Livzon Pharmaceutical : PROPOSED COMPANY'S PROVISION OF FINANCING GUARANTEES TO CONTROLLING SUBSIDIARY LIVZON MAB

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PROPOSED COMPANY'S PROVISION OF FINANCING GUARANTEES

TO CONTROLLING SUBSIDIARY LIVZON MAB

PROPOSED COMPANY'S PROVISION OF FINANCING GUARANTEES TO CONTROLLING SUBSIDIARY LIVZON MAB

In view of the needs of business development of Livzon MAB, on 15 April 2021, the Board has considered and approved the provision of joint liability guarantees to the six banks for Livzon MAB's applications of facility financing of no more than RMB1,005,000,000 or its equivalent in foreign currencies.

HONG KONG LISTING RULES IMPLICATIONS

As at the date of this announcement, Joincare directly and indirectly held approximately 44.60% of the total issued share capital of the Company, and Livzon MAB is indirectly held as to 33.07% by Joincare. Therefore, Livzon MAB, an associate of Joincare, is a connected person of the Company under Chapter 14A of the Hong Kong Listing Rules. As such, the Livzon MAB Guarantees constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules. As the highest applicable percentage ratios (as defined in the Hong Kong Listing Rules) in respect of the Livzon MAB Guarantees exceed 0.1% but are less than 5%, the Livzon MAB Guarantees are subject to the reporting and announcement requirements, but are exempt from the independent Shareholders' approval requirement under Chapter 14A of the Hong Kong Listing Rules.

As the Joincare Counter Guarantees to be provided in relation to the Livzon MAB Guarantees by Joincare are on normal commercial terms or better and will not be secured by the assets of the Group, according to Rule 14A.90 of the Hong Kong Listing Rules, the Joincare Counter Guarantees will be fully exempt from reporting, annual review, announcements, and independent Shareholders' approval under Chapter 14A of the Hong Kong Listing Rules.

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According to Rule 9.11(II) of the Shenzhen Listing Rules and the Articles of Association, the total amount of the Livzon MAB Guarantees of RMB1,005.00 million represent 8.30% of the latest audited net assets attributable to shareholders of the parent company (RMB12,107.2419 million), and is therefore subject to the approval at the general meeting of the Company.

According to the Shenzhen Listing Rules and the Articles of Association, the Livzon MAB Guarantees are subject to the approval of Shareholders by way of special resolution. It is therefore proposed at the AGM for the Shareholders' approval for the Livzon MAB Guarantees, and to grant mandate to the Board and other persons authorised by the Board to negotiate with relevant banks regarding the amount of guarantees within the limits under the Livzon MAB Guarantees, and to execute all relevant documents. Please refer to the circular of the AGM to be dispatched by the Company in due course pursuant to the Hong Kong Listing Rules for relevant details.

GENERAL

Given that (i) Mr. Zhu Baoguo, the non-executive Director and the chairman of the Company, is also the chairman of Joincare and indirectly holds 45.78% equity interest in Joincare and 33.07% equity interest in Livzon MAB as at the date of this announcement; and (ii) Mr. Qiu Qingfeng and Mr. Yu Xiong, the non- executive Directors, are also a director and the president of Joincare, respectively, therefore Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong were deemed to have material interest in the Livzon MAB Guarantees and had abstained from voting at the Board meetings approving the Livzon MAB Guarantees. Except for Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong, no other Directors were required to abstain from voting at the Board meetings approving the Livzon MAB Guarantees.

As at the date of this announcement, Joincare and its associates, directly or indirectly holding approximately 44.60% of the total issued share capital of the Company, shall abstain from voting on the resolution approving the proposed provision of financing guarantees to controlling subsidiary Livzon MAB at the AGM.

