Grand Pharmaceutical Group Limited - Proxy Solicitation & Information Statement 2017

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 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.

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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: 00512)

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

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

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

A letter from the Board is set out on pages 4 to 15 of this circular. A letter of advice from the Independent Board Committee is set out on pages 16 to 17 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 18 to 33 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, 13 December 2017 at 10:30 a.m. is set out on pages SGM-1 to SGM-3 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 17M 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.

* For identification purpose only

27 November 2017

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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:

“associates”

has the meaning ascribed to it under the Listing Rules

“Board” the board of Directors
“CCT Agreements” collectively, the Huadong Medicine Supply Agreement and the China Grand Supply Agreement
“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, being a controlling shareholder of the Company which is indirectly interested in approximately 67.13% of the total issued share capital of the Company
“China Grand Supply Agreement”
the agreement dated 30 October 2017 and entered into between Grand Pharm (China) and China Grand in respect of the supply of pharmaceutical preparations, raw materials and related services by Grand Pharm (China) or its related companies to China Grand or its related companies
“China Grand Supply Caps” the annual caps for the transactions contemplated under the China Grand Supply Agreement for each of the periods commencing on the respective Effective Date and ending 31 December 2017 and the two years ending 31 December 2019
“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” has the meaning ascribed to it under the Listing Rules
“Director(s)” the director(s) of the Company
“Effective Date”
the effective date of the CCT Agreements, i.e. the date upon fulfilment of all conditions precedent set out in the CCT Agreements
“ENT”
Ear, nose, throat and eye treatment
“Grand Pharm (China)”
Grand Pharmaceutical (China) Company Limited[#] (遠大醫藥(中國) 有限公司), 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

DEFINITIONS

“Hong Kong”
“Huadong Medicine”
“Huadong Medicine Supply Agreement”
“Huadong Medicine Supply Caps”
“Independent Board Committee”
“Independent Shareholder(s)”
“Independent Third Party(ies)”
“Latest Practicable Date”
“Listing Rules”
“Nuada Limited” or
“Independent Financial Adviser”
the Hong Kong Special Administrative Region of the PRC
Huadong Medicine Co., Ltd[#] (華東醫藥股份有限公司), a company established in the PRC, and the issued shares of which are listed on the Shenzhen Stock Exchange, and principally engaged in manufacture and sale of pharmaceutical products
the agreement dated 30 October 2017 and entered into between Grand Pharm (China) and Huadong Medicine in respect of the supply of pharmaceutical preparations, raw materials and other related services by Grand Pharm (China) or its related companies to Huadong Medicine or its related companies
the annual caps for the transactions contemplated under the Huadong Medicine Supply Agreement for the three years ending 31 December 2019
an independent committee of the Board consisting of all 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 as to the fairness and reasonableness of the CCT Agreements and the transactions contemplated thereunder and as to how to vote at the SGM
Shareholder(s) other than Huadong Medicine, China Grand and their respective associates and Shareholders who are connected to or otherwise associated with Huadong Medicine, China Grand or interested in the CCT Agreements
any person(s) or company(ies) and their 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
22 November 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

the Rules Governing the Listing of Securities on the Stock Exchange

a corporation licensed under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities and the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the CCT Agreements and the transactions contemplated respectively thereunder

DEFINITIONS

“PRC”	the People’s Republic of China, which, for the purpose of this
	circular, shall exclude Hong Kong, the Macau Special Administrative
	Region of the PRC and Taiwan
“Previous Huadong Medicine	the agreement dated 23 October 2015 and entered into between
Supply Agreement”	Grand Pharm (China) and Huadong Medicine in respect of the supply
	of pharmaceutical preparations and raw materials to Huadong
	Medicine
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the laws of
	Hong Kong) as amended or otherwise modified from time to time
“SGM”	the special general meeting of the Company to be convened to
	consider and, if thought fit, approve the CCT Agreements and the
	transactions contemplated respectively thereunder
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“%”	per cent.

* For identification purpose only.

# 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

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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: 00512)

Executive Directors: Mr Liu Chengwei (Chairman) Mr Hu Bo (Deputy Chairman) Dr Shao Yan (Chief Executive Officer) Dr Niu Zhanqi

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

27 November 2017

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

On 30 October 2017, the Board announced that the Group entered into the CCT Agreements, pursuant to which:

(1) Grand Pharm (China) or its related companies will supply pharmaceutical preparations, raw materials and related services to Huadong Medicine or its related companies; and
(2) Grand Pharm (China) or its related companies will supply pharmaceutical preparations, raw materials and related services to China Grand or its related companies.

The purpose of this circular is to provide you with, among other things, (i) further information on the CCT Agreements; (ii) the advice 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) the notice of the SGM.

* For identification purpose only

LETTER FROM THE BOARD

RELATIONSHIPS BETWEEN THE PARTIES

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the relationships between the relevant parties under the CCT Agreements are set out below:

The Group

The 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 with its issued Shares listed on the Stock Exchange

Grand Pharm (China)

Grand Pharmaceutical (China) Company Limited[#] (遠大醫藥(中國) 有限公司), a company established under the laws of the PRC and is an indirect non-wholly owned subsidiary of the Company

Parties outside the Group

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, a controlling shareholder of the Company, which is indirectly interested in 67.13% of the total issued share capital of the Company. China Grand is in turn controlled and ultimately and beneficially owned by Mr Hu Kaijun

Huadong Medicine Huadong Medicine Co., Ltd[#] (華東醫藥股份有限公司), a company established in the PRC, the issued shares of which are listed on the Shenzhen Stock Exchange and owned as to approximately 41.77% by China Grand

CONTINUING CONNECTED TRANSACTIONS

(I) Huadong Medicine Supply Agreement

Date: 30 October 2017 Parties: Grand Pharm (China), as supplier Huadong Medicine, as purchaser

Products: Grand Pharm (China) or its related companies shall supply pharmaceutical preparations, raw materials and related services to Huadong Medicine or its related companies, including various medicines specific for different areas (such as ENT and cerebro-cardiovascular medicines), pharmaceutical intermediates which are chemicals and raw materials for Huadong Medicine to manufacture its own products, and also related services such as product inspection, testing and training.

LETTER FROM THE BOARD

The parties shall determine the specifications and technical requirements, price and volume of the products supplied on an order-by-order basis.

Pricing basis:

For the purpose of ascertaining the market prices, the sales department would extract information from the Group’s internal sales record to ascertain the range of unit price which the Group charges for products of comparable quality, quantity and specifications which have been supplied to Independent Third Parties in the two months preceding the intended sales to Huadong Medicine. If there is no such sales record, the sales department will use the three latest sales records for products of comparable quality, quantity and specifications sold to Independent Third Parties as the reference price range for the sales to Huadong Medicine. The Group will ensure that the unit prices chargeable to Huadong Medicine will not be lower than the upper limits of the aforesaid price range. The final unit prices chargeable to Huadong Medicine shall be approved and confirmed by the management of the sales department.

Payment terms:

Term:

Annual caps:

The fees chargeable by the Group will be satisfied in cash. A credit period of 90 days will be given after issuance of invoices.

For the period commencing from the respective Effective Date until 31 December 2019.

Huadong Medicine Supply Caps for the three years ending 31 December 2019 are RMB50.0 million, RMB123.0 million and RMB162.0 million respectively.

Huadong Medicine Supply Caps are determined by the Directors based on (i) the historical amount of products purchased by Huadong Medicine; and (ii) the estimated maximum orders to be placed to Grand Pharm (China) or its related companies as indicated by Huadong Medicine or its related companies.

