Grand Pharmaceutical Group Limited - Proxy Solicitation & Information Statement 2015

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 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 the transferee.

Hong Kong Exchanges 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.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of China Grand Pharmaceutical and Healthcare Holdings Limited.

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**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: 512)

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF THE EQUITY INTEREST IN A PRC COMPANY INVOLVING THE GRANT OF A PUT OPTION

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular.

A letter from the Board is set out on pages 4 to 21 of this circular.

For identification purpose only

24 December 2015

			Pages
DEFINITIONS.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM	THE	BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . .	I-1
APPENDIX II	–	ACCOUNTANTS’ REPORT OF JIU HE. . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	–	PRO FORMA FINANCIAL INFORMATION
		OF THE ENLARGED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1

DEFINITIONS

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

“30% Option Equity Interest”
30% equity interest in Jiu He held by Ningbo CDH after the completion of the Jiu He Acquisition Agreement
“Affiliate”
with respect to any specified person (i) any other person that directly or indirectly controls, or is controlled by, or is under common control with, such specified person; and (ii) without limiting the generality of the foregoing, includes any limited or general partner, venture capital, investment vehicle or investment fund or member of such person and any now or hereafter existing that is controlled by or under common control with such specified person. “Affiliates” and “Affiliated” shall have correlative meanings
“Announcement” the announcement of the Company dated 17 July 2015 in respect of the Jiu He Acquisition and the grant of the Put Option
“Board” the board of Directors
“Business Days” a day other than a Saturday or Sunday on which commercial banks are open for business in the PRC
“Company” China Grand Pharmaceutical and Healthcare Holdings Limited (遠大醫藥健康控股有限公司*), a company incorporated in Bermuda with limited liability, the issued Shares are listed on the main board of the Stock Exchange
“Consideration” the consideration of approximately RMB452 million payable by Grand Pharm (China) to Ningbo CDH for the sale and purchase of the 67% equity interest in Jiu He pursuant to the Jiu He Acquisition Agreement
“Director(s)” the director(s) of the Company
“Enlarged Group”
the Company and its subsidiaries after the completion of the Jiu He Acquisition
“Grand Pharm (China)” 遠大醫藥（中國）有限公司 (Grand Pharmaceutical (China) Co., Limited), a company established in the PRC with limited liability, being an indirect non-wholly owned subsidiary of the Company
“Group” the Company and its subsidiaries
“Hong Kong” the Hong Kong Special Administrative Region of the PRC

DEFINITIONS

“Independent Third Party(ies)” person(s) and their respective associates or, in the case of, their ultimate beneficial owner(s) and their respective associates, who are independent of and not connected with the Company and its subsidiaries and their respective connected persons
“Jiu He” 北京九和藥業有限公司 (Beijing Jiu He Pharmaceutical Limited[#] ), a company established in the PRC with limited liability, which was owned as to 97% by Ningbo CDH and as to 3% by an Independent Third Party as at the date of the Announcement, and as to 97% by Grand Pharm (China) and as to 3% by an Independent Third Party as at the Latest Practicable Date
“Jiu He Acquisition the agreement dated 17 July 2015 and entered into between Grand Agreement” Pharm (China) and Ningbo CDH relating to the sale and purchase of 67% equity interest in Jiu He
“Jiu He Acquisition” the acquisition of 67% equity interest in Jiu He by Grand Pharm (China) in accordance with the terms and conditions of the Jiu He Acquisition Agreement
“Latest Practicable Date” 22 December 2015 being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Long Stop Date” 30 September 2015 or such other date as the purchaser and the vendor of the Jiu He Acquisition Agreement may agree in writing
“Main Board” the main board maintained and operated by the Stock Exchange
“Ningbo CDH” 寧波鼎暉錦繡投資管理有限公司 (Ningbo CDH Jinxiu Investment Management Company Limited[#] ), a company established in the PRC with limited liability, the vendor to Jiu He Acquisition and the holder of the Put Option
“Outwit” Outwit Investments Limited, a company incorporated in the British Virgin Islands with limited liability, which is the controlling shareholder (as defined in the Listing Rules) of the Company holding approximately 62.63% of the total issued Shares
“PRC” the People’s Republic of China, for the purpose of this circular, excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan

DEFINITIONS

“PRC GAAP”	the general accepted accounting principles of the PRC
“Put Option”	a right granted to Ningbo CDH to require the Grand Pharm
	(China), or the Company if not accepted by Grand Pharm (China),
	to purchase all of the 30% Option Equity Interest
“Put Option Deed”	the deed dated 17 July 2015 entered into among Ningbo CDH,
	Grand Pharm (China) and the Company relating to the grant of
	Put Option
“Put Option Period”	subject to the fulfillment of the conditions precedent set out in the
	Put Option Deed, commencing from the first anniversary date of
	the Put Option Deed and expiring on the last date of forty-eight
	(48) months after the date of entering into the Put Option Deed
“Second Jiu He Acquisition	the agreement dated 27 November 2015 and entered into between
Agreement”	Grand Pharm (China) and Ningbo CDH relating to the sale and
	purchase of another 30% of the entire equity interest in Jiu He
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the issued Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subsequent Acquisition”	the acquisition of another 30% of the entire equity interest in Jiu
	He by Grand Pharm (China) in accordance with the terms and
	conditions of the Second Jiu He Acquisition Agreement
“Subsequent Announcement”	the announcement of the Company dated 27 November 2015 in
	respect of the Subsequent Acquisition and possible termination of
	Put Option
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“%”	per cent

In this circular, amounts denominated in RMB have been converted into HK$ at the rate of RMB0.82 = HK$1 for the purpose of illustration.

The English transliteration of the Chinese name(s) in this circular, where indicated, is included for information purpose only, and should not be regarded as the official English name(s) of such Chinese name(s).
For identification purpose only

LETTER FROM THE BOARD

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**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: 512)

Executive Directors: Mr. Liu Chengwei (Chairman)

Mr. Hu Bo (Deputy Chairman) Dr. Shao Yan (Chief Executive Officer)

Dr. 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

Dr. Pei Geng

Principal place of business in Hong Kong: Unit 3302, The Center, 99 Queen’s Road Central, Hong Kong

24 December 2015

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF THE EQUITY INTEREST IN A PRC COMPANY INVOLVING THE GRANT OF A PUT OPTION

INTRODUCTION

Reference is made to the Announcement, in which the Board announced that on 17 July 2015 (after trading hours of the Stock Exchange), Grand Pharm (China), an indirect non-wholly owned subsidiary of the Company, entered into the Jiu He Acquisition Agreement with Ningbo CDH, pursuant to which Ningbo CDH has agreed to sell and Grand Pharm (China) has agreed to purchase 67% equity interest in Jiu He. The consideration for the Jiu He Acquisition is approximately RMB452 million (equivalent to approximately HK$551 million) and will be settled by cash upon completion.

For identification purpose only

LETTER FROM THE BOARD

The Board further announced that immediately after the entering into of the Jiu He Acquisition Agreement, Grand Pharm (China) and the Company, also executed the Put Option Deed in favour of Ningbo CDH, pursuant to which an option was granted by Grand Pharm (China) to Ningbo CDH so that Ningbo CDH has the right at any time during the Put Option Period to require Grand Pharm (China) to purchase all of the 30% Option Equity Interest at the Put Option Price. In the event that Grand Pharm (China) fails to purchase the 30% Option Equity Interest, the Company shall unconditionally and irrevocably purchase the 30% Option Equity Interest at the Put Option Price.

THE JIU HE ACQUISITION AGREEMENT

Date: 17 July 2015

Parties: (1) Ningbo CDH, as the vendor; and

(2) Grand Pharm (China), as the purchaser

Ningbo CDH is an enterprise established in the PRC and is principally engaged in assets and investment management business. The ultimate beneficial owner of Ningbo CDH is 郭力(Guo Li[#] ) a merchant. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of Ningbo CDH and its ultimate beneficial owner(s) was an Independent Third Party as at the date of the Announcement. After completion of the Jiu He Acquisition, Ningbo CDH became a substantial shareholder of Jiu He and is therefore a connected person of the Company at the subsidiary level. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, as at the Latest Practicable Date, save and except Ningbo CDH is a substantial shareholder of Jiu He and is therefore a connected person of the Company at the subsidiary level, each of Ningbo CDH, its associates and its ultimate beneficial owner(s) is not otherwise connected with the Company and its subsidiaries and their respective connected persons.

Assets to be acquired

Pursuant to the Jiu He Acquisition Agreement, Grand Pharm (China) agreed to purchase and Ningbo CDH agreed to sell 67% equity interest in Jiu He (being RMB13,400,000 in the registered capital of Jiu He), subject to and upon the terms and conditions of the Jiu He Acquisition Agreement.

Consideration

The Consideration for the Jiu He Acquisition is approximately RMB452 million (equivalent to approximately HK$551 million) and would be settled by Grand Pharm (China) to Ningbo CDH in cash payable upon completion.

LETTER FROM THE BOARD

The Consideration was arrived at after arm’s length negotiations between Grand Pharm (China) and Ningbo CDH after taking into consideration of various factors, including but not limited to (i) the prospects of Jiu He; (ii) synergy effect and benefits brought by the Jiu He Acquisition as stated in the section “Reasons for and Benefits of the Jiu He Acquisition” set out herein below; and (iii) the current financial position of Jiu He. Based on the Consideration and the profit after taxation for the year ended 31 December 2014 shared by Grand Pharm (China) after completion of the Jiu He Acquisition, it implies the price to earnings ratio of Jiu He to be approximately 16.78 times. The Directors considered the Consideration to be fair and reasonable and in the interests of the Company and the Shareholders as a whole as compared to the price to earnings ratio of nine companies with their issued shares listed on the Stock Exchange and with similar businesses in the pharmaceutical industry which range from approximately 9.98 times to 42.40 times. It is intended that the Consideration would be funded by internal resources of the Group.

Conditions Precedent

Completion of the Jiu He Acquisition is conditional upon the fulfillment (or waiver, where applicable) of the following conditions:

(a) the passing by the Shareholders (at the general meeting of the Company to be convened and held, if necessary, or written resolution, in lieu of holding a general meeting) of an ordinary resolution to approve the Jiu He Acquisition Agreement and the transactions contemplated thereunder;
(b) all necessary consents, approvals and authorisations required to be obtained on the part of Ningbo CDH, Grand Pharm (China) and Jiu He in respect of the Jiu He Acquisition Agreement and the transactions contemplated thereunder having been obtained;
(c) no breach of any terms, conditions, statements, undertakings, warranties and obligations under the Jiu He Acquisition Agreement on the part of each of Ningbo CDH and/or Grand Pharm (China);
(d) the obtaining of approval(s) from the State Administration of Industry and Commerce of the PRC or the relevant local authorities, which applicable, in dealing with the change of the business registration certificate in relation to the transfer of equity interest pursuant to the Jiu He Acquisition Agreement;
(e) the passing by the shareholders of Jiu He of an ordinary resolution to approve the transfer of the equity interest contemplated under the Jiu He Acquisition Agreement; and
(f) the obtaining of written confirmation issued by the existing shareholders (apart from Ningbo CDH) of Jiu He granting the waiver of exercising their preemptive rights in respect of acquiring the said 67% equity interest of Jiu He disposed by Ningbo CDH.

Save that conditions (c) is waivable by Ningbo CDH or Grand Pharm (China), the other conditions are incapable of being waived by the parties to the Jiu He Acquisition Agreement. If any of the above conditions is not fulfilled or waived (as the case may be) by 12:00 p.m. on the Long Stop Date or such other date as the parties to the Jiu He Acquisition Agreement may agree in writing, the Jiu He Acquisition Agreement shall terminate and neither party shall have any further obligations and liabilities towards the other thereunder save for antecedent breach.

LETTER FROM THE BOARD

As at the Latest Practicable Date, all the conditions precedent have been fulfilled, and the transaction contemplated under the Jiu He Acquisition Agreement has been completed in July 2015.

Completion

Completion shall take place on the second Business Day following the date on which the last of the conditions precedent as set out in the Jiu He Acquisition Agreement has been fulfilled or waived (as the case may be), or such later date as the parties of the Jiu He Acquisition Agreement may agree in writing.

Subsequent Acquisition

As announced by the Company in the Subsequent Announcement, Grand Pharm (China) entered into the Second Jiu He Acquisition Agreement with Ningbo CDH, pursuant to which Ningbo CDH has agreed to sell and Grand Pharm (China) has agreed to purchase another 30% of the entire equity interest in Jiu He. Hence, immediately after the completion of the Jiu He Acquisition and the Subsequent Acquisition, Grand Pharm (China) would have been interested in 97% of the equity interest in Jiu He.

The consideration for the Subsequent Acquisition is RMB210,080,000 (equivalent to approximately HK$256,195,000) and will be settled by Grand Pharm (China) to Ningbo CDH in cash payable upon completion (or such other date may be agreed by both parties).

The consideration for the Subsequent Acquisition was arrived at after arm’s length negotiations between Grand Pharm (China) and Ningbo CDH after taking into consideration of various factors, including but not limited to (i) the prospects of Jiu He; (ii) synergy effect and benefits brought by the Acquisition as stated in the section “Reasons for and Benefits of the Acquisition” set out herein below; and (iii) the current financial position of Jiu He. The price to earnings ratio of the Subsequent Acquisition is approximately 17.42 times. The Directors considered the consideration to be fair and reasonable and in the interests of the Company and the Shareholders as a whole as compared to the price to earnings ratio of other similar businesses in the pharmaceutical industry and with reference to the price to earnings ratio of Jiu He of approximately 16.78 times as mentioned in the sub-paragraph headed “Consolidation” in the paragraph headed “The Jiu He Acquisition Agreement” above. As at the Latest Practicable Date, the Subsequent Acquisition has been completed.

PUT OPTION DEED

Date: 17 July 2015

Parties:

(1) Ningbo CDH, as the vendor;

(2) Grand Pharm (China), as the purchaser I; and
(3) the Company, as the purchaser II

LETTER FROM THE BOARD

Put Option

Ningbo CDH shall have the right to, at any time within the Put Option Period require Grand Pharm (China), or the Company if not accepted by Grand Pharm (China), to purchase all but not part of the 30% Option Equity Interest in Jiu He held by Ningbo CDH at a price (the “ Put Option Price ”) in cash decided by Ningbo CDH based on one of the below calculation methods:

(i) Consideration payable by Grand Pharm (China) to Ningbo CDH (i.e. approximately RMB452 million) in acquiring the 67% equity interest of Jiu He as a base (the “ Base ”), counting the number of days from the date on which business registration of Jiu He issued by the PRC authorities showing Ningbo CDH was one of the shareholders of Jiu He till the date on which Ningbo CDH exercises the Put Option (the “ Number of Days ”), and at the annual simple interest rate of 11%, divided by 67% times 30%, the formula shall be as follows:
Put Option Price = [the Base + (the Base x the Number of Days/365 days x 11%)] x 30%/67%
(ii) Jiu He’s audited net profit for the financial year immediately preceding the exercise of the Put Option (“ Net Profit ”) times 13 times 30%, the formula shall be as follows:
Put Option Price = Net Profit x 13 x 30%

To exercise the Put Option, Ningbo CDH shall deliver a written notice to both of Grand Pharm (China) and the Company stating the Put Option Price and the bank account details of Ningbo CDH for receiving the consideration of the 30% Option Equity Interest by Grand Pharm (China) or the Company. In the event that Ningbo CDH does not receive the written notice from Grand Pharm (China) accepting the Put Option within 10 Business Days from the date on which Ningbo CDH serving its exercise of the Put Option notice, the Company shall unconditionally and irrevocably accept on the Put Option in place and stead of Grand Pharm (China).

Conditions

Completion of the Put Option Deed is conditional upon the fulfillment of the following conditions:

(a) the passing by the Shareholders (at the general meeting of the Company to be convened and held, if necessary, or written resolution, in lieu of holding a general meeting) of an ordinary resolution to approve the Put Option Deed and the transactions contemplated thereunder;
(b) the consents, approvals and authorisations necessarily required to be obtained on the part of Ningbo CDH, Grand Pharm (China), the Company and Jiu He in respect of the Put Option Deed and the transactions contemplated thereunder having been obtained; and
(c) the completion of the Jiu He Acquisition Agreement and the transactions contemplated thereunder.

LETTER FROM THE BOARD

The Possible Termination of the Put Option

As disclosed in the Subsequent Announcement, the 30% equity interest in Jiu He is subject to the Put Option Deed. Simultaneously upon the signing of the Second Jiu He Acquisition Agreement, a supplemental deed has been entered into among the parties to the Put Option Deed, namely the Company, Grand Pharm (China) and Ningbo CDH, pursuant to which it is agreed that the Put Option Deed shall be cancelled and become null and void upon completion of the Subsequent Acquisition. The possible termination is in accordance with the terms of the Put Option Deed and does not involve payment of any amounts by way of penalty, damages or other compensation.

