Sinco Pharmaceuticals Holdings Limited - Proxy Solicitation & Information Statement 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubts to any aspect of this circular or as to the action to be taken, you should consult your stockbrokers, licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in Sino Biopharmaceutical Limited (the “Company”), you should at once hand this circular to the purchaser or the transferee or to the bank, stockbrokers, licensed securities dealer, registered institution in securities or other agent through whom the sales or transfer was effected for transmission to the purchaser or the transferee.

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

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(Incorporated in the Cayman Islands with limited liability)

Website: www.sinobiopharm.com (Stock code: 1177)

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE RESTRUCTURING OF BEIJING TIDE

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 7 to 23 of this circular. A letter from the Independent Board Committee containing its advice to the Independent Shareholders in connection with the Restructuring is set out on pages 24 to 25 of this circular. A letter from CIMB Securities containing its advice to the Independent Board Committee and the Independent Shareholders in connection with the Restructuring is set out on pages 26 to 39 of this circular.

A notice convening the extraordinary general meeting of the Company to be held at 10:00 a.m. on Friday, 13 July, 2012 at 7th Floor, Dynasty II Room, The Dynasty Club Limited, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong or any adjournment is set out from pages 48 to 49 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy to the Company’s principal place of business in Hong Kong at Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the extraordinary general meeting of the Company. Completion and return of the form of proxy shall not preclude you from attending and voting at the extraordinary general meeting of the Company should you so wish.

This circular will remain on the “Listed Company Information” page of the website of the Stock Exchange and the website of the Company for at least seven days from the date of its posting.

22 June, 2012

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . .	24
LETTER FROM CIMB SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48

– i –

DEFINITIONS

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

“Acquisitions”
the acquisitions of the Super Demand 48% Shareholding and the France Investment BVI 45% Shareholding by the Company pursuant to the Restructuring Agreement
“associate” has the meaning ascribed to it in the Listing Rules
“Articles of Association” the articles of association of the Company
“Beijing Decheng Jingwei”
Beijing Decheng Jingwei Consultancy Co., Ltd.（北京德成經緯諮詢有限公司）
“Beijing Guorong Xinghua”
Beijing Guorong Xinghua Asset Appraisal Company Limited（北京國融興華資產評估有限責任公司）
“Beijing Taitongda”
Beijing Taitongda Information Consultancy Co., Ltd.
（北京泰通達信息諮詢有限公司）
“Beijing Tide”
Beijing Tide Pharmaceutical Co. Ltd.（北京泰德製藥股份有限公司）, a company established under the laws of the PRC whose legal address is at 8 Rong Jing Dong Street, Beijing Economic and Technological Development Zone, Beijing, the PRC
“Board”
the board of directors of the Company
“Business Day”

a day (other than a Saturday, Sunday or public holiday in Hong Kong) on which banks are generally open for business in Hong Kong

“Chia Tai Pharmaceutical Investment”
Chia Tai Pharmaceutical Investment (Beijing) Co., Ltd.
（正大製藥投資（北京）有限公司）
“CIMB Securities”

CIMB Securities Ltd., a licensed corporation under the SFO for carrying out Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities, the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements)

“CJF”

China-Japan Friendship Hospital

– 1 –

DEFINITIONS

“Company” Sino Biopharmaceutical Limited（中國生物製藥有限公司）, a company incorporated under the laws of the Cayman Islands whose shares are listed on the Main Board of the Stock Exchange “Completion” completion of the Restructuring pursuant to the Restructuring Agreement “Conditions” the conditions set out in the section headed “The Restructuring – (f) Conditions” of this circular “connected person” has the meaning ascribed to it in the Listing Rules “connected transaction” has the meaning ascribed to it in the Listing Rules “controlling shareholder” has the meaning ascribed to it in the Listing Rules “CSRC” the China Securities Regulatory Commission “Director(s)” the director(s) of the Company “Disposal” the disposal of the Sino Biopharm Beijing 51% Shareholding by the Company pursuant to the Restructuring Agreement “EGM” the extraordinary general meeting of the Company to be held to consider and, if thought fit, approve the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements)

“Framework Agreement”

the non-binding framework agreement dated 2 April, 2012 entered into between the Company, France Investment Hong Kong and Mr. Tse in relation to the Restructuring

“France Investment BVI”

France Investment (China I) Group Limited, a company incorporated under the laws of the British Virgin Islands whose registered office is at Sea Meadow House, Blackburne Highway, (P.O. Box 116), Road Town, Tortola, British Virgin Islands

“France Investment BVI 45% Shareholding”

45% of the entire issued share capital of France Investment BVI

– 2 –

DEFINITIONS

“France Investment Hong Kong” France Investment (China 1) Group Limited, a company incorporated under the laws of Hong Kong whose registered office is at Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong
“Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC
“HK$” Hong Kong dollars, the lawful currency of Hong Kong “HKFRS” the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants
“IFRS” the International Financial Reporting Standards issued by the International Accounting Standards Board
“Independent Board Committee” a committee of the Board comprising all the independent non-executive Directors, namely Mr. Lu Zhengfei, Mr. Li Dakui, Ms. Li Jun and Mr. Mei Xingbao
“Independent Shareholders” the shareholders of the Company other than Mr. Tse, Ms. Cheng, Mr. Tse Hsin and their respective associates
“JCTT” Jiangsu Chia Tai-Tianqing Pharmaceutical Co., Ltd.（江蘇正大天晴藥業股份有限公司）
“Jiangsu Fenghai” Jiangsu Chia Tai Fenghai Pharmaceutical Co., Ltd.（江蘇正大豐海製藥有限公司）
“Jiangsu Qingjiang” Jiangsu Chia Tai Qingjiang Pharmaceutical Co., Ltd.（江蘇正大清江製藥有限公司）
“Latest Practicable Date” 16 June, 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Long Stop Date” the date falling six months from the date of the Restructuring Agreement (or such other date as may be agreed between the Company and France Investment Hong Kong)

“major transaction” has the meaning ascribed to it in the Listing Rules

– 3 –

DEFINITIONS

“Model Code” the model code for Securities Transactions by Directors of Listed Issuers “Mr. Tse” Mr. Tse Ping, the founder, the chairman and an executive director of the Company “Mr. Tse Hsin” Mr. Tse Hsin, an executive director of the Company and a cousin of Mr. Tse “Ms. Cheng” Ms. Cheng Cheung Ling, an executive director of the Company and the spouse of Mr. Tse

the model code for Securities Transactions by Directors of Listed Issuers

“NJCTT” Nanjing Chia Tai Tianqing Pharmaceutical Co., Ltd.（南京正大天晴製藥有限公司）

“PRC” the People’s Republic of China (excluding, for the purpose of this circular, Hong Kong, the Macau Special Administrative Region and Taiwan)

“Proposed Listing” the proposed listing of Beijing Tide on the ChiNext of the Shenzhen Stock Exchange

“Qingdao Haier” Qingdao Chia Tai Haier Pharmaceutical Co., Ltd.（青島正大海爾製藥有限公司）

“Remarkable Industries” Remarkable Industries Limited

“Restructuring” the Disposal and the Acquisitions

“Restructuring Agreement” the restructuring agreement dated 1 June, 2012 entered into among the Company, France Investment Hong Kong and Mr. Tse

“RMB” Renminbi Yuan, the lawful currency of the PRC “SFO” the Securities and Futures Ordinance (CAP 571) “Shares” the ordinary shares of HK$0.025 each in the issued share capital of the Company “Shareholder(s)” the shareholder(s) of the Company

– 4 –

DEFINITIONS

“Shareholders’ Agreements”
collectively, the shareholders’ agreement to be entered into among the Company, Mr. Tse, France Investment Hong Kong and Super Demand relating to Super Demand, the shareholders’ agreement to be entered into among the Company, Mr. Tse, Super Demand and France Investment BVI relating to France Investment BVI and the shareholders’ agreement to be entered into among the Company, Mr. Tse, France Investment Hong Kong and Sino Biopharm Beijing relating to Sino Biopharm Beijing, in each case at Completion
“Sino Biopharm Beijing”
Sino Biopharmaceutical (Beijing) Limited, a company incorporated under the laws of Hong Kong whose registered office is at Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong
“Sino Biopharm Beijing 51% 51% of the entire issued share capital of Sino Shareholding” Biopharm Beijing
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Super Demand”
Super Demand Investments Limited, a company incorporated under the laws of the British Virgin Islands whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
“Super Demand 48% Shareholding”
48% of the entire issued share capital of Super Demand
“Target Companies”
Super Demand, France Investment BVI and Sino Biopharm Beijing, and “Target Company” means any of them
“Transaction Documents” means the Restructuring Agreement and the Shareholders’ Agreements
“US$” United States dollars, the lawful currency of United States of America
“Validated Profits”
Validated Profits Limited
“Yancheng Suhai” Yancheng Suhai Pharmaceutical Co., Ltd.（鹽城蘇海製藥有限公司）

“%” per cent.

– 5 –

DEFINITIONS

Unless otherwise stated, conversion of HK$ and US$ into RMB in this circular is based on the exchange rates of HK$1 = RMB0.8104 and US$1 = RMB6.3214 for the purpose of illustration only. No representation is made and there is no assurance that RMB, US$ or HK$ can be purchased or sold at such rate.

The English names of certain PRC entities referred to in this circular are translations from their Chinese names and are for identification purposes only. If there is any inconsistency, the Chinese name shall prevail.

– 6 –

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability) Website: www.sinobiopharm.com

(Stock code: 1177)

Executive Directors: Mr. Tse Ping (Chairman) Mr. Zhang Baowen (Vice Chairman) Mr. Xu Xiaoyang (Chief Executive Officer) Mr. Tse Hsin Ms. Cheng Cheung Ling Mr. Tao Huiqi Mr. He Huiyu

Independent Non-executive Directors: Mr. Lu Zhengfei Mr. Li Dakui Ms. Li Jun Mr. Mei Xingbao

Registered office: Codan Trust Company (Cayman) Limited Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

Head office and principal place of business: Unit 09, 41st Floor Office Tower Convention Plaza 1 Harbour Road Wanchai Hong Kong

22 June, 2012

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION THE RESTRUCTURING OF BEIJING TIDE

INTRODUCTION

On 1 June, 2012, the Company, France Investment Hong Kong and Mr. Tse entered into a restructuring agreement in relation to the restructuring of Beijing Tide to be carried out in preparation for the proposed listing of Beijing Tide on the ChiNext of the Shenzhen Stock Exchange. The Restructuring Agreement superseded the Framework Agreement entered into amongst the same parties earlier.

