Rego Interactive Co., Ltd — Proxy Solicitation & Information Statement 2004

Apr 30, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant, or other professional adviser.

If you have sold or transferred all your shares in Tianjin Capital Environmental Protection Company Limited, you should at once hand this circular and the accompanying forms of proxy to the purchaser or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee(s).

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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 circular.

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

(Stock Code: 1065)

RENEWAL OF ONGOING CONNECTED TRANSACTIONS WAIVER

Independent financial adviser to the Independent Board Committee

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A letter from the Independent Board Committee (as defined herein) containing its advice to the Independent Shareholders (as defined herein) is set out on page 11 of this circular. A letter from Access Capital Limited containing its advice to the Independent Board Committee is set out on pages 12 to 18 of this circular.

A notice convening the EGM (as defined herein) to be held at the Conference Room on 4th Floor of the Company at 45 Guizhou Road, Heping District, Tianjin, the People’s Republic of China on 15th June, 2004 at 10:30 a.m. are set out on pages 22 to 23 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not later than 24 hours before the time scheduled for the holding of the meeting or any adjournments thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournments thereof should you so wish.

30th April, 2004

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
**Letter from the **	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
**Letter from the **	Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Letter from Access Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
Appendix —	General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Notice of EGM	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22

— i —

DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the content requires otherwise:

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----- Start of picture text -----

|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|“A|shares”|Renminbi-denominated|domestic|shares|of|nominal|value|of|
|RMB1.00|each|in|the|ordinary|share|capital|of|the|Company|
|“Access|Capital”|Access|Capital|Limited,|deemed|licenced|to|conduct|type|1|
|(dealing|in|securities),|type|4|(advising|on|securities),|type|6|
|(advising|on|corporate|finance)|and|type|9|(asset|
|management)|regulated|activities|under|SFO|and|the|
|independent|financial|adviser|to|the|Independent|Board|
|Committee|
|“associates”|has|the|meaning|ascribed|thereto|in|the|Listing|Rules|
|“Beicang|Plant”|the|Beicang|sewage|treatment|plant|(|)|
|“Board”|the|board|of|Directors|
|“Company”|Tianjin|Capital|Environmental|Protection|Company|Limited,|
|a|joint|stock|limited|company|established|in|the|PRC|whose|
|A|shares|and|H|shares|are|listed|on|the|Shanghai|Stock|
|Exchange|and|the|Stock|Exchange,|respectively|
|“Directors”|the|directors|of|the|Company|
|“Dongjiao|Plant”|the|Dongjiao|sewage|treatment|plant|(|)|
|“EGM”|the|extraordinary|general|meeting|of|the|Company|to|be|held|
|on|15th|June,|2004|to|consider|and|approve,|if|thought|fit,|the|
|new|cap|amounts|of|the|Ongoing|Connected|Transactions|
|“Group”|the|Company|and|its|subsidiaries|
|“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|
|“Hong|Kong”|the|Hong|Kong|Special|Administrative|Region|of|the|PRC|
|“Independent|Board|Committee”|an|independent|committee|of|the|Board|
|“Independent|Shareholders”|the|Shareholders|of|the|Company|other|than|TMICL|and|its|
|associates|(as|defined|in|the|Listing|Rules)|and|any|connected|
|persons|having|an|interest|in|the|Ongoing|Connected|
|Transactions|
|“Jizhuangzi|Expansion|Plant”|the|expansion|project|of|the|Jizhuangzi|sewage|treatment|
|plant|(|)|

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— 1 —

DEFINITIONS

“Latest Practicable Date”	28th April, 2004, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained in this circular
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“Ongoing Connected	the transactions contemplated under the Sewage Water Plants
Transactions”	Fee Agreement and the Sewage Water Processing Agreement
“PRC”	The People’s Republic of China
“Pricing Formula”	the formula in determining the price payable by TSC to the
	Company for the processing of sewage water as set out in the
	Sewage Water Processing Agreement
“Sewage Water Plants Fee	the conditional agreement dated 24th September, 2001
Agreement”	entered into between the Company and TSC in relation to the
	fees charged by the Company during the construction period
	of the Sewage Water Treatment Plants
“Sewage Water Processing	the agreement dated 10th October, 2000 entered into between
Agreement”	TSC and TMICL in relation to the pricing of the treatment of
	sewage water, details of which are stated in the circular of the
	Company dated 6th December, 2000 and the 2000 annual
	report of the Company
“Sewage Water Treatment Plants”	the Xianyanglu Plant, the Jizhuangzi Expansion Plant and the
	Beicang Plant
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholders”	shareholders of the Company, including holders of A Shares
	and H Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“TMICL”	Tianjin Municipal Investment Company Limited ( ), a State-owned company with limited
	liability under the supervisory control of the Urban
	Construction Bureau
“TSC”	Tianjin Sewage Company ( ), a State-owned
	enterprise established in the PRC and under the supervisory
	control of the Urban Construction Bureau
“Urban Construction Bureau”	the Urban Construction Bureau of the Tianjin Municipality
	( )

— 2 —

DEFINITIONS

“Xianyanglu Plant” the Xianyanglu sewage treatment plant ( “HK$” Hong Kong dollars, the lawful currency of “RMB” Renminbi, the lawful currency of the PRC “%” per cent	) Hong Kong

Notes: For the purposes of this circular, unless otherwise indicated, exchange rate of HK$1.00 = RMB1.065 has been used for currency translation, where applicable. This is for the purposes of illustration only and does not constitute a representation that any amounts in HK$ or RMB have been, could have been or may be converted, at these or any other rates.

