The Tender Offer is for the securities of a company organised under the laws of the PRC and is subject to the procedure and disclosure requirements of the laws and regulations of the PRC and the rules of the Shanghai Stock Exchange, which are different from those of the United States.  The Tender Offer is being made in the United States pursuant to Section 14(e) of, and Regulation 14E under, the US Securities Exchange Act of 1934, as amended (the “Exchange Act”), subject to the exemptions provided by Rule 14d-1(c) under the Exchange Act and otherwise in accordance with the requirements of the laws and regulations of the PRC and the rules of the Shanghai Stock Exchange.  Accordingly, the Tender Offer is subject to disclosure and other procedural requirements, including with respect to withdrawal rights, the offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and laws.  This document has been prepared for the purposes of complying with the applicable laws and regulations of the PRC and the rules of the Shanghai Stock Exchange and the information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws and regulations of any jurisdiction outside of the PRC.

It may be difficult for US holders or beneficial owners of SJF Shares to enforce their rights and any claim arising out of the US federal securities laws, since SJF and the Offeror are located outside of the United States, and some or all of their officers and directors may be resident outside of the United States.  US holders or beneficial owners of SJF Shares may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the US securities laws.  Further, it may be difficult to compel a foreign company and its affiliates to subject themselves to a US court's judgment.

An official publication of the Tender Offer Report for Sichuan Shuijingfang Company Ltd. was published in Chinese on 2 March 2010.  A convenience translation of the TO Report in English is set out below and if there is any inconsistency the Chinese version shall prevail.  A copy of this document and other documents related to the Tender Offer are and will be available free of charge for inspection on SJF’s website at www.swellfun.com during the course of the Tender Offer. 

 

 

The purpose of this abstract of the Tender Offer is to provide summary information of the Tender Offer to public investors.  The documents in connection with the Tender Offer are still subject to application to the China Securities Regulatory Commission.  Hence, the Tender Offer is not yet effective and is still subject to uncertainties.

The full text of the Tender Offer Report will be available on the website of the Shanghai Stock Exchange (http://www.sse.com.cn) provided that the China Securities Regulatory Commission has no objection on the documents in connection with the Tender Offer.  Investors should read the full text of the Tender Offer Report carefully before making any decisions on whether or not to pre-accept the Tender Offer and should treat such text as the source for any such investment decisions.

1.    The Tender Offer is triggered by DHHBV’s proposed acquisition of 4% of the equity interests in Quanxing Group from Yingsheng (the Chinese shareholder of Quanxing Group).  Following the completion of the Equity Transfer, the Offeror will become the controlling shareholder of Quanxing Group which in turn has a direct holding of 39.71% of the SJF Shares.  The Offeror of the Tender Offer is DHHBV or a Diageo plc domestic wholly-owned and non-wholly-owned subsidiary as approved by the applicable regulatory authority.

2.    According to Section 3(2)(1) of the “Foreign Investment Catalogue” as revised in 2007, production of “famous quality Chinese white sprits” must be controlled by a Chinese party.

3.    The launch of the Tender Offer is subject to the approval from the applicable regulatory authorities of the anti-trust application made in connection with the Equity Transfer,  the approval in relation to strategic investments by a foreign investor in listed companies and the approval relating to foreign investment policies.

The CSRC will only officially accept the application of the Tender Offer after the receipt of the above approvals.  The Tender Offer report will be officially published only when the “no objection” letter has been obtained from the CSRC.

4.    The Tender Offer is triggered by DHHBV’s proposed acquisition of 4% of the equity interests in Quanxing Group from Yingsheng.  Although the purpose of the Tender Offer is not to terminate the listing status of SJF, if upon the expiration of the offer period of the Tender Offer the number of SJF Shares held by the public shareholders fall below 48,854,570 SJF Shares, representing 10% of the total number of SJF Shares in issue, then there is a risk that SJF would fail to meet the minimum public float requirements under the Shanghai Listing Rules.