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In view of the needs of business development of Livzon MAB, on 15 April 2021, the Board has considered and approved the provision of joint liability guarantees to the following six banks (the "Banks") for Livzon MAB's applications of facility financing of no more than RMB1,005,000,000 or its equivalent in foreign currencies (the "Livzon MAB Guarantees"), detail terms of which are set out below:

	Shareholding			Maximum	Term of
Guaranteed	Name of facility granting		guarantee	Type of
of the	Currency	guarantee	Note
entity	bank	amount	guarantee
Company		(years)
			(RMB)
		Industrial and Commercial	RMB	105,000,000	1
		Bank of China Ltd.
		Agricultural Bank of China					Amount to be
		Limited	RMB	200,000,000	1		shared with
		("Agricultural Bank")					the Group
		Bank of Communications
		Co., Ltd. ("Bank of	RMB	100,000,000	1
		Communications")				Joint
	51.00%					liability
	China Merchants Bank				Amount to be
					guarantee
Livzon MAB						shared with
	Co., Ltd.	RMB	300,000,000	1
		("Merchants Bank")					the Group
		China Minsheng Banking	RMB	100,000,000	1
		Corp., Ltd.
		China CITIC Bank					Amount to be
		RMB	200,000,000	1		shared with
		Corporation Limited
						the Group
	Total	RMB	1,005,000,000

As at the date of this announcement, except for the guarantee agreement of RMB50.00 million entered into between the Company and Bank of Communications on 20 March 2020, the guarantee agreement of RMB300.00 million entered into between the Company and Merchants Bank on 17 July 2020 and the guarantee agreement of RMB60.00 million entered into between the Company and Agricultural Bank on 12 April 2021, the Company has not entered into any agreement in relation to the Livzon MAB Guarantees. The Company will not charge Livzon MAB any commissions, fees or costs in relation to the Livzon MAB Guarantees. Based on the audited net asset of RMB555.40 million as at 31 December 2020 of Livzon MAB, the Board considered that the guarantee risks assumed by Livzon MAB Guarantees are within the controllable range and Livzon MAB has the ability to repay the debts.

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In order to ensure the fairness and equity of the Livzon MAB Guarantees, Joincare, which indirectly holds 33.07% equity interests of Livzon MAB, will provide to the Company a "Letter of Undertaking for Counter Guarantee" subject to the approval by its shareholders, pursuant to which it will undertake to provide counter guarantees in proportion to its shareholdings in Livzon MAB (the "Joincare Counter Guarantees"), and the guarantee period of the Joincare Counter Guarantees will be expired on the expiry date of the Company's obligation under the Livzon MAB Guarantees. Based on the audited net assets of approximately RMB19,236.90 million as at 31 December 2020 of Joincare, the Directors are of the view that Joincare has sufficient financial ability to fulfil its obligation under the Joincare Counter Guarantees. In addition, Livzon MAB will only apply and draw down the Livzon MAB Facilities and hence the Company will only enter into specific guarantee agreements with the relevant banks in respect of Livzon MAB Guarantees upon the shareholders of Joincare approving the Joincare Counter Guarantees.

To the best knowledge, information and belief of the Board, having made all reasonable enquiries, each of the Bank and its ultimate beneficial owner are independent third parties.

REASONS FOR AND BENEFIT OF PROVISION OF THE LIVZON MAB GUARANTEES

As at the date of this announcement, Livzon MAB was indirectly held as to 51.00% by the Company, 33.07% by Joincare, 8.43% by YF Pharmab Limited (an independent third party) and 7.50% by Hainan Lisheng Juyuan Investment Partnership (Limited Partnership) (海南麗生聚源投資合夥企業(有限合夥)). The Directors (including the independent non-executive Directors) consider that the Company will benefit from the provision of the Livzon MAB Guarantees in terms of facilitation of the general operation and business of Livzon MAB to be supported by the Livzon MAB Facilities, and the Company will benefit from alleviating its capital contribution requirement into Livzon MAB and optimising its capital allocation to the other profitable business segments, therefore benefiting the overall business development and financial position of the Group.

In addition, it is also common commercial practice for banks in the PRC to require guarantee from the controlling shareholder of a borrower for financing facilities. In view that Joincare will undertake to provide counter guarantees for 33.07% of the obligation of the Company under the Livzon MAB Guarantees in favour of the Company which corresponds to its shareholdings in Livzon MAB, the Directors (including the independent non-executive Directors) consider that the risk exposure to the Company is relatively low.