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LETTER FROM THE BOARD

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

Executive Directors:

Ms. Ma Baiyu (Chairman) Mr. An Pingdong Mr. Gu Qifeng Mr. Wang Zhanying Mr. Tan Zhaofu Ms. Fu Yana

Registered address:

No. 45 Guizhou Road Heping District Tianjin The People’s Republic of China Postal Code: 300051

Independent Non-Executive Directors:

Mr. Wang Xiangfei

Mr. Gao Zongze Mr. Ko Po Ming

30th April, 2004

To the Shareholders

Dear Sir or Madam,

RENEWAL OF ONGOING CONNECTED TRANSACTIONS WAIVER

INTRODUCTION

The previous waiver granted by the Stock Exchange on 21st November, 2001 from strict compliance with the relevant requirements of the Listing Rules in respect of the Ongoing Connected Transactions as disclosed in the previous circular expired on 31st December, 2003. The Company has applied to the Stock Exchange for the renewal of the Ongoing Connected Transactions waiver.

The purpose of this circular is to provide you with further information relating to the Ongoing Connected Transactions, advice of Access Capital to the Independent Board Committee and the recommendation of the Independent Board Committee.

BACKGROUND

Since TSC and TMICL were and are all under the supervisory control of the Urban Construction Bureau and TMICL was and is the controlling shareholder of the Company and beneficially owns an aggregate of approximately 63.08% of the issued share capital of the Company, accordingly, the transactions in respect of (i) the Sewage Water Plants Fee Agreement; and (ii) the Sewage Water Processing Agreement constituted and will constitute ongoing connected transactions of the Company and is subject to disclosure requirements of the Listing Rules and the approval of the Independent Shareholders unless a waiver is granted by the Stock Exchange. The Ongoing Connected Transactions

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LETTER FROM THE BOARD

have been approved by the Independent Shareholders on 12th November, 2001 and the Stock Exchange granted the waiver on 21st November, 2001 from strict compliance with the relevant requirements under the Listing Rules in respect of the Ongoing Connected Transactions for a period of three financial years expired on 31st December, 2003. The Directors (including the independent nonexecutive Directors) consider that the Ongoing Connected Transactions have been and will be conducted on an arm’s length basis and on normal commercial terms, in the usual and ordinary course of business of the Company. The Directors believe that it would not be practical to make disclosure of, or, where it is required under the Listing Rules, to obtain approval from the Independent Shareholders, for each particular Ongoing Connected Transactions when it arises. Accordingly, the Directors intend to renew the waiver previously granted by the Stock Exchange from strict compliance with the announcement and shareholders’ approval requirements as required under the Listing Rules for a period of three financial years ending 31st December, 2006. Details of such application and the relevant information relating thereto are set out in the announcement of the Company dated 8th April, 2004.

SUMMARY OF THE ONGOING CONNECTED TRANSACTIONS

1. Sewage Water Plants Fee Agreement

On 24th September, 2001, the Company entered into the Sewage Water Plants Fee Agreement with TSC for the period from the date of the agreement to the completion of the respective sewage plants. Pursuant to the Sewage Water Plants Fee Agreement, TSC has agreed to pay, and the Company will charge, a fee during the construction period of the Sewage Water Treatment Plants in order to provide incentives and compensate for the Company in constructing the Sewage Water Treatment Plants. The Sewage Water Plants Fee Agreement has been arrived at after arm’s length negotiation and is based on normal commercial terms.

For each of the Sewage Water Treatment Plants listed below, the Company will be entitled to a lump sum fee which is calculated on the aggregate of the fees calculated at 23.7% of the simple average balances of the estimated construction cost of each of the Sewage Water Treatment Plants for each year/period until the estimated time of completion and operation of the respective Sewage Water Treatment Plants. The estimated lump sum fee payable to the Company for the construction of the Xianyanglu Plant, the Jizhuangzi Expansion Plant, the Beicang Plant is approximately RMB589 million (approximately HK$553 million), approximately RMB317 million (approximately HK$298 million) and approximately RMB264 million (approximately HK$248 million), respectively.

With reference to the latest information available, the estimated timing of completion of the Xianyanglu Plant, the Jizhuangzi Expansion Plant (including certain part of the South-east Rural Drainage System) and the Beicang Plant is as follow:

(i)	Xianyanglu Plant	:	End of 2004
(ii)	Jizhuangzi Expansion Plant	:	End of 2004
(iii)	Beicang Plant	:	End of 2005

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LETTER FROM THE BOARD

The estimated construction costs to be incurred since 24th September, 2001 to the respective dates of completion of the construction of the Xianyanglu Plant, the Jizhuangzi Expansion Plant (including certain part of the South-east Rural Drainage System) and the Beicang Plant are approximately RMB1,134 million (approximately HK$1,064 million), approximately RMB978 million (approximately HK$918 million) and approximately RMB366 million (approximately HK$344 million), respectively. However, it should be reminded that the actual construction cost may or may not exceed this estimation of construction cost.

According to the terms of the Sewage Water Plants Fee Agreement, the construction fees will be payable by TSC to the Company in advance on a monthly basis based on the amounts calculated according to the percentage of completion of the respective construction projects estimated by the management. The percentage of completion of each project will be adjusted on a quarterly basis according to the certifications issued by a qualified independent surveyor/engineer. Pursuant to the agreement, upon the commencement of the operation of the three sewage water processing plants, the rights and obligation between the Company and TSC will follow the terms as specified in the Sewage Water Processing Agreement (as described below).

2. Sewage Water Processing Agreement

On 10th October, 2000, TMICL has entered into the Sewage Water Processing Agreement with TSC which was subsequently assigned by TMICL to the Company on 20th December, 2000. Pursuant to the Sewage Water Processing Agreement, the Company agreed to procure the Jizhuangzi Plant and the Dongjiao Plant and any future sewage water treatment plants of the Company to process sewage water released from the sewage systems located in the Tianjin city. The term of the agreement is 30 years commencing from 1st October, 2000, and the Company is entitled to extend the term of the agreement for a period of not less than 20 years but not more than 30 years by serving a written notice on TSC within twelve months prior to the expiry of the agreement.

