SINOPHARM GROUP CO. LTD. * 國 藥 控 股 股 份 有 限 公 司

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. 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) CONTINUING CONNECTED TRANSACTIONS ENTERING INTO THE EPC GENERAL CONTRACTING SERVICE FRAMEWORK AGREEMENT The Board hereby announces that on 15 October 2015, the Company entered into the EPC General Contracting Service Framework Agreement with the CNPGC, pursuant to which the CNPGC Group will provide EPC (Engineering, Procurement, and Construction) general contracting services to the Group according to the engineering project general contracting agreements obtained by CNPGC through bidding process. CNPGC is the ultimate controlling shareholder of the Company and therefore is a connected person of the Company under the Hong Kong Listing Rules. Accordingly, the transaction under the EPC General Contracting Service Framework Agreement constitutes a continuing connected transaction of the Company pursuant to Chapter 14A of the Hong Kong Listing Rules. As one or more of the applicable percentage ratios (as defined under Rule 14A.77 of the Hong Kong Listing Rules) in respect of the continuing connected transaction under the EPC General Contracting Service Framework Agreement exceed 0.1% but less than 5%, the transaction thereunder is only subject to the reporting, announcement and annual review requirements, but is exempt from the independent shareholders approval requirement under Chapter 14A of the Hong Kong Listing Rules. * 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

2 I. INTRODUCTION On 15 October 2015, the Company entered into the EPC General Contracting Service Framework Agreement with the CNPGC, pursuant to which the CNPGC Group will provide EPC (Engineering, Procurement, and Construction) general contracting services to the Group according to the engineering project general contracting agreements obtained by CNPGC through bidding process. II. THE EPC GENERAL CONTRACTING SERVICE FRAMEWORK AGREEMENT Details of the EPC General Contracting Service Framework Agreement are as follows: Date: 15 October 2015 Parties: (i) the Company (ii) the CNPGC Scope of services: Term of the Agreement: Pricing Policy: CNPGC Group will provide EPC general contracting services to the Group pursuant to the EPC general contracting service agreements obtained through bidding process. The EPC General Contracting Service Framework Agreement is for a term of three years commencing on 1 January 2015 and ending on The EPC General Contracting Service Framework Agreement will, subject to compliance with relevant laws and regulations and the Hong Kong Listing Rules and the agreement of the parties, be or extended or renewed. Under the EPC General Contracting Service Framework Agreement, the service provider and the price of EPC general contracting services shall be determined through a bidding process in principle and in compliance with applicable laws, regulations and rules. The CNPGC Group shall bid by stringently following the steps and/or measurements as stipulated by The Invitation And Submission of Bids Law of the PRC ( 中 華 人 民 共 和 國 招 標 投 標 法 ) and the specific requirements in bidding invitation documents made by the Group

3 The bid invitation documents made by the Group include all substantial requirements and all key terms for the conclusion of contracts, including: the project s technical requirements, the criteria for examination of the contractors, the requirements for the bid price and the standard of evaluation of the bid and etc. The Group s tender committee is responsible for (i) adhering the process is in accordance with The Invitation And Submission of Bids Law of the PRC ( 中 華 人 民 共 和 國 招 標 投 標 法 ); (ii) reviewing, evaluating and monitoring documents from outsourcing service providers based on the technical, commercial and pricing criteria and payment terms of relevant service fees, which will ensure the terms obtained by the Group from the CNPGC Group is no less favorable than those available from independent third parties; and (iii) grading the service providers and writing recommendation advice. The Group s tender committee is responsible for deciding which service provider will be awarded the EPC General Contracting Service Framework Agreement. Payment Arrangements: For EPC general contracting services provided by the CNPGC Group to the Group, the payment shall be made by the Group by installments in accordance with the time nodes of engineering, procurement, and construction or other methods agreed by the parties. The purchase prices under the EPC General Contracting Service Framework Agreement shall be paid in cash or other methods agreed by the parties. The service fees under the EPC General Contracting Service Framework Agreement are payable in accordance with the agreed payment terms stipulated in the specific implementation agreements. Implementation Agreements: Members of the Group and members of the CNPGC Group will enter into, from time to time and as necessary, individual implementation agreements to set out the specific terms and conditions in respect of the provision of EPC general contracting services thereunder. Any such implementation agreements will be within the ambit of the EPC General Contracting Service Framework Agreement and shall not contravene the provisions of the EPC General Contracting Service Framework Agreement

