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.

天津渤海化工(集團)股份有限公司

TIANJIN BOHAI CHEMICAL INDUSTRY (GROUP)

COMPANY LIMITED

(a joint stock limited company incorporated in the

People's Republic of China with limited liability)

天津渤海化工集團公司

TIANJIN BOHAI CHEMICAL INDUSTRY GROUP CORPORATION

(a State-owned enterprise established in the

People's Republic of China)

天津市政投資有限公司

TIANJIN MUNICIPAL INVESTMENT

COMPANY LIMITED

(a State-owned enterprise established in the

People's Republic of China)

Transfer of a 63.09% interest in the Company from Bohai Corporation to TMICL,

Very substantial acquisition and connected transactions regarding, among others, exchange

of the Existing Chemical Business for the New Business,

proposed change of the name of the Company to

Tianjin Capital Environmental Protection Company Limited (天津創業環保股份有限公司)

and proposed amendments to the articles of association of the Company

‍‍SUMMARY:

The Share Transfer

The Directors have been informed by Bohai Corporation that Bohai Corporation shall transfer its 63.09% interest in the Company to TMICL at nil consideration pursuant to approvals of the Tianjin Municipal Government and the Ministry of Finance, and that Bohai Corporation and TMICL have entered into the Transfer Agreement to effect such transfer. Both the Executive and the CSRC have granted waivers to TMICL from making a mandatory offer to the holders of H Shares and A Shares of the Company respectively under the Takeovers Code and the Securities Law of the PRC. The Share Transfer will become effective upon MOFTEC's formal approval of the Transfer Agreement, which is expected to be obtained before the end of October 2000.

The Transaction and the AR Disposal

The Directors are pleased to announce that the following conditional agreements dated 10th October, 2000 have been entered into:

(1) the Asset Exchange Agreement between the Company, Bohai Corporation and TMICL, pursuant to which the Company conditionally agreed to transfer the Existing Chemical Business to Bohai Corporation in exchange for the New Business; and

(2) the AR Agreement between the Group and Tianjin Huaze, pursuant to which the Group conditionally agreed to dispose of the AR Assets to Tianjin Huaze at a cash consideration of RMB305.2 million (approximately HK$285.2 million).

‍The terms of the Asset Exchange Agreement have been arrived at after arm's length negotiation and are based on normal commercial terms. The implementation of the Transaction and the AR Disposal will result in the replacement of the heavily indebted and loss-making Existing Chemical Business with the New Business. The Directors believe that the Transaction represents a good opportunity for the Company to enter into the urban construction and environmental protection related businesses in Tianjin, the PRC and to allow the Company to secure a stable income and steady cashflows. Upon the Asset Exchange Completion, the Company will become the dominant sewage water treatment processor in Tianjin. The Directors consider that the Transaction and the AR Disposal are in the interests of the Company and are fair and reasonable so far as Shareholders are concerned.

The Transaction constitutes a very substantial acquisition and connected transaction for the Company under the Listing Rules and, as a result of the Transaction, the Company will be treated by the Stock Exchange as a new applicant for listing. In addition, the AR Disposal constitutes a discloseable and connected transaction for the Company under the Listing Rules. Upon the Asset Exchange Completion, the Ongoing Connected Transactions will constitute connected transactions of the Company under the Listing Rules. Accordingly, the Transaction, the AR Disposal and the Ongoing Connected Transactions may only proceed with the approval of the Independent Shareholders. The Controlling Shareholder and its associates will abstain from voting at the EGM in this respect. In view of the interest of the Controlling Shareholder in the Transaction, the AR Disposal and the Ongoing Connected Transactions, the Independent Board Committee has been formed to advise the Independent Shareholders in respect of the Transaction, the AR Disposal and the Ongoing Connected Transactions and an independent financial adviser will be appointed to advise the Independent Board Committee on whether the Transaction, the AR Disposal and the Ongoing Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned.

Change of the Company's name and amendments to the Company's articles of association

It is proposed that, subject to the Asset Exchange Completion and the approval of the Shareholders at the EGM, (i) the name of the Company will be changed to Tianjin Capital Environmental Protection Company Limited(天津創業環保股份有限公司)and (ii) the articles of association of the Company will be amended to reflect the change of the principal business of the Company and anticipated future developments.

THE SHARE TRANSFER

Transfer Agreement dated 10th October, 2000

Parties involved:

Transferor: Bohai Corporation

Transferee: TMICL

Particulars of the Transfer Agreement:

The Directors have been informed by Bohai Corporation and TMICL that pursuant to the approval document (Jin Zheng Han [2000] No.58) dated 8th June, 2000 issued by the Tianjin Municipal Government the approval document (Cai Qi [2000] No.379) dated 28th September, 2000 issued by the Ministry of Finance and the Transfer Agreement, the 63.09% interest in the Company held by Bohai Corporation is to be transferred to TMICL at nil consideration.

Set out below are the shareholding structures of the Company prior to and immediately after the completion of the Share Transfer:

Prior to the completion of the Share Transfer:

Notes:

Bohai Corporation and TMICL are under the supervisory control of Tianjin Economic Commission and Urban Construction Bureau respectively
the Company's H Shares are listed on the Stock Exchange
the Company's A Shares are listed on the Shanghai Stock Exchange
the legal person shares are owned by PRC State-owned enterprises independent of any of the directors, chief executive and substantial shareholders of the Group or any of their respective associates

Immediately upon the completion of the Share Transfer:

Notes:

Bohai Corporation and TMICL are under the supervisory control of Tianjin Economic Commission and Urban Construction Bureau respectively
the Company's H Shares are listed on the Stock Exchange
the Company's A Shares are listed on the Shanghai Stock Exchange
the legal person shares are owned by PRC State-owned enterprises independent of any of the directors, chief executive and substantial shareholders of the Group or any of their respective associates

As indicated in the above charts, both Bohai Corporation and TMICL are wholly- owned by the Tianjin Municipal Government and accordingly, the Share Transfer will not result in a change of ultimate control of the Company. A waiver in relation to the Share Transfer has been granted by the Executive under the Takeovers Code to TMICL from making a mandatory offer to the holders of H Shares of the Company under Rule 26 of the Takeovers Code. In addition, a waiver in relation to the Share Transfer has also been granted by the CSRC under the Securities Law of the PRC to TMICL from making a mandatory offer to the holders of A Shares of the Company.

The Transfer Agreement has been entered into by Bohai Corporation and TMICL so that the Share Transfer can be effected in compliance with the relevant laws, regulations and rules of regulatory bodies in the PRC and Hong Kong. Completion of the Transfer Agreement is subject to the fulfillment of certain conditions, including (i) the approval from the Ministry of Finance; (ii) the granting of the waivers by the CSRC and the Executive respectively to TMICL from the general offer obligations to acquire all the A Shares and H Shares that would be triggered by the Share Transfer pursuant to the Securities Law of the PRC and the Takeovers Code respectively; and (iii) the approval from MOFTEC. As stated above, the approval from the Ministry of Finance and the waivers from the CSRC and the Executive respectively have been obtained. Bohai Corporation and TMICL are in the process of applying to MOFTEC for the approval of the Share Transfer and the Transfer Agreement. Both Bohai Corporation and TMICL expect that the approval from MOFTEC will be obtained before the end of October 2000. The Share Transfer is neither subject to nor conditional upon the completion of the Transaction or completion of the AR Disposal, details of which are set out below. A further announcement will be made when Bohai Corporation and TMICL notify the Company that all relevant approvals have been obtained and that the Share Transfer has completed.

The Share Transfer is intended to facilitate the Transaction with a view to improving the financial position and the business prospects of the Group. Further details about the Transaction are set out in paragraph 2 below. As the business operations of the Group have been managed by the board of Directors, which is responsible to Shareholders and is independent of Bohai Corporation and the Tianjin Municipal Government, the Directors consider that the business operations of the Group will not be affected as a result of the Share Transfer.

THE TRANSACTION

Asset Exchange Agreement dated 10th October, 2000

Parties:

(i) The Company;

(ii) TMICL; and

(iii) Bohai Corporation

Particulars of the Asset Exchange Agreement:

Pursuant to the Asset Exchange Agreement, the Company has conditionally agreed to transfer its Existing Chemical Business in exchange for the New Business. The Directors consider that the terms of the Asset Exchange Agreement have been agreed after arm's length negotiation and is fair and reasonable so far as the Independent Shareholders are concerned. Upon the Asset Exchange Completion, the principal activities of the Company will change from its present chemical business to urban construction and environmental protection related businesses principally in Tianjin, in particular, (i) the holding, operation and development of sewage water treatment plants, and (ii) the operation and development of city roads and toll stations. Upon the Asset Exchange Completion, the Company will become the holding company of dominant sewage water treatment processors in Tianjin.

