the Group based on historical cash balance of the Group; ii) the anticipated cash balance based on the cash balance and trade receivables of the Group as at 31 December 2016; and iii) expected growth of the Group and anticipated loans from Datang Finance, we concur with the view of the Management that the Proposed Caps of the Deposit Services are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

Listing Rules Implication

As China Datang directly and indirectly holds approximately 78.96% of the issued share capital of the Company as at the Latest Practicable Date, it is a controlling shareholder as defined under the Listing Rules and thus a connected person of the Company. Datang Finance is a subsidiary of China Datang, and is therefore a connected person of the Company. Accordingly, the Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company under the Listing Rules.

As each of the percentage ratio(s) (as defined in Rule 14.07 of the Listing Rules) applicable to the Deposit Services is more than 5%, the Deposit Services are subject to the reporting, annual review, announcement, and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Company will disclose relevant details in the annual report and accounts of the Company to be published in the next year pursuant to the relevant requirements under Rule 14A.71 of the Listing Rules. In addition, as one or more of the applicable percentage ratios for the Proposed Cap of the Deposit Services exceed 25% but less than 75%, the Deposit Services contemplated under the Financial Services Agreement also constitute a major transaction of the Company under Chapter 14 of the Listing Rules.

The Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 to 14A.59 of the Listing Rules pursuant to which (i) the values of the Deposit Services must be restricted by the Proposed Caps of the Deposit Services for the period concerned under the Financial Services Agreement; (ii) the terms of the Deposit Services contemplated under the Financial Services Agreement must be reviewed by the independent non-executive Directors annually; (iii) details of independent non-executive Directors’ annual review on the terms of the Financial Services Agreement must be included in the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Company’s subsequent published annual reports and financial accounts. Furthermore, it is also required by the Listing Rules that the auditors of the Company must provide a letter to the Board confirming, among other things, whether anything has come to their attention that causes them to believe that the Deposit Services (i) have not been approved by the Board; (ii) were not, in all material respects, in accordance with the pricing policies of the Group; (iii) were not entered into, in all material respects, in accordance with the relevant agreement governing the transactions; and (iv) have exceeded the Proposed Caps of the Deposit Services. In the event that the maximum amounts of the Deposit Services are anticipated to exceed the Proposed Caps of the Deposit Services, or that there is any proposed material amendment to the terms of the Financial Services Agreement, as confirmed by the Directors, the Company shall comply with the applicable provisions of the Listing Rules governing continuing connected transaction.

Given the above stipulated requirements for continuing connected transactions pursuant to the Listing Rules, we are of the view that there are adequate measures in place to monitor the Deposit Services and thus the interest of the Independent Shareholders would be safeguarded.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Deposit Services (including the Proposed Caps of the Deposit Services) contemplated under the Financial Services Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Deposit Services contemplated under the Financial Services Agreement and the Proposed Caps of the Deposit Services are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the 2016 AGM to approve the Deposit Services under the Financial Services Agreement and we recommend the Independent Shareholders to vote in favour of the relevant resolution(s) in this regard.

Yours faithfully, For and on behalf of

Orient Capital (Hong Kong) Limited Jiang Jun Managing Director

Ms. Jiang Jun is a licensed person of the Securities and Future Commission of Hong Kong and a Responsible Officer of Orient Capital to carry out Type 6 (advising on corporate finance) regulated activity as defined under the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong), and has over 9 years of experience in corporate finance in Hong Kong.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the three years ended 31 December 2014, 2015 and 2016 are disclosed in the 2016 annual report of the Company dated 28 April 2017. There was no qualified audit opinion expressed on the financial statements of the Group for the three years ended 31 December 2014, 2015 and 2016.

The said 2016 annual report of the Company are published on both the website of the Stock Exchange ( http://www.hkexnews.hk ) and the website of the Company ( www.dteg.com.cn ).

2. INDEBTEDNESS

The Group’s borrowings amounted to RMB4,195.9 million, none of which was secured, as at 30 April 2017, being the latest practicable date for the purpose of the indebtedness statement prior to the printing of this circular. Save as disclosed above and apart from intra-group liabilities, the Group did not have any outstanding debt securities issued and outstanding or authorised or otherwise created but unissued, term loans, other borrowings or indebtedness in the nature of borrowing including bank overdrafts, liabilities under acceptances (other than normal trade bills), acceptance credits, material hire purchase commitments, mortgages and charges, material contingent liabilities and guarantees outstanding. The Directors confirm that there was no material change in the indebtedness of the Group since 30 April 2017 up to the date of this circular.

3. WORKING CAPITAL

Taking into account the financial resources available to the Group, including cash and cash equivalents, cash generated from operations and unutilised financial facilities, the Directors are of the view that, the Group will have sufficient working capital for its present requirements, which is for at least 12 months from the date of this circular, in the absence of unforeseeable circumstances.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group’s business primarily focuses on the environmental protection and energy conservation for coal-fired power plant. Looking forward, the Group faces both opportunities and challenges.

