Grand Pharmaceutical Group Limited - Proxy Solicitation & Information Statement 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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 (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

==> picture [119 x 53] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability) (Stock Code: 00512)

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES

BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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

A letter from the Board is set out on pages 4 to 13 of this circular. A letter of advice from the Independent Board Committee is set out on pages 14 to 15 to this circular. A letter of advice of the Independent Financial Adviser containing its opinion and advice to the Independent Board Committee and the Independent Shareholders is set out on pages 16 to 28 of this circular.

A notice convening the SGM to be held at Unit 3302, The Center, 99 Queen’s Road Central, Hong Kong on Wednesday, 14 September 2016 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

19 August 2016

For identification purpose only

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

DEFINITIONS

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

“associate(s)”

has the meaning ascribed to it under the Listing Rules

“Board” the board of Directors “China Grand” China Grand Enterprises Incorporation (中國遠大集團有限責任公司), a company established in the PRC with limited liability, which is controlled and ultimately and beneficially owned by Mr Hu

“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, and the issued Shares of which are listed on the main board of the Stock Exchange

“connected person(s)”

has the meaning ascribed thereto under the Listing Rules

“controlling shareholder(s)” has the meaning ascribed thereto under the Listing Rules “Director(s)” the director(s) of the Company “Emporium” East Ocean Capital (Hong Kong) Company Limited (formerly known as Emporium Energy Limited), a company incorporated in Hong Kong with limited liability, which is an indirect non-wholly owned subsidiary of China Grand “GL Subscription” the subscription of 44,570,000 new Shares to be issued by the Company to GL Healthcare Investment L.P. pursuant to a subscription agreement dated 14 July 2016 (see the Company’s announcement dated 15 July 2016 for further details)

“Group”

the Company and its subsidiaries

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee” the independent board committee comprising all the independent non-executive Directors, namely, Ms So Tosi Wan, Winnie, Mr Lo Kai Lawrence and Dr Pei Geng, established for the purpose of advising the Independent Shareholders on the Subscriptions

“Independent Financial Adviser” Nuada Limited, a licensed corporation under the SFO to conduct type 6 (advising on corporate finance) regulated activity appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscriptions

DEFINITIONS

“Independent Shareholder(s)” Shareholder(s) other than Mr Hu, Outwit and their respective associates and Shareholders who are connected to or otherwise associated with Mr Hu, Outwit or interested in the Subscriptions
“Independent Third Party(ies)” any person(s) or company(ies) and their respective ultimate beneficial owner(s) who, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, are third party(ies) independent of and not connected with the Company or its connected persons
“Last Trading Day” 12 July 2016, being the last trading day on which the Shares were traded on the Stock Exchange immediately prior to the entering into of the Subscription Agreement
“Latest Practicable Date” 16 August 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained therein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Mr Hu” Mr Hu Kaijun, being the sole shareholder of Outwit, a substantial shareholder of the Company
“Outwit” Outwit Investments Limited, a company incorporated in the British Virgin Islands with limited liability, which is a substantial shareholder of the Company holding approximately 58.95% of the total issued Shares as at the Latest Practicable Date
“Placing” the placing of 122,428,000 Shares pursuant to the terms of a conditional placing agreement entered into between the Company and ICBC International Securities Limited and Sinolink Securities (Hong Kong) Company Limited (as placing agents) dated 14 July 2016, which was completed on 22 July 2016 (see the Company’s announcements dated 15 July 2016 and 22 July 2016 for further details)
“PRC” the People’s Republic of China, which, for the purpose of this circular, shall exclude Hong Kong, the Macau Special Administration Region of the PRC and Taiwan
“SFO” the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time

DEFINITIONS

“SGM”	the special general meeting of the Company to be convened to
	consider and, if thought fit, approve the Subscriptions (including
	the grant of the Specific Mandate)
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Specific Mandate”	a specific mandate to be sought from the Independent
	Shareholders at the SGM for the allotment and issue of the
	Subscription Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscribers”	Outwit and Emporium, collectively
“Subscription Agreement”	the subscription agreement dated 13 July 2016 entered into among
	the Company and the Subscribers in connection with
	Subscriptions
“Subscription Price”	HK$1.40 per Subscription Share
“Subscription Share(s)”	107,973,421 new Shares to be issued by the Company to the
	Subscribers pursuant to the Subscription Agreement
“Subscriptions”	the subscriptions of the Subscription Shares by Outwit and
	Emporium respectively pursuant to the Subscription Agreement
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

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).

LETTER FROM THE BOARD

==> picture [119 x 52] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability) (Stock Code: 00512)

Executive Directors: Mr Liu Chengwei (Chairman) Mr Hu Bo (Deputy Chairman) 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

Head office and principal place of business in Hong Kong: Unit 3302, The Center 99 Queen’s Road Central Hong Kong

19 August 2016

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

INTRODUCTION

On 13 July 2016, the Board announced that the Company had entered into the Subscription Agreement with the Subscribers regarding the Subscriptions under the Specific Mandate which constituted connected transactions of the Company.

The purpose of this circular is to provide you with, among other things, (i) further information on the Subscriptions; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders; (iii) the advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (iv) a notice of the SGM and the form of proxy.

For identification purpose only

LETTER FROM THE BOARD

SUBSCRIPTION AGREEMENT

Date

13 July 2016

Parties

(i) the Company, as issuer
(ii) Outwit, as subscriber
(iii) Emporium, as subscriber

As at the Latest Practicable Date, save for the Subscription Shares, Outwit owned 1,228,775,094 Shares, representing approximately 58.95% of the total issued share capital of the Company; Emporium did not own any Shares.

Both Outwit and Emporium are connected persons of the Company. See the paragraph headed “Information about the Subscribers and the Listing Rules Implication” for further information about the Subscribers.

Subscription Shares

Pursuant to the terms of the Subscription Agreement, Outwit has agreed to subscribe for 83,056,478 Subscription Shares, representing:

(i) approximately 3.98% of the existing issued Shares as at the Latest Practicable Date; and
(ii) approximately 3.79% of the issued Shares as enlarged by the allotment and issue of the Subscription Shares (assuming there will be no other changes in the issued Shares between the Latest Practicable Date and the completion of the Subscriptions).

Pursuant to the terms of the Subscription Agreement, Emporium has agreed to subscribe for 24,916,943 Subscription Shares, representing:

(i) approximately 1.20% of the existing issued Shares as at the Latest Practicable Date; and
(ii) approximately 1.14% of the issued Shares as enlarged by the allotment and issue of the Subscription Shares (assuming there will be no other changes in the issued Shares between the Latest Practicable Date and the completion of the Subscriptions).