The completion of the Transaction is subject to the fulfillment of the conditions precedent set out in the paragraph headed “Conditions precedent of the Asset Exchange Agreement and the AR Agreement” below. One of the conditions is the passing by Shareholders of an ordinary resolution at the EGM to approve the set-off of the accumulated losses with the capital reserve fund and general reserve of the Group as at the date of Asset Exchange Completion. For indicative purposes, the balance of accumulated losses and the aggregate balance of the capital reserve fund and general reserve of the Group according to the audited accounts of the Group as at 31st December, 1999 prepared in accordance with PRC GAAP amounted to approximately RMB891.3 million (approximately HK$833.0 million) and approximately RMB787.8 million (approximately HK$736.3 million) respectively. The Directors consider that such set-off will increase the ability of the Company to distribute dividends to Shareholders in the future.

Consideration:

Pursuant to the Asset Exchange Agreement, the Company has conditionally agreed to transfer its Existing Chemical Business, including the proceeds of RMB305.2 million (approximately HK$285.2 million) resulting from the AR Disposal, in exchange for the New Business and accordingly, no cash consideration (except for the adjustment of the consideration summarised below) is involved in the Transaction. According to the independent valuation conducted by the PRC Valuer in accordance with the PRC laws and regulations, the net asset values of the Existing Chemical Business and the New Business as at 31st December, 1999 were approximately RMB1,355 million (approximately HK$1,266.4 million) and RMB1,399 million (approximately HK$1,307.5 million) respectively. The valuation of approximately RMB1,355 million of the net asset value of the Existing Chemical Business as at 31st December, 1999 includes the valuation of approximately RMB299.7 million of the AR Assets, details of which are set out in paragraph 3 below. The valuation of the net asset value of the New Business accordingly shows a premium of 3.2% over the valuation of the net asset value of the Existing Chemical Business. The valuations of the net asset values of the Existing Chemical Business and the New Business have been confirmed by the Ministry of Finance.

The valuation of the net asset value of the Existing Chemical Business represents a premium of approximately 10.5% and 17.7% over the net asset value of the Group as at 31st December, 1999 and 30th June, 2000 respectively, prepared in accordance with PRC GAAP.

The valuation of the net asset value of the New Business also represents a premium of 14.1% and 21.5% over the net asset value of the Group as at 31st December, 1999 and 30th June, 2000 respectively, prepared in accordance with PRC GAAP. In addition, the valuation of the net asset value of the New Business represents a discount of 16.8% to the business valuation of the New Business of approximately RMB1,682 million (approximately HK$1,571.9 million) as at 31st August, 2000 ascertained by Sallmanns.

The Directors and the directors of TMICL consider that taking into account (i) the track record and financial position of the Existing Chemical Business, (ii) the discount of approximately 16.8% of the valuation of the net asset value of the New Business to the business valuation of the New Business, (iii) the premium of approximately 3.2% of the valuation of the net asset value of the New Business to that of the Existing Chemical Business, and (iv) the track record, business prospects and growth potential of the New Business, the Transaction is fair and reasonable so far as the Shareholders, including the Independent Shareholders, are concerned.

Adjustment to the consideration:

The consideration payable under the Asset Exchange Agreement is subject to adjustments to account for possible variations in the values of the Existing Chemical Business and the New Business, if any, between 1st January, 2000 and the day prior to the Asset Exchange Completion.

In the event that the independent valuation prepared by a PRC valuer of the net asset value of the New Business as at the close of business on the day immediately before the Asset Exchange Completion, exceeds or, as the case may be, is below the amount of the said valuation of the net asset value of approximately RMB1,399 million (approximately HK$1,307.5 million) of the New Business as at 31st December, 1999, such surplus or, as the case may be, shortfall amount shall be accounted for as a debt payable by the Company to TMICL or, as the case may be, vice versa.

Similarly, in the event that the independent valuation prepared by a PRC valuer of the net asset value of the Existing Chemical Business as at the close of business on the day immediately before the Asset Exchange Completion, exceeds or, as the case may be, is below the amount of the said valuation of the net asset value of approximately RMB1,355 million (approximately HK$1,266.4 million) of the Existing Chemical Business as at 31st December, 1999, such surplus or, as the case may be, shortfall amount shall be accounted for as a debt payable by TMICL to the Company or, as the case may be, vice versa.

The amounts of the debts payable, if any, that are deemed to arise under the adjustment provisions summarised above shall be set-off against one another at their respective face value. The remaining balance, if any, is required to be paid in cash within six months by the respective parties from the date of the Asset Exchange Completion. In the event that a material amount of debt is payable by the Company to TMICL or, as the case may be, vice versa, further announcement will be made by the Company.

Completion date:

The day when all the conditions set out in the paragraph headed “Conditions precedent of the Asset Exchange Agreement and the AR Agreement” below have been fulfilled, which is expected to be on or before 31st December, 2000, or such other date as the parties to the Asset Exchange Agreement may agree.

THE AR DISPOSAL

The AR Agreement dated 10th October, 2000

Parties:

Vendor : The Company, the Three Plants, the Finance Company and the Supplies and Sales Company

Purchaser : Tianjin Huaze

Particulars of the AR Agreement:

Pursuant to the AR Agreement, the Company, the Three Plants, the Finance Company and the Supplies and Sales Company have conditionally agreed to dispose, and Tianjin Huaze has conditionally agreed to acquire, the AR Assets at a cash consideration of RMB305.2 million (approximately HK$285.2 million), which represents the original book value of the AR Assets, subject to the conditions set out in paragraph 8 below. The proceeds of the cash consideration will be retained in the Group and will form part of the assets of the Existing Chemical Business to be transferred to Bohai Corporation upon the Asset Exchange Completion. The AR Assets mainly comprise RMB168.9 million (approximately HK$157.9 million) of trade debtors, RMB64.4 million (approximately HK$60.3 million) of other receivables, RMB34.0 million (approximately HK$31.8 million) of long-term investments and RMB37.7 million (approximately HK$35.2 million) of loan receivables, which have been provided for as bad and doubtful debts and/or accounted for as a diminution in value of long-term investments in the audited accounts of the Group for the year ended 31st December, 1999, prepared in accordance with PRC GAAP and HKGAAP. The net book value of the AR Assets as at 31st December, 1999 was approximately RMB51.1 million (approximately HK$47.8 million).

Upon completion of the AR Agreement, the Group will write-back the provisions for bad and doubtful debts and the diminution in value of long-term investments by an amount of approximately RMB254.1 million (approximately HK$237.4 million). Accordingly, the accumulated loss of the Group will be reduced as a result of the disposal of the AR Assets. The Directors consider that the disposal of the AR Assets is in the interests of the Company and Shareholders, including Independent Shareholders, as a whole.

Consideration:

The consideration for the disposal of the AR Assets had been agreed after arm's length negotiation and was determined by reference to the independent valuation of the AR Assets as at 31st December, 1999 of RMB299.7 million (approximately HK$280.1 million) prepared by the PRC Valuer in accordance with PRC laws and regulations. The consideration of RMB305.2 million (approximately HK$285.2 million) for the disposition of the AR Assets represents a premium of approximately 497.3% to the net book value of the AR Assets in the audited accounts of the Group as at 31st December, 1999 prepared in accordance with PRC GAAP and HKGAAP. The Directors consider that after taking into consideration such premium and the quality of the AR Assets, the AR Disposal is favourable to the Shareholders, including the Independent Shareholders, as a whole.

Completion date:

INFORMATION ON THE EXISTING CHEMICAL BUSINESS

The Existing Chemical Business comprises the existing business, assets and liabilities of the Group, including the Three Plants, the Supplies and Sales Company and the Finance Company. The Group is principally engaged in the production of chemical products such as soda ash, PVC, caustic soda, agricultural chemicals and other organic and inorganic chemicals using salt.

Since 1998, the trading and operating position of the Existing Chemical Business has deteriorated drastically, mainly due to the fact that the chemical industry in the PRC as a whole has been suffering from increasing competition.

According to the Company's 1999 annual report and based on the audited accounts of the Group prepared in accordance with PRC GAAP, the Group recorded a loss of approximately RMB616.9 million (approximately HK$576.5 million) and RMB374.2 million (approximately HK$349.7 million) respectively for the years ended 31st December, 1998 and 1999. The net asset value of the Group as at 31st December, 1998 and 1999 was approximately RMB1,597.8 million (approximately HK$1,493.3 million) and RMB1,226.5 million (approximately HK$1,146.3 million) respectively. Apart from the fall in market prices of the chemical products of the Group, the loss incurred by the Group for the year ended 31st December, 1999 was also attributable to substantial depreciation expenses of approximately RMB293.2 million (approximately HK$274.0 million) and interest expenses of approximately RMB229.2 million (approximately HK$214.2 million), net of interest capitalised of RMB64.7 million (approximately HK$60.5 million).

