Rego Interactive Co., Ltd — Capital/Financing Update 2020

Jul 14, 2020

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 1065)

(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES; (2) CONNECTED TRANSACTION IN RELATION TO THE PROPOSED SUBSCRIPTION OF A SHARES BY THE CONTROLLING SHAREHOLDER; (3) PROPOSED INTRODUCTION OF THE STRATEGIC INVESTOR SUBSCRIPTION; (4) SPECIFIC MANDATE; (5) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND

(6) PROPOSED ADOPTION OF THE SHAREHOLDERS’ RETURN PLAN

(1) Proposed Non-public Issuance of A Shares

The Board is pleased to announce that at the Board meeting held on 13 July 2020, the Board has approved the proposed issuance of 323,741,007 new A Shares (inclusive) to 3 specific target investors (i.e. TMICL, Yangtze Ecology and Three Gorges Capital ). It is expected that the gross proceeds to be raised from the Non-public Issuance of A Shares will not exceed RMB1.8 billion (inclusive).

The Issue Price of Non-public Issuance of A Shares is RMB5.56/share, and the price is not lower than 80% of the average trading price of the Company’s A Shares over the 20 trading days preceding the Price Determination Date (the average trading price of the A Shares of the Company over the 20 trading days preceding the Price Determination Date = the total turnover of A Shares over the 20 trading days preceding the Price Determination Date/the total trading volume of A Shares over the 20 trading days preceding the Price Determination Date).

The number of A Shares to be issued under the Non-public Issuance of A Shares, being 323,741,007 A Shares, represents (i) approximately 29.78% of the existing number of A Shares in issue as at the date of this announcement, and approximately 22.68% of the existing total number of Shares in issue as at the date of this announcement; and (ii) approximately 22.94% of the number of A Shares in issue and approximately 18.49% of the total number of Shares in issue, in each case as enlarged by the number of A Shares to be issued upon completion of the Non-public Issuance of A Shares.

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(2) Connected Transaction in Relation to the Proposed Subscription of A Shares by the Controlling Shareholder

As part of the Non-public Issuance of A Shares, on 13 July 2020, the Company entered into the TMICL Subscription Agreement with TMICL, pursuant to which TMICL conditionally agreed to subscribe for 35,971,223 A Shares to be issued based on the Non-public Issuance of A Shares at RMB200 million according to the Issue Price, accounting for approximately 11.11% of the total number of A Shares to be issued under the Non-public Issuance of A Shares.

(3) Proposed Introduction of the Strategic Investor Subscription

As part of the Non-public Issuance of A Shares, on 13 July 2020, the Company entered into the Strategic Investor Subscription Agreement with Subscriber 1 and Subscriber 2, pursuant to which Subscriber 1, Subscriber 2 and the Company agreed on certain strategic cooperation matters. Subscriber 1 conditionally agreed to subscribe for 179,856,115 A Shares to be issued under the Non-public Issuance of A Shares at RMB1.0 billion according to the Issue Price, accounting for 55.56% of the total number of A Shares to be issued under the Non-public Issuance of A Shares; and Subscriber 2 conditionally agreed to subscribe for 107,913,669 A Shares to be issued under the Non-public Issuance of A Shares at RMB0.6 billion according to the Issue Price, accounting for 33.33% of the total number of A Shares to be issued under the Non-public Issuance of A Shares.

(4) Specific Mandate

The Non-public Issuance of A Shares, TMICL Subscription Agreement and Strategic Investor Subscription Agreement are subject to the approvals from the relevant state-owned assets supervision and administration authority (or the state-funded enterprise) and the CSRC, and the approvals by the Shareholders at the EGM, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting. The Non-public Issuance of A Shares will be issued under the Specific Mandate.

(5) Proposed Amendments to the Articles of Association

After the completion of issuance of the new A Shares under the Non-public Issuance of A Shares, the registered capital and shareholding structure of the Company will change. Therefore, the Company’s Articles of Association will need to be amended to reflect the relevant changes. The Board intends to seek Shareholders’ approval at the EGM to authorize the Board or its authorized representatives to make corresponding amendments to the relevant provisions of the Company’s Articles of Association according to the results of the Non-public Issuance of A Shares.

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(6) Proposed Adoption of the Shareholders’ Return Plan

Pursuant to the Notice Regarding Further Implementation of Cash Dividend Distribution of Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) (Zheng Jian Fa [2012] No. 37) and the Regulatory Guidance No. 3 of Listed Companies – Cash Dividend Distribution of Listed Companies (《上市公司監管指引第3號-上市公司現金分紅》) (Zheng Jian Hui Gong Gao [2013] No. 43) both issued by the CSRC as well as the Guideline on Cash Dividend of Listed Companies (《上市公司現金分紅指引》) and the Working Memorandum No. 7 for the Regular Report of Listed Companies – Matters to be Noticed in Relation to Annual - Report and Cash Dividend (《上市公司定期報告工作備忘錄第七號 關於年報工作中與現 金分紅相關的注意事項》) promulgated by the Shanghai Stock Exchange and the Articles of Association, the Company has formulated and proposed to adopt the Shareholders’ Return Plan. The proposed adoption of the Shareholders’ Return Plan will be subject to the approvals by the Shareholders at the EGM, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting.

Implications under the Listing Rules

As at the date of this announcement, TMICL directly holds 715,565,186 shares of A Shares of the Company, representing approximately 50.14% of the Company’s total issued share capital. Since TMICL is the controlling shareholder of the Company, it is therefore a connected person of the Company. According to Chapter 14A of the Listing Rules, the Proposed TMICL Subscription constitutes a connected transaction of the Company, therefore the Company shall comply with the relevant reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee (comprising all independent non-executive directors) has been established in accordance with Chapter 14A of the Listing Rules to advise Independent Shareholders on Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate.

In this regard, Gram Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate.

