(Registration No ) (Incorporated in Bermuda) CIRCULAR TO SHAREHOLDERS. in relation to the VOLUNTARY UNCONDITIONAL CASH OFFER

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1 CIRCULAR DATED 25 SEPTEMBER 2012 THIS CIRCULAR IS IMPORTANT AS IT CONTAINS THE RECOMMENDATION OF THE RECOMMENDING DIRECTORS OF LUYE PHARMA GROUP LTD. AND THE ADVICE OF HONG LEONG FINANCE LIMITED. THIS CIRCULAR REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. This Circular is issued by Luye Pharma Group Ltd. (the Company ). If you are in any doubt in relation to this Circular or as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. If you have sold or transferred all your issued and fully paid shares in the capital of the Company ( Shares ), held through The Central Depository (Pte) Limited ( CDP ), you need not forward this Circular to the purchaser or transferee as arrangements will be made by CDP for a separate Circular to be sent to the purchaser or transferee. If you have sold or transferred all your Shares which are not deposited with CDP, you should immediately forward this Circular to the purchaser or the transferee or to the bank, stockbroker or agent through whom the sale or transfer was effected for onward transmission to the purchaser or the transferee. The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made or reports contained or opinions expressed in this Circular. (Registration No ) (Incorporated in Bermuda) CIRCULAR TO SHAREHOLDERS in relation to the VOLUNTARY UNCONDITIONAL CASH OFFER by DBS BANK LTD. (Incorporated in the Republic of Singapore) (Company Registration No E) for and on behalf of LUYE PHARMACEUTICAL INVESTMENT CO., LTD. (Incorporated in the Cayman Islands) (Company Registration Number ) to acquire all the issued and paid-up ordinary shares in the capital of Luye Pharma Group Ltd. Independent Financial Adviser to the Recommending Directors of Luye Pharma Group Ltd. HONG LEONG FINANCE LIMITED (Incorporated in the Republic of Singapore) (Company Registration No D) SHAREHOLDERS SHOULD NOTE THAT THE OFFER DOCUMENT STATES THAT ACCEPTANCES SHOULD BE RECEIVED BY THE CLOSE OF THE OFFER AT 5.30 P.M. ON 9 OCTOBER THE OFFEROR DOES NOT INTEND TO EXTEND THE OFFER BEYOND 9 OCTOBER THE OFFER WILL NOT BE OPEN FOR ACCEPTANCES BEYOND 5.30 P.M. ON 9 OCTOBER 2012.

2 CONTENTS DEFINITIONS DEFINITIONS 3 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS 6 INDICATIVE TIMETABLE 7 LETTER TO SHAREHOLDERS 8 1. INTRODUCTION 8 2. THE OFFER 9 3. INFORMATION ON THE OFFEROR AND CONSORTIUM RATIONALE FOR THE OFFER AND THE OFFEROR S INTENTIONS FOR THE COMPANY FINANCIAL EVALUATION OF THE OFFER LISTING STATUS AND COMPULSORY ACQUISITION ADVICE AND RECOMMENDATION OVERSEAS SHAREHOLDERS ACTION TO BE TAKEN DIRECTORS RESPONSIBILITY STATEMENT ADDITIONAL INFORMATION 21 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 22 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 32 APPENDIX 3 VALUATION REPORTS 56 APPENDIX 4 EXTRACT FROM THE COMPANY S BYE-LAWS 69 APPENDIX 5 SIGNIFICANT ACCOUNTING POLICIES OF THE GROUP 85 APPENDIX 6 STATEMENT OF PROSPECTS 96 APPENDIX 7 LETTER FROM THE AUDITORS IN RELATION TO THE STATEMENT OF PROSPECTS 97 APPENDIX 8 LETTER FROM THE IFA IN RELATION TO THE STATEMENT OF PROSPECTS 99 2

3 DEFINITIONS Except where the context otherwise requires, the following definitions apply throughout this Circular: 1Q : The three (3) months financial period ended or ending 31 March 2Q : The three (3) months financial period ended or ending 30 June Act : The Companies Act, Chapter 50 of Singapore Auditors : Ernst & Young, Hong Kong, the independent auditors of the Company Bermuda Act : The Companies Act 1981 of Bermuda Bye-laws : The bye-laws of the Company Board : Board of Directors of the Company CDP : The Central Depository (Pte) Limited Circular : This Circular to Shareholders in relation to the Offer, setting out, inter alia, the recommendation of the Recommending Directors and the advice of the IFA to the Recommending Directors Closing Date : 9 October 2012, being the last day for the lodgement of acceptances for the Offer Code : The Singapore Code on Take-overs and Mergers Company : Luye Pharma Group Ltd. Directors : The directors of the Company as at the Latest Practicable Date DBS : DBS Bank Ltd. FAA : Form of Acceptance and Authorisation which forms part of the Offer Document and which is issued to Shareholders whose Shares are deposited with CDP FAT : Form of Acceptance and Transfer which forms part of the Offer Document and which is issued to Shareholders whose Shares are not deposited with CDP FY : Financial year ended or ending 31 December Group : The Company, its subsidiaries and associated companies HY : The six (6) months financial period ended or ending 30 June IFA : Hong Leong Finance Limited, the independent financial adviser to the Recommending Directors in relation to the Offer 3

4 DEFINITIONS IFA Letter : The letter from the IFA to the Recommending Directors dated 25 September 2012 containing the advice of the IFA to the Recommending Directors in respect of the Offer, a copy of which is set out in Appendix 2 of this Circular Latest Practicable Date : 16 September 2012, being the latest practicable date prior to the printing of this Circular Listing Manual : Main Board listing manual of the SGX-ST Market Day : A day on which the SGX-ST is open for trading of securities Offer : The voluntary unconditional cash offer by DBS, for and on behalf of the Offeror, to acquire all the Offer Shares on the terms and subject to the conditions set out in the Offer Document, the FAA and the FAT Offer Announcement : The announcement relating to the Offer issued by DBS, for and on behalf of the Offeror, on the Offer Announcement Date Offer Announcement Date : 28 August 2012, being the date of the Offer Announcement Offer Document : The offer document dated 11 September 2012 issued by DBS, for and on behalf of the Offeror, to the Shareholders Offer Price : S$1.30 for each Offer Share Offer Shares : The Shares, other than those already owned, controlled or agreed to be acquired by the Offeror Offeror : Luye Pharmaceutical Investment Co., Ltd. Overseas Shareholders : Shareholders whose mailing addresses are outside Singapore, as maintained on the register of members of the Company or, as the case may be, in the records of CDP PRC : The People s Republic of China Recommending Directors : The Directors who are independent for the purpose of making a recommendation to Shareholders in respect of the Offer, namely Tan Soo Kiat, Tan Chong Huat and Dr Hong Hai Securities Account : A securities account maintained by a Depositor with CDP but does not include a securities sub-account SGX-ST : Singapore Exchange Securities Trading Limited 4

5 DEFINITIONS Shareholders : Holders of Shares (including persons whose Shares are deposited with CDP or who have purchased Shares on the SGX-ST) Shares : Issued and paid-up ordinary shares of par value US$0.02 each in the capital of the Company SIC : Securities Industry Council Singapore Share Transfer Agent : Boardroom Corporate & Advisory Services Pte. Ltd. Statement of Prospects : Has the meaning ascribed to it in Appendix 6 to this Circular S$ and cents : Singapore dollars and cents, respectively Valuation Reports : The valuation reports from Yantai Zhengping Assets Appraisal Firm ( 烟台市正平资产评估事务所 ), Jiangsu Yonghe Land Real Estate Appraisal Co., Ltd ( 江苏永和土地房地产估价有限公司 ) and Beijing Lixin Runde Assets Appraisal Firm ( 北京立信润德资产评估事务所 ) dated 14 September 2012 as set out in Appendix 3 to this Circular % or per cent. : Per centum or percentage The expression acting in concert shall have the meaning ascribed to it in the Code. The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Act and the terms subsidiary and substantial shareholder shall have the meanings ascribed to them in Sections 5 and 81 of the Act respectively. The term related corporation shall have the meaning ascribed to it in Section 6 of the Act. References to you, your and yours in this Circular are to Shareholders. Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall include the feminine and neuter genders and vice versa. References to persons shall, where applicable, include corporations. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Act, the Bermuda Act, the Listing Manual or the Code or any modification thereof and used in this Circular shall, where applicable, have the meaning assigned to it under the Act, the Bermuda Act, the Listing Manual or the Code or any modification thereof, as the case may be, unless the context otherwise requires. Any reference to a time of day and date in this Circular is made by reference to Singapore time and date, unless otherwise stated. Any discrepancies in figures included in this Circular between amounts shown and the totals thereof are due to rounding. Accordingly, figures shown as totals in this Circular may not be an arithmetic aggregation of the figures that precede them. References in this Circular to the total number of Shares in issue are based on 492,764,900 Shares in issue as at the Latest Practicable Date, unless otherwise stated. As at the Latest Practicable Date, the Company does not hold any treasury shares. 5

6 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this Circular are or may be forward-looking statements. Forward-looking statements include but are not limited to those using words such as anticipate, believe, estimate, expect, forecast, intend, plan, project, seek, strategy, and similar expressions or future or conditional verbs such as could, may, might, should, will and would. These statements reflect the Company s current expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions in light of currently available information. Such forward-looking statements are not guarantees of future performance or events and involve known and unknown risks and uncertainties. Accordingly, actual results may differ materially from those described in such forward-looking statements. Shareholders should not place undue reliance on such forward-looking statements, and the Company assumes no obligation to update publicly or revise any forwardlooking statement. 6

7 INDICATIVE TIMETABLE Date of despatch of Offer Document : 11 September 2012 Closing Date : 9 October 2012 Date of settlement of consideration for the Offer Shares SUMMARY TIMETABLE : Within 10 days after the date of receipt of valid and complete acceptances to the Offer 7

8 LETTER TO SHAREHOLDERS LUYE PHARMA GROUP LTD. (Registration No ) (Incorporated in Bermuda) Directors: Liu Dian Bo (Executive Chairman) Yuan Hui Xian (Executive Director) Yang Rong Bing (Executive Director) Tan Soo Kiat (Independent Director) Tan Chong Huat (Independent Director) Hong Hai (Independent Director) Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda 25 September 2012 To: The Shareholders of Luye Pharma Group Ltd. Dear Sir/Madam VOLUNTARY UNCONDITIONAL CASH OFFER BY DBS BANK LTD., FOR AND ON BEHALF OF LUYE PHARMACEUTICAL INVESTMENT CO., LTD., TO ACQUIRE ALL THE ISSUED AND PAID-UP ORDINARY SHARES IN THE CAPITAL OF THE COMPANY 1. INTRODUCTION 1.1 Offer Announcement On 28 August 2012, DBS issued the Offer Announcement, for and on behalf of the Offeror, that the Offeror intends to make the Offer for the Offer Shares in accordance with Rule 15 of the Code at the Offer Price. As stated in the Offer Announcement, the Offer will be unconditional in all respects. 1.2 Offer Document Shareholders should have by now received a copy of the Offer Document despatched on 11 September 2012, setting out, inter alia, the terms and conditions of the Offer. Shareholders are urged to read carefully the terms and conditions contained therein. A copy of the Offer Document is available on the website of the SGX-ST at Independent Financial Adviser The Recommending Directors have appointed Hong Leong Finance Limited as their independent financial adviser in respect of the Offer. 1.4 Circular The purpose of this Circular is to provide Shareholders with relevant information pertaining to the Offer and to set out the recommendation of the Recommending Directors and the advice of the IFA in relation to the Offer. Shareholders should carefully consider the recommendation of the Recommending Directors and the advice of the IFA before deciding whether or not to accept the Offer. 8

9 LETTER TO SHAREHOLDERS 2. THE OFFER Based on the information set out in the Offer Document, the Offeror has offered to acquire all the Offer Shares on the terms and subject to the conditions set out in the Offer Document, the FAA and the FAT on the following basis: 2.1 Offer Price As stated in section 2.1 of the Offer Document, the Offeror is making the Offer for the Offer Shares on the following basis: For each Offer Share: S$1.30 in cash. The Offer Shares are to be acquired (a) fully paid, (b) free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and other third party rights and interests of any nature whatsoever, and (c) together with all rights, benefits and entitlement attached thereto as at the Offer Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, other distributions and return of capital (if any) which may be announced, declared, paid or made thereon by the Company on or after the Offer Announcement Date). If any dividend, other distribution or return of capital is announced, declared, paid or made on or after the Offer Announcement Date, the Offeror reserves the right to reduce the Offer Price by the amount of such dividend, distribution or return of capital. 2.2 Offer Shares The Offer will be extended, on the same terms and conditions, to all the Shares owned, controlled or agreed to be acquired by any party acting or deemed to be acting in concert with the Offeror in connection with the Offer. 2.3 Unconditional Offer The Offer is unconditional in all respects. Shareholders who accept the Offer before the close of the Offer will be paid the Offer Price in cash within 10 days after the receipt by the Offeror of valid and complete acceptances to the Offer in accordance with the terms and conditions of the Offer Document. 2.4 Warranty According to section 2.4 of the Offer Document, acceptance of the Offer will be deemed to constitute an unconditional and irrevocable warranty by the accepting Shareholder that each Offer Share tendered in acceptance of the Offer is sold by the accepting Shareholder, as or on behalf of the beneficial owner(s) thereof, (a) fully paid, (b) free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and other third party rights and interests of any nature whatsoever, and (c) together with all rights, benefits and entitlements attached thereto as at the Offer Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, other distributions and return of capital (if any) which may be announced, declared, paid or made thereon by the Company on or after the Offer Announcement Date). 2.5 Closing Date Shareholders should note that the Offer will close at 5.30 p.m. on 9 October The Offeror does not intend to extend the Offer beyond 5.30 p.m. on 9 October The Offer will not be open for acceptance beyond 5.30 p.m. on 9 October Acceptances received after 5.30 p.m. on 9 October 2012 will be rejected. 9

10 LETTER TO SHAREHOLDERS 2.6 Details of the Offer Further details of the Offer are set out in Appendix IV to the Offer Document, including details on (a) the settlement of the consideration for the Offer; (b) the requirements relating to the announcement of level of acceptances of the Offer; and (c) the right of withdrawal of acceptance of the Offer. 2.7 Procedures for acceptance The procedures for acceptance of the Offer are set out in Appendix V to the Offer Document. 3. INFORMATION ON THE OFFEROR AND CONSORTIUM The following has been extracted from section 3 of the Offer Document and is set out in italics below. Unless otherwise defined, all terms and expressions used in the extract below shall have the same meanings as those defined in the Offer Document. Shareholders are advised to read the extract below carefully: 3.1 The Offeror The Offeror is an investment holding company incorporated under the laws of the Cayman Islands on 10 December The Offeror has not carried on any business since its incorporation, except to enter into certain arrangements in connection with the Offer and the formation of the Consortium (as elaborated in paragraphs 3.3 and 3.4 below). As at the Latest Practicable Date, the Offeror has an issued and paid-up share capital of US$1.00, consisting of one ordinary share of par value US$1.00. Appendix I of this Offer Document sets out certain additional information on the Offeror. 3.2 Offeror Group The Offeror is wholly owned by LPH, through its wholly owned subsidiary, LPI, both of which are companies incorporated in the Cayman Islands. As at the Latest Practicable Date, LPH has an issued share capital of US$10,000 divided into 1,000,000 ordinary shares of par value of US$0.01 each and US$0.03 divided into three special shares of par value of US$0.01 each ( Special Share ). AsiaPharm, a company incorporated in Bermuda, holds all the issued ordinary shares in the capital of LPH. LDB, YRB and YHX (collectively, the Founders ) are the directors and shareholders of AsiaPharm, holding 70%, 15% and 15% of the issued share capital in AsiaPharm respectively. 3.3 Consortium The Founders have formed a consortium with CDH Flower Limited ( CDH Flower ), CPE Greenery Ltd. ( CPE Greenery ) and Beyond Border Investment Limited ( BBI, together with CDH Flower and CPE Greenery, the Investors ) to make the Offer ( Consortium ). Each of the Investors currently holds one Special Share in the capital of LPH. (a) CDH Flower CDH Flower is a Cayman Islands incorporated investment holding company wholly owned by CDH Pharmaceutical Investments Limited ( CDH PIL ), a company incorporated in the Cayman Islands. CDH PIL is in turn wholly owned by CDH Fund IV, L.P. ( CDH Fund IV ), an exempted limited partnership organised under the laws of the Cayman Islands. CDH IV Holdings Company Limited, a limited liability company incorporated under the laws of the Cayman Islands, is the general partner of CDH Fund IV. CDH China Management Company Limited ( CDH ), a limited liability company incorporated under the laws of the Cayman Islands, is the management company of CDH Fund IV. CDH is a leading private equity company primarily specialising in growth capital, middle market and buyout investments in Greater China. PJ is CDH Flower s nominee director on the board of directors of the Offeror. 10