The Directors (including the independent non-executive Directors) consider that the Livzon MAB Guarantees are fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

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INTENDED USE OF THE FACILITIES GRANTED TO LIVZON MAB

The Livzon MAB Facilities are intended to be used to finance the general operation and business of Livzon MAB. The amounts of the Livzon MAB Facilities have been arrived at regarding principally the funding requirements of research and development activities for Livzon MAB according to the progress of its clinical studies in the foreseeable future. As at the date of this announcement, except for the facility agreement of RMB50.00 million entered into between Livzon MAB and Bank of Communications on 20 March 2020 and the facility agreement of RMB300.00 million entered into between Livzon MAB and Merchants Bank on 17 July 2020, Livzon MAB has not entered into any agreement in relation to the Livzon MAB Facilities.

INFORMATION ON THE COMPANY, LIVZON MAB AND THE BANKS

The Company

The Company, through its subsidiaries, is principally engaged in the research and development, production and sales of drug preparation products, active pharmaceutical ingredients and intermediates, as well as diagnostic reagents and equipment.

Livzon MAB

Livzon MAB is a limited liability company established in the PRC in 2010 which is indirectly held as to 51.00% by the Company, 33.07% by Joincare, 8.43% by YF Pharmab Limited (an independent third party) and 7.50% by Hainan Lisheng Juyuan Investment Partnership (Limited Partnership) (海南麗生聚源投資 合夥企業(有限合夥)). It is principally engaged in research, development and commercialization of biopharmaceutical products.

Banks

The Banks are financial institutions incorporated in the PRC. To the best knowledge, information and belief of the Board, having made all reasonable enquiries, each of the Bank and its ultimate beneficial owner are independent third parties.

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HONG KONG LISTING RULES IMPLICATIONS

As at the date of this announcement, Joincare directly and indirectly held approximately 44.60% of the total issued share capital of the Company, and Livzon MAB is indirectly held as to 33.07% by Joincare. Therefore, Livzon MAB, an associate of Joincare, is a connected person of the Company under Chapter 14A of the Hong Kong Listing Rules. As such, the Livzon MAB Guarantees constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules. As the highest applicable percentage ratios (as defined in the Hong Kong Listing Rules) in respect of the Livzon MAB Guarantees exceed 0.1% but are less than 5%, the Livzon MAB Guarantees are subject to the reporting and announcement requirements, but are exempt from the independent Shareholders' approval requirement under Chapter 14A of the Hong Kong Listing Rules.

As the Joincare Counter Guarantees to be provided in relation to the Livzon MAB Guarantees by Joincare are on normal commercial terms or better and will not be secured by the assets of the Group, according to Rule 14A.90 of the Hong Kong Listing Rules, the Joincare Counter Guarantees will be fully exempt from reporting, annual review, announcements, and independent Shareholders' approval under Chapter 14A of the Hong Kong Listing Rules.

According to Rule 9.11(II) of the Shenzhen Listing Rules and the Articles of Association, the total amount of the Livzon MAB Guarantees of RMB1,005.00 million represent 8.30% of the latest audited net assets attributable to shareholders of the parent company (RMB12,107.2419 million), and is therefore subject to the approval at the general meeting of the Company.

According to the Shenzhen Listing Rules and the Articles of Association, the Livzon MAB Guarantees are subject to the approval of Shareholders by way of special resolution. It is therefore proposed at the AGM for the Shareholders' approval for the Livzon MAB Guarantees, and to grant mandate to the Board and other persons authorised by the Board to negotiate with relevant banks regarding the amount of guarantees within the limits under the Livzon MAB Guarantees, and to execute all relevant documents. Please refer to the circular of the AGM to be dispatched by the Company in due course pursuant to the Hong Kong Listing Rules for relevant details.

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GENERAL

Given that (i) Mr. Zhu Baoguo, the non-executive Director and the chairman of the Company, is also the chairman of Joincare and indirectly holds 45.78% equity interest in Joincare and 33.07% equity interest in Livzon MAB as at the date of this announcement; and (ii) Mr. Qiu Qingfeng and Mr. Yu Xiong, the non- executive Directors, are also a director and the president of Joincare, respectively, therefore Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong were deemed to have material interest in the Livzon MAB Guarantees and had abstained from voting at the Board meetings approving the Livzon MAB Guarantees. Except for Mr. Zhu Baoguo, Mr. Qiu Qingfeng and Mr. Yu Xiong, no other Directors were required to abstain from voting at the Board meetings approving the Livzon MAB Guarantees.

As at the date of this announcement, Joincare and its associates, directly or indirectly holding approximately 44.60% of the total issued share capital of the Company, shall abstain from voting on the resolution approving the proposed provision of financing guarantees to controlling subsidiary Livzon MAB at the AGM.

