Livzon Pharmaceutical Group Inc. - Proxy Solicitation & Information Statement 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, 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 麗珠醫藥集團股份有限公司 Livzon Pharmaceutical Group Inc.*, you should at once hand this circular together with the proxy form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

**麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]**

(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock code: 1513)

(I) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION, RULES AND PROCEDURES FOR GENERAL MEETINGS, RULES AND PROCEDURES FOR BOARD MEETINGS, RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS (II) PROPOSED CHANGE OF REGISTERED ADDRESS

(III) PROPOSED FORMULATION OF ‘‘LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (2015-2017)’’（《麗珠醫藥集團股份有限公司未來三年股東回報規劃（2015-2017年）》） AND

(IV) FURTHER REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

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

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A letter from the Board is set out from pages 4 to 15 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on page 16 of this circular. A letter from Yu Ming, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out from pages 17 to 33 of this circular.

The notice convening the EGM to be held at the Conference Room on the 2nd Floor of Livzon Building, 132 Guihua North Road, Gongbei, Zhuhai, Guangdong Province, China at 2 p.m. on Wednesday, 11 November 2015 was given by the Company on 25 September 2015. The accompanying reply slip for attendance and proxy form for the EGM, which were also despatched by the Company on 25 September 2015, are also available at the website of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the website of the Company (www.livzon.com.cn).

If you would like to attend the EGM in person or by proxy, please complete the reply slip in accordance with the instructions printed thereon and return it to the H Share Registrar of the Company, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in person, by post or by fax in any event on or before Thursday, 22 October 2015. If you would like to attend the EGM by proxy, please complete the proxy form in accordance with the instructions printed thereon and return it to the H Share Registrar of the Company, Tricor Investor Services Limited as soon as possible and in any event no later than 24 hours before the holding of the EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting at the EGM or any adjournment thereof in person if you so wish.

22 October 2015

For identification purpose only

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
I.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
II.	Proposed amendments to the Articles of Association, Rules and Procedures
	for General Meetings, Rules and Procedures for Board Meetings, Rules and
	Procedures for Supervisory Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
III.	Proposed Change of Registered Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
IV.	Proposed Formulation of ‘‘Livzon Pharmaceutical Group Inc.’s
	Shareholders’ Return Plan for the Coming Three Years (2015-2017)’’
	（《麗珠醫藥集團股份有限公司未來三年股東回報規劃（2015-2017年）》） . . .	6
V.	Further Revision of Annual Caps For Continuing Connected Transactions . . . . . .	7
VI.	EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
VII.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
VIII.	Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		16
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
Appendix	I – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Appendix	II – Proposed amendments to the Articles of Association . . . . . . . . . . . . .	41
Appendix	III – Proposed amendments to the Rules and Procedures
	for General Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50
Appendix	IV – Proposed amendments to the Rules and Procedures
	for Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	57
Appendix	V – Proposed amendments to the Rules and Procedures
	for Supervisory Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . .	62
Appendix	VI – Livzon Pharmaceutical Group Inc.’s
	Shareholders’ Return Plan for
	the Coming Three Years (2015-2017) . . . . . . . . . . . . . . . . . . . . . . . . . .	65

– i –

DEFINITIONS

In this circular, the following terms shall have the meanings set out below unless the context requires otherwise:

‘‘2014 Joincare Purchase Agreement’’
the framework agreement entered into between the Company and Joincare on 5 September 2014 in respect of the purchase by the Group of certain products and raw materials which are mainly used for the production of antifungal and antibiotics related products from the Joincare Group
‘‘associate(s)’’ has the meaning given to it under the Listing Rules
‘‘A Share(s)’’
the ordinary shares in the registered capital of the Company with a nominal value of RMB1.00 each, which are listed and traded on the Shenzhen Stock Exchange
‘‘Articles of Association’’
the articles of association of the Company
‘‘Board’’ the board of Directors
‘‘Company’’ 麗珠醫藥集團股份有限公司 Livzon Pharmaceutical Group Inc.*, a joint stock company incorporated in the PRC in accordance with the PRC Company Law on 25 January 1985 with limited liability and listed on the Shenzhen Stock Exchange and the Stock Exchange
‘‘connected person(s)’’ has the meaning given to it under the Listing Rules
‘‘Controlling Shareholder’’ has the meaning given to it under the Listing Rules
‘‘Director(s)’’ the director(s) of the Company
‘‘EGM’’

the 2015 Second Extraordinary General Meeting of the Company to be held at the Conference Room on the 2nd Floor of Livzon Building, 132 Guihua North Road, Gongbei, Zhuhai, Guangdong Province, China at 2 p.m. on Wednesday, 11 November 2015

‘‘Group’’

the Company and its subsidiaries collectively

‘‘Hong Kong’’

the Hong Kong Special Administrative Region of the PRC

For identification purpose only

– 1 –

DEFINITIONS

‘‘H Share(s)’’
‘‘Independent Board Committee’’
‘‘Independent Financial Adviser’’ or ‘‘Yu Ming’’
‘‘Independent Shareholders’’
‘‘Independent Third Party(ies)’’
‘‘Joincare’’
‘‘Joincare Group’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘PRC’’

the ordinary shares in the registered capital of the Company with a nominal value of RMB1.00 each, which are listed and traded on the Stock Exchange

the independent board committee of the Company formed to consider the Supplemental Agreement and the transactions contemplated thereunder
Yu Ming Investment Management Limited, a licensed corporation eligible to carry out Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO, and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Supplemental Agreement
Shareholders other than Joincare, Shenzhen Haibin Pharmaceutical Co., Ltd., Topsino Industries Limited and their respective associates
a person or persons or a company or companies that is not or are not the connected person(s) of the Group
健康元藥業集團股份有限公司Joincare Pharmaceutical Industry Group Co., Ltd.* (Shanghai Stock Exchange stock code: 600380), a joint stock company incorporated in the PRC and listed on the Shanghai Stock Exchange in 2001 and one of the Company’s Controlling Shareholders
Joincare and its subsidiaries (other than the Group)
20 October 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein
The Rules Governing the Listing of Securities on the Stock Exchange, as the same may be amended and supplemented or otherwise modified from time to time
the People’s Republic of China (for the purpose of this circular only, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan)

For identification purpose only

– 2 –

DEFINITIONS

‘‘RMB’’

Renminbi, the lawful currency of the PRC

‘‘Rules and Procedures for General Meetings’’
the ‘‘Rules and Procedures for General Meetings of Livzon Pharmaceutical Group Inc.*’’
‘‘Rules and Procedures for Board Meetings ’’
the ‘‘Rules and Procedures for Board Meetings of Livzon Pharmaceutical Group Inc.*’’
‘‘Rules and Procedures for Supervisory Committee Meetings’’
the ‘‘Rules and Procedures for Supervisory Committee Meetings of Livzon Pharmaceutical Group Inc.*’’
‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Shanghai Stock Exchange’’
上海證券交易所(the Shanghai Stock Exchange)
‘‘Shareholder(s)’’
holder(s) of the share(s) of the Company
‘‘Shenzhen Stock Exchange’’
深圳證券交易所(the Shenzhen Stock Exchange)
‘‘Shenzhen Listing Rules’’ 《深圳證券交易所股票上市規則（2014年修訂）》(the Stock Listing Rules of the Shenzhen Stock Exchange (as amended in 2014))
‘‘Stock Exchange’’
The Stock Exchange of Hong Kong Limited
‘‘Supplemental Agreement’’ the supplemental framework agreement entered into between the Company and Joincare on 24 September 2015 to further revise the annual caps under the 2014 Joincare Purchase Agreement for the two years ending 31 December 2015 and 2016
‘‘USD’’ United States dollars, the lawful currency of the United States
‘‘%’’ per cent

If there is any inconsistency between the Chinese names of the PRC entities mentioned in this circular and their English translations, the Chinese names shall prevail.

For identification purpose only

– 3 –

LETTER FROM THE BOARD

**麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]**

(a joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock code: 1513)

Executive Directors: Registered office: Mr. Tao Desheng (Vice Chairman and President) Administration and Research Building, Mr. Fu Daotian (Vice President) 38 Chuangye North Road, Mr. Yang Daihong (Vice President) Shuang Linpian Area, Liangang Industrial Zone, Non-executive Directors: Hongqi Town, Mr. Zhu Baoguo (Chairman) Jinwan District, Zhuhai, Mr. Qiu Qingfeng Guangdong Province, Mr. Zhong Shan China Independent non-executive Directors: Principal place of business Mr. Xu Yanjun in Hong Kong: Mr. Guo Guoqing Flat 02, 17/F, Mr. Wang Xiaojun Bayfield Building, Mr. Xie Yun 99-101 Hennessy Road, Wanchai, Mr. Zheng Zhihua Hong Kong 22 October 2015

Non-executive Directors: Mr. Zhu Baoguo (Chairman) Mr. Qiu Qingfeng Mr. Zhong Shan

To the Shareholders,

Dear Sir or Madam,

(I) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION, RULES AND PROCEDURES FOR GENERAL MEETINGS, RULES AND PROCEDURES FOR BOARD MEETINGS,

RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS (II) PROPOSED CHANGE OF REGISTERED ADDRESS

(IV) FURTHER REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

I. INTRODUCTION

Reference is made to (i) the announcement dated 30 August 2015 regarding the Articles of Association, Rules and Procedures for General Meetings, Rules and Procedures for Board Meetings, Rules and Procedures for Supervisory Committee Meetings and Proposed Change of Registered Address, (ii) the announcement dated 24 September 2015 regarding the Further Revision of Annual Caps for Continuing Connected Transactions and (iii) the notice of the EGM dated 25 September 2015.

For identification purpose only

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with relevant information to enable you to make informed decisions in voting on the ordinary resolutions and the special resolutions in relation to (among others) the followings to be proposed at the EGM:

Proposed amendments to the Articles of Association, Rules and Procedures for General Meetings, Rules and Procedures for Board Meetings and Rules and Procedures for Supervisory Committee Meetings;
Proposed Change of Registered Address;
Proposed Formulation of ‘‘Livzon Pharmaceutical Group Inc.’s Shareholders’ Return Plan for the Coming Three Years (2015-2017)’’（《麗珠醫藥集團股份有限公司未來三年股東回報規劃（2015-2017年）》）; and
Further Revision of Annual Caps For Continuing Connected Transactions.

II. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION, RULES AND PROCEDURES FOR GENERAL MEETINGS, RULES AND PROCEDURES FOR BOARD MEETINGS, AND RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS

The Board proposes to amend the Articles of Association, the Rules and Procedures for General Meetings and the Rules and Procedures for Board Meetings, and the Supervisory Committee proposes to amend the Rules and Procedures for Supervisory Committee Meetings. Details and illustrations of the amendments were set out in Appendix II to Appendix V to the Circular.

The above amendments are now proposed to be considered and approved by way of special resolutions at the EGM. It is further proposed that: (i) the Board be authorised to make corresponding adjustments and modifications (including, but not limited to, the wordings, sections and terms) to Articles of Association, the Rules and Procedures for General Meetings and the Rules and Procedures for Board Meetings, if approved at the EGM, in accordance with the requirements and advice of relevant governmental and regulatory authorities; and (ii) the Supervisory Committee be authorised to make corresponding adjustments and modifications (including, but not limited to, the wordings, sections and terms) to the Rules and Procedures for Supervisory Committee Meetings, if approved at the EGM, in accordance with the requirements and advice of relevant governmental and regulatory authorities.

– 5 –

LETTER FROM THE BOARD

III. PROPOSED CHANGE OF REGISTERED ADDRESS

Ordinary resolution will be proposed at the EGM to consider and, if thought fit, approve the change of registered address.

In view of the need in the development of operation, under the requirements of the Company Law of the PRC, the Regulations of the PRC on the Administration of Company Registration and relevant laws and regulations, the Board proposed to change the registered address of the Company from ‘‘Administration and Research Building, 38 Chuangye North Road, Shuanglin Pian Area, Liangang Industrial Zone, Hongqi Town, Jinwan District, Zhuhai City’’ to ‘‘Administration Building, 38 Chuangye North Road, Jinwan District, Zhuhai City’’.

The proposed change of registered address, if approved at the EGM, shall be effective conditional on the completion of the corresponding registration modification procedures by Guangdong Province Zhuhai City Administration for Industry and Commerce of China. After the change of the registered address of the Company becoming effective, the Company will carry out the necessary filing procedures with the Companies Registry in Hong Kong.

IV. PROPOSED FORMULATION OF ‘‘LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (20152017)’’（《麗珠醫藥集團股份有限公司未來三年股東回報規劃（2015-2017年）》）

In order to improve and refine the profit distribution decision-making and monitoring mechanism of the Company, actively generate returns to the investors of the Company and simultaneously guide the investors to establish the concepts of ‘‘long-term investment’’ and ‘‘rational investment’’, the Board has formulated the Shareholders’ Return Plan for the Coming Three Years (2015-2017) (hereinafter referred to as the ‘‘Plan’’) in accordance with the relevant documents of the CSRC including ‘‘Notice Regarding Further Implementation of Cash Dividends Distribution of Listed Companies’’ (Zheng Jian Fa [2012] No. 37) and ‘‘Listed Companies Regulatory Guidance No.3 – Cash Dividends Distribution of Listed Companies’’ (CSRC Notice [2013] No. 43) as well as the relevant requirements of ‘‘Articles of Association of Livzon Pharmaceutical Group Inc.’’ in respect of the profit distribution policy.

According to the relevant requirements under the Shenzhen Listing Rules and the Articles of Association of the Company, the Plan is subject to the approval of Shareholders of the Company by way of a special resolution, therefore, we proposes to the EGM to approve the Plan, details of which are set out in Appendix VI.

– 6 –

LETTER FROM THE BOARD

V. FURTHER REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

Reference is made to the announcement of the Company dated 5 September 2014 and the circular of the Company dated 7 October 2014 (the ‘‘2014 Circular’’) in relation to, among other things, the 2014 Joincare Purchase Agreement, pursuant to which the Company and Joincare revised the then annual caps for the two years ending 31 December 2014 and 2015 and set the annual cap for the year ending 31 December 2016 regarding the transactions contemplated under the 2014 Joincare Purchase Agreement.

