Sinco Pharmaceuticals Holdings Limited — Proxy Solicitation & Information Statement 2017

Dec 8, 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR ATTENTION

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

If you have sold or transferred all your shares in Sinco Pharmaceuticals Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of Sinco Pharmaceuticals Holdings Limited.

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Sinco Pharmaceuticals Holdings Limited 興科蓉醫藥控股有限公司

(Incorporated under the laws of the Cayman Islands with limited liability)

(Stock Code: 6833)

ISSUE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE; INCREASE IN AUTHORISED SHARE CAPITAL; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Capitalised terms used in this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 6 to 32 of this circular. A notice convening the EGM to be held at Boardroom 6, M/F, Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Friday, 29 December 2017 at 10:00 a.m. is set out on pages 33 to 35 of this circular. A form of proxy for use by the Shareholders at the EGM or any adjourned meeting is also enclosed.

Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

11 December 2017

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . .		33

– i –

DEFINITIONS

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

• “Amendments”

the CB Amendments and the Bond Amendments

• “Announcements”

• the announcements of the Company dated 12 October 2017 and 6 December 2017 relating to, among others, the Subscription Agreement, the Increase in Authorised Share Capital and the Amendments

• “Board”

• the board of Directors

• “Bond Amendments”

• the proposed amendments to the terms and conditions of June 2017 Bond under the Bond Supplemental Deed

• “Bondholder(s)”

• holder(s) of Convertible Bonds

• “Bond Supplemental Deed”

• the supplemental deed dated 12 October 2017 and executed by the Company by way of deed poll in respect of amendments of certain terms and conditions of June 2017 Bond

• “Business Day”

• any day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours

• “CB Amendments”

• the proposed amendments to the terms and conditions of June 2017 CB under the CB Supplemental Deed

• “CB Supplemental Deed”

• the supplemental deed dated 12 October 2017 and executed by the Company by way of deed poll in respect of amendments of certain terms and conditions of June 2017 CB

• “Company”

• Sinco Pharmaceuticals Holdings Limited, a company incorporated in the Cayman Islands with limited liability and whose Shares are listed on the Main Board of the Stock Exchange

• “Completion”

completion of the subscription of each tranche of the Convertible Bonds, and “Completion Date” shall mean the date of such Completion

– 1 –

DEFINITIONS

• “Conditions”

• “connected person”

• the conditions precedent to each Completion as set out under the section headed “Conditions Precedent” has the meaning ascribed to it under the Listing Rules

• “Conversion Price” the conversion price of the Convertible Bonds

• “Conversion Right(s)”

• the right(s) of the Bondholder(s) to convert the whole or part of the principal amount of the Convertible Bonds into Conversion Shares

• “Conversion Shares”

• the new Shares to be allotted and issued upon the exercise of the Conversion Rights

• “Convertible Bonds”

• the unsecured 4% interest bearing convertible bonds in the maximum aggregate principal amount of US$150,000,000 to be issued by the Company to the Subscriber pursuant to the Subscription Agreement, comprising the First Part CB and the Second Part CB

• “Definitive Agreement(s)”

• definitive agreement(s) to be entered by the Company for any acquisition transaction(s) of hospitals or ancillary and related business

• “Director(s)”

• the director(s) of the Company

• “EGM”

• the extraordinary general meeting of the Company to be convened on 29 December 2017 for the purpose of approving the Subscription Agreement and the transactions contemplated thereunder and the Increase in Authorised Share Capital

• “Existing Bonds”

• the June 2017 Bond and the June 2017 CB

• “Existing Bonds Holder”

• Harvest Progress International Limited

• “Final Tranche”

• final tranche of the Convertible Bonds to be issued under the Subscription Agreement

• “First Part CB”

• the Convertible Bonds in the principal amount of up to US$50,000,000

• “First Tranche”

• first tranche of the Convertible Bonds to be issued under the Subscription Agreement

• “Floor Price”

• HK$0.33 per Conversion Share

– 2 –

DEFINITIONS

• “Group”

• “Group Company”

• “Hong Kong”

• “Increase in Authorised Share Capital”

• “Issue Date”

• “June 2017 Bond”

• “June 2017 CB”

• “June 2017 Subscription Agreement”

• “Last Trading Day”

• “Latest Practicable Date”

• “Listing Rules”

• “Maturity Date”

the Company and its subsidiaries

any company in the Group

• the Hong Kong Special Administrative Region of the People’s Republic of China

• the proposed increase in the authorised share capital of the Company from HK$380,000 divided into 3,800,000,000 Shares of HK$0.0001 each to HK$1,000,000 divided into 10,000,000,000 Shares of HK$0.0001 each by the creation of an additional 6,200,000,000 unissued Shares of HK$0.0001 each

• the date of issue of the respective tranche of the Convertible Bonds

• the bonds in the principal amount of HK$120,000,000 issued by the Company pursuant to the June 2017 Subscription Agreement

• the convertible bonds in the principal amount of HK$40,000,000 issued by the Company pursuant to the June 2017 Subscription Agreement

• the subscription agreement dated 24 June 2017 and entered into between the Company and the Existing Bonds Holder in respect of the subscription of June 2017 CB and June 2017 Bond

• 12 October 2017, being the date of the Prior Subscription Agreement

• 6 December 2017, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining information contained herein

• the Rules Governing the Listing of Securities on the Stock Exchange

• in respect of each tranche of the Convertible Bonds, a date falling thirty six (36) months from the issue date of such tranche or, if that is not a Business Day, the first Business Day thereafter

– 3 –

DEFINITIONS

• “PRC”

• the People’s Republic of China, which for the purpose of this circular excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

• “Prior Subscription Agreement”

• the subscription agreement dated 12 October 2017 and entered into between the Company and the Subscriber relating to the subscription of the Convertible Bonds, which has been amended and restated by the Subscription Agreement

• “RMB” Renminbi, the lawful currency of the PRC

• “Second Part CB”

• the Convertible Bonds in the principal amount of up to US$100,000,000

• “Second Part CB GM(s)”

• each general meeting of the Company to be convened and held for the purposes of considering and, if thought fit, approving, among other matters, (i) the issue and allotment of any tranche(s) of the Second Part CB and the corresponding Conversion Shares, and (ii) the Definitive Agreement(s) and the transactions contemplated thereunder

• “Share(s)”

• ordinary share(s) of HK$0.0001 each in the share capital of the Company

• “Shareholder(s)”

• the holder(s) of Shares

• “Specific Mandate”

• the specific mandate to be sought from the Shareholders at the EGM to approve the allotment and issuance of the Conversion Shares upon exercise of the Conversion Rights attaching to the First Part CB

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited

• “Subscriber”

• Crede CG III Ltd

• “Subscription Agreement”

• the amended and restated subscription agreement dated 6 December 2017 and entered into between the Company and the Subscriber in respect of the subscription of the Convertible Bonds

• “Takeovers Code”

• the Hong Kong Code on Takeovers and Mergers

• “Trading Day(s)”

• day(s) on which the Shares are traded on the Main Board of the Stock Exchange

– 4 –

DEFINITIONS

“HK$” Hong Kong dollar, the lawful currency of Hong Kong “US$” US dollars, the lawful currency of the United States “%” per cent.

For the purpose of this circular, unless otherwise indicated, conversions of US$ into HK$ is calculated at the exchange rate of US$1 to HK$7.8 and conversion of RMB into HK$ is calculated at the exchange rate of RMB1 to HK$1.15. These exchange rates are adopted for the purpose of illustration purpose only and do not constitute a representation that any amounts have been, could have been, or may be, exchanged at these rates or any other rates.