The Group enjoys certain advantages. On one hand, Mr. Li Keqiang, the Premier of the State Council of the PRC, has clearly highlighted the importance to cultivate energy conservation and environmental protection industry to become one of the pillar industries of the national economy. A series of supporting policies and regulations have been consecutively promulgated to support emerging business such as water treatment, energy conservation, soil treatment, indicating promising future prospects. On the other hand, as the Paris Agreement (《巴黎協定》)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

has officially come into effect and increasing weights have been placed on the Belt and Road Initiative , there will be huge potential for the development of the environmental protection and energy conservation markets in the Belt and Road Initiative countries, which will bring enormous opportunities for a leapfrog development of the Group.

The Group also faces challenges. On one hand, if the utilisation hours of coal-fired power generation units continue to decrease, the profitability of the Group’s concession operation may be adversely affected. On the other hand, if the price of coal continues to maintain at a high level, it will hinder the operation of coal-fired power plants who are the major customers of the Group, and may in turn indirectly affect the business operations of the Group.

By leveraging its experience in the environmental protection and energy conservation business in countries such as India and Thailand, the Group will capture the market opportunities emerging from the Paris Agreement and the Belt and Road Initiative , relying on its management experience, reserve of technologies and comprehensive capability in the environmental protection and energy conservation industry as well as its first-mover advantage in the overseas markets. The Group will continue to devote itself in expanding the market of environmental protection and energy conservation business in such Belt and Road Initiative countries and promoting its advantageous business, such as concession operation, denitrification catalysts and environmental protection facilities engineering, to overseas markets, aiming to achieve a leapfrog development of the Group’s business.

The Group will continue to expand the scale of its business with competitive edges, such as concession operation, denitrification catalysts and environmental protection facilities engineering, and increase the market presence to keep enhancing the management and profitability of such business. The Group will continue to strengthen and optimise its concession operation business following the “ four first-classes ” standards and further improve its professionalised management in order to reduce cost and improve efficiency. For catalyst business, the Group will accelerate its regeneration and post treatment business, develop its big data center and establish an industry value chain covering the full life-cycle management services and the entire denitrification catalyst business. For environmental protection facilities engineering business, the Group will commence optimised design and proposal benchmarking and reinforce cost control to efficiently reduce the cost of construction of engineering projects.

The Group will actively seize the opportunities arising from the implementation of various policies and regulations, including the Soil Pollution Prevention Action Plan (《土壤污染防治行動計劃》 the Law on Water Pollution Prevention and Control (Amendment Draft) (《水污染防治法（修訂草案)》), the Law on Environmental Protection Tax (《環境保護稅法》) and the 13th Five-Year Comprehensive Action Plan for Energy Conservation and Emission Reduction (《“十三五”節能減排綜合工作方案》). The Group will foster its core technologies and products in respective fields, innovate business models and development mechanisms, and promote the development of business, such as water treatment operation, EMC and environmental remediation.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deeply believing in the concept that innovation drives development, the Group will accelerate the establishment of its innovative platform for technology, and continue to construct various workstations, technology centers and pilot bases. The Group will also introduce the system of chief expert and commit more resources to the training and development of talents, aiming to develop their full potential and place them in suitable positions. The Group will stay abreast of the latest technology trends in order to invest extensively in the research and development and commercialisation of such advanced technologies in the industry.

5. EFFECT OF THE DEPOSIT SERVICES ON THE EARNINGS AND ASSETS AND LIABILITIES OF THE GROUP

The Group expects that the Deposit Services under the Financial Services Agreement will not have any material effect on its earnings, assets or liabilities.

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

1. RESPONSIBILITY STATEMENT

This document, 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 document is accurate and complete in all material aspects and not misleading or deceptive, and there are no other matters, the omission of which would make any statement herein or this document misleading.

2. DISCLOSURE OF INTERESTS AND CONFIRMATIONS

(1) as at the Latest Practicable Date, none of the Directors, Supervisors or senior management of the Company had any interest or short positions in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO), which are 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 and short positions which he is taken or deemed to have under such provision of the SFO); or are required pursuant to section 352 of the SFO to be entered in the register referred to therein, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers;
(2) the Company has not granted its Directors, Supervisors, senior management of the Company or their respective spouses or children below 18 any rights to subscribe for its equity securities or debt securities;
(3) as at the Latest Practicable Date, four (4) Directors held the following positions with China Datang: (a) Mr. Jin Yaohua held the position as a deputy general manager of China Datang; (b) Mr. Liu Chuandong held the position as the chief accountant of China Datang; (c) Mr. Liu Guangming held the position as the director of capital operation and property management department of China Datang; and (d) Mr. Liang Yongpan held the position as the director of safety production department of China Datang. Save as disclosed above, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group since 31 December 2016, being the date to which the latest published audited annual financial statements of the Company were made up, and which was subsisting as at the Latest Practicable Date and significant in relation to the business of the Group;
(4) none of the Directors had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group, since 31 December 2016, being the date to which the latest published audited annual financial statements of the Company were made up;

