Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2010

Apr 9, 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of 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 Grand Pharmaceutical and Healthcare Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchange and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

==> picture [57 x 57] intentionally omitted <==

CHINA GRAND PHARMACEUTICAL AND HEALTHCARE HOLDINGS LIMITED 遠大醫藥健康控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 00512)

GENERAL MANDATE TO ISSUE SHARES, RE-ELECTION OF RETIRING DIRECTORS, SHARE PREMIUM REDUCTION AND NOTICE OF ANNUAL GENERAL MEETING

A notice convening the annual general meeting of China Grand Pharmaceutical and Healthcare Holdings Limited to be held at Unit 6211, The Center, 99 Queen’s Road Central, Hong Kong on 12 May 2010 at 11:00 a.m. or any adjournment thereof is set out on pages 8 to 10 of this circular.

A form of proxy for use at the annual general meeting of China Grand Pharmaceutical and Healthcare Holdings Limited is enclosed with this circular. Whether or not you are able to attend and vote at such meeting, please complete and return the enclosed proxy form in accordance with the instructions printed thereon and return the same to China Grand Pharmaceutical and Healthcare Holdings Limited’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the annual general meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting at the annual general meeting or any adjournment thereof should you so wish.

* For identification purpose only

12 April 2010

CONTENTS

	Pages
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
General mandate to issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Share Premium Reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Voting at the Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Notice of Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8

— i —

DEFINITIONS

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

“Annual General Meeting” the annual general meeting of the Company to be held at Unit 6211, The Center, 99 Queen’s Road Central, Hong Kong on 12 May 2010 at 11:00 a.m. notice of which is set out on pages 8 to 10 of this circular

“Board”	the board of Directors
“Bye-laws”	the bye-laws of the Company
“Company”	China Grand Pharmaceutical and Healthcare Holdings
	Limited, a company incorporated in Bermuda with limited
	liability and its securities are listed on the Stock Exchange
“Directors”	the directors of the Company
“Effective Date”	the date on which the Share Premium Reduction shall become
	effective, being (subject to compliance with Section 46(2) of
	the Companies Act of Bermuda) the date of passing of the
	special resolution to approve the Share Premium Reduction at
	the Annual General Meeting
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Issue Mandate”	a general and unconditional mandate proposed to be granted
	to the Directors to exercise all the powers of the Company
	to allot, issue and deal with Shares in the manner as set out
	in the ordinary resolution number 4 of the notice of Annual
	General Meeting
“Latest Practicable Date”	8 April 2010, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)

— 1 —

DEFINITIONS

“Share(s)” the share(s) of HK$0.01 each in the capital of the Company “Shareholder(s)” holder(s) of the Shares “Share Premium Account” the share premium account of the Company “Share Premium Reduction” the proposed reduction of the amount of approximately HK$230,407,000 standing to the credit of the Share Premium Account “Stock Exchange” The Stock Exchange of Hong Kong Limited “HK$” Hong Kong dollars, the lawful currency of Hong Kong

— 2 —

LETTER FROM THE BOARD

==> picture [57 x 57] intentionally omitted <==

CHINA GRAND PHARMACEUTICAL AND HEALTHCARE HOLDINGS LIMITED 遠大醫藥健康控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 00512)

Executive Directors: Mr Liu Chengwei (Chairman) Mr Hu Bo (Deputy Chairman) Mr Shao Yan (Chief Executive Officer) Mr Zhang Ji

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent non-executive Directors: Ms So Tosi Wan, Winnie Mr Lo Kai, Lawrence Mr Xin Dongsheng

Principal place of business in Hong Kong: Room 2501A Hopewell Centre 183 Queen’s Road East Hong Kong

12 April 2010

To the Shareholders

Dear Sir or Madam,

GENERAL MANDATE TO ISSUE SHARES, RE-ELECTION OF RETIRING DIRECTORS, SHARE PREMIUM REDUCTION AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information regarding resolutions to be proposed at the Annual General Meeting to be held at Unit 6211, The Center, 99 Queen’s Road Central, Hong Kong on 12 May 2010 at 11:00 a.m. These include resolutions relating to the general mandate for the issue of new Shares, the re-election of retiring Directors and the Share Premium Reduction.

GENERAL MANDATE TO ISSUE SHARES

An ordinary resolution will be proposed that the Directors be granted a general and unconditional mandate to allot, issue and deal with Shares up to a maximum of 20 per cent of the issued share capital of the Company as at the date of passing of the relevant resolution.