LETTER FROM THE BOARD

Huadong Medicine Supply Caps are significantly higher than the annual caps under the Previous Huadong Medicine Supply Agreement because the Group has expanded its product offerings since the entering into the Previous Huadong Medicine Supply Agreement and the Group is expected to increase the amount of products to be supplied under the Huadong Medicine Supply Agreement.

The Previous Huadong Medicine Supply Agreement will cease upon the Huadong Medicine Supply Agreement becoming effective on the respective Effective Date.

The annual caps for the supply of products under the Previous Huadong Medicine Supply Agreement for the year ending 31 December 2017 disclosed in the Company’s circular dated 13 November 2015 will be replaced by Huadong Medicine Supply Caps for the year ending 31 December 2017.

For the illustration purpose, the table below summaries the historical transaction amounts and their respective utilization rates of the annual caps of Previous Huadong Medicine Supply Agreement (i) from 4 December 2015 (i.e. the date on which the Previous Huadong Medicine Supply Agreement was approved by independent Shareholders) to 31 December 2015; (ii) for the year ended 31 December 2016; and (iii) from 1 January 2017 to 30 September 2017.

	From		From
	4 December	For the	1 January
	2015 to	year ended	2017 to
	31 December	31 December	30 September
	2015	2016	2017
Historical transaction amount under Previous
Huadong Medicine Supply Agreement	RMB20.2 million	RMB19.4 million	RMB22.8 million
Utilisation rate of the annual caps	91.8%	77.6%	78.6%
	(Note 1)		(Note 2)
Notes:

The utilisation rate only represented the historical transaction amount from 4 December 2015 to 31 December 2015 to the annual cap of the Previous Huadong Medicine Supply Agreement for the year ended 31 December 2015.
The utilization rate only represented the historical transaction amount from 1 January 2017 to 30 September 2017 to the annual cap of the Previous Huadong Medicine Supply Agreement for the year ended 31 December 2017.

LETTER FROM THE BOARD

Accordingly, as advised by the management of the Company, the annual cap under the Previous Huadong Medicine Supply Agreement for the year ending 31 December 2017 has not been exceeded as at 30 September 2017 and the Latest Practicable Date.

Huadong Medicine Supply Caps for the year ending 31 December 2017 are significantly higher than the annual caps under the Previous Huadong Medicine Supply Agreement for the year ending 31 December 2017 due to the following reasons:

a. Seasonality impact

As advised by the management of the Company, during the fourth quarter of the year, the sales orders received by the Group are generally higher, due to the substantial demand during the said period from the end customers, such as hospitals, clinics and pharmacies. In view of the lowered manufacture capacity and the potential annual maintenance conducted by the pharmaceutical manufacturers during the Chinese New Year holiday, hospitals, clinics and pharmacies would usually procure and keep sufficient stocks to cope with the expected demand during the Chinese New Year holiday.

b. Indicated purchase orders by Huadong Medicine

As at 30 September 2017, approximately 78.6% of the annual cap for the year ended 31 December 2017 under the Previous Huadong Medicine Supply Agreement has been utilised. As advised by the management of the Company, as at the Latest Practicable Date, Huadong Medicine has indicated that they would further order products from the Group amounting to around RMB27 million for the year ending 31 December 2017. In view of the utilization rate of the annual cap and in order to comply with Chapter 14A of the Listing Rules, the Group has procrastinated the taking of purchase orders from Huadong Medicine until and unless the Huadong Medicine Supply Agreement and the Huadong Medicine Supply Caps are duly approved by the Independent Shareholders at the SGM, upon which manufacturing with respect to the bulk orders from Huadong Medicine could resume immediately after.

LETTER FROM THE BOARD

c. Products to be provided by Xian Beilin Pharmaceutical Company Limited[#] (西安碑林藥業有限公司) (“Xian Beilin”) and Beijing Jiu He Pharmaceutical Limited[#] (北京九和藥業有限公司) (“Jiu He”)

As advised by the management of the Company, the majority of the indicated purchaser orders by Huadong Medicine, accounting for around RMB19 million out of the RMB27 million, are products that shall be sold by Xian Beilin (controlling stake of which was acquired by the Company in the second half of 2017) and Jiu He (the controlling stake of which was acquired by the Company in the second half of 2015). As such, the products of the aforesaid two subsidiaries of the Company were not taken into account when determining the annual caps under the Previous Huadong Medicine Supply Agreement.

(II) China Grand Supply Agreement

Date: 30 October 2017

Parties: Grand Pharm (China), as supplier China Grand, as purchaser

Products: Grand Pharm (China) or its related companies shall supply pharmaceutical preparations, raw materials and related services to China Grand or its related companies, including various medicines specific for different areas (such as ENT, cerebro-cardiovascular and anti-tumors medicines) and also related services such as product inspection, testing and training.

The parties shall determine the specifications and technical requirements, price and volume of the products supplied on an order-by-order basis.

Pricing basis:

LETTER FROM THE BOARD

For the purpose of ascertaining the market prices, the sales department will extract information from the Group’s internal sales record to ascertain the range of unit price which the Group charges for products of comparable quality, quantity and specifications which have been supplied to Independent Third Parties in the two months preceding the intended sales to China Grand. If there is no such sales record, the sales department will use the three latest sales records for products of comparable quality, quantity and specifications sold to Independent Third Parties as the reference price range for the sales to China Grand. The Group will ensure that the unit prices chargeable to China Grand will not be lower than the upper limits of the aforesaid price range. The final unit prices chargeable to China Grand shall be approved and confirmed by the management of the sales department.

Payment terms:

The fees chargeable by the Group will be satisfied in cash. A credit period of 90 days will be given after issuance of invoices.

Term:

For the period commencing from the respective Effective Date until 31 December 2019.

Annual caps:

China Grand Supply Caps for each of the periods commencing on the Effective Date and ending 31 December 2017 and the two years ending 31 December 2019 are RMB13.0 million, RMB17.0 million and RMB23.0 million respectively.

China Grand Supply Caps are determined by the Directors based on (i) the estimated maximum orders to be placed to Grand Pharm (China) or its related companies as indicated by China Grand or its related companies and (ii) the estimated price of the products based on prevailing market prices. In particular, China Grand has indicated to the Group the proposed list of sale products with specification and the expected maximum quantities by product. Further, the estimated price of products are estimated based on the method stated above.

Common major terms of the CCT Agreements

Each of the CCT Agreements contains the following major terms:

The terms of each of the CCT Agreements shall become effective on the respective Effective Date and expire on 31 December 2019. The Group will be entitled to extend the CCT Agreements on or before 31 December 2019 and to take such action as may be appropriate to comply with the Listing Rules. Without prejudice to the right of any parties to terminate the CCT Agreements pursuant to their respective terms, the CCT Agreements shall be automatically terminated before 31 December 2019 (or such later date as the parties to the respective agreement may agree) if, among other things:

LETTER FROM THE BOARD

(i) the Group fails to obtain the necessary approvals from the Company, the Shareholders or Grand Pharm (China) in order to comply with the Listing Rules at the relevant time; or
(ii) compliance with the Listing Rules would require changes to the CCT Agreements which are not acceptable to any of the parties.
All changes made to the CCT Agreements shall be subject to compliance by the Company with the Listing Rules.
The total annual amount payable or receivable by the Group under the CCT Agreements shall be subject to the annual caps agreed by the parties.
The CCT Agreements will supersede and replace the previous agreements entered into between the relevant parties (if any) upon the CCT Agreements becoming effective on the respective Effective Date.

INFORMATION ABOUT THE GROUP AND THE COUNTERPARTIES

The Group, including its PRC subsidiaries, is mainly engaged in the research and development, manufacturing and sales of pharmaceutical preparations, pharmaceutical intermediates, specialised pharmaceutical raw materials and healthcare products.

