09:41     JIWA BIO-PHARM<02327> - Announcement (2)                            

    synergies can be created through the Acquisition, whereby the             
    Group's business could be diversified by gaining access to                
    technologies and know-hows relating to traditional Chinese                
    pharmaceutical materials and tradtiional Chinese Medicines                
    which are valuable to the Group in enhancing its research and             
    development, the consideration is reasonable and fair.                    
                                                                              
    The unaudited net asset value of YPML as at 31 December 2004              
    is RMB13,260,069 (equivalent to approximately HK$12.5 million).           
                                                                              
    The unaudited net loss before taxation and extraordinary items            
    attributable to YPML for the two years ended 31 December 2003             
    and 31 December 2004 which was prepared in accordance with                
    accounting principles generally accepted in the PRC is                    
    RMB6,626,160 (equivalent to approximately HK$6.3 million) and             
    RMB4,974,031 (equivalent to approximately HK$4.7 million)                 
    respectively.                                                             
                                                                              
    Payment Terms                                                             
                                                                              
    The consideration in respect of the Acquisition will be settled           
    in 1 payment by Jiwa Pharmaceuticals in cash through internal             
    resources within 5 business days immediately after Completion.            
                                                                              
    The Directors (including the independent non-executive                    
    Directors) consider that the Share Transfer Agreement has been            
    agreed on normal commercial terms between the parties. The                
    Directors (including the independent non-executive Directors)             
    further consider that the terms of the Share Transfer Agreement           
    are fair and reasonable so far as the Shareholders are concerned          
    and the terms of the Share Transfer Agreement are in the interests        
    of the Company and the Shareholders as a whole.                           
                                                                              
    Since YPML will be an associate of the Company, the results of            
    YPML will not be consolidated in the Group's financial statements,        
    but will be accounted for using the equity accounting method.             
                                                                              
    Condition                                                                 
                                                                              
    The Share Transfer Agreement is conditional upon the requisite            
    governmental approvals and the relevant registration procedures           
    with the relevant PRC authorities under the PRC laws in respect           
    of the Acquisition as stated above being obtained or completed.           
                                                                              
    REASON FOR THE ACQUISITION                                                
                                                                              
    Strategic Investment                                                      
                                                                              
    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.                                                                 
                                                                              
    YPML is principally engaged in the research, development,                 
    planting, manufacturing and sale of traditional Chinese                   
    pharmaceutical materials and traditional Chinese medicines.               
                                                                              
    The Vendor is a collective enterprise established in the PRC              
    and is owned by 569 employees of YPML, holding 23.81%                     
    shareholding interests in YPML.                                           
                                                                              
    With YPML's centralized merchandising system and extensive sales          
    network in the PRC, the Directors are of the view that the                
    Acquisition would represent a good opportunity for the Group              
    to accelerate its expansion in the business of traditional                
    Chinese pharmaceutical materials and medicines in the PRC. On             
    the other hand, since the Share Transfer Agreement is conditional         
    on the