Ann: China JV - Diagnostic Imaging Consulting/Clinic Management, page-2

Capitol Health Limited (ASX:CAJ) (“Capitol” or the “Company”) is pleased to announce that further to its announcement regarding its China MOU in June 2016, it has entered into an equity joint venture agreement (“JV”) with CITIC Pharmaceutical (Shenzhen) Co., Ltd (“CITIC Pharmaceutical”) and Xiamen Zhouxin Medical Image Co., Ltd ("Zhouxin") to provide consulting and clinic management services to a network of independent imaging clinics to be created by CITIC and Zhouxin across mainland China. The name of Joint Venture is China-Australia Medical Imaging (Shenzhen) Co., Ltd. ("CAMI"). CITIC Pharmaceutical, a majority controlled subsidiary of CITIC Medical and Health Group Co., Ltd (a wholly owned subsidiary of CITIC Group), is a large comprehensive pharmaceutical enterprise integrating medicine supply to hospitals, cross-regional commercial distribution, medical investment, medical instruments and consumables sales, and a medicine retailing service. Zhouxin is a premium healthcare chain headquartered in Xiamen, Fujian province, China. CITIC Pharmaceutical is a shareholder in Zhouxin. Zhouxin is a market leader in cardiovascular MRI. Zhouxin offers health services including healthcheck, medication, healthcare, senior care, and a health club for very high net worth patients, called Top Boss. Capitol will own a 30% stake in the JV contributing RMB3 million (approximately AUD$600,000), CITIC Pharmaceutical will own 60%, Zhouxin will own 10%, and combined, will contribute RMB7 million. The agreement also provides Capitol with an option at Capitol’s discretion to take ownership stakes in new diagnostic imaging centers to be under management. As the JV will establish greenfield imaging centres it is not expected to generate earnings during the FY17 period. CAMI’s early diagnostic imaging centers are planned for opening in 2017 in cities where CITIC already own hospitals that will generate patient referrals. The JV represents a further step in Capitol’s broader strategy to participate in the fast growing Chinese diagnostic imaging market. The recent Chinese Government healthcare reform resulted in substantial growth in the private healthcare industry in China. It has seen growth in private hospitals, private pathology operations, private health check networks, and more recently the approval for private independent diagnostic imaging centers. Andrew Harrison, Managing Director, noted, “China represents a significant opportunity for Capitol to leverage our world class medical staff and experience in design, development and operations of Diagnostic Imaging Centres. The growth in China’s private healthcare sector, along with the recent reforms allowing Diagnostic Imaging Centres to operate privately outside of hospitals, provides a solid market entry opportunity for Capitol. This JV represents a source of revenue not reliant on Australian regulation, and the opportunity to work with two major Chinese companies to better understand the market, before any decision is taken regarding an investment in clinic ownership.”