CSPC Pharmaceutical : CONNECTED TRANSACTION - ACQUISITION OF LIMITED PARTNERSHIP INTEREST IN A FUND

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CSPC PHARMACEUTICAL GROUP LIMITED

石 藥 集 團 有 限 公 司

(Incorporated in Hong Kong under the Companies Ordinance)

(Stock code: 1093) CONNECTED TRANSACTION ACQUISITION OF LIMITED PARTNERSHIP INTEREST IN A FUND ACQUISITION OF LIMITED PARTNERSHIP INTEREST IN A FUND

On 29 May 2017, the Transferee (an indirect wholly-owned subsidiary of the Company), the Transferor and the General Partner (on its own behalf and as general partner of the Fund and as attorney-in-fact of the existing partners of the Fund) entered into the Transfer Agreement pursuant to which the Transferor shall transfer and assign to the Transferee the Limited Partnership Interest for a consideration of US$3.72 million (equivalent to approximately HK$29.02 million) with effect from the date of the Transfer Agreement. The General Partner has consented to the Transfer and accepted the Transfer on behalf of the Fund.

LISTING RULES IMPLICATIONS

As the General Partner is controlled by Mr. Wang Shunlong, a former Director who retired on 25 May 2017, the General Partner is an associate of Mr. Wang and therefore a connected person of the Company. In addition, as 3H Associates which is the Special Limited Partner of the Fund is controlled by Mr. Wang, it is also an associate of Mr. Wang and therefore a connected person of the Company. Accordingly, the Acquisition will result in the formation of a partnership arrangement among, inter alia, the Transferee and associates of Mr. Wang, namely, the General Partner and the Special Limited Partner, which constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Acquisition (taking into account the Transferee's Capital Commitment of up to US$60 million (equivalent to approximately HK$468 million) under the Limited Partnership Interest) is/are more than 0.1% but less than 5%, the Acquisition is only subject to the reporting and announcement requirements, but is exempt from the circular (including independent financial advice) and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

On 29 May 2017, the Transferee (an indirect wholly-owned subsidiary of the Company), the Transferor and the General Partner (on its own behalf and as general partner of the Fund and as attorney-in-fact of the existing partners of the Fund) entered into the Transfer Agreement pursuant to which the Transferor shall transfer and assign to the Transferee the Limited Partnership Interest for a consideration of US$3.72 million (equivalent to approximately HK$29.02 million) with effect from the date of the Transfer Agreement. The General Partner has consented to the Transfer and accepted the application for the Transfer on behalf of the Fund.

PRINCIPAL TERMS OF THE TRANSFER AGREEMENT

Date : 29 May 2017

Name of the Fund : 3H Health Investment Fund I, L.P. Parties : (1) the Transferor;

1. the Transferee; and

2. the General Partner (on its own behalf and acting as general partner of the Fund and as attorney-in-fact of the existing partners of the Fund).

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, (i) the Transferor and its ultimate beneficial owner(s) is/are independent third party(ies) and not connected person(s) of the Company; (ii) the General Partner is controlled by Mr. Wang, a former Director who retired on 25 May 2017, and is therefore a connected person of the Company; and

(iii) other than the General Partner and the Special Limited Partner, both of which are controlled by Mr. Wang and hence are connected persons of the Company, all other existing partners of the Fund and their respective ultimate beneficial owners are independent third parties and not connected persons of the Company.

Subject Matter : The Transferee would acquire from the Transferor the Limited

Partnership Interest (with a Capital Commitment of US$60 million, equivalent to approximately HK$468 million), representing approximately 44% of the existing partners' total Capital Commitment to the Fund as of the date of the Transfer Agreement and would accept the assignment of all the Transferor's rights, benefits, responsibilities, liabilities, obligations, duties, burden and restrictions attached to the Limited Partnership Interest by virtue of and pursuant to the Partnership Agreement, with effect from the date of the Transfer Agreement.

As of the date of the Transfer Agreement, out of the Limited Partnership Interest acquired by the Transferee, approximately US$5.11 million (equivalent to approximately HK$39.86 million) has been paid by the Transferor as capital contribution to the Fund and the remaining portion of the Capital Commitment of the Transferor is approximately US$54.89 million (equivalent to approximately HK$428.14 million).

