Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2020

Jan 30, 2020

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE 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 your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Sinopharm Tech Holdings Limited (the ‘‘Company’’), you should at once hand this circular and the accompanying form of proxy to the purchaser or the 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 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.

==> picture [77 x 77] intentionally omitted <==

Sinopharm Tech Holdings Limited 國藥科技股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8156)

PROPOSED ISSUE OF UNLISTED WARRANTS UNDER SPECIFIC MANDATE

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Capitalized 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 4 to 19 of this circular. A notice convening the EGM of the Company to be held at Units 307–313, 3/F, Wireless Centre, Phase One Hong Kong Science Park, Pak Shek Kok, New Territories, Hong Kong on Monday, 17 February 2020 at 11: 00 a.m. is set out on pages 20 to 21 of this circular. A form of proxy for use at the EGM is enclosed with this circular.

Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy, in accordance with the instructions printed thereon and deposit the same at the Hong Kong branch share registrar and transfer office of the Company, Tricor Standard Limited at Level 54, 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 the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and in such event, the proxy shall be deemed to be revoked.

This circular will remain on the ‘‘Latest Company Announcements’’ page of the GEM website at http://www.hkgem.com for a minimum period of 7 days from the date of its posting and on the website of the Company at http://www.sinopharmtech.com.hk.

31 January 2020

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

CONTENTS

		Page
Characteristics of GEM	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Definitions . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Notice of EGM . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20

– ii –

DEFINITIONS

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

• ‘‘associate(s)’’ has the meaning ascribed to it under the GEM Listing Rules

• ‘‘Board’’ the board of Directors

• ‘‘Business Day’’ a day on which licensed banks are generally open for banking business in Hong Kong, other than Saturdays, Sundays and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9: 00 a.m. and 12: 00 noon and is not lowered at or before 12: 00 noon or on which a black rainstorm warning signal is hoisted or remains in effect between 9: 00 a.m. and 12: 00 noon and is not discontinued at or before 12: 00 noon

• ‘‘Company’’ Sinopharm Tech Holdings Limited (Stock Code: 08156), a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on the GEM

• ‘‘connected person(s)’’ has the meaning ascribed to it under the GEM Listing Rules

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘EGM’’ the extraordinary general meeting of the Company to be convened and held for the Shareholders to consider, and if thought fit, approve (among others) the Warrant Subscription Agreement, the Warrant Instrument and the transactions contemplated thereunder including the issue of the Warrants and the Specific Mandate

• ‘‘Exercise Period’’ the period during which the subscription rights attaching to the Warrants can be exercised, which shall be at any time during the 12-month period from the date of Warrant Issuance

• ‘‘GEM’’ GEM of the Stock Exchange

• ‘‘GEM Listing Rules’’ the Rules Governing the Listing of Securities on GEM

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

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

• ‘‘Independent Third third party(ies) independent of and not connected with the Party(ies)’’ Company and its connected persons and their respective associates

– 1 –

DEFINITIONS

• ‘‘Independent Valuer’’ CBRE Limited, an independent valuer

• ‘‘Last Trading Day’’

• 3 January 2020, being the last trading day for the Shares before the entering into of the Warrant Subscription Agreement

• ‘‘Latest Practicable Date’’

• 24 January 2020, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

• ‘‘Professional any independent merchant bank or other financial institution in Advisor(s)’’ Hong Kong selected by the Directors, or the auditors of the Company for the time being

• ‘‘Share(s)’’ ordinary share(s) of HK$0.0125 each in the share capital of the Company

• ‘‘Share Option Scheme’’ the share option scheme adopted by the Company on 31 January 2013

• ‘‘Shareholder(s)’’ holder(s) of the Share(s)

• ‘‘Specific Mandate’’ the specific mandate for allotment and issue of up to 200,000,000 Warrant Shares, which is subject to approval by the Shareholders at the EGM

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘Subscriber’’ Mr. Yim Hin Keung

• ‘‘Valuation Report’’ the valuation report in respect of the Warrants dated 3 January 2020 issued by the Independent Valuer

• ‘‘Warrant(s)’’ a total of 200,000,000 unlisted warrants to be issued by the Company at the Warrant Price, each entitling the holder thereof to initially subscribe for one Warrant Share at the Warrant Exercise Price (subject to adjustments) at any time during the Exercise Period

• ‘‘Warrant Exercise Price’’

• an initial exercise price of HK$0.35 per Warrant Share at which holder of the Warrants may subscribe for the Warrant Share(s)

• ‘‘Warrant Instrument’’ the deed poll of the Company governing the terms of the Warrants to be executed and delivered to the Subscriber upon Warrant Issuance

• ‘‘Warrant Issuance’’ the completion of the subscription of the Warrants pursuant to the Warrant Subscription Agreement

– 2 –

DEFINITIONS

‘‘Warrant Price’’ the subscription price of HK$0.04 per Warrant, at the aggregate amount of HK$8,000,000 ‘‘Warrant Share(s)’’ up to 200,000,000 new Shares to be allotted and issued upon exercise of the subscription rights attaching to the Warrants ‘‘Warrant Subscription the conditional subscription agreement dated 3 January 2020 Agreement’’ entered into between the Company and the Subscriber in respect of the Warrants ‘‘%’’ per cent.