In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

– 5 –

LETTER FROM THE BOARD

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Sinco Pharmaceuticals Holdings Limited 興科蓉醫藥控股有限公司

(Incorporated under the laws of the Cayman Islands with limited liability)

(Stock Code: 6833)

Executive Directors: Mr. Huang Xiangbin Ms. Zhang Zhijie

Independent Non-executive Directors: Mr. Chow Siu Lui Mr. Wang Qing Mr. Liu Wenfang

Registered office: PO Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Corporate headquarters: E5-1805, Global Centre No.1700 North Section of Tianfu Avenue High-Tech Zone, Chengdu Sichuan, PRC

Principal place of business in Hong Kong: Unit 4408A, 44/F, Cosco Tower 183 Queen’s Road Central Hong Kong

11 December 2017

To the Shareholders

Dear Sir or Madam

ISSUE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE; INCREASE IN AUTHORISED SHARE CAPITAL; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcements relating to, among others, the Subscription Agreement and the Increase in Authorised Share Capital.

The purpose of this circular is to provide you with, among other things, (i) details of the Subscription Agreement and the Increase in Authorised Share Capital; and (ii) a notice of EGM.

– 6 –

LETTER FROM THE BOARD

1. ISSUE OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

On 12 October 2017 (after trading hours), the Company and the Subscriber entered into the Prior Subscription Agreement relating to the subscription of the Convertible Bonds.

On 6 December 2017 (after trading hours), the Company and the Subscriber entered into the Subscription Agreement to amend, restate, supersede and replace in its entirety the Prior Subscription Agreement.

Pursuant to the Subscription Agreement, the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for, the Convertible Bonds in the maximum aggregate principal amount of US$150,000,000 (equivalent to approximately HK$1,170,000,000).

Principal terms of the Subscription Agreement and the Convertible Bonds are set out as follows:

The Subscription Agreement

Date: 6 December 2017 (amended and restated the Prior Subscription Agreement) Parties Issuer: The Company Subscriber: Crede CG III Ltd

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Subscriber and its ultimate beneficial owner(s) are third parties independent of the Company and its connected persons.

Principal Amount

The Subscriber shall subscribe for, and the Company shall issue, the Convertible Bonds with an aggregate principal amount of up to US$150,000,000 (equivalent to approximately HK$1,170,000,000), comprising the First Part CB in the principal amount of up to US$50,000,000 (equivalent to approximately HK$390,000,000) and the Second Part CB in the principal amount of up to US$100,000,000 (equivalent to approximately HK$780,000,000).

– 7 –

LETTER FROM THE BOARD

The principal amount of the Convertible Bonds to be subscribed in each tranche shall be:

• I. First Part CB

• (i) (a) in respect of each of the first five tranches, US$5,000,000; and (b) in respect of any other tranche, US$5,000,000 or 20% of the Company’s trading turnover during the 20 Trading Days immediately prior to the Completion Date of such tranche, at the election of the Subscriber (such decision shall be notified by the Subscriber to the Company in writing on the Trading Day immediately prior to the Completion Date of such tranche, without which the principal amount of such tranche shall be deemed to be US$5,000,000) (equivalent to approximately HK$39,000,000) (the “ Prescribed Tranche Subscription Amount ”); or

• (ii) such other amount to be mutually agreed by the Company and the Subscriber,

provided that:

• (a) if the remainder of the unissued Convertible Bonds in the final tranche of the First Part CB is less than the Prescribed Tranche Subscription Amount, the principal amount of such tranche shall be such remainder amount;

• (b) in respect of any tranche(s) of the First Part CB, the Company shall be entitled to request the Subscriber to subscribe for, and the Subscriber shall, upon request by the Company, be obligated to subscribe for, the First Part CB in such amount so as to make any payment required under a term sheet (the “ Term Sheet ”) for any acquisition transaction(s) of hospitals or ancillary and related business (the “ Term Sheet Payment Amount ”);

• (c) the aggregate principal amount of the First Part CB shall not exceed (i) the maximum principal amount of the First Part CB (i.e. US$50,000,000 (equivalent to approximately HK$390,000,000)); and (ii) the amount equivalent to the sum of US$37,000,000 (equivalent to approximately HK$288,600,000) and the Term Sheet Payment Amount if the Term Sheet Payment Amount is less than US$13,000,000 (equivalent to approximately HK$101,400,000).

• II. Second Part CB

• (i) the Prescribed Tranche Subscription Amount; or

• (ii) such other amount to be mutually agreed by the Company and the Subscriber,

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LETTER FROM THE BOARD

provided that:

• (a) if the remainder of the unissued Convertible Bonds in the final tranche of the Second Part CB is less than the Prescribed Tranche Subscription Amount, the principal amount of such tranche shall be such remainder amount;

• (b) the Company shall be entitled to request the Subscriber to subscribe for, and the Subscriber shall, upon request by the Subscriber, be obligated to subscribe for, the Convertible Bonds in such amount so as to meet payment requirements as set out in the payment schedule of the Definitive Agreement(s) in the circumstance where net proceeds from previous subscriptions of the Second Part CB in tranches would not be sufficient to meet such payment schedule; and

• (c) the aggregate principal amount of the Second Part CB shall not exceed the maximum principal amount of the Second Part CB (i.e. US$100,000,000 (equivalent to approximately HK$780,000,000)).

Conditions Precedent

The subscription by the Subscriber for the Convertible Bonds in each tranche shall be conditional upon the following conditions being fulfilled or, where applicable, waived:

• (i) the Listing Committee of the Stock Exchange having granted listing of, and permission to deal in, the Conversion Shares to be issued upon exercise of the Conversion Rights attached to the Convertible Bonds of such tranche;

• (ii) (a) in respect of the issue of each tranche of the First Part CB only, the requisite Shareholders’ approval having been obtained at a general meeting of the Company for (i) the Increase in Authorised Share Capital, and (ii) the Subscription Agreement and the transactions contemplated thereunder, including but not limited to the and issue of such tranche of the First Part CB and the allotment and issue of corresponding Conversion Shares; and (b) in respect of the issue of each tranche of the Second Part CB only, the requisite Shareholders’ approval having been obtained at a Second Part CB GM for (i) the issue of such tranche of the Second Part CB and the allotment and issue of corresponding Conversion Shares; and (ii) the transactions in connection with such issue and allotment, including but not limited to, any acquisition transaction(s) of hospitals or ancillary and related business and the use of proceeds, if required;

• (iii) none of the representations, warranties and undertakings of the Company under the Subscription Agreement having been breached in any material respect (or, if capable of being remedied, has not been remedied), or is misleading or untrue in any material respect;

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LETTER FROM THE BOARD

• (iv) the terms and conditions of the Existing Bonds having been amended as set out in the CB Supplemental Deed and the Bond Supplemental Deed;

• (v) Risun Investments Limited, a controlling shareholder of the Company, having undertaken to the Subscriber not to sell or transfer its Shares from the completion date of the first tranche of the Convertible Bonds up to the completion date of the final tranche of the Convertible Bonds in the terms and conditions satisfactory to the Subscriber;

• (vi) in respect of the issue of each tranche of the First Part CB only, the Company having entered into a term sheet for acquisition of hospitals or ancillary and related business in terms and conditions satisfactory to the Subscriber;

• (vii) the closing price for each of the five Trading Days immediately prior to Completion of such tranche of the Convertible Bonds (save for (i) the First Tranche and (ii) any first tranche of the relevant portion of the Second Part CB whose issue has been approved by the Shareholders in a Second Part CB GM) is not less than HK$0.33, being the net asset value per Share as at 31 December 2016; and

• (viii) in respect of the issue of each tranche of the Second Part CB only, the relevant Definitive Agreement(s) having been entered into within 18 months after the date of the EGM and all the conditions precedent under such Definitive Agreement(s) (save for the Company having obtained the financing for the acquisition transaction(s) contemplated under such Definitive Agreement(s), where applicable) having been fulfilled or, where applicable, waived.

