Bloks Group Limited — Capital/Financing Update 2006

Jan 25, 2006

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.

HONG KONG PHARMACEUTICAL HOLDINGS LIMITED 香港葯業集團有限公司[*]

(Provisional Liquidators Appointed) (Incorporated in Bermuda with limited liability)

(Stock code: 182)

MAJOR TRANSACTION

The Provisional Liquidators would like to announce that the Company has, on 15 November 2005, procured Market Strategy to enter into the Hua Xin Agreement with Golden Linker in respect of the sale of 57% equity interest in Hua Xin in consideration of cash payment of HK$15 million to the Provisional Liquidators. An amendment to the Hua Xin Agreement in letter form dated 16 December 2005 (“Amendment Letter”) constitutes one and the same instrument and is supplemental to the Hua Xin Agreement. The Hua Xin Disposal involves an assignment of debts to Golden Linker of approximately (i) HK$28.2 million being the principal amount claim by way of subrogation by the Company against Hua Xin exclusive of interest as at 29 December 2004; (ii) HK$2.51 million being the principal amount owing by Hua Xin to the Company as at 31 March 2005 exclusive of interest; (iii) HK$0.58 million owing by Hua Xin to Nam Pei Hong, a wholly-owned subsidiary of the Company as at 31 March 2005 and (iv) HK$36.06 million owing by China Genetic to Nam Pei Hong as at 31 March 2005.

The Hua Xin Disposal constitutes a major transaction for the Company and is therefore subject to the announcement, reporting and shareholders’ approval requirements under the Listing Rules. Umbrella, which has been given a power of attorney from the controlling Shareholders holding approximately 67% of the total issued share capital of the Company, has given a written approval to the Company pursuant to Rule 14.44 of the Listing Rules to approve the Hua Xin Disposal in lieu of a physical general meeting as its interest in the Hua Xin Disposal is no different from all other Shareholders. To the best of the knowledge of the Provisional Liquidators, having made necessary enquiries, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Hua Xin Disposal. Completion of the Hua Xin Agreement is conditional upon, inter alia , the Court’s sanction.

Trading in the Shares has been suspended at the request of the Company since 5 August 2004 and will continue to be suspended while the Provisional Liquidators remain appointed to the Company. A circular containing information on the Hua Xin Disposal will be included in the composite document targeted to be despatched to the Shareholders as soon as possible.

On 15 November 2005, the Company procured Market Strategy, a 100% indirectly wholly-owned subsidiary of the Company, to enter into the Hua Xin Agreement with Golden Linker in respect of the Hua Xin Disposal. The Amendment Letter dated 16 December 2005, signed by all parties to the Hua Xin Agreement, constitutes one and the same instrument and is supplemental to the Hua Xin Agreement. The Provisional Liquidators wish to announce the details of the Hua Xin Agreement and the Amendment Letter as follows:

THE HUA XIN AGREEMENT

Date:

15 November 2005

Parties:

• (i) The Company;

• (ii) Nam Pei Hong;

• (iii) Market Strategy;

• (iv) Golden Linker; and

• (v) The Provisional Liquidators.

The Provisional Liquidators confirm that to the best of their knowledge, information and belief, after having made all reasonable enquiry, each of Golden Linker and its ultimate beneficial owner, Ms Xu Yin Jie is a third party independent of the Company and its connected persons (as defined in the Listing Rules) and their respective associates (as defined in the Listing Rules), therefore there are no R25 implications. Neither Golden Linker nor its ultimate beneficial owner hold shares in the Company.

Assets to be disposed of:

Pursuant to the Hua Xin Agreement and the Amendment Letter, Golden Linker has agreed to acquire Market Strategy’s 57% equity interest in Hua Xin at a consideration of HK$15 million. The Hua Xin Disposal also involves an assignment of debts to Golden Linker of approximately (i) HK$28.2 million being the principal amount claim by way of subrogation by the Company against Hua Xin exclusive of interest as at 29 December 2004; (ii) HK$2.51 million being the principal amount owing by Hua Xin to the Company as at 31 March 2005 exclusive of interest (i and ii together “HKP Claim”); (iii) HK$0.58 million owing by Hua Xin to Nam Pei Hong, a wholly-owned subsidiary of the Company as at 31 March 2005 and (iv) HK$36.06 million owing by China Genetic to Nam Pei Hong as at 31 March 2005 (iii and iv together “NPH Claim”). Settlement of the Hua Xin Disposal is by way of transfer of 100% issued shares in China Genetic, a wholly-owned subsidiary of Market Strategy and an investment holding company whose assets mainly comprise of 57% equity interest in Hua Xin, to Golden Linker in exchange for a cash amount of HK$15 million.