Pursuant to Articles 12.16, 12.17, 14.1.1(5) and 14.3.1(9) of the Shanghai Listing Rules, if SJF fails to meet the minimum public float requirements under the Shanghai Listing Rules as a result of the fulfillment of a general tender offer obligation by an offeror then such offeror may within five trading days submit a plan to rectify the shareholding structure of the relevant company if the intention of the offeror is not to terminate the listing status of the relevant company.  If the plan is approved by the Shanghai Stock Exchange then the Shanghai Stock Exchange will issue a delisting risk warning on the shares.  The Shanghai Stock Exchange will suspend the trading of the shares of the relevant company if the offeror fails to submit a plan to rectify the shareholding structure, or if the plan as submitted is not approved by the Shanghai Stock Exchange or the shareholding structure of the relevant company continues to fail to meet the minimum public float requirements six months after the issuance of the delisting risk warning.  The Shanghai Stock Exchange will terminate the listing of the shares of the relevant company if the relevant company continues to be unsuitable for listing after six months from the trading suspension.

SJF Shareholders and investors generally are warned against the risks that they may be exposed to if a delisting risk warning is issued on the SJF Shares, or if the trading of the SJF Shares is suspended, or if SJF is delisted.

If after the completion of the Tender Offer, the shareholding structure of SJF no longer meets the listing requirements under the Shanghai Listing Rules, the Offeror, as a shareholder of SJF, may (but shall not be obliged to) cause SJF, by exercising its shareholder voting rights or by submitting proposals through other means in compliance with the laws, regulations and the articles of association of the SJF, to submit and implement a plan addressing the shareholding structure issue within the required time period with an aim to maintain the listing of SJF.

 

 

As at the date of the TO Report, the shareholding structure of SJF is as follows:

 

 

 

On 17 February, 2010, the board of directors of DHHBV held a meeting and passed a resolution to approve DHHBV’s acquisition of 4% of the equity interests in Quanxing Group from Yingsheng, the Chinese shareholder of Quanxing Group, its fulfillment of the resulting obligations to make a general tender offer, and which has also been approved by the board of Diageo plc.

On 28 February, 2010, the board of directors of Quanxing Group held a meeting and passed a resolution to approve DHHBV’s acquisition of 4% of the equity interests in Quanxing Group from Yingsheng.

On 1 March, 2010, DHHBV and Yingsheng entered into the Equity Transfer Agreement.

 

The equity interests in Quanxing Group are currently held by Yingsheng (51%) and DHHBV (49%).  In order to strengthen the cooperation between the joint venture partners in the Chinese liquor industry, DHHBV has agreed to acquire from Yingsheng 4% of the equity interests in Quanxing Group.  Following the completion of the Equity Transfer, DHHBV’s shareholding in Quanxing Group will increase from 49% to 53% and Yingsheng’s corresponding equity interests in Quanxing Group will decrease from 51% to 47%.  DHHBV will become the controlling shareholder of Quanxing Group which in turn has a direct holding of 39.71% of the SJF Shares.

Pursuant to the relevant provisions of the “Securities Law” and the “Regulations on Takeover of Listed Companies”, a general tender offer is required to be made to all the SJF Shareholders apart from Quanxing Group.  The principal purpose of making the Tender Offer is to satisfy the above-mentioned regulatory requirements.  Although the intention of the Offeror in making the Tender Offer is not to privatise SJF, if the level of acceptances received under the Tender Offer result in SJF no longer meeting the minimum public float requirements under the Shanghai Listing Rules and if the Offeror does not to submit a plan to rectify the shareholder structure of SJF so as to enable SJF to maintain its listing, and in which case the listing status of SJF may be terminated and in such case the Offeror will put in place appropriate arrangements to allow the remaining public shareholders to sell their SJF Shares to the Offeror at the Offer Price.

 

As of the date of this TO Report, other than pursuant to the Tender Offer as disclosed herein, the Offeror has no plans to further increase its direct or indirect shareholdings in SJF in the 12 months following the completion of the Tender Offer.

