CWT International Limited — M&A Activity 2005

Jan 31, 2005

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

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SINOCHEM HONG KONG (GROUP) COMPANY LIMITED

( )

(Incorporated in Hong Kong with limited liability)

SINOCHEM HONG KONG HOLDINGS LIMITED ( )

(Incorporated in Bermuda with limited liability) Stock Code: 297

ACQUISITION FROM SINOCHEM HONG KONG (GROUP) COMPANY LIMITED OF THE FERTILISER GROUP

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION REVERSE TAKEOVER INVOLVING AN APPLICATION FOR A NEW LISTING AND AN APPLICATION FOR THE WHITEWASH WAIVER CAPITAL REORGANISATION

Financial adviser to Sinochem Corporation and Sponsor to the Company

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Acquisition

The respective boards of Sinochem HK and the Company are pleased to announce that, on 28 January 2005, the Company (as purchaser) has entered into the Acquisition Agreement with Sinochem HK (as vendor) for the acquisition of the entire issued share capital of the Fertiliser Company. The Fertiliser Company was established to become the holding company of the Fertiliser Group, which is a leading fertiliser enterprise in the PRC, principally engaged in the sourcing, production and sale of fertilisers and other agricultural related products in the PRC. The Fertiliser Group is also the largest importer of fertiliser products in the PRC in terms of import volume.

The consideration for the Acquisition of HK$5,050 million will be satisfied in full by the allotment and issue of 5,050,000,000 Consideration Shares to Sinochem HK at the Issue Price of HK$1.00 per Consideration Share. If the Capital Reorganisation has not been given effect to on or before Completion, the parties have agreed that the number of Consideration Shares shall be adjusted to 50,500,000,000 new Ordinary Shares and the Issue Price shall be HK$0.10 per share. In either case, the number of Consideration Shares represents approximately 93.21% of the enlarged issued ordinary share capital of the Company upon Completion. The consideration for the Acquisition has been arrived at after arms’ length negotiations between the parties.

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Implications of the Acquisition

Upon Completion:

• . Sinochem HK and its concert parties will become the controlling shareholder of the Company owning approximately 94.65% of the enlarged issued ordinary share capital of the Company, resulting in a change of control of the Company;

• . The Company will become a leading vertically integrated fertiliser enterprise in the PRC and the largest importer of fertiliser products in the PRC in terms of import volume. The Fertiliser Group had an audited (based on PRC GAAP) turnover and net profit of approximately RMB11,617.2 million and RMB415.8 million respectively for the year ended 31 December 2003;

• . The Directors expect that going forward, the Company’s resources will be focused on the PRC fertiliser industry and agricultural products sector; and

• . The composition of the Board is expected to change through the intended appointment of two new executive Directors.

Listing Rules

Very substantial acquisition and connected transaction

The Acquisition constitutes a very substantial acquisition and a connected transaction of the Company under Chapters 14 and 14A of the Listing Rules and is therefore subject to the approval of the Independent Shareholders by poll at the SGM.

Reverse takeover and new listing

In addition, as the Acquisition will result in a change of control of the Company, the Acquisition also constitutes a reverse takeover of the Company under Rule 14.06(6) of the Listing Rules and will result in the Company being treated as a new listing applicant under Rule 14.54 of the Listing Rules. As such, the Acquisition is subject to the approval of the Company’s new listing application by the Listing Committee of the Stock Exchange. The new listing application to be made by the Company must comply with all the requirements under the Listing Rules, including the requirements under Chapters 8 and 9 of the Listing Rules. None of the relevant materials regarding the new listing application have been submitted to the Stock Exchange and the Company will initiate the new listing application process as soon as practicable. The Listing Committee of the Stock Exchange may or may not grant the approval of the new listing application. If such approval is not granted, the Acquisition Agreement will lapse and the Acquisition will not proceed.

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Public float requirement

Upon Completion, Sinochem HK will be interested in approximately 94.65% of the enlarged issued ordinary share capital of the Company. In addition, approximately 0.69% of the enlarged issued ordinary share capital of the Company will be held by Mr. Chu Yu Lin, David and Mrs. Chu Ho Miu Hing, who are executive Directors. The public float of the Company will be approximately 4.66% and will therefore be less than the minimum 25% public float required under Rule 8.08 of the Listing Rules. The Company and Sinochem HK have undertaken to the Stock Exchange to use reasonable commercial efforts to take appropriate steps to ensure that not less than 25% of the ordinary shares of the Company then in issue will be held in public hands as soon as practicable following Completion. The Company shall make further announcements in relation to any action taken in respect of the public float of its ordinary shares to ensure strict compliance with the Listing Rules.

Continuing connected transactions

Upon Completion, various companies within the Fertiliser Group will become subsidiaries of the Company. On-going provision of services and sale and purchase of products are expected to take place between members of the Sinochem Group (other than the Company and its subsidiaries) and members of the Fertiliser Group which will constitute continuing connected transactions of the Company under the Listing Rules. Some of these transactions may constitute Non-exempt Continuing Connected Transactions and are subject to the approval of the Independent Shareholders.

The Acquisition is conditional on, among other things, the approval of the Non-exempt Continuing Connected Transactions by the Independent Shareholders at the SGM. Voting will also be conducted by poll and Sinochem HK and its Associates will abstain from voting.

Takeovers Code

As at the date of this announcement, Sinochem HK and its concert parties own approximately 21.16% of the existing issued Ordinary Shares. Upon Completion, the interests of Sinochem HK and its concert parties will increase to approximately 94.65% of the enlarged issued ordinary share capital of the Company. Accordingly, upon Completion, Sinochem HK and its concert parties will be obliged to make an unconditional mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Sinochem HK and parties acting in concert with it under Rule 26.1 of the Takeovers Code unless a waiver from strict compliance with Rule 26.1 of the Takeovers Code has been obtained from the Executive.

Sinochem HK intends to make an application to the Executive for the Whitewash Waiver. The Whitewash Waiver, if granted, will be subject to the approval of the Independent Shareholders taken by way of poll at the SGM. Sinochem HK, its Associates and its concert parties who are involved in, or interested in, the Acquisition are required to abstain from voting under the Takeovers Code. Whether Mr. Chu Yu Lin, David and Mrs. Chu Ho Miu Hing, executive Directors, will be eligible to vote is to be determined. The Executive may or may not grant the Whitewash Waiver. If the Whitewash Waiver is not granted, the Acquisition Agreement will lapse and the Acquisition will not proceed.

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Capital Reorganisation

The Board also proposes the Capital Reorganisation for approval by the Shareholders at the SGM. The Capital Reorganisation will comprise:

• (i) the Capital Reduction — the nominal value of each of the issued Ordinary Shares will be reduced by HK$0.09 by cancelling an equivalent amount of paid-up capital per Ordinary Share so that the nominal value of each Ordinary Share will be reduced from HK$0.10 to HK$0.01 and the entire credit arising from the Capital Reduction will be transferred to the contributed surplus account of the Company;

• (ii) the Share Consolidation — subject to and immediately following the Capital Reduction, every 10 Reduced Shares of HK$0.01 each then in issue will be consolidated into one New Share of HK$0.10;

• (iii) an increase in authorised share capital — the authorised share capital of the Company will be increased to HK$1,316,000,000, comprising 10,000,000,000 ordinary shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each;

• (iv) the Existing Share Premium Cancellation — the entire balance standing to the credit of the share premium account of the Company as at 31 March 2004 will be cancelled, and the credit arising from the Existing Share Premium Cancellation will be transferred to the contributed surplus account of the Company; and

• (v) the Further Share Premium Cancellation — if Completion occurs following the implementation of the matters referred to in (i) to (iv) above, a further amount of HK$131,625,200 representing part of the share premium arising from the issue of the Consideration Shares will be cancelled, and the credit arising from the Further Share Premium Cancellation will be transferred to the contributed surplus account of the Company.