Consideration:

The Consideration comprises a cash amount of HK$15 million. The payment of the Consideration is stipulated in the Hua Xin Agreement as follows:

(i) At the Signing Date, Golden Linker shall pay a deposit of HK$1.5 million (“Deposit”) to Market Strategy’s solicitors to be held in escrow until Completion;

• (ii) Within ten Business Days of the Delivery Date, Golden Linker shall pay to Market Strategy HK$13.5 million representing the balance of the Consideration after deducting the Deposit to Market Strategy’s solicitors to be held in escrow until Completion;

• (iii) Golden Linker will not be concerned as to the distribution of the Consideration between Market Strategy, the Company and Nam Pei Hong.

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A non-refundable Deposit of HK$1.5 million was paid in an escrow to Market Strategy’s solicitors on 11 November 2005. The balance of the Consideration in the total sum of HK$13.5 million was paid in escrow to Market Strategy’s solicitors on 28 and 29 November 2005. The Consideration paid is to be held in escrow until Completion, with interest accruing at 2.5% per annum, to be paid to Golden Linker. The interest rate of 2.5% per annum is fair and reasonable as it is the interest rate offered by The Hongkong and Shanghai Banking Corporation Limited where Market Strategy’s solicitors maintain its escrow account.

The Consideration was determined after arm’s length negotiation among the parties to the Hua Xin Agreement. The Consideration was the best offer made to the Provisional Liquidators after the Provisional Liquidators have explored all other reasonable option for the sale of 57% equity interest in Hua Xin. At Completion:

• (i) Market Strategy will transfer 100% of the issued shares in China Genetic to Golden Linker;

• (ii) The Company will assign the entire legal and beneficial interest in the HKP Claim to Golden Linker;

• (iii) Nam Pei Hong will assign the entire legal and beneficial interest in the NPH Claim to Golden Linker; and

• (iv) Golden Linker will pay or procure the payment of the Consideration to the Provisional Liquidators.

Completion:

On 5 January 2006, the Provisional Liquidators made an application to the Court for sanction of the transactions contemplated in the Hua Xin Agreement. Completion will take place upon the Provisional Liquidators having obtained the Court’s sanction on the Hua Xin Agreement. The Company will cease to have any interest in Hua Xin upon Completion. A net gain of approximately HK$15,148,454 is expected to accrue to the Company in 2005’s interim accounts from the Hua Xin Disposal calculated with reference to the Company’s unaudited consolidated account for the year ended 31 March 2005.

The Hua Xin Agreement contains the following clauses in relation to its termination:

• Golden Linker agrees that in the event that it terminates the Hua Xin Agreement before Completion, Market Strategy’s solicitors shall be entitled to transfer to the Provisional Liquidators (who shall be entitled to retain) the Deposit held in escrow, provided that if Golden Linker terminates the Hua Xin Agreement due to a breach by Market Strategy of its obligations pursuant to the Hua Xin Agreement, the Provisional Liquidators shall forthwith (in any event not later than seven days of such breach) return the Consideration together with interest accrued thereon to Golden Linker;

• Without prejudice to the rights of the Provisional Liquidators and Golden Linker pursuant to the above termination clause, if the conditions precedents set out in the Hua Xin Agreement are not satisfied (or waived, at the option of Golden Linker), the Hua Xin Agreement shall, subject to the liability of any party to the others in respect of any breaches of the Hua Xin Agreement, be null and void and of no effect;

• If Completion has not occurred by the expiration of three months from the Signing Date, unless all parties agree to an extension, the Hua Xin Agreement shall automatically terminate with immediate effect; and

• Each party’s further rights and obligations cease immediately on termination, but termination does not affect a party’s accrued rights and obligations at the date of termination.

Use of Proceeds:

The proceeds in the total sum of HK$15 million received from Hua Xin Disposal, after deduction of legal costs, disbursements, stamp duty and any other related expenses, will be used according to the terms of a scheme of arrangement/restructuring of the Company and its subsidiaries, which the Provisional Liquidators are in the process of negotiating the implementation of, with amongst others, the creditors of the Company, investor, the Stock Exchange and the SFC.

