Livzon Pharmaceutical : CIRCULAR OF THE ANNUAL GENERAL MEETING FOR THE YEAR 2020

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in 麗珠醫藥集團股份有限公司 Livzon Pharmaceutical Group Inc.*, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale 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.

麗珠醫藥集團股份有限公 司

LIVZON PHARMACEUTICAL GROUP INC.*

(a joint stock company incorporated in the People's Republic of China with limited liability)

(Stock code: 1513)

1. 1. 1. 2020 ANNUAL PROFIT DISTRIBUTION PLAN
   2. PROPOSED ADJUSTMENT TO INVESTMENT PLANS OF CERTAIN PROJECTS INVESTED WITH PROCEEDS
2. PROPOSED FACILITY FINANCING AND PROVISION OF FINANCING GUARANTEES TO SUBSIDIARIES

(IV) PROPOSED PROVISION OF FINANCING GUARANTEES TO

CONTROLLING SUBSIDIARY LIVZON MAB

1. PROPOSED GRANT OF GENERAL MANDATE TO THE BOARD FOR ISSUING OF SHARES

(VI) PROPOSED GRANT OF GENERAL MANDATE TO THE BOARD

TO REPURCHASE H SHARES OF THE COMPANY

(VII) CONVENING THE AGM, THE CLASS MEETING OF A SHAREHOLDERS

AND THE CLASS MEETING OF H SHAREHOLDERS

The letter from the Board is set out on pages 6 to 29 of this circular.

The Company will hold the AGM, the Class Meeting of A Shareholders and Class Meeting of H Shareholders at the Conference Room on the 3rd Floor of Headquarters Building, 38 Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province, China at 2:00 p.m., 3:30 p.m. (or immediately after the conclusion of the AGM or any adjournment) and 4:00 p.m. (or immediately after the conclusion of the Class Meeting of A Shareholders or any adjournment) respectively on Thursday, 20 May 2021. Notices and proxy forms have been dispatched regarding the AGM and the Class Meeting of H Shareholders by the Company on 16 April 2021. The aforesaid documents are also available for download on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.livzon.com.cn).

If you would like to attend the AGM and/or the Class Meeting of H Shareholders by proxy, please complete the proxy form in accordance with the instructions printed thereon and return it to the Secretariat of the Board of the Company (for A Shareholders) or the H Share Registrar of the Company, Tricor Investor Services Limited (for H Shareholders) as soon as possible and in any event no later than 24 hours before the AGM and/or the Class Meeting of H Shareholders or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting at the AGM and/or the Class Meeting of H Shareholders or any adjournment thereof in person if you so wish.

• For identification purpose only

24 April 2021

	CONTENTS
	Pages
Definitions . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Expected Timetable . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Letter from the Board . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

- i -

DEFINITIONS

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

"2020 Annual Profit	the plan of the Company for distribution of the Cash
Distribution Plan"	Dividend for the year 2020
"A Share(s)"	the domestic shares in the share capital of the Company
	with a nominal value of RMB1.00 each, which are listed
	on the Shenzhen Stock Exchange (stock code: 000513)
"A Shareholder(s)"	holder(s) of the A Share(s)
"AGM"	the annual general meeting of the Company for the year
	2020 to be held at the Conference Room on the 3rd Floor
	of Headquarters Building, 38 Chuangye North Road,
	Jinwan District, Zhuhai, Guangdong Province, China at
	2:00 p.m. on Thursday, 20 May 2021
"Articles of Association"	the articles of association of the Company, as amended
	from time to time
"associate(s)"	has the meaning ascribed to it under the Hong Kong
	Listing Rules
"Board"	the board of Directors of the Company
"Cash Dividend"	to distribute cash dividend of RMB12.50 (tax inclusive)
	for every 10 shares to all Shareholders of the Company,
	based on the Company's total share capital (excluding the
	shares of the Company which were repurchased but not
	yet cancelled) as at the registration date of shareholding
	as determined by implementation of the 2020 Annual
	Profit Distribution Plan. There will be no bonus shares,
	nor will the capital reserves be capitalized
"Class Meeting of A	the 2021 First Class Meeting of A Shareholders of the
Shareholders"	Company to be held at 3:30 p.m. (or immediately after
	the AGM or any adjournment) on Thursday, 20 May 2021
"Class Meeting of H	the 2021 First Class Meeting of H Shareholders of the
Shareholders"	Company to be held at 4:00 p.m. (or immediately after
	the Class Meeting of A Shareholders or any adjournment)
	on Thursday, 20 May 2021

- 1 -

	DEFINITIONS
"Company"	麗珠醫藥集團股份有限公司 Livzon Pharmaceutical
	Group Inc.*, a joint stock company incorporated in the
	PRC in accordance with the Company Law on 26 January
	1985 with limited liability, whose H Shares and A Shares
	are listed on the Hong Kong Stock Exchange and the
	Shenzhen Stock Exchange
"Company Law"	Company Law of the PRC (中華人民共和國公司法), as
	adopted at the Fifth Session of the Standing Committee
	of the Eighth National People's Congress of the PRC on
	29 December 1993, effective from 1 July 1994, as
	amended, supplemented or otherwise modified from time
	to time
"controlling shareholder"	has the meaning ascribed to it under the Hong Kong
	Listing Rules
"CSRC"	the China Securities Regulatory Commission
"Director(s)"	director(s) of the Company
"General Meetings"	the AGM, the Class Meeting of A Shareholders and the
	Class Meeting of H Shareholders
"Group"	the Company and its subsidiaries
"H Share(s)"	the overseas-listed foreign shares in the share capital of
	the Company with a nominal value of RMB1.00 each,
	which are listed on the Hong Kong Stock Exchange
	(stock code: 01513)
"H Shareholder(s)"	holder(s) of the H Share(s)
"H Share Repurchase Mandate"	proposed grant of general mandate to the Board to
	repurchase H Shares
"Hong Kong"	Hong Kong Special Administrative Region of the PRC
"Hong Kong Listing Rules"	Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
"Hong Kong Stock Exchange"	The Stock Exchange of Hong Kong Limited

- 2 -

DEFINITIONS

"Joincare"健康元藥業集團股份有限公司 Joincare Pharmaceutical Industry Group Co., Ltd.* (Shanghai Stock Exchange stock code: 600380), a joint stock company incorporated in the PRC with limited liability and listed on the Shanghai Stock Exchange in 2001 and one of the Company's controlling shareholders

"Latest Practicable Date"	19 April 2021, being the latest practicable date for the
	purpose of ascertaining certain information contained in
	this circular prior to its publication
"Livzon MAB"	Livzon MABPharm Inc.* (珠海市麗珠單抗生物技術有限
	公司), a controlling subsidiary of the Company
"Livzon MAB Facilities"	the facilities limited up to RMB1,005,000,000 (or its
	equivalent in foreign currencies) in aggregate to be
	applied by Livzon MAB from six banks
"Livzon MAB Guarantees"	the	financing	guarantees	limited	up	to
	RMB1,005,000,000 (or its equivalent in foreign
	currencies) in aggregate to be provided by the Company
	in favour of six banks to secure the Livzon MAB
	Facilities
"Notices of the General	notices dated 16 April 2021 for convening the AGM, the
Meetings"	Class Meeting of A Shareholders and the Class Meeting
	of H Shareholders
"PRC" or "China"	the People's Republic of China, which, for the purpose of
	this circular, does not include Hong Kong, the Macau
	Special Administrative Region and Taiwan
"Record Date"	Wednesday, 2 June 2021, the record date set to determine
	the H Shareholders who are entitled to the Cash Dividend
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholder(s)"	the shareholder(s) of the Company

- 3 -

	DEFINITIONS
"Shenzhen Listing Rules"	the Stock Listing Rules of the Shenzhen Stock Exchange
	(as amended in 2018) (《深圳證券交易所股票上市規則
	(2018年修訂)》)
"Shenzhen Stock Exchange"	the Shenzhen Stock Exchange (深圳證券交易所)

In case of any inconsistency between the Chinese names of the PRC entities mentioned in this circular and their English translations, the Chinese names shall prevail.