The Directors intend to utilise the entire balance standing to the credit of the Company’s contributed surplus account as at 31 March 2004, as well as all sums credited to that account as described above, to set off against an equivalent amount of the accumulated losses of the Company as at 31 March 2004. Further details in this regard are set out in the section headed ‘‘Capital Reorganisation’’ below.

Other matters

• . General mandates to issue and repurchase shares — It is proposed that general mandates be granted to the Directors to (a) repurchase ordinary shares representing up to 10% of the issued ordinary share capital of the Company as enlarged by the issue of the Consideration Shares and (b) allot, issue and deal with additional ordinary shares with an aggregate nominal value not exceeding 20% of the aggregate nominal amount of the issued ordinary share capital of the Company, as enlarged by the issue of the Consideration Shares upon Completion. Ordinary resolutions will be proposed at the SGM for the Shareholders to approve the General Mandates.

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• . Change of financial year end — Upon Completion, it is the Company’s intention to change the financial year end of the Enlarged Group to 31 December going forward to conform with the financial year end of the Fertiliser Group, to provide a consistent accounting period for the Enlarged Group in order to consolidate the results of the Fertiliser Group with those of the Group. A resolution will be proposed at the SGM for approval of this change by the Shareholders. Where necessary, a waiver application to the Stock Exchange in respect of Rule 8.21 of the Listing Rules, which prohibits a change of financial year end for a new listing applicant, will be made.

General

Cazenove is the financial adviser to Sinochem Corporation in relation to the Acquisition and will also act as the sponsor to the Company’s new listing application as a result of the Acquisition.

An independent board committee will be formed to advise the Independent Shareholders on, among others, the Acquisition, the Whitewash Waiver and the Non-exempt Continuing Connected Transactions. An independent financial adviser will be appointed to advise the independent board committee and the Independent Shareholders in this connection. The Company will make a further announcement on the appointment of such independent financial adviser.

The Circular, containing the matters referred to herein, is expected to be despatched to the Shareholders within seven days after obtaining the approval from the Listing Committee of the Company’s new listing application.

In addition, as Completion is subject to the fulfillment of a number of conditions as set out in the sub-paragraph headed ‘‘Conditions’’ under the paragraph A headed ‘‘The Acquisition Agreement’’ below, the Acquisition may or may not proceed. In particular, the Executive may or may not grant the Whitewash Waiver and the new listing application may or may not be approved.

Shareholders and potential investors should exercise caution when dealing in the Shares.

Suspension and resumption of trading

At the request of the Company, trading in the Ordinary Shares on the Stock Exchange was suspended from 12.01 p.m. on 26 January 2005 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Ordinary Shares on the Stock Exchange with effect from 9.30 a.m. on 31 January 2005.

A. THE ACQUISITION AGREEMENT

Parties

1. The Company, as purchaser

2. Sinochem HK, a subsidiary of Sinochem Corporation, as vendor

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Assets involved

The entire issued share capital of the Fertiliser Company. The Fertiliser Company was established to become the holding company of the Fertiliser Group, which is a leading vertically integrated fertiliser group in the PRC, principally engaged in the sourcing, production and sale of fertiliser and other agricultural related products in the PRC. The Fertiliser Group is also the largest importer of fertiliser products in the PRC in terms of import volume.

The following diagrams illustrate the simplified corporate and shareholding structure of the Company, the Fertiliser Company and their respective principal subsidiaries immediately before and after the Completion, in each case, assuming completion of the Reorganisation.

After completion of the Reorganisation and immediately before Completion

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Sinochem Public and other Mr. Chu and
Corporation Shareholders his Associates
100%
Sinochem HK
68.59% 10.25%
21.16% (Note)
100%
Fertiliser
The Company
Company
Fertiliser Existing
Business business
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Immediately after Completion

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Sinochem Public and other Mr. Chu and
Corporation Shareholders his Associates
100%
Sinochem HK
0.69%
94.65% 4.66% (Note)
The Company
100%
Fertiliser
Company
Fertiliser Existing
Business business
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Note: Represents the issued ordinary share capital of the Company held by Mr. Chu Yu Lin, David and Mrs. Chu Ho Miu Hing, executive Directors, assuming (a) save for the Ordinary Shares that might be issued to satisfy the consideration under the Acquisition, no further Ordinary Shares will be issued after the date of this announcement until Completion; and (b) no disposal of shares in the Company by Mr. Chu Yu Lin, David and/or Mrs. Chu Ho Miu Hing between the date of this announcement and Completion.

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Consideration

The consideration for the Acquisition is HK$5,050 million, which has been arrived at after arms’ length negotiations between the parties with reference to various factors including, but not limited to, the financial results of the Fertiliser Group and the earnings potential and the prospects of the Fertiliser Group. This represents approximately 12.87 times the audited net profit (based on PRC GAAP) of the Fertiliser Group for the year ended 31 December 2003. The audited net profit (based on PRC GAAP) of the Fertiliser Group for the nine months ended 30 September 2004 was approximately RMB404.1 million. The consideration also represents approximately 2.8 times the net asset value of the Fertiliser Group as at 30 September 2004. Based on the historical earnings record of the Fertiliser Group and the factors set out in the paragraph D headed ‘‘Reasons for and benefits of the Acquisition’’ below, the Directors consider that the terms of the Acquisition are fair and reasonable and in the interests of the Shareholders as a whole.

Payment method

The consideration will be satisfied in full by the allotment and issue of 5,050,000,000 Consideration Shares to Sinochem HK at the Issue Price of HK$1.00 per Consideration Share. If the Capital Reorganisation has not been given effect to on or before Completion, the parties have agreed that the number of Consideration Shares shall be adjusted to 50,500,000,000 new Ordinary Shares and the Issue Price shall be HK$0.10 per share. In either case, the number of Consideration Shares represents approximately 93.21% of the enlarged issued ordinary share capital of the Company upon Completion. The Consideration Shares shall be issued as fully paid and shall rank pari passu in all respects with the ordinary shares of the Company in issue at the date of Completion. An application will be made by the Company to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

The Issue Price

The Issue Price of HK$1.00 per Consideration Share represents:

• (a) a discount of approximately 78.9% from HK$4.75, the closing price of the Ordinary Shares (adjusted for the effects of the Capital Reorganisation) on the Stock Exchange on 26 January 2005, being the last trading day immediately prior to the suspension of trading in the Ordinary Shares;

• (b) a discount of approximately 77.5% from approximately HK$4.445, the average closing price of the Ordinary Shares (adjusted for the effects of the Capital Reorganisation) on the Stock Exchange for the last 10 full trading days prior to the suspension of trading in the Ordinary Shares;

• (c) a discount of approximately 77.5% from approximately HK$4.437, the average closing price of the Ordinary Shares (adjusted for the effects of the Capital Reorganisation) on the Stock Exchange for the last 30 full trading days prior to the suspension of trading in the Ordinary Shares;

• (d) a premium of approximately 4,248% to the latest published audited consolidated net tangible assets of the Group of approximately HK$0.023 per Ordinary Share (adjusted for the effects of the Capital Reorganisation but without taking into account the effects of any redemption of the Preference Shares) as at 31 March 2004; and

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• (e) a premium of approximately 700% to the unaudited consolidated net tangible assets of the Group of approximately HK$0.125 per Ordinary Share (adjusted for the effects of the Capital Reorganisation but without taking into account the effects of any redemption of the Preference Shares) as at 30 September 2004.