INFORMATION RELATING TO HUA XIN, THE COMPANY AND GOLDEN LINKER

The Company is an investment holding company and its subsidiaries’ principal operations currently comprises the following two core business units:

(i) the traditional Chinese medicine and health food retailer in Hong Kong, Southern China and South East Asia and a medical clinic in Hong Kong; and

(ii) the biopharmaceutical research and development, manufacturing and distribution operation in Shanghai through the 57% ownership of Hua Xin. Hua Xin is a sino-foreign equity joint venture registered and established in Shanghai, the PRC, on 19 January 1993 and has a registered capital of US$9.62 million. It is owned as to 57% by China Genetic and 43% by four other independent joint venture partners, two of whom are foreign entities. The Provisional Liquidators confirm that to the best of their knowledge, information and belief, after having made all reasonable enquiry, the four independent joint venture partners are not shareholders of the Company. Hua Xin is principally engaged in the research, development, manufacturing and distribution of bio-technological pharmaceutical products. Under the joint venture contract and the articles of association of Hua Xin, each party shares profit and loss of Hua Xin in proportion to their respective equity interest.

According to Hua Xin’s latest audit report for the year ended 31 December 2003 that the Company was able to obtain, the financial statements were prepared by Shanghai Linfang Certified Public Accountants in accordance with 中國註冊會計師獨立審計準則 . However the financial statements of Hua Xin incorporated in the Group’s accounts were prepared in accordance with Hong Kong GAAP. Based on the limited financial information made available to the Provisional Liquidators, the unaudited net liabilities of Hua Xin was approximately HK$9.82 million as at 30 November 2004. Hua Xin reported an audited net loss before and after taxation of approximately HK$7.13 million for the year ended 31 March 2002 and HK$38.61 million for the year ended 31 March 2003. The unaudited net loss before and after taxation was approximately HK$7.96 million for the year ended 31 March 2004. Based on the poor financial position and various legal suits and judgments obtained against Hua Xin coupled by the inability to repay its creditors when due, the Provisional Liquidators are of the view that Hua Xin is insolvent.

In March 2001, China Genetic purchased the 57% shareholding interest of Hua Xin at a consideration of approximately HK$32.55 million. It was the intention of the Company that the experience and future prospects of Hua Xin in the production of bio-technological pharmaceutical products, would enhance the capability of the Company and its subsidiaries in the research, development, manufacture, promotion and sale of its pharmaceutical products.

China Genetic was engaged in investment holding whose assets principally comprise of 57% equity interest in Hua Xin. The assets of China Genetic include cash at bank of HK$120 and other debtors, deposits and prepayment of HK$800 as at 31 March 2004 (unaudited). China Genetic made full provision for diminution in its 57% equity interest in Hua Xin in the year ended 31 March 2004. Golden Linker is an investment holding company whose principal investments are in the areas of clinical medicines, biopharmaceutical manufacturing and medical apparatus and equipment in Hong Kong, the PRC and South East Asia.

REASONS FOR THE HUA XIN DISPOSAL

The Provisional Liquidators are at the view that the terms of the Hua Xin Agreement are favourable and in the best interest of the Company, its creditors and its shareholders as a whole, in light of the poor financial position of the Company. Set out below are reasons for the Hua Xin Disposal:

• Hua Xin’s business lacked competitive advantage as its products were readily available in the market. This ready abundance of competing products placed price pressure to Hua Xin and therefore affected its profit margins. Hua Xin has been loss making since the Company’s acquisition in March 2001. This may be evident as Hua Xin reported an audited net loss before and after taxation of approximately HK$7.13 million for the year ended 31 March 2002 and HK$38.61 million for the year ended 31 March 2003. The unaudited net loss before and after taxation was approximately HK$7.96 million for the year ended 31 March 2004. For the period from 1 April 2004 to 30 November 2004, being the most recent period which has been accounted for (but not audited), Hua Xin suffered a net loss of approximately HK$6.85 million. Hua Xin suffered financial difficulties and working capital shortages, resulting in operations being scaled down and/or shutdown.