If there is any inconsistency in this circular between the Chinese and English versions, then English version shall prevail.

– 3 –

LETTER FROM THE BOARD

==> picture [77 x 76] intentionally omitted <==

Sinopharm Tech Holdings Limited 國藥科技股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8156)

Executive Directors: Registered office: Madam CHEUNG Kwai Lan (Chairperson) P.O. Box 10008 Mr. CHAN Ting Willow House (Deputy Chairperson and Chief Executive Officer) Cricket Square Grand Cayman KY1-1001 Non-executive Directors: Cayman Islands

Non-executive Directors: Cayman Islands Mr. CHAN Tung Mei Dr. CHENG Yanjie Head office and principal place of business in Hong Kong: Independent Non-executive Directors: Units 307–313, 3/F Mr. LAU Fai Lawrence Wireless Centre Dr. LIU Ta-pei Phase One Hong Kong Science Park Mr. CHAU Wai Wah Fred Pak Shek Kok, New Territories Hong Kong

31 January 2020

To the Shareholders

Dear Sir/Madam,

PROPOSED ISSUE OF UNLISTED WARRANTS UNDER SPECIFIC MANDATE AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 3 January 2020 in relation to, among others, the conditional Warrant Subscription Agreement entered into between the Company and the Subscriber pursuant to which, subject to the fulfilment of the conditions precedent thereunder, the Warrants will be issued at the issue price of HK$0.04 to the Subscriber.

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with (i) further information on the issue of the Warrants; (ii) the valuation of the Warrants by the Independent Valuer; (iii) other information required to be disclosed under the GEM Listing Rules; and (iv) a notice of the EGM.

THE WARRANT SUBSCRIPTION AGREEMENT

Below is a summary of the principal terms of the Warrant Subscription Agreement:

Date : 3 January 2020 (after trading hours) Issuer : The Company Subscriber : Mr. Yim Hin Keung

Parties

To the best knowledge, information and belief of the Directors after having made all reasonable enquiries, the Subscriber is an Independent Third Party.

Subject matter

Pursuant to the Warrant Subscription Agreement, the Subscriber has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, the Warrants at the aggregate Warrant Price of HK$8,000,000 to the Subscriber or his nominee.

Principal terms of the Warrants

The principal terms of the Warrants under the Warrant Subscription Agreement and the Warrant Instrument are summarized below:

Issuer : The Company Warrant Price : HK$0.04 per Warrant, at the aggregate amount of HK$8,000,000, payable in cash by the Subscriber on the date of completion of the Warrant Issuance. Number of Warrants : 200,000,000 units of unlisted warrants entitling the holder(s) thereof to subscribe for a maximum of 200,000,000 Warrant Shares. Each Warrant carries the right to subscribe for one Warrant Share at the Warrant Exercise Price.

Warrant Exercise Price : HK$0.35 per Warrant Share, subject to adjustments detailed below.

– 5 –

LETTER FROM THE BOARD

Number of Warrant : 200,000,000 Warrant Shares (subject to adjustments) Shares to be issued upon exercise of the subscription rights attaching to the Warrants in full. Exercise Period : The subscription rights attaching to the Warrants can be exercised at any time during the 12-month period commencing from the completion date of Warrant Issuance. Transferability : The Warrants are transferrable to persons who are not connected persons of the Company, in whole or in denominations of 1,000,000 units of Warrants or integral multiples thereof. Any transfer of the Warrants will be subject to applicable laws and the GEM Listing Rules. Voting : The holders of the Warrants will not have any right to attend or vote at any general meeting of the Company by virtue of them being holders of the Warrants. Status of the Warrant : All Warrant Shares falling to be allotted and issued Shares upon the exercise of the subscription rights represented by the Warrant certificates will be allotted and issued not later than 10 Business Days after the relevant exercise date and will rank pari passu with the fully paid Shares in issue on the relevant exercise date and accordingly shall entitle the holder(s) thereof to participate in all dividends or other distribution declared, paid or made on or after the relevant exercise date. Rights on liquidation : In the event a notice is given by the Company to its Shareholders to convene a shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company during the Exercise Period, the Company shall give notice thereof to each holder of the Warrants who shall be entitled to, at any time up to the close of business on the second Business Day before the general meeting, by irrevocable surrender of its/his/her Warrant certificate(s) to the Company with the subscription form(s) duly completed, together with payment of the Warrant Exercise Price or the relative portion thereof (which must be an integral multiple of 1,000,000 Warrants in the case of a partial exercise), exercise the subscription rights represented by such Warrant certificate.