Although the market for chemicals in the PRC in general improved in the first half of 2000, the business of the Group still faces difficulties due to the high level of borrowings and the heavy carrying cost of its fixed assets. Based on the unaudited management accounts of the Group prepared in accordance with PRC GAAP for the six months ended 30th June, 2000, the Group incurred a further loss of approximately RMB75.4 million (approximately HK$70.5 million) for the six months ended 30th June, 2000 and the net asset value of the Group as at 30th June, 2000 was approximately RMB1,151.3 million (approximately HK$1,076.0 million). As at 30th June, 2000, the Group had incurred borrowings of approximately RMB4,191.7 million (approximately HK$3,917.5 million), which were interest bearing at rates ranging from 3.46% to 10.08% per annum. The Group had accumulated losses of RMB966.8 million (approximately HK$903.6 million), prepared in accordance with the PRC GAAP as at 30th June, 2000.

Given that the Group reported a loss for the six months ended 30th June, 2000 and in view of the high level of borrowings of the Group and the heavy carrying cost of its fixed assets, the Directors expect that the operating environment of the Existing Chemical Business will continue to be difficult. The Directors believe that the Group will require a substantial restructuring of its assets and business before the Company may (i) improve its performance, (ii) achieve a reasonable return to the Shareholders, and (iii) distribute dividends to the Shareholders. In addition, the Directors consider that in view of the current situation, should the Transaction and the AR Disposal not proceed, the Group may need additional funding to support the Existing Chemical Business.

Pursuant to the Articles 157 and 158 of the Company Law of the PRC and the relevant rules of the Shanghai Stock Exchange, the relevant securities regulatory authorities of the PRC may suspend the listing of or even delist the A shares of a company which reports losses for a period of three consecutive years. If the A shares are suspended, they will only be traded on a Friday in any given week (other than a public holiday) on the basis of a particular transfer between a willing seller and a willing buyer and such A shares can only trade at a price of not more than 5% above the closing price for the previous trading day.

Given that the Group has reported losses for each of the two years ended 31st December, 1999, and given that the Directors believe the Group is likely to report a loss for the year ending 31st December, 2000, the Directors anticipate that the A Shares may be suspended by the Shanghai Stock Exchange, which they consider will (i) be detrimental to the interests of Shareholders as a whole; (ii) adversely affect the reputation of the Company and the business prospects of the Group; and (iii) inhibit the fund raising capability of the Company in the future.

INFORMATION ON THE NEW BUSINESS

The New Business to be acquired by the Company consists of two businesses, the ownership, operation and development of sewage water processing plants and the operation and development of a city road and toll stations. The sewage water processing business currently comprises the ownership, operation and development of the Dongjiao Plant and the Jizhuangzi Plant, while the city road and toll station business comprise the ownership, operation and development of the Southeastern Half Ring Road and the Toll Stations. In view of the Tianjin Municipal Government's intention to improve environmental protection facilities in the urban area of Tianjin, in particular to alleviate the water pollution problem by constructing more sewage treatment plants in Tianjin, the Directors consider that the ownership, operation and development of sewage water treatment plants will enable the Group to (i) improve its performance, (ii) improve the profitability of the Company, (iii) achieve a reasonable and stable return to Shareholders, (iv) improve the Company's cashflow situation, and (iv) distribute dividends to the Shareholders in the future.

Set out below is a summary of the pro forma results of the New Business for the three years ended 31st December, 1999 and for the six months ended 30th June, 2000 prepared in accordance with PRC GAAP:


	For the year ended 31st December,			For the six months ended
	1997	1998	1999	30th June, 2000
	RMB 'million	RMB 'million	RMB 'million	RMB 'million
Sales revenue Sewage water processing	334	326	324	163
Toll stations and road operation	--	--	69	53
	334	326	393	216
Profit before taxation	245	236	266	143
Profit after taxation	164	158	179	96

The pro forma net asset value of the New Business as at 31st December, 1999 and 30th June, 2000 was RMB1,398 million (approximately HK$1,306.5 million) and RMB1,404 million (approximately HK$1,312.1 million) respectively, as prepared in accordance with PRC GAAP. Sallmanns values the New Business at approximately RMB1,682 million (approximately HK$1,571.9 million) as at 31st August, 2000.

The following is a brief description of the sewage water processing business and the city road and toll station businesses:

The sewage water processing business

Currently, there are six sewage pipeline systems established in Tianjin, namely the Zhaoguli system, the Zhangguizhuang system, the Jizhuangzi system, the Beichang system, the Shuanglin system and the Xianyanglu system. However, there are currently only two sewage water treatment plants currently established in Tianjin, namely the Dongjiao Plant and the Jizhuangzi Plant, which serve only three of the six pipeline systems. The Dongjiao Plant and the Jizhuangzi Plant currently serve the Zhangguizhuang and Zhaoguli systems and the Jizhuangzi system respectively. The combined treatment capacity of the two plants is 660,000 cu.m. per day, enabling them to treat approximately 40% of the city's sewage water when operating at maximum capacity. Accordingly, the existing processing facilities are not able to meet the demands of sewage water treatment services in Tianjin. The Tianjin Municipal Government is aiming to construct more sewage treatment plants to support each sewage pipeline system with a view to alleviating the water pollution problem in the Tianjin region.

The Jizhuangzi Plant is situated at the southern part of Tianjin and is the first large-scale urban sewage water treatment plant in Tianjin. The Jizhuangzi Plant has a treatment capacity of 260,000 cu.m. per day. The Dongjiao Plant is situated at the eastern part of Tianjin and has a treatment capacity of 400,000 cu.m. per day. Plans are currently in place to expand the processing capacity of the Jizhuangzi Plant. In addition, it is the intention of Jizhuangzi Plant to further utilise its processed water to maximise its return on investment. Jizhuangzi Plant plans to construct a new drainage network for the Mei Jiang residential area with the aim of selling and distributing processed water for industrial and irrigation use. The Directors and the directors of TMICL consider that the business of distributing and selling processed water for reuse has good prospect due to the price differential between such processed water and potable water.

TMICL has entered into the Sewage Water Processing Agreement with Tianjin Sewage Company (天津市排水公司), pursuant to which TMICL agreed to procure Jizhuangzi Plant and Dongjiao Plant to process sewage water at a price based on the Pricing Formula. The Pricing Formula provides that the price for processing sewage water is calculated on a cost-plus-profit basis and is linked to, among others, a return on capital investment. Accordingly, the Pricing Formula provides a stable and predictable rate structure and the Directors and the directors of TMICL consider that this, in return, will ensure a stable income and steady cashflows to be generated from the sewage water processing business. Pursuant to the terms of the Sewage Water Processing Agreement, the rights and obligations of TMICL hereunder will be automatically assigned to the Company upon the Asset Exchange Completion. Further information about the Sewage Water Processing Agreement is set out in the paragraph “Ongoing Connected Transactions” below.

The city road and toll station business

The city road network of Tianjin consists of three concentric circular “ring roads” which surround the city, together with a number of radial roads which connect each of the “ring roads”. The outer ring road is built around the city boundary and from which vehicles travel into and out of the city. The middle ring road surrounds the industrial and residential areas of the city, while the inner ring road is built around the central business district. The Southeastern Half Ring Road is a semi-circular road located between the outer ring road and the middle ring road. The Southeastern Half Ring Road starts from Changjiang Road Flyover and ends at Dongting Road, with a length of approximately 14.7 km. The Toll Stations are located at the outskirts of Tianjin along the outer ring road. With the exception of vehicles licensed in Tianjin, small passenger vehicles licensed in Beijing and those vehicles that are specified in the relevant PRC rules and regulations (including army vehicles), all other vehicles entering Tianjin via the outer ring road or certain expressways must pay toll fees at the Toll Stations or other toll booths on the expressways entering the city.

Pursuant to the <<關於同意對外埠車輛進市收取貸款道路建設車輛通行費的覆函>> (Reply Concerning the Permission to Collect Toll Fees with regard to Loan Financed Constructed Toll Roads) (Jin Zhen Ban Han [1998] No. 29) and the <<關於同意增建外埠車輛進市通行費收費站的覆函>> (Reply Concerning the Consent to Increase the Toll Stations in relation to External Vehicles Entering the City) (Jin Zheng Ban Han [1999] No. 33), the Tianjin Municipal Government agreed to the construction of toll stations on entrances to the city of Tianjin along the outer ring road, in line with the PRC's policy of the collection of toll fees from vehicles entering the city of Tianjin in respect of city roads which are constructed from loan financing, and delegated to the Urban Construction Bureau the authority to construct and operate the Toll Stations. Since the construction of the Southeastern Half Ring Road was financed through borrowings, such right to construct and operate the Toll Stations was granted by the Urban Construction Bureau to TMICL pursuant to the Road Operating Method referred to below, to allow TMICL to have a source of income in its operation of the Southeastern Half Ring Road.