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• A number of legal proceedings have been taken against Hua Xin:

• i. Litigation commenced by Zhuang He Ling for non-repayment of a loan amounting to RMB2 million plus interest and default penalty, amounting to approximately RMB56,342;

• ii. Litigation commenced by Shanghai Jinqiao Export Processing Zone Development Company Limited (“Landowner”) to claim for the repossession of the leased premises, outstanding rental payments up to 31 December 2003 amounting to US$116,127, and other costs (including the mense profit and the default penalty) up to 21 March 2004 amounting to approximately US$196,327 and RMB208,000;

• iii. Two litigation matters commenced by Liu Xin Yuan for non-repayment of a loan amounting to RMB493,585 plus interest amounting to approximately RMB20,027, and another loan amounting to RMB2.05 million plus interest and default penalty, amounting to approximately RMB529,162; and

• iv. Litigation commenced by Bank of Shanghai Company Limited, Yanan Branch, for non-repayment of a bank loan amounting to RMB2.845 million plus interest up to 31 May 2004 amounting to approximately RMB19,118.

• As a consequence of various cases of litigation being served against Hua Xin, Hua Xin was unable to meet many of its debt obligations. Although the Company assisted Hua Xin in March 2004 by providing a HK$30 million fixed deposit as security for a loan from a PRC bank, Hua Xin has since defaulted on the loan. Consequently, the fixed deposit was offset against the outstanding balance by the PRC bank. The remaining deposit of approximately HK$1.6 million (after deducting bank charges) is retained by the Provisional Liquidators to be paid to the creditors of the Company.

• Hua Xin’s manufacturing technology is manual and antiquated. It would have required significant (and in the Provisional Liquidators’ view, unjustifiable) capital expenditure to invest in new technology and generally return Hua Xin to profitability. In light of the loss-making trend of Hua Xin, it appears unlikely, in Provisional Liquidators’ view, that the Company would ever be able to recoup its investment in Hua Xin.

• There was a lack of control by the Company of the business operations of Hua Xin due to a lack of co-operation and access to information from the management of Hua Xin. The management of Hua Xin has failed to provide the Company with any financial information subsequent to the provision of unaudited management accounts for the period from 1 April 2004 to 30 November 2004, and has, in fact, taken positive steps to prohibit the Provisional Liquidators from obtaining any information in relation to Hua Xin or its business since about November 2004. The Provisional Liquidators have been unable to obtain access to Hua Xin’s research and manufacturing sites for the purposes of conducting independent valuations of Hua Xin and its business operations.

• The value of Hua Xin’s net assets has fallen dramatically from approximately HK$57.11 million (audited) as at 30 September 2000 to a deficit of approximately HK$2.96 million (unaudited) as at 31 March 2004. The major reason for this impairment is that goodwill and know-how, the primary components of Hua Xin’s assets, are all located in the PRC and no evidence has been made available by Hua Xin to allow for an independent verification of their value. The other significant asset of Hua Xin is the building which has a value of approximately RMB25.5 million according to the valuation report dated 15 June 2005. Mainly as a result of complications with the title to the underlying land (which is leasehold and must be transferred along with the building); the fact that there has been a litigation with the Landowner and that he is a judgment creditor of Hua Xin; the fact that the building is purpose-built; and complications involved in repatriating funds from out of the PRC, the Provisional Liquidators have attributed zero value to the building. Even if the building could be sold at full value, the Company is only entitled to a 57% share of those proceeds. In summary, the Consideration being paid by Golden Linker far exceeds Hua Xin’s net asset value.

• The process leading up to the Hua Xin Disposal involved an advertisement by the Provisional Liquidators calling for Expressions of Interest on 20 October 2004. The offer made by Golden Linker was the highest amongst all responses received. The second highest offer made was for HK$5 million. If the Provisional Liquidators liquidated the 57% equity interest in Hua Xin, any value to be realised from a sale in liquidation of the equity interest in Hua Xin would be minimal, and in any event, far less than the Consideration currently being offered by Golden Linker.

• The HKP Claim is comprised of a loan by the Company to Hua Xin for the principal amount of approximately HK$2.51 million as at 31 March 2005 exclusive of interest and a claim by way of subrogation by the Company against Hua Xin for the principal amount of HK$28.2 million exclusive of interest as at 29 December 2004. The NPH Claim is comprised of a loan from Nam Pei Hong to Hua Xin with a balance outstanding as at 31 March 2005 of HK$0.58 million. Given the prospect of having to enforce rights in the PRC against Hua Xin as a non-profit making PRC company with minimal assets and the subrogation claim would involve pursuing rights in the PRC which is both costly and uncertain, the Provisional Liquidators are of the view that the chances of recovering any portion of the HKP Claim and HK$0.58 million owing by Hua Xin to Nam Pei Hong as at 31 March 2005 are minimal. For these reasons, the Provisional Liquidators have attributed no value to these claims.

