Huscoke Holdings Limited — Proxy Solicitation & Information Statement 2007

Jul 19, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your 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 Shanghai Industrial Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Shanghai Industrial Holdings Limited.

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 363)

DISCLOSEABLE TRANSACTION IN RELATION TO THE PROPOSED INVESTMENT IN A PRC JOINT VENTURE COMPANY

A letter from the Board is set out on pages 3 to 11 of this circular.

19th July 2007

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	The Capital Contribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3.	The Joint Venture Contract and the Joint Venture Articles . . . . . . . . . . . . . .	6
4.	Corporate Structure before and after Completion of
	the Proposed Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
5.	Information about Shanghai Urban Development . . . . . . . . . . . . . . . . . . . . .	9
6.	Financial Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
7.	Source of Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
8.	Reasons for and Benefits of the Joint Venture Agreements . . . . . . . . . . . . . .	10
9.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
10.	Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
**Appendix **	– General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

– i –

DEFINITIONS

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

“Board”

the board of Directors

• “Company” Shanghai Industrial Holdings Limited, a company incorporated under the laws of Hong Kong with limited liability, whose shares are listed on the Main Board of the Stock Exchange

• “Capital Contribution Agreement” an agreement in respect of the increase in capital of Shanghai Urban Development dated 27th June 2007 entered into between the Company and the PRC JV Partner

• “connected person(s)” has the meaning ascribed thereto under the Listing Rules

• “Directors” the directors of the Company

• “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 PRC

• “Independent Third Party” a third party which is not a connected person of the Company

• “Latest Practicable Date” 13th July 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

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

• “Model Code”

• Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules

• “Joint Venture Agreements”

• the Capital Contribution Agreement, the Joint Venture Contract and the Joint Venture Articles

• “Joint Venture Company” a sino-foreign joint venture company to be transformed from Shanghai Urban Development

• “Joint Venture Contract”

• a joint venture contract in respect of the joint operation of the Joint Venture Company dated 27th June 2007 entered into between the Company and the PRC JV Partner

– 1 –

DEFINITIONS

• “Joint Venture Articles” the joint venture articles of association of the Joint Venture Company approved by the Board and signed by the Company and the PRC JV Partner on 27th June 2007

• “PRC” the People’s Republic of China “PRC JV Partner” (Xuhui District State-owned Assets Administrative Committee), a government authority authorised by and established directly under Shanghai Xuhui District People’s Government for supervising and managing state-owned assets in the possession of Xuhui District

• “Proposed Capital Contribution” proposed capital contribution made by the Company to the Joint Venture Company pursuant to the Capital Contribution Agreement

• “RMB” Renminbi, the lawful currency of the PRC

• “SFO” the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong)

• “Shanghai Urban Development” (Shanghai Urban Development (Holdings) Co., Ltd.*), a wholly state-owned enterprise established under the laws of the PRC with the PRC JV Partner as the authorised representative exercising state-owned shareholder’s rights over it

• “Shares” shares of HK$0.10 each in the capital of the Company “Shareholders” holder(s) of Share(s) “SIIC” Shanghai Industrial Investment (Holdings) Co. Ltd., a company incorporated under the laws of Hong Kong with limited liability

• “State-owned Management (Shanghai Xuhui Company” State-owned Assets Management Company), a wholly state-owned enterprise established under the laws of the PRC with the PRC JV Partner as the authorised representative exercising state-owned shareholder’s rights over it

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

For the purposes of this circular, for illustration purpose, amounts in RMB have been translated into Hong Kong dollars at the exchange rate of RMB1 to HK$1. Such translation does not constitute a representation that any amount has been, could have been or may be exchanged at such rates.

For the purposes of this circular, the English name with an asterisk (*) is an informal English translation of the official Chinese name.

