Huscoke Holdings Limited — Proxy Solicitation & Information Statement 2007

Jun 27, 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.

==> picture [79 x 42] intentionally omitted <==

==> picture [166 x 40] intentionally omitted <==

(Incorporated in Hong Kong with limited liability) (Stock Code: 363)

ISSUE OF NEW A SHARES

BY

SHANGHAI INDUSTRIAL PHARMACEUTICAL INVESTMENT CO., LTD.

DISCLOSEABLE TRANSACTION

TRANSFER OF ASSETS TO

SHANGHAI INDUSTRIAL PHARMACEUTICAL INVESTMENT CO., LTD.

A letter from the board of directors of Shanghai Industrial Holdings Limited is set out on pages 4 to 15 of this circular.

27th June 2007

	CONTENTS
		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
2.	The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
3.	The Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
4.	The Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
5.	Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
6.	Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
7.	Shareholding Structure of the Assets before and after
	Completion of the Transfers, the Subscription and the
	Issue of Remaining Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
8.	Information on SI Pharmaceutical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
9.	Information on the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
10.	Reasons for and Benefits of the Subscription and the Transfers . . . . . . . . . .	14
11.	Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
12.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
13.	Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
**Appendix **	−General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16

– i –

DEFINITIONS

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

Term

Meaning

“Assets” 55% equity interest in CT Qingchunbao, 51.0069% equity interest in Huqingyutang Pharmaceutical, 61% equity interest in Xiamen TCM, 55% equity interest in Liaoning Herbapax and 29% equity interest (after a further capital injection increasing such percentage equity interest from 24% to 29%) in Huqingyutang Drugstore to be transferred to SI Pharmaceutical and/or its subsidiaries under the Agreement “A Shares” ordinary shares of RMB1.00 each in the capital of SI Pharmaceutical “Agreement” the agreement among the Company, SIIC MedTech and SI Pharmaceutical in relation to the Subscription and the Transfers dated 15th May 2007

• “Board” the board of directors of the Company

• “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

• “CSRC” China Securities Regulatory Commission

• “CT Qingchunbao” Chia Tai Qingchunbao Pharmaceutical Co., Ltd.* ( ), a limited liability company established under the laws of the PRC and owned by the Group as to 55% and a subsidiary of the Company

• “Directors” 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

• “Huqingyutang Hangzhou Huqingyutang Drugstore Co., Ltd.* Drugstore” ( ), a limited liability company established under the laws of the PRC and owned by the Group as to 29% (after a further capital injection) and a jointly controlled entity of the Company

• The English name is an informal English translation of its official Chinese name.

– 1 –

DEFINITIONS

• “Huqingyutang Hangzhou Huqingyutang Pharmaceutical Co., Ltd.* Pharmaceutical” ( ), a limited liability company established under the laws of the PRC and owned by the Group as to 51.0069% and a subsidiary of the Company

• “Issue of Remaining Shares”

• the issue by SI Pharmaceutical of up to 60,450,000 new A Shares (under the total 107,220,000 new A Shares it proposes to issue) to institutional investors at a price of RMB14.13 per share, determined according to the Measures for the Administration of the Issuance of Securities by Listed Companies ( )

• “Latest Practicable Date” 22nd June 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• “Liaoning Herbapex” Liaoning Herbapex Pharmaceutical (Group) Co., Ltd.* ( ), a limited liability company established under the laws of the PRC and owned by the Group as to 55% and a subsidiary of the Company

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

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

• “PRC” the People’s Republic of China

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

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

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

• “Shareholder(s)” holder(s) of the Share(s)

• “SIIC” Shanghai Industrial Investment (Holdings) Co. Ltd., a company incorporated under the laws of Hong Kong with limited liability

• “SIIC MedTech” SIIC MedTech Health Products Limited, an investment holding company incorporated under the laws of Hong Kong with limited liability and a wholly-owned subsidiary of the Company

• The English name is an informal English translation of its official Chinese name.

– 2 –

DEFINITIONS

• “SI Pharmaceutical” Shanghai Industrial Pharmaceutical Investment Co., Ltd., a limited liability company established under the laws of the PRC which is a subsidiary of the Company, listed on the A Shares market of the Shanghai Stock Exchange (stock code: 600607)

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

• “Subscription” the subscription by SIIC MedTech for 46,770,000 A Shares under the Agreement

• “Transfers” the transfers of the Assets by relevant subsidiaries of the Group to SI Pharmaceutical and/or its subsidiaries pursuant to the Agreement

• “World Honest” World Honest Investments Limited, an investment holding company incorporated under the laws of Hong Kong with limited liability and a wholly-owned subsidiary of the Company

• “Xiamen TCM” Xiamen Traditional Chinese Medicine Co., Ltd.* ( ), a limited liability company established under the laws of the PRC and owned by the Group as to 61% and a subsidiary of the Company

• The English name is an informal English translation of its official Chinese name.