• The NPH Claim also comprised of an inter-company loan made by Nam Pei Hong to China Genetic for the purpose of acquiring the 57% equity interest in Hua Xin in 2001, with a balance outstanding as at 31 March 2005 of approximately HK$36.06 million. The Provisional Liquidators have attributed no value to this claim since the assets of China Genetic principally comprise of 57% equity interest in Hua Xin and given that it is an inter-company liability which in the course of Group’s restructuring, would be written off as part of a nominal winding-up of all subsidiaries within the Group.

• The benefits/advantages of disposing 57% equity interest in Hua Xin by way of transfer of 100% issued shares in China Genetic and the assignments of HKP Claim and NPH Claim to Golden Linker include:

• The disposal of equity interest in Hua Xin would save the Company from providing the necessary management and investment resources in what appears to be a loss making business.

• It appears likely that Hua Xin is experiencing a severe liquidity crisis, and in the Provisional Liquidators’ view, there is little prospect of this situation improving into the future given that the bank accounts belonging to Hua Xin have been frozen by court order and there are substantial outstanding loan balances owed to various creditors.

• Hua Xin’s poor financial performance has caused its inability to service its debt obligations, which has ultimately given rise to claims by creditors against it. These creditor problems have adversely affected the Company and its reputation. The Hua Xin Disposal will help the Company in avoiding the legal disputes and financial difficulties faced by Hua Xin.

• The consideration for acquisition of the 57% equity interest in Hua Xin was paid with reference to the net asset value of Hua Xin as at 30 September 2000, amounting to approximately HK$57.11 million. Hua Xin reported an audited value of net assets of approximately HK$4.99 million as at 31 March 2003. As at 31 March 2004, the unaudited net asset value for Hua Xin was a deficit of approximately HK$2.96 million. It can be seen, therefore, that there has been a significant and rapid devaluation and impairment of Hua Xin’s net assets since the time of acquisition of the 57% equity interest in Hua Xin.

• Hua Xin’s rapidly deteriorating financial position coupled with the potential forced sale of the security held by the Bank of Shanghai Company Limited and repossession of leased premises by the Landowner, the Provisional Liquidators are of the view that there could be financial risks for the Group as a whole, if the equity interest in Hua Xin were to be retained going forward.

Under the terms of the restructuring agreement, Hua Xin was amongst the subsidiaries to be sold, and will not form part of the Restructured Group upon implementation of the restructuring proposal as announced on 26 September 2005.

GENERAL

The Hua Xin Disposal constitutes a major transaction for the Company and is therefore subject to the announcement, reporting and shareholders’ approval requirements under the Listing Rules. Umbrella, which has been given a power of attorney from the controlling Shareholder, holding approximately 67% of the total issued share capital of the Company, had given a written approval to the Company pursuant to Rule 14.44 of the Listing Rules to approve the Hua Xin Disposal in lieu of a general meeting as its interest in the Hua Xin Disposal is no different from all other Shareholders and no Shareholder is required to abstain from voting if the Company were to convene a physical general meeting for the approval of the Hua Xin Disposal. Completion of the Hua Xin Agreement is conditional upon, inter alia , the Court’s sanction.

The Provisional Liquidators are of the view that the Hua Xin Disposal is in the interests of the Shareholders as it will help the Company in avoiding legal disputes and financial difficulties faced by Hua Xin. The Hua Xin Disposal will not affect the Company in respect of the publication of its final results announcements for the years ended 31 March 2004 and 31 March 2005 as the value of Hua Xin has been impaired in the 2004 accounts and deconsolidated in the 2005 accounts. Also, Hua Xin is an Excluded Subsidiary and will not form part of the Restructured Group.

Trading in the Shares has been suspended at the request of the Company since 5 August 2004 and will continue to be suspended while the Provisional Liquidators remain appointed to the Company. A circular containing information on the Hua Xin Disposal will be included in the composite document targeted to be despatched to the Shareholders as soon as possible.

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As at the date of this announcement, the board of directors of the Company comprises five executive directors, namely, Mr Sun Hiu Lu, Ms Huang Shuyun, Mr Chu Kwan, Mr Zhao Dake and Mr Zhang Ke, Winston, and three independent non-executive directors, namely Mr Ng Wing Hang, Dr Melvin Wong and Mr Chu Yu Lin, David.

DEFINITIONS

In this announcement, the following expressions have meanings set out below, unless otherwise specified.

