Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2002

Jun 11, 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect about this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Apollo Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this document, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

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CHINA APOLLO HOLDINGS LIMITED 中國太陽神集團有限公司

(To be renamed as Maxx Bioscience Holdings Limited)

(incorporated in Bermuda with limited liability)

DISCLOSEABLE TRANSACTION

SIGNING OF THE JOINT COOPERATION AGREEMENT IN RELATION TO THE ESTABLISHMENT OF TWO JOINT VENTURE COMPANIES TO ENGAGE IN THE PHARMACEUTICAL FIELD

This circular is provided for the information of shareholders only.

12th June, 2002

DEFINITIONS

In this document, the following expressions shall have the following meanings unless the context requires otherwise:

“Board”	the board of Directors
“Combinatorial Chemical	a collection of chemical compounds that are synthesized
Compound Library”	by a method of combinatorial chemistry. Combinatorial
	chemistry involves the large-scale synthesis of variations
	from a molecule that has therapeutic promise
“Company”	China Apollo Holdings Limited (soon to be renamed as
	Maxx Bioscience Holdings Limited), a company
	incorporated in Bermuda with limited liability and the
	shares of which are listed on the main board of the Stock
	Exchange (stock code: 512)
“Director(s)”	director(s) of the Company
“Drug Candidates”	the molecules that have therapeutic promise
“Drug Target”	the protein, enzyme, receptor and DNA used for screening
	drug candidate of the particular diseases
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	Hong Kong Special Administrative Region of The
	People’s Republic of China
“Integrated Drug Discovery	a combination of technologies that are used in the
Platform”	development of Drug Candidates. Those technologies
	include, but not limited to, drug screening from natural
	products, synthesis of chemical compounds and molecular
	design etc.
“Joint Cooperation Agreement”	the joint cooperation agreement entered into between the
	Company and SIMM dated 17th May, 2002 in relation to
	the establishment of the Shanghai Joint Venture and
	MMSL

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DEFINITIONS

“Latest Practicable Date”	10th June, 2002, being the latest practicable date for
	ascertaining information referred to in this circular prior
	to the printing of this circular
“Listing Rules”	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited
“MAST”	MAXX Applied Science Technology Ltd., which is a
	direct wholly-owned subsidiary of the Company
	incorporated in Hong Kong with limited liability
“MMSL”	MAXX Medica (Shanghai) Ltd., initially an indirect
	wholly-owned subsidiary of the Company incorporated
	in Hong Kong with limited liability
“PRC”	The People’s Republic of China
“SDI Ordinance”	the Securities (Disclosure of Interests) Ordinance,
	Chapter 396 of the laws of Hong Kong
“Shanghai Joint Venture”	the joint venture to be established in Shanghai, the PRC,
	as a sino-foreign cooperative joint venture between
	MMSL and SIMM Subsidiary
“Shareholders”	the shareholders of the Company
“SIMM”	the Shanghai Institute of Materia Medica, Chinese
	Academy of Sciences, an independent third party not
	connected with the directors, chief executive or
	substantial shareholders of the Company or its
	subsidiaries or any of their respective associates
“SIMM (HK) Subsidiary”	a proposed wholly-owned subsidiary of SIMM to be
	incorporated in Hong Kong with limited liability
“SIMM Subsidiary”	a proposed subsidiary of SIMM to be established in the
	PRC, in which SIMM holds not less than 90% equity
	interest
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

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LETTER FROM THE BOARD

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CHINA APOLLO HOLDINGS LIMITED 中國太陽神集團有限公司

(To be renamed as Maxx Bioscience Holdings Limited)

(incorporated in Bermuda with limited liability)

Executive Directors: Lo Yuk Yee (Chairman) Lok Fai Zang Jing Wu Liu Juh, James

Registered Office: Clarendon House Church Street Hamilton HM 11 Bermuda

Independent Non-Executive Directors: Goh Gen Cheung Ho Kwok Wah, George Yuen Kin

Principal Place of Business: 10th Floor Cammer Commercial Building 30-32 Cameron Road Tsimshatsui, Kowloon Hong Kong

12th June, 2002

To the Shareholders of China Apollo Holdings Limited

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

SIGNING OF THE JOINT COOPERATION AGREEMENT IN RELATION TO THE ESTABLISHMENT OF TWO JOINT VENTURE COMPANIES TO ENGAGE IN THE PHARMACEUTICAL FIELD

1. INTRODUCTION

As detailed in the announcement of the Company dated 22nd May, 2002, the Company and SIMM entered into the Joint Cooperation Agreement on 17th May, 2002 in relation to the establishment of the Shanghai Joint Venture and MMSL which will engage in the research, development and commercialization in the pharmaceutical field in the PRC. The Shanghai Joint Venture will be a sino-foreign cooperative joint venture to be

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LETTER FROM THE BOARD

established in the PRC and its principal business will be in the development of pharmaceutical technologies and products through the proprietary Integrated Drug Discovery Platform, which is designed to accelerate the discovery of new drugs. MMSL is a joint venture company to be established in Hong Kong and will act as the fundraising vehicle to support the future business development of the Shanghai Joint Venture.