If the Capital Reorganisation has not been given effect to on or before Completion, the Issue Price will be HK$0.10 per Ordinary Share and will represent:

• (a) a discount of approximately 78.9% from HK$0.475, the closing price of the Ordinary Shares on the Stock Exchange on 26 January 2005, being the last trading day immediately prior to the suspension of trading in the Ordinary Shares;

• (b) a discount of approximately 77.5% from approximately HK$0.445, the average closing price of the Ordinary Shares on the Stock Exchange for the last 10 full trading days prior to the suspension of trading in the Ordinary Shares;

• (c) a discount of approximately 77.5% from approximately HK$0.444, the average closing price of the Ordinary Shares on the Stock Exchange for the last 30 full trading days prior to the suspension of trading in the Ordinary Shares;

• (d) a premium of approximately 4,248% to the latest published audited consolidated net tangible assets of the Group of approximately HK$0.002 per Ordinary Share as at 31 March 2004; and

• (e) a premium of approximately 700% to the unaudited consolidated net tangible assets of the Group of approximately HK$0.013 per Ordinary Share as at 30 September 2004.

Conditions

Completion is conditional upon the fulfillment of the following Conditions, on or before 30 September 2005, or such later date as may be agreed among the parties to the Acquisition Agreement:

• (a) the continued listing of the Ordinary Shares on the Stock Exchange and there having been no suspension in trading in the Ordinary Shares, save for any temporary suspension not exceeding 10 consecutive trading days or such longer period as Sinochem HK may accept in writing, and save for any suspension in connection with a temporary suspension pending clearance by the Stock Exchange and the Executive of announcement(s) relating to the transactions contemplated under the Acquisition Agreement;

• (b) the approval of the Listing Committee of the Stock Exchange of the new listing application by the Company having been obtained;

• (c) (if necessary) the approval of the Bermuda Monetary Authority in respect of the issue of the Consideration Shares;

• (d) the approval by the Independent Shareholders in general meeting by way of a poll of (i) the Acquisition; (ii) the allotment and issue of the Consideration Shares by the Company; (iii) all other transactions contemplated under the Acquisition Agreement; (iv) the Whitewash Waiver; and (v) the Non-exempt Continuing Connected Transactions and the proposed annual caps on the value of such transactions in accordance with the requirements of the Listing Rules and approval by the Shareholders of an increase in the authorised share capital of the Company to such an amount as shall allow the Company to allot and issue the Consideration Shares;

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• (e) the Listing Committee of the Stock Exchange agreeing to grant (subject to allotment) the listing of, and permission to deal in, the Consideration Shares (and such permission and listing not subsequently being revoked prior to the delivery of the definitive share certificate(s) representing the Consideration Shares);

• (f) the Executive granting to Sinochem HK and parties acting in concert with it the Whitewash Waiver; and

• (g) the obtaining of all licences, consents, approvals, authorisations, permissions, waivers, orders or exemptions from government or regulatory authorities (including relevant PRC authorities) or third parties which are necessary in connection with the execution and performance of the Acquisition Agreement and any of the transactions contemplated under the Acquisition Agreement (collectively, the ‘‘Consents’’).

Pursuant to the Acquisition Agreement, Sinochem HK may waive the Condition in (a) above and the Company and Sinochem HK may jointly waive the Condition in item (g) above at any time if it is agreed that the Consent(s) which have not been obtained is/are not material to the business of the Group and the Fertiliser Group taken as a whole, and such waiver may be subject to such terms and conditions as may be jointly determined by the Company and Sinochem HK. All the other Conditions above cannot be waived and, in the event that they are not satisfied, the Acquisition will not proceed. Save for the Condition in (c) above, none of the Conditions have been satisfied as at the date of this announcement.

Completion

Completion is expected to take place on the fifth business day after all the Conditions have either been fulfilled and/or waived. If any of the Conditions has not been fulfilled (or waived by the relevant parties) by 30 September 2005 (or such later date as the parties to the Acquisition Agreement may agree in writing), the Acquisition Agreement will lapse and all obligations and liabilities of all parties thereunder will cease (without prejudice to the rights of the parties in respect of antecedent breaches).

Following Completion, the Fertiliser Company will become a wholly-owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Enlarged Group.

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B. SHAREHOLDING STRUCTURE BEFORE AND AFTER THE ACQUISITION

The Acquisition will result in a change of control of the Company.

Set out below is a table showing, for the purpose of illustration, the shareholding structure of the Company before and after the completion of the Acquisition and the Capital Reorganisation:

Shareholders Sinochem HK and its concert parties Mr. Chu Yu Lin, David (Note 2) Mrs. Chu Ho Miu Hing (Note 2) Public Total	Existing shareholding as at the date of this announcement Ordinary Shares % 778,477,633 21.16 312,876,297 8.50 64,304,000 1.75 2,523,840,354 68.59 3,679,498,284 100	Shareholding structure after the Capital Reorganisation but before completion of the Acquisition (Note 1) New Shares % 77,847,763 21.16 31,287,630 8.50 6,430,400 1.75 252,384,035 68.59 367,949,828 100	Shareholding structure after the Capital Reorganisation and the Acquisition (Note 1) New Shares % 5,127,847,763 94.65 31,287,630 0.58 6,430,400 0.11 252,384,035 4.66 5,417,949,828 100	Shareholding structure after the Capital Reorganisation and the Acquisition (Note 1) New Shares % 5,127,847,763 94.65 31,287,630 0.58 6,430,400 0.11 252,384,035 4.66 5,417,949,828 100
				100

Set out below is a table showing, for the purpose of illustration, the shareholding structure of the Company before and after Completion in the absence of the Capital Reorganisation:

Shareholders Sinochem HK and its concert parties Mr. Chu Yu Lin, David (Note 2) Mrs. Chu Ho Miu Hing (Note 2) Public Total	Existing shareholding as at the date of this announcement Ordinary Shares % 778,477,633 21.16 312,876,297 8.50 64,304,000 1.75 2,523,840,354 68.59 3,679,498,284 100	Shareholding structure after Completion (Note 1) Ordinary Shares % 51,278,477,633 94.65 312,876,297 0.58 64,304,000 0.11 2,523,840,354 4.66 54,179,498,284 100	Shareholding structure after Completion (Note 1) Ordinary Shares % 51,278,477,633 94.65 312,876,297 0.58 64,304,000 0.11 2,523,840,354 4.66 54,179,498,284 100
			100

Notes:

1. Assumes (a) save for the Ordinary Shares that might be issued to satisfy the consideration under the Acquisition, no further Ordinary Shares will be issued after the date of this announcement until Completion; and (b) no disposal of shares in the Company by Mr. Chu Yu Lin, David and/or Mrs. Chu Ho Miu Hing between the date of this announcement and Completion.

2. Mr. Chu Yu Lin, David is an executive Director and is the husband of Mrs. Chu Ho Miu Hing, also an executive Director.

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C. PARTICULARS OF THE FERTILISER GROUP

Overview

The Fertiliser Group is a leading fertiliser enterprise in the PRC offering a comprehensive range of fertiliser and agricultural-related products. It is also the largest importer of fertiliser products in the PRC in terms of import volume. The Fertiliser Group is the fertiliser flagship of Sinochem Corporation, established in 1950, and one of the largest state-owned enterprises in the PRC in terms of turnover and which is currently a Fortune Global 500 enterprise with global operations in the petroleum refining, chemicals and fertiliser industries.

