SINOPHARM : Announcements and Notices - Supplemental Announcement to the Discloseable and Connected Transactions in Relation to the (i) Proposed Disposal of Equity Interests in Certain Subsidiaries Held by the Company and Sinopharm Accord to Modern Pharmaceutical and (ii) Proposed Acquisition of Equity Interests in Southern Pharmaceutical

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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 AND CONNECTED TRANSACTIONS IN RELATION TO THE (I) PROPOSED DISPOSAL OF EQUITY INTERESTS IN CERTAIN SUBSIDIARIES HELD BY THE COMPANY AND SINOPHARM ACCORD TO MODERN PHARMACEUTICAL AND (II) PROPOSED ACQUISITION OF EQUITY INTERESTS IN SOUTHERN PHARMACEUTICAL

References is made to the announcement of Sinopharm Group Co. Ltd. (the "Company") dated 9 March 2016 (the "Announcement"), in relation to, among others, the discloseable and connected transactions involving the following matters:

1. the proposed disposal of the Target Assets I by the Company to Modern Pharmaceutical and the proposed disposal of the Target Assets II by Sinopharm Accord to Modern Pharmaceutical, the consideration of which will be satisfied by issuance consideration shares by Modern Pharmaceutical to the Company and Modern Pharmaceutical, respectively; and

2. the proposed acquisition of the Target Asset III by Sinopharm Accord from Foreign Trade Corporation, the consideration of which will be satisfied by the issuance of consideration share by Sinopharm Accord to Foreign Trade Corporation.

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

THE SUPPLEMENTAL ASSETS TRANSFER AGREEMENTS

As disclosed in the Announcement, the valuation reports of the Target Assets I, Target Assets II, and Target Asset III will be filed with and confirmed by the SASAC, and if there is any change or adjustment to the valuation results, the parties under the Assets Transfer Agreement I, the Assets Transfer Agreement II, and the Asset Transfer Agreement III 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 each of the Assets Transfer Agreement I, the Assets Transfer Agreement II, and the Asset Transfer Agreement III is adjusted, the total number of the consideration shares to be issued by Modern Pharmaceutical under the Assets Transfer Agreement I and the Assets Transfer Agreement II, as well as the total number of the consideration shares to be issued by Sinopharm Accord under the Asset Transfer Agreement III will be correspondingly adjusted based on the respective issue price.

After filing with and confirmed by the SASAC, the valuation results of the Target Assets I, Target Assets II, and Target Asset III have been adjusted as follows:

1. the aggregate amount of the appraisal value of the Target Assets I has been adjusted from RMB490.4507 million to RMB486.2098 million (among which the appraisal value of 26% equity interest in Sinopharm A-Think and 51% of equity interest in Sanyi Pharmaceutical have been adjusted from RMB431.7958 million and RMB58.6522 million to RMB431.7980 million and RMB54.4118 million, respectively);

2. the aggregate amount of the appraisal value of the Target Assets II has been adjusted from RMB2,511.3556 million to RMB2,511.3225 million (the appraisal value of 51% equity interest in Zhijun Pharmaceutical and 51% equity interest in Pingshan Pharmaceutical have been adjusted from RMB1,543.2802 million and RMB392.3286 million to RMB1,543.2718 million and RMB392.3039 million, respectively; while the appraisal value of 51% equity interest in Zhijun Pharmaceutical Trade Company remained as RMB8.1253 million, and the appraisal value of Pingshan Base remained as RMB567.6215 million); and

3. the aggregate amount of the appraisal value of the Target Asset III has been adjusted from RMB286.3988 million to RMB284.7828 million.

Pursuant to the Assets Transfer Agreement I, the Assets Transfer Agreement II, and the Asset Transfer Agreement III, the issue price and amount of the consideration shares to be issued by Modern Pharmaceutical to the Company and Sinopharm Accord, and the consideration shares to be issued by Sinopharm Accord to Foreign Trade Corporation will be adjusted in case of ex-rights or ex-dividend by Modern Pharmaceutical and/or Sinopharm Accord during the period between the Pricing Reference Date and the issuance date of the consideration shares as agreed by the parties and is subject to the approval at the general meetings of Modern Pharmaceutical and/or Sinopharm Accord and the approval of relevant authorities.