Pursuant to the terms of the Joint Venture Cooperation Agreement, the Company agreed to contribute 100% of the initial registered capital in the amount of HK$1 million or the minimum amount required by law, whichever is the lower, and an aggregate amount of approximately HK$5 million, which includes the aforesaid capital contribution, made up of registered capital and shareholder’s loan, to the Shanghai Joint Venture.

The Company has committed to raise HK$35 million to HK$40 million through MMSL within 6 months, inclusive of the HK$5 million to be contributed to the Shanghai Joint Venture, and will use its best efforts to raise a further HK$100 million within 2 years, from the establishment of the Shanghai Joint Venture. The HK$35 million to HK$40 million to be raised will be used as working capital of MMSL, and may further be used to support the research and development work of the Shanghai Joint Venture. From the date of the Joint Cooperation Agreement up to the Latest Practicable Date, the Company has not made any capital contribution or commitment to the Shanghai Joint Venture or MMSL pursuant to the terms of the Joint Cooperation Agreement or otherwise.

As at 31st December 2001, the audited consolidated net tangible assets of the Company were approximately HK$188.528 million. Therefore, the investment to be made by the Company in the Shanghai Joint Venture, together with the funds committed to be raised by the Company in MMSL, in the aggregate amount of approximately HK$40 million, constitute a discloseable transaction for the Company under Chapter 14 of the Listing Rules. The purpose of this circular is to give the Shareholders further information on the terms of the Joint Cooperation Agreement.

2. JOINT COOPERATION AGREEMENT

Date : 17th May, 2002

Parties

Party A : The Company; and Party B : SIMM

Pursuant to the Joint Cooperation Agreement, the parties agreed to establish two joint ventures, the Shanghai Joint Venture and MMSL, in order to carry out research and development of pharmaceutical products and technologies in the PRC. The Joint

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LETTER FROM THE BOARD

Cooperation Agreement shall be effective from 17th May, 2002 and shall not be terminated unless the parties thereto by written consent agree to do so.

The following is a simplified structure involving the Shanghai Joint Venture and MMSL pursuant to the Joint Cooperation Agreement:

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----- Start of picture text -----

A Legal Entity held
by the Chinese
SIMM Academy
(in the PRC) of Sciences
The Company
90%
100% 100%
MAST SIMM (HK) 10%
(in HK) Subsidiary
(in HK)
100%/ note 1
note 1 40%
60%
MMSL SIMM Subsidiary
(in HK) (in the PRC)
note 2
note 2 1%
99%
The Shanghai Joint Venture
(in the PRC)
----- End of picture text -----

Note 1: Upon the establishment of the Shanghai Joint Venture and the obtaining of the necessary licences in respect of the use of certain equipment and technology and the fulfillment of the other necessary conditions, the Company shall procure MMSL to issue an option for up to 40% of new shares to an escrow agent, which option will be transferred to SIMM (HK) Subsidiary once it is set up. MAST shall hold the remaining 60% interests in MMSL.

• Note 2: MMSL and SIMM Subsidiary shall assume profit and loss in the proportion of 99% to 1%, respectively. MMSL shall contribute 100% of the registered capital of the Shanghai Joint Venture.

3. THE SHANGHAI JOINT VENTURE

The Shanghai Joint Venture will be established in the PRC as a sino-foreign cooperative joint venture between the Company, through MMSL, and SIMM, through SIMM Subsidiary. SIMM has agreed to grant a first right of refusal in respect of research projects for new pharmaceutical products to the Company and in due course to the Shanghai Joint Venture once it is established. To the extent that any such research projects are not taken up by the Company or the Shanghai Joint Venture, SIMM may seek cooperation with and funding from third parties. In such event, the Shanghai Joint Venture still continues to retain the first right to develop such projects and to use by way of licensing any such new pharmaceutical products on the same terms as such third parties.

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LETTER FROM THE BOARD

Scope of Business

The scope of business of the Shanghai Joint Venture is (i) to engage in the research and development of pharmaceutical products selected from SIMM; and (ii) to expand and strengthen the Combinatorial Chemical Compound Library in the Integrated Drug Discovery Platform for generating more Drug Candidates for the joint collaboration drug discovery programmes of big pharmaceutical companies and for the expansion of the range of product pipeline.