The monthly processing fee payable by TSC to TMICL for the processing of sewage water is based on the Pricing Formula which is structured on a cost-plus-profit approach and is linked to, among other things, the operating cost of processing sewage water and a return of 15% per annum of the yearly average balance of the monthly net book value of the fixed assets (as defined in the Sewage Water Processing Agreement) of the sewage water processing business.

As mentioned in paragraph 1 above, the Company has entered into the Sewage Water Plants Fee Agreement with TSC. TSC has agreed to pay, and the Company will charge, a fee during the construction period of the Sewage Water Treatment Plants in order to provide incentives for the Company to construct the Sewage Water Treatment Plants. Further information about the Sewage Water Plants Fee Agreement has set out in paragraph 1 above. Pursuant to the Sewage Water Plants Fee Agreement, upon completion of the construction of the Sewage Water Treatment Plants, the Pricing Formula as stipulated in the Sewage Water Processing Agreement will be automatically applied in calculating the sewage water processing fee to be paid by TSC to the Company on a monthly basis for the processing of sewage water in respect of the Sewage Water Treatment Plants. Pursuant to the Sewage Water Plants Fee Agreement, the “estimated construction cost” of the Sewage Water Treatment Plants as agreed by TSC and the Company will be treated as the initial fixed assets value of the Sewage Water Treatment Plants as opposed to the actual “net book value” of the Sewage Water

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LETTER FROM THE BOARD

Treatment Plants as stipulated in the Sewage Water Processing Agreement and will be applied in calculating the return of 15% for the Sewage Water Treatment Plants as stipulated in the Pricing Formula. The above arrangement can provide an incentive to the Company to control the construction costs of the Sewage Water Treatment Plants within the estimated construction costs. In the event that the actual construction costs for the Sewage Water Treatment Plants incurred by the Company below the estimated construction stated in the Sewage Water Plants Fee Agreement or, as the case may be, exceed the estimated construction costs, the Company will be entitled to more returns for the Sewage Water Treatment Plants under the current arrangement or as the case may be, vice versa. The revised term is only applicable for the Sewage Water Treatment Plants under the Sewage Water Plants Fee Agreement and the calculation for the Pricing Formula of the Jizhuangzi Plant and the Dongjiao Plant remains unchanged.

HISTORICAL FIGURES

The relevant cap amounts and the historical figures for each of the Ongoing Connected Transactions (including the percentages of the relevant annual revenues of the Company and its subsidiaries they represent) for the following period are set out below:

	Annual Caps	**Year **	ended 31st December	ended 31st December
	2001-2003	2001	2002	2003
		RMB’ 000	RMB’ 000	RMB’ 000
Total revenues		564,415	636,016	601,176
Revenue from sewage water processing	95%	417,944	399,665	421,048
		(74.0%)	(62.8%)	(70.0%)
Revenue from construction of	48%	91,013	183,536	143,982
sewage water processing plants		(16.1%)	(28.9%)	(23.9%)

NEW CAP AMOUNTS FOR THE ONGOING CONNECTED TRANSACTIONS

In the proposed renewal of waiver in relation to the Ongoing Connected Transactions, the new cap amount for the Sewage Water Processing Agreement remains the same as those in the expired waiver and the new cap amount for the Sewage Water Plants Fee Agreement will be 48%, 25% and 0% of the total revenues of the Group for the three years ending 31st December, 2006, respectively. After consideration of the historical figures, and the estimated stage of completion of the respective Sewage Water Treatment Plants, the amounts of the Sewage Water Plants Fee receivable and the amounts of sewage water processing fee receivable, the Company considers that the new cap amounts are fair and reasonable.

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LETTER FROM THE BOARD

APPLICATION FOR RENEWAL OF WAIVER

Under the Listing Rules, the Ongoing Connected Transactions described above are subject to the reporting, announcement and shareholders’ approval requirements relating to connected transactions under Chapter 14 of the Listing Rules. The Directors (including the independent non-executive Directors) consider that the Ongoing Connected Transactions have been and will be conducted on an arm’s length basis and on normal commercial terms, in the usual and ordinary course of business of the Company. The Directors believe that it would not be practical to make disclosure of, or, where it is required under the Listing Rules, to obtain approval from the Independent Shareholders, for each particular Ongoing Connected Transactions when it arises.

The Company has applied to the Stock Exchange for a renewal of the waiver from compliance with the requirements for disclosure by way of press announcement and approval of the Independent Shareholders pursuant to Chapter 14 of the Listing Rules under the following conditions for a period of three financial years ending 31st December, 2006 on condition that:

• (a) Independent Shareholders approval of the new cap amounts of the Ongoing Connected Transactions at the EGM;

• (b) that the Ongoing Connected Transactions shall be:

• (i) entered into by the Company in the ordinary and usual course of its business;

• (ii) conducted either (A) on normal commercial terms (which expression will be applied by reference to transactions of a similar nature and to be made by similar entities in the PRC) or (B) (where there is no available comparison) on terms that are fair and reasonable so far as the Independent Shareholders are concerned; and

• (iii) entered into either (A) in accordance with the terms of the agreements governing such Ongoing Connected Transactions or (B) (where there are no such agreements) on terms no less favourable than those available to and from independent third parties;

• (c) the aggregate amount of each of the Ongoing Connected Transactions for each of the three financial years ending 31st December, 2006 shall not exceed the respective new cap amounts (the “New Cap Amount”) set forth in the right column below:

Description of Ongoing Connected New Cap Amount for the relevant financial Transactions year

Sewage Water Plants Fee Agreement

48%, 25% and 0% of the Company’s annual revenues in the respective financial years

Sewage Water Processing Agreement

95% of the Company’s annual revenues in the respective financial years

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LETTER FROM THE BOARD

• (d) the independent non-executive Directors shall review the Ongoing Connected Transactions annually and confirm in the Company’s next and successive annual reports that these were conducted in the manner as stated in paragraphs (b) and (c) above;

• (e) the auditors of the Company shall review the Ongoing Connected Transactions annually and confirm in a letter (the “Letter”) to the board of Directors, a copy of which shall be provided to the Listing Division of the Stock Exchange, stating whether:

• (i) the Ongoing Connected Transactions have obtained the approval of the Board;

• (ii) the Ongoing Connected Transactions have been entered into in accordance with the pricing policies as stated in the respective agreements;

• (iii) the Ongoing Connected Transactions have been entered into in accordance with the terms of the agreements governing the Ongoing Connected Transactions or, if there are no such agreements, on terms no less favourable than those available to or from the independent third parties; and

• (iv) the Cap Amount has been exceeded.