For the purposes of this circular, the exchange rate at HK$1 = RMB1 has been used, where applicable, for purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be exchanged at any particular rate on the date or dates in question or any other date.

– 3 –

LETTER FROM THE BOARD

==> picture [79 x 43] intentionally omitted <==

==> picture [166 x 40] intentionally omitted <==

(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)

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

Mr. Lu Ming Fang

Mr. Ding Zhong De

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

27th June 2007

To the Shareholders

Dear Sir or Madam,

ISSUE OF NEW A SHARES BY SHANGHAI INDUSTRIAL PHARMACEUTICAL INVESTMENT CO., LTD.

DISCLOSEABLE TRANSACTION TRANSFER OF ASSETS TO SHANGHAI INDUSTRIAL PHARMACEUTICAL INVESTMENT CO., LTD.

1. INTRODUCTION

The Board announced on 15th May 2007 that SI Pharmaceutical, a subsidiary in which the Company through its another wholly-owned subsidiary owns approximately 43.62% of its total issued share capital, proposed to issue a total of up to 107,220,000 new A Shares. The Company, SIIC MedTech and SI Pharmaceutical entered into the Agreement on 15th May 2007 for the subscription by SIIC MedTech for 46,770,000 A Shares (out of the total 107,220,000 new A Shares to be issued by SI Pharmaceutical) at RMB14.13 per share and for the transfers of the Assets to SI Pharmaceutical and/or its subsidiaries.

– 4 –

LETTER FROM THE BOARD

The Transfers constitute a discloseable transaction for the Company under the Listing Rules, as the profits, revenue and consideration ratios under Chapter 14 of the Listing Rules exceed 5% but are less than 25%. The Company is required by the Listing Rules to issue this circular to provide the Shareholders with further information on such transaction and to give other information in relation to the Company.

2. THE AGREEMENT

Date

15th May 2007

Parties

1. The Company

2. SI Pharmaceutical, a subsidiary of the Company

3. SIIC MedTech, a subsidiary of the Company

3. THE SUBSCRIPTION

The Company through SIIC MedTech shall subscribe for 46,770,000 A Shares (out of the total 107,220,000 new A Shares to be issued by SI Pharmaceutical) at RMB14.13 per share. Such subscription price represents a 10% discount from the average closing price of the A Shares on the Shanghai Stock Exchange in the 20 trading days preceding the announcement of the resolution of the board of SI Pharmaceutical on the transactions under the Agreement.

According to the Measures for the Administration of the Issuance of Securities by Listed Companies ( ) promulgated by the CSRC, a non-public offer of new shares by publicly listed companies in the PRC shall be at a price not less than 90% of the average closing price in the 20 trading days preceding the date for price determination. In addition, the Company as the controlling shareholder of SI Pharmaceutical may not transfer such new A Shares within 36 months from the completion of the issue.

The Company currently through another wholly-owned subsidiary holds an approximately 43.62% shareholding in SI Pharmaceutical. Immediately upon completion of the Subscription alone, the Company will increase its indirect percentage shareholding in SI Pharmaceutical to approximately 49.98% of its enlarged issued share capital.

4. THE TRANSFERS

Pursuant to the Agreement, the following equity interests held by wholly-owned subsidiaries of the Company will be transferred to SI Pharmaceutical and/or its subsidiaries:–

• (a) an amount of RMB70,675,000 in the registered capital of CT Qingchunbao, representing 55% of the total equity interest in CT Qingchunbao;

• (b) an amount of RMB27,115,292 in the registered capital of Huqingyutang Pharmaceutical, representing 51.0069% of the total equity interest in Huqingyutang Pharmaceutical;

– 5 –

LETTER FROM THE BOARD

• (c) an amount of RMB29,175,000 in the registered capital of Xiamen TCM, representing 61% of the total equity interest in Xiamen TCM;

• (d) an amount of RMB28,050,000 in the registered capital of Liaoning Herbapex, representing 55% of the total equity interest in Liaoning Herbapex; and

• (e) an amount of RMB3,157,900 in the registered capital of Huqingyutang Drugstore representing 24% of the total equity interest in Huqingyutang Drugstore (which will be increased to RMB4,084,500 representing 29% of the total equity interest in Huqingyutang Drugstore after approval of a further capital injection by World Honest to Huqingyutang Drugstore).

