Sinopec Engineering Group Co Ltd. — Capital/Financing Update 2000

Jul 11, 2000

The Stock Exchange of Hong Kong Limited takes (the "Stock Exchange") 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.

Universe International Holdings Limited

(incorporated in Bermuda with limited liability)

Issue of Convertible Notes

Under General Mandate

Universe International Holdings Limited (the "Company") has entered into a conditional subscription agreement with Multimedia Group Limited (the "Investor") (a company wholly-owned by a fund under the management of HSBC Private Equity (Asia) Limited) on 10th July, 2000 (the "Subscription Agreement") under which, subject to the satisfaction of certain conditions, the Company has agreed to issue unsecured convertible notes in the aggregate principal amount of US$7,000,000 to Multimedia Group Limited (the "Notes"). Unless converted or redeemed earlier, all outstanding Notes shall be redeemed in accordance with the terms of the Notes on the second anniversary of the date of issue of the Notes (the "Issue Date"). The conversion of all the Notes at an initial price of HK$2.55 per share, represents approximately 11.3 per cent. of the existing issued share capital and 10.1 per cent. of the enlarged issued share capital of the Company.

Trading in the Company's shares (the "Shares") was suspended with effect from 10:00 a.m. on 10th July, 2000 pending the issuance of this announcement. An application has been made to the Stock Exchange to resume trading of the Shares with effect from 10:00 a.m. on 11th July, 2000.

The board of directors of the Company wishes to announce that the Subscription Agreement has been entered into between the Company and the Investor on 10th July, 2000. The Directors believe that the issue of the Notes will enhance the capital base of the Company.

Issuer

Universe International Holdings Limited

Investors

Multimedia Group Limited, being wholly-owned by a fund managed by HSBC Private Equity (Asia) Limited ("HSBC") (which is a member of the HSBC Group), is an independent third party not connected with the Company or any of the directors, chief executive and substantial shareholders of the Company or its subsidiaries or their respective associates (as defined in the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules")). HSBC is an international private equity manager which has private equity funds of over US$1 billion under its management. The primary investment objective of HSBC is to achieve medium to long-term capital appreciation for their managed funds through direct investment in high growth and promising companies in Asia. The Investor believes that the investment will capitalize on the earnings potential of the Company and intend to hold the Notes as long term investment.

Principal terms of the Notes

The principal terms of the Notes are summarized below:

Amount of issue

US$7,000,000 payable in cash in full on completion.

Number of notes to be subscribed

The Company has agreed to issue and the Investor has agreed to subscribe for the Notes. An aggregate amount of US$7,000,000 is payable in cash at completion of the Subscription Agreement. The Notes are issued in registered form in the denomination of either US$1,000,000 or US$100,000.

Each Note carries the right of conversion into Shares at the conversion price of the Notes (the "Conversion Price").

Conversion price

The Conversion Price is initially HK$2.55, subject to adjustments as set out in the conditions attached to the Notes.

Interest

The Notes will bear interest from the date of issue at the rate of 2 per cent. per annum, which will be payable half yearly in arrears on dates following six months, one year, one year and six months and two years after the Issue Date.

Maturity date

The second anniversary of the Issue Date (the "Maturity Date").

Redemption

Unless previously redeemed or converted as provided in the Subscription Agreement , the Company shall redeem the Notes on the Maturity Date.

Upon the breach by the Company of certain events, including the undertaking given by the Major Shareholder as disclosed below, as set out in the Subscription Agreement between Issue Date and before the Maturity Date, the holders of the Notes (the "Noteholders") may elect to redeem the Notes. Upon such redemption, in addition to the principal amount outstanding and any accrued but unpaid interest (calculated up to the date of payment) under the Notes, the Company is required to pay an additional amount calculated as provided in the conditions of the Notes which would give the Noteholders an 8 per cent. internal rate of return.

Conversion provisions

Subject to the other terms of the Notes and the provisions under the Mandatory Conversion referred to below, each of the Noteholders will have the right, at any time after the Issue Date to convert the Notes with an aggregate principal amount of US$1,000,000 (or if more than US$1,000,000, always in integral multiples of US$100,000) into Shares at the Conversion Price on any business day up to the close of business on the business day prior to the Maturity Date.

The Conversion Price also represents a discount of approximately 4.9 per cent. to the average closing price per Share for the last 10 trading days ended on 7th July, 2000 of approximately HK$2.68. The Conversion Price also represents a discount of approximately 3.8 per cent. to the closing price per Shares as quoted on the Stock Exchange of HK$2.65 on 7th July, 2000, being the last trading day prior to the suspension of trading in the Shares on the Stock Exchange.