The Subscriber may, at its absolute discretion, waive compliance with any or all of the Conditions (iii) to (vii) in whole or in part as the Subscriber may deem fit provided that the Condition (vi) shall be fulfilled within (a) six months after the date of the EGM or (b) any longer period as agreed between the parties and approved by the Shareholders in a general meeting of the Company.

For the first US$25,000,000 of the First Part CB, the Subscriber intends to and considers it very likely to waive condition (vi) on or before 31 January 2018.

For the remaining principal amount of the First Part CB, in the event that Condition (vi) is not fulfilled within six months after the date of the EGM or the principal amount of the First Part CB is not issued in full within twelve months after the date of the EGM, the Company will seek for Shareholders’ approval at another general meeting for issue of the remaining portion of the First Part CB.

If any of the applicable Conditions above are not fulfilled or, where applicable, waived by the Subscriber:

• (a) with respect to the First Tranche, by 5:00 p.m. (Hong Kong time) on 31 January 2018, or such other date as the Company and the Subscriber shall agree in writing;

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LETTER FROM THE BOARD

• (b) in respect of the first tranche of the Second Part CB, by 5:00 p.m. (Hong Kong time) on a date falling on the expiry of 18 months after the date of the EGM; or

• (c) with respect to the Final Tranche, by 5:00 p.m. (Hong Kong time) on 31 December 2020 or such other date as the Company and the Subscriber shall agree in writing,

the Subscription Agreement shall terminate and the respective obligations of the parties thereto under the Subscription Agreement shall forthwith cease and terminate and neither of the parties shall have any claim against the other except for antecedent breach of provisions of the Subscription Agreement. The aforesaid termination of the Subscription Agreement shall not affect any accrued rights or liabilities of the parties, in particular the subscription of the tranches of the Convertible Bonds which have been completed before the termination.

Completion

Completion of the First Tranche shall take place within 3 Business Days after all the conditions having been fulfilled or, where applicable, waived, or any other date as agreed between the parties, and the Completion of any subsequent tranche of the First Part CB shall take place on (i) the 21st Trading Day after Completion of the previous tranche of the First Part CB; or (ii) such other date as agreed between the parties, provided that:

• (a) the Completion of the First Part CB in the aggregrate principal amount of US$25,000,000 (equivalent to approximately HK$195,000,000) shall take place within 5 months after the date of the EGM;

• (b) the Completion of the additional portion of First Part CB in the aggregrate principal amount of US$12,000,000 (equivalent to approximately HK$94,000,000) shall take place within 6 months after the date of the EGM; and

• (c) the Completion of any remaining portion of the First Part CB in the principal amount of US$13,000,000 (equivalent to approximately HK$101,000,000) shall take place within 12 months after the date of the EGM or any longer period as agreed between the parties and approved by the Shareholders in a general meeting of the Company.

The Completion of each tranche of the Second Part CB shall take place within 3 Business Days after all the conditions having been fulfilled or, where applicable, waived, or any other date as agreed between the parties.

In the event that the resolutions to be proposed at the Second Part CB GM(s) are not approved by the Shareholders, the Second Part CB in the relevant principal amount will not be issued.

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LETTER FROM THE BOARD

Pre-emptive Right to Future Issues

For a period of 180 days from the Completion of the Final Tranche, subject to the compliance of the Company’s constitutional documents and all applicable laws, rules and regulations, in case of any proposed issue of new Shares or other securities convertible into Shares by the Company (excluding any new Shares to be issued upon exercise or conversion of any securities of the Company issued prior to the Completion of the Final Tranche) (collectively, the “ New Securities ”), the Subscriber shall have a pre-emptive right to purchase such New Securities to be issued and the Company shall be required to notify the Subscriber the terms of such proposed issue.

Restrictions on Issuance of Additional New Securities

The Company shall not, without prior approval from the Subscriber, issue additional New Securities for a period of 90 days from the Completion of the Final Tranche, including employee incentive options.

Undertakings

The Company shall procure its Shareholder(s) to enter into a share lending agreement with the Subscriber prior to the Completion of the First Tranche, pursuant to which the following number of Shares shall be lent to the Subscriber from such Shareholder(s) for the period from the date when the Subscriber serves the first notice for the conversion of the Convertible Bonds to the Company up to the date when the corresponding Conversion Shares have been credited to the Subscriber’s securities account:

Number of Shares =	US$1,250,000 (equivalent to approximately HK$9,750,000)
	Conversion Price of the First Tranche

Principal Terms of the Convertible Bonds

Principal terms of the Convertible Bonds are summarised as follows:

Issuer:	The Company
Principal Amount:	The maximum aggregate principal amount of
	US$150,000,000 (equivalent to approximately
	HK$1,170,000,000)
Issue Price:	100% of the principal amount of the Convertible
	Bonds
Maturity Date:	In respect of each tranche of the Convertible Bonds, a
	date falling 36 months after the issue date of such
	tranche of the Convertible Bonds or, if that is not a
	Business Day, the first Business Day thereafter

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LETTER FROM THE BOARD

Interest:

Early Redemption:

• Redemption at Maturity:

Conversion Price:

• Conversion Price reset:

• 4% per annum payable semi-annually in arrears

• After the expiry of 12 months after the Completion of the First Tranche, the Company may, by giving not less than three Business Days’ prior written notice to the Bondholder(s), to redeem the whole or part of the outstanding Convertible Bonds at an amount equivalent to 100% of the principal amount of the outstanding Convertible Bonds to be redeemed with an interest accrued thereon at the rate of 15% per annum from the Issue Date until the date of redemption (after deducting therefrom any interest paid on the Convertible Bonds to be redeemed).

• The Company will redeem any Convertible Bonds which remain outstanding on the Maturity Date at an amount equal to 100% of the principal amount of the Convertible Bonds together with any accrued but unpaid interest thereon.

• Initial conversion price in respect of each tranche of the Convertible Bonds shall be the higher of (i) the Floor Price of HK$0.33, being the net asset value per Share as at 31 December 2016 (the “ NAV Conversion Price ”), and (ii) 70% of the volume weighted average price of the Shares in the 20 Trading Days prior to the relevant Issue Date (the “ Initial Conversion Price ”).

• So far as the Convertible Bonds in the Maximum Aggregate Principal Amount have not been fully issued, with respect to each tranche of the Convertible Bonds in issue, its Conversion Price shall be reset on Completion of every subsequent tranche of the Convertible Bonds (“ Reset Reference Date ”) to the higher of (i) 70% of the volume weighted average price of the Shares in the 20 Trading Days prior to the Reset Reference Date, and (ii) the NAV Conversion Price (“ Reset Price ”) if, on the relevant Reset Reference Date, its prevailing Conversion Price is higher than the relevant Reset Price.