The EGM and Class Meetings will be convened to consider and approve, as appropriate, (among others) (i) the Non-public Issuance of A Shares; (ii) the Proposed TMICL Subscription; (iii) Proposed Introduction of the Strategic Investor Subscription; (iv) the Specific Mandate; and (v) the proposed adoption of the Shareholders’ Return Plan. The EGM will be convened to consider and approve, as appropriate, the authorization to the Board and its authorized representative(s) to handle all matters relating to the Non-public Issuance of A Shares, including but not limited to, the amendments to the Company’s Articles of Association.

As additional time is required to prepare the information contained in the circular, a circular containing (among others) (i) further details of Non-public Issuance of A Shares, Proposed TMICL Subscription, Proposed Introduction of the Strategic Investor Subscription, Specific Mandate, proposed amendments to the Company’s Articles of Association and proposed adoption of the Shareholders’ Return Plan; (ii) letter from the Independent Board Committee making recommendations on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate to Independent Shareholders; and (iii) letter from Independent Financial Adviser making recommendations on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate to the Independent Board Committee and Independent Shareholders, is expected to be dispatched to Shareholders on or before 31 August 2020. The notice of the EGM and the H Shareholders’ Class Meeting will be dispatched to the Shareholders in due course.

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Other Information

Shareholders’ attention is also drawn to the overseas regulatory announcement dated 13 July 2020 issued by the Company in relation to the Non-public Issuance of A Shares by the Company.

The completion of Non-public Issuance of A Shares, the Proposed TMICL Subscription and Proposed Introduction of the Strategic Investor Subscription are subject to fulfilment of certain conditions. Therefore, the Non-public Issuance of A Shares, the Proposed TMICL Subscription and Proposed Introduction of the Strategic Investor Subscription may or may not proceed. Shareholders and potential shareholders of the Company are reminded to exercise caution when dealing in the securities of the Company.

INTRODUCTION

The Board is pleased to announce that at the Board meeting held on 13 July 2020, the Board has approved the proposed issuance of 323,741,007 new A Shares (inclusive) to 3 specific target investors (i.e. TMICL, Yangtze Ecology and Three Gorges Capital). It is expected that the gross proceeds to be raised from the Non-public Issuance of A Shares will not exceed RMB1.8 billion (inclusive).

(1) Proposed Non-public Issuance of A Shares

Details of the proposed Non-public Issuance of A Shares are set out below:

Class and par value of A Shares of RMB1.00 each. the shares to be issued:

Target subscribers: (i) TMICL; (ii) Yangtze Ecology; and

(iii) Three Gorges Capital

(collectively, the “ Subscribers ”).

TMICL will remain as the controlling shareholder and connected person of the Company after the subscription of new A Shares under the Non-public Issuance of A Shares by the Subscribers.

In addition to the TMICL Subscription Agreement, the Company has also entered into a Strategic Investor Subscription Agreement for the Non-public Issuance of A Shares with Subscriber 1 and Subscriber 2. As at the date of this announcement, except for TMICL, to the best of the Directors’ knowledge, information and belief after making all reasonable enquiries, Subscriber 1 and Subscriber 2 and their respective ultimate beneficial owners are third parties independent of the Company and its connected persons.

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Upon the completion of the Non-public Issuance of A Shares, the Company anticipates that Subscriber 1 will become the substantial Shareholder and connected person of the Company.

Number of A Shares to be issued:

323,741,007 A Shares (inclusive) will be issued under the Nonpublic Issuance of A Shares. The number of A Shares offered through non-public issuance is calculated by dividing the total amount of funds raised through the Non-public Issuance of A Shares by the final Issue Price. The maximum number of issued shares will not exceed 30% of the Company’s total share capital of 1,427,228,430 shares before the issuance.

TMICL intends to subscribe 35,971,223 shares of new A Shares, accounting for 11.11% of the total number of A Shares to be issued under the Non-public Issuance of A Shares; Yangtze Ecology intends to subscribe 179,856,115 shares of new A Shares, accounting for 55.56% of the total number of A Shares to be issued under the Non-public Issuance of A Shares; and Three Gorges Capital intends to subscribe 107,913,669 shares of new A Shares, accounting for 33.33% of the total number of A Shares to be issued under the Non-public Issuance of A Shares.

The number of A Shares to be issued under the Non-public Issuance of A Shares will be adjusted accordingly in cases of occurrence of ex-rights or ex-dividend matters such as distribution of dividend and bonus shares, and conversion of capital reserve into share capital during the period from the Price Determination Date to the date of issuance, which has caused changes to the Company’s share capital.

The final number of issuance will be determined by the Board authorized by the EGM of the Company or persons authorized by the Board in accordance with the authorization of the EGM and the sponsor (the lead underwriters) of the Non-public Issuance of A Shares based on the issuance scheme approved by the CSRC.

Method of issuance:

It will be conducted by way of non-public issuance to target subscribers, and the Shares will be issued as and when appropriate within the validity period of the approval in respect of the Nonpublic Issuance of A Shares to be issued by the CSRC.

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The Price Determination Date, Issue Price and pricing principle:

The Price Determination Date for the Non-public Issuance of A Shares is the date of the announcement of the Board resolutions approving the Non-public Issuance of A Shares passed at the 32nd meeting of the 8th session of the Board (i.e 14 July 2020). On the last trading day before the Price Determination Date, the closing price of the A-shares quoted on the Shanghai Stock Exchange was RMB7.52 per share; as at the date of this announcement, the closing price of the H-shares quoted on the Hong Kong Stock Exchange was HK$2.56 per share.

The Issue Price of Non-public Issuance of A Shares is RMB5.56/ share, and the price is not lower than 80% of the average trading price of the Company’s A Shares over the 20 trading days preceding the Price Determination Date (the average trading price of the A Shares of the Company over the 20 trading days preceding the Price Determination Date = the total turnover of A Shares over the 20 trading days preceding the Price Determination Date/the total trading volume of A Shares over the 20 trading days preceding the Price Determination Date).

The Subscribers subscribe for the shares under the Non-public Issuance of A Shares by cash.

The Issue Price under the Non-public Issuance of A Shares will be adjusted accordingly in cases of occurrence of ex-rights or exdividend matters such as distribution of dividend and bonus shares, and conversion of capital reserve into share capital during the period from the Price Determination Date to the date of issuance.