Mandatory conversion

Upon the occurence of the first time during the period from the Issue Date to the Maturity Date the average of the closing price per Share as quotated on the Stock Exchange for any 20 consecutive trading days quotated on the Stock Exchange (the "First Twenty Days") exceeds HK$3.50, and the average daily trading volume for the Shares in respect of the First Twenty Days exceeds 1.5 million Shares, that part of the principal amount of the Notes outstanding for the time being which is equal to one half of the principal amount of the Notes on the Issue Date (less any amount of the Notes previously converted or redeemed) shall be converted into Shares.

Upon the occurrence of the second time during the period from the Issue Date to the Maturity Date the average of the closing price per Share as quoted on the Stock Exchange for any 20 consecutive trading days (the "Second Twenty Days") exceeds HK$3.75, and the average daily trading volume for the Shares in respect of the Second Twenty Days exceeds 1.5 million Shares, all outstanding amount for the time being of the Notes shall be converted into Shares.

Conversion shares

Approximately 21,301,961 Shares will fall to be issued upon full conversion of all the Notes at the initial Conversion Price representing approximately 11.3 per cent. of the existing issued share capital and approximately 10.1 per cent. of the enlarged issued share capital of the Company.

The Shares to be issued on any exercise of the conversion rights attaching to the Notes (the "Conversion Shares") will rank pari passu in all respects with the Shares in issue as at the date of the registration of Shares issued upon conversion of the Notes.

The maximum number of Shares which may be issued (pursuant to the general mandate granted to the Directors on 29th November, 1999) upon the exercise of the conversion right attached to the Notes is 27,000,000 Shares (the "Maximum Share Number"), representing approximately 14.3 per cent. of the issued share capital of the Company. The number of Shares fall to be issued upon full conversion of all the Notes may change if there is an adjustment to the Conversion Price under the provisions of the Notes. If the aggregate number of Shares required to be issued upon any exercise of the Notes, would result in the Maximum Share Number being exceeded, then unless shareholders' consent to issue further Shares pursuant to the Notes is obtained, the Company is required to pay to the relevant Investor exercising the conversion rights an amount equal to the product of the closing price per Share quoted on the Stock Exchange on the date of conversion and the number of Shares which would have been issued but for the limitation regarding the Maximum Share Number.

Any alterations in the terms of convertible equity securities after issue must be approved by the Stock Exchange, except where the alterations take effect automatically under the existing terms of such convertible equity securities.

Adjustment provisions

The Notes will contain provisions for the adjustment of the Conversion Price. The adjustment provisions include provisions for determination of certain questions relating to adjustments by an approved merchant bank or independent auditors.

Voting

None of the Noteholders will be entitled to attend or vote at any meetings of the Company by reason only of its being a Noteholder.

Transferability

The Notes will be freely transferable subject to a Noteholder giving at least 14 days prior notice in writing to the Company. A Noteholder shall not, without the prior written consent of the Company, transfer the Note (or any part thereof) to any person which is a connected person (as defined by the Listing Rules) of the Company. The Company will provide an undertaking to the Stock Exchange that the Company will not consent any transfer of the Notes to a connected person (as defined by the Listing Rules) of the Company unless prior consent from the Stock Exchange is obtained.

Conditions

Completion of the Subscription Agreement is conditional upon the satisfaction of the following conditions with 10 days from the date of the Subscription Agreement (or such other date as my be agreed in writing between the Company and the Investor):

(i) all requirements imposed by the Stock Exchange under the Listing Rules or otherwise in connection with the transactions contemplated by the Subscription Agreement having been fully complied with;

(ii) approval by the Stock Exchange having been granted in respect of the listing of, and permission to deal in the Conversion Shares;

(iii) all necessary consents from the Bermuda Monetary Authority including (without limitation) consents in relation to the issue of the Notes and the Conversion Shares pursuant to the Subscription Agreement having been obtained; and

(iv) the delivery of a legal opinion from Bermuda lawyers in a form agreed by the Company and the Investor.

Completion

Completion of the Subscription Agreement will take place within 20 business days upon the satisfaction of the conditions referred to above.