• For identification purposes only

- 4 -

EXPECTED TIMETABLE

2021

The record date for determining the qualification of the H Shareholders to attend and vote at the AGM

and the Class Meeting of H Shareholders . . . . . . . . . . . . . . . . . . . . . .Wednesday, 12 May

Latest time for lodging transfer documents for
registration of transfer of H Shares to qualify for
attending and voting at the AGM and
the Class Meeting of H Shareholders . . . . . . . . . . . . . . .	4:30 p.m. on Wednesday, 12 May

Latest time for returning proxy form for

the AGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2:00 p.m. on Wednesday, 19 May

Latest time for returning proxy form for

the Class Meeting of H Shareholders . . . . . . . . . . . . . . .4:00 p.m. on Wednesday, 19 May

AGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2:00 p.m. on Thursday, 20 May

Class Meeting of A Shareholders . . . . . . . . . . . . . . . . . . . . .3:30 p.m. on Thursday, 20 May (or immediately after the AGM or any adjournment)

Class Meeting of H Shareholders . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Thursday, 20 May (or immediately after the Class Meeting of A Shareholders or any adjournment)

Last day of dealings in H Shares on
a cum-entitlement basis relating to
the Cash Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Monday, 31 May

First day of dealings in H Shares on an ex-entitlement basis relating to

the Cash Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 1 June

Record Date (to qualify H Shareholders for

the Cash Dividend) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 2 June

Latest time for lodging transfer documents for registration of transfer of H Shares to

qualify H Shareholders for the Cash Dividend . . . . . . . .4:30 p.m. on Wednesday, 2 June

Latest date for delivery of payment cheques for

the Cash Dividend for H Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 25 June

Note: The dates with regard to the Cash Dividend are for references only as they are subject to approval by the Shareholders and might be adjusted by the Company. If there is any such change, the Company will publish announcement to inform the Shareholders as soon as practicable. All times and dates in this circular are Hong Kong times and dates.

- 5 -

LETTER FROM THE BOARD

麗珠醫藥集團股份有限公 司

LIVZON PHARMACEUTICAL GROUP INC.*

(a joint stock company incorporated in the People's Republic of China with limited liability)

(Stock code: 1513)

Executive Directors:	Registered office:
Mr. Tang Yanggang (President)	Headquarters Building
Mr. Xu Guoxiang (Vice Chairman and Vice President)	38 Chuangye North Road
Non-executive Directors:	Jinwan District Zhuhai
Guangdong Province
Mr. Zhu Baoguo (Chairman)	China
Mr. Tao Desheng (Vice Chairman)	Principal place of business
Mr. Qiu Qingfeng
Mr. Yu Xiong	in Hong Kong:
Independent Non-executive Directors:	Room 1301, 13/F
China Evergrande Centre
Mr. Bai Hua	38 Gloucester Road
Mr. Xie Yun	Wanchai
Mr. Zheng Zhihua	Hong Kong
Mr. Tian Qiusheng
Mr. Wong Kam Wa
	24 April 2021
To the Shareholders
Dear Sir/Madam,

1. 1. 1. 2020 ANNUAL PROFIT DISTRIBUTION PLAN
   2. PROPOSED ADJUSTMENT TO INVESTMENT PLANS OF CERTAIN PROJECTS INVESTED WITH PROCEEDS
2. PROPOSED FACILITY FINANCING AND PROVISION OF FINANCING GUARANTEES TO SUBSIDIARIES

(IV) PROPOSED PROVISION OF FINANCING GUARANTEES TO

CONTROLLING SUBSIDIARY LIVZON MAB

1. PROPOSED GRANT OF GENERAL MANDATE TO THE BOARD FOR ISSUING OF SHARES

(VI) PROPOSED GRANT OF GENERAL MANDATE TO THE BOARD

TO REPURCHASE H SHARES OF THE COMPANY

(VII) CONVENING THE AGM, THE CLASS MEETING OF A SHAREHOLDERS

AND THE CLASS MEETING OF H SHAREHOLDERS

• For identification purpose only

- 6 -

LETTER FROM THE BOARD

The purpose of this circular is to provide you with relevant information to enable you to make informed decisions in voting on the following ordinary resolutions and/or special resolutions to be proposed at the General Meetings:

1. 2020 Annual Profit Distribution Plan;

1. proposed adjustment to investment plans of certain projects invested with proceeds;

1. proposed facility financing and provision of financing guarantees to subsidiaries;
   (IV) proposed provision of financing guarantees to controlling subsidiary Livzon MAB;

1. 1. proposed grant of general mandate to the Board for issuing of shares; and
      (VI) proposed grant of general mandate to the Board to repurchase H Shares.
2. 2020 ANNUAL PROFIT DISTRIBUTION PLAN
3. 
   The Company will propose a special resolution to be considered and passed at the AGM,

the Class Meeting of A Shareholders and the Class Meeting of H Shareholders to (i) distribute cash dividend of RMB12.50 (tax inclusive) for every 10 shares to all Shareholders of the Company, based on the Company's total share capital (excluding the shares of the Company which were repurchased but not yet cancelled) as at the registration date of shareholding as determined by implementation of the 2020 Annual Profit Distribution Plan. There will be no bonus shares, nor will the capital reserves be capitalized; and (ii) authorise the Board to deal with all specific matters regarding the 2020 Annual Profit Distribution Plan.

The proposed Cash Dividend by the Company will be denominated and declared in RMB and will be distributed in RMB to the A Shareholders and in Hong Kong dollar to H Shareholders, using the middle exchange rate for RMB to Hong Kong dollar as published by the People's Bank of China on the date of the AGM (Thursday, 20 May 2021) as the exchange rate. The remaining undistributed profits and capital reserve will be carried forward to the next financial year.

Based on the 313,235,617 issued and not repurchased H Shares of the Company as at the Latest Practicable Date, the Cash Dividend in the sum of RMB391,544,521.25 will be distributed to H Shareholders whose names are listed on the register of members of H Shares of the Company at close of business on the Record Date. The Record Date for determining the qualification of the H Shareholders for the proposed distribution of the Cash Dividend will be Wednesday, 2 June 2021. In order to qualified for the proposed distribution of the Cash Dividend, H Shareholders who are not registered must lodge all transfers of shares accompanied by the relevant share certificates with the Company's H Share Registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p.m. on Wednesday, 2 June 2021.

- 7 -

LETTER FROM THE BOARD

In accordance with the "Enterprise Income Tax Law of the People's Republic of China (《中華人民共和國企業所得稅法》)" (the "CIT Law") and the "Rules for the Implementation of the Enterprise Income Tax Law of the People's Republic of China (《中華人民共和國企業 所得稅法實施條例》)" (the "Implementation Rules of CIT Law"), both became effective on 1 January 2008, and the "Notice of the State Administration of Taxation on Issues Relevant to the Withholding of Enterprise Income Tax on Dividends Paid by PRC Resident Enterprises to Offshore Non-resident Enterprise Holders of H Shares (Guo Shui Han [2008] No. 897) (《關 於中國居民企業向境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》(國 稅函[2008]897號))" promulgated by the State Administration of Taxation on 6 November 2008, the Company is obliged to withhold and pay the PRC enterprise income tax on behalf of non-resident enterprise(s) at a tax rate of 10% when the Company distributes any dividends to non-resident enterprise Shareholder(s) whose names appear on the register of members for H Shares of the Company. Accordingly, any H Shares which are not registered under the name(s) of individual(s) (which, for this purpose, include H Shares registered under the name of HKSCC Nominees Limited, other nominees, trustees, or other organisations or groups) shall be deemed to be H Shares held by non-resident enterprise Shareholder(s), and the PRC enterprise income tax shall be withheld from dividends payable thereon. Non-resident enterprise Shareholders may apply for a tax refund for the difference (if any) in accordance to relevant tax laws such as tax treaty (arrangement).

In accordance with the "Circular on Certain Issues Concerning the Policies of Individual Income Tax (Cai Shui Zi [1994] No. 020) (《關於個人所得稅若干政策問題的通知》 (財稅字 [1994]020號))" promulgated by the Ministry of Finance and the State Administration of Taxation on 13 May 1994, overseas individuals are temporarily exempted from the PRC individual income tax for dividends or bonuses received from foreign invested enterprises. As the Company is a foreign-invested enterprise, the Company will not withhold and pay the individual income tax on behalf of overseas individual Shareholders whose names appear on the register of members for H Shares of the Company when the Company distributes dividends to those Shareholders.