After completion of the Transfers, the above companies will continue to be consolidated as subsidiaries in the audited consolidated financial statements of the Group through SI Pharmaceutical and/or its subsidiaries (except for Huqingyutang Drugstore which is a jointly-controlled entity of the Group).

Consideration for the Transfers

The consideration for the Transfers shall be determined by the valuation by an asset appraisal institution with securities business qualifications in accordance with the PRC legal and regulatory requirements, and shall be determined at RMB1,515,000,000 if the assessed value of the Assets is within a range of 5% of such amount. If the assessed value is beyond such range, the Company and SI Pharmaceutical shall negotiate to determine the final consideration for the Transfers.

The above consideration for the Transfers was determined after taking into account the following factors:

• (1) The sum of the carrying value and committed capital of the Assets as at 31st December 2006 was RMB862,788,000, and the above consideration for the Transfers represents a premium of approximately 75.6% over such carrying value and committed capital of the Assets.

• (2) The sum of the proportionate audited net asset value of the Assets as at 31st December 2006 (in accordance with the generally accepted accounting principles in the PRC) was RMB506,156,000, and the above consideration for the Transfers represents a premium of approximately 199.3% over such net asset value.

• (3) The subscription price per share of RMB14.13 under the Subscription represents a premium of approximately 190.7% over the audited net asset value per share of RMB4.86 of SI Pharmaceutical as at 31st December 2006.

If the assessed value of the Assets is beyond the range of 5% of RMB1,515,000,000 and the Company and SI Pharmaceutical negotiate to determine the final consideration for the Transfers, the Company will comply with applicable requirements of the Listing Rules, and make a further announcement if required and seek approval by the Shareholders for the Transfers if the applicable percentage ratios reach 25% or more.

As at the date of this circular, the valuations of the various subject companies under the Transfers have not been completed.

– 6 –

LETTER FROM THE BOARD

5. CONSENTS AND APPROVALS

The Subscription and the Transfers shall only be implemented after the following approvals or consents have been obtained:–

1. approval by the shareholders of SI Pharmaceutical in general meeting;

2. consent by the Board and the board of directors of SIIC MedTech;

3. approval of the Subscription by the Department of Commerce of the PRC;

4. consent, approval and/or waiver by the CSRC, other administrative departments and organizations (if necessary).

Both the Subscription and the Transfers will be completed after the above consents, approvals and/or waivers have been obtained. As at the Latest Practicable Date, except the consents referred to in item no. 2 above, all the other consents, approvals and/or waivers had not yet been obtained.

6. COMPLETION

After all approvals and consents of the Subscription by the PRC administration departments or bodies have been obtained, the Company and SI Pharmaceutical and/or their respective subsidiaries shall execute agreements for the transfer of equity interest under the Assets, and shall attend to necessary formalities for the Transfers.

Completion of the Subscription shall take place on a date after all approvals and consents of the proposed issue of new A Shares by SI Pharmaceutical by the PRC administration departments or bodies have been obtained, as confirmed by negotiation among the parties to the Agreement. The date of completion of the Subscription shall be no later than the expiry of six months after the date of approval by CSRC of the new issue of A Shares by SI Pharmaceutical.

The amount payable for the Subscription of RMB660,860,100 shall be used to settle the portion of the consideration for the Transfers of equivalent amount. SI Pharmaceutical proposes to further issue up to 60,450,000 new A Shares (under the total 107,220,000 new A Shares it proposes to issue) to institutional investors at a price of RMB14.13 per share, determined according to the Measures for the Administration of the Issuance of Securities by Listed Companies ( ), the proceeds of which will be applied towards payment of the balance of the consideration for the Transfers of RMB854,139,900. If such proceeds are insufficient, any residual amount of the consideration shall be paid by SI Pharmaceutical by other methods acceptable to the Company in cash as negotiated between the Company and SI Pharmaceutical. If the Issue of Remaining Shares is materialised, the Company’s shareholding percentage in SI Pharmaceutical will be maintained at 43.62% of its enlarged issued share capital.

The issue of new A Shares under the Issue of Remaining Shares, if it proceeds, will take place simultaneously with issue of new A Shares under the Subscription so that the shareholding of the Company in SI Pharmaceutical will be maintained at not less than approximately 43.62%.

