Dongjiang Environmental : INSIDE INFORMATION ANNOUNCEMENT IN RELATION TO PROVISION FOR ASSET IMPAIRMENT

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DONGJIANG ENVIRONMENTAL COMPANY LIMITED*

東江環保股份有限公司

(a joint stock limited company incorporated in the People's Republic of China)

(Stock code: 00895)

INSIDE INFORMATION

ANNOUNCEMENT IN RELATION TO PROVISION FOR ASSET

IMPAIRMENT

This announcement is made pursuant to Rules 13.09 and 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

On 29 March 2021, Dongjiang Environmental Company Limited* (the "Company") convened the 5th meeting of the seventh session of the board of directors (the "Board") and the 2nd meeting of the seventh session of the supervisory committee (the "Supervisory Committee"), at which the "Resolution for Provision for Asset Impairment for the Year 2020" was considered and approved, the details of which are set out as follows:

I. Overview of the Provision for Asset Impairment

According to the relevant requirements of the Accounting Standard for Business Enterprises, in order to truly reflect the financial position, asset value and operating results of the Company, the Company have reviewed and analyzed the value of relevant assets in the consolidated financial statements as at 31 December 2020 and carried out assessment based on asset types to make provision for asset impairment in respect of the assets that may be subject to an impairment.

II. Scope of Assets, Total Amount and Description of the Provision for Asset Impairment

The Company made provision for asset impairment in an aggregate amount of RMB80,452,600 in respect of each of the assets recorded in the consolidated financial statements for the year of 2020, and the breakdown of provision of impairment made for each asset is set out as follows:

Unit: RMB ten thousand

Description of provision for asset impairment

Accounts receivable

Provision for asset impairment made based on expected credit loss model and individual expected credit loss rate

Other receivables

Inventories

Loans

Goodwill

Total

Provision for asset impairment made based on expected credit loss model and individual expected credit loss rate

Provision for asset impairment made based on the difference between the higher amount of cost and net realizable value

Provision for loss on loans made based on the classification of loans by reference to groups of normal, concerned, secondary, suspicious and loss with reference to the Guidelines on Risk-Based Loan Classification and Guidelines on Provision for Loss on Loans of the People's Bank of China.

The carrying value of goodwill is allocated to the related asset groups or groups of asset groups which are expected to benefit from the synergy effect of corporate mergers. If the result of the test indicates that the recoverable amount of goodwill allocated to asset groups or groups of asset groups is lower than its carrying amount, the corresponding impairment loss is recognized.

Note: The audited net profit attributable to shareholders of the listed company for the year 2020 of the Company was RMB303,161,000.

III. Details of Significant Amount of Provision for Asset Impairment

1. Details of provision for bad debts in respect of accounts receivable

On the basis of expected credit losses, the Company performs impairment treatment on financial assets at amortized cost, debt instrument investments, loan commitments and contract assets at fair value through other comprehensive income and recognizes the loss provision.

On the basis of expected credit losses, the Company makes provision for impairment and recognizes credit impairment losses for each of the above items in accordance with its applicable expected credit loss measurement method (general method or simplified method). For financial instruments with low credit risk on date of the balance sheet, the Company makes the loss provision based on whether the credit risk has increased significantly since the initial confirmation, and uses the expected credit loss amount in the next 12 months or the entire period as the basis. The Company evaluates the credit risk of individual financial assets with significantly different credit risks. In addition to financial assets which are subject to individual credit risk assessments, the Company classifies financial assets into different groups based on common risk characteristics, and assesses credit risk on a portfolio basis.

In addition to the accounts receivable and other receivables that are individually assessed for credit risk, the Company classifies them into different groups according to the credit risk characteristics:

Based on the expected credit loss and individual expected credit loss rate, the Company made bad debts provision for accounts receivable of RMB6,380,800 and bad debts provision for other receivables of RMB39,084,200 for 2020, which mainly included the provision of RMB34.47 million recognized for a land advance payment. As at 31 December 2020, loss allowance has been fully provided for such advance payment.

2.

