Livzon Pharmaceutical Group Inc. - Proxy Solicitation & Information Statement 2020

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 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 ADJUSTMENT TO THE IMPLEMENTATION SITE AND INVESTMENT PLAN OF A SUB-PROJECT UNDER CERTAIN PROJECT INVESTED WITH PROCEEDS

(II) PROPOSED ADOPTION OF THE MEDIUM TO LONG-TERM BUSINESS PARTNER SHARE OWNERSHIP SCHEME (REVISED DRAFT)

(III) PROPOSED INCREASE OF THE REGISTERED CAPITAL OF THE COMPANY

(IV) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

(V) PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS INVESTED COMPANY ZHUHAI SANMED (VI) PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS CONTROLLING SUBSIDIARY LIVZON MAB

The letter from the Board is set out on pages 4 to 25 of this circular.

The Company will hold the EGM at the Conference Room on the 3rd Floor of Headquarters Building, 38 Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province, China at 2:00 p.m. on Friday, 11 December 2020. The notice convening the EGM has been dispatched on Tuesday, 17 November 2020, and the proxy form for use by the Shareholders of the Company at the EGM has also been dispatched on Tuesday, 17 November 2020.The aforesaid documents are also available for download on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.livzon.com.cn).

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 Secretariat of the Board of the Company (for A Shareholders) or the H Share Registrar of the Company, Tricor Investor Services Limited (for H Shareholders) as soon as possible and in any event no later than 24 hours before 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.

For identification purpose only

24 November 2020

CONTENTS

	Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix – Ownership Scheme (Revised Draft) . . . . . . . . . . . . . . . . . . . . . . . . . .	26

– i –

DEFINITIONS

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

“A Share(s)” the shares in the share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Shenzhen Stock Exchange (stock code: 000513)
“A Shareholder(s)” holder(s) of the A Share(s)
“Articles of Association” the articles of association of the Company, as amended from time to time
“associate(s)” has the meaning ascribed to it under the Hong Kong Listing Rules
“Board” the board of Directors of the Company
“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 Company Law on 26 January 1985 with limited liability, whose H Shares and A Shares are listed on the Hong Kong Stock Exchange and the Shenzhen Stock Exchange, respectively
“Company Law” Company Law of the PRC (《中華人民共和國公司法》), as amended, supplemented or otherwise modified from time to time
“controlling shareholder(s)” has the meaning ascribed to it under the Hong Kong Listing Rules
“Director(s)” director(s) of the Company
“EGM”
the 2020 fifth extraordinary general meeting of the Company to be held at the Conference Room on the 3rd Floor of Headquarters Building, 38 Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province, China at 2:00 p.m. on Friday, 11 December 2020
“Group”
the Company and its subsidiaries

– 1 –

DEFINITIONS

“H Share(s)”
the overseas-listed foreign shares in the share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange (stock code: 01513)
“H Shareholder(s)” holder(s) of the H Share(s)
“Hong Kong”
Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules”
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Hong Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Joincare”
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 with limited liability and listed on the Shanghai Stock Exchange in 2001 and one of the Company’s controlling shareholders
“Latest Practicable Date”
17 November 2020, being the latest practicable date for the purpose of ascertaining certain information contained in this circular prior to its publication
“Livzon MAB”
Livzon MABPharm Inc.* (珠海市麗珠單抗生物技術有限公司), a controlling subsidiary of the Company
“Livzon MAB Facilities”
the facilities limited up to RMB900,000,000 (or its equivalent in foreign currencies) in aggregate to be applied by Livzon MAB from six banks
“Livzon MAB Guarantees”
the financing guarantees limited up to RMB900,000,000 (or its equivalent in foreign currencies) in aggregate to be provided by the Company in favour of six banks to secure the Livzon MAB Facilities
“Ownership Scheme (Draft)”
the Medium to Long-term Business Partner Share Ownership Scheme (Draft) of the Company, which was approved by the 2020 first extraordinary general meeting of the Company convened on 11 February 2020

– 2 –

DEFINITIONS

“Ownership Scheme (Revised Draft)”
the Medium to Long-term Business Partner Share Ownership Scheme (Revised Draft) of the Company, which is set out in the Appendix to this circular
“PRC” or “China” the People’s Republic of China, which, for the purpose of this circular, does not include Hong Kong, the Macau Special Administrative Region and Taiwan
“RMB” Renminbi, the lawful currency of the PRC
“Shareholder(s)” the shareholder(s) of the Company
“Shenzhen Stock Exchange”
the Shenzhen Stock Exchange (深圳證券交易所)
“Shenzhen Listing Rules”

the Stock Listing Rules of the Shenzhen Stock Exchange (as amended in 2018) (《深圳證券交易所股票上市規則 (2018年修訂)》)

“Zhuhai Sanmed” Zhuhai Sanmed Biotech Inc.* (珠海聖美生物診斷技術有限公司), in which the Company holds 29.1642% equity interest as at the Latest Practicable Date
“Zhuhai Sanmed Facilities” the facilities limited up to RMB50,000,000 (or its equivalent in foreign currencies) in aggregate to be applied by Zhuhai Sanmed from two banks
“Zhuhai Sanmed Guarantees” the financing guarantees limited up to RMB50,000,000 (or its equivalent in foreign currencies) in aggregate to be provided by the Company in favour of two banks to secure the Zhuhai Sanmed Facilities
For identification purposes 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:

Mr. Tang Yanggang (President) Mr. Xu Guoxiang (Vice Chairman and Vice President)

Non-executive Directors:

Mr. Zhu Baoguo (Chairman)

Mr. Tao Desheng (Vice Chairman) Mr. Qiu Qingfeng Mr. Yu Xiong

Independent Non-executive Directors:

Mr. Bai Hua

Mr. Zheng Zhihua

Mr. Xie Yun

Registered office:

Headquarters Building, 38 Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province, China

Principal place of business in Hong Kong:

Room 1301, 13/F., China Evergrande Centre, 38 Gloucester Road, Wanchai, Hong Kong

Mr. Tian Qiusheng

Mr. Wong Kam Wa

24 November 2020

To the Shareholders

Dear Sir/Madam,

(I) PROPOSED ADJUSTMENT TO THE IMPLEMENTATION SITE AND INVESTMENT PLAN OF A SUB-PROJECT UNDER CERTAIN PROJECT INVESTED WITH PROCEEDS (II) PROPOSED ADOPTION OF THE MEDIUM TO LONG-TERM BUSINESS PARTNER SHARE OWNERSHIP SCHEME (REVISED DRAFT)

(III) PROPOSED INCREASE OF THE REGISTERED CAPITAL OF THE COMPANY

(IV) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION (V) PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS INVESTED COMPANY ZHUHAI SANMED (VI) PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS CONTROLLING SUBSIDIARY LIVZON MAB

The purpose of this circular is to provide you with relevant information to enable you to make informed decisions in voting on, among other things, the following ordinary resolution and special resolutions to be proposed at the EGM:

* For identification purpose only

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LETTER FROM THE BOARD

(I) Proposed adjustment to the implementation site and investment plan of a sub-project under certain project invested with proceeds;
(II) proposed adoption of the Ownership Scheme (Revised Draft);
(III) proposed increase of the registered capital of the Company;
(IV) proposed amendments to the Articles of Association;
(V) proposed Company’s provision of financing guarantees to its invested company Zhuhai Sanmed; and
(VI) proposed Company’s provision of financing guarantees to its controlling subsidiary Livzon MAB.

I. PROPOSED ADJUSTMENT TO THE IMPLEMENTATION SITE AND INVESTMENT PLAN OF A SUB-PROJECT UNDER CERTAIN PROJECT INVESTED WITH PROCEEDS

On 16 November 2020, the Board considered and approved the Resolution on Adjustment to the Implementation Site and Investment Plan of a Sub-Project under Certain Project Invested with Proceeds. The resolution is subject to the approval of the Shareholders by way of an ordinary resolution, details of which are as follows:

1. Information of the Non-public Issuance and the Proceeds

After receiving the “Approval to Non-public Issue of Shares by the Company” (Zheng Jian Xu Ke [2016] No.1524) issued by China Securities Regulatory Commission, the Company issued 29,098,203 shares of RMB ordinary shares (A Shares) (the “ Non-public Issuance ”) by way of non-public issuance, with a par value of RMB1 each and at an issue price of RMB50.10 per share. The total proceeds of the Non-public Issuance were RMB1,457,819,970.30. After deducting the issue expenses in the amount of RMB37,519,603.53, the net proceeds raised were RMB1,420,300,366.77 (the “ Proceeds ”). The Proceeds were transferred into the bank account of the Company by the sponsor (the lead underwriter) of the Company, Minsheng Securities Co., Ltd* (民生證券股份有限公司) and were verified by Ruihua Certified Public Accountants (LLP) which issued the related capital verification report (Ruihua Yan Zi [2016] No.40033019). The Non-public Issuance was completed on 19 September 2016. Please refer to the circulars of the Company dated 26 November 2015 and 8 April 2016, and the announcement of the Company dated 18 September 2016 for details.

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LETTER FROM THE BOARD

2. Projects invested with the Proceeds and utilisation of the Proceeds

(1) General information of projects invested with the Proceeds

The Proceeds from the Non-public Issuance were RMB1,420,300,366.77. After consideration and approval at the Company’s 2017 first extraordinary general meeting convened on 19 September 2017, the 2018 annual general meeting convened on 30 May 2019 and the 2019 annual general meeting convened on 25 May 2020, the details of the altered projects invested with the Proceeds are as follows:

No. Investment project name 1 Project for in-depth development and industrialisation upgrade of innovative Ilaprazole series (艾普拉唑系列創新產品深度開發及產業化升級項目) (the “Ilaprazole Project”) 2 Replenishment of working capital and repayment of bank loans 3 Relocation and expansion project of Livzon Group Xinbeijiang Pharmaceutical Manufacturing Inc. (first phase) (麗珠集團新北江製藥股份有限公司搬遷擴建項目(一期)) 4 Technology transformation project of bag infusion workshop for Livzon Group Limin Pharmaceutical Manufacturing Factory (麗珠集團利民製藥廠袋裝輸液車間技改項目) 5 Construction project for research & development platform for prolonged-action microsphere technologies (長效微球技術研發平台建設項目) Total	Proceeds intended to be invested (RMB’0,000) 29,562.72 51,685.32 14,328.94 5,311.73 41,141.33
	142,030.04

No.
Investment project name
1
Project for in-depth development and industrialisation
upgrade of innovative Ilaprazole series (艾普拉唑系
列創新產品深度開發及產業化升級項目)
(the “Ilaprazole Project”)
2
Replenishment of working capital and repayment of
bank loans
3
Relocation and expansion project of Livzon Group
Xinbeijiang Pharmaceutical Manufacturing Inc.
(first phase) (麗珠集團新北江製藥股份有限公司搬遷
擴建項目(一期))
4
Technology transformation project of bag infusion
workshop for Livzon Group Limin Pharmaceutical
Manufacturing Factory (麗珠集團利民製藥廠袋裝輸
液車間技改項目)
5
Construction project for research & development
platform for prolonged-action microsphere
technologies (長效微球技術研發平台建設項目)
Total

Proceeds
intended to be
invested
(RMB’0,000)
29,562.72
51,685.32
14,328.94
5,311.73
41,141.33

142,030.04

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LETTER FROM THE BOARD

(2) Utilisation of the Proceeds

As at 30 June 2020, the use of proceeds in projects invested with the Proceeds of the Non-public Issuance is as follows:

No. Investment project name 1 Ilaprazole Project 2 Replenishment of working capital and repayment of bank loans 3 Relocation and expansion project of Livzon Group Xinbeijiang Pharmaceutical Manufacturing Inc. (first phase) (麗珠集團新北江製藥股份有限公司搬遷擴建項目(一期)) 4 Technology transformation project of bag infusion workshop for Livzon Group Limin Pharmaceutical Manufacturing Factory (麗珠集團利民製藥廠袋裝輸液車間技改項目) 5 Construction project for research & development platform for prolonged-action microsphere technologies (長效微球技術研發平台建設項目) Total	Unit: RMB’0,000 Planned investment amount Cumulative investment amount 29,562.72 8,862.22 51,685.32 51,685.32 14,328.94 4,637.76 5,311.73 5,311.73 41,141.33 24,668.36 142,030.04 95,165.39	Unit: RMB’0,000 Planned investment amount Cumulative investment amount 29,562.72 8,862.22 51,685.32 51,685.32 14,328.94 4,637.76 5,311.73 5,311.73 41,141.33 24,668.36 142,030.04 95,165.39
		95,165.39

3. Overview of and reason for the adjustment to the implementation site and investment plan of a sub-project under certain project invested with proceeds (the “Proposed Adjustment”)

(1) Overview of the Proposed Adjustment

The planned investment amount of “Construction of the chemical drug lyophilized powder injection workshop (化藥凍乾粉針車間建設)”, the sub-project under the Ilaprazole Project (the “ Sub-project ”), is RMB102.60 million. The principal investment and construction include demolishing the original cephalosporin powder injection workshop, cleaning and decorating the new construction of the chemical drug lyophilized powder injection workshop, purchasing and installing the technology equipment, and

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LETTER FROM THE BOARD

purchasing and installing the supporting public system equipment and facilities. The construction site is located at 1st floor, P09 building, Livzon Industrial Park, 38 Chuangye North Road, Jinwan District, Zhuhai City. The construction period is two years, and the implementation bodies are the Company and Livzon Group Livzon Pharmaceutical Factory (麗珠集團麗珠製藥廠) (“ Livzon Pharmaceutical Factory ”). As at the Latest Practicable Date, the Proceeds used for investment in the Sub-project were RMB7.4793 million.

The Proposed Adjustment is to make adjustments to the implementation site and investment plan of the Sub-project. After the Proposed Adjustment, the construction site shall be located at 1st floor, P06 building, Livzon Industrial Park, 38 Chuangye North Road, Jinwan District, Zhuhai City. The construction shall include cleaning and decorating the new construction of the chemical drug lyophilized powder injection workshop, purchasing and installing the technology equipment, and purchasing and installing the supporting public system equipment and facilities. The construction period shall remain two years, and, however, be extended accordingly as a result of the adjustment to the construction site, which is expected to reach the conditions for use no later than 31 December 2022. The implementation bodies shall remain unchanged, i.e. the Company and Livzon Pharmaceutical Factory. The production facilities acquired with the Proceeds shall be maintained at the existing construction site for other projects of the Company. To ensure the use of the Proceeds for the designated purpose, the Company will apply its own fund in replacement of the Proceeds of RMB7.4793 million used for cleaning and decorating the workshop and purchasing equipment.

After the Proposed Adjustment, the total investment in the Ilaprazole Project will remain to be RMB295.6272 million, and the investment in the Sub-project will remain to be RMB102.60 million.

(2) Reasons for the Proposed Adjustment

During the first three quarters of 2020, the Company has maintained a rapid growth of sales of Ilaprazole Sodium for Injection (注射用艾普拉唑鈉). In light of that development of production lines are expected to require more space for expansion in the future, the existing P09 building cannot fully meet the requirements. To meet the development needs of its overall business at the current stage, the Company has decided to adjust the layout of the industrial park by changing the construction site of the Sub-project from P09 building to P06 building, so as to provide full support to the needs of production and operation of Ilaprazole Sodium for Injection (注射用艾普拉唑鈉).

The Proposed Adjustment is based on a comprehensive consideration of operation and development of the overall business of the Company at the current stage, while provide support to the needs of rapid development of its existing major projects without material impact on the projects invested with the Proceeds.

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LETTER FROM THE BOARD

4. Effects of the Proposed Adjustment on the Company

The Company has proposed the Proposed Adjustment after sufficient discussion for the purpose of accelerating the research and development progress of its existing major projects and effectively centralizing its resources on the condition that no material effect would be caused to the projects invested with the Proceeds of the Company, which meet the needs of operation development of its overall business at the current stage. After the Proposed Adjustment, the Company will continue its investment in the construction of the Sub-project, and no material adverse effect will be caused to its projects invested with the Proceeds of the Company.

II. PROPOSED ADOPTION OF THE OWNERSHIP SCHEME (REVISED DRAFT)

Reference is made to the announcements of the Company dated 23 December 2019 and 11 February 2020 and the circular of the Company dated 16 January 2020 in relation to the proposed adoption and approval of the Ownership Scheme (Draft). The Ownership Scheme (Draft) and the grant of mandate to the Board to deal with matters regarding the Ownership Scheme (Draft) were approved by the 2020 first extraordinary general meeting of the Company convened on 11 February 2020.

On 16 November 2020, the Board proposed to adopt the Ownership Scheme (Revised Draft) for further refinement of the Ownership Scheme (Draft). The revised major terms for such amendments are as follows:

Content of Revision

Chapter

Before Revision

After Revision

Special Reminder
Target Participants of the Ownership Scheme: the core 3. management personnel who play an important role in the overall performance and medium to long-term development of the Company. Target Participants for the Respective Phases shall be drawn up by the Board in the Respective Phases according to staff changes and appraisals, and shall be reviewed and determined by the general meeting.

Target Participants of the Ownership Scheme: the core management personnel who play an important role in the overall performance and medium to long-term development of the Company. Target Participants for the Respective Phases shall be drawn up by the Board in the Respective Phases according to degree of contribution to the performance results of the Company during the years of assessment, staff changes and appraisals, and shall be reviewed and determined by the general meeting.

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LETTER FROM THE BOARD

Content of Revision

Chapter

Before Revision

After Revision

Special Reminder

Duration and lock-up period of the Ownership Scheme
Duration and lock-up period of the Ownership Scheme

The Ownership Scheme shall be implemented in ten phases. Within the ten years from 2019 to 2028, the ten independently existing phases of the Ownership Scheme shall be implemented on a rolling basis and, in principle, once a year, after determining whether the incentive fund for the previous year shall be extracted or not. The duration of the Respective Phases shall be 48 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase.

The Ownership Scheme shall be implemented in multiple phases. Within the ten years from 2020 to 2029, the multiple independently existing phases of the Ownership Scheme shall be implemented on a reasonable basis and, in principle, once a year, after determining whether the Special Fund for the previous year shall be extracted or not, be determined by the Board to decide whether to implement or not. The duration of the Respective Phases shall be 48 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase.

Special Reminder 9. Upon review and approval by the general meeting of the 8. Company, the Ownership Scheme shall be implemented in ten phases. The Board shall be subsequently authorised to take charge of the extraction of the incentive fund and the implementation of the Ownership Scheme. Where the Underlying Shares are purchased through the secondary market, it shall be completed within six months after the Respective Phases are reviewed and approved by the general meeting. Where the shares are obtained by way of participating in the subscription for the Company’s nonpublic issuance of shares, it shall be implemented in accordance with relevant provisions on non-public issuance.

Upon review and approval by the general meeting of the Company, the Ownership Scheme shall be implemented in multiple phases. The Board shall be subsequently authorised to take charge of the extraction of the Special Fund and the implementation of the Ownership Scheme. Where the Underlying Shares are purchased through the secondary market, it shall be completed within six months after the Respective Phases are reviewed and approved by the general meeting. Where the shares are obtained by way of participating in the subscription for the Company’s non-public issuance of shares, it shall be implemented in accordance with relevant provisions on non-public issuance.

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LETTER FROM THE BOARD

Content of Revision Chapter Before Revision After Revision Chapter Two II. Scope of the Target Participants of the Scheme II. Scope of the Target Participants of the Scheme The scope of the Holders of the Scheme shall include the The scope of the Holders of the Scheme shall core management personnel of the Company (including its the core management personnel of the subsidiaries) who play an important role in the Company’s (including its subsidiaries) who play an overall performance and medium and long-term in the Company’s overall performance and medium and development. long-term development. Target Participants for the Respective Phases shall be drawn Target Participants for the Respective Phases up by the Board in the Respective Phases according to staff drawn up by the Board in the Respective changes and appraisals, and shall be reviewed and according to degree of contribution to the performance determined by the general meeting. results of the Company during the years of assessment,

The scope of the Holders of the Scheme shall include the core management personnel of the Company (including its subsidiaries) who play an important role in the Company’s overall performance and medium and long-term development.

Target Participants for the Respective Phases shall be drawn up by the Board in the Respective Phases according to degree of contribution to the performance results of the Company during the years of assessment, staff changes and appraisals, and shall be reviewed and determined by the general meeting.

Chapter Three I. Source of funds of the Scheme

I. Source of funds of the Scheme

The special incentive fund serves as the source of funds for the Respective Phases that will be subsequently established under the Scheme. The personnel and administration headquarters, the secretary to the Board and other departments shall be responsible for the pre-allocation of the aforementioned special incentive fund among the Participants according to the Participants’ annual appraisal results and degree of contribution and implement the Ownership Scheme upon submission to the Board and general meeting for review.

The Special Fund serves as the source of funds for the Respective Phases that will be subsequently established under the Scheme. The personnel and administration headquarters, the secretary to the Board and other departments shall be responsible for the pre-allocation of the aforementioned Special Fund among the Participants according to the Participants’ degree of contribution to the performance results of the Company during the years of assessment, staff changes and appraisals, and implement the Ownership Scheme upon submission to the Board and general meeting for review.

Chapter Three III. Number of Underlying Shares involved in the Scheme

III. Number of Underlying Shares involved in the Scheme

The Ownership Scheme formulated by the Company shall be implemented in ten phases and, in principle, one phase per year from 2020 to 2029. The specific number of shares for each phase shall be determined and disclosed by the Company in the Respective Phases.

The Ownership Scheme formulated by the Company shall be implemented in multiple phases and, after determining whether the Special Fund for the previous year shall be extracted or not, be determined by the Board to decide whether to implement or not. The specific number of shares for each phase shall be determined and disclosed by the Company in the Respective Phases.

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LETTER FROM THE BOARD

		Content of	Revision	Revision
Chapter		Before Revision		After Revision
Chapter Four	1.	Duration of the Ownership Scheme	I.	Duration of the Ownership Scheme
		The Company shall implement the ten independently		The Company shall implement the multiple
		existing phases of the Ownership Scheme on a rolling basis.		independently existing phases of the Ownership
		The duration of the Respective Phases shall be 48 months,		Scheme. The duration of the Respective Phases shall be
		which is calculated from the time when the Company makes		48 months, which is calculated from the time when the
		an announcement on the transfer of the last tranche of the		Company makes an announcement on the transfer of the
		Underlying Shares in each phase to the account in the name		last tranche of the Underlying Shares in each phase to
		of the Ownership Scheme for the current phase.		the account in the name of the Ownership Scheme for
				the current phase.
Chapter Four	4.	Termination of the Ownership Scheme	IV.	Termination of the Ownership Scheme
		(3) if not all the shares not sold before the expiration of the		3. if not all the shares not sold before the expiration of
		duration of the Respective Phases, the duration of the		the duration of the Respective Phases, the duration of
		Respective Phases may be extended upon the approval of		the Respective Phases may be extended upon the
		Holders with more than two-thirds of the effective voting		approval of Holders with more than two-thirds of the
		rights present at the Holders’Meeting and the approval of the		effective voting rights present at the Holders’ Meeting
		Board which are held three months before the expiration of		and the approval of the Board which are held 10 days
		the duration of the Respective Phases.		before the expiration of the duration of the Respective
				Phases.

Chapter Five (II) Management Committee for the Respective Phases under the II. Management Committee for the Respective Phases Scheme under the Scheme
Procedures for election of the Management Committee for 1. Procedures for election of the Management Committee the Respective Phases for the Respective Phases

The Management Committee for the Respective Phases shall comprise three members and a chairman of the Management Committee. The term of office of members of the Management Committee shall be the duration of the Respective Phases.