– 6 –

LETTER FROM THE BOARD

Subject to the foregoing, if the Company is wound up, all subscription rights which have not been exercised at the commencement of the winding up will lapse and each Warrant certificate will cease to be valid for any purpose.

Listing : No listing of the Warrant will be sought on the Stock Exchange or other stock exchanges.

Number of Warrant Shares to be allotted and issued upon exercise of the subscription rights attaching to the Warrants

Assuming there will be no further changes in the issued share capital of the Company between the Latest Practicable Date up to and including the date of allotment and issue of the Warrant Shares, the maximum number of 200,000,000 Warrant Shares which will fall to be issued represent (i) approximately 4.87% of the existing issued share capital of the Company; and (ii) approximately 4.64% of the issued share capital of the Company as enlarged by the allotment and issue of the Warrant Shares.

The aggregate nominal value of the 200,000,000 Warrant Shares is HK$2,500,000.

Warrant Price and Warrant Exercise Price

The Warrant Price is HK$0.04 per Warrant and the Warrant Exercise Price is HK$0.35 per Warrant Share. The Warrants will be issued to the Subscriber at the aggregate consideration of HK$8,000,000. The net Warrant Price, after deduction of relevant expenses, is approximately HK$0.039 per Warrant.

The Company has engaged CBRE Limited (the ‘‘Independent Valuer’’), a valuation firm which is an Independent Third Party, to assess the fair value of the Warrants by making reference to the Binomial option pricing model (the ‘‘Binomial Model’’). Based on the Binomial Model, the unit Warrant value as valued by the Independent Valuer was approximately HK$0.039738 as at 3 January 2020, being the date of the Warrant Subscription Agreement, representing a discount of approximately 0.7% to the Warrant Price. The key assumptions and parameters applied by the Independent Valuer in the Binomial Model extracted from the Valuation Report for the assessment of the fair value of the Warrants are set out as follows:

Assumptions

1. the risk-free rate is the annualized yield of Hong Kong Exchange Fund Note with maturity matching the contractual life of the Warrants obtained from Bloomberg as at the 3 January 2020;

2. the dividend yield of the Company is deemed as 0.00% as no dividends were declared by the Company for the previous 7 years and it is assumed that no dividends will be paid in the near future; and

– 7 –

LETTER FROM THE BOARD

1. the expected volatility is the historical volatility of the Shares over the most recent period commensurate with the contractual life of the Warrants and reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

Parameters

1. the underlying stock price of HK$0.246 per Share, being the closing price of the Share as quoted on the Stock Exchange on 3 January 2020, being the date of the Warrant Subscription Agreement;

2. the initial Warrant Exercise Price of HK$0.35;

3. the Exercise Period, being the 12-month period commencing on the date of Warrant Issuance assuming the Warrant Issuance took place on 3 January 2020;

4. the contractual warrants life of 1 year;

5. a risk free rate of 1.798%;

6. an expected volatility of 69.386%; and

7. an expected annualized dividend yield of 0.00%.

The Directors consider that the Warrant Price and Warrant Exercise Price are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

Adjustments to the Warrant Exercise Price

The initial Warrant Exercise Price of HK$0.35 per Warrant Share is subject to adjustments as follows:

• (i) If and whenever the Shares by reason of any consolidation or sub-division become of a different nominal amount, the Warrant Exercise Price in force immediately prior thereto shall be adjusted by multiplying it by the revised nominal amount and dividing the result by the former nominal amount. Each such adjustment shall be effective from the close of business in Hong Kong on the day immediately preceding the date on which the consolidation or sub-division becomes effective.

• (ii) If and whenever the Company shall issue (other than in lieu of a cash dividend) any Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund), the Warrant Exercise Price in force immediately prior to such issue shall be adjusted by multiplying it by the aggregate nominal amount of the issued Shares immediately before such issue and dividing the result by the sum of such aggregate nominal amount and the aggregate nominal amount of the Shares issued in such capitalisation. Each such adjustment shall be effective (if appropriate retroactively) from the commencement of the day next following the record date for such issue.

– 8 –

LETTER FROM THE BOARD

• (iii) If and whenever the Company shall offer to the Shareholders new Shares for subscription by way of rights, or shall grant to the Shareholders any options or warrants to subscribe for new Shares, at a price which is less than 80% of the market price at the date of the announcement of the terms of the offer or grant, the Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force immediately before the date of the announcement of such offer or grant by the following fraction:

==> picture [49 x 23] intentionally omitted <==

whereas:

• A =the number of Shares in issue immediately before the date of such announcement;

• B =the number of Shares which the aggregate of the amount (if any) payable for the rights, options or warrants and of the amount payable for the total number of new Shares comprised therein would purchase at such market price; and

• C =the number of Shares in issue on the date of such announcement plus the aggregate number of Shares offered for subscription or comprised in the options or warrants.

Such adjustment shall become effective (if appropriate retroactively) from the commencement of the day next following the record date for the offer or grant.