The Fertiliser Group now operates three principal segments, namely SINOCHEM Procurement, SINOCHEM Production and SINOCHEM Distribution, which together form a vertically-integrated business operation across the fertiliser supply chain:

SINOCHEM Procurement — sources a variety of products and certain principal raw materials from both overseas and domestic suppliers for sales by SINOCHEM Distribution and production by SINOCHEM Production respectively.

SINOCHEM Production — produces phosphate-based fertilisers and compound fertilisers with high nutrient content. As at the date of this announcement, SINOCHEM Production operates seven production enterprises, including three subsidiaries and four joint venture enterprises for the production of phosphate-based fertilisers and potash fertilisers.

SINOCHEM Distribution — distributes products sourced by SINOCHEM Procurement and products produced by SINOCHEM Production. Products are principally sold in the PRC with a small proportion being exported to overseas customers. Products are sold through its own extensive sales and distribution network in the PRC as well as through independent distributors.

The Fertiliser Group has developed a centrally co-ordinated operation model to facilitate the integration of the three principal business segments. Under such operation model, the flow of products, information and funds, as well as resources deployment are managed and co-ordinated centrally. The model is supported and facilitated by the structured logistics network and the proprietary management information system of the Fertiliser Group, thereby enabling the Fertiliser Group to operate a scaleable operation in an efficient manner.

Principal strengths

The directors of the Fertiliser Group consider that the principal strengths of the Fertiliser Group include the following:

• . Vertically-integrated operation model with a scaleable operation

• . Strong upstream capability to secure supplies of fertiliser products

• . Strong downstream sales and distribution capabilities

• . Comprehensive product portfolio

• . Strong brand recognition among customers and end-users

• . Experienced management team and effective management system

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Key financials

The following table summaries the key audited financial information of the Fertiliser Group prepared based on PRC GAAP:

based on PRC GAAP:
					For the nine
				months ended
	For the year	ended 31 December		30 September
	2001	2002	2003		2004
	(RMB’million) (RMB’million) (RMB’million)			(RMB’million)
Turnover	4,608.6	7,803.9	11,617.2		10,647.1
Net profit (before taxation and
extraordinary items)	224.2	297.1	523.1		513.6
Net profit (after taxation and
extraordinary items)	180.0	240.4	415.8		404.1
Net profit margin	3.9%	3.1%	3.6%		3.8%
Net asset value	406.1	764.6	1,181.0		1,889.8

D. REASONS FOR AND BENEFITS OF THE ACQUISITION

Potential for the PRC fertiliser industry

China has approximately 7% of the world’s arable land and approximately 22% of the world population, of which approximately 71% (approximately 900 million people) are engaged in the agricultural industry (Source: China Data Center and the United Nations). It has been one of the key fertiliser supply and consumption countries in the world.

Set out below is a list of major production and consumption countries of the three major types of fertilisers:

Major production countries and production output (Mt nutrient) in 2002

Nitrogen-based	fertilisers	Phosphate-based	fertilisers	Potash fertilisers	Potash fertilisers
	Mt		Mt		Mt
Country	nutrient	% Country	nutrient	% Country	nutrient	%
PRC	23.64	27.1 USA	7.97	23.5 Canada	8.03	31.1
USA	9.44	10.8 PRC	7.91	23.3 Russia Federation	4.38	16.9
Russia Federation	6.01	6.9 India	3.90	11.5 Belarus	3.79	14.7
Aggregate output	39.09	44.8 Aggregate output	19.78	58.3 Aggregate output	16.2	62.7
Total global		Total global		Total global
production output	87.21	production output	33.90	production output	25.85

Source: FAOSTAT Data, 2004

Major consumption countries and consumption (Mt nutrient) in 2002

Nitrogen-based	fertilisers		Phosphate-based	fertilisers		Potash	fertilisers
	Mt			Mt				Mt
Country	nutrient	%	Country	nutrient	%	Country	nutrient		%
PRC	25.43	30.0	PRC	9.92	29.6	USA		4.55	19.5
USA	10.88	12.8	India	4.00	11.9	PRC		4.25	18.3
India	10.47	12.4	USA	3.87	11.5	Brazil		3.06	13.1
Aggregate	46.78	55.2		17.79	53.0		11.86		50.9
Total global			Total global			Total global
consumption	84.76		consumption	33.55		consumption	23.27

Source: FAOSTAT data, 2004

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Since the 1990s, the total consumption of fertilisers in the PRC maintained a steady growth from 33.18 Mt in 1994 to 44.12 Mt in 2003, growing at a CAGR of approximately 3.22% (Source: China Statistical Yearbook 2004). The directors of the Fertiliser Group believe that the demand for fertiliser products in the PRC will be driven by the following factors in the future:

• . the demand for agricultural products to satisfy the basic consumption need of the large population in the PRC;

• . the growth of livestock husbandry and the increasing demand for feed crops;

• . reducing total arable land due to urbanization and the importance of fertilisers to increase crop yields;

• . structural change of the agricultural industry towards high-quality cash crop; and

• . the government policy to develop the agricultural industry.

The Directors consider that the PRC fertiliser industry presents promising growth potential and the Acquisition will enable the Company to participate in the growth of the PRC fertiliser industry.

A unique opportunity to become a leading fertiliser supplier and the largest fertiliser importer in the PRC

While the PRC is one of the major fertiliser production and consumption countries, the Fertiliser Group is a leading fertiliser enterprise in the PRC and the largest fertiliser importer in the PRC in terms of import volume. The Directors consider that the Acquisition represents an attractive opportunity for the Group to immediately become a leading player in the PRC fertiliser industry.

A means to immediately enhance earnings capability and net asset value

A summary of the financial information of the Fertiliser Group is included in paragraph C headed ‘‘Particulars of the Fertiliser Group’’ above. The Directors expect that the Acquisition will bring an immediate and substantial contribution to the earnings of the Group. In addition, there will be a significant increment in the net asset value of the Group, thereby enhancing the value for Shareholders as a whole.

A structure enabling the Company to become the listed flagship company of Sinochem Corporation

Upon Completion, the Company will be ultimately majority controlled by Sinochem Corporation, which is one of the largest state-owned enterprises in the PRC in terms of turnover and has been listed among the Fortune Global 500 companies for 15 consecutive years and ranked 270th in 2004. It also ranks 7th among all Chinese industrial companies in terms of turnover. As the only Hong Kong listed flagship company for Sinochem Corporation, the Company would be able to leverage on the global business network of Sinochem Corporation for future development.

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E. PARTICULARS OF THE GROUP

The Company is an investment holding company. It was incorporated in Bermuda on 26 May 1994 and its Ordinary Shares have been listed on the main board of the Stock Exchange since 30 September 1996. At the time of the Company’s initial listing, the name of the Company was Wah Tak Fung Holdings Limited (which was changed to Sinochem Hong Kong Holdings Limited with effect from 21 May 2004). The Group is principally engaged in property investment and investment holding.

F. INTENTIONS OF SINOCHEM HK FOR THE COMPANY

Listing Status

The parties to the Acquisition Agreement intend that the Company will maintain the listing of the ordinary shares of the Company on the Stock Exchange after Completion.

On Completion, the shareholding of Sinochem HK will increase from approximately 21.16% to 94.65% of the issued ordinary share capital of the Company. In addition, approximately 0.69% of the issued ordinary share capital of the Company will be held by Mr. Chu Yu Lin, David and Mrs. Chu Ho Miu Hing, both of whom are executive Directors. The public float of the Company will be approximately 4.66% and therefore below the minimum 25% public float requirement under the Listing Rules.