The Management Committee for the Respective Phases shall, in principle, comprise three members and a chairman of the Management Committee. The term of office of members of the Management Committee shall be the duration of the Respective Phases.

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LETTER FROM THE BOARD

Content of Revision

Chapter

Before Revision

After Revision

Chapter Six (IV)During the duration of the Respective Phases, where any of the following situations occurs to a Participant, such Participant shall no longer take part in the Respective Phases subsequently to be established under the Scheme, and that the Participant shall no longer be entitled to any income from the Respective Phases he/she participates that is not distributed (except for the case where the Participant takes part in the Respective Phases with self-raised funds). The Management Committee of the Respective Phases shall have the right to determine that the aforementioned income will be recovered by the Company without compensation:
(IV)During the duration of the Respective Phases, where any of the following situations occurs to a Participant, such Participant shall no longer take part in the Respective Phases subsequently to be established under the Scheme, and that the Participant shall no longer be entitled to any income from the Respective Phases he/she participates that is not distributed (except for the case where the Participant takes part in the Respective Phases with self-raised funds). The Management Committee of the Respective Phases shall have the right to determine that all underlying shares held by the Participant which are purchased by way of the Special Fund set aside by the Company and the income thereof shall be recovered without compensation and be allocated to other Participants of the corresponding Ownership Scheme:
Chapter Six (VI)During the duration of the Respective Phases, if a Participant (VI)During the duration of the Respective Phases, if a leaves, retires, dies, or otherwise becomes unfit to take part Participant leaves, retires, dies, or otherwise, the in the Scheme, relevant interests of the Participant in the Participant may continue to enjoy all his or her Scheme shall be handled as follows (except as otherwise underlying interests from the Respective Phases (except provided for in item (IV) and item (V) of this Article): as otherwise provided for in item (IV) and item (V) of this Article).

		Incentive fund set
	Funds raised by the	aside by the
Type	Participant	Company
Before the	The Participant shall	No entitlement to
expiration of	be entitled to the	any interest
the lock-up	corresponding
period	interests at the time of
	the overall clearance
After the expiration of	of the current phase of the Scheme	Entitlement to the corresponding
the lock-up		interests of the
period		established phase
		of the Scheme,
		the specific
		amount of which
		shall be
		determined by the
		Management
		Committee

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LETTER FROM THE BOARD

Content of Revision
Chapter Before Revision After Revision The aforementioned “lock-up period” refers to the lock-up period (36 months) of the Underlying Shares that are purchased through the incentive fund set aside by the Company. The Management Committee of the Respective Phases shall have the right to decide that the aforementioned income will be recovered by the Company without compensation.
Chapter Eight (II) The Company shall be responsible for formulating the (II) The Company shall be responsible for formulating the Ownership Scheme on the basis of fully soliciting the Ownership Scheme (Revised Draft) on the basis of fully opinions of employees through general employee assembly soliciting the opinions of employees through general and other organisations. The general meeting of the employee assembly and other organisations. The general Company shall consider giving authorisation to the Board to meeting of the Company shall consider giving determine or deal with the following matters, including but authorisation to the Board to determine or deal with the not limited to: following matters, including but not limited to: …… ……
1. authorising the Board to give explanation on relevant 5. authorising the Board to give explanation on relevant contents not covered in the Scheme; contents not covered in the Scheme;
1. authorising the Board to handle all other matters necessary 6. authorising the Board to decide whether or not to for the Scheme, except for the rights that are clearly implement the Ownership Scheme in the current year; stipulated in relevant documents that those rights shall be reviewed and exercised by the general meeting. 7. authorising the Board to handle all other matters necessary for the Scheme, except for the rights that are clearly stipulated in relevant documents that those rights shall be reviewed and exercised by the general meeting.

Apart from the above amendments, there are also revision or update on some terms and sequence numbers of terms of the Ownership Scheme (Revised Draft) so as to refine the expression thereof.

Full text of the terms of the Ownership Scheme (Revised Draft) is set out in the Appendix to this circular. The adoption of the Ownership Scheme (Revised Draft) is subject to the approval of Shareholders by way of a special resolution at the EGM.

Hong Kong Listing Rules Implications

The Ownership Scheme (Revised Draft) does not constitute a share option scheme pursuant to Chapter 17 of the Hong Kong Listing Rules and is a discretionary scheme of the Company.

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LETTER FROM THE BOARD

III. PROPOSED INCREASE OF THE REGISTERED CAPITAL OF THE COMPANY

In view of the fact that 8,822,350 share options were exercised in the first exercise period under the first grant of the 2018 Share Options Incentive Scheme of the Company, the share capital of the Company has been increased from 934,762,675 shares (comprising 614,898,458 A Shares and 319,864,217 H Shares) to 943,585,025 shares (comprising 623,720,808 A Shares and 319,864,217 H Shares), and the registered capital of the Company has been increased from RMB934,762,675 to RMB943,585,025.

Accordingly, the Company proposes a special resolution in respect of the increase of the registered capital of the Company to reflect the above changes to be considered and approved at the EGM.

IV. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

As the total issued share capital of the Company has been increased from 934,762,675 shares to 943,585,025 shares, and the registered capital of the Company has been increased from RMB934,762,675 to RMB943,585,025, the Company proposes to amend the Articles of Association as follows:

Existing Articles of Association Revised Articles of Association Article 6 The registered capital of the Article 6 The registered capital of the Company is RMB934,762,675. Company is RMB 943,585,025 . Article 21 Following the establishment of Article 21 Following the establishment of the Company, after public issuance of the Company, after public issuance of shares, rights issue, creation of bonus shares shares, rights issue, creation of bonus shares by transfer of capital reserve and by transfer of capital reserve and undistributed profit and repurchase of undistributed profit and repurchase of foreign-invested shares, the share capital foreign-invested shares, the share capital structure of the Company is changed as structure of the Company is changed as follows: 295,721,852 ordinary shares, of follows: 295,721,852 ordinary shares, of which 183,728,498 shares are domesticwhich 183,728,498 shares are domesticlisted domestic-invested shares, representing listed domestic-invested shares, representing 62.13% of the total number of issued 62.13% of the total number of issued ordinary shares of the Company and ordinary shares of the Company and 111,993,354 shares are domestic-listed 111,993,354 shares are domestic-listed foreign-invested shares, representing foreign-invested shares, representing 37.87% of the total number of issued 37.87% of the total number of issued ordinary shares of the Company. ordinary shares of the Company. …… ……

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LETTER FROM THE BOARD

	Existing	Existing	Articles	Articles	Articles	of	of	Association	Association	Association		Revised Articles of Association
As	approved	by a		special				resolution passed				As approved by a special resolution passed
at the shareholders’					general meeting,						after	at the shareholders’ general meeting, after
the	Company	has completed the bonus									issue	the Company has completed the bonus issue
by	way of capitalising					capital reserve to all						by way of capitalising capital reserve to all
shareholders,		the		share			capital structure of					shareholders, the share capital structure of
the	Company		is		changed as					follows:		the Company is changed as follows:
934,762,675		ordinary					shares,		of	which		934,762,675 ordinary shares, of which
614,898,458			shares			are		domestic-listed				614,898,458 shares are domestic-listed
domestic-invested				shares				and 319,864,217				domestic-invested shares and 319,864,217
shares are overseas-listed								foreign-invested				shares are overseas-listed foreign-invested
shares (H Shares), representing 65.78% and												shares (H Shares), representing 65.78% and
34.22% of		the		total			number		of	issued		34.22% of the total number of issued
ordinary shares					of			the	Company			ordinary shares of the Company
respectively.												respectively.
												As approved by a special resolution
												passed at the shareholders’ general
												meeting, subsequent to the exercise of
												share options in the first exercise period
												under the first grant of the 2018 Share
												Options Incentive Scheme of the
												Company, the share capital structure of
												the Company is changed as follows:
												943,585,025 ordinary shares, of which
												623,720,808 shares are domestic-listed
												domestic-invested shares and 319,864,217
												shares are overseas-listed foreign-invested
												shares (H Shares), representing 66.10%
												and 33.90% of the total number of issued
												ordinary shares of the Company
												respectively.

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LETTER FROM THE BOARD

Save for the proposed amendments to the Articles of Association set out above, other provisions in the Articles of Association remain unchanged.

The Company confirms that the proposed amendments to the Articles of Association will not have any adverse effect to the existing businesses and operations of the Group and the Directors confirm that the proposed amendments to the Articles of Association are in compliance with the Hong Kong Listing Rules. As confirmed by the Company’s PRC legal adviser, the proposed amendments to the Articles of Association comply with the applicable PRC laws and regulations.

The Articles of Association and aforesaid proposed amendments are written and prepared in Chinese, thus the English version is a mere translation for reference purpose only. If there is any inconsistency between the English translation and the Chinese version, the Chinese version shall prevail.

The proposed amendments to the Articles of Association are subject to the approval of Shareholders by way of special resolution at the EGM.

V. PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS INVESTED COMPANY ZHUHAI SANMED

On 16 November 2020, the Board has considered and approved the provision of joint liability guarantees to the following two banks for Zhuhai Sanmed’s applications of facility financing of no more than RMB50,000,000 or its equivalent in foreign currencies (the “ Zhuhai Sanmed Guarantees ”), details of which are set out below:

Guaranteed entity Shareholding of the Company Name of facility granting bank Currency	Maximum guarantee amount Term of guarantee Type of guarantee (RMB) (years)
Zhuhai Sanmed 29.1642% Industrial and Commercial Bank of China Ltd. RMB China Merchants Bank Co., Ltd. RMB Total RMB	30,000,000 1 Joint liability guarantee 20,000,000 1 50,000,000

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LETTER FROM THE BOARD

As at the Latest Practicable Date, the Company has not entered into any agreement in relation to the Zhuhai Sanmed Guarantees. The Company will not charge Zhuhai Sanmed any commissions, fees or costs in relation to the Zhuhai Sanmed Guarantees.

In order to ensure the fairness and equity of the Zhuhai Sanmed Guarantees, other shareholders of Zhuhai Sanmed will provide to the Company “Letters of Undertaking for Counter Guarantee”, pursuant to which they will undertake to provide counter guarantees in proportion to their shareholdings in Zhuhai Sanmed, and the guarantee period will be expired on the expiry date of the Company’s obligation under the Zhuhai Sanmed Guarantees.

Reasons for provision of the Zhuhai Sanmed Guarantees

The Zhuhai Sanmed Facilities are intended to be used to finance the general operation and business of Zhuhai Sanmed. As at the Latest Practicable Date, Zhuhai Sanmed has not obtained the Zhuhai Sanmed Facilities.

The Zhuhai Sanmed Guarantees are for the purpose of meeting the capital needs for business operation of Zhuhai Sanmed. After conducting a comprehensive evaluation on Zhuhai Sanmed’s asset quality, operation, industry prospects, solvency and credit status, based on the audited net asset of RMB85.13 million as at 31 December 2019 and the unaudited net asset of RMB84.11 million as at 30 September 2020 of Zhuhai Sanmed, the Board considered that the guarantee risks assumed by Zhuhai Sanmed Guarantees are within the controllable range and Zhuhai Sanmed has the ability to repay the debts.

The Directors (including independent non-executive Directors) consider that the Zhuhai Sanmed Guarantees are fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

Information on the Company and Zhuhai Sanmed

The Company

The Company, through its subsidiaries, is principally engaged in the research and development, production and sales of drug preparation products, active pharmaceutical ingredients and intermediates, as well as diagnostic reagents and equipment.

Zhuhai Sanmed

Zhuhai Sanmed is a limited liability company established in the PRC in 2016 which is held as to 29.1642% by the Company, 36.1584% by Ms. Li Lin and 34.6774% by the remaining 11 shareholders. It is principally engaged in the development and industrialization of liquid biopsy reagents, automation equipment and artificial intelligence cloud computing for tumors.