The adjustment method:

By assuming the issue price before the adjustment as P0, the number of bonus shares or shares being issued upon transfer to share capital from capital reserve of each share as N, distribution of dividends for each Share/cash dividend distribution as D, the issue price after the adjustment as P1, then

Dividends distribution/cash dividend distribution: P1 = P0-D

Bonus issue or transfer to share capital from capital reserve: P1 = P0/(1+N)

Combination of the two items: P1 = (P0-D)/(1+N)

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Conditions for the Non-public Issuance of A Shares:

The Non-public Issuance of A Shares is subject to:

• (1) the approvals by the Shareholders at the EGM, A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting; and

• (2) the approval by the state-owned assets supervision and administration authority (or the state-founded enterprise) and the CSRC.

• Arrangement for the lock-up period:

• Validity period of the resolution:

Listing application:

• Specific Mandate of

• the issuance of A Shares:

• Rights of A Shares to be issued:

Use of proceeds:

• Arrangement relating to the accumulated undistributed profits of the Company prior to the Non-Public Issuance of A Shares:

The new A Shares to be subscribed by the Subscribers shall not be transferred within 18 months from the date of the completion of the issuance of the new A Shares. If the laws and regulations of the PRC govern otherwise, the lock-up period will be governed by such laws and regulations.

• The resolution with respect to the Non-public Issuance of A Shares shall be valid for 12 months from the date of approvals at the EGM and the Class Meetings. If the laws and regulations of the PRC have new requirements in relation to non-public issuance of A Shares, the validity period will be adjusted accordingly by such new requirements.

• The Company will make an application to the Shanghai Stock Exchange for the granting of the listing of all the new A Shares to be issued under the Non-public Issuance of A Shares. Upon expiry of the lock-up period, the new A Shares can be traded on the Shanghai Stock Exchange.

• The Company will issue the A Shares under the Specific Mandate to be sought from the Independent Shareholders at the EGM and the Class Meetings.

• The A Shares to be issued under the proposed Non-public Issuance of A Shares, when fully paid and issued, will rank pari passu in all respects amongst themselves and with the A Shares in issue at the time of the issuance of such A Shares.

It is expected that the gross proceeds to be raised from the proposed Non-public Issuance of A Shares will be not more than RMB1.8 billion (inclusive). After deducting the issuance costs, all proceeds are proposed to be used in repayment of interest-bearing liabilities and supplement of the Company’s working capital.

All the existing and new Shareholders upon completion of the NonPublic Issuance of A Shares will be entitled to the accumulated undistributed profits of the Company.

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(2) Connected transaction in relation to the Proposed Non-public Issuance of A Shares by TMICL

As part of the Non-public Issuance of A Shares, on 13 July 2020, the Company entered into the TMICL Subscription Agreement with TMICL, pursuant to which TMICL conditionally agreed to contribute RMB200 million to subscribe for 35,971,223 shares of A Shares to be issued based on the Non-public Issuance of A Shares at the Issue Price, accounting for 11.11% of the total number of A Shares to be issued under the Non-public Issuance of A Shares.

Principal terms of the TMICL Subscription Agreement

Date:

13 July 2020

Parties: (1) The Company (as Issuer); and (2) TMICL (as subscriber)

Number of A Shares to TMICL will contribute no more than RMB200 million to subscribe for be issued: 35,971,223 A Shares to be issued under the Non-public Issuance of A Shares, accounting for 11.11% of the total number of A Shares to be issued under the Non-public Issuance of A Shares.

Subscription Price and pricing principle:

The Subscription Price and the pricing principle shall be consistent with the abovementioned Issue Price and pricing principle of the proposed Non-public Issuance of A Shares.

The Subscription Price will be paid in cash.

TMICL will use its own funds to subscribe the A Shares to be issued under the Non-public Issuance of A Shares.

The Subscription Price will be adjusted accordingly in cases of occurrence of ex-rights or ex-dividend matters such as distribution of dividend and bonus shares, and conversion of capital reserve into share capital during the period from the Price Determination Date to the date of issuance.

The adjustment method:

By assuming the issue price before the adjustment as P0, the number of bonus Shares or Shares being issued upon transfer to share capital from capital reserve of each share as N, distribution of dividends/ cash dividend distribution for each Share as D, the issue price after the adjustment as P1, then

Dividends distribution/cash dividend distribution: P1 = P0-D

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Bonus issue or transfer to share capital from capital reserve: P1 = P0/ (1+N)

Combination of the two items: P1 = (P0-D)/(1+N)

Time of Payment and Payment Method of Subscription Price:

Share Delivery:

Conditions precedent:

TMICL undertakes that after the Non-public Issuance of Shares of the Company is approved by the CSRC, it will transfer the Subscription Price to the special account for this Non-public Issuance of A Shares opened by the sponsor (the lead underwriter) on the specific payment date determined by the Company and the sponsor (the lead underwriter). After capital verification, the sponsor (the lead underwriter) will deduct relevant fees before transferring it to the Company’s special deposit account for raising funds.

Within 5 working days following the payment of the Subscription Price by TMICL, an audit institution with securities business qualifications should be appointed by the Company to verify the TMICL Subscription Price and issue a capital verification report; the Company should, within 10 working days from the date of issuance of the capital verification report, apply to the Shanghai Stock Exchange and the securities registration and settlement agency to go through the procedures for registering new shares under the name of TMICL.

The TMICL Subscription Agreement will take effect on the day when all the following conditions precedent are fulfilled:

• (1) The Non-public Issuance of A Shares and the Proposed TMICL Subscription were approved at the Board meeting and the general meetings of Shareholders;

• (2) The authorized institution of TMICL (as a subscriber) approves its subscription of the Proposed TMICL Subscription in cash;

• (3) The Non-public Issuance of A Shares is approved by the stateowned assets supervision and administration authority (or statefunded enterprise); and

• (4) The Non-public Issuance of A Shares is approved by the CSRC.