Where, for whatever reason, the auditors decline to accept the engagement or are unable to provide the Letter, the Directors shall contact the Listing Division of the Stock Exchange immediately;

• (a) details of the Ongoing Connected Transactions in each financial year shall be disclosed as required under Rule 14.25(1)(A) to (D) of the Listing Rules in the annual report of the Company for that financial year together with a statement of the opinion of the independent non-executive Directors referred to in paragraph (d) above; and

• (b) the Company shall provide, and procure TSC, TMICL and the respective associates (as defined under the Listing Rules) to provide, to the Stock Exchange an undertaking that, for so long as the Company’s shares are listed on the Stock Exchange, they will provide the Company’s auditors with full access to its relevant records for the purpose of the auditors’ review of the Ongoing Connected Transactions referred to in paragraph (e) above.

If any terms of the transactions as mentioned above are altered or if the Company enters into any new agreements with any connected persons (within the meaning of the Listing Rules) in the future, the Company must comply with the provisions of Chapter 14A of the Listing Rules governing connected transactions unless it applies for and obtains a separate waiver from the Stock Exchange.

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LETTER FROM THE BOARD

CONFIRMATION FROM THE DIRECTORS

The Directors confirm that there is no change to the terms and conditions of each of the Ongoing Connected Transactions and are entered into on normal terms in the ordinary course of business and the terms thereof are fair and reasonable. The Ongoing Connected Transactions are conducted in the normal course of business of the Company and the terms thereof are fair and reasonable so far as the Independent Shareholders are concerned.

EGM

An EGM will be convened on 15th June, 2004 in accordance with the provisions of the articles of association of the Company and the relevant laws, regulations and rules of the PRC and Hong Kong, at which ordinary resolution will be proposed to approve the new cap amounts of the Ongoing Connected Transactions. In view of the interests of TMICL and its associates in the Ongoing Connected Transactions, TMICL will abstain from voting at the EGM.

A notice of EGM, together with the proxy form, was despatched to Shareholders on 30th April, 2004. Shareholders are reminded that the proxy form must be delivered to either the secretarial office of the Company or for the Company’s H share’s shareholders, to Hong Kong Registrars Limited in not less than 24 hours before the time scheduled for the holding of the EGM (i.e. 10:30 a.m. on 14th June, 2004).

An announcement will be made by the Company following conclusion of the EGM to inform Shareholders of the results of the EGM.

GENERAL

The Independent Board Committee comprising all the independent Directors has been formed to consider the new cap amounts of the Ongoing Connected Transactions and to advise the Independent Shareholders in this regard. Access Capital has been appointed by the Company to advise the Independent Board Committee as to the fairness and reasonableness of the new cap amounts of the Ongoing Connected Transactions.

Your attention is drawn to the letter from the Independent Board Committee, the letter from Access Capital, and the information set out in Appendix of this circular.

FURTHER INFORMATION

You are urged to read carefully the letters from the Independent Board Committee and from Access Capital as set out on page 11 and pages 12 to 18 of this circular respectively, and a copy of the notice of the EGM as set out on pages 22 to 23 of this circular.

Yours faithfully, For and on behalf of the Board Ma Baiyu Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

30th April, 2004

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular of the Company despatched to the Shareholders dated 30th April, 2004 (the “Circular”), of which this letter forms a part. The terms used in the Circular shall have the same meanings in this letter unless the context otherwise requires.

As the Independent Board Committee, we have been appointed to advise you in connection with the new cap amounts of the Ongoing Connected Transactions, details of which are set out in the Letter from the Board contained in the Circular.

Access Capital has been appointed as the independent financial adviser to advise us regarding the new cap amounts of the Ongoing Connected Transactions. Details of their advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out in their letter on pages 12 to 18 of the Circular.

Having taken into account the terms of the agreements contemplated under the Ongoing Connected Transactions, the interests of the Independent Shareholders and the advice of Access Capital, we consider that the new cap amounts of the Ongoing Connected Transactions are in the interests of the Company and are fair and reasonable so far as the Independent Shareholders are concerned and are on normal commercial terms by reference to similar transactions and entities in the PRC. Accordingly, we recommend that the Independent Shareholders to vote in favour of the ordinary resolution approving the new cap amounts of the Ongoing Connected Transactions.

Yours faithfully,

For and on behalf of the

Independent Board Committee

Wang Xiangfei Gao Zongze Ko Po Ming Independent Independent Independent non-executive Director non-executive Director non-executive Director

— 11 —

LETTER FROM ACCESS CAPITAL

The following is the text of a letter received from Access Capital setting out its opinion to the Independent Board Committee in respect of the Ongoing Connected Transactions for inclusion in this circular.