As at the Latest Practicable Date, there was a total of 1,440,600,667 Shares in issue. Subject to the passing of the resolution granting the Issue Mandate and on the basis that no further Shares are issued before the Annual General Meeting, the Company will be allowed to issue a maximum of 288,120,133 Shares.

* For identification purpose only

— 3 —

LETTER FROM THE BOARD

RE-ELECTION OF DIRECTORS

Pursuant to bye-law 87(1) of the Bye-laws, Mr Liu Chengwei, Mr Hu Bo and Mr Xin Dongsheng retire by rotation and, being eligible, offer themselves for re-election at the Annual General Meeting.

Details of the retiring Directors who are proposed to be re-elected at the Annual General Meeting are as follows:

Mr Liu Chengwei , aged 36, was appointed executive director of the Company in July 2008. Mr Liu is the Chairman of the Company and is a director of Wuhan Grand Pharmaceutical Group Limited (“Wuhan Grand”), the principal subsidiary of the Company. Mr Liu is also a director of Huadong Medicine Company Limited, the shares of which are listed on the main board of the Shenzhen Stock Exchange. Mr Liu has over 10 years of financial and management experience in the PRC. Mr Liu is currently the General Manager of the Pharmaceutical Industry Division of China Grand Enterprises Incorporation (“China Grand”) and a director of China Grand. Mr Liu worked for General Electric Company’s PRC subsidiaries for 5 years before joining China Grand in 2001. Mr Liu holds a bachelor degree in International Economics from the Peking University and a master’s degree in Business Administration from the China Europe International Business School.

Mr Liu is appointed for a term of one year and is subject to retirement by rotation and reelection in accordance with the Bye-laws. Mr Liu will be entitled to receive director’s emoluments in the amount of HK$50,000 per annum. Such emoluments are determined by reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions.

Save as disclosed above, Mr Liu has not held any other position with the Company or other members of the Company’s group. Save as disclosed above, Mr Liu has not held any major appointments or professional qualifications or any directorship in other listed company in the last three years.

Mr Liu does not have any relationship with any director, senior management, substantial or controlling shareholder of the Company. Mr Liu does not have any interest in any shares or underlying shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance.

There is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h)-13.51(2)(v) of the Listing Rules. The Directors are not aware of any other matters relating to Mr Liu’s re-election that need to be brought to the attention of the shareholders of the Company.

Mr Hu Bo , aged 25, was appointed executive director of the Company in July 2008. Mr Hu has over 5 years of experience in network project management and property management. Mr Hu is currently a deputy general manager of a real estate company in the PRC. Mr Hu holds a bachelor degree in Applied Science & Engineering, Electrical Engineering from the University of Toronto. Mr Hu is a nephew of Mr Hu Kaijun, the beneficial owner of Outwit Investments Limited, which is the controlling shareholder of the Company.

— 4 —

LETTER FROM THE BOARD

Mr Hu is appointed for a term of one year and is subject to retirement by rotation and reelection in accordance with the Bye-laws. Mr Hu will be entitled to receive director’s emoluments in the amount of HK$50,000 per annum. Such emoluments are determined by reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions.

Save as disclosed above, Mr Hu has not held any other position with the Company or other members of the Company’s group. Save as disclosed above, Mr Hu has not held any major appointments or professional qualifications or any directorship in other listed company in the last three years.

Save as disclosed above, Mr Hu does not have any relationship with any director, senior management, substantial or controlling shareholder of the Company. Mr Hu does not have any interest in any shares or underlying shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance.

There is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h)-13.51(2)(v) of the Listing Rules. The Directors are not aware of any other matters relating to Mr Hu’s re-election that need to be brought to the attention of the shareholders of the Company.

Mr Xin Dongsheng , aged 47, was appointed independent non-executive director of the Company in October 2008. Mr Xin is a director of Beijing Qun Ying Management Consultancy Company Limited, a company established in Beijing. Mr Xin is also a director of Tibet Cheezheng Tibetan Medicine Company Limited, the shares of which are listed on the main board of the Shenzhen Stock Exchange. He has over 20 years of experience in marketing, product development, business development, strategic research and consultancy in pharmaceutical business in the PRC. He holds an EMBA degree from the China Europe International Business School, a master’s degree in Pharmacy and a bachelor degree in Medicine from the Xian Medical University.