BUSINESS AND SHAREHOLDING INFORMATION OF JIU HE

Jiu He is a company established in the PRC with limited liability. Jiu He is principally engaged in manufacturing of capsules, pharmaceutical intermediates (Tremella Polysaccharide), tablets, granules and soft capsules.

Ningbo CDH entered into the agreement for the acquisition of 97% equity interests in Jiu He in February 2015. The aggregated consideration is approximately RMB633,500,000 (equivalent to approximately HK$772,561,000).

Jiu He was owned as to 97% by Ningbo CDH, and as to 3% by 中國醫藥科學院醫藥生物技術研究所 (Institute of Medicinal Biotechnology Chinese Academy of Medical Sciences), an Independent Third Party as at the date of the Announcement. The Institute of Medicinal Biotechnology Chinese Academy of Medical Sciences is a medical research institute in the PRC, particularly focus on selfdevelopment of new medications. It is mainly engaged in research on medications relates to anti-tumour, cardiovascular disease precaution, neuropsychiatric, metabolic disorder, anti-infectious, degenerative diseases, etc. After the completion of the Jiu He Acquisition, Grand Pharm (China) directly owns 67% equity interest in Jiu He, and Jiu He becomes an indirect non-wholly owned subsidiary of the Company and the financial results of Jiu He would be consolidated into the Company’s consolidated financial statements.

As at the Latest Practicable Date, Jiu He is an indirect non-wholly owned subsidiary of the Company. Jiu He is owned as to 97% by Grand Pharm (China) and the remaining 3% is owned by an Independent Third Party.

LETTER FROM THE BOARD

FINANCIAL INFORMATION OF JIU HE

The following are the audited turnover and profit before and after taxation of Jiu He (prepared in accordance with the PRC GAAP) for each of the two years ended 31 December 2014:

	For the year ended	For the year ended
	31 December 2014	31 December 2013
	(RMB’000)	(RMB’000)
Turnover	153,138	107,458
Profit before taxation	47,527	32,107
Profit after taxation	40,195	27,278

According to the audited accounts of Jiu He for the year ended 31 December 2014, the audited net asset value of Jiu He (prepared in accordance with the PRC GAAP) was approximately RMB98,652,000 (equivalent to approximately HK$120,307,000) as at 31 December 2014.

The unaudited profit before and after taxation of Jiu He (prepared in accordance with the PRC GAAP) for the seven months period ended 31 July 2015 was approximately RMB 21,858,000 and RMB 18,504,000 respectively. According to the unaudited accounts of Jiu He for the period ended 31 July 2015, the unaudited net asset value of Jiu He (prepared in accordance with the PRC GAAP) was approximately RMB 43,182,000 (equivalent to approximately HK$52,661,000) as at 31 July 2015. According to a valuation performed by an independent professional valuer, the fair value of the identifiable net assets of Jiu He as at 31 July 2015 was approximately RMB504,123,000 (equivalent to approximately HK$614,784,000).

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF JIU HE

(i) For the year ended 31 December 2012

Financial Review

For the year ended 31 December 2012, the total turnover of Jiu He was approximately RMB68.75 million, and the average gross profit margin was approximately 61.6%. In which, the turnover growth in its main products Eucalyptol Limonene and Pinene Enteric Soft Capsules (the “ Qie Nuo ”) was approximately 64.9% to RMB66.40 million, which generally recorded a higher gross profit margin.

The profit after tax of Jiu He was approximately RMB13.42 million in 2012.

Business Review and Prospects

In 2012, Jiu He was recognized as a High and New Technology Enterprise by Beijing Municipal Science & Technology Commission. Its solely developed exclusive product Qie Nuo was recommended by the Chinese Medical Association of Otolaryngology Head and Neck Surgery Branch in the Chinese Guideline for the Diagnosis and Treatment of Chronic Rhinosinusitis and listed in the Interpretation of Clinical Pathway and Therapeutic Drugs – the Respiratory Volume. Its turnover recorded a growth of approximately 64.9% in comparison with the same period of last year. It was predicted that the turnover would continue to grow significantly in the next few years.

LETTER FROM THE BOARD

Moreover, in meeting with the requirements of the new version of GMP certification and its continuous development, Jiu He began to reconstruct its existing integrated tower at the end of 2011 and followed with the setting up of a new pharmaceutical preparations production base and new pharmaceutical development center with a total area of approximately 2,000 square metres in early 2012. The total investment in these two projects was approximately RMB12.0 million, in which the new production base and development center were accounted for approximately RMB10.0 million. These two projects were targeted to be finished and the commercial operation was targeted to be launched in the third quarter of 2013, which not only enlarged Jiu He’s production capacity and new pharmaceutical development ability but also provided a foundation base for Jiu He’s further development.

Jiu He would continue to focus on enlarging its market shares and enhancing the sales networks through its integrated marketing strategies, and by the means of developing and producing those new drugs with unique market prospects to create a driving force for the enterprise to fully capture the opportunities arising from the PRC pharmaceutical and public health systems reform.

There were no business segment information presented as all the turnover and operating result of Jiu He were generated from the manufacture and sales of pharmaceutical products. The geographical segments of Jiu He were classified according to the location of customers and the turnovers were principally attributable to a single geographical region, which was the PRC, and accordingly, no further geographical segment information was presented.

Financial Resources and Liquidity

As at 31 December 2012, Jiu He had current assets of approximately RMB34.42 million and current liabilities of RMB30.57 million. The current ratio was 1.13 at 31 December 2012.

Jiu He’s cash and bank balances as at 31 December 2012 amounted to approximately RMB4.69 million.

As at 31 December 2012, Jiu He had no outstanding bank loans and the debt ratio measured by total debts as a percentage of total assets of Jiu He was approximately 49.7% in the same period. As at 31 December 2012, Jiu He did not pledge any assets.

Since Jiu He’s principal activities are in the PRC and the financial resources available, including cash on hand and bank deposits, are mainly in Renminbi, the exposure to foreign exchange fluctuation is relatively low.

Jiu He intended to principally finance its operations and investing activities with its operating revenue, internal resources and bank facilities. It was believed that Jiu He had a healthy financial position and had sufficient resources to satisfy its capital expenditure and working capital requirement. Jiu He adopted a conservative treasury policy with most of the bank deposits being kept in RMB to minimize exposure to foreign exchange risks. As at 31 December 2012, Jiu He had no foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purposes.

LETTER FROM THE BOARD

Significant Investments

Save as disclosed above, there was no significant investment during the year.

Material Acquisitions and Disposals

There was no material acquisitions and disposals during the year.

Future Plans for Material Investments

Save as disclosed above, Jiu He had no other material investments plans and no authorized but not provided capital expenditure commitment as at 31 December 2012.

Employees and Remuneration Policy

As at 31 December 2012, Jiu He employed about 152 staff and workers in the PRC. The remuneration to employees, including directors’ emolument, was approximately RMB11.9 million. Jiu He remunerates its employees based on their performance and experience and the remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and share option scheme.

Contingent Liabilities

Jiu He had no significant contingent liabilities as at 31 December 2012

(ii) For the year ended 31 December 2013

Financial Review

For the year ended 31 December 2013, the total turnover of Jiu He was approximately RMB107.46 million, which was increased by approximately 56.3% in comparison with the year ended 31 December 2012. The average gross profit margin was increased from approximately 61.6% in 2012 to approximately 63.6% in 2013. This was mainly contributed by the further growth in the sales of Jiu He’s key products Qie Nuo.

The profit after tax of Jiu He was approximately RMB27.28 million in 2013, which was increased by 103.3% from approximately RMB13.42 million in 2012.

Business Review and Prospects

Benefiting from Jiu He’s key products Qie Nuo being recorded in recommendation drugs list of the Chinese Guideline for the Diagnosis and Treatment of Chronic Rhinosinusitis (Year 2012 version), each product portfolio of Qie Nuo recorded a double-digit growth, in which, the middle and high dosage formulations packaging recorded 43.5%-65.5% growth, it was believed that the demand for these products would continued to increase.

LETTER FROM THE BOARD

In 2013, Jiu He successfully passed the new version of GMP qualification test and granted with a medicine approval number. During the year, Jiu He was further recognized by Zhongguancun Science Park Administrative Committee as one of the high-tech enterprises in Zhongguancun. Followed by the completion of the integrated tower expansion project and the launch of the operation of the new pharmaceutical development center, Jiu He had gradually introduced some developing partners, combined with the existing product lines and established several new drugs R&D projects, which offering more new and competitive products for Jiu He’s future growth.

Moreover, given the significant growth in turnover in the past two years and in the view of the further growth in the coming years, Jiu He had started to expand its warehouse during the period under review in order to match with its business strategies and expansion. The total investment cost of the newly expanded warehouse was expected to be approximately RMB3.00 million with a total area of approximately 2,700 square metres was expected to be completed and put into production in late 2014.

There were no business segment information presented as all the turnover and operating result of Jiu He were generated from the manufacture and sale of pharmaceutical products. The geographical segments of Jiu He were classified according to the location of customers and the turnovers were principally attributable to a single geographical region, which was the PRC, and accordingly, no further geographical segment information was presented.

Financial Resources and Liquidity

As at 31 December 2013, Jiu He had current assets of approximately RMB50.66 million (31 December 2012: approximately RMB34.42 million) and current liabilities of RMB27.58 million (31 December 2012: RMB30.57 million). The current ratio was 1.84 at 31 December 2013 while it was 1.13 as at 31 December 2012.

Jiu He’s cash and bank balances as at 31 December 2013 amounted to approximately RMB6.62 million (31 December 2012: approximately RMB4.69 million)

As at 31 December 2013, Jiu He had no outstanding bank loans (31 December 2012: nil) and the debt ratio measured by total debts as a percentage of total assets of Jiu He was approximately 32.9% in the same period whereas it was 49.7% as at 31 December 2012. As at 31 December 2013, Jiu He did not pledge any assets.

Since Jiu He’s principal activities are in the PRC and the financial resources available, including cash on hand and bank balances, are mainly in Renminbi, the exposure to foreign exchange fluctuation is relatively low.

Jiu He intended to principally finance its operations and investing activities with its operating revenue, internal resources and bank facilities. It was believed that Jiu He had a healthy financial position and had sufficient resources to satisfy its capital expenditure and working capital requirement. Jiu He adopted a conservative treasury policy with most of the bank deposits being kept in RMB to minimize exposure to foreign exchange risks. As at 31 December 2013, Jiu He had no foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purposes.

LETTER FROM THE BOARD

Significant Investments

Save as disclosed above, there was no significant investment during the year.

Material Acquisitions and Disposals

There was no material acquisitions and disposals during the year.

Future Plans for Material Investments

Save as disclosed above, Jiu He had no other material investments plans and no authorized but not provided capital expenditure commitment as at 31 December 2013.

Employees and Remuneration Policy

As at 31 December 2013, Jiu He employed about 160 staff and workers in the PRC. The remuneration to employees, including directors’ emoluments, was approximately RMB16.4 million. Jiu He remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and share option scheme.

Contingent Liabilities

Jiu He had no significant contingent liabilities as at 31 December 2013.

(iii) For the year ended 31 December 2014

Financial Review

For the year ended 31 December 2014, the total turnover of Jiu He was approximately RMB153.14 million, which was increased by approximately 42.5% in comparison with RMB107.46 million for the year ended 31 December 2013. Apart from the key products Qie Nuo recorded a growth of approximately 40.1% in turnover, Jiu He’s another key products Tremella Polysaccharide Enteric-coated Capsules (the “ TPEC ”) also recorded approximately 131.8% increment and amounted to approximately RMB5.78 million. In 2014, the average gross profit margin was approximately 54.3% while it was approximately 63.6% in 2013. The change in the average gross profit margin was mainly attributed to the change in costing of the raw materials and the change of Qie Nuo products structures during the period under review as the demand in small dosage was descending and would be faded out.

The profit after tax of Jiu He was approximately RMB38.96 million in 2014 whereas it was approximately RMB27.28 million in 2013.

LETTER FROM THE BOARD

Business Review and Prospects

Following the ongoing improvement in the production techniques, the integrated tower and the warehouse reconstruction together with strengthened own and cooperation research and development capabilities in the past few years, Jiu He’s turnover during the current year under review had recorded a sustained growth. Apart from the key products Qie Nuo continuously recorded over 40% increment in turnover, the turnover of TPEC and Tremella Polysaccharide powder also recorded a multiple growth which further consolidate Jiu He’s leading position in the oral administration treatments of chronic rhinosinusitis, acute rhinosinusitis and the respiratory diseases field.

In the current year, riding on the long-term development strategies and the completion of the pharmaceutical preparations production base and new pharmaceutical development centre, Jiu He began to provide sub-contracting services and technical supporting advices to external parties. It did not only enlarged Jiu He’s income base but also enriched its business lines which turning Jiu He into a diversified enterprise. In the meantime, to cope with the market demand and its business expansion, Jiu He began to construct a new production base with a total area of approximately 4,000 square metres during the current year under review. The new production base would be equipped with advanced equipment and enhanced technology to integrate into the production in order to raise the products quality and increase the production capacity to meet with the increasing market demand.

Financial Resources and Liquidity

As at 31 December 2014, Jiu He had current assets of approximately RMB68.84 million (31 December 2013: approximately RMB50.66 million) and current liabilities of RMB22.01 million (31 December 2013: RMB27.58 million). The current ratio was 3.13 at 31 December 2014 while it was 1.84 as at 31 December 2013.

Jiu He’s cash and bank balances as at 31 December 2014 amounted to approximately RMB16.65 million (31 December 2013: approximately RMB6.62 million)

As at 31 December 2014, Jiu He had no outstanding bank loans (31 December 2013: nil) and the debt ratio measured by total debts as a percentage of total assets of Jiu He was approximately 19.9% in the same period whereas it was 32.9% as at 31 December 2013. As at 31 December 2014, Jiu He did not pledge any assets.

LETTER FROM THE BOARD

Jiu He intended to principally finance its operations and investing activities with its operating revenue, internal resources and bank facilities. It was believed that Jiu He had a healthy financial position and had sufficient resources to satisfy its capital expenditure and working capital requirement. Jiu He adopted a conservative treasury policy with most of the bank deposits being kept in RMB to minimize exposure to foreign exchange risks. As at 31 December 2014, Jiu He had no foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purposes.

Significant Investments

Save as disclosed above, there was no significant investment during the year.

Material Acquisitions and Disposals

There was no material acquisitions and disposals during the year.

Future Plans for Material Investments

Save as disclosed above, Jiu He had no other material investments plans and no authorized but not provided capital expenditure commitment as at 31 December 2014.

Employees and Remuneration Policy

As at 31 December 2014, Jiu He employed about 193 staff and workers in the PRC. The remuneration to employees, including directors’ emoluments, was approximately RMB17.7 million. Jiu He remunerates its employees based on their performance and experience and the remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and share option scheme.

Contingent Liabilities

Jiu He had no significant contingent liabilities as at 31 December 2014.

(iv) For the seven months ended 31 July 2015

Financial Review

For the period ended 31 July 2015, the total turnover of Jiu He was approximately RMB83.81 million, similar to the same period in 2014 which was RMB83.35 million. During the period under review, the average gross profit margin was approximately 71.1% while it was 47.3% in the same period in 2014.

The profit after tax of Jiu He was approximately RMB21.18 million for the period ended 31 July 2015 whereas it was approximately RMB17.50 million for the same period in 2014.

LETTER FROM THE BOARD

Business Review and Prospects

Jiu He had been invested in several large construction and expansion projects in the past few years, including the expansion of the integrated tower and warehouse, as well as the new pharmaceutical preparations production base and new pharmaceutical development center, which provided a solid foundation for Jie He’s long term business development. With these foundation supports, Jiu He would continue to focus on new drugs reserves and development. In addition to its own development projects, Jiu He also proactively participated in certain collaborative development programs in order to fully utilize its advantages in the field of respiratory diseases to grasp with the growing opportunities in the new drugs market.

During the period under review, Jiu He actively expanded its sales network together with the implementation of an in-depth research on its products matrix. Jiu He was prudent and conscientious in restructuring its products mix to meet with the market demand and development. The restructure allowed Jiu He to have a better allocation of its resources on more profitable and high-growth products which encouraging Jiu He to have a sustained growth in turnover while the production efficiency is improving.

