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YiChang HEC ChangJiang Pharmaceutical Co., Ltd. 宜 昌 東 陽 光 長 江 藥 業 股 份 有 限 公 司 (A joint stock company incorporated in the People’s Republic of with limited liability) (Stock code: 01558)

ANNOUNCEMENT

CONTINUINGCONNECTEDTRANSACTIONS CONSTRUCTIONWORKCONTRACT

On 28 July 2020, HEC Pharmaceutical Manufacturing and Construction entered into the Construction Work Contract, pursuant to which HEC Pharmaceutical Manufacturing entrusted Yidu Construction to provide EPC (Engineering, Procurement and Construction) services for its synthesis workshop 5, synthesis workshop 6 and synthesis workshop 8 in the phase I of the innovative and generic drug project of the Company, which is located at Louzihe Village, Zhicheng Town, Yidu, China.

CONTINUINGCONNECTEDTRANSACTIONS

Construction Work Contract

Principal terms of the Construction Work Contract are as follows:

Date: 28July2020(‘‘Effective Date’’)

Parties: HECPharmaceuticalManufacturing(adirectwholly-owned subsidiary of the Company); and

Yidu Construction

Term: 29July2020to24July2021

Nature of the transaction: HEC Pharmaceutical Manufacturing entrusted Yidu Construction to provide EPC (Engineering, Procurement and Construction) services for the synthesis workshop 5, synthesis workshop 6 and synthesis workshop 8 in the phase I of the innovative and generic drug project of the Company, which is located at Louzihe Village, Zhicheng Town, Yidu, China.

– 1 – Consideration and HEC Pharmaceutical Manufacturing expects to pay to Yidu payment method: Construction in the amount of RMB28,000,000 for the year ending 31 December 2020 and in the amount of RMB27,893,045 for the year ending 31 December 2021 in the following manner.

The payment shall be paid per quarter according to the project progress by HEC Pharmaceutical Manufacturing, equaling to 95% of the construction work completed in such quarter and the remaining 5% shall be reserved as quality warrant and shall be paid by HEC Pharmaceutical Manufacturing within one month after expiration of one year from the day immediately following the final examination and acceptance, provided that Yidu Construction has completed all the warranty work.

Basis of consideration: The consideration under the Construction Work Contract is the bidding price (i.e. RMB55,893,045 in total) offered by Yidu Construction, the successful bidder, at the tender for the Construction Work Contract, who obtained the highest overall score in the evaluation.

Guarantee: ToensureYiduConstructionfulfilsitsresponsibilities under the Construction Work Contract, Yidu Construction shall, within 14 days from the date of the Construction Work Contract, provide a cash guarantee of RMB500,000 (the ‘‘Guarantee’’) via telegraphic transfer to HEC Pharmaceutical Manufacturing, with a validity period from the date of the Construction Work Contract until the final examination and acceptance. HEC Pharmaceutical Manufacturing shall return the Guarantee to Yidu Construction within 7 days upon the final examination and acceptance.

Tender Procedures and Assessment Criteria

As a general principle, the prices and terms of the contracts shall be determined in the ordinary course of business on normal commercial terms, the terms should be fair and reasonable and the prices should not be lower than those awarded to independent third parties of the Group.

In respect to the provision of EPC (Engineering, Procurement and Construction) services for its synthesis workshop 5, synthesis workshop 6 and synthesis workshop 8 in the phase I of the innovative and generic drug project, HEC Pharmaceutical Manufacturing arranged the tender procedures and invited three construction contractors for the tender, including two independent construction contractors and Yidu Construction.

– 2 – HEC Pharmaceutical Manufacturing has established an assessment committee comprising experts of construction engineering, finance and chemical engineering and senior management to determine the successful bidder. The assessment criteria of the assessment committee include but not limited to the qualifications and relevant experience of bidders and the tender prices.

According to the evaluation of the assessment committee, Yidu Construction obtained the highest overall score among all the bidders. Thus, Yidu Construction was the successful bidder in this tender.