Consideration : US$3.72 million (equivalent to approximately HK$29.02 million)

which was determined after good faith arm's length negotiation between the Transferor and the Transferee, reflecting a 27% mutually agreed discount calculated based on the capital contribution actually made by the Transferor to the Fund on or prior to the date of the Transfer Agreement. The consideration was funded by the Group's internal resources and has been paid in full on the date of the Transfer Agreement.

Upon entering into of the Transfer Agreement, the Transferee agrees to be bound by all the terms of the Partnership Agreement in respect of the Limited Partnership Interest as if it had been an original party to the Partnership Agreement.

Completion of the Acquisition has taken place immediately after the entering into of the Transfer Agreement, upon which the Transferee became the owner of the Limited Partnership Interest. The interest in the Fund held by the Transferee will be treated as an investment of the Group.

INFORMATION ABOUT THE FUND AND THE PARTNERSHIP AGREEMENT

The Fund is a Cayman Islands exempted limited partnership registered under the Exempted Limited Partnership Law, 2014 (as amended) of the Cayman Islands with the Registrar of Exempted Limited Partnerships in the Cayman Islands on 8 December 2015, the investment objective of which is to achieve long-term capital appreciation through making investments in equity and equity-related securities of companies in the life sciences and healthcare sector, its related technologies, products and services, or which otherwise have a strong nexus with such sector, and principally in companies based in or with substantial operations or customers in the PRC, Hong Kong and/or Taiwan but may also be based in other countries. The General Partner has full control over the business and affairs of the Fund, including responsibility for making all investment and divestment decisions.

The target size of the Fund is US$250 million (equivalent to approximately HK$1.95 billion). As at the date of this announcement, the total Capital Commitment to the Fund is US$136 million (equivalent to approximately HK$1.06 billion) and the Capital Commitment of the Transferor to the Fund is US$60 million (equivalent to approximately HK$468 million), representing approximately 44% of the total Capital Commitment to the Fund. The actual capital contribution made by the Transferor to the Fund was approximately US$5.11 million (equivalent to approximately HK$39.86

million) and the remaining portion of the Capital Commitment of the Transferor to the Fund is approximately US$54.89 million (equivalent to approximately HK$428.14 million) as at the date of the Transfer Agreement. The Special Limited Partner's Capital Commitment is US$10 million (equivalent to approximately HK$78 million).

Financial information of the Fund

The Fund was newly established in December 2015. Based on the audited financial statements of the Fund for the period from 8 December 2015 (being the establishment date of the Fund) to 31 December 2016, the loss (both before and after taxation) of the Fund was approximately US$2.96 million (equivalent to approximately HK$23.09 million), which was primarily attributable to administrative and operational expenses incurred by the Fund. The Fund has had no realised appreciation or depreciation on investments since its establishment.

Based on the audited financial statements of the Fund, the net assets of the Fund as at 31 December 2016 amounted to approximately US$8.44 million (equivalent to approximately HK$65.83 million).

Term of the Fund

The Fund has a term of eight years from its final closing, subject to (i) one-year extension upon the election of the General Partner, (ii) additional one-year extension upon the request of the General Partner and the consent of the advisory committee appointed by the General Partner, and may be further extended upon the request of the General Partner and as approved by the Limited Partners holding not less than 75% of the total Capital Commitments to permit the orderly disposition of investments.

Advisor

3H Health Investment Management Ltd., a Cayman Islands exempted company incorporated with limited liability, is controlled by Mr. Wang and is the Advisor to provide certain portfolio management and administrative services to the General Partner in respect of the Fund, including identifying, evaluating, structuring and negotiating proposed investments, monitoring the performance of portfolio companies and advising the General Partner on investment and divestment opportunities.

Management fee

The General Partner will pay to the Advisor out of the Fund assets an annual management fee, being an amount equal to 2.0% per annum of each Limited Partner's Capital Commitment for the period commencing on the first closing date of the Fund and ending on the first full fiscal semi- annual period following the fifth anniversary of the final closing date of the Fund. After that, the