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*

(Incorporated in Bermuda with limited liability)

MAJOR TRANSACTION and

RESUMPTION OF TRADING

Further to the announcement of the Company dated 27 October 2000, the Directors announce that on 12 January 2001, China Genetic, a wholly-owned subsidiary of the Company, entered into the Contract with De Chang pursuant to which De Chang has conditionally agreed to sell, and China Genetic has conditionally agreed to purchase, the 57 per cent. equity interest owned by De Chang in Hua Xin at a consideration of HK$32,553,000. The Acquisition is subject to the fulfilment of certain conditions and may or may not proceed. Shareholders and investors are advised to exercise caution when dealing in the Shares.

The Acquisition constitutes a major transaction for the Company under the Listing Rules and will be subject to approval of its shareholders. Since no shareholders are required under the Listing Rules to abstain from voting at a general meeting of shareholders to approve the Acquisition, the Acquisition was approved in writing on 12 January 2001 by, among others, a controlling shareholder of the Company, Tin Ming Management Limited, who is interested in approximately 63.83 per cent. of the nominal value of the Shares and is not connected with De Chang and/or Hua Xin.

A circular containing information regarding the Acquisition will be despatched to shareholders of the Company for their information as soon as possible.

The Shares were suspended from trading on the Stock Exchange from 10 a.m. on 15 January 2001. The Company has made an application to the Stock Exchange to resume trading of the Shares on the Stock Exchange from 10 a.m. on 17 January 2001.

Further to the announcement of the Company dated 27 October 2000, the Directors are pleased to announce that China Genetic has, on 12 January 2001, entered into the Contract with De Chang pursuant to which De Chang conditionally agreed to sell, and China Genetic conditionally agreed to purchase, the 57 per cent. equity interest owned by De Chang in Hua Xin at a consideration of HK$32,553,000. A refundable deposit of HK$8,580,000 was paid by the Company to De Chang as deposit on 20 November 2000. After the Acquisition, Hua Xin will become a 57 per cent. owned subsidiary of the Company.

THE CONTRACT

Date: 12 January 2001

Parties:

Purchaser: China Genetic

Vendor: De Chang

Each of De Chang and its beneficial owners is independent of and not connected with the Directors, the chief executives and the substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

Assets to be acquired:

57 per cent. of the equity interest in Hua Xin, representing the existing entire equity interest of De Chang in Hua Xin.

Hua Xin is independent of and not connected with the Directors, the chief executives and the substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

Consideration:

The Consideration shall be paid by the Company in cash out of its internal resources in the following manner:

(a) as to HK$14,648,850 within three business days upon signing of the Contract and fulfilment of condition (a) as stated in the section headed “Conditions of the Contract” below;

(b) as to HK$16,276,500 within three business days upon fulfilment of conditions (b) to (e) as stated in the section headed “Conditions of the Contract” below; and

(c) as to the balance of HK$1,627,650 upon fulfilment of condition (f) as stated in the section headed “Conditions of the Contract” below.

The Consideration was determined after arm’s length negotiation among the parties to the Contract with reference to the net asset value of Hua Xin as at 30 September 2000 amounting to about RMB60,600,000, equivalent to about HK$57,111,000 (subject to audit).

Pursuant to the Contract, the deposit of HK$8,580,000 paid by the Group to De Chang on 20 November 2000 will be refunded to the Group within 20 business days upon completion of the Acquisition.

Conditions of the Contract:

Completion of the Contract is conditional upon, among others, the following conditions being satisfied:

(a) an announcement relating to the Acquisition and the Contract having been published in compliance with the Listing Rules;

(b) the receipt of written confirmation from all of the other joint venture parties to Hua Xin confirming that they will not exercise their respective pre-emptive rights to purchase the equity interest relating to the Acquisition;

(c) China Genetic and all other joint venture parties to Hua Xin having executed the amended joint venture contract and the amended articles of association of Hua Xin and the same having been approved by the relevant approval authorities in the PRC;

(d) the unanimous approval of all current directors of Hua Xin attending its board meeting in relation to (i) the Acquisition; and (ii) the amendments of the joint venture contract and the articles of association of Hua Xin;

(e) the Contract having been approved by the relevant approval authorities in the PRC and an approval certificate stating that China Genetic is the registered joint venture partner of Hua Xin being issued proving that China Genetic has become the legal joint venture partner of Hua Xin; and

(f) all the necessary registration in relation to the Acquisition having been registered and filed with the relevant governmental authorities in the PRC.