Accordingly, the Company and Sinochem HK have undertaken to the Stock Exchange to use reasonable commercial efforts to take appropriate steps to ensure that the public float of the ordinary shares of the Company then in issue shall not be less than 25% as soon as practicable after Completion.

Further announcements shall be made in relation to any action taken in respect of the public float of the Company’s ordinary shares to ensure strict compliance with the Listing Rules.

The Stock Exchange has stated that it will closely monitor trading in the ordinary shares of the Company on the Stock Exchange. If the Stock Exchange believes that:

• (a) a false market exists or may exist in the trading of the shares; or

• (b) there are too few shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend trading in such shares until a sufficient public float is attained.

Existing business of the Company

The Directors expect that going forward, the Company’s resources will be focused on the PRC fertilisers and agricultural products sector. The Company will be the fertiliser flagship of Sinochem Corporation. The Fertiliser Group will become the principal assets and operations of the Company.

It is the intention of Sinochem HK that, after Completion, it will conduct a detailed evaluation of the existing business and operation of the Company. Any plan in relation to the treatment of the existing assets of the Company will depend on the outcome of such evaluation. No definite plan has been decided as at the date of this announcement.

Sinochem HK and the Company will comply with all necessary disclosure and/or Shareholders’ approval requirements in respect of any future plans for the existing business and assets of the Group.

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Management

Upon Completion, Sinochem HK intends to nominate two new executive Directors to the Board at the earliest time permitted under Rule 7 of the Takeovers Code. The following sets out brief background information of the proposed Directors:

Dr. CHEN Guo Gang ( ), aged 45, is the Chief Finance Officer and a director of Sinochem Corporation. He graduated from the Accounting Department of Xiamen University with a doctorate degree and is a Senior Accountant. Before taking up his current position, Dr. Chen occupied a number of senior positions within subsidiaries of Sinochem Corporation. Dr. Chen joined Sinochem Group in 1991.

Mr. DU Ke Ping ( ), aged 44, is the General Manager of Sinochem Fertiliser and a vicepresident of Sinochem Corporation. He graduated from the Accounting Department of Shandong Economic College with a bachelor degree and from China Foreign Economics and Trade University with a Master of Business Administration degree. Before taking up his current position, Mr. Du was a senior official of the Ministry of Commerce of the PRC (formally the Ministry of Foreign Trade and Economic Commission). Mr. Du joined Sinochem Group in 1989.

Further details of the proposed Directors will be set out in the Circular.

Treatment of the Preference Shares

As at the date of this announcement, Sinochem HK also holds 103 Preference Shares, representing all of the outstanding Preference Shares. Pursuant to the terms of the Preference Shares, they are convertible into Ordinary Shares by no later than the 7th business day before the maturity date (the maturity date being 27 February 2005, which is the third anniversary from their date of issue) and, unless previously converted into Ordinary Shares, all but not part of the Preference Shares may be redeemed at their aggregate nominal value of HK$103 million on the maturity date at the option of the holder or the Company. If the conversion or redemption rights are not exercised by the respective deadlines referred to above, the rights will lapse but the Preference Shares will continue to confer on their holder preferential rights to capital and fixed dividends. Sinochem HK has informed the Company that it does not intend to exercise any of the conversion rights attached to the Preference Shares but intends to request the redemption of all of the outstanding Preference Shares on their maturity date.

G. RELEVANT LISTING RULES REQUIREMENTS

Very substantial acquisition and connected transaction

As at the date of this announcement, Sinochem HK, the vendor under the Acquisition Agreement, is interested in 778,477,633 Ordinary Shares, representing approximately 21.16% of the existing issued ordinary share capital of the Company and is therefore a substantial Shareholder, and hence a connected person, of the Company. The Acquisition constitutes a very substantial acquisition and a connected transaction of the Company under Chapters 14 and 14A of the Listing Rules and is therefore subject to the approval of the Independent Shareholders by poll at the SGM.

Reverse takeover and new listing application

In addition, as the Acquisition will involve a change of control of the Company, the Acquisition also constitutes a reverse takeover of the Company under Rule 14.06(6) of the Listing Rules and the Company will be treated as a new listing applicant under Rule 14.54 of the Listing Rules if the Acquisition proceeds. As such, the Acquisition is subject to approval of the Company’s new listing application by the Listing Committee of the Stock Exchange. The new listing application to be made

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by the Company must comply with all the requirements under the Listing Rules, including the requirements under Chapters 8 and 9 of the Listing Rules. None of the relevant material regarding the new listing application has been submitted to the Stock Exchange as at the date of this announcement and the Company will initiate the new listing application process for its ordinary shares as soon as practicable. The Circular is expected to be despatched to the Shareholders within seven days after the Company has obtained the approval from the Listing Committee of its new listing application. The Listing Committee may or may not grant the approval for the new listing application. If such approval is not granted, the Acquisition Agreement will lapse and the Acquisition will not proceed.

Voting by the Independent Shareholders at the SGM will be conducted by poll. Sinochem HK and its Associates will abstain from voting on the resolutions which require the approval of the Independent Shareholders at the SGM.

H. IMPLICATIONS OF THE TAKEOVERS CODE AND WHITEWASH WAIVER

As at the date of this announcement, Sinochem HK and its concert parties owns approximately 21.16% of the existing issued ordinary share capital of the Company. Sinochem HK also holds 103 unlisted Preference Shares, representing all the outstanding Preference Shares. None of Sinochem HK or its concert parties have dealt in any securities of the Company in the 6 months prior to the date of this announcement. Upon Completion, Sinochem HK and its concert parties shall be interested in 5,127,847,763 New Shares or 51,278,477,633 Ordinary Shares if the Capital Reorganisation has not been given effect to on or before Completion, in either case representing approximately 94.65% of the issued ordinary share capital of the Company as enlarged by the issue of the Consideration Shares upon Completion. Not only would this level of voting rights give Sinochem HK effective control of general meetings of the Company, it may also be possible for Sinochem HK to increase its shareholdings without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer. As such, Sinochem HK will, upon Completion, be required to make a mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Sinochem HK and parties acting in concert with it under Rule 26.1 of the Takeovers Code unless a waiver from strict compliance with Rule 26.1 of the Takeovers Code is granted by the Executive.

Sinochem HK intends to make an application to the Executive for the granting of the Whitewash Waiver as soon as possible, which, if granted, would be subject to the approval of the Independent Shareholders at the SGM by way of a poll. Whether Mr. Chu Yu Lin, David and Mrs. Chu Ho Miu Hing, executive Directors, will be eligible to vote is to be determined. If the Whitewash Waiver is granted by the Executive, Sinochem HK and parties acting in concert with it would not be required to make a mandatory offer which would otherwise be required as a result of the allotment and issue of the Consideration Shares pursuant to the Acquisition Agreement. The Executive may or may not grant the Whitewash Waiver. If the Whitewash Waiver is not granted, the Acquisition Agreement will lapse and the Acquisition will not proceed.

I. RELATIONSHIP WITH SINOCHEM HK, SINOCHEM CORPORATION AND NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Sinochem HK is an investment holding company incorporated under the laws of Hong Kong and wholly-owned by Sinochem Corporation. Sinochem Corporation is a state-owned enterprise under the supervision of SASAC. Founded as a state-owned import/export company in China in 1950 and

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formerly known as the China National Chemicals Import & Export Corporation, Sinochem Corporation is currently one of the largest state-owned conglomerates in the PRC, with operations in core businesses such as petroleum, fertilizer, rubber, plastic, chemical products, and inbound/ outbound trade. It also expanded into business areas including finance, insurance, logistics and real estate. In 2002, the Sinochem Group had total sales of approximately US$18.76 billion and realized net profit of approximately US$101 million.