Mr Xin is appointed for a term of one year and is subject to retirement by rotation and reelection in accordance with the Bye-laws. Mr Xin will be entitled to receive director’s emoluments in the amount of HK$60,000 per annum. Such emoluments are determined by reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions.

Save as disclosed above, Mr Xin has not held any other position with the Company or other members of the Company’s group. Save as disclosed above, Mr Xin has not held any major appointments or professional qualifications or any directorship in other listed company in the last three years.

Mr Xin does not have any relationship with any director, senior management, substantial or controlling shareholder of the Company. Mr Xin does not have any interest in any shares or underlying shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance.

— 5 —

LETTER FROM THE BOARD

There is no information required to be disclosed pursuant to any of the requirements of Rules 13.51(2)(h)-13.51(2)(v) of the Listing Rules. The Directors are not aware of any other matters relating to Mr Xin’s re-election that need to be brought to the attention of the shareholders of the Company.

SHARE PREMIUM REDUCTION

The Board proposes to put forward to the Shareholders a proposal of the Share Premium Reduction pursuant to the Companies Act 1981 of Bermuda and the Bye-laws.

It is proposed that subject to compliance with section 46(2) of the Companies Act 1981 of Bermuda and passing of a special resolution at the Annual General Meeting, with effect from the Effective Date, the amount of approximately HK$230,407,000 standing to the credit of the share premium account of the Company as at 28 February 2010 be reduced to zero balance and the credit arising therefrom be credited to the contributed surplus account of the Company to be utilised to set off the accumulated losses of the aggregate amount of approximately HK$109,133,000 of the Company as at 28 February 2010.

Upon the Share Premium Reduction becoming effective and transfer of the credit arising therefrom to the contributed surplus account of the Company to set off the accumulated losses, all the accumulated losses of the Company will be eliminated.

Conditions of the Share Premium Reduction

The Share Premium Reduction is conditional upon, inter alia, the following being fulfilled:

• (a) the passing of a special resolution approving the Share Premium Reduction by the Shareholders at the Annual General Meeting;

• (b) compliance with section 46(2) of the Companies Act 1981 of Bermuda, including publication of a notice of the Share Premium Reduction in an appointed newspaper in Bermuda on a date not more than thirty days and not less than fifteen days before the Effective Date; and

• (c) the Directors being satisfied that on the Effective Date, there are no reasonable grounds for believing that the Company is, or after the Effective Date will be, unable to pay its liabilities as they become due.

Financial Effect of the Share Premium Reduction

The implementation of the Share Premium Reduction does not involve any reduction in the authorised or issued share capital of the Company nor does it involve any reduction in the nominal value of the Shares or the trading arrangements concerning the Shares.

The implementation of the Share Premium Reduction will not, in itself, affect the underlying assets, business operations, management or financial position of the Company or the proportionate interests of the Shareholders, other than related expenses incurred which are immaterial. Save for the aforesaid expenses, the Directors consider that the Share Premium Reduction will not cause any loss in the Shareholders’ funds of the Company and will not have a material adverse effect on the financial position of the Company.

— 6 —

LETTER FROM THE BOARD

Reasons for the Share Premium Reduction

The Directors consider that it would be inappropriate for the Company to pay dividends while the Company has accumulated losses. The Share Premium Reduction will allow the Company to eliminate the accumulated losses of the Company and bring the Company to a position that permits declaration and payment of dividends if and when the Company’s financial position allows and the Directors consider appropriate.

ANNUAL GENERAL MEETING

A notice of the Annual General Meeting is set out on pages 8 to 10 of this circular. At the Annual General Meeting, in addition to the ordinary business of the meeting, resolutions will be proposed to approve the general mandate for the issue of new Shares, the re-election of retiring Directors and the Share Premium Reduction.

A form of proxy for use at the Annual General Meeting is enclosed herewith. Whether or not you are able to attend and vote at the Annual General Meeting, please complete the enclosed form of proxy and return it to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the Annual General Meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Annual General Meeting or any adjournment thereof should you so wish and in such case the proxy form shall be deemed to be revoked.

VOTING AT THE ANNUAL GENERAL MEETING

Pursuant to Rule 13.39 of the Listing Rules, all votes of Shareholders at a general meeting must be taken by poll. The chairman of the meeting will therefore demand a poll for every resolution put to the vote at the Annual General Meeting pursuant to bye-law 66(1)(a) of the Bye-laws.