Huadong Medicine and its subsidiaries are principally engaged in the manufacture and sale of pharmaceutical products.

China Grand and its subsidiaries is a group principally engaged in various business, including but not limited to sale of pharmaceutical products.

REASONS AND BENEFITS FOR ENTERING INTO THE CONTINUING CONNECTED TRANSACTIONS

The Group will sell and/or supply to Huadong Medicine and China Grand various pharmaceutical preparations, such as ENT, cerebro-cardiovascular and anti-tumors medicines, certain pharmaceutical intermediates, which are chemicals and raw materials for the production of its own products and also related services. As Huadong Medicine and China Grand have developed their own sales network and retail stores in many cities in the PRC, which cover over ten provinces, the Directors (excluding the independent non-executive Directors, whose views are set out in the section headed “Letter from the Independent Board Committee” in this circular) are of the view that the entering into of the CCT Agreements may allow the Group to make use of the existing sales network of Huadong Medicine and China Grand and to promote the Group’s product brands through such sales network.

LETTER FROM THE BOARD

In particular, with regard to China Grand Supply Agreement, despite the fact that there had not been any similar transaction with China Grand due to the lack of business opportunities in the past, the Directors consider the entering into of the China Grand Supply Agreement is in the interest of the Company and the Shareholders as a whole since it could expand our sales network, promote the products brand of the Group through China Grand and enlarge our market shares through its distribution channels, in view of the business opportunities arise and that China Grand were requested to provide the types of pharmaceutical preparations and raw materials we manufactured by its end customers.

In view of the above, the Directors (excluding the independent non-executive Directors, whose views are set out in the section headed “Letter from the Independent Board Committee” in this circular) consider that the entering into of the CCT Agreements are in the ordinary course of business of the Group and that the terms of such agreements are determined on an arm’s length basis among the relevant parties and that the terms and conditions of the CCT Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of the CCT Agreements, to the best of the Director’s knowledge, information and belief, having made all reasonable enquiries, Huadong Medicine is an associate of China Grand by virtue of fact that China Grand controls the exercise of 30% or more of the voting power at the general meeting of Huadong Medicine. On the other hand, China Grand is indirectly interested in approximately 67.13% of the total issued share capital of the Company and thus is a controlling shareholder of the Company. Accordingly, each of Huadong Medicine and China Grand is regarded as a connected person of the Company. Hence the transactions contemplated under the CCT Agreements constitute continuing connected transactions on the part of the Company.

As Huadong Medicine and China Grand are connected with each other and the subject matters of each of the CCT Agreements are similar in nature, pursuant to Rule 14A.81 of the Listing Rules, the transactions between the Group and each of these companies would be aggregated.

As one or more of the applicable percentage ratios for the transactions contemplated under the CCT Agreements exceeds 5%, and the aggregated amount of the Huadong Medicine Supply Caps and the China Grand Supply Caps exceeds HK$10,000,000 per annum, the transactions contemplated under the CCT Agreements are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

In accordance with the Listing Rules, Huadong Medicine, China Grand and their respective associates will abstain from voting on the resolutions to approve the CCT Agreements 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 CCT Agreements that is required to abstain from voting on the relevant resolutions at the SGM.

The text of the letter from the Independent Board Committee is set out on pages 16 to 17 of this circular, the text of the letter from Nuada Limited containing its advice is set out on pages 18 to 33 of this circular.

LETTER FROM THE BOARD

SGM

Set out on pages SGM-1 to SGM-3 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 resolutions will be proposed at the SGM to approve, among other things, the CCT Agreements and the transactions contemplated respectively thereunder. The resolutions 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.

In accordance with the Listing Rules, Huadong Medicine, China Grand and their respective associates, who, to the best knowledge, information and belief of the Directors having made all reasonable enquiries, in aggregate hold 1,348,670,515 Shares as at the Latest Practicable Date, representing approximately 60.29% of the entire issued share capital of the Company, are required to abstain from voting on the resolutions to approve the CCT Agreements and the transactions contemplated respectively thereunder 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 CCT Agreements that is required to abstain from voting and being counted towards the quorum on the relevant resolution at the SGM.

In addition, given that (i) Mr Hu Bo, an executive Director, is a nephew of Mr Hu Kaijun (who controls and ultimately and beneficially owns China Grand); (ii) Mr Liu Chengwei, an executive Director, is a director of China Grand and a supervisor of Huadong Medicine; and (iii) Dr Niu Zhanqi, an executive Director, is a director of Huadong Medicine, and thus they are considered to be interested in the transactions contemplated under the CCT Agreements, and have abstained from voting on the board resolutions for approving such transactions. Save as aforesaid, the Board confirms that none of the Directors has any material interest in the CCT Agreements and the transactions contemplated respectively thereunder and is required to abstain from voting on the board resolutions for approving such transactions.

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, 17M 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.

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

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 CCT Agreements (including the Huadong Medicine Supply Caps and the China Grand Supply Caps) and the transactions contemplated thereunder and as to how to vote at the SGM.

Nuada Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the CCT Agreements and the transactions contemplated thereunder.

The Independent Board Committee, having taken into account the advice and recommendation of Nuada Limited, consider that the terms of the CCT Agreements and the transactions contemplated thereunder are fair and reasonable and 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 CCT Agreements and the transactions contemplated thereunder.

The text of the letter from the Independent Board Committee is set out on pages 16 to 17 of this circular, the text of the letter from the Independent Financial Adviser containing its advice is set out on pages 18 to 33 of this circular.

RECOMMENDATIONS

The Board (other than the independent non-executive Directors, whose views are set out in the section headed “Letter from the Independent Board Committee” in this circular), having taken into account of the reasons set out in the paragraphs headed “Reasons and Benefits for Entering into the Continuing Connected Transactions” above and the recommendations of the Independent Board Committee and the Independent Financial Adviser, considers that the terms of the CCT Agreements and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (other than all independent non-executive Directors) recommends the Independent Shareholders to vote in favour of the ordinary resolutions which will be proposed at the SGM for approving the the CCT Agreements and the transactions contemplated thereunder, including the Huadong Medicine Supply Caps and the China Grand Supply Caps.

ADDITIONAL INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on pages 16 to 17 of this circular which contains its recommendation to the Independent Shareholders concerning the resolutions to be voted at the SGM; and (ii) the letter from the Independent Financial Adviser set out on pages 18 to 33 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders concerning the resolutions to be voted at the SGM and the principal factors and reasons considered by it in arriving its opinions.

LETTER FROM THE BOARD

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

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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: 00512)

27 November 2017

To the Shareholders,

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 27 November 2017 (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 CCT Agreements and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable 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 18 to 33 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 4 to 15 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 CCT Agreements, and the principal factors and reasons considered by, and the advice of the Nuada Limited, we are of the opinion that the CCT Agreements and the transactions contemplated thereunder are in the ordinary and usual course of business of the Company, on normal commercial terms and fair and reasonable 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 resolutions to be proposed at the SGM to approve the CCT Agreements and the transactions contemplated thereunder, including the Huadong Medicine Supply Caps and the China Grand Supply Caps.

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 to the Independent Board Committee and the Independent Shareholders from Nuada Limited dated 27 November 2017 prepared for the purpose of inclusion in this circular.

