Annual PDF

Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited • Annual Report 2018 1
Contents
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. COMPANY PROFILE AND FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
III. COMPANY’S BUSINESS PROFILE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
IV. DISCUSSION AND ANALYSIS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
V. MAJOR EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
VI. CHANGES IN SHARE CAPITAL AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
VII. RELEVANT INFORMATION ON PREFERRED SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
VIII. DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF . . . . . . . . . . . . . . . . . . . . . . . . . . 145
IX. CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
X. RELEVANT INFORMATION OF COMPANY’S BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
XI. FINANCIAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
XII. DOCUMENTS AVAILABLE FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416
IMPORTANT NOTICE
I. The Board, the Supervisory Committee and the Directors, supervisors and senior management
collectively and individually accept full responsibility for the truthfulness, accuracy and completeness
of the information contained in this annual report and confirm that there are no false information,
misleading statements or material omissions in this annual report.
II. The Directors were present at the 20th meeting of the seventh session of the Board, among whom,
Mr. Chen Mao and Ms. Liu Juyan, both executive directors, were unable to attend the meeting and
had appointed Ms. Cheng Ning and Mr. Wu Changhai to attend the meeting and vote on their behalf,
respectively.
III. The financial report of the Group and the Company for the year ended 31 December 2018 was
prepared in accordance with the China Accounting Standards for Business Enterprises, which are audited
by Ruihua Certified Public Accountants LLP which had issued an unqualified auditors’ report in respect
thereof.
IV. Mr. Li Chuyuan (chairperson of the Board), Mr. Li Hong (general manager) and Ms. Yao Zhizhi (deputy
director of Finance and head of the finance department) declared that they warrant the truthfulness and
completeness of the financial report contained in this annual report.
V. Profit distribution plan or plan of carrying over reserved funds to equity shares during the Reporting
Period as considered by the Board
As audited and confirmed by Ruihua Certified Public Accountants LLP: the net profit of the Group
attributable to the shareholders of the Company of 2018 amounted to RMB3,440,980,103.08. Based
on the net profit of the Company of RMB2,139,729,642.17 in 2018, a 10% statutory surplus reserve
in the amount of RMB213,972,964.22 is provided, with the addition of the undistributed profit
carried over from last year in the amount of RMB3,955,047,509.80, and after deducting the cash
dividends of 2017 in the amount of RMB619,426,351.57, the actual distributable profits amounted to
RMB5,261,377,836.18.
Based on the actual circumstances of the Company, it is proposed that based on the share capital of
1,625,790,949 shares as at the end of 2018, a cash dividend of RMB4.24 (inclusive of tax) for every
10 shares, an aggregate of RMB689,335,362.38 be distributed. The undistributed portion shall be
transferred to the next distribution. There will not be any capitalization of capital reserve for 2018.
The profit distribution plan will be submitted to the 2018 Annual General Meeting for approval.
2 Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited • Annual Report 2018
Contents
VI. Forward-looking statements such as plans for the future and development strategy contained in this
annual report do not constitute any actual commitment of the Company to investors. Investors are
advised to pay attention to any investment risk.
VII. There was no non-operational appropriation of the funds of the Company by its connected parties.
VIII. The Company had not provided any external guarantee in violation of the decision-making procedures
stipulated by the Company or relevant authorities.
IX. Warning on Significant Risks
During the Reporting Period, there are no significant risks that have substantive significant effect on the
production and operation of the Group. Various risks and corresponding measures that the Group might
face in the production and operation have been detailed in the Report, please refer to the “Potential
challenges and risks”set out in the “Discussion and Analysis of Operation” under Section IV.
X. This annual report is prepared in both English and Chinese. In the event of discrepancy in interpretation,
the Chinese version shall prevail.
Definitions
In this annual report, unless the context otherwise requires, the following terms have the meanings as follows:
Company/the Company/GYBYS Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited
PRC or China the People’s Republic of China
Reporting Period/Year/ the 12 months from 1 January 2018 and ended 31 December 2018
the current year
Group the Company and its subsidiaries
Board the board of directors of the Company
Supervisory Committee the supervisory committee of the Company
CSRC China Securities Regulatory Commission
SSE The Shanghai Stock Exchange
HKEx The Stock Exchange of Hong Kong Limited
Depository Corporation the Shanghai branch of China Securities Depository and Clearing
Corporation Limited
Articles of Association the articles of association of the Company
Listing Rules of HKEx the Rules Governing the Listing of Securities on HKEx
Listing Rules of SSE the Listing Rules of the SSE
SFO the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong
Kong)
Model Code The Model Code for Securities Transactions by Directors of Listed Issuers
contained in the Listing Rules of HKEx
GPHL Guangzhou Pharmaceutical Holdings Limited (廣州醫藥集團有限公司)
GPC Guangzhou Pharmaceutical Company Limited (廣州藥業股份有限公司)
Xing Qun Guangzhou Baiyunshan Xing Qun Pharmaceutical Co., Ltd. (廣州白雲山星群
（藥業）股份有限公司)
Zhong Yi Guangzhou Baiyunshan Zhong Yi Pharmaceutical Company Limited (廣州白

雲山中一藥業有限公司)
Definitions
Chen Li Ji Guangzhou Baiyunshan Chen Li Ji Pharmaceutical Factory Company Limited

(廣州白雲山陳李濟藥廠有限公司)
Qi Xing Guangzhou Baiyunshan Qi Xing Pharmaceutical Co., Ltd. (廣州白雲山奇星藥

業有限公司)
Pan Gao Shou Guangzhou Baiyunshan Pan Gao Shou Pharmaceutical Co., Ltd. (廣州白雲山
潘高壽藥業股份有限公司)
Jing Xiu Tang Guangzhou Baiyunshan Jing Xiu Tang Pharmaceutical Co., Ltd. (廣州白雲山
敬修堂藥業股份有限公司)
Wang Lao Ji Guangzhou Wang Lao Ji Pharmaceutical Co., Ltd. (廣州王老吉藥業股份有限

公司)
Guangzhou Han Fang Guangzhou Baiyunshan Han Fang Contemporary Pharmaceutical Co., Ltd.
(廣州白雲山漢方現代藥業有限公司)
Guangzhou Bai Di Guangzhou Baiyunshan Bai Di Bio-technology Co., Ltd. (廣州白雲山拜迪生

物醫藥有限公司)
Guangxi Ying Kang Guangxi Yingkang Pharmaceutical Company Limited (廣西盈康藥業有限公

司)
WLJ Great Health Guangzhou WLJ Great Health Industry Co., Ltd. (廣州王老吉大健康產業有
限公司)
GP Corp. Guangzhou Pharmaceuticals Corporation (廣州醫藥有限公司)
Cai Zhi Lin Guangzhou Cai Zhi Lin Pharmaceutical Co., Ltd. (廣州采芝林藥業有限公司)
Pharmaceutical Import & Export Guangzhou Pharmaceutical Import & Export Company Limited (廣州醫藥進
出口有限公司)
Guangyao Baiyunshan Guangzhou Pharmaceutical Baiyunshan Hong Kong Company Limited (廣藥
Hong Kong Company 白雲山香港有限公司)
Nuo Cheng Guangzhou Promise Biological Products Co., Ltd. (廣州諾誠生物製品股份有

限公司)
Baiyunshan Guangzhou Baiyunshan Pharmaceutical Co., Ltd. (廣州白雲山製藥股份有限

公司)
Baiyunshan General Factory Guangzhou Baiyunshan Pharmaceutical General Factory (廣州白雲山醫藥集

團股份有限公司白雲山製藥總廠)
Definitions
Chemical Pharmaceutical Factory Guangzhou Baiyunshan Chemical Pharmaceutical Factory (廣州白雲山醫藥

集團股份有限公司白雲山化學製藥廠)
He Ji Gong Guangzhou Baiyunshan Pharmaceutical Co., Ltd. Baiyunshan He Ji Gong

Pharmaceutical Factory (廣州白雲山醫藥集團股份有限公司白雲山何濟公製
藥廠)
Tian Xin Guangzhou Baiyunshan Tian Xin Pharmaceutical Co., Ltd. (廣州白雲山天心
製藥股份有限公司)
Guang Hua Guangzhou Baiyunshan Guang Hua Pharmacy Co., Ltd., (廣州白雲山光華製
藥股份有限公司)
Ming Xing Guangzhou Baiyunshan Ming Xing Pharmaceutical Co., Ltd. (廣州白雲山明
興製藥有限公司)
HWBYS Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company

Limited (廣州白雲山和記黃埔中藥有限公司)
Baxter Qiao Guang Guangzhou Baxter Qiao Guang Pharmaceutical Co., Ltd. (廣州百特僑光醫療
用品有限公司)
Pharmaceutical Technology Guangzhou Baiyunshan Pharmaceutical Technology Development Co., Ltd.