The new production base planned in 2014 is still under construction, it is expected that Jiu He’s production capability will be further enhanced. The new production base not only benefited the production of existing products but also provided more spaces and opportunities for Jiu He to develop its manufacturing business which broaden the business areas and income base.

Financial Resources and Liquidity

As at 31 July 2015, Jiu He had current assets of approximately RMB68.99 million (31 December 2014: approximately RMB68.84 million) and current liabilities of RMB72.97 million (31 December 2014: RMB22.01 million). The current ratio was 0.95 at 31 July 2015 while it was 3.13 as at 31 December 2014.

Jiu He’s cash and bank balances as at 31 July 2015 amounted to approximately RMB7.33 million (31 December 2014: approximately RMB16.65 million)

As at 31 July 2015, Jiu He had an outstanding bank loans of RMB1.5 million (31 December 2014: nil) which was denominated in RMB and granted by banks in the PRC. The main purpose of the loan was for short term working capital. The interest rate charged by the bank was 2.7% (for the year ended 31 December 2014: nil) per annum. As at 31 July 2015, the debt ratio measured by total debts as a percentage of total assets of Jiu He was approximately 66.9% (31 December 2014: 19.9%), in which the gearing ratio measured by bank borrowing as a percentage of shareholders’ equity, was approximately 4.2% at 31 July 2015 (31 December 2014: nil). As at 31 July 2015, Jiu He did not pledge any assets.

LETTER FROM THE BOARD

Jiu He intended to principally finance its operations and investing activities with its operating revenue, internal resources and bank facilities. It was believed that Jiu He had a healthy financial position and had sufficient resources to satisfy its capital expenditure and working capital requirement. Jiu He adopted a conservative treasury policy with most of the bank deposits being kept in RMB to minimize exposure to foreign exchange risks. As at 31 July 2015, Jiu He had no foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purposes.

Significant Investments

Save as disclosed above, there was no significant investment during the period under review.

Material Acquisitions and Disposals

There was no material acquisitions and disposals during the period under review.

Future Plans for Material Investments

Save as disclosed above, Jiu He had no other material investments plans and no authorized but not provided capital expenditure commitment as at 31 July 2015.

Employees and Remuneration Policy

As at 31 July 2015, Jiu He employed about 191 staff and workers in the PRC. The remuneration to employees, including directors’ emoluments, was approximately RMB30.3 million. Jiu He remunerates its employees based on their performance and experience and the remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and share option scheme.

Contingent Liabilities

Jiu He had no significant contingent liabilities as at 31 July 2015.

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF JIU HE ACQUISITION ON ASSETS, EARNINGS AND LIABILITIES OF THE COMPANY

Upon completion of the Jiu He Acquisition, Jiu He will become an indirect non-wholly owned subsidiary of the Company and its financial results will be consolidated into the Group.

Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, the pro forma total assets of the Enlarged Group would increase from approximately HK$6,137.43 million to HK$6,332.36 million, while the pro forma total liabilities of the Enlarged Group would increase from approximately HK$4,752.03 million to HK$4,931.70 million. The Directors consider that the Jiu He Acquisitions will have a positive effect on the earnings of the Enlarged Group but the extent of such impact will depend on market conditions and future performance of Jiu He.

REASONS FOR AND BENEFITS OF THE JIU HE ACQUISITION

The Group is mainly engaged in research and development, manufacturing and sales of pharmaceutical preparations, pharmaceutical intermediates, specialised pharmaceutical raw materials and healthcare products. Apart from the Cardiovascular and Cerebrovascular, Eye, Nose & Throat (the “ ENT ”) (mainly Ophthalmology) are another major market of the Group. The sales team of the Group, which cover the entire PRC market, comprising approximately 500 salespersons who are focusing in the ENT field. Currently the turnover of this product category recorded approximately RMB300 million and ranking the forefront of domestic sales in this field.

Jiu He is principally engaged in the manufacturing and sales of pharmaceutical products in the PRC. The products manufactured by Jiu He have the following competitive edges: (i) its main products have a leading position in the oral administration treatments of chronic rhinosinusitis, acute rhinosinusitis and the respiratory diseases field, and also being listed as one of the main products in the treatment of rhinosinusitis guidebook in the PRC which is highly complementary with the Group’s business strategy on the ENT; (ii) its products in dealing with disease preventions and treatments on PM2.5 related illnesses have a broad market opportunity; (iii) its core products are listed in the national reimbursement drugs list of more than 20 provinces and/or cities in the PRC, this is a great advantage on the product pricing and sales; and (iv) Jiu He’s product pipelines containing high-end technologies and knowledge which with widen market prospects.

The Company is of the view that the Jiu He Acquisition will (i) bring in a new product line to the Group with great potential and strong market development force; (ii) widen the Group’s brand name awareness and recognition by the pharmaceutical industries, doctors and patients in virtue of the influence of this product and to achieve a substantial increase in overall brand value; and (iii) bring the innovation and development drive force for the Group in developing the new pharmaceutical products and biopharmaceutical products. Since 2015, the Group riding on the fact that the completion of production base relocation and reconstruction and integration of merges and acquisitions, have started to develop into the new pharmaceuticals field which encourages the Group to build up a steady, rapid and sustainable growth.

LETTER FROM THE BOARD

Taking into account of the aforesaid, the Directors consider that the terms and conditions of the Jiu He Acquisition Agreement and the Put Option Deed are fair and reasonable and entering into of the Jiu He Acquisition Agreement by Grand Pharm (China) is in the interests of the Company and the Shareholders as a whole. The Directors would recommend the Shareholders to vote in favour of the ordinary resolution(s) to approve the Jiu He Acquisition Agreement and the Put Option Deed and the transactions contemplated respectively thereunder if a general meeting would be convened.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios as defined under the Listing Rules in respect of the Jiu He Acquisition are more than 25% but less than 100%, the Jiu He Acquisition constitutes a major transaction of the Company and is subject to shareholder’s approval under Rule 14.40 of the Listing Rules.

The Put Option is exercisable at the discretion of Ningbo CDH at the Put Option Price, the applicable percentage ratios under the grant of the Put Option is expected to be more than 25% but less than 100% and constitutes a major transaction for the Company pursuant to Rule 14.76(1) of the Listing Rules.

As the Jiu He Acquisition Agreement and the Put Option Deed were entered into between same parties and have the possibility to be completed within 12 months period and the applicable percentage ratios when aggregated are more than 25% but less than 100%, entering the Jiu He Acquisition Agreement and/or the Put Option Deed constitute a major transaction of the Company and is subject to the reporting, announcement and shareholder’s approval under Rule 14.40 of the Listing Rules.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, none of the Shareholders has any material interests in the transaction contemplated under the Jiu He Acquisition Agreement and/or the Put Option Deed and there is (i) no voting trust or other agreement or arrangement or understanding entered into by binding upon any Shareholders; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case-by-case basis.

Since no Shareholders are required to abstain from voting if the Company were to convene a general meeting for the approval of the foregoing mentioned transactions, written shareholders’ approval may be accepted in lieu of holding a general meeting pursuant to Rule 14.44 of the Listing Rules. Outwit, the controlling shareholder holding 1,228,775,094 Shares as at the date of the Announcement (representing approximately 62.63% of total issued Shares), has given its written approval in respect of the Jiu He Acquisition Agreement and the Put Option Deed. Accordingly, no special general meeting of the Company will be convened for the purposes of approving the Jiu He Acquisition Agreement and Put Option Deed.

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board

China Grand Pharmaceutical and Healthcare Holdings Limited Liu Chengwei Chairman

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

The audited financial information of the Group for each of the three years ended 31 December 2014 can be referred to the annual reports of the Company for the years ended 31 December 2012 (pages 23 to 94), 2013 (pages 23 to 100) and 2014 (pages 27 to 110) respectively. The unaudited financial information of the Group for the six months ended 30 June 2015 can be referred to the interim report of the Company for the six months ended 30 June 2015 (pages 16 to 27).

The abovementioned financial information has been published on both the websites of the Stock Exchange (www.hkex.com.hk) and the website of the Company (http://www.chinagrandpharm.com/html/ ir_reports.php). The auditors of the Company have not issued any qualified opinion on the Group’s financial statements for each of three financial years ended 2014.

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 October 2015, being the latest practicable date for the purpose of ascertaining the indebtedness of the Enlarged Group prior to the printing of this circular, the Enlarged Group had total outstanding borrowings of approximately HK$2,534.03 million, comprising bank loans of approximately HK$2,511.05 million and amount due to holding company of approximately HK$22.98 million. Certain bank loans are secured by the pledge of certain prepaid lease payments, buildings and pledged bank deposits of the Enlarged Group. The remaining bank loans are guaranteed by China Grand Enterprises Incorporation. The Enlarged Group leased certain of its manufacturing equipment under finance lease, and the Enlarged Group’s finance lease liabilities were approximately HK$221.89 million. The Company also issued 2 convertible bonds with the aggregated principal amount of HK$330 million, which entitles the holder to convert to the Company’s ordinary share at a conversion price of HK$1.35 and maturity on 17 October 2019. The Enlarged Group also had a bank overdraft of approximately HK$0.02 million.

Amount due to holding company is unsecured, interest bearing at 5% per annum and not repayable within next twelve months. Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of the business, as at the close of business on 31 October 2015, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

Disclaimers

Save as aforesaid above or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables in ordinary course of business, at the close of business on 31 October 2015, the Group did not have any outstanding debts securities, bank overdrafts, liabilities under acceptances (other than normal trade bills), acceptances credits, material hire purchase commitments, mortgages or charges, which are either guaranteed, unguaranteed, secured or unsecured. Save as disclosed above, the Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31 October 2015, up to and including the Latest Practicable Date.

I-1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the cash flows generated from the operating activities, the financial resources presently available to the Enlarged Group, and the estimated net consideration to be paid for the Acquisition, the Enlarged Group has sufficient working capital for its present requirements and for the period up to twelve months from the date of this circular in the absence of unforeseen circumstances. The Company also considered that the net current liabilities of Jiu He as at 31 July 2015 will not have adverse effect to the working capital sufficiency of the Enlarged Group, since such was resulted from the dividend payment by Jiu He during the seven months ended 31 July 2015 and this is considered to be an one-off issue.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited financial statements of the Group were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The PRC has took over Japan to become the second largest pharmaceutical market in the world, following the United States. According to information published at Boao Forum 2015, the total size of the PRC pharmaceutical market amounted to RMB1,280.20 billion for 2014, representing a year-on-year growth of 13.3%. The market size is expected to further grow by about 11.5% year-on-year to RMB1,427.30 billion in 2015, the growth pace gradually slow down. With the further advancement of the PRC medical reform and the implementation of tender reform and policies aimed to lower prices of medicines, more efforts had been made to control the cost of medical insurance and counter commercial bribe, and considerable progress has been achieved in the adoption of market-based pricing policies for medical services. As China’s overall GDP growth rate slowed down to 7.0%, the growth pace of government spending in medical and health sector will also slow down. All these factors will have significant impacts on the PRC pharmaceutical market.

As a result of such new model of market development, the PRC pharmaceutical industry is also undergoing profound changes. On one hand, the PRC pharmaceutical enterprises must further upgrade their production facilities, obtain the latest GPM certificates, an increase in input of investment in research and development, expand into the areas of biological medicine and medical device, or introduce internationally advanced technologies and products for promotion in the PRC market, in order to maintain steady organic growth. At the same time, the number of consolidation and acquisition transactions in the PRC pharmaceutical industry significantly increased. According to a report from 中國證券網 (www.cnstock.com) published in August 2015, there were 149 cases of mergers and acquisitions of listed pharmaceutical companies in the PRC capital market in the first half of 2015, increased by 36% from 109 cases during the same period of last year and with a total transaction amount of over RMB30.00 billion. In addition, according to an analysis report of Deutsche Bank, sales of multinational corporations in the PRC were also badly hit in the first half of 2015, only recording a growth rate of single digit. Nevertheless, PRC is still a market with vast potential and multinational pharmaceutical enterprises are adjusting their strategies by enhancing investments and cooperation in the PRC pharmaceutical market to

I-2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

seek strategic alliance. Both domestic and foreign pharmaceutical enterprises are striving to capture the opportunities arising from the development of the PRC pharmaceutical market.

In view of the development status of the PRC pharmaceutical market and in order to alleviate the impacts of factors such as the downward trend of internal growth in the industry in recent years and the slow approval process for new drugs, the Enlarged Group has been fine-tuning its product structure by focusing on pharmaceutical preparations and products with high profit margin and starting to expand into the medical device area, which has produced positive results, as evident in the significant improvement in the Enlarged Group’s gross profit margin. In particular in respect of expansion, the Enlarged Group has seized the opportunities by leveraging its years of experience in mergers and acquisitions and development and focusing on its core therapeutic areas, from mergers and acquisitions to expand its product mix, to acquisitions of enterprises with exclusive and reputable products, and to acquisitions of enterprises enjoying internationally leading technological advantages. The Company is of the view that after the completion of the Jiu He Acquisition, it will bring in a new product line to the Enlarged Group with great potential and strong market development force, and bring the innovation and development drive force for the Enlarged Group in developing the new pharmaceutical products and biopharmaceutical products.

Furthermore, in view of the worsening living environment, aging population and lack of orphan diseases medication in the PRC, the Enlarged Group has made investments in and planning for the relevant areas, which are expected to produce great results and help deliver the promises of the management of the Enlarged Group in achieving steady growth and maximize the returns to its shareholders and investors.

I-3

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

The following is the text of a report received from the reporting accountants, HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, prepared for the purpose of incorporation in this circular.

24 December 2015

The Board of Directors

China Grand Pharmaceutical and Healthcare Holdings Limited Units 3302, The Center 99 Queen’s Road, Central, HONG KONG

Dear Sirs,

We set out below our report on the financial information (the “ Financial Information ”) of 北京九和藥業有限公司 (Beijing Jiu He Pharmaceutical Limited) (the “ Target Company ”), comprising the statements of financial position of the Target Company as at 31 December 2012, 2013 and 2014 and 31 July 2015, and the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows of the Target Company for the years ended 31 December 2012, 2013 and 2014 and the seven months ended 31 July 2015 (the “ Relevant Periods ”), together with the note thereto the Financial Information, and the comparative statements of profit or loss and comprehensive income, the statements changes in equity and the statements of cash flows of the Target Company for the seven months ended 31 July 2014 (the “ Unaudited Comparative Financial Information ”), prepared on the basis of presentation set out in Note 2 of Appendix II below, for inclusion in the circular of China Grand Pharmaceutical and Healthcare Holdings Limited (the “ Company ”) dated 24 December 2015 (the “ Circular ”) in connection with the sale and purchase agreement dated 17 July 2015 (the “ Sale and Purchase Agreement ”) entered into between 遠大醫藥（中國）有限公司(Grand Pharmaceutical (China) Co., Limited) (the “ Purchaser ”), an indirect non-wholly owned subsidiary of the Company, the Company and 寧波鼎暉錦繡投資管理有限公司 (Ningbo CDH Jinxiu Investment Management Company Limited) (“ Vendor ”) pursuant to which the Purchaser would acquire 67% of the equity interest of the Target Company at a consideration of approximately RMB452 million (the “ Consideration ”), (collectively refer as the “ Acquisition ”). The Company, also executed the Put Option Deed in favour of the Vendor, pursuant to which an option was granted by the Purchaser to the Vendor so that the Vendor has the right at any time during the Put Option Period to require the Purchaser to purchase all of the 30% Option Equity Interest at the Put Option Price. In the event that the Purchaser fails to purchase the 30% Option Equity Interest, the Company shall unconditionally and irrevocably purchase the 30% Option Equity Interest at the Put Option Price.

The Consideration shall be satisfied by the Purchaser in cash and is payable to the Vendor upon completion.

The Target Company is principally engaged in manufacture and sales of pharmaceutical and healthcare products. The Target Company was incorporated in People’s Republic of China (the “ PRC ”) with limited liability on 16 May 1997 under the PRC company law. The Target Company has no direct or indirect subsidiaries at 31 July 2015 and the date of this report.

II-1

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

The audited statutory financial statements of the Target Company were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises incorporated/ established in PRC and the details are as follows:

Name of Target Company Financial year Name of auditors 北京九和藥業有限公司 Year ended 31 December 2012 北京中金華會計師事務所 (“ Beijing Jiu He 有限公司 Pharmaceutical Limited ”) (“ Beijing Zhongjinhua CPA Limited ”) Year ended 31 December 2013 北京中金華會計師事務所有限公司 (“ Beijing Zhongjinhua CPA Limited ”) Year ended 31 December 2014 北京中啟恒會計師事務所有限責公司 (“ *Beijing Zhongqiheng CPA Limited* ”)

the name of translation is for identification only.

