09:38     JIWA BIO-PHARM<02327> - Announcement (3)                            

    Rintech and the remaining director will be nominated by Party A.          
                                                                              
    The PRC JV Company will become an indirect subsidiary of the              
    Company and the results of the PRC JV Company will be consolidated        
    in the Group's financial statements.                                      
                                                                              
    REASON FOR THE TRANSACTIONS                                               
                                                                              
    The Group is principally engaged in the research, development,            
    manufacture and sale of pharmaceutical products, including new            
    medicine and generic pharmaceutical products, and health-care             
    products.                                                                 
                                                                              
    Jiwa Rintech is principally engaged in the research, development          
    and manufacturing of pharmaceutical bulk materials.                       
                                                                              
    Party A is principally engaged in the manufacture and process             
    of fine chemical products. Party B is principally engaged in              
    the manufacture and process of Inositol (*) and bulk medicines            
    of Oryzanol (*), sale of feed additive (*), and                           
    purchase of rice sugar (*) and Calcium Phytate (*). Party                 
    C is principally engaged in the manufacture and process of                
    beverages and food.                                                       
                                                                              
    The manufacturing plant of the PRC JV Company has been under              
    construction and not come into operation yet and will be                  
    principally engaged in the manufacturing of pharmaceutical                
    products, including raw materials. The Directors expect that              
    the plant will come into operation by the end of this year. The           
    unaudited net asset value of the PRC JV Company which was prepared        
    in accordance with accounting principles generally accepted in            
    the PRC as at 28 February 2005 is RMB5,827,700. The Directors             
    are of the view that investing in a manufacturing plant which             
    has started the construction work would be more efficient and             
    cost-effective than constructing its own plant since the Company          
    does not need to spend extra money and time for planning and              
    constructing a new plant. It is also of the Directors' view that          
    Jiangsu, being the place in which the plant of the PRC JV Company         
    is located, is a good place for developing bulk material                  
    manufacturing business in light of the well-established                   
    pharmaceutical supporting industry in the vicinity.                       
                                                                              
    The Company has been reviewing various opportunities with an              
    aim to diversify the variety of its products and to improve their         
    quality. The Directors are of the view that the investment of             
    the PRC JV Company would enable the Group to set up a PRC                 
    manufacturing plant of pharmaceutical products with Jiwa Rintech          
    for export market in the United States and the management of              
    the Jiwa Rintech's research experience in medicinal chemistry             
    can help the Company with new product discovery and development,          
    allowing the Company to avoid hiring staff or investing long-term         
    resources in projects of uncertain potential.                             
                                                                              
    The Directors considered that the terms of the Capital Injection          
    Agreement are fair and reasonable and the Capital Injection               
    Agreement is in the interests of the Company and its shareholders         
    as a whole.                                                               
                                                                              
    GENERAL                                                                   
                                                                              
    The injection of capital into the PRC JV Company constitutes              
    a discloseable transaction for the Company under the Listing              
    Rules. Accordingly, a circular containing further details of              
    the Capital Injection Agreement and the injection of capital              
    into the PRC JV Company will be despatched to the shareholders            
    of the Company as soon as practicable.                                    
                                                                              
    DEFINITIONS