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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

27 November 2017

To the Independent Board Committee

and the Independent Shareholders of China Grand Pharmaceutical and Healthcare Holdings Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

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 continuing connected transactions, which include the Huadong Medicine Supply Agreement (with the Huadong Medicine Supply Caps), the China Grand Supply Agreement (with the China Grand Supply Caps) and the transactions contemplated respectively thereunder, details of which are set out in the section headed “Letter from the Board” (the “ Letter from the Board ”) in the Company’s circular dated 27 November 2017 to the Shareholders, of which this letter forms part. Our appointment as the Independent Financial Adviser has been approved by the Independent Board Committee. Terms used in this letter shall have the same meanings as defined in this circular unless the context requires otherwise.

On 30 October 2017, Grand Pharm (China) as supplier entered into (i) the Huadong Medicine Supply Agreement with Huadong Medicine as purchaser, pursuant to which Grand Pharm (China) or its related companies shall supply pharmaceutical preparations, raw materials and related services to Huadong Medicine or its related companies; and (ii) the China Grand Supply Agreement with China Grand as purchaser, pursuant to which Grand Pharm (China) or its related companies shall supply pharmaceutical preparations, raw materials and related services to China Grand or its related companies.

As at the Latest Practicable Date, (i) Huadong Medicine is an associate of China Grand by virtue of fact that China Grand controls the exercise of 30% or more of the voting power at the general meeting of Huadong Medicine; and (ii) China Grand is indirectly interested in approximately 67.13% of the total issued share capital of the Company and thus is a controlling shareholder of the Company. Accordingly, each of Huadong Medicine and China Grand is regarded as a connected person of the Company. Hence the transactions contemplated under the CCT Agreements constitute continuing connected transactions on the part of the Company.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As Huadong Medicine and China Grand are connected with each other and the subject matters of each of the CCT Agreements are similar in nature, pursuant to Rule 14A.81 of the Listing Rules the transactions between the Group and each of these companies would be aggregated.

As one or more of the applicable percentage ratios for the transactions contemplated under the CCT Agreements exceeds 5%, and the aggregated amount of the Huadong Medicine Supply Caps and the China Grand Supply Caps exceeds HK$10,000,000 per annum, the transaction contemplated under the CCT Agreements are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, China Grand is indirectly interested in approximately 67.13% of the total issued share capital of the Company and has material interest in the China Grand Supply Agreement. China Grand, being the controlling shareholder of the Company, together with Huadong Medicine, Grand Pharm (China) and their respective associates will abstain from voting on the resolutions to approve the CCT Agreements 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 CCT Agreements that is required to abstain from voting on the relevant resolutions at the SGM.

The Independent Board Committee comprising Ms. So Tosi Wan, Winnie, Mr. Lo Kai Lawrence and Dr. Pei Geng, being all the independent non-executive Directors, has been established to give advice to the Independent Shareholders in relation to the CCT Agreements (including the Huadong Medicine Supply Caps and the China Grand Supply Caps) and the transactions contemplated thereunder. We, Nuada Limited, has been appointed by the Company as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

During the past two years immediately preceding and up to the date of our appointment as the Independent Financial Adviser, we have issued the following letters in respect of certain transactions of the Group:

Transaction types	Relevant letters issued	Date of our letters
Connected transaction	Letter of advice as an	17 November 2017
	independent financial adviser
Connected transaction and	Letter of advice as an	19 August 2016
subscription of new shares by	independent financial adviser
controlling shareholder and its
related party under specific
mandate
Continuing connected transactions	Letter of advice as an	13 November 2015
	independent financial adviser

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Save for this appointment as the Independent Financial Adviser in respect of the CCT Agreements and the aforesaid appointments, there were no other engagements between the Group and Nuada Limited during the past two years immediately preceding and up to the date of our appointment as the Independent Financial Adviser. Apart from normal professional fees for our services to the Company in connection with the aforesaid engagements and this appointment as the Independent Financial Adviser, no other arrangement exists whereby we have received/will receive any fees and/or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence. Accordingly, we are independent from, and are not connected with the Company or their respective substantial shareholder(s) or connected person(s) as defined under the Listing Rules, and accordingly are considered eligible to give independent advice on the CCT Agreements.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the statements, information, opinions and representations contained or referred to in this circular and the information and representations provided to us by the Company, the Directors and the management of the Company. We have no reason to believe that any information or representation 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, representations and opinions contained or referred to in this circular, which have been provided by the Company, the Directors and the management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be true up to the Latest Practicable Date and should there be any material changes after the despatch of this circular, the Shareholders would be notified as soon as possible.

The Directors have jointly and severally accepted full responsibility for the accuracy of the information contained in this circular and have confirmed in this circular, having made all reasonable inquiries, that to the best of their knowledge, opinion expressed in this circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement in this circular misleading.

We consider that we have reviewed sufficient information, including relevant information and documents provided by the Company and the Directors and the information published by the Company, to enable us to reach an informed view and to justify reliance on the accuracy of the information contained in this circular to provide a reasonable basis for our opinions and recommendations. We have not, however, carried out any independent verification of the information provided by the Company and the Directors, nor have we conducted an independent in-depth investigation into the business and affairs, financial condition and future prospects of the Group.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation in respect of the terms of the CCT Agreements (including the Huadong Medicine Supply Caps and the China Grand Supply Caps), we have taken into account the following principal factors and reasons:

1. Background information of the Company, Grand Pharm (China), Huadong Medicine and China Grand

(a) The Group

The Company is the holding company of the Group which is listed on the main board of the Stock Exchange. The Company, with its PRC subsidiaries, is mainly engaged in the research and development, manufacturing and sales of pharmaceutical preparations, pharmaceutical intermediates, specialized pharmaceutical raw materials and healthcare products.

(b) Grand Pharm (China)

Grand Pharmaceutical (China) Company Limited* (遠大醫藥(中國)有限公司) is a company established under the laws of the PRC and is an indirectly non-wholly owned subsidiary of the Company.

(c) Huadong Medicine

Huadong Medicine Co., Ltd* (華東醫藥股份有限公司) is a company established in the PRC, the issued shares of which are listed on the Shenzhen Stock Exchange and owned as to approximately 41.77% by China Grand. Huadong Medicine and its subsidiaries are principally engaged in the manufacture and sale of pharmaceutical products.

(d) China Grand

China Grand Enterprises Incorporation* (中國遠大集團有限責任公司) is a company established in the PRC with limited liability, being the controlling shareholder of the Company which is indirectly interested in approximately 67.13% of the total number of issued share of the Company. China Grand and its subsidiaries are principally engaged in various business, including but not limited to sales of pharmaceutical products.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for entering into the CCT Agreements

According to the management of the Company and the Company’s circulars dated 28 January 2013 and 13 November 2015, before entering into the Huadong Medicine Supply Agreement, the Group has continuously carried out transactions with Huadong Medicine for over 4 years since 2013. The Group through Grand Pharm (China) entered into agreements with Huadong Medicine in respect of the supply of pharmaceutical preparations, raw materials and technologies to Huadong Medicine on 28 November 2012 (the “ 2012 Huadong Medicine Supply Agreement ”) and 23 October 2015 (i.e. the Previous Huadong Medicine Supply Agreement) respectively. The 2012 Huadong Medicine Supply Agreement (including the proposed annual caps and transactions contemplated thereunder) and Previous Huadong Medicine Supply Agreement (including the proposed annual caps and transactions contemplated thereunder) were approved by the then independent Shareholders on the special general meetings held on 19 February 2013 and 4 December 2015 respectively. For detailed information of the 2012 Huadong Medicine Supply Agreement and Previous Huadong Medicine Supply Agreement, please refer to the Company’s circular dated 28 January 2013 and 13 November 2015 respectively.