– 7 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information regarding the Restructuring and other information in accordance with the Listing Rules.

The Proposed Listing

As at the Latest Practicable Date, Sino Biopharm Beijing (a wholly-owned subsidiary of the Company) was the legal and beneficial owner of approximately 33.6% of the entire issued share capital of Beijing Tide.

The Company understands from the sponsor of the Proposed Listing that the CSRC is in the process of reviewing the application by Beijing Tide for the Proposed Listing submitted in December, 2010 and that, given Mr. Tse is entitled to exercise significant control over each of the Company and Beijing Tide, the Company wishes to address the concerns about the competition between the business of certain members of the Group and the business of Beijing Tide.

THE RESTRUCTURING

A summary of the major terms of the Restructuring Agreement is set out below.

(a) Date

1 June, 2012

(b) Parties

The Company : Vendor of the Disposal Purchaser of the Acquisitions France Investment Hong Kong : Purchaser of the Disposal Vendor of the Acquisitions Mr. Tse : Guarantor

(c) The Disposal

The Company has agreed to sell, and France Investment Hong Kong has agreed to purchase, the Sino Biopharm Beijing 51% Shareholding on the terms and subject to the conditions set out in the Restructuring Agreement.

Presently, Sino Biopharm Beijing is a wholly-owned subsidiary of the Company and the legal and beneficial owner of approximately 33.6% of the entire issued share capital of Beijing Tide.

– 8 –

LETTER FROM THE BOARD

The total consideration for the Disposal is HK$293,040,370.28 and has been determined by the Company and France Investment Hong Kong after arm’s length negotiation with reference to, among other things, the present market conditions, the development of the pharmaceutical industry, the original investment cost for the Sino Biopharm Beijing 51% Shareholding, the carrying value of Sino Biopharm Beijing as at 30 April, 2012 and the valuation report in respect of Beijing Tide dated 25 May, 2012 prepared by Beijing Guorong Xinghua based on the cost approach.

The original investment cost for the Sino Biopharm Beijing 51% Shareholding paid by the Company was approximately HK$38,201,000 (equivalent to approximately RMB30,959,000)

(d) The Acquisitions

France Investment Hong Kong has agreed to sell, and the Company has agreed to purchase, the Super Demand 48% Shareholding on the terms and subject to the conditions set out in the Restructuring Agreement.

France Investment Hong Kong has also agreed to procure Super Demand to sell, and the Company has also agreed to purchase, the France Investment BVI 45% Shareholding on the terms and subject to the conditions set out in the Restructuring Agreement.

Presently: (i) Mr. Tse is the legal and beneficial owner of approximately 51.33% of the entire issued share capital of France Investment Hong Kong; (ii) Super Demand is a wholly-owned subsidiary of France Investment Hong Kong; and (iii) France Investment BVI is a wholly-owned subsidiary of Super Demand and the legal and beneficial owner of approximately 24% of the entire issued share capital of Beijing Tide.

The total consideration for the Acquisitions is HK$293,040,370.28 and has been determined by the Company and France Investment Hong Kong after arm’s length negotiation with reference to, among other things, the present market conditions, the development of the pharmaceutical industry, the original investment cost for the Super Demand 48% Shareholding and the France Investment BVI 45% Shareholding, the carrying value of each of Super Demand and France Investment BVI as at 30 April, 2012 and the valuation report in respect of Beijing Tide dated 25 May, 2012 prepared by Beijing Guorong Xinghua based on the cost approach.

The total original investment cost for the Super Demand 48% Shareholding paid by France Investment Hong Kong was approximately HK$25,908,000 (equivalent to approximately RMB20,997,000), and the total original investment cost for the France Investment BVI 45% Shareholding paid by Super Demand was approximately US$3,114,000 (equivalent to approximately RMB19,685,000).

– 9 –

LETTER FROM THE BOARD

(e) Set-Off

The total consideration payable by the Company in respect of the Acquisitions will be set-off against the total consideration receivable by the Company in respect of the Disposal.

(f) Condition

Completion of the Restructuring is conditional upon the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements) having been approved by the Independent Shareholders in accordance with the Listing Rules and the Articles of Association on or before the Long Stop Date.

(g) Termination

If (i) the Condition is not satisfied on or before the Long Stop Date or (ii) the Company reasonably believes that the Condition will not be satisfied on or before the Long Stop Date, the Company is entitled to terminate the Restructuring Agreement.

(h) Completion

Completion of the Restructuring will take place within five Business Days following the satisfaction of the Condition (or on such other date as the Company and France Investment Hong Kong may agree).

Upon completion of the Restructuring, Sino Biopharm Beijing will be held as to 49% by the Company and will cease to be a subsidiary of the Company. However, for accounting purposes and in accordance with the applicable accounting standards, it will only cease to be accounted for and consolidated as a wholly-owned subsidiary of the Company in the consolidated financial statements of the Company when (i) the Proposed Listing is completed; (ii) in the event that the Proposed Listing has not taken place by 31 December, 2013, the Company elects to exercise its right under the Restructuring Agreement to unwind the Restructuring but such unwinding is not completed for any reason, including failure to satisfy the requirements under the rules of the relevant stock exchanges (including but not limited to the Listing Rules); or (iii) the Company elects not to unwind the Restructuring. In each of such cases, Sino Biopharm Beijing will then be accounted for, for accounting purposes, as an associate of the Company in its consolidated financial statements. Further details of the accounting treatment of the Restructuring are set out in the section headed “Financial Effects of the Restructuring” of this circular.

Sino Biopharm Beijing is currently a wholly-owned subsidiary of the Company and the Company has no interest in Super Demand or France Investment BVI. Upon Completion the Company will become interested in 49%, 48% and 45% respectively, of the entire issued share capital of Sino Biopharm Beijing, Super Demand and France Investment BVI respectively.

– 10 –

LETTER FROM THE BOARD

In order to protect the interests of the Company as a minority shareholder of each of the Target Companies upon completion of the Restructuring, Mr. Tse is required to enter into, and France Investment Hong Kong is required to enter into and/or procure the relevant parties to enter into, the Shareholders’ Agreements at the completion of the Restructuring. A summary of the major terms of the Shareholders’ Agreements is set out below in the section headed “Shareholders’ Agreements”.

(i) Guarantee

Mr. Tse has irrevocably and unconditionally (i) undertaken to the Company to take all such action as is necessary to procure that France Investment Hong Kong duly performs its obligations under the Transaction Documents; and (ii) guaranteed to the Company the due performance of all of the obligations of France Investment Hong Kong under the Transaction Documents.

(j) Unwinding Mechanism

In the event that the completion of the Proposed Listing has not taken place by 31 December, 2013, the Company is entitled, subject to compliance with applicable laws and rules of the relevant stock exchanges (including but not limited to the Listing Rules) to unwind the Restructuring and to require France Investment Hong Kong to:

(i) sell the Sino Biopharm Beijing 51% Shareholding back to the Company for the same total consideration (being HK$293,040,370.28);
(ii) re-purchase the Super Demand 48% Shareholding, and procure Super Demand to re-purchase the France Investment BVI 45% Shareholding, from the Company for the same total consideration (being HK$293,040,370.28); and
(iii) procure the relevant parties to terminate the Shareholders’ Agreements,

in each case on such terms and subject to such conditions as the Company may find acceptable.

– 11 –

LETTER FROM THE BOARD

SHAREHOLDERS’ AGREEMENTS

A summary of the major terms of the Shareholders’ Agreements is set out below:

(a) Reserved Matters

A Target Company shall not, and each of its shareholders shall procure the Target Company not to, take any action or pass any resolution in respect of any of the following matters without the affirmative votes of the shareholders of the Target Company representing, individually or in the aggregate, at least 75% of the voting rights in the Target Company:

(i) any amendment to the articles of association of the Target Company (other than the provisions relating to distribution of profits);
(ii) any increase in or reduction of, or any change to, the authorised share capital or the issued share capital of the Target Company;
(iii) any sale, transfer or disposal of all or substantially all of the assets of the Target Company;
(iv) any merger, consolidation or amalgamation of the business of the Target Company; and
(v) any merger, division, change in corporate form, dissolution or liquidation of the Target Company.

(b) Transfer Restrictions

Each shareholder of a Target Company shall not do and shall not agree to do, directly or indirectly, any of the following without the prior written consent of each of the other shareholders of the Target Company:

(i) sell, transfer or otherwise dispose of, or grant any option over, any of its shareholding in the Target Company or any interest in any of such shareholding;
(ii) pledge or otherwise encumber any of its shareholding in the Target Company or any interest in any of such shareholding; and
(iii) enter into any agreement with any other person in respect of the voting rights or any other rights attached to any of its shareholding in the Target Company or any interest in any of such shareholding.

(c) Distribution of Profits

A Target Company shall distribute the total amount of its annual net profits to all of its shareholders by way of cash dividends each year.

– 12 –

LETTER FROM THE BOARD

A Target Company shall not, and each of its shareholders shall procure the Target Company not to, take any action or pass any resolution in respect of any amendment to any provision of the articles of association of the Target Company relating to distribution of profits without the affirmative votes of the shareholders of the Target Company representing all of the voting rights in the Target Company.

(d) Board of Directors

Each shareholder of a Target Company shall be entitled to nominate two individuals to be the directors of the Target Company. One of the directors of the Target Company nominated by the majority shareholder of the Target Company shall act as the chairman of the board of directors of the Target Company and shall have a casting vote in the event of equality of votes or disputes.

(e) Compensation

In the event that Beijing Tide distributes a cash dividend to all of its shareholders, France Investment Hong Kong shall pay the Company an amount in cash as compensation to be calculated as follows:

P = The amount of cash compensation payable by France Investment Hong Kong to the Company
P = O – N
O = D x 33.6% x 95%

(being the amount of dividend which the Company would have received indirectly through Sino Biopharm Beijing before the completion of the Restructuring – as Sino Biopharm Beijing is a Hong Kong company, the dividend received by the Company indirectly through it is subject to a lower withholding tax rate of 5%)

N = D x 33.6% x 95% x 49% + D x 24% x 90% x 45% + D x 24% x 90% x 55% x 48%

(being the amount of dividend which the Company would have received indirectly through the Target Companies after the completion of the Restructuring – as Super Demand and France Investment BVI are British Virgin Islands companies, the dividend received by the Company indirectly through them is subject to a higher withholding tax rate of 10%)

D = The amount of the cash dividend distributed by Beijing Tide

(f) Guarantee

– 13 –

LETTER FROM THE BOARD

Agreement; and (ii) guarantee to the Company the due performance of all of the obligations of the majority shareholder of each Target Company under the relevant Shareholders’ Agreement.

