10:12 SINOCHEM HK<00297>-Announcement & Resumption of Trading(16) If Completion occurs after the implementation of the matters referred to in (i) to (iv) above, the issue of 5,050,000,000 Consideration Shares at the Issue Price of HK$1.00 each will result in a further share premium of HK$4.545 billion. Pursuant to the Further Share Premium Cancellation, a credit of HK$131,625,200 will arise from the cancellation of part of such further share premium. All amounts representing credits from the Capital Reduction, the Existing Share Premium Cancellation and the Further Share Premium Cancellation will be transferred to the contributed surplus account of the Company where it may be utilised as the Board may direct in accordance with the Bye-laws and all applicable laws. As at 31 March 2004, the balance standing to the credit of the Company's contributed surplus account amounted to approximately HK$1,114,686,000. Such balance, when combined with the aggregate credits to be transferred to the contributed surplus account as described above, is expected to amount to approximately HK$2,326,648,000. The Directors intend to utilise all such sums in the contributed surplus account to set off against an equivalent amount of the accumulated losses of the Company as at 31 March 2004 which stood at approximately HK$2,326,648,000. On the bases described above and assuming Completion occurs after the implementation of the matters referred to in (i) to (iv) above, the entire accumulated losses of the Company as at 31 March 2004 will be eliminated in full following Completion. If Completion fails to occur following the Capital Reorganisation, the Further Share Premium Cancellation will not be implemented and the resultant balance standing in the contributed surplus account is expected to amount to approximately HK$2,195,022,845 in aggregate. The Directors intend to utilise such sum to partially eliminate an equivalent amount of the accumulated losses of the Company as at 31 March 2004. Effect of the Capital Reorganisation The existing authorized share capital of the Company is HK$1,000,000,000 divided into 6,840,000,000 Ordinary Shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each, of which 3,679,498,284 Ordinary Shares and 103 Preference Shares are in issue as at the date of this announcement. Upon the implementation of the matters referred to in (i) to (iv) under the section headed Overview above but prior to Completion, the authorised share capital of the Company will be increased to HK$1,316,000,000, divided into 10,000,000,000 New Shares of HK$0.10 each and 316 Preference Shares of HK$1,000,000 each, of which 367,949,828 New Shares of HK$0.10 each and 103 Preference Shares will be in issue (assuming no further Ordinary Shares are issued after the date of this announcement and all outstanding Preference Shares have not been converted or redeemed). The board lot size will remain as 2,000 New Shares following the Capital Reduction and Share Consolidation. Other than the expenses incurred in relation to the Capital Reorganisation and the elimination of the accumulated losses of the Company, the implementation thereof will not, by itself, alter the underlying assets, business operations, management or financial position of the Company. The Directors believe that the Capital Reorganisation will not have any material adverse effect on the financial position of the Company and its subsidiaries. Reasons for the Capital Reorganisation The audited financial statements of the Company as at 31 March 2004 showed that the Company had accumulated losses of approximately HK$2,326,648,000. The Directors believe that it is unlikely that the Company will generate sufficient profits in the immediate future to eliminate this deficit and that it would be inappropriate for the Company to pay dividends while the deficit remains. The Directors propose the Capital Reorganisation be adopted by the Company such that the amount arising from such reduction and cancellation may be applied to eliminate the accumulated losses. The Directors expect that upon the Share Consolidation taking effect, the trading value of the New Shares will be in the preferred range from the perspective of international investors. Conditions of the Capital Reorganisation The Capital Reorganisation is conditional on: (a) the passing by the Shareholders at the SGM of the necessary resolutions approving the Capital Reduction, the Share Consolidation, the increase in authorised share capital of the Company, the Existing Share Premium Cancellation and, conditional on Completion taking place, the Further Share Premium Cancellation and the transfer of all credits arising to the contributed surplus account of the Company; and