Pursuant to the Road Operating Method issued by the Urban Construction Bureau which took effect from 1st March, 1999, TMICL was granted the right to operate, manage, maintain and repair, together with the right of first refusal to participate in the reconstruction and expansion of, the Southeastern Half Ring Road for a term of 30 years starting from 1st March, 1999. Pursuant to additional letters issued by the Urban Construction Bureau, TMICL was authorised during the said period to set up the Toll Stations at the junctions between the city road of Tianjin and expressways leading to the city, and to collect toll fees from vehicles entering the city of Tianjin at such toll stations.

Pursuant to the <<天津市貸款道路建設車輛通行費收費管理辦法 (暫行)>> (Provisional Method of Managing Toll Fee Collection For Loan Financed Road Construction in Tianjin), TMICL may not collect toll fees from vehicles which are licensed in Tianjin and other vehicles such as police vehicles, prison vans, fire engines, ambulances, hearse and military vehicles entering the city. It is also a general practice that small passenger vehicles licensed in Beijing entering the city of Tianjin are exempted from paying such toll fees.

The levels of toll fees prescribed by the Road Operating Method which may be imposed and collected by TMICL from vehicles entering the city of Tianjin are as follows:


Toll Class	Classification of vehicles	Toll Rate
		(RMB per passage)
1.	Passenger vehicles with 1 to 20 seats, goods vehicles of up to 2 tonnes	15
2.	Passenger vehicles with 21 to 50 seats and goods vehicles exceeding 2 tonnes but up to and including 5 tonnes	30
3.	Passenger vehicles with 51 seats or above and goods vehicles exceeding 5 tonnes but up to and including 15 tonnes	45
4.	Goods vehicles exceeding 15 tonnes and all other group packed boxes vehicles	70

Upon the Asset Exchange Completion, all the rights of TMICL under the Road Operating Method will be automatically assigned to the Company pursuant to the Asset Exchange Agreement and the Road Operating Method.

INFORMATION ON TMICL

TMICL is a State-owned enterprise wholly-owned by the Tianjin Municipal Government. TMICL is principally engaged in urban infrastructure businesses, including sewage processing and toll station operations.

It is the intention of TMICL that the Company will, upon the Asset Exchange Completion, employ a strategy of (i) expanding and strengthening its existing businesses, principally the sewage water processing business; (ii) evaluating opportunities in other urban construction and environmental protection related businesses, such as the water recycling business; (iii) enhancing the management efficiency of the Group; and (iv) optimising its financial structure to increase its flexibility in securing funding required for business expansion.

As part of the future plans of the Group and pursuant to four legally non-binding memoranda of understanding, the Company has obtained non-binding rights of first refusal from Urban Construction Bureau and TMICL to acquire and operate the expansion project of the Jizhuangzi Plant, two recycling water processing projects and a toll bridge respectively. Any acquisition by the Company of such will be subject to compliance with the requirements of the Listing Rules. In addition, the directors of TMICL have confirmed that the Dongjiao Plant and the Jizhuangji Plant are the only assets in relation to the sewage water processing business that are currently owned by TMICL and such assets will be transferred to the Company upon the Asset Exchange Completion. In relation to the operation of the Southeastern Half Ring Road and the Toll Stations, the directors of TMICL have confirmed that TMICL does not own or operate any toll roads or toll stations that is in competition with the Southeastern Half Ring Road and the Toll Stations. Accordingly, TMICL is not engaged in any business which will compete with the New Business upon the Asset Exchange Completion.

In addition, TMICL has close relationships with the Urban Construction Bureau and the Tianjin Municipal Government and enjoys strong support from them. Pursuant to a non-legally binding letter of comfort, the Tianjin Municipal Government has indicated that, for so long as TMICL remains the controlling shareholder of the Company after the Asset Exchange Completion, the Group will enjoy benefits which are not less favourable than those granted to other entities under the control of the Tianjin Municipal Government. The Tianjin Municipal Government has also indicated in the said letter of comfort that the Company will be the only company in Tianjin under its control listed outside the PRC which is principally engaged in urban construction and environmental protection and related businesses in Tianjin (including the operation of city toll road and bridge, construction and operation of telecommunication infrastructure, production and sales of purification water, mass transportation and heat and power product in Tianjin).

REASONS FOR THE TRANSACTION AND THE AR DISPOSAL

In light of the adverse trading and financial position of the Existing Chemical Business as described in the paragraph headed “Information on the Existing Chemical Business” above, the Directors consider that the interests of the Shareholders will be severely affected if the quality of assets of the Company is not improved.

The Directors and the directors of TMICL consider that the Transaction and the AR Disposal provide an opportunity for the Company to restructure its existing assets and business by disposing the Existing Chemical Business in exchange for the New Business and improving the liquidity of the Group by disposing the AR Assets. The implementation of the Transaction and the AR Disposal will result in the replacement of the heavily indebted and loss-making Existing Chemical Business with the New Business which has a dominant position in the market in which it operates and which the Directors and the directors of TMICL believe will generate stable income for the Company.

The Directors and the directors of TMICL also consider that the Transaction represents a good opportunity for the Company to enter into the urban construction and environmental protection related businesses in Tianjin. The Directors believe that in general the urban construction and environmental protection related businesses are much less likely to be adversely affected by economic downturns when compared to the Group's chemical production business. Furthermore, in view of the demand for sewage treatment in Tianjin and also the on-going modernisation and urbanisation of Tianjin, the Directors and the directors of TMICL believe that there is a promising growth opportunity for the urban construction and environmental protection related businesses in Tianjin. It should be noted that upon the Asset Exchange Completion, the Company will become the dominant sewage water treatment processor in Tianjin. Furthermore, by capitalising on its relationship with the Urban Construction Bureau and the Tianjin Municipal Government, the Directors and the directors of TMICL believe that the Company can further explore opportunities in the investment in and development of urban construction and environmental protection related businesses in Tianjin.

The Directors and the directors of TMICL believe that the New Business will allow the Company to secure a stable income and steady cashflows. The majority of the income of the New Business is attributable to the sewage water processing business. Pursuant to the Sewage Water Processing Agreement, the Pricing Formula, which is based on a cost-plus-profit approach and linked to, among others, a return on capital investment, is expected to provide a stable and predictable rate structure, and ensure steady cashflows for the Company. The Directors and the directors of TMICL consider that this is of benefit to the Company and its Shareholders as a whole and the New Business will provide a solid platform for the Company to carry out its future business development.

In addition, the Directors anticipate that following completion of the Transaction and the AR Disposal on or before 31st December, 2000, the performance of the Group will improve and the Group is unlikely to be suspended from listing on the Shanghai Stock Exchange. The Directors further anticipate that, as a result, the delisting penalty which may be imposed by the Shanghai Stock Exchange pursuant to the relevant rules of the Shanghai Stock Exchange is unlikely to be imposed. Accordingly, the Transaction and the AR Disposal may allow the Company to maintain its equity financing ability from the A shares market.

As indicated in the paragraph headed “Information on the Existing Chemical Business” above, the Group's performance is adversely affected by its high level of borrowings. The Transaction not only allows the Company to engage in the urban construction and environmental protection related businesses but also enables the Company to reduce its gearing level substantially from 364% as at 30th June, 2000, prepared in accordance with PRC GAAP, to 0% upon the Asset Exchange Completion. The Directors and the directors of TMICL believe that the Transaction will strengthen the earnings prospect of the Company.

In addition, as part of the Transaction, the Company has proposed, subject to the approval of the Shareholders, the set-off of the accumulated losses with the capital reserve fund and general reserve of the Group as at the date of the Asset Exchange Completion. For indicative purposes, the balance of accumulated losses and the aggregate balance of the capital reserve fund and general reserve prepared in accordance with the PRC GAAP amounted to approximately RMB891.3 million (approximately HK$833.0 million) and approximately RMB787.8 million (approximately HK$736.3 million) as at 31st December, 1999, respectively. The Directors consider that such set-off will improve the ability of the Company to distribute dividends to Shareholders in the future.

Based on the above, the Directors consider that the Transaction and the AR Disposal are in the interest of the Company and are beneficial to the Shareholders, including Independent Shareholders, as a whole.