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

(5) save as disclosed in the section “Interest of Directors in Competing Business” of Appendix II to this circular, none of the Directors or, so far as is known to them, any of their respective associates was interested in any business (apart from the Group’s business) which competes or is likely to compete either directly or indirectly with the Group’s business (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controlling shareholder);
(6) the Directors are not aware of any material adverse change in the financial or trading positions of the Company since 31 December 2016, the date to which the latest published audited annual financial statements of the Company were made up;
(7) none of the Directors had entered into any service contract with the Company or any member of the Group (excluding contracts expiring or terminable by the employer within one year without payment of compensation (other than statutory compensation)); and
(8) the Board confirms that, after making all reasonable enquires and to the best of their knowledge, information and belief, there are no voting trust or other agreement or arrangement or understanding (other than an outright sale) entered into by or binding upon any Shareholders, or any obligation or entitlement of any Shareholders as at the Latest Practicable Date, whereby such Shareholders have or may have temporarily or permanently passed control over the exercise of the voting right in respect of his Shares, either generally or on a case-by-case basis.

3. INTERESTS OF DIRECTORS IN COMPETING BUSINESS

As at the Latest Practicable Date, Mr. Liu Guangming and Mr. Liang Yongpan, two (2) nonexecutive Directors who also acted as non-executive directors of Datang Renewable (a subsidiary of China Datang and listed on the Main Board of the Stock Exchange (stock code: 1798)) and directors of Datang Huayin (a subsidiary of China Datang and listed on the Shanghai Stock Exchange (stock code: 600744)). Neither of Mr. Liu and Mr. Liang is involved in daily operations of Datang Renewable or Datang Huayin. As at the Latest Practicable Date, Datang Renewable held interests in EMC business and wind power EPC business that competes with Our Principal Business (as defined in the Prospectus), and Datang Huayin held interests in EMC business and energy conservation EPC business that competes with Our Principal Business. For details, please refer to the section headed “Relationship with Our Controlling Shareholder” in the Prospectus.

Mr. Liu Guangming and Mr. Liang Yongpan will abstain from voting for decision making involving any competing business with Datang Renewable or Datang Huayin. Even if both of them simultaneously abstain from voting, there will still remain seven (7) Directors (including two nonexecutive Directors, two (2) executive Directors and three (3) independent non-executive Directors) in the Board which will enable effective decision makings.

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

Save as disclosed in this circular, our Directors confirm that, as of the Latest Practicable Date, none of the Directors or their close associates had any direct or indirect interest in any business which competes or might compete with Our Principal Business.

4. SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS HOLDING DISCLOSABLE INTERESTS IN THE COMPANY

As at the Latest Practicable Date, to the best of the Directors’ knowledge, having made all reasonable enquiry, the following persons (other than the Directors, Supervisors or chief executive of the Company) had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO and, which were entered in the register required to be kept by the Company pursuant to Section 336 of the SFO:

			Number
			of Shares/
			underlying	Percentage in the	Percentage
			Shares directly	relevant class of	in the total
Name of Shareholders	Class of Shares	Capacity	or indirectly held	Share capital(1)	Share capital(2)
			(Shares)	(%)	(%)
China Datang	Domestic Shares	Beneficial owner	2,343,245,800	100	78.96
			(Long position)
Anbang Investment Holdings Co., Limited	H Shares	Beneficial owner	120,540,000	19.31	4.06
(安邦投資控股有限公司)(3)			(Long position)
Anbang Group Holdings Co., Limited	H Shares	Interest in controlled	120,540,000	19.31	4.06
(安邦集團控股有限公司)(3)		corporation	(Long position)
Anbang Life Insurance Co., Ltd.	H Shares	Interest in controlled	120,540,000	19.31	4.06
(安邦人壽保險股份有限公司)(3)		corporation	(Long position)
Anbang Insurance Group Co., Ltd.	H Shares	Interest in controlled	120,540,000	19.31	4.06
(安邦保險集團股份有限公司)(3)		corporation	(Long position)
China Chengtong Investment Company	H Shares	Beneficial owner	61,557,000	9.86	2.07
Limited(4)			(Long position)
China Chengtong Holdings Group Ltd.(4)	H Shares	Interest in controlled	61,557,000	9.86	2.07
		corporation	(Long position)