LETTER FROM THE BOARD

The Subscription Shares in aggregate represent:

(i) approximately 5.18% of the existing issued share capital of the Company as at the Latest Practicable Date; and
(ii) approximately 4.92% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming there will be no other changes in the issued Shares between the Latest Practicable Date and the completion of the Subscriptions).

Based on the closing price of the Shares of HK$1.42 per Share on the Last Trading Day, the Subscription Shares in aggregate have a market value of approximately HK$153.3 million and an aggregate nominal value of approximately HK$1.1 million.

Specific Mandate to issue the Subscription Shares

The Subscription Shares will be issued pursuant to the Specific Mandate to be sought from the Independent Shareholders at the SGM. The Specific Mandate, if approved, will be valid until the completion of the Subscriptions or the termination of the Subscription Agreement.

Conditions of the Subscriptions

Completion of the Subscription Agreement is subject to the fulfilment or waiver (as the case may be) of the following conditions:

(i) the Stock Exchange granting or agreeing to grant (subject to allotment and/or despatch of certificates for the Subscription Shares) the listing of, and permission to deal in, the Subscription Shares (and such listing and permission not subsequently revoked prior to the completion of the Subscriptions);
(ii) the passing of resolution(s) by the Independent Shareholders to approve the Subscription Agreement and the transactions contemplated thereunder (including the granting of the Specific Mandate);
(iii) the allotment and issue of the Subscription Shares pursuant to the Subscription Agreement complying with the Companies Act under the laws of Bermuda, the Companies Ordinance, the Listing Rules and all other applicable laws, rules and regulations; and
(iv) the representations and warranties of the Company and the Subscribers as set out in the Subscription Agreement being true and accurate and not misleading at all times from the date of the Subscription Agreement up to and including the completion of the Subscriptions.

In the event that the conditions precedent above are not waived (as to condition (iv) above only) or fulfilled by 5:00 p.m. on 31 December 2016 (or such later date as may be agreed by Outwit, Emporium and the Company in writing), the Subscription Agreement and all rights and obligations thereunder shall cease and terminate and none of the parties thereto shall have any claim against the other.

LETTER FROM THE BOARD

Completion of the Subscriptions

Completion of the Subscriptions will take place within three business days after the date that the conditions of the Subscription Agreement have been fulfilled or waived, as the case may be (or such other date as the Company and the Subscribers may agree in writing).

SUBSCRIPTION PRICE

The subscription price of HK$1.40 per Subscription Share represents:

(i) a discount of approximately 1.41% to the closing price of HK$1.42 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 1.41% to the closing price of HK$1.42 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) the equivalent of the average closing price of approximately HK$1.40 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iv) a discount of approximately 2.10% to the average closing price of approximately HK$1.43 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day; and
(v) a premium of approximately 94.44% over the audited consolidated net asset value of approximately HK$0.72 per Share as at 31 December 2015 (based on the audited consolidated statement of financial position of the Company and the number of Shares in issue as at 31 December 2015).

The Subscription Price was determined on an arm’s length basis between the Company and the Subscribers with reference to the average closing price per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day. The Directors consider that the Subscription Price is fair and reasonable under the current market conditions and in light of the recent price performance of the Shares and the liquidity of the Shares.

RANKING

The Subscription Shares, when issued and fully paid, will rank pari passu among themselves and with all existing Shares presently in issue and at the time of allotment and issue of the Subscription Shares and in particular shall rank in full for all dividends and other distributions declared made or paid thereafter.

APPLICATION FOR LISTING

Application has been made by the Company to the Stock Exchange for the grant of an approval for the listing of, and permission to deal in, the Subscription Shares.

LETTER FROM THE BOARD

INFORMATION ABOUT THE SUBSCRIBERS AND THE LISTING RULES IMPLICATION

As at the Latest Practicable Date, Emporium was directly wholly-owned by Shanghai China Grand Asset Finance Investment Management Co., Limited (上海遠大產融投資管理有限公司), which in turn was directly held as to 60% by China Grand[1] , which was controlled and ultimately and beneficially owned by Mr Hu, a controlling shareholder of the Company.

Therefore, Outwit and Emporium are both connected persons of the Company under Chapter 14A of the Listing Rules. Accordingly, the Subscriptions constitute non-exempt connected transactions for the Company under the Listing Rules and are subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

REASONS FOR THE SUBSCRIPTIONS AND USE OF PROCEEDS

The Group is mainly engaged in the research and development, manufacturing and sales of pharmaceutical preparations, pharmaceutical intermediates, specialised pharmaceutical raw materials and healthcare products. Both Outwit and Emporium are investment holding companies.

The Directors believe the Subscriptions will enable the Company to raise additional fund to improve its financial position, broaden its capital base and support the Group’s future growth.

The aggregate gross proceeds from the Subscriptions are expected to be approximately HK$151.2 million. After deducting related fees and expenses, the aggregate net proceeds from the Subscriptions are expected to be approximately HK$150.9 million. The net price per Subscription Share after deducting related fees and expenses is approximately HK$1.40 per Subscription Share.

It is expected that the net proceeds from the Subscriptions will be used for (i) the repayment of existing bank loans; (ii) the payment of part of the consideration for the acquisition of Xian Beilin Pharmaceutical Company Limited (西安碑林藥業股份有限公司)(“Xian Beilin”), details of which were announced by the Company on 29 June 2016; and (iii) funding the Group’s general working capital.

The aggregate net proceeds from the Subscriptions, the Placing and the GL Subscription (assuming these fund raising activities, if not yet completed, will all be completed) are expected to be HK$381.1 million.

1 The remaining equity interest in Shanghai China Grand Asset Finance Investment Management Co., Limited (上海遠大產融投資管理有限公司) is held as to (i) 10% by Tianjin China Grand Allied Auto Trading Group Co., Limited (天津遠大聯合汽車貿易有限公司) (which is a non-wholly owned subsidiary of China Grand); and (ii) 30% by an Independent Third Party.

LETTER FROM THE BOARD

The following table summarises the expected uses of the net proceeds from the Subscriptions, the Placing and the GL Subscription:

Subscriptions Placing GL Subscription Total	Uses of net proceeds Payment of part of the consideration of Repayment of the acquisition of General working bank loans Xian Beilin capital (HK$) (HK$) (HK$) 35,000,000 110,900,000 5,000,000 60,000,000 103,200,000 5,000,000 5,000,000 52,000,000 5,000,000 100,000,000 266,100,000 15,000,000	Total *(HK$)* 150,900,000 168,200,000 62,000,000
		381,100,000

The aggregate consideration for the acquisition of Xian Beilin is approximately HK$456.9 million. The balance of the consideration which is not funded by the proceeds from the Subscriptions, the Placing and/or the GL Subscription will be funded by the Group’s internal resources.