CONDITIONS PRECEDENT OF THE ASSET EXCHANGE AGREEMENT AND AR AGREEMENT

In relation to the Asset Exchange Agreement

Completion of the Transaction is conditional upon, amongst other matters, the occurrence of the following on or before 31st December, 2000 or such other date as the parties to the Asset Exchange Agreement may agree:

the passing by Shareholders of an ordinary resolution at the EGM to approve the set-off of the accumulated losses with the capital reserve fund and general reserve of the Group as at the date of Asset Exchange Completion. (For indicative purposes, the balance of accumulated losses and the aggregate balance of the capital reserve fund and general reserve prepared in accordance with the PRC GAAP amounted to approximately RMB891.3 million (approximately HK$833.0 million) and approximately RMB787.8 million (approximately HK$736.3 million) as at 31st December, 1999, respectively);
the completion of the AR Agreement;
the passing by Independent Shareholders of an ordinary resolution (or, if required, by a special resolution) at the EGM to approve the Transaction;
the passing by Shareholders of a special resolution at the EGM to amend certain articles of the articles of association of the Company to reflect the transactions contemplated under the Asset Exchange Agreement;
the Listing Committee of the Stock Exchange granting or agreeing to grant and not having revoked the grant of listing of, and permission to deal in the H Shares;
the receipt by the Company of a legal opinion issued by a firm of qualified lawyers in such form and substance satisfactory to the Company and TMICL confirming, among such other matters as the Company may reasonably prescribe, (a) the legality, validity and enforceability of the transactions contemplated by the Asset Exchange Agreement and the AR Agreement under applicable PRC laws and regulations, and (b) the legality, validity and enforceability of the land use rights to be transferred to the Company contemplated under the Transaction;
compliance with all requirements of the Listing Rules including, if applicable, obtaining necessary approval from the Stock Exchange;
all necessary approvals and consents and registrations required under PRC laws and regulations obtained by the Company, Bohai Corporation and TMICL for the carrying out of the Transaction;
completion of satisfactory due diligence by the Company on the New Business and by TMICL on the Existing Chemical Business (including but not limited to, the assets, liabilities, financial conditions, contractual commitments and business);
the passing of ordinary resolutions by the Shareholders at the EGM to approve the replacement of the existing executive Directors and the existing Supervisors with the appointment of new Directors and Supervisors; and
the granting of a waiver by the Stock Exchange from strict compliance with the relevant disclosure and/or Shareholders' approval requirements under the Listing Rules in respect of the Ongoing Connected Transactions on conditions which are not unacceptable to the Company, and the passing by Independent Shareholders of ordinary resolutions (or, if required, by special resolution) to approve the Ongoing Connected Transactions at the EGM.

In the event that the above conditions are not fulfilled on or before 31st December, 2000 (or such later date as the parties may agree), the Company or TMICL may terminate the Asset Exchange Agreement by giving notice in writing to the other parties to the Asset Exchange Agreement. Accordingly, the parties to the agreement will have no claim against each other, for any such termination.

In relation to the AR Agreement

Completion of the AR Disposal is conditional upon, amongst other matters, the occurrence of the following on or before 31st December, 2000 or such other date as the parties to the AR Agreement may agree:

the passing by Shareholders of an ordinary resolution at the EGM to approve the set-off of the accumulated losses with the capital reserve fund and general reserve of the Group as at the date of Asset Exchange Completion. (For indicative purposes, the balance of accumulated losses and the aggregate balance of the capital reserve fund and general reserve prepared in accordance with the PRC GAAP amounted to approximately RMB891.3 million (approximately HK$833.0 million) and approximately RMB787.8 million (approximately HK$736.3 million) as at 31st December, 1999, respectively);
the passing by Independent Shareholders of an ordinary resolution (or, if required, by a special resolution) at the EGM to approve the Transaction; and
the passing by Independent Shareholders of an ordinary resolution at the EGM for the approval of the AR Disposal.

In the event that the above conditions are not fulfilled on or before 31st December, 2000 (or such other date as the parties may agree), the Group or Tianjin Huaze may terminate the AR Agreement by giving notice to the other party. Accordingly, the Group and Tianjin Huaze will have no claim against each other for any such termination.

ONGOING CONNECTED TRANSACTIONS

Following the Asset Exchange Completion, the rights and obligations of TMICL under the following agreements will be automatically assigned to the Company. Accordingly, the Company will enter into, on an on-going basis, the transactions referred to in paragraphs 9(i) to 9(iii) below with Tianjin Sewage Company, TURBCC and TMICL respectively. Since Tianjin Sewage Company, TURBCC and TMICL are all under the supervisory control of the Urban Construction Bureau, the following transactions to be entered into by the Company subsequent to the Asset Exchange Completion and the completion of the Share Transfer will constitute connected transactions for the Company under the Listing Rules.

The following is a summary of the pro forma amounts of each of the Ongoing Connected Transactions described below for each of the three years ended 31st December, 1999 and the six months ended 30th June, 2000 and the corresponding percentages of such amounts to the New Business' pro forma sales revenue over each of the three years ended 31st December, 1999 and the six months ended 30th June, 2000:


		For the year ended 31st December,						For the six months ended 30th June,
			1997		1998		1999		2000
Ongoing Connected Transactions		RMB '000	% of the New Business' sales revenue	RMB '000	% of the New Business' sales revenue	RMB '000	% of the New Business' sales revenue	RMB '000	% of the New Business' sales revenue
(i)	Processing of sewage water	333,526	100.0	326,059	100.0	323,820	82	162,613	75
(ii)	Repair and maintenance	--	--	--	--	2,561	0.7	1,536	0.7
(iii)	Leasing of office premises	--	--	--	--	375	0.1	225	0.1

i. Sewage Water Processing Agreement dated 10th October, 2000

Parties:

(i) TMICL

(ii) Tianjin Sewage Company

Term:

Thirty years, renewable at the option of TMICL by notice in writing to Tianjin Sewage Company within twelve months before the expiry of the thirty-year term for another term of not less than twenty years but not longer than thirty years.

Particulars of the Sewage Water Processing Agreement:

Pursuant to the Sewage Water Processing Agreement, Tianjin Sewage Company agreed to engage TMICL, and TMICL undertook to process sewage water of not less than the Minimum Processing Volume per annum for a term of thirty years starting from 1st October, 2000, at a price to be determined according to the Pricing Formula. The price provided for under the Pricing Formula is subject to adjustment each year and is calculated based on a cost-plus-profit approach, which is linked to, among others, the cost of processing sewage water and a fixed return on capital investment. The performance and obligations of Tianjin Sewage Company under the Sewage Water Processing Agreement, including the amount payable by Tianjin Sewage Company to TMICL, are guaranteed by the Agricultural Bank of China, Tianjin Branch, pursuant to an irrevocable guarantee given by the Agricultural Bank of China, Tianjin Branch, in favour of TMICL, and TMICL's rights under such guarantee will be automatically transferred to the Company upon the Asset Exchange Completion. Details about the Sewage Water Processing Agreement, including the Minimum Processing Volume, the Pricing Formula and the settlement mechanism will be set out in the listing document which will be dispatched to the Shareholders as soon as practicable in compliance with the Listing Rules. Pursuant to the terms of the Sewage Water Processing Agreement, the rights and obligations of TMICL stipulated in the Sewage Water Processing Agreement will be automatically assigned to the Company upon the Asset Exchange Completion. The Directors and the directors of TMICL consider that the Sewage Water Processing Agreement are on normal commercial terms and the terms are fair and reasonable so far as the Independent Shareholders are concerned.

ii. Road Repair and Maintenance Agreement dated 10th October, 2000

Parties:

(i) TMICL

(ii) TURBCC

Term:

30 years from 1st March, 1999

Particulars of the Road Repair and Maintenance Agreement:

Pursuant to the Road Repair and Maintenance Agreement, TURBCC will provide repair and maintenance services to TMICL in relation to the Southeastern Half Ring Road. Pursuant to the Road Repair and Maintenance Agreement, TURBCC will charge TMICL for fees based on the rate prescribed under the <<全國市政工程設施養護維修估算指標>> (the Estimated Amount of Repair and Maintenance of Tianjin Urban Construction) (Jian Cheng [1993] No. 412) issued by the Urban Construction Bureau, from time to time. Nevertheless, TMICL has the right to obtain the services from third parties if such services are offered on better terms. The rights and obligations of TMICL under the Road Repair and Maintenance Agreement will automatically be assigned to the Company upon the Asset Exchange Completion. The Directors and the directors of TMICL consider that the Road Repair and Maintenance Agreement are on normal commercial terms and the charges are fair and reasonable so far as the Independent Shareholders are concerned.

iii. Lease Agreement dated 10th October, 2000

Parties:

(i) the Company as lessee

(ii) TMICL as lessor

Term:

20 years from the Asset Exchange Completion

Particulars of the Lease Agreement:

The Company and TMICL have entered into the Lease Agreement pursuant to which the Company will lease from TMICL upon the Asset Exchange Completion a building situated at No.18 Jinlong Apartment, Shuishang Park North Road, Nankai District, Tianjin, PRC, with a total gross floor area of about 674.21 sq.m. as its office premises. The annual rental payable by the Company to TMICL is RMB450,000 (approximately HK$420,560) and such annual rental will be adjusted every three years based on the then market rentals determined by an independent valuer. The Directors consider that the Lease Agreement is on normal commercial terms and the rental charge is comparable with market rentals. Sallmanns, the independent international valuer, has reviewed the Lease Agreement and has confirmed that the rentals payable under the Lease Agreement are comparable with market rentals.