11 LETTER TO SHAREHOLDERS (b) CPE Greenery CPE Greenery is a Cayman Islands incorporated investment holding company owned by CPEChina Fund, L.P. ( CPEChina ) and CPE Palm Beach L.P. ( CPE Palm Beach ), both of which are exempted limited partnerships registered under the laws of the Cayman Islands. The general partner of CPEChina is CITIC PE Associates, L.P., an exempted limited partnership registered under the laws of the Cayman Islands whose general partner is CITIC PE Funds Limited ( CITIC PE ), a company incorporated in the Cayman Islands. The general partner of CPE Palm Beach is CPE Coinvest Management Limited, which is a company incorporated in the Cayman Islands and 100% owned by CITIC PE. CPEChina is a China-focused private equity fund and CPE Palm Beach is an investment fund for project co-investment by certain limited partners of CPEChina. LD is CPE Greenery s nominee director on the board of directors of the Offeror. (c) BBI BBI is jointly owned by Harvest Hill Investment Ltd. ( HHI ) and AXA Direct Asia II, L.P. ( AXA Fund ). HHI is a company incorporated in the Cayman Islands and is wholly owned by New Horizon Capital III, L.P. ( NHC ), a limited partnership registered under the laws of the Cayman Islands. The general partner of NHC is New Horizon Capital Partners III Ltd ( New Horizon ), a company incorporated in the Cayman Islands. New Horizon is a leading private equity company focusing on investing in the PRC, particularly in the consumer and retail, alternative energy, pharmaceutical and healthcare, and advanced manufacturing sectors. AXA Fund is a limited partnership registered under the laws of Scotland and the general partner of AXA Fund is AXA PE Asia Manager Limited, a company incorporated in Jersey. AXA Fund is an Asia-Pacific focused vehicle, with a specific focus on the most significant countries in terms of private equity activity: the PRC, Australia, India, South Korea and South-East Asia. WX is BBI s nominee director on the board of directors of the Offeror. 3.4 Consortium Arrangements The arrangements comprised in the Consortium include the following: (a) The Offeror, the Founders, AsiaPharm, LPI and LPH have entered into a consortium agreement with the Investors ( Consortium Agreement ), under which the Investors have subscribed in cash for such amount of convertible and exchangeable bonds ( Bonds ) issued by LPH, and the proceeds have been utilised in part to fund the acquisition of Shares by the Offeror pursuant to married trades as disclosed in paragraph 1( b) of Appendix III below and will be utilised, inter alia, to fund the fees and expenses in connection with the Offer. 11

12 LETTER TO SHAREHOLDERS (b) The Bonds are convertible into issued ordinary shares of LPH or exchangeable into Shares in the Company held by the Offeror at any time after the first anniversary of the date of issue or upon the occurrence of certain events of default, unless waived by the Investors holding at least two thirds of the Shares in LPH or the Shares in the Company issuable or exchangeable for and/or issued or exchanged for upon the conversion or exchange of all outstanding Bonds (the Requisite Holders ). (c) Under the Consortium Agreement, the board of Directors of the Offeror shall initially comprise seven Directors, with each Investor being entitled to appoint or remove at least one Director as long as it continues to hold at least 20% of all the outstanding Bonds and AsiaPharm being entitled to appoint or remove the remaining Directors so long as it continues to hold a majority of the enlarged issued share capital of LPH on a fully diluted and as converted basis. It was also agreed that AsiaPharm will have the exclusive right to nominate and replace the chief executive officer of LPH, and after the Offeror has acquired no less than 95% of all the Shares, the Requisite Holders will have the right to nominate and replace the chief financial officer of LPH whose appointment shall be subject to the approval of the board of directors of LPH. (d) Each Consortium member has agreed under the Consortium Agreement that LPH and its subsidiaries and associated companies (each, LPH Group Company ) shall not undertake certain reserved matters (the Reserved Matters ) unless approved by the Requisite Holders. The Reserved Matters include, inter alia, (i) any change in the nature and/or scope of the business of any LPH Group Company, (ii) any dissolution or winding-up of any LPH Group Company, (iii) any issue of equity in any LPH Group Company except for the issuance of shares in LPH or Shares upon the conversion or exchange of the Bonds, and (iv) incurrence of indebtedness by any LPH Group Company which exceeds a certain threshold agreed by the Consortium members. Where the Company remains listed on the SGX-ST, the sole obligation of the parties to the Consortium Agreement will be to ensure that LPH s nominee(s) on the board of the Company and its major PRC subsidiaries vote in accordance with LPH s resolution (as approved by the Requisite Holders) on a Reserved Matter to the extent permitted under applicable laws. (e) Under the Consortium Agreement, AsiaPharm and the Founders have agreed to maintain certain shareholding interests in LPH for so long as the Investors hold in aggregate no less than 20% of all the outstanding Bonds. Each Investor has also agreed not to, without the prior written consent of other Consortium members, transfer any of the Bonds for a restricted period except upon the occurrence of certain events of default. (f) The transfer of shares in LPH or Bonds is subject to the right of first offer by non-transferring shareholders of LPH or holders of Bonds (collectively, ROFO Holders ) under the terms of the Consortium Agreement, and if the transferor of such shares or Bonds is not an Investor, the ROFO Holders who do not exercise their respective rights of first offer are also entitled to participate in such sale. 3.5 Resultant Position It is currently contemplated that immediately following the close of the Offer and assuming that the Company becomes a wholly owned subsidiary of the Offeror upon the close of the Offer: 12

13 LETTER TO SHAREHOLDERS (a) (b) (c) (d) LPI will hold the entire issued share capital of the Offeror and LPH will hold the entire issued share capital of LPI; AsiaPharm will hold all the issued ordinary shares in LPH while each Investor will hold one Special Share in LPH; the Investors will hold all outstanding Bonds. If all outstanding Bonds are fully converted as at the close of the Offer, the shareholding percentages of AsiaPharm, CDH Flower, CPE Greenery and BBI of all issued ordinary shares of LPH on a fully diluted basis and as converted basis would be 55.00%, 11.76%, 23.29% and 9.95% respectively; and if all outstanding Bonds are fully exchanged by the Investors into Shares held by the Offeror as at the close of the Offer, the shareholding percentages of the Offeror, CDH Flower, CPE Greenery and BBI in the issued share capital of the Company would be approximately 55.00%, 11.76%, 23.29% and 9.95% respectively. Additional information on the Offeror is set out in Appendix I of the Offer Document. 4. RATIONALE FOR THE OFFER AND THE OFFEROR S INTENTIONS FOR THE COMPANY The full text of the rationale for the Offer and the Offeror s intentions for the Company has been extracted from section 5 of the Offer Document and is set out in italics below. All terms and expressions used in the extract below shall have the same meanings as those defined in the Offer Document, unless otherwise stated. Shareholders are advised to read the extract below carefully. 5.1 Opportunity for the Remaining Shareholders to Realise Their Investment As at the Latest Practicable Date, the Offeror owns, controls or has agreed to acquire an aggregate of 456,427,747 Shares, representing approximately 92.63% of all the Shares. This implies that no more than approximately 7.37% of all the Shares are held in public hands. Under Rule 724(1) of the Listing Manual, the SGX-ST may suspend trading of all the Shares if the percentage of the Shares (excluding treasury shares) held in public hands falls below 10%. Further, the SGX-ST may allow the Company a period of three months, or such longer period as the SGX-ST may agree, to raise the percentage of Shares in public hands to at least 10%, failing which the Company may be delisted. As noted in paragraph 7.3 of this Offer Document, the Offeror is making the Offer with a view to delisting the Company from the SGX-ST and exercising any rights of compulsory acquisition that may arise under the Bermuda Companies Act. Hence, the Offer is intended to provide to the remaining Shareholders an opportunity to realise their investment in the Shares, without incurring brokerage and other trading costs, at a premium of approximately 20.4%, 21.5%, 39.8% and 41.3% over the one-month VWAP of S$1.08, three-month VWAP of S$1.07, six-month VWAP of S$0.93 and 12-month VWAP of S$0.92 respectively, in the period up to and including 27 July 2012 (the Last Full Trading Day ), being the last full Market Day prior to the Offer Announcement Date. As the Offer is unconditional in all respects, Shareholders who accept the Offer before the Offer closes will be paid in cash within 10 days after the receipt by the Offeror of valid and complete acceptances to the Offer in accordance with the terms and conditions of this Offer Document. Shareholders who do not accept the Offer will, in the event that the Company is delisted and the Offeror is not entitled to exercise any right of compulsory acquisition following the close of the Offer, hold Shares in an unlisted company for which there is no public market. 13

14 LETTER TO SHAREHOLDERS 5.2 Generally Low Trading Liquidity of Shares Further, the trading volume of the Shares on the SGX-ST over the year has been low, with an average daily trading volume of approximately 50,682 Shares, 59,266 Shares, 192,563 Shares and 105,480 Shares during the one-month period, three-month period, six-month period and 12-month period up to and including the Last Full Trading Day. This represents only approximately 0.01%, 0.01%, 0.04% and 0.02% of all the Shares respectively. Hence, the Offer will provide an exit opportunity for Shareholders who wish to realise their entire investment in the Shares but find it difficult to do so as a result of the low trading liquidity of the Shares. 5.3 Greater Management Flexibility The Offeror believes that delisting the Company from the SGX-ST and privatising the Company will give the Offeror and the management of the Company more flexibility to manage the business of the Company and optimise the use of its management and capital resources. 5.4 Offeror s Intentions for the Company Following the close of the Offer, the Offeror intends to undertake a strategic and operational review of the organisation, businesses and operations of the Group which may involve the disposal or cessation of under-performing businesses and assets and the redeployment of certain employees to other entities within the Group. Save as disclosed above, the Offeror has no present intention to (a) make any major changes to the existing businesses of the Company, (b) redeploy the fixed assets of the Company, or (c) discontinue the employment of the employees of the Group. Nonetheless, the Offeror retains the flexibility at any time to consider any options or opportunities which may present themselves and which it regards to be in the interests of the Offeror and/or the Company. Depending on the Group s future performance, the Offeror intends to evaluate in due course various strategic options following the privatisation of the Company, including listing the shares of the Offeror on a recognised stock exchange at an opportune time in the future if market conditions and regulatory environment are favourable. 5. FINANCIAL EVALUATION OF THE OFFER The information on financial evaluation of the Offer set out in italics below has been extracted from section 6 of the Offer Document. All terms and expressions used in the extract below shall have the same meanings as those defined in the Offer Document, unless otherwise stated. Shareholders are advised to read the extract below carefully: 6.1 IPO Price Comparison The Offer Price represents a significant premium of approximately 364.3% over the Company s initial public offering of S$0.28 per Share. 6.2 Market Price Comparison The Offer Price represents the following premia over the historical traded prices of the Shares: 14

15 LETTER TO SHAREHOLDERS Description Share Price (S$) (1) Premium over Share Price (%) (a) (b) (c) (d) (e) (f) Last transacted price per Share on 30 July 2012 (being the last Market Day on which Shares were traded on the SGX-ST prior to the Latest Practicable Date) Last transacted price per Share on the Last Full Trading Day VWAP for the one-month period prior to and including the Last Full Trading Day VWAP for the three-month period prior to and including the Last Full Trading Day VWAP for the six-month period prior to and including the Last Full Trading Day VWAP for the 12-month period prior to and including the Last Full Trading Day Note: (1) The Share prices set out in the table above are rounded to two decimal places and are computed based on data extracted from Bloomberg L.P. on 30 July NAV per Share Comparison The Offer Price represents a premium of approximately 136.4% over the NAV per Share of approximately RMB2.76 (equivalent to approximately S$0.55 adopting an exchange rate of S$1.00 to RMB ), calculated based on the net asset of the Group 6 (excluding non-controlling interests) and the Company s total issued share capital of 492,764,900 Shares. 5 Based on data extracted from Bloomberg L.P. on 29 June Based on figures obtained from the Half-year Financial Statement Announcement. 6. LISTING STATUS AND COMPULSORY ACQUISITION The full text of the intentions of the Offeror relating to the compulsory acquisition and listing status of the Company has been extracted from section 7 of the Offer Document and is set out in italics below. All terms and expressions used in the extract below shall have the same meanings as those defined in the Offer Document, unless otherwise stated. Shareholders are advised to read the extract below carefully: 7.1 Trading Suspension and Listing Status Pursuant to Rule 1105 of the Listing Manual, upon an announcement by the Offeror that acceptances have been received pursuant to the Offer that brings the holdings owned by the Offeror and parties acting in concert with it to above 90% of the total number of issued Shares (excluding any Shares held by the Company as treasury shares), the SGX-ST may suspend the listing of the Shares in the Ready and Unit Share markets until it is satisfied that at least 10% of the total number of issued Shares (excluding any Shares held by the Company as treasury shares) are held by at least 500 Shareholders who are members of the public. Rule 1303(1) of the Listing Manual provides that if the Offeror succeeds in garnering acceptances exceeding 90% of the total number of issued Shares (excluding any Shares held by the Company as treasury shares), thus causing the percentage of the total number of issued Shares (excluding any Shares held by the Company as treasury shares) held in public hands to fall below 10%, the SGX-ST will suspend trading of the Shares only at the close of the Offer. 15