II-2

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

BASIS OF PREPARATION

For the purpose of this report, the directors of the Target Company have prepared the Financial Information for the Relevant Periods that give a true and fair view in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”), and for such internal control as the directors determine is necessary to enable the preparation of the Financial Statements that are free from material misstatement, whether due to fraud or error. The Financial Information for each of the Relevant Periods were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA. The Financial Information set out in this report has been prepared from the unaudited financial statements with no adjustments made thereon.

RESPONSIBILITY OF THE DIRECTORS

The directors of the Company are responsible for the contents of the Circular, including the preparation of the Financial Information that gives a true and fair view in accordance with the basis set out in Note 2 of Appendix II. The directors of the Target Company are responsible for the preparation of the Financial Information and the Unaudited Comparative Financial Information that give a true and fair view in accordance with HKFRSs and the disclosure requirements of Listing Rules and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of the Financial Information and the Unaudited Comparative Financial Information that are free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

For the Financial Information for the Relevant Periods, it is our responsibility to form an independent opinion on the Financial Information based on our examination and to report our opinion to you. We examined the relevant financial statements of the Target Company for the Relevant Periods, and carried out such procedures as are necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

For the purpose of this report, we have reviewed the Unaudited Comparative Financial Information for which the directors of the Company are responsible, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Preformed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists principally of making enquiries of the Target Company’s management and applying analytical procedures to the Unaudited Comparative Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the Unaudited Comparative Financial Information.

II-3

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

OPINION

In our opinion, the Financial Information for the Relevant Periods, for the purpose of this report gives a true and fair view of the state of affairs of the Target Company as at 31 December 2012, 2013, 2014 and 31 July 2015 and of the results and cash flows of the Target Company for the Relevant Periods.

On the basis of our review which does not constitute an audit, for the purpose of this report, nothing has come to our attention that causes us to believe that the Unaudited Comparative Financial Information is not prepared, in all material respects, in accordance with accounting policies set out in Note 2 of Appendix II below which are in conformity with HKFRSs.

II-4

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

I. FINANCIAL INFORMATION

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes
Turnover
6
Cost of operations
Gross profit
Other revenue and gains
7
Other operating expenses
Selling and distribution expenses
Administrative expenses
Profit from operations
Finance costs
8
Profit before taxation
9
Taxation
11
Profit for the year/period
Other comprehensive
Income/(loss) for the
year/period, net of tax:
Items that may be
reclassified subsequently
to profit or loss:
Exchange difference on
translation of foreign
operations
Total comprehensive income
for the year/period, net of tax
Profit for the year/period
attributable to:
Owners of the Target Company
Total comprehensive income
attributable to:
Owners of the
Target Company

Seven months
Year ended 31 December
ended 31 July
2012
2013
2014
2014
2015
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited)
84,430
136,160
193,214
105,131
104,447
(32,418)
(49,583)
(88,293)
(55,409)
(30,201)
52,012
86,577
104,921
49,722
74,246
72
150
308
322
51
(2)
(666)
(710)
(106)
–
(19,505)
(26,110)
(21,859)
(15,324)
(33,384)
(13,108)
(19,268)
(24,524)
(8,894
(9,699)
19,469
40,683
58,136
25,720
31,214
–
–
–
–
(49)
19,469
40,683
58,136
25,720
31,165
(2,990)
(6,119)
(8,977)
(3,653)
(4,766)
16,479
34,564
49,159
22,067
26,399
120
1,305
(463)
(772)
(1,275)
16,599
35,869
48,696
21,295
25,124
16,599
35,869
48,696
21,295
25,124
16,599
35,869
48,696
21,295
25,124

The accompanying notes form an integral part of the Financial Information.

II-5

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

STATEMENTS OF FINANCIAL POSITION

Notes Non-current assets Property, plant and equipment 13 Construction in progress 13 Prepaid rental 14 Intangible assets 15 Current assets Inventories 16 Trade and other receivables 17 Prepaid rental 14 Cash and cash equivalents 18 Tax recoverable Current liabilities Trade and other payables 19 Amounts due to former shareholders 21 Receipts in advance 19 Amount due to a director 21 Bank borrowings 20 Income tax payables Net current assets/(liabilities) Net assets Capital and reserves Share capital 22 Reserves 23	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 22,287 37,153 51,182 9,689 3,585 – 1,309 1,184 1,721 – 40 35 33,285 41,962 52,938 20,495 34,010 24,016 15,827 21,666 41,559 163 169 220 5,758 8,402 20,990 – – – 42,243 64,247 86,785 25,465 18,406 15,550 – – 2,269 7,966 13,929 4,833 3,657 – – – – – 424 2,650 5,100 37,512 34,985 27,752 4,731 29,262 59,033 38,016 71,224 111,971 9,765 9,765 24,905 28,251 61,459 87,066 38,016 71,224 111,971	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 22,287 37,153 51,182 9,689 3,585 – 1,309 1,184 1,721 – 40 35 33,285 41,962 52,938 20,495 34,010 24,016 15,827 21,666 41,559 163 169 220 5,758 8,402 20,990 – – – 42,243 64,247 86,785 25,465 18,406 15,550 – – 2,269 7,966 13,929 4,833 3,657 – – – – – 424 2,650 5,100 37,512 34,985 27,752 4,731 29,262 59,033 38,016 71,224 111,971 9,765 9,765 24,905 28,251 61,459 87,066 38,016 71,224 111,971	As at 31 July 2015 HK$’000 48,249 – 1,574 33 49,856 53,016 22,891 218 9,140 723 85,988 30,946 36,111 22,017 – 1,869 – 90,943 (4,955) 44,901 24,905 19,996 44,901
	2012 HK$’000 22,287 9,689 1,309 – 33,285 20,495 15,827 163 5,758 – 42,243 25,465 – 7,966 3,657 – 424 37,512 4,731 38,016 9,765 28,251 38,016	2013 HK$’000 37,153 3,585 1,184 40 41,962 34,010 21,666 169 8,402 – 64,247 18,406 – 13,929 – – 2,650 34,985 29,262 71,224 9,765 61,459 71,224

The accompanying notes form an integral part of the Financial Information.

II-6

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of	Attributable to owners of	the Target Company	the Target Company	Total HK$’000 23,996 16,479 (2,579) – 120
Statutory reserve HK$’000 – – – 2,454 – 2,454 2,454 – – 3,456 – 3,456 5,910 – – – 5,071 – 5,071 10,981 – – 2,640 – 2,640 13,621 5,910 – – – – – 5,910	Capital reserve HK$’000 3,454 – – – – – 3,454 – – – – – 3,454 – – 1,893 – – 1,893 5,347 – – – – – 5,347 3,454 – – 1,893 – 1,893 5,347	Exchange reserve HK$000 – – – – 120 120 120 – – – 1,305 1,305 1,425 – – – – (463) (463) 962 – – – (1,275) (1,275) (313) 1,425 – – – (772) (772) 653	Retained earnings HK$’000 10,777 16,479 (2,579) (2,454) – 11,446 22,223 34,564 (2,661) (3,456) – 28,447 50,670 49,159 (24,982) – (5,071) – 19,106 69,776 26,399 (92,194) (2,640) – (68,435) 1,341 50,670 22,067 (22,613) – – (546) 50,124
				14,020
				38,016 34,564 (2,661) – 1,305
				33,208
				71,224 49,159 (24,982) 17,033 – (463)
				40,747
				111,971 26,399 (92,194) – (1,275)
				(67,070)
				44,901

				71,224 22,067 (22,613) 1,893 (772)
				575
				71,799

The accompanying notes form an integral part of the Financial Information.

II-7

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

STATEMENTS OF CASH FLOWS

				Seven months	Seven months
	Year	ended 31 December		ended 31 July
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(Unaudited)
Operating activities
Profit before taxation	19,469	40,683	58,136	25,720	31,165
Adjustments for:
Interest income	(27)	(35)	(38)	(19)	(51)
Interest expenses	–	–	–	–	49
(Gain)/loss on disposal of
property, plant and
equipment	(45)	123	611	89	–
Amortisation	207	119	198	100	151
Depreciation	3,347	4,389	4,515	2,750	3,085
Operating cash flows before
movements in working capital	22,951	45,279	63,422	28,640	34,399
(Increase)/decrease in trade and
other receivables	(9,605)	(5,305)	(20,039)	(5,736)	18,193
(Increase)/decrease in inventories	(11,390)	(12,816)	9,796	3,603	(29,273)
Increase/(decrease) in trade
and other payables	12,740	(7,642)	(2,747)	726	15,573
Increase/(decrease) in amount
due to a director	3,659	(3,776)	–	–	–
Increase/(decrease) in receipt
in advance	4,070	5,690	(9,020)	(7,013)	17,239
Cash generated from the
operations	22,425	21,430	41,412	20,220	56,131
Income tax paid	(6,506)	(3,893)	(3,877)	(3,041)	(10,530)
Net cash generated from
operating activities	15,919	17,537	37,535	17,179	45,601

II-8

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

Investing activities
Payment for purchase of
intangible assets
Payment for purchase of
property, plant and equipment
Expenditure on construction
work in progress
Payment for prepaid rental
Proceed from disposal of
property, plant & equipment
Interest received
Net cash used in
investing activities
Financing activities
Proceed from bank borrowings
Bank interest paid
Dividend paid
Capital injection
Net cash used in financing
activities
Net (decrease)/increase in cash
and cash equivalents
Cash and cash equivalents at the
beginning of the year/period
Effect of foreign currency
exchange rate changes
Cash and cash equivalents at
the end of the year/period
Analysis of balances of cash
and cash equivalents
Cash and bank balances

Seven months
Year ended 31 December
ended 31 July
2012
2013
2014
2014
2015
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited)
–
(40)
–
–
–
(5,520)
(3,973)
(2,265)
(1,437)
(741)
(8,429)
(9,095)
(14,922)
(7,329)
–
–
–
(782)
–
–
84
873
1,364
30
6
27
35
38
19
51
(13,838)
(12,200)
(16,567)
(8,717)
(684)
–
–
–
–
1,869
–
–
–
–
(49)
(2,579)
(2,661)
(24,982)
(5,276)
(58,327)
–
–
17,033
1,893
–
(2,579)
(2,661)
(7,949)
(3,383)
(56,507)
(498)
2,676
13,019
5,079
(11,590)
6,278
5,758
8,402
8,402
20,990
(22)
(32)
431
(125)
(260)
5,758
8,402
20,990
13,356
9,140
5,758
8,402
20,990
13,356
9,140

The accompanying notes form an integral part of the Financial Information.

II-9

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

The registered office and principal place of business of the Target Company is in People’s Republic of China. The Target Company was incorporated in People’s Republic of China with limited liability and is principally engaged in manufacture and sales of pharmaceutical and healthcare products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”), which collective term includes HKFRSs, Hong Kong Accounting Standards (“ HKAS ”) and related interpretations promulgated by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). The Financial Information also complies with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure required by the Rules Governing the Listing of Securities on the Stock Exchange.

The Target Company has not applied the following new and revised HKFRSs that have been issued but are not yet effective, in these financial statements:

HKFRS 9	Financial instruments1
HKFRS 15	Revenue from contracts with customers1
Amendments to HKFRS 11	Accounting for acquisitions of interests in joint operations2
Amendments to HKAS 1	Disclosure initiative2
Amendments to HKAS 16	Clarification of acceptable methods of depreciation
and HKAS 38	depreciation and amortisation2
Amendments to HKAS 16	Agriculture: Bearer plants2
and HKAS 41
Amendments to HKAS 27	Equity method in separate financial statements2
Amendments to HKFRS 10	Sale and contribution of assets between an investor
and HKAS 28	and its associate or joint venture2
Amendments to HKFRS 10,	Investment entities: Applying the consolidation exception2
HKFRS 12 and HKAS 28
Amendments to HKFRSs	Annual improvements to HKFRSs 2012 – 2014 cycle2

1 Effective for annual periods beginning on or after 1 January 2018, with earlier application.
2 Effective for annual periods beginning on or after 1 January 2016, with limited exceptions. Earlier application is permitted

HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for general hedge accounting. Another revised version of HKFRS 9 was issued in 2014 mainly to include (a) impairment requirements for financial assets and (b) limited amendments to the classification and measurement requirements by introducing a fair value through other comprehensive income (“ FVTOCI ”) measurement category for certain simple debt instruments.

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ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

Key requirements of HKFRS 9 are described below:

All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent reporting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.

The date when entities would be required to apply HKFRS 9 was previously stated at 1 January 2015. This mandatory effective date has been removed to provide sufficient time for preparation of financial statements to make the transition to the new requirements, which will now become effective from a later date yet to be announced.

The directors anticipate that the adoption of HKFRS 9 in the future may have a significant impact on the amounts reported in respect of the Target Company’s financial assets and financial liabilities. Regarding the Target Company’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

HKFRS 15 Revenue from Contracts with Customers

In July 2014, HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15.

II-11

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

The directors anticipate that the application of HKFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Target Company’s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Target Company performs a detailed review.

The directors do not anticipate that the application of the other new and revised HKFRSs will have a material impact on the Target Company’s financial statements.

(b) Basis of preparation

The financial statements have been prepared under the historical cost convention. The directors of the Target Company are of the opinion that it is appropriate to prepare the Financial Information on a going concern basis.

The Financial Information is presented in Hong Kong Dollar (“ HK$ ”) rounded to the nearest thousand except when otherwise indicated, which is the presentation currency of the Target Company and the functional currency of the Target Company is Renminbi.

The measurement basis used in the preparation of the Financial Information is the historical cost convention except for certain financial assets, financial liabilities which have been carried at fair value as explained below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The preparation of the Financial Information in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of HKFRSs that have significant effect on the Financial Information and estimates with a significant risk of material adjustment in the next financial year are discussed in Note 3.

The accounting policies set out below have been applied consistently to all periods presented in the Financial Information.

(c) Impairment of assets

(1) Financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contracts, such as a default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial reorganisation; or
the disappearance of an active market for that financial asset because of financial difficulties.

II-12

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of within 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(2) Other assets

Internal and external sources of information are reviewed at each reporting date to identify indications that other assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased.

Property, plant ad equipment
Land use right
Intangible assets

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount.

II-13

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

– Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of impairment losses is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the statements of profit or loss and other comprehensive income in the year in which the reversals are recognised.

(d) Financial instruments

Financial assets and financial liabilities are recognised on the statements of financial position when an entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the statements of profit or loss and other comprehensive income.

(i) Financial assets

Financial assets are classified into loans and receivables (including cash and bank balances). All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way of purchases or sales of financial assets that requires delivery of assets within the time frame established by regulation or convention in the marketplace.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables including trade and other receivables, and cash and bank balances are carried at amortised cost using the effective interest method, less any identified impairment losses.

Effective interest method

The effective interest method is a method of calculating the amortised cost of debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

(ii) Financial liabilities (including interest-bearing borrowings)

Financial liabilities including trade and other payables, amount due to director, amounts due to former shareholders and bank borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. The related interest expense is recognised within “finance costs” in the statements of profit or loss and other comprehensive income.

Gains and losses are recognised in the statements of profit or loss and other comprehensive income when the liabilities are derecognised as well as through the amortisation process.

II-14

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

Effective interest method

The effective interest method is a method of calculating the amortised cost of financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

(iii) Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the entity has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in the statements of profit or loss and other comprehensive income.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in the statements of profit or loss and other comprehensive income.

(e) Cash and cash equivalents

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Target Company’s cash management.

For the purpose of the statements of financial position, cash and cash equivalents comprise cash on hand and at banks, including time deposits, which are not restricted to use.

(f) Revenue recognition

Sales of pharmaceutical and healthcare products:
Revenue from the sale of pharmaceutical and healthcare products is recognized when the risks and rewards of ownership of the products has been transferred to customers.
Interest income
Interest income is recognised as it accrues using the effective interest method.
Government grants
Government grants that compensate the Target Company for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred.

(g) Property, plant and equipment

Property, plant and equipment are stated in the statements of financial position at cost less accumulated depreciation and impairment losses.

The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of profit or loss and other comprehensive income in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the property, plant and equipment, the expenditure is capitalised as an additional cost of that asset.

II-15

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

Depreciation is provided to write off the cost of items of property, plant and equipment, using the straight line method, over its estimated useful life. The principal annual rates are as follows:

Building	20 years
Plant and machinery	10 years
Office equipment	3-5 years
Motor vehicle	4 years

The gain or loss on disposal or retirement of an item of property, plant and equipment is the difference between the net sale proceeds and the carrying amount of the relevant asset, and is recognised in the statement of profit or loss and other comprehensive income.

