China New Consumption Group Limited — Regulatory Filings 2009

Dec 31, 2009

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CHINA SHINEWAY PHARMACEUTICAL GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 02877)

CONTINUING CONNECTED TRANSACTION

On 31 December 2009, Shineway Pharmaceutical, an indirect wholly-owned subsidiary of the Company, entered into the General Services Agreement with Shineway Medical in relation to the provision of the Services by Shineway Medical to Shineway Pharmaceutical.

The controlling shareholder of Shineway Medical is Mr. Li, an executive Director. As such, Shineway Medical is a connected person of the Company under the Listing Rules. The transactions contemplated under the General Services Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As one of the applicable percentage ratios (as defined under Rule 14A.10 of the Listing Rules) in respect of the annual caps for the provision of the Services to Shineway Pharmaceutical by Shineway Medical contemplated under the General Services Agreement exceeds 0.1% but is less than 2.5%, the transactions contemplated under the General Services Agreement are only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules and are exempt from the independent shareholders ’ approval requirements under Rule 14A.48 of the Listing Rules.

GENERAL SERVICES AGREEMENT

The principal terms of the General Services Agreement are as follow:

Date : 31 December 2009 Parties : (i) Shineway Medical (ii) Shineway Pharmaceutical

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• Term : The period from 1 January 2010 to 31 December 2012 (both dates inclusive) subject to the early termination by agreement signed by the parties thereto

• Scope of services to : (i) The provision of neighbourhood facilities and property be rendered management services by Shineway Medical to (collectively, the Shineway Pharmaceutical, including (a) provision of “ Services ” ) bicycle parking spaces and caretaking services; (b) provision of property management services such as safety management and fire fighting services at the Factory Premises; and (c) provision of environmental maintenance services such as green management of the Factory Premises, hygienic cleaning services, waste disposal management services and handling of abandoned secondhand resources in accordance with existing property management regulations.

  • (ii) The provision of staff benefit facilities by Shineway Medical to staff of Shineway Pharmaceutical, including (a) staff canteen and dining services; (b) staff living quarters; and (c) other staff recreational facilities.

  • (iii) The provision of machine repair services by Shineway Medical to Shineway Pharmaceutical, including installation, testing and repair services for machinery, equipment and electrical appliances and repair and management services for facilities and pipe network of water and electricity supply.

• Consideration : The fee for the Services to be provided by Shineway Medical will be equal to the sum of the costs of the provision of the Services and an additional of 5.45% (being the business tax ( 營業稅 )(5%), urban maintenance and construction tax ( 城市 建設維護稅 )(0.25%), extra charges for education ( 教育費附 加收入 )(0.15%) and extra charges for regional education ( 地 方教育費附加收入 )(0.05%) payable to the relevant PRC government authorities) thereof.

Shineway Pharmaceutical will settle the service fee to Shineway Medical in cash within 1 month immediately after each quarter during each relevant year.

The aggregate annual consideration payable by Shineway Pharmaceutical to Shineway Medical under the General Services Agreement for each of the years ending 31 December 2010, 2011 and 2012 shall not exceed the relevant annual caps as set out in the paragraph headed “ Annual Caps ” below.

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The Company will re-comply with the relevant disclosure requirements under Chapter 14A of the Listing Rules if the term of the General Services Agreement will be extended such that the term of the General Services Agreements will be more than three years.

ANNUAL CAPS

The proposed annual caps in respect of provision of the Services to Shineway Pharmaceutical by Shineway Medical contemplated under the General Services Agreement for the three years ending 31 December 2012 are set out below:

	Year ending	Year ending	Year ending
	31 December 2010	31 December 2011	31 December 2012
Transaction	Annual Cap	Annual Cap	Annual Cap
Provision of Services to	RMB6,600,000	RMB6,700,000	RMB6,900,000
Shineway	(equivalent to	(equivalent to	(equivalent to
Pharmaceutical by	approximately	approximately	approximately
Shineway Medical	HK$7,491,000)	HK$7,604,500)	HK$7,831,500)

BASIS OF THE ANNUAL CAPS

The percentage increase in costs for provision of Services for each succeeding year shall not exceed 3% above the Price Inflation Index than that of the previous year.

To the best of the knowledge of the Directors, the costs of the provision of the Services during the years ended 2007, 2008 and 2009 were approximately RMB6,596,000, RMB6,727,000 and RMB6,862,000 respectively.