 

The shares subject to the Tender Offer include all listed transferable shares in SJF apart from the shares held by Quanxing Group.  Set forth below is the detailed information on the shares subject to the Tender Offer：

The shares subject to the Tender Offer will be acquired with all rights attached thereto at the expiration of the Offer Period., or subsequently becoming attached thereto.

Pursuant to the “Securities Law” and the “Regulations on Takeover of Listed Companies”, the Offer Price and its method of calculation are set forth below:

The Offeror did not trade in any SJF Shares during the six months prior to the date on which the abstract of the TO Report was published.  The arithmetic mean value of the daily weighted average price of the SJF Shares during the last thirty trading days prior to the date of the abstract of the TO Report is 21.4465 Yuan/Share.

Having considered all relevant factors, the Offeror has determined that the Offer Price shall be 21.45 Yuan/Share.

 

Based on the Offer Price of RMB21.45 per SJF Share, the maximum amount payable as consideration under the Tender Offer is RMB6,318,081,498.30 (assuming all SJF Shares (other than those held by Quanxing Group) are tendered for pre-acceptance under the Tender Offer) (the “Consideration”). 

An amount in US dollars equivalent to RMB1,263,616,299.66, representing 20 per cent. of the Consideration, has been deposited by DHHBV into the account designated by the Shanghai branch of the CSDCC as the performance guarantee for the Tender Offer.  The Shanghai branch of the CSDCC has issued a receipt confirming receipt of such deposit.

The Consideration will be financed through financial resources of the Diageo Group.

Based on the above, the Offeror undertakes that it is able to satisfy the Consideration payable under the Tender Offer. 

 

The offer period of the Tender Offer will last for 30 calendar days (unless otherwise extended with the approval of the CSRC), namely 30 calendar days from the date of receipt of the “no comment” letter from the CSRC on the full text of the TO Report.  The offer period of the Tender Offer shall commence from [●] 2010 to [●] 2010 (both days inclusive).

 

 

 

This TO Report was executed on [date].

 

1.      The TO Report was prepared in accordance with the “Securities Law of the People’s Republic of China”, the “Regulations on the Takeover of Listed Companies”, the “Standards Concerning the Contents and Formats of Information Disclosure by Companies Offering Securities to the Public No.17- Tender Offer Report” and other relevant laws, regulations and any other regulations/laws/provisions other than the laws adopted by the National People’s Congress or its standing committee or the regulations promulgated by the State Council.

2.   The TO Report contains a full disclosure on the equity interests in SJF held by the Offeror as required by the relevant provisions in the “Securities Law of the People’s Republic of China” and the “Regulations on the Takeover of Listed Companies”.  The Offeror undertakes that as of the date of the execution of the TO Report, save for the shareholding information to be disclosed in the TO Report, the Offeror will not hold any interest in any SJF Shares.

3.   The Offeror has obtained all necessary authorisations and approvals to execute the TO Report, and its performance pursuant to the Tender Offer will not violate or conflict with any provisions in its articles of association or internal rules and regulations.

4.   The Tender Offer will, once made, be an unconditional general tender offer to all SJF Shareholders other than Quanxing Group, the principal purpose of which is to fulfill the general tender offer obligation triggered by the acquisition of the 4% equity interests in Quanxing Group by the Offeror from Yingsheng pursuant to the Equity Transfer Agreement.  Although the intention of the Offeror in making the Tender Offer is not to privatise SJF, if the level of acceptances received under the Tender Offer SJF result in SJF no longer meeting the minimum public float requirements under the Shanghai Listing Rules and if the Offeror does not to submit a plan to rectify the shareholder structure of SJF so as to enable SJF to maintain its listing, and in which case the listing status of SJF may be terminated and in such case the Offeror will put in place appropriate arrangements to allow the remaining public shareholders to sell their SJF Shares to the Offeror at the Offer Price.

5.    The Tender Offer will be conducted in accordance with the information contained in the TO Report. Apart from the Offeror and the financial adviser, no other person is entrusted or authorised to provide any information not already contained in the TO Report nor to provide any explanations or clarifications in connection with the TO Report.

6.   The Offeror warrants that the contents of the TO Report and other relevant filing documents are true, accurate and complete and that they do not contain any information, misleading statement or material omission. The Offeror shall bear liability for this warranty.

