Extrawell Pharmaceutical Holdings Limited — Proxy Solicitation & Information Statement 2003

Aug 4, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Extrawell Pharmaceutical Holdings Limited, you should at once hand this circular with the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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EXTRAWELL PHARMACEUTICAL HOLDINGS LIMITED 精優藥業控股有限公司[*]

(incorporated in Bermuda with limited liability)

PROPOSED GRANT OF GENERAL MANDATES TO ALLOT AND ISSUE NEW SHARES AND TO REPURCHASE BY THE COMPANY OF ITS OWN SHARES

Notice of the Annual General Meeting of Extrawell Pharmaceutical Holdings Limited to be held at Salon 6, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Thursday, 28th August, 2003 at 3:00 p.m. is set out on pages 70 to 72 of the annual report of the Company despatched on 31 July 2003. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event by no later than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person if you so wish.

* For identification purposes only

31 July 2003

DEFINITIONS

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

“Annual General Meeting”

the annual general meeting of the Company to be convened and held on Thursday, 28 August 2003 at 3:00 p.m. at Salon 6, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong, the notice of which is set out on pages 70 to 72 of the Company’s 2003 annual report despatched on 31 July 2003, and any adjournment thereof

• “associates”

has the meaning as defined under the Listing Rules

• “Board”

the board of Directors

• “Code”

the Hong Kong Code on Takeovers and Mergers

• “Company”

Extrawell Pharmaceutical Holdings Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange

• “Companies Act”

the Companies Act 1981 of Bermuda (as amended)

• “Director(s)”

director(s) of the Company

• “Extension Mandate”

a general and unconditional mandate to the Director to the effect that any Shares repurchased under the Repurchase Mandate will be added to the total number of Shares which may be allotted and issue under the General Mandate

• “Group”

the Company and its subsidiaries

• “Issue Mandate”

a general and unconditional mandate to the Directors to exercise the power of the Company to allot, issue or otherwise deal with Shares up to a maximum of 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing the relevant resolution at the Annual General Meeting

• “Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China

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DEFINITIONS

• “Latest Practicable Date” 28 July 2003, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Repurchase Mandate” a general and unconditional mandate to the Directors to enable them to repurchase the Shares the aggregate nominal amount of which does not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing the relevant resolution at the Annual General Meeting

• “SFO” The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

• “Shareholder(s)” holder(s) of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent.

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LETTER FROM THE BOARD

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EXTRAWELL PHARMACEUTICAL HOLDINGS LIMITED 精優藥業控股有限公司[*]

(incorporated in Bermuda with limited liability)

Directors: Mao Yu Min ( Chairman ) Ho Chin Hou Ho Yu Ling Li Qiang Yu Ying Zhou Xie Yi Fang Lin Hu[#] Xue Jing Lun[#] Chung Shui Ming[#]

# Independent non-executive Directors

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place

of business in Hong Kong: Suites 4701–04, 47th Floor NatWest Tower, Times Square 1 Matheson Street Causeway Bay Hong Kong

31 July 2003

To the Shareholders

Dear Sir or Madam,

PROPOSED GRANT OF GENERAL MANDATES TO ALLOT AND ISSUE NEW SHARES AND TO REPURCHASE BY THE COMPANY OF ITS OWN SHARES

INTRODUCTION

The purpose of this circular is to provide you information regarding the ordinary resolutions to be proposed at the Annual General Meeting. These include ordinary resolutions relating to the proposed grant of the Repurchase Mandate and the Issue Mandate. Such mandate will lapse at the conclusion of the Annual General Meeting of the Company.

* For identification purposes only

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LETTER FROM THE BOARD

Under the Listing Rules, the Company is required to provide you with information reasonably necessary to enable you to make an informed decision as to whether to vote for or against the resolutions to be proposed at the Annual General Meeting. This circular is prepared for such propose.

ISSUE MANDATE

At the Annual General Meeting, an ordinary resolution will be proposed that the Directors be given the Issue Mandate, i.e. a general and unconditional mandate to allot, issue and deal with Shares equal in aggregate up to 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing of the relevant resolution.