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LETTER FROM THE BOARD

Implications under the Hong Kong Listing Rules and the Shenzhen Listing Rules

As at the Latest Practicable Date, Ms. Li Lin is a connected person of the Company at the subsidiary level according to Rule 14A.07(1) of the Hong Kong Listing Rules, and Ms. Li Lin holds 36.1584% equity interest in Zhuhai Sanmed and accordingly Zhuhai Sanmed is an associate of Ms. Li Lin. Accordingly, the Zhuhai Sanmed Guarantees constitute connected transaction of the Company under Chapter 14A of the Hong Kong Listing Rules. By virtue of Rule 14A.76(1)(b) of the Hong Kong Listing Rules, since (1) one or more of the applicable percentage ratios (as defined in the Hong Kong Listing Rules) in respect of the Zhuhai Sanmed Guarantees exceed 0.1% but is less than 1%, (2) Zhuhai Sanmed is a connected person at the subsidiary level; and (3) the Zhuhai Sanmed Guarantees are on normal commercial terms or better, the Zhuhai Sanmed Guarantees are fully exempt from reporting, annual review, announcements, and independent Shareholders’ approval under Chapter 14A of the Hong Kong Listing Rules.

As the counter guarantees to be provided in relation to the Zhuhai Sanmed Guarantees by Ms. Li Lin together with other shareholders of Zhuhai Sanmed are on normal commercial terms or better and will not be secured by the assets of the Group, according to Rule 14A.90 of the Hong Kong Listing Rules, the above counter guarantees will be fully exempt from reporting, annual review, announcements, and independent Shareholders’ approval under Chapter 14A of the Hong Kong Listing Rules.

As Mr. Tao Desheng, a Director of the Company, and Mr. Yang Liang, a vice president of the Company, hold directorships in Zhuhai Sanmed, Zhuhai Sanmed is a related legal person of the Company pursuant to the Shenzhen Listing Rules. According to Rule 10.2.6 of the Shenzhen Listing Rules and the Articles of Association, providing guarantees for a related legal person, Zhuhai Sanmed, is subject to the approval at the general meeting of the Company.

According to the Shenzhen Listing Rules and the Articles of Association, the Zhuhai Sanmed Guarantees are subject to the approval of Shareholders by way of special resolution. It is therefore proposed at the EGM for the Shareholders’ approval for the Zhuhai Sanmed Guarantees, and to grant mandate to the Board and other persons authorised by the Board to negotiate with relevant banks regarding the amount of guarantees within the limits under the Zhuhai Sanmed Guarantees, and to execute all relevant documents.

General

Given that Mr. Tao Desheng, the non-executive Director and the vice chairman of the Company, is also a director of Zhuhai Sanmed, therefore Mr. Tao Desheng was deemed to have a material interest in the Zhuhai Sanmed Guarantees and had abstained from voting at the Board meetings approving the Zhuhai Sanmed Guarantees. Apart from Mr. Tao Desheng, no other Directors were required to abstain from voting at the Board meetings approving the Zhuhai Sanmed Guarantees.

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LETTER FROM THE BOARD

VI. PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS CONTROLLING SUBSIDIARY LIVZON MAB

Reference is made to the circular of the Company dated 29 April 2020 in relation to the provision of financing guarantees of RMB810,000,000 or its equivalent in foreign currencies by the Company to its controlling subsidiary, Livzon MAB. The above guarantees (the “ Previous Resolution ”) have been considered and approved by the annual general meeting for the year 2019 of the Company on 25 May 2020. In view of the needs of business development of Livzon MAB, Livzon MAB proposed to adjust its cap of facility financing to RMB900,000,000. Accordingly, on 16 November 2020, the Board has considered and approved the provision of joint liability guarantees to the following six banks (the “ Banks ”) for Livzon MAB’s applications of facility financing of no more than RMB900,000,000 or its equivalent in foreign currencies (the “ Livzon MAB Guarantees ”), detail terms of which are set out below:

Guaranteed entity Shareholding of the Company Name of facility granting bank Currency	Maximum guarantee amount Term of guarantee Type of guarantee Note (RMB) (years)
Livzon MAB 55.13% Industrial and Commercial Bank of China Ltd. RMB Agricultural Bank of China Limited RMB Bank of Communications Co., Ltd. (“Bank of Communications”) RMB China Merchants Bank Co., Ltd. (“Merchants Bank”) RMB China CITIC Bank Corporation Limited RMB China Development Bank RMB Total RMB	100,000,000 1 Joint liability guarantee 100,000,000 1 Amount to be shared with the Group 100,000,000 1 300,000,000 1 Amount to be shared with the Group 200,000,000 1 100,000,000 1 Amount to be shared with the Group 900,000,000

– 20 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, except for the guarantee agreement of RMB50.00 million entered into between the Company and Bank of Communications on 20 March 2020 and the guarantee agreement of RMB300.00 million entered into between the Company and Merchants Bank on 17 July 2020, the Company has not entered into any agreement in relation to the Livzon MAB Guarantees. The Company will not charge Livzon MAB any commissions, fees or costs in relation to the Livzon MAB Guarantees. Based on the audited net asset of RMB496.24 million as at 31 December 2019 and the unaudited net asset of RMB610.84 million as at 30 September 2020 of Livzon MAB, the Board considered that the guarantee risks assumed by Livzon MAB Guarantees are within the controllable range and Livzon MAB has the ability to repay the debts.

In order to ensure the fairness and equity of the Livzon MAB Guarantees, Joincare, which indirectly holds 35.75% equity interests of Livzon MAB, will provide to the Company a “Letter of Undertaking for Counter Guarantee” subject to the approval by its shareholders, pursuant to which it will undertake to provide counter guarantees in proportion to its shareholdings in Livzon MAB (the “ Joincare Counter Guarantees ”), and the guarantee period of the Joincare Counter Guarantees will be expired on the expiry date of the Company’s obligation under the Livzon MAB Guarantees. Based on the audited net assets of approximately RMB17,384.03 million and the unaudited net assets of approximately RMB18,596.42 million as at 31 December 2019 and 30 September 2020, respectively, of Joincare, the Directors are of the view that Joincare has sufficient financial ability to fulfil its obligation under the Joincare Counter Guarantees. In addition, Livzon MAB will only apply and draw down the Livzon MAB Facilities and hence the Company will only enter into specific guarantee agreements with the relevant banks in respect of Livzon MAB Guarantees upon the shareholders of Joincare approving the Joincare Counter Guarantees.

To the best knowledge, information and belief of the Board, having made all reasonable enquiries, the Banks and their ultimate beneficial owners are independent third parties.

Reasons for provision of the Livzon MAB Guarantees

As at the Latest Practicable Date, Livzon MAB was indirectly held as to 55.13% by the Company, 35.75% by Joincare and 9.12% by YF Pharmab Limited (an independent third party). The Directors (including independent non-executive Directors) consider that the Company will benefit from the provision of the Livzon MAB Guarantees in terms of facilitation of the general operation and business of Livzon MAB to be supported by the Livzon MAB Facilities, and the Company will benefit from alleviating its capital contribution requirement into Livzon MAB and optimising its capital allocation to the other profitable business segments, therefore benefiting the overall business development and financial position of the Group.

In addition, it is also common commercial practice for banks in the PRC to require guarantee from the controlling shareholder of a borrower for financing facilities. In view that Joincare will undertake to provide counter guarantees for 35.75% of the obligation of the

– 21 –

LETTER FROM THE BOARD

Company under the Livzon MAB Guarantees in favour of the Company which corresponds to its shareholdings in Livzon MAB, the Directors (including independent non-executive Directors) consider that the risk exposure to the Company is relatively low.

The Directors (including independent non-executive Directors) consider that the Livzon MAB Guarantees are fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

Intended use of the facilities granted to Livzon MAB

The Livzon MAB Facilities are intended to be used to finance the general operation and business of Livzon MAB. The amounts of the Livzon MAB Facilities have been arrived at regarding principally the funding requirements of research and development activities for Livzon MAB according to the progress of its clinical studies in the foreseeable future. As at the Latest Practicable Date, except for the facility agreement of RMB50.00 million entered into between Livzon MAB and Bank of Communications on 20 March 2020 and the facility agreement of RMB300.00 million entered into between Livzon MAB and Merchants Bank on 17 July 2020, Livzon MAB has not entered into any agreement in relation to the Livzon MAB Facilities.

Information on the Company and Livzon MAB

The Company

Livzon MAB

Livzon MAB is a limited liability company established in the PRC in 2010 which is indirectly held as to 55.13% by the Company, 35.75% by Joincare and 9.12% by YF Pharmab Limited. It is principally engaged in technological research and development for biopharmaceutical products and antibiotics.

Implications under the Hong Kong Listing Rules

As at the Latest Practicable Date, Joincare directly and indirectly held approximately 44.37% of the total issued share capital of the Company, and Livzon MAB is indirectly held as to 35.75% by Joincare. Therefore, Livzon MAB, an associate of Joincare, is a connected person of the Company under Chapter 14A of the Hong Kong Listing Rules. As such, the Livzon MAB Guarantees constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules. As the highest applicable percentage ratios (as defined in the Hong Kong Listing Rules) in respect of the Livzon MAB Guarantees exceed 0.1% but are less

– 22 –

LETTER FROM THE BOARD

than 5%, the Livzon MAB Guarantees are subject to the reporting and announcement requirements, but are exempt from the independent Shareholders’ approval requirement under Chapter 14A of the Hong Kong Listing Rules.

As the Joincare Counter Guarantees to be provided in relation to the Livzon MAB Guarantees by Joincare are on normal commercial terms or better and will not be secured by the assets of the Group, according to Rule 14A.90 of the Hong Kong Listing Rules, the Joincare Counter Guarantees will be fully exempt from reporting, annual review, announcements, and independent Shareholders’ approval under Chapter 14A of the Hong Kong Listing Rules.

This resolution (being the Livzon MAB Guarantees) involves changes to the Previous Resolution. Therefore, this resolution is subject to consideration and approval at the general meeting of the Company. If this resolution is approved at the general meeting of the Company, this resolution shall be implemented and the Previous Resolution shall cease to be effective.

The Livzon MAB Guarantees are subject to the approval of Shareholders by way of special resolution. It is therefore proposed at the EGM for the Shareholders’ approval for the Livzon MAB Guarantees, and to grant mandate to the Board and other persons authorised by the Board to negotiate with relevant banks regarding the amount of guarantees within the limits under the Livzon MAB Guarantees, and to execute all relevant documents.

General

Given that (i) Mr. Zhu Baoguo, the non-executive Director and the chairman of the Company, is also the chairman of Joincare and indirectly holds 45.95% equity interest in Joincare and 35.75% equity interest in Livzon MAB as at the Latest Practicable Date; and (ii) Mr. Qiu Qingfeng and Mr. Yu Xiong, the non-executive Directors, are also a director and a vice president of Joincare, respectively, therefore Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong were deemed to have a material interest in the Livzon MAB Guarantees and had abstained from voting at the Board meetings approving the Livzon MAB Guarantees. Apart from Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong, no other Directors were required to abstain from voting at the Board meetings approving the Livzon MAB Guarantees.

As at the Latest Practicable Date, Joincare and its associates, directly or indirectly holding approximately 44.37% of the total issued share capital of the Company, shall abstain from voting on the resolution approving the proposed provision of financing guarantees to controlling subsidiary Livzon MAB at the EGM.

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LETTER FROM THE BOARD

VII. CONVENING THE EGM

The Company will hold the EGM at the Conference Room on the 3rd Floor of Headquarters Building, 38 Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province, China at 2:00 p.m. on Friday, 11 December 2020. The notice convening the EGM has been dispatched on Tuesday, 17 November 2020, and the proxy form for use by the Shareholders of the Company at the EGM has also been dispatched on Tuesday, 17 November 2020. The aforesaid documents are also available for download on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.livzon.com.cn).