Immediately upon Completion, Sinochem HK will own approximately 94.65% of the then issued ordinary share capital of the Company. As such, Sinochem Corporation will be the ultimate controlling shareholder of the Company on Completion. Sinochem Corporation is a connected person of the Company by virtue of it being the parent company of Sinochem HK. Upon Completion, various companies within the Fertiliser Group will become subsidiaries of the Company. On-going provision of services and sale and purchase of products are expected to take place between members of the Sinochem Group (other than the Company and its subsidiaries) and members of the Fertiliser Group which will constitute continuing connected transactions under the Listing Rules. Some of these continuing connected transactions may constitute Non-exempt Continuing Connected Transactions and are subject to approval by the Independent Shareholders at the SGM. The Acquisition is conditional on, among other things, the approval of the Non-exempt Continuing Connected Transactions by the Independent Shareholders. Details of the continuing connected transactions will be disclosed in a further announcement and in the Circular. Sinochem Corporation is also expected to enter into the Non-competition Undertaking in favour of the Company. Pursuant to the Noncompetition Undertaking, Sinochem Corporation is expected to undertake to the Company that, so long as:

(i) Sinochem Corporation is the ultimate controlling shareholder of the Company; and

(ii) the Company’s ordinary shares are listed on the Stock Exchange,

Sinochem Corporation will not and will procure that its subsidiaries will not (except for the Company and its subsidiaries and Sinochem Corporation’s various remaining investments and subsidiaries which are engaged in the production of fertilisers), without the prior consent of the Company, develop, operate or assist in operating, participate in or conduct any business which may compete with the business carried on by the Fertiliser Group, either on its own or jointly with or on behalf of any other person or company in the PRC. Further details regarding the Non-competition Undertaking will be disclosed in the Circular.

J. THE CAPITAL REORGANISATION

Overview

The Board also proposes the Capital Reorganisation which comprises:

• (i) the Capital Reduction;

• (ii) the Share Consolidation;

• (iii) an increase in the authorized share capital of the Company;

• (iv) the Existing Share Premium Cancellation; and

• (v) the Further Share Premium Cancellation.

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(i) Capital Reduction

The Directors propose that the Capital Reduction be effected in the following manner:

• (a) the nominal value of all issued Ordinary Shares of HK$0.10 each will be reduced by HK$0.09 per Ordinary Share by cancelling an equivalent amount of paid-up capital per Ordinary Share so that the nominal value of each such Ordinary Share will be reduced from HK$0.10 to HK$0.01; and

• (b) the entire credit arising from such reduction will be transferred to the contributed surplus account of the Company.

(ii) Share Consolidation

The Directors also propose that, subject to and immediately after the Capital Reduction, every 10 Reduced Shares of HK$0.01 each then in issue be consolidated into one New Share of HK$0.10.

(iii) Increase in authorised share capital

The existing authorized share capital of the Company is HK$1,000,000,000 divided into 6,840,000,000 Ordinary Shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each. It is proposed that the authorized share capital of the Company be increased to HK$1,316,000,000, comprising 10,000,000,000 ordinary shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each.

(iv) Existing Share Premium Cancellation

The Directors further propose that the entire balance standing to the credit of the share premium account of the Company as at 31 March 2004 be cancelled, and the credit arising from the Existing Share Premium Cancellation be transferred to the contributed surplus account of the Company.

(v) Further Share Premium Cancellation

The Directors propose that, if Completion occurs following the implementation of the matters referred to in (i) to (iv) above, a further amount of HK$131,625,200 representing part of the share premium arising from the issue of the Consideration Shares, be cancelled and the credit arising from the Further Share Premium Cancellation be transferred to the contributed surplus account of the Company.

Utilisation of credits

The credit arising from the Capital Reduction is expected to amount to approximately HK$331,154,845 on the basis of a total of 3,679,498,284 Ordinary Shares in issue as at the date of this announcement and assuming no further Ordinary Shares will be issued between the date of this announcement and the date on which the Capital Reduction becomes effective.

The entire amount standing to the credit of the Company’s share premium account as at 31 March 2004 was approximately HK$749,182,000 which will give rise to a credit of the same amount under the Existing Share Premium Cancellation.

If Completion occurs after the implementation of the matters referred to in (i) to (iv) above, the issue of 5,050,000,000 Consideration Shares at the Issue Price of HK$1.00 each will result in a further share premium of HK$4.545 billion. Pursuant to the Further Share Premium Cancellation, a credit of HK$131,625,200 will arise from the cancellation of part of such further share premium.

All amounts representing credits from the Capital Reduction, the Existing Share Premium Cancellation and the Further Share Premium Cancellation will be transferred to the contributed surplus account of the Company where it may be utilised as the Board may direct in accordance with the Bye-laws and all applicable laws.

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As at 31 March 2004, the balance standing to the credit of the Company’s contributed surplus account amounted to approximately HK$1,114,686,000. Such balance, when combined with the aggregate credits to be transferred to the contributed surplus account as described above, is expected to amount to approximately HK$2,326,648,000. The Directors intend to utilise all such sums in the contributed surplus account to set off against an equivalent amount of the accumulated losses of the Company as at 31 March 2004 which stood at approximately HK$2,326,648,000. On the bases described above and assuming Completion occurs after the implementation of the matters referred to in (i) to (iv) above, the entire accumulated losses of the Company as at 31 March 2004 will be eliminated in full following Completion.

If Completion fails to occur following the Capital Reorganisation, the Further Share Premium Cancellation will not be implemented and the resultant balance standing in the contributed surplus account is expected to amount to approximately HK$2,195,022,845 in aggregate. The Directors intend to utilise such sum to partially eliminate an equivalent amount of the accumulated losses of the Company as at 31 March 2004.

Effect of the Capital Reorganisation

The existing authorized share capital of the Company is HK$1,000,000,000 divided into 6,840,000,000 Ordinary Shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each, of which 3,679,498,284 Ordinary Shares and 103 Preference Shares are in issue as at the date of this announcement. Upon the implementation of the matters referred to in (i) to (iv) under the section headed ‘‘Overview’’ above but prior to Completion, the authorised share capital of the Company will be increased to HK$1,316,000,000, divided into 10,000,000,000 New Shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each, of which 367,949,828 New Shares of HK$0.10 each and 103 Preference Shares will be in issue (assuming no further Ordinary Shares are issued after the date of this announcement and all outstanding Preference Shares have not been converted or redeemed). The board lot size will remain as 2,000 New Shares following the Capital Reduction and Share Consolidation. Other than the expenses incurred in relation to the Capital Reorganisation and the elimination of the accumulated losses of the Company, the implementation thereof will not, by itself, alter the underlying assets, business operations, management or financial position of the Company. The Directors believe that the Capital Reorganisation will not have any material adverse effect on the financial position of the Company and its subsidiaries.

Reasons for the Capital Reorganisation

The audited financial statements of the Company as at 31 March 2004 showed that the Company had accumulated losses of approximately HK$2,326,648,000. The Directors believe that it is unlikely that the Company will generate sufficient profits in the immediate future to eliminate this deficit and that it would be inappropriate for the Company to pay dividends while the deficit remains. The Directors propose the Capital Reorganisation be adopted by the Company such that the amount arising from such reduction and cancellation may be applied to eliminate the accumulated losses.

