10:04     SHANDONG XINHUA<00719> - Announcement (1)                           

    The Stock Exchange of Hong Kong Limited takes no responsibility for       
    the contents of this announcement, makes no representation as to its      
    accuracy or completeness and expressly disclaims any liability            
    whatsoever for any loss howsoever arising from or in reliance upon the    
    whole or any part of the contents of this announcement.                   
                                                                              
    Shandong Xinhua Pharmaceutical Company Limited                            
                                                                              
                                                                              
    (a joint stock limited company established in the People's Republic of    
    China with limited liability)                                             
                                                                              
    (Stock Code: 0719)                                                        
                                                                              
    NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS                              
                                                                              
                                                                              
    Reference is made to announcements dated 26 September, 2002 and 12th      
    November, 2002 and circular dated 17th October, 2002. On 7 December       
    1996, the Company entered into with SXPGC the Trademark Licence           
    Agreement for the exclusive use of the trademark "Xinhua" by the          
    Company for its existing and future products in and outside the PRC.      
    On 26th September, 2002, the Company and SXPGC entered into the 2002      
    Agreement in relation to sale and purchase of chemical raw materials      
    and sundry items (including but not limited to water, electricity,        
    steam and such other items for the production of pharmaceutical           
    products) and the provisions of services to and from SXPGC for a term     
    from 26th September, 2002 to 31st December, 2006 subject to extension.    
    The Ongoing Connected Transactions are continuous in nature and were      
    entered into in the ordinary course of business of the Company and        
    constituted a continuing connected transactions of the Company under      
    the Listing Rules. On 21st November, 2002, the Stock Exchange granted     
    the Company a waiver from strict compliance with the Listing Rules in     
    connection with the Ongoing Connected Transactions for a period of        
    three financial years ended on 31st December, 2004. Since the above       
    waiver has expired, the Company is required to comply with the Listing    
    Rules currently in force.                                                 
                                                                              
    As at the date of this announcement, SXPGC holds and owns 46.89% of       
    the total issued share capital of the Company and is currently the        
    largest shareholder of the Company. SXPGC is a connected person of the    
    Company for the purposes of the Listing Rules. Therefore, any             
    transactions between SXPGC and the Company constitute connected           
    transactions under Chapter 14A of the Listing Rules. The Ongoing          
    Connected Transactions are subject to reporting, announcement and         
    Independent Shareholders' approval requirement pursuant to Rule           
    14A.35. The Independent Shareholders will be asked to consider and, if    
    thought fit, approve by poll the Ongoing Connected Transactions and       
    the New Annual Cap for the two years ended 31 December 2006, which        
    will be RMB 128,120,000 and RMB 144,440,000 respectively, at AGM.         
                                                                              
    A circular containing, among other things, (i) details of the Ongoing     
    Connected Transactions; (ii) a letter from an independent financial       
    adviser to the Independent Board Committee containing its advice to       
    the Independent Board Committee and the Independent Shareholders;         
    (iii) the recommendation of the Independent Board Committee; and (iv)     
    a notice of the AGM will be despatched to the shareholders of the         
    Company as soon as practicable.                                           
                                                                              
    1. 2002 AGREEMENT                                                         
                                                                              
    Date of agreement                                                         
                                                                              
    26 September, 2002                                                        
                                                                              
    Parties to agreement                                                      
                                                                              
    SXPGC and the Company                                                     
                                                                              
    Principal Terms and Conditions                                            
                                                                              
    The 2002 Agreement entered into between the Company and SXPGC on 26       
    September 2002 contains the following principal terms:                    
                                                                              
    (1) The Company shall purchase the following products and services        
    from SXPGC at market price:                                               
                                                                              
    (a) chemical raw materials primarily for the production of                
    pharmaceutical products;                                                  
                                                                              
    (b) sundry items and materials relating to maintenance and repair of      
    production equipment;                                                     
                                                                              
    (c) sundry items and services relating to packaging products; and