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 Secretariat of the Board of the Company (for A Shareholders) or the H Share Registrar of the Company, Tricor Investor Services Limited (for H Shareholders) as soon as possible and in any event no later than 24 hours before 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.

VIII.RECORD DATE

The record date for determining the qualification of the Shareholders to attend and vote at the EGM will be Friday, 4 December 2020. In order to qualify as Shareholders to attend and vote at the EGM, H Shareholders who are not registered must lodge all transfers of shares accompanied by the relevant share certificates with the Company’s H Share Registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Friday, 4 December 2020.

IX. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Hong Kong Listing Rules, the resolutions put forward at the EGM will be voted on by poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Poll results will be announced by the Company in accordance with Rule 13.39(5) of the Hong Kong Listing Rules after the EGM.

– 24 –

LETTER FROM THE BOARD

X. RECOMMENDATION

The Board considers that the resolutions set out in the notice of the EGM in relation to, as applicable, (I) proposed adjustment to the implementation site and investment plan of a sub-project under certain project invested with proceeds; (II) proposed adoption of the Ownership Scheme (Revised Draft); (III) proposed increase of the registered capital of the Company; (IV) proposed amendments to the Articles of Association; (V) proposed Company’s provision of financing guarantees to its invested company Zhuhai Sanmed; and (VI) proposed Company’s provision of financing guarantees to its controlling subsidiary Livzon MAB are in the interests of the Company and the Shareholders as a whole, and accordingly recommends the Shareholders to vote in favour of all above resolutions to be proposed the EGM.

XI. RESPONSIBILITY STATEMENT

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

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

Zhuhai, China

For identification purpose only

– 25 –

OWNERSHIP SCHEME (REVISED DRAFT)

APPENDIX

The following is the full text of the Ownership Scheme (Revised Draft). The Ownership Scheme (Revised Draft) 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.

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)

Medium to Long-term Business Partner Share Ownership Scheme (Revised Draft)

Declaration

The Company and all members of the Board guarantee that the contents of the information disclosed is true, accurate and complete, and there are no false records, misleading statements or major omissions.

Special Reminder

The Medium to Long-term Business Partner Share Ownership Scheme of Livzon Pharmaceutical Group Inc. (Revised Draft)_ is formulated by Livzon Pharmaceutical Group Inc. (hereinafter the “Company” or “Livzon Group”) in accordance with the _Company Law of the People’s Republic of China , the Securities Law of the People’s Republic of China , the Guiding Opinions on the Pilot Program for the Implementation of Employee Ownership Schemes by Listed Companies , the Guidelines No. 4 of the Shenzhen Stock Exchange on the Disclosure of Information by Listed Companies – Employee Ownership Schemes as well as relevant laws, administrative regulations, rules, normative documents, the provisions of the Articles of Association of Livzon Pharmaceutical Group Inc. * and the Medium to Long-term Business Partner Share Ownership Scheme of Livzon Pharmaceutical Group Inc.* (Draft) .
The Ownership Scheme follows the principles of independent decision by the company and voluntary participation of employees. There will not be any such situation of forcing employees to participate in the Ownership Scheme by way of apportionment or forced distribution.
For identification purpose only

– 26 –

OWNERSHIP SCHEME (REVISED DRAFT)

APPENDIX

Target Participants of the Ownership Scheme: the core management personnel who play an important role in the overall performance and medium to long-term development of the Company. Target Participants for the Respective Phases shall be drawn up by the Board in the Respective Phases according to degree of contribution to the performance results of the Company during the years of assessment, staff changes and appraisals, and shall be reviewed and determined by the general meeting.
Funds for the Ownership Scheme may come from the special fund of the Ownership Scheme (the “Special Fund”) set aside by the Company, employees’ legal compensation, employees’ self-raised funds and other means permitted by the laws and regulations.

The special fund system of the Ownership Scheme shall be valid for ten years, with 2019 to 2028 as the years of assessment. During the years of assessment, the Board shall be responsible for extracting the Special Fund according to the Special Fund extracting principles, and the Special Fund extracted shall be included in the management expenses of the current year.

Where the conditions for extracting the Special Fund are not met in the relevant year, the Special Fund shall not be extracted. However, there shall be no impact on the implementation of the Ownership Scheme when the Special Fund is not extracted in that year. The source of funds for the implementation may include funds raised by employees on their own and other means as permitted by the laws and regulations.

Sources of shares in the Ownership Scheme: Underlying Shares purchased through means as permitted by the laws and regulations, including purchases through the secondary market (including but not limited to auction transactions and block trades), repurchases of treasury shares by the Company, and participation in the subscription for the Company’s non-public issuance of shares.
The aggregate number of shares to be held in the Respective Phases that will be established and continued in the Ownership Scheme shall not exceed 10% of the total share capital of the Company, and the aggregate number of shares corresponding to the share of the Ownership Scheme (including all Respective Phases) to be held by a single employee shall not exceed 1% of the total share capital of the Company.

The aggregate number of the Underlying Shares shall not include shares obtained by the Holders prior to the initial public offering of shares by the Company, shares purchased through the secondary market and shares obtained through equity incentives.

Duration and lock-up period of the Ownership Scheme

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Lock-up periods of the Underlying Shares obtained by the Ownership Scheme:

(1) the lock-up period of the Underlying Shares purchased by way of employees’ legal compensation and employees’ self-raised funds shall be 12 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase;
(2) the lock-up period of the Underlying Shares purchased by way of the Special Fund set aside by the Company shall be 36 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase.

Where the Underlying Shares of the Ownership Scheme is obtained by way of participating in the subscription for the Company’s non-public issuance of shares, the lock-up period shall be 36 months, which is calculated from the time when the Company makes an announcement on the deposit of shares obtained by way of non-public issuance to the account in the name of the Ownership Scheme for the current phase.

Upon review and approval by the general meeting of the Company, the Ownership Scheme shall be implemented in multiple phases. The Board shall be subsequently authorised to take charge of the extraction of the Special Fund and the implementation of the Ownership Scheme. Where the Underlying Shares are purchased through the secondary market, it shall be completed within six months after the Respective Phases are reviewed and approved by the general meeting. Where the shares are obtained by way of participating in the subscription for the Company’s non-public issuance of shares, it shall be implemented in accordance with relevant provisions on non-public issuance.
Holders of the Ownership Scheme shall voluntarily waive their rights, including the right to vote on the shares of the Company indirectly entitled to due to their participation in the Ownership Scheme, and shall only retain the rights to the dividends and investment income of such shares.

Shareholders holding more than 5% of the shares of the Company and actual controllers shall not participate in the Ownership Scheme.

Holders of the Ownership Scheme shall voluntarily waive their rights, including the right to vote on the shares of the Company indirectly entitled to due to their participation in the Ownership Scheme, and shall only retain the rights to the dividends and investment income of such shares. Therefore, there shall neither be any arrangement nor plan for concerted action in the Respective Phases.

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Prior to the implementation of the Ownership Scheme, the Company shall fully solicit opinions from employees through organisations, such as the general employee assembly. After a draft of the Ownership Scheme is proposed and approved by the Board, it shall be submitted to the general meeting for consideration, and the Board shall be authorised to implement it upon approval by the general meeting. When the Board makes a resolution on the Ownership Scheme, it shall be approved by more than half of all unconnected Directors. Where the number of unconnected Directors present at the board meeting is less than three, the Board shall directly submit the matter to the general meeting of the Company for consideration. Shareholders who are in the following circumstances and their concerted parties should avoid from conducting a vote on the Ownership Scheme at a general meeting: any of them or their connected parties intends to become the asset management company of the Ownership Scheme, subscribes for any share of the Scheme, provides or advances funds for the Scheme, provide stocks for the Scheme, share benefits of the Scheme and other situations that may lead to an imbalance of interests.
The Ownership Scheme shall be managed by the Company itself or by a commissioned third-party agency.
(1) To be managed by the Company itself: the Holders’ Meeting that will be held in the Respective Phases shall elect a Management Committee for the Respective Phases to exercise shareholder rights on behalf of the Ownership Scheme. The Management Committee shall be the manager of the Ownership Scheme, responsible for the specific management of the Ownership Scheme.
(2) To be commissioned to a third-party agency.
After reviewing and passing the Ownership Scheme, the Board shall submit it to the general meeting for consideration. The Ownership Scheme may only be implemented upon review and approval by the general meeting.

The Company shall adopt a combination of on-site and online voting at the general meeting for considering the Ownership Scheme. The Company shall provide shareholders with an online voting platform through the trading system of the SSE so that shareholders may exercise their voting rights through the above system during the online voting period.

The implementation of the Ownership Scheme will not lead to any failure of the Company to meet the listing requirements in terms of shareholding distribution.

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Chapter	One	General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Chapter	Two	Target Participants of the Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Chapter	Three	Source of Funds, Source and Number of Shares of the Scheme. . . . .	35
Chapter	Four	Duration and Lock-up Period of the Scheme . . . . . . . . . . . . . . . . . . .	37
Chapter	Five	Management Model of the Scheme . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Chapter	Six	Disposal of Interests of the Scheme. . . . . . . . . . . . . . . . . . . . . . . . . .	45
Chapter	Seven	Modification and Termination of the Scheme . . . . . . . . . . . . . . . . . .	50
Chapter	Eight	Formulation, Approval and Implementation of the Scheme . . . . . . . .	50
Chapter	Nine	Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51

Definition

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

“Livzon Pharma, Livzon Group, Livzon Pharmaceutical Group Inc.* Company”
“Underlying Shares”

shares of the Company held by the Scheme obtained through means permitted by the laws and regulations, including purchases through the secondary market

“Scheme, Ownership Scheme”
the Medium to Long-term Business Partner Share Ownership Scheme of Livzon Pharmaceutical Group Inc.*
“ Ownership Scheme (Revised Draft) ”
the Medium to Long-term Business Partner Share Ownership Scheme of Livzon Pharmaceutical Group Inc.* (Revised Draft)
“Respective Phases”

respective phases of the Medium to Long-term Business Partner Share Ownership Scheme of Livzon Pharmaceutical Group Inc.* to be implemented in accordance with the Ownership Scheme (Revised Draft)

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“Holder(s), Target Participant(s), Participant(s)”
“Holders’ Meeting”
“Management Committee”
“ Company Law ”
“ Securities Law ”
“ Labour Contract Law ”
“ Guiding Opinions ”
“ Information Disclosure Guidelines No. 4 ”
“ Articles of Association ”
“Administrative Measures”
“CSRC”
“SSE”
“Depository and Clearing Corporation”
“RMB”
employee(s) of the Company participating in the Scheme
the meeting of Holders of the Ownership Scheme
the management committee of the Ownership Scheme
the Company Law of the People’s Republic of China
the Securities Law of the People’s Republic of China
the Labour Contract Law of the People’s Republic of China
the Guiding Opinions Concerning the Pilot Program for the Implementation of Employee Ownership Schemes by Listed Companies
The Guidelines No. 4 of the Shenzhen Stock Exchange on the Disclosure of Information by Listed Companies – Employee Ownership Schemes
the Articles of Association of Livzon Pharmaceutical Group Inc.*
the Administrative Measures for the Respective Phases (if any)
China Securities Regulatory Commission
Shenzhen Stock Exchange
Shenzhen Branch of China Securities Depository and Clearing Corporation Limited
Renminbi

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Chapter One General Provisions

The Scheme is formulated in accordance with the Company Law , the Securities Law , the Guiding Opinions , the Information Disclosure Guidelines No. 4 and other laws, regulations, normative documents and the Articles of Association based on the principles of fairness, impartiality and openness. It aims at establishing and improving the benefit sharing mechanisms among employees and shareholders of the Company as well as enhancing the cohesion of the employees and the competitiveness of the Company to ensure the realisation of the Company’s development strategies and business objectives going forward.