Principal terms concerning the Shanghai Joint Venture

The Company, through MMSL, is obliged to contribute the lower of HK$1 million or the minimum amount required by law, whichever is the lower, to the Shanghai Joint Venture by way of initial registered capital of the Shanghai Joint Venture and an aggregate amount of approximately HK$5 million, which includes the aforesaid capital contribution, made up of a combination of registered capital and shareholder’s loan.

SIMM is obliged to grant to the Shanghai Joint Venture the right to the use of certain tangible and intangible assets (including equipment and technology) and will be principally responsible for the coordination of research and development work to be undertaken by the Shanghai Joint Venture.

MMSL and SIMM Subsidiary shall assume profit and loss in the proportion of 99% to 1%, respectively. The intellectual property rights attaching to any new products or inventions as a result of the research and development of the Shanghai Joint Venture shall belong to the Shanghai Joint Venture.

Each of the Company and SIMM has undertaken to each other not to enter into any form of joint venture with any other persons or entities in respect of the development and research of pharmaceutical products undertaken by SIMM Subsidiary or to establish any companies or to set up any joint ventures in Hong Kong which will compete in terms of the nature of work with the Shanghai Joint Venture and MMSL. The Company shall have an exclusive cooperation relationship with SIMM, through the Shanghai Joint Venture, within or outside the PRC to set up the proprietary Integrated Drug Discovery Platform mainly targeting at the development of drugs made from natural plants.

Each of the Company and SIMM has also undertaken to each other that, apart from the transfer of the option in relation to the 40% interest in MMSL to SIMM (HK) Subsidiary, none of the direct and indirect interests held by each of them in the Shanghai Joint Venture (including interests in MAST, MMSL, the SIMM Subsidiary and the SIMM (HK) Subsidiary) will be disposed of for a period of three years from the establishment of the Shanghai Joint Venture or the listing of MMSL, whichever is the earlier.

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LETTER FROM THE BOARD

4. MMSL — THE HONG KONG JOINT VENTURE

Upon the establishment of the Shanghai Joint Venture and the obtaining of the necessary licences in respect of the use of certain equipment and technology and the fulfillment of the other necessary conditions by SIMM, the Company shall procure MMSL to issue an option for up to 40% of new shares to an escrow agent, which option will be transferred to SIMM (HK) Subsidiary once it is set up. MAST shall hold the remaining 60% interests in MMSL. Should SIMM (HK) Subsidiary become the largest shareholder of MMSL in the future, unless with the prior consent of both parties, MAST shall remain as the second largest shareholder of MMSL.

Scope of Business

MMSL is intended to be the vehicle engaged in raising funds to support the future business development of the Shanghai Joint Venture.

Commitment of the Company

Pursuant to the terms of the Joint Cooperation Agreement, the Company has committed to raise HK$35 million to HK$40 million through MMSL by cash within 6 months from the establishment of the Shanghai Joint Venture. This amount is inclusive of the HK$5 million to be contributed to the Shanghai Joint Venture. In the event that the Company fails to raise an amount up to HK$35 million to HK$40 million, leading to the inadequacy of capital to continue with the operations of the Shanghai Joint Venture and MMSL, the Shanghai Joint Venture and MMSL may be wound-up or liquidated. The raising of the funds in the amount of HK$35 million to HK$40 million is an obligation on the part of the Company.

The funds in the amount of HK$35 million to HK$40 million to be raised by the Company will be used as working capital of MMSL, and may further be used to support the research and development work of the Shanghai Joint Venture in the pharmaceutical field.

Role of the Company for further funding

It is further provided in the Joint Cooperation Agreement that the Company will only endeavour to raise a further HK$100 million within 2 years from the establishment of the Shanghai Joint Venture. In the event that the Company fails to raise such an amount, there is no legal consequences for any parties under the Joint Cooperation Agreement. The Company will not be regarded as being in breach of any provisions in the Joint Cooperation Agreement; it being understood that the Company’s role is merely to raise funding on a best efforts basis. The Company is not bound, nor committed, to raise, procure or lend such an amount to the joint ventures. There is no provision in the Joint

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LETTER FROM THE BOARD

Cooperation Agreement as to the future continuation of the joint ventures in the event that the HK$100 million is not raised. The Directors presently expect that there will be no material adverse consequence on the operations of the joint ventures in the event that MMSL fails to raise the HK$100 million.

5. BUSINESS OF THE COMPANY

The Company is principally engaged in the development, manufacture and sale of tonic and health products in the PRC.