(廣州白雲山醫藥科技發展有限公司)
Weiling Baiyuanshan Weiling Pharmaceutical Co., Ltd. (白雲山威靈藥業有限公司)
Xing Zhu Guangzhou Baiyunshan Xing Zhu Pharmaceutical Co., Ltd. (廣州白雲山星珠
藥業有限公司)
Chemical & Pharmaceutical Guangzhou Baiyunshan Chemical & Pharmaceutical Technology Co., Ltd. (廣
Technology Company 州白雲山化學藥科技有限公司)
Guangyao General Institute Guangzhou Pharmaceutical Research General Institute (廣州醫藥研究總院有

限公司)
Baiyunshan Pharmaceutical Guangzhou Baiyunshan Pharmaceutical Marketing Co., Ltd. (廣州白雲山醫

Marketing 藥銷售有限公司)
Baiyunshan Medical and Guangzhou Baiyunshan Medical and Healthcare Industry Investment Co.,
Healthcare Industry Company Ltd. (廣州白雲山醫療健康產業投資有限公司)
Medical Instrument Guangzhou Baiyunshan Medical Instrument Investment Company (廣州白雲

Investment Company 山醫療器械投資有限公司)
Guangzhou Baiyunshan Hospital Guangzhou Baiyunshan Hospital Co., Ltd. (廣州白雲山醫院有限公司)

Definitions
WLJ Catering Guangzhou WLJ Catering Management Development Co., Ltd. (廣州王老吉
餐飲管理发展有限公司)
Yi Gan Guangzhou Guangyao Yigan Biological Products Co., Ltd. (廣州廣藥益甘生

物製品股份有限公司)
Golden Eagle Fund Golden Eagle Fund Management Co., Ltd. (金鷹基金管理有限公司)
Runkang Confinement Company Guangzhou Baiyunshan Runkang Confinement Service Center Co., Ltd.（廣
州白雲山潤康月子會所有限公司）
Yi Xin Tang Yunnan Hongxiang Yixintang Phamaceutical (Group) Co., Ltd. ( 雲南鴻翔一
心堂藥業（集團）股份有限公司 )
Baiyunshan Yi Xin Tang Guangzhou Baiyunshan Yi Xin Tang Pharmaceutical Investment &
Development Co., Ltd.（廣州白雲山一心堂醫藥投資發展有限公司）
Hua Cheng Guangzhou Hua Cheng Pharmaceutical Co., Ltd. (廣州花城藥業有限公司)
GMP the English abbreviation of Good Manufacturing Practice, being a set of

mandatory standards applicable to the pharmaceutical industry, which
requires the pharmaceutical companies to ensure the quality of medicines
in the production process shall conform to the national standards in
accordance with the GMP requirements
GAP the English abbreviation of Good Agricultural Practice for Chinese Crude
Drugs (Trial). It refers to the management system for the development of this
specification with a view to standardize the Chinese crude drugs production,
and to ensure its quality as well as to promote the standardization and
modernization of the Chinese crude drugs
GPO group purchasing organizations
Drug Registration the drug supervision and administration department conducts the systematic
evaluation of the safety, effectiveness, quality and controllability of the drugs
proposed for sale in accordance with legal procedures, and determines if it
agrees to perform the approval processes of drug clinical studies, production
of drugs or importing of drugs, which include the approval of the content in
the evidence documents of application for change of drug approval and the
appendix
Essential Drugs List the National Essential Drugs List (the 2018 version) is the basis for medical
institutions to prepare and use drugs. The drugs in the Essential Drugs List
are those adapted to the basic medical and health needs, and are featured
by appropriate dosage and form as well as reasonable pricey and supply and
availability are guaranteed to the public
Medical Insurance Catalogue a Catalogue of the List of Pharmaceutical Products under the National Basic
Medical Insurance, Work-Related Injury Insurance and Maternity Insurance
o f t h e P R C (國家基本醫療保險、工傷保險和生育保險藥品目錄) ( t h e
2017 version), being the standard payable drugs fees for the basic medical
insurance, work-related injury insurance and maternity insurance fund.
Definitions
Provincial Medical a Catalogue of the List of Pharmaceutical Products under the National Basic
Insurance Catalogue Medical Insurance, Work-Related Injury Insurance and Maternity Insurance at
the provincial level of the PRC (the 2017 version) ( 省級基本醫療保險、工傷
保險和生育保險藥品目錄 )（2017 年版）
OEM Original Equipment Manufacture
GZ SOA Development Guangzhou State-owned Asset Development Holdings Limited (廣州國資發

展控股有限公司)
GZ Chengfa Guangzhou China Life Urban Development Industry Investment Enterprise

(Limited Partnership) ( 廣州國壽城市發展產業投資企業（有限合夥）)
Yunfeng Investment Shanghai Yunfeng Xinchuang Equity Investment Center (Limited Partnership)
(上海雲鋒新創股權投資中心（有限合夥）)
Placement Prosperous Age Fund of Huitianfu-Citic bank-Guangzhou Baiyunshan Pharmaceutical

Exclusive Account No.66 Holdings Company Limited (匯添富基金－中信銀行－廣州白雲山醫藥集團
股份有限公司)
Alliance BMP Alliance BMP Limited (聯合美華有限公司)
The Material Assets the Group’s major asset reorganization involving the merger and acquisition
Reorganization in 2013 of Baiyunshan and issue of shares to purchase the assets of GPHL that was
completed in 2013
Sino-Israel Fund Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) ( 廣州中以生物產

業投資基金（ ) 有限合夥）
Elin Company Guangzhou Elin Biotech Industrial Venture Capital Management Company
（廣州以琳生物產業投資管理有限公司）
C.Q. Pharmacentical Holding Chongqing Pharmaceutical Holding Company Limited（重藥控股股份有限公

司）
Company Profile and Financial Highlights
1. COMPANY PROFILE
(1) Legal Chinese Name: 廣州白雲山醫藥集團股份有限公司

Chinese Name Abbreviation: 廣藥白雲山
English Name: Guangzhou Baiyunshan Pharmaceutical
Holdings Company Limited
English Name Abbreviation: GYBYS
Legal Representative: Li Chuyuan
(2) Secretary to the Board: Huang Xuezhen

Address: 45 Sha Mian North Street, Liwan District,
Guangzhou City, Guangdong Province, the PRC
Telephone: (8620) 6628 1217/6628 1219
Fax: (8620) 6628 1229
E-mail: huangxz@gybys.com.cn
(3) Registered address and office: 45 Sha Mian North Street, Liwan District,
Postal code: 510130
Internet website: http://www.gybys.com.cn
E-mail: sec@gybys.com.cn
Principal place of business in Hong Kong: Room 2005, 20th Floor, Tower Two Lippo Center,
89 Queensway, Hong Kong
(4) Designated newspapers for Mainland China: Shanghai Securities News

information disclosure: (上海證券報), Securities Times (證券時報),
China Securities Journal (中國證券報),
Securities Daily (證券日報)
Internet website designated by the http://www.sse.com.cn
CSRC for publishing the annual report:
Internet website of the HKEx for http://www.hkex.com.hk
publishing the annual report:
Place for inspection of the annual report: The Secretariat of the Company
(5) Stock exchanges, names and codes A Shares: SSE

of the Company’s shares:
Stock Code: 600332
Stock Abbreviation: BAIYUNSHAN
H Shares: HKEx
Stock Code: 0874
Stock Abbreviation: BAIYUNSHAN PH
(6) Other information:

First registration date: 1 September 1997
First place of registration: 45 Sha Mian North Street, Liwan District,
Date of registration of change: 31 July 2017
Place of registration of change: 45 Sha Mian North Street, Liwan District,
Unified social credit code 914401063320680X7
Auditors and its address: Ruihua Certified Public Accountants LLP
9/F, West Tower, Zhonghai Real Estate Plaza,
No. 7 Building, No.8 Courtyard, West Binhe
Road,Yongdingmen, Dongcheng District, Beijing
Names of the accountants of the auditors He Xiaojuan, Wen Jing
firm whose signatures are given:
2. PRINCIPAL FINANCIAL DATA AND FINANCIAL INDICATORS AS AT THE END OF THE

REPORTING PERIOD
(1) Principal financial data
Year 2014
on year
increase/
(decrease) After Before
Principal financial data 2018 2017 (%) 2016 2015 restatement restatement
Income from operations (RMB’000) 42,233,838 20,954,225 101.55 20,035,681 19,124,658 18,818,232 18,799,881
Net profit attributable
to the shareholders of
the Company (RMB’000) 3,440,980 2,061,652 66.90 1,508,033 1,300,351 1,194,141 1,192,472
Net profit attributable to
the shareholders of the
Company after deducting
non-recurring items (RMB’000) 2,131,485 1,935,560 10.12 1,071,111 1,128,765 1,092,530 1,112,771
Net cash flow from operating
activities (RMB’000) 5,216,888 1,833,691 184.50 2,544,672 1,941,956 1,751,690 1,761,382
Total profit (RMB’000) 4,018,730 2,492,976 61.20 1,945,053 1,628,122 1,468,061 1,467,177
Year As at 31 December 2014

As at As at on year As at As at
31 31 increase/ 31 31
December December (decrease) December December After Before
Principal financial data 2018 2017 (%) 2016 2015 restatement restatement
Net assets attributable to

the shareholders of
the Company (RMB’000) 21,684,909 18,871,521 14.91 17,345,080 8,450,814 7,705,137 7,739,301
Total assets (RMB’000) 51,482,184 28,314,713 81.82 25,897,170 15,870,577 14,266,903 14,210,784
Total liabilities (RMB’000) 28,338,451 9,051,560 213.08 8,243,380 7,186,644 6,344,908 6,251,805
Equity attributable to the
shareholders of the
Company per share (RMB) 13.34 11.61 14.91 10.67 6.55 5.97 5.99
Total equity (RMB’000) 1,625,791 1,625,791 – 1,625,791 1,291,079 1,291,341 1,291,341
2. PRINCIPAL FINANCIAL DATA AND FINANCIAL INDICATORS AS AT THE END OF THE

REPORTING PERIOD (Continued)
(2) Principal financial indicators
Year 2014
on year
increase/
(decrease) After Before
Principal financial indicators 2018 2017 (%) 2016 2015 restatement restatement
Basic earnings per share (RMB) 2.116 1.268 66.9 1.075 1.007 0.925 0.923
Diluted earnings per share (RMB) 2.116 1.268 66.9 1.075 1.007 0.925 0.923
Basic earnings per share after
deducting non-recurring
items (RMB) 1.311 1.191 10.12 0.764 0.874 0.846 0.862
Weighted average return on 16.93 11.34 An increase 12.75 15.91 16.48 16.38
net assets ratio (%) of 5.59
percentage
points
Ratio of weighted return 10.48 10.64 A decrease 9.06 13.81 15.08 15.29
on net assets after deducting of 0.16
non-operating items (%) percentage
point
Return on total equity attributable 15.87 10.92 An increase 8.69 15.39 15.50 15.41
to shareholders of the of 4.95
Company (%) percentage
points
Ratio on total equity attributable 42.12 66.65 A decrease 66.98 53.25 54.01 54.46
to shareholders of the Company of 24.53
to total assets(%) percentage
points
Gearing ratio (%) 55.05 31.97 An increase 31.83 45.28 44.47 43.99
of 23.08
percentage
points
Note: The above financial data and indicators are computed based on the consolidated financial statements.
3. PRINCIPAL FINANCIAL DATA OF 2018 ON QUARTERLY BASIS
The fourth
The second The third quarter quarter
The first quarter quarter (July – (October –
(January – March) (April – June) September) December)
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Income from operations 6,909,195 7,930,819 15,035,811 12,358,013