If within 12 months after the TMICL Subscription Agreement is approved by the EGM of the Company and upon the expiration of the validity period of the extended EGM resolution, any of the conditions precedent fails to be fulfilled, so that the relevant provisions of the TMICL Subscription Agreement cannot become effective and cannot be performed, the TMICL or the Company shall have the right to terminate the TMICL Subscription Agreement by giving a written notice.

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As at the date of this announcement, the Company has not submitted application for the approval of the proposed TMICL Subscription to the Tianjin State-owned Assets Supervision and Administration Commission or the CSRC. According to applicable laws and regulations in the PRC, the Company will submit application for approval (i) to the Tianjin SASAC after the Board approves the proposed TMICL Subscription, and (ii) to the CSRC after Independent Shareholders approve the proposed TMICL Subscription in the EGM and Class Meetings.

Lock-up period:

Pursuant to the TMICL Subscription Agreement, TMICL shall not transfer the A Shares subscribed under the Non-public Issuance of A Shares within 18 months from the date of completion of the Non-public Issuance of A Shares.

Shareholding Period and Future Withdrawal Arrangements:

TMICL intends to hold the Company’s shares for a long term. After the lock-up period expires, if TMICL intends to reduce its shareholding, it shall also abide by the relevant regulations of the CSRC, the stock exchange and other relevant laws and regulations on reduction of shareholdings by shareholders and carefully formulate stock reduction plans in accordance with the requirements of Company’s business and capital operation.

(3) Proposed Introduction of the Strategic Investor Subscription

As part of the Non-public Issuance of A Shares, on 13 July 2020, the Company entered into Strategic Investor Subscription Agreement with Subscriber 1 and Subscriber 2, pursuant to which Subscriber 1, Subscriber 2 and the Company agreed on strategic cooperation matters. Subscriber 1 conditionally agreed to subscribe for 179,856,115 A Shares to be issued under the Non-public Issuance of A Shares at RMB1.0 billion according to the Issue Price, accounting for 55.56% of the total number of A Shares to be issued under the Non-public issuance of A Shares; and Subscriber 2 conditionally agreed to subscribe for 107,913,669 A Shares to be issued under the Non-public Issuance of A Shares at RMB0.6 billion according to the Issue Price, accounting for 33.33% of the total number of A Shares to be issued under the Non-public issuance of A Shares.

Principal terms of the Strategic Investor Subscription Agreement

Date: 13 July 2020 Parties: (1) The Company (as Issuer); (2) Yangtze Ecology (as Subscriber 1); and (3) Three Gorges Capital (as Subscriber 2) (the Subscriber 1 and Subscriber 2 are collectively the “ Strategic Investors ”)

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Number of A Shares to be issued:

Subscriber 1 will subscribe for 179,856,115 A Shares to be issued under the Non-public Issuance of A Shares with a contribution of RMB1.0 billion, accounting for 55.56% of the total number of A Shares to be issued under the Non-public issuance of A Shares.

Subscriber 2 will subscribe for 107,913,669 A Shares to be issued under the Non-public Issuance of A Shares with a contribution of RMB0.6 billion, accounting for 33.33% of the total number of A Shares to be issued under the Non-public issuance of A Shares.

• Subscription Price and pricing principle:

The Subscription Price and the pricing principle shall be consistent with the abovementioned Issue Price and pricing principle of the proposed Non-public Issuance of A Shares.

The Subscription Price will be paid in cash.

Conditions precedent:

The Strategic Investor Subscription Agreement will take effect on the day when all the following conditions precedent are fulfilled:

• (1) The Non-public Issuance of A Shares and the Proposed Introduction of the Strategic Investor Subscription were approved at the Board meeting and the general meetings of Shareholders;

• (2) The authorized institutions of the Strategic Investors (as subscribers) approve their subscriptions under the Proposed Introduction of the Strategic Investor Subscription in cash;

• (3) The Non-public Issuance of A Shares is approved by the stateowned assets supervision and administration authority (or statefunded enterprise); and

• (4) The Non-public Issuance of A Shares is approved by the CSRC.

• Scope of strategic cooperation and goals:

With regard to cooperative development of projects, in addition to Tianjin, the Company’s main sewage treatment projects are concentrated in the Yangtze River Economic Belt, while the Strategic Investors are also the backbone of the “Great Yangtze River Protection Project”. The Company and Strategic Investors shall jointly develop the environmental protection market of the Yangtze River Economic Belt and effectively promote the “Great Yangtze River Protection Project” on the premise of meeting their respective standards and ensuring mutual benefit.

With regard to cooperative operation of projects, the Company has mature operation experience in domestic water projects, while Yangtze Ecology has a large number of sewage treatment projects in the Yangtze River Economic Belt. Under the market condition, Yangtze Ecology may entrust the Company to operate some of its projects to meet its project operation requirements, while increasing the proportion of the Company’s “asset-light” operation business.

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With regard to technology research and development, the Company has a powerful research and development center and team, and has strong technical advantages in biological deodorization, biological bacteria preparation, sludge treatment and industrial wastewater. In the future, the parties will carry out in-depth cooperation in the research and development of environmental protection technologies to realize cooperative research and development and technology sharing.

With regard to business management, the Strategic Investors, as stateowned enterprises, have the international advanced management level. In the future, the Strategic Investors will nominate directors and other executives to the Company, which will help improve the management efficiency of the Company and promote the optimization of its management process.

Strategic cooperation mechanism:

• (1) In order to smoothly promote strategic cooperation, study and solve new issues and problems arising in the cooperation, and explore new ways and means of cooperation, all parties shall establish a high-level contact and meeting mechanism and carry out communication, research and exchanges on market development and cooperation projects on a regular or irregular basis.

• (2) For specific projects, relevant project team shall be set up to promote strategic cooperation.

• (3) The Strategic Investor Subscription Agreement on strategic cooperation only represents the basic consensus reached by all parties on comprehensive cooperation. For the cooperation in specific projects, the parties shall further negotiate on specific matters of project cooperation and sign relevant contracts and agreements after approval by their respective decision-making bodies.

