Announcement on Related Party Transaction of Shanghai Worldbest Co., Ltd.
The Company and all of the members of Board of Directors guarantee the authenticity, accuracy and integrity of the announcement and bear the joint liability for false record, misleading statement or important omission of the announcement.
Important Notice
Content of transaction: The Company used all of its equity of Shanghai Worldbest Life Science Research and Development Co., Ltd. and Suzhou Worldbest Agro-Biochemical Co.,Ltd.to participate the establishment of China Worldbest Life Industry Co., Ltd.
Target of transaction: 95.66% of the equity of Shanghai Worldbest Life Science Research and Development Co., Ltd. and 96.75% of the equity of Suzhou Worldbest Agro-Biochemical Co.,Ltd.
Amount of transaction: About RMB 170 million.
Withdraw of related directors: Related-party directors Ji Qunli, Yu Chaoyang, Wang Caifu, Fu Weimin whose interests are closely related with this transaction abstained from voting in the spirit of being responsible for all shareholders.
Influence of transaction upon the Company’s sustainable operating ability, gain and loss, and status of assets: The implementation of this related party transaction can avoid the competition between the Company and its major shareholder which is beneficial for the Company to adjust the industry structure and to concentrate on developing the main business.
Other issues to be noticed by investors: After the transaction, the Company will hold about 17% of the total share capital of China Worldbest Life Industry Co., Ltd. and will not directly manage the production and operation of life industry. There is no additional condition attached to the above transaction.
This related party transaction shall be approved by the Shareholders’ Meeting of the Company before implementation, the Company will disclose the information according to the progress of the establishment of China Worldbest Life Industry Co.,Ltd promptly.
1. Brief account of the transaction
The Company and China Worldbest Group Co., Ltd. (hereinafter briefed as the “Worldbest Group”) signed Framework Agreement on the Establishment of China Worldbest Life Industry Co., Ltd. on April 18 ,2003. In accordance with the Agreement, the Company used its 95.66% of the equity of Shanghai Worldbest Life Science Research and Development Co., Ltd. (hereinafter briefed as the “Life Science”) and 96.75% of the equity of Suzhou Worldbest Agro-Biochemical Co.,Ltd.. (hereinafter briefed as the “Suzhou Agricultural Chemical”) as investment to co-establish China Worldbest Life Industry Co., Ltd. (hereinafter briefed as “Worldbest Life”) with “Worldbest Group”.
In order to optimize the distribution of resources and improve the productivity of assets, “Worldbest Group” recapitalized the life industry-related assets of its subsidiaries as the foundation to establish “Worldbest Life”, which is aimed to be the advanced domestic enterprise of Life Industry. The registered capital of “Worldbest Group ”is planned to be RMB 1000 million, the Company used its 95.66% of the equity of “Life Science” and 96.75% of the equity of “Suzhou Agricultural Chemical” as investment, taking up about 17% of the equity of “Worldbest Life”.
Capital contribution of the Company and “Worldbest Group” as follows:
No Shareholder Way of Investment
Amount of capital contribution (RMB100 million) Percentage of equity (%)
1 Worldbest Group Asset and cash 8.3 83%
2 The Company Asset 1.7 17%
“Worldbest Group” is the biggest shareholder of the Company, and in accordance with the related regulations, this transaction belongs to relate party transaction.
The 2nd Session of the 3rd Board of Directors of the Company was held on April 18, 2003, at which, this related party transaction was carefully reviewed. All of the related-party directors abstained from voting. The non-related-party directors unanimously approved this proposal.
2. Introduction of related party
1) Name of company: China Worldbest Group Co., Ltd.
2) Address: No. 660 Shang Cheng Road, Pudong New Area, Shanghai
3) Legal representative: Zhou Yucheng
4) Type of company: Company of limited liabilities (domestic joint company)
5) Registered capital: RMB 479.73 million
6) Business scope: Domestic trade (except those specially stipulated), development and management of real estate, warehousing, crude oil, foreign economic cooperation, self-operation and agency business of exports and trade of other products and technology except those monopolized by the State or those operated by companies ratified by the State, counter trade and entrepot trade.
7) Main financial situation: Total profit of 2001 of Worldbest Group is RMB 552.35 million, and net assets by December 31 of 2001 were RMB 5277.79 million.
Worldbest Group has 154.932 million legal person shares of the Company; accounting for 31.51% of the Company’s total shares, and is the biggest shareholder of the Company.
3. Introduction of target of related party transaction
1. Shanghai Worldbest Life Science Research and Development Co., Ltd.
1) Address: 26F, Worldbest Plaza, No.1958,Zhong Shanbei Road, Shanghai
2) Legal representative: Dong Yunxiong
3) Type of company: Company of limited liabilities
4) Registered capital: RMB 115.16 million
5) Business scope: biotechnology, compound pharmaceuticals , natural medicine, testing preparation, enzyme of industrial use, the research and development of agricultural biotechnology, scientific information consultation and service.