As at the Latest Practicable Date, save for the Subscriptions and the GL Subscription, the Company has no plan for other fund raising exercises in the near future.

However, as mentioned in the Company’s annual report for the year ended 31 December 2015, the Company will, among other things, continue to implement its reinforcement and synergy strategies in core therapeutic areas and enrich its product mix through research and development and acquisitions of products and assets, and to explore investment opportunities in the global pharmaceutical market. As at the Latest Practicable Date, save for the acquisition of Xian Beilin, the Group had not identified any investment target. But the Directors will continue to evaluate the Group’s development strategies and financial position. If any favourable opportunity arises, the Company may consider conducting fund raising exercises to support the Group’s future development.

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST 12 MONTHS

The Company has not conducted any equity fund raising activities in the 12 months immediately prior to the 13 July 2016, being the date of the announcement of the Subscriptions.

On 14 July 2016, the Company entered into (i) a placing agreement with ICBC International Securities Limited and Sinolink Securities (Hong Kong) Company Limited in relation to the placing of up to 122,428,000 new Shares at the placing price of HK$1.40 per Share on a best effort basis; and (ii) a subscription agreement with GL Healthcare Investment L.P., pursuant to which GL Healthcare Investment L.P. has conditionally agreed to subscribe, and the Company has conditionally agreed to allot and issue, 44,570,000 Shares at the subscription price of HK$1.40 per Share. Particulars of the Placing and the GL Subscription are set out below:

Estimated/ Date of actual net announcement proceeds Intended use of proceeds 15 July 2016 HK$168.2 (i) The repayment of existing bank million loans (ii) The payment of part of the consideration for the acquisition of Xian Beilin Pharmaceutical Company Limited (西安碑林藥業股份有限公司), details of which were announced by the Company on 29 June 2016

Fund raising activity The Placing

(iii) Funding the Group’s general working capital The GL 15 July 2016 HK$62.0 Same as above Subscription million

Status of fund raising activity and actual use of proceeds as at the Latest Practicable Date

The Placing was completed on 22 July 2016.

The net proceeds have not been used and will be used as intended.

The GL Subscription has not yet been completed.

See the Company’s announcement dated 15 July 2016 for further details about the Placing and the GL Subscription.

LETTER FROM THE BOARD

EFFECT ON SHAREHOLDING STRUCTURE

The table below illustrates the shareholding structures of the Company (assuming there will be no other changes in the issued Shares between the Latest Practicable Date and the completion of the Subscriptions) (i) as at the Latest Practicable Date; (ii) immediately after the completion of the GL Subscription assuming that the Subscriptions are not completed; (iii) immediately after the completion of the Subscriptions assuming that the GL Subscription is not completed; and (iv) immediately after the completion of the Subscriptions and the GL Subscription:

Shareholders Outwit Emporium Sub-total Public Shareholders The Placees GL Healthcare Investment Other public Shareholders Total	(i) As at the Latest Practicable Date Number of Shares % 1,228,775,094 58.95 – – 1,228,775,094 58.95 122,428,000 5.87 – – 733,265,794 35.18 2,084,468,888 100.00	(ii) Immediately after the completion of the GL Subscription assuming that the Subscriptions are not completed Number of Shares % 1,228,775,094 57.72 – – 1,228,775,094 57.72 122,428,000 5.75 44,570,000 2.09 733,265,794 34.44 2,129,038,888 100.00	(iii) Immediately after the completion of the Subscriptions assuming that the GL Subscription is not completed Number of Shares % 1,311,831,572 59.83 24,916,943 1.14 1,336,748,515 60.97 122,428,000 5.58 – – 733,265,794 33.45 2,192,442,309 100.00	(iv) Upon completion of the Subscriptions and the GL Subscription Number of Shares % 1,311,831,572 58.64 24,916,943 1.12 1,336,748,515 59.76 122,428,000 5.47 44,570,000 1.99 733,265,794 32.78 2,237,012,309 100.00	(iv) Upon completion of the Subscriptions and the GL Subscription Number of Shares % 1,311,831,572 58.64 24,916,943 1.12 1,336,748,515 59.76 122,428,000 5.47 44,570,000 1.99 733,265,794 32.78 2,237,012,309 100.00
					59.76 5.47 1.99 32.78
					100.00

SGM

Set out on pages SGM-1 to SGM-2 of this circular is a notice convening the SGM to be held at Unit 3302, The Center, 99 Queen’s Road Central, Hong Kong at which the relevant resolution will be proposed at the SGM to approve, among other things, the Subscriptions and the grant of the Specific Mandate. The resolution proposed to be approved at the SGM will be taken by poll and an announcement on the results of the SGM will be made by the Company after the SGM.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into or 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.

LETTER FROM THE BOARD

In accordance with the Listing Rules, Mr Hu, Outwit and their respective associates, who in aggregate held 1,228,775,094 Shares, representing approximately 58.95% of the entire issued share capital of the Company as at the Latest Practicable Date, are required to abstain from voting on the resolution to approve the Subscriptions and any vote exercised by the Independent Shareholders at the SGM shall be taken by poll. Save as disclosed above, no Shareholder has a material interest in the Subscription Agreement that is required to abstain from voting and being counted towards the quorum on the relevant resolution at the SGM.

In addition, Mr Hu Bo, an executive Director, is a nephew of Mr Hu (the beneficial owner of Outwit) and is considered to be interested in the Subscriptions, and thus has abstained from voting on the board resolutions for approving it. Besides, Mr Liu Chengwei, an executive Director, is a director of China Grand; and Dr Shao Yan is a director of each of Outwit and Emporium. Both of them had voluntarily abstained from voting on the board resolutions for approving the Subscriptions to avoid any potential conflict of interests. Save as aforesaid, the Board confirms that none of the Directors has any material interest in the Subscriptions and is required to abstain from voting on the board resolutions for approving it.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Ms So Tosi Wan, Winnie, Mr Lo Kai Lawrence and Dr Pei Geng, being all independent non-executive Directors, has been formed to advise the Independent Shareholders as to the fairness and the reasonableness of the terms of the Subscription Agreement and the grant of the Specific Mandate and as to how to vote at the SGM.

Nuada Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscription Agreement and the grant of the Specific Mandate.

The Independent Board Committee, having taken into account the advice and recommendation of Nuada Limited, consider that the Subscriptions and the grant of the Specific Mandate are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned. While the Subscriptions and the grant of the Specific Mandate are not in the ordinary and usual course of business of the Group, they are in the interests of the Company and the Shareholders as a whole, and accordingly recommends the Independent Shareholders to vote in favour of the ordinary resolution which will be proposed at the SGM for approving the Subscriptions and the grant of the Specific Mandate respectively thereunder.

