MicroPort Scientific : Continuing Connected Transactions-Distribution Framework Agreement, Service Framework Agreement

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微創醫療科學有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00853) CONTINUING CONNECTED TRANSACTIONS DISTRIBUTION FRAMEWORK AGREEMENT SERVICE FRAMEWORK AGREEMENT

The Board is pleased to announce that on 23 January 2017, the Company and Otsuka entered into the Distribution Framework Agreement pursuant to which the Company will appoint Otsuka's associates as exclusive distributors for the medical devices of the Company's subsidiaries in certain countries or region where the respective business of Otsuka and its associates covers.

On the same day, the Company and Maxwell entered into the Service Framework Agreement pursuant to which Maxwell and/or its associates will provide respective members of the Group with various services, including, among others, properties rental and management, and publicity planning services.

LISTING RULES IMPLICATIONS

1. Distribution Framework Agreement

   As at the date of this announcement, Otsuka indirectly holds 26.61% of the equity interest of the Company through its subsidiary Otsuka Medical Devices Co., Ltd. and is therefore a connected person of the Company under Chapter 14A of the Listing Rules. Thus, the transactions entered into between the members of the Group with Otsuka and/or its associates pursuant to the Distribution Framework Agreement will constitute continuing connected transactions of the Company under the Listing Rules.

   As the highest applicable percentage ratio in respect of the transactions contemplated under the Distribution Framework Agreement is more than 0.1% and less than 5%, the Distribution Framework Agreement is subject to the reporting and announcement but is exempt from the circular (including independent financial advice) and shareholders' approval requirements under the Listing Rules.

   Mr. Norihiro Ashida and Mr. Hiroshi Shirafuji, the non-executive Directors of the Company, hold senior management positions in Otsuka, and have abstained from voting with respect to the Distribution Framework Agreement in the Board meeting of the Company. Save as aforesaid, no Director has any material interest in the Distribution Framework Agreement or the transaction contemplated thereunder.

2. Service Framework Agreement

As at the date of this announcement, Maxwell directly holds 15.08% of the equity interest of the Company and is therefore a connected person of the Company under Chapter 14A of the Listing Rules. Thus, the transactions entered into between the members of the Group with Maxwell and/or its associates pursuant to the Service Framework Agreement will constitute continuing connected transactions of the Company under the Listing Rules.

As the highest applicable percentage ratio in respect of the transactions contemplated under the Service Framework Agreement is more than 0.1% and less than 5%, the Service Framework Agreement is subject to the reporting and announcement but is exempt from the circular (including independent financial advice) and shareholders' approval requirements under the Listing Rules.

To the best knowledge of the Company, none of the Directors has any material interest under the Service Framework Agreement or the transactions contemplated thereunder.

INTRODUCTION

We refer to the prospectus of the Company in respect of the existing continuing connected transactions under the 2008 Exclusive Distribution Agreements, and the announcements of the Company dated 17 January 2014, 2 January 2015 and 4 January 2016 in respect of the renewal of the 2008 Exclusive Distribution Agreements and the agreements in respect of renewing the 2008 Exclusive Distribution Agreements and the renewed agreements in the previous years, respectively. The exclusive distribution agreements entered into between MP Shanghai and certain subsidiaries of Otsuka on January 2016 expired on 31 December 2016.

Considering the business development needs and long-established relationships between the Group and Otsuka and/or its associates, on 23 January 2017, the Company and Otsuka entered into the Distribution Framework Agreement. On the same day, the Company and Maxwell entered into the Service Framework Agreement. Details of the Distribution Framework Agreement and the Service Framework Agreement are set out below.

CONTINUING CONNECTED TRANSACTIONS

1. Distribution Framework Agreement

2. Principal Terms

   Date: 23 January 2017 Parties: The Company, as the supplier; and Otsuka, as the distributor Term: The Distribution Framework Agreement has a term commencing from 23 January 2017 and ending on 31 December 2019 (both days inclusive). Subject matter: The Company will appoint Otsuka's associates as exclusive distributors for the medical devices of the Company's subsidiaries in certain countries or region where the respective business of Otsuka and its associates covers. Pricing standards: The purchase price for each of the medical devices under the Distribution Framework Agreement shall be negotiated between Otsuka and/or its associates and respective members of the Group with reference to the prevailing market prices (including but not limited to the comparable tender prices approved by local governments or hospitals) of similar products within the respective markets. The market prices will be collected by International Business Department of the Company based on quotes from at least three main competitors of Otsuka in respective markets. The unit prices for each product in the respective markets will be specified in each separate agreement. Payment terms: Payments under the Distribution Framework Agreement will be made by Otsuka and/or its associates to respective members of the Group from time to time during the term of the Distribution Framework Agreement in accordance with each specific distribution agreement entered into between respective parties.

3. Historical figures and annual caps

   The table below sets out a summary of (1) the historical amounts in respect of the supply of medical devices by the Group to Otsuka and/or its associates for the three years ended 31 December 2016, and (2) the proposed annual caps for the three years ending 31 December 2019.

   Historical transaction amounts (USD million) Proposed annual caps (USD million) For the year ended 31 December For the year ending 31 December 2014 2015 2016 2017 2018 2019

   3.76 4.27 3.92 10 11 12

4. Basis of the annual caps

   The proposed annual caps for the three years ending 31 December 2019 for the Distribution Framework Agreement have been determined based on:

5. the historical transaction amounts for the three years ended 31 December 2016;

6. the anticipated purchase amounts of the medical devices (including certain new products) provided in Thailand, Philippines, Indonesia, Pakistan, Japan and etc.;

7. the estimated growth in sales volume of Otsuka and its associates; and

8. a buffer amount to accommodate for any unexpected increase in sales volume.

   The Board is of the view that the proposed annual caps for the Distribution Framework Agreement set out above are fair and reasonable so far as the Company and its Shareholders are concerned.

9. Reasons for and benefits of the transactions contemplated under the Distribution Framework Agreement

The Group has been supplying medical products, mainly including drug-eluting stent systems and balloon catheters, to Otsuka and/or its associates under the previous established exclusive distribution agreements since January 2008. Also, the Group has been supplying inflation devices, Y-connector park, manifolds, pressure monitoring tubes and etc. to Otsuka and/or its associates since June 2016; and expects to supply electrophysiological, and orthopedics medical devices and etc. to Otsuka and/or its associates. As Otsuka and/or its associates have extensive distribution networks in the countries in which they operate, it will be beneficial for the Group to utilize these distribution channels to increase the sales of products of the Group. Furthermore, it is not viable for the Group to set up a distribution network in these countries solely for the