 

 

 

Unless expressly provided otherwise in this TO Report, the words set forth below shall have the meaning ascribed to them:

 

The Tender Offer is triggered by DHHBV’s proposed acquisition of 4% of the equity interests in Quanxing Group from Yingsheng.  Following the completion of the Equity Transfer, DHHBV will become the controlling shareholder of Quanxing Group, which in turn directly holds 39.71% of the SJF Shares.  The Tender Offer is made by DHHBV or a Diageo plc domestic subsidiary as approved by the applicable regulatory authority.  Set out below are the basic information of DHHBV:

The foregoing registration information has been notarised by the notarisation institution in The Netherlands and authenticated by the Embassy of the PRC in The Netherlands by Authentication Certificate No. (2009) He Ren Zi Di 0004371.

 

 

 

Diageo plc is the world's leading premium drinks business with a wide collection of beverage alcohol brands across spirits, beer and wines.  These brands include: Smirnoff, Johnnie Walker, Captain Morgan, Baileys, J&B, Tanqueray, Guinness, Crown Royal, Beaulieu Vineyard and Sterling Vineyards wines, and Bushmills Irish whiskey.  In addition, Diageo plc also has the distribution rights for the Jose Cuervo brands in North America and many other markets.

Diageo plc is a global company, with its products sold in over 180 markets around the world.  The company is listed on both the London Stock Exchange (DGE) and the New York Stock Exchange (DEO).

Diageo plc employs over 24,000 people worldwide with offices in around 80 countries.  Diageo plc has manufacturing facilities across the globe including Great Britain, Ireland, United States, Canada, Italy, Africa, Latin America, Australia and the Caribbean.

Diageo plc was formed in 1997, following the merger of Grand Metropolitan plc and Guinness plc, and is headquartered in London.

The Diageo Group’s Asia Pacific region operating unit comprises the PRC, India, South Korea, Japan and other Asian markets, Australia and New Zealand.  In the financial year ended 30 June 2009, the net sales of the Diageo Group’s Asia Pacific region operating unit was approximately GBP 0.91 billion, accounting for 9.77% of the total net sales of Diageo plc.

Set forth below is the shareholding structure showing DHHBV and its de facto controllers:

 

 

 

 

As a listed company, Diageo plc has a highly decentralised shareholding structure. As at 22 February 2010, the following substantial interests (3% or more) in Diageo plc’s ordinary share capital (voting securities) had been notified to Diageo plc:

 

As of June 30, 2009, the subsidiaries and associates that principally affect the profits and assets of the Diageo Group include:

* All percentages, unless otherwise stated, relate to holdings of ordinary share capital and are equivalent to the percentage of voting rights held by the Diageo Group.

** French partnership

 

The principal business of DHHBV is investment and the holding of equity/shares.  Set forth below is summary of the financial statements of DHHBV for the financial years ended 30 June 2009, 2008 and 2007:

GBP (million)	30 June 2009	30 June 2008	30 June 2007
Total Assets	209.72	165.49	108.85
Net Assets	201.41	149.47	108.85
Debt-asset Ratio（%）	3.96	9.68	0
	Financial Year of 2009	Financial Year of 2008	Financial Year of 2007
Net Profit	6.95	5.62	2.35
Net ROE（%）	3.45	3.76	2.16

* The table above contains information extracted and derived from the annual financial statements of DHHBV for each of the relevant years.

The above financial information for DHHBV has been prepared in accordance with accounting principles generally accepted in The Netherlands.  Financial data for DHHBV is consolidated into the audited annual financial statements of Diageo plc which have been filed with the Dutch Trade Register.  The annual financial statements for DHHBV are not required to be audited pursuant to Article 396, Book 2 of the Dutch Civil Code.