LETTER FROM THE BOARD

The text of the letter from the Independent Board Committee is set out on pages 14 to 15 of this circular, the text of the letter from the Independent Financial Adviser containing its advice is set out on pages 16 to 28 of this circular.

RECOMMENDATION

The Board (including the independent non-executive Directors), having taken into account of the reasons set out in the paragraphs headed “Reasons for the Subscriptions and use of proceeds” above and the recommendations of the Independent Board Committee and the Independent Financial Adviser, considers that the Subscriptions and the grant of the Specific Mandate are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolution which will be proposed at the SGM for approving the Subscriptions and the grant of the Specific Mandate.

ADDITIONAL INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on pages 14 to 15 of this circular which contains its views in relation to the Subscriptions and the grant of the Specific Mandate; and (ii) the letter from the Independent Financial Adviser set out on pages 16 to 28 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Subscriptions and the grant of the Specific Mandate and the principal factors and reasons considered by it in arriving its opinions.

Your attention is also drawn to other additional information as set out in the appendix to this circular.

Yours faithfully,

For and on behalf of the Board

China Grand Pharmaceutical and Healthcare Holdings Limited Liu Chengwei Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [119 x 52] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability) (Stock Code: 00512)

19 August 2016

To the Independent Shareholders,

Dear Sir or Madam,

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

We refer to the circular of the Company dated 19 August 2016 (the “ Circular ”) to the Shareholders, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee and to advise you as to whether, in our opinion, the Subscriptions and the grant of the Specific Mandate are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

Nuada Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in these respects. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 16 to 28 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 4 to 13 of the Circular and the additional information set out in the appendix of the Circular.

For identification purpose only

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms and conditions of the Subscription Agreement and the principal factors and reasons considered by, and the advice and recommendation of the Independent Financial Adviser, we are of the opinion that the Subscriptions and the grant of the Specific Mandate are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Subscription Agreement and the grant of the Specific Mandate.

Yours faithfully,

Independent Board Committee of China Grand Pharmaceutical and Healthcare Holdings Limited

So Tosi Wan, Winnie

Independent non-executive Director

Lo Kai Lawrence Pei Geng Independent non-executive Director Independent non-executive Director

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice from Nuada Limited in connection with the terms of the Subscription Agreement which has been prepared for inclusion in this circular.

Nuada Limited

Corporate Finance Advisory

Unit 1805-08, 18/F OfficePlus @Sheung Wan 93-103 Wing Lok Street Sheung Wan, Hong Kong 香港上環永樂街93-103號協成行上環中心18樓1805-08室

19 August 2016

To the Independent Board Committee and the Independent Shareholders of China Grand Pharmaceutical and Healthcare Holdings Limited

Dear Sirs,

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement, details of which are set out in the circular to the Shareholders dated 19 August 2016 (the “ Circular ”), of which this letter forms part. Unless otherwise stated, terms used in this letter have the same meanings as those defined in the Circular.

On 13 July 2016, the Company entered into the Subscription Agreement with Outwit and Emporium, pursuant to which Outwit and Emporium have conditionally agreed to subscribe, and the Company has conditionally agreed to allot and issue, 83,056,478 and 24,916,943 Subscription Shares respectively at the Subscription Price of HK$1.40 per Subscription Share. The aggregate gross proceeds from the Subscriptions are expected to be approximately HK$151.2 million. After deducting related fees and expenses, the aggregate net proceeds from the Subscriptions are expected to be approximately HK$150.9 million.

As at the Latest Practicable Date, Outwit and its associates owned 1,228,775,094 Shares, representing approximately 58.95% of the total issued share capital of the Company and was thus a controlling shareholder of the Company. Mr Hu is the sole shareholder of Outwit. Emporium is an indirect non-wholly owned subsidiary of China Grand, which is controlled and ultimately and beneficially owned by Mr Hu, a controlling shareholder of the Company. Therefore, Outwit and Emporium are both connected persons of the Company under Chapter 14A of the Listing Rules. Accordingly, the Subscriptions constitute non-exempt connected transactions for the Company under the Listing Rules and

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Subscription Shares will be allotted and issued under the Specific Mandate which is subject to the Independent Shareholders’ approval at the SGM.

The Independent Board Committee has been formed to advise the Independent Shareholders as to whether the terms of the Subscription Agreement are on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole. We are appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in those regards.

As at the Latest Practicable Date, Nuada Limited did not have any relationships or interests with the Company or the Subscribers that could reasonably be regarded as relevant to the independence of Nuada Limited. In the past two years, except for Nuada Limited had acted as an independent financial adviser in respect of continuing connected transactions of the Company, the circular of which was issued on 13 November 2015, there was no other engagement between the Group and Nuada Limited. Apart from normal professional fees paid or payable to us in connection with our appointment as the independent financial adviser, no arrangements exist whereby we had received any fees or benefits from the Company or the Subscribers. Accordingly, we are qualified to give independent advice in respect of the Subscriptions.

BASIS OF OUR OPINION

In formulating our opinion in respect of the Subscription Agreement, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company and the Directors. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have assumed that all information and representations made or referred to in the Circular and provided to us by the Company and the Directors, for which they were solely and wholly responsible, were true, complete and accurate at the time they were made and continue to be true, complete and accurate at the date of the SGM.

The Directors collectively and severally accept full responsibility for the accuracy of the information contained in the Circular. The Directors have confirmed, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our opinion regarding the Subscription Agreement. We have not, however, conducted any independent verification of the information and representations provided to and reviewed by us, nor have we carried out any form of independent in-depth investigation into the businesses and affairs, financial position or the future prospects of the businesses of the Group and/or the Subscribers or the markets in which they operate respectively.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have not studied, investigated nor verified the validity of all legal aspects of, and procedural aspects for, the Subscription Agreement. We have further assumed that all material governmental, regulatory or other consents, rights, waivers, authorisations, licenses, clearances and approvals necessary for the effectiveness and implementation of the Subscription Agreement have been or will be obtained and will not be withdrawn without any adverse effect on the Group, the assets and liabilities of the Group or the contemplated benefits to the Group as derived from the Subscription Agreement.

Our opinion is necessarily based upon the financial, economic (including exchange rates and interest rates), market, regulatory and other conditions as they exist on, and the facts, information, representations and opinions made available to us as of the Latest Practicable Date. Our opinion does not in any manner address the Company’s own decision to proceed with the Subscription Agreement. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein, which may come or be brought to our attention after the Latest Practicable Date.