4 III. PROPOSED ANNUAL CAPS FOR THE THREE YEARS ENDING 31 DECEMBER 2017 Historical figures For the three years ended 2014, CNPGC Group had provided designing and project management services to the Group, the historical transaction amount is as follows: Transactions Year ended 2012 Year ended 2013 Year ended 2014 (RMB) (RMB) (RMB) Amount paid by the Group to the CNPGC Group regarding the designing and project management services provided by the CNPGC Group 3,225,640 4,032,000 5,408,365 Note: the above-mentioned historical transactions only included designing and project management services, and the transaction amount of the aforesaid two services generally has a very low proportion in the total amount of an EPC general contracting agreement. Estimation of the annual caps for the three years ending 2017 The Directors expect the annual caps for the continuing connected transactions under the EPC General Contracting Service Framework Agreement for the three years ending 2017 are as follows: Transactions Year ending 2015 Year ending 2016 Year ending 2017 (RMB) (RMB) (RMB) The expected maximum transaction amount payable by the Group to the CNPGC Group under the EPC General Contracting Service Framework Agreement 300,000, ,000, ,000,000 The Directors have been monitoring the transaction amount under the EPC General Contracting Service Framework Agreement to ensure compliance, and so far all EPC general contracting services provided by the CNPGC Group to the Group on an annually aggregated basis are de minimus transactions under the Hong Kong Listing Rules and as at the date of this announcement, the 2015 annual cap has not been exceeded

5 Basis of determination of the annual caps In arriving at the above estimated annual caps for the continuing connected transactions under the EPC General Contracting Service Framework Agreement, the Directors have taken into consideration the following factors: (i) the historical figures of the transaction amount in relation to the designing and project management services provided by the CNPGC Group to the Group for the three years ended The above-mentioned historical transactions only included designing and project management services, and the transaction amount of the aforesaid two services generally has a very low proportion in the total amount of an EPC general contracting agreement; (ii) the estimated gradual increase in the industrial construction programs and logistics construction programs of the Company during the three years ending 2017 according the project construction planning of the Company, based on the demand for business development and the requirements of satisfying the GSP standards. And at the same time, in order to improve project efficiency, the Group will conduct the aforesaid engineering construction projects by way of EPC general contracting more frequently; (iii) the increased probability of the CNPGC Group being awarded a tender in the tendering and bidding projects in relation to EPC general contracting services of the Group, with the business development of the CNPGC Group; (iv) the expected rising price of the relevant services under the EPC General Contracting Service Framework Agreement, due to the increase in the labor cost and the price of raw materials; (v) the inclusion of a buffer for the transaction amount under the EPC General Contracting Service Framework Agreement so as to accommodate any unexpected increase in the aforesaid transaction amount; and (vi) the then market conditions and the economic outlook of the PRC during the three years ending IV. REASONS FOR AND BENEFIT OF ENTERING INTO THE EPC GENERAL CONTRACTING SERVICE FRAMEWORK AGREEMENT Due to the demand for business development and the requirements of satisfying the GSP standards, the Group expects that in the coming few financial years it will continuously develop industrial construction programs and logistics construction programs. In order to improve project efficiency, the Group will conduct the aforesaid engineering construction projects by way of EPC general contracting more frequently, and will select service provider through open tendering process in accordance with relevant laws and regulations. The CNPGC Group may - 5 -