Net profit attributable to the
shareholders of the Company 905,169 1,713,830 820,294 1,687
Net profit attributable to the
shareholders of the Company
after deducting non-recurring items 872,357 668,639 640,838 (50,349)
Net cash flow from operating activities 802,226 400,551 2,152,939 1,861,172
Note: Compared with the first three quarters, the changes of the revenue and the profit for the fourth quarter were due to:
(1) in order to achieve high-quality development, the Company’s subsidiaries integrated sales channels, controlled social
inventory, which is expected to affect the revenue and profit in the short term; (2) to better carry out the transformation
of workshop to prepare for GMP certification,the production and sales volume decreased, which is expected to affect the
revenue and profit of the Group; (3) the Company’s subsidiaries have accelerated the development and investment of
consistency evaluation for generic drugs, resulting in increased R&D costs and reduced profits; (4) Profit arising from the
changes in fair value of equity interests of C.Q. Pharmaceutical Holding held by the Company was minus RMB136 million.
Provision for impairment on goodwill of GP Corp. was provided amounting to RMB118 million as at the end of the year.
4. NON-RECURRING ITEMS AND THEIR AMOUNTS
Amount in Amount in Amount in

2018 2017 2016
Items (RMB’000) Notes (RMB’000) (RMB’000)
Gain/(Loss) on disposal 707 (1,669) 15,244

of non-current assets
Government subsidies recognized as gain/ 243,250 This is the amount 171,549 496,824
(loss) of government
subsidies received
by the Company’s
subsidiaries which
was transferred
to non-operating
income in the
Reporting Period.
Gains generated from the amount of 125,982 – –

the enterprise’s investment costs for
acquisition of subsidiaries, joint ventures
and associates lower than the earnings
from the fair value of the net identifiable
assets of the invested entity that the
enterprise should enjoy upon acquisition
Gain/(Loss) on changes in fair value arising 115,575 (1,151) (1,087)
from trading financial assets and trading
financial liabilities held (excluding the
valid hedging business related to normal
operating activities of the Company) as
well as the investment gains received
from disposal of trading financial assets,
trading financial liabilities and financial
assets available for sale
Write-off of provision for impairment 7,200 4,040 3,110
of accounts receivable undergoing
independent impairment test
Other non-operating income and expenses 9,656 (26,099) (33,640)
excluding the above items
Investment gains from long-term equity 870,677 – –
investment measured at fair value
Income tax effect (59,294) (21,209) (40,659)
Effect on minority interest (after tax) (4,258) 631 (2,871)
Total 1,309,495 126,092 436,921

5. CHANGES IN SHAREHOLDERS’ EQUITY IN 2018 (CONSOLIDATED)
Total
shareholders’
equity
Other attributable
Share Capital comprehensive Surplus Undistributed to the parent
Items capital reserve income reserve profits company
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Opening balance 1,625,791 9,875,178 (6,819) 1,154,762 6,218,195 18,867,107

Additions – – 8,983 213,973 3,440,980 3,663,936
Deductions – 10,094 2,641 – 833,399 846,134
Closing balance 1,625,791 9,865,084 (477) 1,368,735 8,825,776 21,684,909
6. ITEMS RELATED TO FAIR VALUE MEASUREMENT
Balance
at the Balance
beginning at the Changes Impact on the
of the end of the during the profit for the
Reporting Reporting Reporting Reporting
Items Period Period Period Period
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Other equity instrument investments 62,686 84,898 22,212 –

Other non-current financial assets 975,857 226,938 (748,919) (125,278)
Total 1,038,543 311,836 (726,707) (125,278)
Note: During the Reporting Period, the change in other equity instrument investment is mainly due to the increase in investment
in Sino-Israel Fund and Elin Company by the Company, which amounts to RMB 25,098,000.
Company’s Business Profile
1. DESCRIPTION OF THE GROUP’S PRINCIPAL BUSINESS, OPERATION MODEL AND INDUSTRY

SITUATION DURING THE REPORTING PERIOD
(1) Main Business and Products
Since its establishment, the Company has been committed to the healthcare industry. After
years of development, the Company has continuously to grow in both of its scale and efficiency.
Currently, the Group is principally engaged in: (1) research, development, manufacturing and
sales of Chinese patent medicine, western medicine, chemical raw materials, natural medicine,
biological medicine and chemical raw materials intermediates; (2) wholesale, retail and import
and export business of Western medicine, Chinese medicine and medical equipment; (3) the
research and development, production and sales of great health product; and (4) the health
industry investment in medical care, health management, health maintenance and elderly care
etc.
(i) Great Southern TCM (pharmaceutical manufacturing business)
There are 25 pharmaceutical manufacturing companies and organizations under the

Company (including 3 branches, 19 subsidiaries and 3 joint ventures). The above
enterprises or institutions engaged in the R&D and manufacturing of Chinese patent
medicine and western medicine, chemical raw materials, intermediates chemical raw
materials, biomedicine and natural medicine, etc..
1) The Group is an epitome of the southern TCM. The Company has more than 10
China time honored brand enterprises such as Zhong Yi, Chen Li Ji, Qi Xing, Jing
Xiu Tang, Pan Gao Shou, etc.. The Company have 3 protected Chinese traditional
medicine of national grade and the main products include Xiao Ke Pill, Hua Tuo
Zai Zao Pill, compound Salvia Milltiorrhiz slice, Ban Lan Gen Granule, Qing Kai Ling
series, An Gong Niu Huang Pill, Zi Shen Yu Tai Pill, Shu Jin Jian Yao Pill, Xiao Chai
Hu Granule, Xia Sang Ju Granule, Zhui Feng Tou Gu Pill etc. The Group boasts clear
brand and variety advantages in proprietary Chinese medicines in southern China
and even countrywide.
2) The Group has a complete antibiotic production chain ranging from raw material
medicine to preparation, with products covering commonly used antibiotic varieties
and male medicine. The Group integrated the antibiotic brands with the famous
trademark “Kang Zhi Ba”, striving to make a market image with the number one
brand of oral antibacterial anti-inflammatory. The Group’s chemical medicine
includes Cefathiamidine, Cefixime, Amoxicillin and Sildenafil Citrate Tablets (“Jin
Ge”), etc..

SITUATION DURING THE REPORTING PERIOD (Continued)
(1) Main Business and Products (Continued)
(ii) Great Health Industry
The Great Health Industry segment of the Group mainly engaged in the production, R&D
and sale of beverage, food, healthcare product and cosmeceuticals, etc., including the
subsidiaries, WLJ Great Health and Wang Lao Ji and the main products include Wang Lao
Ji Herbal Tea, ganoderma spore oil capsules, lozenges, tortoise herb jelly etc..
(iii) Great Commerce (Pharmaceutical distribution business)
The pharmaceutical distribution business of the Group mainly includes the wholesale,
retail, and import and export business of pharmaceutical products, medical equipment
and healthcare products etc. The wholesale business is carried out principally through the
Company’s subsidiaries, namely GP Corp., Cai Zhi Lin and Pharmaceutical Import & Export.
The retail business is carried out principally through Cai Zhi Lin pharmacy chains, Jian Min
pharmacy chains, GPC Prescription Pharmacy chains and Ying Bang pharmacy, etc. GP
Corp. is the largest pharmaceutical logistics company in Southern China.
(iv) Great Medical Care
The Group leveraged on Baiyunshan Medical and Healthcare Industry Company and
Medical Instrument Investment Company as the main investment vehicles and used various
means, including new establishment, joint venture and co-operation to focus on the
development of medical instrument industry and three areas, i.e. medical services, health
maintenance and modern elderly care.
Currently, the Great Medical Care segment is at the stage of investment expansion.The
projects that have been invested or founded include Guangzhou Baiyunshan Hospital, the
Tibetan-style Health Preservation Castle, Runkang Confinement Company and Guangzhou
Zhongcheng Medical Device Industry Development Co., Ltd. etc.

(2) Operating Model
(i) Great Southern TCM
1) Procurement Model
After completion of the Material Assets Reorganization in 2013, the Group

integrated the procurement system of its subsidiaries, and established a centralized
procurement platform with Pharmaceutical Import & Export and Cai Zhi Lin forming
the core. The intensively centralized procurement of raw materials and auxiliary
materials, Chinese herbal medicine, packaging materials and machinery equipment
materials, improved the ability of negotiation on prices and risk resistance and
effectively reduced the procurement cost.
Details of the centralized procurement platform of the Group are set out below:
Centralized
procurement
No. Procurement platform Description
a Bulk Chinese herbal Cai Zhi Lin, relevant Pursuant to the procurement
medicine subsidiaries with requirements of the bulk Chinese
GAP herbal medicine, the Group
established direct links with the
production spots of the raw
materials of medicine, ensured the
valuable raw materials were stable
and controllable through certificated
GAP bases, so as to ensure the
quantity, quality, time and cost of
the bulk supply of Chinese herbal
medicine.
b Bulk raw materials and Pharmaceutical The Group ensured the advantage of
auxiliary materials, Import & Export quality and cost of the bulk raw
packaging materials and auxiliary materials, packaging
materials through strengthening
supplier development, improving
and subdividing the supplier
classification management and
cultivating strategic cooperation
suppliers.
c Imported equipment Guangyao Guangyao Baiyunshan Hong Kong

Baiyunshan Hong Company takes charge of the
Kong Company, imported equipment procurement,
Pharmaceutical Pharmaceutical Import & Export
Import & Export takes charge of the import
formalities.