According to the proposed 2015 annual profit distribution plan of Modern Pharmaceutical, Modern Pharmaceutical proposed to, based on the its entire issued share capital of 287,733,402 shares as at 31 December 2015, make a cash dividend distribution of RMB0.50 for every ten shares (tax inclusive), to all of its shareholders. Therefore the issue price per consideration share under the Assets Transfer Agreement I and the Assets Transfer Agreement II shall be adjusted from RMB29.11 to RMB29.06. According to the proposed 2015 annual profit distribution plan of Sinopharm Accord, Sinopharm Accord proposed to, based on the its entire issued share capital of 362,631,943 shares as at 31 December 2015, make a cash dividend distribution of RMB3.00 for every ten shares (tax inclusive), to all of its shareholders. Therefore the issue price per consideration share under the Assets Transfer Agreement III shall be adjusted from RMB53.80 to RMB53.50.

Taking into account the above-mentioned adjusted valuation of the Target Assets I, Target Assets II, and Target Asset III, as well as the adjustments on issue price of consideration shares under the Assets Transfer Agreement I, the Assets Transfer Agreement II, and the Asset Transfer Agreement III, on 30 May 2016, (i) the Company entered into the supplemental agreement to the Assets Transfer Agreement I with Modern Pharmaceutical, pursuant to which, the consideration for the disposal of the Target Assets I has been confirmed as RMB486.2098 million, the issue price of each consideration shares has been adjusted from RMB29.11 to RMB29.06, and the number of consideration shares to be issued by Modern Pharmaceutical to the Company has been adjusted from approximately 16.8482 million shares to 16.7312 million; (ii) Sinopharm Accord entered into the supplemental agreement to the Assets Transfer Agreement II with Modern Pharmaceutical, pursuant to which, the consideration for the disposal of the Target Assets II has been confirmed as RMB2,511.3225 million, the issue price of each consideration shares has been adjusted from RMB29.11 to RMB29.06, and the number of consideration shares to be issued by Modern Pharmaceutical to Sinopharm Accord has been adjusted from approximately 86.2712 million shares to 86.4185 million shares; and (iii) Sinopharm Accord entered into the supplemental agreement to the Asset Transfer Agreement III with Foreign Trade Corporation, pursuant to which, the consideration for the acquisition of the Target Asset III has been confirmed as RMB284.7828 million, the issue price of each consideration shares has been adjusted from

RMB53.80 to RMB53.50, and the number of consideration shares to be issued by Sinopharm Accord to Foreign Trade Corporation has been adjusted from approximately 5.3234 million shares to 5.3230 million shares.

The above-mentioned adjustments are immaterial, and save as amended by the supplemental agreements mentioned above, all provisions of the Asset Transfer Agreement I, the Asset Transfer Agreement II, and the Asset Transfer Agreement III remain unchanged and continue to be in force. The final issue price and amount of consideration shares under the Asset Transfer Agreement I, the Asset Transfer Agreement II, and the Asset Transfer Agreement III are subject to the approval of shareholders of Modern Pharmaceutical and Sinopharm Accord, and the approval of the CSRC.

PROFIT FORECAST

As mentioned in the Announcement, the valuation of each of Sinopharm A-Think, Sanyi Pharmaceutical, Zhijun Pharmaceutical, Zhijun Pharmaceutical Trade Company, Pingshan Pharmaceutical, and Southern Pharmaceutical was prepared by the Independent Valuers based on, among others, income approach, which involves the calculation of discounted cash flow. Therefore, such valuation of each of the aforesaid targets is regarded as a profit forecast under Rule 14.61 of the Listing Rules.

The filed valuation of each of the aforesaid targets was prepared based on the same valuation methods as adopted in the preliminary valuation, and the Board confirms that there are no material difference between the preliminary valuations and the filed valuations of such targets.

PricewaterhouseCoopers, the auditor of the Company, has reviewed the arithmetical calculations of the discounted future estimated cash flows of Sinopharm A-Think, Sanyi Pharmaceutical, Zhijun Pharmaceutical, Zhijun Pharmaceutical Trade Company, and Pingshan Pharmaceutical in accordance with the final bases and assumptions adopted as set out in the Appendix I-A to Appendix V-A to this announcement, which do not involve the adoption of the accounting policy. Baker Tilly Hong Kong Limited, the reporting accountant of the Company, has reviewed the arithmetical calculations of the discounted future estimated cash flows of Southern Pharmaceutical in accordance with the final bases and assumptions adopted as set out in the Appendix IV-A to this announcement, which do not involve the adoption of the accounting policy.

The Directors confirm that the profit forecast of each of Sinopharm A-Think, Sanyi Pharmaceutical, Zhijun Pharmaceutical, Zhijun Pharmaceutical Trade Company, Pingshan Pharmaceutical, and Southern Pharmaceutical has been made after due and careful enquiries.