• (iv) If and whenever the Company or any other company shall issue wholly for cash any securities (other than options granted pursuant to the Share Option Scheme) which by their terms are convertible into or exchangeable for or carry rights of subscription for new Shares and the total Effective Consideration per Share initially receivable for such securities is less than 80% of the price which is the market price at the date of the announcement of the terms of issue of such securities, the Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force immediately prior to the issue by the following fraction:

==> picture [49 x 22] intentionally omitted <==

whereas:

• A =the number of Shares in issue immediately before the date of the issue of such securities;

• B =is the number of Shares which the total Effective Consideration receivable for the securities issued would purchase at such market price; and

– 9 –

LETTER FROM THE BOARD

• C =is the number of Shares in issue immediately before the date of the issue plus the number of Shares to be issued upon conversion or exchange of, or the exercise of the subscription rights conferred by, such securities at the initial conversion or exchange rate or subscription price.

Such adjustment shall become effective (if appropriate retrospectively) from the close of business in Hong Kong on the business day immediately preceding whichever is the earlier of the date on which the issue is announced and the date on which the issuer determines the conversion or exchange rate or subscription price.

• (v) If and whenever the rights of conversion or exchange or subscription attached to any such securities as mentioned in the above paragraph (iv) are modified so that the total Effective Consideration per Share initially receivable for such securities shall be less than 80% of the price which is the market price at the date of announcement of the proposal to modify such rights of conversion or exchange or subscription, the Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force immediately prior to such modification by the following fraction:

==> picture [49 x 23] intentionally omitted <==

whereas:

• A =the number of Shares in issue immediately before the date of such modification

• B =the number of Shares which the total Effective Consideration receivable for the securities issued at the modified conversion or exchange price would purchase at the market price at the date of the announcement of such proposal and

• C =the number of Shares in issue immediately before such date of modification plus the number of Shares to be issued upon conversion or exchange of or the exercise of the subscription rights conferred by, such securities at the modified conversion or exchange rate or subscription price.

Such adjustment shall become effective as at the date upon which such modification shall take effect. A right of conversion or exchange or subscription shall not be treated as modified for the foregoing purposes where it is adjusted to take account of rights or capitalisation issues and other events normally giving rise to adjustment of conversion or exchange terms.

For the purposes of those adjustments in (iv) and (v) above, the ‘‘total Effective Consideration’’ receivable for the securities issued shall be deemed to be the consideration receivable by the issuer for any such securities plus the additional minimum consideration (if any) to be received by the issuer and/or the Company

– 10 –

LETTER FROM THE BOARD

(if not the issuer) upon (and assuming) the conversion or exchange thereof or the exercise of such subscription rights and the Effective Consideration per Share initially receivable for such securities shall be such aggregate consideration divided by the number of Shares to be issued upon (and assuming) such conversion or exchange at the initial conversion or exchange rate or the exercise of such subscription rights at the initial subscription price, in each case without any deduction for any commissions, discounts or expenses paid, allowed or incurred in connection with the issue.

• (vi) If and whenever the Company shall issue wholly for cash any Shares (other than Shares issued to any eligible participants, or their personal representatives pursuant to the Share Option Scheme) at a price per Share which is less than 80% of the market price at the date of the announcement of the terms of such issue, the Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force immediately before the date of such announcement by a fraction of which the numerator is the number of Shares in issue immediately before the date of such announcement plus the number of Shares which the aggregate amount payable for the issue would purchase at such market price and the denominator is the number of Shares in issue immediately before the date of such announcement plus the number of Shares so issued. Such adjustment shall become effective on the date of the issue.

For the purposes of those adjustments in (iii) to (vi) above, the ‘‘market price’’ means the average of the closing prices of one Share on the Stock Exchange in respect of dealings in board lots for the five consecutive business days ending on the last business day preceding the day on or as of which the market price is to be ascertained.

• (vii) If and whenever the Company shall purchase any Shares or securities convertible into Shares or any rights to acquire Shares (other than on the Stock Exchange or any other stock exchange recognised for such purpose by the Securities and Futures Commission of Hong Kong and the Stock Exchange) and the Directors cancel such Shares, securities convertible into Shares or rights to acquire Shares, the Directors may (but not obliged) if they consider it appropriate make an adjustment to the Warrant Exercise Price provided that the Directors shall have appointed a Professional Advisor to consider whether, for any reason whatever as a result of such purchases, an adjustment should be made to the Warrant Exercise Price fairly and appropriately to reflect the relative interests of the persons affected by such purchases by the Company and, if such Professional Advisor shall consider in its opinion that it is appropriate to make an adjustment to the Warrant Exercise Price, the Directors shall make an adjustment to the Warrant Exercise Price in such manner as such Professional Advisor shall certify to be, in its opinion, appropriate. Such adjustment shall become effective (if appropriate retroactively) from the close of business in Hong Kong on the business day next preceding the date on which such purchases by the Company are made.