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

Construction in progress represents leasehold improvements under construction or installation and is stated at cost. These costs include interior and exterior decorations, floor and wall coverings and an allocation of interest cost incurred. Construction in progress is transferred to leasehold improvements when the assets are ready for their intended use, at which time depreciation commences.

(h) Intangible assets (other than goodwill)

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated amortization and any accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less any subsequent accumulated impairment losses.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internallygenerated intangible asset can be recognised, development expenditure is recognised in profit or loss in period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and are initially recognised at their fair values at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately

(i) Land use right

Land use right represents the exclusive right to occupy and use land in the PRC for a specific contractual term. Land use right is carried at cost and charged to general and administrative expenses on a straight-line basis over the term of the land use right of 30 years.

II-16

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

(j) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, which comprises all costs of purchase and, where applicable, other costs those have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average method. Net realisable value represents the estimated selling price in the ordinary course of business less all estimated costs necessary to make the sale.

(k) Foreign currencies

i. Functional and presentation currency

Items included in the financial statements of each of the companies now comprising the Target Company are measured using the currency of the primary economic environment in which the company operates (the “ functional currency ”). The financial statements are presented in Hong Kong dollars, which is the functional and presentation currency of the Target Company.

ii. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss and other comprehensive income.

Translation differences on non-monetary financial assets and liabilities are reported as part of their fair value gain or loss.

iii. Group company

The results and financial positions of the Target Company (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a) Assets and liabilities are translated at the closing rate;
(b) Income and expenses are translated at average exchange rates; and
(c) All resulting exchange differences are recognised as a separate component of equity.

(l) Borrowing costs

Borrowing costs are interests and other costs incurred in connection with the borrowing of funds. All borrowing costs are charged to the statements of profit or loss and other comprehensive income in the period in which they are incurred.

(m) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Target Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that is probable that taxable profit will be available

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against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Target Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax is recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

(n) Provision

Provision is recognised when the Target Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligations.

(o) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Target Company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognised but is disclosed. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Target Company. A contingent asset is not recognised but is disclosed when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(p) Related parties transactions

A party is considered to be related to the Target Company if:

(i) A person, or a close member of that person’s family, is related to the Target Company if that person:
(1) has control or joint control over the Target Company;
(2) has significant influence over the Target Company; or
(3) is a member of the key management personnel of the Target Company or of a parent of the Company.

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(ii) An entity is related to the Target Company if any of the following conditions applies:
(1) the entity and the Target Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(2) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(3) both entities are joint ventures of the same third party.
(4) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(5) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company.
(6) the entity is controlled or jointly controlled by a person identified in (i).
(7) a person identified in (i)(1) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

A transaction is considered to be a related party transaction when there is a transfer of resources and obligations between related parties.

(q) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the leases. All other leases are classified as operating leases.

The Target Company as lessor

Amounts due from lessees under finance leases are recognised as receivables at the amount of the Target Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Target Company’s net investment outstanding in respect of the leases.

The Target Company as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(r) Government grants

Government grants are not recognised until there is reasonable assurance that the Target Company will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Target Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Target Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

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Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Target Company with no future related costs are recognised in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Company’s accounting policies which are described in Note 2, the directors of the Target Company is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Income tax

The Target Company is subject to income taxes in numerous tax authorities. Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Target Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

(b) Impairment of assets

In considering the impairment losses that may be required for certain property, plant and equipment, land use right and non-current financial assets, recoverable amount of these assets needs to be determined. The recoverable amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for these assets may not be readily available. In determining the value in use, expected cash flows generated by the asset are discounted to their present value, which requires significant judgment relating to items such as level of turnover and amount of operating costs. The Target Company uses all readily available information in determining an amount that is reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of items such as turnover and operating costs. An increase or decrease in the above impairment losses would affect the net profit or loss in future years

(c) Inventories

Inventories are stated at the lower of cost and net realisable value at the end of the reporting period. Net realizable value is determined on the basis of the estimated selling price less the estimated costs necessary to make the sale. The director estimates the net realisable value for finished goods based primarily on the latest invoice prices and current market conditions. In addition, the director performs an inventory review on a product-by-product basis at the end of each reporting period and assesses the need for write down of inventories.

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4. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 15,827 21,666 41,559 5,758 8,402 20,990 21,585 30,068 62,549 25,465 18,406 15,550 2,269 3,657 – – – – – 29,122 18,406 17,819	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 15,827 21,666 41,559 5,758 8,402 20,990 21,585 30,068 62,549 25,465 18,406 15,550 2,269 3,657 – – – – – 29,122 18,406 17,819	As at 31 July 2015 HK$’000 22,891 9,140
2012 HK$’000 15,827 5,758 21,585 25,465 3,657 – 29,122	2013 HK$’000 21,666 8,402 30,068 18,406 – – 18,406
		32,031
		30,946 36,111 – 1,869
		68,926

(b) Financial risk management objectives and policies

The Target Company’s major financial instruments include trade and other receivables, cash and cash equivalents, trade and other payables, amounts due to former shareholders amount due to a director and bank borrowings. The details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

The main risks arising from the Target Company’s financial instruments are currency risk, credit risk and liquidity risk. The directors review and agree policies for managing each of these risks and they are summarised below.

During the Relevant Periods, there has been no change to the types of the Target Company’s exposure in respect of financial instruments or the manner in which it manages and measures the risks.

Currency risk

Foreign exchange risk arises when future commercial transactions or recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.

The main operations of the Target Company were in the PRC and all the transactions were denominated in Renminbi (“ RMB ”). The Target Company did not use any derivative financial instruments to hedge for its foreign exchange risk exposure during the Relevant Periods.

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The carrying amounts of the Target Company’s foreign currency denominated monetary assets and monetary liabilities at the end of each reporting period are as follows:

Assets RMB Liabilities RMB		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 75,528 106,209 139,723 As at As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 37,512 34,985 27,752	As at 31 July 2015 HK$’000 135,844
			31 July 2015 HK$’000 90,943

Sensitivity analysis on currency risk

The Target Company is mainly exposed to the effects of fluctuation of RMB.

The following table details the Target Company’s sensitivity to a 5% increase and decrease in the Hong Kong dollars against the relevant foreign currency. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Target Company where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase in loss where the Hong Kong dollars strengthen 5% against the relevant currency. For a 5% weakening of the Hong Kong dollars against the relevant currency, there would be an equal and opposite impact on the loss.

Impact of RMB Profit or loss Note:		As at As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,900 3,561 5,599	As at As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,900 3,561 5,599	31 July 2015 HK$’000 2,245
		2012 HK$’000 1,900	2013 HK$’000 3,561

This is mainly attributable to the exposure outstanding on receivables and payables denominated in RMB at the end of the reporting period.

Credit risk

The Target Company’s credit risk is primarily attributable to trade and other receivables. It has policies in place to ensure that sales and services are made to customers with an appropriate credit history. The exposure to these credit risks are monitored on an ongoing basis.

The carrying amounts of trade and other receivables included in the statement of financial position represent the Target Company’s maximum exposure to credit risk in relation to the Target Company’s financial assets. No other financial assets carry a significant exposure to credit risk.

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The Target Company’s concentration of credit risk by geographical location is mainly in the PRC. However, Target Company does not have concentration of credit risk by customers as the revenue was earned from a wide range of customers during the Relevant Periods. In this regard, the director of Target Company considers that the Target Company’s credit risk is significantly reduced.

Substantially all of the Target Company’s cash and cash equivalents are deposited in banks with high credit ratings assigned by international credit-rating agencies which the director assessed the credit risk to be insignificant.

Liquidity risk

Liquidity risk is the risk that funds will not be available to meet liabilities as they fall due, and it results from amount and maturity mismatches of assets and liabilities. The Target Company will consistently maintain a prudent financial policy and ensure that it maintains sufficient cash to meet its liquidity requirements.

The Target Company’s financial liabilities are analysed into relevant maturity groupings based on the remaining period at the respective end of the reporting periods to the contractual maturity date, using the contractual undiscounted cash flows, as follows:

At 31 December 2012	At 31 December 2012	Total HK$’000 25,465 3,657
On demand or less than Over 1 year 1 year HK$’000 HK$’000 25,465 – 3,657 – 29,122 – At 31 December 2013
		29,122

		Total HK$’000 18,406
On demand or less than Over 1 year 1 year HK$’000 HK$’000 18,406 – At 31 December 2014

		Total HK$’000 15,550 2,269
On demand or less than 1 year HK$’000 15,550 2,269 17,819	Over 1 year HK$’000 – – –
		17,819

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Weighted average interest rate Trade and other payables – Amounts due to former shareholders – Bank borrowings –		At 31 July 2015	At 31 July 2015
	Carrying amount HK$’000 30,946 36,111 1,869 68,926	On demand or less than 1 year HK$’000 30,946 36,111 1,869 68,926	Over 1 year HK$’000 – – – –	Total HK$’000 30,946 36,111 1,869
				68,926

Fair value of financial instruments

The fair value of financial assets and financial liabilities are determined as follows:

(i) the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices; and
(ii) the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using the relevant prevailing market rate.

The director considers that the carrying amount of other financial assets and financial liabilities carried at amortised cost, approximate to their fair values due to the relatively short-term nature of these financial instruments.

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable as at the end of the relevant periods.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

No analysis is disclosed since the Target Company has no financial instruments that are measured subsequent to initial recognition at fair value at the end of the reporting period.

Interest rate risk

The Target Company has no significant interest, bearing liabilities and therefore has no significant interest rate risk exposure.

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5. CAPITAL RISK MANAGEMENT

The primary objective of the Target Company’s capital management is to safeguard the Target Company’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value. The Target Company manages the capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Target Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Target Company’s objectives, policies or processes for managing capital remain unchanged during the Relevant Periods.

The Target Company monitors capital to ensure that entities in the Target Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Target Company overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Target Company consists of debt (other borrowings), cash and bank balances and equity attributable to owners of Target Company, comprising issued share capital and reserves.

As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 3,657 – 2,269 38,016 71,224 111,971 9.6% N/A 2.0%	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 3,657 – 2,269 38,016 71,224 111,971 9.6% N/A 2.0%	As at 31 July 2015 HK$’000 37,980
2012 HK$’000 3,657 38,016 9.6%	2013 HK$’000 – 71,224 N/A
		44,901
		84.6%

Notes:

a. Equity includes all capital and reserves attributable to owners of the Target Company.

b. Other borrowings include amounts due to former shareholders and a director as detailed in notes 21.

6. TURNOVER

An analysis of the Target Company’s turnover for the year/period is as follows:

Turnover Income from sales of Pharmaceutical and healthcare products	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 84,430 136,160 193,214	Seven months ended 31 July
		2014 2015 HK$’000 HK$’000 (Unaudited) 105,131 104,447

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7. OTHER REVENUE AND GAINS

Bank interest income Government grants Sundry income Gain on disposal of property, plant and equipment FINANCE COSTS Interest: Bank loan		Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 27 35 19 – 115 278 – – 11 45 – – 72 150 308 Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 – – –	Seven months ended 31 July	Seven months ended 31 July
			2014 2015 HK$’000 HK$’000 (Unaudited) 35 51 277 – 10 – – – 322 51 Seven months ended 31 July	2015 HK$’000 51 – – –
				51


			2014 2015 HK$’000 HK$’000 (Unaudited) – 49

8. FINANCE COSTS

9. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging:

Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 12,658 17,650 19,176 1,916 3,162 3,114 14,574 20,812 22,290 13 13 29 43 – 4 164 119 194 3,347 4,389 4,515 – 123 611	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 12,658 17,650 19,176 1,916 3,162 3,114 14,574 20,812 22,290 13 13 29 43 – 4 164 119 194 3,347 4,389 4,515 – 123 611	Seven months ended 31 July	Seven months ended 31 July
2012 HK$’000 12,658 1,916 14,574 13 43 164 3,347 –	2013 HK$’000 17,650 3,162 20,812 13 – 119 4,389 123	2014 HK$’000 (Unaudited) 12,122 1,658 13,780 – 2 98 2,750 89	2015 HK$’000 35,554 2,183
			37,737

			– 2 149 3,085 –

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10. DIRECTOR’S AND KEY MANAGEMENT PERSONNEL EMOLUMENTS

(a) Details of director’s emoluments are as follows:

Fees Other emoluments: Salaries, allowances and benefits in kind Provident fund contributions Seven months ended 31 July 2015 Shao Yan（邵岩） Shen Fang Ling（沈芳玲） HSU WILLIAM SHANG WI Xie Fang（謝方） Wu Min Feng（伍旻鋒） Huang Zhi Wu（黄志武） Wang Hong Qin（王紅芹） Wang Wei Qiang（王偉强） Liu Cong Xue（劉從學） Wu Zhi Hong（吳志紅） Zhang Suo Zhong（仉鎖忠） Huang Yi（黄毅） Seven months ended 31 July 2014 Huang Zhi Wu（黄志武） Wang Hong Qin（王紅芹） Wang Wei Qiang（王偉强） Liu Cong Xue（劉從學） Wu Zhi Hong（吳志紅） Zhang Suo Zhong（仉鎖忠） Huang Yi（黄毅） Year ended 31 December 2014 Huang Zhi Wu（黄志武） Wang Hong Qin（王紅芹） Wang Wei Qiang（王偉强） Liu Cong Xue（劉從學） Wu Zhi Hong（吳志紅） Zhang Suo Zhong（仉鎖忠） Huang Yi（黄毅）		Seven months ended Year ended 31 December 31 July 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) – – – – – 2,294 2,512 3,801 2,566 3,304 143 172 195 105 125 2,437 2,684 3,996 2,671 3,429 Salaries, allowances Provident and benefits fund Total Fees in kind contributions emoluments HK$’000 HK$’000 HK$’000 HK$’000 – – – – – – – – – – – – – – – – – – – – – 1,621 50 1,671 – 1,447 50 1,497 – 236 25 261 – – – – – – – – – – – – – – – – – 1,318 45 1,363 – 1,078 45 1,123 – 170 14 184 – – – – – – – – – – – – – – – – – 1,947 81 2,028 – 1,581 81 1,662 – 273 32 305 – – – – – – – – – – – – – – – –	Seven months ended 31 July	Seven months ended 31 July	Seven months ended 31 July
				2015 HK$’000 – 3,304 125 3,429 Total emoluments HK$’000 – – – – – 1,671 1,497 261 – – – –	2015 HK$’000 – 3,304 125
					3,429


				1,363 1,123 184 – – – –
				2,028 1,662 305 – – – –

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Year ended 31 December 2013 Huang Zhi Wu（黄志武） Wang Hong Qin（王紅芹） Wang Wei Qiang（王偉强） Liu Cong Xue（劉從學） Wu Zhi Hong（吳志紅） Zhang Suo Zhong（仉鎖忠） Huang Yi（黄毅） Year ended 31 December 2012 Huang Zhi Wu（黄志武） Wang Hong Qin（王紅芹） Wang Wei Qiang（王偉强） Liu Cong Xue（劉從學） Wu Zhi Hong（吳志紅） Zhang Suo Zhong（仉鎖忠） Huang Yi（黄毅）	Fees HK$’000 – – – – – – – – – – – – – –	Salaries, allowances Provident and benefits fund in kind contributions HK$’000 HK$’000 1,342 74 974 74 196 24 – – – – – – – – 1,073 62 1,107 61 114 20 – – – – – – – –	Total emoluments HK$’000 1,416 1,048 220 – – – –
			1,135 1,168 134 – – – –

Note:

(i) Huang Zhi Wu（黄志武）, Wang Hong Qin（王紅芹）, Wang Wei Qiang（王偉强）, Liu Cong Xue（劉從學）, Wu Zhi Hong（吳志紅）, Zhang Suo Zhong（仉鎖忠） and Huang Yi（黄毅） were retired on 15 July 2015

(ii) HSU WILLIAM SHANG WI, Xie Fang（謝方） and Wu Min Feng（伍旻鋒） were appointed on 15 July 2015 and retired on 17 July 2015

(iii) Shao Yan（邵岩）, Shen Fang Ling（沈芳玲） and Wu Min Feng（伍旻鋒） were appointed on 17 July 2015

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(b) Five highest paid individuals

Of the five individuals with highest emoluments, no director of the Target Company during the Relevant Periods whose emoluments are disclosed in Note 10(a). The emoluments in respect of the five highest paid individuals are as follows:

Director Non-directors		Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 2,303 2,464 3,690 1,293 1,518 1,799 3,596 3,982 5,489	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 2,303 2,464 3,690 1,293 1,518 1,799 3,596 3,982 5,489	Seven months ended 31 July	Seven months ended 31 July
		2012 HK$’000 2,303 1,293 3,596	2013 HK$’000 2,464 1,518 3,982	2014 HK$’000 (Unaudited) 2,486 1,240 3,726	2015 HK$’000 3,168 1,399
					4,567

Details of the emoluments of the above non-directors, highest paid employees during the Relevant Periods are as follows:

Salaries, allowances and benefit in kinds Provident fund contributions		Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,227 1,461 1,699 66 57 100 1,293 1,518 1,799	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,227 1,461 1,699 66 57 100 1,293 1,518 1,799	Seven months ended 31 July	Seven months ended 31 July
		2012 HK$’000 1,227 66 1,293	2013 HK$’000 1,461 57 1,518	2014 HK$’000 (Unaudited) 1196 44 1,240	2015 HK$’000 1,336 63
					1,399

The number of these non-directors, highest paid employees whose emoluments fell within the following band is as follows:

Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000		Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 3 3 3 – – – 3 3 3	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 3 3 3 – – – 3 3 3	Seven months ended 31 July	Seven months ended 31 July
		2012 HK$’000 3 – 3	2013 HK$’000 3 – 3	2014 HK$’000 (Unaudited) 3 – 3	2015 HK$’000 3 –
					3

There was no arrangement under which the directors or the highest paid employees waived or agreed to waive any remuneration during the Relevant Periods.