16 LETTER TO SHAREHOLDERS Under Rule 724(1) of the Listing Manual, if the percentage of the Shares (excluding treasury shares) held in public hands falls below 10%, the Company must, as soon as practicable, announce that fact and the SGX-ST may suspend trading of all the Shares. Rule 724(2) of the Listing Manual states that the SGX-ST may allow the Company a period of three months, or such longer period as the SGX-ST may agree, to raise the percentage of the Shares held in public hands to at least 10%, failing which the Company may be delisted. 7.2 Compulsory Acquisition Under Section 103 of the Bermuda Companies Act, if the Offeror receives acceptances pursuant to the Offer, which when taken with the Shares already held by the Offeror resulting in the Offeror holding not less than 95% of all the Shares, the Offeror will have a right to, and intends to exercise its right to, compulsorily acquire at the Offer Price, all Shares held by the Shareholders who have not accepted the Offer (the Dissenting Shareholders ). In the event that the Offeror is not entitled to exercise any right of compulsory acquisition under the Bermuda Companies Act after the close of the Offer, the Offeror may explore the possibility of effecting a merger or amalgamation between a wholly owned newly incorporated Bermuda subsidiary of the Offeror ( NewCo ) and the Company pursuant to Sections 104 to 109 of the Bermuda Companies Act. To effect a merger or an amalgamation, the Offeror, NewCo and the Company will be required to enter into a merger or an amalgamation agreement setting out the terms and means of effecting the merger or amalgamation. The merger or amalgamation will require (a) the approval of the boards of directors of each of NewCo and the Company; (b) the approval of the Offeror as the parent company of Newco; and (c) the approval of 75% of the shareholders of the Company present and voting at a special general meeting. Accordingly, if, following the close of the Offer, NewCo and the Company were to effect a merger or an amalgamation pursuant to the Bermuda Companies Act, any Shareholder who did not accept the Offer and who continued to hold Shares in the Company, would, on completion of the merger or amalgamation of the Company and NewCo, have his Shares in the Company cancelled, in return for the consideration set out in the merger or amalgamation agreement. Such consideration is not bound to be equivalent to the Offer Price. Since as at the Latest Practicable Date the Offeror holds approximately 92.63% of all the Shares, after the close of the Offer, the Offeror could, subject to the provisions under the Code, ensure that any merger or amalgamation between NewCo and the Company is approved without the support of any of the Dissenting Shareholders. Shareholders who are in doubt of their position under the Bermuda Companies Act are advised to seek their own independent legal advice. 7.3 Offeror s Intentions The Offeror intends to make the Company its wholly owned subsidiary and does not intend to preserve the listing status of the Company. Accordingly, the Offeror, when entitled, intends to exercise its rights of compulsory acquisition under the Bermuda Companies Act or to effect a merger or amalgamation between NewCo and the Company. In the event that the trading of the Shares is suspended by the SGX-ST at the close of the Offer, the Offeror does not intend to take steps for any trading suspension of the Shares by the SGX-ST to be lifted. In addition, the Offeror also reserves the right to seek a voluntary delisting of the Company from the SGX-ST pursuant to Rules 1307 and 1309 of the Listing Manual. 16

17 LETTER TO SHAREHOLDERS 7. ADVICE AND RECOMMENDATION 7.1 Appointment of IFA Hong Leong Finance Limited has been appointed as the independent financial adviser to advise the Recommending Directors in respect of the Offer. Shareholders should read and consider carefully the advice of the IFA and the recommendation of the Recommending Directors in its entirety before deciding whether or not to accept the Offer. 7.2 Advice of the IFA in relation to the Offer The Recommending Directors have considered carefully the advice of the IFA on the Offer which is set out in the IFA Letter in Appendix 2 of this Circular. The following is an extract from section 9 of the IFA Letter and should be read by Shareholders in conjunction with, and in the full context of the IFA Letter. All terms and expressions used in the extract below shall have the same meanings as those defined in the IFA Letter, unless otherwise stated. Shareholders are advised to read the extract below carefully: 9. OUR RECOMMENDATION In arriving at our recommendation in respect of the Offer, we have taken into account the various factors which we consider may have a significant bearing on our assessment which includes our analysis set out in earlier sections of the following: (a) (b) (c) (d) (e) (f) assessed valuation of the Group; market quotation and trading activity of the Shares; Share price performance relative to selected market indices; comparison of financial valuation ratios of selected listed companies considered to be comparable to the Company; comparison with successful privatisations of other companies listed on the SGX-ST; other relevant considerations in relation to the Offer which may have a significant bearing on our assessment. Having regard to the considerations set out in this letter and the information that has been made available to us as at the Latest Practicable Date, we are of the opinion that as at the Latest Practicable Date, on balance, the terms of the Offer are fair and reasonable from a financial point of view. Accordingly, we advise the Recommending Directors to recommend to Shareholders to ACCEPT the Offer if they are unable to obtain a price higher than the Offer Price (net of related expenses) in the open market. Shareholders should also take note of the Offeror s stated intentions not to preserve the listing status of the Company and to exercise its rights to compulsorily acquire all the Shares held by Dissenting Shareholders pursuant to Section 103 of the Bermuda Companies Act. 17

18 LETTER TO SHAREHOLDERS Directors and/or Shareholders should note that the trading of the Shares are subject to, inter alia, the performance and prospects of the Group, prevailing economic conditions, economic outlook and stock market conditions and sentiments. Accordingly, our advice on the Offer does not and cannot take into account future trading activities or patterns or price levels that may be established for the Shares after the Latest Practicable Date since these are governed by factors beyond the ambit of our review and also, such advice, if given, would not fall within our terms of reference in connection with the Offer. Our recommendation is addressed to the Recommending Directors for their benefit in connection with and for the purposes of their consideration of the Offer and should not be relied on by any other party. Any recommendation made by the Recommending Directors in respect of the Offer shall remain their responsibility. Whilst a copy of this letter may be reproduced in the Circular, neither the Company nor the Directors may reproduce, disseminate or quote this letter (or any part thereof) for any other purpose (other than the intended purpose in relation to the Offer) at any time and in any manner without the prior written consent of HLF in each specific case. This opinion is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to the matters stated herein and does not apply by implication to any other matter. 7.3 Exemption relating to Director s Recommendation Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian are directors and shareholders of AsiaPharm Holdings Ltd., the ultimate holding company of the Offeror. Under the Code, Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian will be parties presumed to be acting in concert with the Offeror. The SIC has, in its letter dated 22 August 2012, ruled that Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian are exempted from the requirement to make a recommendation to Shareholders on the Offer as they face irreconcilable conflicts of interest being persons acting in concert with the Offeror. However, Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian must still assume responsibility for the accuracy of facts stated or opinions expressed in documents or advertisements issued by, or on behalf of, the Company to Shareholders in connection with the Offer. 7.4 Independence All Recommending Directors consider themselves to be independent for the purpose of making a recommendation to Shareholders in respect of the Offer. 7.5 Recommendation of the Recommending Directors The Recommending Directors, having considered carefully the terms of the Offer and the advice given by the IFA, CONCUR with the opinion and advice of the IFA in respect of the Offer that, as at the Latest Practicable Date, on balance, the terms of the Offer are fair and reasonable from a financial point of view. Accordingly, the Recommending Directors recommend that Shareholders ACCEPT the Offer if they are unable to obtain a price higher than the Offer Price (net of related expenses) in the open market. Shareholders should also take note of the Offeror s stated intentions not to preserve the listing status of the Company and to exercise its rights to compulsorily acquire all the Shares held by Dissenting Shareholders pursuant to Section 103 of the Bermuda Companies Act. Shareholders are advised to read the opinion and advice of the IFA on the Offer as set out in the IFA Letter in Appendix 2 of this Circular carefully before deciding whether to accept or reject the Offer. 18

19 LETTER TO SHAREHOLDERS 7.6 Limitations In rendering the above opinion and advice and giving the above recommendation, the IFA and the Recommending Directors have not had regard to the general or specific investment objectives, tax position, financial situation, tax status, risk profiles or unique needs and constraints or particular circumstances of any individual Shareholder. As each Shareholder would have different investment objectives and profiles, the Recommending Directors recommend that any Shareholder who may require specific advice in relation to his specific investment objective(s) or portfolio(s) should consult his stock broker, bank manager, solicitor, accountant, tax adviser or other professional advisers immediately. Accordingly, Shareholders should note that the opinion and advice of the IFA and the recommendation of the Recommending Directors should not be relied upon by any Shareholder as the sole basis for deciding whether or not to accept the Offer. 8. OVERSEAS SHAREHOLDERS 8.1 Overseas Shareholders should refer to section 9 of the Offer Document, an extract of which is set out in italics below. All terms and expressions used in the extract below shall have the same meanings as those defined in the Offer Document, unless otherwise stated. Shareholders are advised to read the extract below carefully: 9. OVERSEAS SHAREHOLDERS The availability of the Offer to Shareholders whose mailing addresses are outside Singapore, as maintained on the register of members of the Company or, as the case may be, in the records of CDP (each, an Overseas Shareholder ) may be affected by the laws of the relevant overseas jurisdictions. Accordingly, any Overseas Shareholder should inform himself about and observe any applicable legal requirements. Where there are potential restrictions on sending this Offer Document, the FAAs and/or the FATs to any overseas jurisdiction, the Offeror and DBS Bank each reserves the right not to send these documents to Shareholders in such overseas jurisdictions. For the avoidance of doubt, the Offer is open to all Shareholders, including those to whom this Offer Document, the FAAs and/or the FATs have not been, or may not be, sent. Copies of this Offer Document and any other formal documentation relating to the Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any jurisdiction where the making of or the acceptance of the Offer would violate the law of that jurisdiction (a Restricted Jurisdiction ) and will not be capable of acceptance by any such use, instrumentality or facility within any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction. The Offer (unless otherwise determined by the Offeror and permitted by applicable law and regulation) will not be made, directly or indirectly, in or into, or by the use of mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction, and the Offer will not be capable of acceptance by any such use, means, instrumentality or facilities. 19

20 LETTER TO SHAREHOLDERS Overseas Shareholders may, nonetheless, obtain copies of this Offer Document, the FAAs and/ or the FATs and any related documents, during normal business hours and up to the Closing Date, from the Offeror through its receiving agent, Boardroom Corporate & Advisory Services Pte. Ltd., at its office located at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore Alternatively, an Overseas Shareholder may write to the Offeror through Boardroom Corporate & Advisory Services Pte. Ltd. at the address listed above to request for this Offer Document, the FAAs and/or the FATs and any related documents to be sent to an address in Singapore by ordinary post at the Overseas Shareholder s own risk, up to fi ve (5) Market Days prior to the Closing Date. It is the responsibility of any Overseas Shareholder who wishes to (a) request for this Offer Document, the FAAs and/or the FATs and/or any related documents, or (b) accept the Offer, to satisfy himself as to the full observance of the laws of the relevant jurisdiction in that connection, including the obtaining of any governmental or other consent which may be required, and compliance with all necessary formalities or legal requirements and the payment of any taxes, imposts, duties or other requisite payments due in such jurisdiction. Such Overseas Shareholder shall be liable for any such taxes, imposts, duties or other requisite payments payable and the Offeror and any person acting on its behalf (including DBS Bank) shall be fully indemnified and held harmless by such Overseas Shareholder for any such taxes, imposts, duties or other requisite payments as the Offeror and/or any person acting on its behalf (including DBS Bank) may be required to pay. In (i) requesting for this Offer Document, the FAAs and/or the FATs and any related documents and/or (ii) accepting the Offer, the Overseas Shareholder represents and warrants to the Offeror and DBS Bank that he is in full observance of the laws of the relevant jurisdiction in that connection, and that he is in full compliance with all necessary formalities or legal requirements. Any Overseas Shareholder who is in any doubt about his position should consult his professional adviser in the relevant jurisdiction. The Offeror and DBS Bank each reserves the right to notify any matter, including the fact that the Offer has been made, to any or all Overseas Shareholders by announcement to the SGX-ST or notice and if necessary, paid advertisement in a daily newspaper published and circulated in Singapore, in which case such notice shall be deemed to have been sufficiently given notwithstanding any failure by any Shareholder to receive or see such announcement, notice or advertisement. 8.2 Potential restrictions in sending this Circular and any related documents to overseas jurisdictions could result in such documents not being sent to any Overseas Shareholder. Copies of this Circular may however be obtained during normal business hours up to the Closing Date from the office of the Singapore Share Transfer Agent at 50 Raffles Place #32-01 Singapore Land Tower, Singapore Alternatively, any Overseas Shareholder may write to the Singapore Share Transfer Agent at the aforementioned address to request for the Circular and any related documents to be sent to an address in Singapore by ordinary post at his own risk (the last date for despatch in respect of such request shall be a date falling three (3) Market Days prior to the Closing Date). 9. ACTION TO BE TAKEN Shareholders who wish to accept the Offer, as the case may be, must do so not later than 5.30 p.m. on 9 October The Offeror does not intend to extend the offer beyond 9 October THE OFFER WILL NOT BE OPEN FOR ACCEPTANCE BEYOND 5.30 P.M. ON 9 OCTOBER ACCEPTANCES RECEIVED AFTER 5.30 P.M. ON 9 OCTOBER 2012 WILL BE REJECTED. Shareholders who do not wish to accept the Offer need not take any further action in respect of the Offer Document and the FAA or the FAT and any related documents which have been sent to them. 20

21 LETTER TO SHAREHOLDERS 10. DIRECTORS RESPONSIBILITY STATEMENT The Directors (including those who may have delegated detailed supervision of the preparation of this Circular) collectively and individually accept full responsibility for the accuracy of the information given in this Circular and confirm after making all reasonable enquiries that, to the best of their knowledge and belief, this Circular constitutes full and true disclosure of all material facts about the Offer and the Company and its subsidiaries, and the Directors are not aware of any facts the omission of which would make any statement in this Circular misleading. The recommendation of the Recommending Directors set out in section 7.5 of this Circular is the responsibility of the Recommending Directors. Where information in this Circular has been extracted from published or otherwise publicly available sources or obtained from a named source (including without limitation, information extracted from the Offer Document and/or the Offer Announcement), the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Circular in its proper form and context. 11. ADDITIONAL INFORMATION Your attention is drawn to the additional information set out in the Appendices which form part of this Circular. Yours faithfully For and on behalf of the Board of Directors of LUYE PHARMA GROUP LTD. Tan Chong Huat Independent Director 21

22 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 1. DIRECTORS The names, addresses, and designations of the Directors as at the Latest Practicable Date are set out below: Name Address Designation Liu Dian Bo Yang Rong Bing Yuan Hui Xian Tan Soo Kiat Tan Chong Huat Hong Hai Room 98, No. 198 Middle Binghai Road Laishan District Yantai Shandong People s Republic of China No.9 Baoyuan Road Laishan District Yantai Shandong People s Republic of China #09-08, No.5 Guanhai Road, Laishan District Yantai Shandong People s Republic of China 6 Dover Rise #05-10 Singapore K Hillcrest Road Singapore Oriole Crescent Singapore Executive Chairman Executive Director Executive Director Independent Director Independent Director Independent Director 2. HISTORY AND PRINCIPAL ACTIVITIES The Company was incorporated on 2 July 2003 under the name of AsiaPharm Group Ltd.. The Company has been listed on the Main Board of the SGX-ST since 5 May The Company changed its name to Luye Pharma Group Ltd. on 26 March The Group specialises in the research, development, production and sale of pharmaceutical drugs and new formulations for chemical drugs, the sale of research and development results and patents for new drugs, and the provision of research services on a contract basis. 3. SHARE CAPITAL 3.1 Issued Share Capital The Company has one class of shares, being ordinary shares. As at the Latest Practicable Date, the authorised share capital and issued and fully paid-up share capital of the Company are as follows:- Authorised share capital US$100,000,000 Issued and fully paid-up share capital US$9,855,000, comprising 492,764,900 Shares. The issued Shares are listed and quoted on the Main Board of the SGX-ST. 22