– 11 –

LETTER FROM THE BOARD

The Warrant Exercise Price represents (i) a premium of approximately 42.28% to the closing price of HK$0.246 per Share as quoted on the Stock Exchange on the Last Trading Day; (ii) a premium of approximately 38.89% to the average closing price of HK$0.252 per Share as quoted on the Stock Exchange for the five trading days immediately prior to the Last Trading Day; and (iii) a premium of 40% to the closing price of HK$0.25 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The aggregate of Warrant Price of HK$0.04 per Warrant and the Warrant Exercise Price of HK$0.35 per Warrant Share, i.e. HK$0.39, represents (i) a premium of approximately 58.54% over the closing price of HK$0.246 per Share quoted on the Stock Exchange on the Last Trading Day; (ii) a premium of approximately 54.76% over the average closing price of HK$0.252 per Share as quoted on the Stock Exchange for the five trading days immediately prior to the Last Trading Day; and (iii) a premium of 56% to the closing price of HK$0.25 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Warrant Price and the Warrant Exercise Price were determined on normal commercial terms after arm’s length negotiations between the Company and the Subscriber with reference to the current market sentiment, the Group’s financial position, the historical Share price, the liquidity of the Shares in the market, the valuation of the Warrants by the Independent Valuer, the intended use of proceeds and reasons for and benefits of the issue of the Warrants set out in the section headed ‘‘REASONS FOR AND BENEFITS OF THE ISSUE OF WARRANTS’’ below. The Directors (including the independent non-executive Directors) consider that the Warrant Price and the Warrant Exercise Price are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Conditions precedent for the Warrant Issuance

Completion of the Warrant Issuance is conditional upon the fulfilment of the following conditions:

• (a) (i) the application having been made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares which fall to be allotted and issued upon the exercise of the subscription rights attaching to the Warrants; and (ii) the Listing Committee of the Stock Exchange having granted (either unconditionally or subject to conditions to which neither the Company nor the Subscriber shall reasonably object) the listing of, and permission to deal in, the Shares which fall to be allotted and issued upon the exercise of the subscription rights attaching to the Warrants; and

• (b) the approval of the Shareholders of the Warrant Subscription Agreement, the Warrant Instrument and the issue of the Warrants at the EGM.

If the above conditions precedent are not fulfilled in all respects on or before 30 April 2020 or such later date as may be agreed between the Company and the Subscriber, the Warrant Subscription Agreement shall lapse and be of no further effect, save for certain general provisions under the Warrant Subscription Agreement and the liabilities of the parties for any antecedent breaches thereunder.

– 12 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, none of the above conditions precedent have been fulfilled.

The Warrant Issuance

Completion of the Warrant Issuance shall take place on or before the 7th Business Day following the date on which the above conditions precedent are fulfilled.

On completion of the Warrant Issuance, the Company will execute and deliver to the Subscriber the Warrant Instrument governing the terms of the Warrants.

Rights to participate in any distributions or issues

The warrantholders shall not have the right to participate in any distributions or further issues of Shares, securities or warrants made by the Company as a result of them being warrantholders.

Rights of warrantholders on liquidation

• (a) If an effective resolution is passed during the Exercise Period to voluntarily wind up the Company for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement to which the warrantholder, or some person designated by them for such purpose by special resolution of the warrantholders, shall be a party or in conjunction with which a proposal is made to the warrantholders and is approved by special resolution of the warrantholders, the terms of such scheme of arrangement or (as the case may be) proposal shall be binding on all the warrantholders.

• (b) If a notice is given by the Company to its Shareholders to convene a Shareholders’ meeting for the purposes of considering, and if thought fit approving, a resolution to voluntarily wind-up the Company during the Exercise Period, the Company shall give notice thereof to each warrantholder, and every warrantholder shall be entitled by irrevocable surrender of his Warrant certificate(s) to the Company (such surrender to occur not later than two business days prior to the proposed Shareholders’ meeting) with the subscription form(s) duly completed, together with payment of the Warrant Exercise Price or the relative portion thereof (which must be an integral multiple of 1,000,000 Warrants in the case of a partial exercise), to exercise the subscription rights represented by such Warrant and the Company shall as soon as possible and in any event no later than the day immediately prior to the date of the proposed Shareholders’ meeting allot such number of Shares to the warrantholder which fall to be issued pursuant to the exercise of the subscription rights represented by such Warrant.

If the Company is wound up, all subscription rights which have not been exercised at the commencement of the winding up shall lapse and each warrant certificate will cease to be valid for any purpose.

– 13 –

LETTER FROM THE BOARD

Specific mandate

The Warrant Shares to be allotted and issued upon exercising of the subscription rights attaching to the Warrants will be allotted and issued pursuant to the Specific Mandate. The Company will seek the grant of the Specific Mandate at the EGM.

Listing application

The Company will apply to the Stock Exchange for the listing of, and permission to deal in, the Warrant Shares which may fall to be allotted and issued upon exercise of the subscription rights attaching to the Warrants. No listing of the Warrants will be sought on the Stock Exchange or any other stock exchanges.