The Previous Huadong Medicine Supply Agreement will expire on 31 December 2017. With a view to continuing the supply arrangements with Huadong Medicine which are in alignment with the Group’s business development, the Group entered into the Huadong Medicine Supply Agreement with Huadong Medicine for a term of not more than three years commencing from the date falling upon the passing of the relevant resolutions by the Independent Shareholders at the SGM to 31 December 2019. With a view to extending the aforesaid supply arrangements to China Grand, the Group also entered into the China Grand Supply Agreement on the same day for similar term. As stated in the Letter from the Board, Huadong Medicine and China Grand have developed their own sales network and retail stores in many cities in the PRC (covering over ten provinces), the Directors (including the independent non-executive Directors after taking the advice from the independent financial adviser) are of the view that the entering into the CCT Agreements may allow the Group to make use of the existing sales network of Huadong Medicine and China Grand and to promote the Group’s product brands through such sales network.

In particular, with regard to China Grand Supply Agreement, despite the fact that there had not been any similar transaction with China Grand due to the lack of business opportunities in the past, the Directors consider the entering into of the China Grand Supply Agreement is in the interest of the Company and the Shareholders as a whole since it could expand our sales network, promote the products brand of the Group through China Grand and enlarge the market shares of the Group through its distribution channels, in view of the business opportunities arise and that China Grand were requested to provide the types of pharmaceutical preparations and raw materials we manufactured by its end customers.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the Letter from the Board and according to the management of the Company, taking into account of the difference in products, target customers and principal activities engaged by the Group, Huadong Medicine and China Grand under the CCT Agreements, the Directors confirm that they are not competing and are unlikely to compete with the Group’s business. In particular:

(i) save for the products to be supplied by Grand Pharm (China) to Huadong Medicine, the Group and Huadong Medicine provide different products to different kinds of target customer groups in that the major products sold by Huadong Medicine includes medicines related to diabetes, digestive system, blood and orthopaedic and traumatology, which are products acquired from other manufacturers or its own branded product, whereas the Group’s major products mainly include cerebro-cardiovascular, ophthalmic, antibacterial and antibiotics, antipyretics and analgesics;
(ii) China Grand is principally engaged in various business, including but not limited to trading of pharmaceutical products, while the Group is principally engaged in research and development, manufacturing and sales of pharmaceutical preparations, pharmaceutical intermediates, specialized pharmaceutical raw materials and healthcare products; and
(iii) Huadong Medicine and China Grand do not produce products to be supplied by the Group applied in the ENT and cerebro-cardiovascular emergency, and they only act as distributors of the Group for such products.

Taking into account of different kinds of principal activities, products and target customers of the Group, Huadong Medicine and China Grand, we concur with the view of the management of the Company that there is no competition among the business of the Group, Huadong Medicine and China Grand.

Furthermore, having considered the principal activities of the Group as mentioned in the paragraph headed “1. Background information of the Group, Grand Pharm (China), Huadong Medicine and China Grand” above in this letter, we concur with the view of the management of the Company that the entering of the CCT Agreements which cover the sales and distribution of pharmaceutical products and raw materials are in the ordinary and usual course of the Group’s business.

Based on the above, we are of the view and concur with the Directors’ view that (i) the entering into of the Huadong Medicine Supply Agreement offers the opportunity to continue the business relationship with Huadong Medicine and enjoy its existing sales network to promote the product brands of the Group; and (ii) the entering into of the China Grand Supply Agreement can expand the sales network to promote the products brand of the Group through China Grand, and therefore the CCT Agreements are in the interest of the Company and the Shareholders as a whole.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Financial information of the Group

The table below summarises the financial results of the Group for the two years ended 31 December 2015 (“ FY2015 ”) and 31 December 2016 (“ FY2016 ”) respectively as extracted from the annual report of the Company for the year ended 31 December 2016 (the “ Annual Report ”), and the financial results of the Group for the two six-month period ended 30 June 2016 (“ Interim 2016 ”) and 30 June 2017 (“ Interim 2017 ”) respectively as extracted from the interim report of the Company for the six-month period ended 30 June 2017 (the “ Interim Report ”).

	For the six	For the six	For the	For the
	months ended	months ended	year ended	year ended
	30 June	30 June	31 December	31 December
	2017	2016	2016	2015
	(unaudited)	(unaudited)	(audited)	(audited)
	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	2,275,005	1,781,300	3,696,164	3,245,546
Gross profit	1,154,087	761,571	1,732,428	1,350,484
Profit for the period/year	224,401	106,900	269,362	200,407

Annual results of the Group

The Group recorded a revenue of approximately HK$3,696.2 million for FY2016, representing an increase of approximately 13.9% as compared with that of approximately HK$3,245.6 million for FY2015. As disclosed in the Annual Report and according to the management of the Company, the increment of the revenue is mainly due to the active fine-tuning of the Group’s product matrix and the completion of the acquisition of the controlling stake in the share capital of Xian Beilin Pharmaceutical Company Limited[#] (西安碑林藥業股份有限公司) (the “ Xian Beilin ”) in July 2016 (details of the aforesaid acquisition are set out in the Company’s announcement dated 29 June 2016) which started contributing revenue and profit to the Group. The aforesaid strategy of optimising product matrix increase the portion of turnover by the pharmaceutical preparations and medical devices sector substantially, which also drove the gross profit margin of the Group from approximately 41.6% in FY2015 to approximately 46.9% in FY2016, representing an increase of approximately 5.3 percent point. Therefore, the Group recorded a growth of profits from approximately HK$200.4 million in FY2015 to approximately HK$269.4 million in FY2016, representing an increase of approximately 34.4%.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Interim results of the Group

The Group continued to enhance the financial performance during the first half of 2017. The revenue of the Group rose from approximately HK$1,781.3 million for Interim 2016 to approximately HK$2,275.0 million for Interim 2017, representing an increase of approximately 27.7%. According to the Interim Report and the management of the Company, the growth of revenue was mainly attributable to the fact that (i) 203 products of the Group are listed in the “National Drug List for Basic Medical Reimbursement, WorkRelated Injury Reimbursement and Materniaty Reimbursement (2017 Version)*” (國家基本醫療保險、工傷保險和生育藥品目錄 (2017年版)) published by the Ministry of Human Resources and Social Security of the PRC in February 2017, thus the Group’s products were used by more hospital resulting in sales improvement; (ii) market price of bio-technology products and nutrition products increased due to technological improvement and quality enhancement; and (iii) the revenue generated from Xian Beilin (which was acquired by the Group in July of 2016) was recognised in Interim 2017. As advised by the management of the Company and according to the Interim Report, mainly due to the advanced development and market potential of ENT and cerebro-cardiovascular emergency products, the gross profit margin of the Group also rose from approximately 42.8% in Interim 2016 to approximately 50.7% in Interim 2017, representing an increase of approximately 7.9 percent point. As such, the profit of the Group grew from approximately HK$106.9 million to approximately HK$224.4 million, representing an increase of approximately 109.9%.

4. Market outlook of the pharmaceutical industry in the PRC

In respect of the prospect of the pharmaceutical industry in which the Group is principally engaged, we have reviewed relevant statistics released by the National Bureau of Statistics of the PRC. It is noted that the per capita health care expenditure increased from approximately RMB1,044.8 in 2014 to approximately RMB1,164.5 in 2015, and further increased to approximately RMB1,307.0 in 2016. This cumulative annual growth of approximately 11.8% during the recent two years reflects that the public are spending more on health care related products and services.