– 2 –

LETTER FROM THE BOARD

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 363)

Executive Directors:

Mr. Cai Lai Xing (Chairman) Mr. Cai Yu Tian (Vice Chairman and Chief Executive Officer) Mr. Qu Ding (Vice Chairman and Executive Deputy CEO)

Mr. Lu Ming Fang

• Mr. Ding Zhong De

Registered office: 26th Floor Harcourt House 39 Gloucester Road Wanchai Hong Kong

• Mr. Qian Shi Zheng (Deputy CEO)

Mr. Yao Fang

• Mr. Tang Jun

Independent Non-Executive Directors:

Dr. Lo Ka Shui Prof. Woo Chia-Wei

Mr. Leung Pak To, Francis

19th July 2007

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION IN RELATION TO THE PROPOSED INVESTMENT IN A PRC JOINT VENTURE COMPANY

1. INTRODUCTION

On 27th June 2007, the Board announced that the Company and the PRC JV Partner entered into the Capital Contribution Agreement, pursuant to which the Company had agreed to make a capital contribution of RMB2,130,660,600 to Shanghai Urban Development, of which RMB120.53 million would be contributed to the registered capital of Shanghai Urban Development and the remaining RMB2,010,130,600 would be contributed to its capital reserve. On the same day, the Company and the PRC JV Partner entered into the Joint Venture Contract and the Joint Venture Articles. Immediately after the Proposed Capital Contribution, the registered capital of Shanghai Urban Development will be increased from RMB180.80 million to RMB301.33 million and the PRC JV Partner and the Company will respectively own 60% and 40% equity interest in Shanghai Urban Development. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the PRC JV Partner is an Independent Third Party.

– 3 –

LETTER FROM THE BOARD

The Joint Venture Agreements and the transactions contemplated thereunder constitute discloseable transaction of the Company under Chapter 14 of the Listing Rules. The Company is required by the Listing Rules to issue this circular to provide the Shareholders with further information on such transactions and to give other information in relation to the Company.

2. THE CAPITAL CONTRIBUTION AGREEMENT

Major terms of the Capital Contribution Agreement are summarised as below:

Date 27th June 2007

Parties (1) The Company

(2) The PRC JV Partner

Nature of the transaction

Pursuant to the Capital Contribution Agreement, the Company has agreed to make a capital contribution of RMB2,130,660,600 to Shanghai Urban Development, of which RMB120.53 million will be contributed to the registered capital of Shanghai Urban Development and the remaining RMB2,010,130,600 will be contributed to its capital reserve. Immediately after the Proposed Capital Contribution, the registered capital of Shanghai Urban Development will be increased from RMB180.80 million to RMB301.33 million and the PRC JV Partner and the Company will respectively own 60% and 40% equity interest in Shanghai Urban Development.

Consideration

The Company has agreed to make a capital contribution of RMB2,130,660,600 to Shanghai Urban Development in return for a 40% equity interest in Shanghai Urban Development.

The amount of capital contribution to be made by the Company to Shanghai Urban Development as mentioned above was determined by reference to the net asset value of Shanghai Urban Development as at 31st December 2006 as shown in an asset appraisal report. According to the asset appraisal report, the net asset value of Shanghai Urban Development as at 31st December 2006 amounted to RMB3,195,990,860.33.

An amount of RMB220 million is payable by the Company to (Shanghai United Assets and Securities Exchange) as deposit to secure the performance by the Company of its obligations to pay the capital contribution pursuant to the Capital Contribution Agreement. Such deposit can be applied towards payment of the second stage payment of the capital contribution to be made by the Company as mentioned below. The deposit shall be refunded to the

– 4 –

LETTER FROM THE BOARD

Company within five business days if the failure of the Company to perform its obligation to pay its capital contribution is caused by reasons other than breaches of the Company.

Capital contribution made by the Company and the deposit mentioned above shall be paid in cash in either Hong Kong dollars or United States dollars. Of the RMB2,130,660,600 capital contribution, not less than 30% shall be paid within five business days from the date on which the Capital Contribution Agreement becomes effective and the balance shall be paid in one lump sum within two months after the Capital Contribution Agreement becomes effective.

• Non-disposal Undertaking

The Company has undertaken to the PRC JV Partner that it shall not dispose of its 40% equity interest in the Joint Venture Company acquired pursuant to the Capital Contribution Agreement within five years after such acquisition. If it is necessary to do so, such transfer must be approved in writing by the PRC JV Partner. An exception to the aforesaid restriction on the Company’s right to transfer is where the transfer is to a group company for the purpose of an internal Group restructuring and there is no change in the capacity of the Company as the ultimate controller and the consideration for such transfer is not obviously higher than the consideration payable by the Company as mentioned above and in the case of such transfer, the PRC JV Partner shall give its consent.