REASONS FOR AND BENEFITS OF THE ISSUE OF WARRANTS

The Group is principally engaged in (i) the provision of lottery-related services; (ii) the provision of Internet Plus services (solutions and supply chain); and (iii) other services.

The Board considers that the Warrant Issuance represents good opportunities to raise funds for the Group as it is not interest-bearing and will not increase the Company’s financial pressure through the equity financing instead of debt financing. Further, it does not have any immediate dilution effect on the shareholding of the existing Shareholders. In addition to the proceeds that will be raised upon completion of the Warrant Issuance, further capital of HK$70 million will be raised upon the full exercise of the subscription rights attaching to the Warrants by the holder(s) thereof during the Exercise Period. The aggregate of Warrant Price and Warrant Exercise Price of HK$0.39 represents premiums to the market price of the Shares which has not resulted in unfair dilution of the existing Shareholders’ interest.

As the Warrants are transferrable to persons who are not connected persons of the Company, the Shareholder base may be broadened even there is only one Subscriber for the Warrant Issuance. Therefore, the Board considers that the issue of Warrants provides opportunities for the Group to broaden and strengthen the Shareholder and capital base of the Company.

In view of the above, the Directors (including the independent non-executive Directors) consider that the terms of the Warrant Subscription Agreement (including the Warrant Instrument) are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

USE OF PROCEEDS

Upon completion of the Warrant Issuance, the gross proceeds to be received by the Company will be HK$8.0 million. Assuming the full exercise of the subscription rights attaching to the maximum number of Warrants at the Warrant Exercise Price, the Company will further raise an additional of HK$70.0 million. The aggregate gross proceeds in the amount of HK$78.0 million, less the relevant expenses, are expected to be used for general

– 14 –

LETTER FROM THE BOARD

working capital, repayment of debts and future investment of the Group as and when opportunities arise but no specific investment targets have been identified yet as at the Latest Practicable Date.

FUND RAISING ACTIVITY IN THE PAST TWELVE-MONTH PERIOD

Save for the fund raising activity mentioned below, the Board confirms that there has not been any fund raising exercise made by the Company in the twelve months immediately preceding the date of the announcement of the Company, being 3 January 2020, and the Latest Practicable Date.

				Actual use of
				proceeds as at
Date of			Intended use of	the Latest
Announcement	Event	Net proceeds	proceeds	Practicable Date
07/01/2019	Placing of	Approximately	General	Used as
22/01/2019	168,000,000 Shares	HK$39.5 million	working capital	intended
	under general		of the Group
	mandate at
	HK$0.238 per
	Share

INFORMATION ON THE SUBSCRIBER

Mr. Yim Hin Keung (‘‘Mr. Yim’’) had been a professional jockey in Hong Kong for over 15 years and retired in 2006 with 128 wins under his mount. He has been a top apprentice jockey champion twice 1994–1995 and 1995–1996 seasons. Mr. Yim was involved in business investment as principal investor in the area of agriculture, minerals, Chinese medicine and elderly care homes. He is currently a director of Kenford Medical Group Company Limited which is one of the largest modernized Chinese medical clinic groups in Hong Kong. He was introduced to the Company through business associates of the Company. He wished to be an investor in the Company and agreed to subscribe for the Warrants.

EFFECT ON THE SHAREHOLDING STRUCTURE

As at the Latest Practicable Date, the Company has 4,108,855,068 Shares in issue. Assuming there will be no further changes in the issued share capital of the Company prior to the allotment and issue of the Warrant Shares, the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the allotment and

– 15 –

LETTER FROM THE BOARD

issue of the 200,000,000 Warrant Shares in full with no adjustment to the number of Warrant Shares to be allotted and issued on exercise of the subscription rights attaching to the Warrants, are set out as below for illustration purposes only:

Shareholders Directors Madam Cheung Kwai Lan Mr. Chan Tung Mei Dr. Cheng Yanji Mr. Chau Wai Wah Fred Sub-total Sinopharm Traditional Chinese Medicine Overseas Holdings Limited Best Frontier Investments Limited (Note 1) Integrated Asset Management (Asia) Limited (‘‘Integrated Asset Management’’) and its concert parties (Note 2) Sub-total The Subscriber Public Shareholders Total Notes:	As at the Latest Practicable Date Number of Shares Approximate % 4,656,000 0.11 3,020,000 0.07 1,965,000 0.05 3,800,000 0.09 13,441,000 0.32 650,000,000 15.82 632,920,856 15.40 461,733,000 11.24 1,744,653,856 42.46 — — 2,350,760,212 57.22 4,108,855,068 100.00	Immediately after the exercise of the subscription rights attaching to the Warrants in full Number of Shares Approximate % 4,656,000 0.11 3,020,000 0.07 1,965,000 0.05 3,800,000 0.09 13,441,000 0.32 650,000,000 15.09 632,920,856 14.69 461,733,000 10.72 1,744,653,856 40.50 200,000,000 4.64 2,350,760,212 54.54 4,308,855,068 100.00	Immediately after the exercise of the subscription rights attaching to the Warrants in full Number of Shares Approximate % 4,656,000 0.11 3,020,000 0.07 1,965,000 0.05 3,800,000 0.09 13,441,000 0.32 650,000,000 15.09 632,920,856 14.69 461,733,000 10.72 1,744,653,856 40.50 200,000,000 4.64 2,350,760,212 54.54 4,308,855,068 100.00
			0.32 15.09 14.69
			10.72
			40.50 4.64 54.54
			100.00

1. The 632,920,856 Shares were held by Best Frontier Investments Limited which was owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei who are spouses to each other and each a Director.