To further understand the market regulation of pharmaceutical products, we have also reviewed the publication named “Opinion on Reforming Policy regarding the Production, Distribution and Consumption of Pharmaceutical Products*” (關於進一步改革完善藥品生產流通使用政策的若干意見) issued by the State Council of the PRC on 24 January 2017, and found that the PRC government intends to improve quality, promote circulation and regulate usage of pharmaceutical products in the PRC. In those regards, the PRC government would implement measures including (i) improving the listing approval of new products on a strict and consistent basis; (ii) strengthening products inspection so as to safeguard quality; (iii) increasing the transparency of purchases by hospitals by supporting provincial central purchase platforms; (iv) encouraging e-commerce trading in order to increase circulation and lower the transaction costs; and (v) combating various problems in the industry, such as illegal sales and pricing monopoly. Based on the aforesaid, we note that it is the aim of the PRC government to improve the development of pharmaceutical product in the PRC, which would have positive impact on the development of pharmaceutical industry in the PRC.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Taking into consideration the increasing trend on health expenditure in the PRC and the government policies in supporting the pharmaceutical industry, we are of the view and concur with the view of the management of the Company that the outlook of the pharmaceutical industry in the PRC will remain positive.

5. Principal terms of the CCT Agreements

(a) Principal terms of the Huadong Medicine Supply Agreement

Products:

Grand Pharm (China) or its related companies shall supply pharmaceutical preparations, raw materials and related services to Huadong Medicine or its related companies, including various medicines specific for different areas (such as ENT and cerebro-cardiovascular medicines), pharmaceutical intermediates which are chemicals and raw materials for Huadong Medicine to manufacture its own products, and also related services such as product inspection, testing and training.

The parties shall determine the specifications, technical requirements, price and volume of the products supplied on an order-by-order basis.

Pricing basis:

The price of the products will be determined on an arm’s length basis in the ordinary course of business and on normal commercial terms with reference to the prevailing market prices, or on terms not less favourable than those which will be charged by Grand Pharm (China) or its related companies (if any) to other independent customers for the same or similar products. For the purpose of ascertaining the market prices, the Group will make reference to the latest price which the Group charges for products of comparable quality, quantity and specifications which are supplied to Independent Third Parties.

Payment terms:

The fees chargeable by the Group will be satisfied in cash. A credit period of 90 days will be given after issuance of invoices.

Term: For the period commencing from the Effective Date until 31 December 2019.

For detailed terms of the Huadong Medicine Supply Agreement, please refer to the paragraph headed “(I) Huadong Medicine Supply Agreement” in the Letter from the Board.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Principal terms of the China Grand Supply Agreement

The parties shall determine the specifications, technical requirements, price and volume of the products supplied on an order-by-order basis.

Pricing basis:

Payment terms: The fees chargeable by the Group will be satisfied in cash. A credit period of 90 days will be given after issuance of invoices.

Term: For the period commencing from the Effective Date until 31 December 2019.

For detailed terms of the China Grand Supply Agreement, please refer to the paragraph headed “(II) China Grand Supply Agreement” in the Letter from the Board.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Pricing basis of the CCT Agreements

We have discussed with the management of the Company regarding the pricing basis, which is the same under each of the CCT Agreements. We note that for the purpose of ascertaining the market prices, the sales department will extract information from the Group’s internal sales record to ascertain the range of unit price which the Group charges for products of comparable quality, quantity and specifications which have been supplied to Independent Third Parties in the two months preceding the intended sales to Huadong Medicine or China Grand. If there is no such sales record, the sales department will use the three latest sales records for products of comparable quality, quantity and specifications sold to Independent Third Parties as the reference price range for the sales to Huadong Medicine or China Grand. The final unit prices chargeable to China Grand shall be approved and confirmed by the management of the sales department. The management of the Company also confirmed that the Group will ensure that the unit prices chargeable to Huadong Medicine or China Grand will not be lower than the upper limits of the aforesaid price range. Based on the above, we are of the view and concur with the view of the management of the Company that the aforesaid pricing basis can safeguard that the selling price of pharmaceutical preparations to Huadong Medicine or China Grand are no less favourable to the Group than those offered to Independent Third Parties.

(d) Our review on the pricing basis

As disclosed in the Letter from the Board and according to the management of the Company, the Group has continuously carried out transactions with Huadong Medicine for over 4 years since 2013. To ascertain whether the Company has adhered to the aforesaid pricing basis under previous transactions between the Group and Huadong Medicine, we have requested the Company to provide the master list of all transactions conducted between Grand Pharm (China) and Huadong Medicine for the two years ended 31 December 2016 and the period from 1 January 2017 up to 30 September 2017 (involving over 40 types of products supplied by Grand Pharm (China) to Huadong Medicine) (the “ Huadong Medicine Supply Master List ”). The Huadong Medicine Supply Master List stated (i) the details of each of the transactions conducted between the Group and Huadong Medicine for the two years ended 31 December 2016 and the period from 1 January 2017 up to 30 September 2017, such as transaction date, unit price, transaction volume, total amount of each transaction and name of products sold; and (ii) relevant transactions conducted between the Company and Independent Third Parties used for pricing comparison, i.e. relevant products supplied to Independent Third Parties in the two months preceding the sales to Huadong Medicine for products of comparable quality, quantity and specifications sold to Independent Third Parties is applied, or the three latest sales records for products of comparable quality, quantity and specifications sold to Independent Third Parties if there is no such sales record in the previous two months. Based on the Huadong Medicine Supply Master List and after discussion with the management of the Company, we note that the unit sales prices of products chargeable to Huadong Medicine were indeed not lower than those chargeable to Independent Third Parties and the pricings of such products followed the aforesaid pricing policy.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Since the Group did not carried out any transaction with China Grand previously, there is no sales record between the Group and China Grand. In spite of this, given (i) the Company’s years of experience in conducting continuing connected transactions; and (ii) our finding regarding previous continuing connected transactions of the Group with Huadong Medicine, we consider that the Group will follow the pricing policy regarding the transactions contemplated under the China Grand Supply Agreement.

Based on the above, we are of the view and concur with the view of the management of the Company that there are adequate measures in place to ensure that the fees chargeable to Huadong Medicine or China Grand are based on the prevailing market prices and not less favourable than those charged to Independent Third Parties, and therefore such pricing arrangement is on normal commercial terms and the transactions conducted under the CCT Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

6. The proposed Huadong Medicine Supply Caps and China Grand Supply Caps

The table below shows (i) the annual caps under the Previous Huadong Medicine Supply Agreement for the two years ended 31 December 2015, 31 December 2016 and the year ending 31 December 2017 (the “ Previous Annual Caps ”); and (ii) the proposed Huadong Medicine Supply Caps and China Grand Supply Caps (collectively, the “ Annual Caps ”) for a term commencing from the date where the terms of the Huadong Medicine Supply Agreement and China Grand Supply Agreement becomes effective to 31 December 2019 respectively:

Previous Annual Caps Huadong Medicine Supply Caps China Grand Supply Caps	For the year ended 31 December 2015 (RMB million) 22.0 For the year ending 31 December 2017 (RMB million) 50.0 13.0	For the year ended 31 December 2016 (RMB million) 25.0 For the year ending 31 December 2018 (RMB million) 123.0 17.0	For the year ending 31 December 2017 (RMB million) 29.0 For the year ending 31 December 2019 (RMB million) 162.0 23.0

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to the Letter from the Board, the Board determined the Huadong Medicine Supply Caps after taking into account of (i) the historical amount of products purchased by Huadong Medicine; and (ii) the estimated maximum orders to be placed by Huadong Medicine or its related companies with Grand Pharm (China) or its related companies.

As stated in the Letter from the Board, the Previous Huadong Medicine Supply Agreement will cease upon the Huadong Medicine Supply Agreement becoming effective on the respective Effective Date. The Directors confirmed that no further orders from Huadong Medicine or its related companies should be/have been made since the entering into of the Huadong Medicine Supply Agreement and until all relevant requirement under Chapter 14A of the Listing Rules could be complied with. As such, as advised by the management of the Company, the Previous Annual Cap for the year ending 31 December 2017 has not been exceeded as at the Latest Practicable Date.