During the Relevant Periods, no emoluments were paid by the Target Company to the directors, highest paid employees as an inducement to join, or upon joining the Target Company, or as compensation for loss of office. None of the director has waived emoluments during the Relevant Periods.

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11. TAXATION

Current tax for the year/period: Provision for the year/period	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 2,990 6,119 8,977	Seven months ended 31 July
		2014 2015 HK$’000 HK$’000 (Unaudited) 3,653 4,766

The Target Company is subject to income tax on an entity basis on profits arising in or derived from the jurisdictions which members of the Target Company are domiciled and operate.

PRC Enterprise Income Tax

As described in the paragraph below, the Target Company is subject to PRC enterprise income tax at a rate of 15% for the year ended 31 December 2012, 2013, 2014 and 7 months ended 31 July 2015.

No provision was made for Hong Kong Profits Tax as the Target Group did not earn any income subject to Hong Kong Profits Tax for the Relevant Period.

The Target Company received the certificate from the Beijing Municipal Office, SAT and Beijing Local Taxation Bureau that the Target Company has been recognised as a High and New Technology Enterprise on 12 November 2012. Pursuant to the new Enterprise Income Tax Law, enterprise income tax applicable to a High and New Technology Enterprise is reduced to 15%. The Target Company has since been enjoying the tax concession rate of 15% for three years effective from 12 November 2012.

Reconciliation of the taxation applicable to profit/loss before taxation using the statutory rate for the location in which the Target Company is domiciled to the tax expense at the effective tax rate is as follows:

Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 19,469 40,683 58,136 2,920 6,102 8,720 – – – 70 17 257 2,990 6,119 8,977	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 19,469 40,683 58,136 2,920 6,102 8,720 – – – 70 17 257 2,990 6,119 8,977	Seven months ended 31 July	Seven months ended 31 July
2012 HK$’000 19,469 2,920 – 70 2,990	2013 HK$’000 40,683 6,102 – 17 6,119	2014 HK$’000 (Unaudited) 25,720 3,843 (190) – 3,653	2015 HK$’000 31,165

			4,683 – 83
			4,766

As at 31 December 2012, 31 December 2013, 31 December 2014 and 31 July 2015, the Target Company had no unused estimated tax losses available for offset against future taxable profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams.

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12. DIVIDENDS

Dividends payable to shareholders of the Target Company approved and paid during the Relevant Period.

						Seven months ended	Seven months ended
		Year ended 31 December				31	July
		2012	2013	2014		2014	2015
		HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
						(Unaudited)
Dividends recognised as distribution
during the year/period:		2,579	2,661	24,982		22,613	92,194

PROPERTY, PLANT AND	EQUIPMENT
		Plant and	Office	Motor	Construction
	Building	machinery	equipment	vehicle		in progress	Total
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Cost
As at 1 January 2012	11,336	11,211	1,325	3,297		1,747	28,916
Additions	491	1,491	283	3,746		8,429	14,440
Disposal	–	(251)	–	–		(491)	(742)
Exchange realignment	61	59	7	16		4	147
As at 31 December 2012
and 1 January 2013	11,888	12,510	1,615	7,059		9,689	42,761
Additions	15,517	3,223	199	551		9,095	28,585
Disposal	(976)	–	–	(206)		(15,517)	(16,699)
Exchange realignment	413	422	55	237		318	1,445
As at 31 December 2013
and 1 January 2014	26,842	16,155	1,869	7,641		3,585	56,092
Additions	16,008	3,351	360	1,035		14,922	35,676
Disposal	(261)	–	–	(5,029)		(18,489)	(23,779)
Exchange realignment	(174)	(99)	(12)	(43)		(18)	(346)
As at 31 December 2014
and 1 January 2015	42,415	19,407	2,217	3,604		–	67,643
Additions	–	694	47	–		–	741
Disposal	–	–	–	(134)		–	(134)
Exchange realignment	(483)	(221)	(26)	(41)		–	(771)
As at 31 July 2015	41,932	19,880	2,238	3,429		–	67,479
Accumulated depreciation
As at 1 January 2012	413	5,175	571	1,452		–	7,611
Charge for the year	551	1,380	173	1,243		–	3,347
Disposal	–	(212)	–	–		–	(212)
Exchange realignment	2	27	3	7		–	39
As at 31 December 2012
and 1 January 2013	966	6,370	747	2,702		–	10,785
Charge for the year	784	1,829	205	1,571		–	4,389
Disposal	(121)	–	–	(65)		–	(186)
Exchange realignment	34	215	25	92		–	366
As at 31 December 2013
and 1 January 2014	1,663	8,414	977	4,300		–	15,354
Charge for the year	1,316	1,774	341	1,084		–	4,515
Disposal	(57)	–	–	(3,258)		–	(3,315)
Exchange realignment	(11)	(52)	(6)	(24)		–	(93)

13. PROPERTY, PLANT AND EQUIPMENT

II-31

APPENDIX II

ACCOUNTANTS’ REPORT OF JIU HE

Plant and Building machinery HK$’000 HK$’000 As at 31 December 2014 and 1 January 2015 2,911 10,136 Charge for the year 1,191 1,444 Disposal – – Exchange realignment (32) (116) As at 31 July 2015 4,070 11,464 Carrying amounts As at 31 July 2015 37,862 8,416 As at 31 December 2014 39,504 9,271 As at 31 December 2013 25,179 7,741 As at 31 December 2012 10,922 6,140 PREPAID RENTAL The Target Company’s prepaid rental comprise: Land outside Hong Kong Medium term lease: Analysed for reporting purposes as: Current assets Non-current assets	Plant and Building machinery HK$’000 HK$’000 As at 31 December 2014 and 1 January 2015 2,911 10,136 Charge for the year 1,191 1,444 Disposal – – Exchange realignment (32) (116) As at 31 July 2015 4,070 11,464 Carrying amounts As at 31 July 2015 37,862 8,416 As at 31 December 2014 39,504 9,271 As at 31 December 2013 25,179 7,741 As at 31 December 2012 10,922 6,140 PREPAID RENTAL The Target Company’s prepaid rental comprise: Land outside Hong Kong Medium term lease: Analysed for reporting purposes as: Current assets Non-current assets	Office equipment HK$’000 1,312 176 – (16) 1,472 766 905 892 868 As at	Office equipment HK$’000 1,312 176 – (16) 1,472 766 905 892 868 As at	Office equipment HK$’000 1,312 176 – (16) 1,472 766 905 892 868 As at
		2012 HK$’000 1,472 163 1,309 1,472	2013 HK$’000 1,353 169 1,184 1,353

14. PREPAID RENTAL

II-32

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

15. INTANGIBLE ASSETS

Capitalised development costs HK$’000 Cost As at 1 January 2012 427 Additions – Disposal – Exchange realignment 2 As at 31 December 2012 and 1 January 2013 429 Additions – Disposal – Exchange realignment 15 As at 31 December 2013 and 1 January 2014 444 Additions – Disposal – Exchange realignment (3) As at 31 December 2014 and 1 January 2015 441 Additions – Disposal – Exchange realignment (5) As at 31 July 2015 436 Accumulated amortisation As at 1 January 2012 384 Amortisation expenses 43 Disposal – Exchange realignment 2 As at 31 December 2012 and 1 January 2013 429 Amortisation expenses – Disposal – Exchange realignment 15 As at 31 December 2013 and 1 January 2014 444 Amortisation expenses – Disposal – Exchange realignment (3)	Patent HK$’000 – – – – – 40 – – 40 – – – 40 – – – 40 – – – – – – – – – 4 – 1	Total HK$’000 427 – – 2 429 40 – 15 484 – – (3) 481 – – (5) 476 384 43 – 2 429 – – 15 444 4 – (2)

II-33

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

Accumulated amortisation As at 31 December 2014 and 1 January 2015 Amortisation expenses Disposal Exchange realignment As at 31 July 2015 Carrying amounts As at 31 July 2015 As at 31 December 2014 As at 31 December 2013 As at 31 December 2012	Capitalised development costs HK$’000 441 – – (5) 436 – – – –	Patent HK$’000 5 2 – – 7 33 35 40 –	Total HK$’000 446 2 – (5)
			443
			33
			35
			40
			–

16. INVENTORIES

Raw materials Finished goods Consumables and others		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 8,812 6,901 7,587 9,465 20,277 14,036 2,218 6,832 2,393 20,495 34,010 24,016	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 8,812 6,901 7,587 9,465 20,277 14,036 2,218 6,832 2,393 20,495 34,010 24,016	As at 31 July 2015 HK$’000 30,359 21,796 861
		2012 HK$’000 8,812 9,465 2,218 20,495	2013 HK$’000 6,901 20,277 6,832 34,010
				53,016

17. TRADE AND OTHER RECEIVABLES

Trade receivables Prepayments Deposits Other receivables		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 12,672 19,787 38,691 1,387 4 2,315 346 426 289 1,422 1,449 264 15,827 21,666 41,559	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 12,672 19,787 38,691 1,387 4 2,315 346 426 289 1,422 1,449 264 15,827 21,666 41,559	As at 31 July 2015 HK$’000 20,367 1,537 132 855
		2012 HK$’000 12,672 1,387 346 1,422 15,827	2013 HK$’000 19,787 4 426 1,449 21,666
				22,891

The fair values of trade receivables approximate their carrying cost.

II-34

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

(a) The ageing analysis of trade receivables is as follows:

0 – 60 days 61 – 90 days 91 – 180 days Over 180 days		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 7,702 7,562 23,229 1,563 3,755 7,348 1,448 6,194 6,229 1,959 2,276 1,885 12,672 19,787 38,691	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 7,702 7,562 23,229 1,563 3,755 7,348 1,448 6,194 6,229 1,959 2,276 1,885 12,672 19,787 38,691	As at 31 July 2015 HK$’000 8,741 7,372 2,043 2,211
		2012 HK$’000 7,702 1,563 1,448 1,959 12,672	2013 HK$’000 7,562 3,755 6,194 2,276 19,787
				20,367

According to the credit rating of different customers, the Target Company allows a range of credit periods within 90 days to its trade customers.

The Target Company’s policy for impairment loss on trade receivables is based on an evaluation of collectability and aged analysis of the receivables which requires the use of judgement and estimates. Provisions would apply to the receivables when there are events or changes in circumstances indicate that the balances may not be collectible. The management closely reviews the trade receivables balances and any overdue balances on an ongoing basis and assessments are made by our management on the collectability of overdue balances.

The Target Company does not hold any collateral over the balances.

(b) Trade receivables that are not impaired

Trade receivable that are individually nor collectively considered to be impaired are aged with 90 days.

Receivables that are neither past due nor impaired related to a wide range of customers for whom there was no recent history of default.

Trade receivables disclosed above include amounts which are past due at the end of the reporting period for which the Target Company has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable.

The ageing analysis of these trade receivables are as follows:

Overdue by: 1 – 90 days Over 90 days Total		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,448 6,194 6,229 1,959 2,276 1,885 3,407 8,470 8,114	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,448 6,194 6,229 1,959 2,276 1,885 3,407 8,470 8,114	As at 31 July 2015 HK$’000 2,043 2,211
		2012 HK$’000 1,448 1,959 3,407	2013 HK$’000 6,194 2,276 8,470
				4,254

II-35

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

18. CASH AND CASH EQUIVALENTS

Cash and bank balances	As at As at 31 December 31 July 2012 2013 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 5,758 8,402 20,990 9,140

Included in the cash and bank balances were amounts in RMB which is not freely convertible into other currencies.

19. TRADE AND OTHER PAYABLES

Trade payables Accruals and other payables Receipt in advance		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 16,244 9,653 5,465 9,221 8,753 10,085 7,966 13,929 4,833 33,431 32,335 20,383	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 16,244 9,653 5,465 9,221 8,753 10,085 7,966 13,929 4,833 33,431 32,335 20,383	As at 31 July 2015 HK$’000 4,504 26,442 22,017
		2012 HK$’000 16,244 9,221 7,966 33,431	2013 HK$’000 9,653 8,753 13,929 32,335
				52,963

The ageing analysis of trade payables is as follows:

0 – 90 days	As at As at 31 December 31 July 2012 2013 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 16,244 9,653 5,465 4,504

The trade payables are interest free and are normally settled on or before the delivery and the credit period on purchase is average 90 days.

20. BANK BORROWINGS

Bank borrowings (unsecured) Carrying amounts repayable: On demand or within one year		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 – – – – – –	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 – – – – – –	As at 31 July 2015 HK$’000 1,869
		2012 HK$’000 – –	2013 HK$’000 – –
				1,869

The bank borrowings of approximately HK$1,869,000 were obtained from one party and carry interest variable at 2.7% over the loan prime rate per annum.

II-36

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

21. AMOUNTS DUE TO FORMER SHAREHOLDERS/A DIRECTOR

The amounts due to former shareholders and a director are unsecured, interest-free and recoverable on demand.

22. SHARE CAPITAL

Issued and fully paid ordinary shares At the beginning of the year Increase during the year At the end of the year		As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 9,765 9,765 9,765 – – 15,140 9,765 9,765 24,905	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 9,765 9,765 9,765 – – 15,140 9,765 9,765 24,905	As at 31 July 2015 HK$’000 24,905 –
		2012 HK$’000 9,765 – 9,765	2013 HK$’000 9,765 – 9,765
				24,905

23. RESERVES

Details of the movements of the Target Company’s reserves are set out in the statements of changes in equity on page II-7 of this appendix.

24. MATERIAL RELATED PARTY TRANSACTIONS

(a) Compensation of key management personnel

Save as disclosed elsewhere in this Appendix, the Target Company has the following related party transactions. Compensation of key management personnel of the Target Company, including director’s remuneration as detailed in note 10 above.

Total compensation paid to key management personnel	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 3,730 4,202 5,794	Seven months ended 31 July
		2014 2015 HK$’000 HK$’000 (Unaudited) 3,910 4,828

(b) Transactions with related party

Name of company Relationship 武漢遠大製藥集團 Fellow subsidiary 銷售有限公司 Income from sales of Pharmaceutical and healthcare products	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 – – –	Seven months ended 31 July
		2014 2015 HK$’000 HK$’000 (Unaudited) – 860

Sales of goods to related parties were made at the Target Company’s usual list prices.

II-37

ACCOUNTANTS’ REPORT OF JIU HE

APPENDIX II

25. OPERATING LEASE COMMITMENT

The Target Company did not have any significant operating lease commitment at the Relevant Periods.

26. CAPITAL COMMITMENT

The Target Company did not have any significant capital commitment at the Relevant Periods.

27. CONTINGENT LIABILITIES

The Target Company did not have any significant contingent liabilities at the Relevant Periods.

28. SUBSEQUENT EVENTS

Grand Pharm (China), an indirect non-wholly owned subsidiary of the Company, entered into the acquisition agreement with Ningbo CDH, pursuant to which Ningbo CDH has agreed to sell and Grand Pharm (China) has agreed to purchase the Sale Capital, representing 30% of the entire equity interest in Jiu He. The consideration for the acquisition is RMB210,080,000 (equivalent to approximately HK$256,195,000) and will be settled by cash on completion. As at the date of this circular, Jiu He is an indirect non-wholly owned subsidiary of the Company. Upon completion of the said acquisition, Grand Pharm (China) will become interested in 97% of the entire equity interest in Jiu He. Simultaneously upon the signing of the acquisition agreement, a supplemental deed has been entered into among the parties to the Put Option Deed, namely the Company, Grand Pharm (China) and Ningbo CDH, pursuant to which it is agreed that the Put Option Deed shall be cancelled and become null and void upon completion of the acquisition. The possible termination is in accordance with the terms of the Put Option Deed and does not involve payment of any amounts by way of penalty, damages or other compensation. Please refer to the announcement dated 27 November 2015 for details.

29. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company or any of the companies now comprising the Target Company in respect of any period subsequent to 31 July 2015.

Yours faithfully

HLB Hodgson Impey Cheng Limited Certified Public Accountants Shek Lui Practising Certificate Number: P05895 Hong Kong

II-38

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

24 December 2015

The Board of Directors

China Grand Pharmaceutical and Healthcare Holdings Limited Units 3302, The Center 99 Queen’s Road, Central, HONG KONG

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR

Dear Sirs,

We have completed our assurance engagement to report on the compilation of pro forma financial information of China Grand Pharmaceutical and Healthcare Holdings Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors of the Company (the “ Directors ”) for illustrative purposes only. The unaudited pro forma financial information consists of the pro forma statement of assets and liabilities as at 30 June 2015 and related notes as set out on pages III-4 to III-8 of the circular issued by the Company dated 24 December 2015 (the “ Circular ”). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described on page III-1 of the Circular.

The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition of 67% and 30% of equity interest of the Beijing Jiu He Pharmaceutical Limited (“ Target Company ”) on the Group’s unaudited interim financial position as at 30 June 2015 (the “ Acquisition ”) as if the Acquisition had taken place at 30 June 2015. As part of this process, information about the Group’s unaudited interim financial position has been extracted by the Directors from the Group’s unaudited interim consolidated financial statements for the six months ended 30 June 2015 as set out in the Company’s interim results announcement dated 17 August 2015, an interim report has been published on 23 September 2015.

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

III-1

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (“ HKSAE ”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of unaudited pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at as at 30 June 2015 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related unaudited pro forma adjustments give appropriate effect to those criteria; and
The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

III-2

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OPINION

In our opinion:

the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
such basis is consistent with the accounting policies of the Group; and
the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

Shek Lui

Practising Certificate Number: P05895

Hong Kong

III-3

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

The following is the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group has been prepared based on the unaudited interim consolidated statement of financial position of the Group as set out in published interim result announcement for the six months ended 30 June 2015. This unaudited pro forma statement of assets and liabilities of the Enlarged Group has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effects of the Acquisition, as if the Acquisition had taken place on 30 June 2015. The unaudited pro forma financial information of the Group is prepared for illustrative purpose only, based on the judgements and assumptions of the Directors, and because of its hypothetical nature, it may not give a true picture of the consolidated statement of assets and liabilities of the Group following the Acquisition as at the date to which it is made up or at any future date. The audited statement of financial position of The Target Company as at 31 July 2015 as set out in Appendix II to the Circular, after making pro forma adjustments relating to the Acquisition that are (i) directly attributable to the transactions; and (ii) factually supportable.

table.
	Unaudited	Audited					Unaudited
	consolidated	statement of					pro Forma
	statement of	assets and					consolidated
	assets and	liabilities of					statement of
	liabilities of	the Target					assets and
	the Group	Company					liabilities
	as at	as at					of the
	30 June	31 July					Enlarged
	2015	2015		Pro forma	adjustments		Group
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note 6)
Non-current assets
Property, plant and
equipment	2,362,628	48,249					2,410,877
Prepaid lease payments	269,692	–					269,692
Prepaid rental	–	1,574					1,574
Interests in associates	246,540	–					246,540
Available-for-sale
financial assets	39,844	–					39,844
Deposit for acquisition of
non-current assets	4,050	–					4,050
Goodwill	161,153	–		294,032			455,185
Intangible assets	141,240	33			561,334		702,607
Deferred tax assets	3,161	–					3,161
Prepayments	28,590	–					28,590
Loan receivables	26,250	–					26,250
	3,283,148	49,856					4,188,370
Current assets
Inventories	510,762	53,016			23,519		587,297
Trade and other receivables	1,371,147	22,891					1,394,038
Loan receivables	30,421	–					30,421
Prepaid lease payments	6,773	–					6,773
Prepaid rental	–	218					218
Pledged bank deposits	121,554	–					121,554
Cash and bank equivalents	813,622	9,140	(563,602)				2,965
			(256,195)
Tax recoverable	–	723					723
	2,854,279	85,988					2,143,989

III-4

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

	Unaudited	Audited					Unaudited
	consolidated statement of						pro Forma
	statement of	assets and					consolidated
	assets and liabilities of						statement of
	liabilities of	the Target					assets and
	the Group	Company					liabilities
	as at	as at					of the
	30 June	31 July					Enlarged
	2015	2015		Pro forma	adjustments		Group
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note 6)
Current liabilities
Trade and other
payables	1,166,915	30,946				1,000	1,198,861
Amounts due to former
shareholders	–	36,111					36,111
Bank borrowings	2,086,290	1,869					2,088,159
Bank overdraft	1,848	–					1,848
Receipt in advance	–	22,017					22,017
Obligations under finance
leases	49,819	–					49,819
Income tax payable	47,466	–					47,466
	3,352,338	90,943					3,444,281

Net current assets/
(liabilities)	(498,059)	(4,955)					(1,300,292)

Total assets less current
liabilities	2,785,089	44,901					2,888,078

Non-current liabilities
Bank borrowings	233,749	–					233,749
Convertible bonds	253,228	–					253,228
Obligations under
finance leases	194,272	–					194,272
Deferred tax liabilities	57,204	–			87,728		144,932
Amount due to holding
company	22,975	–					22,975
Deferred income	638,259	–					638,259
	1,399,687	–					1,487,415

Net assets	1,385,402	44,901					1,400,663

III-5

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to Unaudited Pro Forma Financial information of the Enlarged Group

The balances are extracted from the unaudited interim consolidated financial position of the Group as at 30 June 2015 set out in the published interim result announcement for the six months ended 30 June 2015.
The balances are extracted from the accountants’ report of the Target Company as at 31 July 2015 as set out in Appendix II to this circular.
The adjustment represents the acquisition of the Company as a business combination in accordance with HKFRS 3 (Revised). In accordance to the sale and purchase agreement, the Group through its indirect non-wholly owned subsidiary has conditionally agreed to acquire 67% equity interest of the Target Company at the cash consideration of approximately HK$563,602,000 (equivalent to approximately RMB452,220,000). Upon the completion of the acquisition, the Target Company will become an indirectly non wholly-owned subsidiary of the Company.

On 27 November 2015, Grand Pharm (China), an indirect non-wholly owned subsidiary of the Company, entered into the acquisition agreement with Ningbo CDH, pursuant to which Ningbo CDH has agreed to sell and Grand Pharm (China) has agreed to purchase the sale capital, representing 30% of the entire equity interest in Jiu He. The consideration for the acquisition is RMB210,080,000 (equivalent to approximately HK$256,195,000) and will be settled by cash on completion.

Details of goodwill arising from the Acquisition is as following:

Total cash consideration – 67% – 30% Identifiable net assets attributable to the shareholders of Target Company_(Note 5)_ 629,754 Less: Deferred tax liabilities arising on assets revaluation (87,728) 542,026 Less: Identifiable net assets attributable to the retained shareholders of Target Company – 3% (16,261) Identifiable net assets acquired by the Company – 97% Goodwill	HK$’000 563,602 256,195 819,797 (525,765) 294,032

III-6

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Directors have reviewed the carrying value of goodwill and intangible assets of the Enlarged Group in accordance with Hong Kong Accounting Standard 36 Impairment of Assets (‘‘HKAS 36’’). According to the HKAS 36, an impairment loss is recognized in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. The recoverable amount of an asset is the higher of its net selling price and value in use. Based on the valuation report as detailed in note 5 of this appendix, the Directors are of the opinion that there are no indications that the values of the goodwill and intangible assets of the Enlarged Group may be impaired in respect of the intangible assets and goodwill with an assumed fair value of approximately HK$561,334,000 and HK$294,032,000 respectively, as shown in the Unaudited Pro Forma Statement of Financial Position of the Enlarged Group as at 30 June 2015.

It is the responsibility solely of the Directors to ensure that the Company is adopting and will continue to adopt consistent accounting policies and ensure that the principal assumption of the valuation for assessment of the impairment of the Enlarged Group’s intangible assets and goodwill are consistent for future annual audit of the Group.

The reporting accountants concurred with the Directors’ assessment of impairment in the intangible assets and goodwill in the Unaudited Pro Forma Financial Information and adoption of consistent accounting policies and principal assumptions in the preparation of financial statements of the Group after the Completion of the Acquisition.

(5) For the purpose to preparing the Unaudited Pro Forma Financial Information of the Enlarged Group, the net identifiable assets acquired is taken to be its fair value.

The carrying amount of the net assets of the Target Company as at 31 July 2015 Fair value adjustments: Inventory Intangible assets: Patent, trademark and capitalised development cost Fair value of the identifiable net assets of the Target Company as at 31 July 2015	HK$’000 44,901 23,519 561,334
	584,853
	629,754

The pro forma adjustment reflects the fair value adjustments of the identifiable assets and liabilities of the Target Company. Upon closing of the acquisition of the equity interests of the Target Company, the identifiable assets and liabilities of the Target Group will be accounted for in the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group at fair value under the purchase method of accounting in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations”.

III-7

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The valuer has adopted the income approach for valuation of the intangible assets. The discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of the intangible assets. This valuation methodology is based on the following major assumptions:

1) For Jiu He to continue as a going concern, Jiu He will successfully carry out all necessary activities for the development of its business. There is no major change in the way of using the major assets;
2) The intangible assets assessed belong to the Jiu He, there is no questions on the ownership;
3) The information provided by the Jiu He is true, legitimate and completed;
4) Jiu He is fully compliance with all relevant laws, regulations and policies and no major changes in the future;
5) There will be no material changes in the Jiu He’s accounting policy;
6) Interest rates, tax base, tax rate, exchange rates and levy in the localities for the operation of Jiu He will not differ materially from those presently prevailing; and
7) There will be no force majeure that could adversely impact the conditions of the operations of Jiu He.

The valuer is of the opinion that the technology used to produce the pharmaceutical and healthcare products has no foreseeable limited to the period over which the products are expected to generate net cash flow for the Group.

As a result, the technology is considered by the management of the Group as having an indefinite useful life because it is expected to contribute to net cash inflows indefinitely. The intangible asset will not be amortised until its useful life is determined to be finite. Instead it will be tested for impairment annually and whenever there is an indication that it may be impaired.

(6) The adjustment represents the estimated transaction costs of approximately HK$1,000,000, which are mainly professional fees payable by the Group in connection with the Acquisition.
(7) No adjustments have been made to reflect any results or transactions of the Group and the Target Company entered into subsequent to 30 June 2015 and 31 July 2015 respectively.
(8) The actual amounts of the adjustment were determined on the completion date of the Acquisitions, which may be different from the amounts presented in this Unaudited Pro Forma Financial Information and such differences may be material.

III-8

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, were as follows:

			Approximate
		Number of	percentage of
		issued Shares held	the issued share
	Nature of	(long position (L)/	capital of the
Name of Director	interests	short position (S))	Company (%)
Shao Yan_(Note)_	Interest in spouse	4,640,000 (L)	0.24

Note: Dr. Shao Yan, a director of the Company, is the spouse of Ms. Tian Wen Hong who is the holder of the above shares. By virtue of the SFO, Dr. Shao Yan shall be deemed to be interested in such 4,640,000 Shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

IV-1

GENERAL INFORMATION

APPENDIX IV

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

			Approximate
			percentage or
	Number or attributable		attributable
	number of Shares held or		percentage of
Name of Shareholder	short positions	Nature of interests	shareholding (%)
Outwit	1,228,775,094 (L)	Beneficial owner	62.63
Mr Hu Kaijun_(Note 1)_	1,228,775,094 (L)	Beneficial owner	62.63
黃岡市國有資產經營公司(Huang	RMB4,000,000 out of	Beneficial shareholder of a	10.26
Gang City State-Owned Asset	RMB38,990,000 registered	member of the Group
Operation Company)(Note 2)*	capital (L)
黃石飛雲製藥有限公司	RMB50,000,000 out of	Beneficial shareholder of a	40.00
(HuangShi Feiyun	RMB125,000,000	member of the Group
Pharmaceutical Company	registered capital (L)
Limited )(Note 3)*
上海沐翼投資管理合夥企業（有限	US$62,003,100 out of	Beneficial shareholder of an	66.67
合夥）(Shanghai Muyi	US$93,000,000 registered	associated corporation of
Investment Management	capital (L)	the Group
Partnership (Limited Partners)*)
(Note 4)
上海沐翼投資管理合夥企業	US$220,110 out of	Beneficial shareholder of a	22.01
（有限合夥）(Shanghai Muyi	US$1,000,000 registered	member of the Group
Investment Management	capital (L)
Partnership (Limited Partners)*)
(Note 5)
Dr. Michael Stefan Orlowski	EUR13,500 out of	Beneficial shareholder of an	27.00
(Note 6)	EUR50,000 registered	associated corporation of
	capital (L)	the Group

IV-2

GENERAL INFORMATION

APPENDIX IV

			Approximate
			percentage or
	Number or attributable		attributable
	number of Shares held or		percentage of
Name of Shareholder	short positions	Nature of interests	shareholding (%)
武漢大學資產經營投資管理有限	RMB12,300,000 out of	Beneficial shareholder of a	24.60
責任公司(Wuhan University	RMB50,000,000 registered	member of the Group
Assets Operation Investment	capital (L)
Management Limited)(Note 7)*
Wuhan Sanzhen Industry Holding	RMB5,000,000 out of	Beneficial shareholder of a	10.00
Company Limited_(Note 8)_	RMB50,000,000 registered	member of the Group
	capital (L)
武漢市蔬菜科學研究所(Wuhan	RMB921,006 out of	Beneficial shareholder of a	16.05
City Vegetables Science	RMB5,736,888 registered	member of the Group
Research Institution)(Note 9)*	capital (L)
Mr Yang Li Xin_(Note 10)_	RMB1,020,000 out of	Beneficial shareholder of an	51.00
	RMB2,000,000 registered	associated corporation of
	capital (L)	the Group
Mr Ye Bo_(Note 11)_	RMB1,800,000 out of	Beneficial shareholder of a	18.00
	RMB10,000,000 registered	member of the Group
	capital (L)
Ms Ye Jing Jing_(Note 12)_	RMB1,500,000 out of	Beneficial shareholder of a	15.00
	RMB10,000,000 registered	member of the Group
	capital (L)
北京市櫻花製藥厰(Beijing Ying	RMB2,208,192 out of	Beneficial shareholder of a	28.00
Hua Pharmaceutical Factory*)	RMB7,886,400 registered	member of the Group
(Note 13)	capital (L)
武漢雙暉天樂科技有限公司	RMB1,372,000 out of	Beneficial shareholder of a	49.00
(Wuhan Shuang Hui Tian Le	RMB2,800,000 registered	member of the Group
Technology Company	capital (L)
Limited)(Note 14)*

IV-3

GENERAL INFORMATION

APPENDIX IV

Notes :

These shares are held by Outwit, the entire issued share capital of which is wholly owned by Mr Hu Kaijun.
黃岡市國有資產經營公司 (Huang Gang City State-Owned Asset Operation Company*) established in the PRC, holds approximately 10.26% (i.e. RMB4,000,000 out of RMB38,990,000 registered capital) in Hubei Grand Fuchi Pharmaceutical and Chemical Company Limited.
黃石飛雲製藥有限公司 (HuangShi Feiyun Pharmaceutical Company Limited*) established in the PRC, holds 40% (i.e. RMB50,000,000 out of RMB125,000,000 registered capital) in Grand Pharmaceutical Huangshi Feiyun Pharmaceutical Company Limited.
上海沐翼投資管理合夥企業（有限合夥） (Shanghai Muyi Investment Management Partnership (Limited Partners)*) holds approximately 66.67% (i.e. US$62,003,100 out of US$93,000,000 registered capital) in Cardionovum Holding Co., Limited, an associated corporation of the Company.
上海沐翼投資管理合夥企業（有限合夥） (Shanghai Muyi Investment Management Partnership (Limited Partners)*) holds approximately 22.01% (i.e. US$220,110 out of US$1,000,000 registered capital) in Zhuhai Cardionovum Medical Device Company Limited.
Dr. Michael Stefan Orlowski holds 27% (i.e. EUR13,500 out of EUR50,000 registered capital) in Cardionovum GmbH, an associated corporation of the Company.
武漢大學資產經營投資管理有限責任公司 (Wuhan University Assets Operation Investment Management Limited*) established in the PRC, holds 24.60% (i.e. RMB12,300,000 out of RMB50,000,000 registered capital) in Wuhan Grand Hoyo Company Limited.
Wuhan Sanzhen Industry Holding Company Limited established in the PRC, holds 10% (i.e. RMB5,000,000 out of RMB50,000,000 registered capital) in Wuhan Grand Hoyo Company Limited.
武漢市蔬菜科學研究所 (Wuhan City Vegetables Science Research Institution*) established in the PRC, holds approximately 16.05% (i.e. RMB921,006 out of RMB5,736,888 registered capital) in Wuhan Kernel Bio Tech Company Limited.
Mr Yang Li Xin holds 51% (i.e. RMB1,020,000 out of RMB2,000,000 registered capital) in 陽新富新化工有限責任公司 (Yang Xin Fu Xin Chemical Limited*), an associated corporation of the Company.
Mr Ye Bo holds 18% (i.e. RMB1,800,000 out of RMB10,000,000 registered capital) in Zhejiang Xianju Xianle Pharmaceutical Company Limited.
Ms Ye Jing Jing, a daughter of Mr Ye Bo, holds 15% (i.e. RMB1,500,000 out of RMB10,000,000 registered capital) in Zhejiang Xianju Xianle Pharmaceutical Company Limited.
北京市櫻花製藥厰 (Beijing Ying Hua Pharmaceutical Factory) established in the PRC, holds approximately 28% (i.e. RMB2,208,192 out of RMB7,886,400 registered capital) in 北京華靳製藥有限公司 (Beijing Huajin Pharmaceutical Limited).
武漢雙暉天樂科技有限公司 (Wuhan Shuang Hui Tian Le Technology Company Limited) established in the PRC, holds 49% (i.e. RMB1,372,000 out of RMB2,800,000 registered capital) in 湖北遠大生物技術有限公司 (Hubei Grand Bio-technology Limited).