I. Purpose of the Scheme

At the time when Livzon Group was established 35 years ago, the Company put forward the development concept of “back to square one and start all over again”, and spared no effort in achieving the goal of becoming a leading domestic, world-class international pharmaceutical enterprise.

Against a backdrop of escalating market competition and an increasingly complex economic environment, organisational reengineering and enterprise innovation are the cores of business management and strategic development for enterprises. In order to achieve the goal of realising leapfrog development again to become a leading domestic, world-class international pharmaceutical enterprise, Livzon Group needs to display enterprise characteristics such as diligence, openness, enterprising spirit, passion, and ambition. In light of long-term future-oriented development and governance, establishing an innovative longterm incentive stock ownership mechanism for senior management and core technical teams is effective in motivating the hardworking entrepreneurial spirit of senior management and core technical personnel. By attaching rights and obligations to the Holders and establishing the business partnership mechanism of “enjoying the benefits and assuming the risk together”, it is expected to effectively advance and promote the change from “managers” to “partners” in the Company, uniting a group of era strugglers and business leaders sharing common values to carry forward entrepreneurship, promoting the long-term stable development of the Company, and realising the alignment of interests among shareholders.

The essence of the business partner Ownership Scheme lies in “performance-based stocks” and, through the arrangement of the “business partner Ownership Scheme” and the characteristics of a “business partner”, it can be of a longer term, achieving the sharing of responsibilities and values. Specifically, the Scheme is launched for the following purposes:

(I) Institutional innovation. The core management team will increase its shareholding in the Company through the business partner Ownership Scheme, which is expected to further improve the corporate governance structure and optimise the Company’s equity structure, and promote the alignment of interests and the sharing of income among shareholders, the Company, and employees, injecting internal vitality and motivation into the Company’s developments, hence ensuring the Company’s long-term, healthy, stable and sustainable development and enhance the overall value of the Company.

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(II) The core management team participating in the business partner Ownership Scheme will comprise all key personnel playing an important role in the overall performance and medium and long-term development of the Company. While continuing to promote organisational reform and improvement in efficiency, adhering to the concept of equal rights and responsibilities and promoting the tie-in of the core management team with the Company’s long-term growth values is conducive to driving the change in the mind-set of the team from being a “manager” to a “partner” in exerting their subjective initiative and actively taking on the responsibility for the Company’s long-term growth to ensure the long-term competitive advantages of the Company.
(III) Currently, the Company’s core management team compensation structure is relatively simple and there is a lack of long-term incentives. The business partner Ownership Scheme will help to optimise the compensation structure and, based on the progress in achieving the Company’s performance, setting aside the Special Fund, purchasing the Company’s shares, and locking them up in the medium and long term is conducive to long-term incentives and constraints of the core management team of the Company, hence ensuring the realisation of the Company’s long-term business goals.

II. Basic principles of the Scheme

(I) Principle of legality

Relevant entities of the Scheme must strictly abide by the market transaction rules and comply with the regulation that no stocks may be traded during sensitive periods. No party may use the Scheme to engage in securities fraud such as insider trading and market manipulation. In implementing the Scheme, the Company shall perform the procedures in strict accordance with the laws and administrative regulations, and make a disclosure of the information in a truthful, accurate, complete and timely manner.

(II) Principle of voluntary participation

The Scheme follows the principle of voluntary participation of employees, and there will be no such situation of forcing employees to participate in the Scheme by way of apportionment, forced distribution, etc.

(III) Principle of assuming one’s own risk

Holders of the Scheme shall be held responsible for one’s own profits and losses, and shall take on their own risks and have equal rights with the other investors.

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(IV) Principle of ensuring the Company’s long-term development

To ensure the long-term healthy development of the Company, the Scheme adheres to the long-term development principle in pegging personal income with the Company’s medium and long-term interests.

(V) Principles of value creation and benefit sharing

Adhering to the principles of value creation and benefit sharing, the Scheme will realise the sharing of profits and the assumption of risk with the employees.

Chapter Two Target Participants of the Scheme

I. Basis for determining the Target Participants of the Scheme

It shall be determined by the Company in accordance with the Company Law , the Securities Law , the Labour Contract Law , the Guiding Opinions and other relevant laws, administrative regulations and rules as well as relevant provisions of the Articles of Association , taking into account the actual circumstances.

II. Scope of the Target Participants of the Scheme

The aggregate number of shares to be held in the Respective Phases that will be established and continued in the Ownership Scheme shall not exceed 10% of the total share capital of the Company, and the aggregate number of shares corresponding to the share of the Ownership Scheme (including all Respective Phases) to be held by a single employee shall not exceed 1% of the total share capital of the Company.

Lawyers engaged by the Company shall give a clear opinion on whether the Target Participants, the fund and source of shares, the term and size, the management model and other issues of the Ownership Scheme are compliant with the laws and regulations, and whether the necessary review procedures are performed.

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Chapter Three Source of Funds, Source and Number of Shares of the Scheme

I. Source of funds of the Scheme

Funds for the Ownership Scheme may come from the Special Fund of the Ownership Scheme set aside by the Company, employees’ legal compensation, or funds raised by the employees themselves through means permitted by the laws and regulations.
The Company will extract a corresponding proportion of the Special Fund according to the Special Fund extraction principle, transfer it to the capital account of the Ownership Scheme and, together with the employees’ self-raised funds, purchase the Underlying Shares using the securities account of the Ownership Scheme. The Special Fund shall be extracted according to the following principles:
(1) The Special Fund shall be extracted with net profit attributable to the shareholders of the Company after deducting the extraordinary gains or loss in 2018 (RMB947.2163 million) as the base. During the period of assessment (2019-2028), the Company will use the compound growth rate of net profit achieved in each year as the assessment indicator to calculate and set aside a progressive Special Fund for each period. The ratios are set out in details as below:

Compound growth rate of net Percentage of progressive Special profit achieved in each year of Fund with a compound growth assessment (X) rate of over 15% X�15% 0 15%<X�20% 25% 20%<X 35%

Note 1: the above “compound growth rate of net profit” indicator is calculated based on the audited net profit attributable to the shareholders of the Company after deducting the extraordinary gains or loss, excluding the impact of the amount of the Special Fund being set aside for the Ownership Scheme.
Note 2: with the net profit attributable to the shareholders of the Company after deducting the extraordinary gains or loss in 2018 as the base, during the period of assessment (2019-2028), the specific values of net profit with a compound growth rate of 15% are set out below:

			Net profit attributable to the
			shareholders of the Company after
			deducting the extraordinary gains or
Year	of	assessment	loss (RMB0’000)
2019			108,929.88
2020			125,269.36
2021			144,059.76
2022			165,668.72
2023			190,519.03
2024			219,096.89
2025			251,961.42
2026			289,755.63
2027			333,218.98
2028			383,201.83

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(2) If the amount of the Special Fund to be set aside exceeds 8% of the audited net profit attributable to the shareholders of the Company after deducting the extraordinary gains or loss in that year, the Special Fund shall be set aside in the amount of 8% of the audited net profit attributable to the shareholders of the Company after deducting the extraordinary gains or loss.
(3) If the audited net profit attributable to the shareholders of the Company after deducting the extraordinary gains or loss in the current year decreases by 5% year-on-year comparing to that in the previous year due to the accrual of the Special Fund, no Special Fund shall be set aside for the year.

The Company shall measure and account for the Special Fund extracted in accordance with relevant provisions and include them in expenses for the current term.

II. Source of shares in the Scheme

centralised bidding on the secondary market (including but not limited to auction transactions and block trades);
participation in the subscription for non-public issuance of shares of the Company;
treasury shares repurchased by the Company;
other means permitted by the laws and administrative regulations.

Where the shares of the Ownership Scheme are purchased through the secondary market, the Company shall be required to complete the purchase of the Underlying Shares within six months after the Respective Phases are reviewed and approved by the general meetings. Where the Underlying Shares are obtained by way of participating in the subscription for the Company’s non-public issuance of shares, placing and other means, the Company shall carry it out in accordance with relevant provisions on non-public issuance, placing, etc.

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III. Number of Underlying Shares involved in the Scheme

The aggregate number of shares to be held in the Respective Phases that will be established and continued in the Ownership Scheme shall not exceed 10% of the total share capital of the Company, and the aggregate number of shares corresponding to the share of the Ownership Scheme (including all phases) to be held by a single employee shall not exceed 1% of the total share capital of the Company.

Chapter Four Duration and Lock-up Period of the Scheme

I. Duration of the Ownership Scheme

The Company shall implement the multiple independently existing phases of the Ownership Scheme. The duration of the Respective Phases shall be 48 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase.

II. Lock-up period for the Underlying Shares of the Ownership Scheme

The lock-up period of the Underlying Shares purchased by way of employees’ legal compensation and employees’ self-raised funds shall be 12 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase.
The lock-up period of the Underlying Shares purchased by way of the Special Fund set aside by the Company shall be 36 months, which is calculated from the time when the Company makes an announcement on the transfer of the last tranche of the Underlying Shares in each phase to the account in the name of the Ownership Scheme for the current phase.

Where the Underlying Shares of the Ownership Scheme is obtained by way of participating in the subscription for the Company’s non-public issuance of shares, the lock-up period shall be 36 months, which is calculated from the time when the Company makes an announcement on the deposit of shares obtained by way of non-public issuance into the account in the name of the Ownership Scheme for the current phase.

After the expiration of the lock-up period in each phase, the Company shall disclose the relevant status of the Ownership Scheme in a timely manner.

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III. Any changes made to the Ownership Scheme in its duration shall be subject to the consent of Holders holding more than two-thirds of the total share present at the Holders’ Meeting and shall be submitted to the Board for approval prior to implementation.

IV. Termination of the Ownership Scheme

The Respective Phases shall automatically terminate after the expiration of their duration;
after the lock-up periods of the Respective Phases expire, and if the assets in the Respective Phases are all monetary funds, the Respective Phases may be terminated in advance;
if not all the shares not sold before the expiration of the duration of the Respective Phases, the duration of the Respective Phases may be extended upon the approval of Holders with more than two-thirds of the effective voting rights present at the Holders’ Meeting and the approval of the Board which are held 10 days before the expiration of the duration of the Respective Phases.

Chapter Five Management Model of the Scheme

The highest organ of authority responsible for the internal management of the Respective Phases under the Scheme shall be the Holders’ Meeting. The Holders’ Meeting in the Respective Phases shall elect a Management Committee. The Management Committee shall perform the daily management of the Ownership Scheme in accordance with the provisions of the Scheme and shall exercise shareholder rights or authorise management agencies to exercise shareholder rights on behalf of the Holders.

It shall be determined by the general meeting whether the management of the Respective Phases under the Scheme will be taken charge of by the Company itself or will be commissioned to agencies with asset management qualifications (including but not limited to trust companies, insurance and asset management companies, securities companies and their asset management subsidiaries, fund management companies, etc.). In the case of commissioning an agency with asset management qualifications, the asset management agency shall be determined by the Board. The accrual of management fees and the payment method will be detailed in relevant provisions of the management contracts signed in the Respective Phases. Details of the main terms and conditions of the management agreements will be set out in the drafts for the Respective Phases.

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The shares and funds to be held by the Ownership Scheme shall be entrusted property, and the agency managing the Ownership Scheme shall not include the entrusted property into its inherent property. Where the agency managing the Ownership Scheme is liquidated for being dissolved, de-registered or declared bankruptcy according to law and other reasons, the entrusted property shall not belong to any of its property on the liquidation.

I. Holders’ Meetings to be held in the Respective Phases under the Scheme

The Holders’ Meeting, being the organ of authority of the Ownership Scheme, shall comprise all Holders. Holders may attend and vote in person at the Holders’ Meeting, or they may appoint other Holders to attend and vote on their behalf.