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Suite 606, 6th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

30th April, 2004

To: The Independent Board Committee of Tianjin Capital Environmental Protection Company Limited

Dear Sirs,

RENEWAL OF ONGOING CONNECTED TRANSACTIONS WAIVER

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee as regards the new cap amounts for the Ongoing Connected Transactions, details of which are contained in the “Letter from the Board” set out on pages 4 to 10 of a circular to the Shareholders dated 30th April, 2004 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

The Ongoing Connected Transactions have been approved by the Independent Shareholders on 12th November, 2001 and the Company has in the past applied to the Stock Exchange for, and was granted, a waiver from strict compliance with the ongoing disclosure and shareholders’ approvals requirements in connection with the Ongoing Connected Transactions for the period until 31st December, 2003. As the said waiver expired on 31st December, 2003, the Company has applied to the Stock Exchange for a renewal of the waiver from strict compliance with the disclosure and shareholders’ approval requirements in respect of the Ongoing Connected Transactions for the period from 1st January, 2004 to 31st December, 2006 (the “Waiver”). The Waiver will be subject to the conditions set out in the section headed “Application for renewal of Waiver” in the “Letter from the Board” of the Circular and the new cap amounts for the Ongoing Connected Transactions are subject to approval of the Independent Shareholders at the EGM.

— 12 —

LETTER FROM ACCESS CAPITAL

At the EGM, ordinary resolution will be proposed to the Independent Shareholders for the approval of the new cap amounts for the Ongoing Connected Transactions. TMICL being the controlling shareholder of the Company together with its associates will abstain from voting at the EGM.

INDEPENDENT BOARD COMMITTEE

Messrs. Wang Xiangfei, Gao Zongze and Ko Po Ming, the independent non-executive Directors, have been appointed to form the Independent Board Committee to consider and advise the Independent Shareholders on the new cap amounts for the Ongoing Connected Transactions.

We have been appointed to advise the Independent Board Committee as to whether the new cap amounts for the Ongoing Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned, and to give our opinion in relation to the new cap amounts for the Ongoing Connected Transactions for the Independent Board Committee’s consideration in making their recommendation to the Independent Shareholders.

BASIS OF THE OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company and/or the Directors. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or otherwise provided by the Company and/or the Directors and/or the senior management staff of the Company and for which they are/it is solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have also assumed that all statements, opinions and representations made or provided by the Company and/or the Directors and/or the senior management staff of the Company contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or the Directors and/or the senior management staff of the Company and that no material facts have been omitted from the information provided and referred to in the Circular.

We consider that we have reviewed all currently available information and documents which are available to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis of our opinions. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company and/or the Directors and/or the senior management staff of the Company and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out an independent verification of the information provided, nor have we conducted an independent investigation into the business and affairs of the Company, or any of its subsidiaries.

— 13 —

LETTER FROM ACCESS CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal factors and reasons:

1. Background to the Ongoing Connected Transactions

2. 1.1 About the Company

The Group is principally engaged in the business of sewage water processing, sewage water processing plant construction and road and toll operations.

• 1.2 About the Sewage Water Plants Fee Agreement

Pursuant to the Sewage Water Plants Fee Agreement entered into between TSC and the Company dated 24th September, 2001, TSC will pay and the Company will charge a fee during the period of construction of the Sewage Water Treatment Plants in order to provide incentives and compensate the Company for the construction of the respective Sewage Water Treatment Plants.

As stated in the “Letter from the Board”, for each of the Sewage Water Treatment Plants mentioned therein, the Company is entitled to a lump sum fee which is calculated on the aggregate of the fees calculated at 23.7% of the simple average balances of the estimated construction cost for each of the Sewage Water Treatment Plants for each year/period until the estimated time of completion and operation of the respective Sewage Water Treatment Plants.

According to the Sewage Water Plants Fee Agreement, TSC shall pay to the Company the construction fee in advance on a monthly based on the amounts calculated according to the percentage of completion of the respective Sewage Water Treatment Plants estimated by the management of the Company. The percentage of completion will be adjusted on a quarterly basis according to the certifications by a qualified surveyor/engineer. Once the construction work of the respective Sewage Water Treatment Plants have been completed and such Sewage Water Treatment Plants commenced to operate, the Sewage Water Plants Fee Agreement shall lapse and the rights and obligations between the Company and TSC shall follow the Sewage Water Processing Fee Agreement.

• 1.3 About the Sewage Water Processing Agreement

Pursuant to the Sewage Water Processing Agreement, the Company shall procure its Sewage Water Treatment Plants to process sewage water released from the sewage systems located in Tianjin City for a term of 30 years from 1st October, 2000 and extendable for a period of not less than 20 years but not more than 30 years by serving a written notice to TSC within a 12 months period prior to the expiry of the agreement. The monthly processing fee payable by TSC to the Company for the processing of the sewage water is based on a pricing formula and

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LETTER FROM ACCESS CAPITAL

is structured on a cost plus profit approach and is linked to, among other things, the operating cost of processing sewage water and a return of 15% per annum of the yearly average balance of the monthly net book value of the fixed assets (as defined in the Sewage Water Processing Agreement) of the sewage water processing business.

Pursuant to the Sewage Water Plants Fee Agreement, the “estimated construction cost” of the Sewage Water Treatment Plants as agreed by TSC and the Company will be treated as the initial fixed assets value of the Sewage Water Treatment Plants as opposed to the actual “net book value” of the Sewage Water Treatment Plants as stipulated in the Sewage Water Processing Agreement.

• 1.4 About the Ongoing Connected Transactions

As TSC and TMICL are both under the supervisory control of the Urban Construction Bureau of Tianjin Municipal Government, and TMICL is the controlling shareholder of the Company holding approximately 63.08% of the existing issued share capital of the Company, the transactions contemplated under the Sewage Water Plants Fee Agreement and the Sewage Water Processing Agreement constituted ongoing connected transactions for the purpose of the Listing Rules.

The Directors confirmed that the Ongoing Connected Transactions were based on normal commercial terms agreed after arms’ length negotiations between the parties concerned and were conducted in the normal course of business of the Company. The Directors are of the view that the terms of the Ongoing Connected Transactions are fair and reasonable in so far as the Independent Shareholders are concerned and are in the interest of the Company.