According to the Letter from the Board, China Grand Supply Caps are determined by the Directors based on (i) the estimated maximum orders to be placed to Grand Pharm (China) or its related companies as indicated by China Grand or its related companies and (ii) the estimated price of the products based on prevailing market prices.

The table below summaries the historical transaction amounts and their respective utilisation rates of Previous Huadong Medicine Supply Agreement (i) from 4 December 2015 to 31 December 2015; (ii) for the year ended 31 December 2016; and (iii) from 1 January 2017 to 30 September 2017.

	From	For	From
	4 December 2015 to	the year ended	1 January 2017 to
	31 December 2015	31 December 2016	30 September 2017
Historical transaction amount
under Previous Huadong
Medicine Supply Agreement	RMB20.2 million	RMB19.4 million	RMB22.8 million
Utilisation rate	91.8%	77.6%	78.6%
	(Note 1)		(Note 2)
Note:

The utilisation rate only represented the historical transaction amount from 4 December 2015 to 31 December 2015 to the annual cap of the Previous Huadong Medicine Supply Agreement for the year ended 31 December 2015.
The utilisation rate only represented the historical transaction amount from 1 January 2017 to 30 September 2017 to the annual cap of the Previous Huadong Medicine Supply Agreement for the year ended 31 December 2017.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in the above table, we noted that the utilisation rates of Previous Annual Caps were (i) approximately 91.8% from 4 December 2015 to 31 December 2015; (ii) approximately 77.6% for the year ended 31 December 2016; (iii) approximately 78.6% from 1 January 2017 to 30 September 2017. Pursuant to the Letter from the Board, the Huadong Medicine Supply Caps will be significantly higher than the annual caps under the Previous Huadong Medicine Supply Agreement because the Group has expanded its product offerings since the entering into the Previous Huadong Medicine Supply Agreement and the Group is expected to increase the amount of products to be supplied under the Huadong Medicine Supply Agreement. As discussed with the management of the Company, we understand that the Annual Caps are determined by the parties to the respective CCT Agreements after negotiation with reference to, among other factors, the estimated maximum orders to be placed by Huadong Medicine or China Grand, and the estimated prices of the products based on market prices.

We discussed with the management of the Company in relation to the increase from the Previous Annual Caps of RMB29.0 million to Huadong Medicine Supply Caps of RMB50 million for the year ending 31 December 2017. We are advised that (i) sales orders during the fourth quarter of the year are generally higher due to the substantial demand during the said period from the end customers, such as hospitals, clinics and pharmacies; and (ii) Huadong Medicine has indicated that they would further order products from the Group amounting to around RMB27 million for the year ending 31 December 2017. We obtained a list of such future orders of products with corresponding prices and note that the majority of them, accounting for around RMB19 million out of the RMB27 million possible orders, are products that are sold by Xian Beilin (the controlling stake of which was acquired by the Company in the second half of 2016) and Beijing Jiu He Pharmaceutical Limited[#] (北京九和藥業有限公司) (“ Jiu He ”) (the controlling stake of which was acquired by the Company in second half of 2015). As such, the products of the aforesaid two subsidiaries of the Company were not taken into account when determining the Previous Annual Caps. Based on the above, we consider the Huadong Medicine Supply Cap of RMB50 million for the year ending 31 December 2017 is justifiable.

We have also reviewed the list of maximum quantity of orders (with estimated prices) for the three years ending 31 December 2019 between Huadong Medicine or China Grand and the Group provided by the Company. As discussed with the management of the Company, the quantities of the products are based on orders indicted by Huadong Medicine or China Grand. Regarding the estimated prices of the products, we note that they are based on the latest market price of the products at which the Group sell to Independent Third Parties and are kept stable. As discussed with the Company, we understand that the prices of the products to be placed by Huadong Medicine or China Grand had and might have possible price increase in view of market change, which is captured by a 10% buffer included in the determination of the Annual Caps. Given that the utilisation rate of Previous Annual Caps for the year ended 31 December 2015 was over 90% and that for the year ending 31 December 2017 will be well over 100% if the aforesaid future orders of around RMB27 million are taking into account, we consider that the 10% buffer set for prudent sake is justifiable. The Annual Caps are therefore calculated by multiplying the maximum quantities by the estimated prices and the 10% buffer.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notwithstanding the increase of Huadong Medicine Supply Caps as compared with Previous Annual Caps, having considered that (i) we understand from the management of the Company that sales orders during the last three months of the year are generally higher; (ii) as advised by the management of the Company, Huadong Medicine has indicated that they would order products from the Group amounting to around RMB27 million, most of which had not yet been products of the Group, i.e. products that are sold by Xian Beilin and Jiu He (the controlling stakes of which were acquired by the Company in the second half of 2016 and 2015 respectively) when determining the Previous Annual Caps; (iii) the market outlook of the pharmaceutical industry in the PRC is positive in view of market statistics and government policy; (iv) the Annual Caps are determined with respect to estimated maximum orders (with corresponding estimated prices) to be placed by Huadaong Medicine or China Grand; and (v) the utilisation rates of Previous Annual Caps are high, we are of the view and concur with the Directors’ view that the Annual Caps are fair and reasonable.

7. Internal control for implementing the CCT Agreements

According to the management of the Company, the Group will implement the following measures to ensure that each individual transaction under the CCT Agreements will be conducted within the framework thereof:

(i) The sales department will keep up-to-date records of the unit prices of products sold by the Group so that the sales team can timely obtain the relevant pricing information to determine the price ranges for the products to be sold to Huadong Medicine, China Grand and their related companies.
(ii) The finance department will continuously monitor the transactions under the CCT Agreements and review the pricing of products, payment terms and actual transaction amount on a quarterly basis. In particular, the finance department will regularly compare the prices of the products supplied under the CCT Agreements to see if any prices are less favourable than those offered by Independent Third Parties.
(iii) The independent non-executive Directors will review the transactions under the CCT Agreements annually to ensure that the relevant transactions are entered (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms; and (c) in accordance with the CCT Agreements governing them on terms that are fair and reasonable and in the interest of the Company and Shareholders as a whole.
(iv) The Company will engage its auditors to report on the CCT Agreements annually, confirming whether (a) the relevant transactions under the CCT Agreements have received approval by the Board; (b) price charged for each of the transactions selected were in accordance with the pricing terms set out in the CCT Agreements and/or the prices charged were consistent with the prices charged for comparable transactions that were identified by management; and (c) the continuing connected transactions have not exceed the relevant Annual Caps.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the above measures, and our review of the Huadong Medicine Supply Master List, we considers that there are adequate and enforceable internal control measures in place regarding the continuing connected transactions contemplated under the CCT Agreements.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that (i) the entering of CCT Agreements is in the ordinary and usual course of business of the Group; and (ii) the terms of CCT Agreements (together with the Huadong Medicine Supply Caps and the China Grand Supply Caps) are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, and we also recommend the Independent Shareholders, to vote in favour of the relevant resolution(s) to be proposed at the SGM to approve the CCT Agreements (including the Huadong Medicine Supply Caps and the China Grand Supply Caps) and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of

Nuada Limited

Po Chan Kevin Wong Executive Director Vice President

Mr. Po Chan is a person licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO and is a responsible officer of Nuada Limited who has over 15 years of experience in corporate finance industry, including but not limited to continuing connected transactions.