Under the Listing Rules, the Ongoing Connected Transactions described in paragraphs 9(i) to 9(iii) above would normally require full disclosure and/or prior Independent Shareholders' approval. However, as such transactions are in the normal course of business and occur on a regular basis, the Directors consider that it would not be practical to make disclosure of or, if necessary, obtain Independent Shareholders' approval for each transaction as it arises. Accordingly, the Directors will apply to the Stock Exchange for a waiver from strict compliance with the relevant requirements of the Listing Rules, subject to the Independent Shareholders' approval as referred to in paragraph 14 below and to other terms and conditions as may be required by the Stock Exchange. A further announcement relating to the aggregate maximum annual limit of the value of the Ongoing Connected Transactions and any condition which may be required should the waiver be granted, will be made.

CHANGE AND REPLACEMENT OF DIRECTORS AND SUPERVISORS

The Controlling Shareholder proposes to replace all existing Directors and all existing Supervisors by nominating at the EGM six new executive Directors and six new Supervisors, to be appointed with effect from the Asset Exchange Completion, subject to the passing of ordinary resolutions by the Independent Shareholders at the EGM to approve the Transaction and the appointment of the proposed executive Directors and the proposed Supervisors. Details of the proposed Directors and Supervisors are set out below.

Accordingly, upon the passing of the ordinary resolutions to appoint the proposed Directors at the EGM and the completion of the Transaction, the board of Directors will comprise nine Directors, including three independent non-executive Directors. Upon the passing of the ordinary resolutions by the Shareholders at the EGM to appoint the proposed Supervisors and the completion of the Transaction, the supervisory committee of the Company will comprise six Supervisors, comprising five Supervisors elected by the Shareholders and one Supervisors nominated by the employees of the Company.

Set out below are the biographies of the proposed Directors and Supervisors:

‍Executive Directors

Ms. Ma Bai Yu (馬白玉), aged 38, is the general manager of TMICL. Ms. Ma graduated from NanKai University in the PRC in 1996 with a master’s degree in economics. Ms. Ma joined Urban Construction Bureau in 1985 as an assistant supervisor and a lecturer. From 1996 to 1998, Ms. Ma worked as chief economist in Tianjin Road Construction and Development Company Limited (天津公路建設發展公司) and subsequently joined TMICL in 1998 as general manager. Ms. Ma has over ten years' experience in the urban construction industry. It is proposed that Ms. Ma be appointed as the chairman of the board of Directors and general manager of the Company upon the Asset Exchange Completion.

Mr. Zhu Min (朱敏), aged 46, is the head of Tianjin Road & Bridge Department (天津市道路橋樑管理處). Mr. Zhu has over fifteen years' experience in the road and bridge construction industry. Since December 1993, Mr. Zhu has held a number of senior positions ranging from the head of Equipment Division of Urban Construction Bureau to the head of Tianjin Road & Bridge Department.

Mr. An Pin Dong (安品東), aged 32, has been the assistant chief accountant of TMICL since December 1999. Mr. An graduated from Tianjin Finance Institute in 1991 with a degree in accountancy. From 1992 to 1997, Mr. An has been involved in the Hu Ning Expressway project and was responsible for the accounting and finance functions of such project. In 1997, he was transferred to Tianjin Jin Zheng Transportation Development Company Limited (天津市政交通發展公司) as a finance manager. It is proposed that Mr. An be appointed as a Director and the chief accountant of the Company.

Mr. Gu Qi Feng (顧啟峰), aged 34, has been the chief engineer of TMICL since November 1998. Mr. Gu graduated from Tong Ji University in the PRC with a master’s degree in engineering. Prior to joining TMICL, Mr. Gu held various senior positions in Urban Construction Bureau (天津市市政工程局). Mr. Gu was responsible for the supervision of the construction of Ji Qing Expressway, Hu Ning Expressway and Dong Jun Expressway. It is proposed that Mr. Gu be appointed as a Director and the chief engineer of the Company.

Mr. Wang Yue Qing (王月清), aged 56, is the chief accountant of Tianjin Sewage Management Division (天津市排水管理處). Mr. Wang has held various senior positions in Urban Construction Bureau since 1964, ranging from assistant supervisor, head of finance department and chief accountant of Tianjin Sewage Management Division.

Mr. Zhang Wen Hui (張文輝), aged 45, has been the head of Tianjin Sewage Management Division since August 1994. Mr. Zhang graduated from Tianjin University with a master degree in engineering. Mr. Zhang has held various senior positions in Tianjin Sewage Management Division since December 1980, ranging from deputy head of Tianjin Sewage Management Division -- No.4 Branch (天津市排水管理處四所) to deputy head of Tianjin Sewage Management Division.

‍Independent Non-Executive Directors

Mr. Li Wei Bin (李偉斌), aged 39, is a senior partner of Li & Partners, a firm of solicitors in Hong Kong. He graduated from the Chinese University of Political Science and Law in Beijing, PRC, the Postgraduate School of the Chinese Academy of Social Sciences in Beijing, the PRC and the University of Hong Kong with a Bachelor of Laws degree, a Master of Laws degree and a Bachelor Degree in Common Law respectively. Mr. Li is admitted to practice law in the PRC, Hong Kong and England and Wales. He is the first PRC lawyer admitted in Hong Kong to practice the laws of Hong Kong. Mr. Li is also a China-Appointed Attesting Officer and has worked in the legal field for 15 years.

Mr. Guan Weili (管維立), aged 57, associate professor, is currently a non-executive director of the Company. Since graduating from the China University of Science and Technology in 1966, he had worked with manufacturing companies as an engineer and with universities as a faculty member in engineering for many years. He also obtained a Master of Business Administration degree in the United States in the early 1980's. Having returned to China in 1993, Mr. Guan became the Dean of Business Management Department of the Beijing Polytechnic University. He was transferred to the National Administrative Bureau of the State-Owned Property under the PRC State Council in 1991 and then appointed to be the Director of Enterprise Department. In 1994, he joined GE Capital Asia Pacific as the Vice President. Since 1996, Mr. Guan has been the President of China Enterprise Consultants and the Honorary Chairman of China Enterprise Appraisals. He is a member of Asian Executive Board of the Wharton School, University of Pennsylvania, the Standing Council Member of China Real Estate Valuer Association, and an arbitrator specialising in the securities industry appointed by China International Economic and Trade Arbitration Commission. He is also a qualified Certified Public Assets Appraiser in the PRC. Mr. Guan has been an independent non-executive director of the Company since 1994.

Mr. Chan Boon Teong (曾文仲), aged 58, is the chairman and one of the founder of Coastal Realty Group Ltd, shares of which are listed on the Stock Exchange. He graduated from the Imperial College of the University of London, United Kingdom with a bachelor's degree in Electrical Engineering and also holds master's degrees in Electrical Engineering and Operational Research from the Polytechnic University of New York City in the United States. He has over thirty years of experience in commercial, industrial and real estate business in the Southeast Asia region. He also served as a director of the Kowloon Stock Exchange. He is also a director of TPV Technology Limited, the shares of which are listed in Hong Kong, and a director of United World Chinese Commercial Bank Limited, a listed company in Taiwan. Mr. Chan is a member of the National Chinese People's Political Consultative Conference and a member of the Standing Committee of the Fujian Province Chinese People's Political Consultative Conference. He is also a member of the 8th Standing Committee of the Overseas Chinese Association in the PRC.

‍Supervisors

Ms. Yu Ruihua (于瑞華), aged 54, engineer, is the supervisor of the labour union, deputy secretary of the Party Committee and human resource manager of TMICL respectively. Ms. Yu graduated from Tianjin University in 1970. She has held various positions in Tianjin Urban Construction Bureau, Sewage Management Division and Tianjin Municipal No.2 Road Construction Company Limited. From 1984 to 1998, she worked as the deputy head of staff section, head of human resources department and supervisor of Tianjin Municipal No.2 Road Construction Company Limited. In 1999, she joined TMICL.

Mr. Chen Baosen (陳寶森), aged 48, is the assistant manager of the human resources department of TMICL. From 1984 to 1993, Mr. Chen held various staff-related positions in Tianjin Urban Construction Bureau. In 1993, he joined Tianjin Municipal No.2 Road Construction Company Limited as a deputy head of human resources department. He joined TMICL in June 2000.

