Shanghai Fosun Pharmaceutical : CONNECTED TRANSACTION-INVESTMENT AGREEMENT IN RELATION TO CAPITAL INCREASE IN THE TARGET（H SHARES）

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上 海 復 星 醫 藥（ 集 團 ）股 份 有 限 公 司

Shanghai Fosun Pharmaceutical (Group) Co., Ltd.*

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

(Stock code: 02196)

CONNECTED TRANSACTION

INVESTMENT AGREEMENT IN RELATION TO

CAPITAL INCREASE IN THE TARGET

THE INVESTMENT AGREEMENT

The board is pleased to announce that on 24 January 2022, Fosun Pharmaceutical Industrial, Yadong Zhijian, Ningbo Fumai and the Target entered into the Investment Agreement in relation to, among other things, the Capital Increase in the Target. The Group's total contribution amount through Fosun Pharmaceutical Industrial is RMB90 million which will be paid in part by cash and in part by capitalisation of loan owed to it by the Target.

Before the Capital Increase, the Target is held by the Company through Fosun Pharmaceutical Industrial and Foshan Hospital as to 30% in aggregate. Upon completion of the Capital Increase, Fosun Pharmaceutical Industrial's shareholding in the Target will increase from 25% to approximately 25.88%, and the Target will be held by the Company through Fosun Pharmaceutical Industrial and Foshan Hospital as to approximately 28.24% in aggregate.

IMPLICATIONS UNDER THE HONG KONG LISTING RULES

As at the date of this announcement, the Target is held as to 40% and 10% by Yadong Zhijian and Ningbo Fumai respectively, which in turn are both subsidiaries of Fosun High Tech, the Company's controlling shareholder. As such, the Target is an associate of Fosun High Tech, and each of Yadong Zhijian, Ningbo Fumai and the Target is a connected person of the Company. The transaction under the Investment Agreement therefore constitutes a connected transaction of the Company. Given the other parties to the Investment Agreement are all associated with Fosun High Tech, the transaction contemplated under the Investment Agreement are aggregated with the Previous Connected Transactions pursuant to Rule 14A.81 of the Hong Kong Listing Rules.

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As the relevant percentage ratio(s) in respect of the capital contribution to be made by Fosun Pharmaceutical Industrial, when aggregated with the Previous Connected Transactions, is more than 0.1% but all of them are less than 5%, the transaction contemplated under the Investment Agreement is subject to the reporting and announcement requirements, but is exempted from the independent shareholders' approval requirement under Chapter 14A of the Hong Kong Listing Rules.

THE INVESTMENT AGREEMENT

The board is pleased to announce that on 24 January 2022, Fosun Pharmaceutical Industrial, Yadong Zhijian, Ningbo Fumai and the Target entered into the Investment Agreement in relation to, among other things, the Capital Increase in the Target. The principal terms of the Investment Agreement are summarized below:

Date

24 January 2022

Parties

1. Fosun Pharmaceutical Industrial
2. Yadong Zhijian
3. Ningbo Fumai
4. the Target

The Capital Increase

Pursuant to the Investment Agreement:

1. Yadong Zhijian will contribute an aggregate sum of RMB210 million to the Target (comprising a cash amount of RMB43.4 million and capitalisation of the outstanding loan amount owing from the Target of RMB166.6 million) to subscribe for additional registered capital of RMB35 million in the Target;
2. Fosun Pharmaceutical Industrial will contribute an aggregate sum of RMB90 million to the Target (comprising a cash amount of RMB18.6 million and capitalisation of the outstanding loan amount owing from the Target of RMB71.4 million) to subscribe for additional registered capital of RMB15 million in the Target;
3. Ningbo Fumai has agreed to make an investment in the amount of RMB37.5 million in the Target for the subscription of additional registered capital in the Target in the amount of RMB6.25 million.

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On the same date as the Investment Agreement, the parties have also entered into a supplemental agreement confirming that the additional registered capital as subscribed by Ningbo Fumai will be utilised for equity incentive purposes in the future.

The cash portion of the respective contributions by Yadong Zhijian and Fosun Pharmaceutical Industrial are to be paid within 5 business days of the conditions precedent to the Capital Increase as described below in the section headed ''Conditions Precedent to the Capital Increase'' in this announcement. The total investment amount by Ningbo Fumai will be paid up in cash by the corresponding grantees upon vesting and exercise of the relevant equity incentives which may be granted.

Upon completion of the Capital Increase, the registered capital of the Target will increase from RMB50 million to RMB106.25 million, and the excess of the investment amounts over the amount of registered capital subscribed for will be credited by the Target as contributed surplus.

The capital contributions are intended to be applied primarily towards meeting the Target's research funding, marketing expenses, as well as daily operational needs.

The capital contribution by Fosun Pharmaceutical Industrial will be financed by its self-raised funds.