(2) Operating Model (Continued)
(i) Great Southern TCM (Continued)
2) Production Model
The subsidiaries of the Company formulated the annual, monthly and weekly
production plan and arrange production according to the production plan based on
the demands of the medical market. The enterprises under the Company organized
the production strictly in accordance with the national GMP requirements and
strictly implemented the relevant national regulations in the aspects of purchase
of raw materials, allocation of manpower, equipment management, production
procedures, quality control, packaging, transportation and so on; throughout
the entire manufacturing processes of pharmaceuticals and products, the Quality
Control Department conducts testing and monitor the whole processes of raw
materials, auxiliary materials, packaging materials, intermediate products and
finished products so as to ensure product quality and safety. Meanwhile, the
Company carries out supervisions and guidance for the production management of
enterprises under the Company in the aspects of technology, quality, environment
protection, employee safety, hygiene and health, and so on.
3) Sales Model
① Self-operation and agency mode
The Group mainly leverages on sales channels of distributors and agents at

all levels to cover the majority of hospitals, community medical services and
retail terminals in China. For products in hospitals’ tenders, the Group carries
out tendering process throughout the country according to the relevant
national policies. After winning the bid, it carries out distribution and
dispatching process for relevant pharmaceutical products. For products not
tendered by hospitals, the Group conducts promotion mainly by agent sales
and by way of distribution.
② Sales platform
In recent years, the Group has integrated its internal marketing resources
to establish a pharmaceutical industry marketing platform with Baiyunshan
Pharmaceutical Marketing as the core, which has integrated the marketing
business and marketing staff of four enterprises, namely Baiyunshan General
Factory, Guang Hua, Jing Xiu Tang and Ming Xing.
In addition, the Group has proactively adapted itself to new economy,

innovated new models, actively built up e-commerce marketing system and
developed the e-commerce business. Currently, the Company’ s Guangyao
Baiyunshan flagship store has set up e-commerce terminal sales platforms at
Tmall and JD. com; GYJM. com has become the designated online drugstore
for medical insurance that can make payment online without medical
insurance card.

(ii) Great Health Industry
1) Purchasing Mode
The centralized procurement is mainly through the unified centralized procurement

platform established by the Group.
2) Production Mode
Strictly in accordance with the relevant national laws and regulations, the
subsidiaries of the Company, through (among other things) production facilities
established by the Group and OME, ensured the safety quality in the entire process
from plantation, harvesting, manufacturing to use by consumers, and in the
entire process of base of the raw materials, auxiliary materials, packing materials,
personnel and equipment, final products and consumer safety.
3) Sales Mode
The revenue of the Great Health segment of the Group mainly came from Wang
Lao Ji herbal tea. For sales of Wang Lao Ji herbal tea, WLJ Great Health and Wang
Lao Ji mainly depends on distributorship by setting three tiers of distributors. The
first-tier distributors are directly responsible to WLJ Great Health and Wang Lao
Ji, and took respective responsibilities for regional channel development as per
the marketing tasks given by WLJ Great Health and Wang Lao Ji. The second-
tier distributors shall purchase products from the first-tier distributors and be
responsible for distribution and dispatching. WLJ Great Health and Wang Lao
Ji shall directly be responsible for the products’ advertisement investment, and
participate in terminal expansion, promotion and customer maintenance etc.

(iii) Great Commerce
The Group’s pharmaceutical circulation businesses include two modes of pharmaceutical

distribution and retail, whose profits came from price difference of purchasing price and
marketing price medicines and medical equipments/or dispatching expense.
GP Corp., the holding subsidiary of the Company, is the leading medicine circulation
enterprise in Southern China, with good business reputation, huge sales network, a wide
range of sales channels and stronger pharmaceutical distribution capacity. The Group
has “Cai Zhi Lin”, “Jian Min” and other well-known pharmaceutical retail chain and 76
medicine retail outlets, with strong terminal strength.
As at 31 December 2018, the Group had 76 retail chain pharmacy outlets, including 32
“Cai Zhi Lin” pharmacy outlets which specialized in traditional Chinese medicines, 30 “Jian
Min” pharmacy outlets which specialized in western medicine, medical apparatus and
instruments, 13 Professional DTP “GPC Prescription Pharmacy” and one pharmacy named
Ying Bang.
The main performance driving factors: During the Reporting Period, the Group’s
revenue amounted to RMB42,233,838,000, representing an increase of 101.55%
compared with the corresponding period last year. For the growth factors, please refer
to the “Management Discussion and Analysis” in section 4 “Discussion and Analysis of
Operation” in this report.
(3) Current circumstances of the development of the industry
In recent years, under the influence of economic restructuring and the deepening of medical
and health reform, the growth rate of the pharmaceutical industry has declined.The income of
pharmaceutical manufacturing enterprises above designated size in 2018 was RMB2,426.47
billion, representing an increase of 12.4%, of which the operating revenue was RMB2,398.63
billion, representing an increase of 12.6%; total profit amounted to RMB309.42 billion,
representing an increase of 9.5% (source: National bureau of statistics).

(4) Periodic Characteristics
Among the businesses of the Group, the Great Commerce business segment has no obvious
seasonality. Seasonal diseases such as flu have a higher incidence of morbidity in a specific period
of time, and are rapidly prevalent after the outbreak and therefore there is a seasonal surge in
demand for drugs that prevent and treat such diseases. As a result, the sales of some drugs in
the Great Southern TCM segment shows certain seasonality. The demand for the current main
product of the Great Health segment, namely Wang Lao Ji herbal tea, relates to weather and
major holidays. The sales will significantly increase when the weather is hot. In addition, as the
Group explored the sales channels of the gift market, the sale of the Wang Lao Ji herbal tea has
increased during major festivals.
(5) Position of the Company in the Industry
The Group is one of the largest pharmaceutical manufacturing companies in the PRC.After years
of meticulous development and accelerated expansion, the Group basically achieved the whole
industrial chain layout of biomedicine and health industry and formed the four business segments
of Great Southern TCM, Great Health, Great Commerce and Great Medical Care and three new
types of operation in e-commerce, capital finance and medical equipment.
2. SIGNIFICANT CHANGES IN THE MATERIAL ASSETS OF THE GROUP DURING THE REPORTING
PERIOD
✓Applicable □Not applicable
During the Reporting Period, the significant changes in material assets of the Group are shown in the
following table:
Percentages
Categories of Assets 31 December 2018 of changes
(RMB’000) (%)
Total assets 51,482,184 81.85

