Rego Interactive Co., Ltd — Capital/Financing Update 2002

Mar 1, 2002

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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

PROPOSED APPLICATION FOR THE ISSUE OF NOT MORE THAN
RMB1,200,000,000 A SHARES CONVERTIBLE BONDS IN THE PEOPLE’S REPUBLIC OF CHINA

PRC Adviser

China Securities Co., Ltd

International Adviser

The Company intends to apply to the relevant PRC authorities for the issue of not more than RMB1.2 billion (approximately HK$1.13 billion) A Shares Convertible Bonds to institutional and public investors in the PRC and the listing of such A Shares Convertible Bonds on the Shanghai Stock Exchange in the PRC.

Save as disclose herein, the Directors confirm that they are not aware of any matter discloseable under the general obligation imposed by paragraph 2 of the Listing Agreement, which is or may be of a price sensitive nature.

The Company intends to apply to the relevant PRC authorities for the issue of not more than RMB1.2 billion (approximately HK$1.13 billion) A Shares Convertible Bonds, on a fully underwritten basis, to institutional and public investors in the PRC and such A Shares Convertible Bonds are proposed to be listed on the Shanghai Stock Exchange.

PRINCIPAL TERMS OF THE A SHARES CONVERTIBLE BONDS

The proposed terms of the A Shares Convertible Bonds will comprise the following:

1. Principal Amount

Not more than RMB1.2 billion (approximately HK$1.13 billion). The actual amount of the issue of A Shares Convertible Bonds will be fixed upon the Company obtaining the approval from the CSRC which is expected to be obtained in September 2002.

2. Target subscribers

All natural persons and legal person investors (except those restricted by the PRC laws and regulations) that have A Shares stock trading accounts with the Shanghai Stock Exchange.

3. Interest

1.12% per annum, subject to adjustment which is equivalent to 40% of any future increase or decrease of the 5-year fixed deposit rate made by the People’s Bank of China, on the principal amount of the A Shares Convertible Bonds, payable annually in arrears. The adjustment will be made once there is a change in the 5-year fixed deposit rate made by the People’s Bank of China.

4. Maturity

5 years from the date of issue of the A Shares Convertible Bonds which is expected to be matured in September 2002.

5. Denomination

RMB100 (about HK$94.3) each.

6. Conversion Price

The initial Conversion Price will be determined with reference to 5% to 15% premium over the average closing price of A Shares traded on the Shanghai Stock Exchange for 30 trading days immediately preceding the date of the despatch of the prospectus of the A Shares Convertible Bonds, which is expected to be available in September 2002, but subject to the date of obtaining the approval from the CSRC. The Conversion Price will also be subject to adjustments for, among other things, subdivision or consolidation of Shares, bonus issues, rights issues and other dilutive events. During the conversion period of the A Shares Convertible Bonds, the average closing price of the A Shares traded on the Shanghai Stock Exchange for a period of 20 consecutive trading days is below 80% of the then conversion price, the Directors are authorised to reduce the then conversion price by up to 20%. Such conversion price adjustment can only be made once every 12 months. Shareholders’ approval will be required for any conversion price adjustment of over 20%. A Shares issued on conversion will rank pari passu in all respects with the A Shares then in issue on the relevant conversion date.

7. Conversion Rights

A Shares Convertible Bonds holders may convert the A Shares Convertible Bonds into the number of A Shares, as determined by dividing the principal amount of the A Shares Convertible Bonds by the Conversion Price provided that a minimum amount of RMB1,000 (approximately HK$943.4) of the A Shares Convertible Bonds and an integral multiple thereof has to be converted at any time.

8. Conversion period

12 months after the completion of the issue of A Shares Convertible Bonds up to the maturity date of the A Shares Convertible Bonds.

9. Redemption by the Company

Unless previously redeemed, converted or cancelled, the Company will redeem each of the A Shares Convertible Bonds on the maturity date at the principal amount of the A Shares Convertible Bonds in whole with all accrued interest.

During the conversion period of the A Shares Convertible Bonds, in the event that the average closing price of A Shares traded on the Shanghai Stock Exchange for a period of 30 consecutive trading days is not less than 130%. of the Conversion Price, the Company may redeem wholly or partly the A Shares Convertible Bonds at the price of 102% of the principal amount of the A Shares Convertible Bonds with all accrued interest. Such redemption right can only be exercised once every financial year and made in the first time of the above event occurs in any financial year during the conversion period.

During the conversion period of the A Shares Convertible Bonds, in the event that the average closing price of A Shares traded on the Shanghai Stock Exchange for a period of 30 consecutive trading days is below 70% of the Conversion Price, the A Shares Convertible Bonds holders may request the Company to redeem the A Shares Convertible Bonds at a price of 102%, 103%, 104% and 105% of the principal amount of the A Shares Convertible Bonds with all accrued interest after the expiry of one year, two years, three years and four years, respectively, of the issue of the A Shares Convertible Bonds. Such redemption right can only be exercised once every financial year and made in the first time of the above event occurs in any financial year during the conversion period.