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LETTER FROM THE BOARD

• Conversion Right(s):

• Each of the holders of the Convertible Bonds shall have the right to convert the whole or part of the outstanding amount of the Convertible Bonds (in a whole multiples of US$100,000 or such lesser amount as may represent the entire principal amount thereof) into Conversion Shares on or after the Issue Date of the Convertible Bonds to the close of business on the date falling seven days prior to the Maturity Date (both days inclusive).

• Conversion restriction:

• The Company shall not be obliged to issue any Shares upon exercise by a Bondholder of the Conversion Rights relating to any of the Convertible Bonds held by such Bondholder if such exercise would result in:

• (i) such Bondholder and parties acting in concert with it (within the meaning of the Takeovers Code), taken together, directly or indirectly controlling or being interested in 30% (or such other percentage as may from to time be specified in the Takeovers Code as being the level of triggering a mandatory general offer) or more of the entire issued voting share capital of the Company as at the date of conversion and a mandatory general offer obligation will be triggered under the Takeovers Code; or

• (ii) the Company not meeting the public float requirement under the Listing Rules immediately after the conversion.

Transferability:

• The Convertible Bonds shall be freely transferrable in whole multiples of US$100,000 (or such lesser amount as may represent the entire principal amount thereof), subject to compliance with all applicable laws, rules and regulations (including but not limited to the Listing Rules) and the terms and conditions of the Convertible Bonds.

Ranking:

The Convertible Bonds at all times rank pari passu and without any preference among themselves. The Conversion Shares, when issued, will rank pari passu in all respects with the fully paid Shares then in issue.

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LETTER FROM THE BOARD

Adjustment Events:

In addition to the Conversion Price reset arrangement above, the Conversion Price shall be subject to adjustment upon occurrence of the following:

• (a) consolidation, subdivision or reclassification of the Shares;

• (b) capitalisation of profits or reserves (other than in lieu of a cash dividend);

• (c) capital distribution to the Shareholders (whether on a reduction of capital or otherwise) or grant to the Shareholders rights to acquire for cash assets of the Company or any of its subsidiaries;

• (d) offer new Shares to the Shareholders for subscription by way of rights, or grant to the Shareholders any options or warrants or other rights to subscribe for new Shares by way of rights at a price which is less than 90% of the market price as at the date of the announcement of the terms of the offer or grant;

• (e) issue wholly for cash of any securities which are convertible into, exchangeable for or carry rights of subscription for new Shares at an effective price initially receivable which is less than 90% of the market price at the date of the announcement of the terms of issue of such securities or at the date of the announcement of the proposal of modifying the rights of conversion, exchange or subscription attached to any such securities;

• (f) issue wholly for cash of any Shares at a price which is less than 90% of the market price at the date of announcement of the terms of such issue; and

• (g) issue of Shares for acquisition of asset at an effective price per Share which is less than 90% of the market price of the Shares at the date of announcement of the terms of such issue.

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LETTER FROM THE BOARD

Events of Default:

If any of the following events occurs, the Bondholder may give notice to the Company that the Convertible Bonds are immediately due and repayable at their principal amount together with interest accrued thereon at the rate of 15% per annum from and including the Issue Date up to the date of redemption (after deducting therefrom any interest paid on such Convertible Bonds):

• (a) Payment default: a default is made in the payment of interest due on the Convertible Bonds when due and such default shall not have been cured by payment by the Company within 15 Business Days after the due date; or

• (b) Other default: a default is made by the Group in the performance or observance of any covenant, condition or provision contained in the instrument constituting the Convertible Bonds or in the Convertible Bonds and on its part to be performed or observed or there is a breach by the Company of any warranty given by it in the Subscription Agreement (other than the covenant to pay the principal, premium (if any) and interest in respect of any of the Convertible Bonds) and such default or breach continues for the period of 15 Business Days next following the service by any holder of the Convertible Bonds on the Company of notice specifying brief details of such default or breach and requiring such default or breach to be remedied; or

• (c) Dissolution of the Group and disposals: a petition is presented or a proceeding is commenced or a resolution is passed or an order of a court of competent jurisdiction is made that any Group Company be wound up or dissolved or the Group disposes of all or a material part of its assets, otherwise, in any such case, than for the purposes of or pursuant to and followed by a consolidation, amalgamation, merger or reorganisation, the terms of which shall have previously been approved in writing by an ordinary resolution of holders of the Convertible Bonds; or

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LETTER FROM THE BOARD

• (d) Encumbrances: an encumbrancer takes possession or a receiver, liquidator, assignee or similar officer is appointed of the whole or a material part of the assets or undertaking of the Group; or

• (e) Distress etc.: a distress, execution, seizure, compulsory acquisition, expropriation or nationalisation is levied or enforced upon or sued out against a material part of the assets or undertaking or property of the Group; or

• (f) Trading suspension and delisting: the trading of the Shares is suspended by the Stock Exchange for a period of 10 consecutive Trading Days or listing of the Shares on the Stock Exchange is being revoked or withdrawn; or

• (g) Insufficient share capital: there is not sufficient authorised share capital of the Company available for the fulfilment of the obligations regarding the issue of such number of the Conversion Shares upon the conversion of the outstanding Convertible Bonds; or

• (h) Insolvency: any Group Company is (or is, or could be, deemed by law or a court to be) insolvent or unable to pay its debts, stops, suspends or threatens to stop or suspend payment all or a substantial part of its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all or a material part of its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of all or a material part of its debts; or

– 17 –

LETTER FROM THE BOARD

• (i) Failure to obtain approval: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Company lawfully to enter into, exercise its rights and perform and comply with its obligations under the Convertible Bonds, (ii) to ensure that those obligations are legally binding and enforceable, and (iii) to make the Convertible Bonds admissible in evidence in the courts of the Cayman Islands and Hong Kong, is not taken, fulfilled or done; or

• (j) Unable to fulfill obligation: it is or will become unlawful for the Company to perform or comply with any one or more of its material obligations under any of the Convertible Bonds; or

• (k) Cross default: any event of default as set out in other financing or convertible securities agreements having occurred; or

• (l) Analogous effect: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of the above.

Conversion Price of the Convertible Bonds

The Conversion Price shall not be lower than the Floor Price of HK$0.33 per Conversion Share, which represents:

• (a) a discount of approximately 32.7% to the closing price of HK$0.49 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (b) a discount of approximately 33.7% to the average closing price of approximately HK$0.498 per Share as quoted on the Stock Exchange for the last five consecutive Trading Days up to and including the Last Trading Day;

• (c) the net asset value per Share (based on the net asset value of the Group of RMB457,275,000 (equivalent to approximately HK$525,866,000) as at 31 December 2016 and the existing issued Shares of 1,615,220,000 as at the Latest Practicable Date); and

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LETTER FROM THE BOARD

• (d) a discount of approximately 52.2% to the closing price of HK$0.69 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

In determining the Conversion Price, the Directors took into account:

• (i) the net asset value of the Group. The Floor Price is equivalent to the net asset value of the Group of HK$0.33 per Share as at 31 December 2016 and a premium of approximately 10% over the net asset value of the Group of HK$0.30 per Share as at 30 June 2017;

• (ii) the net loss of the Group of approximately RMB31.5 million for the six months ended 30 June 2017 and the challenging operation environment of the Group in light of the national policies for the restructuring of the pharmaceutical business in the PRC, details of which were set out in the section headed “Reasons for the Subscription” in this circular;