– 7 –

LETTER FROM THE BOARD

7. SHAREHOLDING STRUCTURE OF THE ASSETS BEFORE AND AFTER COMPLETION OF THE TRANSFERS, THE SUBSCRIPTION AND THE ISSUE OF REMAINING SHARES

Before Completion

==> picture [398 x 302] intentionally omitted <==

----- Start of picture text -----

The Company
(through its wholly-owned subsidiaries) 43.62%
29% (subject to
SI Pharmaceutical the completion
of a further
capital injection
increasing such
percentage equity
interest from
55% 51.0069% 61% 55% 24% to 29%)
CT Huqingyutang Xiamen Liaoning Huqingyutang
Qingchunbao Pharmaceutical TCM Herbapex Drugstore
After Completion
The Company
(through its wholly-owned subsidiaries)
43.62% 29% (subject to
the completion
SI Pharmaceutical and/or its of a further
subsidiary capital injection
increasing such
percentage equity
interest from
55% 51.0069% 61% 55% 24% to 29%)
CT Huqingyutang Xiamen Liaoning Huqingyutang
Qingchunbao Pharmaceutical TCM Herbapex Drugstore
----- End of picture text -----

8. INFORMATION ON SI PHARMACEUTICAL

SI Pharmaceutical is a subsidiary owned by the Company as to approximately 43.62%, the A Shares of which are listed on the A Shares market of the Shanghai Stock Exchange. As three out of the four directors of SI Pharmaceutical in charge of its management and administration are Directors or senior management personnel of the Company, the Company has the power to govern the daily operations and the financial and operating policies of SI Pharmaceutical and, in accordance with the Hong Kong Accounting Standard 27 paragraph 4, SI Pharmaceutical is consolidated into the audited consolidated financial statements of the Group. SI Pharmaceutical and its subsidiaries are principally engaged in the manufacture and sale of biomedicine and commercial network operations.

As at the Latest Practicable Date, Mr. Lu Ming Fang and Mr. Ding Zhong De (both being Directors) beneficially owned 23,400 A Shares and 23,400 A Shares respectively, representing approximately 0.01% and 0.01% of the total issued share capital of SI Pharmaceutical. To the best of the Director’s knowledge, information and belief and having made all reasonable enquiries, the other holders of A Shares are third parties independent of and not connected with the Company and its connected persons.

– 8 –

LETTER FROM THE BOARD

9. INFORMATION ON THE ASSETS

(a) CT Qingchunbao

CT Qingchunbao is principally engaged in the manufacture and sale of Chinese medicine and health food.

Share capital

CT Qingchunbao has total registered capital of RMB128,500,000. The total equity interest in CT Qingchunbao are currently held by its shareholders in the following manner:–

==> picture [379 x 198] intentionally omitted <==

----- Start of picture text -----

|||||||
|---|---|---|---|---|---|
|Amount|of|Percentage|
|Name|of|shareholder|registered|capital|shareholding|
|RMB|
|SIIC|MedTech|(wholly-owned|subsidiary|70,675,000|55%|
|of|the|Company)|
|China|(Hangzhou)|Qingchunbao|Group|25,700,000|20%|
|Co.,|Ltd.|
|(|)|
|Hangzhou|Chia|Tai|Qingchunbao|25,700,000|20%|
|Shareholding|Staff|Union|
|(|)|
|An|independent|corporate|shareholder|6,425,000|5%|

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

The equity interest in CT Qingchunbao held by SIIC MedTech will be transferred to SI Pharmaceutical and/or its subsidiaries under the Transfers.

Financial information

The audited profit before taxation and the audited profit after taxation of CT Qingchunbao for the two years ended 31st December 2006, which were prepared in accordance with the generally accepted accounting principles in the PRC, were approximately as follows:–

==> picture [379 x 72] intentionally omitted <==

----- Start of picture text -----

||||||
|---|---|---|---|---|
|Year|ended|31st|December|
|2006|2005|
|RMB’000|RMB’000|
|Profit|before|taxation|189,508|209,160|
|Profit|after|taxation|138,772|152,616|

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

The audited net asset value and the audited total asset value of CT Qingchunbao as at 31st December 2006 amounted to approximately RMB381,583,000 and approximately RMB735,251,000 respectively.

* The English name is an informal English translation of its official Chinese name.