In accordance with the "Notice of the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission on Taxation Policies concerning the Pilot Program of an Interconnection Mechanism for Transactions in the Shenzhen and Hong Kong Stock Markets (Cai Shui [2016] No. 127) (《財政部、國家稅務總局、證監會 關於深港股票市場交易互聯互通機制試點有關稅收政策的通知》 (財稅[2016]127號))", (i) for dividends received by domestic individual investor from investing in the Company's H shares listed on the Hong Kong Stock Exchange through Shenzhen-HongKong Stock Connect, the Company is obliged to withhold personal income tax at a tax rate of 20% when the Company shall apply to China Securities Depository and Clearing Corporation Limited ("CSDCC") for the registrar of domestic individual investors. For dividends of the shares listed on the Hong Kong Stock Exchange received by mainland securities investment funds through the Shenzhen-HongKong Stock Connect, individual income tax shall be calculated in accordance with the above requirements; (ii) for dividends received by domestic enterprise investors from investing in Shares listed on the Hong Kong Stock Exchange through Shenzhen-HongKong Stock Connect, such amount shall be reckoned in their gross revenue and subject to corporate

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LETTER FROM THE BOARD

income tax pursuant to laws. In particular, for the dividends obtained by mainland resident enterprises from holding relevant H Shares for consecutive 12 months, the corporate income taxes shall be exempted pursuant to laws. The Company shall apply to CSDCC for the registrar of domestic individual investors. The Company will not withhold the income tax on dividend for the domestic enterprise investors, and the tax payable shall be declared and paid by the domestic enterprise investors.

Shareholders are advised to consult their tax advisers regarding the PRC, Hong Kong and other tax implications arising from their holding and disposal of H Shares of the Company.

According to the relevant provisions of CSDCC Shenzhen Branch and in accordance with the market practice as adopted for distribution of dividends, the Company will separately publish an announcement on distribution of the Cash Dividend to A Shareholders after the General Meetings, which will set out (among others) the record date (registration date of shares) and ex-dividend date for A Shareholders.

Risk warning for trading of H Shares

H Shareholders should note that H Shares are expected to be traded on ex-entitlement basis commencing from Tuesday, 1 June 2021. The distribution of the Cash Dividend will be subject to the approval of Shareholders at the General Meetings. Any person who deals in H Shares on ex-entitlement basis prior to obtaining of the approval will be subject to the risk that the relevant proposal may fail to proceed. Shareholders or potential investors shall seek professional advice from their own professional consultants should they have any doubt on their situations.

1. PROPOSED ADJUSTMENT TO INVESTMENT PLANS OF CERTAIN PROJECTS INVESTED WITH PROCEEDS

On 22 March 2021, the Board considered and approved the Resolution on Adjustment to Investment Plans of Certain Projects Invested with Proceeds. The resolution is subject to the approval of the Shareholders by way of an ordinary resolution, details of which are as follows:

1. Information of the Non-public Issuance and the Proceeds

After receiving the "Approval to Non-public Issue of Shares by the Company" (Zheng Jian Xu Ke [2016] No.1524) issued by the CSRC, the Company issued 29,098,203 shares of RMB ordinary shares (A Shares) (the "Non-publicIssuance") by way of non-public issuance, with a par value of RMB1 each and at an issue price of RMB50.10 per share. The total proceeds of the Non-public Issuance were RMB1,457,819,970.30. After deducting the issue expenses in the amount of RMB37,519,603.53, the net proceeds raised were RMB1,420,300,366.77 (the "Proceeds"). The Proceeds were transferred into the bank account of the Company by the sponsor (the lead underwriter) of the Company, Minsheng Securities Co., Ltd* (民生證券股份 有限公司) and were verified by Ruihua Certified Public Accountants (LLP) which issued the

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LETTER FROM THE BOARD

related capital verification report (Ruihua Yan Zi [2016] No.40033019). The Non-public Issuance was completed on 19 September 2016. Please refer to the circulars of the Company dated 26 November 2015 and 8 April 2016, and the announcement of the Company dated 18 September 2016 for details.

2. Projects invested with the Proceeds and utilisation of the Proceeds

1. General information of projects invested with the Proceeds

The Proceeds from the Non-public Issuance were RMB1,420,300,366.77. After consideration and approval at the Company's 2017 first extraordinary general meeting convened on 19 September 2017, the 2018 annual general meeting convened on 30 May 2019 and the 2019 annual general meeting convened on 25 May 2020, the details of the altered projects invested with the Proceeds are as follows:

		Proceeds intended
No.	Investment project name	to be invested
		(RMB0'000)
1	Project for in-depth development and	29,562.72
	industrialisation upgrade of innovative Ilaprazole
	series (艾普拉唑系列創新產品深度開發及產業化
	升級項目) (the "Ilaprazole Project")
2	Replenishment of working capital and repayment of	51,685.32
	bank loans
3	Relocation and expansion project of Livzon Group	14,328.94
	Xinbeijiang Pharmaceutical Manufacturing Inc.
	(first phase) (麗珠集團新北江製藥股份有限公司
	搬遷擴建項目(一期)) (the "Xinbeijiang Project")
4	Technology transformation project of bag infusion	5,311.73
	workshop for Livzon Group Limin
	Pharmaceutical Manufacturing Factory (麗珠集團
	利民製藥廠袋裝輸液車間技改項目)
	(the "Limin Project")
5	Construction project for research & development	41,141.33
	platform for prolonged-action microsphere
	technologies (長效微球技術研發平台建設項目)
	(the "Prolonged-action Microsphere Project")
Total		142,030.04

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LETTER FROM THE BOARD

1. Utilisation of the Proceeds to date

As at 31 December 2020, the use of proceeds in projects invested with the Proceeds is as follows:

				Unit: RMB0'000
No.	Investment project name	Planned		Cumulative
		investment		investment
		amount		amount
1	Ilaprazole Project	29,562.72		9,163.05
2	Replenishment of working capital	51,685.32		51,685.32
	and repayment of bank loans
3	Xinbeijiang Project	14,328.94		7,769.70
4	Limin Project	5,311.73		5,311.73
5	Prolonged-action Microsphere Project	41,141.33		29,516.03
Total		142,030.04		103,445.83

3. Overview of and reason for the adjustment to the specific investment plans of the Ilaprazole Project

As considered and approved at the 2019 annual general meeting of the Company, the proposed use of the Proceeds for the Ilaprazole Project amounted to RMB295.6272 million, which mainly includes the in-depth development of Ilaprazole Tablet (艾普拉唑片) and Ilaprazole Sodium for Injection (注射用艾普拉唑鈉) and the construction of the chemical drug lyophilized powder injection workshop (化藥凍乾粉針車間建設). As at 31 December 2020, a total of RMB91.6305 million of the Proceeds has been used for the Ilaprazole Project.

In order to fully guarantee the production and operation needs of Ilaprazole Sodium for Injection, as considered and approved at the 2020 fifth extraordinary general meeting of the Company, the construction site of the sub-project "Construction of the chemical drug lyophilized powder injection workshop" under the Ilaprazole Project was relocated to the first floor of the P06 building of Livzon Industrial Park, No.38 Chuangye North Road, Jinwan District, Zhuhai City. Except for the relocation of construction site, the content, implementation subject, investment amount and project feasibility of the "Construction of the chemical drug lyophilized powder injection workshop" remain unchanged. In addition, the clinical trial for the new indication of Ilaprazole Sodium for Injection was approved by the

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LETTER FROM THE BOARD

China National Medical Products Administration in December 2020. As the time of obtaining the approval is later than expected, the commencement of clinical trial will be postponed accordingly and the project is still feasible.