Include:
Notes receivable and Accounts receivable 13,653,056 384.77
Advances to suppliers 837,808 226.54
Other receivables 1,056,551 38.61
Inventories 9,231,739 149.49
Fixed assets 3,165,747 52.04
Construction in progress 480,306 68.72
Intangible assets 1,013,353 39.20
Goodwill 825,573 7,079.17
The main reason for the changes in the above main assets is the (1) major asset purchase event of
acquiring 30% equity interest in GP Corp. in cash by the Company and the asset transfer and change
in business registration was completed on 31 May 2018. Thereafter, GP Corp. became a subsidiary
which is controlled as to 80% by the Company and was consolidated into the Company’s accounts;
(2) the Company completed the acquisition of 48.0465% equity interest in Wang Lao Ji, and Wang
Lao Ji became a subsidiary controlled as to 96.093% by the Company and was consolidated into the
Company’s accounts. Please refer to the “B Principal Operations During the Reporting Period–(c) Analysis
on Financial Conditions-V Assets and liabilities” in section 4 “Discussion and Analysis of Operation” for
details.
3. ANALYSIS ON CORE COMPETITIVENESS DURING THE REPORTING PERIOD
The Group’s core competitiveness capacity is principally demonstrated in the following aspects:
(i) The Group possesses rich product and brand resources:
1) Products: The Group has formed complete series in areas such as diabetes, cardiovascular
and cerebrovascular diseases, anti-bacteria and anti-infection, cooling and detox,
parenteral nutrition, coughing, bone-setting and pain relief, rheumatism and bone pain,
gynaecological and paediatric medication, and nurturing and health. The Group has more
than 30 forms and nearly 2,000 specifications and over 100 exclusive products.
2) Brands: Currently, the Group and its joint venture have trademarks of 9 nationally
renowned brands, 20 renowned brands in Guangdong Province and 25 renowned brands
in Guangzhou City. Among which, the brand awareness and reputation of “BYS” have
a greater impact and appeal among consumers in the country, and is one of the most
valuable pharmaceutical brands in the country. After completion of The Material Assets
Reorganization in 2013 and non-public offering of A Shares in 2015, the Group promoted
the grand brand strategy on the basis of integrating brand resources, implementing
the changes in brand marketing model from developing individual brands to grouping
brands under one umbrella with collective strategy, four business segments with unique
characteristics, namely, Great Southern TCM, Great Health, Grest Commerce and Great
Medical Care, gradually constituted and three new modes of businesses, namely capital
finance, e-commerce and medical equipment also gradually constituted. The Group has
extended its coverage of brand value from traditional medical products to new Great
health products.
(ii) Long history in Chinese traditional medicine and cultural soft power. The Group has 12 long
lasting enterprises in Chinese pharmaceutical industry, among which Chen Li Ji, Zhong Yi, Pan
Gao Shou, Jing Xiu Tang, Cai Zhi Lin, Wang Lao Ji, Xing Qun, Qi Xing, Ming Xing and Guang
Hua have been established for over a hundred years. Also, the Group has 6 items admitted as
the nation’s Intangible Cultural Heritage, namely “Xia Sang Ju” (夏桑菊) of Xing Qun, “Da Shen
Kou Yan Qing” (大神口焱清) of BYS, Wang Lao Ji Herbal Tea, the traditional Chinese medicine
culture of each of Chen Li Ji and Pan Gao Shou as well as the “Production Technology of Bao Zi
Tang Bao Ying Dan” (保滋堂保嬰丹製作技藝) of Zhong Yi. The Group had established the Chen
Li Ji Museum (陳李濟博物館), “Chen Li Ji Health Preservation Research Institute” (陳李濟健康
養生研究院), “Lingnan Experience Centre of Chinese Medicine Culture” (嶺南中醫藥文化體驗
館), Shen Nong Cottage (神農草堂), Cai Zhi Lin Museum (采芝林博物館) and Wang Lao Ji Herbal
Tea Museum had established a number of platforms for the promotion of the “Grand Southern
TCM” culture and demonstration of the long history and splendid culture of Chinese medicine
and rebuilding the famous brands of Chinese medicine.
3. CORE COMPETITION CAPACITY ANALYSIS DURING THE REPORTING PERIOD (Continued)
(iii) The Group has a relatively complete production chain system, including the existing major
pharmaceutical assets. Through the internal and external forward integration and backward
integration, the Group has formed a thorough raw materials, research and development,
production, circulation and terminal production chain. In respect of the supply of Chinese
herbs, the Group and its joint ventures have more than 70 GAP herbs bases nationwide, which
effectively ensure the quality and supply of Chinese herbs and controls the production costs. In
respect of research and development of products, the Group continues to build a comprehensive
technological innovation system. The Group has built an extensive collaborative network with
renowned scientific research institutions, both domestic and abroad to create a synergy effect
between both sides for highly effective utilization of favourable resources from various parties,
promoting development through the support of technology.
(iv) The Group has a large-scale pharmaceutical wholesale distribution and delivery network and a
broad and stable customer base in China, and the Company is one of the first pharmaceutical
trading enterprises in Guangdong Province that obtained the GSP certificate. The Group have
76 retail chain pharmacy outlets. The Group has also established the largest pharmaceutical
retail network and medicine logistics center in southern China. With the advantages of its
strong market position and marketing network, the Group has established a long-term and
reliable business relationship with hundreds of thousands of customers in 31 provinces, cities
and autonomous regions across the country, including medium-and-large-sized hospitals,
pharmaceutical wholesalers, distributors and retailers. The Group also has the industry leading
digital integration and operation informatisation management system. GP Corp., a subsidiary of
the Company, was within the first batch of enterprises in the country which passed the digital
integration and operation informatisation management system and assessment system.
3. CORE COMPETITION CAPACITY ANALYSIS DURING THE REPORTING PERIOD (Continued)
(v) The Group has an ever-improving technological innovation system. The Group has continuously
strengthening the construction of platforms for many years, improving the scientific research
innovation system. As at the date of this report, the Group and its joint ventures have 6 state level
research and development institutions, 1 national level corporate technical center, 2 postdoctoral
workstation, 14 provincial level corporate technical centers, 16 provincial level engineering
technical centers, 14 municipal level engineering technical centers, 14 municipal level engineering
technical research and development centers, 6 provincial level key laboratories and 5 municipal
level key laboratories. The Group has research and development of Chinese medicine and
Chinese NHPs, Chinese medicine engineering technology including automatic control and online
testing, Chinese preparation medicine, supercritical CO2 extraction, reversal extraction, separation
of macroporous resin adsorption, quality control for finger printing of Chinese medicine, synthesis
and technology of cephalosporins antibiotic APIs and core technology in national leading position
such as sterile powder production technology and preparation agent technology.
During the Reporting Period, the Group newly added (1) 3 provincial level engineering centers,
i.e. Engineering Research Center for Baiyunshan General Factory, Engineering Research Center
for Zhong Yi and Engineering Research Center for Nuo Cheng; (2) 2 provincial level corporate
technical centers, i.e. Guangdong Province Precision Medical Biotechnology Products Engineering
Technology Research Center and Guangdong Province Freeze-dried Human Rabies Vaccine
(Vero Cell) Engineering Technology Research Center; (3) 1 provincial key laboratory: Zhong
Yi Guangdong Province Southern TCM Development Engineering Laboratory; (4) 2 municipal
enterprise technology centers: Baiyunshan General Factory and Guangzhou Bai Di.
(vi) The Group has a forward-thinking, high quality, reasonably structured and extremely innovative
team of talents. In recent years, the Group has insisted on attracting talents with competitive
work environment and remuneration package, nurturing them with its excellent corporate culture
and motivating them with promising corporate visions. Currently, the Group has a strong high-
level talent team with 2 Nobel Prize winners, 9 domestic academicians, 7 foreign academicians,
2 State Council Special Allowance experts in-service, 23 chief experts (scientists), 54 doctors
and post doctors. The Group also has nearly 6,292 technology personnels, 1,514 of which have
intermediate titles or above.
There is no significant change in the Group’s core competitiveness during the Reporting Period.
Discussion and Analysis of Operation
1. MANAGEMENT DISCUSSION AND ANALYSIS
During the Reporting Period, the Group actively adapted to the new normality of economic development
according to the development idea of “a year of innovation and efficiency enhancement” by insisting on
maintaining stability while making progress,adhering to the requirements of high quality development
and accelerating business structure adjustment with innovation driven focus, sustainable stable
development was maintained in the operating results. In 2018, the Group’s revenue amounted to
RMB42,233,838,000, increased by 101.55% year-on-year; the total profit was RMB4,018,730,000,
increased by 61.20% year-on-year; and the net profit attribute to shareholders of the Company was
RMB3,440,980,000, increased by 66.90% year-on-year.
When compared with the corresponding period in 2017, the Group recorded a remarkable growth in
operating results during the Reporting Period, which was mainly driven by the following: (1) During
the Reporting Period, as the Group took forward the development of various business segments
and made increased efforts in market expansion, the principal operation therefore achieved a steady
and faster growth. (2) the asset transfer and change in business registration of the significant asset
acquisition in relation to the Company’s acquisition of 30% equity interests in GP Corp. in cash were
completed on 31 May 2018. Thereafter, GP Corp. became a subsidiary controlled by the Company
with 80% equity interests and was consolidated into the Company’s accounts. In view of the above
and in accordance with the Accounting Standards for Business Enterprises, income generated from
operations of GP Corp. has been included in the Company’s combined financial statements since June
2018, resulting in a higher year-on-year growth in operating income; meanwhile, the Company’s equity
interests previously held in the acquiree before the acquisition date were re-measured at fair value on
the acquisition date and the difference of RMB825.77 million between the fair value and the carrying
value was included in the “investment income” item in the income statement for the Reporting Period,
resulting in a substantial year-on-year increase in profit. (3) During the Reporting Period, the Company
completed the acquisition of 48.0465% equity interests in Wang Lao Ji, and Wang Lao Ji became a
subsidiary controlled by the Company with 96.093% equity interests and was consolidated into the
Company’s accounts. Therefore, the income of RMB170.88 million from equity acquisition was included
in the income statement for the year. (4) According to the judgment that the Company has significant
influence over Yi Xin Tang and re-categorized its shareholding in Yi Xin Tang as “long-term equity
investments” instead of “other non-current financial asset” and the shareholding is accounted by equity
method in May 2018. The fair value of such investment was increased by RMB254.93 million. The
additional amount was included in “gain or loss arising from a change in fair value” item in the income
statement for the Reporting Period, leading to a higher total profit for the Reporting Period.
During the Reporting Period, the Group had made solid progress in the following areas:
Firstly, we continued to increase efforts in building channels for potential products and brand
promotions, and increased efforts in nurturing key products, to improve sales, expand markets
and create “fashionable Chinese medicine” with continuous and strong efforts, and to promote
transformation in the development of the traditional Chinese medicine segment so as to drive the
improvement in development quality of the Great Southern TCM segment. Moreover, the Group
continued to implement the resources consolidation strategy by refining consolidation work, fully
utilizing the advantages in distribution network and logistics of the Great Commerce segment and
coordinating the synergies and cooperation between the Great Southern TCM segment and the Great
Commerce segment to realize complementary enhancement and improvement in these two major
business segments. During the Reporting Period, sales revenue achieved good growth in products of
Great Southern TCM segment through Great Commerce segment.
1. MANAGEMENT DISCUSSION AND ANALYSIS (Continued)
Secondly, we promoted the quality enhancement in the Great Health segment by focusing on “diversity
in products” and using fashionable marketing and regulated operation as driving forces. (1) On the
basis of channel building and closely surrounding the “Ji culture”, the gift market was further developed
with refinement.WLJ Great Health reinforced the promotions of “drinking red-can Wang Lao Ji to enjoy
an auspicious year” during the Spring Festival period by creating a form of“Ji culture” and strongly
enhanced the red-can branding effect. (2) The development quality of the Great Health segment was
enhanced by fashionable marketing. During the Reporting Period, WLJ Great Health used a celebrity
spokesperson for the first time and stimulated consumption among the young customers, while the
development of the bottled ready-to-drink market and the end-user outlet network was enhanced,
facilitating continuous growth in sales. Meanwhile, Wang Lao Ji freshly brewed herbal tea shop
gradually transformed from the model of direct marketing to franchised marketing and a total of 26
stores were opened. (3) The product strategy of “one core product with diversification, and diversity in
products” was implemented to promote diversification of singular products continuously. During the
Reporting Period, Baiyunshan mineral water in a new packing and the new coconut milk product of WLJ
Great Health were launched successfully. Projects such as Wang Lao Ji Jasmine Flavor Herbal Tea and
Bubble Herbal Tea (爆冰涼茶) are also under intense development.
Thirdly, the quality of the Great Commerce segment was enhanced by adopting “further development
+ expansion” as the core strategy. (1) The transaction of acquiring 30% equity interest in GP Corp. in
cash by the Company was completed in the Reporting Period. Thereafter, GP Corp. became a subsidiary
controlled as 80% by the Company, enlarging the size of the Group’s Great Commerce segment and
laying a foundation for the next step of consolidation of segmental resources. (2) Continuous adhering
to the terminal strategy and expansion of various classes of hospitals and medical institution business.
During the Reporting Period, GP Corp. won the first place in the bid for Guangzhou GPO and entered
the list of pilot enterprises for national supply chain innovation and application, laying a foundation
for the stabilization and expansion of the commercial pharmaceutical market in South China. (3) Retail
business was developed in all directions with diversification and distribution plan. During the Reporting
Period, GP Corp. established GPC Prescription Pharmacy Co., Ltd., opened a prescription pharmacy,
and established its presence in the retail market of prescription drugs outside the hospital. Cai Zhi
Lin developed a featured retail terminal chain service and continued to develop the business model
of “drugstore chains + TCM medical centre”; the Company, Yi Xin Tang and Guangdong Guangyao
Jinshen Equity Investment Fund Management Co., Ltd. (廣東廣藥金申股權投資基金管理有限公司)
jointly invested to establish Baiyunshan Yi Xin Tang by fully utilizing the advantages of resources of
all cooperating parties, focusing on the market of Guangdong and through various methods such as
merger and acquisition and new establishment to accelerate the formation of pharmaceutical retail
terminal chain.
Fourthly, the layout formation of the Great Medical Care segment was enlarged: (1)By integrating
peripheral properties to expand in scale, while soft power of Guangzhou Baiyunshan Hospital was
improved at the same time to enhance medical standard and brand image, business growth was
increased. (2) New cooperation projects in the areas of postpartum services and elderly services were
explored and developed for gradual commencement. During the Reporting Period, Baiyunshan Medical
and Healthcare Industry Company and Guangzhou South Runkang Service Co., Ltd. (廣州南方潤康
服務有限公司), a subsidiary of Nanfang Hospital, established a joint venture, Runkang Confinement
Company. (3) The medical device new business was actively nurtured, and Zhongcheng Medical Device
Industry Development Co., Ltd., in which we held an equity interest was used to build an operation
platform for the Medical Device Innovation Incubation Park to lay a solid development base for medical
and medical device developments.
1. MANAGEMENT DISCUSSION AND ANALYSIS (Continued)
Fifthly, innovations were driven to optimize and improve the quality of scientific research and products
to promote high quality development in technology: (1) Quality management work was stringently
monitored to create a high pressure environment for quality management by conducting self-
evaluation on weak segments in quality management and potential safety hazards and by providing
training in pharmaceutical administrative and legal regulations to enhance awareness on corporate
laws and quality. (2) The establishment of an innovation system was enhanced and breakthroughs
were achieved in the research of leading and innovative products. During the Reporting Period,
Baiyunshan Pharmaceutical General Factory obtained clinical test approval for Class 1.1 new chemical
drugs Ceftriamidine Sodium for injection. The Group and joint ventures obtained 2 approvals for
manufacturing and filed 2 approvals for clinical research approval. The Group applied for 125 patents
and had 52 licensed patents. 13 enterprises passed the standard implementation for intellectual
property. 12 enterprises passed the recertification for high-tech enterprise. It obtained three China
Patent Excellence Award, one First Prize, one Second Prize and one Third Prize of Guangdong Province
Science and Technology Award. (3) The Group promoted the integration of production resources in
accordance with the principle of gradual and orderly progress with the easier tasks started before the
more difficult ones. After Qi Xing became an enterprise that holds marketing licenses successfully in
2017, in March 2018, Xing Qun successfully obtained the Approval for Supplementary Application
Regarding Drugs and became the holder of 25 varieties of vitamin AD drops of the former Zhujiang
Pharmaceutical Factory (珠江藥廠). The successful completion of the holder application of the two
pilot enterprises has accumulated rich experience for the subsequent follow up work of production
resources integration. (4) Major projects in scientific research and innovation were further implemented
continuously, and consistency evaluation for generic drugs was promoted steadily.
Sixthly, internal management was strengthened, operational quality was optimized and management
efficiency was enhanced. During the Reporting Period, the Group strictly managed the aspects of party
building, strategy, appraisal, regulation, cost, risk, safety and environmental protection, increased
efforts to promote information technology construction, enhanced resources integration and integrated
management, and enhanced the quality of macro-management development.
2. CIRCUMSTANCES OF THE OPERATION DURING THE REPORTING PERIOD
(1) Analysis of principal operations
Analysis of change in certain items in income statement and cash flow statement
Increase/
The The (Decrease)
Reporting corresponding over the same
Items Period period of 2017 period of 2017
(RMB’000) (RMB’000) (%)
Revenue 42,233,838 20,954,225 101.55