According to the Directors, the purpose of the fees receivable under the Sewage Water Plants Fee Agreement is to provide incentive to the Company in promoting efficiency in managing the construction of the Sewage Water Treatment Plants. By linking the payments of fees with percentage of completion of the construction of the Sewage Water Treatment Plants, the terms of the Sewage Water Plants Fee Agreement effectively encourage the Company to ensure the construction is on or ahead of the planned schedule, thereby optimising the timing of income recognition and cashflow during the construction period.

According to the Directors, none of the terms and conditions of the Ongoing Connected Transactions has been amended and the amount of the transactions contemplated under the Ongoing Connected Transactions fell within the cap amounts stipulated under the previous waiver approval granted by the Stock Exchange dated 21st November, 2001.

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LETTER FROM ACCESS CAPITAL

2. Reason to apply for the renewal of the Waiver

The Company has in the past applied to the Stock Exchange for, and was granted, a waiver from strict compliance with the disclosure and independent shareholders’ approval requirements in connection with the Ongoing Connected Transactions for the period until 31st December, 2003.

As the said waiver expired on 31st December, 2003, the Company has applied to the Stock Exchange for a renewal of the waiver from strict compliance with the disclosure and independent shareholders’ approval requirements in respect of the Ongoing Connected Transactions for the period from 1st January, 2004 to and 31st December, 2006.

In view of the terms of the Ongoing Connected Transactions (as mentioned above) are ongoing by nature, we believe that obtaining the Waiver from the Stock Exchange is a practical solution for the Company, that is in compliance with the Listing Rules.

3. The commercial justifications for determining the new cap amounts for the Ongoing Connected Transactions under the Waiver

The relevant cap amounts and the historical figures for each of the Ongoing Connected Transactions (including the percentages of the relevant annual revenues of the Company and its subsidiaries they represent) for the three financial years ended 31st December, 2003 were set out under the section headed “Historical figures” in the “Letter from the Board”.

	**For the **	**For the **	**year ended **	31st December,	31st December,
	2001		2002		2003
	RMB’000	%	RMB’000	%	RMB’000	%
Total revenues	564,415	100.0	636,016	100.0	601,176	100.0
Revenue generated from sewage
water processing	417,944	74.0	399,665	62.8	421,048	70.0
Revenue generated from the
construction of sewage water
processing plants	91,013	16.1	183,536	28.9	143,982	23.9
Sub-total	508,957	90.1	583,201	91.7	565,030	93.9

In the Waiver, the new cap amount for the Sewage Water Processing Agreement remain the same as in the expired waiver (being 95% of the total revenues of the Group); and the new cap amount for the Sewage Water Plants Fee Agreement will be 48%, 25% and 0% of the total revenues of the Group for the three years ending 31st December, 2006.

According to the Directors, the basis of determining the new cap amounts of the Ongoing Connected Transactions under the Waiver are as follows:

a) with reference to the historical figures for the past three years ended 31st December, 2003 as stated in the “Letter from the Board”;

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LETTER FROM ACCESS CAPITAL

• b) with reference to the estimated stage of completion of the respective Sewage Water Treatment Plants as set out in the “Letter from the Board”; and

• c) with reference to the estimated amount of fees receivable under the Sewage Water Processing Agreement and the Sewage Water Plants Fee Agreement.

Taking into account of the abovementioned factors, as well as (i) the fact that the combined revenues generated from the sewage water treatment business of the Company (including the sewage water treatment plants construction) in the past three financial years has been the major source of revenue of the Company and represented over 90% but below 95% of the total revenues of the Group as stated in the table above, (ii) the lump sum fees to be generated from the Sewage Water Plants Fee Agreement will decrease as the respective Sewage Water Treatment Plants are approaching their completion stage and such decrease will be off set by the increase in the processing fees to be generated from the Sewage Water Processing Agreement (as shown in the table above), and (iii) our discussion with the Directors on the progress of the construction and operations of the respective Sewage Water Treatment Plants, we are of the view that the new cap amounts and the basis of determining the new cap amounts are fair and reasonable so far as the Independent Shareholders are concerned.

RECOMMENDATION

Having considered the above principal factors including:

• (i) the background to the Ongoing Connected Transactions;

• (ii) reason to apply for the renewal of the Waiver; and

• (iii) the commercial justifications for determining the new cap amounts for the Ongoing Connected Transactions under the Waiver,

we are of the view that the new cap amounts for the Ongoing Connected Transactions under the Waiver are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

Furthermore, in relation to compliance with the conditions set out in the section headed “Application for renewal of Waiver” in the “Letter from the Board”, the Directors confirmed that the auditors of the Company shall review the Ongoing Connected Transactions and confirm the terms of the Ongoing Connected Transactions have received the approval of the independent non-executive Directors and that the Ongoing Connected Transactions will not exceed the new cap amounts stipulated in the Wavier. In addition, in order to comply with this condition, the Directors confirm that the auditors of the Company will have full access to the books and records of the Company for the purpose of the auditors of the Company to review the Ongoing Connected Transactions. On this basis, we believe that the aforesaid condition and right has been given in the interest of the Shareholders and provide additional safeguards to the Company.

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LETTER FROM ACCESS CAPITAL

Accordingly, we advise the Independent Board Committee to recommend to the Independent Shareholders to vote in favour of the ordinary resolution in relation to the new cap amounts for the Ongoing Connected Transactions to be proposed at the EGM.