Based on the foregoing summary, the investment progress of the Proceeds from the Ilaprazole Project in 2020 is slower than expected. Taking into account the actual implementation of each sub-project, the investment plans of the "Ilaprazole Project" are proposed to be adjusted. Details of the investment plans of the Ilaprazole Project after adjustment are as follows:

						Unit: RMB0'000
Name of project	Construction		2021	2022	2023	2024	Total
	project
Ilaprazole Tablet	In-depth	R&D equipment	200.00	200.00	200.00	200.00	800.00
	development	Industrialisation	100.00	100.00	100.00	100.00	400.00
		development and
		technological reform
		Clinical studies post market	800.00	400.00	200.00	200.00	1,600.00
		launch
Ilaprazole Sodium	In-depth	R&D equipment	200.00	200.00	100.00	100.00	600.00
for Injection	development	Industrialisation	100.00	100.00	100.00	100.00	400.00
		development and
		technological reform
		Clinical studies post market	3,000.00	1,800.00	900.00	639.67	6,339.67
		launch
Construction of the chemical drug lyophilized powder injection workshop	7,592.40	2,667.60	-	-	10,260.00
Total			11,992.40	5,467.60	1,600.00	1,339.67	20,399.67

4. Impact of adjustment to the investment plans of the Ilaprazole Project on the Company

The adjustment is proposed by the Company based on the actual progress of the Ilaprazole Project, and the adjustment is only made to the plans for the use of proceeds for each subsequent year with respect to the Ilaprazole Project, and there is no change in the use of the Proceeds.

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LETTER FROM THE BOARD

1. PROPOSED FACILITY FINANCING AND PROVISION OF FINANCING GUARANTEES TO SUBSIDIARIES

In order to meet the business development needs, in 2021, the Company plans to apply for facility financing of not more than RMB14,200 million or its equivalent in foreign currencies in total (the "Company Facility Financing") from the following banks, details of which are set out below:

			Amount of
No.	Name of facility granting bank	Currency	credit	Note
1	Industrial and Commercial Bank of China Ltd.	RMB	1,500,000,000	or equivalent in foreign currencies
2	Agricultural Bank of China Limited	RMB	1,000,000,000	or equivalent in foreign currencies
3	Bank of China Limited	RMB	250,000,000	or equivalent in foreign currencies
4	China Construction Bank Corporation	RMB	500,000,000	or equivalent in foreign currencies
5	Bank of Communications Co., Ltd.	RMB	700,000,000	or equivalent in foreign currencies
6	Postal Savings Bank of China Co., Ltd.	RMB	300,000,000	or equivalent in foreign currencies
7	China Merchants Bank Co., Ltd.	RMB	1,500,000,000	or equivalent in foreign currencies
8	Industrial Bank Co., Ltd.	RMB	300,000,000	or equivalent in foreign currencies
9	China Everbright Bank Co., Ltd.	RMB	500,000,000	or equivalent in foreign currencies
10	China Minsheng Banking Corp., Ltd.	RMB	400,000,000	or equivalent in foreign currencies
11	China CITIC Bank Corporation Limited	RMB	1,000,000,000	or equivalent in foreign currencies
12	Shanghai Pudong Development Bank Co., Ltd.	RMB	500,000,000	or equivalent in foreign currencies
13	China Bohai Bank Co., Ltd.	RMB	200,000,000	or equivalent in foreign currencies
14	Hua Xia Bank Co., Limited	RMB	200,000,000	or equivalent in foreign currencies
15	China Zheshang Bank Co., Ltd.	RMB	650,000,000	or equivalent in foreign currencies
16	PingAn Bank Co., Ltd.	RMB	800,000,000	or equivalent in foreign currencies
17	China Guangfa Bank Co., Ltd.	RMB	500,000,000	or equivalent in foreign currencies
18	Standard Chartered Bank (China) Limited	RMB	800,000,000	or equivalent in foreign currencies
19	HSBC Bank (China) Company Limited	RMB	500,000,000	or equivalent in foreign currencies
20	Morgan Stanley Bank International (China) Limited	RMB	200,000,000	or equivalent in foreign currencies
21	China Resources Bank of Zhuhai Co., Ltd.	RMB	200,000,000	or equivalent in foreign currencies
22	Bank of Guangzhou Co., Ltd.	RMB	400,000,000	or equivalent in foreign currencies
23	The Export-Import Bank of China	RMB	500,000,000	or equivalent in foreign currencies
24	China Development Bank	RMB	800,000,000	or equivalent in foreign currencies
Total		RMB	14,200,000,000

- 13 -

LETTER FROM THE BOARD

The Company plans to provide joint liability guarantees (the "Subsidiaries Guarantees") to the following banks for the applications of facility financing of no more than RMB11,443 million or its equivalent in foreign currencies (the "Subsidiaries Facility Financing") made by the following subsidiaries, details of which are set out below:

		Shareholding			Maximum
		of the	Name of facility granting		guarantee	Term of	Type of
No.	Subject of guarantee	Company	bank	Currency	amount	guarantee	guarantee	Note
					(RMB)	(years)
1	Livzon Group Livzon	100%	Industrial and Commercial	RMB	300,000,000		3	Joint liability
	Pharmaceutical		Bank of China Ltd.					guarantee
	Factory* (麗珠集團		Agricultural Bank of China	RMB	330,000,000		3		Amount to be
	麗珠製藥廠)		Limited						shared with
									the Group
			Bank of China Limited	RMB	100,000,000		3
			China Construction Bank	RMB	200,000,000		3
			Corporation
			Bank of Communications	RMB	280,000,000		3
			Co., Ltd.
			Postal Savings Bank of	RMB	100,000,000		3
			China Co., Ltd.
			Industrial Bank Co., Ltd.	RMB	150,000,000		3
			China Merchants Bank Co.,	RMB	200,000,000		5		Amount to be
			Ltd.						shared with
									the Group
			China Minsheng Banking	RMB	150,000,000		3
			Corp., Ltd.
			China Everbright Bank Co.,	RMB	300,000,000		3		Amount to be
			Ltd.						shared with
									the Group
			China CITIC Bank	RMB	100,000,000		3		Amount to be
			Corporation Limited						shared with
									the Group
			PingAn Bank Co., Ltd.	RMB	100,000,000		3		Amount to be
									shared with
									the Group
			China Bohai Bank Co., Ltd.	RMB	200,000,000		3
			HSBC Bank (China)	RMB	200,000,000		3		Amount to be
			Company Limited						shared with
									the Group
			Bank of Guangzhou Co.,	RMB	200,000,000		3		Amount to be
			Ltd.						shared with
									the Group
			The Export-Import Bank of	RMB	200,000,000		3		Amount to be
			China						shared with
									the Group
			China Development Bank	RMB	300,000,000		3		Amount to be
									shared with
									the Group
		Sub-total		RMB	3,410,000,000

- 14 -

LETTER FROM THE BOARD

No. Subject of guarantee

2 Zhuhai FTZ Livzon Hecheng Pharmaceutical Manufacturing Co., Ltd.* (珠海保稅區 麗珠合成製藥有限公 司)

Shareholding			Maximum
of the	Name of facility granting		guarantee	Term of	Type of
Company	bank	Currency	amount	guarantee	guarantee	Note
			(RMB)	(years)
100%	Industrial and Commercial	RMB	160,000,000		3	Joint liability
	Bank of China Ltd.					guarantee
	Agricultural Bank of China	RMB	50,000,000		3		Amount to be
	Limited						shared with
							the Group
	China Construction Bank	RMB	200,000,000		3
	Corporation
	Bank of Communications	RMB	200,000,000		3
	Co., Ltd.
	Postal Savings Bank of	RMB	50,000,000		3
	China Co., Ltd.
	China Merchants Bank	RMB	200,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	China Everbright Bank	RMB	300,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	Shanghai Pudong	RMB	50,000,000		3
	Development Bank
	Co., Ltd.
	China CITIC Bank	RMB	100,000,000		3		Amount to be
	Corporation Limited						shared with
							the Group
	China Minsheng Banking	RMB	100,000,000		3
	Corp., Ltd.
	China Bohai Bank Co., Ltd.	RMB	150,000,000		3
	China Guangfa Bank	RMB	200,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	Standard Chartered Bank	RMB	200,000,000		3		Amount to be
	(China) Limited						shared with
							the Group
	Bank of Guangzhou	RMB	200,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	China Development Bank	RMB	200,000,000		3		Amount to be
							shared with
							the Group
Sub-total		RMB	2,360,000,000