 

For principal businesses of Diageo plc, please see “(1) Basic information of the ultimate controller of DHHBV” under “Equity and/or control relations in connection with the Offeror” in that section.  Set forth below is a summary of the audited financial information of Diageo plc prepared in accordance with IFRS for the financial years ended 30 June 2009, 2008 and 2007:

GBP (million)	30 June 2009	30 June 2008	30 June 2007
Total Assets	18,096	16,027	13,956
Net Assets	3,936	4,175	4,170
Debt-asset Ratio（%）	78.25	73.95	70.12
	Financial Year of 2009	Financial Year of 2008	Financial Year of 2007
Net Sales	9,311	8,090	7,481
Total Profit for the year	1,725	1,597	1,556
Net ROE（%）	53.55	43.65	39.17

* The table above contains information extracted or derived from the audited annual financial statements of Diageo plc for each of the relevant years.

 

 

As of the time of execution of the TO Report, the Offeror has not been subject to any material securities market related administrative or criminal penalties, nor have them in the past five years been involved in any material civil law suits or arbitrations related to commercial disputes.

 

 

DHHBV is an intermediate investment holding company of Diageo plc.  The sole director of DHHBV is Diageo Holdings Netherlands B.V., which is a legal person.  Diageo Holdings Netherlands B.V. is a wholly owned indirect subsidiary of Diageo plc.  Diageo Holdings Netherlands B.V. is domiciled in The Netherlands and is incorporated as a private limited liability company in The Netherlands.  The registered office of Diageo Holdings Netherlands B.V. is Molenwerf 10-12, 1014 BG Amsterdam, The Netherlands.

 

Name	Position	Nationality	Long-term Residence Place	Permanent Residence Right of Other Country and Regions
Dr Franz Humer	Chairman of the Board, Non-executive Director	Switzerland/Austria	Switzerland	Austria
Paul S Walsh	Chief Executive , Executive Director	UK	UK	None
Nicholas C Rose	Chief Financial Officer, Executive Director	UK	UK	None
Lord Hollick of Notting Hill	Non-executive Director	UK	UK	None
Peggy B Bruzelius	Non-executive Director	Sweden	Sweden	None
Laurence M Danon	Non-executive Director	France	France	None
Betsy D Holden	Non-executive Director	US	US	None
Philip G Scott	Non-executive Director	UK	UK	None
H Todd Stitzer	Non-executive Director	US	US	UK
Paul A Walker	Non-executive Director	UK	UK	None
Paul D Tunnacliffe	Company secretary	UK	UK	None

 

Diageo plc does not have any supervisors.

The directors, supervisors and senior management of the Offeror have not been subjected to any material securities market related administrative or criminal penalties, nor have they in the past five years been involved in any material civil law suits or arbitrations related to commercial disputes.

 

 

Set forth below are the shareholdings of the Offeror and/or its ultimate controllers in the onshore/offshore listed companies that they hold more than 5% of the shares in as of the time of the execution of the TO Report.

 

Listed Company	Listed Stock Exchange/Country	Stock Code	Shareholding percentage held	Note
Desnoes & Geddes Ltd	Jamaica	JAM:DG	57.8%	Indirectly Held by Diageo plc
East Africa Breweries Limited	Kenya	NBO:EABL	50.03%	Indirectly Held by Diageo plc
Guinness Anchor Berhad	Malaysia	KUL:GUINESS	25.50%	Indirectly Held by Diageo plc
Guinness Ghana Breweries Limited	Ghana	GHA:GGBL	51%	Indirectly Held by Diageo plc
Guinness Nigeria PLC	Nigeria	NIG:GUIN	53.08%	Indirectly Held by Diageo plc
Zwack Unicum Likőripari és Kereskedelmi Nyrt	Budapest	ZWACK:HB	25.50%	Indirectly Held by Diageo plc
Namibia Breweries Limited	Namibia	XNAM:NBS	14%	Indirectly Held by Diageo plc
SJF	China	600779	39.71%	Held by Quanxing Group

 

As of the time of the execution of the TO Report, the Offeror and/or its ultimate controllers do not hold or control more than 5% of any financial institution.

Given the past successes of the cooperation between DHHBV, Yingsheng and SJF, DHHBV wishes to further strengthen the cooperation between the joint venture partners in the Chinese white spirits industry.  DHHBV and Yingsheng believe that facilitating further Sino-foreign cooperation will benefit SJF and in turn its public shareholders’ investment return.