– 9 –

LETTER FROM THE BOARD

(b) Huqingyutang Pharmaceutical

Huqingyutang Pharmaceutical is principally engaged in the manufacture and sale of Chinese medicine and health food.

Share capital

Huqingyutang Pharmaceutical has a total registered capital of RMB53,160,000. The total equity interest in Huqingyutang Pharmaceutical are currently held by its shareholders in the following manner:–

										Amount of	Percentage
Name of shareholder										registered capital	shareholding
										RMB
SIIC MedTech (wholly-owned										27,115,292	51.0069%
subsidiary of the					Company)
Hangzhou				Huqingyutang Investment						23,898,952	44.9566%
Co., Ltd.*
(								)
Enhanced				Assets Management					Limited	1,594,800	3.0000%
China (Hangzhou) Qingchunbao Group										550,956	1.0364%
Co., Ltd.* (									)

The equity interest in Huqingyutang Pharmaceutical held by SIIC MedTech will be transferred to SI Pharmaceutical and/or its subsidiaries under the Transfers.

Financial information

The audited consolidated profit before taxation and minority interests and the audited consolidated profit after taxation and minority interests of Huqingyutang Pharmaceutical for the two years ended 31st December 2006, which were prepared in accordance with the generally accepted accounting principles in the PRC, were approximately as follows:–

			**Year ended 31st **	December
			2006	2005
			RMB’000	RMB’000
Consolidated	profit	before taxation and minority
interests			38,755	53,231
Consolidated	profit	after taxation and minority
interests			33,728	45,335

* The English name is an informal English translation of its official Chinese name.

– 10 –

LETTER FROM THE BOARD

The audited consolidated net asset value and the audited consolidated total asset value of Huqingyutang Pharmaceutical as at 31st December 2006 amounted to approximately RMB268,506,000 and approximately RMB369,153,000 respectively.

(c) Xiamen TCM

Xiamen TCM is principally engaged in the manufacture and sale of Chinese medicine.

Share capital

Xiamen TCM has a total registered capital of RMB47,830,000. The total equity interest in Xiamen TCM are currently held by its shareholders in the following manner:–

	Amount of	Percentage
Name of shareholder	registered capital	shareholding
	RMB
SIIC MedTech (wholly-owned	29,175,000	61%
subsidiary of the Company)
Xiamen Qinggong Group Co., Ltd.* ( )	14,350,000	30%
Rocal Health Limited	4,305,000	9%

The equity interest in Xiamen TCM held by SIIC MedTech will be transferred to SI Pharmaceutical and/or its subsidiaries under the Transfers.

Financial information

The audited consolidated profit before taxation and minority interests and the audited consolidated profit after taxation and minority interests of Xiamen TCM for the two years ended 31st December 2006, which were prepared in accordance with the generally accepted accounting principles in the PRC, were approximately as follows:–

			**Year ended 31st **	December
			2006	2005
			RMB’000	RMB’000
Consolidated	profit	before taxation and minority
interests			28,461	35,062
Consolidated	profit	after taxation and minority
interests			26,027	33,165

The audited consolidated net asset value and the audited consolidated total asset value of Xiamen TCM as at 31st December 2006 amounted to approximately RMB121,603,000 and approximately RMB133,553,000 respectively.

* The English name is an informal English translation of its official Chinese name.

– 11 –

LETTER FROM THE BOARD

(d) Liaoning Herbapex

Liaoning Herbapex is principally engaged in the manufacture and sale of Chinese medicine.

Share capital

Liaoning Herbapex has a total registered capital of RMB51,000,000. The total equity interest in Liaoning Herbapex are currently held by its shareholders in the following manner:–

==> picture [379 x 209] intentionally omitted <==

----- Start of picture text -----

||||||||||
|---|---|---|---|---|---|---|---|---|
|Amount|of|Percentage|
|Name|of|shareholder|registered|capital|shareholding|
|RMB|
|SIIC|MedTech|(wholly-owned|28,050,000|55.0000%|
|subsidiary|of|the|Company)|
|Medieval|International|Limited|7,650,000|15.0000%|
|Hu|Lu|Dao|Jing|Xin|Investment|Group|1,000,000|1.9608%|
|Co.,|Ltd.|
|(|)|
|Zheng|Ji|Yu|(|)|8,400,000|16.4706%|
|Qu|Wen|Ge|(|)|4,100,000|8.0392%|
|Lu|Xi|Wei|(|)|1,800,000|3.5294%|

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

The equity interest in Liaoning Herbapex held by SIIC MedTech will be transferred to SI Pharmaceutical and/or its subsidiaries under the Transfers.