- 15 -

LETTER FROM THE BOARD

No. Subject of guarantee

3 Zhuhai Livzon Pharmaceutical Trading Co., Ltd.* (珠海市麗珠醫藥貿 易有限公司)

4 Livzon Group Xinbeijiang Pharmaceutical Manufacturing Inc.* (麗珠集團新北江製 藥股份有限公司) ("Xinbeijiang Company") (Notes 1, 4)

Shareholding			Maximum
of the	Name of facility granting		guarantee	Term of	Type of
Company	bank	Currency	amount	guarantee	guarantee	Note
			(RMB)	(years)
100%	Industrial and Commercial	RMB	25,000,000		3	Joint liability
	Bank of China Ltd.					guarantee
	Agricultural Bank of China	RMB	20,000,000		3		Amount to be
	Limited						shared with
							the Group
	Bank of Communications	RMB	30,000,000		3
	Co., Ltd.
	China Merchants Bank	RMB	100,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	China Everbright Bank	RMB	200,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	China CITIC Bank	RMB	100,000,000		3		Amount to be
	Corporation Limited						shared with
							the Group
	Hua Xia Bank Co., Limited	RMB	50,000,000		3
	China Minsheng Banking	RMB	150,000,000		3
	Corp., Ltd.
	PingAn Bank Co., Ltd.	RMB	100,000,000		3		Amount to be
							shared with
							the Group
	Standard Chartered Bank	RMB	33,000,000		3		Amount to be
	(China) Limited						shared with
							the Group
	HSBC Bank (China)	RMB	150,000,000		3		Amount to be
	Company Limited						shared with
							the Group
	Morgan Stanley Bank	RMB	150,000,000		3		Amount to be
	International (China)						shared with
	Limited						the Group
Sub-total		RMB	1,108,000,000
87.14%	Industrial and Commercial	RMB	110,000,000		3	Joint liability
	Bank of China Ltd.					guarantee
	Bank of Communications	RMB	40,000,000		3
	Co., Ltd.
	China Merchants Bank	RMB	200,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	China Zheshang Bank	RMB	90,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	Standard Chartered Bank	RMB	80,000,000		3		Amount to be
	(China) Limited						shared with
							the Group

- 16 -

LETTER FROM THE BOARD

		Shareholding			Maximum
		of the	Name of facility granting		guarantee	Term of	Type of
No.	Subject of guarantee	Company	bank	Currency	amount	guarantee	guarantee	Note
					(RMB)	(years)
			HSBC Bank (China)	RMB	150,000,000		3		Amount to be
			Company Limited						shared with
									the Group
			Morgan Stanley Bank	RMB	150,000,000		3		Amount to be
			International (China)						shared with
			Limited						the Group
		Sub-total		RMB	820,000,000
5	Livzon Group Fuzhou
90.36%	Bank of Communications	RMB	430,000,000		5	Joint liability
	Fuxing		Co., Ltd.					guarantee
	Pharmaceutical Co.,		China Merchants Bank	RMB	200,000,000		3		Amount to be
	Ltd.* (麗珠集團福		Co., Ltd.						shared with
	州福興醫藥有限公		Industrial Bank Co., Ltd.	RMB	200,000,000		3		the Group
	司) ("Fuzhou
		HSBC Bank (China)	RMB	150,000,000		3		Amount to be
	Fuxing")
		Company Limited						shared with
	(Notes 2, 4)
								the Group
			Standard Chartered Bank	RMB	100,000,000		3		Amount to be
			(China) Limited						shared with
									the Group
		Sub-total		RMB	1,080,000,000
6	Livzon Group
87.14%	Bank of Communications	RMB	120,000,000		3	Joint liability
	(Ningxia)		Co., Ltd.					guarantee
	Pharmaceutical		China Merchants Bank	RMB	200,000,000		3		Amount to be
	Manufacturing Co.,		Co., Ltd.						shared with
	Ltd.* (麗珠集團(寧		China Bohai Bank Co., Ltd.	RMB	50,000,000		3		the Group
	夏)製藥有限公司)
		China Zheshang Bank	RMB	260,000,000		3		Amount to be
	("Ningxia Company")
		Co., Ltd.						shared with
	(Notes 3, 4)
								the Group
			Standard Chartered Bank	RMB	220,000,000		3		Amount to be
			(China) Limited						shared with
									the Group
			HSBC Bank (China)	RMB	150,000,000		3		Amount to be
			Company Limited						shared with
									the Group
		Sub-total		RMB	1,000,000,000

- 17 -

LETTER FROM THE BOARD

No. Subject of guarantee

7 Sichuan Guangda Pharmaceutical Manufacturing Co., Ltd.* (四川光大製 藥有限公司)

1. Livzon Group Limin Pharmaceutical Manufacturing Factory* (麗珠集團 利民製藥廠 )
2. Jiaozuo Livzon Hecheng Pharmaceutical Manufacturing Co., Ltd.* (焦作麗珠合 成製藥有限公司)
3. Zhuhai Livzon Microsphere Technology Co. Ltd.*(珠海市麗珠微 球科技有限公司)

Total

Shareholding			Maximum
of the	Name of facility granting		guarantee	Term of	Type of
Company	bank	Currency	amount	guarantee	guarantee	Note
			(RMB)	(years)
100%	Industrial and Commercial	RMB	470,000,000		5	Joint liability
	Bank of China Ltd.					guarantee
	Bank of China Limited	RMB	100,000,000		3
	Bank of Communications	RMB	100,000,000		3
	Co., Ltd.
	Industrial Bank Co., Ltd.	RMB	150,000,000		3
	Standard Chartered Bank	RMB	80,000,000		3		Amount to be
	(China) Limited						shared with
							the Group
	Shanghai Pudong	RMB	100,000,000		3
	Development Bank
	Co., Ltd.
Sub-total		RMB	1,000,000,000
100%	Bank of Communications	RMB	15,000,000		3	Joint liability
	Co., Ltd.					guarantee
	Standard Chartered Bank	RMB	40,000,000		3		Amount to be
	(China) Limited						shared with
							the Group
Sub-total		RMB	55,000,000
100%	Bank of Communications	RMB	60,000,000		3	Joint liability
	Co., Ltd					guarantee
	Standard Chartered Bank	RMB	150,000,000		3		Amount to be
	(China) Limited						shared with
							the Group
Sub-total		RMB	210,000,000
100%	Industrial and Commercial	RMB	100,000,000		3	Joint liability
	Bank of China Ltd.					guarantee
	Bank of Communications	RMB	100,000,000		3
	Co., Ltd.
	China Merchants Bank	RMB	100,000,000		3		Amount to be
	Co., Ltd.						shared with
							the Group
	Agricultural Bank of	RMB	100,000,000		3		Amount to be
	China Limited						shared with
							the Group
Sub-total		RMB	400,000,000
		RMB	11,443,000,000

- 18 -

LETTER FROM THE BOARD

Notes:

1. Zhuhai Zhong Hui Yuan Investment Partnership (Limited Partnership)* (珠海中匯源投資合夥企業(有限合夥)) ("Zhong Hui Yuan"), which holds 8.44% equity interests of Xinbeijiang Company, has provided "Letter of Undertaking for Counter Guarantee", pursuant to which it has undertaken to provide a joint liability guarantee for 8.44% of the obligation of the Group under the guarantee provided to Xinbeijiang Company and the guarantee period of which will be expired on the expiry date of the Group's obligation under the guarantee. Taking into consideration that Xinbeijiang Company had an audited net assets of approximately RMB1,383.84 million and an unaudited net assets of approximately RMB1,495.48 million as at 31 December 2020 and 31 March 2021, respectively, and had not defaulted in repayment of its prior facility financing, the Directors consider that the risk for Xinbeijiang Company to default its repayment of the relevant Subsidiaries Facility Financing is relatively low. To the best knowledge of the Directors after making reasonable enquiries with Zhong Hui Yuan, Zhong Hui Yuan does not have sufficient net assets to cover its counter guarantee. However, the Company, as the majority shareholder of Xinbeijiang Company, has controlling stake in the daily operation and management, including the levels of borrowings and debt liabilities, of Xinbeijiang Company, and based on the relatively low risk for Xinbeijiang Company to default its repayment, the chance of enforcing such counter guarantee against Zhong Hui Yuan is therefore relatively remote. Based on the above, the Directors are of the view that a counter guarantee from Zhong Hui Yuan serves as sufficient protection to the Company and its Shareholders as a whole in respect the guarantee amounts in proportionate to Zhong Hui Yuan's 8.44% equity interests in Xinbeijiang Company. The remaining 4.42% equity interests in Xinbeijiang Company are held by 1,393 individuals (the "Individual Shareholders", all of whom are independent third parties and none of them held more than 0.15% of equity interests in Xinbeijiang Company). Given the large number of the Individual Shareholders, the Directors consider that it would be impracticable to obtain counter guarantees from each of the Individual Shareholders of Xinbeijiang Company. Considering the relatively low risk of default of Xinbeijiang Company and the counter guarantee provided by Zhong Hui Yuan, the Directors are of the view that the absence of counter guarantees from the Individual Shareholders of 4.42% of the guaranteed amount are fair and reasonable from an administrative perspective and is in the interests of the Company and the Shareholders as a whole.
2. Xinbeijiang Company, a non-wholly owned subsidiary of the Company which holds 75% equity interests of Fuzhou Fuxing, has provided "Letter of Undertaking for Counter Guarantee", pursuant to which it has undertaken to provide a joint liability guarantee for 75% of the obligation of the Group under the guarantee provided to Fuzhou Fuxing and the guarantee period of which will be expired on the expiry date of the Group's obligation under the guarantee. Fuzhou Fuxing recorded an audited net assets of approximately RMB646.20 million and an unaudited net assets of approximately RMB727.40 million as at 31 December 2020 and 31 March 2021, respectively, and had not defaulted in repayment of its prior facility financing, the Directors consider that the risk for Fuzhou Fuxing to default its repayment of the relevant Subsidiaries Facility Financing is relatively low. In addition, Xinbeijiang Company had an audited net assets of approximately RMB1,383.84 million and an unaudited net assets of approximately RMB1,495.48 million as at 31 December 2020 and 31 March 2021, respectively. Furthermore, the Company holds approximately 87.14% equity interests in Xinbeijiang Company, which allows the Company to have control over the daily operation and management, including the levels of borrowings and debt liabilities, of Xinbeijiang Company, and therefore to assess and re-evaluate the financial ability of Xinbeijiang Company to fulfil its obligations under the counter guarantee on an on-going basis. Based on the above, the Directors are of the view that a counter guarantee from Xinbeijiang Company in proportion to its 75% equity interests in Fuzhou Fuxing serves as sufficient protection to the Company and its Shareholders as a whole.
3. Xinbeijiang Company, which holds 100% equity interests of Ningxia Company, has provided "Letter of Undertaking for Counter Guarantee", pursuant to which it has undertaken to provide a joint liability guarantee for 100% of the obligation of the Group under the guarantee provided to Ningxia Company and the guarantee period of which will be expired on the expiry date of the Group's obligation under the guarantee. Considering that Ningxia Company recorded an audited net assets of approximately RMB195.19 million and an unaudited net assets of approximately RMB219.01 million as at 31 December 2020 and 31 March 2021, respectively, and had not defaulted in repayment of its prior facility financing, the Directors are of the view that a counter guarantee from Xinbeijiang Company in proportion to its equity interests in Ningxia Company is sufficient to minimise the risk for the Company in providing such relevant Subsidiaries Guarantees to Ningxia Company. Furthermore, the Company holds approximately 87.14% equity interests in Xinbeijiang Company, which allows the Company to have control over the daily operation and management, including the levels of borrowings and debt liabilities, of Xinbeijiang Company, and therefore to assess and re-evaluate the financial ability of Xinbeijiang Company to fulfil its obligations under the counter guarantee on an on-going basis.

- 19 -

LETTER FROM THE BOARD

4. As advised by the Company's PRC legal adviser, each of the aforesaid counter guarantees is legally enforceable, and the Company has the legal right to exercise such counter guarantees and claim against the respective counter parties. In the event that a counter party fails to fulfil his or its obligations under the relevant counter guarantee, the Company is entitled to apply to the courts to freeze his or its assets, including his or its equity interests in the relevant non-wholly owned subsidiaries of the Group, and receive compensation in priority.

As at the Latest Practicable Date, the Company has not entered into any guarantee agreement with relevant banks in relation to the Subsidiaries Guarantees. In consideration of the repayment record and creditworthiness of the Group, in particular the Company, the relevant banks providing the Subsidiaries Facility Financing do not require the relevant subsidiaries to provide or deposit any guarantee fees but only joint liability guarantees from the Company, the guarantee fees saved can be used by the relevant subsidiaries in their other business activities, which, in the view of the Directors, could create more value to those relevant subsidiaries and the Company. Furthermore, the Subsidiaries Facility Financing are intended to be used to finance the general operation and business of the relevant subsidiaries, and the Company will benefit from alleviating its capital contribution requirement into the relevant subsidiaries. In view of above, the Directors are of the view that the provision of the Subsidiaries Guarantees in respect of the Subsidiaries Facility Financing is in the interests of the Company and the Shareholders as a whole.

According to the Shenzhen Listing Rules and the Articles of Association, the guarantees of facility financing of RMB11,443 million to be provided by the Company to its subsidiaries represent approximately 94.51% of the latest audited net assets attributable to shareholders of the parent company (RMB12,107.2419 million), and the Company's facility financing and provision of guarantees to its subsidiaries are subject to the approval of Shareholders by special resolution. While the proposed Company Facility Financing, subject to the approval of the Shareholders at the AGM, is provided by the relevant banks to the Company, the Subsidiaries Facility Financing, which is proposed to be covered by the Subsidiaries Guarantees, is provided by the relevant banks to the specific subsidiaries of the Company.

It is therefore proposed at the AGM to seek approval for the abovementioned credit facilities and guarantees, and to grant mandate to the Board and other persons authorised by the Board to negotiate with the relevant banks regarding the amount of credit facilities and guarantees within the above-mentioned credit facilities or guarantee limits, and to execute all relevant documents.

- 20 -

LETTER FROM THE BOARD

IV. PROPOSED PROVISION OF FINANCING GUARANTEES TO CONTROLLING

SUBSIDIARY LIVZON MAB

On 15 April 2021, the Board has considered and approved the provision of joint liability guarantees to the following six banks (the "Banks") for Livzon MAB's applications of facility financing of no more than RMB1,005,000,000 or its equivalent in foreign currencies (the "Livzon MAB Guarantees"), details of which are set out below:

	Shareholding			Maximum
Guaranteed	of the	Name of facility granting		guarantee	Term of	Type of
entity	Company	bank	Currency	amount	guarantee	guarantee	Note
				(RMB)	(years)
Livzon MAB	51.00%	Industrial and Commercial	RMB	105,000,000	1	Joint liability
		Bank of China Ltd.					guarantee
		Agricultural Bank of China	RMB	200,000,000	1		Amount to be
		Limited ("Agricultural						shared with
		Bank")						the Group
		Bank of Communications	RMB	100,000,000	1
		Co., Ltd. ("Bank of
		Communications")
		China Merchants Bank Co.,	RMB	300,000,000	1		Amount to be
		Ltd. ("Merchants Bank")						shared with
								the Group
		China Minsheng Banking	RMB	100,000,000	1
		Corp., Ltd.
		China CITIC Bank	RMB	200,000,000	1		Amount to be
		Corporation Limited						shared with
								the Group
	Total		RMB	1,005,000,000

As at the Latest Practicable Date, except for the guarantee agreement of RMB50.00 million entered into between the Company and Bank of Communications on 20 March 2020, the guarantee agreement of RMB300.00 million entered into between the Company and Merchants Bank on 17 July 2020 and the guarantee agreement of RMB60.00 million entered into between the Company and Agricultural Bank on 12 April 2021, the Company has not entered into any agreement in relation to the Livzon MAB Guarantees. The Company will not charge Livzon MAB any commissions, fees or costs in relation to the Livzon MAB Guarantees. Based on the audited net asset of RMB555.40 million as at 31 December 2020 and the unaudited net asset of RMB477.05 million as at 31 March 2021 of Livzon MAB, the Board considered that the guarantee risks assumed by Livzon MAB Guarantees are within the controllable range and Livzon MAB has the ability to repay the debts.