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

			Number
			of Shares/
			underlying	Percentage in the	Percentage
			Shares directly	relevant class of	in the total
Name of Shareholders	Class of Shares	Capacity	or indirectly held	Share capital(1)	Share capital(2)
			(Shares)	(%)	(%)
China Energy Engineering Corporation	H Shares	Beneficial owner	61,557,000	9.86	2.07
Limited (中國能源建設集團有限公司)			(Long position)
State Grid International Development	H Shares	Beneficial owner	61,467,000	9.85	2.07
Limited (國家電網國際發展有限公司)(5)			(Long position)
State Grid Corporation of China	H Shares	Interest in controlled	61,467,000	9.85	2.07
(國家電網公司)(5)		corporation	(Long position)
Three Gorges Capital Holdings Co., Ltd.	H Shares	Beneficial owner	59,506,000	9.53	2.01
(三峽資本控股有限責任公司)(6)			(Long position)
China Three Gorges Corporation	H Shares	Interest in controlled	59,506,000	9.53	2.01
(中國長江三峽集團公司)(6)		corporation	(Long position)
National Council for Social Security Fund	H Shares	Beneficial owner	56,754,200	9.09	1.91
			(Long position)
China Huaneng Group Hong Kong Limited	H Shares	Beneficial owner	49,002,000	7.85	1.65
(中國華能集團香港有限公司)(7)			(Long position)
China Huaneng Group	H Shares	Interest in controlled	49,002,000	7.85	1.65
(中國華能集團公司)(7)		corporation	(Long position)
China Huadian Hong Kong Limited	H Shares	Beneficial owner	48,628,000	7.79	1.64
(中國華電香港有限公司)(8)			(Long position)
China Huadian Corporation	H Shares	Interest in controlled	48,628,000	7.79	1.64
(中國華電集團公司)(8)		corporation	(Long position)
Taiping General Insurance Co., Ltd.	H Shares	Beneficial owner	41,038,000	6.57	1.38
(太平財產保險有限公司)(9)			(Long position)

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

			Number
			of Shares/
			underlying	Percentage in the	Percentage
			Shares directly	relevant class of	in the total
Name of Shareholders	Class of Shares	Capacity	or indirectly held	Share capital(1)	Share capital(2)
			(Shares)	(%)	(%)
China Taiping Insurance Holdings Company	H Shares	Interest in controlled	41,038,000	6.57	1.38
Limited (中國太平保險控股有限公司)(9)		corporation	(Long position)
China Taiping Insurance (HK) Company	H Shares	Interest in controlled	41,038,000	6.57	1.38
Limited (中國太平保險集團（香港）		corporation	(Long position)
有限公司)(9)
China Taiping Insurance Group Ltd.	H Shares	Interest in controlled	41,038,000	6.57	1.38
(中國太平保險集團有限責任公司)(9)		corporation	(Long position)
China Life Franklin Asset Management Co.,	H Shares	Beneficial owner	41,038,000	6.57	1.38
Limited (中國人壽富蘭克林資產管理有			(Long position)
限公司)(10)
China Life Asset Management Company	H Shares	Interest in controlled	41,038,000	6.57	1.38
Limited (中國人壽資產管理有限公司)(10)		corporation	(Long position)
China Life Insurance Company Limited	H Shares	Beneficial owner	20,519,000	3.29	0.69
(中國人壽保險股份有限公司)(10)			(Long position)
		Interest in controlled	41,038,000	6.57	1.38
		corporation	(Long position)
China Life Insurance (Group) Company	H Shares	Beneficial owner	41,038,000	6.57	1.38
(中國人壽保險（集團）公司)(10)			(Long position)
		Interest in controlled	20,519,000	3.29	0.69
		corporation	(Long position)
		Interest in controlled	41,038,000	6.57	1.38
		corporation	(Long position)

– 46 –

GENERAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

(1) The calculation is based on the percentage of shareholding in a total of 2,343,245,800 Domestic Shares and a total of 624,296,200 H Shares respectively as at the Latest Practicable Date.
(2) The calculation is based on the percentage of shareholding in a total of 2,967,542,000 Shares as at the Latest Practicable Date.
(3) Anbang Investment Holdings Co., Limited is a wholly-owned subsidiary of Anbang Group Holdings Co., Limited. Anbang Group Holdings Co., Limited is a wholly-owned subsidiary of Anbang Life Insurance Co., Ltd., which is wholly-owned by Anbang Insurance Group Co., Ltd..
(4) China Chengtong Investment Company Limited is a wholly-owned subsidiary of China Chengtong Holdings Group Ltd..
(5) State Grid International Development Limited is a wholly-owned subsidiary of State Grid Corporation of China.
(6) Three Gorges Capital Holdings Co., Ltd. is the wholly-owned subsidiary of China Three Gorges Corporation.
(7) China Huaneng Group Hong Kong Limited is a wholly-owned subsidiary of China Huaneng Group.
(8) China Huadian Hong Kong Company Limited is a wholly-owned subsidiary of China Huadian Corporation.
(9) Taiping General Insurance Co., Ltd. is a subsidiary of China Taiping Insurance Holdings Company Limited. China Taiping Insurance Holdings Company Limited is a subsidiary of China Taiping Insurance (HK) Company Limited, which is a wholly-owned subsidiary of China Taiping Insurance Group Ltd..
(10) China Life Asset Management Company Limited is a controlling shareholder of China Life Franklin Asset Management Co., Limited. China Life Asset Management Company Limited is a subsidiary of China Life Insurance Company Limited, which is controlled by China Life Insurance (Group) Company.