Functions and powers of the Holders’ Meeting
(1) to elect and remove members of the Management Committee;
(2) to review and decide on the revision of the Administrative Measures;
(3) to review changes to the Respective Phases and submit such matters to the Board for consideration;
(4) to review changes to the Respective Phases;
(5) when the Company raises funds by way of placing, additional issue, convertible bonds and other means during the duration of the Respective Phases, the Management Committee of the Respective Phases shall request the Holders’ Meeting to consider whether to participate in the financing and other relevant matters;
(6) to authorise the Management Committee to carry out daily management of the Respective Phases;
(7) when the Company undergoes a merger, division, change in control and other situations after the statutory lock-up period of the Respective Phases expires, to consider shortening or extending the duration and lock-up period of the Respective Phases or terminating the Respective Phases in advance;
(8) to authorise the Management Committee to clear the assets of the Respective Phases at the time of their termination;
(9) to authorise the Management Committee to exercise shareholder rights, and the Management Committee to authorise the chairman of the Management Committee to exercise shareholders rights attached to shares to be held by the Respective Phases prior to the completion of clearance and allocation of the Respective Phases (except for some shareholder rights such as voting rights voluntarily waived by the Holders);

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(10) to authorise the Management Committee to take charge of the alignment work with the asset management agency (if any);
(11) other matters that the Management Committee deems necessary to convene the Holders’ Meeting.
Procedures for the convening of the Holders’ Meeting

The first Holders’ Meeting shall be convened and presided over by the Secretary to the Board. Thereafter, the Management Committee to be elected by the Holders’ Meeting shall be responsible for convening the meeting and the chairman of the Management Committee shall preside over the meeting. When the chairman of the Management Committee is unable to perform his/her duties, he/she shall appoint a member of the Management Committee to preside over the meeting.

In convening the Holders’ Meeting, the Management Committee shall give notice of the meeting three days in advance and serve the notice to all Holders by direct delivery, mail, email or other means. In case of emergency, Holders may be notified of the meeting orally on short notice. The notice of meeting shall at least include the following items:

(1) the time and place of the meeting;
(2) the matters to be considered in the meeting (motions);
(3) the mode of holding the meeting;
(4) the convener and presider of the meeting, proposer of the ad hoc meeting and his or her written proposals;
(5) the materials necessary for voting in the meeting;
(6) the requirement that Holders shall attend in person or appoint other Holders to attend the meeting on their behalf;
(7) the contact person and contact information;
(8) the date of notification.
Voting procedures of the Holders’ Meeting
(1) After each motion is fully discussed, the presider shall timely invite Holders attending the meeting to vote. Voting shall be conducted in writing by filling in a ballot paper.
(2) Holders shall exercise their voting rights in proportion to their shares held in the Scheme in the current phase. Each share shall have one vote, and the Holders’ Meeting shall adopt the mode of signed voting.

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(3) The intent of Holders in the voting shall be divided into consent, opposition and abstention. Holders shall choose an option from one of the above intents. In the case of failing to make a choice or choosing two or more options at the same time, the Holders concerned shall be deemed to abstain from voting. Any unfilled, wrongly filled, unrecognisable ballot papers or uncast votes shall be considered as abstention. If any of the Holders votes after the presider of the meeting announces the voting results or after the end of specified voting period, such vote shall not be counted.
(4) The presider of the meeting shall announce the voting figures at the site. Except as otherwise provided by the Holders’ Meeting and in the Respective Phases, each motion shall be deemed to be approved by voting to form a valid resolution of the Holders’ Meeting if it is agreed by Holders present at the Holders’ Meeting holding more than 50% (not inclusive of the 50%) of the shares.
(5) Holders who individually or collectively hold more than 10% (inclusive of the 10%) of the shares in the Respective Phases may submit an interim motion to the Holders’ Meeting. The interim motion shall be submitted to the Management Committee five days before the holding of the Holders’ Meeting.
(6) Holders who individually or collectively hold more than 30% (inclusive of the 30%) of the shares in the Respective Phases may propose to convene the Holders’ Meeting.
(7) Where a resolution of the Holders’ Meeting needs to be submitted to the Board for review, the resolution must be submitted to the Board for review in accordance with the Articles of Association .
(8) Given the large number of Holders that will be present in the Respective Phases under the Scheme, for the sake of utmost convenience and efficiency, the Holders’ Meeting may also be conducted by communications, in written form and by other means. In the case where review and voting of the Holders’ Meeting are carried out by communications, in written form and by other means, the Management Committee shall safeguard the rights of the Holders, including the right to full information.
(9) The rules and procedures of the Holders’ Meeting may be further defined in the Administrative Measures for the Respective Phases or detailed implementation rules may be formulated separately.

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II. Management Committee for the Respective Phases under the Scheme

A Management Committee shall be set up in the Respective Phases. It shall be held accountable for the Ownership Scheme and shall be the organ responsible for the daily management of the Ownership Scheme.

Procedures for election of the Management Committee for the Respective Phases

Candidates for membership of the Management Committee for the Respective Phases shall be nominated by Holders who individually or collectively hold more than 10% (inclusive of the 10%) of the shares in the Respective Phases, and shall be elected by the Holders’ Meeting. The chairman of the Management Committee shall be elected by a majority of all the members of the Management Committee.

Obligations of members of the Management Committee

Members of the Management Committee shall abide by the laws and administrative regulations and shall owe the following obligations of loyalty to the Ownership Scheme:

(1) they may not take advantage of their positions and powers to accept bribes or other illegal income, and encroach upon the property of the Ownership Scheme;
(2) they may not misappropriate funds of the Ownership Scheme;
(3) without the consent of the Holders’ Meeting, assets or funds of the Ownership Scheme may not be deposited in an account opened in their own names or in the name of another individual;
(4) without the consent of the Holders’ Meeting, they may not lend funds of the Ownership Scheme to other parties or use the property of the Ownership Scheme to provide guarantee for other parties;
(5) they may not use their positions and powers to damage the interests of the Ownership Scheme.
Duties of the Management Committee
(1) to convene the Holders’ Meeting;
(2) to carry out daily management of the Respective Phases;

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(3) to request the Holders’ Meeting to consider shortening or extending the duration and lock-up period of the Respective Phases or terminating the Respective Phases in advance;
(4) to handle matters relating to the subscription of shares of the Respective Phases;
(5) to manage the securities account, fund account and other relevant accounts of the Respective Phases;
(6) to handle all matters relating to the lock-up and the lifting of restrictions on shares purchased in the Respective Phases;
(7) to exercise the asset management responsibilities in the Respective Phases, including but not limited to cashing in the Underlying Shares after the expiration of the lock-up period, and investing the cash assets of the Respective Phases in fixed income securities, wealth management products, money market funds and other cash management instruments;
(8) to clear the assets or dispose them of by other specific means upon the termination of the Respective Phases;
(9) to develop and implement schemes on matters relating to the participation in additional issues, placing, convertible bond issues and other refinancing issues of the Company during the duration of the Respective Phases;
(10) to authorise the chairman of the Management Committee to exercise shareholders rights attached to the shares to be held by the Respective Phases prior to the completion of liquidation and allocation in the Respective Phases (except for some shareholder rights such as voting rights voluntarily waived by the shareholders);
(11) to formulate and revise the Administrative Measures for the Respective Phases and submit it to the Holders’ Meeting for consideration;
(12) to protect other rights in the interest of the Holders.

Where a member of the Management Committee violates the above obligations and duties, the Holders’ Meeting shall have the right to remove such member from office. In the case where the violation causes losses to the Respective Phases, such member shall be held liable for compensation.

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Functions and powers of the chairman of the Management Committee
(1) to convene and preside over the Holders’ Meeting and meetings of the Management Committee;
(2) to exercise shareholder rights on behalf of all Holders with the authorisation of the Management Committee, except for some shareholder rights such as voting rights voluntarily waived by the Holders;
(3) to supervise and inspect the implementation of resolutions of the Holders’ Meeting and the Management Committee;
(4) to sign relevant agreements and contracts with external parties on behalf of the Ownership Scheme;
(5) other functions and powers conferred by the Management Committee.
Procedures for the convening of meetings of the Management Committee

Meetings of the Management Committee shall be convened by the chairman of the Management Committee, and all members of the Management Committee shall be notified of the meeting three days in advance. In case of emergency, Holders may be notified of the meeting orally on short notice. The notice of meeting shall include the following contents:

(1) the date and place of the meeting;
(2) the reasons for and agenda of the meeting;
(3) the materials necessary for the meeting;
(4) the date of notification.
Procedures for the holding of meetings and voting of the Management Committee
(1) Meetings of the Management Committee shall be held only when more than half of the members of the Management Committee are present.
(2) Resolutions of the Management Committee must be passed by a majority of all members of the Management Committee.
(3) The “one person, one vote” principle shall be adopted for voting on resolutions of the Management Committee. Voting shall be conducted by signed ballot.

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(4) In the meetings of the Management Committee, on the premise that members of the Management Committee can fully express their opinions, resolutions may be adopted by way of email or other means and shall be signed by the members attending the meeting.
(5) Meetings of the Management Committee shall be attended by members of the Management Committee in person. If any member is unable to attend the meeting for any reason, he/she may appoint another member of the Management Committee in writing to attend the meeting on his/her behalf, and the member who attend the meeting on his/her behalf shall exercise the rights within the scope of authorisation. Any failure of attending a meeting of the Management Committee or appointing a representative to attend the meeting shall be deemed to waive the right to vote at that meeting.
(6) The Management Committee shall form a resolution in respect of decisions made on the matters that are discussed at the meeting, and members of the Management Committee shall give their signature on the resolution at the meeting.
Ways of participation in the Scheme when the Company finances during the duration of the Scheme

When the Company raises funds by way of placing, additional issues, convertible bonds and other means during the duration of the Respective Phases, the Management Committee of the Respective Phases shall request the Holders’ Meeting of the Respective Phases to consider whether to participate in the financing and other relevant matters.

Chapter Six Disposal of Interests of the Scheme

I. Asset composition of the Scheme

(I) shares of the Company;
(II) cash and the interests generated;
(III) other assets such as proceeds from the asset management.

Assets under the Respective Phases shall be independent of one another and independent of assets of the Company and the custodian. The Company, the custodian as well as creditors of the Company and the custodian shall have no right to freeze, seize, pledge or impose other sanctions on assets under the Ownership Scheme.

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II. Disposal methods of the assets of the Scheme

(I) Disposal methods after the expiration of the duration

After the expiration of the duration, assets of the Scheme shall be disposed of in the following ways:

The Holders’ Meetings of the Respective Phases shall authorise the Management Committee to complete clearance within 15 working days from the expiration of the duration or termination of the Scheme. After deducting relevant taxes and fees according to law, the allocation of interests shall be carried out in accordance with relevant regulations under the Administrative Measures for the Respective Phases.
If any of the Underlying Shares is still included in the assets which are held by the Respective Phases, the Management Committee of the Respective Phases shall determine a specific way of disposal.

During the lock-up period of the Respective Phases, the shares or interests of the Holders of the Respective Phases may not be transferred, withdrawn or used for any mortgage, pledge, guarantee and repayment of debt.

(II) Disposal methods after the expiration of the lock-up period
The specific way of allocating interests after the expiration of the lock-up period of the Respective Phases shall be determined by the Management Committee of the Respective Phases in accordance with the Respective Phases.
After the lock-up period of the Scheme expires, interests of the Scheme may be disposed of according to one of the following ways:
- (1) to continue to hold the Underlying Shares during the duration of the Scheme;
- (2) to sell the Underlying Shares that are purchased by the Scheme within the duration of the Scheme;
- (3) to transfer the ownership of the Underlying Shares to the personal accounts of Holders of the Scheme;
- (4) other ways as permitted by the laws, administrative regulations, rules or normative documents.