Financial information

The audited consolidated profit before taxation and minority interests and the audited consolidated profit after taxation and minority interests of Liaoning Herbapex for the two years ended 31st December 2006, which were prepared in accordance with the generally accepted accounting principles in the PRC, were approximately as follows:–

==> picture [379 x 104] intentionally omitted <==

----- Start of picture text -----

|||||||
|---|---|---|---|---|---|
|Year|ended|31st|December|
|2006|2005|
|RMB’000|RMB’000|
|Consolidated|profit|before|taxation|and|minority|
|interests|11,518|25,446|
|Consolidated|profit|after|taxation|and|minority|
|interests|9,400|25,033|

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

* The English name is an informal English translation of its official Chinese name.

– 12 –

LETTER FROM THE BOARD

The audited consolidated net asset value and the audited consolidated total asset value of Liaoning Herbapex as at 31st December 2006 amounted to approximately RMB137,404,000 and approximately RMB251,371,000 respectively.

(e) Huqingyutang Drugstore

Huqingyutang Drugstore is principally engaged in the operation of about 30 drugstores for sale of traditional Chinese medicine, drug and health food.

Share capital

Huqingyutang Drugstore has a total registered capital of RMB13,157,900 and is in the process of increasing its registered capital to RMB14,084,500 with the increased amount of registered capital contributed by World Honest. Such increase in registered capital will increase the percentage equity interest held by World Honest from 24% to 29% and is subject to the approval by the PRC administration department on foreign investment. On the condition that such increase in registered capital is completed before completion of the Transfers, the total equity interest in Huqingyutang Drugstore will be held by its shareholders in the following manner:–

						Amount of	Percentage
Name of shareholder						registered capital	shareholding
						RMB
Hangzhou				Huqingyutang	Investment	5,100,000	36.21%
Co., Ltd.*
(					)
World Honest (wholly-owned subsidiary						4,084,500	29.00%
of the			Company)
39 Individual Shareholders						4,900,000	34.79%

The equity interest in Huqingyutang Drugstore held by World Honest will be transferred to SI Pharmaceutical and/or its subsidiaries under the Transfers.

* The English name is an informal English translation of its official Chinese name.

– 13 –

LETTER FROM THE BOARD

Financial information

The audited consolidated profit before taxation and minority interests and the audited consolidated profit after taxation and minority interests of Huqingyutang Drugstore for the two years ended 31st December 2006, which were prepared in accordance with the generally accepted accounting principles in the PRC, were approximately as follows:–

			**Year ended 31st **	December
			2006	2005
			RMB’000	RMB’000
Consolidated	profit	before taxation and minority
interests			8,325	8,025
Consolidated	profit	after taxation and minority
interests			6,285	6,611

The audited consolidated net asset value and the audited consolidated total asset value of Huqingyutang Drugstore as at 31st December 2006 amounted to approximately RMB33,096,000 and approximately RMB50,463,000 respectively.

10. REASONS FOR AND BENEFITS OF THE SUBSCRIPTION AND THE TRANSFERS

Upon the completion of the Transfers, the Subscription and the Issue of Remaining Shares in full, the Company will maintain the same controlling stake of approximately 43.62% shareholding in SI Pharmaceutical, while the Chinese pharmaceutical business of the Group will be grouped together under a unified pharmaceutical platform. These will help to streamline the administration structure of the pharmaceutical assets of the Group, and further enhance the strengths and position of SI Pharmaceutical as the pharmaceutical business flagship of the Company, as well as realize the Group’s measure of placing the entire Chinese pharmaceutical assets on the A Shares market. These transactions also present an opportunity for the Group to raise additional capital from the A Shares market.

Upon completion of the Transfers, the Subscription and the Issue of Remaining Shares in full, the Group will record a before-tax profit of approximately RMB164 million based on the carrying value of the Assets as at 31st December 2006. In consideration of a potential tax liability in the estimated amount ranging from approximately RMB117 million to approximately RMB234 million calculated based on a capital gain tax rate of 10% to 20% on the profit on disposal of the Assets, there will be potential after-tax profit of approximately RMB47 million to after-tax loss of approximately RMB70 million. The actual figures of profit and loss will be subject to the actual capital gain tax amount, the carrying value of the Assets at completion of the Transfers and the final number of A Shares placed under the Issue of Remaining Shares.