Mr. Kevin Wong is a person licensed to carry out type 1 (dealing in securities) regulated activity and type 6 (advising on corporate finance) regulated activity under the SFO and is a responsible officer of Nuada Limited who has over 13 years of experience in corporate finance industry, including but not limited to continuing connected transactions.

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

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	4,790,000 (L)	Interest in spouse	0.21

(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 4,790,000 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 Mr Liu Chengwei (who is a director of China Grand) and Dr Shao Yan (who is a director of Outwit Investments Limited, 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 or the Independent Financial Adviser had, 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 2016, the date to which the latest published audited financial statements of the Company were made up.

As disclosed in the Company’s announcement dated 23 October 2015 and the circular dated 13 November 2015, on 23 October 2015, the Group entered into (i) the agreement with Huadong Medicine in respect of the supply of pharmaceutical preparations and raw materials to Huadong Medicine (i.e. Previous Huadong Medicine Supply Agreement); (ii) the agreement with Jiangsu Grand Xin Yi Pharmaceutical Co., Ltd[#] (江蘇遠大信誼藥業有限公司) in respect of the purchase of raw materials for steroid hormones and intermediates from Jiangsu Grand Xin Yi Pharmaceutical Co., Ltd[#] ; and (iii) the agreement with Grand Group Corporation Limited[#] (遠大物產集團有限公司) in respect of the purchase of raw materials for steroid hormones and intermediates from Grand Group Corporation Limited[#] , all of which constituted continuing connected transactions of the Company. Each of these companies is an associate of China Grand. Mr Hu Bo, an executive Director, is a nephew of Mr Hu Kaijun (who controls and ultimately and beneficially owns China Grand). Mr Liu Chengwei, an executive Director, is a director of China Grand and a supervisor of Huadong Medicine. Dr Niu Zhanqi, an executive Director, is a director of Huadong Medicine. As such, Mr Hu Bo, Mr Liu Chengwei and Dr Niu Zhanqi are considered to be interested in these agreements.

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

I-2

GENERAL INFORMATION

APPENDIX

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 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities

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.

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 2016, being the date of which the latest audited financial statements of the Group were made up.

7. COMPETING INTERESTS

As at the Latest Practicable Date, despite the fact that Mr Liu Chengwei, the chairman of the Board and an executive Director, is a director of China Grand and a supervisor of Huadong Medicine, and Dr Niu Zhanqi, an executive Director, is a director of Huadong Medicine, taking into account of the difference in products, target customers and principal activities engaged by the Group, Huadong Medicine and China Grand under the CCT Agreements (as further disclosed in the section headed “Letter from the Independent Financial Adviser” of this circular), the management of the Company consider that there is no competition among the business of the Group, Huadong Medicine and China Grand. As such, 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 shall prevail over the Chinese text in case of inconsistency.

9. DOCUMENTS AVAILABLE FOR INSPECTION

A copy of the CCT Agreements are available for inspection during normal business hours on any weekday (except for public holidays) at the 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 18 December 2017.

I-3

NOTICE OF SGM

==> picture [147 x 39] 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, 13 December 2017 at 10:30 a.m. for the purposes of considering and, if thought fit, passing the following resolutions with or without amendments as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the supply agreement (the “ Huadong Medicine Supply Agreement ”) dated 30 October 2017 entered into between Grand Pharmaceutical (China) Company Limited[#] (“ Grand Pharm (China) ”) as supplier and Huadong Medicine Co., Ltd.[#] (“ Huadong Medicine ”) as purchaser in respect of the supply of pharmaceutical preparations, raw materials and related services to Huadong Medicine or its related companies by Grand Pharm (China) or its related companies (a copy of which has been produced to the SGM marked “A” and initialed by the Chairman of the SGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the annual caps for the transactions contemplated under the Huadong Medicine Supply Agreement as stated in the circular of the Company dated 27 November 2017 for the three years ending 31 December 2019 be and are hereby approved; and
(c) any one or more of the Directors of the Company be and is/are hereby authorised to do all such acts and things and execute all such documents which he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Huadong Medicine Supply Agreement and the transactions contemplated thereunder.”

* For identification purpose only

SGM-1

NOTICE OF SGM

“ THAT
(a) the supply agreement (the “ China Grand Supply Agreement ”) dated 30 October 2017 entered into between Grand Pharm (China) as supplier and China Grand Enterprises Incorporation[#] (“ China Grand ”) as purchaser in respect of the supply of pharmaceutical preparations, raw materials and related services to China Grand or its related companies by Grand Pharm (China) or its related companies (a copy of which has been produced to the SGM marked “B” and initialed by the Chairman of the SGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the annual caps for the transactions contemplated under the China Grand Supply Agreement as stated in the circular of the Company dated 27 November 2017 for each of the periods commencing on the effective date of the China Grand Supply Agreement and ending 31 December 2017 and the two years ending 31 December 2019 be and are hereby approved; and
(c) any one or more of the Directors of the Company be and is/are hereby authorised to do all such acts and things and execute all such documents which he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the China Grand Supply Agreement and the transactions contemplated thereunder.”

By order of the Board

China Grand Pharmaceutical and Healthcare Holdings Limited Liu Chengwei Chairman

Hong Kong, 27 November 2017

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

SGM-2

NOTICE OF SGM

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, 11 December 2017 to Wednesday, 13 December 2017, 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, 8 December 2017.
To be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a certified copy of that power of attorney or authority must be deposited at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M, 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.

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 Niu Zhanqui; and three independent non-executive Directors, namely Ms So Tosi Wan, Winnie, Mr Lo Kai Lawrence and Dr Pei Geng.

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

SGM-3

AI assistant

Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2017

49262_rns_2017-11-24_e5a7dec6-71a8-4061-986e-4df03817f14d.pdf

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

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

RELATIONSHIPS BETWEEN THE PARTIES

The Group

Parties outside the Group

CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

a. Seasonality impact

b. Indicated purchase orders by Huadong Medicine

LETTER FROM THE BOARD

(II) China Grand Supply Agreement

LETTER FROM THE BOARD

Common major terms of the CCT Agreements

INFORMATION ABOUT THE GROUP AND THE COUNTERPARTIES

REASONS AND BENEFITS FOR ENTERING INTO THE CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

SGM

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

RECOMMENDATIONS

ADDITIONAL INFORMATION

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

CONTINUING CONNECTED TRANSACTIONS

Yours faithfully,

Independent Board Committee of

China Grand Pharmaceutical and Healthcare Holdings Limited

So Tosi Wan, Winnie

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Company, Grand Pharm (China), Huadong Medicine and China Grand

(a) The Group

(b) Grand Pharm (China)

(c) Huadong Medicine

(d) China Grand

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for entering into the CCT Agreements

3. Financial information of the Group

4. Market outlook of the pharmaceutical industry in the PRC

5. Principal terms of the CCT Agreements

(c) Pricing basis of the CCT Agreements

(d) Our review on the pricing basis

6. The proposed Huadong Medicine Supply Caps and China Grand Supply Caps

7. Internal control for implementing the CCT Agreements

RECOMMENDATION

Nuada Limited

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

6. MATERIAL ADVERSE CHANGE

7. COMPETING INTERESTS

8. MISCELLANEOUS

9. DOCUMENTS AVAILABLE FOR INSPECTION

NOTICE OF SGM

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

NOTICE OF SGM

ORDINARY RESOLUTIONS

NOTICE OF SGM

By order of the Board

China Grand Pharmaceutical and Healthcare Holdings Limited Liu Chengwei Chairman

Registered office:

Principal place of business in

Hong Kong:

NOTICE OF SGM

Grand Pharmaceutical Group Limited Proxy Solicitation & Information Statement 2017

**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[*]**