REPURCHASE MANDATE AND EXTENSION MANDATE

At the Annual General Meeting, an ordinary resolution will also be proposed that the Directors be given the Repurchase Mandate, i.e. a general and unconditional mandate to exercise all powers of the Company to repurchase on the Stock Exchange or on any other stock exchange on which the Shares may be listed, Shares up to a maximum of 10% of the nominal amount of the issued share capital of the Company as at the date of passing of the relevant resolution.

In addition, an ordinary resolution regarding the Extension Mandate will be proposed at the Annual General Meeting providing that any Shares repurchased under the Repurchase Mandate (up to maximum of 10% of the issued Shares as at the date of the grant of the Repurchase Mandate) will be added to the total number of Shares which may be allotted and issued under the Issue Mandate.

The Repurchase Mandate and the Issue Mandate would continue in force until the conclusion of the next annual general meeting of the Company unless they are renewed at such meeting or until revoked or varied by ordinary resolutions of the Shareholders in a general meeting prior to the next annual general meeting of the Company.

An explanatory statement required by the Listing Rules, to be sent to the Shareholders in connection with the proposed Repurchase Mandate is set out in the Appendix to this circular. The explanatory statement contains all information reasonably necessary to enable Shareholders to make an informed decision as to whether to vote for or against the resolution in respect of the Repurchase Mandate at the Annual General Meeting.

ACTIONS TO BE TAKEN

At the Annual General Meeting, ordinary resolutions will be proposed to approve, among other matters, the following: the grant of the Issue Mandate, the Repurchase Mandate and the Extension Mandate. Whether or not you are able to attend the Annual General Meeting in person, you are requested to complete and return the form of proxy in accordance with the

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LETTER FROM THE BOARD

instructions printed thereon as soon as possible and, in any event not later than 48 hours before the time for the Annual General Meeting or any adjournment thereof to the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting at the Annual General Meeting or any adjournment thereof should you so wish.

RECOMMENDATION

The Directors believe that the Issue Mandate, the Repurchase Mandate and the Extension Mandate are beneficial to the Company and the Shareholders as a whole.

The Directors believe that an exercise of the Issue Mandate and the Extension Mandate will enable the Company to take advantage of market conditions to raise additional capital for the Company.

The Repurchase Mandate may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made when the Directors believe that such repurchases of Shares will benefit the Company and the Shareholders.

An exercise of the Repurchase Mandate in full could have a material adverse impact on the working capital and gearing position of the Company compared with that as at 31 March 2003, being the date of its latest audited consolidated accounts. The Directors do not, however, intend to make any repurchase in circumstances that would have a material adverse impact on the working capital or gearing position of the Company.

Accordingly, the Directors recommend that Shareholders vote in favour of the ordinary resolutions approving the Issue Mandate, the Repurchase Mandate and the Extension Mandate at the Annual General Meeting.

GENERAL INFORMATION

Your attention is drawn to the additional information set out in the appendix to this circular.

Yours faithfully

For and on behalf of the Board

Extrawell Pharmaceutical Holdings Limited

Mao Yu Min

Chairman

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EXPLANATORY STATEMENT

APPENDIX

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide requisite information to enable you to make an informed decision whether to vote for or against the resolution to approve the grant of the Repurchase Mandate to the Directors.

1. LISTING RULES RELATING TO THE REPURCHASE OF SHARES

The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their shares on the Stock Exchange subject to certain restrictions, amongst which the Listing Rules provide that the shares of a company with a primary listing on the Stock Exchange must be fully paid up and all repurchase of shares by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of shareholders, either by way of Repurchase Mandate or by specific approval of a particular transaction.

2. SHARE CAPITAL

As at Latest Practicable Date, there was a total of 2,290,000,000 Shares in issue.

Subject to the passing of the proposed resolution granting the Repurchase Mandate and on the basis that no further Shares are issued or repurchased prior to the Annual General Meeting, the Company will be allowed under Repurchase Mandate to repurchase a maximum of 229,000,000 Shares during the period ending on the earlier of the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting of the Company is required to be held by the bye-laws of the Company or any applicable laws or the date upon which such authority is revoked or varied by an ordinary resolution of the Shareholders in a general meeting.

3. REASONS FOR THE REPURCHASE

The Directors believe that the Repurchase Mandate is in the best interests of the Company and its Shareholders to seek a general authority from the Shareholders to enable the Company to repurchase its Shares on the Stock Exchange. Share repurchases may depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset per Share and/or earnings per Share and will only be made when the Directors believe that such a repurchase will benefit the Company and its Shareholders.

