09:17     SINO BIOPHARM<01177> - Announcement (3)                             

    to appoint 1 director who shall also be the Vice-Chairman.                
                                                                              
    REASONS FOR THE FORMATION OF THE JOINT VENTURE                            
                                                                              
    The Group is principally engaged in the research and development,         
    production and sale of biopharmaceutical products, modernised             
    Chinese medicines and chemical medicines. The Joint Venture,              
    which will be a subsidiary of the Company, will be engaged in             
    the wholesale distribution of the modernised Chinese medicines,           
    chemical medicines and modern health-care products produced by            
    the Group (such as medicines for the treatment for infection,             
    indigestion or cardio cerebral diseases). The Joint Venture's             
    financial results will be consolidated to the Group's financial           
    statements.                                                               
                                                                              
    The formation of the Joint Venture is expected to enable the              
    Group to distribute its own manufactured products which should            
    bring corresponding cost advantages and help the Group enhance            
    its competitiveness. It will also provide a further opportunity           
    for the Group to develop and expand its distribution business             
    in the PRC.                                                               
                                                                              
    Lianyungang Runzi is principally engaged in investment                    
    management in the PRC. Mr. Tao Huiqi (an executive Director)              
    and Mr. Zhang Baowen (a director of certain subsidiaries of the           
    Company) are interested in approximately 16% and approximately            
    8% of the equity interests in Lianyungang Runzi respectively.             
    The other equity owners comprise of 12 individuals with equity            
    interests ranging from approximately 1.5% to approximately 13%.           
    To the best of the Directors' knowledge, information and belief           
    having made all reasonable enquires, other than Mr. Tao Huiqi             
    and Mr. Zhang Baowen, the equity owners of Lianyungang Runzi              
    are third parties independent of the Company and connected                
    persons (as defined in the Listing Rules) of the Company.                 
                                                                              
    Jiangsu Agribusiness is a state-owned enterprise established              
    in Jiangsu Province in the PRC. Jiangsu Juxin is a subsidiary             
    of Jiangsu Agribusiness. Jiangsu Juxin is principally engaged             
    in investment management in the PRC. Jiangsu Juxin is a connected         
    person of the Company within the meaning of the Listing Rules.            
    Details of Jiangsu Juxin's relationship with the Company are              
    set out in the paragraph headed "General" below.                          
                                                                              
    The Directors, including the independent non-executive                    
    Directors, consider that the terms of the Joint Venture Agreement         
    and the Joint Venture Articles, which were concluded by the               
    Parties after arm's length negotiations, are fair and reasonable          
    and are on normal commercial terms and the Joint Venture                  
    Agreement and the Joint Venture Articles are in the interests             
    of the Company and its shareholders as a whole.                           
                                                                              
    GENERAL                                                                   
                                                                              
    Jiangsu Juxin is owned as to approximately 51% by Jiangsu                 
    Agribusiness which holds a 33.5% equity interest in JCTT, a               
    subsidiary of the Company. Hence, Jiangsu Juxin is an associate           
    of Jiangsu Agribusiness (being a substantial shareholder of the           
    Company's subsidiary) and a connected person of the Company               
    within the meaning of the Listing Rules. Accordingly, the                 
    formation of the Joint Venture constituted a connected                    
    transaction for the Company. As the applicable percentage ratios          
    of the contribution of CTL to the Joint Venture are below 2.5%,           
    the transaction is only subject to the reporting and announcement         
    requirements and is exempt from the independent shareholders'             
    approval under Chapter 14A of the Listing Rules.                          
                                                                              
    DEFINITIONS