Mr. Li Kaijian (李凱建), aged 48, has been the Dean of Tianjin Urban Construction Design Institute since January 2000. Mr. Li graduated from Tianjin Economic and Management Institute. He joined Tianjin Urban Construction Bureau in 1976 and has held various positions ranging from technician to assistant general manager. In 1995, Mr. Li was appointed as the chairman and general manager of Tianjin No.2 Urban Highway Construction Company Limited.

Mr. Dou Zhenming (竇振明), aged 49, is the general manager of Tianjin Ban Hai Urban Construction Development Company Limited (天津濱海市政工程建設公司). From 1992 to 1997, Mr. Dou was the assistant manager of Tianjin Urban Construction Company Limited. From 1982 to 1992, he has held various positions in Tianjin No.2 Urban Construction Company Limited. Mr. Dou was graduated from Tianjin No.76 Secondary School in 1968.

Mr. Shi Zhenhua (史春華), aged 36, is the deputy head of the internal audit department and finance department of Tianjin Urban Bureau. Mr. Shi graduated from Tianjin Finance Institute in July 1998 with a degree in auditing.

Mr. Jing Shikui (荊世奎), aged 54, has been the deputy factory manager of the Dongjiao Plant since 1993. Mr. Jing graduated from Hubei Engineering School in 1967. He joined the Dongjiao Plant in 1988 as a deputy head of Engineering and Equipment Department and was promoted to deputy factory manager in 1993. Mr. Jing will be nominated by the employees of the Company.

The Directors believe that the change in the Directors and the supervisory committee of the Company described above will enhance the management capability of the Company after the Asset Exchange Completion.

CHANGE OF COMPANY NAME AND AMENDMENTS OF THE ARTICLES OF ASSOCIATION

It is proposed that, subject to the Asset Exchange Completion, (i) the name of the Company be changed to Tianjin Capital Environmental Protection Company Limited (天津創業環保股份有限公司); and (ii) the existing articles of association of the Company be amended to reflect the change of business of the Company and the anticipated future developments of the Company. The change of name and the corresponding amendments to the articles of association will be subject to, among others, the passing of special resolutions by the Shareholders at the EGM to approve such changes.

12. CONTINUATION OF LISTING

It is the intention of the Company and TMICL that the listing of the H Shares on the Stock Exchange be maintained. The Stock Exchange has, however, indicated that the Company will be treated as a new applicant for listing. Accordingly, a listing document relating to the Company will be submitted for approval by the Listing Committee of the Stock Exchange, and all relevant requirements of a new listing applicant as prescribed under the Listing Rules will have to be satisfied. THE STOCK EXCHANGE HAS INDICATED THAT THE CLEARANCE OF THIS JOINT ANNOUNCEMENT BY THE STOCK EXCHANGE DOES NOT SUGGEST THAT THE LISTING APPLICATION TO BE MADE BY THE COMPANY WILL BE SUCCESSFUL.

The Stock Exchange has also stated that any future injections into or disposals of assets by the Company (other than the Transaction and the AR Disposal) will be subject to the provisions of the Listing Rules. Pursuant to the Listing Rules, the Stock Exchange has the discretion to require the Company to issue a circular to its shareholders where any acquisition or disposal by the Company is proposed, irrespective of the size of such acquisition or disposal and in particular where such acquisition or disposal represents a departure from the principal activities of the Company. The Stock Exchange also has the power, pursuant to the Listing Rules, to aggregate a series of acquisitions or disposals by the Company and any such acquisitions or disposals may, in any event, result in the Company being treated as a new applicant for listing and subject to the requirements for new applicants as set out in the Listing Rules.

The EGM will be convened in accordance with the provisions of the articles of association of the Company and the relevant laws, regulations and rules and a notice convening the EGM will be served to Shareholders in due course, at which ordinary and special resolutions (as the case may be) will be proposed to approve, among others, the Asset Exchange Agreement, the amendments to the articles of association of the Company, the Ongoing Connected Transactions, the AR Agreement, the change of name, and the appointment of the new Directors and Supervisors. In view of the interest of the Controlling Shareholder in the Transaction, the AR Agreement and the Ongoing Connected Transactions, the Controlling Shareholder and its associates will abstain from voting at the EGM in respect of the Asset Exchange Agreement, the AR Agreement and the Ongoing Connected Transactions.

14. APPROVAL BY THE INDEPENDENT SHAREHOLDERS

As at 10th October, 2000, being the latest practicable date before the publication of this announcement, the Controlling Shareholder beneficially owns an aggregate of approximately 63.09% of the issued share capital of the Company. Accordingly, the Transaction constitutes a connected transaction of the Company for the purposes of the Listing Rules. The Transaction also constitutes a very substantial acquisition to the Company for the purposes of the Listing Rules and as a result of the Transaction, the Company will be treated by the Stock Exchange as a new applicant for listing. The AR Disposal constitutes a discloseable and connected transaction to the Company for the purposes of the Listing Rules. In addition, the Ongoing Connected Transactions will constitute connected transactions for the purposes of the Listing Rules. Accordingly, the Transaction, the AR Disposal and the Ongoing Connected Transactions may only proceed with the approval of the Independent Shareholders. The Independent Board Committee has been formed to advise the Independent Shareholders in relation to the Transaction, the AR Disposal and the Ongoing Connected Transactions and an independent financial adviser will be appointed to advise the Independent Board Committee on whether the Transaction, the AR Disposal and the Ongoing Connected Transactions are in the best interests of the Company and whether the terms of the Transaction, the AR Disposal and the Ongoing Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned.

GENERAL

A listing document containing, among other matters, details of the Transaction, the Ongoing Connected Transactions and the AR Disposal, the letter from an independent financial adviser containing its advice to the Independent Board Committee on the Transaction, the AR Disposal and the Ongoing Connected Transactions, the recommendation of the Independent Board Committee regarding the Transaction, the AR Disposal and the Ongoing Connected Transactions, an accountants' report on the New Business, business valuation report of the New Business prepared by Sallmanns and the valuation report of Sallmanns will be despatched to holders of the H Shares of the Company as soon as practicable in compliance with the requirements of the Listing Rules.

Given that the Asset Exchange Completion and the completion of the AR Agreement are subject to the fulfillment of the conditions as stated in paragraph 8 above, including the listing application complying with all the relevant requirements of the Listing Rules and being subject to the approval of the Listing Committee of the Stock Exchange, shareholders and public investors should exercise extreme caution when dealing in the Shares.

