Rego Interactive Co., Ltd — Capital/Financing Update 2004

Jun 25, 2004

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.

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

(Stock code: 1065)

Issue of RMB 1,200,000,000 A Shares Convertible Bonds in the PRC

On 5th April, 2004, the CSRC has approved the issuance of RMB 1.2 billion (approximately HK$1.13 billion) A Shares Convertible Bonds to institutional and public investors in the PRC and granted the listing approval of such A Shares Convertible Bonds on the Shanghai Stock Exchange in the PRC. The Company will arrange for the listing of the A Shares Convertible Bonds on the Shanghai Stock Exchange in the PRC as soon as possible.

The Document will be published in Shanghai Security News and China Security News on 26th June, 2004. Roadshow for the issuance of A Shares Convertible Bonds will take place on 29th June, 2004.

This announcement is made pursuant to Rule 13.09 of the Listing Rules.

Reference is made to the announcements made by the Company on 28th February, 2002 and 5th April, 2004, (the “Announcements”) and the circular despatched by the Company on 14th April, 2004 (the “Circular”) in relation to the issue of the A Shares Convertible Bonds. Capitalised terms used herein shall have the same meaning as those used in the Circular and the Announcements unless otherwise defined herein.

The Board hereby announces that on 5th April, 2004 the CSRC has approved the issuance of RMB 1.2 billion (approximately HK$1.13 billion) A Shares Convertible Bonds to institutional and public investors in the PRC and granted the listing approval of such A Shares Convertible Bonds on the Shanghai Stock Exchange in the PRC. The Company will arrange for the listing of the A Shares Convertible Bonds on the Shanghai Stock Exchange in the PRC as soon as possible.

DOCUMENT

The Document will be published in Shanghai Security News and China Security News in the PRC on 26th June, 2004.

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The information set out below is extracted from the Document:

Operation objectives

I. DEVELOPMENT PLANS

• (1) Development Strategies and Long Term Objectives

The Company’s development strategies are: to expand scope of operations through diversification, to have construction of environmental-friendly water treatment facilities as the core business, and to gradually tap into water treatment facilities management, re-use and sewage water recycling, municipal construction, and water treatment equipment manufacturing sectors.

The Company’s long-term objectives are: to provide first class products and services in the environment conservation and municipal construction industries, to establish a well-known brand name, and to become the most reputable enterprise in environment conservation and municipal construction industries in the PRC.

• (2) The Company’s 10-year development plan

Phase I — Accumulation of strength and fostering of core competency (2004 - 2005)

The principal objective of this phase is to consolidate the basis for the Company’s growth. Specific tasks include:

1. To develop sale distribution activities, and to establish a well-known corporate brand;

2. To enhance the research and development standard of the “R&D Center”, and to accumulate the R&D capabilities in water treatment technology;

3. To establish water treatment engineering design capabilities;

4. To establish project contracting capabilities and obtain project contracting qualification;

5. To proactively promote internal and external human resources development, and to accumulate human resources with project financing and project contracting capabilities;

6. To continue the expansion of sewage water treatment operations on a national basis;

7. To tap into the water treatment equipment sector through external expansions;

8. To ensure the healthy and steady growth of net assets and profit margins, and to pursue earnings indicators that surpass or on par with industry’s averages.

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Phase II — Growth Acceleration (2006-2013)

The objectives of this stage are to fully capitalise on its established core competency to obtain rapid expansion and to secure a leading position in the industry, capturing higher profitability. The specific tasks in this phase include:

1. To expand environmental conservation and municipal construction projects’ financing and contracting on a national basis;

2. To obtain a sizable market share in the water treatment equipment manufacturing sector so as to take advantage of economies of scale;

3. To expand operations in solid waste handling and other environment conservation segments;

4. To attain a larger scale so as to secure an advantageous competitive position in the sewage water treatment industry;

5. To create higher brand equity;

6. To achieve excellent operating results with leading profitability within the industry;

7. To obtain excellent performance for principal business, with profit margin exceeding 70%;

8. To implement a steady dividend policy with dividend per share maintaining at the high end of the market range, providing significant bonus to shareholders.

(3) Staff expansion plan

Pursuant to the Company’s development plan, the Company will recruit and train technical and management personnel of various levels according to the Company’s need, providing professional support for the Company’s business expansion.

• (4) Technical development and innovative plans

The Company’s Technological R&D Center under construction will develop environment friendly products, equipments and technologies relating to municipal sewage water treatment, and will use technological developments to enhance corporate development.

• (5) Re-financing, acquisition, mergers and external expansion plans

It is anticipated that in the next three years, subsequent to the current issue, the Company will have no further financing plans in the A Share market. On consideration of attracting international strategic investors, the Company may conduct specific placing or additional issue to strategic investors in the Hong Kong market.

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In accordance with the progress of Company on project construction, operation developments and financial conditions, the Company will make a choice on whether or not to proceed with financing through financial institutions such as banks.

• (6) Planning of further reforms and adjustment to organisational structure

In the course of its future developments, the headquarter of the Company will bear two major missions — fostering of core competency and management of subordinates. The administration function of the headquarter will also be developed around these two major misions. To ensure full implementation of the administration functions of the Company and to enable the various departments to develop their own management capabilities through their activities, the Company will make appropriate adjustment to its organisational structure based on the principles of minimal functional duplications and emphasis on expertise. In addition, on the basis of the Company’s future business external development and new project constructions, adjustments may also be made on the ways of managing the lower level units, and if possible, will adopt the form of business departments and project companies.

• (7) Internationalised operation plans

Following the entry of the PRC into the WTO and the gradual implementation of the commitments associated with WTO accession, the Company will actively cooperate with internationally advanced sewage water treatment companies to enhance the technical and management standard of the Company and to prudently participate in the international sewage water treatment market when conditions mature.

Use of proceeds

The net proceeds amounting to approximately RMB 1.09 billion from the issue of A Shares Convertible Bonds are presently intended to apply as follows:

• approximately RMB 620 million for the construction of Xianyanglu Plant;

• approximately RMB 321 million for the Jizhuangzi Plant Expansion Project;

• approximately RMB 149 million for the construction of Beicang Plant; and

• the remaining balance for the repayment of bank loans.

Important dates of the A Shares Convertible Bonds

1. Publication of the Document date: 26th June, 2004

2. Publication of the A Shares Convertible Bonds Issue announcement date: 26th June, 2004

3. Application date: 1st July, 2004

4. Blocked fund date: 2nd July, 2004 to 6th July, 2004

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1. Expected listing date: Will arrange listing as soon as possible

DEFINITIONS

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

“A Shares Convertible A Share convertible bonds in the principal amount of Bonds” RMB1.2 billion (approximately HK$1.13 billion) due 5 years after the date of issue “Document” The document of the Company in respect of the issuance of the A Shares Convertible Bonds

As at the date of this announcement, the Board comprises executive directors: Ms. Ma Baiyu, Mr. An Pindong, Mr. Gu Qifeng, Mr. Wang Zhanying, Mr. Tan Zhaofu and Ms. Fu Yana and independent non-executive directors: Mr. Wang Xiangfei, Mr. Gao Zongze and Mr. Ko Po Ming.

By order of the Board Ma Baiyu Chairman

Tianjin, the PRC, 25th June, 2004

Unless otherwise specified, the translation of RMB into Hong Kong dollars is based on the exchange rate of HK$1.00 to RMB1.065. The above translation should not be construed as a representation that the relevant amounts have been, could have been, or could be, converted at that or any other rate at all.

Please also refer to the published version of this announcement in The Standard.

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