Save as disclosed above, as at the Latest Practicable Date, to the best knowledge of the Directors, the Directors were not aware of any persons who had interests and/or short positions in the Shares or underlying Shares which would be required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and which were entered in the register required to be kept by the Company pursuant to section 336 of the SFO.

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

5. QUALIFICATION EXPERT AND CONSENT

The following are the qualifications of the experts who have provided opinions or advice contained in this circular:

Name

Qualification

Orient Capital (Hong Kong) Limited

A corporation licensed to conduct type 6 (advising on corporate finance) regulated activities under the SFO

Zhong Lun Law Firm

PRC legal advisor

(1) As at the Latest Practicable Date, each of the experts listed above did not hold any beneficial interest in the share capital of any member of the Group, nor did it have the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
(2) Each of the experts listed above has given and has not withdrawn its written consent to the issue of this circular with inclusion of its letter (as the case may be) and the reference to its name included herein in the form and context in which they currently appear.
(3) As at the Latest Practicable Date, each of the experts did not have any interest in any assets which have been, since 31 December 2016 (being the date to which the latest published audited annual accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.
(4) The letter and recommendation given by Orient Capital are given as of the date of this circular for incorporation herein.

6. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business of the Group, were entered into by the Company or its subsidiaries during the period commencing two years preceding the date of this circular which are or may be material:

(1) the equity transfer agreement dated 27 May 2015 and entered into between Beijing Boyuanshengtang Energy Technology Co., Ltd. and Datang (Beijing) Information Technology Co., Ltd. (the “ Nanjing Automation Equity Transfer Agreement ”), pursuant to which, Beijing Boyuanshengtang Energy Technology Co., Ltd. agreed to transfer 60% of the equity interest in Datang Nanjing Automation Co., Ltd. to Datang (Beijing) Information Technology Co., Ltd. at a consideration of RMB28,638,100. As of the Latest Practicable Date, the shareholder registration of Datang (Beijing) Information Technology Co., Ltd. had not been completed at the relevant authority;

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

(2) the supplemental agreement dated 31 July 2015 to the Nanjing Automation Equity Transfer Agreement entered into between Beijing Boyuanshengtang Energy Technology Co., Ltd. and Datang (Beijing) Information Technology Co., Ltd., pursuant to which, Datang (Beijing) Information Technology Co., Ltd. undertakes to compensate or indemnify Beijing Boyuanshengtang Energy Technology Co., Ltd. and the direct/indirect shareholders and subsidiaries of Beijing Boyuanshengtang Energy Technology Co., Ltd. for all losses and damages that may incur in connection with the liabilities and obligations in relation to the establishment, existence, production, operation, assets and liabilities of Datang Nanjing Automation Co., Ltd.;
(3) the Non-competition Agreement dated 1 December 2015 and entered into between the Company and China Datang in respect of the non-competition undertakings, details of which are set out in the section headed “Relationship with Our Controlling Shareholder” in the Prospectus;
(4) the undertaking dated 21 August 2015 from China Datang, pursuant to which, China Datang undertook to the Group, among other things, to hold the Company and/or its subsidiaries harmless from and compensate or indemnify the Company and/or its subsidiaries all losses, damages and penalties that may incur in connection with the business qualification non-compliance issues of the Company and/or its subsidiaries;
(5) the undertaking dated 21 August 2015 from China Datang, pursuant to which, China Datang undertook to the Group, among other things, to hold the Company and/or its subsidiaries harmless from and compensate or indemnify the Company and/or its subsidiaries for all losses, damages and penalties that may incur in connection with the defective land use rights and building ownerships of the Company and/or its subsidiaries;
(6) the equity transfer agreement dated 7 April 2016 and entered into between China Datang Technologies & Engineering Co., Ltd. and the Company, pursuant to which China Datang Technologies & Engineering Co., Ltd. agreed to transfer its 100% equity interest in Jiangsu Nanjing Thermal Electricity Engineering Design Institute Co., Ltd. to the Company at a consideration of RMB672,200;
(7) the equity transfer agreement dated 29 May 2016 and entered into between Beijing Hengtong Huanke Material Conveying Technologies Co., Ltd. (北京恒通環科物料輸送技術有限公司) and the Company, pursuant to which Beijing Hengtong Huanke Material Conveying Technologies Co., Ltd. agreed to transfer its 20% equity interest in Beijing Datang Hengtong Mechanical Transport Co., Ltd. to the Company at a consideration of RMB3,192,889.33;