SHAREHOLDING STRUCTURE

A simplified shareholding structure chart of the Company and Beijing Tide as at the Latest Practicable date is set out below:

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

Mr Tse
51.33% 100% 100%
France Investment Remarkable Validated
Hong Kong Industries Profits
8.69% 1.82% 32.20%
100%
Super Demand The Company
100% 100% 4.92% 19.2%
CJF France Beijing Sino Biopharm Beijing Decheng LTT Bio-Pharma
Investment BVI Taitongda Beijing Jingwei Co., Ltd.
28% 24% 2.02% 33.6% 0.86% 11.52%
Beijing Tide
----- End of picture text -----

– 14 –

LETTER FROM THE BOARD

A simplified shareholding structure chart of the Company and Beijing Tide upon completion of the Restructuring is set out below (assuming no change will take place in the shareholding structure of each of the relevant entities otherwise than pursuant to the Restructuring between the Latest Practicable Date and the completion of the Restructuring):

==> picture [364 x 301] intentionally omitted <==

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

Mr Tse
100% 100%
Remarkable
Validated Profits
Industries
1.82%
8.69% 32.20%
51.33%
France Investment The Company
Hong Kong
52% 48%
Super Demand
55% 45% 51% 49%
4.92% 19.2%
CJF France Beijing Sino Biopharm Beijing Decheng LTT Bio-Pharma
Investment BVI Taitongda Beijing Jingwei Co., Ltd.
28% 24% 2.02% 33.6% 0.86% 11.52%
Beijing Tide
----- End of picture text -----

INFORMATION ON MR. TSE

Mr. Tse is the founder of the Company and is the chairman of the Board and an executive Director. He is presently the legal and beneficial owner of approximately 51.33% of the entire issued share capital of France Investment Hong Kong.

As at the Latest Practicable Date, Mr. Tse and companies controlled by him were together the beneficial owner of approximately 42.71% of the entire issued share capital of the Company in aggregate and Mr. Tse is therefore a controlling shareholder of the Company.

INFORMATION ON FRANCE INVESTMENT HONG KONG

France Investment Hong Kong is a company incorporated in Hong Kong with limited liability. It is presently held as to approximately 51.33% by Mr. Tse, as to approximately 40% by Ms. Cheng and as to approximately 8.67% by Mr. Tse Hsin. Ms. Cheng is an executive Director and is the spouse of Mr. Tse and Mr. Tse Hsin is an executive Director and is a first cousin of Mr. Tse. Each of Ms. Cheng and Mr. Tse Hsin is therefore a connected person of the Company.

– 15 –

LETTER FROM THE BOARD

France Investment Hong Kong is principally engaged in investment holding and does not carry on any other business. As at the Latest Practicable Date, it was the legal and beneficial owner of the entire issued share capital of Super Demand. As at the Latest Practicable Date, save as disclosed in the simplified shareholding structure chart on page 14, France Investment Hong Kong was not the legal or beneficial owner of any share capital of any other company.

INFORMATION ON SUPER DEMAND

Super Demand is a company incorporated in the British Virgin Islands with limited liability. As at the Latest Practicable Date, it was a wholly-owned subsidiary of France Investment Hong Kong.

It is principally engaged in investment holding and does not carry on any other business. As at the Latest Practicable Date, it was the legal and beneficial owner of the entire issued share capital of France Investment BVI. As at the Latest Practicable Date, save as disclosed in the simplified shareholding structure chart on page 14, Super Demand was not the legal or beneficial owner of any share capital of any other company.

The following information is extracted from the unaudited consolidated management accounts of Super Demand for the financial years ended 31 December, 2010 and 31 December, 2011, respectively (which were prepared in accordance with IFRS):

	For the financial year	For the financial year	ended 31 December, Note	ended 31 December, Note
	2010		2011
	US$	RMB	US$	RMB
	million	million	million	million
	(approx.)	(approx.)	(approx.)	(approx.)
Net profit before taxation and
extraordinary items	16.6	104.9	22.5	142.3
Net profit after taxation and
extraordinary items	12.5	79.1	16.7	105.5

Note: The reporting currency used was US$. References to RMB are for illustrative purposes only.

Based on the unaudited consolidated management accounts of Super Demand, the net asset value of Super Demand as at 31 December, 2011 was approximately US$60.0 million (equivalent to approximately RMB379.1 million).

INFORMATION ON FRANCE INVESTMENT BVI

France Investment BVI is a company incorporated in the British Virgin Islands with limited liability. As at the Latest Practicable Date, it was a wholly-owned subsidiary of Super Demand.

– 16 –

LETTER FROM THE BOARD

It is principally engaged in investment holding and does not carry on any other business. As at the Latest Practicable Date, it was the legal and beneficial owner of approximately 24% of the entire issued share capital of Beijing Tide. As at the Latest Practicable Date, save as disclosed in the simplified shareholding structure chart on page 14, France Investment BVI was not the legal or beneficial owner of any share capital of any other company.

The following information is extracted from the unaudited consolidated management accounts of France Investment BVI for the financial years ended 31 December, 2010 and 31 December, 2011, respectively (which were prepared in accordance with IFRS):

	For the financial year	For the financial year	ended 31 December, Note	ended 31 December, Note
	2010		2011
	US$	RMB	US$	RMB
	million	million	million	million
	(approx.)	(approx.)	(approx.)	(approx.)
Net profit before taxation and
extraordinary items	16.6	104.9	22.5	142.3
Net profit after taxation and
extraordinary items	12.5	79.1	16.7	105.5

Note: The reporting currency used was US$. References to RMB are for illustrative purposes only.

Based on the unaudited consolidated management accounts of France Investment BVI, the net asset value of France Investment BVI as at 31 December, 2011 was approximately US$59.9 million (equivalent to approximately RMB378.7 million).

INFORMATION ON THE GROUP

The Group is principally engaged in the research, development, production and sale of a series of modernised Chinese medicines and chemical medicines for the treatment of hepatitis and cardio-cerebral diseases. It is also developing medicines for treating oncology, analgesia, respiratory system, diabetes and digestive system diseases. It has also strategically entered into the related healthcare and hospital business through the acquisition of Chia Tai Shaoyang Orthopedic Hospital located in the Hunan Province of the PRC in 2011.

INFORMATION ON SINO BIOPHARM BEIJING

Sino Biopharm Beijing is a wholly-owned subsidiary of the Company incorporated in Hong Kong with limited liability.

It is principally engaged in investment holding and does not carry on any other business. As at the Latest Practicable Date, it was the legal and beneficial owner of approximately 33.6% of the entire issued share capital of Beijing Tide. As at the Latest Practicable Date, save as disclosed in the simplified shareholding structure chart on page 14, Sino Biopharm Beijing was not the legal or beneficial owner of any share capital of any other company.

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LETTER FROM THE BOARD

The following information is extracted from the unaudited consolidated management accounts of Sino Biopharm Beijing for the financial years ended 31 December, 2010 and 31 December, 2011, respectively (which were prepared in accordance with HKFRS):

	For the financial year	For the financial year	ended 31 December, Note	ended 31 December, Note
	2010		2011
	HK$	RMB	HK$	RMB
	million	million	million	million
	(approx.)	(approx.)	(approx.)	(approx.)
Net profit before taxation and
extraordinary items	190.0	154.0	252.8	204.9
Net profit after taxation and
extraordinary items	146.0	118.4	195.4	158.3

Note: The reporting currency used was HK$. References to RMB are for illustrative purposes only.

Based on the unaudited consolidated management accounts of Sino Biopharm Beijing, the net asset value of Sino Biopharm Beijing as at 31 December, 2011 was approximately HK$654.9 million (equivalent to approximately RMB530.7 million).

INFORMATION ON BEIJING TIDE

Beijing Tide is a jointly-controlled entity of the Company established in the PRC with limited liability and is held as to approximately 33.6% by Sino Biopharm Beijing, approximately 24% by France Investment BVI, approximately 28% by CJF, approximately 2.02% by Beijing Taitongda, approximately 0.86% by Beijing Decheng Jingwei and approximately 11.52% by LTT Bio-Pharma Co., Ltd..

It is principally engaged in the manufacture and sale of pharmaceutical products. As at the Latest Practicable Date, the registered capital of Beijing Tide was RMB500 million.

The following information is extracted from the audited financial statements of Beijing Tide for the financial years ended 31 December, 2010 and 31 December, 2011, respectively (which were prepared in accordance with generally acceptable accounting principles in the PRC):

			For the financial year	For the financial year
			ended 31 December,
			2010	2011
			RMB million	RMB million
			(approx.)	(approx.)
Net	profit	before taxation and extraordinary items	531.4	611.3
Net	profit	after taxation and extraordinary items	438.9	500.1

Based on the audited financial statements of Beijing Tide, the net asset value of Beijing Tide as at 31 December, 2011 was approximately RMB1,288.7 million.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE RESTRUCTURING

As mentioned in the section headed “The Restructuring – (j) Unwinding Mechanism” of this circular, the Company is entitled under the Restructuring Agreement, subject to compliance with applicable laws and rules of the relevant stock exchanges (including but not limited to the Listing Rules), to unwind the Restructuring in the event that the completion of the Proposed Listing has not taken place by 31 December, 2013.

Given that there may be a possibility for the Restructuring to be unwound, for accounting purposes:

(a) save for fees and expenses in relation to the Restructuring of approximately HK$1,600,000 which will be charged to the income statement immediately after they have been incurred, the completion of the Restructuring will only have impact on the Company’s revenue, assets or liabilities and gain or loss will only accrue to the Company;
(b) Sino Biopharm Beijing will only cease to be accounted for and consolidated as a wholly-owned subsidiary of the Company, and will only be accounted for as an associate of the Company, in the consolidated financial statements of the Company; and
(c) each of Super Demand and France Investment BVI will only be accounted for as an associate of the Company in the consolidated financial statements of the Company,

in each case when (a) the Proposed Listing is completed; or (b) in the event that the Proposed Listing has not taken place by 31 December, 2013, the Company elects to exercise its right under the Restructuring Agreement to unwind the Restructuring but such unwinding is not completed for any reason, including failure to satisfy the requirements under the rules of the relevant stock exchanges (including but not limited to the Listing Rules); or (c) the Company elects not to unwind the Restructuring (each, a “ Relevant Event ”).