23 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 3.2 Rights of Shareholders in respect of Capital, Dividends and Voting The rights of Shareholders in respect of capital, dividends and voting are contained in the Byelaws, which is available for inspection at the business office of the Company at 137 Telok Ayer Street, #05-05, Singapore The relevant bye-laws in the Bye-laws relating to the rights of Shareholders in respect of capital, dividends and voting have been extracted from the Articles and are set out in Appendix 4 to this Circular. Capitalised terms and expressions not defined in the extracts have the meanings ascribed to them in the Bye-laws. 3.3 Shares Issued since End of Last Financial Year No Shares have been issued by the Company since the end of the last financial year up to the Latest Practicable Date. 3.4 Outstanding Convertible Securities As at the Latest Practicable Date, there are no outstanding instruments convertible into, rights to subscribe for, and options in respect of, securities being offered for or which carry voting rights affecting shares in the Company. 4. DISCLOSURE OF INTERESTS 4.1 Interests of the Company in the shares of the Offeror The Company does not have any direct or deemed interest in the shares or convertible securities of the Offeror as at the Latest Practicable Date. 4.2 Dealings in shares of the Offeror by the Company The Company has not dealt for value in the shares or convertible securities of the Offeror during the period commencing three (3) months prior to Offer Announcement Date, and ending on the Latest Practicable Date. 4.3 Interests of Directors in the Shares Save as disclosed below, none of the Directors has any direct or deemed interests in the Shares or convertible securities of the Company as at the Latest Practicable Date: Name of Director Direct Interest Deemed Interest No. of No. of Shares Shares Percentage of Total no. of Shares (%) (1) Percentage of Total no. of Shares (%) (1) Liu Dian Bo (2) ,140, Yuan Hui Xian 34, Yang Rong Bing Tan Soo Kiat 17, Tan Chong Huat 17, Hong Hai 17, Notes: (1) Based on the Company s issued and paid up capital of 492,764,900 Shares as at the Latest Practicable Date. (2) Liu Dian Bo holds 70% of the issued share capital in AsiaPharm Holdings Ltd ( AsiaPharm ). AsiaPharm holds all the issued ordinary shares in the capital of Luye Pharma Holdings Ltd. ( LPH ). The Offeror is wholly owned by LPH, through its wholly owned subsidiary, Luye Pharmaceutical International Co., Ltd. As such, Liu Dian Bo is deemed interested in the Shares held by the Offeror. 4.4 Dealings in Shares by Directors Save as disclosed below, none of the Directors has dealt for value in the Shares or convertible securities of the Company during the period commencing three (3) months prior to Offer Announcement Date, and ending on the Latest Practicable Date: 23

24 APPENDIX 1 ADDITIONAL GENERAL INFORMATION Date Name of holder Nature of Dealing Number of Shares Dealt Percentage of Total Issued Shares (%) (1) Price Paid Per Share (S$) 27 July 2012 Luye Pharmaceutical Investment Co., Ltd. (2) Married trades 74,987, September 2012 Luye Pharmaceutical Investment Co., Ltd. (2) Open market purchase 11,700, September 2012 Luye Pharmaceutical Investment Co., Ltd. (2) Receipt of acceptances tendered pursuant to the Offer 2,182, September 2012 Luye Pharmaceutical Investment Co., Ltd. (2) Receipt of acceptances tendered pursuant to the Offer 119, September 2012 Luye Pharmaceutical Investment Co., Ltd. (2) Receipt of acceptances tendered pursuant to the Offer 4,711, Notes: (1) Based on the Company s issued and paid up capital of 492,764,900 Shares as at the Latest Practicable Date. (2) Liu Dian Bo, Yang Rong Bing and Yuan Hui Xian are shareholders of AsiaPharm Holdings Ltd ( AsiaPharm ), holding 70%, 15% and 15% of the issued share capital in AsiaPharm respectively. AsiaPharm holds all the issued ordinary shares in the capital of Luye Pharma Holdings Ltd. ( LPH ). Luye Pharmaceutical Investment Co., Ltd., the Offeror, is wholly owned by LPH, through its wholly owned subsidiary, Luye Pharmaceutical International Co., Ltd Interests of Directors in shares of the Offeror Save as disclosed below, none of the Directors has any direct or deemed interest in the shares or convertible securities of the Offeror as at the Latest Practicable Date. Name of Director Direct Interest Deemed Interest No. of shares in the Offeror Percentage of Total no. of issued shares in the Offeror (%) (1) No. of shares in the Offeror Percentage of Total no. of issued shares in the Offeror (%) (1) Liu Dian Bo (2) Yuan Hui Xian (2) Yang Rong Bing (2) Tan Soo Kiat Tan Chong Huat Hong Hai Notes: (1) Based on the Offeror s issued and paid up capital of 1 share as at the Latest Practicable Date. (2) Liu Dian Bo, Yang Rong Bing and Yuan Hui Xian are shareholders of AsiaPharm Holdings Ltd ( AsiaPharm ), holding 70%, 15% and 15% of the issued share capital in AsiaPharm respectively. AsiaPharm holds all the issued ordinary shares in the capital of Luye Pharma Holdings Ltd. ( LPH ). Luye Pharmaceutical Investment Co., Ltd., the Offeror, is wholly owned by LPH, through its wholly owned subsidiary, Luye Pharmaceutical International Co., Ltd.. 24

25 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 4.6 Dealings in shares of the Offeror by Directors None of the Directors has dealt for value in the shares or convertible securities of the Offeror during the period commencing three (3) months prior to Offer Announcement Date, and ending on the Latest Practicable Date. 4.7 Interests of the IFA in the Shares The IFA does not own or control any Shares or convertible securities of the Company as at the Latest Practicable Date. The IFA does not manage the investment of any funds. 4.8 Dealings in the Shares by the IFA The IFA has not dealt for value in the Shares or convertible securities of the Company during the period commencing three (3) months prior to the Offer Announcement Date, and ending on the Latest Practicable Date. 4.9 Directors Intentions Mr Liu Dian Bo is deemed interested in all the Shares held by the Offeror. Mr Yuan Hui Xian, Mr Tan Soo Kiat, Mr Tan Chong Huat and Dr. Hong Hai have informed the Company that they intend to accept the Offer in respect of all the Shares held by them. Mr. Yang Rong Bing does not have any interest in any Shares (direct and/or deemed). 5. OTHER DISCLOSURE 5.1 Directors Service Contracts There are no service contracts between any director or proposed director of the Company or its subsidiaries with more than 12 months to run, and which the employing company cannot, within the next 12 months, terminate without paying any compensation. There were no such contracts entered into or amended during the period commencing six (6) months prior to the Offer Announcement Date and ending on the Latest Practicable Date. 5.2 Arrangements Affecting Directors Mr Liu Dian Bo, Mr Yuan Hui Xian and Mr Yang Rong Bing have each executed an equitable share mortgage to charge all their respective shareholdings in AsiaPharm Holdings Limited in favour of CITIC Bank International Limited as security for the loan agreement as described in paragraph 1(i) of Appendix III of the Offer Document. Save as disclosed above and in this Circular, as at the Latest Practicable Date,: (i) (ii) there are no payments or other benefit to be made or given to any Director or any director of any related corporation, as compensation for loss of office or otherwise in connection with the Offer; there is no agreement or arrangement made between any Director and any other person in connection with or conditional upon the outcome of the Offer; and (iii) none of the Directors has any material personal interest, whether direct or indirect, in any material contract entered into by the Offeror. 25

26 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 6. MATERIAL CONTRACTS WITH INTERESTED PERSONS The Company has entered into the following transactions with the following interested persons during the period commencing three (3) years prior to the Offer Announcement Date, and ending on the Latest Practicable Date: (a) Asiapharm Holdings Ltd., a company in which Mr. Liu Dian Bo, the Executive Chairman of the Company, has controlling interests Asiapharm Holdings Ltd. has made payments for certain expenses on behalf of the Company, the aggregate amounts were RMB0.63 million, RM2.73 million, RMB1.58 million and RMB0.51 million in FY2009, FY2010, FY2011 and for the period from 1 January 2012 to the Latest Practicable Date, respectively. The amounts incurred have been fully reimbursed by the Company. (b) Asiapharm (Singapore) Pte Ltd. ( ASPL ), a wholly-owned subsidiary of Asiapharm Holding Ltd. ASPL provides management services to the Company and all staff of the Company are employed through ASPL. Pursuant to such arrangement, ASPL charged the Company a management fee and also made payment for staff costs on behalf of the Company which is to be reimbursed by the Company, such amounts were offset by certain advances made by the Company to ASPL. The aggregate amounts of transactions between the Company and ASPL were RMB3.24 million, RMB3.45 million, RMB3.56 million and RMB3.49 million in FY2009, FY2010, FY2011 and for the period from 1 January 2012 to the Latest Practicable Date, respectively. Save for the above, neither the Company nor any of its subsidiaries has entered into any material contract (other than those entered into in the ordinary course of business) with interested persons during the period commencing three (3) years prior to the Offer Announcement Date, and ending on the Latest Practicable Date. Notes: An interested person, as defined in Note on Rule of the Code, is: (a) (b) (c) (d) (e) (f) a director, chief executive officer, or substantial shareholder of the Company; the immediate family of a director, the chief executive officer, or a substantial shareholder (being an individual) of the Company; the trustees, acting in their capacity as such trustees, of any trust of which a director, the chief executive officer or a substantial shareholder (being an individual) and his immediate family is a beneficiary; any company in which a director, the chief executive officer or a substantial shareholder (being an individual) together and his immediate family together (directly or indirectly) have an interest of 30% or more; any company that is the subsidiary, holding company or fellow subsidiary of the substantial shareholder (being a company); or any company in which a substantial shareholder (being a company) and any of the companies listed in (e) above together (directly or indirectly) have an interest of 30% or more. 26

27 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 7. MATERIAL LITIGATION As at the Latest Practicable Date, neither the Company nor any company in the Group is engaged in any material litigation or arbitration proceedings as plaintiff or defendant which might materially and adversely affect the financial position of the Company or the Group. The Directors are not aware of any proceedings pending or threatened against the Company or any company in the Group or of any facts likely to give rise to any proceedings which might materially and adversely affect the financial position of the Company of the Group. 27

28 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 8. FINANCIAL INFORMATION 8.1 Consolidated Statement of Comprehensive Income A summary of the audited consolidated statement of comprehensive income of the Group for the past three (3) financial years for FY2009, FY2010 and FY2011 and the unaudited consolidated statement of comprehensive income of the Group for 1Q2012 and 2Q2012 is set out below: GROUP FY2009 (Audited) FY2010 (Audited) FY2011 (Audited) 1Q2012 (Unaudited) 2Q2012 (Unaudited) (RMB 000) (RMB 000) (RMB 000) (RMB 000) (RMB 000) Revenue 954,750 1,340,895 1,774, , ,355 Cost of sales (135,964) (204,247) (301,121) (80,535) (80,229) Gross profit 818,786 1,136,648 1,473, , ,126 Other income 15,369 37,774 21,111 1,886 1,352 Selling and distribution costs (526,763) (761,788) (980,111) (303,938) (291,344) Administrative expenses (82,832) (111,606) (151,566) (35,488) (26,896) Other expenses (62,578) (99,136) (147,307) (39,355) (40,651) Profit from operating activities 161, , ,396 64,399 65,587 Finance income 2,555 3,790 4, ,624 Finance costs (9,902) (11,325) (19,636) (9,671) (11,351) Share of profits of associates 11,574 1, Profit before tax 166, , ,128 55,774 56,075 Income tax (37,044) (45,016) (34,902) (12,485) (5,829) Profit for the year/period 129, , ,226 43,289 50,246 Attributable to: Owners of the parent Non-controlling interests 123,547 5, ,103 14, ,624 14,602 40,566 2,723 47,066 3,180 Other comprehensive income 129, , ,226 43,289 50,246 Exchange differences on translation of foreign operations Fair value change on available-for-sale investments Other comprehensive income for the year/period, net of tax Total comprehensive income for the year/ period 2,959 9, (1,349) (1,587) 326 1,547 (1,705) 16 (4) 3,285 10,841 (887) (1,333) (1,591) 132, , ,339 41,956 48,655 Attributable to: Owners of the parent Non-controlling interests 126,832 5, ,944 14, ,737 14,602 39,233 2,723 45,475 3, , , ,339 41,956 48,655 Earnings per share attributable to owners of the parent Basic and diluted Net dividends per share NIL NIL NIL NIL NIL 28

29 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 8.2 Consolidated Balance Sheets A summary of the audited consolidated balance sheet of the Group as at 31 December 2009, 31 December 2010 and 31 December 2011 is set out below: Group 31 December 2009 (RMB 000) 31 December 2010 (RMB 000) 31 December 2011 (RMB 000) ASSETS Non-current assets Property, plant and equipment 200, , ,517 Construction in progress 4,586 67, ,211 Advance payments for property, plant and equipment 28,850 46,481 22,853 Investments in subsidiaries Investments in associates 2,090 3,313 3,652 Intangible assets 223, , ,815 Land use rights 143, , ,647 Available-for-sale investments 2,566 4,186 2,410 Long-term deferred expenditure 2,292 1,792 1,292 Goodwill 188, , ,356 Deferred tax assets 21,349 22,926 58, , ,807 1,524,214 Current assets Inventories 57,630 73, ,382 Contracts for services 1, Trade and notes receivables 296, , ,326 Prepayments, deposits and other receivables 23,447 34,729 34,310 Cash and cash equivalents 275, , ,501 Pledged short-term deposits 45,126 54,500 79,009 Due from related parties 7,217 4,561 3,755 Due from subsidiaries , , ,173 TOTAL ASSETS 1,523,975 1,822,167 2,454,387 EQUITY AND LIABILITIES Equity Issued capital 81,180 81,180 81,180 Share premium 427, , ,980 Reserves 478, , ,022 Equity attributable to owners of the parent 987,298 1,126,445 1,277,182 Non-controlling interest 107, , ,205 Total equity 1,094,735 1,248,183 1,404,387 Non-current liabilities Interest-bearing loans and borrowings 30,000 1,318 2,000 Provision for restoration costs - 2,389 2,528 Government grants 8,285 29,740 60,502 Deferred tax liabilities 70,142 81,538 93, , , ,013 Current liabilities Trade payables 13,450 20,296 34,331 Accrued liabilities and other payables 124, , ,619 Interest-bearing loans and borrowings 170, , ,815 Government grants 2,110 18,810 28,310 Income tax payable 9,683 12,305 32,010 Due to the holding company 428 2,266 2,898 Due to related parties - 1,529 2,004 Due to subsidiaries , , ,987 Total liabilities 429, ,984 1,050,000 TOTAL EQUITY AND LIABILITIES 1,523,975 1,822,167 2,454,387 29