The above proposed annual caps in respect of provision of Services to Shineway Pharmaceutical by Shineway Medical are therefore arrived at after taking into account of certain factors, including (i) the historical figures for the years ended 2007, 2008 and 2009 and assuming that the annual increment of the actual costs of the provision of the Services will not be more than 2% for the three years ending 31 December 2010, 2011 and 2012; (ii) depreciation charges of fixed assets used for provision of the Services (e.g. the staff canteen and the staff living quarters), which in turn reduces the costs of the provision of the Services; (iii) estimated taxation; and (iv) the current market conditions.

REASONS FOR ENTERING INTO THE GENERAL SERVICES AGREEMENT

The Group considers that it is in the interests of Shineway Pharmaceutical to engage the Services from Shineway Medical to ensure smooth operation of its business of manufacture and trading of Chinese pharmaceutical products and upkeeping of the Factory Premises.

GENERAL

The Group, including Shineway Pharmaceutical, is principally engaged in research and development, manufacture and trading of Chinese pharmaceutical products.

Shineway Medical is principally engaged in the business of property and investment holding.

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LISTING RULES IMPLICATIONS

The controlling shareholder of Shineway Medical is Mr. Li, an executive Director. As such, Shineway Medical is a connected person of the Company under Rule 14A.11 of the Listing Rules

As one of the percentage ratios in respect of the annual caps for the provision of Services to Shineway Pharmaceutical by Shineway Medical under the General Services Agreement exceeds 0.1% but is less than 2.5%, the transactions contemplated under the General Services Agreement are only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules and are exempt from the independent shareholders ’ approval requirement under Rule 14A.48 of the Listing Rules.

The Directors (including the independent non-executive Directors) consider that the terms of the General Services Agreement are on normal commercial terms and the transactions contemplated therein are in the ordinary and usual course of business of the Group. They also consider that the General Services Agreement is fair and reasonable and in the interests of the Group and the shareholders of the Company as a whole.

DEFINITIONS

“ Board ” the board of Directors “ Company ” China Shineway Pharmaceutical Group Limited, a company incorporated in Cayman Islands with limited liability and the shares of which are listed on the main board of the Stock Exchange “ connected person(s) ” has the meaning ascribed thereto under the Listing Rules “ Director(s) ” the director(s) of the Company “ Factory Premises ” the factory premises of Shineway Pharmaceutical, being the principal place for its manufacture of Chinese pharmaceutical products and located at 中國河北省石家莊市欒城縣城南口 (Southern exit of Luancheng county, Shijiazhuang municipal, Hebei province, China*) “ General Services the master agreement dated 31 December 2009 entered into Agreement ” between Shineway Pharmaceutical and Shineway Medical in relation to the provision of the Services by Shineway Medical to Shineway Pharmaceutical “ Group ” the Company and its subsidiaries “ HK$ ” Hong Kong dollars, the lawful currency of Hong Kong “ Listing Rules ” the Rules Governing the Listing of Securities on the Stock Exchange

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“ Mr. Li ”

• Mr. Li Zhenjiang ( 李振江 ), an executive Director and the controlling shareholder of Shineway Medical

• “ PRC ” the People ’ s Republic of China

• “ Price Inflation Index ”

  • the price inflation index( 物價上漲指數 ) of Shijiazhuang arrived at by Shijiazhuang Municipal Bureau of Statistics ( 石 家庄市統計局 ) and reported to the National Bureau of Statistics of China ( 國家統計局 )

• “ RMB ” Renminbi, the lawful currency of the PRC

• “ Services ” has the meaning ascribed thereto under the section headed “ General Services Agreement ” in this announcement

• “ Shineway Medical ” 神威醫藥科技股份有限公司 (Shineway Medical Science & Technology Co., Ltd.*), a joint stock company incorporated in the PRC which is ultimately controlled by Mr. Li

• “ Shineway Pharmaceutical ” 神威藥業有限公司 (Shineway Pharmaceutical Co., Ltd.*), a wholly foreign-owned enterprise incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

• “ Stock Exchange ” The Stock Exchange of Hong Kong Limited

• “ subsidiary ” has the meaning ascribed thereto under the Listing Rules

• “ % ” per cent.

By Order of the Board China Shineway Pharmaceutical Group Limited Li Huimin Executive Director

31 December 2009

As at the date of this announcement, the executive Directors are Mr. Li Zhenjiang, Ms. Wang Zhihua, Ms. Xin Yunxia, Mr. Li Huimin and Mr. Hung Randy King Kuen and the independent non-executive Directors are Mr. Ren Dequan and Ms. Cheng Li.

In this announcement, amounts denominated in RMB have been converted into HK$ at the rate of RMB1 = HK$1.135. The translation shall not be taken as representation that Renminbi could actually be converted into Hong Kong dollars at that rate, or at all.

*English names of the PRC established companies/entities/authorities in this announcement are only translations of their official Chinese names. In case of inconsistency, the Chinese names prevail.

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