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After the lock-up period of the Respective Phases expires, in the case where a phase of the Scheme is managed by an asset management agency, the Management Committee shall entrust the asset management agency to sell the Underlying Shares in a centralised manner; in the case where a phase of the Scheme is managed by the Company itself, the Management Committee of that phase may sell the Underlying Shares at its option during the duration of that phase of the Scheme. Where there is distributable income after the lock-up period of the Respective Phases expires, the Management Committee of the Respective Phases shall allocate the distributable income. The Management Committee of that phase shall, after deducting relevant taxes and fees according to law, allocate the aforementioned distributable income according to the number of shares that are held by the Holders.

(III) The Ownership Scheme shall strictly abide by market transaction rules and comply with the regulation that no stocks may be traded during sensitive periods. No party may use the Scheme to engage in securities fraud such as insider trading and market manipulation. The aforementioned “sensitive periods” refer to periods during which the directors, supervisors and senior management officers of listed companies may not trade shares of the Company as stipulated in the Rules on the Management of Shares Held by the Directors, Supervisors and Senior Management Officers of Listed Companies and the Changes Thereof and other regulations. The details of which include but are not limited to:
within 30 days before the Company’s announcement of its periodic report, or if the date of announcement of the periodic report is postponed due to special reasons, the period starting from 30 days before the original date of announcement to the day before the announcement;
within ten days before the announcement of performance estimation and the announcement of performance preview of the Company;
the period starting from the date of occurrence or the date of entering the decision-making process of a major event that may have a significant impact on the trading price of the Company’s shares and their derivatives to within two trading days from the date of disclosure according to law;
other periods as required by the CSRC and the SSE.

The aforementioned “major event” refers to a transaction or any other significant matter that the Company shall disclose in accordance with the provisions of the Stock Listing Rules of the Shenzhen Stock Exchange .

In making a decision on the trading of the Company’s shares, the representative of Holders shall timely consult the Secretary to the Board of the Company on whether it is in a stock trading sensitive period.

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(IV) During the duration of the Respective Phases, where any of the following situations occurs to a Participant, such Participant shall no longer take part in the Respective Phases subsequently to be established under the Scheme, and that the Participant shall no longer be entitled to any income from the Respective Phases he/she participates that is not distributed (except for the case where the Participant takes part in the Respective Phases with self-raised funds). The Management Committee of the Respective Phases shall have the right to determine that all underlying shares held by the Participant which are purchased by way of the Special Fund set aside by the Company and the income thereof shall be recovered without compensation and be allocated to other Participants of the corresponding Ownership Scheme:
the Holder is held criminally responsible for their conduct according to law;
the Holder has violated the provisions of the Company Law , the Securities Law and other laws, administrative regulations, rules and normative documents, thus damaging the interests of the Company;
upon confirmation of the Board or the supervisory committee of the Company, the Holder is found to violate the provisions of the Articles of Association and commits a serious violation of the internal rules and policies of the Company;
the Holder establishes a labour relationship with other employers without the written consent of the Company;
the Holder violates his/her obligations to the Company, such as the restraint on competition and confidentiality;
the occurrence or existence of any other actions that is deemed by the Company to be detrimental to the interests of the Company.
(V) During the duration of the Respective Phases, where any of the following situations occurs to a Participant, the Participant may continue to enjoy the corresponding interests of the Scheme (except as otherwise provided for in item (IV) of this Article):
normal retirement in compliance with relevant policies and upon the approval of the Company, and without engaging in the investment in and employment at any business similar with that of the Company prior to clearance;
resignation from the Company due to major illness;
loss of labour capacity due to work-related injury or illness;
death due to work-related injury or illness.

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(VI) During the duration of the Respective Phases, if a Participant leaves, retires, dies, or otherwise, the Participant may continue to enjoy all his or her underlying interests from the Respective Phases (except as otherwise provided for in item (IV) and item (V) of this Article).
(VII) During the duration of the Respective Phases, where there is any other matter relating to the disposal of interests of the Scheme that is not clarified, it shall be determined by the Management Committee of the Respective Phases.

III. Taxes and fees payable by the Scheme

Securities transaction fees for the Respective Phases, including commissions and stamp duties, shall be accrued at the time of occurrence of the investment or transaction and paid according to the prescribed proportions. In addition to commissions and stamp duties, other expenses including asset management fees (if any) and custodial fees (if any) shall be borne by the Participants in accordance with relevant laws, regulations and corresponding agreements. With respect to personal income taxes or other contingent taxes payable by the Participants due to their participation in the Scheme, the Company shall be obliged to withhold and pay such taxes on their behalf. After the shares are sold, the taxes shall be deducted from the income in the name of the Participants before redeeming it to the Participants.

All taxpayers involved in the Respective Phases shall perform their tax obligations in accordance with national tax laws and regulations. For the Company’s financial and accounting treatment of the Scheme as well as its taxation and other issues, they shall be implemented in accordance with relevant financial policies, accounting standards and tax systems.

According to the provisions of the Scheme, after conditions for the growth in performance are met, a certain proportion of the Special Fund shall be extracted as the source of funds for schemes under the Scheme, which may have a certain impact on the operating performance of the Company.

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Chapter Seven

Modification and Termination of the Scheme

I. During the duration of the Scheme, any changes made to the Respective Phases shall be submitted to the Board for review and approval after being considered by the Holders’ Meeting. Subject to compliance with the Ownership Scheme (Revised Draft) , any changes to the Respective Phases under the Scheme shall be determined by the Holders’ Meeting in the Respective Phases.
II. The Scheme shall be terminated upon expiration of its duration. The Board may extend and shorten the duration of the Scheme after deliberation by the Holders’ Meeting. The provisions on the extension and shortening of the duration and lock-up period of the Respective Phases shall be subject to the scheme of the Respective Phases.
III. If the Company undergoes a merger, division, or change in control for any reason, subject to compliance with relevant laws and regulations, the Scheme and the Respective Phases shall continue to be implemented, except for the cases where the Holders’ Meeting of the Respective Phases makes a decision on shortening or extending the duration and lock-up period or terminating the Respective Phases in advance.

Chapter Eight Formulation, Approval and Implementation of the Scheme

I. The general meeting of the Company shall be the highest organ of authority of the Scheme, responsible for the approval of the Scheme.
II. The Company shall be responsible for formulating the Ownership Scheme (Revised Draft) on the basis of fully soliciting the opinions of employees through general employee assembly and other organisations. The general meeting of the Company shall consider giving authorisation to the Board to determine or deal with the following matters, including but not limited to:
authorising the Board to extract the annual Special Fund and determine the detailed allocation plans;
authorising the Board to decide on the modification of the Ownership Scheme (Revised Draft) , including but not limited to the disqualification of Holders, addition of Holders, changes in the shares of Holders, handling of matters relating to the succession of deceased Holders, and early termination of the Ownership Scheme according to the provisions of the Ownership Scheme (Revised Draft) ;
authorising the Board to make a decision on the extension or shortening of the duration of the Scheme;
authorising the Board to make decisions in respect of the engagement and change of intermediaries, such as asset managers and custodians, for the Respective Phases under the Scheme;

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authorising the Board to give explanation on relevant contents not covered in the Scheme;
authorising the Board to decide whether or not to implement the Ownership Scheme in the current year;
authorising the Board to handle all other matters necessary for the Scheme, except for the rights that are clearly stipulated in relevant documents that those rights shall be reviewed and exercised by the general meeting.
III. The independent Directors of the Company shall be responsible for expressing independent opinions on whether the Ownership Scheme is conducive to the sustainable development of the Company, whether there is any situation that is detrimental to the Company and its interests as well as the legitimate rights and interests of minority shareholders, whether the opinions of employees have been sought prior to the launch of the Scheme, and whether there is any such situation of forcing employees to participate in the Ownership Scheme by apportionment, forced distribution and other means.
IV. The supervisory committee of the Company shall be responsible for expressing independent opinions on whether the Ownership Scheme is conducive to the sustainable development of the Company, whether there is any situation that is detrimental to the Company and its interests as well as the legitimate rights and interests of minority shareholders, whether the opinions of employees have been sought prior to the launch of the Scheme, and whether there is any situation of forcing employees to participate in the Ownership Scheme by apportionment, forced distribution and other means.

Chapter Nine Other Matters

Where any of the provisions of the Scheme is in conflict with relevant national laws, administrative regulations, rules and normative documents, it shall be implemented in accordance with the relevant national laws, administrative regulations, rules and normative documents.

The Scheme shall be interpreted by the Board, and shall take effect after the review and approval by the general meeting of the Company.

Livzon Pharmaceutical Group Inc.* The Board of Directors 17 November 2020

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AI assistant

Livzon Pharmaceutical Group Inc. — Proxy Solicitation & Information Statement 2020

49967_rns_2020-11-23_9c82e55e-1fa4-4d5d-b609-a93ce86a1c22.pdf

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

(I) PROPOSED ADJUSTMENT TO THE IMPLEMENTATION SITE AND INVESTMENT PLAN OF A SUB-PROJECT UNDER CERTAIN PROJECT INVESTED WITH PROCEEDS

(IV) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

DEFINITIONS

DEFINITIONS

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

(Stock code: 1513)

Executive Directors:

Non-executive Directors:

Independent Non-executive Directors:

Registered office:

Principal place of business in Hong Kong:

To the Shareholders

(IV) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION (V) PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS INVESTED COMPANY ZHUHAI SANMED (VI) PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS CONTROLLING SUBSIDIARY LIVZON MAB

I. PROPOSED ADJUSTMENT TO THE IMPLEMENTATION SITE AND INVESTMENT PLAN OF A SUB-PROJECT UNDER CERTAIN PROJECT INVESTED WITH PROCEEDS

1. Information of the Non-public Issuance and the Proceeds

2. Projects invested with the Proceeds and utilisation of the Proceeds

(1) General information of projects invested with the Proceeds

(2) Utilisation of the Proceeds

(1) Overview of the Proposed Adjustment

(2) Reasons for the Proposed Adjustment

4. Effects of the Proposed Adjustment on the Company

II. PROPOSED ADOPTION OF THE OWNERSHIP SCHEME (REVISED DRAFT)

Content of Revision

Chapter

Before Revision

After Revision

LETTER FROM THE BOARD

Content of Revision

Chapter

Before Revision

After Revision

Chapter Three I. Source of funds of the Scheme

LETTER FROM THE BOARD

Content of Revision

Chapter

Before Revision

After Revision

Hong Kong Listing Rules Implications

III. PROPOSED INCREASE OF THE REGISTERED CAPITAL OF THE COMPANY

IV. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

V. PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS INVESTED COMPANY ZHUHAI SANMED

Reasons for provision of the Zhuhai Sanmed Guarantees

Information on the Company and Zhuhai Sanmed

The Company

Zhuhai Sanmed

Implications under the Hong Kong Listing Rules and the Shenzhen Listing Rules

General

VI. PROPOSED COMPANY’S PROVISION OF FINANCING GUARANTEES TO ITS CONTROLLING SUBSIDIARY LIVZON MAB

LETTER FROM THE BOARD

Reasons for provision of the Livzon MAB Guarantees

Intended use of the facilities granted to Livzon MAB

Information on the Company and Livzon MAB

The Company

Livzon MAB

Implications under the Hong Kong Listing Rules

General

VII. CONVENING THE EGM

VIII.RECORD DATE

IX. VOTING BY POLL

X. RECOMMENDATION

XI. RESPONSIBILITY STATEMENT

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

Medium to Long-term Business Partner Share Ownership Scheme (Revised Draft)

Declaration

Special Reminder

APPENDIX

Contents

Definition

Chapter One General Provisions

I. Purpose of the Scheme

II. Basic principles of the Scheme

(I) Principle of legality

(II) Principle of voluntary participation

Chapter Two Target Participants of the Scheme

I. Basis for determining the Target Participants of the Scheme

II. Scope of the Target Participants of the Scheme

Livzon Pharmaceutical Group Inc. Proxy Solicitation & Information Statement 2020