Termination

The Investor has the right to terminate the Subscription Agreement at any time prior to Completion if:

(i) any matter or event showing any of the warranties given by the Company to the Investor as set out in the Subscription Agreement to be untrue or misleading which comes to the notice of the Investor or any of such warranties having been breached in any material respect which comes to the notice of the Investor; or

(ii) the Company is in material breach of any obligation on its part under the Subscription Agreement; or

(iii) anything occurs which in the reasonable opinion of the Investor, has, or would be likely to have, a material adverse effect on the business, financial, operating or trading position or prospects of the Company and its subsidiaries (the "Group") including, without limitation, any of the following:

(a) the introduction of any new law or regulation or change in existing law or regulation (or the judicial interpretation thereof); or

(b) any change in, or any event or series of events resulting or likely to result in any change in, local, national or international financial, political, military, industrial, economic conditions or currency or (whether or not sui generis with any of the foregoing) securities markets; for this purpose but without limiting the generality of the foregoing:

(1) a change in the system under which the value of the Hong Kong currency is linked to that of the currency of the United States of America shall be an event resulting or likely to result in a change in currency conditions; and

(2) volatility in market conditions on or before the date of Completion shall be disregarded in determining whether there has been or there is likely to be a change in market conditions; or

(c) any change or development involving a prospective change in Hong Kong, the People's Republic of China, Bermuda or any other places which any member within the Group currently carries on business in terms of taxation or exchange control which will or may materially and adversely affect the Group (taken as a whole); or

(d) a strike, lockout or other significant industrial dispute arising or being threatened which will or is likely to have an adverse effect on the Group or

(e) any significant fixed asset of the Group being destroyed or damaged; or

(f) any material litigation or arbitration proceedings being instituted or threatened in respect of any member within the Group; or

(iv) if a liquidator or receiver or other person carrying out any similar function is appointed in respect of any part of assets or undertakings of any member within the Group or if an order is made or a resolution is passed for the winding up of any member within the Group; or

(v) the trading in the Shares on the Stock Exchange is terminated or suspended for a period exceeding ten 10 consecutive dealing days (other than the suspension of trading in the Shares required by the Stock Exchange for the clearance of this announcement or for other reasons which are not resulted from any breach of the Listing Rules by the Company or by the Major Shareholders (as defined below); or

1. any default has occurred or is likely to occur in respect of any material contracts entered into by any member within the Group which will or is likely to have a material adverse effect on the business, financial, operating or trading position or prospects of the Group.

Rights of first refusal

During the period from the Issue Date up to (but not including) the Maturity Date, in the event of the Company proposing to issue any Shares or issue any securities convertible into Shares, the Company shall:-

(i) in the case of an issue of Shares, first offer to all outstanding Noteholders in proportion to the aggregate principal amount outstanding under their respective holdings, such Shares; and

(ii) in the case of issue of securities convertible into Shares, first offer to all outstanding Noteholders in proportion to the aggregate principal amount outstanding under their respective holdings, such securities.

The above rights of first refusal shall not be made available to the Noteholders in the event that the Shares or securities convertible into Shares are being issued by way of rights or bonus to shareholders of the Company.

Undertakings

Globalcrest Enterprises Limited (the "Major Shareholder") and Mr. Lam Shiu Ming, Daneil ("Mr. Lam") will undertake to the Investor that unless and until all the Notes have been converted or redeemed:

(i) the aggregate direct or indirect beneficial interests of the Major Shareholder and/or its associates and/or any company jointly controlled by the Major Shareholder and/or its associates in the issued share capital of the Company as represented by Shares shall not fall below 45 per cent. of such issued share capital (on a fully diluted basis). Presently the Major Shareholder own 60 per cent. of the issued share capital;

(ii) Neither the Major Shareholder nor Mr. Lam will directly or indirectly engage in or conduct any business which competes or is likely to compete with any business of any member within Group (other than engaged or conducted through any member within the Group);

(iii) Neither the Major Shareholder nor Mr. Lam will directly or indirectly cause any material change to the nature of the business of any member within the Group; and

(iv) in the event that the Major Shareholder has come to a bona fide arrangement with a third party (the "Third Party Purchaser") to sell all or part of its Shares, it shall promptly notify the Investor of the terms of such arrangement and procure that the Third Party Purchaser shall at the same time offer to buy from the Investor the Notes and/or the Conversion Shares held by the Investor on terms same as those offered by the Third Party Purchaser to the Major Shareholder and that the Investor shall have the right (but not the obligation) to participate in such arrangement/sale.

Use of proceeds

The net proceeds of this transaction will amount to approximately US$6.8 million in cash and will be used for the Group's general working capital purposes.

Application for listing

No application will be made for listing of, or permission to deal in, the Notes on the Stock Exchange or any other stock exchange. An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, Shares which may be issued under the Notes.

Suspension and resumption of trading in the shares

Trading in the Shares on the Stock Exchange was suspended at the request of the Company with effect from 10:00 a.m. on Monday, 10th July, 2000 pending release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares with effect from 10:00 a.m. on Tuesday, 11th July, 2000.

By order of the board

Lam Shiu Ming, Daneil

Chairman and Managing Director

Hong Kong, 10th July, 2000