• (iii) the downward trend of the market price of the Shares. The Hang Seng Index increased by approximately 23.6% from 23,031 points to 28,459 points while the Share price decreased by approximately 14.0% from HK$0.57 to HK$0.49 in the past 12 months up to the Last Trading Day;

• (iv) the PRC banking system has tightened credit policy on the healthcare sector, two of the Company’s previous bank loans were not renewed or extended by the banks. The Company has met difficulties in raising fund from non-banking system financiers without asset pledging or controlling shareholder’s assistance in charging its shares given the light asset base of the Group;

• (v) the absence of means of financing alternative to raise fund of the size of the Convertible Bonds as disclosed in the section headed “Reasons for the Subscription” in this circular;

• (vi) given the current booming financial market in Hong Kong, it would be in the interest of the Company to capture the prevailing market sentiment to raise fund for its future development and not to let go the Subscriber whilst it would be for sure harder for the Company to raise fund or identify any suitable investor, if possible, when market direction turns downhill and/or when its performance is getting more worrying; and

• (vii) it is commercially reasonable for the Company to offer a discount on the Conversion Price to the prevailing market price of the Shares as an incentive to attract the Subscriber to invest in the Company.

Having considered the factors above, the Board considers the Conversion Price, which represents approximately 33% discount of the closing price of the Share on the Last Trading Day, is fair and reasonable.

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LETTER FROM THE BOARD

Conversion Shares

As at the Latest Practicable Date, the Company has 1,615,220,000 Shares in issue. Assuming full exercise of the Conversion Rights attaching to the Convertible Bonds at the Floor Price of HK$0.33 per Conversion Share, the Company will allot and issue 3,545,454,545 Conversion Shares, representing approximately 219.5% of the existing issued share capital of the Company and approximately 68.7% of the issued share capital of the Company as enlarged by the allotment and issue of the Conversion Shares in full.

The Conversion Shares will be allotted and issued pursuant to the specific mandates to be sought from the Shareholders at the general meetings of the Company.

Application for listing

No listing of the Convertible Bonds will be sought on the Stock Exchange or any other stock exchanges. Applications will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares that may be allotted and issued upon conversion of the Convertible Bonds.

Reasons for the Subscription

The Group is principally engaged in the provision of comprehensive marketing, promotion and channel management service for imported pharmaceutical products in the PRC.

• (i) National Policies and Financial Performance

As set out in the interim report of the Group for the six months ended 30 June 2017, 2017 is an important year for comprehensively delivering the spirit of the National Hygiene and Health Conference (全國衛生與健康大會) and the “13th Five-Year Plan” for pharmaceutical reform. It is also a crucial year to establish a systematic framework of basic healthcare and meet the stage target of the medical reform. Given the acceleration of industrial restructuring, the PRC is striving to develop the systems for hierarchical diagnosis and treatment, modern hospital management, national medical insurance, protection of pharmaceutical supply, and integrated regulation. On the one hand, the whole pharmaceutical industry faces the dilemma caused by tightened medical insurance budgets, the price limits and rising costs of pharmaceutical products. On the other hand, the pharmaceutical industry has the potential of attracting more capital injection, owing to the deepening reform of public hospitals and the emerging healthcare industry.

During the first half of 2017, pharmaceutical distribution businesses of the Group are confronted by a more complicated macro-environment affected by policies such as price reduction through public tendering, tightened medical insurance budgets, “Two-Invoice System”, “Value-added Tax in place of Business Tax”, public hospitals cancelling pharmaceutical price hikes. Under such policies,

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LETTER FROM THE BOARD

the Group continues to face pressure and challenges in its business, with the overall operating results significantly compromised. For the six months ended 30 June 2017, the Group recorded a total revenue of RMB414.4 million (for the six months ended 30 June 2016: RMB569.4 million), representing a year-on-year decrease of 27.2%, primarily because sales volume of the Group’s major products declined during the adjustment process in response to the implementation of “Two-Invoice System” across the pharmaceutical distribution industry in the PRC. Coupled with the increase in average unit cost of sales due to depreciation of RMB against US$, the Group reported a net loss of approximately RMB31.5 million for the six months ended 30 June 2017 compared with a net profit of approximately RMB30.5 million for the previous corresponding period.

On 9 February 2017, the PRC government announced the Certain Opinions of the General Office of the State Council Concerning Further Reforming and Improving the Policy on Production, Circulation and Utilization of Drugs (國務院辦 公廳關於進一步改革完善藥品生產流通使用政策的若干意見) which set out, among others, the “Two-Invoice System” which aims to streamline the multi-layers of distribution channels from wholesalers to hospitals. It is targeted that the “Two-Invoice System” will be fully implemented throughout the nation in 2018.

In the “Two-Invoice System”, there will be only two invoices: the first invoice is between pharmaceutical manufacturers/import agents and tier 1 distributors, and the second invoice is between tier 1 distributors and hospitals. Currently, the Group mostly relies on 2 layers of sub-distributors for the distribution of its imported pharmaceutical products to hospitals. With the fully implementation of the “Two-Invoice System”, the Board expects that the drug distribution industry is becoming more centralized and the market will continue to consolidate. In this process, if the Group only relies on the original distributor network and sales channel, its financial performance will be further dampened.

In light of the above, the Group has been striving to improve product sales by continuously strengthening its marketing campaign and exploring new sales channels. In order to improve the competitiveness and the performance of the Group, the Board considers that the Group will have to adjust its distribution channels towards direct relationship with hospital/medical institutions by vertical integration into the hospital business so as to secure direct sales of its imported pharmaceutical products to hospitals/medical institutions. In addition, the demand for healthcare services from the private hospitals in the PRC has been increasing. The Board expects that the vertical integration into the hospital business will support the Group’s distribution of imported pharmaceutical products on one hand and create a new income stream to the Group on the other hand. As such, the Company proposed to issue the Convertible Bonds to raise funds for the Group for the acquisition of hospital business when suitable investment opportunities arise.

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LETTER FROM THE BOARD

(ii) Other fund raising methods

Apart from the Convertible Bonds, the Company has also considered other financing alternatives such as bank borrowings, issue of new shares and rights issue/open offer.

Since the first half of 2017, in light of the national policy for the restructuring of the pharmaceutical business in the PRC, financial institutions in the PRC have tightened their credit policy for pharmaceutical companies. In fact, loan facilities in the aggregate amount of RMB130 million granted by banks to the Group were not renewed upon maturity in the first half of 2017. The remaining bank facilities of the Group were all secured by the fixed assets of the Group. With the light asset base of the Group and deteriorated performance of the Group in the first half 2017, the Company encountered difficulties in securing further bank borrowings without pledging the Group’s assets or Shares from controlling shareholder of the Company. All the Shares held by the controlling shareholder of the Company were charged to the Existing Bonds Holder as securities for the payment obligations under the Existing Bonds.

The Company approached four financial institutions, for equity fund raising, including open offer/rights issue, placing of new shares or convertible securities, of HK$1 billion (approximately the amount of the fund to be raised under the Convertible Bonds). Two of the financial institution declined to the possible financing, one of the financial institution expressed difficulty for equity financing without specific suggestion on alternative financing and one of the financial institution suggested much less amount equity financing with much higher interest rate, which is not in the interest of the Company.

In view of the above and the fact that the Convertible Bonds will not cause an immediate dilution effect to the existing Shareholders, the Board consider that the issue of the Convertible Bonds is an appropriate fund raising method and beneficial to the Company and the Shareholders as a whole.