Solely for illustrative purposes, based on the financial information available on the Latest Practicable Date (without taking into account the fees and expenses in relation to the Restructuring in the amount of approximately HK$1,600,000) and assuming that the Restructuring and the Proposed Listing were completed on the Latest Practicable Date:

(a) the gain which would have accrued to the Group as a result of the Disposal would have been approximately HK$10,467,000 (equivalent to approximately RMB8,483,000), which is calculated based on the difference between (i) the fair value of the Sino Biopharm Beijing 51% Shareholding (being approximately HK$293,040,000 (equivalent to approximately RMB237,491,000)) together with the recognition of fair value of 49% equity interests in Sino Biopharm Beijing (being approximately HK$281,549,000 (equivalent to approximately RMB228,178,000)) and (ii) the carrying value of the net assets of Sino Biopharm Beijing (being approximately HK$564,122,000 (equivalent to approximately RMB457,186,000)) as at the Latest Practicable Date;

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LETTER FROM THE BOARD

(b) no gain or loss would have accrued to the Group as a result of the Acquisitions;
(c) Sino Biopharm Beijing would have ceased to be accounted for and consolidated as a wholly-owned subsidiary of the Company, and each of Sino Biopharm Beijing, Super Demand and France Investment BVI would have been accounted for as an associate of the Company, in the consolidated financial statements of the Company, which would have led to a net increase in the earnings of the Group;
(d) the total assets of the Group would have increased as a result of the Restructuring; and
(e) there would have been no effect on the total liabilities of the Group as a result of the Restructuring.

However, the actual gain as a result of the Disposal and the actual effect of the Restructuring on the earnings, total assets and total liabilities of the Group will be calculated based on the financial information available on the date on which the applicable Relevant Event takes place.

In the event that the Proposed Listing has not taken place by 31 December, 2013, the Company exercises its right under the Restructuring Agreement to unwind the Restructuring and such unwinding is completed, the completion of each of the Restructuring and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements) would not have any impact on the Company’s revenue, assets or liabilities and no gain or loss will accrue to the Company as if the Restructuring had never taken place.

REASONS FOR AND BENEFITS OF THE RESTRUCTURING

As the Proposed Listing would enable Beijing Tide to unlock its value and to raise additional funds for its future development, the Company believes that the Proposed Listing is a positive phase in the development of Beijing Tide and is likely to have a positive impact on the value of the Company’s investment in Beijing Tide.

According to the sponsor of the Proposed Listing, one of the significant concerns regarding the Proposed Listing is about the competition between the business of certain members of the Group and the business of Beijing Tide and such concern is likely to be sufficiently addressed by the completion of the Restructuring.

As shown in the simplified shareholding structure chart of the Company and Beijing Tide upon completion of the Restructuring, the aggregate effective shareholding of the Company in Beijing Tide immediately before the completion of the Restructuring (i.e. (100% x 33.6%) + (4.92% x 11.52%) = 34.2%) is the same as the aggregate effective shareholding of the Company in Beijing Tide immediately after the completion of the Restructuring (i.e. (33.6% x 49%) + (24% x 45%) + (24% x 55% x 48%) + (4.92% x = 11.52%) 34.2%).

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LETTER FROM THE BOARD

Having considered the reasons set out above, the protections afforded to the Company as a minority shareholder in each of Super Demand, France Investment BVI and Sino Biopharm Beijing after the completion of the Restructuring under the Shareholders’ Agreements and the unwinding mechanism under the Restructuring Agreement, the Directors (including the independent non-executive Directors) believe that the terms of the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements) are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As the total consideration payable by the Company in respect of the Acquisitions will be set-off against the total consideration receivable by the Company in respect of the Disposal, there will not be any proceeds from the Disposal.

PROSPECTS

During the first quarter of 2012, a number of directives issued by the PRC government indicated that the price adjustment of medicines would continue to be one of the key tasks assigned for the year. As a result, the cumulative effect of these price changes will impose the greatest pressure on the development of the entire industry. In addition, as reform of payment methods for medical insurance is initiated, a stronger regulatory authority over medical insurance premium is set to become a fundamental focus of the reform policies. As such, the Group believes that 2012 would mark a year of pivotal adjustment for the pharmaceutical industry which is poised to undergo transformation and an upgrade in its professionalism. Under the current government policy and market condition, the pharmaceutical industry has to adjust strategically so as to survive and pharmaceutical enterprises including our Group need to adapt to the new policies and strategies.

Growth of the pharmaceutical industry may slow down and competition within the industry may further polarise. Nevertheless, a number of favourable factors indicate that the pharmaceutical industry will still undergo growth in future. These include the rapidly aging population and rising standard of living in the PRC, the efforts of the PRC government to establish a basic medical and health care system covering both urban and rural citizens and offering better medical protection to the general public coupled with greater investment in the pharmaceutical industry. Further, as the Group is engaged in patented and innovative medicines, the Group remains relatively competitive in the industry. Hence, the Group remains optimistic about the prospects of the industry in the forthcoming year.

LISTING RULES IMPLICATIONS

Major Transaction

The Restructuring involves both acquisition and disposal by the Company and is therefore required under Rule 14.24 of the Listing Rules to be classified by reference to the larger of the Acquisitions and the Disposal.

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LETTER FROM THE BOARD

As (a) one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Acquisitions are 5% or more but each of them is less than 25%; and (b) one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Disposal are 25% or more but each of them is less than 75%, the Restructuring constitutes a major transaction of the Company under Chapter 14 of the Listing Rules.

Connected Transaction

As: (a) Mr. Tse is an executive Director; (b) at the Latest Practicable Date, Mr. Tse and companies controlled by him were together the beneficial owners of approximately 42.71% of the entire issued share capital of the Company in aggregate and Mr. Tse was therefore a controlling shareholder of the Company; (c) Mr. Tse is the beneficial owner of approximately 51.33% of the entire issued share capital of France Investment Hong Kong and France Investment Hong Kong is therefore an associate of Mr. Tse; and (d) Ms. Cheng and Mr. Tse Hsin are executive Directors and the beneficial owners of approximately 40% and approximately 8.67%, respectively, of the entire issued share capital of France Investment Hong Kong.

Accordingly, each of Mr. Tse, France Investment Hong Kong, Ms. Cheng and Mr. Tse Hsin is a connected person of the Company. The Restructuring therefore also constitutes a connected transaction of the Company which is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Save for Mr. Tse, Ms. Cheng, Mr. Tse Hsin, who abstained from voting at the Board meeting to approve the Restructuring, the Restructuring Agreement and the transactions contemplated thereunder (including the Shareholders’ Agreements), none of the Directors has any material interest in the Restructuring, the Restructuring Agreement or the transactions contemplated thereunder (including the Shareholders’ Agreements).

Pursuant to Rule 14A.18 and Rule 14.46 of the Listing Rules, Mr. Tse, Ms. Cheng and Mr. Tse Hsin and their respective associates, who as at the Latest Practicable Date controlled or were entitled to control the voting right in respect of an aggregate 2,690,729,920 Shares, representing approximately 54.45% of the total number of Shares in issue as at the Latest Practicable Date, will abstain from voting at the EGM.

THE INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee (comprising all the independent non-executive Directors) has been formed to advise the Independent Shareholders, and CIMB Securities has been appointed as the independent financial adviser of the Company to advise the Independent Board Committee and the Independent Shareholders, in each case in respect of the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements).

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LETTER FROM THE BOARD

The text of the letter from the Independent Board Committee to the Independent Shareholders is set out on pages 24 to 25 of this circular and the text of the letter from CIMB Securities containing its advice to the Independent board Committee and the Independent Shareholders is set out on pages 26 to 39 of this circular.

EGM

A notice convening the EGM is set out on pages 48 to 49 of this circular. The EGM will be held at 10:00 a.m. on Friday, 13 July, 2012 at 7th Floor, Dynasty II Room, The Dynasty Club Limited, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong or any adjournment thereof. An ordinary resolution will be proposed at the EGM to consider and, if thought fit, approve the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements).

A proxy form for use in the EGM is enclosed. Whether or not you propose to attend the meeting, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the Company’s principal place of business in Hong Kong at Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the proxy form for the EGM will not preclude you from attending, and voting in person, at the EGM or any adjournment thereof should you so wish.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the proposed ordinary resolution for approval of the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements), are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Shareholders to vote in favour of the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements).

ADDITIONAL INFORMATION

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

Yours faithfully, By Order of the Board Sino Biopharmaceutical Limited Tse Ping Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [174 x 99] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) Website: www.sinobiopharm.com (Stock code: 1177)

22 June, 2012

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

We refer to the circular of the Company (the “Circular”) dated 22 June, 2012 of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed to the Independent Board Committee which has been established to advise the Independent Shareholders on whether or not the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreement) are on normal commercial terms and fair and reasonable to the Independent Shareholders and whether or not the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreement) are in the interests of the Shareholders as a whole. CIMB Securities has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

Please refer to the letter from the Board set out on pages 7 to 23 of the Circular which contains, inter alia, information in respect of the Restructuring and the letter from CIMB Securities set out on pages 26 to 39 of the Circular which contains its advice in respect of the Restructuring. Having taken into account the opinion of CIMB Securities, we consider that the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreement) are on normal commercial terms which are fair and reasonable to the Independent Shareholders and that the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreement) are in the interests of the

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreement).

Yours faithfully, For and on behalf of the Independent Board Committee Sino Biopharmaceutical Limited Lu Zhengfei, Li Dakui, Li Jun and Mei Xingbao Independent non-executive Directors

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LETTER FROM CIMB SECURITIES

The following is the text of a letter of advice dated 22 June, 2012 to the Independent Board Committee and the Independent Shareholders from CIMB Securities in respect of the Restructuring, the Restructuring Agreement and the transactions contemplated thereunder (including the Shareholders’ Agreements) prepared for the purpose of incorporation in this circular.

==> picture [98 x 44] intentionally omitted <==

Units 7706-08, Level 77 International Commerce Centre 1 Austin Road West Kowloon, Hong Kong

22 June 2012

To the Independent Board Committee and the Independent Shareholders of Sino Biopharmaceutical Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE RESTRUCTURING OF BEIJING TIDE

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements), details of which are contained in a circular (the “ Circular ”) to the Shareholders dated 22 June 2012, of which this letter forms part. Expressions used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

As described in the Circular, the Restructuring involves both disposal and acquisitions by the Company and constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. Mr. Tse, is an executive Director and a controlling Shareholder, with a beneficial interest of approximately 42.71% in the entire issued capital of the Company as at the Latest Practicable Date. France Investment Hong Kong is owned as to approximately 51.33% by Mr. Tse and is regarded as an associate of Mr. Tse. Furthermore, Ms. Cheng and Mr. Tse Hsin are executive Directors and the beneficial owners of approximately 40% and approximately 8.67%, respectively, of the entire issued share capital of France Investment Hong Kong. Accordingly, each of Mr. Tse, France Investment Hong Kong, Ms. Cheng and Mr. Tse Hsin is a connected person of the Company. Therefore, the Restructuring also constitutes a connected transaction of the Company which is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

An Independent Board Committee comprising Mr. Lu Zhengfei, Mr. Li Dakui, Ms. Li Jun and Mr. Mei Xingbao, being all the independent non-executive Directors, has been formed to advise the Independent Shareholders in relation to the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements).

