Shengnuo Medicine-B (02257) announced that as previously announced and mentioned in the 2023 annual report, the company has subscribed to the independent investment portfolio of TradArt Flagship Investment SPC (fund) for a total of $20 million (excluding transaction costs), and as of the date of this announcement, $0.2 million has been redeemed. The board of directors was recently notified by the investment manager of the fund that due to the possible default of the issuer of the private placement bonds invested by the fund, it is expected that the net asset value of the fund will undergo significant adverse changes. The board of directors was further notified that the investment manager has taken appropriate measures regarding this incident, including appointing auditors to audit the financial information of the private bond issuers. The company requested the investment manager to provide a detailed report on the latest net asset value of the fund, including the audited financial information of the private bond issuers. According to discussions between the company and the investment manager on July 4, 2024, and the preliminary assessment conducted by the board of directors, the board of directors expects that the investment manager may report a significant loss in the fund as of the date of this announcement. The board of directors reserves the right to hold the fund management (including the investment manager) accountable to recover the losses caused by this incident.

The board of directors has established an investigation committee composed of Dr. Lu Yang, the chairman and executive director of the board of directors, and all independent non-executive directors, namely Dr. Yu Changhai, Ms. Huang Mengying and Ms. Sheng Muxian, to investigate the incident. Ms. Huang Mengying has been appointed as the chairperson of the investigation committee. The investigation committee may also engage other professional consultants to assist in the investigation. The duties and purposes of the investigation committee include: (i) investigating the incident to report the causes and issues that led to the incident; (ii) providing timely reports to the board of directors on the progress and results of the investigation; and (iii) making recommendations to the board of directors on the actions to be taken regarding the incident.

The board of directors would like to further supplement that the group's research and development activities are still ongoing, and the management team of the group is also actively promoting business development and financing work to improve its financial situation.