Other Undertakings The Company and the PRC JV Partner have agreed, among other things, that:

• (1) if the State-owned Management Company incurs liabilities under various guarantees given by it in respect of certain loans obtained by Shanghai Urban Development from banks prior to the signing of the Capital Contribution Agreement, such economic loss shall be borne by the Joint Venture Company in accordance with the law. Whereas, if the Joint Venture Company incurs liabilities under various guarantees given by Shanghai Urban Development in respect of certain loans obtained by the State-owned Management Company from banks prior to the signing of the Capital Contribution Agreement, the PRC JV Partner shall compensate the actual economic loss suffered by the Joint Venture Company out of its share of the future profits of the Joint Venture Company in respect of its 60% equity interest;

– 5 –

LETTER FROM THE BOARD

• (2) if after the completion of the Proposed Capital Contribution, (i) it shall be discovered that there was any undisclosed liability or legal risk of the Joint Venture Company prior to 31st December 2006 which caused the net asset value of Shanghai Urban Development become less than the net asset value as shown in the asset appraisal report mentioned above, or (ii) it shall be discovered that there were assets, or contingent rights and interests or gains of Shanghai Urban Development omitted from the asset appraisal report and which were not provided for in the Capital Contribution Agreement, and, in each case, the cumulative amounts involved equal to RMB30 million or more, and there are sufficient reasons, the Company and the PRC JV Partner shall resolve the matter through separate negotiation; and

• (3) if the Joint Venture Company shall in the future recover any assets to which zero value had been assigned for the purpose of the asset appraisal mentioned above due to the inability to recover such assets over a long period of time, such assets (and similar assets which had been appraised at zero value) shall belong to the PRC JV Partner.

Effective Date

The Capital Contribution Agreement will become effective when it is approved by the relevant approval authorities.

As at the Latest Practicable Date, the Capital Contribution Agreement has not yet been approved by the relevant approval authorities.

3. THE JOINT VENTURE CONTRACT AND THE JOINT VENTURE ARTICLES

Major terms of the Joint Venture Contract and the Joint Venture Articles are summarised as below:

Date 27th June 2007 Parties (1) The Company (2) The PRC JV Partner Business scope of The scope of business of the Joint Venture Company following the Joint Venture its conversion into a sino-foreign equity joint venture company Company shall include real estate development and consultancy services, resettlement work, ancillary construction equipment, construction material, industrial investment, domestic trading (specially regulated ones excepted) and property sales, leasing and management.

– 6 –

LETTER FROM THE BOARD

• Registered capital The registered capital of the Joint Venture Company will be of the Joint RMB301.33 million. Immediately after the Proposed Capital Venture Contribution, the PRC JV Partner and the Company will Company respectively own 60% and 40% of the registered capital of Shanghai Urban Development.

• Restrictions on Transfer or mortgage of any interest in the Joint Venture transfer of Company by a party shall require the approval of the other Interest party. In addition, transfer of interest in the Joint Venture Company by any of the PRC JV Partner and the Company to a third party is subject to the pre-emptive right of the other and the terms of transfer offered to the third party shall not be more favourable than those offered to the other shareholder of the Joint Venture Company. However, in the case of a transfer by a party to the Joint Venture Contract to its group company of all or any part of its equity interest in the Joint Venture Company and such transfer is for the purpose of its internal restructuring, the other party to the Joint Venture Contract shall waive its pre-emptive right in respect of such transfer.

• Board composition The board of directors of the Joint Venture Company shall of the Joint consist of seven members. The Company and the PRC JV Venture Partner are entitled to appoint three directors and four directors Company of the Joint Venture Company respectively. The chairman of the board of directors of the Joint Venture Company shall be appointed by the PRC JV Partner and the vice-chairman of the board of directors of the Joint Venture Company shall be appointed by the Company. Each term of office of the directors of the Joint Venture Company is three years and a director may remain in office if the party appointing him/her shall continue to appoint him/her. Pursuant to the Joint Venture Articles, two-thirds of the total number of directors of the Joint Venture Company shall form a quorum of board meetings.

Profit and loss

• Pursuant to the Joint Venture Contract, profits available for distribution shall be distributed to the PRC JV Partner and the Company in proportion to their respective capital contribution to the registered capital of the Joint Venture Company. The liability of the PRC JV Partner and the Company towards the liabilities of the Joint Venture Company shall be limited to the respective amounts of capital contribution responsible to be made by them.

– 7 –

LETTER FROM THE BOARD

• Term of the Joint Venture Company

• The Joint Venture Company will have a joint venture period of fifty years commencing on the date of issuance of its business licence. The PRC JV Partner and the Company may apply for an extension of the joint venture period within six months prior to the expiry of the original joint venture period.