Include: income from principal operations 41,980,378 20,789,416 101.93
Cost of sales 32,164,392 13,063,229 146.22
Include: cost from principal operations 32,106,055 13,023,398 146.53
Selling and distribution expenses 5,056,821 4,285,949 17.99
General and administrative expenses 1,699,062 1,206,295 40.85
Research and development expenses 585,498 373,288 56.85
Financial expenses (6,655) (210,571) 96.84
Profit before tax 4,018,730 2,492,976 61.20
Net profit attributable to shareholders
of the Company 3,440,980 2,061,652 66.90
Net cash flow from operating activities 5,216,888 1,833,691 184.50
Net cash flow from investing activities 1,109,718 (2,440,644) 145.47
Net cash flow from financing activities (2,751,337) (484,274) (468.14)
Notes:
1. Revenue for the Reporting Period increased as compared with the same period of last year, was due to: (1)
consolidation of GP Corp. and Wang Lao Ji’s accounts into the Company’s accounts during the Year, which led
to a year-on-year increase of RMB20.322 billion in this statement item for the Reporting Period; (2) an increase in
principal operations income of the Company’s subsidiaries.
2. Cost of sales increased in the Reporting Period as compared with the same period of last year, was due to: (1)
consolidation of GP Corp. and Wang Lao Ji’s accounts into the Company’s accounts during the Year, which led to
an increase of RMB19.042 billion in this statement item; (2) a slight increase in cost from principal operations of
the Company’s subsidiaries.
3. General and administrative expenses increased in the Reporting Period as compared with the same period of last
year, was due to: (1) consolidation of GP Corp. and Wang Lao Ji’s accounts into the Company’s accounts during
the Year, which led to an increase of RMB257 million in this statement item; (2) an increase in corresponding
expenses as a result of constant business expansion of the Company’s subsidiaries
4. Research and development expenses for the Reporting Period increased as compared with the same period of last
year, which was due to: increase in drug consistency evaluation expenses and expenses on other research projects
of the Company’s subsidiaries.
5. Financial expenses increased in the Reporting Period as compared with the same period of last year, which was
due to: (1) consolidation of GP Corp. and Wang Lao Ji’s accounts into the Company’s accounts during the Year,
which led to an increase of RMB223 million in this statement item; (2) improvement in the fund management of
the Company’s other subsidiaries, increase in interest income and reduction in financial costs as a result of the
reasonable fund allocation, increase in capital efficiency as well as optimization in types of deposits.
2. CIRCUMSTANCES OF THE OPERATION DURING THE REPORTING PERIOD (Continued)
(1) Analysis of principal operations (Continued)
6. Profit before tax increased in the Reporting Period as compared with the same period of last year,which was due
to: (1) the income of RMB985 million generated from acquisition of equity interests in GP Corp. and Wang Lao Ji
by the Company; (2) an increase in the profits of the Company’s subsidiaries; (3) an increase of RMB119 million in
net profit arising from the changes in fair value of equity interests of Yi Xin Tang and C.Q. Pharmaceutical Holding
hold by the Company.
7. Net cash flow from operating activities for the Reporting Period increased as compared with the same period
of last year, which was due to: (1) consolidation of GP Corp. and Wang Lao Ji’s accounts into the Company’s
accounts during the Year; (2) Increased cash flow from daily operational activities as a result of growth in advance
payment from customers and collection of receivables of products.
8. Net cash flow from investing activities for the Reporting Period increased as compared with same period of last
year, which was due to: (1) the fact that not only more structured deposits and wealth management products
of the Group matured as compared with the same period of last year, but also there were less purchases of
structured deposits and wealth management products as compared with the same period of last year; (2)
consolidation of GP Corp. and Wang Lao Ji’s accounts into the Company’s accounts during the Year, respectively,
which recognized the difference between consideration payment and cash and cash equivalents of such enterprise.
9. Net cash flow from financing activities for the Reporting Period decreased as compared with the same period of
last year, was due to: consolidation of GP Corp.’s accounts into the Company’s accounts during the Year, which
led to consolidation of such corporation’s bank borrowings.
(i) Analysis of revenue and cost
1) Industry, product and regional analysis of the operation result
Results of principal operations by industry

Income from Cost of Profit margin of
principal operations principal operations principal operations
Increase/ Increase/
(Decrease) (Decrease)
over the over the Profit Increase/
Income from same Cost of same margin (Decrease)
principal period of principal period of of principal over the same
Operations operations 2017 operations 2017 operations period of 2017
(RMB’000) (%) (RMB’000) (%) (%) (percentage point)
Great Southern TCM 9,635,377 23.59 5,479,359 28.74 43.13 A decrease of 2.27 percentage
points
Great Health 9,487,460 10.66 5,367,039 14.34 43.43 A decrease of 1.82 percentage
points
Great Commerce 22,743,867 425.40 21,171,258 428.96 6.91 A decrease of 0.63 percentage
point
Other 113,674 24.96 88,399 25.31 22.23 A decrease of 0.22 percentage
point
Total 41,980,378 101.93 32,106,055 146.53 23.52 A decrease of 13.84
percentage points
(i) Analysis of revenue and cost (Continued)
1) Industry, product and regional analysis of the operation result (Continued)
Results of principal operations by products