Completion of the Contract:

In the event that the conditions of the Contract are not fulfilled or waived by 1 April 2001 (or such later date as may be agreed by the parties to the Contract), either party may terminate the Contract and the Acquisition will not proceed. In such event, De Chang shall forthwith refund the entire amount already paid by China Genetic together with interests at an annual interest rate of approximately 5.5 per cent.. It is currently expected that completion of the Contract will take place on or before 1 April 2001.

INFORMATION ON HUA XIN

Hua Xin is a sino-foreign equity joint venture registered and established in Shanghai, the PRC, on 19 January 1993 and has now a registered capital of US$9,620,000. Hua Xin, which is owned as to 57 per cent. by De Chang and 43 per cent. by four other independent joint venture parties, two of whom are foreign entities, is independent of and not connected with the Directors, the chief executives and the substantial shareholders of the Company and its subsidiaries or any of their respective associates.

Hua Xin is principally engaged in the research, development, manufacture and sale of bio-technological pharmaceutical products. Approval from the relevant authorities in the PRC has been obtained on three drugs. Currently, one of the drugs is being manufactured and distributed by Hua Xin. On 4 December 2000, Hua Xin has obtained the PRC certificate of Good Manufacturing Practice (GMP) to obtain the Pharmaceutical Manufacturing Enterprise Permit in respect of this drug. Hua Xin is now obtaining this permit to complete the relevant administrative procedures in the PRC and the Directors expect that this permit will be granted within this year. Another of the drugs is being manufactured and distributed by an affiliated company of Hua Xin. Five other drugs have obtained approval for clinical trial. Drugs developed or being developed by Hua Xin focus on anti-viro and anti-tumor treatment.

Hua Xin has a joint venture term of 45 years until 18 January 2038. Under the joint venture contact and articles of association of Hua Xin, each party shares profit and loss of Hua Xin in proportion to their respective equity interests. After completion of the Acquisition, China Genetic will be actively involved in the day-to-day operation of Hua Xin. Under the amended joint venture contract and articles of association of Hua Xin, China Genetic shall be entitled to appoint 5 directors of Hua Xin out of a total of 9 directors and to appoint the chairman of the board. Board decisions will be arrived at by majority vote and the chairman will not have any casting vote.

For the financial year ended 31 December 1998, Hua Xin recorded a profit before taxation of about HK$2,500,000 (subject to audit) and recorded a profit after taxation of about HK$2,470,000 (subject to audit). For the financial year ended 31 December 1999 and the nine months ended 30 September 2000, Hua Xin recorded a loss after taxation of about HK$6,500,000 (subject to audit) and about HK$4,700,000 respectively (subject to audit). As at 30 September 2000, the net asset value of Hua Xin amounted to about HK$57,111,000 (subject to audit).

Hua Xin has aggregate outstanding bank loans of RMB24,160,000. These bank loans have been overdue. One of the bank creditors has taken legal action against Hua Xin in respect of loans in an aggregate amount of RMB22,260,000. The court has given orders in favour of the bank creditor. Although certain construction in progress, machinery and equipment of Hua Xin have, pursuant to the court orders, been frozen by the court in September 2000, as advised by the Company’s legal advisers on PRC laws and as witnessed by the Directors during a site visit, the Directors understand that there has not been any material adverse effect on the normal operation of Hua Xin, and the Directors intend to assist in the discharge of the frozen assets by obtaining further banking facilities.