PRINCIPAL FACTORS AND REASONS CONSIDERED

The principal factors and reasons we have taken into account in giving our advice to the Independent Board Committee and the Independent Shareholders are set out below:

Business and financial information of the Group

The Group is principally engaged in the research and development, manufacturing and sales of pharmaceutical preparations, pharmaceutical intermediates, specialised pharmaceutical raw materials and healthcare products.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reference is made to the annual report 2015 (the “ 2015 Annual Report ”) of the Company. The financial results of the Group for each of the two years ended 31 December 2015 respectively are summarised as follows:

Revenue
Cost of sales
Gross profit
Other revenue and income
Distribution cost
Administrative expenses
Other operating expenses
Share of results of associates
Finance costs
Profit before tax
Income tax expenses
Profit for the year
Other comprehensive loss, net of income tax
Items that may be reclassified subsequently to profit or loss:
Exchange difference on translating foreign operations
Total comprehensive income for the year, net of income tax
Profit for the year attributable to:
– Owners of the Company
– Non-controlling interests
Total comprehensive income/(loss) attributable to:
– Owners of the Company
– Non-controlling interests

For the years ended
31 December
2015
2014
HK$’000
HK$’000
(audited)
(audited)
3,245,546
3,122,116
(1,895,062)
(1,928,469)
1,350,484
1,193,647
138,325
117,192
(641,662)
(608,155)
(431,575)
(372,436)
(12,181)
(13,804)
(5,673)
569
(157,155)
(114,092)
240,563
202,921
(40,156)
(27,198)
200,407
175,723
(64,759)
(12,020)
135,648
163,703
180,906
175,208
19,501
515
116,640
164,025
19,008
(322)

For the financial year ended 31 December 2015, the Group recorded revenue of approximately HK$3,245.55 million, representing an increase of approximately 3.95% as compared to approximately HK$3,122.12 million for the previous year. As disclosed in the 2015 Annual Report, the main contributors were those new acquired companies commenced to provide contribution to the Group and also certain products have gradually restarted the production after completing the new version GMP

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

certification, and the shifting of the Group’s sales focus to those high-end pharmaceutical preparations including Eye, Nose & Throat and Cardiovascular emergency medicines and biotechnological raw materials pharmaceutical also led to the increase in average gross profit margin of the Group. Further details regarding the Group’s acquisitions in 2015 are disclosed in the 2015 Annual Report.

For the financial year ended 31 December 2015, the Group recorded net profit of approximately HK$200.41 million, representing an increase of approximately 14.05% as compared to HK$175.72 million for the previous year. The increase in net profit was mainly attributable to the increase in revenue and profit margin .

As at 31 December 2015, the Group had net assets of approximately HK$1,404.34 million and net tangible assets (excluding goodwill and intangible assets) of approximately HK$372.45 million. As at 31 December 2015, the Group recorded net current liabilities of approximately HK$842.87 million, with cash and cash equivalents amounted to approximately HK$653.99 million and current liabilities amounted to approximately HK$3,248.76 million (with current bank borrowings of approximately HK$1,962.48 million).

As advised by the Company, as at 31 May 2016, the Group had unaudited cash and cash equivalents amounted to approximately HK$692.71 million, and unaudited current bank borrowings amounted to approximately HK$1,706.55 million.

Reasons for and benefits of the Subscriptions

The aggregate gross proceeds from the Subscriptions are expected to be approximately HK$151.2 million. After deducting related fees and expenses, the aggregate net proceeds from the Subscription Shares are expected to be approximately HK$150.9 million. It is expected that the net proceeds from the Subscriptions will be used for (i) the repayment of existing bank loans; (ii) the payment of part of the consideration for the acquisition of Xian Beilin Pharmaceutical Company Limited (西安碑林藥業股份有限公司) (the “ Xian Beilin Acquisition ”), details of which were announced by the Company on 29 June 2016 (the “ Acquisition Announcement ”); and (iii) funding the Group’s general working capital.

As disclosed in the Acquisition Announcement, the Group entered into an agreement with several independent third parties (the “ Vendors ”) in relation to the acquisition of an aggregate of approximately 77.2133% interest in Xian Beilin Pharmaceutical Company Limited (“ Xian Beilin ”) by the Group from the Vendors for an aggregate consideration of RMB386,066,500 (equivalent to approximately HK$456,883,400). Xian Beilin is a modern pharmaceutical enterprise with research and development and sales capacity which is principally engaged in the manufacturing of pharmaceutical products preprocessing an extraction of Chinese medicine and sale of health food in the PRC. The Xian Beilin Acquisition constitutes a discloseable transaction for the Company and is subject to notification and announcement requirement under Chapter 14 of the Listing Rules. For further details regarding Xian Beilin and the Xian Beilin Acquisition, please refer to the Acquisition Announcement.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition, on 14 July 2016, the Company entered into (i) an agreement with two placing agents in relation to the placing of up to a maximum of 122,428,000 new Shares (the “ Placing Shares ”) at an issue price of HK$1.40 per Share on a best effort basis (the “ Placing ”); and (ii) an agreement with an independent third party (the “ I3P Subscriber ”) in relation to the subscription of 44,570,000 new Shares (the “ I3P Subscription Shares ”) by the I3P Subscriber at an issue price of HK$1.40 per Share (the “ I3P Subscription ”). The Placing Shares and the I3P Subscription Shares will be issued under the general mandate granted by the Shareholders to the Directors pursuant to the resolution passed on 27 May 2016. Completion of the Placing took place on 22 July 2016. A total of 122,428,000 Placing Shares have been successfully placed and issued. The net proceeds from the Placing (after deducting the placing commission and other related expenses payable by the Company) amount to approximately HK$168.2 million. Completion of the I3P Subscription is subject to the satisfaction of a number of conditions and therefore may not proceed, and is yet to be completed as at the Latest Practicable Date. After deducting related fees and expenses, the aggregate net proceeds from the I3P Subscription are expected to be approximately HK$62.0 million. It is expected that the net proceeds from the Placing and the I3P Subscription (together with the net proceeds from the Subscriptions) will be used for (i) the repayment of existing bank loans; (ii) the payment of part of the consideration for the Xian Beilin Acquisition; and (iii) funding the Group’s general working capital. Further details regarding the Placing and the I3P Subscription are set out in the announcements of the Company dated 15 July 2016 and 22 July 2016.