The Directors expect that upon the Share Consolidation taking effect, the trading value of the New Shares will be in the preferred range from the perspective of international investors.

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Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional on:

• (a) the passing by the Shareholders at the SGM of the necessary resolutions approving the Capital Reduction, the Share Consolidation, the increase in authorised share capital of the Company, the Existing Share Premium Cancellation and, conditional on Completion taking place, the Further Share Premium Cancellation and the transfer of all credits arising to the contributed surplus account of the Company; and

• (b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares in issue following the Share Consolidation.

An application will be made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in all such New Shares.

Trading arrangements

The Ordinary Shares are currently traded in board lots of 2,000 Shares. The New Shares will be traded in board lots of 2,000 New Shares and will rank pari passu in all respects with each other. The Share Consolidation will not result in any change in the relative rights among the Shareholders. Any fractions which arise upon the Share Consolidation becoming effective will be aggregated and sold for the benefit of the Company.

In order to facilitate the trading of odd lots of New Shares as a result of the Share Consolidation, the Company will, for a period of one month commencing from the effective date of the Share Consolidation, appoint Mr. Eric Chan of Cazenove Asia Limited (Tel: 2123 0303) to provide a ‘‘matching service’’ to Shareholders who wish to buy or sell their holding of odd lots. Further information in this regard will be set out in the Circular.

K. OTHER MATTERS

General mandates to issue and repurchase shares

It is proposed that a general mandate be granted to the Directors to repurchase ordinary shares representing up to 10% of the issued ordinary share capital of the Company as at the date of such grant and as enlarged by the issue of the Consideration Shares.

It is also proposed that a general mandate be granted to the Directors to allot, issue and deal with additional ordinary shares with an aggregate nominal value not exceeding 20% of the aggregate nominal amount of the issued ordinary share capital of the Company as at the date of such grant and as enlarged by the issue of the Consideration Shares.

Change of financial year end

Upon Completion, it is the Company’s intention to change the financial year end of the Enlarged Group to 31 December going forward to conform with the financial year end of the Fertiliser Group to provide a consistent accounting period for the Enlarged Group in order to consolidate the results of the Fertiliser Group with those of the Group. A resolution will be proposed at the SGM for approval of this change by the Shareholders. Where necessary, a waiver application to the Stock Exchange in respect of Rule 8.21 of the Listing Rules, which prohibits a change of financial year end for a new listing applicant, will be made.

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Assuming the above change becomes effective, the Company will publish its annual report for the year ended 31 March 2005 on or before 31 July 2005. In addition, the Company will issue its interim results announcement for the three months ended 30 June 2005 on or before 30 September 2005, and will publish the first set of audited financial statements of the Company after the change of the financial year end date (for the nine months ended 31 December 2005) on or before 30 April 2006, in accordance with the Listing Rules.

L. GENERAL

Cazenove is the financial adviser to Sinochem Corporation in relation to the Acquisition and will also act as the sponsor to the Company’s new listing application as a result of the Acquisition.

An independent board committee will be formed to advise the Independent Shareholders as to whether or not the terms of the Acquisition Agreement, the Whitewash Waiver and the Non-exempt Continuing Connected Transactions are fair and reasonable and in the interest of the Group so far as the Independent Shareholders are concerned. An independent financial adviser will be appointed to advise the independent board committee and the Independent Shareholders in this connection. The Company will make a further announcement on the appointment of such independent financial adviser.

The Circular containing, among other things, further particulars of the Proposals and the Fertiliser Group, together with the recommendations of an independent board committee to be established, a letter of advice from an independent financial adviser to be appointed, a notice convening the SGM, and such other information as required under the Takeovers Code and the Listing Rules is expected to be despatched to the Shareholders within seven days after obtaining the approval from the Listing Committee of the Company’s new listing application.

Under Rules 14.38 and 14A.49 of the Listing Rules and Rule 8.2 of the Takeovers Code, a circular is required to be sent to the Shareholders within 21 days of the date of this announcement. In view of the process that is required in connection with the new listing application, it is unlikely that the Circular can be despatched within the time required under the Listing Rules and the Takeovers Code. The Company will seek a consent from the Stock Exchange and the SFC for an extension of time within which to despatch the Circular. A further announcement will be made in due course.

At the SGM, Sinochem HK, a substantial Shareholder which holds approximately 21.16% of the existing issued ordinary share capital of the Company as at the date of this announcement, and its Associates will abstain from voting on resolutions which require the approval of the Independent Shareholders. Sinochem HK is a party interested in the Acquisition and is therefore required to abstain from voting on the resolutions approving the Acquisition, the Whitewash Waiver and the Non-exempt Continuing Connected Transactions at the SGM, but has otherwise indicated its intention to vote in favour of the resolutions approving the other aspects of the Proposals. Whether Mr. Chu Yu Lin, David and Mrs. Chu Ho Miu Hing, executive Directors, will be eligible to vote is to be determined.

The Company will make a new listing application to the Stock Exchange. Such new listing application may or may not be approved. In addition, as Completion is subject to the fulfillment of a number of conditions as set out in the sub-paragraph headed ‘‘Conditions’’ of the paragraph A headed ‘‘The Acquisition Agreement’’ above, the Acquisition may or may not proceed. In particular, the Executive may or may not grant the Whitewash Waiver.

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M. SUSPENSION AND RESUMPTION OF TRADING

At the request of the Company, trading in the Ordinary Shares on the Stock Exchange was suspended from 12.01 p.m. on 26 January 2005 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Ordinary Shares on the Stock Exchange with effect from 9.30 a.m. on 31 January 2005.

N. DEFINITIONS

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

• ‘‘Acquisition’’ the proposed acquisition of the entire issued share capital of the Fertiliser Company

• ‘‘Acquisition Agreement’’ the conditional sale and purchase agreement dated 28 January 2005 entered into between the Company (as purchaser) and Sinochem HK (as vendor) relating to the Acquisition

• ‘‘Associates’’ has the meaning ascribed to it under the Listing Rules ‘‘BVI’’ the British Virgin Islands ‘‘Board’’ the board of Directors (including both executive Directors and independent non-executive Directors)

• ‘‘Bye-laws’’ the bye-laws of the Company ‘‘CAGR’’ compound annual growth rate ‘‘Capital Reduction’’ the reduction of the nominal value of each Ordinary Share in issue as described in the paragraph J headed ‘‘Capital Reorganisation’’ above

• ‘‘Capital Reorganisation’’ the Capital Reduction, the Share Consolidation, an increase in the authorized share capital of the Company, the Existing Share Premium Cancellation and the Further Share Premium Cancellation

• ‘‘Cazenove’’ or ‘‘Sponsor’’ Cazenove Asia Limited, a licenced corporation to carry out type 1, type 4, type 6 and type 9 regulated activities as defined under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), and the financial adviser to Sinochem Corporation in respect of the Acquisition and will be the sponsor to the Company in respect of the Company’s new listing application

• ‘‘Circular’’ the shareholders’ circular to be sent to all Shareholders, being a listing document for the purposes of the Listing Rules and a composite document for the purposes of the Takeovers Code

• ‘‘Company’’ Sinochem Hong Kong Holdings Limited (previously known as Wah Tak Fung Holdings Limited), a company incorporated on 26 May 1994 in Bermuda with limited liability, the Ordinary Shares of which are listed on the Stock Exchange

• ‘‘Completion’’ completion of the Acquisition pursuant to the terms and conditions of the Acquisition Agreement

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‘‘Conditions’’