4. FUNDING OF REPURCHASES

Repurchase made pursuant to the Repurchase Mandate would be funded out of funds legally available for the purpose in accordance with the Company’s memorandum of association and bye-laws and the applicable laws of Bermuda.

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EXPLANATORY STATEMENT

APPENDIX

There might be material adverse impact on the working capital and gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the Annual Report for the year ended 31 March 2003), in the event that the Repurchase Mandate were to be carried out in full at any time during the proposed repurchase period. However, the Directors do not intend to exercise the Repurchase Mandate to such extent as would in the circumstances, have a material adverse impact on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

5. SHARE PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange in each of the previous 12 months from 1 July 2002 to 30 June 2003 are as follows:

	Highest	Lowest
	HK$	HK$
July 2002	0.415	0.260
August 2002	0.300	0.250
September 2002	0.265	0.178
October 2002	0.224	0.167
November 2002	0.219	0.190
December 2002	0.223	0.201
January 2003	0.214	0.195
February 2003	0.214	0.188
March 2003	0.230	0.176
April 2003	0.188	0.150
May 2003	0.202	0.151
June 2003	0.195	0.167

6. GENERAL

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates, has any present intention to sell any Shares to the Company if the Repurchase Mandate is approved by the Shareholders.

The Directors have undertaken to the Stock Exchange that they will only exercise the power of the Company to make repurchases pursuant to the Repurchase Mandate and in accordance with the Listing Rules and the applicable laws of Bermuda.

As at the Latest Practicable Date, the interests and short positions of the Directors in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which had been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and

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EXPLANATORY STATEMENT

APPENDIX

short positions in which they were deemed or taken to have under such provisions of the SFO) or which were required pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules to be notified to the Company and the Stock Exchange were as follows:

	Company/
	associated
Name of Director	corporation	Notes	Capacity	Interest in shares
Mao Yu Min	The Company	1	Interest of controlled	680,000,000
			corporation	ordinary shares
Xie Yi	The Company	1	Interest of controlled	680,000,000
			corporation	ordinary shares
Ho Yu Ling	The Company	2	Interest of controlled	102,000,000
			corporation	ordinary shares
	Extrawell Enterprise	3	Interest of controlled	100,000
	Limited		corporation	non-voting
				deferred shares
Li Qiang	The Company		Beneficial owner	15,000,000
				ordinary shares

Notes:

1. JNJ Investments Ltd., Biowindow Gene Development (Hong Kong) Limited, Fudan Biotech (Hong Kong) Limited and Fudan Pharmaceutical Limited hold 500,000,000 Shares, 74,000,000 Shares, 76,000,000 Shares and 30,000,000 Shares respectively.

The entire issued share capital of JNJ Investments Ltd. is owned by Biowindow Gene Development (Hong Kong) Limited, the issued share capital of which is owned as to 99.01% by United Gene Holdings Limited and as to 0.99% by Shanghai Biowindow Gene Development Co., Ltd.. The capital of Shanghai Biowindow Gene Development Co., Ltd. is 60% owned by United Gene Holdings Limited, 13.575% owned by Dr. Xie Yi, a Director and 13.575% owned by Ms. Sheng Xiao Yu, wife of Dr. Mao Yu Min. Dr. Mao Yu Min is a Director. The equity capital of United Gene Holdings Limited is beneficially owned as to 33.5% by Dr. Mao Yu Min and as to 33.5% (including direct and indirect interests) by Dr. Xie Yi.

Fudan Biotech (Hong Kong) Limited is owned as to 99% by Shanghai Fudan Biotech Limited, Shanghai Fudan Biotech Limited is owned as to 75% by Shanghai Biowindow Gene Development Co., Ltd..

Biowindow Gene Development (Hong Kong) Limited owned 80% of the share capital of Fudan Pharmaceutical Limited.

1. These Shares are owned by Well Success Limited, the entire issued share capital of which is beneficially owned by Mr. Ho Yu Ling, a Director.

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EXPLANATORY STATEMENT

APPENDIX

1. 100,000 non-voting deferred share of HK$10 each in Extrawell Enterprise Limited, a wholly owned subsidiary of the Company, are beneficially owned by Extrawell Holdings Limited, a related company of the Group. Mr. Ho Yu Ling, a Director, is interested in 41.6% of the entire issued share capital of Extrawell Holdings Limited and Messrs. Ho Chin Hou and Li Qiang, certain of the Directors, also have beneficial interests in Extrawell Holdings Limited.