2014 JOINCARE PURCHASE AGREEMENT

As disclosed in the 2014 Circular, the 2014 Joincare Purchase Agreement comprises the general terms and conditions upon which the relevant members of the Group may purchase products and raw materials from the relevant members of the Joincare Group. The relevant members of the Group may from time to time place purchase orders with the relevant members of the Joincare Group setting out the detailed terms for the purchase of products and raw materials, provided that such detailed terms shall not be inconsistent with the terms of the 2014 Joincare Purchases Agreement. The products and raw materials which are mainly used for the production of antifungal and antibiotics related drug preparation products refer to, amongst others, voriconazole itraconazole（伏立康唑）, 7-ACA, D7-ACA, OXAT（氟氧頭孢母核）, acetonitrile（乙睛）, 100ml moulded bottles and rubber plugs, etc. The actual quantity, types and prices of the products and raw materials to be sold to the relevant members of the Group shall be subject to the individual purchase order placed by the relevant members of the Group with the relevant members of the Joincare Group from time to time.

The prices at which the products and raw materials are to be sold by the relevant members of the Joincare Group to the relevant members of the Group shall be (a) indicative prices (if any) prescribed by the national price administrative department; (b) where (a) is not available, the comparable market prices based on quotation(s) obtained from other third party suppliers; or (c) where (a) and (b) are not available, the prices are to be agreed between the parties but, together with the other terms, subject to being not less favourable to the Group than the prices and terms offered by Joincare Group to third parties for similar transactions.

– 7 –

LETTER FROM THE BOARD

REASONS FOR ENTERING INTO THE 2014 JOINCARE PURCHASE AGREEMENT

The Company is a PRC based pharmaceutical company which is principally engaged in the research and development, production and sales of pharmaceutical products.

Members of the Group have commenced purchasing the products and raw materials which are mainly used for the production of antifungal and antibiotics related drug preparation products from members of the Joincare Group since the year ended 31 December 2007 and no material issue on the quality of the products and raw materials from members of the Joincare Group was noted. The Group has been continuously expanding its business and anticipates that more raw materials for the manufacture of the Group’s products will be required for the Group’s future business growth. Taking into account factors such as the quality and price of raw materials supplied by the relevant members of the Joincare Group and the reputation of Joincare, the Group considers that the purchase of raw materials under the 2014 Joincare Purchases Agreement is necessary to facilitate the Group’s business development plan and will improve the competitiveness, quality and price of the Group’s products.

SUPPLEMENTAL AGREEMENT

The annual caps under the 2014 Joincare Purchase Agreement were RMB260.00 million, RMB280.00 million and RMB460.00 million for the three years ending 31 December 2014, 2015 and 2016, respectively.

For the year ended 31 December 2014 and the nine months ended 30 September 2015, the total amount paid to the Joincare Group in relation to the purchase of products and raw materials from the Joincare Group amounted to approximately RMB237.82 million and RMB231.99 million, respectively, representing approximately 14.92% and 17.06% of the total purchases of the Group for the respective periods. The total amount paid to the Joincare Group under the 2014 Joincare Purchase Agreement for the period from 1 January 2015 to the Latest Practicable Date did not exceed the annual cap for the year ending 31 December 2015.

Pursuant to the Supplemental Agreement, the Company and Joincare have agreed to further revise the annual caps for the two years ending 31 December 2015 and 2016 to RMB340 million and RMB572 million respectively, subject to the Independent Shareholders’ approval. Save as the said revision, all other terms of the 2014 Joincare Purchase Agreement shall remain unchanged and effective.

– 8 –

LETTER FROM THE BOARD

Up to the nine months ended 30 September 2015 approximately 82.85% of the existing annual cap for the year ending 31 December 2015 had been utilised. As at the Latest Practicable Date, approximately 17.15% of the annual cap had not been utilised. Therefore, the annual cap for the year ending 31 December 2015 will not be exceeded before the approval from the Independent Shareholders is obtained at the EGM.

REASONS FOR AND BENEFITS OF THE SUPPLEMENTAL AGREEMENT AND REVISION OF THE ANNUAL CAPS

As a result of (a) the market consolidation in the bulk medicine (including cephalosporins category（頭孢類）) area due to the more stringent requirement on the new GMP certification, environment and quality issues implemented in late 2014; (b) the increase in demand for the Group’s antifungal and antibiotics related products; and (c) the recent technical and environmental control improvement measures undertaken by the Company which exerted effective cost control on the production of bulk medicine (including cephalosporins category（頭孢類）), the Group was able to enhance its competitiveness, increase its market share and production volume of bulk medicine (including cephalosporins category（頭孢類）) to the extent exceeding original projections.

As disclosed in the 2014 circular, the Directors expect that the Group will launch a new product, namely Flomoxef Sodium（氟氧頭孢鈉）, a cephalosporins category（頭孢類） product with high product safety and efficacy, in 2016.

The Group expects to purchase 40 tonnes of OXAT（氟氧頭孢母核）, a raw material of Flomoxef Sodium（氟氧頭孢鈉）, for the year ending 31 December 2016. The relevant amount payable to the Joincare Group in respect of the proposed purchase of OXAT（氟氧頭孢母核）is expected to be approximately 29.88% of the proposed annual cap for the year ending 31 December 2016.

The increase in the annual cap for the year ending 31 December 2016 is mainly attributable to the increase in purchases of the corresponding raw materials of cephalosporins category products and voriconazole itraconazole（伏立康唑）products of the Company as a result of the expected increase in market demand for the relevant products in future. The expected amount of purchases of cephalosporins category raw materials (i.e. 7- ACA and D7-ACA) and voriconazole itraconazole（伏立康唑）raw materials in 2016 are expected to increase approximately 15.84% and 31.03% respectively as compared to 2015.

The proposed annual caps for each of the two years ending 31 December 2015 and 2016 have been determined with reference to the historical transaction amounts between members of the Group and the Joincare Group and the internal projection of the development of the Group’s business, which in turn is based on the prevailing market condition and demand for the Group’s products and the prevailing market prices for the relevant raw materials.

– 9 –

LETTER FROM THE BOARD

The table below sets out the percentage of the total purchases and the estimated percentage of the total purchases of the major products and raw materials (the ‘‘Major Products and/or Raw Materials’’) by the members of the Group from the Joincare Group as at the Latest Practicable Date and for the year ending 31 December 2016, respectively:

Major Products and/or Raw Materials Description of the Major Products and/or Raw Materials 1. 7-ACA and D7-ACA Both 7-ACA and D7-ACA can be used in the synthesis of various types of cephalosporanic antibiotics. 7-ACA is the key intermediate of cephalosporin. D7-ACA is an intermediate for synthetic cephalosporanic antibiotics, which can substitute for 7-ACA. 2. Voriconazole itraconazole （伏立康唑） A broad-spectrum triazole antifungal drug mainly used for the treatment of patients with progressive immune deficiency, possibly life-threatening infections. It is applicable to the treatment of severe fungal infections in immune-suppressed patients, acute invasive pulmonary aspergillosis (the most commonly found pathogenic agents being aspergillus fumigatus, followed by aspergillus flavus, aspergillus niger and aspergillus terreus), severe invasive infections caused by fluconazole-resistant yeasts (including Candida krusei) and severe infections caused by scedosporium species and fusarium species. 3. OXAT（氟氧頭孢母核） A raw material of Flomoxef Sodium（氟氧頭孢鈉）, of which its core acts as the functional basic chemical structure. Flomoxef Sodium（氟氧頭孢鈉）is a broad-spectrum oxa-cephalosporanic antibacterial drug.	Percentage of the total purchases from the Joincare Group as at the Latest Practicable Date 91.14% 8.80% 0 (Note) 99.94%	Estimated percentage of the total purchases from the Joincare Group under the proposed annual cap for the year ending 31 December 2016 62.21% 7.10% 29.88%
		99.19%

Note: The Group had not purchased any OXAT（氟氧頭孢母核）as at the Latest Practicable Date. It expects to purchase 40 tonnes of OXAT（氟氧頭孢母核）from the Joincare Group for the year ending 31 December 2016.

– 10 –

LETTER FROM THE BOARD

Therefore, the Directors (including the independent non-executive Directors) consider that the proposed annual caps for the two years ending 31 December 2015 and 2016 as contemplated under the Supplemental Agreement are fair and reasonable so far as the Independent Shareholders are concerned, and that there is no disadvantage of the transactions contemplated under the Supplemental Agreement for the Company to the best knowledge and belief of the Directors.

PRICING PRINCIPLES

As disclosed in the 2014 Circular, the basis of determining the prices of the products and raw materials to be purchased by members of the Group from the Joincare Group will be based on the indicative prices (if any) prescribed by the national price administrative department. If such indicative prices are not applicable, the prices of the products and raw materials will be determined in accordance with the prevailing market prices of such products and raw materials and on the following principles:

(a) by reference to the prevailing market price of the same products and raw materials, taking into account of the price of the same products and raw materials with comparable order quantities and quality offered by Independent Third Parties; and
(b) if there are not sufficient comparable transactions in (a) above (i.e. one to two quotations from independent suppliers), on normal commercial terms which must not be less favourable than those offered to Independent Third Parties by the Joincare Group in respect of the same products and raw materials with comparable quantities.

As at the Latest Practicable Date, there was no indicative price prescribed by the national price administrative department, nor was there a standard price list, for all products and raw materials purchased by members of the Group from the Joincare Group.

For all products and raw materials to be purchased from the Joincare Group, the same pricing principle of taking reference to the prevailing market price and being not less favourable to comparable quotations offered by Independent Third Parties applies.

In determining the prevailing market price of the products and raw materials for a particular purchase order, the Group will obtain quotations from suppliers which are Independent Third Parties to give a reference on the prevailing market prices for the relevant products and raw materials to be procured.

– 11 –

LETTER FROM THE BOARD

The table below sets out the quotations obtained in respect of the Major Products and/ or Raw Materials:

Major Products and/or Raw Materials Quotations

7-ACA and D7-ACA

There are 4 suppliers in the PRC market, namely the Joincare Group and 3 suppliers that are Independent Third Parties. The Group has obtained 2 quotations from the suppliers that are Independent Third Parties.

Voriconazole itraconazole （伏立康唑）

There are only 2 suppliers that supply the required sterile raw materials for voriconazole itraconazole in the PRC market, namely the Joincare Group and an independent supplier. The Group has obtained a quotation from the supplier that is an Independent Third Party.

OXAT（氟氧頭孢母核）

There are only 2 suppliers in the PRC market, namely the Joincare Group and an independent supplier. When the Group commences the production of Flomoxef Sodium（氟氧頭孢鈉）and the purchasing of OXAT （氟氧頭孢母核）, it will obtain a quotation from the supplier that is an Independent Third Party.

Such quotations will be reviewed and evaluated from both the technical and commercial perspectives by qualified personnel of the Group to ensure that the products and raw materials to be procured from the Joincare Group are not less favourable than the prices for such products and raw materials being offered by the Independent Third Parties. The personnel of the Group will also review other applicable terms of the quotations from the Third Parties Independent suppliers (including but not limited to product quality assurance, payment terms and terms on delivery timing) in order to ascertain whether the terms of the individual purchase order are on normal commercial terms.

In view of the above, the Directors consider that the prices and terms offered by the Joincare Group in respect of the Major Products and/or Raw Materials are better or not less favourable than those provided by the quotations obtained from the above suppliers that are Independent Third Parties.

– 12 –

LETTER FROM THE BOARD

To further ensure that the actual prices of the products and raw materials to be purchased by members of the Group from the Joincare Group are on normal commercial terms as stated above and on terms no less favourable to the Group than that available from Independent Third Party suppliers, the Group will conduct regular checks to review and assess whether the products and raw materials have been purchased in accordance with the terms of the 2014 Joincare Purchases Agreement. Such checks will be conducted by the financial controller of the Group on a monthly basis and the secretary of the Board on a quarterly basis. In addition, the Company will engage the auditors of the Company to conduct an annual review of the transactions contemplated under the 2014 Joincare Purchases Agreement.

INFORMATION ON THE JOINCARE GROUP

Joincare is a joint stock company incorporated in the PRC and was listed on the Shanghai Stock Exchange in 2001. It is principally engaged in three major business segments, namely (a) the production and sales of drug preparation products; (b) the production and sales of bulk medicines and intermediates; and (c) the research, production and sales of healthcare products. Mr. Zhu Baoguo, the chairman of the Company and a nonexecutive Director, is also the chairman and a director of Joincare as well as the ultimate beneficial owner of Joincare. Mr. Qiu Qingfeng, a non-executive Director, is also a director and the secretary to the board of directors of Joincare. Mr. Zhong Shan, a non-executive Director, is also a vice general manager of Joincare.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, Joincare, directly and indirectly, owned approximately 46.04% of the total issued share capital of the Company and therefore Joincare is a Controlling Shareholder of the Company. Accordingly, Joincare and its associates are connected persons of the Company and the transactions contemplated under the Supplemental Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Hong Kong Listing Rules. To avoid possible conflict of interests, Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Zhong Shan have abstained from voting in the meeting of the Board in which the Supplemental Agreement and the transactions contemplated thereunder were approved.

Given that certain applicable percentage ratios for the revised annual caps contemplated under the Supplemental Agreement exceed 5%, the transactions contemplated under the Supplemental Agreement are therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

– 13 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, Joincare and its associate held and controlled in aggregate 182,159,367 Shares, representing approximately 46.04% of the total issued share capital of the Company. In view of the interests of Joincare in the Company, Joincare, Shenzhen Haibin Pharmaceutical Co., Ltd., Topsino Industries Limited and their respective associates will abstain from voting in relation to the resolution(s) to approve the transactions contemplated under the Supplemental Agreement.

An Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders on the terms of the Supplemental Agreement (including the annual caps) and the transactions contemplated thereunder. Yu Ming has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

VI. EGM

– 14 –

LETTER FROM THE BOARD

VII. RECOMMENDATION

The Board considers that the resolutions set out in the notices of EGM in relation to (I) Proposed amendments to the Articles of Association, Rules and Procedures for General Meetings, Rules and Procedures for Board Meetings, and Rules and Procedures for Supervisory Committee Meetings; (II) Proposed Change of Registered Address; and (III) Proposed Formulation of ‘‘Livzon Pharmaceutical Group Inc.’s Shareholders’ Return Plan for the Coming Three Years (2015-2017)’’（《麗珠醫藥集團股份有限公司未來三年股東回報規劃（2015-2017年）》）are in the best interests of the Company and the shareholders of the Company as a whole, and recommends shareholders to vote in favour of the relevant resolutions at the EGM.

The Independent Board Committee and the Board, having taken into account the advice of the Independent Financial Adviser, consider that the terms of the Supplemental Agreement (including the annual caps) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, and that the transactions contemplated under the Supplemental Agreement are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee and the Board recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM.

VIII. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in Appendix I to this circular.

By order of the Board 麗珠醫藥集團股份有限公司

Livzon Pharmaceutical Group Inc.* Yang Liang

Company Secretary

For identification purpose only

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

**麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]**

(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock code: 1513)

22 October 2015

To the Independent Shareholders

Dear Sir or Madam,

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 22 October 2015 issued by the Company (the ‘‘Circular’’), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

We have been appointed to advise the Independent Shareholders in connection with the terms of the Supplemental Agreement (including the annual caps) and the transactions contemplated thereunder. Yu Ming has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

After taking into account the advice of the Independent Financial Adviser as set out from pages 17 to 33 of the Circular, we are of the view that the terms of the Supplemental Agreement (including the annual caps) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, and that the transactions contemplated under the Supplemental Agreement are in the interests of the Company and the Shareholders as a whole. In addition, the Supplemental Agreement was entered into by the Group in its ordinary and usual course of business.

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Further Revision of Annual Caps for the Continuing Connected Transaction.

Yours faithfully,

Independent Board Committee

Mr. Xu Yanjun Mr. Guo Guoqing Mr. Wang Xiaojun Mr. Xie Yun Mr. Zheng Zhihua Independent non-executive Directors

For identification purpose only

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from Yu Ming, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in connection with the Supplemental Agreement.

==> picture [128 x 35] intentionally omitted <==

22 October 2015

To the Independent Board Committee and the Independent Shareholders of

Livzon Pharmaceutical Group Inc.

Dear Sirs,

FURTHER REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the announcement of the Company dated 24 September 2015 and the Letter from the Board (the ‘‘Board Letter’’) contained in the circular of the Company dated 22 October 2015 to the Shareholders (the ‘‘Circular’’), of which this letter forms part. We are appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the Supplemental Agreement. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular, unless otherwise specified.

Pursuant to the Supplemental Agreement, subject to the Independent Shareholders’ approval, the Company and Joincare agreed to revise the existing annual caps under the 2014 Joincare Purchase Agreement for the two years ending 31 December 2015 and 2016 to RMB340.00 million and RMB572.00 million respectively (‘‘Proposed Annual Cap(s)’’). Save as the said revision, all other terms of the 2014 Joincare Purchase Agreement shall remain unchanged and effective.

Since Joincare directly and indirectly held and controlled approximately 46.04% equity interest in the Company, Joincare is a controlling Shareholder. Accordingly, Joincare and its associates are connected persons of the Company and the transactions contemplated under the Supplemental Agreement constitute continuing connected transaction for the Company under Chapter 14A of the Listing Rules.

Based on the applicable percentage ratios for the revised annual caps under the Supplemental Agreement which exceed 5%, the transactions contemplated under the Supplemental Agreement constitute non-exempt continuing connected transactions of the Company that are subject to the reporting, annual review, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

– 17 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Shenzhen Haibin Pharmaceutical Co., Ltd. and Topsino Industries Limited are wholly-owned subsidiaries of Joincare. As at the Latest Practicable Date, Joincare, its subsidiaries and its associates held and controlled in aggregate 182,159,367 Shares, representing approximately 46.04% of the total issued share capital of the Company. In light of the interests of Joincare in the Company, each of Joincare, Shenzhen Haibin Pharmaceutical Co., Ltd., Topsino Industries Limited and their respective associates will abstain from voting in relation to the resolution(s) to approve the transactions contemplated under the Supplemental Agreement. In addition, to avoid possible conflict of interest, Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Zhong Shan, who are also management members of Joincare, have abstained from voting at the Board meeting in which the Supplemental Agreement and the transactions contemplated thereunder were approved.

The Independent Board Committee, comprising Mr. Xu Yanjun, Mr. Xie Yun, Mr. Guo Guoqing, Mr. Wang Xiaojun and Mr. Zheng Zhihua (all being the independent non-executive Directors), has been established to advise the Independent Shareholders whether the terms of the Supplemental Agreement (including the revised annual caps) are fair and reasonable, on normal commercial terms and in the interest of the Company and the Shareholders as a whole. We are appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

BASIS OF OUR OPINION

In formulating our opinion, we have reviewed, inter alia, 2014 Joincare Purchase Agreement, the Supplemental Agreement and other relevant documents, and relied on the statements, information, opinions and representations contained in the Circular and the statements, information, opinions and representations provided to us by the Directors through management, officers and professional advisers of the Company (‘‘Relevant Information’’). We have assumed that all Relevant Information provided to us by the Directors for which they are solely responsible are, to the best of their knowledge, true and accurate at the time they were made and continue to be so on the date of this letter.

We consider we are provided with necessary information to form our opinion on terms of the Supplemental Agreement. We have no reason to suspect that any Relevant Information has been withheld, nor are we aware of any fact or circumstance which would render Relevant Information provided and presented to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification on the Relevant Information provided to us by the Directors, nor have we conducted any independent investigation into the business and affairs of the Group.

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation in respect of terms of Supplemental Agreement and transactions contemplated thereunder, we have taken into consideration of the following principal factors and reasons:

I. Background of and reasons for entering into of the Supplemental Agreement

a. Background of the Supplemental Agreement

The Company is a PRC based pharmaceutical company which is principally engaged in the research and development, production and sales of pharmaceutical products.

Members of the Group have commenced purchasing products and raw materials which are mainly used for the production of antifungal and antibiotics related drug preparation products from members of the Joincare Group since the year ended 31 December 2007 and no material issue on the quality of the products and raw materials from members of the Joincare Group was noted. Shortly prior to the listing of the Company on 16 January 2014, the Company entered into agreement with Joincare to procure certain products and raw materials from Joincare Group for a period commencing from the listing date of the Company on the Stock Exchange and ending on 31 December 2015. The then annual caps set for the two years ending 31 December 2014 and 2015 were RMB156 million and RMB187.2 million respectively.

Pursuant to the announcement of the Company dated 5 September 2014 and the circular of the Company dated 7 October 2014 (the ‘‘2014 Circular’’), due to a number of reasons, including, inter alia, the increased market demand for the Group’s antibiotics related products exceeds the original projection of the Company, the Company and Joincare entered into the 2014 Joincare Purchase Agreement to revise the then existing caps for the two years ending 31 December 2014 and 2015 and set the annual cap for the year ending 31 December 2016 regarding the transactions contemplated under the 2014 Joincare Purchase Agreement (‘‘Existing Annual Cap(s)’’) as follows:

	2014	2015	2016
(RMB Million)
Existing Annual Caps	260	280	460

– 19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the 2014 Circular, the 2014 Joincare Purchase Agreement comprises the general terms and conditions upon which the relevant members of the Group may purchase products and raw materials from the relevant members of the Joincare Group. The relevant members of the Group may from time to time place purchase orders with the relevant members of the Joincare Group setting out the detailed terms for the purchase of products and raw materials, provided that such detailed terms shall not be inconsistent with the terms of the 2014 Joincare Purchase Agreement. The products and raw materials which are mainly used for the production of antifungal and antibiotics related drug preparation products refer to, amongst others, voriconazole itraconazole（伏立康唑）, 7-ACA, D7-ACA, OXAT（氟氧頭孢母核）, acetonitrile（乙睛）, 100ml moulded bottles and rubber plugs, etc. The actual quantity, types and prices of the products and raw materials to be sold to the relevant members of the Group shall be subject to the individual purchase order placed by the relevant members of the Group with the relevant members of the Joincare Group from time to time.

b. Reasons for entering into of the Supplemental Agreement

As disclosed in the Board Letter, with (a) the market consolidation in the bulk medicine (including cephalosporins category（頭孢類）) area due to the more stringent requirement on the new GMP certification, environment and quality issues implemented in late 2014; (b) the persistently increasing demand for raw materials in the market; and (c) the recent technical and environmental control improvement measures undertaken by the Company which exerted effective cost control on the production of bulk medicine (including cephalosporins category（頭孢類）), the Group was able to enhance its competitiveness, increase its market share by taking up the market share lost by its competitors and to increase its production volume of bulk medicine (including cephalosporins category（頭孢類）) to the extent exceeding original projections.

According to the Board Letter, the Group has been continuously expanding its business and anticipates that more raw materials for the manufacture of the Group’s products will be required for the Group’s future business growth. Taking into account factors such as the quality and price of raw materials supplied by the relevant members of the Joincare Group and the reputation of Joincare, the Group considers that the purchase of raw materials under the Supplemental Agreement is necessary to facilitate the Group’s business development plan and will improve the competitiveness, quality and price of the Group’s products.

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the year ended 31 December 2014 and the nine months ended 30 September 2015, the total purchase amount of the Group from the Joincare Group for products and raw materials are as follows:

	2014	Jan-Sep 2015
(RMB Million)
Actual Purchase Amount	237.82	231.99
% to Existing Annual Cap	91.47%	82.85%

Up to the Latest Practicable Date, the total purchase amount of the Group from Joincare Group did not exceed the Existing Annual Cap. As at the Latest Practicable Date, approximately 17.15% of the Existing Annual Cap for 2015 had not been utilized. Therefore, the Existing Annual Cap for 2015 will not be exceeded before the approval from the Independent Shareholders is obtained at the EGM.

As the market demand for Group’s antifungal and antibiotics related products exceeds the original projections, the aggregate amount of the products and raw materials to be procured from the Joincare Group for the years ending 31 December 2015 and 2016 is expected to exceed the Existing Annual Caps.

In view of the above, the Company and Joincare entered into the Supplemental Agreement on 24 September 2015 to revise the Existing Annual Caps.

II. Proposed terms of the Supplemental Agreement

Pursuant to the Supplemental Agreement, conditional upon the Independent Shareholders’ approval, the Company and Joincare have agreed to revise the Existing Annual Caps for the two years ending 31 December 2015 and 2016 as follows:

	2015	2016
(RMB Million)
Proposed Annual Caps	340	572
% increase to Existing Annual Cap	21.43%	24.35%

Save for the revision of the Existing Annual Caps to the Proposed Annual Caps, other terms of the 2014 Joincare Purchase Agreement shall remain unchanged and effective.

– 21 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

III. Principal factors considered

In arriving at our opinion on whether the terms of the Supplemental Agreement and Proposed Annual Caps are fair and reasonable, on normal commercial terms and in the interest of the Independent Shareholders and the Company as a whole, we have considered the following factors:

a. Operating results of the Group

For the year ended 31 December 2014

As disclosed in the annual report of the Company for the year ended 31 December 2014, for the year ended 31 December 2014, the Group’s principal activities generated an operating income of RMB5,456.21 million, representing an increase of RMB886.82 million or 19.41% as compared with RMB4,569.39 million of the previous year, and growth in sale of antibiotics and bulk medicines (including voriconazole itraconazole products and cephalosporins category products) amounts to approximately 20.55% and 42.65% respectively. Such increase in sales of these products has primarily reflected the continuous improvement in product quality of the Company as well as ongoing enhancement of market competitiveness.

The Group’s operating costs of principal activities amounted to RMB2,083.83 million for the year ended 31 December 2014, representing an increase of RMB430.49 million or 26.04% as compared with RMB1,653.34 million of the previous year, which was mainly due to a rise in proportion of sale of raw materials of bulk medicines and intermediates with lower profit margins, coupled with a shortage in raw materials of certain hormone-kind products resulting in an increase in costs.

For the six months ended 30 June 2015

As disclosed in the interim report of the Company for the six months ended 30 June 2015 (‘‘Interim Report 2015’’), for the six months ended 30 June 2015, the Group’s principal activities generated an operating income of RMB3,072.68 million, representing an increase of RMB514.33 million or 20.10% as compared with RMB2,558.35 million for the same period last year. Contributing factors include the growth in sale of antibiotics, bulk medicines and intermediates (including voriconazole itraconazole products and cephalosporins category products) of approximately 12.02% and 38.32% respectively. The increase in sales of these products has primarily reflected the continuous improvement in product quality and cost of the Company as well as ongoing enhancement of market competitiveness.

– 22 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group’s operating costs of principal activities amounted to RMB1,169.25 million for the six months ended 30 June 2015, representing an increase of RMB215.36 million or 22.58% as compared with RMB953.89 million for the same period last year, which was mainly due to the increase of sales.

b. Historical transaction amount

Actual purchase amounts by the Group from the Joincare Group in the past three years ended 31 December 2012, 2013 and 2014 and the nine months period from 1 January to 30 September 2015 are summarized in Table-1 below:

Table-1

	For the year ended 31	For the year ended 31	December	Jan to Sep
	2012	2013	2014	2015
(RMB Million)
Historical transaction
amount	84.63	149.05	237.82	231.99
Actual Growth %		76.12%	59.56%	–2.45%
CAGR % (2012-2014)			67.63%

As illustrated in the Table-1 above, the historical transaction amount for products and raw materials purchased by the Group from Joincare Group showed a robust growth from approximately RMB84.63 million in 2012 to RMB237.82 million in 2014, representing a compound annual growth rate (‘‘CAGR’’) of 67.63%. It is also noted that the total transaction amount with Joincare Group for the nine months ended 30 September 2015 of RMB231.99 million represents approximately 97.55% of the total transaction amount for the full year ended 31 December 2014 and approximately 82.85% of the Existing Annual Cap for 2015 respectively.

