SINOPHARM : Supplemental Announcement to the Discloseable Transactions in Relation to the Proposed Disposal of Equity Interests in Certain Subsidiaries Held by the Company to Sinopharm (cncm Ltd)

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SINOPHARM GROUP CO. LTD.*

國藥控股股份有限公司

(A joint stock limited company incorporated in the People's Republic of China with limited liability and carrying on business in Hong Kong as 國控股份有限公司)

(Stock Code: 01099)

SUPPLEMENTAL ANNOUNCEMENT TO THE DISCLOSEABLE TRANSACTIONS IN RELATION TO THE PROPOSED DISPOSAL OF EQUITY INTERESTS IN CERTAIN SUBSIDIARIES HELD BY THE COMPANY TO SINOPHARM (CNCM LTD)

References is made to the announcement of Sinopharm Group Co. Ltd. (the "Company") dated 20 July 2016 (the "Announcement") in relation to, among others, the proposed disposal of the Target Assets by the Company to SINOPHARM (CNCM LTD), the consideration of which will be satisfied by issuance Consideration Shares by SINOPHARM (CNCM LTD) to the Company.

Unless otherwise specified, capitalized terms used in this announcement shall have the same meanings as those defined in the Announcement.

SUPPLEMENTAL ASSETS TRANSFER AGREEMENTS

As disclosed in the Announcement, the valuation reports of the Target Assets will be filed with and confirmed by the SASAC, and if there is any change or adjustment to the results of the Filed Valuation, the parties under the Assets Transfer Agreements will negotiate in good faith to agree on adjustments to the initial price and any other consequential amendments that may be necessary. In addition, if the final consideration for the transactions under the Assets Transfer Agreements is adjusted, the total number of the Consideration Shares to be issued by SINOPHARM (CNCM LTD) will be correspondingly adjusted based on the issue price.

After filing with and confirmed by the SASAC, the results of the Filed Valuation of the Target Assets have been adjusted from RMB5,372.6849 million, being the results of the Preliminary Valuation, to RMB5,372.9226 million, of which the valuation results of 96% equity interest in Sinopharm Beijing, 51% equity interest in Beijing Huahong, 51% equity interest in Beijing Kangchen, and 51% equity interest in Beijing Tianxing have been adjusted from RMB2,668.4786 million, RMB1,108.4566 million, RMB524.5686 million, and RMB1,071.1811 million to RMB2,668.8758 million, RMB1,108.4565 million, RMB524.4522 million, and RMB1,071.1381 million, respectively.

Taking into account the above-mentioned results of the Filed Valuation and Beijing Huahong's distribution of 2015 final dividend amounted to RMB65.1530 million, on 23 September 2016, the Company entered into the supplemental agreements to the Assets Transfer Agreements with SINOPHARM (CNCM LTD) and the Other Minority Shareholders, pursuant to which, the consideration for the disposal of the Target Assets has been confirmed as RMB5,339.6946 million, the issue price of Consideration Shares remain as RMB25.10 per share, and the number of Consideration Shares to be issued by SINOPHARM (CNCM LTD) to the Company has

been adjusted from approximately 214,051,189 shares to 212,736,835 shares. While the consideration to be obtained by the Other Minority Shareholders for disposal of their corresponding equity interests in certain Target Companies to SINOPHARM (CNCM LTD) and the consideration shares to be issued by SINOPHARM (CNCM LTD) are also adjusted by the parties accordingly. Upon completion of all the transactions under the Assets Transfer Agreements, the Company's shareholding ratio in SINOPHARM (CNCM LTD) will be increased from 44.01% to 58.52%.

The above-mentioned adjustments are immaterial, and saved as amended by the supplemental agreements mentioned above, all other major provisions in relation to the Assets Restructuring under the Asset Transfer Agreements remain unchanged and continue to be in force. The issue price and amount of Consideration Shares under the Asset Transfer Agreements are subject to the approval of shareholders of SINOPHARM (CNCM LTD) and the approval of the CSRC.

PROFIT FORECAST

As mentioned in the Announcement, the valuation of each of the Target Companies was prepared by the Independent Valuer based on, among others, income approach, which involves the calculation of discounted cash flow. Therefore, such valuation of each of the aforesaid Target Companies is regarded as a profit forecast under Rule 14.61 of the Hong Kong Listing Rules.

The Filed Valuation of each of the aforesaid Target Companies was prepared based on the same valuation methods and major assumptions as adopted in the Preliminary Valuation, and the Board confirms that there are no material difference between the Preliminary Valuation and the Filed Valuation.

PricewaterhouseCoopers, the reporting accountant of the Company, has reviewed the arithmetical calculations of the discounted future estimated cash flows of Sinopharm Beijing, Beijing Huahong, Beijing Kangchen and Beijing Tianxing in accordance with the bases and assumptions adopted in the Filed Valuation as set out in the appendixes to this announcement, which do not involve the adoption of any accounting policy.