As disclosed in the letter from the Board in the Circular, the aggregate net proceeds from the Subscriptions, the Placing and the I3P Subscription (assuming these fund raising activities, if not yet completed, will all be completed) are expected to be HK$381.1 million. The following table summarises the expected uses of the net proceeds from the Subscriptions, the Placing and the I3P Subscription:

Subscriptions Placing I3P Subscription Total	Uses of net Payment of part of the consideration of Repayment of the Xian Beilin bank loans Acquisition (HK$) (HK$) (Note) 35,000,000 110,900,000 60,000,000 103,200,000 5,000,000 52,000,000 100,000,000 266,100,000	proceeds General working capital (HK$) 5,000,000 5,000,000 5,000,000 15,000,000	Total *(HK$)* 150,900,000 168,200,000 62,000,000
			381,100,000

Note: As disclosed in the letter from the Board in the Circular, the balance of the consideration for the Xian Beilin Acquisition which is not funded by the proceeds from the Subscriptions, the Placing and/or the I3P Subscription will be funded by the Group’s internal resources.

For avoidance of doubt, our presentation obtained herein does not in any manner constitute and/or imply our opinions, views and/or advices regarding the Xian Beilin Acquisition, the Placing and the I3P Subscription.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Taking into account (i) the principal business of the Group and the funding requirements under the Xian Beilin Acquisition for business expansion of the Group; and (ii) the net current liabilities position of the Group as detailed above, we consider that the Subscriptions would enable the Group to raise additional funds for financing the Xian Beilin Acquisition on one hand as well as repaying existing loans of the Group, thus reducing its gearings and interest burden and improving the Group’s financial position, and enhancing the liquidity of the Group for general working capital purposes on the other hand.

Principal terms of the Subscription Agreement

Pursuant to the Subscription Agreement, Outwit and Emporium have conditionally agreed to subscribe, and the Company has conditionally agreed to allot and issue, 83,056,478 and 24,916,943 Subscription Shares respectively at the Subscription Price of HK$1.40 per Subscription Share.

The Subscription Price of HK$1.40 per Subscription Share:

(i) represents a discount of approximately 1.41% to the closing price of HK$1.42 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) equal to the average closing price of approximately HK$1.40 per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day;
(iii) represents a discount of approximately 2.10% to the average closing price of approximately HK$1.43 per Share as quoted on the Stock Exchange for the 30 consecutive trading days up to and including the Last Trading Day;
(iv) a discount of approximately 1.41% to the closing price of HK$1.42 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(v) a premium of approximately 94.44% over the audited consolidated net asset value of approximately HK$0.72 per Share as at 31 December 2015 (based on the audited consolidated statement of financial position of the Company and the number of Shares in issue as at 31 December 2015.

For reference purpose, the Subscription Price is the same as the issue price of the Placing Shares and the I3P Subscription Shares.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Historical Share price performance

The graph below illustrates the closing price level of the Shares during the period from 1 July 2015 to 13 July 2016 (being the 12 calendar months period prior to and up to the date of the Subscription Agreement) (the “ Review Period ”):

==> picture [398 x 206] intentionally omitted <==

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

2.102.1
2.002.0
1.901.9
1.801.8
1.701.7
1.601.6
1.501.5
1.401.4 Subscription Price = HK$1.40
1.301.3
1.201.2
1.101.1
1.001.0
7 8 9 10 11 12 1 2 3 4 5 6 7
Closing price of the Shares
Hong Kong Dollar
2/7/2015 3/8/2015 1/9/2015 2/10/2015 2/11/2015 1/12/2015 4/1/2016 1/2/2016 1/3/2016 1/4/2016 3/5/2016 1/6/2016 14/7/2016
----- End of picture text -----

Data source: Website of the Stock Exchange (www.hkex.com.hk)

During the Review Period, the closing price level of the Shares ranged from the lowest of HK$1.35 per Share (recorded on 4 July 2016) to the highest of HK$2.05 per Share (recorded on 20 July 2015). Though the Subscription Price was at most of the time below the closing prices of the Shares, the closing price of the Shares had followed a recent general downward trend and had dropped below the Subscription Price in June 2016 during the Review Period.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Historical trading volume

The table below sets out (i) the average daily trading volume of the Shares (the “ Average Volume ”); (ii) the percentage of the Average Volume to the total number of 1,962,040,888 Shares in issue as at the date of the Subscription Agreement (the “ Total Issued Shares ”); and (iii) the percentage of the Average Volume to the total number of 733,265,794 issued Shares held by independent Shareholders as at the date of the Subscription Agreement (the “ Total Independent Shares ”) for each of the calendar months during the Review Period:

			Percentage of
		Percentage of	Average Volume
		Average Volume	to Total
		to Total	Independent
	Average Volume	Issue Shares	Shares
	(approximately)	(approximate %)	(approximate %)
2015
July	1,825,723	0.093	0.249
August	886,195	0.045	0.121
September	204,600	0.010	0.028
October	217,725	0.011	0.030
November	280,057	0.014	0.038
December	420,012	0.021	0.057
2016
January	222,575	0.011	0.031
February	237,122	0.012	0.032
March	336,399	0.017	0.046
April	233,420	0.012	0.032
May	216,762	0.011	0.030
June	148,524	0.008	0.020
July (up to the date of
the Subscription Agreement)	151,125	0.008	0.021

Data source: Website of the Stock Exchange (www.hkex.com.hk)

As illustrated in the table above, the trading volume of the Shares during the Review Period had been in general thin, with the highest Average Volume amounted to 1,825,723 Shares recorded in July 2015, representing approximately 0.093% to the Total Issued Shares and approximately 0.249% to the Total Independent Shares.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Market comparables

In assessing the fairness and reasonableness of the Subscription Price, we have attempted to make reference to all subscriptions of new shares for cash with selection criteria including (i) those with issuance of new shares under specific mandate; and (ii) those offering new shares with fixed issue price (but excluding those involving (i) issue of shares not ordinarily traded on the Stock Exchange; (ii) reverse takeovers; and (iii) whitewash waiver application under The Codes on Takeovers and Mergers and Share Repurchases) initially announced by other companies listed on the Stock Exchange from 14 January 2016 to 13 July 2016, being the six months period prior to and including the date of the Subscription Agreement (the “ Comparables ”), a comprehensive list of which is set out below:

			Premium/(Discount)
			represented by
			issue price over/to
			the reference closing
			price of shares on
			the date of the
			relevant agreement
			or the relevant
			last trading day
			as referred to
			in the relevant
Date of initial		Stock	initial announcement
announcement	Company name	code	(Approximately)
28 January 2016	Winshine Entertainment &	209	3.90%
	Media Holding Company Limited
29 January 2016	China Precious Metal Resources	1194	(9.80)%
	Holdings Co., Ltd.
15 March 2016	CST Mining Group Limited	985	19.05%
16 March 2016	FU JI Food and Catering Services	1175	0.00%
	Holdings Limited
27 April 2016	Hin Sang Group (International)	6893	(33.33)%
	Holdings Co., Ltd.
11 May 2016	China State Construction	3311	(2.11)%
	International Holdings Limited
22 May 2016	CPMC Holdings Limited	906	(21.45)%
24 May 2016	CPMC Holdings Limited	906	(22.39)%
27 May 2016	Suchuang Gas Corporation Limited	1430	19.16%
	Maximum		19.16%
	Minimum		(33.33)%
	Mean		(5.22)%
	Median		(2.11)%
13 July 2016	The Company		(1.41)%

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Note: During our research, it is noted that Zhi Cheng Holdings Limited (stock code: 8130), a company listed on The Growth Enterprise Market of the Stock Exchange, announced on 5 February 2016 an issuance of new shares at an offer price with a discount of approximately 65.38% to the reference closing price of the relevant shares on 5 February 2016. Taking into account Zhi Cheng Holdings Limited is a company listed on the Growth Enterprise Market of the Stock Exchange and the relatively deep discount offered thereunder, for prudence sake, the issuance of new shares of Zhi Cheng Holdings Limited was excluded from the list of comparables above.