• Dissolution

• At the end of the term of the Joint Venture Company, the remaining assets of the Joint Venture Company (after payment of debts) will be distributed to the PRC JV Partner and the Company in proportion to the respective amounts of capital contribution paid up by them.

Effective Date

The Joint Venture Contract and the Joint Venture Articles will become effective when they are approved by the relevant approval authority.

Save for the capital contribution disclosed above, the Company has no other capital commitment (whether equity, loan or otherwise) to the Joint Venture Company.

4. CORPORATE STRUCTURE BEFORE AND AFTER COMPLETION OF THE PROPOSED CAPITAL CONTRIBUTION

Following completion of the Proposed Capital Contribution, the Company will become the holder of 40% of the equity interest in the Joint Venture Company, and the Joint Venture Company will be accounted for as an associated company.

Set out below are the shareholding structures of Shanghai Urban Development as at the date of this circular and of the Joint Venture Company immediately after completion of the Proposed Capital Contribution:

As at the date of this circular

Immediately after completion of the Proposed Capital Contribution

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Note The PRC
The PRC JV Partner Note The Company
JV Partner
60% 40%
100%
Shanghai Urban
Joint Venture Company
Development
----- End of picture text -----

Note: The PRC JV Partner is authorised by Shanghai Xuhui District People’s Government to exercise state-owned shareholder’s rights.

– 8 –

LETTER FROM THE BOARD

5. INFORMATION ABOUT SHANGHAI URBAN DEVELOPMENT

Business carried on by Shanghai Urban Development

Shanghai Urban Development is a wholly state-owned enterprise established in 1996. The capital of Shanghai Urban Development was made by Shanghai Xuhui District People’s Government and the PRC JV Partner is authorised by Shanghai Xuhui District People’s Government to exercise state-owned shareholder’s rights over Shanghai Urban Development. Shanghai Urban Development and its subsidiaries together have a land reserve with a total gross floor area of about 2 million square meters for development, which includes commercial and residential development projects in Shanghai, Kunshan (Jiangsu province), Changsha (Hunan province) and Hefei (Anhui province). Among these projects are “Xujiahui Centre” and “Urban Cradle” in which Shanghai Urban Development has a 60% and 90% interest respectively. “Xujiahui Centre” (currently in the planning stage) is located above the Xuhui subway station in the main commercial hub of Shanghai and is one of the largest comprehensive commercial projects in downtown Shanghai, which has a planned development site area of approximately 13.2 hectares. “Urban Cradle” (which is currently under development) is one of the largest residential projects in southwest Shanghai, within the Middle Ring Road territory with a planned development site area of approximately 94.3 hectares.

The current principal activities of Shanghai Urban Development and its subsidiaries include real estate development and consultancy services, resettlement work, ancillary construction equipment, construction material, industrial investment, domestic trading (specially regulated ones excepted) and property sales, leasing and management. The current registered capital of Shanghai Urban Development is RMB180.80 million.

Financial information on Shanghai Urban Development

The unaudited consolidated profit	before	taxation, extraordinary	items and
minority interests, and the unaudited consolidated		profit after taxation, extraordinary
items and minority interests, of Shanghai	Urban Development for the two		years ended
31st December 2006, which were prepared in accordance with Hong Kong Financial
Reporting Standards, were as follows:
		Year ended 31st December
		2005	2006
		RMB’000	RMB’000
		(unaudited)	(unaudited)
Consolidated profit before taxation,
extraordinary items and minority interests		96,319	616,604
Consolidated profit after taxation,
extraordinary items and minority interests		61,165	317,323

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LETTER FROM THE BOARD

The unaudited consolidated net asset value and the unaudited consolidated total asset value of Shanghai Urban Development as at 31st December 2006, which were prepared in accordance with Hong Kong Financial Reporting Standards, were approximately RMB836.74 million and RMB8,880.60 million respectively.

6. FINANCIAL EFFECTS

Effect on net asset value

Upon completion of capital contribution in Shanghai Urban Development, there will be no material change to the consolidated net asset value of the Group as a result of the capital contribution in Shanghai Urban Development.

Effect on earnings

The unaudited consolidated net profit of Shanghai Urban Development for the financial year ended 31st December 2006 was approximately RMB317,323,000. Upon completion of the capital contribution in Shanghai Urban Development, the Group will account for 40% of the result of Shanghai Urban Development.