Use of Proceeds

The gross proceeds (before expenses) and the estimated net proceeds of the issue of the Convertible Bonds will be up to US$150,000,000 and approximately US$141,900,000 respectively (equivalent to approximately HK$1,170 million and approximately HK$1,107 million respectively).

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LETTER FROM THE BOARD

The Company will apply the proceeds from the issue of the Convertible Bonds as follows:

First Part CB:

• (i) US$25,000,000 (equivalent to approximately HK$195,000,000) which shall take place within 5 months after the date of the EGM;

• (ii) US$12,000,000 (equivalent to approximately HK$94,000,000) which shall take place within 6 months after the date of the EGM (subject to, among others, a Term Sheet is entered within six months after the date of the EGM); and

• (iii) Up to US$13,000,000 (equivalent to approximately HK$101,000,000) which shall take place within 12 months after the date of the EGM (subject to, among others, a Term Sheet is entered within six months after the date of the EGM).

The Company intends to apply the net proceeds of US$46,900,000 (equivalent to approximately HK$366,000,000) from the issuance of the First Part CB as to:

• (a) Repayment of debt: US$22,800,000 (equivalent to approximately HK$178,000,000) for repayment of the principal and accrued interest of the Existing Bonds;

• (b) General working capital: (i) US$640,000 (equivalent to approximately HK$5,000,000) for the expected due diligence for acquisition of hospital; and (ii) US$10,460,000 (equivalent to approximately HK$82,000,000) for procurement and expansion of sales channels of imported pharmaceutical product;

• (c) Term Sheet Payment Amount: up to US$13,000,000 (equivalent to approximately HK$101,000,000) for the payment of the Term Sheet Payment Amount. In the event that the Term Sheet Payment Amount is less than US$13,000,000, the Company will only issue such principal amount of the First Part CB equivalent to the Term Sheet Payment Amount to the Subscriber and the remaining portion of the First Part CB will not be issued.

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LETTER FROM THE BOARD

Second Part CB:

up to US$100,000,000 (equivalent to approximately HK$780 million) for the payment of professional fee relating to the issue of the Second Part CB and acquisition of hospitals or ancillary and related business and expenditures of the hospitals.

In the circumstance where (a) less than US$25,000,000 of the First Part CB (“ Shortfall Amount ”) is subscribed by the Subscriber on or before 27 March 2018 (being the due date for the repayment of the principal and accrued interest of the June 2017 Bond), and (b) the Shortfall Amount is subscribed by the Subscriber after 27 March 2018, the Company intends to use its internal working capital and/or external borrowings to repay such shortfall of the total amount required to be paid for the Existing Bonds and the Shortfall Amount subscribed by the Subscriber after 27 March 2018 will then be applied to replenish the Company’s working capital and/or repay external borrowings and costs incurred in this regard.

As at the Latest Practicable Date, the Company is exploring private hospital(s) acquisition target of integrated second class or above in the PRC and has identified a target hospital (“ Target Hospital ”) in Guangdong province. The Target Hospital is an integrated hospital which mainly covers the departments of obstetrics and gynecology, neurosurgery, pediatric, general medicine, surgery and Chinese medicine. It has a gross floor area of 20,000 square meters and 260 beds. The Target Hospital is associated with several medical schools in the PRC. The Board anticipates that the operation of the Target Hospital is a prohibited business in the PRC and may or may not subject to restriction of less than 100% ownership by foreign investors.

The Company considers that a period of six months represents a reasonable time for the Company to identify acquisition target(s), conduct due diligence on the hospital, negotiate and agree on a term sheet with the potential vendors.

Despite the Company may or may not enter into a term sheet or definitive agreement for the acquisition of the Target Hospital, given the acquisition of hospitals or ancillary and related business will be financed by the Second Part CB which will be subject to the Shareholders’ approval at the Second Part CB GM(s), details of the acquisition target(s) will be set out in a circular to provide sufficient information to the Shareholders to make an informed decision.

Information on the Subscriber

The Subscriber is a wholly owned subsidiary of Crede Capital Group LLC (“ Crede Capital ”). Crede Capital is an investment fund established in 2009 and has offices located in Los Angeles, New York and Beijing.

Crede Capital is a passive investor who does not seek board seats or control position. It focuses on investment in life sciences, healthcare, energy, natural resources, media, social media, technology and special situations, in particular small-cap public companies with market capitalizations below US$2 billion in U.S., Canadian, European, Australian and Asian markets. Since its inception, Crede Capital has completed approximately 115 transactions committing over US$900 million.

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LETTER FROM THE BOARD

Although Crede Capital will become a passive investor of the Company, Crede Capital has indicated to the Company that it intends to leverage on its network to introduce healthcare related projects to the Company and line up potential cooperation opportunities between the Company and potential pharmaceutical institutions where possible.

In view of the above, despite the potential dilution impact of the Convertible Bonds on the existing Shareholders upon their conversion, the Board reckons that having Crede Capital to become an investor of the Company and possibly potential substantial Shareholder is expected to benefit the Company and its Shareholders, and the terms of the Convertible Bonds are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Fund raising exercise of the Company in the past 12 months

				Actual use of net
Date of			Intended use of	proceeds as at the
announcements	Event	Net proceeds	net proceeds	Latest Practicable Date
25 June 2017,	Issue of June 2017	HK$159,321,500	(i) HK$144 million	(i) approximately
27 June 2017	CB and June 2017		will be used for	HK$144 million has
and 30 June 2017	Bond		expanding the	been used for
			scale of overseas	purchase of
			purchase of	pharmaceutical
			pharmaceutical	products; and
			products in the
			second half of
			2017; and
			(ii) HK$15 million will	(ii) approximately
			be used for	HK$15 million has
			strengthening the	been used for
			Company’s	strengthening the
			marketing channels	Company’s
			in the second half	marketing channels
			of 2017 and in 2018

Save for the above, the Company had not conducted any other fund raising exercise in the past 12 months immediately preceding the dates of the Announcements.

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LETTER FROM THE BOARD

Effect on shareholding structure

Details of the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) upon full conversion of the Convertible Bonds (assuming the Convertible Bonds are converted at the Floor Price by the Subscriber); and (iii) upon maximum conversion of the Convertible Bonds while maintaining minimum public float (assuming the Convertible Bonds are converted at the Floor Price by the Subscriber) are set out below:

Risun Investments Limited_(Note 1) Subscriber(Note 2)_ Public Shareholders Total	As at the Latest Practicable Date Number of Shares % 1,050,000,000 65.01 – – 565,220,000 34.99 1,615,220,000 100.00	Upon full conversion of the Convertible Bonds (assuming the Convertible Bonds are converted at the Floor Price by the Subscriber) Number of Shares % 1,050,000,000 20.35 3,545,454,545 68.70 565,220,000 10.95 5,160,674,545 100.00	Upon maximum conversion of the Convertible Bonds while maintaining minimum public float (assuming the Convertible Bonds are converted at the Floor Price by the Subscriber) Number of Shares % 1,050,000,000 46.44 645,660,000 28.56 565,220,000 25.00 2,260,880,000 100.00	Upon maximum conversion of the Convertible Bonds while maintaining minimum public float (assuming the Convertible Bonds are converted at the Floor Price by the Subscriber) Number of Shares % 1,050,000,000 46.44 645,660,000 28.56 565,220,000 25.00 2,260,880,000 100.00
				100.00

Notes:

1. Mr. Huang Xiangbin is the settlor of a trust in which UBS Trustees (B.V.I.) Limited is the trustee and holds the entire interest in Fullwealth Holdings Limited, which in turn holds the entire interest in Risun Investments Limited.