Upon completion of the Subscription and the Transfers, the effective interest in the companies under the Assets held by the Company will decrease due to the transfer of the Assets by the Company from its wholly-owned subsidiaries to its non-wholly owned

– 14 –

LETTER FROM THE BOARD

subsidiary, SI Pharmaceutical. The consolidated net profit of the Group will be decreased by the portion of the results contributed by the reduced effective shareholding in the Assets held by the Group. The effect on the net asset value and the earnings of the Group will be as follows:–

(i) Effect on net asset value

Upon completion of the Transfers and the Subscription and the Issue of Remaining Shares, the change in the net asset value of the Group will range from a decrease of approximately RMB70 million to an increase of approximately RMB47 million which principally reflects the result of the completion of the Transfers and the Subscription and the Issue of Remaining Shares and the potential accruing tax liability. The change in net asset value of the Group upon completion of the Transfers and the Subscription and the Issue of Remaining Shares represents approximately 0.3% to 0.4% of the net asset value of the Group as at 31st December 2006.

(ii) Effect on earnings

Upon completion of the Subscription and the Transfers, the effective interest in the companies under the Assets held by the Company will decrease due to the transfer of the Assets by the Company from its wholly-owned subsidiaries to its non-wholly owned subsidiary, SI Pharmaceutical and/or its subsidiaries. The consolidated net profit of the Group will be decreased by the portion of the results contributed by the reduced effective shareholding in the Assets held by the Group.

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

11. USE OF PROCEEDS

The Company intends to use the net proceeds in cash from the Transfers as general working capital, and may apply such proceeds towards potential acquisitions that may arise from time to time in the future.

12. GENERAL

The Group is principally engaged in the business of infrastructure facilities, medicine, consumer products and information technology.

13. ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board CAI LAI XING Chairman

– 15 –

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 interest 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

			Number of	Percentage of
		Nature of	issued shares	total issued
Name of Director	Capacity	interests	held	share 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	3,280,000	0.34%
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.

– 16 –

GENERAL INFORMATION

APPENDIX

(b) Share Options of the Company

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

			Number	Percentage
		Nature of	of issued	of total issued
Name of Director	Capacity	interests	shares held	share 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.

– 17 –

GENERAL INFORMATION

APPENDIX

• (b) As at the Latest Practicable Date, so far as was known to the Directors, the interest 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
				ordinary	Percentage
				shares	of total
			Nature of	beneficially	issued share
Name		Capacity	interests	held	capital
(a)	Long Positions
	SIIC	Interest held by	Corporate	548,076,000	56.53%
		controlled		(note (i))
		corporations
	Templeton Asset	Investment	Corporate	57,610,253	5.94%
	Management	manager
	Limited
(b)	Short Positions
	SIIC	Interest 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 is 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 of the Company.

– 18 –

GENERAL INFORMATION

APPENDIX

• (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 Mr. Cai Yu Tian Mr. Qu Ding Mr. Lu Ming Fang Mr. Ding Zhong De Mr. Qian Shi Zheng Mr. Tang Jun

Chairman

Executive Director and President Executive Director and Executive Vice President Executive Director Executive Director Vice President and General Manager of Finance and Planning Department General Manager of the Internal Audit Department and Deputy General Manager of Finance and Planning Department

• (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:–

==> picture [403 x 352] intentionally omitted <==

----- Start of picture text -----

||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|Percentage|
|Name|of|member|of|Class|of|share|of|registered|
|the|Group|Name|of|substantial|shareholders|capital|shareholding|
|Changzhou|Pharmaceutical|Changzhou|State-owned|Assets|equity|interest|23.05%|
|Co.|Ltd.|Investment|Co.|
|(|)|(|)|
|C|T|Qingchunbao|China|(Hangzhou)|Qingchunbao|equity|interest|20%|
|Group|Co.|Ltd.|
|(|)|
|Hangzhou|Chia|Tai|Qingchunbao|equity|interest|20%|
|Staff|Shareholding|Association|
|(|)|
|Chifeng|Arker|Pharmaceutical|Shenzhen|Yigong|Industrial|equity|interest|14.67%|
|Technology|Co.|Ltd.|Co.|Ltd.|
|(|)|(|)|
|Chifeng|Mysun|Pharma|Co.|Ltd.|Chifeng|Pharmaceutical|(Group)|equity|interest|17.91%|
|(|)|Co.|Ltd.|
|(|)|
|Guangdong|Techpool|Biochem|Guangzhou|Bopu|Biotechnology|equity|interest|23.06%|
|Pharma|Co.|Ltd.|Co.|Ltd.|
|(|)|(|)|
|Fu|He|Liang|(|)|equity|interest|11.98%|
|Techpool|International|Pharma|Guangzhou|Bopu|Biotechnology|equity|interest|27.62%|
|Co.|Ltd.*|Co.|Ltd.|
|(|)|(|)|