30 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 8.3 Material Changes in Financial Position Save as disclosed in this Circular, the unaudited consolidated financial statements of the Group for 1Q2012, 2Q2012 and HY2012 and any other financial information on the Group which is publicly available (including without limitation, the announcements released by the Group on the SGX- ST), there has not been, within the knowledge of the Directors, any material changes in financial position since the last financial year ended 31 December 2011, being the date of the last published audited financial statements of the Company. 8.4 Significant Accounting Policies The significant accounting policies of the Group are disclosed in Appendix 5 to this Circular. The Group has adopted a number of new and revised International Financial Reporting Standards issued by the International Accounting Standards Board that are effective for annual period beginning on or after 1 January The adoption of these new and revised standards, interpretations and amendments has no material impact on the financial statements. 8.5 Changes in Accounting Policies There was no significant change in accounting policies of the Group which will cause the figures disclosed in this Circular not to be comparable to a material extent. 9. GENERAL (a) (b) (c) (d) (e) (f) All expenses and costs incurred by the Company in relation to the Offer will be borne by the Company. Hong Leong Finance Limited has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of the IFA Letter setting out, inter alia, its advice to the Recommending Directors in respect of the Offer which is annexed hereto as Appendix 2, its letter dated 25 September 2012 in relation to the Statement of Prospects which is annexed hereto as Appendix 8 and references to its name, in the form and context in which they appear in this Circular. Ernst & Young, Hong Kong has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its letter dated 24 September 2012 in relation to the Statement of Prospects which is annexed hereto as Appendix 7 and references to its name, in the form and context in which they appear in this Circular. Jiangsu Yonghe Land Real Estate Appraisal Co., Ltd ( 江苏永和土地房地产估价有限公司 ) has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of the extracts of its valuation report, and references to its name, in the form and context in which they appear in this Circular. Yantai Zhengping Assets Appraisal Firm ( 烟台市正平资产评估事务所 ) has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of the extracts of its valuation report, and references to its name, in the form and context in which they appear in this Circular. Beijing Lixin Runde Assets Appraisal Firm ( 北京立信润德资产评估事务所 ) has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of the extracts of its valuation report, and references to its name, in the form and context in which they appear in this Circular. 30

31 APPENDIX 1 ADDITIONAL GENERAL INFORMATION 10. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for inspection at the business office of the Company at 137 Telok Ayer Street, #05-05, Singapore , during business hours for the period during which the Offer remains open for acceptances: (a) the memorandum of association and Bye-laws of the Company; (b) the annual reports of the Company for FY2009, FY2010 and FY2011; (c) the unaudited consolidated financial statements of the Group for 2Q2012 and HY2012 as announced by the Company on SGXNet on 14 August 2012; (d) the letter from the IFA in relation to the Statement of Prospects; (e) the letter from the Auditors in relation to the Statement of Prospects; (f) the IFA Letter; (g) the Valuation Reports; and (h) the letters of consent referred to in Paragraph 9 above. 31

32 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 25 September 2012 The Recommending Directors Luye Pharma Group Ltd. Clarendon House 2 Church Street Hamilton HM 11 Bermuda Dear Sirs, VOLUNTARY UNCONDITIONAL CASH OFFER BY DBS BANK LTD. FOR AND ON BEHALF OF LUYE PHARMACEUTICAL INVESTMENT CO., LTD. TO ACQUIRE ALL THE ISSUED AND PAID-UP ORDINARY SHARES IN THE CAPITAL OF LUYE PHARMA GROUP LTD. 1 INTRODUCTION On 28 August 2012 (the Offer Announcement Date ), DBS Bank Ltd. ( DBS ), for and on behalf of Luye Pharmaceutical Investment Co., Ltd. (the Offeror ) announced that the Offeror intends to make a voluntary unconditional cash offer (the Offer ) to acquire all the issued and paid-up ordinary shares (the Shares ) in the capital of Luye Pharma Group Ltd. ( Luye or the Company ), other than those already owned, controlled or agreed to be acquired by the Offeror (the Offer Shares ). On 11 September 2012, DBS announced, for and on behalf of the Offeror, that the offer document dated 11 September 2012 ( Offer Document ) has been despatched to shareholders on the same date. In accordance with Rule 15 of the Singapore Code on Take-overs and Mergers ( Code ) and subject to the terms and conditions set out in the Offer Document, the Offeror made the Offer for each Offer Share at S$1.30 in cash (the Offer Price ). According to the Offer Document, as at the Latest Practicable Date of the Offer Document ( Offer Document LPD ), being 4 September 2012, the Offeror owns, controls or has agreed to acquire an aggregate of 456,427,747 Shares, representing approximately 92.63% of all the Shares. Accordingly, the Offer will be unconditional in all respects. Hong Leong Finance Limited ( HLF ) has been appointed by the Company as the independent financial adviser to the directors of the Company who are independent for the purpose of making recommendations to Shareholders in respect of the Offer (the Recommending Directors ). This letter sets out, inter alia, our views and evaluation of the financial terms of the Offer and our opinion thereon, and will form part of the circular dated 25 September 2012 (the Circular ) issued by the Company providing, inter alia, details of the Offer and the recommendation of the Recommending Directors. Unless otherwise defined or the context otherwise requires, all terms defined in the Circular shall have the same meaning herein. 32

33 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 2 TERMS OF REFERENCE We have been appointed to advise the Recommending Directors on the financial terms of the Offer in compliance with the provisions of the Code. We have confined our evaluation to the financial terms of the Offer and have not taken into account the commercial risks and/or commercial merits of the Offer. We were not privy to the negotiations in relation to the Offer. Our terms of reference do not require us to evaluate or comment on the rationale for, and/or the merits of the Offer or on the listing status or future prospects of the Company and its subsidiaries (the Group ). We are not authorised and we have not solicited, any indications of interest from any third party with respect to the Offer. We are therefore not addressing the relative merits of the Offer as compared to any alternative transaction that may be available to the Company (or its Shareholders), or as compared to any alternative offer that might otherwise be available in the future. In the course of our evaluation of the financial terms of the Offer, we have relied on, and assumed without independent verification, the accuracy and completeness of published information relating to the Company. We have also relied on information provided and representations made by the management of the Company and/or the Directors. We have not independently verified such information or any representation or assurance made by them, whether written or verbal, and accordingly cannot and do not make any representation or warranty, expressed or implied, in respect of, and do not accept any responsibility for, the accuracy, completeness or adequacy of such information, representation or assurance. We have nevertheless made such enquiries and exercised our judgement as we deemed necessary and have found no reason to doubt the reliability of the information. We have relied upon the assurances of the Directors that, upon making all reasonable inquiries and to the best of their respective knowledge, information and belief, all material information in connection with the Offer and/or the Group has been disclosed to us, that such information is true, complete and accurate in all material respects and that there is no other information or fact, the omission of which would cause any information disclosed to us or the facts of or in relation to the Company and/or the Group stated in the Circular to be inaccurate, incomplete or misleading in any material respect. The Directors jointly and severally accept responsibility accordingly. For the purposes of assessing the financial terms of the Offer and reaching our conclusions thereon, we have not relied upon any financial projections or forecasts in respect of the Company or the Group. We will not be required to express, and we do not express, any view on the growth prospects and earnings potential of the Company or the Group in connection with our opinion in this letter. We have not made any independent evaluation or appraisal of the assets and liabilities of the Company or the Group and we have not been furnished with any such independent evaluation or appraisal, except for the Valuation Reports issued by Yantai Zhengping Assets Appraisal Firms ( 烟台市正平资产评估事务所 ), Jiangsu YongHe Land Real Estate Appraisal Co., Ltd ( 江苏永和土地房地产估价有限公司 ) and Beijing Lixin Runde Asset Appraisal Firms ( 北京立信润德资产评估事务所 ) (collectively, the Valuers ) dated 14 September 2012, extracts of which have been set out in Appendix 3 of the Circular. Our opinion as set out in this letter is based upon market, economic, industry, monetary and other conditions in effect on, and the information provided to us as of 16 September 2012, being the Latest Practicable Date. Such conditions may change significantly over a relatively short period of time. We assume no responsibility to update, revise or reaffirm our opinion in light of any subsequent development after the Latest Practicable Date that may affect our opinion contained herein. Shareholders should further take note of any announcements relevant to their consideration of the Offer which may be released by the Company and/or the Offeror after the Latest Practicable Date. In rendering our opinion, we did not have regard to the specific investment objectives, financial situation, tax status or position, risk profiles or unique needs and constraints and circumstances of any individual Shareholder or group of Shareholders. As different Shareholders would have different investment profiles and objectives, we recommend that any individual Shareholder or group of Shareholders who may require specific advice in relation to his investment portfolio, including his investment in the Company, should consult his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. 33

34 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS The Company has been separately advised by its own advisers in the preparation of the Circular. Accordingly, we take no responsibility for and express no views, expressed or implied, on the contents of the Circular (other than the letters issued by us). Our recommendation in respect of the Offer, as set out in Section 9 of this letter, should be considered in the context of the entirety of this letter and the Circular. 3 THE OFFER Shareholders should have by now received a copy of the Offer Document containing the formal offer by DBS, for and on behalf of the Offeror, and the relevant forms of acceptance. The details relating to the Offer are set out in Section 2 and Appendix IV of the Offer Document. Shareholders are advised to read the terms and conditions of the Offer set out in the Offer Document carefully. The salient information relating to the Offer, as extracted from the Offer Document and/or announcements made by the Offeror is set out in the ensuing paragraphs. 3.1 Offer Price For and on behalf of the Offeror, DBS has made the Offer to acquire all the Offer Shares on the following basis: For each Offer Share: S$1.30 in cash 3.2 Offer Shares The Offer will be extended, on the same terms and conditions, to all the Shares owned, controlled or agreed to be acquired by any party acting or deemed to be acting in concert with the Offeror in connection with the Offer. 3.3 Unconditional Offer The Offer is unconditional in all respects. Shareholders who accept the Offer before the close of the Offer will be paid the Offer Price in cash within 10 days after the receipt by the Offeror of valid and complete acceptances to the Offer in accordance with the terms and conditions of the Offer Document. 3.4 No Encumbrances The Offer Shares are to be acquired (a) fully paid, (b) free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and other third party rights and interests of any nature whatsoever, and (c) together with all rights, benefits and entitlements attached thereto as at the Offer Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, other distributions and return of capital (if any) which may be announced, declared, paid or made thereon by the Company on or after the Offer Announcement Date). If any dividend, other distribution or return of capital is announced, declared, paid or made by the Company on or after the Offer Announcement Date, the Offeror reserves the right to reduce the Offer Price by the amount of such dividend, distribution or return of capital. 3.5 Further Details of the Offer Further details of the Offer are set out in Appendix IV of the Offer Document, including details on (a) the settlement of the consideration for the Offer, (b) the requirements relating to the announcement of the level of acceptances of the Offer, and (c) the right of withdrawal of acceptances of the Offer. 34

35 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 3.6 Closing Date Except insofar as the Offer may be withdrawn with the consent of the SIC and every person released from any obligation incurred thereunder, the Offer will remain open for acceptances by Shareholders for a period of at least 28 days from the date of posting of the Offer Document. Accordingly, the Offer will close at 5.30 p.m. on 9 October The Offeror does not intend to extend the Offer beyond 5.30 p.m. on 9 October 2012 and has given notice that the Offer will not be open for acceptance beyond 5.30 p.m. on 9 October Acceptances received after 5.30 p.m. on 9 October 2012 will be rejected. 3.7 Revision Pursuant to Rule 20.1 of the Code, the Offer, if revised, will remain open for acceptance for a period of at least 14 days from the date of posting of the written notification of the revision to Shareholders. In any case, where the terms are revised, the benefit of the Offer (as so revised) will be made available to each of the Shareholders, including those who had previously accepted the Offer. 4. INFORMATION ON THE OFFEROR AND CONSORTIUM The information on the Offeror, the Offeror Group and the Consortium is contained in Section 3 and Appendix I of the Offer Document and an extract is also set out in Section 3 of the Circular. 5. INFORMATION ON THE COMPANY The Company was incorporated on 2 July 2003 in Bermuda and was listed on the Main Board of the Singapore Exchange Securities Trading Limited ( SGX-ST ) on 5 May The Company and its subsidiaries specialize in the research, development, production and sale of pharmaceutical drugs and new formulations for chemical drugs, the sale of research and development results and patents for new drugs, and the provision of research services on a contract basis. As set out in Section 4.2 of the Offer Document, based on publicly available information, as at the Offer Document LPD: (a) the board of directors of the Company comprises the following: (i) (ii) (iii) (iv) (v) (vi) Liu Dian Bo (Executive Director and Chairman) Yuan Hui Xian (Executive Director) Yang Rong Bing (Executive Director) Tan Soo Kiat (Independent Director); Tan Chong Huat (Independent Director); and Hong Hai (Independent Director); (b) (c) the Company has no shares held in treasury; and the Company has not granted any options or issued any rights, warrants or other securities convertible into, exercisable for or redeemable with any Shares. As at the Offer Document LPD, the Company had a market capitalization of approximately S$616.0 million (based on the last transacted price of S$1.25 per Share on 30 July 2012, being the last Market Day on which Shares were traded on the SGX-ST prior to the Offer Document LPD). Additional information on the Company is set out in Appendix II of the Offer Document. 35

36 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 6. RATIONALE FOR THE OFFER AND THE OFFEROR S INTENTIONS FOR THE COMPANY The full text of the information on the rationale for the Offer and the Offeror s intentions for the Company is set out under Section 5 of the Offer Document and has been reproduced in italics below. Shareholders are advised to read this section of the Offer Document carefully. Rationale for the Offer Opportunity for the Remaining Shareholders to Realise Their Investment. As at the Latest Practicable Date, the Offeror owns, controls or has agreed to acquire an aggregate of 456,427,747 Shares, representing approximately 92.63% of all the Shares. This implies that no more than approximately 7.37% of all the Shares are held in public hands. Under Rule 724(1) of the Listing Manual, the SGX-ST may suspend trading of all the Shares if the percentage of the Shares (excluding treasury shares) held in public hands falls below 10%. Further, the SGX-ST may allow the Company a period of three months, or such longer period as the SGX-ST may agree, to raise the percentage of Shares in public hands to at least 10%, failing which the Company may be delisted. As noted in paragraph 7.3 of this Offer Document, the Offeror is making the Offer with a view to delisting the Company from the SGX-ST and exercising any rights of compulsory acquisition that may arise under the Bermuda Companies Act. Hence, the Offer is intended to provide to the remaining shareholders an opportunity to realize their investment in the Shares, without incurring brokerage and other trading costs, at a premium of approximately 20.4%, 21.5%, 39.8% and 41.3% over the one-month VWAP of S$1.08, threemonth VWAP of S$1.07, six-month VWAP of S$0.93 and 12-month VWAP of S$0.92 respectively, in the period up to and including 27 July 2012 (the Last Full Trading Day ), being the last full Market Day prior to the Offer Announcement Date. As the Offer is unconditional in all respects, Shareholders who accept the Offer before the Offer closes will be paid in cash within 10 days after the receipt by the Offeror of valid and complete acceptances to the Offer in accordance with the terms and conditions of this Offer Document. Shareholders who do not accept the Offer will, in the event that the Company is delisted and the Offeror is not entitled to exercise any right of compulsory acquisition following the close of the Offer, hold Shares in an unlisted company for which there is no public market. Generally Low Trading Liquidity of Shares. Further, the trading volume of Shares on the SGX-ST over the year has been low, with an average daily trading volume of approximately 50,682 Shares, 59,266 Shares, 192,563 Shares and 105,480 Shares during the one-month period, three-month period, six-month period and 12-month period up to and including the Last Full Trading Day. This represents only approximately 0.01%, 0.01%, 0.04% and 0.02% of all the Shares respectively. Hence, the Offer will provide an exit opportunity for Shareholders who wish to realise their entire investment in the Shares but find it difficult to do so as a result of the low trading liquidity of the Shares. Greater Management Flexibility. The Offeror believes that delisting the Company from the SGX-ST and privatizing the Company will give the Offeror and the management of the Company more flexibility to manage the business of the Company and optimise the use of its management and capital resources. Offeror s Intentions for the Company Following the close of the Offer, the Offeror intends to undertake a strategic and operational review of the organisation, businesses and operations of the Group which may involve the disposal or cessation of underperforming businesses and assets and the redeployment of certain employees to other entities within the Group. Save as disclosed above, the Offeror has no present intention to (a) make any major changes to the existing businesses of the Company, (b) redeploy the fixed assets of the Company, or (c) discontinue the employment of the employees of the Group. Nonetheless, the Offeror retains the flexibility at any time to consider any options or opportunities which may present themselves and which it regards to be in the interests of the Offeror and/or the Company. Depending on the Group s future performance, the Offeror intends to evaluate in due course various strategic options following the privatisation of the Company, including listing the shares of the Offeror on a recognised stock exchange at an opportune time in the future if market conditions and regulatory environment are favourable. 36