Income from Cost of Profit margin of
principal operations principal operations principal operations
Increase/
Increase/ (Decrease)
(Decrease) over the Increase/
Income from over the Cost of same Profit margin (Decrease)
principal same principal period of of principal over the same
Types of products operations period of 2017 operations 2017 operations period of 2017
Chinese patent medicine 3,847,332 (1.69) 2,185,414 (4.80) 43.20 An increase of 1.85 percentage
points
Chemical medicine 5,788,045 49.08 3,293,945 68.00 43.09 A decrease of 6.41 percentage points
Total of Great Southern TCM 9,635,377 23.59 5,479,359 28.74 43.13 A decrease of 2.27 percentage points
Results of principal operations by regions

Income from Profit margin of
principal operations Cost of principal operations principal operations
Increase/ Increase/
(Decrease) (Decrease)
over the over the Profit Increase/
Income from same Cost of same margin (Decrease)
principal period of principal period of of principal over the same
Regions operations 2017 operations 2017 operations period of 2017
Southern China 28,849,804 151.13 23,915,085 214.68 17.10 A decrease of 16.74

percentage points
Eastern China 4,555,824 25.09 2,450,090 17.59 46.22 An increase of 3.43 percentage
points
Northern China 2,368,824 12.91 1,346,551 18.87 43.16 A decrease of 2.84 percentage
points
North-Eastern China 1,043,076 169.40 896,881 310.73 14.02 A decrease of 29.58
percentage points
South-Western China 3,603,000 45.93 2,331,393 45.82 35.29 An increase of 0.05 percentage
point
North-Western China 1,515,841 131.69 1,123,178 230.20 25.90 A decrease of 22.11
percentage points
Exports 44,009 (13.85) 42,877 (14.06) 2.57 An increase of 0.24 percentage
point
Gross profit margin of principal operations = (Income from principal operations –

Cost of principal operations)/Income from principal operations*100%
1) Industry, product and regional analysis of the operation result (Continued)
Notes:
(1) The large increase in income from principal operations and cost of principal operations of the
Great Commerce as compared with last year was mainly due to consolidation of GP Corp.’s
accounts into the Company’s accounts during the Reporting Period.
(2) As set out in the above table, the large increase in income from principal operations of chemical
medicine as compared with last year was mainly due to: intensification of product promotion
and enhancement in marketing efforts; a great increase in the market demand for the products
related to prevention and control of influenza resulting from the influence of influenza outbreak
in the beginning of 2018; the increase in prices of part of products in order to deal with the
impact of rising costs and changes in industry policies. The large increase in cost of principal
operations as compared with last year was mainly due to: the decrease in output of part of
the products resulting from the transformation of the work center for GMP certification by the
subsidiaries of the Company and the increase in operating cost and decrease in gross margin
caused by execution of environmental protection policy and increase in prices of raw materials.
2) Analysis on quantities of production and sales
Production Sales Inventory

increase/ increase/ increase/
(decrease) (decrease) (decrease)
over the over the over the
same period same period same period
Main products Production Sales Inventory of 2017 of 2017 of 2017
(%) (%) (%)
Cefixime series (thousand tablets) 320,069.82 313,588.73 24,435.81 (9.53) (5.32) (37.31)
Cephathiamidine for Injection
(thousand ampoules) 35,787.76 32,958.28 1,148.17 (1.78) (16.44) (8.98)
Sildenafil Citrate Tablet
(thousand boxes) 49,030.82 47,739.87 8,529.95 13.78 20.45 16.42
Xiao Ke Pill (thousand bottles) 43,747.73 35,672.59 11,312.73 6.47 (10.00) 125.29
Xiao Chai Hu Granule
(ten thousand packs) 33,870.71 32,219.90 6,815.63 7.83 1.00 30.90
Cephalopropylene series
(thousand boxes) 75,053.34 77,543.48 5,422.81 (17.53) (7.51) (50.11)
Amoxicillin series (thousand boxes) 1,224,775.88 1,149,631.29 178,046.84 32.09 1.37 67.80
Acafen powder series
(thousand boxes) 24,006.00 21,682.00 6,584.00 1.40 (2.90) 49.30
Hua Tuo Zai Zao Pill
(thousand bottles) 9,719.90 6,044.01 2,347.03 (29.52) (26.17) 37.59
Cefixime (thousand kg) 91.06 109.27 7.68 (20.96) 8.05 (71.39)
2) Analysis on quantities of production and sales (Continued)
Description on changes on production, sales and inventory as at the end of the

Reporting Period of products:
① Inventory of Cefixime series as at the end of period decreased by 37.31%

year on year, mainly due to: digesting the inventory in the society and
improve operating quality in the fourth quarter of 2018; In addition, to
better carry out the reform of workshop to prepare for GMP certification,
the production and sales volume decreased, which resulted in resulting in a
decrease in inventory year on year.
② The inventory of Xiao Ke Pill at the end of period increased by 125.29% year
on year, mainly due to: the slowdown in sales and the increase in inventory
as a result of integrated adjustment of sales channel in the fourth quarter of
2018.
③ The inventory of Xiao Chai Hu Granules at the end of period increased by

30.90% year on year, mainly due to: the early arrival of the Spring Festival
in 2019 as compared to that of 2018, and to responded to the delivery peak
during the Spring Festival in 2019, thus the inventory prepared in advance
resulted in an increase in inventory.
④ The inventory of Caphalopropylene series as at the end of period decreased

by 50.11% year on year, mainly due to: to focus on digesting the inventory
in the society and improve operating quality in the fourth quarter of 2018;
In addition, to better carry out the reform of workshop to prepare for GMP
certification, the production and sales volume decreased, resulting in a
decrease in inventory year on year.
⑤ Production volume and inventory of Amoxicillin series at the end of period

increased by 32.09% and 67.80% year on year, respectively,mainly due to:
the expansion of mass production as a result of the increase in future sales
demand.
⑥ The inventory of Acafen Powder series at the end of period increased by

49.30% year on year, mainly due to: the significant increase in the inventory
in the factory year on year as a result of high level of inventory in the society
and the delivery was controlled in the fourth quarter of 2018.
⑦ Production volume of Hua Tuo Zai Zao Pill decreased by 29.52% year on
year, mainly due to: a drop in sales demand in 2018 as a result of the
production has been reduced. Sales volume decreased by 26.17% year on
year, mainly due to: affected by the restriction of prescription and volume,
the promotion of GPO bargaining procurement in various localities and the
restriction and control of the entire Chinese patent medicine market by the
government, sales in key medical markets such as Beijing and Shanghai and
the retail terminal market have declined dramatically. Inventory as at the
end of period increased by 37.59% year on year, mainly due to: the decline
in market demand and production volume, which resulted in an increase in
inventory.
⑧ Inventory of Cefixime as at the end of period decreased by 71.39% year

on year, mainly due to: the excessive inventory in 2017, and destocking
operations were adopted in 2018, which resulted in a decrease in inventory
year on year.
3) Analysis of cost
Results by industry
2018 2017
Percentage Percentage
of the of the
proportion proportion Percentage
of of of Changes
Principal operation operation in the
Operation Components Amount cost Amount cost proportion
(RMB’000) (%) (RMB’000) (%) (%)
Manufacturing Raw materials 8,162,354 75.25 6,580 ,674 73.52 24.04

business
Fuel 122,022 1.12 118,643 1.33 2.85
Labor costs 317,398 2.93 294,089 3.29 7.93
Others 2,244,624 20.70 1,957,002 21.86 14.70
Pharmaceutical The Cost 21,171,258 100.00 4,002,443 100.00 428.96
distribution of purchase
business
Others Other costs 88,399 100.00 70,547 100.00 25.31
4) Major suppliers and sale
During the Year, sales by the Group to the five largest customers amounted to
RMB2,578,963,000 (2017: RMB2,402,240,000), representing approximately 6.14%
of the total sales (2017: 11.56%) of the Group. The sales to the largest customer
amounted to RMB756,278,000 (2017: RMB1,019,758,000), representing 1.80%
(2017: 4.91%) of the total sales of the Group. The sales to the 5 largest customers
included RMB534,800,000 being sales to related parties, representing 1.27% of
the total sales of the Group for the Year.
During the Year, purchases by the Group from the five largest suppliers amounted
to RMB3,025,139,000 (2017: RMB1,912,706,000), representing approximately
7.27% of the total purchases (2017: 18.75%) of the Group for the year. The
purchases from the largest suppliers amounted to RMB898,962,000 (2017:
RMB872,215,000), representing 2.16% (2017: 8.55%) of the total purchases
of the Group for the Year. The purchases from the 5 largest suppliers included
RMB898,962,000 being purchases from related parties, representing 2.16% of the
total purchases of the Group for the Year.
For the relationship between the Group and the customers and suppliers, please
refer to the 2018 Social Responsibility Report of the Company (the full text of
which had been disclosed on the websites of the SSE and the HKEx). To the
knowledge of the Directors, none of the Directors, their associates or shareholders
who held more than 5% of the Company’s total issued share capital had any
interest in any of the 5 largest customers and suppliers as were mentioned above.
(ii) Expenses
During the Reporting Period, the Group’s selling and distribution expenses was
approximately RMB5,056,821,000 (2017: RMB4,285,949,000), representing an increase
of 17.99% as compared with last year, was mainly due to: (1) consolidation of GP Corp.
and Wang Lao Ji’s accounts into the Company’s accounts during the Year, which led to
an increase of RMB702 million in this statement item; (2) a slight increase in selling and
distribution expenses of the Company’ other subsidiaries.
During the Reporting Period, the Group’s general and administrative expenses was
approximately RMB1,699,062,000 (2017: RMB1,206,295,000), representing a growth
of 40.85% as compared with last year, was mainly due to: (1) consolidation of GP Corp.
and Wang Lao Ji’s accounts into the Company’s accounts during the Year, which led to
an increase of RMB257 million in this statement item; (2) an increase in corresponding
expenses as a result of constant business expansion of the Company’s subsidiaries.
During the Reporting Period, the Group’s research and development expenses was
approximately RMB585,498,000 (2017: RMB373,288,000), representing a growth of
56.85% as compared with last year, was mainly due to: increase in drug consistency
evaluation expenses and expenses on other research projects of the Company’s
subsidiaries.
During the Reporting Period, the Group’s financial expense was approximately
RMB-6,650,000 (2017: RMB-210,571,000), representing a growth of 96.84% as
compared with last year, was mainly due to: (1) consolidation of GP Corp. and Wang
Lao Ji’s accounts into the Company’s accounts during the Year, which led to an increase
of RMB223 million in this statement item; (2) improvement in the fund management of
the Company’s other subsidiaries, increase in interest income and reduction in financial
costs as a result of the reasonable fund allocation, increase in capital efficiency as well as
optimization in types of deposits.
During the Reporting Period, the Group’s income tax expenses was approximately
RMB485,014,000 (2017: RMB374,221,000), representing a growth of 29.61% as
compared with last year, was mainly due to an increase in the profits of the subsidiaries
during the Year.
(iii) Research and development expenses
Cost of research and development expenses in the current year (RMB’000) 585,498
Capitalization of research and development expenses in the current year (RMB’000) –
Total research and development expenses (RMB’000) 585,498
Ratio of research and development expenses to income from operations 1.39
Ratio of research and development expenses to income from principal operations of the Great
Southern TCM (%) 6.08
Total research and development expenses accounted for the proportion of net assets (%) 2.53
Number of the research and development personnel of the Company 709
Percentage of total number of the research and development personnel in the total number of
personnel of the Company (%) 3.07
Percentage of the research and development of capitalization (%) –
Detailed description
□ Applicable ✓Not Applicable