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LETTER FROM CIMB SECURITIES

In formulating our recommendation, we have relied on the information and facts contained or referred to in the Circular. The Directors have declared in a responsibility statement set out in the appendix to the Circular that they jointly and severally accept full responsibility for the accuracy of the information contained in the Circular. We have also assumed that the information and representations contained or referred to in the Circular were true and accurate at the time they were made and continue to be so at the date of the EGM. We have no reason to doubt the truth, accuracy and completeness of the information, statements, opinions and representations provided to us by the Directors or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aftersaid documents. We have also been advised by the Directors and believe that no material facts have been omitted from the Circular.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or the prospects of the Company, Sino Biopharm Beijing, France Investment Hong Kong, Super Demand and France Investment BVI or any of their respective subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion for the Restructuring, the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements), we have considered the following principal factors and reasons:

1. Background of and reasons for the Restructuring

The Group is principally engaged in research, development, production and sale of a series of modernised Chinese medicines and chemical medicines for the treatment of hepatitis and cardio-cerebral diseases. Beijing Tide is a jointly-controlled entity of the Company principally engaged in manufacture and sale of pharmaceutical products. Sino Biopharm Beijing (a wholly-owned subsidiary of the Company) is Beijing Tide’s single largest shareholder, holding approximately 33.6% of the entire issued share capital of Beijing Tide as at the Latest Practicable Date.

The financial performance of Beijing Tide in the past few years has continued to grow. According to the audited financial statements of Beijing Tide, its revenue increased by approximately 24.4%, from approximately RMB1,218.0 million for the year ended 31 December 2010 to approximately RMB1,515.7 million for the year ended 31 December 2011. Its net profit after taxation and extraordinary items for each of the two years ended 31 December 2011 amounted to approximately RMB438.9 million and RMB500.1 million respectively, representing an annual growth of approximately 13.9%. As stated in the Group’s annual report for the year end 31 December 2011, Beijing Tide was ranked the top 100 profit-making enterprises under the National Pharmaceutical Industrial Statistics Annual Report. According to the management of the Company, taking into account Beijing Tide’s i) strong financial performance; ii) good business prospect given its technology competence as

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LETTER FROM CIMB SECURITIES

well as research and development capability; and iii) need for funding for the expansion of its research and development center and production facilities, a separate listing of Beijing Tide would be to its benefits.

On 27 December, 2010, the Company announced that Beijing Tide was seeking to list on the ChiNext of the Shenzhen Stock Exchange. As stated in the subsequent announcement of the Company dated 2 April, 2012, the Company understands from the sponsor of the Proposed Listing that the CSRC is in the process of reviewing the application by Beijing Tide for the Proposed Listing submitted in December 2010 and that, given Mr. Tse is entitled to exercise significant control over each of the Company and Beijing Tide (in the capacity of an ultimate controlling shareholder of both companies), there is a concern about the competition between the business of certain members of the Group and the business of Beijing Tide (the “ Concern ”).

In order to address the Concern, which is what the Company understands to be one of the significant concerns regarding the Proposed Listing, the Company, France Investment Hong Kong and Mr. Tse entered into the non-binding Framework Agreement on 2 April, 2012. Under the Framework Agreement, the Company, France Investment Hong Kong and Mr. Tse have, among other things, (a) reached agreement on the principal terms on which the Restructuring should be carried out; and (b) agreed to use all commercially reasonable efforts to discuss and negotiate the detailed terms of the Restructuring with a view to entering into the transaction documents as soon as reasonably practicable. Terms of the non-binding Framework Agreement is set out in the announcement of the Company dated 2 April, 2012.

On 1 June, 2012, the Company, France Investment Hong Kong and Mr. Tse entered into the Restructuring Agreement to formalize the restructuring arrangement in the Framework Agreement. The Restructuring Agreement superseded the Framework Agreement.

The Company understands from the sponsor of the Proposed Listing that the Concern, being one of the significant concerns regarding the Proposed Listing, is likely to be sufficiently addressed by the completion of the Restructuring.

As stated in the letter from the board of the Circular (the “ Letter from the Board ”), as the Proposed Listing would enable Beijing Tide to unlock its value and to raise additional funds for its future development, the Company believes that the Proposed Listing is a positive phase in the development of Beijing Tide and that the completion of the Proposed Listing is likely to have a positive impact on the value of the Company’s investment in Beijing Tide which if realized, will lead to an enhancement of Shareholders’ value.

Having considered the above background of and reasons for the Restructuring, in particular the potential positive impact on the value of the Company’s investment in Beijing Tide following the completion of the Proposed Listing resulting from the enhancement in the liquidity of Beijing Tide’s shares and the expected improvement in Beijing Tide’s performance with the expanded research and production capacity, and taking into account the effect of the Restructuring on the Company, the protections afforded to the Company under the Shareholders’ Agreements and the unwinding mechanism under the Restructuring

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LETTER FROM CIMB SECURITIES

Agreement (each of which is discussed below), we concur with the view of the Directors that the entering into the Restructuring Agreement is in the interests of the Company and the Shareholders as a whole.

2. Major terms of the Restructuring Agreement

The Restructuring involves both disposal and acquisitions by the Company as contemplated under the Restructuring Agreement (including the Shareholders’ Agreements).

2.1 The Disposal

Subject Matter

The Company has conditionally agreed to sell, and France Investment Hong Kong has conditionally agreed to purchase, the Sino Biopharm Beijing 51% Shareholding.

Sino Biopharm Beijing is a wholly-owned subsidiary of the Company and the single largest shareholder of Beijing Tide, holding approximately 33.6% of its entire issued share capital as at the Latest Practicable Date.

Consideration

2.2 The Acquisitions

Subject Matter

(a) France Investment Hong Kong has conditionally agreed to sell, and the Company has conditionally agreed to purchase, the Super Demand 48% Shareholding.
(b) France Investment Hong Kong has also conditionally agreed to procure Super Demand to sell, and the Company has also conditionally agreed to purchase, the France Investment BVI 45% Shareholding.

As at the Latest Practicable Date, (i) Mr Tse was the legal and beneficial owner of approximately 51.33% of the entire issued share capital of France Investment Hong Kong; (ii) Super Demand was a wholly-owned subsidiary of France Investment Hong Kong; and (iii) France Investment BVI was a wholly-owned subsidiary of Super Demand and the legal and beneficial owner of approximately 24% of the entire issued share capital of Beijing Tide.

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LETTER FROM CIMB SECURITIES

Consideration

2.3 Set off of consideration for the Acquisitions and the Disposal

The total consideration payable by the Company in respect of the Acquisitions will be set-off against the total consideration receivable by the Company in respect of the Disposal.

2.4 Condition

2.5 Termination

If (i) the Condition is not satisfied on or before the Long Stop Date; or (ii) the Company reasonably believes that the Condition will not be satisfied on or before the Long Stop Date, the Company is entitled to terminate the Restructuring Agreement.

2.6 Completion

Completion of the Restructuring will take place within five Business Days following the satisfaction of the Condition (or on such other date as the Company and France Investment Hong Kong may agree).

In order to protect the interests of the Company as a minority shareholder of each of the Target Companies upon completion of the Restructuring, Mr Tse is required to enter into, and France Investment Hong Kong is required to enter into and/or procure the relevant parties to enter into, the Shareholders’ Agreements at the completion of the Restructuring. A summary of the major terms of the Shareholders’ Agreements is set out below in the section headed “3. Major terms of the Shareholders’ Agreements”.

2.7 Guarantee

Mr. Tse has irrevocably and unconditionally (i) undertaken to the Company to take all such action as is necessary to procure that France Investment Hong Kong duly performs its obligations under the Restructuring Agreement and the Shareholders’ Agreements; and (ii)

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LETTER FROM CIMB SECURITIES

guaranteed to the Company the due performance of all of the obligations of France Investment Hong Kong under the Restructuring Agreement and the Shareholders; Agreements.

2.8 Unwinding Mechanism

In the event that the completion of the Proposed Listing has not taken place by 31 December, 2013, the Company is entitled, subject to compliance with applicable laws and rules of the relevant stock exchanges (including but not limited to the Listing Rules), to unwind the Restructuring and to require France Investment Hong Kong to:

(i) sell the Sino Biopharm Beijing 51% Shareholding back to the Company for the same total consideration (being HK$293,040,370.28);
(ii) re-purchase the Super Demand 48% Shareholding, and procure Super Demand to re-purchase the France Investment BVI 45% Shareholding, from the Company for the same total consideration (being HK$293,040,370.28); and
(iii) procure the relevant parties to terminate the Shareholders’ Agreements, in each case on such terms and subject to such conditions as the Company may find acceptable.

3. Major terms of the Shareholders’ Agreements

As stated in the Restructuring Agreement, in order to protect the interests of the Company as a minority shareholder in each of the Target Companies (being Super Demand, France Investment BVI and Sino Biopharm Beijing), upon the completion of the Restructuring, Mr. Tse is required to enter into, and France Investment Hong Kong is required to enter into and/or procure the relevant parties to enter into, the Shareholders’ Agreements. A summary of the major terms of the Shareholders’ Agreements is set out below:

3.1 Reserved Matters

A Target Company (being either of Super Demand, France Investment BVI and Sino Biopharm Beijing) shall not, and each of its shareholders shall procure the Target Company not to, take any action or pass any resolution in respect of any of the following matters without the affirmative votes of the shareholders of the Target Company representing, individually or in the aggregate, at least 75% of the voting rights in the Target Company:

(i) any amendment to the articles of association of the Target Company (other than the provisions relating to distribution of profits);
(ii) any increase in or reduction of, or any change to, the authorised share capital or the issued share capital of the Target Company;
(iii) any sale, transfer or disposal of all or substantially all of the assets of the Target Company;

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LETTER FROM CIMB SECURITIES

(iv) any merger, consolidation or amalgamation of the business of the Target Company; and
(v) any merger, division, change in corporate form, dissolution or liquidation of the Target Company.