37 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 7. LISTING STATUS AND COMPULSORY ACQUISITION 7.1 Trading Suspension and Listing Status. Under Rule 724(1) of the Listing Manual, if the percentage of the Shares (excluding treasury shares) held in public hands falls below 10%, the Company must, as soon as practicable, announce that fact and the SGX-ST may suspend trading of all the Shares. Rule 724(2) of the Listing Manual states that the SGX-ST may allow the Company a period of three months, or such longer period as the SGX-ST may agree, to raise the percentage of the Shares in public hands to at least 10%, failing which the Company may be delisted. In this regard, it is noted that Shares in the Company were suspended on 30 July 2012, as the percentage of Shares of the Company held in public hands has fallen below 10%. Pursuant to Rule 1105 of the Listing Manual, upon an announcement by the Offeror that acceptances have been received pursuant to the Offer that brings the holdings owned by the Offeror and parties acting in concert with it to above 90% of the total number of issued Shares (excluding any Shares held by the Company as treasury shares), the SGX-ST may suspend the listing of the Shares in the Ready and Unit Share markets until it is satisfied that at least 10% of the total number of issued Shares (excluding any Shares held by the Company as treasury shares) are held by at least 500 Shareholders who are members of the public. Rule 1303(1) of the Listing Manual provides that if the Offeror succeeds in garnering acceptances exceeding 90% of the total number of issued Shares (excluding any Shares held by the Company as treasury shares), thus causing the percentage of the total number of issued Shares (excluding any Shares held by the Company as treasury shares) held in public hands to fall below 10%, the SGX-ST will suspend trading of the Shares only at the close of the Offer. It is noted that Shares in the Company resumed trading on 7 September 2012, subsequent to the announcement of the Offer on 28 August Compulsory Acquisition. As stated in Section 7.2 of the Offer Document, under Section 103 of the Bermuda Companies Act, if the Offeror receives acceptances pursuant to the Offer, which when taken with the Shares already held by the Offeror resulting in the Offeror holding not less than 95% of all the Shares, the Offeror will have a right to, and intends to exercise its right to, compulsorily acquire at the Offer Price, all Shares held by the Shareholders who have not accepted the Offer (the Dissenting Shareholders ). In this regard, as announced by DBS on 7 September 2012, for and on behalf of the Offeror, the Offeror had acquired 11,700,000 Shares in the open market on 7 September 2012, thereby resulting in its aggregate percentage of Shares owned or controlled by the Offeror and persons acting in concert with it being raised to 95.01% as at 7 September Offeror s Intentions. The Offeror intends to make the Company its wholly owned subsidiary and does not intend to preserve the listing status of the Company. Accordingly, as announced by DBS on 7 September 2012, for and on behalf of the Offeror, the Offeror has the right to, and intends to, serve a notice pursuant to Section 103 of the Bermuda Companies Act to compulsorily acquire, all the Shares held by the Dissenting Shareholders in due course. Shareholders who are in doubt of their position under the Bermuda Companies Act are advised to seek their own independent legal advice. In the event that the trading of the Shares is suspended by the SGX-ST at the close of the Offer, the Offeror does not intend to take steps for any trading suspension of the Shares by the SGX-ST to be lifted. In addition, the Offeror also reserves the right to seek a voluntary delisting of the Company from the SGX-ST pursuant to Rules 1307 and 1309 of the Listing Manual. 37

38 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 8. ASSESSMENT OF THE FINANCIAL TERMS OF THE OFFER In our evaluation and assessment of the financial terms of the Offer, we have taken into consideration the following pertinent factors: a. assessed valuation of the Group; b. market quotation and trading activity of the Shares; c. share price performance relative to selected market indices; d. comparison of financial valuation ratios of selected listed companies considered to be comparable to the Company; e. comparison with successful privatisations of other companies listed on the SGX-ST; and f. other relevant considerations in relation to the Offer which may have a significant bearing on our assessment. These factors are discussed in greater detail in the following sections. 8.1 Assessed Valuation of the Group The net tangible asset value ( NTA ) and/or net asset value ( NAV ) based valuation provides an estimate of the value of a company assuming the hypothetical sale of all its tangible and/or intangible assets over a reasonable period of time and would be more relevant for asset-based companies or where the subject company intends to realise or convert the uses of all or most of its assets. Such a valuation approach would also be appropriate when applied in circumstances where the business is to cease operations or where the profitability of the business being valued is not sufficient to sustain an earnings-based valuation. Accordingly, the NTA and/or NAV based approach is meaningful only in so far as it shows the extent to which the value of each Share is backed by assets, and would be more relevant in the event that the Group intends to change the nature of its business and/or realises or converts the uses of all or most of its assets. In this regard, we note that the Offeror has no present intention to make any major changes to the existing businesses of the Company or to redeploy the fixed assets of the Company. As such, we have deemed that the ensuing NTA and NAV based analyses would not be the primary consideration in our overall evaluation of the Offer Book NTA and NAV of the Group as at 30 June 2012 against the Offer Price Based on the latest unaudited balance sheet of the Group as at 30 June 2012, the NTA of the Group (excluding non-controlling interests) was approximately RMB655.7 million, equivalent to approximately S$0.265 per Share (based on a conversion rate of S$1.00:RMB ). The Offer Price of S$1.30 represents a premium of approximately 390.6% to the NTA per Share of S$ We note that the Group has substantial non-tangible assets (including intangible assets, land use rights and goodwill) amounting to approximately RMB798.6 million as at 30 June 2012, which represents approximately 53.4% of the Group s net assets as at 30 June As such, we have also considered the NAV of the Group, which would include the value of the non-tangible assets, in our evaluation of the financial terms of the Offer. Based on the latest unaudited balance sheet of the Group as at 30 June 2012, the NAV of the Group (excluding non-controlling interests) was approximately RMB1,362 million, equivalent to approximately S$0.55 per Share (based on a conversion rate of S$1.00:RMB5.023). The Offer Price of S$1.30 represents a premium of approximately 136.4% to the NAV per Share. 1 Based on the exchange rate of 29 June 2012, as extracted from Bloomberg L.P. 38

39 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS S$ Premium/(Discount) of Offer Price over NTA/NAV (%) Latest unaudited NTA per share Latest unaudited NAV per share In our evaluation of the financial terms of the Offer, we have considered whether there are any factors which have not been otherwise disclosed in the financial statements of the Group that are likely to have a material impact on the unaudited book NAV of the Group as at 30 June In this respect, save as disclosed in the unaudited financial statements of the Group as at 30 June 2012, the Directors have confirmed that, to their best knowledge and belief, as at the Latest Practicable Date, there are no contingent liabilities or doubtful debts which are likely to have a material impact on the unaudited NAV of the Group as at 30 June Adjusted NAV of the Group as at 30 June 2012 against the Offer Price In our evaluation of the financial terms of the Offer, we have also considered whether there are any material events that may impact the unaudited balance sheet of the Group from 30 June 2012 to the Latest Practicable Date to determine whether adjustments need to be made to the book NAV per Share as at 30 June In this respect, the Directors have confirmed that, to their best knowledge and belief, as at the Latest Practicable Date, there are no events that have or will have a material impact on the unaudited balance sheet of the Group since 30 June Revalued NAV of the Group as at 30 June 2012 against the Offer Price In our evaluation of the financial terms of the Offer, we have also considered whether there are any assets which should be valued at an amount that is materially different from that which is recorded in the unaudited balance sheet of the Group as at 30 June In connection with the Offer, the Company has commissioned the Valuers to conduct independent valuation of the land and buildings occupied by its key operating subsidiaries, namely Nanjing Luye Sike Pharmaceutical Co., Ltd., Shandong Luye Pharmaceutical Co., Ltd. and Beijing WBL Peking University Biotech Co., Ltd. (the Revalued Properties ). Based on the valuation reports issued by the Valuers, the aggregate open market value of the Revalued Properties as at 31 August 2012 based on their existing use is approximately RMB377.6 million. The Directors have confirmed that to their best knowledge and belief, as at the Latest Practicable Date, other than the revaluation surplus arising in respect of the Revalued Properties as set out herein, there are no material differences between the realisable value of the Group s assets (including intangible assets) and their respective book values as at 30 June 2012 which would have a material impact on the revalued NAV of the Group. We set out below the market value and net revaluation surplus of the Revalued Properties (taking into account the tax effect of a hypothetical sale of the Revalued Properties): 39

40 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS RMB 000 Market value of the Revalued Properties as at 31 August ,604 Less: Book value of the Revalued Properties as at 30 June 2012 (321,290) Potential tax liability arising from a hypothetical sale of the Revalued Properties (1) (24,633) Net revaluation surplus arising from the Revalued Properties 31,681 Note: (1) Based on information provided by the Company, the potential tax liability that may be incurred by the Group on the hypothetical disposal of the Revalued Properties is approximately RMB24,633,000. We understand that the Company has no immediate plans to dispose of its interests in the Revalued Properties and the Offeror had stated that it presently has no intention to, inter alia, redeploy the fixed assets of Luye. As such, the aforesaid tax liability is not likely to crystallise. The revalued NAV of the Group (excluding non-controlling interests) as at 30 June 2012, taking into account the net revaluation surplus of the Revalued Properties based their open market values as at 31 August 2012 as assessed by the Valuers (the Revalued NAV ), is computed as follows: RMB$ 000 NAV of the Group (excluding non-controlling interests) as at 30 June ,361,891 Add: Net revaluation surplus arising from the Revalued Property 31,681 Revalued NAV of the Group (excluding non-controlling interests) as at 30 June ,393,572 Revalued NAV per Share as at 30 June 2012 based on 492,764,900 Shares RMB2.83 or S$0.563 (1) Notes: (1) Based on a conversion rate of S$1.00:RMB We note that the Offer Price of S$1.30 per Share represents a premium of 130.9% to the Revalued NAV per share as at 30 June 2012 of S$ Market quotation and trading activity of the Shares In evaluating the reasonableness of the Offer Price from a market price expectation perspective, on the basis that the stock market may be considered to provide an efficient mechanism by which such price expectations may be expressed, we have considered the current and historical market price of the Company to be reasonable indicators for assessing the financial value of the Shares at a given point in time. We wish to highlight that under ordinary circumstances, the market valuations of shares traded on a recognised stock exchange may be affected by, inter alia, its relative liquidity, the size of its free float, the extent of research coverage, the investor interest it attracts, and the general market sentiment at a given period in time. We set out below a chart showing the Offer Price relative to the trend of the daily last transacted prices and trading volumes of the Shares for the 12-month period prior to the Last Full Trading Day on which the Shares were traded before the Offer Announcement Date and up to the Latest Practicable Date. 40

41 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS Closing Price (S$) Offer Price = S$1.30 A1 A2 A3 A4 A5 A6 A8 A7 A9 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 Volume Traded ,000, Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug-12 Source: Bloomberg L.P. A summary of the salient announcements made by the Company during the 12-month period and up to the Latest Practicable Date is set out below: Symbol Date of Announcement Event A1 11 August 2011 A2 11 November 2011 A3 19 February 2012 The Company announced its second quarter and first half financial statement and dividend announcement for the period ended 30 June The Group attained total revenue of RMB789.7 million for the first six months of 2011, which represented an increase of 21.4% over the corresponding period in FY2010. Net profit decreased by 30.5% to RMB67.8 million. The Company announced its third quarter and nine months financial statement and dividend announcement for the period ended 30 September The Group attained total revenue of RMB1.3 billion for the first nine months of 2011, which represented an increase of 23.5% over the corresponding period in FY2010. Net profit decreased by 21.3% to RMB111.3 million. The Company issued a clarification statement with reference to a media report saying that the Company may be a subject of a privatisation from the SGX-ST. The Company announced that it is not the source for the report, and no privatisation proposal has been submitted to the board nor has the board approved any privatisation exercise. 41

42 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS A4 29 February 2012 The Company announced that on 28 Feb 2012, Hygeia Holdings Ltd ( Hygie )(a wholly-owned entity of MBK Partners, L.P. ( MBK )) has transferred all its interest in Luye Pharmaceutical International Co., Ltd ( Luye International ), comprising of one share and bonds convertible into shares in Luye Pharmaceutical International to Luye Pharma Holdings Ltd. Consequently, MBK and Hygeia have ceased to hold a deemed interest under Section 7 of the Companies Act, Cap 50 in the 381,439,877 issued ordinary shares ( Shares ) in Luye Pharma Group Ltd, held indirectly by Luye International through its wholly-owned subsidiary, Luye Pharmaceutical Investment Co., Ltd. Consequential to the transfer, Mr Kong Teck Chien and Mr Kung Kuo Chuan, both being Non-Executive Directors nominated by MBK resigned from their positions in the Luye. The Company also announced its fourth quarter and twelve months financial statement and dividend announcement for the period ended 31 December 2011 ( FY2011 ). The Group attained total revenue of RMB1.8 billion, which represented an increase of 32.3% over FY2010. Net profit increased by 10.5% to RMB166.2 million. A5 11 May 2012 A6 30 July August August August September 2012 A7 7 September 2012 The Company announced its first quarter financial statement and dividend announcement for the period ended 31 March The Group attained total revenue of RMB521.8 million for the first quarter of FY2012, which represented an increase of 41.0% over the corresponding period in FY2011. Net profit increased by 32.4% to RMB43.3 million. The Company announced that Luye Pharmaceutical Investment Co., Ltd. ( LPIC ) has acquired 15.22% of the issued share capital of Luye Pharma Group Ltd, bringing its total interest to 92.63%. Due to the increase of the shareholding by LPIC, the percentage of all the shares of the Company held in public hands has fallen below 10%. Accordingly, the Company has requested for a suspension in the trading of its shares on the SGX-ST. The Company announced its second quarter and first half financial statement and dividend announcement for the period ended 30 June The Group attained total revenue of RMB1.0 billion for the first half of 2012, which represented an increase of 29.8% over the corresponding period in FY2011. Net profit increased by 38.0% to RMB93.5 million. The Company announced that it is currently engaging its controlling shareholder in relation to its free float and will try to seek a satisfactory resolution to the matter. DBS announced, for and on behalf of the Offeror, the voluntary unconditional cash offer to acquire all the Shares in the capital of Luye. The Company requested for the resumption of trading starting from 7 Sep DBS announced, for and on behalf of the Offeror, that the Offeror had on 7 Sep 2012 acquired 11.7 million Shares of Luye in the open market, resulting in the Offeror holding 95.01% of all the Shares. The Offeror intends to exercise its rights to compulsory acquire all the remaining Shares in Luye. 42