As advised by the management of the Company, the increase in the actual transaction amount for products and raw materials purchased from Joincare Group for the nine months ended 30 September 2015 was mainly due to the increase in the purchase of the raw materials of voriconazole itraconazole and 7-ACA for the manufacturing of the voriconazole itraconazole products and cephalosporins category products due to strong market demand for such products. Sales of Group’s voriconazole itraconazole products increased by approximately 28.84% from approximately 503,900 bottles for the nine month ended 30 September 2014 to approximately 649,200 bottles for the nine month ended 30 September 2015. On the other hand, the sales of Group’s cephalosporins category products increased by approximately 15.40%, as compared with the same period last year. The growth in the sale of these products is in line with the financial results of the Groups as discussed above.

– 23 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

c. Proposed Annual Caps

Existing Annual Caps under the 2014 Joincare Purchase Agreement, utilization rate of the Existing Annual Caps, the Proposed Annual Caps under the Supplemental Agreement and the increase percentage of the Proposed Annual Caps as compared to the Existing Annual Caps are illustrated in Table-2 below:

Table-2

	For the year	ending 31	December
	2014	2015	2016
(RMB Million)
Existing Annual Caps (A)	260.00	280.00	460.00
% Utilized Existing Annual Caps	91.47%	82.85%	NA
Proposed Annual Caps (B)		340	572
% Increase in annual caps (B/A)		21.43%	24.35%

It is noted that the Proposed Annual Caps of RMB340 million and RMB572 million represent an increase of 21.43% and 24.35% over the Existing Annual Caps of RMB280 million and RMB460 million for the years ending 2015 and 2016 respectively.

The increase in the annual cap for the year ending 31 December 2016 is mainly attributable to the increase in purchases of the corresponding raw materials of cephalosporins category products and voriconazole itraconazole（伏立康唑）products as a result of the expected increase in market demand for the relevant products in future. The expected amount of purchases of cephalosporins category raw materials (i.e. 7-ACA and D7ACA) and voriconazole itraconazole（伏立康唑）raw material in 2016 are expected to increase by approximately 15.84% and 31.03% respectively as compared to 2015.

In arriving at the Proposed Annual Caps, the Directors have taken into account of the (a) historical transaction amounts between members of the Group and the Joincare Group; and (b) internal projection of the development of the Group’s business, which in turn is based on prevailing market condition and demand for the Group’s products and the prevailing market prices for the relevant raw materials.

– 24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below sets out the percentage of the total purchases and the estimated percentage of the total purchases of the major products and raw materials (the ‘‘Major Products and/or Raw Materials‘‘）by the members of the Group from the Joincare Group as at the Latest Practicable Date and for the year ending 31 December 2016, respectively:

Table-3

		Percentage of the
		total purchases	Estimated
		from the Joincare	percentage of the
		Group under the	total purchase
		Existing Annual	from the Joincare
		Cap for 2015	Group under the
Major Products and/or	Description of the Major	as at the Latest	Proposed Annual
Raw Materials	Products and/or Raw Materials	Practicable Date	Cap for 2016
1. 7-ACA and D7-ACA	Both 7-ACA and D7-ACA can be	91.14%	62.21%
	used in the synthesis of
	various types of
	cephalosporanic antibiotics.
	7-ACA is the key intermediate of
	cephalosporin.
	D7-ACA is an intermediate for
	synthetic cephalosporanic
	antibiotics, which can
	substitute for 7-ACA.

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Major Products and/or Raw Materials Description of the Major Products and/or Raw Materials 2. Voriconazole itraconazole （伏立康唑） A broad-spectrum triazole antifungal drug mainly used for the treatment of patients with progressive immune deficiency, possibly life- threatening infections. It is applicable to the treatment of severe fungal infections in immune-suppressed patients, acute invasive pulmonary aspergillosis (the most commonly found pathogenic agents being aspergillus fumigatus, followed by aspergillus flavus, aspergillus niger and aspergillus terreus), severe invasive infections caused by fluconazole-resistant yeasts (including Candida krusei) and severe infections caused by scedosporium species and fusarium species. 3. OXAT （氟氧頭孢母核） A raw material of Flomoxef Sodium（氟氧頭孢鈉）, of which its core acts as the functional basic chemical structure. Flomoxef Sodium （氟氧頭孢鈉）is a broad- spectrum oxa-cephalosporanic antibacterial drug.	Percentage of the total purchases from the Joincare Group under the Existing Annual Cap for 2015 as at the Latest Practicable Date 8.80% 0 (Note) 99.94%	Estimated percentage of the total purchase from the Joincare Group under the Proposed Annual Cap for 2016 7.10% 29.88%
		99.19%

Note: The Group had not purchased any OXAT（氟氧頭孢母核）as at the Latest Practicable Date. It expects to purchase 40 tonnes of OXAT（氟氧頭孢母核）from Joincare Group for the year ending 31 December 2016.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

d. Launch of new Flomoxef Sodium （氟氧頭孢鈉）products in 2016

As advised by the management of the Company, the Company endeavours to research and develop Flomoxef Sodium（氟氧頭孢鈉）products, which are one of the cephalosporins category products with high product safety and efficacy. The Company expects Flomoxef Sodium（氟氧頭孢鈉）products will be launched in 2016. The management expects that there will be a demand of 40 tons of products and raw materials from Joincare Group for the production of 16 tons of Flomoxef Sodium products in 2016.

As disclosed in the Interim Report 2015, riding on the existing fertility specialty field with competitive edge, the Company will gradually develop its competitive edge in antitumor, psychiatry and digestion specialty fields and enrich the relevant product lines, further strengthen the development of various specialized research and development technological platforms (antibody bioscience, sustained release microspheres technology and targeted sustained release technology) and continuously strengthen the research and development and market power in respect of specialized preparation drugs.

The Company has advised us that Flomoxef Sodium products are manufactured by relatively fewer producers in the PRC and hence the possible early launch of the products would enable the Group to tap into a less competitive market. Given that the Group has emphasized its strategic position in research and development of new products, we concur with the Directors that it is fair and reasonable to maintain the amount of annual cap in 2016 for the purchase of raw materials of Flomoxef Sodium from Joincare Group, namely OXAT（氟氧頭孢母核）for the Group’s production of the new product. Same as the last year, the Directors estimated that 40 tons of OXAT will be purchased from Joincare Group in 2016, which represents 29.88% of the Proposed Annual Cap for 2016.

Our view

We have reviewed the calculation of the Proposed Annual Caps and were given to understand that the estimated growth in the Proposed Annual Caps is mainly due to the increase in quantity of the raw materials to be purchased for the manufacturing of the Group’s voriconazole itraconazole products and cephalosporins category products driven by the market demand. Taking into account:

(a) CAGR of 67.63% in the historical transaction amount for the past three years ended 31 December 2014 due to the strong market demand for the Group’s voriconazole itraconazole products and cephalosporins category products;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) the demand for the Group’s voriconazole itraconazole products and cephalosporins category products continued to grow in 2015, leading to the actual purchase of raw materials from Joincare Group for the nine months ended 30 September 2015 reached RMB231.99 million, representing approximately 97.55% of the historical transaction for the full year of 2014 and approximately 82.85% of the Existing Annual Cap for 2015 and approximately 68.23% the Proposed Annual Cap for 2015 respectively;
(c) the Proposed Annual Caps for 2015 and 2016 represent an increase of 21.43% and 24.35% over the respective Existing Annual Caps;
(d) the growth for the demand of the Group’s voriconazole itraconazole products and cephalosporins category products and actual purchase of raw materials from the Joincare Group were in line with the operating results of the Group for the year ended 31 December 2014 and the six months ended 30 June 2015; and
(e) it is expected that the Group is taking up certain market share in bulk medicine (including cephalosporins category（頭孢類）) area due to market consolidation,

we concur with the Directors that the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are considered and in the interests of the Company and the Shareholders as a whole, and that there is no disadvantage for the transactions contemplated under the Supplemental Agreement to the Company.

e. Pricing terms

In the extraordinary general meetings of the Company on 24 October 2014, Independent Shareholders had been advised by the then independent financial adviser appointed by the Company and after taking into such advice, approved the terms of the 2014 Joincare Purchase Agreement, including the pricing terms for the products and raw materials to be purchased from Joincare Group. We noted that save for the Proposed Annual Caps, there is no change to the terms of the 2014 Joincare Purchase Agreement, including the pricing terms for products and raw materials to be purchased from the Joincare Group. Accordingly, no pricing term was included in the Supplemental Agreement which shall be subject to approval by the Shareholders at the EGM.

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

However, as the remaining terms of the Supplemental Agreement would still be bound by the pricing terms of the 2014 Joincare Purchase Agreement, we reviewed the pricing mechanism for products and raw materials to be purchased by the Group in the 2014 Joincare Purchase Agreement to make assessment on if any of the pricing terms would be no more appropriate/applicable.

According to the 2014 Joincare Purchase Agreement, pricing of products and raw materials to be sold by the relevant members of the Joincare Group to the relevant members of the Group shall be:

(i) indicative prices (if any) prescribed by the national price administrative department;
(ii) where (i) is not available, the comparable market prices based on quotation(s) obtained from other third party suppliers; or
(iii) where (i) and (ii) are not available, the prices are to be agreed between the parties but, together with the other terms, subject to being not less favourable to the Group than the prices and terms offered by Joincare Group to third parties for similar transactions.

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(i) Indicative prices prescribed by the national price administrative department

According to the management of the Company and our independent research on the website of the National Development and Reform Commission (http://www.ndrc.gov.cn) regarding voriconazole itraconazole, 7-ACA, D7-ACA and OXAT, major raw materials representing over 99% of the total projected purchase amount under the Existing Annual Caps and the Proposed Annual Caps, it is noted that there is no indicative prices prescribed by the national price administrative department, nor was there a standard price list, for the products under the 2014 Joincare Purchase Agreement.

Nonetheless, pursuant to the 2014 Joincare Purchase Agreement, should the indicative prices promulgated by the national price administrative department for the products or raw materials to be purchased from Joincare becoming available in the future, Joincare Group and the Group will abide by such prices so as to comply with the applicable rules and regulations.

(ii) Comparable market prices

Pursuant to the 2014 Joincare Purchase Agreement, where the indicative price from national price administrative department is not available for product or raw material to be purchased from Joincare Group, comparable market prices based on quotation(s) obtained from other third party suppliers should be adopted.

According to the Board Letter, we noted that the Group has the following policies and procedures to monitor that pricing of products or raw materials from Joincare Group are no less favorable than comparable market quotes as follows:

(aa) the Group will invite one to two quotations from independent suppliers (depending on the availability of quotations obtained at the particular time) to give a reference on the prevailing market prices for the relevant products and raw materials to be procured. Such quotations will be reviewed and evaluated from both the technical and commercial perspectives by qualified personnel of the Group to ensure that the prices of the products and raw materials to be procured from the Joincare Group no less favorable to the prices for such products and raw materials being offered by the Independent Third Parties. The personnel of the Group will also review other applicable terms of the quotations from the Independent Third Parties (including but not limited to product quality assurance, payment terms and terms on delivery timing) in order to ascertain whether the terms of the individual purchase order are on normal commercial terms (‘‘Comparable Quotes’’);

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(bb) the Group will conduct regular checks to review and assess whether the products and raw materials have been purchased in accordance with the terms of the Supplemental Agreement. Such checks will be conducted by the financial controller of the Group on a monthly basis and the secretary of the Board on a quarterly basis (‘‘Regular Review’’); and
(cc) the Company will engage the auditors of the Company to conduct an annual review of the transactions contemplated under the Supplemental Agreement pursuant to Rule 14A.56 of the Listing Rules (‘‘Auditor Review’’).

The Directors consider that the prices and terms offered by the Joincare Group in respect of the Major Products and/or Raw Materials are better or not less favourable than those provided by the quotations obtained from suppliers that are Independent Third Parties.

We understand from the management that, it has been the Group’s policy to diversify its suppliers to reduce risks of supply and, the Group normally will maintain at least two suppliers for each type of major raw materials, other than voriconazole itraconazole and OXAT, which are only supplied by Joincare Group and another independent supplier in the PRC market respectively, independent third parties to the Group and the Joincare Group as confirmed by the Directors.

The table below sets out the quotations obtained in respect of the Major Products and/ or Raw Materials:

Table-4

Major Products and/or Raw

Materials Quotations

7-ACA and D7-ACA There are 4 suppliers in the PRC market, namely the Joincare Group and 3 suppliers that are Independent Third Parties. The Group has obtained 2 quotations from the suppliers that are Independent Third Parties.

Voriconazole itraconazole

（伏立康唑）

There are only 2 suppliers that supply the required sterile raw materials for voriconazole itraconazole in the PRC market, namely the Joincare Group and an independent supplier. The Group has obtained quotation from a supplier that is an Independent Third Party.

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OXAT（氟氧頭孢母核）

There are only 2 suppliers in the PRC market, namely the Joincare Group and an independent supplier. When the Group commences the production of Flomoxef Sodium（氟氧頭孢鈉） and the purchasing of OXAT（氟氧頭孢母核）, it will obtain a quotation from a supplier that is an Independent Third Party.

Given there are only 2 suppliers for each of voriconazole itraconazole and OXAT in PRC market (including Joincare Group and an independent supplier) respectively, quotation from an independent supplier for each product is available to the Company only. In light of the independence of the suppliers, there is no other supplier available in the PRC market, and the price offered by Joincare Group would be no less favorable than the third party supplier, we consider that the price offered by such supplier is a reasonable benchmark of the market price available and is acceptable to determine whether the purchase price of voriconazole itraconazole and OXAT from Joincare Group is on normal commercial terms and no less favourable than those available from third party supplier.

As advised by the management of the Company, given the stringent quality requirements imposed by relevant Company’s policies and legal requirements for pharmaceutical products, the Company may take a long time to complete the procedures required to switch the supplier for a type of raw material. Nevertheless, the Group maintains a list of reputable suppliers for these raw materials and can alter its suppliers if appropriate after considering all relevant circumstances, such as quality, availability and administrative cost, etc.

We have reviewed the top 5 purchase orders in terms of transaction amount and the Comparable Quotes obtained from third party suppliers for major products procured by the Group from Joincare Group in each of the period ended 31 December 2014 and 30 September 2015, and we observed that the prices for products and raw materials purchased from Joincare Group are offered to the Group at no less favorable terms as compared to relevant Comparable Quotes received from third party suppliers.