Details of provision for goodwill impairment

According to the requirements of "Accounting Standard for Business Enterprises No. 8 - Impairment of Assets", goodwill arising from corporate mergers shall be tested for impairment at least at the end of each year. Goodwill shall be tested for impairment in combination with the asset group or combination of asset groups associated with it. If the recoverable amount of an asset group or combination of asset groups is lower than its carrying amount, the corresponding impairment loss should be recognized. The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the asset group or combination of asset groups, and is recognised in the profit and loss statement of the period as impairment loss on goodwill.

As at the end of 2020, the Company performed impairment test on goodwill arising from corporate mergers and made provision for goodwill impairment of RMB34,535,200, representing 11.39% of the absolute value of net profit attributable to shareholders of the listed company in 2020, the details of which are set out as follows: Based on the current operation and future development of Zhuhai Qingxin Industrial Environment Co., Ltd.* (珠海市清新 工業環保有限公司 ,"Zhuhai Qingxin"), Weifang Dongjiang Environmental Blue Sea Environmental Protection Co., Ltd.* (濰坊東江環保藍海環境保護有限公司, "Weifang

Dongjiang") and Hengshui Ruitao Environmental Technology Company Co., Ltd.* (衡水睿 韜環保技術有限公司,"Hengshui Ruitao"), the Company considered that the goodwill arising from the acquisition of the above three companies showed indication of impairment, and engaged asset valuation firms to appraise the recoverable amounts of their respective groups of assets (including goodwill) as at the valuation reference date using income approach and asset based approach. Based on the valuation report, the Company made provision for goodwill impairment of RMB12,651,500 for Zhuhai Qingxin, RMB11,220,900 for Weifang Dongjiang and RMB10,662,800 for Hengshui Ruitao, respectively.

IV. Effect of Provision for Asset Impairment on the Company

The amount of provision for asset impairment in 2020 was in total RMB80,452,600, which reduced the Company's net profit attributable to shareholders of listed company in 2020 by RMB80,452,600 and correspondingly reduced the owners' equity attributable to shareholders of the listed company in 2020 of the Company by RMB80,452,600. After making provision for asset impairment, the Company's total profits in 2020 amounted to RMB401,719,700, and the net profit attributable to shareholders of the listed company amounted to RMB303,161,000. The information above has been audited by Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership).

V. Explanation of the Board on Reasonableness of Provision for Asset Impairment for the Year of 2020

The provision for asset impairment was in compliance with relevant requirements of the Accounting Standard for Business Enterprises and had sufficient basis to reflect the actual condition of the Company based on the accounting principle of prudence. After the provision forasset impairment, the Company's financial position and asset value as at 31 December 2020 were more fairly presented, which enhanced the reasonableness of the Company's accounting information.

VI. Opinions of the Supervisory Committee

The Company's decision-making process for the provision for asset impairment was in compliance with the requirements of relevant laws and regulations and the Articles of Association, the resolution was in compliance with relevant requirements of the Accounting Standard for Business Enterprises and reflected the Company's operation results for the year of 2020 and the asset position as at 31 December 2020. As such, the Supervisory Committee unanimously approved the provision for asset impairment.

VII. Opinions of Independent Directors of the Company

The Company made provision for asset impairment in accordance with relevant requirements of the Accounting Standard for Business Enterprises, and the Company's assets position and operation results were presented in a more objective and fair manner after the provision for asset impairment made by the Company, which enhanced the truthfulness and reliability of the Company's accounting information on asset value and was reasonable. The Board's decision-making process for such matter was in compliance with relevant laws and regulations and was not prejudicial to the interests of the Company and its shareholders. The independent directors agreed to the provision for asset impairment.

For details of the provision for impairment of assets under the International Financial Reporting Standards, please refer to the annual results announcement dated 29 March 2021 and the H Shares annual report for the year ended 31 December 2020 of the Company to be published in due course.

By order of the Board

Dongjiang Environmental Company Limited*

Tan Kan

Chairman

Shenzhen, the PRC

29 March 2021

As at the date of this announcement, the Board of Directors of the Company comprises two executive directors, being Mr. Tan Kan and Mr. Lin Peifeng; three non-executive Directors, being Mr. Tang Yi, Ms. Shan Xiaomin and Mr. Jin Yongfu and three independent non-executive Directors, being Mr. Li Jinhui, Mr. Siu Chi Hung and Ms. Guo Suyi .

* For identification purpose only