Yours faithfully, For and on behalf of

ACCESS CAPITAL LIMITED Jeanny Leung Managing Director

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GENERAL INFORMATION

APPENDIX

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, none of the Directors, supervisors or the chief executive of the Company had any interest, or short position in the Shares, underlying shares and debentures of the Company (within the meaning of the SFO) which (a) were required to be notified to the Company and Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short positions which the Director is taken or deemed to have under such provisions of the SFO; (b) were required, pursuant to section 352 of the SFO to be entered into the register referred to therein; or (c) were required, pursuant to the Model code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, none of the Directors, supervisors or chief executive of the company or their spouses or children under 18 years of age were granted or had exercised any right to subscribe for any equity or debt securities of the Company or any of its associated corporations within the meaning of the SFO.

None of the Directors or Access Capital has any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Company or are proposed to be acquired or disposed of by or leased to any member of the Company since 31st December, 2003, the date to which the latest published audited financial statement of the Company were made up.

None of the Directors or Access Capital is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Company taken as a whole.

Access Capital does not have any shareholding in any member of the Company, nor does it have any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Company.

As at the Latest Practicable Date, none of the Directors had entered or was proposing to enter into a service contract with the Company (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register of interests kept by the Company under section 336 of the SFO, the following entities have interests in the shares of the Company which are required to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO:

			Percentage to
		Number	total share
No. of shares options	Class	of shares	capital
			(%)
TMICL (State Shares)	A	839,020,000	63.08

Save as disclosed above, so far as is known to the Directors, supervisors and the chief executive of the Company, as at the Latest Practicable Date, there was other person who had an interest or a short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who was interested, directly or indirectly, in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or particulars of any options in respect of such capital.

QUALIFICATION

The following is the qualification of the expert who has given opinion or advice which are contained in this circular:

Qualification

Name Qualification Access Capital Deemed licenced to conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

CONSENT

Access Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name and letter in the form and context in which they appear.

LITIGATION

The Company is not engaged in any litigation or arbitration of material importance and no litigation or arbitration or claim of material importance is known to the Directors to be pending or threatened by or against the Company.

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GENERAL INFORMATION

APPENDIX

MATERIAL CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st December, 2003, the date to which the latest audited financial statements of the Company were made up.

GENERAL

The secretaries of the Company are Ms. Fu Yana and Mr. Ip Pui Sum. Mr. Ip Pui Sum is a fellow member of the Association of Chartered Certified Accountants and associate member of The Hong Kong Society of Accountants.

The H Share transfer office of the Company in Hong Kong is Hong Kong Registrars Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

The English text of this circular shall prevail the Chinese text for the purpose of interpretation.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any week day (except public holidays) at the offices of Messrs. Li & Partners, solicitors, at 22nd floor, World Wide House, Central, Hong Kong up to and including 15th June, 2004:

• (a) Sewage Water Plants Fee Agreement;

• (b) Sewage Water Processing Agreement;

• (c) the circular of the Company in relation to the Ongoing Connected Transactions dated 17th October, 2001;

• (d) the letter from Access Capital, the text of which is set out in this circular; and

• (e) the written consent referred to in paragraph heading “Consent” of this appendix.

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NOTICE OF EGM

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

(Stock Code: 1065)

NOTICE FOR CONVENING THE 2ND EXTRAORDINARY GENERAL MEETING IN 2004

NOTICE IS HEREBY GIVEN that 2nd extraordinary general meeting in 2004 (the “EGM”) of Tianjin Capital Environmental Protection Company Limited (the “Company”) will be held at 10:30 a.m. on 15th June, 2004 at the Conference Room on the 4th Floor of the Company at 45 Guizhou Road, Heping District, Tianjin, the People’s Republic of China (the “PRC”) to transact the following matters:

I. As ordinary resolution:

to consider and approve the “cap amounts of the Ongoing Connected Transactions Waiver:

The Ongoing Connected Transactions have been approved by the Independent Shareholders at the extraordinary general meeting of the Company on 12th November, 2001 and a waiver from strict compliance with the relevant requirements under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) was granted by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) to the Company on 21st November, 2001. The said waiver expired on 31st December, 2003. The Company has made an application to the Stock Exchange for the renewal of the waiver from strict compliance with the relevant requirements of the Listing Rules for a period of three financial years ending 31st December, 2006. An announcement on the same was published on 13th April, 2004 in Shanghai Securities, Hong Kong Wen Wei Po and The Standard.

In the proposed renewal of waiver in relation to the Ongoing Connected Transactions, the new cap amount for the Sewage Water Processing Agreement remains the same as 95% of the total revenues in the expired waiver, whereas the new cap amount for the Sewage Water Plants Fee Agreement will be 48%, 25% and 0% of the total revenues of the Group for the three years ending 31st December, 2006, respectively. After consideration of the historical figures, and the estimated stage of completion of the respective Sewage Water Treatment Plants, the amount of Sewage Water Plants Fee receivable and the amounts of sewage water processing fee receivable, the Company considers that the new cap amounts are fair and reasonable.

For details of the above Ongoing Connected Transactions, please refer to the announcement published on Shanghai Securities, Hong Kong Wen Wei Po and The Standard on 13th April, 2004, and the Shareholder’s circular to be dispatched to the Company’s shareholders with this notice for convening extraordinary general meeting.”

By order of the Board Fu Yana Ip Pui Sum Company Secretaries

Tianjin, the PRC 30th April, 2004

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NOTICE OF EGM

Notes:

• (1) The register of members of the Company’s H shares will be closed from 15th May, 2004 to 15th June, 2004 (both days inclusive) for the purpose of determining the shareholders’ list for the EGM. Shareholders of the Company (the “Shareholders”) who are registered in the register of members after the close of trading in the afternoon session on 14th May, 2004 are entitled to attend the EGM.

• (2) Shareholders who are entitled to attend and vote at the EGM shall appoint one or more persons (whether a shareholder or not) as his proxy to attend and vote on his behalf. If more than one proxy is appointed by a shareholder, such proxies will only be entitled to vote on a poll.