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

(8) the cornerstone investment agreement dated 28 October 2016 and entered into between the Company, China Life Insurance Company Limited, CITIC CLSA Capital Markets Limited (the “ Sole Sponsor ”) and China Merchants Securities (HK) Co., Limited, pursuant to which China Life Insurance Company Limited has agreed to acquire at the Offer Price the number of H Shares that may be purchased with US$10 million;
(9) the cornerstone investment agreement dated 28 October 2016 and entered into between the Company, China Life Insurance (Group) Company, the Sole Sponsor and China Merchants Securities (HK) Co., Limited, pursuant to which China Life Insurance (Group) Company has agreed to acquire at the Offer Price the number of H Shares that may be purchased with US$20 million;
(10) the cornerstone investment agreement dated 28 October 2016 and entered into between the Company, China Life Franklin Asset Management Co., Limited, the Sole Sponsor and China Merchants Securities (HK) Co., Limited, pursuant to which China Life Franklin Asset Management Co., Limited has agreed to acquire at the Offer Price the number of H Shares that may be purchased with US$20 million;
(11) the cornerstone investment agreement dated 28 October 2016 and entered into between the Company, Anbang Investment Holdings Co. Limited, the Sole Sponsor and Deutsche Bank AG, Hong Kong Branch, pursuant to which Anbang Investment Holdings Co. Limited has agreed to acquire at the Offer Price 120,540,000 H Shares with certain conditions, details of which are set out in the section headed “Cornerstone Investors” in this prospectus;
(12) the cornerstone investment agreement dated 28 October 2016 and entered into between the Company, China Chengtong Holdings Group Ltd. (中國誠通控股集團有限公司), the Sole Sponsor and CLSA Limited, pursuant to which China Chengtong Holdings Group Ltd. has agreed to acquire at the Offer Price the number of H Shares that may be purchased with US$30 million;
(13) the cornerstone investment agreement dated 28 October 2016 and entered into between the Company, Three Gorges Capital Holdings Co., Ltd. (三峽資本控股有限責任公司), the Sole Sponsor and CLSA Limited, pursuant to which Three Gorges Capital Holdings Co., Ltd. has agreed to acquire at the Offer Price the number of H Shares that may be purchased with US$29 million;
(14) the underwriting agreement dated 2 November 2016 relating to the Hong Kong Public Offering (as defined in the Prospectus) entered into between, among others, the Company, the Sole Sponsor, the Joint Global Coordinators (as defined in the Prospectus) and the Hong Kong Underwriters (as defined in the Prospectus);

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

(15) the equity transfer agreement dated 8 November 2016 and entered into between Tuoketuo Electric Power Tongfa Commercial and Trading Co., Ltd. (托克托電力同發商貿有限責任公司) and the Company, pursuant to which Tuoketuo Electric Power Tongfa Commercial and Trading Co., Ltd. agreed to transfer its 5% equity interest in China Datang Technologies & Engineering Co., Ltd. to the Company at a consideration of RMB9,000,000;
(16) the underwriting agreement dated 9 November 2016 relating to the International Offering (as defined in the Prospectus) entered into among the Company, Joint Global Coordinators (as defined in the Prospectus) and the International Underwriters (as defined in the Prospectus); and
(17) the Financial Services Agreement.

7. LITIGATION

As at the Latest Practicable Date, save as disclosed in this circular, no member of the Group was engaged in any litigation, arbitration or claim of material importance and, so far as the Directors are aware, no litigation, arbitration or claim of material importance was pending or threatened against any member of the Group.

8. OTHER INFORMATION

(1) The joint company secretaries of the Company are Mr. Zeng Bing, who is the chief economist and the authorised representative of the Company, and Ms. Wong Sau Ping, who is a member of The Hong Kong Institute of Chartered Secretaries.
(2) The registered office of the Company is No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC.
(3) The head office of the Company in the PRC is No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, and the principal place of business in Hong Kong is 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.
(4) H Share Registrar of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(5) The English text of this circular shall prevail over the Chinese text in the event of inconsistency.

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GENERAL INFORMATION OF THE GROUP

APPENDIX II

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hour at the Company’s principal place of business in Hong Kong at 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong from the date of this circular up to and including 29 May 2017:

(1) Articles of Association;
(2) the material contracts referred to paragraph 6 of Appendix II;
(3) the 2016 annual report of the Company for each of the three financial years ended 13 December 2016;
(4) the letter from the Independent Board Committee, full text of which is set out on pages 24 to 25 of this circular;
(5) the letter from the Independent Financial Adviser, full text of which is set out on pages 26 to 38 of this circular;
(6) the written consent of the experts referred to paragraph 5 of Appendix II;
(7) the Financial Services Agreement; and
(8) this circular.
For identification purpose only

– 52 –

NOTICE OF 2016 AGM

==> picture [47 x 48] intentionally omitted <==

**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1272)

NOTICE OF 2016 ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the annual general meeting of Datang Environment Industry Group Co., Ltd. (the “ Company ”) for the year of 2016 (the “ 2016 AGM ”) will be convened at the 2:00 p.m. on Friday, 30 June 2017 at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, for the purpose of considering and, if thought fit, passing the following matters (whether amended or not). Terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 15 May 2017 (the “ Circular ”) unless otherwise specified.