Based on the financial due diligence conducted on Hua Xin by the financial adviser to the Company and to the best knowledge of the Directors, the Directors are not aware of any significant potential liabilities in connection with any of the outstanding bank loans of Hua Xin other than those as disclosed herein. Although neither the Company nor China Genetic has any direct obligation, or has executed any guarantee, to settle such bank loans, it is expected that upon completion of the Acquisition, the Directors will assist Hua Xin in obtaining facilities from banking institutions in order to secure the discharge of the frozen assets and improve its financial position in the long-run.

REASONS FOR THE ACQUISITION

The Company is an investment holding company. The Group is principally engaged in the wholesale and retail of Chinese and other medicines, health products and dried seafoods and property investment.

Upon completion of the Acquisition and the transactions contemplated under the Contract, Hua Xin will become a 57 per cent. owned subsidiary of the Company. In view of the experience and the future prospects of Hua Xin in the business of producing bio-technological pharmaceutical products, the Directors believe the Acquisition will enhance the capability of the Group in the research, development, manufacture, promotion and sale of its pharmaceutical products.

Having taken into consideration of all relevant factors in connection with the Acquisition, including the outstanding bank loans of Hua Xin and the freeze of certain of its assets, the Directors consider that the terms of the Contract are fair and reasonable and the Acquisition are in the interests of the Company and the shareholders as a whole.

APPROVAL BY SHAREHOLDERS

GENERAL

The Acquisition is subject to the fulfilment of certain conditions and may or may not proceed. Shareholders and investors are advised to exercise caution when dealing in the shares of the Company.

A circular containing information regarding the Acquisition will be despatched to shareholders of the Company for their information as soon as possible.

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


“Acquisition”	the acquisition by China Genetic of about 57 per cent. of the registered capital of Hua Xin pursuant to the Contract;

“China Genetic”	China Genetic Limited中國基因工程有限公司, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of the Company;

“Company”	Hong Kong Pharmaceutical Holdings Limited, a company incorporated in Bermuda whose securities are listed on the Stock Exchange;

“Consideration”	the consideration payable by China Genetic under the Contract;

“Contract”	the conditional share transfer contract dated 12 January 2001 entered into between China Genetic, as purchaser, and De Chang, as vendor, in relation to the Acquisition;

“De Chang”	Shanghai De Chang Investment Development Company Limited上海德昌投資發展有限公司, a limited liability company registered in Shanghai, the PRC;

“Directors”	directors of the Company;

“Group”	the Company and its subsidiaries;

“Hua Xin”	Shanghai Hua Xin High Biotechnology Inc. 上海華新生物高技術有限公司, a sino-foreign equity joint venture registered and established in Shanghai, the PRC;

“Letter of Intent”	the letter of intent entered into by China Genetic and De Chang on 27 October 2000;

“Listing Rules”	The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

“PRC”	the People’s Republic of China;

“RMB”	Renminbi yuan, the lawful currency of the PRC;

“Shares”	the shares of HK$0.10 each in the capital of the Company;

“Stock Exchange”	The Stock Exchange of Hong Kong Limited.

By Order of the Board of Directors

HONG KONG PHARMACEUTICAL HOLDINGS LIMITED

Huang Shuyun

Deputy Chairman and Managing Director

Hong Kong, 16 January 2001

* For identification only

Please also refer to the published version of this announcement in the i Mail dated 17/1/2001.

AI assistant

Bloks Group Limited M&A Activity 2001

THE CONTRACT

INFORMATION ON HUA XIN

REASONS FOR THE ACQUISITION

APPROVAL BY SHAREHOLDERS

GENERAL

Deputy Chairman and Managing Director

AI assistant

Bloks Group Limited — M&A Activity 2001

THE CONTRACT

INFORMATION ON HUA XIN

REASONS FOR THE ACQUISITION

APPROVAL BY SHAREHOLDERS

GENERAL

Deputy Chairman and Managing Director

More from Bloks Group Limited

Bloks Group Limited M&A Activity 2001