• (3) Shareholders appointing a proxy to attend the EGM and vote on his behalf shall be made in writing by the proxy form enclosed herewith. The proxy form shall be signed by the person appointing the proxy or an attorney authorised by such person in writing. In order to be valid, the proxy form signed by an attorney shall be submitted with the power of attorney or other documents of authorisation notarially certified to the following office address of the Company not less than 24 hours before the time appointed for the holding of the EGM.

• (4) Shareholders or their proxies who intend to attend the EGM shall deliver the completed and signed reply slip for attendance to the secretary’s office of the board of directors on or before 25th May, 2004 by hand, by post or by facsimile. Please use the enclosed reply slip or its copy for the purpose of confirmation.

• (5) Shareholders or their proxies shall present proofs of their identities upon attending the EGM. Attorneys shall also present the power of attorney or other documents of authorisation.

• (6) Details of the cap amounts of the waiver of the Ongoing Connected Transactions together with the notice of the EGM, will be despatched to the H shares shareholders in the form of a circular on the date of this announcement.

• (7) It is expected that the EGM will last for half a day. Shareholders who attend the EGM shall be responsible for their own travelling and accommodation expenses.

Address of the Company’s office: 45 Guizhou Road, Heping District, Tianjin, the PRC Postal code: 300051

Telephone No.: 86-22-23523036 Facsimile No.: 86-22-23523100

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

PROXY FORM OF SHAREHOLDERS FOR USE AT THE EXTRAORDINARY GENERAL MEETING

I/We [(note][1)]

Address [(note][2)]

being the holders of A Shares/H Shares [(note][3)] , Shares [(note][4)] in Tianjin Capital Environmental Protection Company Limited (the “Company”), is/are the shareholder(s) of the Company, and HEREBY APPOINT [(note] 5) THE

CHAIRMAN OF THE EXTRAORDINARY GENERAL MEETING or as my/our

proxy(ies) to attend and act for me/us at the extraordinary general meeting of the Company to be held at 4th Floor, Conference Room, Tianjin Capital Environmental Protection Company Limited, 45 Guizhou Road, Heping District, Tianjin, the People’s Republic of China (the “PRC”) at 10:30 a.m. on 15th June, 2004 and to exercise the right of voting at such meeting in respect of the resolution as hereunder indicated, or if no such indication is given, as my/our proxy(ies) think(s) fit.

	To consider and approve the cap amounts of the Ongoing Connected Transactions waiver.
	Date:	2004 Signature(s)(note 7):

Shareholder

Notes:

1. Please insert the full name(s) (shareholder(s) of H Shares please insert the name(s) in Chinese and English) (as shown in the register of members) in block capital(s).

2. Please insert the address(es) in block capitals.

3. Please delete the inapplicable class of shares.

4. Please insert the number of shares in the Company registered in your name(s) and to which this proxy form relates. If no such number is inserted, this form of proxy will be deemed to relate to all the shares in the Company registered in your name(s).

5. If any proxy other than the chairman of the extraordinary general meeting of the Company, strike out “the Chairman of the extraordinary general meeting” and insert the name and the address of the proxy desired in the space provided. Each shareholder is entitled to appoint one or more proxies to amend and vote at the extraordinary general meeting. The proxy needs not be a member of the Company. Any alteration made to this form of proxy must be signed by the person who signs it.

6. Important: If you wish to vote for any resolution, tick in the box marked “For”. If you wish to vote against any resolution, tick in the box marked “Against”. Failure to tick either box will entitle your proxy to cast your vote at his discretion.

7. This form of proxy must be signed by you or your attorney duly authorised in writing or, in the case of a corporation or an institution, either under the common seal or under the hand of any director or attorney duly authorised in writing. In any event, the execution shall be made in accordance with the articles of association of such corporation or institution.

8. To be valid, this proxy form and, if such proxy form is signed by a person under a power of attorney or authority on behalf of the appointer, a notarised copy of that power of attorney or other authority, must be deposited at the Company’s office in Tianjin at 45 Guizhou Road, Heping District, Tianjin, the PRC or by fax at 8622-23523100 in not less than 24 hours before the time appointed for the holding of the extraordinary general meeting of the Company.

9. A proxy, on behalf of the shareholder, attending the extraordinary general meeting shall bring along the proxy form duly completed and signed as well as the proof of identification of the proxy.

10. This proxy form shall be completed in form of a set of two copies, one of which shall be lodged to the Company pursuant to Note 8; and the other copy shall be produced upon the extraordinary general meeting by the proxy of the shareholder pursuant to Note 9.

11. Completion and delivery of this proxy form will not prelude you from attending and voting at the extraordinary general meeting if you so wish.

12. The resolution set out in this proxy form are only summary. The full text is set out in the “Notice of EGM”.

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

Reply Slip

To: Tianjin Capital Environmental Protection Company Limited

I/We intend to attend (in person or by proxy) the EGM of the Company to be held at 4/F., Conference Room, Tianjin Capital Environmental Protection Company Limited, 45 Guizhou Road, Heping District, Tianjin, the People’s Republic of China (the “PRC”) at 10:30 a.m. on 15th June 2004.

Signature(s):

Date:		2004
Name
Shareholding (A/H Share*)
Identity Card/Passport No.*
Shareholder	code
Correspondence address
Telephone No.

Notes:

1. Please insert full name(s) and address(es) in English and Chinese in block capital(s) (Holders of A Shares shall only insert name(s) in Chinese).

2. Please enclose copy(ies) of Identity Card/Passport and evidence to shareholding together with the reply slip.

3. • Please delete where it is inappropriate.

4. This completed and signed reply slip shall be delivered to the office address of the Company at 45 Guizhou Road, Heping District, Tianjin, the PRC on or before 25th May 2004 by hand, by post or by fax.

Postal code: 300051 Telephone No.: 8622-23523036 Facsimile No.: 8622-23523100