7. SOURCE OF FUNDING

The investment of the Company in the Joint Venture Company will be funded by internal resources of the Group.

8. REASONS FOR AND BENEFITS OF THE JOINT VENTURE AGREEMENTS

Leveraging on its Shanghai background and by capitalizing on the experience of the management accumulated from operating in the Shanghai real estate market, the proposed acquisition of equity interest in Shanghai Urban Development enables the Group to acquire quality real estate projects and companies in Shanghai. It is visualized by the management of the Company that the investment in real estate will become a core segment in the Group’s future strategic planning.

On the basis of the wide experience of Shanghai Urban Development’s management team and good reputation of Shanghai Urban Development in the Shanghai real estate sector, the strategic value of commercial property projects and residential property projects, and land reserve of about 2 million square meters of gross floor area for development owned by Shanghai Urban Development and its subsidiaries, the proposed acquisition of equity interest in Shanghai Urban Development will facilitate the Group to penetrate in the Shanghai real estate sector with leading position. It is expected to form a platform to integrate state-owned real estate resources in Shanghai and to achieve the Group’s strategic goal of becoming a regional leading real estate player in the PRC.

The consideration for the transactions contemplated under the Joint Venture Agreements have been determined through arm’s length negotiation between the Company and the PRC JV Partner principally based on the asset appraisal mentioned above.

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LETTER FROM THE BOARD

The Directors consider that the Joint Venture Agreements are on normal commercial terms and are fair and reasonable so far as the Company and the Shareholders are concerned.

9. GENERAL

The Group is principally engaged in the businesses of real estate investment, infrastructure facilities, medicine and consumer products.

The PRC JV Partner is a government authority authorised by and established directly under Shanghai Xuhui District People’s Government for supervising and managing state-owned assets in the possession of Xuhui District.

10. ADDITIONAL 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 CAI LAI XING Chairman

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

• (a) As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executive of the Company in the shares and underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed 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 maintained by the Company referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

• (i) Interests in shares and underlying shares of the Company

(a) Ordinary Shares of the Company

				Percentage
			Number of	of total
		Nature of	issued	issued share
Name of Director	Capacity	interest	shares held	capital
Cai Lai Xing	Beneficial Owner	Personal	4,000,000	0.41%
Qu Ding	Beneficial Owner	Personal	1,250,000	0.13%
Lu Ming Fang	Beneficial Owner	Personal	1,870,000	0.19%
Ding Zhong De	Beneficial Owner	Personal	377,000	0.04%
Qian Shi Zheng	Beneficial Owner	Personal	459,000	0.05%
Yao Fang	Beneficial Owner	Personal	200,000	0.02%

All interests stated above represented long positions.

– 12 –

GENERAL INFORMATION

APPENDIX

(b) Share options of the Company

					Percentage
				Number	of total
			Exercise	of share	issued
			price per	options	share
Name of Director	Capacity	Date of grant	share	held	capital
Cai Lai Xing	Beneficial Owner	2nd September	HK$14.89	800,000	0.08%
		2005
Cai Yu Tian	Beneficial Owner	2nd May 2006	HK$17.10	1,300,000	0.13%
Qu Ding	Beneficial Owner	2nd September	HK$14.89	560,000	0.06%
		2005
Lu Ming Fang	Beneficial Owner	2nd September	HK$14.89	480,000	0.05%
		2005
Ding Zhong De	Beneficial Owner	2nd May 2006	HK$17.10	1,000,000	0.10%
Qian Shi Zheng	Beneficial Owner	2nd September	HK$14.89	300,000	0.03%
		2005
Tang Jun	Beneficial Owner	2nd September	HK$14.89	300,000	0.03%
		2005

Share options granted on 2nd September 2005 under the Company’s share option scheme are exercisable during the period from 2nd March 2006 to 1st March 2009 in three batches.

Share options granted on 2nd May 2006 under the Company’s share option scheme are exercisable during the period from 2nd November 2006 to 1st November 2009 in three batches.

(ii) Interests in shares of Shanghai Industrial Pharmaceutical Investment Co. Ltd.

				Percentage
			Number of	of total
		Nature of	issued	issued share
Name of Director	Capacity	interests	shares held	capital
Lu Ming Fang	Beneficial Owner	Personal	23,400	0.01%
Ding Zhong De	Beneficial Owner	Personal	23,400	0.01%

All interests stated above represented long positions.