In light of this, DHHBV and Yingsheng have agreed to transfer 4% of the equity interests in Quanxing Group from Yingsheng to DHHBV such that following the completion of the Equity Transfer, DHHBV will become the controlling shareholder of Quanxing Group.  The Diageo Group will, by virtue of its extensive operational experience in the global liquor industry, be able to provide SJF with more support to enhance its supply, procurement, marketing, sales and distribution capabilities and as a result strengthen the profitability of SJF, and the likely return to its shareholders. 

Following the completion of the Equity Transfer, DHHBV will hold 53% of the equity interests in Quanxing Group and will become the controlling shareholder of Quanxing Group which in turn has a direct holding of 39.71% of the SJF Shares.  Pursuant to the relevant provisions of the “Securities Law” and the “Regulations on the Takeover of Listed Companies”, as a result of the completion of the Equity Transfer, the Offeror is required to make a general tender offer to all the shareholders of SJF apart from Quanxing Group.  The principal purpose of making the Tender Offer is to satisfy the above-mentioned regulatory requirements.  Although the intention of the Offeror in making the Tender Offer is not to privatise SJF, if the level of acceptances received under the Tender Offer SJF result in SJF no longer meeting the minimum public float requirements under the Shanghai Listing Rules and if the Offeror does not to submit a plan to rectify the shareholder structure of SJF so as to enable SJF to maintain its listing, and in which case the listing status of SJF may be terminated and in such case the Offeror will put in place appropriate arrangements to allow the remaining public shareholders to sell their SJF Shares to the Offeror at the Offer Price.

 

On 17 February, 2010, the board of directors of DHHBV held a meeting and passed a resolution to approve DHHBV’s acquisition of 4% of the equity interests in Quanxing Group from Yingsheng, the Chinese shareholder of Quanxing Group, its fulfillment of the resulting obligations to make a general tender offer, which has also been approved by the board of Diageo plc.

On 28 February, 2010, the board of directors of Quanxing Group held a meeting and passed a resolution to approve DHHBV’s acquisition of 4% of the equity interests in Quanxing Group from Yingsheng.

On 1 March, 2010, DHHBV and Yingsheng entered into the Equity Transfer Agreement.

 

As of the date of this TO Report, other than under the Tender Offer as disclosed herein, the Offeror has no plans to further increase or decrease its direct or indirect shareholdings in SJF in the 12 months following the completion of the Tender Offer.

 

 

The professional institutions engaged by the Offeror for the purpose of the Tender Offer are set out below:

 

(2) Legal counsel：

 

Save as otherwise disclosed in the TO Report, there is no association relationship between CITIC Securities or Haiwen & Partners and any of the Offeror or SJF.

 

CITIC Securities, as the financial adviser of the Offeror, has issued conclusive opinions in connection with the Tender Offer in its financial adviser report as follow:

“We, as the financial adviser, are of the opinion that the Offeror of the Tender Offer complies with the “Securities Law”, the “Regulation on the Takeover of Listed Companies” and other applicable laws and regulations.  The Offeror has made proper arrangements to fund its obligations under the Tender Offer.  The Offeror has the capacity to conduct the Tender Offer, pay for the Tender Offer and fulfill the other obligations in connection with the Tender Offer.

Following due diligence conducted by us, we are of the opinion that the Offeror complies with the requirements relating to strategic investment in a listed company under the “Administration Rules regarding Strategic Investment in Listed Companies by Foreign Investors” (Ministry of Commerce, CSRC, State Tax General Bureau State Administration of Industry and Commerce, State Administration of Foreign Exchange Document No. 28, 2005).”

 

Haiwen & Partners, as the legal counsel of the Offeror, has issued conclusive opinions in connection with the Tender Offer in its legal opinion as follow:

“We are of the opinion that the content of the Tender Offer Report issued by the Offeror is authentic, correct and complete and no false information, misleading representations and material omissions are found therein.”