IV-4

GENERAL INFORMATION

APPENDIX IV

Save as disclosed, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares, which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

(c) Interests and short position of Directors or proposed Directors who is a director or employee of a company or companies which has or have an interest on short position in the Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, none of the Directors or proposed directors was a director or employee of any company which has an interest or short position in the Shares, underlying Shares or debentures of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Enlarged Group (excluding contracts expiring or determinable by the employer within one year without payments of compensation (other than statutory compensation)).

4. COMPETING INTEREST

As at the Latest Practicable Date, save the Mr. Liu Chengwei, the chairman and an executive Director, who is the director of some pharmaceutical companies in the PRC and thus had interest in businesses which competes or is likely to compete, either directly or indirectly, with the business of the Group, so far as the Directors are aware of, no Directors or their respective associates had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirm that there was no material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest audited financial statements of the Company were made up.

6. LITIGATION

As at the Latest Practicable Date, none of the companies in the Enlarged Group was involved in any litigation or arbitration of material importance and no litigation or claim of material importance known to the Directors to be pending or threatened against any company in the Enlarged Group.

IV-5

GENERAL INFORMATION

APPENDIX IV

7. INTEREST IN CONTRACT OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets of the Enlarged Group which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to any company in the Enlarged Group, or are proposed to be acquired or disposed of by, or leased to any company in the Enlarged Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any company in the Enlarged Group which contract or arrangement is subsisting as at the Latest Practicable Date and which is significant in relation to the business of the Enlarged Group.

8. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following is the qualification of the expert who has given opinions or advices which are contained in this circular:

Name Qualification HLB Hodgson Impey Cheng Limited Certified Public Accountants

The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion of their respective reports and references to their respective names in the form and context in which they appear.

As at the Latest Practicable Date, the above expert did not have any shareholding, direct or indirect, in any member of the Enlarged Group or any right or option, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group or any interest, either direct or indirect, in any assets which have been, since 31 December 2014, the date to which the latest published audited consolidated financial statements of the Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

9. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Enlarged Group within the two years immediately preceding the date of this circular and are or may be material:

the put option deed dated 23 June 2014 entered into between the Company and AIM Global Holdings Limited (世標控股有限公司) (“ AIM ”) relating to the grant of the right to the AIM to require the Company to purchase all or a portion of the registered capital (“ Weicon Registered Capital ”) of the 上海衛康光學眼鏡有限公司 (Shanghai Weicon Optical Co., Ltd.) (“ Weicon* ”) then held by the AIM or its Affiliates at a price to be calculated in according to the terms of the put option deed, which was terminated on 28 May 2015;

IV-6

GENERAL INFORMATION

APPENDIX IV

the put option deed dated 23 June 2014 entered into between the Company and CDH Giant Health II Limited (“ CDH ”) relating to the grant of the right to the CDH to require the Company to purchase all or a portion of the Weicon Registered Capital then held by the CDH or its Affiliates at a price to be calculated in according to the terms of the put option deed, which was terminated on 28 May 2015;
the subscription agreement dated 23 June 2014 entered into between CDH Giant Health I Limited and the Company relating to the subscription and issue of the HK$300,000,000 convertible bonds;
the subscription agreement dated 23 June 2014 entered into between RedStone Capital Management (Cayman) Limited and the Company relating to the subscription and issue of the HK$30,000,000 convertible bonds;
the agreement dated 23 June 2014 entered into between the AIM, the Company, CDH and the Weicon relating to the grant of exclusive right at nil consideration to negotiate the proposed acquisition of 52.25% of the Weicon Registered Capital by Grand Pharm (China) from the AIM, and the proposed subscription by Grand Pharm (China) of further Weicon Registered Capital which will result in Grand Pharm (China) holding an aggregate of 55% of Weicon Registered Capital;
the agreement dated 23 June 2014 entered into among the Company, Grand Pharm (China), CDH, AIM, Weicon and Ms Lily Liu in relating to the sale and purchase of approximately 71.25% of the Weicon Registered Capital at the total consideration of US$78,750,000, which was terminated on 28 May 2015;
the agreement dated 5 March 2015 entered into Grand Pharm (China) and 武漢光谷融資租賃有限公司 (Wuhan Guanggu Finance Lease Limited) (“ Wuhan Guanggu ”) relating to the sale of certain machineries and equipment for medicine production purpose (the “ Medical Equipment* ”) by Grand Pharm (China) to Wuhan Guanggu at the total consideration of RMB200,000,000;
the agreement dated 5 March 2015 entered into Grand Pharm (China) and Wuhan Guanggu relating Wuhan Guanggu lease the Medical Equipment back to Grand Pharm (China) for a period of five years at the total lease payment of approximately RMB237,714,820;
the strategic cooperative agreement dated 15 September 2014 and entered into between Grand Pharm (China) and Institute of Materia Medica, Chinese Academy of Medical Sciences (“ CAMS ”) in related to the research and development, production and supply of medications to serve the rare diseases patients;
the acquisition agreement dated 22 December 2014 and entered into between Grand Pharm (China), 吳亮 (Wu Liang), 范麗津 (Fan Li Jin) and 天津晶明新技術開發有限公司 (Tianjin Jingming New Technology Development Co., Ltd.) (the “ Jingming* ”) in relation to the sale and purchase of up to 100% of the entire equity interest in the registered and paid up capital of Jingming at a consideration of RMB141,300,000;

IV-7

GENERAL INFORMATION

APPENDIX IV

a series of transaction documents all dated 21 April 2015 entered into among, inter alia, (i) the Company, (ii)上海沐翼投資管理合夥企業(有限合伙)(Shanghai Muyi Investment Management Partnership (Limited Partners)) (the “ JV Partner ”), (iii) Cardionovum Holdings Co., Limited (the “ Hong Kong JV ”), (iv) Dr. Michael Stefan Orlowski (“ Vendor A ”) and (v)日本ライフライン株式会社 (Japan Lifeline Co., Ltd.)(“ Vendor B ”), in relation to the formation of a joint venture which involved: (a) the establishment of the Hong Kong JV to be owned by the Company as to 33.3% and the JV Partner as to 66.7%, pursuant to which the Company shall contribute approximately US$24.3 million (equivalent to approximately HK$188.4 million) as share capital of the Hong Kong JV; (b) the establishment of the joint venture company with limited liability in the PRC (the “ PRC JV ”), which would be held by Grand Pharm (China) as to 67% and the Hong Kong JV as to 33%, pursuant to which Grand Pharm (China) and the Hong Kong JV shall contribute US$1 million (equivalent to approximately HK$7.75 million) in proportion to their respective shareholding in the PRC JV; (c) the acquisition of 63% and 10% of the total subscribed and outstanding share capital of Cardionovum GmbH by the Hong Kong JV from Vendor A and Vendor B respectively at a consideration of US$63 million (equivalent to HK$488.4 million) and US$10 million (equivalent to approximately HK$77.5 million), pursuant to which the Hong Kong JV shall within 90 days after the completion of the said acquisition, repay (or procure Cardionovum GmbH to repay) EUR1.35 million (equivalent to approximately HK$11.1 million) owed by Cardionovum GmbH to Vendor B; and (d) a further subscription of non-redeemable shares in the Hong Kong JV by the Company and the JV Partner on a pro rata basis at a subscription price of approximately US$6.7 million (equivalent to approximately HK$51.9 million) and US$13.3 million (equivalent to approximately HK$103.1 million) respectively;
the Jiu He Acquisition Agreement;
the Put Option Deed;
the agreement (the “ Grand Pharm Supply Agreement ”) dated 23 October 2015 and entered into between Grand Pharm (China) and 華東醫藥股份有限公司 (Huadong Medicine Co., Ltd) (“ Huadong Medicine* ”) in respect of the supply of pharmaceutical preparations and raw materials from Grand Pharm (China) or its related companies to Huadong Medicine or its related companies with the annual cap of for each of the periods commencing on the effective date of the Grand Pharm Supply Agreement until 31 December 2015 and for the two years ending 31 December 2017 are RMB22.0 million, RMB25.0 million and RMB29.0 million respectively;
the agreement (the “ Xianle Purchase Agreement I ”) dated 23 October 2015 and entered into between Zhejiang Xianju Xianle Pharmaceutical Company Limited (“ Zhejiang Xianle ”) and 江蘇遠大信誼藥業有限公司 (Jiangsu Grand Xin Yi Pharmaceutical Co., Ltd) (“ Jiangsu Xin Yi* ”) in respect of the purchase of raw materials for steroid hormones and intermediates by Zhejiang Xianle or its related companies from Jiangsu Xin Yi or its related companies with the annual cap of for each of the periods commencing on the effective date of the Xianle Purchase Agreement I until 31 December 2015 and for the two years ending 31 December 2017 are RMB80.0 million, RMB100.0 million and RMB100.0 million respectively;

IV-8

GENERAL INFORMATION

APPENDIX IV

the agreement (the “ Xianle Purchase Agreement II ”) dated 23 October 2015 and entered into between Zhejiang Xianle and 遠大物產集團有限公司 (Grand Group Corporation Limited) (“ Grand Group Corporation* ”) in respect of the purchase of raw materials for steroid hormones and intermediates by Zhejiang Xianle or its related companies from Grand Group Corporation or its related companies with the annual cap of for each of the periods commencing on the effective date of the Xianle Purchase Agreement II until 31 December 2015 and for the two years ending 31 December 2017 are RMB8.0 million, RMB10.0 million and RMB10.0 million respectively;
the Second Jiu He Acquisition Agreement; and
a supplemental deed dated 27 November 2015 entered into among the parties to the Put Option Deed, pursuant to which it is agreed that the Put Option Deed shall be cancelled and become null and void upon completion of the Subsequent Acquisition.

10. GENERAL

(a) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(b) The head office and principal place of business of the Company in Hong Kong is located at Units 3302, The Center, 99 Queen’s Road Central, Hong Kong.
(c) As at the date of this circular, the Board comprises of four executive Directors, namely, Mr. Liu Chengwei, Mr. Hu Bo, Dr. Shao Yan and Dr. Zhang Ji and three independent nonexecutive Directors, namely, Ms. So Tosi Wan, Winnie, Mr. Lo Kai Lawrence and Dr. Pei Geng.
(d) The company secretary of the Company is Mr. Foo Tin Chung, Victor, who is a member of the Australia Society of Certified Practising Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.
(e) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(f) In case of any discrepancy, the English text of this circular shall prevail over the Chinese text.

IV-9

GENERAL INFORMATION

APPENDIX IV

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the Company’s principal office in Hong Kong during the normal business hours on Business Days from the date of this circular up to 15 January 2016:

(a) the Memorandum of Association and Bye-laws of the Company;
(b) the material contracts referred to in paragraph 9 headed “Material Contracts” in this Appendix;
(c) the annual reports of the Company for each of the financial years ended 31 December 2012, 31 December 2013 and 31 December 2014;
(d) the accountant’s reports on the financial information of the Group for the three years ended 31 December 2012, 31 December 2013 and 31 December 2014;
(e) the accountants’ reports on the financial information of Jiu He for the three years end 31 December 2014 and seven months ended 31 July 2015 prepared by HLB Hodgson Impey Cheng Limited, the text of which is set out in Appendix II to this circular and the related statement of adjustments;
(f) the report from HLB Hodgson Impey Cheng Limited on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;
(g) the written consents from the experts as referred to under the section headed “Qualifications and Consents of Experts” in this appendix; and
(h) this circular and a copy of each circular issued pursuant to the requirements set out in Chapters 14 which has been issued since the date of the latest published audited accounts (if any).

IV-10

AI assistant

Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2015

49262_rns_2015-12-23_2a5072ac-5533-490d-bf6d-0bc9bd1a3076.pdf

China Grand Pharmaceutical and Healthcare Holdings Limited 遠大醫藥健康控股有限公司[*]

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF THE EQUITY INTEREST IN A PRC COMPANY INVOLVING THE GRANT OF A PUT OPTION

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

The English transliteration of the Chinese name(s) in this circular, where indicated, is included for information purpose only, and should not be regarded as the official English name(s) of such Chinese name(s).

China Grand Pharmaceutical and Healthcare Holdings Limited 遠大醫藥健康控股有限公司[*]

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF THE EQUITY INTEREST IN A PRC COMPANY INVOLVING THE GRANT OF A PUT OPTION

INTRODUCTION

THE JIU HE ACQUISITION AGREEMENT

Assets to be acquired

Consideration

Conditions Precedent

Completion

Subsequent Acquisition

PUT OPTION DEED

Put Option

Conditions

The Possible Termination of the Put Option

BUSINESS AND SHAREHOLDING INFORMATION OF JIU HE

FINANCIAL INFORMATION OF JIU HE

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF JIU HE

Financial Review

Business Review and Prospects

LETTER FROM THE BOARD

Financial Resources and Liquidity

Significant Investments

Material Acquisitions and Disposals

Future Plans for Material Investments

Employees and Remuneration Policy

Contingent Liabilities

Financial Review

Business Review and Prospects

LETTER FROM THE BOARD

Financial Resources and Liquidity

Significant Investments

Material Acquisitions and Disposals

Future Plans for Material Investments

Employees and Remuneration Policy

Contingent Liabilities

Financial Review

Business Review and Prospects

Financial Resources and Liquidity

LETTER FROM THE BOARD

Significant Investments

Material Acquisitions and Disposals

Future Plans for Material Investments

Employees and Remuneration Policy

Contingent Liabilities

Financial Review

Business Review and Prospects

Financial Resources and Liquidity

Significant Investments

Material Acquisitions and Disposals

Future Plans for Material Investments

Employees and Remuneration Policy

Contingent Liabilities

FINANCIAL EFFECTS OF JIU HE ACQUISITION ON ASSETS, EARNINGS AND LIABILITIES OF THE COMPANY

REASONS FOR AND BENEFITS OF THE JIU HE ACQUISITION

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

ADDITIONAL INFORMATION

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

2. STATEMENT OF INDEBTEDNESS

Disclaimers

3. WORKING CAPITAL

4. MATERIAL ADVERSE CHANGE

5. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Board of Directors

Dear Sirs,

BASIS OF PREPARATION

RESPONSIBILITY OF THE DIRECTORS

REPORTING ACCOUNTANTS’ RESPONSIBILITY

OPINION

I. FINANCIAL INFORMATION

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Grand Pharmaceutical Group Limited Proxy Solicitation & Information Statement 2015

**China Grand Pharmaceutical and Healthcare Holdings Limited 遠大醫藥健康控股有限公司[*]**

**China Grand Pharmaceutical and Healthcare Holdings Limited 遠大醫藥健康控股有限公司[*]**