The registered capital of Life Science is RMB 115.16 million and it has two shareholders, of whom, the Company has 110.16 million shares, taking up 95.66% of the total share capital; Shanghai ChuangJia Investment Co., Ltd. has 5 million shares, taking up 4.34% of the total share capital.
In accordance with the audit report prepared by Shanghai Ernst & Young Da Hua CPAs Firm, an accounting firm qualified for securities business, by December 31 of 2002, total assets of Life Science were RMB 124.6429 million, total liabilities were RMB 18.2484 million, net assets were RMB 106.3945 million. The value of the net assets of the 95.66% of the total equity owned by the Company were RMB 101.7770 million.
2. Suzhou Worldbest Agro-Biochemical Co.,Ltd.
1) Address: Mudu Town, Wuzhong District ,Suzhou
2) Legal representative: Dong Yunxiong
3) Type of company: Company of limited liabilities
4) Registered capital : RMB 61.61million
5) Business scope: manufacture and sale of pesticide, various kinds of chemical preparations, hardware tools, garments; import the raw materials, equipment, instruments, meters and auxiliaries for manufacturing and research.
The registered capital of Suzhou Agricultural Chemical is RMB 61.61million and it has two shareholders, of whom, The Company has RMB 59.61 million shares, taking up 96.75% of the total share capital; Dai Jiansheng (natural person) has RMB 2 million shares, taking up 3.25% of the total capital.
In accordance with the audit report prepared by Shanghai Ernst & Young Da Hua CPAs Firm, an accounting firm qualified for securities business, by December 31 of 2002, the total assets of Suzhou Agricultural Chemical were RMB 204.0453 million, total liabilities were RMB 133.6205 million, net assets were RMB 70.4248 million. The value of the net assets of the 96.75% of the total equity owned by the Company were RMB 68.1360 million.
4. Main contents of this transaction and pricing policy
1) The two Parties of the Agreement : The Company and “Worldbest Group”
2) Date of signature of the Agreement: April 18 ,2003
3) Content of transaction: The Company uses all of its equity of Shanghai Worldbest Life Science Research and Development Co., Ltd. and Suzhou Worldbest Agro-Biochemical Co.,Ltd. to participate the establishment of China Worldbest Life Industry Co., Ltd.
4) Pricing policy: Fix December 31 of 2002 as the reference date for asset evaluation, the two parties negotiated and fixed the transaction price according to the value of the evaluated net assets of all the Company’s equity of Life Science and Suzhou Agricultural Chemical. In accordance with the evaluation report prepared by Shanghai Ernst & Young Da Hua CPAs Firm, an accounting firm qualified for securities business, by December 31 of 2002, the value of the total assets of Life Science is about RMB 124.6429 million, the total liabilities was RMB 18.2484 million, and the net assets was RMB 106.3945 million. The value of the 95.66% of the equity owned by the Company was about RMB 101.7770million. By December 31 of 2002, the value of the total assets of Suzhou Agricultural Chemical was about RMB 204.0453 million, the total liabilities was RMB 133.6205 million, and the net assets was RMB 70.4248 million. The value of the net assets of the 96.75% of the equity owned by the Company was about RMB 68.1360 million. The value of the evaluated net assets of Life Science and Suzhou Agricultural Chemical was RMB 169.9130 million.
5) Entry-into-force condition: The Agreement will become effective after it is signed and sealed by legal representatives or authorized representatives of the two Parties to the Agreement and reviewed and approved by the two Parties’ Board of Directors Meeting, Shareholders’ Meeting or superordinate authorities. This Agreement needs to be approved by the Company’s Shareholders’ Meeting before it become effective.
5. Opinion of Board of Directors to this related party transaction
1) Objective of this related party transaction: to adjust the industry structure and to avoid the competition with the major shareholder of the Company.
2) Influence of this transaction upon the Company: After the transaction, the Company holds about 17% of the equity of Worldbest Life and will not directly manage the production and operation of life industry. This will be beneficial for the Company to concentrate on developing the main business such as chemical fiber, chemical new material, etc and to avoid the competition with major shareholder of the Company.
6. Opinion of independent directors
Independent directors of the Company, Xu Duanfu, Wang Fanghua, Zhang Wenxian, and Chen Yanmo believe that vote of this related party transaction conforms to the relative regulations ,and the price is fair, the transaction is equitable and reasonable and does not jeopardize the rights of non-related shareholders, and the transaction is beneficial to the long-term development of the Company .
7. List of documents for reference
1)Resolution of the 2nd Session of the 3rd Board of Directors of the Company
2) Opinion of independent directors
3) Framework Agreement on the Establishment of China Worldbest Life Industry Co., Ltd.
4) Audit report prepared by Ernst & Young Da Hua CPAs Firm
Hereby announced .
Shanghai Worldbest Co., Ltd.
2003/4/18
14/05/2003
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