3.2 Transfer Restrictions

(i) sell, transfer or otherwise dispose of, or grant any option over, any of its shareholding in the Target Company or any interest in any of such shareholding;
(ii) pledge or otherwise encumber any of its shareholding in the Target Company or any interest in any of such shareholding; and
(iii) enter into any agreement with any other person in respect of the voting rights or any other rights attached to any of its shareholding in the Target Company or any interest in any of such shareholding.

3.3 Distribution of Profits

A Target Company shall distribute the total amount of its annual net profits to all of its shareholders by way of cash dividends each year.

3.4 Board of Directors

3.5 Compensation

In the event that Beijing Tide distributes a cash dividend to all of its shareholders, France Investment Hong Kong shall pay the Company an amount in cash as compensation, which amount would equal to difference between (i) the amount of dividend which the Company would have received indirectly through Sino Biopharm Beijing before completion of the Restructuring; and (ii) the amount of dividend which the Company would have

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LETTER FROM CIMB SECURITIES

received indirectly through the Target Companies after completion of the Restructuring. The detailed formula for the calculation of the compensation is set out in the Letter from the Board.

3.6 Guarantee

Mr. Tse shall irrevocably and unconditionally (i) undertake to the Company to take all such action as is necessary to procure that the majority shareholder of each Target Company duly performs its obligations under the relevant Shareholders’ Agreements and (ii) guarantee to the Company the due performance of all of the obligations of the majority shareholder of each Target Company under the relevant Shareholders’ Agreements.

4. Effects of the Restructuring

4.1 Effect in shareholding structure

A simplified shareholding structure chart of Beijing Tide as at the Latest Practicable Date is set out below:

==> picture [344 x 254] intentionally omitted <==

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

Mr Tse
51.33% 100% 100%
France Investment Remarkable Validated
Hong Kong Industries Profits
8.69% 1.82% 32.20%
100%
Super Demand The Company
100% 100% 4.92% [Note] 19.2%
CJF France Beijing Sino Biopharm Beijing Decheng LTT Bio-Pharma
Investment BVI Taitongda Beijing Jingwei Co., Ltd.
28% 24% 2.02% 33.6% 0.86% 11.52%
Beijing Tide
----- End of picture text -----

Note: Apart from holding interest in Beijing Tide through Sino Biopharm Beijing before the Restructuring and through Sino Biopharm Beijing and France Investment BVI after the Restructuring, the Company also has an indirect effective interest of approximately 0.6% in Beijing Tide through LTT Bio-Pharma Co., Ltd., (“ LTT ”) in which the Company holds approximately 4.92%. Given that there is no change in the interest in Beijing Tide held through LTT before and after the Restructuring and the Company’s insignificant stake in and lack of influence on LTT, our analysis below in relation to the effect of the Restructuring only focuses on the interest in Beijing Tide held by the Target Companies.

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LETTER FROM CIMB SECURITIES

As shown in the chart above, at present, the Company is the single largest shareholder of Beijing Tide with an interest of approximately 33.6%, which is held through its wholly owned subsidiary, Sino Biopharm Beijing.

A simplified shareholding structure chart of Beijing Tide upon completion of the Restructuring is set out below (assuming no change will take place in the shareholding structure of each of the relevant entities otherwise than pursuant to the Restructuring between the Latest Practicable Date and the completion of the Restructuring):

==> picture [364 x 301] intentionally omitted <==

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

Mr Tse
100% 100%
Remarkable
Validated Profits
Industries
1.82%
8.69% 32.20%
51.33%
France Investment The Company
Hong Kong
52% 48%
Super Demand
55% 45% 51% 49%
4.92% 19.2%
CJF France Beijing Sino Biopharm Beijing LTT Bio-Pharma
Investment BVI Taitongda Beijing Decheng Jingwei Co., Ltd.
28% 24% 2.02% 33.6% 0.86% 11.52%
Beijing Tide
----- End of picture text -----

As shown in the chart above, upon completion of the Restructuring, the Company’s shareholding interest in Sino Biopharm Beijing (which will continue to hold approximately 33.6% of Beijing Tide) will reduce from 100% to 49% while it will have an interest of 48% in Super Demand (which holds 55% interest in France Investment BVI) and 45% interest in France Investment BVI (which will continue to hold approximately 24% interest of Beijing Tide). Nevertheless, the aggregate effective interest of the Company in Beijing Tide immediately before and after the completion of the Restructuring remains unchanged at approximately 33.6%.

4.2 Financial effects

Pursuant to the Restructuring Agreement, the Company is entitled, subject to compliance with applicable laws and rules of the relevant stock exchanges (including but not limited to the Listing Rules), to unwind the Restructuring in the event that the completion of the Proposed Listing has not taken place by 31 December, 2013. Given this unwinding mechanism, while Sino Biopharm Beijing will legally cease to be a subsidiary of the

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LETTER FROM CIMB SECURITIES

Company upon completion of the Restructuring, for accounting purposes and in accordance with the applicable accounting standards, Sino Biopharm Beijing will continue to be accounted for and consolidated as a wholly-owned subsidiary of the Company until certain criteria are met. In particular, as explained in the Letter from the Board, for accounting purposes:

(a) save for fees and expenses in relation to the Restructuring of approximately HK$1,600,000 million in relation to the Restructuring which will be charged to the income statement immediately after they have been incurred, the completion of the Restructuring will only have impact on the Company’s revenue, assets or liabilities and gain or loss will only accrue to the Company;
(b) Sino Biopharm Beijing will only cease to be accounted for and consolidated as a wholly-owned subsidiary of the Company, and will only be accounted for as an associate of the Company, in the consolidated financial statements of the Company; and
(c) each of Super Demand and France Investment BVI will only be accounted for as an associate of the Company in the consolidated financial statements of the Company,

in each case when (a) the Proposed Listing is completed; (b) in the event that the Proposed Listing has not taken place by 31 December, 2013, the Company elects to exercise its right under the Restructuring Agreement to unwind the Restructuring but such unwinding is not completed for any reason, including failure to satisfy the requirements under the rules of the relevant stock exchanges (including but not limited to the Listing Rules); or (c) the Company elects not to unwind the Restructuring.

In the event that the Proposed Listing has not taken place by 31 December, 2013 and the Company exercises its right under the Restructuring Agreement to unwind the Restructuring and such unwinding is completed, the Restructuring would be regarded as if it had never taken place and there would not be any impact on the Company’s revenue, assets or liabilities and no gain or loss will accrue to the Company.

i. the gain which would have accrued to the Group as a result of the Disposal would have been approximately HK$10,467,000 (equivalent to approximately RMB8,483,000), which is calculated based on the difference between (a) the fair value of the Sino Biopharm Beijing 51% Shareholding (being approximately HK$293,040,000 (equivalent to approximately RMB237,491,000)) together with the recognition of fair value of 49% equity interests in Sino Biopharm Beijing (being approximately HK$281,549,000 (equivalent to approximately

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LETTER FROM CIMB SECURITIES

RMB228,178,000)) and (b) the carrying value of the net assets of Sino Biopharm Beijing (being approximately HK$564,122,000 (equivalent to approximately RMB457,186,000)) as at the Latest Practicable Date;

ii. no gain or loss would have accrued to the Group as a result of the Acquisitions;
iii. Sino Biopharm Beijing would have ceased to be accounted for and consolidated as a wholly-owned subsidiary of the Company, and each of Sino Biopharm Beijing, Super Demand and France Investment BVI would have been accounted for as an associate of the Company, in the consolidated financial statements of the Company, which would have led to a net increase in the earnings of the Group;
iv. the total assets of the Group would have increased as a result of the Restructuring; and
v. there would have been no effect on the total liabilities of the Group as a result of the Restructuring.

DISCUSSION AND ANALYSIS

As at the Latest Practicable Date, the Company was beneficially interested in an aggregate of approximately 34.2% of the share capital of Beijing Tide comprising (i) the approximately 33.6% interest held by Sino Biopharm Beijing, a wholly owned subsidiary of the Company; and (ii) the approximately 0.6% interest held through LTT. As mentioned in the paragraph headed “4.1. Effect in shareholding structure” above, given that there is no change in the structure of interest in Beijing Tide held through LTT before and after the Restructuring and the Company’s insignificant stake in and lack of influence on LTT, our analysis below in relation to the effect of the Restructuring will focus on the approximately 33.6% interest in Beijing Tide held by Sino Biopharm Beijing.

Under the pre-Restructuring structure, the Company is the single largest shareholder of Beijing Tide with an interest of approximately 33.6% (not including the approximately 0.6% interest held through LTT). While the Company does not have absolute majority interest in nor board control of Beijing Tide, being the single largest shareholder, it has a significant influence on Beijing Tide which enables it to safeguard its interests in Beijing Tide. However, it should be noted that Beijing Tide has two other substantial shareholders, namely CJF (an independent third party) with an interest of approximately 28.0% and France Investment BVI (which is beneficially owned as to approximately 51.33% by Mr. Tse) with an interest of approximately 24.0%, each of which has a significant influence on Beijing Tide. In fact, if any two parties among the Company, CJF and France Investment BVI act jointly, they would have majority control over Beijing Tide. On the other hand, any of the

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LETTER FROM CIMB SECURITIES

Company, CJF and France Investment BVI singly would not be able to control Beijing Tide and its position would become a minority position if the other two substantial shareholders hold different view and act jointly.

Under the post-Restructuring structure, Beijing Tide would be under the absolute control of Mr. Tse through his majority interest in each of the Target Companies, which collectively hold approximately 57.6% of Beijing Tide. While Mr. Tse is the majority shareholder and the Company is only a minority shareholder of each of the Target Companies, the Company will have significant influence on each of the Target Companies (and hence indirectly on Beijing Tide) and enjoy certain minority shareholder protection rights afforded by, among others, the following principal provisions stipulated under the Shareholders’ Agreements:

1. Veto right on major corporate decisions

Pursuant to the Shareholders’ Agreements, all major corporate decisions of any of the Target Companies (being Super Demand, France Investment BVI and Sino Biopharm Beijing), namely amendment to articles of association, change in share capital, disposal of substantial assets, merger, consolidation and amalgamation of business and merger, division, change in corporate form, dissolution or liquidation, would require affirmative votes of shareholders holding at least 75% of the voting rights. The Company with an interest of at least 45% in each of the Target Companies will be able to veto major proposals of the Target Companies as it thinks fit.

2. Equal board representation

Pursuant to the Shareholders’ Agreements, each shareholder of the Target Company shall be entitled to nominate two members to the board of the Target Company. However, one of the directors nominated by the majority shareholder will have a casting vote in the event of equality of votes or disputes. Although the Company does not hold the casting vote, its 50% representation in the board of each of the Target Companies would allow it to have a very significant influence on the Target Companies.