- 21 -

LETTER FROM THE BOARD

In order to ensure the fairness and equity of the Livzon MAB Guarantees, Joincare, which indirectly holds 33.07% equity interests of Livzon MAB, will provide to the Company a "Letter of Undertaking for Counter Guarantee" subject to the approval by its shareholders, pursuant to which it will undertake to provide counter guarantees in proportion to its shareholdings in Livzon MAB (the "Joincare Counter Guarantees"), and the guarantee period of the Joincare Counter Guarantees will be expired on the expiry date of the Company's obligation under the Livzon MAB Guarantees. Based on an audited net assets of approximately RMB19,236.90 million and an unaudited net assets of approximately RMB19,836.71 million as at 31 December 2020 and 31 March 2021, respectively, of Joincare, the Directors are of the view that Joincare has sufficient financial ability to fulfil its obligation under the Joincare Counter Guarantees. In addition, Livzon MAB will only apply and draw down Livzon MAB Facilities and hence the Company will only enter into specific guarantee agreements with the relevant banks in respect of Livzon MAB Guarantees upon the shareholders of Joincare approving the Joincare Counter Guarantees.

To the best knowledge, information and belief of the Board, having made all reasonable enquiries, each of the Bank and its ultimate beneficial owner are independent third parties.

Reasons for and benefit of provision of the Livzon MAB Guarantees

As at the Latest Practicable Date, Livzon MAB was indirectly held as to 51.00% by the Company, 33.07% by Joincare, 8.43% by YF Pharmab Limited (an independent third party) and 7.50% by Hainan Lisheng Juyuan Investment Partnership (Limited Partnership) (海南麗生聚源 投資合夥企業(有限合夥)). The Directors (including independent non-executive Directors) consider that the Company will benefit from the provision of the Livzon MAB Guarantees in terms of facilitation of the general operation and business of Livzon MAB to be supported by the Livzon MAB Facilities, and the Company will benefit from alleviating its capital contribution requirement into Livzon MAB and optimising its capital allocation to the other profitable business segments, therefore benefiting the overall business development and financial position of the Group.

In addition, it is also common commercial practice for banks in the PRC to require guarantee from the controlling shareholder of a borrower for financing facilities. In view that Joincare will undertake to provide counter guarantees for 33.07% of the obligation of the Company under the Livzon MAB Guarantees in favour of the Company which corresponds to its shareholdings in Livzon MAB, the Directors (including independent non-executive Directors) consider that the risk exposure to the Company is relatively low.

The Directors (including independent non-executive Directors) consider that the Livzon MAB Guarantees are fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

- 22 -

LETTER FROM THE BOARD

Intended use of the facilities granted to Livzon MAB

The Livzon MAB Facilities are intended to be used to finance the general operation and business of Livzon MAB. The amounts of the Livzon MAB Facilities have been arrived at regarding principally the funding requirements of research and development activities for Livzon MAB according to the progress of its clinical studies in the foreseeable future. As at the Latest Practicable Date, except for the facility agreement of RMB50.00 million entered into between Livzon MAB and Bank of Communications on 20 March 2020 and the facility agreement of RMB300.00 million entered into between Livzon MAB and Merchants Bank on 17 July 2020, Livzon MAB has not entered into any agreement in relation to the Livzon MAB Facilities.

Information on the Company, Livzon MAB and the Banks

The Company

The Company, through its subsidiaries, is principally engaged in the research and development, production and sales of drug preparation products, active pharmaceutical ingredients and intermediates, as well as diagnostic reagents and equipment.

Livzon MAB

Livzon MAB is a limited liability company established in the PRC in 2010 which is indirectly held as to 51.00% by the Company, 33.07% by Joincare, 8.43% by YF Pharmab Limited (an independent third party) and 7.50% by Hainan Lisheng Juyuan Investment Partnership (Limited Partnership) (海南麗生聚源投資合夥企業(有限合夥)). It is principally engaged in research, development and commercialization of biopharmaceutical products.

Banks

The Banks are financial institutions incorporated in the PRC. To the best knowledge, information and belief of the Board, having made all reasonable enquiries, each of the Bank and its ultimate beneficial owner are independent third parties.

Implications under the Hong Kong Listing Rules and the Shenzhen Listing Rules

As at the Latest Practicable Date, Joincare directly and indirectly held approximately 44.60% of the total issued share capital of the Company, and Livzon MAB is indirectly held as to 33.07% by Joincare. Therefore, Livzon MAB, an associate of Joincare, is a connected person of the Company under Chapter 14A of the Hong Kong Listing Rules. As such, the Livzon MAB Guarantees constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules. As the highest applicable percentage ratios (as defined in the Hong Kong Listing Rules) in respect of the Livzon MAB Guarantees exceed 0.1% but are less than 5%, the Livzon MAB Guarantees are subject to the reporting and announcement requirements, but is exempt from the independent Shareholders' approval requirement under Chapter 14A of the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

As the Joincare Counter Guarantees to be provided in relation to the Livzon MAB Guarantees by Joincare are on normal commercial terms or better and will not be secured by the assets of the Group, according to Rule 14A.90 of the Hong Kong Listing Rules, the Joincare Counter Guarantees will be fully exempt from reporting, annual review, announcements, and independent Shareholders' approval under Chapter 14A of the Hong Kong Listing Rules.

According to Rule 9.11(II) of the Shenzhen Listing Rules and the Articles of Association, the total amount of the Livzon MAB Guarantees of RMB1,005.00 million represent 8.30% of the latest audited net assets attributable to shareholders of the parent company (RMB12,107.2419 million), and is therefore subject to the approval at the general meeting of the Company.

According to the Shenzhen Listing Rules and the Articles of Association, the Livzon MAB Guarantees are subject to the approval of Shareholders by way of special resolution. It is therefore proposed at the AGM for the Shareholders' approval for the Livzon MAB Guarantees, and to grant mandate to the Board and other persons authorised by the Board to negotiate with relevant banks regarding the amount of guarantees within the limits under the Livzon MAB Guarantees, and to execute all relevant documents.

General

Given that (i) Mr. Zhu Baoguo, the non-executive Director and the chairman of the Company, is also the chairman of Joincare and indirectly holds 45.78% equity interest in Joincare and 33.07% equity interest in Livzon MAB as at the Latest Practicable Date; and

1. Mr. Qiu Qingfeng and Mr. Yu Xiong, the non-executive Directors, are also a director and the president of Joincare, respectively, therefore Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong were deemed to have material interest in the Livzon MAB Guarantees and had abstained from voting at the Board meetings approving the Livzon MAB Guarantees. Except for Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong, no other Directors were required to abstain from voting at the Board meetings approving the Livzon MAB Guarantees.

As at the Latest Practicable Date, Joincare and its associates, directly or indirectly holding approximately 44.60% of the total issued share capital of the Company, shall abstain from voting on the resolution approving the proposed provision of financing guarantees to controlling subsidiary Livzon MAB at the AGM.

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LETTER FROM THE BOARD

1. PROPOSED GRANT OF GENERAL MANDATE TO THE BOARD FOR ISSUING OF SHARES

In order to ensure flexibility and to give discretion to the Directors in the event that it becomes desirable to issue any Shares, a special resolution will be proposed at the AGM to grant an unconditional general mandate to the Board that, during the period as permitted under the general mandate, to separately or concurrently distribute, issue, allot and deal with additional A Shares and H Shares of not more than 20% of each of its existing A Shares and H Shares in issue as at the date of the relevant resolution to be proposed and passed at the AGM (the "General Mandate to Issue Shares").

As at the Latest Practicable Date, the Company's issued and not repurchased share capital comprised 619,231,287 A Shares and 313,235,617 H Shares. Therefore, subject to the granting of the General Mandate to Issue Shares being approved and assuming that no additional shares will be issued and repurchased prior to the AGM, the Board will be entitled to issue a maximum of 123,846,257 A Shares and 62,647,123 H Shares.