‘‘Conditions’’ conditions precedent to Completion as set out in the Acquisition Agreement and summarised in the sub-paragraph headed ‘‘Conditions’’ of the paragraph A headed ‘‘The Acquisition Agreement’’ above ‘‘Consideration Shares’’ the New Shares to be allotted and issued to Sinochem HK in connection with the Acquisition (subject to adjustment as described in the subparagraph headed ‘‘Payment method’’ of the paragraph A headed ‘‘The Acquisition Agreement’’ above) ‘‘Director(s)’’ director(s) of the Company ‘‘Enlarged Group’’ the Company and its subsidiaries following Completion ‘‘Executive’’ the executive director of the Corporate Finance Division of the SFC from time to time and any delegate of such executive director ‘‘Existing Share Premium the cancellation of the entire balance standing to the credit of the share Cancellation’’ premium account of the Company as at 31 March 2004 as described in the paragraph J headed ‘‘Capital Reorganisation’’ above ‘‘FAOSTAT Data’’ The FAO Statistical Database, a statistical database maintained by the Food and Agricultural Organisation of the United Nations ‘‘Fertiliser Business’’ the fertiliser business carried on by the Fertiliser Group ‘‘Fertiliser Company’’ China Fertiliser (Holdings) Company Limited, a company incorporated in the BVI with limited liability on 16 December 2004 and which is wholly-owned by Sinochem HK ‘‘Fertiliser Group’’ the Fertiliser Company and its various subsidiaries and interests in companies incorporated in the PRC and elsewhere which, except for certain interests in various companies as stated in the Non-Competition Undertaking, comprise the entire fertiliser business of Sinochem Corporation prior to the Reorganisation ‘‘Further Share Premium the cancellation of the further share premium to the extent of Cancellation’’ HK$131,625,200 arising from the issue of the Consideration Shares as described in the paragraph J headed ‘‘Capital Reorganisation’’ above ‘‘General Mandates’’ the general mandate to issue and repurchase ordinary shares of the Company proposed to be granted to the Directors at the SGM, details of which are set out in the section headed ‘‘General Mandates to Issue and Repurchase shares’’ of this announcement ‘‘Group’’ the Company and its subsidiaries ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China ‘‘Independent the Shareholders who are not interested or involved in the Acquisition Shareholders’’ and the Whitewash Waiver, being Shareholders other than Sinochem HK, its Associates and its concert parties

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‘‘Issue Price’’	the price of HK$1.00 per Consideration Share (subject to adjustment as
	described in the sub-paragraph headed ‘‘Payment method’’ of the
	paragraph A headed ‘‘The Acquisition Agreement’’ above)
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Mt nutrient’’	million tonnes of nutrient, it measures the quantity of effective nutrient.
	Quantity of consumption and production of fertilisers are expressed in
	weight containing 100% effective nutrient
‘‘New Share(s)’’	ordinary shares of HK$0.10 each in the capital of the Company upon
	the Capital Reduction and Share Consolidation becoming effective
‘‘Non-competition	the non-competition undertaking to be entered into by Sinochem
Undertaking’’	Corporation in favour of the Company
‘‘Non-exempt Continuing	any continuing transactions between members of the Fertiliser Group
Connected Transactions’’	and the connected persons (as defined in the Listing Rules) of the
	Company which will constitute continuing connected transactions (as
	defined in the Listing Rules) of the Company immediately following
	Completion and which will not be exempt from the reporting,
	announcement and shareholder approval requirements under Chapter
	14A of the Listing Rules
‘‘Ordinary Share(s)’’	ordinary share(s) of HK$0.10 each in the capital of the Company prior
	to the Capital Reduction and Share Consolidation
‘‘PRC’’ or ‘‘China’’	the People’s Republic of China (for the purpose of this announcement,
	excluding Hong Kong, Taiwan and Macau)
‘‘PRC GAAP’’	generally accepted accounting principles in the PRC
‘‘Preference Shares’’	unlisted convertible redeemable non-voting preference shares with a
	nominal value of HK$1,000,000 each in the capital of the Company
‘‘Proposals’’	the Acquisition, the Whitewash Waiver, the Non-exempt Connected
	Transactions, the Capital Reorganisation, the grant of the General
	Mandates and the change of financial year end
‘‘Reduced Share(s)’’	ordinary share(s) of HK$0.01 each in the capital of the Company upon
	the Capital Reduction becoming effective and prior to the Share
	Consolidation
‘‘Reorganisation’’	the restructuring of the Fertiliser Group whereby Sinochem Corporation
	injected the Fertiliser Group into the Fertiliser Company
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘SASAC’’	State-owned Assets Supervision and Administration Commission of the
	PRC
‘‘SFC’’	the Hong Kong Securities and Futures Commission
‘‘SGM’’	the special general meeting of the Company to be held to consider and
	approve the Proposals

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• ‘‘Share Consolidation’’ the consolidation of 10 Reduced Shares of HK$0.01 each in issue immediately following the Capital Reduction into one New Share of HK$0.10 as described in the paragraph J headed ‘‘Capital Reorganisation’’ above

• ‘‘Shareholder(s)’’ the holder(s) of Ordinary Shares ‘‘Sinochem BVI’’ Sinochem Fertiliser (Overseas) Holdings Ltd., a company incorporated in the BVI with limited liability on 1 July 2004 and which is whollyowned by the Fertiliser Company

• ‘‘Sinochem Corporation’’ (Sinochem Corporation), a state-owned enterprise established in the PRC, formerly known as China National Chemicals Import & Export Corporation which operates globally mainly in the petroleum, fertiliser and chemicals business

• ‘‘Sinochem Distribution’’ the distribution and sales operation of the Fertiliser Business ‘‘Sinochem Fertiliser’’ Sinochem Fertiliser Company Limited, formerly known as Sinochem International Fertiliser Trading Corporation ( ), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of Fertiliser Company

• ‘‘Sinochem Group’’ Sinochem Corporation and its subsidiaries ‘‘Sinochem HK’’ Sinochem Hong Kong (Group) Company Limited, a company incorporated in Hong Kong with limited liability which is whollyowned by Sinochem Corporation

• ‘‘SINOCHEM the sourcing operation of the Fertiliser Business Procurement’’

• ‘‘SINOCHEM Production’’ the production operation of the Fertiliser Business ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers ‘‘Whitewash Waiver’’ a waiver in respect of the obligation of Sinochem HK to make a mandatory offer to the Shareholders in respect of issued shares of the Company not already owned or agreed to be acquired by Sinochem HK as a result of the issue of the Consideration Shares in accordance with Note 1 of the Notes on dispensations from Rule 26 of the Takeovers Code

• ‘‘%’’ per cent

For the purpose of this announcement, unless otherwise indicated, the exchange rate of RMB1.06 = HK$1.00 has been used for currency translation, where applicable. Such exchange rate is for the purpose of illustration only and do not constitute a representation that any amounts in HK$ or RMB have been, could have been or may be converted at such or any other rates or at all.

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By order of the board Sinochem Hong Kong (Group) Company Limited Song Yu Qing Director

By order of the board Sinochem Hong Kong Holdings Limited Navin Aggarwal Company Secretary

Hong Kong, 28 January 2005

As at the date of this announcement, the executive Directors are Mr. Liu Deshu (Chairman), Mr. Song Yu Qing (Deputy Chairman and Chief Executive Officer), Mr. Chu Yu Lin, David, Mrs. Chu Ho Miu Ming and Ms. Chen Hao and the independent non-executive Directors are Mr. Ko Ming Tung, Edward, Mr. Tang Tin Sek and Dr. Li Ka Cheung, Eric.

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

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

Please also refer to the published version of this announcement in the (The Standard)

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