3. Compulsory distribution of profits

Pursuant to the Shareholders’ Agreements, the Target Companies shall distribute the total amount of their respective annual net profits to their respective shareholder by way of cash dividends each year. The Shareholders’ Agreements further stipulate that the Target Companies shall not, and their respective shareholders shall procure that the Target Companies not to take any action or pass any resolution to amend the aforesaid distribution of profits provision without the affirmative votes of all the shareholders. With this protective provision, the Company would be able to receive same amount of dividends distributed by Beijing Tide (save for deduction for administrative expenses incurred by the Target Companies) under both the pre-Restructuring and post-Restructuring structure.

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LETTER FROM CIMB SECURITIES

4. Transfer restrictions

The Shareholders’ Agreements provide that each shareholder of a Target Company shall not, without the prior written consent of the other shareholders of the Target Company (i) sell or transfer or grant any option over; (ii) pledge or otherwise encumber; and (iii) enter into any agreement in respect of the voting rights or any other rights attached to any of its shareholding in the Target Company or any interest in any of such shareholding. These restrictions allow the Company to ensure that its partner in each of the Target Companies, being Mr. Tse, cannot be changed without its consent.

To summarise, under the pre-Restructuring structure, the Company has direct control over its approximately 33.6% interest in Beijing Tide and is able to exercise significant influence on Beijing Tide. However, it does not have absolute control of Beijing Tide and its influence on Beijing Tide is very much dependent on the position of the other two substantial shareholders of Beijing Tide, of which Mr. Tse (through France Investment BVI) is one. Under the post-Restructuring structure, the Company would not have a direct influence on Beijing Tide. In exchange, it would have a significant influence on each of Sino Biopharm Beijing and France Investment BVI, both of which are beneficially majority-owned by Mr. Tse and which collectively have absolute control over Beijing Tide. We consider that each of the pre-Restructuring structure and the post-Restructuring structure has its own merits and disadvantages and one cannot draw an undisputed conclusion on which structure is better.

However, having considered the following principal factors, namely

the Restructuring will not have any impact on the accounting treatment in relation to the Company’s interest in Beijing Tide;
the Company will be able to receive same amount of dividends distributed by Beijing Tide (save for deduction for administrative expenses incurred by the Target Companies) under both the pre-Restructuring and post-Restructuring structure;
prior completion of the Proposed Listing or the election by the Company not to unwind the Restructuring (whichever is earlier), the Restructuring will not have any impact on the Company’s cash flow or income statement save for the fees and expenses of approximately HK$1.6 million in relation to the Restructuring which will be borne and paid by the Company;
the Company will enjoy minority shareholder protection rights for each of the Target Companies under the Shareholders’ Agreements;
the potential benefits of the Proposed Listing which includes, among others, the unlocking of the value of Beijing Tide to its shareholders and raising of funds by Beijing Tide for its business development; and

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LETTER FROM CIMB SECURITIES

the Company is entitled to unwind the Restructuring if the Proposed Listing has not taken place by 31 December, 2013,

we are of the view that the Restructuring is in the interests of the Company and the Shareholders as a whole and the terms of the Restructuring Agreements are fair and reasonable.

RECOMMENDATION

Having considered the principal factors and reasons and our analysis discussed above, we are of the view that the Restructuring, the entering into of the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements) by the Group, although not in the ordinary course of business of the Company, is on normal commercial terms, in the interests of the Company and the Shareholders as a whole, and the terms thereof are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise, and we advise, the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM in relation to the Restructuring, the entering into of the Restructuring Agreement and the transactions contemplated by the Restructuring Agreement (including the Shareholders’ Agreements).

Yours faithfully,	Yours faithfully,
For and on	behalf of
CIMB Securities Limited
Alex Lau	Heidi Cheng
Head	Deputy Head
Corporate Finance	Corporate Finance

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors’ interests and short positions in the shares, underlying shares and debentures of the Company or its associated corporations

As at the Latest Practicable Date, the interests and short positions of each of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or which were required to be entered in the register required to be kept pursuant to Section 352 of the SFO or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code as set out in Appendix 10 of the Listing Rules were as follows:

Long positions in ordinary shares of the Company

		Number of shares	Number of shares	held, capacity and	nature of interest	nature of interest
							Approximate
							percentage
							of the
		Capacity/	Directly	Through			Company’s
		Nature of	beneficially	controlled	Through		issued share
Name of Director	Notes	interest	owned	corporations	Spouse	Total	capital
Mr. Tse	(1)	Beneficial	90,000,000	2,020,417,815	–	2,110,417,815	42.71%
		owner
Ms. Cheng	(2)	Deemed	–	–	2,110,417,815	2,110,417,815	42.71%
		interest
Mr. Tse Hsin		Beneficial	48,196,000	–	–	48,196,000	0.98%
		owner
Mr. Tao Huiqi		Beneficial	3,599,999	–	–	3,599,999	0.07%
		owner

Notes:

(1) Mr. Tse held 90,000,000 shares directly and 2,020,417,815 shares through Remarkable Industries and Validated Profits. The entire issued share capital in each of these companies is owned by Mr. Tse.
(2) Ms. Cheng is the spouse of Mr. Tse and is therefore deemed to be interested in the same shares in which Mr. Tse has an interest.

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GENERAL INFORMATION

APPENDIX

Long position in shares of an associated corporation of the Company

					Approximate
	Name of				percentage of
	associated			Number of	the issued
Name of Director	corporation	Notes	Capacity	shares	share capital
Mr. Tse	Beijing Tide	(1)	Interest in a controlled	120,000,000	24%
			corporation
Ms. Cheng	Beijing Tide	(2)	Interest in a controlled	120,000,000	24%
			corporation
Mr. Zhang Baowen	Jiangsu Fenghai		Beneficial owner	32,333	0.35%
	Yancheng Suhai		Beneficial owner	32,027	0.35%
	JCTT		Beneficial owner	229,250	0.18%
	NJCTT		Beneficial owner	26,583	0.53%
	Jiangsu Qingjiang		Beneficial owner	151,335	0.31%
	Qingdao Haier		Beneficial owner	22,680	0.3%
Mr. Xu Xiaoyang	Qingdao Haier		Beneficial owner	7,560	0.1%
Mr. Tse Hsin	JCTT		Beneficial owner	229,250	0.18%
	NJCTT		Beneficial owner	26,583	0.53%

Notes:

(1) Mr. Tse holds approximately 51.33% interests in France Investment Hong Kong and approximately 42.71% interests in the Company, each of which indirectly holds interests in Beijing Tide.
(2) Ms. Cheng holds approximately 40% interests in France Investment Hong Kong, which indirectly holds interests in Beijing Tide.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or which were required to be entered in the register required to be kept pursuant to Section 352 of the SFO or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

APPENDIX

(b) Substantial shareholders’ interests and short positions in the shares, and underlying shares

So far as is known to the Directors and chief executive of the Company, as at the Latest Practicable Date, the following persons had interests or short positions in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, which were recorded in the register required to be kept by the Company under Section 336 of the SFO:

Long positions in the shares and/or underlying shares of the Company

			Number of	Approximate
			shares and/or	percentage of
		Capacity/	underlying	issued share
		Nature of	shares of the	capital of the
Name	Notes	Interest	Company	Company
Validated Profits	(1)	Beneficial	1,590,977,815	32.20%
		owner
Remarkable Industries	(1)	Beneficial	429,440,000	8.69%
		owner

Note:

(1) Each of Validated Profits and Remarkable Industries is an investment holding company wholly-owned by Mr. Tse who is the sole director of each of these companies and a Director.

Save as disclosed above, as at the Latest Practicable Date, no person (not being a Director or chief executive of the Company) had an interest and/or short position in the shares and/or underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

Save as disclosed above, at no time during the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any directors or their respective spouse or minor children, or were any such rights exercised by them; or was the Company or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.

Save as disclosed above, as at the Latest Practicable Date, there were no other persons who were recorded in the register of the Company as having an interest or short positions in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

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GENERAL INFORMATION

APPENDIX

Save as disclosed below, no other Directors are directors or employees of Validated Profits or Remarkable Industries:

Name of Director	Title	Company
Mr. Tse	Director	Validated Profits and Remarkable Industries

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which will not expire or be determinable by the relevant member of the Group within one year without payment of compensation (other than statutory compensation).

4. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

5. COMPETING INTERESTS

As at the Latest Practicable Date, save for the interests of Mr. Tse, Ms. Cheng, Mr. Tse Hsin and their respective associates in Beiing Tide, none of the Directors and their respective associates had any interest in a business which competes or may compete with the businesses of the Group (which would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling shareholder of the Company).

6. INTEREST IN ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been, since 31 December, 2011 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

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

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GENERAL INFORMATION

APPENDIX

7. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has provided advice for inclusion in this circular:

Name

Qualification

CIMB Securities a licensed corporation under the SFO for carrying out Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities

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

As at the Latest Practicable Date, CIMB Securities was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, CIMB Securities did not have any direct or indirect interest in any assets which had since 31 December, 2011 (being the date to which the latest published audited financial statements of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

8. INDEBTEDNESS OF THE GROUP

As at the close of business on 30 April, 2012, being the latest practicable date for this indebtedness statement, the Group had unsecured and unguaranteed short term loans of approximately HK$174.67 million and unsecured and unguaranteed long term loans of approximately HK$34.55 million.

Save as otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have any material:

(i) debt securities issued and outstanding, authorised or otherwise created but unissued;
(ii) term loans;
(iii) borrowings or indebtedness in the nature of borrowing of the Group including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments;

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GENERAL INFORMATION

APPENDIX

(iv) mortgages or charges; or
(v) contingent liabilities or guarantees.

9. SUFFICIENCY OF WORKING CAPITAL

The Directors are of the opinion that, in the absence of unforeseeable circumstances, the Group’s present internal resources and available banking facilities, the Group has sufficient working capital for its present requirements for at least the next twelve months from the date of this circular.

10. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December, 2011, the date to which the latest published audited financial statements of the Group were made up.