DEFINITIONS

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


“A Shares”	Renminbi-denominated domestic shares of nominal value of RMB1.00 each in the ordinary share capital of the Company
“AR Agreement”	the conditional agreement entered into between, the Group and Tianjin Huaze on 10th October, 2000 in relation to the disposal of the AR Assets
“AR Assets”	certain assets of the Group, comprising mainly of trade debtors, other receivables, loan receivables and long-term investments totalling approximately RMB305.2 million (approximately HK$285.2 million) as at 31st December, 1999
“AR Disposal”	the disposal of the AR Assets by the Company and its subsidiaries to Tianjin Huaze pursuant to the AR Agreement
“Asset Exchange Agreement”	the conditional agreement dated 10th October, 2000 entered into between the Company, Bohai Corporation and TMICL in relation to the Transaction
“Asset Exchange Completion”	the completion of the Asset Exchange Agreement, which is expected to be on or before 31st December, 2000
“associates”	Has the meaning ascribed in the Listing Rules
“BNP Paribas Peregrine”	BNP Paribas Peregrine Capital Limited, an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)
“Bohai Corporation”	Tianjin Bohai Chemical Industry Group Corporation (天津渤海化工集團公司), a State-owned enterprise owned by the Tianjin Municipal Government and the controlling shareholder of the Company prior to the Share Transfer
“Company”	Tianjin Bohai Chemical Industry (Group) Company Limited (天津渤海化工(集團)股份有限公司), 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, and whose name will be changed to Tianjin Capital Environmental Protection Company Limited (天津創業環保股份有限公司) upon the Asset Exchange Completion
“Controlling Shareholder”	Bohai Corporation, and where the context requires, TMICL upon completion of the Share Transfer
“CSRC”	China Securities Regulatory Commission (中國証券監督管理委員會)
“cu.m.”	cubic metre
“Dagu Plant”	Tianjin Bohai Chemical Industry (Group) Company Limited Dagu Chemical Plant (天津渤海化工(集團)股份有限公司天津大沽化工廠), a wholly-owned subsidiary of the Company which is engaged in the production of chemical products including caustic soda and PVC
“Directors”	the directors of the Company
“Dongjiao Plant”	the Dongjiao sewage treatment plant (東郊污水處理廠) to be transferred to the Company pursuant to the Asset Exchange Agreement
“EGM”	the extraordinary general meeting of the Company to be convened
“Executive”	the Executive Director (as defined in the Takeovers Code) of the Corporate Finance Division of the Securities and Futures Commission or any delegate of the Executive Director
“Existing Chemical Business”	the business, assets and liabilities of the Group as at 31st December, 1999, including, among others, the Three Plants, the Supplies and Sales Company, the Finance Company, and exclusive of the AR Assets but inclusive of the proceeds of RMB305.2 million (approximately HK$285.2 million) resulting from the AR Disposal , details of which are set out in the Asset Exchange Agreement
“Finance Company”	Tianjin Bohai Group Finance Company (天津渤海集團財務公司), a wholly-owned subsidiary of the Company which is engaged in the provision of financing and other related services to members of the Group
“Group”	the Company together with its subsidiaries or where the context so requires in respect of the Company after the Asset Exchange Completion, the subsidiaries of the Company after the Asset Exchange Completion
“H Shares”	overseas listed foreign shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Stock Exchange
“HKGAAP”	Hong Kong Generally Accepted Accounting Principles
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	an independent committee of the board of Directors, comprising Messrs. Guan Weili, Ji Chongwei and Feng Shupei
“Independent Shareholders”	the Shareholders other than Bohai Corporation or TMICL (as the case may be) and any of their respective associates
“International Auditor”	PricewaterhouseCoopers, Certified Public Accountants, the international auditors of the Company
“Jizhuangzi Plant”	the Jizhuangzi sewage treatment plant (紀庄子污水處理廠) to be transferred to the Company pursuant to the Asset Exchange Agreement
“km”	kilometer
“Lease Agreement”	the lease agreement dated 10th October, 2000 entered into between the Company and TMICL regarding the leasing of an office building in Tianjin, the PRC
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Minimum Processing Volume”	the minimum volume that Tianjin Sewage Water Company requires the Company to process in each year pursuant to the Sewage Water Processing Agreement
“Ministry of Finance”	Ministry of Finance of the PRC (中華人民共和國財政部)
“MOFTEC”	the Ministry of Foreign Trade and Economic Cooperation of the PRC (中華人民共和國對外貿易經濟合作部)
“New Business”	the business, assets and liabilities of two sewage treatment plants (including the Dongjiao Plant and the Jizhuangzi Plant), the Toll Stations and the Southeastern Half Ring Road held by TMICL to be transferred to the Company pursuant to the Asset Exchange Agreement
“Ongoing Connected Transactions”	the transactions contemplated under the Lease Agreement, the Sewage Water Processing Agreement and the Road Repair and Maintenance Agreement
“PRC”	the People's Republic of China
“PRC Auditor”	PriceWaterhouse Da Hua CPAs, the PRC auditors of the Company (now known as PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd.)
“PRC Company Law”	the Company Law of the PRC
“PRC GAAP”	the PRC Generally Accepted Accounting Principles
“PRC Valuer”	China Enterprise Appraisal (中企華資產評估公司), an accredited firm of valuers licensed by the Ministry of Finance to carry out valuation of State-owned assets in the PRC and which is independent of the Directors, chief executives, substantial shareholders of the Company or any of their respective associates
“Pricing Formula”	the formula for determining the price payable by the Tianjin Sewage Water Company (天津市排水公司) for the processing of sewage water to the Company as set out in the Sewage Water Processing Agreement
“RMB”	Reminbi, the lawful currency of the PRC
“Road Operating Method”	the Administrative Method of the Southeastern Half Ring Road of Tianjin (天津市中環線東南半環長江道立交橋至洞庭路專營管理辦法) issued by the Urban Construction Bureau
“Road Repair and Maintenance Agreement”	the service agreement dated 10th October, 2000 entered into between TMICL and TURBCC regarding the repair and maintenance of the Southeastern Half Ring Road
“Sallmanns”	Sallmanns (Far East) Limited, an independent property and business valuer
“Sewage Water Processing Agreement”	the agreement dated 10th October, 2000 entered into between TMICL and Tianjin Sewage Company regarding the treatment of sewage water
“SFC”	the Securities & Futures Commission of Hong Kong
“Share Transfer”	the transfer of Bohai Corporation's 63.09% equity interest in the Company to TMICL pursuant to the approval document (Jin Zheng Han [2000] No. 58) dated 8th June, 2000 issued by the Tianjin Municipal Government and the approval document (Cai Qi [2000] No. 379 dated 28th September, 2000 issued by the Ministry of Finance and to be implemented by the Transfer Agreement in accordance with relevant PRC laws and regulations.
“Shareholders”	shareholders of the Company
“Soda Plant”	Tianjin Bohai Chemical Industry (Group) Company Limited Tianjin Soda Plant (天津渤海化工(集團)股份有限公司天津鹹廠), a wholly-owned subsidiary of the Company which is engaged in the production of soda ash, ammonium chloride, sodium bicarbonate, calcium chloride and caustic soda using electrolysis
“Southeastern Half Ring Road”	the approximately 14.7 km section of Changjiang Road Flyover to Dongting Road section of the Southeastern Half Ring Road to be transferred to the Company pursuant to the Asset Exchange Agreement
“sq.m.”	square metre
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supervisors”	supervisors of the Company
“Supplies and Sales Company”	Tianjin Bohai Chemical Industry (Group) Company Supplies and Sales Company (天津渤海化工(集團)供銷公司), a wholly-owned subsidiary of the Company which is engaged in the sale of chemical products and materials to PRC customers
“Takeovers Code”	The Hong Kong Code on Takeovers and Mergers
“Three Plants”	the Soda Plant, the Tianjin Chemical Plant and the Dagu Plant
“Tianjin Chemical Plant”	Tianjin Bohai Chemical Industry (Group) Company Limited Tianjin Chemical Plant (天津渤海化工(集團)股份有限公司天津化工廠), a wholly-owned subsidiary of the Company which is engaged in the production of chemical products including caustic soda and PVC
“Tianjin Economic Commission”	Economic Commission of Tianjin Municipal (天津市經濟委員會)
“Tianjin Finance Bureau”	the Finance Bureau of Tianjin Municipal Government (天津市財政局), a department under the administration of the Tianjin Municipal Government
“Tianjin Huaze”	Tianjin Huaze (Group) Co. Ltd. (天津華澤(集團)有限公司), a State-owned enterprise owned by Tianjin Municipal Government and under the supervisory control of Tianjin Economic Commission
“Tianjin Municipal Government”	the People's Government of Tianjin Municipality
“Tianjin Price Bureau”	the Price Administration Bureau of the Tianjin Municipal Government (天津市物價局), a department under the administration of Tianjin Municipal Government
“Tianjin Sewage Company”	Tianjin Sewage Company (天津市排水公司), a State-owned enterprise established in the PRC and under the supervisory control of Urban Construction Bureau
“TMICL”	Tianjin Municipal Investment Company Limited (天津市政投資有限公司), a State-owned enterprise owned by the Tianjin Municipal Government and the controlling shareholder of the Company after completion of the Share Transfer
“Toll Stations”	the 16 toll stations, namely Jingjin, Jinyu, Jinwei, Jinzhong, Jinhan, Jinbei, Jintang, Jingu, Jingang, Youyilu, Jinzi, Jinlai, Jinjing, Jinyang, Jintong and Jinba, located at the outskirts of Tianjin along the outer ring road, to be transferred to the Company pursuant to the Asset Exchange Agreement
“Transaction”	the exchange of the Existing Chemical Business with the New Business pursuant to the Asset Exchange Agreement
“Transfer Agreement”	the agreement dated 10th October, 2000 entered into between the Bohai Corporation and TMICL in relation to the Share Transfer
“TURBCC”	Tianjin Urban Road & Bridge Construction Company (天津市市政道橋建築工程公司), a company established in the PRC and which is under the supervision of Urban Construction Bureau
“Urban Construction Bureau”	Urban Construction Bureau of the Tianjin Municipal (天津市市政工程局)

By order of the board
Tianjin Bohai Chemical
Industry (Group)
Company Limited
Gong Suo ZhuDirector and General Manager

Tianjin Bohai Chemical
Industry Group Corporation
Wang Bao DiChairman

Tianjin Municipal Investment
Company Limited
Ma Bai YuVice Chairman and General Manager
10th October, 2000, the PRC

Unless otherwise specified, the translation of RMB into Hong Kong dollars is based on the exchange rate of HK$1.00 to RMB1.07.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than those relating to Bohai Corporation or TMICL) and confirm, having made all reasonable enquiries that, to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which will make any statements in this announcement misleading.

The directors of Bohai Corporation jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than those relating to the Group or TMICL) and confirm, having made all reasonable enquiries that, to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The directors of TMICL jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than those relating to the Group or Bohai Corporation), and confirm, having made all reasonable enquiries that, to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

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The AR Agreement dated 10th October, 2000

The sewage water processing business

The city road and toll station business

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The AR Agreement dated 10th October, 2000

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