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

– 19 –

GENERAL INFORMATION

APPENDIX

==> picture [403 x 630] intentionally omitted <==

----- Start of picture text -----

||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Percentage|
|Name|of|member|of|Class|of|share|of|registered|
|the|Group|Name|of|substantial|shareholders|capital|shareholding|
|Changzhou|Techpool|Pharma|Co.|Ltd.|Yaoheng|Investment|Co.|Ltd.|equity|interest|25.82%|
|(|)|(|)|
|Huqingyutang|Pharmaceutical|Hangzhou|Huqingyutang|Investment|equity|interest|44.9566%|
|Co.|Ltd.|
|(|)|
|Liaoning|Herbapex|Medieval|International|Limited|equity|interest|15%|
|Zheng|Ji|Yu|(|)|equity|interest|16.5%|
|Mergen|Biotech|Limited|Excellent|Hope|Holdings|Inc.|ordinary|share|15%|
|Shanghai|Qiyi|Dental|Equipment|Shanghai|Dental|Materials|Factory|equity|interest|10%|
|Co.|Ltd.|Qi|Xin|Operating|Services|
|(|)|Department|
|(|
|)|
|Shanghai|Sunway|Biotech|Shanghai|Alliance|Investment|Ltd.|equity|interest|18.6%|
|Co.|Ltd.|
|Shanghai|Victor|Medical|Instrument|ACCS|Products|Inc.|USA|equity|interest|25%|
|Co.|Ltd.|
|(|)|
|Shanghai|Yichuang|Traditional|Shanghai|University|of|Traditional|equity|interest|45%|
|Chinese|Medicine|Research|&|Chinese|Medicine|
|Development|Center|Co.|Ltd.|Technological|Development|Co.|
|(|(|)|
|)|
|Shanghai|Yunhu|Raw-pharmaceutical|Shanghai|Yunhu|Raw|equity|interest|15.45%|
|Co.|Ltd.|Pharmaceutical|Co.|Ltd.|
|(|)|Staff|Shareholding|Association|
|(|
|)|
|Shanghai|Yunhu|Yuemin|Pharmacy|Shanghai|Yuanfeng|Pharmacy|equity|interest|30%|
|Co.|Ltd.|(|)|
|(|)|
|SI|United|Pharmaceutical|Co.|Ltd.|Zhou|Yi|Ping|(|)|equity|interest|22%|
|(|)|
|Hu|Zheng|(|)|equity|interest|17%|
|Feng|Wei|(|)|equity|interest|10%|
|SI|United|Changcheng|Jin|Jiang|International|Holdings|equity|interest|30%|
|Pharmaceutical|Co.|Ltd.|Co.|Ltd.|
|(|(|)|
|)|
|Xiamen|TCM|Xiamen|Qinggong|Group|Co.|Ltd*|equity|interest|30%|
|(|)|

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

– 20 –

GENERAL INFORMATION

APPENDIX

==> picture [403 x 266] intentionally omitted <==

----- Start of picture text -----

||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|Percentage|
|Name|of|member|of|Class|of|share|of|registered|
|the|Group|Name|of|substantial|shareholders|capital|shareholding|
|Chengdu|Wingfat|Printing|Sichuan|Quanxing|Co.|Ltd.|equity|interest|20%|
|Co.|Ltd.|(|)|
|(|)|
|Chengdu|Jiangshi|Investment|equity|interest|19%|
|Co.|Ltd.|
|(|)|
|Xichuen|Huize|Investment|equity|interest|10%|
|Co.|Ltd.|
|(|)|
|Hebei|Yongxin|Paper|Co.|Ltd.|Xinnan|(Tianjin)|Paper|equity|interest|29%|
|(|)|Co.|Ltd.|
|(|)|
|Xuchang|Yongchang|Printing|Henan|Cigarette|Industrial|Co.|equity|interest|20.6%|
|Co.|Ltd.|(|)|
|Shantou|Bonded|Area|Jinguang|equity|interest|28.4%|
|Industrial|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 interest or short positions in any shares or underlying shares or interest 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.

• (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 valued 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.

– 21 –

GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ INTERESTS IN 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 as 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.

– 22 –