CONDITIONS PRECEDENTS

The issue of the A Shares Convertible Bonds will be conditional upon, inter alia, the fulfillment of the following conditions:

(1) the approval of the issue and the principal terms of the issue of the A Shares Convertible Bonds and the authorisation granted to the board of Directors to implement all related matters in respect of, among other things, timing of the issue, fixing of the Conversion Price, executing relevant agreements and making appropriate and necessary amendments to the relevant provisions of the Articles of Association of the Company upon conversion of the A Shares Convertible Bonds by the Shareholders at an AGM and the Class Meetings to be convened by the Company;

(2) the CSRC having given all necessary approvals and consents for the Company to issue A Shares Convertible Bonds; and

(3) the entering into the underwriting agreement with the PRC underwriter.

AMENDMENTS OF THE ARTICLES OF ASSOCIATION

As a result of the proposed issue of the A Shares Convertible Bonds, the issue of any A Shares upon conversion of the A Shares Convertible Bonds, the Articles of Association will have to be amended to reflect the increase of the registered capital of the Company to comprise the existing shares in issue and such new A Shares to be issued. It is now proposed that, at the AGM and the Class Meetings, a general authorisation be given by the Shareholders of the Company to the board of Directors to make appropriate and necessary amendments to the relevant provisions of the Articles of Association as they think fit to reflect such alterations in the registered share capital and shareholding structure of the Company upon conversion of the A Shares Convertible Bonds.

USE OF PROCEEDS AND REASONS FOR THE ISSUE OF THE A SHARES CONVERTIBLE BONDS

The net proceeds from the issue of A Shares Convertible Bonds are presently intended to apply for the construction of Xianyanglu Plant; Beicang Plant and the expansion part of Jizhuangzi Expansion Plant. Should the net proceeds together with the loans of about HK$1,366 million to be obtained from the three banks, which are independent of any of the directors, chief executive or substantial shareholders of the Company or any of their associates, as disclosed in the Company’s circular dated 17th October, 2001 exceed the capital requirement of about HK$2,411 million for the construction of the three plants, the balance will be applied as the additional working capital of the Company. For details of the three plants, please refer to the Company’s circular dated 17th October, 2001.

The Directors believe that the A Shares Convertible Bonds represent an attractive financing option for the Company taking into account the terms (including the conversion price and the interest rate) of the A Shares Convertible Bonds. The Directors also believe that the issue of the A Shares Convertible Bonds to finance the above projects will have a less immediate dilution effect on the Company’s earnings and net asset per Share and the conversion of the A Shares Convertible Bonds will strengthen the Company’s capital base. Accordingly, the Directors consider that the terms of the A Shares Convertible Bonds are fair and reasonable so far as the Shareholders are concerned and are in the interest of the Company.

The proposed issue of the A Shares Convertible Bonds will not affect the rights of the holders of H Shares of the Company and other shareholders of the Company provided in the Articles of Association of the Company. The Directors believe that TMICL, the controlling shareholder of the Company at present holding approximately 63.09% of the shares of the Company, will remain as the controlling shareholder of the Company following the issue and the conversion of the A Shares Convertible Bonds.

CHANGES IN SHAREHOLDING STRUCTURE UPON FULL CONVERSION OF THE A SHARES CONVERTIBLE BONDS

The following table shows the changes in shareholding structure of the Company upon full conversion of the A Shares Convertible Bonds assuming the total amount of the A Shares Convertible Bonds to be issued is RMB1.2 billion and the Conversion Prices are RMB9.29 and RMB10.18, being 5% and 15%, respectively, premium over the closing price of RMB8.85 traded on the Shanghai Stock Exchange on 27th February 2002.

Based on the Conversion Price of RMB9.29:

Shareholders	Existing shareholding	%	Number of shares to be issued	Shareholding after conversion	%
	(‘000 shares)		(‘000 shares)	(‘000 shares)
TMICL	839,020	63.09	--	839,020	57.50
Legal person shares	38,485	2.89	--	38,485	2.64
A Shares	112,495	8.46	129,171	241,666	16.56
H Shares	340,000	25.56	--	340,000	23.30
Total	1,330,000	100.00	129,171	1,459,171	100.00

Based on the Conversion Price of RMB10.18:

Shareholders	Existing shareholding	%	Number of shares to be issued	Shareholding after conversion	%
	(‘000 shares)		(‘000 shares)	(‘000 shares)
TMICL	839,020	63.09	--	839,020	57.95
Legal person shares	38,485	2.89	--	38,485	2.66
A Shares	112,495	8.46	117,878	230,373	15.91
H Shares	340,000	25.56	--	340,000	23.48
Total	1,330,000	100.00	117,878	1,447,878	100.00