The issue of new shares of the Company under the General Mandate to Issue Shares is subject to the approval of the CSRC.

The General Mandate to Issue Shares will remain effective until the earliest of: (i) the conclusion of the next annual general meeting of the Company following the passing of this resolution; (ii) the expiration of a period of 12 months following the passing of such resolution; or (iii) the date on which the authority conferred by such resolution is revoked or varied by a special resolution of the Shareholders in a general meeting.

The Board shall comply with the provisions of the Hong Kong Listing Rules, the Articles of Association and applicable PRC laws and regulations when exercising powers pursuant to the General Mandate to Issue Shares.

Shareholders' approval by separate class meeting is not required for the issuance of A Shares and H Shares pursuant to the exercise of the General Mandate to Issue Shares. In the event as required by relevant provisions of the PRC laws and regulations, notwithstanding the grant of General Mandate to Issue Shares, general meetings shall be convened for the purpose of seeking such approval as required. The Company will issue announcement and/or circular to the Shareholders in such event as soon as practicable in accordance with the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

VI. PROPOSED GRANT OF GENERAL MANDATE TO THE BOARD TO

REPURCHASE H SHARES

To obtain the flexibility and ability in pursuing the best interests for the Company and its Shareholders and to strengthen the long-term investment value of the Company and faith of investors, the Board considered and approved the H Share Repurchase Mandate on 15 April 2021. The H Share Repurchase Mandate is subject to Shareholders' approval at the General Meetings by way of passing the special resolution. Please refer to the appendixes to the notices of the AGM and the Class Meeting of H Shareholders dated 16 April 2021 for an explanatory statement in relation to the H Share Repurchase Mandate.

Number of the H Shares Proposed to be Repurchased and the Repurchase Price

As at the Latest Practicable Date, the Company had a total issued and not repurchased share capital of 932,466,904 shares, comprising 313,235,617 H Shares and 619,231,287 A Shares. The maximum number of the H Shares proposed to be repurchased shall not exceed 10% of the aggregate number of H Shares in issue and having not been repurchased as at the date of the passing of the resolution in relation to the H Share Repurchase Mandate, and shall maintain a sufficient public float as required by the Hong Kong Listing Rules. If 10% of the aggregate number of H Shares in issue and having not been repurchased as at the date of the passing of the resolution in relation to the H Share Repurchase Mandate is 313,235,617, then the maximum number of the H Shares proposed to be repurchased shall not exceed 31,323,561 H Shares. The repurchase will be implemented by batches, and each of the repurchase price shall be no higher than 5% of the average closing price in the five trading days prior to the relevant date of repurchase.

Method of Repurchase

Repurchase on the Hong Kong Stock Exchange pursuant to the Hong Kong Listing Rules, the Codes on Takeovers and Mergers and Share Buy-backs of Hong Kong (the "Takeovers Code") and other applicable laws and regulations.

Status and Disposal of the Repurchased Shares

The listing of all H Shares which are purchased by the Company shall be automatically cancelled upon purchase pursuant to the Hong Kong Listing Rules. The Company will cancel the repurchased H Shares upon completion of the repurchase, and the Company will reduce its registered capital accordingly.

Source of Funds

In repurchasing H Shares of the Company, the Company intends to raise fund legally available for such purpose in accordance with its Articles of Association and the applicable laws of the PRC and the Hong Kong Listing Rules, as the case may be.

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LETTER FROM THE BOARD

Effect of the Takeovers Code

If a Shareholder's proportionate interest in the voting rights of the Company increases as a result of the Directors' exercising the powers of the Company to repurchase H Shares pursuant to the H Share Repurchase Mandate, such increase will be treated as an acquisition of voting rights for the purposes of Rule 32 of the Takeovers Code and, if such increase results in a change of control, may in certain circumstances give rise to an obligation to make a mandatory offer for Shares under Rule 26 of the Takeovers Code.

As at the Latest Practicable Date and insofar the Directors are aware, Joincare, together with its associates, directly or indirectly held 163,364,672 H Shares and 255,513,953 A Shares of the Company, representing approximately 52.15% and 41.26% of the H Shares and A Shares of the Company in issue and having not been repurchased, and in aggregate approximately 44.92% of the total shares of the Company in issue and having not been repurchased. If the H Share Repurchase Mandate is fully exercised, the aggregate interest of Joincare in the Company is expected to be increased to approximately 46.48%. The Directors are currently not aware of any consequences which will arise under either or both the Takeovers Code and any similar applicable law of which the Directors are aware as a result of any repurchase of H Shares made under the H Share Repurchase Mandate. Moreover, the Directors have no present intention to exercise the H Share Repurchase Mandate to such an extent as would result in takeover obligations.

VII. CONVENING THE GENERAL MEETINGS

The Company will hold the AGM, the Class Meeting of A Shareholders and Class Meeting of H Shareholders at the Conference Room on the 3rd Floor of Headquarters Building, 38 Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province, China at 2:00 p.m., 3:30 p.m. (or immediately after the conclusion of the AGM or any adjournment) and 4:00 p.m. (or immediately after the conclusion of the Class Meeting of A Shareholders or any adjournment) respectively on Thursday, 20 May 2021. Notices and proxy forms have been dispatched regarding the AGM and the Class Meeting of H Shareholders by the Company on 16 April 2021. The aforesaid documents are also available for download on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.livzon.com.cn).

If you would like to attend the AGM and/or the Class Meeting of H Shareholders by proxy, please complete the proxy form in accordance with the instructions printed thereon and return it to the Secretariat of the Board of the Company (for A Shareholders) or the H Share Registrar of the Company, Tricor Investor Services Limited (for H Shareholders) as soon as possible and in any event no later than 24 hours before the AGM and/or the Class Meeting of H Shareholders or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting at the AGM and/or the Class Meeting of H Shareholders or any adjournment thereof in person if you so wish.

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LETTER FROM THE BOARD

VIII. RECORD DATE

The record date for determining the qualification of the Shareholders to attend and vote at the AGM and the Class Meeting of H Shareholders will be Wednesday, 12 May 2021. In order to qualify as Shareholders to attend and vote at the AGM and the Class Meeting of H Shareholders, the H Shareholders who are not registered must lodge all transfers of shares accompanied by the relevant share certificates with the Company's H Share Registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p.m. on Wednesday, 12 May 2021.

The record date for determining the qualification of the H Shareholders for the proposed distribution of the Cash Dividend will be Wednesday, 2 June 2021. In order to qualified for the proposed distribution of the Cash Dividend, H Shareholders who are not registered must lodge all transfers of shares accompanied by the relevant share certificates with the Company's H Share Registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p.m. on Wednesday, 2 June 2021.

For A Shareholders, the record date for the Cash Dividend, dividend payment methods and time will be announced separately.

IX. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Hong Kong Listing Rules, the resolutions put forward at the AGM and the Class Meeting of H Shareholders will be voted on by poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Poll results will be announced by the Company in accordance with Rule 13.39(5) of the Hong Kong Listing Rules after the AGM and the Class Meeting of H Shareholders.

1. RECOMMENDATION

The Board considers that the resolutions set out in the Notices of the General Meetings in relation to, as applicable, (I) 2020 Annual Profit Distribution Plan, (II) proposed adjustment to investment plans of certain projects invested with proceeds, (III) proposed facility financing and provision of financing guarantees to subsidiaries, (IV) proposed provision of financing guarantees to controlling subsidiary Livzon MAB, (V) proposed grant of general mandate to the Board for issuing of shares, and (VI) proposed grant of general mandate to the Board to repurchase H Shares and other resolutions are in the interests of the Company and the Shareholders as a whole, and accordingly recommends the Shareholders to vote in favour of all above resolutions to be proposed the General Meetings.

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LETTER FROM THE BOARD

XI. RESPONSIBILITY STATEMENT

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

By order of the Board

麗珠醫藥集團股份有限公司

Livzon Pharmaceutical Group Inc.*

Yang Liang

Company Secretary

Zhuhai, China

• For identification purpose only

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