6 participate in the bidding process as a provider of EPC general contracting services. The appointment of the CNPGC Group as a construction contractor for the projects of the Group is subject to a successful tender in a competitive tendering process governed by the relevant rules and regulations in the PRC, and such type of transactions will constitute continuing connected transactions of the Company pursuant to the Hong Kong Listing Rules. The main purpose of the EPC General Contracting Service Framework Agreement is to avoid undue delay in the construction progress of the relevant projects which will otherwise have to implement its duties for information disclosure under the Hong Kong Listing Rules in relation to connected transactions for individual implementation agreements, so as to improve the efficiency of the Group s approval process of such transactions. As such, the Directors (including the independent non-executive Directors) are of the view that the EPC General Contracting Service Framework Agreement was entered into in the ordinary and usual course of business of the Group and on normal commercial terms, and the terms and conditions therein as well as the annual caps for the continuing connected transactions thereunder are fair and reasonable and in the interests of the Company and its shareholders as a whole. V. HONG KONG LISTING RULES IMPLICATIONS CNPGC is the ultimate controlling shareholder of the Company and therefore is a connected person of the Company under the Hong Kong Listing Rules. Accordingly, the transaction under the EPC General Contracting Service Framework Agreement constitutes a continuing connected transaction of the Company pursuant to Chapter 14A of the Hong Kong Listing Rules. As one or more of the applicable percentage ratios (as defined under Rule 14A.77 of the Hong Kong Listing Rules) in respect of the continuing connected transaction under the EPC General Contracting Service Framework Agreement exceed 0.1% but less than 5%, the transaction thereunder is only subject to the reporting, announcement and annual review requirements, but is exempt from the independent shareholders approval requirement under Chapter 14A of the Hong Kong Listing Rules. To the best of the Directors knowledge, information and belief, having made all reasonable enquiry, there is no other connected transaction entered into between any member of the Group and CNPGC and its ultimate beneficial owner(s) or otherwise related, which would be, together with the transaction under the EPC General Contracting Service Framework Agreement, aggregated under Rule 14A.81 of the Hong Kong Listing Rules. The following Directors, being Mr. She Lulin, Mr. Li Yuhua, Mr. Zhou Bin and Mr. Deng Jindong, are also directors or senior management of CNPGC. Therefore, they are deemed to have material interest in the transactions under the EPC General Contracting Service Framework Agreement, and thus have abstained from voting on the relevant resolution at the Board - 6 -

7 meeting. Save as mentioned above, none of the other Directors has a material interest in such transactions and is required to abstain from voting on the relevant resolution at the Board meeting. VI. GENERAL INFORMATION OF THE PARTIES The Group The Group is principally engaged in the distribution and retail of pharmaceutical and healthcare products. CNPGC CNPGC is a wholly state-owned enterprise established in the PRC and the ultimate controlling shareholder of the Company, which is principally engaged in the distribution, retail, research and development and manufacturing of prevention and treatment, diagnosis and nursing and other health related products. VII. DEFINITIONS In this announcement, unless the context otherwise requires, the following words and expressions shall have the meanings ascribed to them below: Associates Board CNPGC CNPGC Group Company controlling shareholder has the meaning ascribed to it under the Hong Kong Listing Rules the board of directors of the Company China National Pharmaceutical Group Corporation ( 中 國 醫 藥 集 團 總 公 司 ), a state wholly-owned enterprise incorporated in the PRC and the ultimate controlling shareholder of the Company CNPGC and its subsidiaries and associates (excluding the Group) Sinopharm Group Co. Ltd., ( 國 藥 控 股 股 份 有 限 公 司 ), a joint stock company incorporated under the laws of the PRC with limited liability and whose H shares are listed and traded on the Hong Kong Stock Exchange has the meaning ascribed to it under the Hong Kong Listing Rules - 7 -

8 Director(s) EPC General Contracting Service Framework Agreement Group Hong Kong Hong Kong Listing Rules Hong Kong Stock Exchange PRC RMB the director(s) of the Company the EPC General Contracting Service Framework Agreement entered into between the Company and the CNPGC on 15 October 2015 in relation to the provision of EPC (Engineering, Procurement, and Construction) general contracting services by the CNPGC Group to the Group the Company and its subsidiaries the Hong Kong Special Administrative Region of the PRC the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited the People s Republic of China, which for the purpose of this announcement only (unless otherwise indicated) excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan Renminbi, the lawful currency of the PRC By order of the Board Sinopharm Group Co. Ltd. Wei Yulin Chairman Shanghai, the PRC 15 October 2015 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 Qi Yu, Mr. She Lulin, Mr. Wang Qunbin, Mr. Li Yuhua, Mr. Zhou Bin, Mr. Deng Jindong, Mr. Li Dongjiu and Mr. Liu Hailiang; and the independent non-executive directors of the Company are Ms. Li Ling, Mr. Yu Tze Shan Hailson, Mr. Lyu Changjiang, Mr. Tan Wee Seng and Mr. Liu Zhengdong