2. The 461,733,000 Shares were owned by Integrated Asset Management which was wholly-owned by Mr. YAM Tak Cheung. 8% coupon convertible bonds in aggregate amount of HK$89,625,000 (the ‘‘CBs’’) for a term of six months were issued to Integrated Asset Management pursuant to the first amendment agreement dated 18 January 2017 approved by the Shareholders at the extraordinary general meeting of the Company held on 29 March 2017. The Company received a written consent from Integrated Asset Management, on which the maturity date of the CBs would be extended for

– 16 –

LETTER FROM THE BOARD

further six months to 17 January 2018. A maximum number of 249,651,810 Shares would be allotted and issued to Integrated Asset Management upon conversion of the CBs in full. The amended conversion price is HK$0.359 per conversion share subject to adjustment.

Pursuant to the second amendment agreement approved by the Shareholders at the extraordinary general meeting of the Company held on 18 April 2018, the amendments were that the maturity date of the CBs was extended for six months from 17 January 2018 to 17 July 2018, and further extended maturity date upon a prior written consent from Integrated Asset Management would be 17 January 2019. Such written consent from Integrated Asset Management has been received by the Company. A maximum number of 249,651,810 Shares would be allotted and issued to Integrated Asset upon conversion of the CBs in full.

An ordinary resolution was passed at the extraordinary general meeting of the Company held on 19 March 2019 in which pursuant to the third amendment agreement, the amendments are that the maturity date of the CBs shall be extended for six months from 17 January 2019 to 17 July 2019, and further extended to 17 January 2020 upon a prior written consent from Integrated Asset Management. Such written consent from Integrated Asset Management has been received by the Company. A maximum number of 249,651,810 Shares shall be allotted and issued to Integrated Asset upon conversion of the CBs in full.

As a result of the adjustments of the CBs on 10 May 2019 upon the allotment and issue of the consideration shares to Sinopharm Traditional Chinese Medicine Overseas Holdings Limited, a maximum number of 263,602,941 Shares shall be allotted and issued to Integrated Asset upon conversion of the CBs in full and thereafter the shareholding of Integrated Asset Management will be increased to approximately 17.65% of the existing issued share capital of the Company and approximately 16.59% of the enlarged issued share capital of the Company. The adjusted conversion price is HK$0.34 per conversion share subject to further adjustment.

Up to the Latest Practicable Date, the Company was in discussion with Integrated Asset Management as to the renewal and refinancing of the CBs and Integrated Asset Management has expressed its willingness to further negotiate with the Company in this regard. For details, please refer to the announcement of the Company dated 17 January 2020.

IMPLICATIONS UNDER GEM LISTING RULES

Pursuant to Rule 21.02(1) of the GEM Listing Rules, the Shares to be issued on exercise of the Warrants must not, when aggregated with all other equity securities remain to be issued on exercise of any other subscription rights, if all such rights were immediately exercised, whether or not such exercise is permissible, exceed 20% of the issued share capital of the Company at the time the Warrants are issued. Options granted under share option schemes which comply with Chapter 23 of the GEM Listing Rules are excluded for the purpose of such limit.

As at the Latest Practicable Date, there are no equity securities of the Company with subscription rights (other than the share options under the Share Option Scheme) outstanding and not yet exercised. Assuming there is no further issue or repurchase of the Shares, upon the full exercise of the subscription rights attaching to the Warrants, an aggregate of 200,000,000 new Shares will be issued, representing approximately 4.87% of the existing issued share capital of the Company as at the Latest Practicable Date, and approximately 4.64% of the issued share capital of the Company as enlarged by the allotment and issue of Warrant Shares.

Accordingly, the issue of the Warrants is in compliance with Rule 21.02(1) of the GEM Listing Rules.

– 17 –

LETTER FROM THE BOARD

COMPETING INTERESTS

None of the Directors, the substantial shareholders (as defined under the GEM Listing Rules) or the controlling shareholder (as defined under the GEM Listing Rules) of the Company or any of their respective close associates (as defined under the GEM Listing Rules) have any interest in any business which competes or is likely to compete, directly or indirectly, with the business of the Group.