– 13 –

GENERAL INFORMATION

APPENDIX

• (b) As at the Latest Practicable Date, so far as was known to the Directors, the interests and short positions of the persons (not being a Director or chief executive of the Company) in the shares and underlying shares of the Company which were notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO were as follows:

				Number of	Percentage
				issued	of total
			Nature of	ordinary	issued share
Name of Shareholder		Capacity	interests	shares held	capital
(a)	Long Positions
	SIIC	Interests held by	Corporate	548,076,000	56.52%
		controlled		(note (i))
		corporations
	Templeton Asset Management	Investment	Corporate	57,610,253	5.94%
	Limited	manager
(b)	Short Positions
	SIIC	Interests held by	Corporate	87,653,993	9.04%
		controlled		(note (ii))
		corporations

Notes:

• (i) SIIC through its wholly-owned subsidiaries, namely Shanghai Investment Holdings Ltd., SIIC Capital (B.V.I.) Ltd. and SIIC CM Development Ltd. held 468,066,000, 80,000,000 and 10,000 Shares respectively, and was accordingly deemed to be interested in the respective Shares held by the aforementioned companies.

• (ii) SIIC was taken to have short positions in respect of 87,653,993 underlying shares of the Company under certain listed equity derivatives pursuant to the Zero Coupon Guaranteed Exchangeable Bonds issued by Shanghai Industrial Investment Treasury Co. Ltd. due March 2009 unconditionally and irrevocably guaranteed by SIIC and exchangeable into ordinary Shares.

• (c) As at the Latest Practicable Date, so far as was known to the Directors, the following Directors are also directors or employees of SIIC:

Name of Director Position held in SIIC

• Mr. Cai Lai Xing Chairman Mr. Cai Yu Tian Executive Director and President Mr. Qu Ding Executive Director and Executive Vice President Mr. Lu Ming Fang Executive Director Mr. Ding Zhong De Executive Director Mr. Qian Shi Zheng Vice President and General Manager of Finance and Planning Department

• Mr. Tang Jun General Manager of Internal Audit Department and Deputy General Manager of Finance and Planning Department

– 14 –

APPENDIX

GENERAL INFORMATION

• (d) As at the Latest Practicable Date, so far as was known to the Directors, the following persons (other than members of the Group) were directly or indirectly interested in 10% or more of the issued share capital carrying rights to vote in all circumstances at general meetings of the following members of the Group (other than the Company) and the amount of each of such person’s interest in such securities were as follows:

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||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Percentage|
|Class|of|of|registered|
|Name|of|member|of|the|Group|Name|of|substantial|shareholders|share|capital|shareholding|
|Changzhou|Pharmaceutical|Co.|Ltd.|Changzhou|State-owned Assets|Investment|Co.|equity|interest|23.05%|
|(|)|(|)|
|Chia|Tai|Qingchunbao|Pharmaceutical|Co.|Ltd.|China|(Hangzhou)|Qingchunbao|Group|Co.|equity|interest|20%|
|(|)|Ltd.|
|(|)|
|Hangzhou|Chia|Tai|Qingchunbao|Staff|equity|interest|20%|
|Shareholding Association|
|(|)|
|Chifeng Arker|Pharmaceutical|Technology|Co.|Ltd.|Shenzhen Yigong|Industrial|Co.|Ltd.|equity|interest|14.67%|
|(|)|(|)|
|Chifeng|Mysun|Pharma|Co.|Ltd.|Chifeng|Pharmaceutical|(Group)|Co.|Ltd.|equity|interest|17.91%|
|(|)|(|)|
|Guangdong|Techpool|Biochem|Pharma|Co.|Ltd.|Guangzhou|Bopu|Biotechnology|Co.|Ltd.|equity|interest|23.06%|
|(|)|(|)|
|Fu|He|Liang|(|)|equity|interest|11.98%|
|Techpool|International|Pharma|Co.|Ltd.|Guangzhou|Bopu|Biotechnology|Co.|Ltd.|equity|interest|27.62%|
|(|)|(|)|
|Hangzhou|Huqingyutang|Pharmaceutical|Co.|Ltd.|Hangzhou|Huqingyutang|Investment|Co.|Ltd.|equity|interest|44.9566%|
|(|)|(|)|
|Liaoning|Herbapex|Pharmaceutical|(Group)|Co.|Ltd.|Medieval|International|Limited|equity|interest|15%|
|(|)|
|Zheng|Ji Yu|(|)|equity|interest|16.5%|
|Mergen|Biotech|Limited|Excellent|Hope|Holdings|Inc.|ordinary|shares|10.99%|
|Sino-Alliance|International,|Ltd|ordinary|shares|18.6%|
|Shanghai|Qiyi|Dental|Equipment|Co.|Ltd.|Shanghai|Dental|Materials|Factory|Qi|Xin|equity|interest|10%|
|(|)|Operating|Services|Department|
|(|
|)|
|Shanghai|Victor|Medical|Instrument|Co.|Ltd.|ACCS|Products|Inc.|USA|equity|interest|25%|
|(|)|
|Shanghai Yichuang|Traditional|Chinese|Medicine|Shanghai|University|of|Traditional|Chinese|equity|interest|45%|
|Research|&|Development|Center|Co.|Ltd.|Medicine|Technological|Development|Co.*|
|(|)|(|)|