6. INFORMATION OF THE COMPANY

As at 31st December, 2001, the audited consolidated net tangible assets of the Company, were approximately HK$188.528 million. Therefore, the total investment and commitment in funds made by the Company and its subsidiaries in the Shanghai Joint Venture and MMSL of approximately HK$40 million constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

7. REASONS FOR ENTERING INTO THE JOINT COOPERATION AGREEMENT

In the post-genome era, there are immense opportunities opened up in the pharmaceutical industry due to the discovery in more Drug Target. Many large pharmaceutical companies have large demands for new drugs and their outsourcing of drug discovery, research and development work are increasing. The Directors consider this as a good opportunity for the Company to participate in the huge market in drug discovery, which may better improve the diversity of the business focus and the future prospects of the Company. The Directors believe that SIMM has a good capability in drug discovery, a long history of drug development in the PRC and a good track record in licensing of its products to the global drug market. Accordingly, SIMM is considered to be a strong partner of the Company in this new focus of business for the Company. The Directors consider the operations of the joint ventures will greatly increase the capability of the Company in pharmaceutical products development both in the PRC and in the world market.

8. ADDITIONAL INFORMATION

Your attention is drawn to the additional information contained in the appendix to this circular.

Yours faithfully,

For and on behalf of the Board

Lo Yuk Yee Chairman

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purposes of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

• (a) As at the Latest Practicable Date, the interests of the Directors in the equity or debt securities of the Company or any of its associated corporations (within the meaning of the SDI Ordinance) which require notification to the Company pursuant to Section 28 of the SDI Ordinance (including interest which any such Director is deemed or taken to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required to be entered in the register maintained by the Company pursuant to Section 29 of the SDI Ordinance, or which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows:

Name of Director Ms. Lo Yuk Yee Mr. Lok Fai	Personal Interests — —	Corporate Interests 415,230,000(1) 185,000,000(2)	Total number of Shares
			415,230,000 185,000,000

Notes:

• (1) These shares are held by Vision Ocean Investments Limited which is beneficially owned by Ms. Lo Yuk Yee.

• (2) These shares are held by Sunny Fortune Limited which is beneficially owned by Mr. Lok Fai.

• (b) As at the Latest Practicable Date, none of the Directors had any interests that are required to be recorded in the register kept by the Company pursuant to Section 29 to the SDI Ordinance being share options granted under the Company’s share option scheme to subscribers for Shares.

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GENERAL INFORMATION

APPENDIX

3. SERVICE CONTRACTS

Ms. Lo Yuk Yee, Mr. Lok Fai and Dr. Zang Jing Wu have service contracts with the Company which are terminable by either party giving not less than three months’ notice in writing. Except the foregoing, none of the Directors has an unexpired service contract with the Company which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following substantial shareholders were directly or indirectly interested in 10% or more of the share capital of the Company as recorded in the register required to be kept under Section 16(1) of the SDI Ordinance.

Name of Shareholder Number of Shares Lo Yuk Yee 415,230,000 Vision Ocean Investments Limited (see note a & b) 415,230,000 Sunny Fortune Limited 185,000,000	Percentage of existing issued capital
	50.94% 50.94% 22.70%

Note:—

• (a) On 22 March, 2002, Vision Ocean Investments Limited (a company wholly-owned by Ms. Lo Yuk Yee) has granted a mortgage of 415,000,000 Shares to Lafe Components Limited as security for a loan from Lafe Components Limited. Lafe Components Limited holds the 415,000,000 Shares on trust for Vision Ocean Investments Limited until such financing is fully repaid, when the 415,000,000 Shares will be transferred back to Vision Ocean Investments Limited subject to the terms of the share mortgage.

• (b) Mr. Ho Wing On, Christopher has 100% deemed beneficial interests in The Grande International Holdings Limited, which holds 73.7% of the entire issued share capital of The Grande Holdings Limited, through its wholly-owned subsidiary, Barrican Investments Corporation, The Grande Holdings Limited holds the entire issued share capital of The Grande (Nominees) Limited, which holds the entire issued share capital of Sheer Profit Corporation as bare trustee on behalf of The Grande Holdings Limited, Sheer Profit Corporation holds 61.9% of the entire issued share capital of Lafe Technology Limited, which holds the entire issued share capital of Lafe Components Limited.

Therefore, all of these shares are entirely duplicated.

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GENERAL INFORMATION

APPENDIX

5. LITIGATION

As at the Latest Practicable Date, the Company is not engaged in any litigation or arbitration of material importance and there is no litigation or claim material importance known to the Directors to be pending or threatened by or against the Company.

6. MISCELLANEOUS

• (a) The Hong Kong branch share registrars and transfer office of the Company in Hong Kong is Central Registration Hong Kong Limited, Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (b) The registered office of the Company is Clarendon House, Church Street, Hamilton HM 11, Bermuda. The principal place of business of the Company is 10th Floor, Cammer Commercial Building, 30-32 Cameron Road, Tsimshatsui, Kowloon, Hong Kong.

• (c) The secretary of the Company is Mr. Lau Chan Wing, Raymond who is a fellow member of the Association of International Accountants and is an associate member of the Hong Kong Society of Accountants.

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