43 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS A8 11 September 2012 A9 13 September 2012 Following the announcement made on 28 August 2012, DBS announced, for and on behalf of the Offeror, that the Offer Document dated 11 September 2012 containing the terms and conditions of the Offer and enclosing the appropriate form(s) of acceptance of the Offer has been despatched to all shareholders of Luye. DBS announced, for and on behalf of the Offeror, that the Offeror has on 13 September 2012 received valid acceptances representing approximately 0.47% of the total number of Shares. Accordingly, as at 5.00 p.m. on 13 September 2012, the total number of (a) Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it and (b) valid acceptances to the Offer, amount to an aggregate of 470,463,346 Shares, representing approximately 95.47% of the total number of Shares of the Company. Source: SGX-ST announcements released by the Company or DBS (for and on behalf of the Offeror) Based on the chart above and historical trading trends, we note the following: i. for the 12-month period from 28 July 2011 to the Last Full Trading Day prior to the Offer Announcement Date, the closing prices of the Shares were in a range of between S$0.730 to S$ The Offer Price represents a premium of 78.1% and 13.0% over the lowest and highest closing prices of the Shares respectively during the period; ii. the trading prices and volumes of the Shares surged in the morning of 30 July 2012 to a high of S$1.280 and last traded at S$1.250 before the Company suspended the trading of the Shares and announced that Luye Pharmaceutical Investment Co., Ltd. has acquired 15.22% of the issued share capital of Luye Pharma Group Ltd, bringing its total interest to 92.63%, resulting in the percentage of all the Shares of the Company held in public hands falling below 10 per cent. The Offer Price represents a premium of 4.0% over the last transacted price on 30 July 2012 before the Shares were suspended and prior to the Offer Announcement Date; iii. the Shares did not trade at or above the Cash Consideration of S$1.30 per share for the period from 28 July 2011 up to the Offer Announcement Date based on the daily closing prices; iv. on 7 September 2012, suspension of trading of the Shares was lifted and the price of the Shares rose to close at S$1.295; and v. the daily average volume of the Shares traded over the 12-month period up to and including the Last Full Trading Day was approximately 0.11 million. On 7 September 2012, an aggregate volume of approximately 14.3 million Shares were traded. We have also compared the Offer Price against the volume weighted average price ( VWAP ) of Shares for selected reference periods both prior to and after the Offer Announcement Date as set out in the table below. 43

44 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS Reference Periods Highest Closing Price (S$) Lowest Closing Price (S$) VWAP (1) / Last Transacted Price (S$) Premium/ (Discount) of Offer Price (2) over VWAP (%) Periods prior to and including the Last Full Trading Day on which the Shares were traded before the Offer Announcement Date Last 12 months Last 6 months Last 3 months Last 1 month Last Full Trading Day on which the Shares were traded prior to the Offer Announcement Date N.A. N.A (3) 16.1 Periods after the Offer Announcement Date Trading Day immediately after the Offer Announcement Date Between the Trading Day immediately after the Offer Announcement Date and the Latest Practicable Date (both dates inclusive) N.A. N.A (4) Latest Practicable Date N.A. N.A (5) 0.4 Source: Bloomberg L.P. Notes: (1) The VWAP is computed based on the closing prices of the Shares for the trading days in the respective periods and rounded to 2 decimal places. (2) Based on the Offer Price of S$1.30 per Share. (3) This is the closing price of the Shares as at 27 July 2012, being the last Full Trading Day on which the Shares were traded prior to the Offer Announcement Date. (4) This is the closing price of the Shares as at 7 September 2012, being the first trading day on which the Shares were traded after the Offer Announcement Date. (5) This is the closing price of the Shares as at 14 September 2012, being the last Market Day as at the Latest Practicable Date of 16 September

45 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS The key observations in respect of the above are highlighted below: (a) Over the 12-month period prior to and including the Last Full Trading Day on which the Shares were traded before the Offer Announcement Date, the Shares have closed between a low of S$0.730 and a high of S$1.150; (b) The Offer Price represents a premium of 38.3%, 36.8%, 20.4% and 20.4% to the VWAP for the 12-month, 6-month, 3-month and 1-month periods prior to the Last Full Trading Day on which the Shares were traded before the Offer Announcement Date respectively; (c) The Offer Price represents a premium of 16.1% to the last transacted price for the Last Full Trading Day on which the Shares were traded prior to the Offer Announcement Date; (d) The Offer Price represents a premium of 0.4% to the last transacted price for the first trading day immediately after the Offer Announcement Date; (e) The Offer Price is equivalent to the VWAP for the period between the Trading Day immediately after the Offer Announcement Date and the Latest Practicable Date; and (f) The Offer Price represents a premium of 0.4% to the last transacted price as at the Latest Practicable Date For illustration purposes only, we set out in the table below the average daily trading volume of the Shares and the average daily trading volume as a percentage of its free float. Reference Periods Periods prior to the last Full Trading Day on which the Shares were traded before the Offer Announcement Date Average Daily Traded Volume (1) Approximate percentage of Free Float (2) Last 12 months Last 6 months Last 3 months Last 1 month Last Full Trading Day on which the Shares were traded prior to the Offer Announcement Date 105, % 192, % 59, % 50, % 18,000 (3) 0.05% 45

46 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS Periods after the Offer Announcement Date Trading Day immediately after the Offer Announcement Date 14,322,000 (4) 39.51% Between the Trading Day immediately after the Offer Announcement Date and the Latest Practicable Date (both dates inclusive) 3,938, % Latest Practicable Date 55,000 (5) 0.15% Source: Bloomberg L.P. Notes: (1) Based on the total volume of Shares traded during the reference periods divided by the number of Market Days during the respective periods, excluding the period during which the Shares were suspended. (2) Free float refers to the 36,252,153 Shares held by the public (as defined in the SGX-ST Listing Manual) as at the Offer Announcement Date as obtained from the Company s announcements and Bloomberg L.P. (3) This is the total volume of Shares traded on 27 July 2012, being the last Full Trading Day on which the Shares were traded prior to the Offer Announcement Date. (4) This is the total volume of Shares traded on 7 September 2012, being the first trading day immediately after the Offer Announcement Date upon the lifting of the suspension of the trading in the Shares. (5) This is the total volume of Shares traded on 14 September 2012, being the last Market Day as at the Latest Practicable Date of 16 September The key observations in respect of the above are highlighted below: (a) The average daily trading volume of the Shares for the 12-month, 6-month, 3-month and 1-month periods prior to the last Full Trading Day on which the Shares were traded before the Offer Announcement Date represents approximately 0.29%, 0.53%, 0.16%, and 0.14% of the Free Float respectively; (b) The trading volume of the Shares on the Last Full Trading Day before the Offer Announcement Date represents 0.05% of the Free Float; (c) The trading volume of the Shares on the first trading day immediately after the Offer Announcement Date represents 39.51% of the Free Float; (d) The average daily trading volume of the Shares for the period between the first trading day immediately after the Offer Announcement Date and the Latest Practicable Date represents 10.86% of the Free Float; (e) The trading volume of the Shares on the Latest Practicable Date represents 0.15% of the Free Float. We wish to highlight that the above analysis of the trading prices and activity of the Shares serves only as an illustrative guide and is not an indication of the future trading price and activity of Shares. 46

47 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 8.3 Share price performance relative to selected market indices To assess the market price performance of the Shares vis-à-vis the general price performance of the Singapore equity market, we have compared the market movement of the Shares against the FTSE Straits Times Index ( FSSTI ) for the 12-month period prior to the last Full Trading Day on which the Shares were traded before the Offer Announcement Date to the Latest Practicable Date, as illustrated below. LUYE SP Equity FSSTI Index Source: Bloomberg L.P. We have also set out in the table below the movements in the last transacted prices of the Shares and the FSSTI between the Last Full Trading Day and the Latest Practicable Date: Company/Index As at the Last Full Trading Day prior to Offer Announcement Date As at the Latest Practicable Date Luye FSSTI Source: Bloomberg L.P. Percentage Change (%) Based on the above, we note the following: (i) During the 12-month period (up to and including the Last Full Trading Day before the Offer Announcement), on a normalized basis, the Shares had generally underperformed the FSSTI for most of the period before March 2012 and generally outperformed the FSSTI after March 2012; (ii) Between the Last Full Trading Day and the Latest Practicable Date, the Shares outperformed the FSSTI, having increased by approximately 15.6% as compared to the increase of approximately 2.4% in FSSTI over the same period. Based on the above observations, it appears likely that the market prices and the trading volumes of the Shares since the Offer Announcement Date have been supported by the announcement of the Offer. As such, there is no assurance that the market prices and trading volumes of the Shares will be maintained at the prevailing level as at the Latest Practicable Date after the close of the Offer. Shareholders should note that the past trading performance of the Shares should not in any way be relied upon as an indication or a promise of its future trading performance. 47

48 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 8.4 Comparison with financial valuation ratios of selected listed companies considered to be comparable to the Company We wish to highlight that the figures used in our financial assessment have been extracted where available and/or applicable, from Bloomberg, the Circular and other publicly available sources. We make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. For the purpose of assessing the financial terms of the Offer Price, references can be made to companies which are listed and traded on the SGX-ST or other stock exchanges, whose business activities and industries are broadly comparable to the Company ( Selected Comparable Companies ) to give an indication of the current market expectations with regards to the valuation of these businesses, implied by their respective closing market prices as at the Latest Practicable Date. We recognise, however, that our list of Selected Comparable Companies is not exhaustive and there may not be any companies listed on the SGX-ST or other stock exchanges that is directly comparable to the Company in terms of business activities, scale of operations, types of products, geographical markets, track record, future prospects, asset base, risk profile, customer base and other relevant criteria. As such, any comparison made with respect to the Selected Comparable Companies is therefore intended to serve as an illustrative guide only. For the purpose of our evaluation and for illustration, we have made comparisons between the Offer Price and the valuation of the Selected Comparable Companies on a historical basis using the following: Valuation Ratio Price-to-Earnings ( P/E ) Price-to-Net Tangible Asset ( P/NTA ) Price-to-Net Asset Value ( P/NAV ) Enterprise Value-to- Earnings Before Interest, Tax, Depreciation and Amortisation ( EV/EBITDA ) General Description P/E ratio or earnings multiple illustrates the valuation ratio of the current market value of a company s shares relative to its consolidated basic earnings per share as stated in its financial statements. The P/E ratio is affected by, inter alia, the capital structure of a company, its tax position as well as its accounting policies relating to depreciation and intangible assets. NTA or net tangible asset is defined to exclude, where applicable, non-controlling interests, land use rights, deferred tax assets and liabilities, deferred expenditure and goodwill. P/NTA ratio illustrates the ratio of the market price of a company s share relative to its historical NTA per share as recorded in its financial statements. The NTA figure provides an estimate of the value of a company assuming the sale of all its tangible assets, the proceeds which are first used to settle its liabilities and obligations with the balance available for distribution to its shareholders. Comparisons of companies using their NTAs are affected by differences in their respective accounting policies, in particular, their depreciation and asset valuation policies. P/NAV ratio illustrates the ratio of the market price of a company s share relative to its historical NAV per share as recorded in its financial statements. The NAV figure is an expression of the underlying value of a company, derived by deducting the company s liabilities from its assets. EV or Enterprise Value is the sum of a company s market capitalisation, preferred equity, independent interests, consolidated short and long term debts inclusive of finance lease liabilities less its consolidated cash and cash equivalents. EBITDA stands for historical consolidated earnings before interest, tax, depreciation and amortization expenses, inclusive of share of associates and joint ventures income but excluding exceptional items. The EV/EBITDA ratio illustrates the ratio of the market value of a company s business relative to its historical pre-tax consolidated operating cashflow performance, without regard to its capital structure. 48

49 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS The statistics for the Selected Comparable Companies are based on their closing prices as at the Latest Practicable Date and the publicly available financial results based on their latest available published financial statements as at the Latest Practicable Date. Comparisons between the Company and the Selected Comparable Companies may be affected, inter alia, by differences in their accounting policies. Our analysis has not attempted to adjust for such differences. We set out in the table below the list of Selected Comparable Companies, together with a brief description of their principal activities which are considered to be broadly comparable to the Company. Selected Comparable Companies Sihuan Pharmaceutical Holdings Group Ltd. Country of Listing Hong Kong Description Researches and develops cardiocerebral vascular drugs in China. The Company s drugs address needs in the areas of anti-infective, metabolism, cardiovascular system, oncology and nervous system. Market Capitalisation as at the Latest Practicable Date (S$ million) (1) 2,436.4 Shanghai Fosun Pharmaceutical (Group) Co., Ltd. China Manufactures genetic medicines, Chinese traditional medicines, diagnostic products, and medical instruments, provides technology, marketing, and advertising services, as well as invests in import and export trading. 4,153.6 Simcere Pharmaceutical Group U.S. Manufactures and supplies branded generic pharmaceuticals to the China market. The Company s products include antibiotics, anticancer medications and anti-stroke medications SBio, Inc. U.S. Researches treatments in the areas of nephrology, oncology, supportive cancer care, inflammation, and infectious diseases Source: Bloomberg L.P. Notes: Market capitalisation of the Selected Comparable Companies is based on their respective closing prices and the respective exchange rates as at the Latest Practicable Date. Shareholders should note that there is no company or group listed on any relevant stock exchange which may be considered exactly identical to the Group in terms of business activities, market capitalisation, scale of operations, risk profile, geographical spread, operating and financial leverage, track record and future prospects. In view of the above, it should be noted that any comparison made with respect to the Selected Comparable Companies is limited in scope and merely serves as an illustration and that the conclusions drawn from the comparisons may not necessarily reflect the perceived market valuation of the Company as at the Latest Practicable Date. We set out in the table below the financial ratios of the Company and the Selected Comparable Companies as at the Latest Practicable Date. 49

50 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS Selected Comparable Companies (1) P/E (2) P/NAV (3) P/NTA (3) EV/EBITDA (4) Sihuan Pharmaceutical Holdings Group Ltd Shanghai Fosun Pharmaceutical (Group) Co., Ltd Simcere Pharmaceutical Group SBio, Inc High Median Low Company (Implied by the Offer Price) Source: Bloomberg L.P. Notes: (1) The historical P/E, historical P/NAV, historical P/NTA and historical EV/EBITDA ratios of the Selected Comparable Companies are based on their respective closing prices as at the Latest Practicable Date. (2) The historical P/E ratios of the respective companies are based on the consolidated earnings for the 12-month period up to 31 December (3) The P/NAV and P/NTA ratios of the respective companies were based on their respective NAV and NTA values as set out in their latest available published financial statements as at the Latest Practicable Date. (4) The EV/EBITDA ratios of the respective companies were based on (i) their market capitalisations as at the Latest Practicable Date (except for the Company where its market capitalisation was based on the Offer Price) and the consolidated net debt and non-controlling interests figures set out in their latest available published financial statements as at the Latest Practicable Date and (ii) the aggregate consolidated EBITDA for the 12 month period up to 31 December Based on the above ratio analysis, we noted that the: (a) Historical P/E ratio of the Company of times as implied by the Offer Price is higher than the highest of the historical P/E ratios of the Selected Comparable Companies. (b) P/NAV ratio of the Company of 2.36 times as implied by the Offer Price is higher than the highest of the historical P/NAV ratios of the Selected Comparable Companies. (c) P/NTA ratio of the Company of 3.94 times as implied by the Offer Price is higher than the highest of the historical P/NTA ratios of the Selected Comparable Companies. (d) EV/EBITDA ratio of the Company of times as implied by the Offer Price is within the range and higher than the median historical EV/EBITDA ratios of the Selected Comparable Companies. 8.5 Comparison with successful privatisations of other companies listed on the SGX-ST We note that the Offeror s current intention is not to maintain the listing status of the Company on the Main Board of the SGX-ST and this will eventually lead to a privatisation and delisting of the Company. Based on the foregoing, for the purpose of our evaluation on the financial terms of the Offer vis-àvis other recent successful privatisations and/or delistings of companies listed on the SGX-ST, we set out in the table below statistics on privatisations and/or delistings relating to companies listed on the SGX-ST during the last 12-month period prior to the Offer Announcement Date ( Precedent Privatisations ). 50