“Amendment Letter”	an amendment to the Hua Xin Agreement in letter form dated 16 December 2005 which amends the definition of “NPH Claim” in the Hua
	Xin Agreement. The Amendment Letter shall constitute one and the same instrument and is supplemental to the Hua Xin Agreement and is
	binding on all parties thereto;
“Business Day”	a day other than a Saturday or Sunday or public holiday in Hong Kong;
“China Genetic”	China Genetic Limited, a company incorporated in Hong Kong with limited liability, the legal and beneficial owner of 57% of the entire
	issued share capital of Hua Xin and an indirect wholly-owned subsidiary of the Company;
“Company”	Hong Kong Pharmaceutical Holdings Limited (Provisional Liquidators Appointed), a company incorporated in Bermuda with limited
	liability and whose securities are listed on the Stock Exchange;
“Completion”	completion of the Hua Xin Agreement;
“Consideration”	cash amount of HK$15 million;
“Court”	the High Court of Hong Kong;
“Delivery Date”	within seven days of the Signing Date;
“Excluded Subsidiary”	the issued shares of all subsidiaries, apart from certain principal subsidiaries including,inter alia, Nam Pei Hong Sum Yung Drugs Company
	Limited, N P H Sino-Meditech Limited and Poo Yuk Loong Limited, either directly or indirectly held by the Company;
“Golden Linker”	Golden Linker International Limited, a company incorporated in Hong Kong with limited liability;
“Group”	the Company and its subsidiaries;
“HKP Claim”	claims by the Company against Hua Xin which include, but are not limited to, the following:
	(i) a claim by way of subrogation by the Company against Hua Xin for the principal amount of HK$28,200,000 exclusive of interest as at
	29 December 2004; and
	(ii) a loan owed by Hua Xin to the Company for the principal amount of HK$2,505,044.77 as at 31 March 2005 exclusive of interest at a
	rate of 5.841% p.a.;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“Hua Xin”	Shanghai Hua Xin High Biotechnology Inc., a limited liability company incorporated in the PRC, and formed as a sino-foreign equity joint
	venture between China Genetic and four other independent joint venture partners;
“Hua Xin Agreement”	agreement for the sale and purchase of shares in and representing the entire issued share capital of China Genetic and assignment of claims
	dated 15 November 2005 in relation to the Hua Xin Disposal;
“Hua Xin Disposal”	the disposal of the Market Strategy’s 57% equity interest in Hua Xin and assignment of HKP Claim and NPH Claim to Golden Linker under
	the Hua Xin Agreement and Amendment Letter;
“Listing Rule(s)”	the Rule(s) Governing the Listing of Securities on the Stock Exchange;
“Market Strategy”	Market Strategy Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability, the legal and beneficial
	owner of the entire issued share capital of China Genetic and an indirect wholly-owned subsidiary of the Company;
“Nam Pei Hong”	Nam Pei Hong (Holding) Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of
	the Company;
“NPH Claim”	claims by Nam Pei Hong against Hua Xin and China Genetic which include, but are not limited to, the following:
	(i) a loan from Nam Pei Hong to Hua Xin with a balance outstanding as at 31 March 2005 of HK$580,000; and
	(ii) a loan from Nam Pei Hong to China Genetic with a balance outstanding as at 31 March 2005 of HK$36,058,955;
“PRC”	the People’s Republic of China;
“Provisional Liquidators”	Messrs. Kelvin Edward Flynn and Cosimo Borrelli of Alvarez & Marsal Asia Limited in their capacity as Joint and Several Provisional
	Liquidators of the Company;
“Restructured Group”	the group that after completion of the restructuring agreement, comprises principally the Company, Nam Pei Hong Sum Yung Drugs
	Company Limited, N P H Sino-Meditech Limited and Poo Yuk Loong Limited;
“SFC”	The Securities and Futures Commission of Hong Kong;
“Shareholder(s)”	holders of Shares;
“Shares”	issued shares of HK$0.10 each in the share capital of the Company;
“Signing Date”	the date of Hua Xin Agreement;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Umbrella”	Umbrella Finance Company Limited, a wholly-owned subsidiary of Citigroup Inc.;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“US$”	United States dollars, the lawful currency of the United States of America; and
“%”	per cent.

For and on behalf of Hong Kong Pharmaceutical Holdings Limited (Provisional Liquidators Appointed) Kelvin Flynn Cosimo Borrelli Joint and Several Provisional Liquidators acting as agent for and on behalf of the Company without personal liability

24 January 2006, Hong Kong

* For identification purposes only

Please also refer to the published version of this announcement in China Daily.

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