10:46 SHANGHAI IND H<00363> - Announcement (6) The Company has applied to the Stock Exchange for a waiver from the requirement to hold a general meeting of Shareholders and permission for the independent shareholders' approval of the Acquisition and the Disposal to be given in writing. The Company is providing information to the Stock Exchange for consideration of the waiver application. Should such waiver not be granted by the Stock Exchange, the Company will convene an extraordinary general meeting to seek the Shareholders' approval of the Acquisition and the Disposal in accordance with the requirements under the Listing Rules. REASONS FOR AND THE BENEFITS OF THE ACQUISITION With a recorded revenue of more than RMB600 million and a net profit before taxation and minority interest of over RMB22.5 million in 2004 from its medical equipment business, Medical Instruments has a solid business foundation and a considerable presence in the local medical equipment market in Shanghai. Medical Instruments has served as the Group's business development platform in the field of medical equipment. Hence, the Group's acquisition of additional equity interest in Medical Instruments and increasing its holding to a 99% stake will be in line with the strategic business development of the Group's medical business. The executive Directors consider that the Acquisition Agreement is on normal commercial terms and the terms including the consideration are fair and reasonable so far as the Company and the Shareholders taken as a whole are concerned. REASONS FOR AND THE BENEFITS OF THE DISPOSAL The Company (through its subsidiary) does not have a controlling stake in Sunve Pharmaceutical, thus making its control over the operation and management of the company rather passive. As part of the internal restructuring of the Group and in view of the potential gain from the Disposal, the Directors considered that the Disposal would be beneficial to business development of the Group. By reference to the unaudited consolidated management accounts of Sunve Pharmaceutical as at 31st March, 2005, the unaudited carrying value of Sunve Pharmaceutical amounted to approximately RMB121,127,000 (equivalent to approximately HK$114,270,000). The Group's expected gain from the Disposal is approximately HK$27,000,000 subject to the financial position of Sunve Pharmaceutical up to the completion of the Disposal. The Group intends to use the proceeds from the Disposal on new investment projects which may be identified as appropriate for the development of its medicine business. At present, the Company has not yet concluded any preliminary negotiations on potential investments in other medicine businesses, and no concrete plan for such investment has been finalised yet. The executive Directors consider that the Disposal Agreement is on normal commercial terms and the terms including the consideration are fair and reasonable so far as the Company and the Shareholders taken as a whole are concerned. GENERAL The Company and its subsidiaries are principally engaged in the businesses of infrastructure facilities, medicine, consumer products and information technology. Shanghai Medical Group is engaged in the sale and distribution of, inter alia, anti-biotics, subscription medicines, Chinese medicines and OTC, raw pharmaceuticals. A circular giving details of the Acquisition and the Disposal, a letter from an Independent Board Committee and a letter of advice from an independent financial adviser to the Independent Board Committee and the Shareholders is expected to be dispatched to the Shareholders as soon as practicable. As at the date of this announcement, the board of directors of the Company comprises nine executive directors, namely, Mr. CAI Lai Xing, Mr. QU Ding, Mr. LU Ming Fang, Mr. LU Da Yong, Mr. DING Zhong De, Mr. LU Shen, Mr. QIAN Zhi Zheng, Mr. YAO Fang and Mr. TANG Jun; three independent non-executive directors, namely, Dr. LO Ka Shui, Prof. WOO Chia-Wei and Mr. LEUNG Pak To, Francis. DEFINITIONS Term Meaning "Acquisition'' the proposed acquisition of the Acquisition Shares by SI United pursuant to the Acquisition Agreement "Acquisition Agreement'' the agreement between Shanghai Medical Group and SI United in relation to the sale and purchase of the Acquisition Shares dated 21st April, 2005