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our view

In light of the above, in particular the Comparable Quotes and monitoring system such as Regular Review and Auditor Review, we concur with the Directors that sufficient safeguard measures are in place to protect the interest of the Independent Shareholders and ensure the actual prices of the products and raw materials to be purchased by members of the Group from the Joincare Group are on normal commercial terms, no less favorable than third party offers and fair and reasonable so far as the Independent Shareholders and the Company is concerned and are still appropriate.

RECOMMENDATION

Having taken into account the principal factors and reasons set out above, we are of the view that the terms of the Supplemental Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole, and the transactions contemplated thereunder are in the ordinary and usual course of business of the Group.

Accordingly, we recommend the Independent Shareholders, and the Independent Board Committee to advise the Independent Shareholders, to vote in favor of the ordinary resolutions to be proposed at the EGM to approve the Supplemental Agreement and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of

YU MING INVESTMENT MANAGEMENT LIMITED Warren Lee

Managing Director

– 33 –

GENERAL INFORMATION

APPENDIX I

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 Group. 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 BY DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE OF THE COMPANY

As at the Latest Practicable Date, the interests and short positions of the Directors, supervisors and chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of the Part XV of the SFO) (1) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (2) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (3) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (‘‘Model Code’’) to be notified to the Company and the Stock Exchange, were as follows:

(1) Interest in shares of the Company

Name of Director Capacity Mr. Zhu Baoguo（朱保國） Interest of controlled corporations Mr. Tao Desheng（陶德勝） Beneficial Owner Spouse’s interest Mr. Yang Daihong（楊代宏） Beneficial Owner	Number of shares interested (Long position) As a percentage of the specific class of issued shares of the Company As a percentage of the total issued shares of the Company (%) (%) 116,301,300 A Shares(1)(2) 46.50% 29.39% 65,858,067 H Shares(1)(3) 45.23% 16.64% 275,990 A Shares 48,360 A Shares(4) 324,350 A Shares 0.13% 0.08% 176,540 A Shares 0.07% 0.04%

– 34 –

APPENDIX I

GENERAL INFORMATION

(2) Interest in shares of associated corporations of the Company

==> picture [380 x 240] intentionally omitted <==

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

As a percentage
of the equity
interest of
Name of associated associated
Name of Director Capacity corporation Equity Interest corporation
(RMB) (%)
Mr. Zhu Baoguo （朱保國） Beneficial owner Shenzhen Baiyeyuan 72,000,000 90.00%
Investment Co., Ltd
（深圳市百業源投資有限
公司）(‘‘Baiyeyuan’’)
Interest of controlled Joincare [(5)] 742,415,520 48.03%
corporations
Interest of controlled Zhuhai Livzon 245,000,000 49.00%
corporations MABPharm Inc（珠海市
麗珠單抗生物技術有限
公司） [(1)(6)]
----- End of picture text -----

Notes:

(1) Joincare is 48.03% held by Baiyeyuan which is in turn 90% held by Mr. Zhu Baoguo（朱保國）. Mr. Zhu Baoguo（朱保國）is deemed to be interested in the shares of the Company and the equity interest of its associated corporations in which Joincare is or is deemed to be interested by virtue of the SFO.
(2) Among these shares, 108,640,474 shares and 7,660,826 shares are held directly by Joincare and its wholly-owned subsidiary, Shenzhen Haibin Pharmaceutical Co., Ltd（深圳市海濱製藥有限公司）(‘‘Shenzhen Haibin’’), respectively.
(3) These shares are directly held by Topsino Industries Limited, a wholly-owned subsidiary of Joincare.
(4) These shares are held directly by Ms. Hou Xuemui（侯雪梅）(spouse of Mr. Tao Desheng（陶德勝）). Therefore, Mr. Tao Desheng（陶德勝）is deemed to be interested in these shares.
(5) These shares are held by Baiyeyuan.
(6) These shares are held by Joincare.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, supervisors and chief executive of the Company had any interest or short position in shares, underlying shares or debentures of the Company or any of its associated corporations which were recorded in the register required to be kept under Section 352 of the SFO or notified to the Company and the Stock Exchange pursuant to the Model Code.

– 35 –

GENERAL INFORMATION

APPENDIX I

3. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors, the following persons (other than the Directors, supervisors or chief executive of the Company) had interests or short positions in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register of substantial shareholders required to be kept by the Company under section 336 of the SFO.

Name of Shareholder
Capacity
Baiyeyuan
Interest of controlled
corporations
Interest of controlled
corporations
Ms. Liu Guangxia
（劉廣霞女士）
Spouse interest
Joincare
Beneficial owner
Interest of controlled
corporation
Person having a
security interest in
shares
Interest of controlled
corporations
Topsino Industries Limited
(‘‘Topsino’’)
Beneficial owner
UBS AG
Beneficial owner
Person having a
security interest in
shares
Interest of controlled
corporations
Interest of controlled
corporations

Number of shares
interested/
that are short position
Position
As a
percentage of
the specific
class of
issued shares of
the Company
As a percentage of
the total issued shares
of the Company
(%)
(%)
116,301,300 A Shares(1)
Long Position
46.50%
29.39%
65,858,067 H Shares(2)
Long Position
45.23%
16.64%
116,301,300 A Shares(3)
Long Position
46.50%
29.39%
65,858,067 H Shares(3)
Long Position
45.23%
16.64%
100,763,218 A Shares
Long Position
7,660,826 A Shares(4)
Long Position
7,877,256 A Shares(5)
Long Position
116,301,300 A Shares
46.50%
29.39%
65,858,067 H Shares(2)
Long Position
45.23%
16.64%
65,858,067 H Shares(2)
Long Position
45.23%
16.64%
163 H Shares(6)
Long Position
1,353,700 H Shares(6)
Long Position
7,420,602 H Shares(6)
Long Position
8,774,465 H Shares
6.03%
2.22%
24,630 H Shares
Short Position
0.02%
0.01%

– 36 –

APPENDIX I

GENERAL INFORMATION

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

As a
percentage of
the specific
Number of shares class of As a percentage of
interested/ issued shares of the total issued shares
Name of Shareholder Capacity that are short position Position the Company of the Company
(%) (%)
UBS Group AG Person having a 1,353,700 H Shares [(8)] Long Position
security interest in
shares
Interest of controlled 7,420,765 H Shares [(8)] Long Position
corporations
8,774,465 H Shares 6.03% 2.22%
Interest of controlled 24,630 H Shares [(8)] Short Position 0.02% 0.01%
corporations
Notes:
----- End of picture text -----

(1) Among these shares, 108,604,474 shares and 7,660,826 shares are held directly by Joincare and its wholly-owned subsidiary, Shenzhen Haibin.
(2) These shares are held directly by Topsino, the wholly-owned subsidiary of Joincare.
(3) As Ms. Liu Guangxia is the spouse of Mr. Zhu Baoguo, Ms. Liu Guangxia is deemed to be interested in Mr. Zhu Baoguo’s equities in which he is deemed to be interested.
(4) These shares are directly held by Shenzhen Haibin, a wholly-owned subsidiary of Joincare.
(5) These shares were directly transferred from, entrusted and pledged by Guangzhou Begol Trading Corporation（廣州市保科力貿易公司）(‘‘Begol’’) in favor of Joincare in accordance with the share transfer, custody and pledge agreement with Joincare and Zhuhai Lishi Investment Co., Ltd.（珠海市麗士投資有限公司）dated 2 January 2004, the share transfer and custody agreement and the share pledge agreement with Joincare.
(6) These shares include 163 shares that are beneficially owned, 1,353,700 shares with security interest and 7,420,602 shares that are interest of controlled corporations, of which 2,130 shares are derivatives settled by cash. Interest of controlled corporations is held as to 6,224,210 shares, 1,010,882 shares, 160,580 shares, 300 shares and 24,630 shares by its wholly-owned UBS Fund Services (Luxembourg) S.A., UBS Global Asset Management (Hong Kong) Limited, UBS Global Asset Management (Singapore) Ltd, UBS Global Asset Management Trust Company and UBS Securities LLC respectively.
(7) These short positions are held by its wholly-owned subsidiary UBS Securities LLC.
(8) As UBS Group AG holds 98.02% of the interest of UBS AG, UBS Group AG is deemed to be interested in UBS AG’s equities and short positions in which it is and deemed to be interested.

– 37 –

GENERAL INFORMATION

APPENDIX I

Save for the shareholders as disclosed herein, the Directors are not aware of any persons, who, as at the Latest Practicable Date, were entitled to exercise or control the exercise of 5% or more of the voting power at the general meeting of the Company and were also, a practicable matter, able to direct or influence the management of the Company.

4. DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, no service contract that cannot be terminated within one year without payment of compensation (other than statutory compensation) had been or proposed to be entered into between the Company and the Directors or the supervisors of the Company.

5. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors or proposed Directors, directly or indirectly, had any interest in any assets which had since 31 December 2014 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

There was no contract or arrangement subsisting at the Latest Practicable Date, in which any of the Directors were materially interested and which was significant to the business of the Group.

6. COMPETING INTERESTS

As disclosed in the section headed ‘‘Relationship with our controlling shareholders’’ in the listing document of the Company dated 14 January 2014, the Group and the Joincare Group research, develop, produce and/or sell four different types of drugs, namely (i) cardio-cerebralvascular drugs; (ii) systemic anti-infective drugs/antibiotics; (iii) blood and hemopoietic system drugs; and (iv) blood management drugs. However the drugs that the Group researches, develops, produces and/or sells are of different categories from those researched, developed, produced and/ or sold by Joincare Group. Although both groups use similar distribution models for the sales and distribution of drug preparation products in the PRC which is in line with the industry norm, and their targeted end customers are similar such as hospitals, clinics and pharmacies, the Directors are of the view that the Group and the Joincare Group are two separate groups operating independently of each other with separate listing status. Furthermore the sales teams of the Group are separate and independent of the Joincare Group and the Group does not share its customer resources and databases. Accordingly the Directors are of the view that there is no substantial competition between the Group’s production and sales of products with that of the Joincare Group.

– 38 –

GENERAL INFORMATION

APPENDIX I

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or proposed Directors or their respective close associates had any interest in a business which competes or may compete with the businesses of the Group (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a Controlling Shareholder of the Company).

7. MATERIAL ADVERSE CHANGE

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

8. QUALIFICATIONS AND CONSENTS OF EXPERT

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

Name	Qualification
Yu Ming Investment	Type 1 (dealing in securities), Type 4 (advising on securities),
Management Limited	Type 6 (advising on corporate finance) and Type 9 (asset
	management) regulated activities under the SFO

The Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or reference to its name or opinion in the form and context in which it appears.

As at the Latest Practicable Date, the Independent Financial Adviser 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.

As at the Latest Practicable Date, the Independent Financial Adviser did not, directly or indirectly, had any interest in any assets which had since 31 December 2014 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

– 39 –

GENERAL INFORMATION

APPENDIX I

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during business hours at the Company’s principal place of business in Hong Kong at Flat 02, 17/F, Bayfield Building, 99101 Hennessy Road, Wanchai, Hong Kong from the date of this circular up to and including the date of the EGM:

(a) the 2014 Joincare Purchases Agreement;
(b) the Supplemental Agreement;
(c) the letter from the Independent Board Committee as set out on page 16 of this circular;
(d) the letter from the Independent Financial Adviser as set out from pages 17 to 33 of this circular; and
(e) the written consent from the Independent Financial Adviser as referred to under the section headed ‘‘Qualifications and Consents of Expert’’ in this appendix.

– 40 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

The Articles of Association are written in Chinese and have no official English version. Therefore, any English version is for reference only, and in case of any discrepancy, the Chinese version shall prevail.

Given the increased registered capital of the Company (as a result of the 2014 equity distribution and transfer of share capital) and in compliance with the relevant requirements of ‘‘Guideline for Articles of Listed Companies (2014 revision)’’ issued by the China Securities Regulatory Commission, to protect the legitimate interests of the Company, shareholders and creditors and take into account the actual situation of the Company, the Board proposed to amend and refine part of the content of the Articles.

Details of the proposed amendments to the existing Articles are stated as follows:

1. The content of the existing Article 5:

‘‘Company Address: Administration and Research Building, 38 Chuangye North Road, Shuang Linpian Area, Liangang Industrial Zone, Hongqi Town, Jinwan District, Zhuhai Postal code: 519090’’

To be amended as:

‘‘Company Address: Administration Building, 38 Chuangye North Road, Jinwan District, Zhuhai Postal code: 519090’’

2. The content of the existing Article 6:

‘‘The registered capital of the Company is RMB304,382,252’’

To be amended as:

‘‘The registered capital of the Company is RMB395,696,927’’

3. The content of the existing Article 21:

‘‘Following the establishment of the Company, after going through public offering of shares, rights issue, capital reserve and creation of new shares from undistributed profit and repurchase of foreign-invested shares, the capital structure of the Company was changed as follows: 295,721,852 ordinary shares, of which 183,728,498 shares were domestic-listed domesticinvested shares, representing 62.13% of the total number of ordinary shares of the Company in issue and 111,993,354 shares were domestic-listed foreign-invested shares, representing 37.87% of the total number of ordinary shares of the Company in issue.

– 41 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

As approved by a special resolution passed at the shareholders’ general meeting and authorized by securities regulatory bodies under the State Council, the Company’s domestic-listed foreign-invested shares were transferred to list on The Stock Exchange of Hong Kong Limited by way of introduction and traded as overseas-listed foreign-invested shares.

Following the aforesaid transfer, through which the domestic-listed foreign-invested shares would be listed on The Stock Exchange of Hong Kong Limited by way of introduction and traded as overseas-listed foreign-invested shares, the Company’s share capital is consisted of 295,721,852 ordinary shares, among which 111,993,354 shares are held by holders of overseaslisted foreign-invested shares (H Shares) and 183,728,498 shares are held by holders of domesticlisted domestic-invested shares, representing 37.87% and 62.13% of the total number of issued ordinary shares of the Company respectively.