The Directors are of the view that the above tender procedures and the established system of tendering can ensure that the transactions contemplated under the Construction Work Contract will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its minority Shareholders.

ANNUALCAPSANDBASISOFANNUALCAPS

HEC Pharmaceutical Manufacturing estimates the annual caps of RMB28,000,000 and RMB27,893,045, respectively for the years ending 31 December 2020 and 31 December 2021. The annual cap for the year ending 31 December 2020 is calculated based on the estimated amount of RMB28,000,000 to be incurred for the transactions to be contemplated under the Construction Work Contract for the year ending 31 December 2020. The annual cap for the year ending 31 December 2021 is calculated based on the estimated amount of RMB27,893,045 to be incurred for the transactions to be contemplated under the Construction Work Contract for the year ending 31 December 2021.

LISTINGRULESIMPLICATION

As at the date of this announcement, the Parent Company directly holds approximately 51.53% equity interests in the Company and is therefore a controlling shareholder of the Company. Shenzhen HEC Industrial is the holding company of the Parent Company and Yidu Construction is a subsidiary of Shenzhen HEC Industrial. Therefore, Yidu Construction is a connected person of the Company by virtue of being an associate of the Parent Company. As a result, the transactions between the Group and Yidu Construction constitute continuing connected transactions of the Company.

As the highest applicable percentage ratio in respect of the transactions contemplated under the Construction Work Contract when aggregated with the transactions entered into between the Group and Yidu Construction in the preceding 12 months pursuant to rule 14A.81 of the Listing Rules is more than 0.1% but less than 5%, the Construction Work Contract and the transactions contemplated thereunder are subject to reporting and announcement requirement but exempted from independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

Due to his position as a director and the general manager of Shenzhen HEC Industrial (being the holding company of Parent Company), Mr. TANG Xinfa, a non-executive Director, is regarded as having a material interest in the Construction Work Contract and has abstained from voting on the Board resolution approving the Construction Work Contract and the transactions thereunder.

– 3 – REASONSFORANDBENEFITSOFENTERINGINTOOFTHECONSTRUCTION WORKCONTRACT

In the opinion of the Board, the construction work for synthesis workshop 5, synthesis workshop 6 and synthesis workshop 8 in the phase I of the innovative and generic drug project are in line with the business development direction of the Group. The Board believes that through continuous approval for launch of the Group’s drugs, it requires corresponding workshops for continuous production of APIs and timely introduction of products into the market to bring about more benefits to the Company. Yidu Construction has met the tender requirements of the Construction Work Contract such as corporate qualification, technical strength, project performance and financial indicators. Other than that, Yidu Construction also has extensive experience in construction work for pharmaceutical companies and received good evaluation for the several projects built for the Group.

The Directors (including the independent non-executive Directors) are of the view that the terms under the Construction Work Contract are fair and reasonable and the transactions contemplated thereunder are on normal commercial terms or better terms, and the entering into of the Construction Work Contract is in the interests of the Company and the Shareholders as a whole.

INTERNALCONTROLPROCEDURES

In addition to the annual review by the auditors and independent non-executive Directors pursuant to the requirements of Chapter 14A of the Listing Rules, the Company has implemented or will implement the following internal control measures:

(1) The finance department will review and monitor the total transaction amount under the Construction Work Contract and ensure that the transaction amount will not exceed the annual caps of the continuing connected transactions under the Construction Work Contract. When the aggregate transaction amount has reached 80% of the relevant annual caps or is expected to exceed the relevant annual caps within two months, the personnel of the finance department shall notify the Board immediately for determination of appropriate actions to be taken;

(2) The Board will also review the Group’s policies, terms of reference and implementation status for continuing connected transactions from time to time, including investigating the auditing body’s process to identify connected person and its process to handle continuing connected transactions; and

(3) The audit committee of the Company reviews the contemplated transactions at least twice a year to confirm whether the relevant transactions are on fair and reasonable terms and in the interest of the Company and the Shareholders as a whole.