EGM

The EGM will be held to consider and, if thought fit, approve, among other matters, the issue of Warrants and the transactions ancillary to it, including the grant of the Specific Mandate. The votes of the Shareholders regarding the resolution(s) for approval of the issue of Warrants, transactions thereunder and the grant of the Specific Mandate will be taken by way of poll at the EGM.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholder is required to abstain from voting on the resolution(s) relating to the above at the EGM.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholder; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case-by-case basis.

A form of proxy for use at the EGM is enclosed with this circular. 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 thereon, and deposit it with the Company’s Hong Kong branch share registrar and transfer office, Tricor Standard Limited at Level 54, 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 or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending in person and voting at the EGM or any adjourned meeting if you so desire and in such event, the proxy shall be deemed to be revoked.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM 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.

– 18 –

LETTER FROM THE BOARD

RECOMMENDATIONS

Up to the Latest Practicable Date, the Directors are not aware of any contemplated acquisitions, disposals or other matters during the Exercise Period (i.e. 12-month commencing from the date of issue of the Warrants) that may have a material impact on the Company which is necessary for the Shareholders and the public to appraise the position of the Company.

Up to the Latest Practicable Date, apart from the Warrant Subscription Agreement, the Company has not entered, or contemplated to enter, into any other arrangement, agreements or understanding (whether formal or informal and whether express or implied) with the Subscriber.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Warrants, including the allotment and issue of the Warrant Shares, are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors would recommend the Shareholders to vote in favour of the resolution(s) approving the same at the EGM.

Yours faithfully, By Order of the Board Sinopharm Tech Holdings Limited 國藥科技股份有限公司 CHAN Ting

Executive Director and Chief Executive Officer

– 19 –

NOTICE OF EGM

==> picture [77 x 76] intentionally omitted <==

Sinopharm Tech Holdings Limited 國藥科技股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8156)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘EGM’’) of Sinopharm Tech Holdings Limited (the ‘‘Company’’) will be held at Units 307–313, 3/F, Wireless Centre, Phase One Hong Kong Science Park, Pak Shek Kok, New Territories, Hong Kong on Monday, 17 February 2020 at 11: 00 a.m., for the purpose of considering and, if thought fit, passing the following resolution:

ORDINARY RESOLUTION

‘‘THAT

• (a) the Warrant Subscription Agreement (as defined in the circular to the shareholders of the Company dated 31 January 2020 (the ‘‘Circular’’)) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

• (b) the Warrant Instrument (as defined in the Circular) be and is hereby approved and confirmed;

• (c) the issuance by the Company of an aggregate of 200,000,000 unlisted warrants initially exercisable into 200,000,000 new ordinary shares of the Company (the ‘‘Warrants’’) to Mr. Yim Hin Keung (the ‘‘Subscriber’’) in accordance with the terms and conditions of the Warrant Subscription Agreement be and is hereby approved and confirmed;

• (d) the allotment and issuance of up to an initial maximum number of 200,000,000 new ordinary shares of the Company (subject to adjustment) credited as fully paid at the exercise price of HK$0.35 per share which may fall to be allotted and issued upon the exercise of the subscription rights attaching to the Warrants (the ‘‘Warrant Shares’’) be and are hereby approved and any one director of the Company (the ‘‘Director’’) be and is hereby authorized to allot, issue and deal with the Warrant Shares; and

– 20 –

NOTICE OF EGM

• (e) any one Director be and is hereby authorized to do all such acts and things (including, without limitation, signing, executing (under hand or under seal), perfecting and delivering all agreements, documents and instruments) which are in his/her opinion, necessary, appropriate, desirable or expedient to implement or to give effect to the Warrant Subscription Agreement, the Warrant Instrument, the Warrant Issuance (as defined in the Circular), the allotment and issue of the Warrant Shares and all transactions contemplated thereunder, and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith that are, in the opinion of the Directors, not material to the terms of the Warrants and the ancillary transactions and which are in the interests of the Company and its shareholders as a whole.’’

By order of the Board Sinopharm Tech Holdings Limited 國藥科技股份有限公司 CHAN Ting

Executive Director and Chief Executive Officer

Hong Kong, 31 January 2020

Registered Office: Head office and principal place of P.O. Box 10008 business in Hong Kong: Willow House Units 307–313, 3/F, Wireless Centre Cricket Square Phase One Hong Kong Science Park Grand Cayman KY1-1001 Pak Shek Kok, New Territories Cayman Islands Hong Kong

Notes:

1. A shareholder of the Company entitled to attend and vote at the EGM (or at any adjournment thereof) is entitled to appoint another person as his/her/its proxy to attend and vote in his/her/its stead in accordance with the articles of association of the Company. A proxy need not be a shareholder of the Company. A form of proxy for use at the EGM is enclosed.

2. In order to be valid, this form of proxy together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority, must be deposited at the Hong Kong branch share registrar and transfer office of the Company, Tricor Standard Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of a form of proxy will not preclude a shareholder of the Company from attending in person and voting at the EGM or any adjournment thereof, should he/she/it so wish and in such event, the proxy shall be deemed to be revoked.

3. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of other joint holder(s), and for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of such shares.

– 21 –