As approved by special resolutions passed at the shareholders’ general meeting and filed with no objection by China Securities Regulatory Commission, after the completion of the first grant under the Restricted A Shares Incentive Scheme by the Company, the capital structure of the Company was changed as follows: 304,382,252 ordinary shares, of which 192,388,898 shares are domestic-listed domestic-invested shares and 111,993,354 shares are overseas-listed foreigninvested shares (H Shares), representing 63.21% and 36.79% of the total number of issued ordinary shares of the Company respectively.’’

To be amended as:

‘‘Following the establishment of the Company, after public issuance of shares, rights issue, creation of bonus shares by transfer of capital reserve and undistributed profit and repurchase of foreign-invested shares, the share capital structure of the Company is changed as follows: 295,721,852 ordinary shares, of which 183,728,498 shares are domestic-listed domestic-invested shares, representing 62.13% of the total number of issued ordinary shares of the Company and 111,993,354 shares are domestic-listed foreign-invested shares, representing 37.87% of the total number of issued ordinary shares of the Company.

As approved by a special resolution passed at the shareholders’ general meeting and authorized by securities regulatory bodies under the State Council, the Company’s domestic-listed foreign-invested shares are converted into overseas-listed foreign-invested shares listed on The Hong Kong Stock Exchange by way of introduction for trading.

– 42 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

After the aforesaid domestic-listed foreign-invested shares converted into overseas-listed foreign-invested shares are listed on The Hong Kong Stock Exchange by way of introduction for trading, the share capital structure of the Company is as follows: 295,721,852 ordinary shares, of which 111,993,354 shares are held by holders of overseas-listed foreign-invested shares (H Shares) and 183,728,498 shares are held by holders of domestic-listed domestic-invested shares, representing 37.87% and 62.13% of the total number of issued ordinary shares of the Company respectively.

As approved by a special resolution passed at the shareholders’ general meeting and filed with no objection by the China Securities Regulatory Commission, after the completion of the first grant under the Restricted Shares Incentive Scheme by the Company, the share capital structure of the Company is changed as follows: 304,382,252 ordinary shares, of which 192,388,898 shares are domestic-listed domestic-invested shares and 111,993,354 shares are overseas-listed foreign-invested shares (H Shares), representing 63.21% and 36.79% of the total number of issued ordinary shares of the Company respectively.

As approved by a special resolution passed at the shareholders’ general meeting, bonus shares created by transfer of capital reserve are issued to all shareholders by the Company. After the bonus shares are created by transfer, the share capital structure of the Company is changed as follows: 395,696,927 ordinary shares, of which 250,105,567 shares are domestic-listed domesticinvested shares and 145,591,360 shares are overseas-listed foreign-invested shares (H Shares), representing 63.21% and 36.79% of the total number of issued ordinary shares of the Company respectively.’’

4. The content of the existing provision (1) of Article 35:

‘‘When the Directors, Supervisors, President and other senior management officer of the Company or shareholders holding more than 5% of the shares of the Company sell their shares within six months from the acquisition of such shares, or purchase shares within six months from the disposal of such shares, the Board of Directors of the Company shall repatriate any profits derived from such dealings and profits derived shall be vested in the Company.’’

– 43 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

To be amended as:

‘‘When the Directors, Supervisors, President and other senior management officers of the Company and shareholders holding more than 5% of the shares of the Company sell their shares within six months from the acquisition of such shares, or purchase shares within six months from the disposal of such shares, the resulting gains are owned by the Company and the board of directors of the Company shall recover its resulting gains. However, the disposal of such shares by securities companies holding more than 5% of the shares as a result of the outstanding shares (after-sale) acquired under underwriting is not subject to the time limit of six months.’’

5. The content of the existing Article 68:

‘‘(i) when the number of directors is less than the minimum number required by the Company Law or two-thirds of the number specified in the Articles of Association (i.e. six);’’

To be amended as:

‘‘(i) when the number of directors is less than the minimum number required by the Company Law or two-thirds of the number specified in the Articles of Association;’’

6. The content of the existing Article 83:

‘‘In the event that the election of directors and supervisors is to be discussed at a shareholders’ general meeting, the notice of the shareholders’ general meeting shall fully disclose details of candidates for the directors and supervisors, and shall at least include the following particulars:

(i) their educational background, work experience, part-time jobs and other personal details;
(ii) whether or not they have any connections with the Company or the Company’s controlling shareholders and de facto controllers;
(iii) the disclosed number of shares of the Company they hold;
(iv) whether or not they have been penalized by the CSRC and other relevant departments, and disciplined by the Shenzhen Stock Exchange.

A single proposal on each of the candidates for directors and supervisors shall submit a separate proposal.’’

– 44 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

To be amended as:

(i) personal details including educational background, work experience and part-time jobs;
(ii) whether or not there is any connection with the Company or the Company’s controlling shareholders and de facto controllers;
(iii) the disclosed number of shares of the Company which are held;
(iv) whether or not they have been penalized by the CSRC and other relevant departments, and disciplined by the Stock Exchange.

Save for the cumulative voting system adopted to elect directors and supervisors, a separate proposal shall be raised in respect of each of the candidates for directors and supervisors.’’

7. The content of the existing Article 107:

‘‘When voting in the shareholders’ general meeting, a shareholder (including its proxy(ies)) shall exercise its voting rights in respect of the number of voting shares it represents, each share shall have one vote.

The shares of the Company held by itself have no voting rights and shall not be counted into the total number of shares carrying voting rights at the shareholders’ general meeting.

The Board of Directors, independent directors, and shareholders satisfying relevant requirements may solicit voting rights from the shareholders of the Company.’’

To be amended as:

‘‘When a shareholder (including his/her/its proxy(ies)) exercises voting rights based on the number of shares carrying voting rights that he/she/it represents, save for the requirements of Article 111 in relation to the adoption of a cumulative voting system for electing directors and supervisors, there shall be one vote for each share.

When significant matters that have an impact on the interests of small and medium investors are considered by the shareholders’ general meeting, votes shall be counted separately in respect of the small and medium investors’ voting.

– 45 –

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

The shares of the Company held by it carry no voting rights and such part of shares shall not be counted into the total number of shares carrying voting rights at the shareholders’ general meeting.

The Board of Directors, independent directors, and shareholders satisfying relevant requirements may solicit voting rights of the shareholders in public. In soliciting voting rights of the shareholders, information including the specific voting intention shall be fully disclosed to the persons whose voting rights are being solicited. Soliciting voting rights of the shareholders on a paid basis or paid basis in disguised form is prohibited. In soliciting voting rights, the Company shall not impose minimum shareholding proportion requirement.’’

8. The content of the existing Article 111:

‘‘The list of candidates for directors and supervisors shall be submitted to the shareholders’ general meeting for voting in the form of a proposal.

Methods and procedures for the nomination of directors and supervisors are as follows:

(i) Shareholders individually or jointly holding more than 10% of the outstanding shares of the Company with voting rights for a period of more than 180 consecutive days as well as the Board are entitled to nominate candidates for non-independent Directors. Shareholders individually or jointly holding more than 1% of the outstanding shares of the Company for a period of more than 180 consecutive days, the Board and the Supervisory Committee are entitled to nominate candidates for independent Directors. Shareholders individually or jointly holding more than 10% of the outstanding shares of the Company for a period of more than 180 consecutive days as well as the Supervisory Committee are entitled to nominate candidates for supervisors. Nonindependent directors, independent directors and supervisors shall be nominated and voted separately.
(ii) There is one supervisor that is acting as the staff representative, who shall be elected from the workers’ congress. Directors and supervisors may be elected by way of single candidate election or competitive election through ordinary resolutions passed by shareholders (including proxies) attending the shareholders’ general meeting. The supervisor being elected from the workers’ congress shall be included into the Supervisory Committee directly.
(iii) Brief biographies on the candidates for directors and supervisors and their written consents to accept the nomination shall be lodged with the shareholders’ general meeting ten days before the holding of the general meeting.’’

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

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To be amended as:

‘‘The list of candidates for directors and supervisors shall be submitted to the shareholders’ general meeting for voting in the form of a proposal in writing.

When voting in respect of the election of directors and supervisors at the shareholders’ general meeting is conducted, a cumulative voting system shall be implemented.

The cumulative voting system mentioned in the previous provisions refers to: In electing directors or supervisors at the shareholders’ general meeting, the voting right(s) carried by each share shall be the same as the number of directors or supervisors to be elected. The voting right(s) of the shareholders can be exercised on a concentration basis.

Methods and procedures for the nomination of directors and supervisors are as follows:

(i) Any shareholder individually or jointly holding more than 10% of the total number of outstanding shares of the Company with voting rights for a period of more than 180 consecutive days as well as the Board are entitled to nominate candidates for nonindependent Directors. Any shareholder individually or jointly holding more than 1% of the total number of outstanding shares of the Company with voting rights for a period of more than 180 consecutive days, the Board and the Supervisory Committee are entitled to nominate candidates for independent Directors. Any shareholder individually or jointly holding more than 10% of the total number of outstanding shares of the Company with voting rights for a period of more than 180 consecutive days as well as the Supervisory Committee are entitled to nominate candidates for supervisors. Non-independent directors, independent directors and supervisors shall be nominated and voted separately.
(ii) The one supervisor acting as the staff representative shall be elected from the workers’ congress. Directors and supervisors shall be elected by way of single candidate election or competitive election through ordinary resolutions passed by shareholders (including proxies) attending the shareholders’ general meeting. The supervisor being elected from the workers’ congress shall be included into the Supervisory Committee directly.
(iii) Brief biographies of the candidates nominated for directors and supervisors and their written consents to accept the nomination shall be lodged with the shareholders’ general meeting ten days before the shareholders’ general meeting is convened.’’

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

9. The content of the existing Article 112:

‘‘The shareholders’ general meeting shall vote on all proposals presented one by one. In the case where different proposals are made on the same matter, votes shall be cast in accordance with the sequence of the proposals presented. Unless the shareholders’ general meeting is suspended or no resolution was passed due to exceptional reasons such as force majeure, the proposals shall not be set aside and voting shall take place.’’

To be amended as:

‘‘Save for the cumulative voting system, all proposals shall be voted one by one at the shareholders’ general meeting. In the case where different proposals are made on the same matter, votes shall be cast in accordance with the sequence of the proposals presented. Unless the shareholders’ general meeting is suspended or no resolution may be passed due to exceptional reasons such as force majeure, the proposals shall not be set aside and voting shall take place.’’

10. The content of the existing Article 274:

‘‘Definitions

(i) The ‘‘actual controller’’ refers to anyone who can actually control the actions of the Company through investment relationships, agreements or any other arrangements even though he is not a shareholder of the Company.
(ii) The ‘‘connected relationships’’ refers to the relationship of the controlling shareholders, actual controllers, directors, supervisors and senior management officers of the Company with any other enterprise under their direct or indirect control and any other relationship liable to lead to the transfer of the Company’s interest. However, the enterprises controlled by the State do not have connections with each other based on the fact that their shares are in each case controlled by the State.’’

To be amended as:

‘‘Definitions

(i) ‘‘Controlling shareholder’’ refers to a shareholder whose shareholding of ordinary shares accounts for more than fifty percent of the entire share capital of the Company, or a shareholder whose shareholding accounts for less than fifty percent but the voting rights entitled by the shares held are sufficient to exert a major impact on resolutions at the shareholders’ general meeting.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(ii) ‘‘Actual controller’’ refers to anyone (even though not a shareholder of the Company) who can actually control the actions of the Company through investment relationships, agreements or any other arrangements.
(iii) ‘‘Connected relationships’’ refers to the relationship of the controlling shareholders, actual controllers, directors, supervisors and senior management officers of the Company with any other enterprise under their direct or indirect control and any other relationship that may lead to the transfer of the Company’s interest. However, the enterprises controlled by the State do not have connections with each other based on the fact that their shares are in each case controlled by the State.’’

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APPENDIX III

PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

The Rules and Procedures for General Meetings are written in Chinese and have no official English version. Therefore, any English version is for reference only, and in case of any discrepancy, the Chinese version shall prevail.

In order to assure successful organization of general meeting, make the procedures of general meeting more efficient, protect the legitimate rights and interests of all shareholders and make sure general meeting exercises its power lawfully and its procedures and resolutions are valid and effective, the Board has proposed to amend some provisions in the Rules and Procedures for General Meetings as follows:

1. The content of the existing Article 8:

‘‘(i) Where the number of directors is less than the quorum specified in the Company Law, or less than two-thirds of the quorum specified in the Articles of Association (six);’’

To be amended as:

‘‘(i) Where the number of directors is less than the quorum specified in the Company Law, or less than two-thirds of the quorum specified in the Articles of Association;’’

2. The content of the existing Article 9:

‘‘The Board of Directors may, if thought fit, call a general meeting. An annual general meeting must be called by notice of at least 20 days (exclusive of the day on which the meeting is convened) in announcement made to all shareholders, and an extraordinary general meeting by notice of at least 15 days (exclusive of the day on which the meeting is convened) in announcement made to all shareholders.’’

To be amended as:

‘‘The Board of Directors may, if thought fit, call a general meeting. A general meeting must be called by notice of at least 45 days (exclusive of the day on which the meeting is convened) in announcement made to all shareholders.’’

3. The content of the existing Article 16:

‘‘The notice of general meeting must:

(i) Specify the date and time and place of the meeting;
(ii) Specify the matters and proposals to be dealt with at the meeting;
(iii) State clearly: all shareholders have the right to attend and vote at the meeting in person or by proxy, who may not necessarily be a shareholder of the Company;

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

APPENDIX III

(iv) Specify the date of record for qualifying shareholders who have the right to attend the meeting;
(v) Specify the name and phone number of standing contact of the meeting;
(vi) Specify the time and place of servicing the instrument appointing a proxy; and
(vii) The Company should also disclose on designated websites other materials that may help shareholders make informed decisions on the matters under consideration.

If attendance at a general meeting happens online or by other means, the notice must specify the voting time and procedure online or by other means. Voting online or by other means must start no earlier than 3:00 pm of the day prior to and no later than 9:30 am of the day on which the meeting is convened, and end no earlier than 3:00 pm of the day on which the meeting ends.’’