Cooperation term:

Arrangements for participating in the management of the Company:

The respective parties of the Strategic Investor Subscription Agreement have the intention and consensus of long-term cooperation, and the relevant provisions of the Strategic Investor Subscription Agreement relating to strategic investment shall remain in effect for the period when the Strategic Investors hold not less than 1% of the Company’s shares.

Upon completion of the subscription of shares under the Non-public Issuance of A Shares by the Strategic Investors in accordance with the Strategic Investor Subscription Agreement, each of Subscriber 1 and Subscriber 2 may nominate one director candidate to the Company. The Company shall convene a Board meeting to supplement (or re-elect) the directors nominated by Subscriber 1 and Subscriber 2 within 60 days from the completion of the Non-public Issuance of A Shares, and submit the relevant proposals to the Company’s general meeting for consideration. The Company is obliged to do its utmost to procure the consideration and approval of such proposals.

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Information of the Company, TMICL , Yangtze Ecology and Three Gorges Capital

The Company is principally engaged in the investment, construction, design, management, operation, technical consultation and auxiliary services of sewage water, tap water and other water treatment facilities; design, construction, management, building and operation management of municipal infrastructural facilities; licensed operation, technical consultation and auxiliary services of the Southeastern Half Ring Urban Road of the Middle Ring of Tianjin City; development and operation of environmental protection technologies and environmental protection products and equipment; leasing of self-owned housing, etc.

TMICL is the controlling shareholder of the Company. As of the date of this announcement, it directly holds approximately 50.14% of the Company’s total issued share capital. TMICL is mainly engaged in the investment, operation and management of commerce, service industry, real estate industry, urban infrastructure, highway facilities and supporting facilities with its own funds; property management; leasing of self-owned housing; and enterprise management consulting.

Yangtze Ecology is a company established in the PRC with limited liability and is a whollyowned subsidiary of Three Gorges Corporation. Yangtze Ecology is the main body of Three Gorges Corporation to carry out the greater ecological protection of Yangtze River. Relying on the construction of Yangtze River Economic Belt, it is responsible for the planning, design, investment, construction, operation, technological research and development, and products and services related to ecology, environmental protection, energy saving and clean energy. Yangtze Ecology operates corresponding state-owned assets according to law.

Three Gorges Capital is a company established in the PRC with limited liability and is 70% owned by Three Gorges Corporation. Three Gorges Capital is a capital investment company controlled by Three Gorges Corporation, and its main business is industrial investment, equity investment, asset management and investment consulting. Centering on the strategy of Three Gorges Corporation, it focuses on new technologies, new materials and new business models in the field of clean energy, actively incubates emerging industries towards the future, nurtures new growth momentum, gives full play to the synergy effect of industry and finance, and strives to become the most innovative investment company in the field of clean energy, with the mission of incubating innovative technologies in the industry, cultivating industry leaders, expanding the breadth and depth of clean energy, promoting the revolution in energy production and consumption and serving the strategy of greater ecological protection of Yangtze River.

Effects of the Non-public Issuance of A Shares on the Shareholding Structure of the Company

The following table sets out the shareholding structure of the Company (a) as at the date of this announcement and (b) immediately after the completion of the Non-public Issuance of A Shares, (assuming that (i) a total of 323,741,007 new A Shares will be issued to TMICL, Yangtze Ecology and Three Gorges Capital under the Non-public Issuance of A Shares, respectively and (ii) there is no other change to the shareholding structure since the date of this announcement save for the issue of the A Shares pursuant to the Non-public issuance of A Shares):

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Shareholders A Shares – TMICL – New A Shareholders under the Non-public Issuance of A Shares – Yangtze Ecology – Three Gorges Capital – Other A Shareholders H Shares Public H Shareholders Total Issued Shares	As at the date of this announcement Number of shares Approximate percentage of the total issued shares (%) 715,565,186 50.14 – – – – 371,663,244 26.04 340,000,000 23.82 1,427,228,430 100	Immediately after the completion of the Non-public Issuance of A Shares Number of shares Approximate percentage of the total issued shares (%) 751,536,409 42.92 179,856,115 10.27 107,913,669 6.16 371,663,244 21.23 340,000,000 19.42 1,750,969,437 100

Reasons for and Benefit of the Non-Public Issuance of A Shares, Proposed TMICL Subscription and Proposed Introduction of the Strategic Investor Subscription

• (1) Introduce important strategic investors who come from environmental protection industry to strengthen strategic synergies

In addition to the TMICL, the target subscribers for the Non-public Issuance of A Shares are Yangtze Ecology and Three Gorges Capital. Yangtze Ecology is a wholly-owned subsidiary of Three Gorges Corporation, and is also the key player of Three Gorges Corporation to carry out the great protection of the Yangtze River. Shouldering the mission of “achieving a fundamental improvement in the water quality of the Yangtze River”, Yangtze Ecology is core member in the environmental protection industry. Three Gorges Capital is a professional investment institution controlled by Three Gorges Corporation. Centering on the strategy of the Three Gorges Corporation and shouldering the mission of serving the great protection of the Yangtze River, it is a person acting in concert of Yangtze Ecology.

After the completion of the Non-public Issuance of A Shares, the Company will effectively utilize the industrial background, market channels and other resource advantages of the Strategic Investors to actively expand its market share and influence, provide the society with efficient and high-quality comprehensive environmental services based on the “Great Yangtze River Protection Plan” and the corporate vision of “returning clear water and sending freshness to the world”, and achieve the development goal of building an ecological civilization in the new era set forth at the 19th National Congress of the CPC.

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(2) Keep abreast of the policies to seize market opportunities

Through the Non-public Issuance of A Shares, the Company will enhance its capital reserves and strengthen the flexibility of operation and management, so as to seize the opportunities brought by the rapid development of the industry and the bonus of the national policies, and to cope with the challenges brought by macroeconomic fluctuations and increasingly fierce competition in the water industry.