2. Pursuant to the Subscription Agreement, conversion of the Convertible Bonds is restricted if such conversion would render the public float of the Company falls below the minimum public float requirement under the Listing Rules or trigger any mandatory offer obligation under Rule 26 of the Takeovers Code. The shareholding of the Subscriber is for demonstration of the potential dilution effect only.

2. INCREASE IN AUTHORISED SHARE CAPITAL

The Company proposes to increase its authorised share capital from HK$380,000 divided into 3,800,000,000 Shares of HK$0.0001 each to HK$1,000,000 divided into 10,000,000,000 Shares of HK$0.0001 each by the creation of an additional 6,200,000,000 unissued Shares of HK$0.0001 each, which upon issue shall rank pari passu in all respects with the existing Shares.

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LETTER FROM THE BOARD

The Increase in Authorised Share Capital is conditional upon the passing of an ordinary resolution by the Shareholders at the EGM approving the Increase in Authorised Share Capital.

As at the Latest Practicable Date, the unissued Shares are 2,184,780,000 Shares which fall short of the maximum of 3,545,454,545 Conversion Shares may be allotted and issued upon conversion of the Convertible Bonds in full. The Increase in Authorised Share Capital will facilitate the Company for the allotment and issuance of the Conversion Shares and will provide the Company with greater flexibility to accommodate future expansion and growth of the Group.

3. PROPOSED AMENDMENT TO TERMS AND CONDITIONS OF JUNE 2017 CB AND JUNE 2017 BOND

On 12 October 2017 (after trading hours), the Company executed the CB Supplemental Deed and Bond Supplemental Deed by way of deed poll pursuant to which certain terms and conditions of June 2017 CB and June 2017 Bond will be amended subject to satisfaction of certain conditions.

Major terms of the CB Supplemental Deed and Bond Supplemental Deed are summarized as follows:

(i) The CB Supplemental Deed

A summary of the proposed amendments of the terms and conditions of June 2017 CB under the CB Supplemental Deed is as follows:

		Original terms	Proposed amendments
Maturity	date:	The date falling 24 months from	30 March 2018
		the issue date of June 2017 CB,
		or if the holder of June 2017
		CB and the Company
		mutually agree in writing to
		extend the maturity of June
		2017 CB to the date falling 36
		months from the issue day of
		June 2017 CB (the “June 2017
		CB Extended Maturity Date”)
Interest:		8.00% per annum payable	15% per annum payable
		quarterly, if the maturity date	quarterly
		is extended, 9.00% per annum
		payable quarterly during the
		extended period

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LETTER FROM THE BOARD

Original terms Proposed amendments Redemption at Unless previously redeemed, Unless previously maturity: converted, purchased or redeemed, or purchased cancelled, the Company will and cancelled, the redeem all of June 2017 CB on Company will redeem the maturity date at 104% of June 2017 CB on the the outstanding principal maturity date at 100% amount together with accrued of its outstanding but unpaid interest to such principal amount date or, if applicable, on the together with accrued June 2017 CB Extended but unpaid interest. Maturity Date at 106% of the outstanding principal amount together with accrued but unpaid interest to such date. Conversion Right: Subject to and upon compliance No conversion right. All with the terms and conditions rights and obligations of June 2017 CB, the right of of the holder of June the holder(s) of June 2017 CB 2017 CB and the to convert any June 2017 CB Company in relation to into conversion shares may be the conversion right of exercised at any time on or June 2017 CB and the after the date falling three (3) conversion shares to be months from the closing date issued upon conversion to the close of business on the of June 2017 CB are date falling ten (10) days prior proposed to be deleted to the maturity date of June from the terms and 2017 CB or, if extended, June conditions of June 2017 2017 CB Extended Maturity CB. Date.

Save for the CB Amendments under the CB Supplemental Deed as disclosed or contemplated above, all other terms and conditions under the June 2017 CB remain unchanged.

Conditions Precedent

The CB Amendments will become effective upon satisfaction of the following conditions:

• (i) the passing of the necessary resolutions by the holder(s) of June 2017 CB to approve the CB Amendments;

• (ii) the Stock Exchange having approved the CB Amendments;

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LETTER FROM THE BOARD

• (iii) the execution of a deed of confirmation by Fullwealth Holdings Limited in favour of the Existing Bonds Holder for the share charge dated 24 June 2017 between Fullwealth Holdings Limited as the chargor and the Existing Bonds Holder as the chargee;

• (iv) the execution of a deed of confirmation by Risun Investments Limited in favour of the Existing Bonds Holder for the share charge dated 24 June 2017 between Risun Investments Limited as chargor and the Existing Bonds Holder as the chargee; and

• (v) the execution of a deed of confirmation by Mr. Huang Xiangbin (黃祥彬) in favour of the holder(s) of the Existing Bonds for the personal guarantee dated 24 June 2017 by Mr. Huang Xiangbin in favour of the holder(s) of the Existing Bonds.

In the event that any of the conditions is not fulfilled on or before 31 January 2018 or such other date as agreed by the Company and the holder(s) of June 2017 CB, the CB Supplemental Deed shall automatically become null and void and shall cease to have any force or effect.

As at the Latest Practicable Date, all above conditions (except for condition (ii)) have been fulfilled. The Company will apply to the Stock Exchange for its approval of the CB Amendments pursuant to the requirements under the Listing Rules.

(ii) The Bond Supplemental Deed

A summary of the proposed amendments of the terms and conditions of June 2017 Bond under the Bond Supplemental Deed is as follows:

		Original terms	Proposed amendments
Interest:		10.00% per annum payable	15% per annum payable
		quarterly	quarterly
Maturity	date:	The date falling 24 months from	27 March 2018
		the issue date of June 2017
		Bond, or if the holder of June
		2017 Bond and the Company
		mutually agree in writing to
		extend the maturity of June
		2017 Bond to the date falling
		36 months from the issue date
		of June 2017 Bond

Save for the Bond Amendments under the Bond Supplemental Deed as disclosed or contemplated above, all other terms and conditions under June 2017 Bond remain unchanged.

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LETTER FROM THE BOARD

Conditions Precedent

The Bond Amendments will become effective upon satisfaction of the following conditions:

• (i) the passing of the necessary resolution by the holder(s) of June 2017 Bond to approve the Bond Amendments;

• (ii) the execution of a deed of confirmation by Fullwealth Holdings Limited in favour of the Existing Bonds Holder for the share charge dated 24 June 2017 between Fullwealth Holdings Limited as the chargor and the Existing Bonds Holder as the chargee;

• (iii) the execution of a deed of confirmation by Risun Investments Limited in favour of the Existing Bonds Holder for the share charge dated 24 June 2017 between Risun Investments Limited as chargor and the Existing Bonds Holder as the chargee; and

• (iv) the execution of a deed of confirmation by Mr. Huang Xiangbin (黃祥彬) in favour of the holder(s) of the Existing Bonds for the personal guarantee dated 24 June 2017 by Mr. Huang Xiangbin in favour of the holder(s) of the Existing Bonds.

All the conditions above have been fulfilled and the Bond Amendments took effective from 12 October 2017.

