Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.


SHENGUAN HOLDINGS (GROUP) LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00829) FURTHER CLARIFICATION ANNOUNCEMENT

Reference is made to the Second Report. This announcement is made to refute the allegations and comments concerning the Group in the Second Report.

References are made to (1) the report dated 2 September 2014 (the "Report"), (2) the further report dated 29 September 2014 (the "Second Report", together with the Report, the "Reports") which are both released by Emerson Analytics Co. Ltd. (the "Entity") and contain groundless allegations and comments concerning Shenguan Holdings (Group) Limited (the "Company", together with its subsidiaries, the "Group"), the Group's business and financial operations, and the target price of the shares in the Company; and (3) the clarification announcement of the Company dated 26 September 2014 (the "Announcement").
This announcement is made to refute the allegations and comments concerning the Group in the Second Report. The Group finds that the Second Report repeated the same allegations as stated in the Report which the Group has responded thoroughly in the Announcement.

Caution

The Second Report contains a disclosure by the Entity that "We and/or our associates/ partners may have long or short positions in the equities and/or their derivatives at the time of publication of our reports, and we and/or our associates/partners may maintain or change our positions at any time."
Shareholders of the Company and investors should exercise extreme caution in reading the Reports as they contain errors of fact, misleading statements, malicious and groundless allegations against the Group.
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REFUTATION OF ALLEGATIONS IN THE SECOND REPORT 1. The Second Report alleged that the sales volume figures disclosed in the Announcement contradict with the conversion rate of cattle inner skin as calculated in the Second Report.

The conversion rate as stated in the Second Report is inaccurate and untrustworthy. The Second Report used the conversion rate of 80,000 meters with cattle skin proportion of 65.0% in its calculation for the Group's cost of raw materials in 2013. However, according to the Group's record, the conversion rate of the Group in 2013 was more than
80,000 meters with cattle skin proportion well above 65.0%.
The Second Report also claimed that as revealed by its laboratory report, the contents of collagen protein in cattle inner skin should be approximately 8.0-8.5%. The Group is unable to ascertain the type of cattle inner skin used by the aforesaid laboratory in reaching its report. However, the directors of the Company (the "Directors") note that
according to Pige Gongye Shouce - Zhige Fence* (ÉZ�I��ffl-I!J�)Jffl) published
by the China Light Industry Publisher* (�fj&�I�tl:Jt&±), cattle skin contains 29% of
collagen protein, which is much higher than the proportion quoted by the Second Report.

2. The Second Report alleged that the Company charged its major clients at a premium.

As stated in the Announcement, there are various types, models and standards as well as selling prices for the Group's products which are tailored to meet clients' needs. According to normal business practice, the biggest client purchased product of the same type and standard at a lower price as compared to normal clients. The Second Report simply took the example of Western and Chinese-style products and disregarded the needs and preferences of the Group's customers for various products in different formulae, models and standards within the Western and Chinese-style products categories, which result in different price packages and there is wide price range within each category of the Western and Chinese-style products.

3. The Second Report alleged that the rise of the raw materials cost of the Group in 2012 is much higher than the sales volume growth it assumed.

The Second Report alleged that the Group's increase in approximately 12.3% of sales volume in 2012 did not reflect its increase of 33% in cost of raw materials for the same period. As stated in the Announcement, the Group had increased the number of production lines by 31.6% in 2012 and as a result, extra raw materials had been consumed for trial runs of the new production lines which in turn, increased the costs of raw materials of the Group in 2012. The allegation of the Second Report is therefore groundless because of its lack of understanding in the operation and production of the Group.
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4. The Second Report alleged that the Company has failed to find the registration information of Handan Dike Collagen Casing Co., Ltd (m��...!W::& ) as disclosed in the Announcement.

The Second Report also attacked that the Group could not provide information in respect of an industry player in China, Handan Dike Collagen Casing Co., Ltd.* (tl)�ìi4� j§:8M�f�%PJ) without mentioning that the Report misstated the Chinese name of the company as "tl)�ìi4M�f�%PJ" and therefore, the Group was unable to
locate any information for such company. It is doubtful whether the ones responsible for preparation of the Reports had taken a serious approach towards the preparation and issue of the Reports.
According to the Second Report, Handan Dike Collagen Casing Co., Ltd.* (tl)�

ìi4�j§:8M�f�%PJ) was established in 2009 with a registered capital of

RMB46,930,000. The Directors are of the view that Handan Dike Collagen Casing
Co., Ltd.* (tl)�ìi4�j§:8M�f�%PJ) is incomparable to the Group in term of
operating history, industry experience and financial strength.
The allegations and comments in the Reports concerning the Group are malicious and groundless. The Company and the Directors are deeply shocked and furious about the Reports. As disclosed in the Announcement, the Company has discussed with its auditors, Ernst & Young ("EY"), on the allegations in the Report and the Announcement, and EY is currently of the view that there is no change to their audit opinions issued for the listing of the Company and annual audits. The Company reserves the right to take legal action against the Entity and those who are responsible for the Reports and to hold them responsible for all losses caused to the Group.
By Order of the Board

Shenguan Holdings (Group) Limited Zhou Yaxian

Chairman

Hong Kong, 30 September 2014

As at the date of this announcement, the executive Directors are Ms. Zhou Yaxian, Mr. Shi Guicheng, Mr. Ru Xiquan and Mr. Mo Yunxi; the non-executive Director is Mr. Low Jee Keong; and the independent non-executive Directors are Mr. Tsui Yung Kwok, Mr. Meng Qinguo and Mr. Yang Xiaohu.

* For identification purposes only

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