Shenzhen Neptunus Interlong Bio technique : Announcements and Notices - CONTINUING CONNECTED TRANSACTION RENEWAL OF NEPTUNUS GROUP SALES FRAMEWORK AGREEMENT

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深 圳 市 海 王 英 特 龍 生 物 技 術 股 份 有 限 公 司

SHENZHEN NEPTUNUS INTERLONG BIO-TECHNIQUE COMPANY LIMITED*

(a joint stock limited company incorporated in the People's Republic of China)

(Stock Code: 8329)

CONTINUING CONNECTED TRANSACTION

RENEWAL OF NEPTUNUS GROUP SALES FRAMEWORK AGREEMENT

RENEWAL OF 2017 NEPTUNUS GROUP SALES FRAMEWORK AGREEMENT

Reference is made to the announcement of the Company dated 30 June 2017 in relation to, among other things, the 2017 Neptunus Group Sales Framework Agreement entered into between the Company and Shenzhen Neptunus, the controlling shareholder of the Company.

As the 2017 Neptunus Group Sales Framework Agreement will expire on 31 December 2019, on 14 October 2019 (after trading hours), the Company entered into the New Neptunus Group Sales Framework Agreement with Shenzhen Neptunus such that the Group will continue to sell certain self- manufactured or distributed products including certain pharmaceutical products and healthcare food products to Neptunus Group for the period from 1 January 2020 to 31 December 2022.

IMPLICATIONS OF THE GEM LISTING RULES

As at the date of this announcement, Shenzhen Neptunus is the controlling shareholder of Neptunus Bio-engineering, which is the controlling shareholder of the Company under the GEM Listing Rules. Therefore, Shenzhen Neptunus is an associate of Neptunus Bio-engineering and thus a connected person of the Company under Rule 20.07 of the GEM Listing Rules. Accordingly, the New Neptunus Group Sales Framework Agreement constitutes continuing connected transactions for the Company as defined under Rule 20.29 of the GEM Listing Rules.

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As one or more of the applicable percentage ratio(s) (as defined under the GEM Listing Rules) in respect of the transactions contemplated under the New Neptunus Group Sales Framework Agreement are more than 5%, such transactions constitute non-exempt continuing connected transactions of the Company. Accordingly, the Transactions are subject to the reporting, annual review, announcement and Independent Shareholders' approval requirements under Chapter 20 of the GEM Listing Rules.

EGM

An EGM will be convened and held to approve the New Neptunus Group Sales Framework Agreement and the Proposed Sales Caps. Neptunus Bio-engineering and its associates will abstain from voting at the EGM.

GENERAL

A circular containing, among other things, (a) further information relating to the New Neptunus Group Sales Framework Agreement ; (b) a letter of advice from the independent financial adviser Gram Capital to the Independent Board Committee and the Independent Shareholders relating to the New Neptunus Group Sales Framework Agreement; and (c) a letter from the Independent Board Committee to the Independent Shareholders relating to the New Neptunus Group Sales Framework Agreement will be dispatched to the Shareholders as soon as possible.

RENEWAL OF 2017 NEPTUNUS GROUP SALES FRAMEWORK AGREEMENT

Reference is made to the announcement of the Company dated 30 June 2017 in relation to, among other things, the 2017 Neptunus Group Sales Framework Agreement entered into between the Company and Shenzhen Neptunus, the controlling shareholder of the Company.

As the 2017 Neptunus Group Sales Framework Agreement will expire on 31 December 2019, on 14 October 2019 (after trading hours), the Company entered into the New Neptunus Group Sales Framework Agreement with Shenzhen Neptunus such that the Group will continue to sell the Products to Neptunus Group for the period from 1 January 2020 to 31 December 2022.

The details of the New Neptunus Group Sales Framework Agreement are as follows:

Date

14 October 2019 (after trading hours)

Parties

1. the Company; and
2. 深圳海王(Shenzhen Neptunus*), the controlling shareholder and a connected person of the Company

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Subject matter

Pursuant to the New Neptunus Group Sales Framework Agreement, among other things, the Group agreed to sell the Products to Neptunus Group.

Term

The term of the New Neptunus Group Sales Framework Agreement is from 1 January 2020 to 31 December 2022 (both days inclusive). The New Neptunus Group Sales Framework Agreement will become effective on 1 January 2020 upon the approval by the Independent Shareholders at the EGM.

Pricing basis and payment terms

Pursuant to the New Neptunus Group Sales Framework Agreement, the prices of the Products shall be determined based on the prevailing market price and after arm's length negotiation between the Group and Neptunus Group, which shall be no more favourable than the prices offered by the Group to independent third parties who have similar transaction quantities and transaction nature.