Ordinary Resolutions

(1) To consider and approve the Report of the Board for 2016;
(2) To consider and approve the Report of the Supervisory Committee for 2016;
(3) To consider and approve the Final Financial Accounts of the Company for 2016;
(4) To consider and approve the Financial Budget Report of the Company for 2017;
(5) To consider and approve the Independent Auditor’s Report and the audited financial statements for 2016;
(6) To consider and approve the Profit Distribution Plan for 2016 and the Proposed 2016 Final Dividend;

– 53 –

NOTICE OF 2016 AGM

(7) To consider and approve the re-appointment of Ernst & Young and Ernst & Young Hua Ming LLP as international and domestic auditors of the Company for 2017, respectively, with term of engagement ended upon the conclusion of the 2017 annual general meeting of the Company, and the grant of authority to the Board, which further grants such authority to the senior management of the Company to determine remunerations of the auditors;
(8) To consider and approve the Remuneration Report for Directors, Supervisors and senior management of the Company for 2016;
(9) To consider and approve the Investment Plan for 2017; and
(10) To consider and approve the Financial Services Agreement between the Company and Datang Finance and the continuing connected transactions and major transaction contemplated thereunder.

Special Resolution

(11) To consider and approve the amendments to the Articles of Association.

With respect to resolution no. (10) above, in view of the interests of China Datang in the proposed continuing connected transactions and major transaction contemplated under the Financial Services Agreement, China Datang and its associates (including China Datang Group Capital Holding Co., Ltd. (中國大唐集團資本控股有限公司)) are required to abstain from voting on the resolution to be proposed at the 2016 AGM to approve such resolution. As at the date of this notice, to the best knowledge, information and belief of the Directors, save as disclosed in the Circular, no other Shareholders will be required to abstain from voting in respect of the resolutions to be proposed at the 2016 AGM.

The main texts of resolutions at the 2016 AGM are set forth in the Circular thereof, which are available on the website of the Stock Exchange (www.hkex.com.hk) and on the website of the Company (www.dteg.com.cn) .

By order of the Board Datang Environment Industry Group Co., Ltd.* Jin Yaohua Chairman

Beijing, the PRC, 15 May 2017

As of the date of this notice, the non-executive Directors are Mr. Jin Yaohua, Mr. Liu Chuandong, Mr. Liu Guangming and Mr. Liang Yongpan; the executive Directors are Mr. Deng Xiandong and Mr. Lu Shengli; and the independent non-executive Directors are Mr. Ye Xiang, Mr. Mao Zhuanjian and Mr. Gao Jiaxiang.

For identification purpose only

– 54 –

NOTICE OF 2016 AGM

Notes:

i. In order to ascertain the entitlements of the Shareholders to attend the 2016 AGM, the register of members of the Company will be closed from Tuesday, 30 May 2017 to Friday, 30 June 2017 (both days inclusive), during which period no transfer of Shares will be effected. Shareholders whose names appear on the register of members of the Company upon the end of business hours on Friday, 30 June 2017 are entitled to attend and vote at the 2016 AGM.

To be eligible to attend and vote at the 2016 AGM, all transfer documents must be lodged with the H Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for holders of H Shares), or the Company’s board office in the PRC at No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, 100097 (for holders of Domestic Shares), no later than 4:30 p.m. on Monday, 29 May 2017.

ii. Each Shareholder entitled to attend and vote at the 2016 AGM may, by completing the form of proxy of the Company, appoint one or more proxies to attend and vote at the 2016 AGM on its behalf. A proxy need not be a Shareholder. With respect to any Shareholder who has appointed more than one proxy, the proxy holders may only vote on a poll.
iii. The instrument to appoint a proxy shall be signed by the appointer or his attorney duly authorised in writing or, in the case of a legal person, must be either executed under its common seal or under the hand of its directors or attorney duly authorised.
iv. To be valid, the form of proxy must be lodged with the H Share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for holders of H Shares) or the Company’s board office in the PRC (for holders of Domestic Shares) within 24 hours prior to the holding of the 2016 AGM. If such instrument is signed by another person under a power of attorney or other authorisation documents given by the appointer, such power of attorney or other authorisation documents shall be notarised. The notarised power of attorney or other authorisation documents shall, together with the instrument appointing the proxy, be deposited at the specified place at the time set out in such instrument. Completion and return of the proxy form will not preclude Shareholders from attending and voting in person at the 2016 AGM or any adjourned meetings should you so wish.
v. Shareholders shall produce their identity documents and supporting documents in respect of Shares held when attending the 2016 AGM. If corporate Shareholders appoint authorised representative to attend the 2016 AGM, the authorised representative shall produce his/her identity documents and a notarised certified copy of the relevant authorised documents signed by the Board or other authorised parties of the Shareholders or other notarised certified documents allowed by the Company. Proxies shall produce their identity documents and the proxy forms signed by the Shareholders or their attorney when attending the 2016 AGM.
vi. The Company has the rights to request a proxy who attends the 2016 AGM on behalf of a Shareholder to provide proof of identity.
vii. H Shareholders (in person or by proxy) who intend to attend the 2016 AGM shall complete and deliver the reply slips to H Share Registrar, Computershare Hong Kong Investor Services Limited on or before Friday, 9 June 2017 in person, by mail or by fax. Domestic Shareholders (in person or by proxy) who intend to attend the 2016 AGM shall deliver the said document to the Company’s board office in the PRC subject to the same time limit.