The Directors confirm that the profit forecast of each of Sinopharm Beijing, Beijing Huahong, Beijing Kangchen and Beijing Tianxing have been made after due and careful enquiries.

Letters from the Board and PricewaterhouseCoopers in relation to the calculations of discounted future estimated cash flows in relation to the Filed Valuation of aforesaid Target Companies are set out in the appendixes to this announcement.

EXPERT AND CONSENT

The name and qualification of the expert who has given opinions and advices included in this announcement are as follows:

Name	Qualification
PricewaterhouseCoopers	Certified Public Accountants

As at the date of this announcement, PricewaterhouseCoopers does not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate person(s) to subscribe for the securities in any member of the Group.

PricewaterhouseCoopers has given and has not withdrawn its consent to the publication of this announcement with inclusion of its letter or report and all references to its name in the form and context in which it is included.

SUPPLEMENTAL COMPENSATION UNDERTAKING AGREEMENTS

As mentioned in the Announcement, the committed net profit amount of each of the Target Companies will be determined by the parties after the valuation results of the Target Companies have been filed with the SASAC. On 23 September 2016, the Company, SINOPHARM (CNCM LTD) and the Other Minority Shareholders entered into the supplemental compensation agreements to determine the committed net profit amount of each of the Target Companies, pursuant to which (i) the committed net profit amount of Sinopharm Beijing are RMB250.5362 million, RMB276.5354 million, and RMB305.2887 million in 2016, 2017 and 2018, respectively, (ii) the committed net profit amount of Beijing Huahong are RMB160.0468 million, RMB182.0305 million, and RMB209.8400 million in 2016, 2017 and 2018, respectively, (iii) the committed net profit amount of Beijing Kangchen are RMB63.2985 million, RMB74.0678 million, and RMB86.6263 million in 2016, 2017 and 2018, respectively, and (iv) the committed net profit amount of Beijing Tianxing are RMB170.1605 million, RMB195.0535 million, and RMB223.0363 million in 2016, 2017 and 2018, respectively.

If the actual net profit amount of any of the Target Companies is lower than the corresponding committed net profit amount during the Profit Compensation Period, the Company will compensate the shortfall in accordance with the ways of compensation as agreed in the compensation agreements and disclosed in the Announcement.

By order of the Board of

Sinopharm Group Co. Ltd.

Wei Yulin

Chairman

Shanghai, the PRC 23 September 2016

As at the date of this announcement, the executive directors of the Company are Mr. Wei Yulin and Mr. Li Zhiming; the non-executive directors of the Company are Mr. Chen Qiyu, Mr. She Lulin, Mr. Wang Qunbin, Mr. Li Yuhua, Mr. Deng Jindong, Mr. Li Dongjiu Mr. Lian Wanyong, and Mr. Wu Yijian; and the independent non-executive directors of the Company are Ms. Li Ling, Mr. Yu Tze Shan Hailson, Mr. Tan Wee Seng, Mr. Liu Zhengdong and Mr. Zhuo Fumin.

• The Company is registered as a non-Hong Kong company under the Hong Kong Companies Ordinance under its Chinese name and the English name "Sinopharm Group Co. Ltd."

  APPENDIX I - FINAL ASSUMPTIONS OF THE FILED VALUATION OF SINOPHARM BEIJING AND LETTERS OF COMFORT IN RELATION TO THE PROFIT FORECAST OF SINOPHARM BEIJING
• FINAL ASSUMPTIONS OF THE FILED VALUATION OF SINOPHARM BEIJING

1. General Assumptions

2. it is assumed that the valuated entity will continue operating after the Valuation Reference Date;

3. it is assumed that there will be no material changes to the political, economic and social environment of the country and regions after the Valuation Reference Date;

4. it is assumed that there will be no material changes to the macro-economic policies, industrial policies or regional development policies in the country after the Valuation Reference Date;

5. it is assumed that, saved as the known changes, there will be no material changes to the interest rates, exchange rates, tax bases and tax rates, as well as policies charges in relation to the valuated entity after the Valuation Reference Date;

6. it is assumed that the management of the valuated entity will be responsible and stable, and have the capability to take on their duties after the Valuation Reference Date;

7. it is assumed that the valuated entity will comply with all related laws and regulations; and

8. it is assumed that there will be no material adverse impacts arising from force majeure after the Valuation Reference Date.

9. Special Assumptions

10. it is assumed that the valuated entity will adopt the fundamentally same accounting policies in the future with the ones adopted in preparing the valuation report after the Valuation Reference Date;

11. it is assumed that the valuated entity will maintain the existing business scope and mode on the basis of the present management mode and level after the Valuation Reference Date; and

12. it is assumed that the valuated entity will have even cash outflow and cash inflow after the Valuation Reference Date.