(3) Optimize capital structure to alleviate working capital pressure

In recent years, the Company’s business scale continues to expand, and the demand for working capital increases accordingly. The current capital structure of the Company not only restricts the ability of indirect financing, but also exposes the Company to certain financial risks. The Company will raise funds through the Non-public Issuance of A Shares to repay interest-bearing liabilities and replenish working capital. On one hand, it is beneficial for reducing the asset-liability ratio, optimizing the capital structure and reducing the debt repayment risk. On the other hand, it is conducive to further expanding the Company’s financial strength, improving its anti-risk ability, financial security level and financial flexibility, and supporting its stable and rapid development.

The Directors (except the members of the Independent Board Committee) consider that the terms of the Non-public Issuance of A Shares, the TMICL Subscription Agreement and the Strategic Investor Subscription Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

In addition, the independent non-executive Directors preliminarily believe that, subject to obtaining Independent Financial Adviser’s opinion, the Company’s Non-public Issuance of A Shares complies with the relevant laws, regulations, regulatory documents and the Articles of Association, and the price and pricing method in relation to connected transaction of the proposed TMICL Subscription is reasonable and fair, in the interests of the Company and the Shareholders as a whole, and there is no situation that harms the interests of the Company and all Shareholders.

Fundraising Activities for the Past 12 Months

The Company did not conduct any fundraising activities involving the issuance of equity securities in the 12 months preceding the date of this announcement.

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(4) Specific Mandate

The Non-public Issuance of A Shares, TMICL Agreements and Strategic Investor Subscription Agreements are subject to the approvals from the relevant state-owned assets supervision and administration authority (or the state-funded enterprise) and the CSRC, and the approvals by the Shareholders at the EGM, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting. The Non-public Issuance of A Shares will be issued under the Specific Mandate.

(5) Proposed Amendments to the Articles of Association

Upon completion of the issuance of new A Shares under the Non-public Issuance of A Shares, the registered capital and shareholding structure of the Company will change. Therefore, the Articles of Association will need to be amended to reflect the relevant changes. The Board intends to seek the approval of the Shareholders at the EGM to authorize the Board or its authorized representative(s) to make corresponding amendments to the relevant provisions in the Company’s Articles of Association according to the results of the Non-public Issuance of A Shares.

(6) Proposed Adoption of the Shareholders’ Return Plan

Pursuant to the Notice Regarding Further Implementation of Cash Dividend Distribution of Listed Companies (《關於進一步落實上市公司現金分紅有關事項的通知》) (Zheng Jian Fa [2012] No.37) and the Regulatory Guidance No. 3 of Listed Companies – Cash Dividend Distribution of Listed Companies (《上市公司監管指引第3號－上市公司現金分紅》) (Zheng Jian Hui Gong Gao [2013] No.43) both issued by the CSRC as well as the Guideline on Cash Dividend of Listed Companies 《上市公司現金分紅指引》( ) and the Working Memorandum No. 7 for the Regular Report of Listed Companies – Matters to be Noticed in Relation to Annual Report and Cash Dividend (《上市公司 定期報告工作備忘錄第七號－關於年報工作中與現金分紅相關的注意事項》) promulgated by the Shanghai Stock Exchange and the Articles of Association, the Company has formulated and proposed to adopt the Shareholders’ Return Plan. The proposed adoption of the Shareholders’ Return Plan will be subject to the approvals by the Shareholders at the EGM, the A Shareholders’ Class Meeting and the H Shareholders’ Class Meeting. A circular containing, among other things, details of the Shareholders’ Return Plan will be despatched to the Shareholders as soon as practicable after the publication of this announcement.

(7) Authorization to the Board and its authorized person(s) to handle all matters relating to the Non-Public Issuance of A Shares

The Board proposes a resolution at the EGM to grant authorization to the Board and its authorized persons (including the chairman, general manager, secretary to the Board and chief accountant of the Company) to handle all matters relating to the Non-public Issuance of A Shares, including but not limited to:

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1. To formulate and implement the detailed proposal of the Non-public Issuance of A Shares according to the issuance proposal approved by the EGM and the actual circumstances, including the time of issuance, number of shares to be issued, issue period, issue price, method of issuance, choice of subscribers, specific methods of subscription, proportion of subscription and other matters related to the issuance;

2. To handle the tasks with respect to the filing, approval, etc for the projects funded by the proceeds raised from the Non-public Issuance of A Shares, and to sign major contracts in the operational process of the investment projects for the Non-public Issuance of A Shares;

3. To appoint the sponsor and other intermediary institutions and to handle the reporting matters in relation to the Non-public Issuance of A Shares, and to produce, amend and submit the relevant reporting materials in relation to the issuance and listing pursuant to the requirements of regulatory authorities;

4. To determine to sign, supplement, amend, submit, report and execute all agreements and documents arising in the process of the Non-public Issuance of A Shares, including but not limited to the underwriting agreement, sponsor agreement, engagement letters with intermediary institutions, share subscription agreements and other legal documents;

5. To open a special bank account designated for the proceeds raised and to sign the relevant agreements in respect of the management and use of the proceeds raised;

6. To adjust the specific arrangements of the investment projects within the scope of the laws and regulations and the resolutions of the EGM and according to the requirements of the competent authorities and the actual market circumstances;

7. Upon the occurrence of force majeure or change of market conditions, or if there is new requirements of the laws and regulations or as required by the securities regulatory authorities in relation to the policy of non-public issuance of shares or the scale of proceeds to be raised from the Non-public Issuance of A Shares, to make adjustments to the detailed proposal of the Non-public Issuance of A Shares accordingly and continue to handle the non-public issuance matters (other than the matters which are subject to the approval(s) at the shareholders’ meeting according to the relevant laws, regulations and the Articles of Association);

8. To handle the registration, locking and listing matters with the Shanghai Branch of China Securities Depository and Clearing Company Limited and the Shanghai Stock Exchange upon completion of the Non-public Issuance of A Shares;

9. To handle the related matters including increasing the registered capital of the Company, amending the relevant articles in the Articles of Association and handling the registration in the industrial and commercial departments and the relevant filing procedures according to the actual issuance results of the Non-public Issuance of A Shares;

10. Apply to the CSRC for terminating the Non-public Issuance of A Shares and withdraw the application materials in accordance with the policy changes in relation to non-public issuance of shares as specified by laws, regulations, securities regulatory authorities and changes in market conditions; and

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1. To handle other matters related to the Non-public Issuance of A Shares within the scope permitted by the laws, regulations and the Articles of Association.