AGM & Class meetings

The AGM will be held on 16th April, 2002 at which special resolutions will be proposed to consider and, if thought fit, to approve, inter alia, the issue and the principal terms of the A Shares Convertible Bonds and to grant authorisation to the board of Directors to implement all related matters in respect of, among other things, timing of the issue, fixing of the Conversion Price, executing relevant agreements and making appropriate and necessary amendments to the relevant provisions of the Articles of Association of the Company upon conversion of the A Shares Convertible Bonds. Subsequent to the AGM and the Class Meetings, at which special resolutions will be prepared to consider and, if thought fit, to approve, inter alia, the issue and the principal terms of the A Shares Convertible Bonds and to grant authorisation to the board of Directors to implement all related matters in respect of, among other things, timing of the issue, fixing of the Conversion Price, executing relevant agreements and making appropriate and necessary amendments to the relevant provisions of the Articles of Association of the Company upon conversion of the A Shares Convertible Bonds. No Shareholders will be required to abstain from voting in the AGM and the Class Meetings. It should be noted that the A Shares Convertible Bonds, upon the approval from the shareholders of the Company at the AGM and the Class Meetings is still subject to the approval of the CSRC and approval of the Shanghai Stock Exchange to the listing and trading in the A Shares Convertible Bonds on the Shanghai Stock Exchange. If for any reasons the A Shares Convertible Bonds are not issued within one year after the date of the approval obtained in the AGM and the Class Meetings, the approval given by the Shareholders on issue of the A Shares Convertible Bonds will automatically lapse.

GENERAL

Save as disclose herein, the Directors confirm that they are not aware of any matter discloseable under the general obligation imposed by paragraph 2 of the Listing Agreement, which is or may be of a price sensitive nature. Further announcement will be made upon the exact amount of the A Shares Convertible Bonds and the Conversion Price are fixed. The Directors confirm that, upon the issue of the A Shares Convertible Bonds, the Company will comply with Rule 19A.14(2)(a) of the Listing Rules at all time.

China Securities has been appointed by the Company to act as the PRC adviser and BNP Paribas Peregrine has been appointed by the Company to act as the international adviser in respect of the issue of the A Shares Convertible Bonds.

DEFINITIONS

As used in this announcement, the following words and phrases have the same meanings assigned:

“AGM”	an annual general meeting of the Company to be held on 16th April, 2002
“A Share(s)”	Renminbi-denominated domestic listing shares of nominal value of RMB1.00 each in the ordinary share capital of the Company which are listed on the Shanghai Stock Exchange
“A Shares Convertible Bonds”	A Shares convertible bonds in the principal amount of not more than RMB1.2 billion (about HK$1.13 billion) with interest of 1.12% per annum to be due in 2007 proposed to be issued by the Company
“Beicang Plant”	the Beicang sewage treatment plant (北倉污水處理廠)
“BNP Paribas Peregrine”	BNP Paribas Peregrine Capital Limited acting as the international adviser of the issue of the A Shares Convertible Bonds, an investment adviser registered under the Securities Ordinance, Chapter 333 of the Laws of Hong Kong
“China Securities”	China Securities Co., Ltd. (華夏証券有限公司) acting as the PRC adviser for the issue of the A Shares Convertible Bonds
“Class Meetings”	the class meetings for holders of the Company’s domestic shares and H shares to be held on 16th April, 2002, respectively
“Conversion Price”	the conversion price of the A Shares Convertible Bonds. The conversion price will also be subject to adjustments for, among other things, subdivision or consolidation of Shares, bonus issues, rights issues and other dilutive events.
“Company”	Tianjin Capital Environmental Protection Company Limited, a joint stock limited company established in the PRC whose A shares and H shares are listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange respectively
“CSRC”	China Securities Regulatory Commission (中國証券監督管理委員會)
“Director(s)”	director(s) of the Company
“Domestic Share(s)”	Renminbi-denominated domestic shares of nominal value of RMB1.00 each in the ordinary share capital of the Company
“H Share(s)”	overseas listed foreign shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC
“Hong Kong Stock Exchange”	the Stock Exchange of Hong Kong Limited
“Jizhuangzi Expansion Plant”	the expansion project of the Jizhuangzi sewage treatment plant (紀莊子污水處理廠)
“Listing Agreement”	the agreement between the Company and the Hong Kong Stock Exchange setting out the continuing obligations which the Company undertakes to comply with as a condition of listing on the Hong Kong Stock Exchange
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“PRC”	the People’s Republic of China, which, for the purposes of this announcement, excludes Hong Kong, Macau and Taiwan
“Shanghai Stock Exchange”	Shanghai Stock Exchange (上海證券交易所)
“Share(s)”	H Share(s) and Domestic Share(s)
“Shareholders”	shareholders of the Company, including holders of Domestic Shares and H Shares
“TMICL”	Tianjin Municipal Investment Company Limited, a State-owned company with limited liability under the supervisory control of the Urban Construction Bureau
“Xianyanglu Plant”	the Xianyanglu sewage treatment plant (鹹陽路污水處理廠)
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC

Unless otherwise specified in this announcement, the translation of RMB into Hong Kong dollars is based on the exchange rate of HK$1.00 to RMB1.06 (for information only).

By Order of the Board
Tianjin Capital Environmental Protection Company Limited
Ma Bai YuTianjin, the PRC 28th February, 2002

Please also refer to the published version of this announcement in the Hong Kong iMail.