Shenzhen International : Joint Announcement – Acquisition of 20% Equity Interest in Chongqing Derun Environment Company Limited by Shenzhen Expressway

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The respective board of directors of SZ International and SZ Expressway (a 50.889% owned subsidiary of SZ International) are pleased to announce that Environment Company, a wholly- owned subsidiary of SZ Expressway, was determined as the transferee of the 20% equity interest in Derun Environment and entered into the Equity Transfer Agreement with Water Asset on 25 May 2017. Pursuant to the Equity Transfer Agreement, Environment Company agreed to acquire 20% equity interest in Derun Environment at the floor price of the listing of RMB4,408,644,500.

SZ Expressway principally engages in the investment, construction, operation and management of toll highways and roads, as well as other urban and transportation infrastructure facilities. As disclosed in SZ Expressway's 2016 annual report, apart from consolidating and enhancing of its main business of toll highway, SZ Expressway has carefully studied and taken into account the country's industrial policies and its own advantages, adopted the strategic choice of having the large environmental protection industry that takes water environment treatment and solid waste treatment as the main content as its new direction for industry development.

As Derun Environment is a comprehensive environmental enterprise with two major business segments: water treatment and waste incineration power generation, SZ Expressway believes that Derun Environment has stable profitability, abundant cash flow, strong scale advantages, regional competitive advantage and growth potentials. Through the acquisition of Derun Environment's equity interest by Environment Company at a reasonable price, SZ Expressway can expand its environmental business and obtain a reasonable return on investment. On the other hand, SZ Expressway may also carry out deep-level cooperation with Derun Environment and complement each other's advantages in business development. Since SZ Expressway is a subsidiary of SZ International, expansion in the environmental industry by SZ Expressway at a reasonable price and the expected investment returns to be brought along by such expansion is beneficial to SZ International as a whole.

For SZ International, the applicable percentage ratios in respect of the Acquisition are more than 5% but less than 25%, and the Acquisition constitutes a discloseable transaction and SZ International is therefore subject to the requirements of reporting and announcement but exempt from the requirement of approval by shareholders under Chapter 14 of the Listing Rules. For SZ Expressway, the applicable percentage ratios in respect of the Acquisition are more than 25% but less than 100%, and the Acquisition constitutes a major transaction and SZ Expressway is therefore subject to the requirements of reporting, announcement and shareholders' approval under Chapter 14 of the Listing Rules.

To the best knowledge, information and belief of the directors of SZ Expressway, no shareholder of SZ Expressway has material interest in the Acquisition and the Acquisition Mandate, and none of the shareholders of SZ Expressway is required to abstain from voting if SZ Expressway is to convene a general meeting for the approval of the Acquisition and the Acquisition Mandate.

Pursuant to Rule 14.44 of the Listing Rules, SZ Expressway has obtained written approvals of the Acquisition and the Acquisition Mandate from three wholly-owned subsidiaries of SZ International, namely, Xin Tong Chan Development (Shenzhen) Co., Ltd, Shenzhen Shen Guang Hui Highway Development Company and Advance Great Limited, which held 654,780,000 A Shares, 411,459,887 A Shares and 43,536,000 H Shares, respectively, as at the date of this announcement, which in aggregate represents approximately 50.889% of the issued capital of SZ Expressway. As such, no extraordinary general meeting of SZ Expressway will be convened to approve the Acquisition and the Acquisition Mandate.

A circular containing, among other things, (i) further details of the Acquisition and the Acquisition Mandate; and (ii) other information required under the Listing Rules will be despatched to the shareholders of SZ Expressway on or before 16 June 2017.

Reference is made to the joint announcement of SZ International and SZ Expressway dated 19 May 2017 in relation to the participation in the Internet Bidding for 20% equity interest in Derun Environment by Environment Company, a wholly-owned subsidiary of SZ Expressway.

The respective board of directors of SZ International and SZ Expressway are pleased to announce that since no other potential purchaser apply to participate in the Internet Bidding, Environment Company was determined as the transferee of the 20% equity interest in Derun Environment and entered into the Equity Transfer Agreement with Water Asset on 25 May 2017. Pursuant to the Equity Transfer Agreement, Environment Company agreed to acquire 20% equity interest in Derun Environment at the floor price of the listing of RMB4,408,644,500.