RECOMMENDATION

The Directors are of the opinion that the granting of the Issue Mandate, the re-election of retiring Directors and the Share Premium Reduction are fair and reasonable and are in the best interests of the Company and the Shareholders as a whole. The Directors therefore recommend the Shareholders to vote in favour of the relevant resolutions as set out in the notice of Annual General Meeting.

MISCELLANEOUS

The English text of this circular and the accompanying proxy form shall prevail over the Chinese text in case of inconsistency.

Yours faithfully,

By order of the Board of

China Grand Pharmaceutical and Healthcare Holdings Limited

Liu Chengwei

Chairman

— 7 —

NOTICE OF ANNUAL GENERAL MEETING

==> picture [57 x 57] intentionally omitted <==

CHINA GRAND PHARMACEUTICAL AND HEALTHCARE HOLDINGS LIMITED 遠大醫藥健康控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 00512)

NOTICE IS HEREBY GIVEN that the Annual General Meeting of China Grand Pharmaceutical and Healthcare Holdings Limited (the “Company”) will be held at Unit 6211, The Center, 99 Queen’s Road Central, Hong Kong on 12 May 2010 at 11:00 a.m. for the following purposes:

1. To adopt the audited financial statements together with the report of the directors and the report of the auditors for the year ended 31 December 2009.

2. To re-elect directors and to authorise the board of directors to fix their remuneration.

3. To re-appoint SHINEWING (HK) CPA Limited as auditors to hold office until the conclusion of the next annual general meeting and to authorise the directors to fix their remuneration.

4. As special business to consider and, if thought fit, pass the following resolution as ordinary resolution, with or without modification:

ORDINARY RESOLUTION

“THAT:

• (i) subject to sub-paragraph (ii) of this resolution, the exercise by the directors of the Company (the “Directors”) during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot and issue additional shares in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such powers either during or after the Relevant Period, be and is hereby generally and unconditionally approved;

• (ii) the aggregate nominal amount of share capital allotted and issued or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors pursuant to the approval in subparagraph (i) of this resolution, otherwise than pursuant to (a) a Rights Issue (as hereinafter defined); (b) an issue of shares upon the exercise of rights of

* For identification purpose only

— 8 —

NOTICE OF ANNUAL GENERAL MEETING

subscription or conversion under the terms of any warrants of the Company or any securities which are convertible into shares; (c) an issue of shares as scrip dividends or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in accordance with the bye-laws of the Company from time to time; or (d) an issue of shares under any option scheme or similar arrangement for the grant or issue to employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares, shall not exceed 20% of the aggregate of the nominal amount of the issued share capital of the Company at the date of passing of this resolution, and the said approval shall be limited accordingly; and

• (iii) for the purposes of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

• (a) the conclusion of the next annual general meeting of the Company;

• (b) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or any applicable law to be held; or

• (c) the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution in general meeting.

“Rights Issue” means an offer of shares open for a period fixed by the Directors to holders of shares whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restriction or obligations under the laws of, or the requirements of, any recognised regulatory body or any stock exchange in any territory outside Hong Kong).”

— 9 —

NOTICE OF ANNUAL GENERAL MEETING

1. As special business to consider and, if thought fit, pass the following resolution as special resolution, with or without modification:

SPECIAL RESOLUTION

“ THAT conditional upon compliance by the Company with all statutory requirements under Section 46(2) of the Companies Act 1981 of Bermuda, and with effect from the day of passing this special resolution:

• (A) the amount of approximately HK$230,407,000 standing to the credit of the share premium account of the Company as at 28 February 2010 be reduced to zero balance and the credit arising therefrom be credited to the contributed surplus account of the Company to be utilised to set off the accumulated losses of the aggregate amount of approximately HK$109,133,000 of the Company as at 28 February 2010; and

• (B) the directors of the Company be and are hereby authorised generally to carry out all acts and things which they may consider appropriate, necessary or desirable to give effect to or to implement the foregoing.”

Yours faithfully,

By order of the Board of

China Grand Pharmaceutical and Healthcare Holdings Limited

Liu Chengwei

Chairman

Hong Kong, 12 April 2010

Notes:

1. Any member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company.

2. To be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a certified copy of that power of attorney or authority must be deposited at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

3. Where there are joint holders of a share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he were solely entitled thereto, but if more than one of such holders be present at the meeting personally or by proxy, that one of such holders so presents whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

— 10 —