51 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS Precedent Privatisations in Singapore Companies Date of announcement Last transacted price prior to announcement (%) Premium of Offer Price over 1 1-month VWAP prior to announcement (%) 3-month VWAP prior to announcement (%) C&O Pharmaceutical Technology Holdings Limited CMZ Holdings Ltd. Centraland Limited Asia Environment Holdings Ltd Heng Long International Ltd. Wanxiang International Limited Unidux Electronics Limited CHT (Holdings) Ltd. 1 Aug Aug Aug n.a Aug Oct Oct Oct Oct Leeden Limited 3 8 Nov SMB United Limited China Healthcare Limited 28 Dec Mar Adampak Limited 2 Apr Brothers (Holdings) Limited 30 May High Median Low Luye (Implied by the Offer Price) 28 Aug Source: SGX-ST announcements and circulars to shareholders in relation to the respective Precedent Privatisations. 51

52 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS Note: (1) Market premia calculated relative to the closing price of the respective target companies one (1) day prior to the respective announcement dates and VWAP of the 1-month and 3-month period prior to the respective announcement dates (2) There were no trades done in the one-month period prior to the announcement. (3) Market premia were calculated for the respective periods prior to 20 Oct 2011, being the Holding Announcement Date. Based on the above analysis, we note the following: (a) the premium of approximately 16.1% implied by the Offer Price of S$1.30 per Share over the last transacted price of the Shares on the Last Full Trading Day is within the range but lower than the median premia implied by the respective offer prices paid over the last transacted market prices of the shares with respect to the Precedent Privatisations; (b) the premium of approximately 20.4% implied by the Offer Price of S$1.30 per Share over the 1-month VWAP of the Shares up to and including the Last Full Trading Day is within the range but lower than the median premia as implied by the 1-month VWAP of the shares with respect to the Precedent Privatisations; and (c) the premium of approximately 20.4% implied by the Offer Price of S$1.30 per Share over the 3-month VWAP of the Shares up to and including the Last Full Trading Day is within the range but lower than the median premia as implied by the 3-month VWAP of the shares with respect to the Precedent Privatisations. The Recommending Directors should note that the level of premium (if any) an acquirer would normally pay for acquiring and/or privatizing a listed company (as the case may be) varies in different circumstances depending on, inter alia, the attractiveness of the underlying business to be acquired, the synergies to be gained by the acquirer from integrating the target company s businesses with its existing business, the possibility of a significant revaluation of the assets to be acquired, the availability of substantial cash reserves, the liquidity in the trading of the target company s shares, the presence of competing bids for the target company, the extent of control the acquirer already has in the target company and prevailing market expectations. Consequently, each Precedent Privatisation has to be judged on its own merits (or otherwise). The list of Precedent Privatisations indicated herein has been compiled based on publicly available information as at the Latest Practicable Date. The above table captures only the premia or discounts implied by the offer prices in respect of the Precedent Privatisations over the aforesaid periods and does not highlight bases other than the aforesaid in determining an appropriate premium or discount for the recent Precedent Privatisations. It should be noted that the comparison is made without taking into account the total amount of the offer value of each respective Precedent Privatisation or the relative efficiency of information or the underlying liquidity of the shares of the relevant companies or the performance of the shares of the companies or the quality of earnings prior to the relevant announcement and the market conditions or sentiments when the announcements were made or the desire or the relative need for control leading to compulsory acquisition. Moreover, we wish to highlight that the Company may not be in the same industry and does not conduct the same businesses as the other companies in the list of Precedent Privatisations and would not, therefore, be directly comparable to the list of companies in terms of, inter alia, geographical markets, composition of business activities, scale of business operations, risk profile, asset base, valuation methodologies adopted, accounting policies, track record, future prospects, market/industry size, political risk, competitive and regulatory environment, financial positions and other relevant criteria. Accordingly, the Recommending Directors should note that the above comparison merely serves as a general guide to provide an indication of the premium or discount in connection with the Precedent Privatisations. Therefore, any comparison of the Offer with the Precedent Privatisations is for illustration purposes only. Conclusions drawn from the comparisons made may not necessarily reflect any perceived market valuation for the Company. 52

53 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS 8.6 Other relevant considerations in relation to the Offer which have a significant bearing on our assessment Offer is unconditional in all respects As the Offer is unconditional in all respects, Shareholders who accept the Offer are assured of receiving the Offer Price in respect of all their acceptances of the Offer without incurring brokerage and other trading costs. Shareholders who accept the Offer before the close of the Offer will be paid the Offer Price in cash within 10 days after the receipt by the Offeror of valid and complete acceptances to the Offer in accordance with the terms and conditions of the Offer Document No Alternative Offer The Directors have confirmed that, as at the Latest Practicable Date, apart from the Offer made by the Offeror, no alternative offer from any third party has been received Offeror s future plans for the Group The full text of the Offeror s intentions in relation to the Group is set out under Section 5.4 of the Offer Document and pertinent parts of which is reproduced in italics below: Following the close of the Offer, the Offeror intends to undertake a strategic and operational review of the organisation, businesses and operations of the Group which may involve the disposal or cessation of under-performing businesses and assets and the redeployment of certain employees to other entities within the Group. Save as disclosed above, the Offeror has no present intention to (a) make any major changes to the existing businesses of the Company, (b) redeploy the fixed assets of the Company, or (c) discontinue the employment of the employees of the Group. Nonetheless, the Offeror retains the flexibility at any time to consider any options or opportunities which may present themselves and which it regards to be in the interests of the Offeror and/or the Company The Financial Performance of the Group The following observations are based on the historical published financials of the Group and should be read in conjunction with the full text of the annual reports of the Group in respect of the relevant financial years and the results announcement of the Group for the six months ended 30 June 2012, including any disclosure notes thereto. We note that the net profit after tax of the Group for the financial year ended 31 December 2011 ( FY2011 ) of RMB166.2 million increased by approximately 10.5% as compared to the previous financial year. In the Company s annual report for FY2011, the following commentary was made on the significant trends and competitive conditions of the industry in which the Group operates in respect of FY2012: The industry continues to face challenges arising from regulatory policies limiting pricing flexibility on medications and delays in the sale of therapeutic drugs due to more stringent approval processes. These regulatory measures coupled with an intensified competitive landscape within the sector, higher cost of operations arising from higher raw material and 53

54 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS labour costs as well as greater capital requirements to initiate research, clinical trials and capacity expansion will continue to be concerns for the Group in the coming year. While these challenges will undoubtedly test the Group s management team, we remain nonetheless confident about the long-term prospects of the PRC pharmaceutical industry. Capitalising on the continued expansion of the National Health Insurance Scheme, a growing awareness and concern for personal health and well-being together with rising affluence of the population will continue to provide Luye with the necessary growth impetus to drive its sustained development. We also note that the net profit after tax of the Group for the half year ended 30 June 2012 ( HY2012 ) of RMB93.5 million increased by approximately 38.0% as compared to the same period of the previous financial year. In the Company s unaudited half year financial results announcement for HY2012, the following commentary was made on the significant trends and competitive conditions of the industry in which the Group operates and any known factors or events that may affect the Group in the next reporting period and the next 12 months: Barring unforeseen circumstances, the Board of Directors believes that the Group will remain profitable for FY Compulsory Acquisition and Listing Status As stated in Section 7.2 of the Offer Document, under Section 103 of the Bermuda Companies Act, if the Offeror holds not less than 95% of all the Shares, the Offeror will have a right to compulsorily acquire at the Offer Price, all Shares held by the Shareholders who have not accepted the Offer ( the Dissenting Shareholders ). As indicated in Section 7.3 of the Offer Document, the Offeror intends to make the Company its wholly owned subsidiary and does not intend to preserve the listing status of the Company. In the event that the trading of the Shares is suspended by the SGX-ST at the close of the Offer, the Offeror does not intend to take steps for any trading suspension of the Shares to be lifted. Further, pursuant to the announcement of 7 September 2012 issued by DBS, for and on behalf of the Offeror, we note that as at 5.00 p.m. on 7 September 2012, the Offeror has acquired such number of Shares, which when taken together with the Shares already held by the Offeror, result in the Offeror holding not less than 95% of all the Shares. Accordingly, the Offeror has the right to, and intends to, serve a notice pursuant to Section 103 of the Bermuda Companies Act to compulsorily acquire, all the Shares held by the Dissenting Shareholders in due course. 9. OUR RECOMMENDATION In arriving at our recommendation in respect of the Offer, we have taken into account the various factors which we consider may have a significant bearing on our assessment which includes our analysis set out in earlier sections of the following: (a) assessed valuation of the Group; 54

55 APPENDIX 2 LETTER FROM THE IFA TO THE RECOMMENDING DIRECTORS (b) market quotation and trading activity of the Shares; (c) Share price performance relative to selected market indices; (d) comparison of financial valuation ratios of selected listed companies considered to be comparable to the Company; (e) comparison with successful privatisations of other companies listed on the SGX-ST; (f) other relevant considerations in relation to the Offer which may have a significant bearing on our assessment. Having regard to the considerations set out in this letter and the information that has been made available to us as at the Latest Practicable Date, we are of the opinion that as at the Latest Practicable Date, on balance, the terms of the Offer are fair and reasonable from a financial point of view. Accordingly, we advise the Recommending Directors to recommend to Shareholders to ACCEPT the Offer if they are unable to obtain a price higher than the Offer Price (net of related expenses) in the open market. Shareholders should also take note of the Offeror s stated intentions not to preserve the listing status of the Company and to exercise its rights to compulsorily acquire all the Shares held by Dissenting Shareholders pursuant to Section 103 of the Bermuda Companies Act. Directors and/or Shareholders should note that the trading of the Shares are subject to, inter alia, the performance and prospects of the Group, prevailing economic conditions, economic outlook and stock market conditions and sentiments. Accordingly, our advice on the Offer does not and cannot take into account future trading activities or patterns or price levels that may be established for the Shares after the Latest Practicable Date since these are governed by factors beyond the ambit of our review and also, such advice, if given, would not fall within our terms of reference in connection with the Offer. Our recommendation is addressed to the Recommending Directors for their benefit in connection with and for the purposes of their consideration of the Offer and should not be relied on by any other party. Any recommendation made by the Recommending Directors in respect of the Offer shall remain their responsibility. Whilst a copy of this letter may be reproduced in the Circular, neither the Company nor the Directors may reproduce, disseminate or quote this letter (or any part thereof) for any other purpose (other than the intended purpose in relation to the Offer) at any time and in any manner without the prior written consent of HLF in each specific case. This opinion is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to the matters stated herein and does not apply by implication to any other matter. Yours faithfully For and on behalf of Hong Leong Finance Limited Joan Ling-Lau Senior Vice President Head, Corporate Finance Tang Yeng Yuen Vice President Corporate Finance 55

56 APPENDIX 3 VALUATION REPORTS This Appendix 3 sets out the extracts of the valuation report from Yantai Zhengping Assets Appraisal Firm ( 烟台市正平资产评估事务所 ), the valuation report from Jiangsu Yonghe Land Real Estate Appraisal Co., Ltd ( 江苏永和土地房地产估价有限公司 ) and the valuation report from Beijing Lixin Runde Assets Appraisal Firm ( 北京立信润德资产评估事务所 ), in respect of the properties owned by the Group as set out in the list below. The full valuation reports of the respective properties are available for inspection at the business office of the Company at 137 Telok Ayer Street, #05-05, Singapore during normal business hours for the period during which the Offer remains open for acceptance. Valuer s Name Yantai Zhengping Assets Appraisal Firm ( 烟台市正平资产评估事务所 ) Properties Valued Buildings and land use rights at: (a) No. 9 Baoyuan Road, Laishan District ( 莱山区宝源路 9 号 ) (b) (c) No. 13 Baoyuan Road, Laishan District ( 莱山区宝源路 13 号 ) land with registration number of 烟国土资挂 [2008] 2004 号 Jiangsu Yonghe Land Real Estate Appraisal Co., Ltd ( 江苏永和土地房地产估价有限公司 ) Beijing Lixin Runde Assets Appraisal Firm ( 北京立信润德资产评估事务所 ) Buildings and land use rights at No, 28 Gaoxin Road, Gaoxin Technology Park, Pukou District, Nanjing City ( 南京市浦口区高新技术开发区高新路 28 号 ) Buildings and land use rights at: (a) No. 2, Yongsheng North Road, Handian District ( 海淀区永盛北路 2 号 ) (b) Baijiatuancun, Wenquan Village, Haidian District ( 海淀区温泉镇白家疃村 ) 56

57 APPENDIX 3 VALUATION REPORTS 57

58 APPENDIX 3 VALUATION REPORTS 58

59 English translation for reference only APPENDIX 3 VALUATION REPORTS Executive Summary of Valuation Report on Properties Owned by Shandong Luye Pharmaceutical Co., Ltd. Yantai Zhengping Assets Appraisal Firm (the Firm ) has been appointed by Shandong Luye Pharmaceutical Co., Ltd. to assess the value of properties owned by Shandong Luye Pharmaceutical Co., Ltd. situated at No. 9 Baoyuan Road, Laishan District ( 莱山区宝源路 9 号 ), No. 13 Baoyuan Road, Laishan District ( 莱山区宝源路 13 号 ) and the land with registration number of 烟国土资挂 [2008] 2004 号 (the Properties ), in accordance with relevant governmental regulations in respect of asset valuation and using independent, objective, fair and scientific principles. In accordance with the necessary assessment procedures, our valuers have made the following fair assessment of the market value of the Properties as at 31 August 2012, after conducting site visits and market research and seeking confirmations from the necessary organisations/authorities. The valuation details and results are as follows: According to the valuation basis and the selected assessment methods and evaluation process, after conducting the valuation, we are of the opinion that the assessed value of the Properties as at 31 August 2012 is RMB143,910,100, details of which are set out below: S/N Item Location Area (m 2 ) Assessed Value (RMB 000) 1 Buildings at No. 9 Baoyuan Road, Laishan District ( 莱山区宝源路 9 号房产 ) 2 Buildings at No. 13 Baoyuan Road, Laishan District ( 莱山区宝源路 13 号房产 ) 3 Integrated factory plant, microspheres workshop, quality inspection building and corridor ( 综合厂房 微球车间 质检楼 连廊 ) 4 Land at No. 9 Baoyuan Road, Laishan District ( 莱山区宝源路 9 号土地 ) 5 Land at No. 13 Baoyuan Road, Laishan District ( 莱山区宝源路 13 号土地 ) 6 Land with registration number of 烟国土资挂 [2008] 2004 号 ( 烟国土资挂 [2008] 2004 号 ) No. 9 Baoyuan Road, Laishan District No. 13 Baoyuan Road, Laishan District No. 15 Chuangye Road, Gaoxin District No. 9 Baoyuan Road, Laishan District No. 13 Baoyuan Road, Laishan District No. 15 Chuangye Road, Gaoxin District 16, , , , , , , , , , , ,030.0 Total 143,910.1 The above is an executive summary extracted from our valuation report. For further information, please read the full report in details. Yantai Zhengping Assets Appraisal Firm Yantai, the PRC 14 September 2012 Legal representative : Luo Wenjun Registered PRC property valuer : Wang Zhongchen Registered PRC property valuer : Sun Mingguang 59

60 APPENDIX 3 VALUATION REPORTS 60

61 APPENDIX 3 VALUATION REPORTS 61