For details of the Internet Bidding, please refer to the joint announcement of SZ International and SZ Expressway dated 19 May 2017.

Since no other potential purchaser apply to participate in the Internet Bidding, Environment Company was determined as the transferee of 20% equity interest in Derun Environment and entered into the Equity Transfer Agreement with Water Asset on 25 May 2017.

Details of the Equity Transfer Agreement are as follows:

Date: 25 May 2017

Parties: Water Asset (as vendor); and Environment Company (as purchaser)

To the best knowledge and belief of the respective board of directors of SZ International and SZ Expressway and having made all reasonable enquiries, each of Water Asset and its ultimate beneficial owner(s) is an independent third party of SZ International and SZ Expressway respectively.

Subject of the transaction:

Pursuant to the Equity Transfer Agreement, Environment Company agreed to acquire 20% equity interest in Derun Environment from Water Asset.

Consideration, payment method and determination basis:

Pursuant to the Equity Transfer Agreement, the consideration of the 20% equity interest in Derun Environment is the floor price of the listing of RMB4,408,644,500. Environment Company should pay the consideration to the Assets and Equity Exchange within 5 business days from the date of the Equity Transfer Agreement.

Within 10 business days after the parties having entered into the Equity Transfer Agreement and Environment Company having paid the consideration in full, Water Asset should submit the business registration materials in relation to the transfer of the 20% equity interest in Derun Environment to the relevant authorities. After having processed with the business registration procedures, Water Asset should produce the relevant proof to the Assets and Equity Exchange, and the Assets and Equity Exchange should transfer the said consideration into the designated account of Water Asset within 3 business days.

The board of directors of SZ Expressway had considered Derun Environment's assets composition, operation, development prospects, valuations of other comparable transactions in the market, and the valuation report on Derun Environment and was of the view that the consideration is fair and reasonable. SZ Expressway will settle the consideration of the Acquisition by its internal resources and borrowings.

Breach of agreement:

If Environmental Company fails to pay the consideration on time, it is subject an overdue penalty, which is amount to 0.05% of the consideration (calculated on a daily basis). The aggregate amount of the overdue penalty shall not exceed 30% of the consideration.

Should the Acquisition cannot be completed due to breach of agreement by any party, the defaulting party is liable for a breach penalty of RMB500 million, such breach penalty shall be paid to the non-defaulting party after deducting the service expense charged by the Asset and Equity Exchange.

If the overdue penalty and/or the breach penalty is insufficient for compensating the direct economic loss of the non-defaulting party, the defaulting party shall also pay the

outstanding amount to the non-defaulting party.

Completion:

Completion of the Acquisition shall take place on the completion date of the business registration. Upon completion, Derun Environment will be owned as to 54.9%. 25.1% and 20% by Water Asset, Suyu Industry and Environment Company, respectively.

If the business registration of the transfer of 20% equity interest in Derun Environment cannot be completed before the termination date, i.e. 5 August 2017, the other shareholders of Derun Environment refuse to waive their pre-emptive right in the 20% equity interest in Derun Environment again, and the parties to the transaction cannot reach an agreement on the extension of the said termination date, the transfer shall be terminated and the parties thereto will not be liable for any breach of contract. Nonetheless, if the business registration cannot be completed due to default of either party, such party shall be liable for the breach.

Derun Environment is a company incorporated in the PRC with limited liability in October 2014 with a registered capital of RMB1 billion. It is owned as to 74.9% and 25.1% by Water Asset and Suyu Industry, respectively. The principal business of Derun Environment is investment holding, its major assets comprise of 50.04% equity interest in Water Group and 57.12% equity interest in San Feng Environment, which were acquired by Derun Environment in December 2015 and May 2015, respectively. The principal business of Water Group covers investment, construction, management, design and technical consultation service in relation to water supply and drainage project and the principal business of San Feng Environment covers construction and operation of waste incineration power generation plants, and consultation service and development of environmental protection technology.

The consolidated financial information of Derun Environment for the two years ended 31 December 2015 and for the 11 months ended 30 November 2016 prepared by Ruihua Certified Public Accountants (LLP) based on the Accounting Standards for Business Enterprises promulgated by Ministry of Finance of the PRC, is set out as follow:

Note: Derun Environment was incorporated on 14 October 2014. It successively acquired the equity interest in Water Group and San Feng Environment in 2015. The financial statements are prepared on the