The Board is of the view that the above measures and procedures can ensure that the pricing and other contract terms for the continuing connected transactions of the Group are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole and that the continuing connected transactions are conducted as agreed under the Construction Work Contract and in compliance with Chapter 14A of the Listing Rules.

– 4 – INFORMATIONOFTHEPARTIES

HEC Pharmaceutical Manufacturing

YiChang HEC Pharmaceutical Manufacturing Co., Ltd. is a company incorporated in the PRC in 2018 and is a direct wholly-owned subsidiary of Company. It is engaged in the manufacturing and selling of APIs in the PRC or overseas. The ultimate beneficial owner of HEC Pharmaceutical Manufacturing is Mr. Zhang Zhongneng.

Yidu Construction

Yidu Construction is a company incorporated in the PRC in 2004 and is a subsidiary of Shenzhen HEC industrial. It is mainly engaged in the construction business. The ultimate beneficial owner of Yidu Construction is Mr. Zhang Zhongneng.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise:

‘‘Board’’ the board of Directors of the Company

‘‘Company’’ YiChang HEC ChangJiang Pharmaceutical Co., Ltd. (宜昌東 陽光長江藥業股份有限公司), a company established in the PRC on 11 May 2015 as a joint stock company

‘‘Construction Work the construction work contract entered into between HEC Contract’’ Pharmaceutical Manufacturing and Yidu Construction on 28 July 2020, in relation to the entrustment of Yidu Construction to provide EPC (Engineering, Procurement and Construction) services for its synthesis workshop 5, synthesis workshop 6 and synthesis workshop 8 in the phase I of the innovative and generic drug project of the Company, which is located at Louzihe Village, Zhicheng Town, Yidu, China

‘‘Director(s)’’ the director(s) of the Company

‘‘Group’’ the Company and its subsidiaries

‘‘HEC Pharmaceutical YiChang HEC Pharmaceutical Manufacturing Co., Ltd. (宜 Manufacturing’’ 昌東陽光製藥有限公司) is a company incorporated in the PRC and is a direct wholly-owned subsidiary of the Company

‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

– 5 – ‘‘Parent Company’’ Guangdong HEC Technology Holding Co., Ltd. (廣東東陽 光科技控股股份有限公司), a company incorporated in the PRC and the immediate controlling shareholder of the Company holding approximately 51.53% equity interests in the Company as at the date of this announcement

‘‘PRC’’ or ‘‘China’’ the People’s Republic of China and for the purpose of this announcement, excluding the Hong Kong Special Administrative Region of the PRC, the Macau Special Administrative Region of the PRC and Taiwan

‘‘RMB’’ Renminbi, the lawful currency of the PRC

‘‘Shareholder(s)’’ the holder(s) of the ordinary share(s) of the Company

‘‘Shenzhen HEC Industrial’’ Shenzhen HEC Industrial Development Co., Ltd. (深圳市東 陽光實業發展有限公司), a company incorporated in the PRC and the holding company of the Parent Company as at the date of this announcement

‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘Yidu Construction’’ Yidu Shanchengshuidu Project Construction Co., Ltd. (宜都 山城水都建築工程有限公司), a company incorporated in the PRC and the subsidiary of Shenzhen HEC Industrial

In this announcement, unless the context otherwise requires, the terms ‘‘associate(s)’’, ‘‘connected person(s)’’, ‘‘connected transaction(s)’’ and ‘‘subsidiary(ies)’’ shall have the meanings given to such terms in the Listing Rules, as modified by the Stock Exchange from time to time.

On behalf of the Board YiChang HEC ChangJiang Pharmaceutical Co., Ltd. TANG Xinfa Chairman

Hubei, the PRC 28 July 2020

As of the date of this announcement, the Board of the Company consists of Mr. JIANG Juncai, Mr. WANG Danjin, Mr. CHEN Yangui and Mr. LI Shuang as executive Directors; Mr. TANG Xinfa and Mr. Eddy HUANG as non-executive Directors; and Mr. TANG Jianxin, Mr. ZHAO Dayao and Ms. XIANG Ling as independent non-executive Directors.

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