2. 10% equity interest in the registered capital of Bio-chip Co. Ltd., Shanghai, a 90% owned subsidiary of Lucky Element Biotech (Su Zhou) Limited (“Biotech (SZ)”), is beneficially owned by United Gene Holdings Limited. The entire equity interest in the registered capital of Biotech (SZ) is owned by Gene Generation Limited, which in turn is 55% beneficially owned by the Company.

3. The issued share capital of Gene Generation Limited (“GGL”) is 45% owned by Biowindow Gene Development (Hong Kong) Limited (“Hong Kong Biowindow”).

The Company has not been notified by any connected person (as defined in the Listing Rules) that such a person has a present intention to sell any Shares to the Company, or has undertaken not to do so, if the Repurchase Mandate is approved by the Shareholders.

If, as a result of a repurchase of Shares, a Shareholders’ proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Code. Accordingly, a Shareholder, or a group of Shareholders acting in concert, depending on the level of increase of the Shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Code.

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by, the Directors, the following persons (not being a Director or the chief executive of the Company) were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

	Interest in			Approximate percentage
Name	ordinary shares	Note	Nature of interest	of the Company’s
JNJ Investments Ltd.	500,000,000	1	Beneficial owner	21.83%
Biowindow Gene	604,000,000	1	Beneficial owner and	26.38%
Development (Hong			interest of controlled
Kong) Limited			corporation
United Gene Holdings	680,000,000	1	Interest of controlled	29.69%
Limited			corporation

Note:

1. JNJ Investments Ltd., Biowindow Gene Development (Hong Kong) Limited, Fudan Biotech (Hong Kong) Limited and Fudan Pharmaceutical Limited hold 500,000,000 Shares, 74,000,000 Shares, 76,000,000 Shares and 30,000,000 Shares respectively.

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EXPLANATORY STATEMENT

APPENDIX

The entire issued share capital of JNJ Investments Ltd. is owned by Biowindow Gene Development (Hong Kong) Limited, the issued share capital of which is owned as to 99.01% by United Gene Holdings Limited and as to 0.99% by Shanghai Biowindow Gene Development Co., Ltd.. The capital of Shanghai Biowindow Gene Development Co., Ltd. is 60% owned by United Gene Holdings Limited, 13.575% owned by Dr. Xie Yi, a Director and 13.575% owned by Ms. Sheng Xiao Yu, wife of Dr. Mao Yu Min. Dr. Mao Yu Min is a Director. The equity capital of United Gene Holdings Limited is beneficially owned as to 33.5% by Dr. Mao Yu Min and as to 33.5% (including direct and indirect interests) by Dr. Xie Yi.

Fudan Biotech (Hong Kong) Limited is owned as to 99% by Shanghai Fudan Biotech Limited, Shanghai Fudan Biotech Limited is owned as to 75% by Shanghai Biowindow Gene Development Co., Ltd..

Biowindow Gene Development (Hong Kong) Limited owned 80% of the share capital of Fudan Pharmaceutical Limited.

In the event that the Repurchase Mandate is exercised in full, the respective percentage shareholdings of the substantial Shareholders before and after such repurchase would be as follows:

	Before repurchase	After repurchase
JNJ Investments Ltd.	21.83%	24.26%
Biowindow Gene Development
(Hong Kong) Limited	26.38%	29.31%
United Gene Holdings Limited	29.69%	32.99%

On the basis that Well Success Limited and United Gene Holdings Limited are considered to be concert parties (as defined under the Code) and assuming that the Repurchase Mandate is exercised in full, the aggregate percentage shareholdings of such concert group before and after such repurchase would be as follows:

	Before repurchase	After repurchase
United Gene Holdings Limited and
Well Success Limited as concert parties	34.15%	37.94%

Such an increase in percentage of shareholdings may give rise to an obligation to make a mandatory offer under Rule 26 of the Code.

Save as disclose above, the Directors are currently not aware of any consequences which will arise under the Code as a result of any purchase made under the Repurchase Mandate.

No repurchase of Share has been made by the Company during the last six months, whether on the Stock Exchange or otherwise.

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