Reasons for the Amendments

The Amendments is a condition precedent to the Subscription Agreement at the request of the Subscriber. June 2017 CB and June 2017 Bond currently bear interest of 8% and 10% per annum respectively (which will increase to 15% per annum after the Amendments becoming effective), while the Convertible Bonds bear interest of 4% per annum only. The repayment of the Existing Bonds with the proceeds from the Convertible Bonds will reduce the interest expenses of the Company and is in the interests of the Company and the Shareholders as a whole.

The Amendments were determined after arm’s length negotiation between the Company and the Existing Bonds Holder for the early redemption of the Existing Bonds. Taking into account that (i) the impact of the PRC policy “Two Invoice System” on the Company’s operations and result as disclosed in the Company’s 2017 interim report and as disclosed in the paragraph headed “Reasons for the Subscription” above; (ii) the Company encountered difficulty in raising funds without pledging assets of the Group or the Shares held by its controlling Shareholder, while the Subscription Agreement does not have such requirement; (iii) gross proceeds from the issue of the Convertible Bonds will be up to US$150 million and the Company can use parts of such proceeds to support the Group for its vertical integration into the hospital business; and (iv) the Amendments could facilitate the issuance of the Convertible Bonds, the Board considers that the Amendments are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

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LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

The Conversion Shares will be allotted and issued pursuant to the specific mandates to be sought from the Shareholders at the general meetings of the Company. The issue of the Convertible Bonds and the Conversion Shares by the Company are subject to, among others, the Shareholders’ approval.

EGM

The EGM will be held at Boardroom 6, M/F, Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Friday, 29 December 2017 at 10:00 a.m. to consider and, if thought fit, pass the resolutions to approve (i) the Subscription Agreement and the transactions contemplated thereunder; and (ii) the Increase in Authorised Share Capital.

A notice convening the EGM is set out on pages 33 to 35 of this circular. A form of proxy for the EGM is enclosed with this circular. Whether or not you intend to be present at the EGM, you are advised to complete the form of proxy and return it to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time scheduled for the EGM or any adjournment thereof. The completion and return of a form of proxy will not preclude you from attending and voting at the meeting in person or any adjourned meeting should you so wish, and in such case, the form of proxy submitted by you shall be deemed to be revoked.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, none of the Shareholders has a material interest in the Subscription Agreement and the transaction contemplated thereunder and the Increase in Authorised Share Capital as at the Latest Practicable Date, and as such, none of the Shareholders will be required to abstain from voting on the resolutions to be proposed at the EGM.

RECOMMENDATION

The Directors are of the opinion that the Subscription Agreement and the transactions contemplated thereunder and the Increase in Authorised Share Capital are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

Accordingly, the Board recommends that all Shareholders vote in favour of the ordinary resolutions approving the Subscription Agreement and the transactions contemplated thereunder and the Increase in Authorised Share Capital to be proposed at the EGM.

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LETTER FROM THE BOARD

RESPONSIBILITY STATEMENT

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

As completion of the issue of each tranche of the Convertible Bonds under the Subscription Agreement is subject to the satisfaction of the Conditions therein and may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

By Order of the Board Sinco Pharmaceuticals Holdings Limited Huang Xiangbin

Chairman and Executive Director

– 32 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [82 x 39] intentionally omitted <==

Sinco Pharmaceuticals Holdings Limited 興科蓉醫藥控股有限公司

(Incorporated under the laws of the Cayman Islands with limited liability)

(Stock Code: 6833)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Sinco Pharmaceuticals Holdings Limited (the “ Company ”) will be held at Boardroom 6, M/F, Renaissance Harbour View Hotel Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on Friday, 29 December 2017 at 10:00 a.m. for the purpose of considering and, if thought fit, passing each of the following resolutions as an ordinary resolution:

ORDINARY RESOLUTIONS

1. “ THAT

• (a) the authorised share capital of the Company be increased from HK$380,000 divided into 3,800,000,000 Shares of HK$0.0001 each to HK$1,000,000 divided into 10,000,000,000 Shares of HK$0.0001 each by the creation of an additional 6,200,000,000 unissued Shares of HK$0.0001 each (the “ Increase in Authorised Share Capital ”); and

• (b) any one director of the Company be and is hereby authorised to do all such acts and things, to sign and execute all such documents for and on behalf of the Company and to take such steps as he/she may in his/her absolute discretion consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Increase in Authorised Share Capital.”

2. “ THAT

• (a) subject to and conditional on the passing of the ordinary resolution no.1 as set out in the notice of this meeting, the amended and restated subscription agreement dated 6 December 2017 (the “ Subscription Agreement ”), a copy of which has been produced to the meeting and marked “A” for the purpose of identification, and entered into between (i) the Company as issuer and (ii) Crede CG III Ltd (the “ Subscriber ”) as subscriber, in relation to the issue of the 4% convertible bonds in the maximum aggregate principal amount of US$150,000,000 (the “ Convertible Bonds ”) by the Company to the Subscriber and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified, and the performance by the Company of all

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NOTICE OF EXTRAORDINARY GENERAL MEETING

the transactions contemplated under the Subscription Agreement, including but not limited to the following, be and is hereby approved:

• (i) the issue by the Company to the Subscriber of the Convertible Bonds in the principal amount of up to US$50,000,000 (the “ First Part Convertible Bonds ”) upon the terms and subject to the conditions set out in the Subscription Agreement; and

• (ii) the allotment and issue by the Company of new ordinary shares of the Company upon exercise of the conversion rights attaching to the First Part Convertible Bonds;

• (b) any director of the Company be and is hereby authorised to do such acts and things, to sign and execute all such further documents (in case of execution of documents under seal, to do so by any two directors of the Company or any director of the Company together with the secretary of the Company) and to take such steps as he/she may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Subscription Agreement or any transactions contemplated thereunder and all other matters incidental thereto or in connection therewith, and to agree to and make such variations, amendments or waivers of any of the matters relating thereto or in connection therewith.”

By Order of the Board Sinco Pharmaceuticals Holdings Limited Huang Xiangbin Chairman and Executive Director

Sichuan, the PRC, 11 December 2017

Notes:

• i.) A shareholder entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend, speak and vote in his/her stead. The proxy does not need to be a shareholder of the Company.

• ii.) Where there are joint registered holders of any shares, any one of such persons may vote at the above meeting (or at any adjournment of it), either personally or by proxy, in respect of such shares as if he/she were solely entitled thereto but the vote of the senior holder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the relevant joint holding.

• iii.) In order to be valid, the completed form of proxy, must be deposited at the Hong Kong share registrar of the Company, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong together with the power of attorney or other authority (if any) under which it is signed or a certified copy of that power of attorney or authority (such certification to be made by either a notary public or a solicitor qualified to practice in Hong Kong), at least 48 hours before the time appointed for holding the above meeting or any adjournment thereof (as the case may be). The completion and return of the form of proxy shall not preclude shareholders of the Company from attending and voting in person at the above meeting (or any adjourned meeting thereof) if they so wish.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

• iv.) The register of members of the Company will be closed from Friday, 22 December 2017 to Friday, 29 December 2017, both days inclusive, in order to determine the eligibility of shareholders to attend and vote at the above meeting, during which period no share transfers will be registered. To be eligible to attend and vote at the above meeting, all properly completed transfer forms accompanied by the relevant share certificates must be lodged for registration with the Hong Kong share registrar of the Company, Computershare Hong Kong Investor Services Limited, at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Thursday, 21 December 2017.

• v.) Pursuant to Rule 13.39(4) of the Listing Rules, voting for all the resolutions set out in this notice will be taken by poll at the above meeting.

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