To be amended as

‘‘ The notice of general meeting must：
(i) Be given in writing;
(ii) Specify the date and time and place of the meeting;
(iii) Specify the matters and proposals to be dealt with at the meeting;
(iv) Provide shareholders with materials and explanations needed to make informed decisions on the matters under consideration; proposals concerned, including but not limited to, business merger, repurchase of shares, capital restructuring or other types of reorganization, should specify the terms of transaction and the contracts (if any) and give serious explanations about the cause and the outcome;
(v) If any director, supervisor, president or any other member of senior management has any material interest in any matter under consideration, disclose the nature and degree of such interest; if a matter under consideration has influence on the said director, supervisor, president or other member of senior management in their capacity as shareholder which is different from the influence on other shareholders of the same class, explain the difference;
(vi) Contain the full text of any special resolution which is intended to be considered and approved at the meeting;

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APPENDIX III

PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

(vii) State clearly: all shareholders have the right to attend and vote at the meeting in person or by proxy, who may be one person or more and may not necessarily be a shareholder of the Company;
(viii) Specify the time and place of servicing the instrument appointing a proxy; and
(ix) Specify the date of record for qualifying shareholders who have the right to attend the meeting; and
(x) Specify the name and phone number of standing contact of the meeting.

The notice and supplementary notice of general meeting must disclose the content of all proposals in details fully and completely. If it is necessary to have independent directors’ opinions on a matter proposed for discussion, the notice and supplementary notice of general meeting must also disclose the opinions and explanations given by independent directors.

4. The content of the existing Article 17:

‘‘Where a general meeting is intended to discuss elections of directors and supervisors, the notice of the general meeting must fully disclose all the particulars of the candidates, at least specifying:

(i) Education, working experience and part-time jobs, among other personal data;
(ii) Presence of any relationship with the Company or the Company’s controlling shareholder or actual controller;
(iii) Number of shares held in the Company; and
(iv) Records of penalties imposed by the CSRC and other regulators and punishments by any stock exchange.

A proposal concerning the election of each director and supervisor candidate must be made separately.’’

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

APPENDIX III

To be amended as:

(i) Education, working experience and part-time jobs, among other personal data;
(ii) Presence of any relationship with the Company or the Company’s controlling shareholder or actual controller;
(iii) Number of shares held in the Company; and
(iv) Records of penalties imposed by the CSRC and other regulators and punishments by any stock exchange.

A proposal concerning the election of each director and supervisor candidate must be made separately, unless accumulative voting system applies to the elections of directors and supervisors.’’

5. The content of the existing Article 65:

‘‘The list of candidates for directors and supervisors (shareholders) must be proposed as a resolution at a general meeting in writing.

The method and procedure of nominating directors and supervisors are described as follows:

(i) Any shareholder representing a holding or combined holding of more than 10% of the total number of shares with voting rights in the Company for 180 consecutive days and the Board of Directors have the right to nominate candidate for non-independent director, any shareholder representing a holding or combined holding of more than 1% of the total number of shares with voting rights in the Company for 180 consecutive days, the Board of Directors and the Board of Supervisors have the right to nominate candidate for independent director, and any shareholder representing a holding or combined holding of more than 10% of the total number of shares with voting rights in the Company for 180 consecutive days and the Board of Supervisors has the right to nominate candidate for supervisor. Nominations of non-independent directors, independent directors and supervisors must be proposed and put to the vote of a general meeting separately.

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

APPENDIX III

(ii) One supervisor representing the employees must be elected at a worker’s congress. Candidates must be elected directors and supervisors by an ordinary resolution passed at a general meeting by shareholders (including proxies) in the form of a noncompetitive election or margin election. The supervisor elected at a worker’s congress may assume office directly.
(iii) Personal resumes of candidates, along with a written notice containing a statement of their acceptance of the nominations, must be submitted to the general meeting at least 10 days in advance.’’

To be amended as:

‘‘The list of candidates for directors and supervisors (shareholders) must be proposed as a resolution at a general meeting in writing.

Accumulative voting system shall apply to the elections of directors and supervisors at a general meeting.

By accumulative voting system, it means each share enjoys voting rights equal to the number of directors or supervisors to be elected at a general meeting, and shareholders having the right to vote may concentrate their votes.

The method and procedure of nominating directors and supervisors are described as follows:

(i) Any shareholder representing a holding or combined holding of more than 10% of the total number of shares with voting rights in the Company for 180 consecutive days and the Board of Directors have the right to nominate candidate for non-independent director, any shareholder representing a holding or combined holding of more than 1% of the total number of shares with voting rights in the Company for 180 consecutive days, the Board of Directors and the Board of Supervisors have the right to nominate candidate for independent director, and any shareholder representing a holding or combined holding of more than 10% of the total number of shares with voting rights in the Company for 180 consecutive days and the Board of Supervisors has the right to nominate candidate for supervisor. Nominations of non-independent directors, independent directors and supervisors must be proposed and put to the vote of a general meeting separately.
(ii) One supervisor representing the employees must be elected at a worker’s congress. Candidates must be elected directors and supervisors by an ordinary resolution passed at a general meeting by shareholders (including proxies) in the form of a noncompetitive election or margin election. The supervisor elected at a worker’s congress may assume office directly.

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

APPENDIX III

(iii) Personal resumes of candidates, along with a written notice containing a statement of their acceptance of the nominations, must be submitted to the general meeting at least 10 days in advance.’’

6. The content of the existing Article 66:

‘‘Each proposal must be put to the vote of a general meeting separately. Where the same matter is divided into different proposals, voting will be organized in chronological order in which such proposals are made. The general meeting won’t shelve or refuse to vote on any proposal unless the general meeting is interrupted by or it is impossible to make a resolution because of force majeure or any other special circumstance.’’

To be amended as:

‘‘Each proposal must be put to the vote of a general meeting separately, unless accumulative voting system is adopted. Where the same matter is divided into different proposals, voting will be organized in chronological order in which such proposals are made. The general meeting won’t shelve or refuse to vote on any proposal unless the general meeting is interrupted by or it is impossible to make a resolution because of force majeure or any other special circumstance.’’

7. The content of the existing Article 71:

‘‘If matters concerning related party transactions are under consideration at a general meeting, related shareholders (including their proxies) are disallowed to vote and their shares with voting rights are not counted in the total number of effective votes; the announcement of resolutions at a general meeting must fully disclose voting by non-related shareholders. Related shareholders include:

(i) Transaction counterparty;
(ii) Those who have a controlling interest in, either directly or indirectly, a transaction counterparty;
(iii) Those who are under the control of, either directly or indirectly, a transaction counterparty;
(iv) Those who are under the control of, either directly or indirectly, the same legal person or natural person as a transaction counterparty;
(v) Those whose voting rights are subject to restriction or influence because of a pending equity transfer agreement or other agreements with a transaction counterparty or its related party; and

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR GENERAL MEETINGS

APPENDIX III

(vi) Any legal person or natural person the CSRC or Shenzhen Stock Exchange identifies the possibility of bias in the interest of the Company.’’

To be amended as:

(i) Transaction counterparty;
(ii) Those who have a controlling interest in, either directly or indirectly, a transaction counterparty;
(iii) Those who are under the control of, either directly or indirectly, a transaction counterparty;
(iv) Those who are under the control of, either directly or indirectly, the same legal person or natural person as a transaction counterparty;
(v) Those whose voting rights are subject to restriction or influence because of a pending equity transfer agreement or other agreements with a transaction counterparty or its related party;
(vi) Any legal person or natural person the CSRC or Shenzhen Stock Exchange identifies the possibility of bias in the interest of the Company; and
(vii) Other related parties as defined in the listing rules of the stock exchange where the Company is listed.’’

– 56 –

APPENDIX IV

PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR BOARD MEETINGS

The Rules and Procedures for Board Meetings are written in Chinese and have no official English version. Therefore, any English version is for reference only, and in case of any discrepancy, the Chinese version shall prevail.

For the purpose of further improving and regulating the rules and procedures and decisionmaking of the Board and raising the work efficiency and the level of scientific decision-making of the Board, the Board proposed to amend and refine part of the content of the Rules and Procedures for Board Meetings:

1. The content of the existing Article 3

‘‘The Board of Directors shall hold at least two regular meetings (annual meeting and semiannual meeting) each year to consider such proposals as the Company’s annual report of the previous year and the semi-annual report of this year. Other meetings are the extraordinary meetings of the Board of Directors.’’

To be amended as:

‘‘The Board of Directors shall hold at least four regular meetings, namely annual meeting, semi-annual meeting and quarterly meetings, each year to consider such proposals as the Company’s annual report of the previous year, the semi-annual report of this year and the quarterly reports of the first quarter and third quarter of this year. Other meetings are the extraordinary meetings of the Board of Directors.’’

2. The content of the existing Article 4:

‘‘The Board of Directors will perform the following duties:

(I) convening the shareholders’ general meeting and reporting to the shareholders’ general meeting;
(II) implementing the resolutions of the shareholders’ general meeting;
(III) determining the operation plan and investment plan of the Company;
(IV) formulating the annual financial budget and final account of the Company;
(V) formulating the profit distribution plan and loss remedy plan of the Company;
(VI) formulating the plan of the Company regarding registered capital increase or decrease, bonds or other securities issue and listing;
(VII) drafting the plan of the Company regarding material acquisition, stock repurchase, merger, division and dissolution;

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APPENDIX IV

PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR BOARD MEETINGS

(VIII) determining such matters of the Company as outbound investment, asset purchase and sale, asset mortgage, outbound guarantee, entrusted wealth management and related party transaction within the scope of authorization by the shareholders’ general meeting;
(IX) determining the setup of the internal management organization of the Company;
(X) employing or dismissing the president and the secretary of the Board of Directors of the Company; employing or dismissing such senior management personnel of the Company as the vice president, the assistant president and the finance director as nominated by the president, and determining their remuneration and awards and punishment;
(XI) formulating the basic management rules of the Company;
(XII) formulating the amendment to the Articles of Association;
(XIII) managing the information disclosure of the Company;
(XIV) submitting proposals to the shareholders’ general meeting regarding the employment or the replacement of the accounting firm carrying out audit for the Company;
(XV) listening to the president’s reports and inspecting the president’s work;
(XVI) drafting the directors’ and the independent directors’ remuneration and allowance standards; and
(XVII) performing other duties stipulated in laws, regulations or the Articles of Association and granted by the shareholders’ general meeting.’’

To be amended as:

‘‘The Board of Directors will perform the following duties:
(I) convening the shareholders’ general meeting and reporting to the shareholders’ general meeting;
(II) implementing the resolutions of the shareholders’ general meeting;
(III) determining the operation plan and investment plan of the Company;
(IV) formulating the annual financial budget and final account of the Company;
(V) formulating the profit distribution plan and loss remedy plan of the Company;

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APPENDIX IV

PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR BOARD MEETINGS

(VI) formulating the plan of the Company regarding registered capital increase or decrease, bonds or other securities issue and listing;
(VII) drafting the plan of the Company regarding material acquisition, stock repurchase, merger, division and dissolution;
(VIII) determining such matters of the Company as outbound investment, asset purchase and sale, asset mortgage, outbound guarantee, entrusted wealth management and related party transaction within the scope of authorization by the shareholders’ general meeting unless otherwise stipulated by the local securities regulatory authority and stock exchange in the place where the stocks of the Company are listed;
(IX) determining the setup of the internal management organization of the Company;
(X) employing or dismissing the president and the secretary of the Board of Directors of the Company; employing or dismissing such officers of the Company as the vice president, the assistant president and the finance director as nominated by the president, and determining their remuneration and awards and punishment;
(XI) formulating the basic management rules of the Company;
(XII) formulating the amendment to the Articles of Association;
(XIII) managing the information disclosure of the Company;
(XIV) submitting proposals to the shareholders’ general meeting regarding the employment or the replacement of the accounting firm carrying out audit for the Company;
(XV) listening to the president’s reports and inspecting the president’s work;
(XVI) drafting the directors’ and the independent directors’ remuneration and allowance standards;
(XVII) performing the duties set out in D.3.1 of the Code on Corporate Governance Practices, including (1) to develop and review an issuer’s policies and practices on corporate governance and make recommendations to the board; (2) to review and monitor the training and continuous professional development of directors and senior management; (3) to review and monitor the issuer’s policies and practices on compliance with legal and regulatory requirements; (4) to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and directors; and (5) to review the issuer’s compliance with the code and disclosure in the Corporate Governance Report; and

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APPENDIX IV PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR BOARD MEETINGS

(XVIII) performing other duties stipulated in laws, regulations or the Articles of Association and granted by the shareholders’ general meeting.’’

3. The content of the existing Article 14:

‘‘Article 14 In case of any of the following events, the Chairman shall convene the extraordinary meeting of the Board of Directors:

(I) The Chairman deems it necessary;
(II) More than one-third directors jointly propose to hold the meeting;
(III) More than a half of all the independent directors jointly propose to hold the meeting;
(IV) The Board of Supervisors proposes to hold the meeting; or
(V) The president proposes to hold the meeting.’’

To be amended as:

‘‘Article 16 In case of any of the following events, the Chairman shall convene the extraordinary meeting of the Board of Directors within 10 days:

(I) The Chairman deems it necessary;
(II) The shareholders representing more than one-tenth voting shares jointly propose to hold the meeting;
(III) More than one-third directors jointly propose to hold the meeting;
(IV) More than a half of all the independent directors jointly propose to hold the meeting;
(V) The Board of Supervisors proposes to hold the meeting; or
(VI) The president proposes to hold the meeting.’’

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR BOARD MEETINGS

APPENDIX IV

The following content is to be inserted:
‘‘Chapter 4 Members of the Board of Directors

Article 11 The Company will consider various aspects when setting up the Board of Directors so that the members of the Board of Directors may be diversified, including but not limited to gender, age, culture and educational background, professional experience, skills and knowledge. The Company will decide the members of the Board of Directors based on such aspects and after taking such objective conditions into consideration as comprehensive value to the business and development of the Company, contribution to the Board of Directors and diversification of the members of the Board of Directors.

Article 12 The Board of Directors of the Company shall include at least three independent non-executive directors, accounting for at least one-third of all the members of the Board of Directors, and one of the independent non-executive directors shall possess the appropriate professional qualification or the proper accounting or relevant financial management skills.’’