DEFINITIONS

Unless the context otherwise requires, terms used in this announcement shall have the following meanings:

"A Share(s)"	the shares in the share capital of the Company with a nominal value of
	RMB1.00 each, which are listed on the Shenzhen Stock Exchange (stock
	code: 000513)
"associate(s)"	has the meaning ascribed to it under the Hong Kong Listing Rules
"AGM"	the annual general meeting for the year 2020 of the Company to be held
	at the Conference Room on the 3rd Floor of Headquarters Building, 38
	Chuangye North Road, Jinwan District, Zhuhai, Guangdong Province,
	China at 2:00 p.m. on Thursday, 20 May 2021

"Articles of Association" the articles of association of the Company, as amended from time to time

"Board"

the board of Directors of the Company

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"Company"	麗珠醫藥集團股份有限公司 Livzon Pharmaceutical Group Inc.*, a
	joint stock company incorporated in the PRC in accordance with the
	Company Law on 26 January 1985 with limited liability, whose H Shares
	and A Shares are listed on the Hong Kong Stock Exchange and the
	Shenzhen Stock Exchange, respectively
"Company Law"	Company Law of the PRC（《中華人民共和國公司法》）, as amended,
	supplemented or otherwise modified from time to time
"controlling shareholder(s)"	has the meaning ascribed to it under the Hong Kong Listing Rules
"Director(s)"	director(s) of the Company
"Group"	the Company and its subsidiaries
"H Share(s)"	the overseas-listed foreign shares in the share capital of the Company
	with a nominal value of RMB1.00 each, which are listed on the Hong
	Kong Stock Exchange (stock code: 01513)
"Hong Kong"	Hong Kong Special Administrative Region of the PRC
"Hong Kong Listing Rules"	Rules Governing the Listing of Securities on The Stock Exchange of
	Hong Kong Limited
"Hong Kong Stock	The Stock Exchange of Hong Kong Limited
Exchange"
"Joincare"	健 康 元 藥 業 集 團 股 份 有 限 公 司 Joincare Pharmaceutical Industry
	Group Co., Ltd.* (Shanghai Stock Exchange stock code: 600380), a joint
	stock company incorporated in the PRC with limited liability and listed
	on the Shanghai Stock Exchange in 2001 and one of the Company's
	controlling shareholders
"Livzon MAB"	Livzon MABPharm Inc.* (珠海市麗珠單抗生物技術有限公司), a
	controlling subsidiary of the Company
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"Livzon MAB Facilities"	the facilities limited up to RMB1,005,000,000 (or its equivalent in
	foreign currencies) in aggregate to be applied by Livzon MAB from six
	banks
"Livzon MAB Guarantees"	the financing guarantees limited up to RMB1,005,000,000 (or its
	equivalent in foreign currencies) in aggregate to be provided by the
	Company in favour of six banks to secure the Livzon MAB Facilities
"PRC" or "China"	the People's Republic of China, which, for the purpose of this circular,
	does not include Hong Kong, the Macau Special Administrative Region
	and Taiwan
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholder(s)"	the shareholder(s) of the Company
"Shenzhen Stock Exchange"	the Shenzhen Stock Exchange（深圳證券交易所）
"Shenzhen Listing Rules"	the Stock Listing Rules of the Shenzhen Stock Exchange (as amended in
	2018) ( 《深圳證券交易所股票上市規則（2018 年修訂）》)

By order of the Board

麗珠醫藥集團股份有限公司

Livzon Pharmaceutical Group Inc. *

Yang Liang

Company Secretary

Zhuhai, China

15 April 2021

As at the date of this announcement, the Executive Directors of the Company are Mr. Tang Yanggang (President) and Mr. Xu Guoxiang (Vice Chairman and Vice President); the Non-Executive Directors of the Company are Mr. Zhu Baoguo (Chairman), Mr. Tao Desheng (Vice Chairman), Mr. Qiu Qingfeng and Mr. Yu Xiong; and the Independent Non-Executive Directors of the Company are Mr. Bai Hua, Mr. Zheng Zhihua, Mr. Xie Yun, Mr. Tian Qiusheng and Mr. Wong Kam Wa.

* For identification purpose only

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