As the purpose of the comparable analysis is for illustrating general market reference for the recent market practice in relation to the offering of issue prices under other subscriptions of new shares as compared to the relevant prevailing market share prices, the Comparables are not meant to be selected in same industry. In addition, we consider that as general market reference for the recent market practice, the review period of six months for the comparable analysis is reasonable and appropriate.

As illustrated in the table above, the discount represented by the Subscription Price to the closing price of the Shares on the Last Trading Day of approximately 1.41% are within the relevant range of the Comparables (ranging from a premium of 19.16% to a discount of approximately 33.33%) and is lower than the average discount of approximately 5.22% and the median discount of 2.11% of the Comparables.

Taking into account (i) the discount represented by the Subscription Price to closing price of the Shares on the Last Trading Day are within the relevant range, and lower than the average discount and the median discount of the Comparables; and (ii) the thin liquidity of the Shares, we consider that the Subscription Price is on normal commercial terms and fair and reasonable.

Other financing alternatives

Other than the Subscriptions, the Placing and the I3P Subscription, the Company has not conducted any other equity fund raising activities in the 12 months immediately prior to the Latest Practicable Date.

In view of the Xian Beilin Acquisition and the current liabilities of the Group, the Group intends to proceed with the Subscriptions, the Placing and 13P Subscription for raising additional funds for financing the Xian Beilin Acquisition, reducing its gearings and enhancing its liquidity for general working capital purposes.

The Company considers rights issues/open offers, which would enable qualifying Shareholders to participate in the subscription of new Shares to be issued by the Company, might not be the most appropriate means for financing the Group’s funding requirements in a timely manner. In addition, given the net current liabilities, it might not be possible for the Company to solicit underwriter(s) to underwrite right issues/open offers on a fully-underwritten basis, and/or to attract Shareholders to subscribe for new Shares under rights issues/open offers without offering new Shares at deeper discount.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Potential dilution on shareholdings of the Company

The Subscription Shares in aggregate represent (i) approximately 5.18% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 4.92% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Price (assuming there is no other changes in the issued Shares between the Latest Practicable Date and the completion of the Subscriptions).

Reference is made to the shareholding structure of the Company as stated in the section headed “EFFECT ON SHAREHOLDING STRUCTURE” in the letter from the Board in the Circular illustrating the dilution effect on shareholdings of the Company immediately upon completion of the Subscriptions.

As at the Latest Practicable Date, Outwit and its associates owned in approximately 58.95% of the total number of issued Shares. Immediately after the allotment and issue of the Subscription Shares (assuming there is no other changes in the issued Shares between the Latest Practicable Date and the completion of the Subscriptions), Outwit, together with Emporium, and its associates would own in an aggregate of approximately 60.97% on diluted basis.

For reference purpose, as mentioned above, the Company also announced on 14 July 2016 the Placing and the I3P Subscription. Completion of the Placing took place on 22 July 2016. A total of 122,428,000 Placing Shares have been successfully placed and issued. A total of 44,570,000 Subscription Shares are expected to be allotted and issued under the I3P Subscription. Completion of the I3P Subscription is subject to the satisfaction of a number of conditions and therefore may not proceed, and is yet to be completed as at the Latest Practicable Date. Details regarding the dilution effect of the I3P Subscription on the shareholdings of the Company are also set out in the letter from the Board in the Circular.

Taking into account that (i) the Subscriptions would enable the Group to raise additional funding for financing the Xian Beilin Acquisition on one hand as well as repaying existing loans of the Group, thus reducing its gearings and interest burden and improving the Group’s financial position, and enhancing the liquidity of the Group for general working capital purposes on the other hand; and (ii) the fairness and reasonableness of the Subscription Price as detailed above, we consider that the dilution effect of the Subscriptions on the shareholdings of the Company as illustrated above is acceptable.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Recommendation

Taking into account the principal factors and reasons mentioned above, we are of the view that Subscriptions are in the interests of the Company and the Shareholders as a whole and the terms of the Subscriptions are on commercial terms and fair and reasonable. We, therefore, advise the Independent Board Committee to recommend the Independent Shareholders, and the Independent Shareholders, to vote in favour of the relevant resolution(s) to be proposed at the SGM to approve the Subscription Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Nuada Limited Po Chan Executive Director

Ms. Po Chan is a person licensed under the SFO to carry out type 6 (advising on corporate finance) regulated activity under the SFO and a responsible officer of Nuada Limited and has over 14 years of experience in corporate finance industry.

GENERAL INFORMATION

APPENDIX

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

Directors’ and chief executive’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executives 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) which were required (i) 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 provision of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) 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
	Name of			percentage or
	the company			attributable
Name of	in which the	Number of	Nature of	percentage of
Director	shares was held	the shares held	interests	shareholding
				(%)
Shao Yan_(Note)_	The Company	4,640,000 (L)	Interest in spouse	0.22

(L) denotes long position

Note: Dr Shao Yan is the spouse of Ms Tian Wen Hong who is the holder of the above Shares. By virtue of the SFO, Dr Shao Yan is 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) which were required (i) 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) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) 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.

I-1

GENERAL INFORMATION

APPENDIX

Directors’ positions in other companies

As at the Latest Practicable Date, save for Dr Shao Yan (who is a director of Outwit, a controlling shareholder of the Company), none of the Directors was also a director or employee of a company which had an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company pursuant to the provisions of Division 2 and 3 of Part XV of 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 Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors, proposed directors and the Independent Financial Adviser has, or had had, any direct or indirect interest in any assets which had been or are proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2015, the date to which the latest published audited financial statements of the Company were made up.

Save for the Subscriptions, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was significant in relation to the business of the Group.