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS

APPENDIX V

The Rules and Procedures for Supervisory Committee Meetings are written in Chinese and have no official English version. Therefore, any English version is for reference only, and in case of any discrepancy, the Chinese version shall prevail.

For the purpose of further improving and regulating the rules and procedures and decisionmaking of the Board of Supervisors of the Company and raising the work efficiency and the level of scientific decision-making of the Board of Supervisors, the Board of Supervisors proposed to amend and refine part of the content of the Rules and Procedures for Supervisory Committee Meetings:

1. The content of the existing Article 6:

‘‘The Board of Supervisors has one Chief Supervisor who shall be elected by more than a half of all the supervisors.’’

To be amended as:

‘‘The Board of Supervisors has one Chief Supervisor who shall be elected and dismissed by more than two-thirds of all the supervisors via voting.’’

2. The content of the existing Article 13:

‘‘The Board of Supervisors mainly performs the following duties:

(I) auditing and giving written auditing comments on the regular report of the Company formulated by the Board of Directors;
(II) inspecting the finance of the Company;
(III) supervising the performance of the duties by the directors, the president and other senior management personnel and proposing to dismiss the directors, the president and other senior management personnel who violate laws, administrative regulations, the Articles of Association or the resolutions of the shareholders’ general meetings;
(IV) requiring the directors, the president and other senior management personnel to correct their conducts which damage the interests of the Company;
(V) proposing to hold the extraordinary general meeting and convening and presiding over the shareholders’ general meeting if the Board of Directors fails to convene and preside over the shareholders’ general meeting in accordance with the Company Law;
(VI) submitting proposals to the shareholders’ general meeting;

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APPENDIX V

PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS

(VII) raising lawsuits against the directors, the president and other senior management personnel in accordance with Article 152 of the Company Law;
(VIII) investigating the abnormality in the operation of the Company, if any; and
(IX) performing other duties stipulated by the Articles of Association or granted by the shareholders’ general meeting.’’

To be amended as:

‘‘The Board of Supervisors mainly performs the following duties:
(I) auditing and giving written auditing comments on the regular report of the Company formulated by the Board of Directors;
(II) inspecting the finance of the Company;
(III) supervising the performance of the duties by the directors, the president and other senior management personnel and proposing to dismiss the directors, the president and other senior management personnel who violate laws, administrative regulations, the Articles of Association or the resolutions of the shareholders’ general meetings;
(IV) requiring the directors, the president and other senior management personnel to correct their conducts which damage the interests of the Company;
(V) proposing to hold the extraordinary general meeting and convening and presiding over the shareholders’ general meeting if the Board of Directors fails to convene and preside over the shareholders’ general meeting in accordance with the Company Law;
(VI) submitting proposals to the shareholders’ general meeting;
(VII) raising lawsuits against the directors, the president and other senior management personnel in accordance with Article 152 of the Company Law;
(VIII) checking the financial reports, operation reports, profit distribution plans and other financial materials to be submitted by the Board of Directors to the shareholders’ general meeting, and, in case of any doubt, employing certified public accountants or practicing auditors to review the same in the name of the Company;
(IX) investigating the abnormality in the operation of the Company, if any, and, if necessary, employing accounting firms, law firms and other professional organizations to render assistance at the cost of the Company; and

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PROPOSED AMENDMENTS TO THE RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS

APPENDIX V

(X) performing other duties stipulated by the Articles of Association or granted by the shareholders’ general meeting.’’

3. The content of the existing Article 15:

‘‘The Board of Supervisors holds at least one regular meeting each year to report to the shareholders’ general meeting its work during the latest accounting year. The other meetings are extraordinary meetings which may be held as proposed by the Chief Supervisor or more than a half of all the supervisors. The time, place, contents, attendees and other issues of the Board of Supervisors shall be decided by the Chief Supervisor under normal conditions. The Chief Supervisor shall send the meeting notice to various relevant personnel through the Secretary Office of the Board of Directors.’’

To be amended as:

‘‘The Board of Supervisors holds at least one regular meeting every 6 months to report to the shareholders’ general meeting its work during the latest accounting year. The other meetings are extraordinary meetings which may be held as proposed by the Chief Supervisor or more than a half of all the supervisors. The time, place, contents, attendees and other issues of the Board of Supervisors shall be decided by the Chief Supervisor under normal conditions. The Chief Supervisor shall send the meeting notice to various relevant personnel through the Secretary Office of the Board of Directors.’’

– 64 –

APPENDIX VI

LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (2015-2017)

The ‘‘Livzon Pharmaceutical Group Inc.’s Shareholders’ Return Plan for the Coming Three Years (2015-2017)’’ is written in Chinese and have no official English version. Therefore, any English version is for reference only, and in case of any discrepancy, the Chinese version shall prevail.

In order to improve and refine the profit distribution decision-making and monitoring mechanism of Livzon Pharmaceutical Group Inc. (hereinafter referred to as the ‘‘Company’’), actively generate returns to the investors of the Company and simultaneously guide the investors to establish the concepts of ‘‘long-term investment’’ and ‘‘rational investment’’, the Board of the Company has formulated the Shareholders’ Return Plan for the Coming Three Years (2015-2017) (hereinafter referred to as the ‘‘Plan’’) in accordance with the relevant documents of the CSRC including ‘‘Notice Regarding Further Implementation of Cash Dividends Distribution of Listed Companies’’ (Zheng Jian Fa [2012] No. 37) and ‘‘Listed Companies Regulatory Guidance No.3 - Cash Dividends Distribution of Listed Companies’’ (CSRC Notice [2013] No. 43) as well as the relevant requirements of ‘‘Articles of Association of Livzon Pharmaceutical Group Inc.’’ (hereinafter referred to as the ‘‘Articles’’) in respect of the profit distribution policy.

Rule 1 Factors taken into consideration in the formulation of the Plan

In order to cater for the long-term and sustainable development of the Company, take into consideration factors including development trends of the industry, development strategy plans of the Company and shareholders’ returns as a whole, as well as establish a sustainable, stable and scientific return plan and mechanism for the investors, a systematic arrangement shall be in place in respect of the profit distribution of the Company to ensure the reasonableness, sustainability and stability of the profit distribution policy.

Rule 2 Basis of Formulation of the Plan

In accordance with the relevant provisions of the Articles in respect of profit distribution, regarding the Shareholders’ Return Plan of the Company, the opinions of the shareholders (especially the minority shareholders), independent directors and supervisors are fully considered and heard and that the key fundamental principle of cash dividend distribution is upheld. Regarding profit distribution of the Company, reasonable investment returns to investors shall be emphasized. The Company implements a sustainable and stable profit distribution policy.

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APPENDIX VI

LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (2015-2017)

Rule 3 Details of the Shareholders’ Return Plan for the Coming Three Years (2015-2017):

Regarding profit distribution of the Company, reasonable investment returns to investors shall be emphasized and that the sustainable development of the Company shall be given consideration. The sustainability and stability of the distribution policy shall be maintained as far as possible.
Profit distribution of the Company can be in the form of cash, shares, a combination of cash and shares or otherwise permitted by laws and regulations.
In principle, the Company distributes profits annually, however, where conditions allow, the Company can conduct interim cash dividend distribution.
In cash dividend distribution, the Company shall satisfy all of the following conditions:
(1) the Company’s distributable profits (i.e. profits after tax of the Company after making up for losses and setting aside reserves) realized in the year shall be positive;
(2) the auditors have issued an audit report with unqualified opinions on the financial report of the Company for the year;
Conditions for stock dividend distribution of the Company: In fulfillment of the conditions for cash dividend profit distribution, if there is a rapid growth in the operating income and net profit of the Company and it is considered by the Board of the Company that the size of the share capital and the shareholding structure of the Company are reasonable, in addition to the cash dividend profit distribution proposal, a stock dividend distribution proposal can be raised.
The Company shall actively adopt cash dividend profit distribution provided that its cash flows are sufficient for normal operations and long-term developments. The Company shall ensure that the accumulated profits distributed in cash for the last 3 years are not less than 30% of the annual average distributable profits realized in the last 3 years. The specific annual cash dividend profit distribution proportion shall be set by the Board of the Company in accordance with the relevant requirements and the operations of the Company for the year and considered and approved at the general meeting of the Company.

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APPENDIX VI

LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (2015-2017)

The Company shall take various factors as a whole into consideration, including the characteristics of the industry where it operates, the stage of development, its own operation model, the level of profitability and the investment expenses, to classify the followings and propose a differentiated cash dividend profit distribution policy:
(1) If the Company is in a mature stage of development with no significant capital expenditure arrangement, in profit distribution, the minimum percentage of cash dividend profit distribution in the profit distribution shall be 80%;
(2) If the Company is in a mature stage of development with significant capital expenditure arrangement, in profit distribution, the minimum percentage of cash dividend profit distribution in the profit distribution shall be 40%;
(3) If the Company is in a growing stage of development with significant capital expenditure arrangement, in profit distribution, the minimum percentage of cash dividend profit distribution in the profit distribution shall be 20%.

Rule 4 Formulation of, decision making in and implementation of profit distribution plan

The management and the Board of the Company shall propose a profit distribution recommendation of the Company based on the profitability, capital requirements and Shareholders’ Return Plan. The recommendation shall be put for approval at general meeting upon review and approval of the Board. The independent Directors shall issue independent opinions on the profit distribution proposal.

When determining specific cash dividend proposal of the Company, the Board shall study and discuss on, among others, the timing, conditions as well as the minimum ratio, conditions for adjustments and the requirements of decision procedures. The independent Directors shall express their opinions clearly.

The independent Directors can gather views from minority shareholders in order to propose a distribution proposal, and submit it directly to the Board for its approval.

Before the specific proposals for distributing cash dividends are considered at the general meeting, the Company shall communicate with the shareholders, especially the minority shareholders, through various channels, such that the opinions and requests of the public shareholders can be fully heard, and their concerns can be responded in a timely manner.

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APPENDIX VI

LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (2015-2017)

When specific proposals for distributing cash dividends are considered at the general meeting, the opinions and requests of the public shareholders should be fully heard. The Board, the independent Directors and shareholders who meet certain conditions may solicit votes from the Company’s shareholders at the general meeting.

If the Company fulfils the conditions for declaring cash dividends, but does not propose any cash dividend proposal, the management shall explain to the Board the reasons for not distributing dividend, and the purpose and the proposed application of the undistributed funds retained by the Company. Independent Directors shall then express their independent opinions thereon which should be disclosed to the public. A special resolution will be put forward to the general meeting for approval upon review and approval of the Board. The Company shall provide an online voting platform to its shareholders, apart from the onsite meeting, when convening the shareholders’ general meeting.
If the Company needs to adjust the profit distribution policy (especially cash dividend profit distribution policy) in its Shareholders’ Return Plan for the coming three years (2015-2017) due to significant changes in the external operating environment or its own operations, it shall be resolved by the Board after due discussion, and the independent Directors shall express and disclose their views thereon to the public, and then put forward a special resolution at the general meeting for approval.
Rule 5 The Plan shall be effective from the date on which it is considered and approved at the general meeting of the Company.
Rule 6 The Board of the Company shall be responsible for the explanation of the Plan.

The Board of Livzon Pharmaceutical Group Inc.

24 September, 2015

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AI assistant

Livzon Pharmaceutical Group Inc. — Proxy Solicitation & Information Statement 2015

49967_rns_2015-10-21_8d829d87-1f64-4153-8e11-c976e917b5ef.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]

DEFINITIONS

DEFINITIONS

DEFINITIONS

‘‘RMB’’

麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]

I. INTRODUCTION

LETTER FROM THE BOARD

II. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION, RULES AND PROCEDURES FOR GENERAL MEETINGS, RULES AND PROCEDURES FOR BOARD MEETINGS, AND RULES AND PROCEDURES FOR SUPERVISORY COMMITTEE MEETINGS

LETTER FROM THE BOARD

III. PROPOSED CHANGE OF REGISTERED ADDRESS

IV. PROPOSED FORMULATION OF ‘‘LIVZON PHARMACEUTICAL GROUP INC.’S SHAREHOLDERS’ RETURN PLAN FOR THE COMING THREE YEARS (20152017)’’（《麗珠醫藥集團股份有限公司未來三年股東回報規劃（2015-2017年）》）

LETTER FROM THE BOARD

V. FURTHER REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

2014 JOINCARE PURCHASE AGREEMENT

LETTER FROM THE BOARD

REASONS FOR ENTERING INTO THE 2014 JOINCARE PURCHASE AGREEMENT

SUPPLEMENTAL AGREEMENT

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE SUPPLEMENTAL AGREEMENT AND REVISION OF THE ANNUAL CAPS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

PRICING PRINCIPLES

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON THE JOINCARE GROUP

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

VI. EGM

LETTER FROM THE BOARD

VII. RECOMMENDATION

VIII. ADDITIONAL INFORMATION

Livzon Pharmaceutical Group Inc.* Yang Liang

麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]

REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

Independent Board Committee

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

FURTHER REVISION OF ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Background of and reasons for entering into of the Supplemental Agreement

a. Background of the Supplemental Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

b. Reasons for entering into of the Supplemental Agreement

II. Proposed terms of the Supplemental Agreement

III. Principal factors considered

a. Operating results of the Group

For the six months ended 30 June 2015

b. Historical transaction amount

c. Proposed Annual Caps

Table-2

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

d. Launch of new Flomoxef Sodium （氟氧頭孢鈉）products in 2016

Our view

e. Pricing terms

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(i) Indicative prices prescribed by the national price administrative department

(ii) Comparable market prices

Table-4

Major Products and/or Raw

Our view

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS BY DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE OF THE COMPANY

(1) Interest in shares of the Company

APPENDIX I

GENERAL INFORMATION

3. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

GENERAL INFORMATION

4. DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS

5. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

6. COMPETING INTERESTS

7. MATERIAL ADVERSE CHANGE

8. QUALIFICATIONS AND CONSENTS OF EXPERT

Livzon Pharmaceutical Group Inc. Proxy Solicitation & Information Statement 2015

**麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]**

**麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]**

**麗珠醫藥集團股份有限公司 LIVZON PHARMACEUTICAL GROUP INC.[*]**