The above authorization shall be valid for 12 months from the date of consideration and approval at the EGM. If the Non-public Issuance of A Shares is approved by the CSRC and completed within the above validity period, the authorization to handle the registration, locking and listing matters with the Shanghai Branch of China Securities Depository and Clearing Company Limited and the Shanghai Stock Exchange, the registration in the industrial and commercial departments and the relevant filing procedures as well as other implement items after completion of the Issuance shall be valid from the date of consideration and approval at the EGM of the Company to the date of completion of the procedures of the relevant matters.

Implications under the Listing Rules

As at the date of this announcement, TMICL directly holds 715,565,186 shares of A Shares of the Company, representing approximately 50.14% of the Company’s total issued share capital. Since TMICL is the controlling shareholder of the Company, it is therefore a connected person of the Company. According to Chapter 14A of the Listing Rules, the Proposed TMICL Subscription constitutes a connected transaction of the Company, therefore the Company shall comply with the relevant reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Mr. Liu Yujun, an executive Director of the Company and Mr. Gu Wenhui, Mr. Han Wei and Mr. Si Xiaolong, non-executive Directors of the Company, are related to Tianjin Investment Group and TMICL and are deemed to be unable to independently advise the Board on the Non-public Issuance of A Shares and the Proposed TMICL Subscription. Therefore, they have abstained from voting on the approval of the Non-public Issuance of A Shares and the Proposed TMICL Subscription at the Board meeting. Save as aforesaid, no other Directors have significant interests in the proposed Non-public Issuance of A Shares and the Proposed TMICL Subscription; therefore, no other Directors have abstained from voting on the relevant board resolutions.

Independent Board Committee and Independent Financial Adviser

The Independent Board Committee (comprising all independent non-executive directors) has been established in accordance with Chapter 14A of the Listing Rules to advise Independent Shareholders on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate.

In this regard, Gram Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate.

EGM and Class Meetings

The EGM and Class Meetings will be convened to consider and approve, as appropriate, (among others) (i) the Non-public Issuance of A Shares; (ii) the Proposed TMICL Subscription; (iii) Proposed Introduction of the Strategic Investor Subscription; (iv) the Specific Mandate; and (v) the proposed adoption of the Shareholders’ Return Plan. The EGM will be convened to consider and approve, as appropriate, the authorization to the Board and its authorized representative(s) to handle all matters relating to the Non-public Issuance of A Shares, including but not limited to, the proposed amendments to the Company’s Articles of Association.

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TMICL, Tianjin Investment Group, its associates and persons involved in, the Non-public Issuance of A Shares, Proposed TMICL Subscription and/or Specific Mandate or having material interest therein will be required to abstain from voting on the corresponding resolutions to be proposed at the EGM and/or Class Meetings. Save as aforementioned, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no other Shareholders have a material interest in the corresponding resolutions and therefore no other Shareholders are required to abstain from voting at the EGM and/or the Class Meetings.

As additional time is required to prepare the information contained in the circular, a circular containing (among others) (i) further details of the Non-public Issuance of A Shares, Proposed TMICL Subscription, Proposed Introduction of the Strategic Investor Subscription, Specific Mandate, proposed amendments to the Company’s Articles of Association and the proposed adoption of the Shareholders’ Return Plan; (ii) letter from the Independent Board Committee making recommendations on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate to Independent Shareholders; and (iii) letter from the Independent Financial Adviser making recommendations on the Non-public Issuance of A Shares, Proposed TMICL Subscription and Specific Mandate to the Independent Board Committee and Independent Shareholders, is expected to be dispatched to Shareholders on or before 31 August 2020. The notice of the EGM and the H Shareholders’ Class Meeting will be dispatched to the Shareholders in due course.

The completion of Non-public Issuance of A Shares, the Proposed TMICL Subscription and Proposed Introduction of the Strategic Investor Subscription are subject to fulfilment of certain conditions. Therefore, the Non-public Issuance of A Shares, the Proposed TMICL Subscription and Proposed Introduction of the Strategic Investor Subscription may or may not proceed. Shareholders and potential shareholders of the Company are reminded to exercise caution when dealing in the securities of the Company.

DEFINITIONS

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

• “A Shareholder(s)”

Holder(s) of A Shares

• “A Shareholders’

• Class Meeting”

• the class meeting of A Shareholders to be convened by the Company to consider and, if thought fit, approve, among other things, (i) the Proposed Non-public Issuance of A Shares; (ii) the Proposed TMICL Subscription; (iii) Proposed Introduction of the Strategic Investor Subscription; (iv) the Specific Mandate; and (v) the proposed adoption of the Shareholders’ Return Plan

• “A Share(s)”

the ordinary share(s) issued by the Company, with a par value of RMB1.00 each, which are listed on the Shanghai Stock Exchange

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“Articles of	the articles of association of the Company, as amended from time to
Association”	time
“associate”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors of the Company
“Class Meetings”	the A Shareholders’ Class Meeting and the H Shareholders’ Class
	Meeting
“Company”	Tianjin Capital Environmental Protection Group 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 Stock
	Exchange respectively
“connected person”	has the meaning as ascribed to it under the Listing Rules
“controlling	has the meaning as ascribed to it under the Listing Rules
shareholder”
“CSRC”	the China Securities Regulatory Commission
“Director(s)”	the director(s) of the Company, including the independent non-
	executive director(s)
“EGM”	the extraordinary general meeting of the Company to be convened
	for the Shareholders to consider and, if thought fit, approve, among
	other things, (i) the Non-public Issuance of A Shares; (ii) the Proposed
	TMICL Subscription; (iii) Proposed Introduction of the Strategic
	Investor Subscription; (iv) the Specific Mandate; (v) proposed
	amendments to the Articles of Association; and (vi) the proposed
	adoption of the Shareholders’ Return Plan
“H Share(s)”	the ordinary share(s) issued by the Company, with a par value of
	RMB1.00 each, which are listed on the Stock Exchange
“H Shareholder(s)”	holder(s) of H Share(s)
“H Share Class	the class meeting of the H Shareholders to be convened by the
Meeting”	Company to consider and, if thought fit, approve, among other things,
	(i) the Proposed Non-public Issuance of A Shares; (ii) the Proposed
	TMICL Subscription; (iii) Proposed Introduction of the Strategic
	Investor Subscription; (iv) the Specific Mandate; and (v) the proposed
	adoption of The Shareholders’ Return Plan
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC