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GENERAL INFORMATION

APPENDIX

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||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Percentage|
|Class|of|of|registered|
|Name|of|member|of|the|Group|Name|of|substantial|shareholders|share|capital|shareholding|
|Shanghai Yunhu|Raw-pharmaceutical|Co.|Ltd.|Shanghai Yunhu|Raw|Pharmaceutical|Co.|Ltd.|equity|interest|15.45%|
|(|)|Staff|Shareholding Association|
|(|
|)|
|Shanghai Yunhu Yuemin|Pharmacy|Co.|Ltd.|Shanghai Yuanfeng|Pharmacy|equity|interest|30%|
|(|)|(|)|
|SI|United|Changcheng|Pharmaceutical|Co.|Ltd.|Jin|Jiang|International|Holdings|Co.|Ltd.|equity|interest|30%|
|(|)|(|)|
|SI|United|Pharmaceutical|Co.|Ltd.|Zhou Yi|Ping|(|)|equity|interest|22%|
|(|)|
|Hu|Zheng|(|)|equity|interest|17%|
|Feng|Wei|(|)|equity|interest|10%|
|Xiamen|Traditional|Chinese|Medicine|Co.|Ltd.|Xiamen|Qinggong|Group|Co.|Ltd.|equity|interest|30%|
|(|)|(|)|
|Chengdu|Wingfat|Printing|Co.|Ltd.|Sichuan|Swellfun|Co.|Ltd.|equity|interest|20%|
|(|)|(|)|
|Chengdu|Jiangshi|Investment|Co.|Ltd.|equity|interest|19%|
|(|)|
|Xichuen|Huize|Investment|Co.|Ltd.|equity|interest|10%|
|(|)|
|Hebei Yongxin|Paper|Co.|Ltd.|Xinnan|(Tianjin)|Paper|Co.|Ltd.|equity|interest|29%|
|(|)|(|)|
|Xuchang Yongchang|Printing|Co.|Ltd.|Henan|Cigarette|Industrial|Co.|equity|interest|20.6%|
|(|)|(|)|
|Shangtou|Bonded Area|Jinguang|Industrial|equity|interest|28.4%|
|Co.|Ltd.*|
|(|)|

----- End of picture text -----

• (e) Save as disclosed above, as at the Latest Practicable Date:

• (i) so far as was known to the Directors, none of the Directors or chief executive of the Company had any interests or short positions in any shares or underlying shares or interests in debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed 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, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX

• (ii) there was no person known to the Directors who had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, was, directly or indirectly, interested in 10% or more of the nominal value of the issued share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group, or any options in respect of such capital.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter into a service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation, other than statutory compensation.

4. DIRECTORS’ INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, so far so was known to the Directors, none of the Directors, and their respective associates was considered to have interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group or have any other conflicts of interest with the Group pursuant to the Listing Rules.

5. LITIGATION

So far as the Directors are aware, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or arbitration of material importance was pending or threatened against the Company or any of its subsidiaries as at the Latest Practicable Date.

6. MISCELLANEOUS

• (a) The registered office of the Company is at 26th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong.

• (b) The share registrar and transfer office of the Company is Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (c) The company secretary of the Company is Ms. Wong Mei Ling, Marina who is a Fellow of the Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries.

• (d) The qualified accountant of the Company is Mr. Lee Kim Fung, Edward who is a Fellow of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.

• (e) In the event of any inconsistency, the English language text of this circular shall prevail over the Chinese language text.

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