Basis of determination of the investment amounts

The pre-money valuation of the Target of RMB300 million is negotiated and agreed between Fosun Pharmaceutical Industrial and the other parties to the Investment Agreement, which amount is determined primarily by reference to the valuation of the owners' equity of the Target as at 31 August 2021 as assessed by an independent valuer.

The valuation by the independent valuer was based on the market approach with reference to the price- to-research ratio (being the valuation as divided by research and development expenses).

A number of comparable companies in the medical imaging AI business with similar asset scale and nature of business with the Target are referred to in the valuation and their details are follows:

				R&D expenses in
	Financing		Pre-money	the corresponding
Comparable Companies	round	Time	valuation	year
			(RMB million)	(RMB million)
Shukun Technology	Round A+	July 2019	500	42.69
Airdoc Technology	Round B	April 2018	400	41.21
Keya Medical	Angel Round	September	247	35.44
		2019

Note: information compiled from information published by comparable companies

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The applicable price-to-research ratio of the Target and the comparable companies are set out as follows:

	Shukun	Airdoc	Keya
	Technology	Technology	Medical
Adjusted price-to-research ratio(Note)	9.43	7.87	7.1
Price-to-research ratio of the Target			8.13

Note: the adjustments to the price-to-research ratio of the comparable companies have taken into account (among other things) the relevant transaction date, financing round, the area of product application, technology advancement indicator and extent of commercialization etc.

The valuation result in respect of the Target's owners' equity as at 31 August 2021 = price-to-research

ratio * the Target's research and development expenses for the year ended 31 December 2021 estimated as at the valuation date + the value of non-operating assets and liabilities(Note)

• 8.13×65.0632+(-227.5006)
• 301.50 (Unit: approximately RMB million with rounding)

Note: the value of non-operating assets and liabilities is RMB-227.5006 million, which mainly comprises shareholders'

loan.

Conditions precedent to the Capital Increase

The Capital Increase by the parties in the Target is conditional upon each of the parties completing their respective internal approval procedures including:

1. the Target obtaining approval from its shareholders at a general meeting;
2. the other shareholders of the Target waiving their respective pre-emptive rights with respect to the Capital Increase; and
3. each of the parties undertaking the Capital Increase having obtained the requisite approvals in accordance with applicable laws and regulations as well as its constitutional documents.

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SHAREHOLDING STRUCTURE OF THE TARGET

The table below sets out the shareholding structure of the Target immediately before and after the Capital Increase:

	Immediately before
	completion of the Capital	Immediately after completion
	Increase	of the Capital Increase
	Capital	Shareholding	Capital	Shareholding
Shareholders	contribution	percentage	contribution	percentage
	(RMB million)			(RMB million)
Yadong Zhijian	20		40%	55		51.7647%
Fosun Pharmaceutical Industrial	12.5	25%	27.5		25.8824%
Foshan Hospital	2.5		5%		2.5		2.3529%
Ningbo Puximai (Note 1)	5		10%	5		4.7059%
Ningbo Songmai (Note 2)	5		10%	5		4.7059%
Ningbo Fumai	5		10%		11.25		10.5882%
Total	50		100%	106.25	100%

Notes:

1. Ningbo Puximai is a limited liability partnership established in the PRC. Its general partner is Shanghai Xingyu Commercial Consulting Co., Ltd.* (上海杏愉商務諮詢有限公司), which in turn is owned by He Chuan (何川) and Fang Qu (房劬) as to 70% and 30%, respectively. Its limited partners are Shanghai Yunji Information Technology Co., Ltd.* (上海雲濟信息科技有限公司) which is a subsidiary of Fosun High Tech, He Chuan (何川), Fang Qu (房劬), Yadong Zhijian, Wang Jialian (王嘉廉), Song Qiong (宋瓊) and Liu Weiping (劉維平).
2. Ningbo Songmai is a limited liability partnership established in the PRC. Its general partner is Shanghai Xingyu Commercial Consulting Co., Ltd.* (上海杏愉商務諮詢有限公司). Its limited partners are Shanghai Yunji Information Technology Co., Ltd.* (上海雲濟信息科技有限公司) and Wang Jialian (王嘉廉).

REASONS FOR AND THE BENEFITS OF ENTERING INTO THE INVESTMENT AGREEMENT

The Target is a company that focuses on technology and innovation, and it is principally engaged in the development, product and sale of artificial intelligence software and digital solutions for medical imaging and pathology applications. While a number of its products were commercialized for the market in 2021, the Target is currently still in the investment and research phase. The Capital Increase seeks to (i) address the capital requirement in relation to the Target's present investment in research and development, marketing expenses as well as daily business operation; (ii) capitalize the outstanding shareholders' loan owed by the Target to Yadong Zhijian and Fosun Pharmaceutical Industrial, thereby improving the Target's liquidity; and (iii) enhance the incentives measures available for the staff of the Target.

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