11. MATERIAL CONTRACTS

The Group had entered into the following material contracts (not being contracts entered into in the ordinary course of business) within two years immediately preceding the Latest Practicable Date:

(a) the joint venture agreement dated 22 April, 2011 entered into among Chia Tai Healthcare (Holding) Limited, 新邵縣邵陽正骨醫院資產經營管理有限公司 (New Shaoxian Shaoyang Orthopedic Hospital Asset Operation and Management Company Limited) and 邵陽正欣醫院管理有限公司 (Shaoyang Zhengxin Hospital Management Company Limited) regarding the acquisition of a 52% equity interest in, and the operation of, 正大邵陽骨傷科醫院 (Chia Tai Shaoyang Orthopedic Hospital) (formerly known as 邵陽正骨醫院 (Shaoyang Orthopedic Hospital)) for a total consideration of RMB65 million comprising RMB57.2 million as consideration for the acquisition of the 52% equity interest of Chia Tai Shaoyang Orthopedic Hospital and RMB7.8 million as capital injection into Chia Tai Shaoyang Orthopedic Hospital;
(b) the investment rights transfer agreement dated 6 December, 2010 made between Validated Profits and Chia Tai Pharmaceutical Investment, pursuant to which Validated Profits agreed to transfer to Chia Tai Pharmaceutical Investment all of its investment rights and obligations under the consortium agreement in connection with 7.5% of the total investment to be contributed by the investment consortium formed to tender for a bid for the development at a site located a Beijing Chaoyang District CBD into an office complex (“ Project ”) at nil consideration and pursuant to which Chia Tai Pharmaceutical Investment committed to 5% of the total investment to be contributed by the investment consortium and to provide funding of up to approximately RMB220 million towards the Project;

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APPENDIX

GENERAL INFORMATION

(c) the investment rights transfer agreement dated 6 December, 2010 made between the Chia Tai Pharmaceutical Investment and 正大置地有限公司 (Chia Tai Land Company Limited) (“ Chia Tai Land ”), pursuant to which Chia Tai Pharmaceutical Investment agreed to transfer to Chia Tai Land its investment rights and obligations under the consortium agreement in connection with 2.5% of the total investment to be contributed by the investment consortium formed to tender for a bid for the Project at nil consideration and pursuant to which Chia Tai Pharmaceutical Investment committed to 5% of the total investment to be contributed by the investment consortium;
(d) the acquisition agreement (“ Ace Elite Acquisition Agreement ”) dated 30 November, 2010 entered into between Lucky Symbol Holdings Limited (“ Lucky Symbol ”), a wholly-owned subsidiary of the Company (as purchaser) and Mr. Tse in relation to the acquisition of 100% of the total issued share capital of Ace Elite Investments Limited by Lucky Symbol from Mr. Tse under the terms and conditions of the Ace Elite Acquisition Agreement as part of the reorganisation of the Group for the total consideration of RMB201,703,812.06 (equivalent to approximately HK$231,657,000);
(e) the acquisition agreement (“ Jiangsu Fenghai Acquisition Agreement ”) dated 30 November, 2010 entered into between Chia Tai Pharmaceutical (Lianyungang) Company Limited (“ Chia Tai LYG ”) and 大豐恒昌諮詢中心 (Da Feng Hang Chang Consultation Centre) (“ DFHC Consultation Centre ”) in relation to the acquisition of 5.31% equity interest in Jiangsu Fenghai by Chia Tai LYG from DFHC Consultation Centre pursuant to the terms and conditions of the Jiangsu Fenghai Acquisition Agreement as part of the reorganisation of the Group for the total consideration of RMB42,349,015 (equivalent to approximately HK$48,638,000); and
(f) the acquisition agreement (“ Yancheng Suhai Acquisition Agreement ”) dated 30 November, 2010 entered into between Chia Tai LYG and DFHC Consultation Centre in relation to the acquisition of 5.31% equity interest in Yancheng Suhai by Chia Tai LYG from DFHC Consultation Centre as part of the reorganisation of the Group for the total consideration of RMB493,071 (equivalent to approximately HK$566,292).

12. GENERAL

(i) Save as disclosed under the section “Interest in Assets and Contracts” in this circular, as at the Latest Practicable Date, none of the Directors was materially interested in any subsisting contract or arrangement which is significant to the business of the Group:
(ii) The secretary of the Company is Ms. Leung Sau Fung, Fanny. Ms. Leung is an associate member of both The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries.

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GENERAL INFORMATION

APPENDIX

(iii) The qualified accountant of the Company is Ms. Yu Chau Ling. Ms. Yu is a fellow member and an associate member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants, respectively.
(iv) The Company’s registered office is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681 GT, George Town, Grand Cayman, British West Indies.
(v) The principal place of business of the Company in Hong Kong is Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong.
(vi) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(vii) The English text of this circular shall prevail over the Chinese text.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours in any weekday (Saturdays and public holidays excepted) at the Company’s principal place of business in Hong Kong at Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong from the date of this circular until the date of the EGM.

(a) the memorandum and articles of association of the Company;
(b) the material contracts referred to under the paragraph headed “Material Contracts” in this appendix;
(c) the letter from CIMB Securities as set out on pages 26 to 39 of this circular;
(d) the written consent from CIMB Securities referred to under the paragraph headed “Qualification and consent of Expert” in this appendix;
(e) the published annual reports of the Company for each of the financial years ended 31 December, 2010 and 31 December, 2011;
(f) the unaudited consolidated management accounts dated 31 December, 2011 of the following companies:
(i) Super Demand;
(ii) France Investment BVI;
(iii) Sino Biopharm Beijing;
(g) the audited financial statements of Beijing Tide dated 31 December, 2011; and
(h) this circular.

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NOTICE OF EGM

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(Incorporated in the Cayman Islands with limited liability) Website: www.sinobiopharm.com (Stock code: 1177)

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting (the “Meeting”) of Sino Biopharmaceutical Limited (the “Company”) will be held at 10:00 a.m. on Friday, 13 July, 2012 at 7th Floor, Dynasty II Room, The Dynasty Club Limited, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT:

(a) the following be and are hereby approved, confirmed and ratified:
(i) the proposed sale of the 51% of the entire issued share capital of Sino Biopharmaceutical (Beijing) Limited by the Company to France Investment (China 1) Group Limited on the terms and subject to the conditions of the Restructuring Agreement (as defined below) (the “ Disposal ”);
(ii) the proposed acquisition by the company of 48% of the entire issued share capital of Super Demand Investments Limited from France Investment (China 1) Group Limited and the proposed acquisition of 45% of the entire issued share capital of France Investment (China I) Group Limited from Super Demand Investments Limited, each on the terms and subject to the conditions of the Restructuring Agreement (the “ Acquisitions ”, and together with the Disposal, the “ Restructuring ”);
(iii) the restructuring agreement (the “ Restructuring Agreement ”) dated 1 June, 2012 entered into between the Company, France Investment Hong Kong and Mr. Tse in relation to, inter alia, the Restructuring, a copy of which has been produced to the Meeting marked “A” and signed by the chairman of the Meeting for the purpose of identification; and
(iv) all transactions contemplated under the Restructuring Agreement (including the Shareholders’ Agreements); and

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NOTICE OF EGM

(b) any one of the Directors be and is hereby authorised to sign, execute, perfect, deliver, negotiate, agree and do all such documents, deeds, acts, matters and things, as the case may be, as he may in his opinion or discretion consider reasonable, necessary, desirable or expedient to implement and/or give effect to the Restructuring, Restructuring Agreement and all the transactions contemplated thereunder (including the Shareholders’ Agreements) with any changes as such Director may consider reasonable, necessary desirable or expedient.”

By Order of the Board Sino Biopharmaceutical Limited Leung Sau Fung, Fanny Company Secretary

Hong Kong, 22 June, 2012

Notes:

A member entitled to attend and vote at the Meeting is entitled to appoint one or more (if the member is a holder of two or more shares) proxies to attend and vote on his/her behalf. A proxy need not be a member of the Company.
To be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority, must be deposited at the Company’s principal place of business in Hong Kong at Unit 09, 41st Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the meeting or any adjournment thereof, should he/she so wish, and in such event, the form of proxy shall be deemed to be revoked.
The register of members of the Company will be closed from Thursday, 12 July, 2012 to Friday, 13 July, 2012, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for attending and voting at the Meeting, all completed transfer forms accompanied by the relevant share certificates must be lodged with the branch share registrar of the Company, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not later than 4.00 p.m. on Wednesday, 11 July, 2012.

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AI assistant

Sinco Pharmaceuticals Holdings Limited — Proxy Solicitation & Information Statement 2012

51056_rns_2012-06-21_3d3a67bd-3742-4d61-8c59-f6b0c9d91233.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE RESTRUCTURING OF BEIJING TIDE

TABLE OF CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

MAJOR AND CONNECTED TRANSACTION THE RESTRUCTURING OF BEIJING TIDE

INTRODUCTION

The Proposed Listing

THE RESTRUCTURING

(a) Date

(b) Parties

(c) The Disposal

(d) The Acquisitions

(e) Set-Off

(f) Condition

(g) Termination

(h) Completion

LETTER FROM THE BOARD

(i) Guarantee

(j) Unwinding Mechanism

SHAREHOLDERS’ AGREEMENTS

(a) Reserved Matters

(b) Transfer Restrictions

(c) Distribution of Profits

(d) Board of Directors

(e) Compensation

(f) Guarantee

SHAREHOLDING STRUCTURE

INFORMATION ON MR. TSE

INFORMATION ON FRANCE INVESTMENT HONG KONG

LETTER FROM THE BOARD

INFORMATION ON SUPER DEMAND

INFORMATION ON FRANCE INVESTMENT BVI

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

INFORMATION ON SINO BIOPHARM BEIJING

LETTER FROM THE BOARD

INFORMATION ON BEIJING TIDE

FINANCIAL EFFECTS OF THE RESTRUCTURING

REASONS FOR AND BENEFITS OF THE RESTRUCTURING

LETTER FROM THE BOARD

PROSPECTS

LISTING RULES IMPLICATIONS

Major Transaction

LETTER FROM THE BOARD

Connected Transaction

THE INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE BOARD

EGM

RECOMMENDATION

ADDITIONAL INFORMATION

MAJOR AND CONNECTED TRANSACTION

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE RESTRUCTURING OF BEIJING TIDE

LETTER FROM CIMB SECURITIES

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Restructuring

2. Major terms of the Restructuring Agreement

2.1 The Disposal

Subject Matter

Consideration

2.2 The Acquisitions

Subject Matter

Consideration

2.3 Set off of consideration for the Acquisitions and the Disposal

2.4 Condition

2.5 Termination

2.6 Completion

2.7 Guarantee

LETTER FROM CIMB SECURITIES

2.8 Unwinding Mechanism

3. Major terms of the Shareholders’ Agreements

3.1 Reserved Matters

3.2 Transfer Restrictions

Sinco Pharmaceuticals Holdings Limited Proxy Solicitation & Information Statement 2012