The consideration of the Products shall be settled (a) within sixty (60) days after the issue date of the invoice or the receipt of the Products, whichever is earlier; or (b) within the time limits to be agreed by the Group and Neptunus Group from time to time, provided that the payment terms of the Products shall be no more favourable than those offered by the Group to independent third parties who have similar transaction quantities and transaction nature.

Annual Caps

The Proposed 2020 Sales Cap, the Proposed 2021 Sales Cap and the Proposed 2022 Sales Cap (all excluding VAT) are RMB58,000,000 (approximately HK$ 63,800,000), RMB80,000,000 (approximately HK$88,000,000) and RMB110,000,000 (approximately HK$ 121,000,000), respectively.

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In arriving at the Proposed Sales Caps, the Directors (including the independent non-executive Directors) have considered the following factors:

1. the historical figures and historical annual caps under the 2017 Neptunus Group Sales Framework Agreement for the year ended 31 December 2017, for the year ended 31 December 2018 and for the
   8 months ended 31 August 2019 as set out below:

	Historical figures and historical annual caps
	under the 2017 Neptunus Group Sales Framework Agreement
		(RMB in '000)
For the year ended	For the year ended	For the 8 months ended
31 December 2017	（31 December 2018	31 August 2019
(audited)	(audited)	(unaudited)
approximately 13,342	approximately 22,557	approximately 25,108
(2017 cap: 22,000)Note	(2018 cap: 27,000)	(2019 cap: 34,000)

Note: The annual cap was for the period from 30 June 2017 to 31 December 2017.

As demonstrated in the table above, the sales transactions in 2018 increased by approximately 69% compared with 2017. Further, the Company anticipates that the annual cap of RMB 34,000,000 for the year ending 2019 is not sufficient to satisfy the actual demand from Neptunus Group resulting from its expansion of the business scale and high business growth, notwithstanding that the Company has been strictly monitoring its sales transactions with Neptunus Group to ensure compliance with the GEM Listing Rules and not to exceed the annual caps;

1. (i) Neptunus Bio-engineering has been developing rapidly in recent years and extending its business coverage to various regions in the PRC. It has become one of the most competitive large-scale pharmaceutical commercial circulation enterprise group in the PRC with a revenue of approximately RMB 38,400,000,000 (approximately HK$42,240,000,000) in 2018, representing a
   growth of approximately 53.90% compared to 2017; (ii) another subsidiary of Shenzhen Neptunus, Shenzhen Quanyaowang Pharmaceutical Company Limited* ( 深圳市全藥網藥業有限公司),
   being a government-guided group purchasing organisation for collective procurement, supply and service provider of pharmaceutical products for public healthcare organisations, has experienced accelerated growth since its establishment in 2015 and its market covers various provinces and regions in the PRC; and (iii) following the commencement of the tendering process for the supply of pharmaceutical products in various regions in the PRC, some of our products have been awarded the tender in certain expansion regions which some of our connected companies are qualified pharmaceutical distribution enterprises in such areas with competitive advantage. As such, it shall further strengthen the cooperation between the Group and its connected companies;

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1. it is anticipated that the relevant business will remain stable in 2021 and 2022 at a growth rate of 30%; and
2. a buffer of 5% in response to certain unforeseen circumstances, such as the unexpected increase in the demand for the Products, the unexpected increase in the selling price of the Products and other relevant factors.

The Directors (including the independent non-executive Directors) are of the view that the Proposed Sales Caps are fair and reasonable and in the interests of the Company and its Shareholders as a whole. If the Proposed Sales Cap is exceeded in the relevant period, the Company will re-comply with the requirements under Chapter 20 of the GEM Listing Rules.

INTERNAL CONTROL MEASURES

In order to ensure that the prices and terms offered to Neptunus Group by the Group are no more favourable than the terms available to independent third parties and to protect the interests of the Company and its Shareholders as a whole, the Group has adopted the following internal control measures regarding the Transactions:

1. The Group will monitor the prices of the Products and the relevant payment terms offered to Neptunus Group by evaluating the average price of the Products and relevant payment terms offered to the independent third parties of the Group and the market prices of similar products under similar sales terms and conditions on a quarterly basis.
2. If at any time the relevant departments of the Group discover that in respect of a transaction, the price of a Product offered to the Neptunus Group is lower than that offered by the Group to independent customers and/or the terms of a Product offered to the Neptunus Group are more favourable than those offered by the Group to independent customers, such findings shall be reported to the general manager of the Company or the relevant subsidiary of the Group for review. The relevant general manager shall then discuss with one of the Directors to evaluate whether the Group should adjust the price of such Product sold to Neptunus Group or amend the relevant terms, with reference to factors such as the corporate background of such customer; its reputation and reliability; and its ability to conduct the transaction in accordance with the terms of the agreement provided by it.

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