5. EXPERT AND CONSENT

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

Name Qualification

Nuada Limited Licensed corporation under the SFO to conduct type 6 (advising on corporate finance) regulated activity

Nuada Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and report and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, Nuada Limited did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

I-2

GENERAL INFORMATION

APPENDIX

6. MATERIAL ADVERSE CHANGE

The Directors are not aware of any circumstances or events that may give rise to a material adverse change in the financial or trading position of the Group since 31 December 2015, being the date of which the latest audited financial statement of the Group were made up.

7. COMPETING INTERESTS

As at the Latest Practicable Date, Mr Liu Chengwei, the chairman of the Board and an executive Director, is a director of some pharmaceutical companies in the PRC (including China Grand) and thus may have interest in businesses which competes or is likely to compete, either directly or indirectly, with the business of the Group. Save as aforesaid, so far as the Directors are aware of, no Directors or their associates had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

8. MISCELLANEOUS

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

9. DOCUMENTS AVAILABLE FOR INSPECTION

A copy of the Subscription Agreement is available for inspection (i) during normal business hours on any weekday (except for public holidays) at the head office and principal place of business of the Company in Hong Kong at Unit 3302, The Center, 99 Queen’s Road Central, Hong Kong from the date of this circular up to and including 14 September 2016.

I-3

NOTICE OF THE SGM

==> picture [119 x 52] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability) (Stock Code: 00512)

NOTICE OF SGM

NOTICE IS HEREBY GIVEN that the Special General Meeting (the “ SGM ”) of China Grand Pharmaceutical and Healthcare Holdings Limited (the “ Company ”) will be held at Unit 3302, The Center, 99 Queen’s Road Central, Hong Kong on Wednesday, 14 September 2016 at 10:00 a.m. for the purposes of considering and, if thought fit, passing the following resolution with or without amendments as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

(a) the subscriptions (the “ Subscriptions ”) of 107,973,421 new ordinary shares of HK$0.01 each in the share capital of the Company (the “ Subscription Shares ”) at the issue price of HK$1.40 per Subscription Share as contemplated in the subscription agreement (the “ Subscription Agreement ”) dated 13 July 2016 and entered into among the Company, Outwit Investments Limited and East Ocean Capital (Hong Kong) Company Limited (formerly known as Emporium Energy Limited) (a copy of the Subscription Agreement having been produced to the meeting and marked “A” and initialed by the chairman of the meeting for the purpose of identification) be and are hereby approved;
(b) the execution and delivery of the Subscription Agreement by the Company be and is hereby approved, confirmed and ratified;
(c) the allotment and issue of the Subscription Shares pursuant to the terms of the Subscription Agreement, credited as fully paid, be and are hereby approved;
(d) the directors (the “ Directors ”) of the Company be and are hereby generally and specifically authorised to allot and issue such number of the Subscription Shares (the “ Specific Mandate ”) subject to and upon the terms and conditions as set out in the Subscription Agreement. The Specific Mandate is in addition to, and shall not prejudice nor revoke any general or specific mandate(s) which has/have been granted or may from time to time be granted to the Directors by the shareholders of the Company prior to the passing of this resolution; and

For identification purpose only

SGM-1

NOTICE OF THE SGM

(e) any one of the Directors be and are hereby authorised to execute all documents and to do all such things and take all such other steps which, in his/her opinion, may be necessary, appropriate, desirable or expedient to implement and/or give effect to the terms of, or the transactions contemplated in and for completion of the Subscription Agreement, including but not limited to the issue and allotment of the Subscription Shares and to agree to such variation, amendment or waiver in relation thereto which are, in the opinion of the Directors, in the interest of the Company.”

By order of the Board China Grand Pharmaceutical and Healthcare Holdings Limited Liu Chengwei Chairman

Hong Kong, 19 August 2016

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

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

Notes:

Any member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company.
The register of members will be closed from Monday, 12 September 2016 to Wednesday, 14 September 2016, both days inclusive, during which no transfer of shares can be registered. In order to qualify to attend the SGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Friday, 9 September 2016.
To be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a certified copy of that power of attorney or authority must be deposited at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Where there are joint holders of a share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he were solely entitled thereto, but if more than one of such holders be present at the meeting personally or by proxy, that one of such holders so presents whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the SGM and in such event, the instrument appointing a proxy shall be deemed to be revoked.
The ordinary resolution set out in this notice will be taken by poll.

As at the date of this notice, the Board comprises four executive Directors, namely Mr Liu Chengwei, Mr Hu Bo, Dr Shao Yan and Dr Zhang Ji; and three independent non-executive Directors, namely Ms So Tosi Wan, Winnie, Mr Lo Kai Lawrence and Dr Pei Geng.

SGM-2

AI assistant

Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2016

49262_rns_2016-08-18_92b55e95-769c-44ef-aff6-9af0bfec3c0f.pdf

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

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES

BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

INTRODUCTION

SUBSCRIPTION AGREEMENT

Date

Parties

Subscription Shares

Specific Mandate to issue the Subscription Shares

Conditions of the Subscriptions

Completion of the Subscriptions

SUBSCRIPTION PRICE

RANKING

APPLICATION FOR LISTING

INFORMATION ABOUT THE SUBSCRIBERS AND THE LISTING RULES IMPLICATION

REASONS FOR THE SUBSCRIPTIONS AND USE OF PROCEEDS

FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST 12 MONTHS

EFFECT ON SHAREHOLDING STRUCTURE

SGM

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

ADDITIONAL INFORMATION

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

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

Yours faithfully,

Independent Board Committee of China Grand Pharmaceutical and Healthcare Holdings Limited

So Tosi Wan, Winnie

Nuada Limited

CONNECTED TRANSACTIONS SUBSCRIPTIONS OF NEW SHARES BY CONTROLLING SHAREHOLDER AND ITS RELATED PARTY UNDER SPECIFIC MANDATE

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

Business and financial information of the Group

Reasons for and benefits of the Subscriptions

Principal terms of the Subscription Agreement

Historical trading volume

Market comparables

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Other financing alternatives

Potential dilution on shareholdings of the Company

Recommendation

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Directors’ and chief executive’s interests and short positions in the securities of the Company and its associated corporations

Directors’ positions in other companies

3. DIRECTORS’ SERVICE CONTRACTS

4. INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT

5. EXPERT AND CONSENT

Name Qualification

6. MATERIAL ADVERSE CHANGE

7. COMPETING INTERESTS

8. MISCELLANEOUS

9. DOCUMENTS AVAILABLE FOR INSPECTION

NOTICE OF THE SGM

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

NOTICE OF SGM

ORDINARY RESOLUTION

“ THAT

More from Grand Pharmaceutical Group Limited

Grand Pharmaceutical Group Limited Proxy Solicitation & Information Statement 2016

**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[*]**

**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[*]**