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“Independent Board Committee”

• the independent board committee of the Company comprising Mr. Di Xiaofeng, Mr. Guo Yongqing and Mr. Wang Xiangfei, being all the independent non-executive Directors of the Company, which is formed to advise the Independent Shareholders on the Non-public Issuance of A Shares, the Proposed TMICL Subscription and the Specific Mandate in accordance with the Listing Rules

• “Independent Financial Gram Capital Limited, a licensed corporation to carry out Type 6 Adviser” or (advising on corporate finance) regulated activity under the Securities “Gram Capital” and Futures Ordinance and the independent financial adviser appointed in accordance with Listing Rules to the Independent Board Committee and the Independent Shareholders on the Proposed Non-public Issuance of A Shares, the Proposed TMICL Subscription and the Specific Mandate

• “Independent Shareholders other than TMICL, Tianjin Investment Group, its Shareholders” associates and the persons involved in, the Non-public Issuance of A Shares, Proposed TMICL Subscription and/or Specific Mandate or having material interest therein

• “Issue Price” the issue price of RMB5.56 per A Share under the Non-public Issuance of A Shares

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Non-public Issuance the proposed non-public issuance of 323,741,007 new A Shares of A Shares” (inclusive) to the Subscribers by the Company at the Issue Price “percentage ratio(s)” has the meaning as ascribed to it under the Listing Rules, as applicable to a transaction

• “PRC” the People’s Republic of China, excluding, for the purpose of this announcement, Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

• “Price Determination 14 July 2020, being the announcement date of the resolution of the Date” 32nd meeting of the eighth Board of Directors of the Company that approved the Non-public Issuance of A Shares

• “Proposed Introduction the subscription for A Shares by Yangtze Ecology and Three Gorges of the Strategic Investor Capital respectively under the Strategic Investor Subscription Subscription” Agreement, being part of the Proposed Non-public Issuance of A Shares

• “Proposed TMICL the subscription of A Shares by TMICL according to the TMICL Subscription” Subscription Agreement, as part of the Proposed Non-public Issuance of A Shares

• “RMB” Renminbi, the lawful currency of the PRC

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“Share(s)”

ordinary share(s) of nominal value of RMB1.00 each in the existing share capital of the Company

“Shareholder(s)” the holder(s) of the Shares “Shareholders’ the shareholders’ return plan for the coming three financial years Return Plan” (2020-2022) of the Company “Specific Mandate” according to Rule 13.36 of Listing Rule (as amended by Chapter 19A of Listing Rule), the specific mandate granted by Independent Shareholders at the EGM and Class Meetings to issue A Shares in accordance with the proposed Non-public Issuance of A Shares

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “Strategic Investor the subscription agreement entered into by Subscriber 1, Subscriber 2 Subscription and the Company on 13 July 2020, pursuant to which, Subscriber 1, Agreement” Subscriber 2 and the Company agreed on strategic cooperation matters; Subscriber 1 agreed to subscribe for a contribution of RMB1.0 billion, and the Company agreed to issue 179,856,115 new A Shares at the Subscription Price to Subscriber 1; and Subscriber 2 agreed to subscribe for a contribution of RMB0.6 billion, and the Company agreed to issue 107,913,669 new A Shares at the Subscription Price to Subscriber 2

• “Subscription Price” subscription price of RMB5.56 per A Share under the TMICL Subscription Agreement and/or the Strategic Investor Subscription Agreement (as the case may be)

• “Substantial has the meaning as ascribed to it under the Listing Rules shareholder(s)” “Three Gorges Capital” or Three Gorges Capital Holdings Co., Ltd.* (三峽資本控股有限責任公 “Subscriber 2” 司), a company incorporated in the PRC with limited liability, and is owned as to 70% by Three Gorges Corporation

“Three Gorges China Three Gorges Corporation* (中國長江三峽集團有限公司), Corporation” a company incorporated in the PRC with limited liability, is wholly owned by the State-owned Assets Supervision and Administration Commission of the State Council

“Tianjin Investment Tianjin City Infrastructure Construction and Investment Group Group” Company Limited* ( 天津城市基礎設施建設投資集團有限公司 ), the ultimate controlling shareholder of the Company and the sole shareholder of TMICL, holding 100% of the shares of TMICL

“TMICL” Tianjin Municipal Investment Company Limited* (天津市政投資 有限公司), the controlling shareholder of the Company, holding approximately 50.14% equity interest in the Company

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“TMICL Subscription the subscription agreement entered into between TMICL and the Agreement” Company on 13 July 2020, pursuant to which TMICL agreed to subscribe for a contribution of RMB0.2 billion, and the Company agreed to issue 35,971,223 new A Shares at the Subscription Price

“trading day” a day on which the Shanghai Stock Exchange is open for dealing or trading in securities

“Yangtze Ecology” or “Subscriber 1”

Yangtze Ecological Environmental Protection Group. Co., Ltd.* (長 江生態環保集團有限公司), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of Three Gorges Corporation

“%”

percent

By order of the Board Liu Yujun Chairman

Tianjin, the PRC 13 July 2020

As at the date of this announcement, the Board comprises three executive Directors: Mr. Liu Yujun, Ms. Wang Jing and Mr. Niu Bo; three non-executive Directors: Mr. Gu Wenhui, Mr. Han Wei and Mr. Si Xiaolong; and three independent non-executive Directors: Mr. Di Xiaofeng, Mr. Guo Yongqing and Mr. Wang Xiangfei.

• For identification purpose only

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