– 55 –

NOTICE OF 2016 AGM

viii. The 2016 AGM is expected to be held for less than half a day. Shareholders who intend to attend the 2016 AGM shall bear their own transportation and accommodation expenses.
ix. In case of joint Shareholders, the vote of the most senior one (in person or by proxy) will be accepted to the exclusion of the votes of other joint Shareholders, and for this purpose, the seniority shall be determined by the order in which the names of such joint Shareholders stand in the register of members of the Company.
x. H Share Registrar, Computershare Hong Kong Investor Services Limited, is situated at Shops 1712– 1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, and with the fax number: +852 2865 0990.
xi. The contact details of the Company’s board office in the PRC are as follows: Address: No. 120 Zizhuyuan Road, Haidian District, Beijing, the PRC, 100097 Fax number: +86 10 5838 9860

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AI assistant

Datang Environment Industry Group Co., Ltd. — AGM Information 2017

49815_rns_2017-05-15_d2739f65-dfe6-4916-a83a-530330867fd6.pdf

Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司

CONTENTS

Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司

I. INTRODUCTION

II. MATTERS TO BE RESOLVED AT THE 2016 AGM

Ordinary Resolutions

1. Report of the Board for 2016

2. Report of the Supervisory Committee for 2016

3. Final Financial Accounts for 2016

4. Financial Budget Report for 2017

5. The Independent Auditor’s Report and the Audited Financial Statements for 2016

6. Profit Distribution Plan for 2016 and Proposed 2016 Final Dividend

(1) Proposed distribution of the Proposed 2016 Final Dividend

(3) Tax

LETTER FROM THE BOARD

LETTER FROM THE BOARD

7. Re-appointment of International and Domestic Auditors for 2017

8. Remuneration Report for Directors, Supervisors and Senior Management of the Company for 2016

9. Investment Plan for 2017

10. Continuing Connected Transactions and Major Transaction in relation to Financial Services Agreement

Scope of Service:

Pricing Policy:

LETTER FROM THE BOARD

Loan Services:

Deposit Services:

Other Financial Services:

(4) Reasons for and benefits of entering into the Financial Services Agreement

LETTER FROM THE BOARD

(5) Listing Rules implications

Loan Services

Deposit Services

Other Financial Services

(6) General information on the parties

Information on the Company

Information on Datang Finance

Information on China Datang

(7) Opinions of the Directors

(8) Approval by the Independent Shareholders

Special Resolution

11. Amendments to Articles of Association

LETTER FROM THE BOARD

III. 2016 AGM AND ITS METHOD OF VOTING

IV. CLOSURE OF REGISTER OF MEMBERS

LETTER FROM THE BOARD

V. RECOMMENDATION

Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTION

Yours faithfully, for and on behalf of

Datang Environment Industry Group Co., Ltd.*

Orient Capital (Hong Kong) Limited

CONTINUING CONNECTED TRANSACTIONS FINANCIAL SERVICES AGREEMENT

INTRODUCTION

BASIS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

Information on the Company

Information on Datang Finance

Information on China Datang

Principal Terms of the Deposit Services

Major Terms Regarding the Deposit Services:

Pricing Policy Regarding the Deposit Services

Reasons for and Benefit of the Deposit Services

Key Financial ratios of Datang Finance

The Proposed Caps of the Deposit Services

i) The Increase of Cash and Cash Equivalent During the Consecutive Four (4) Years Ended 31 December 2016

ii) The Anticipated Outstanding Balances of Deposits of the Group Based on the Cash Balance and Trade Receivables as at 31 December 2016

iii) Anticipated Loans from Datang Finance According to Expected Growth of the Group in Future

Our View

Listing Rules Implication

RECOMMENDATION

Yours faithfully, For and on behalf of

Orient Capital (Hong Kong) Limited Jiang Jun Managing Director

1. FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS

3. WORKING CAPITAL

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

5. EFFECT OF THE DEPOSIT SERVICES ON THE EARNINGS AND ASSETS AND LIABILITIES OF THE GROUP

1. RESPONSIBILITY STATEMENT

Datang Environment Industry Group Co., Ltd. AGM Information 2017

**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**

**Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司**