Letters from the Board, PricewaterhouseCoopers and Baker Tilly Hong Kong Limited in relation to the calculations of discounted future estimated cash flows in relation to the filed valuations of aforesaid targets are set out in the Appendix I-B to the Appendix IV-B to this announcement.

EXPERTS AND CONSENTS

The qualifications of the experts who have given their opinions and advices included in this announcement are as follows:

Names Qualifications

Baker Tilly Hong Kong Limited Certified Public Accountants

PricewaterhouseCoopers Certified Public Accountants

As at the date of this announcement, neither Baker Tilly Hong Kong Limited nor PricewaterhouseCoopers has 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.

Each of Baker Tilly Hong Kong Limited and 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.

COMPENSATION UNDERTAKING AGREEMENTS Compensation Undertaking Agreements between the Group and Modern Pharmaceutical

On 30 May 2016, each of the Company and Sinopharm Accord entered into the compensation agreements with Modern Pharmaceutical, pursuant to which the actual net profit amount, namely the actual net profit attributable to the parent company after extraordinary loss and profit of each of Sinopharm A-Think, Zhijun Pharmaceutical, Zhijun Pharmaceutical Trade Company, and Pingshan Pharmaceutical (each as the "Underlying Company", and collectively referred to as the "Underlying Companies") during the Profit Compensation Period shall be not lower than the net profit amount committed by the Company and Sinopharm Accord to Modern Pharmaceutical, respectively, and shall be not lower than the estimated net profit attributable to the parent company after extraordinary loss and profit of each of the Underlying Companies as set out in the filed valuation reports.

According to the compensation agreement entered into between the Company and Modern Pharmaceutical, the committed net profit amount of Sinopharm A-Think are RMB107.4800 million RMB113.9658 million and RMB126.1322 million in 2016, 2017 and 2018, respectively. According to the compensation agreements entered into between Sinopharm Accord and Modern Pharmaceutical, (i) the committed net profit amount of Zhijun Pharmaceutical are RMB222.6717 million RMB232.5616 million and RMB241.8787 million in 2016, 2017 and 2018, respectively, (ii) the committed net profit amount of Zhijun Pharmaceutical Trade Company are RMB2.3796 million RMB2.3351 million and RMB2.3456 million in 2016, 2017 and 2018, respectively, and (iii) the committed net profit amount of Pingshan Pharmaceutical are RMB39.7163 million RMB43.0335 million and RMB50.3255 million in 2016, 2017 and 2018, respectively.

If the actual net profit amount of any of the Underlying Companies is lower than the corresponding committed net profit amount during the Profit Compensation Period, the Company and/or Sinopharm Accord will compensate the shortfall with the compensation shares, namely the shares of Modern Pharmaceutical held by the Company and/or Sinopharm Accord, between the actual net profit amount and the committed net profit amount. If the Company and/or Sinopharm Accord's shareholding amount in Modern Pharmaceutical is not enough to compensate the aforesaid net profit difference, the Company and/or Sinopharm Accord shall pay the shortfall in cash. The compensation shares shall be repurchased by Modern Pharmaceutical at nil consideration and cancelled thereafter, after the approval by the general meeting of Modern Pharmaceutical.

If the proposal regarding repurchase of the compensation shares is rejected by the general meeting of Modern Pharmaceutical, Modern Pharmaceutical shall inform the Company and/or Sinopharm Accord within ten business days after the announcement of the resolution of the general meeting in written form of the same. The Company and/or Sinopharm shall endow shares of Modern Pharmaceutical corresponding to the total amount of the compensation shares to shareholders of Modern Pharmaceutical other than the Company and/or Sinopharm Accord whose names appear on the register of members thereof on the record date of the aforesaid general meeting or the record dated determined by the board meeting of Modern Pharmaceutical according to the proportion of their shareholding to the remaining share capital of Modern Pharmaceutical after deducting the compensation shares to be compensated, provided that relevant regulatory laws and regulations regarding securities and other requirements of regulatory authorities are complied with.

The aforesaid compensation shall be calculated as follows:

Modern Pharmaceutical shall engage an accounting firm with securities industry qualifications at the end of each accounting year during the Profit Compensation Period for issuing a special audit report regarding the actual profitability of the Underlying Companies. The parties have agreed that the special audit report shall form the basis for determining the net profit difference. Modern Pharmaceutical shall, within ten days after the disclosure of the special audit report, calculate the amount of compensation shares and cash to be