(iv) Cash flow
Increase/
(Decrease)
The as compared
The corresponding with the
Reporting period same period
Items Period of 2017 of 2017 Reasons
(RMB’000) (RMB’000) (%)
Net cash flow 5,216,888 1,833,691 184.50 The year-on-year increase in

from operating cash flow from operating
activities activities was mainly due to: (1)
consolidation of GP Corp. and
Wang Lao Ji’s accounts into the
Company’s accounts during the
Year; (2) increased cash flow
from daily operating activities
as a result of growth in advance
payment from customers and
collection of receivables of
products during the Reporting
Period.
Net cash flow 1,109,718 (2,440,644) 145.47 The year-on-year increase in
from investing cash flow from investing
activities activities was mainly due to:
(1) the fact that not only more
structured deposits and wealth
management products of the
Group matured as compared
with the same period of last
year, but also there were less
purchases of structured deposits
and wealth management
products as compared with the
same period of last year; (2)
Company’s accounts during
Net cash flow (2,751,337) (484,274) (468.14) The year-on-year decrease in cash
from financing flow from financing activities
activities was mainly due to: consolidation
of GP Corp.’s accounts into the
Year, which led to consolidation
of such corporation’s bank
borrowings.
(2) Description of the significant changes on profit resulting from non-principal operation
(1) The asset transfer and change in business registration of the significant asset acquisition
in relation to the Company’s acquisition of 30% equity interests in GP Corp. in cash
were completed on 31 May 2018. Thereafter, GP Corp. became a subsidiary controlled
by the Company with 80% equity interests and was consolidated into the Company’s
accounts. In view of the above and in accordance with Accounting Standards for Business
Enterprises, income generated from operations of GP Corp. has included in the Company’s
combined financial statements since June 2018, resulting in a higher year-on-year growth
in operating income; meanwhile, the Company’s equity interests previously held in the
acquiree before the acquisition date were re-measured at fair value on the acquisition date
and the difference of RMB825.77 million between the fair value and the carrying value
was included in the “investment incom” item in the income statement for the Reporting
Period, resulting in a substantial year-on-year increase in profit.
(2) During the Reporting Period, the Company completed the acquisition of 48.0465% equity
interests in Wang Lao Ji, and Wang Lao Ji became a subsidiary controlled by the Company
with 96.093% equity interests and was consolidated into the Company’s accounts.
Therefore, the income of RMB170.88 million from equity acquisition was included in the
income statement for the year.
(3) According to the judgment that the Company has significant influence over Yi Xin Tang
and re-categorized its shareholding in Yi Xin Tang as “long-term equity investments”
instead of “other non-current financial asset” and the shareholding is accounted by equity
method in May 2018. The fair value of such investment was increased by RMB254.93
million. The additional amount was included in “gain or loss arising from a change in fair
value” item in the income statement for the Reporting Period, leading to a higher total
profit for the Reporting Period.
(3) Analysis on Financial Conditions
(i) Liquidity
As at 31 December 2018, the current ratio of the Group was 1.60 (31 December 2017:
2.60), and its quick ratio was 1.25 (31 December 2017: 2.15). Accounts receivable
turnover rate was 7.95 times (31 December 2017: 20.46 times), representing a decrease
of 61.14% as compared with the corresponding period of 2017. Inventory turnover rate
was 4.91 times (31 December 2017: 3.98 times), representing an increase of 23.28% as
compared with the corresponding period of 2017. Changes in the above indicators are
due to consolidation of GP Corp.’s accounts into the Company’s accounts during the Year.
(ii) Financial resources
As at 31 December 2018, cash and cash equivalents of the Group amounted to

RMB15,071,612,000 (31 December 2017: 11,495,535,000), of which approximately
99.66% and 0.34% were denominated in Renminbi and foreign currencies, such as Hong
Kong dollar, respectively.
As at 31 December 2018, the Group had bank borrowings of RMB6,523,281,000

(31 December 2017: RMB42,807,000), including short-term borrowings of
RMB5,905,703,000 (31 December 2017: RMB11,500,000), current portion of noncurrent
liabilities of RMB204,024,000 (31 December 2017: RMB31,307,000) and long-term
borrowings of RMB413,554,000 (31 December 2017: RMB0). Changes in the above
indicators are due to consolidation of GP Corp.’s accounts into the Company’s accounts
during the Year.
(3) Analysis on Financial Conditions (Continued)
(iii) Capital structure
As at 31 December 2018, the Group’s current liabilities amounted to RMB26,948,764,000

(31 December 2017: RMB8,268,854,000), representing an increase of 225.91% as
compared with the corresponding period of 2017, and its long-term liabilities was
RMB1,389,687,000 (31 December 2017: RMB782,705,000), with an increase of
77.55% as compared with the corresponding period of 2017. The shareholders’ equity
attributable to the shareholders of the Company amounted to RMB21,684,909,000 (31
December 2017: RMB18,871,521,000), with an increase of 14.91% as compared with the
corresponding period of 2017. Changes in the above indicators are due to consolidation of
GP Corp.’s accounts into the Company’s accounts during the Year.
(iv) Capital expenditure
The Group expects that the capital expenditure for 2019 to be approximately RMB3.153
billion (2018: RMB0.524 billion), which would be mainly applied in the construction of
production sites, information system and purchase of new equipment. The Group will raise
funds to meet the capital requirements of capital expenditure by resorting to its internal
funds, bank loans, etc.
(v) Assets and liabilities
As at As at Increase/
31 December % of the 31 December % of the (Decrease) Reasons for
Item 2018 total assets 2017 total assets over 2017 changes
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Cash at bank and 16,114,884 31.3 11,697,219 41.32 37.77 The change in balance of such
on hand item was mainly due to: (1)
Year, which led to an increase
of RMB2.821 billion in balance
of this statement item; (2) an
increase in payment received by
the Company’s subsidiaries.
Notes receivable 13,653,056 26.52 2,816,424 9.95 384.77 The change in balance of such item
and accounts was mainly due to: consolidation
receivable of GP Corp. and Wang Lao Ji’s
accounts into the Company’s
accounts during the Year, which
led to an increase of RMB11.295
billion in balance of accounts
receivable and notes receivable.
(v) Assets and liabilities (Continued)
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Advances to 837,808 1.63 256,572 0.91 226.54 The change in balance of such item
suppliers was mainly due to: consolidation
of RMB611 million in balance of
advances to suppliers.
Other receivables 1,056,551 2.05 762,257 2.69 38.61 The change in balance of such item
was mainly due to: consolidation
of GP Corp. and Wang Lao Ji’s
led to an increase of RMB828
million in other receivables, and
a decrease of RMB455million in
balance of dividends receivable.
Inventories 9,231,739 17.93 3,700,223 13.07 149.49 The change in balance of such
item was mainly due to: (1)
of RMB4.276 billion in balance
of this statement item; (2)
accumulation of stock by the
subsidiary of the Company at
the end of 2018 in preparation
of peak sales season in the
coming Spring Festival; (3)
increase in cost of inventories as
a result of the increase in costs
of purchase for raw materials of
some products.
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Other equity 84,898 0.16 62,686 0.22 35.43 The change in balance of such
instrument item was mainly due to: (1) the
investments reclassification of financial assets
from “available-for-sale financial
assets” to this item with the
implementation of the new
recognition and measurement
standard of financial instruments
by the Company; (2) increase
investment in Sino-Israel Fund by
the Company.
Other non-current 226,938 0.44 975,857 3.45 (76.74) The change in balance of such
financial assets item was mainly due to: (1) the
reclassification of financial assets
from “available-forsale financial
assets” to this item with the
recognition and measurement
standard of financial instruments
by the Company; (2) the
transfer of the Company’s
shareholding in Yi Xin Tang to
“long-term equity investments”
item accounted for using the
equity method according to
the Company’s judgment of
significant influence over such
company.
Fixed assets 3,165,747 6.15 2,082,245 7.36 52.04 The change in balance of such item
billion in balance of this
statement item.
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Construction in 480,306 0.93 284,672 1.01 68.72 The change in balance of such
progress item was mainly due to: (1)
in balance of this statement
item; (2) increase investment in
projects by the subsidiary of the
Company.
Intangible assets 1,013,353 1.97 728,009 2.57 39.20 The change in balance of such item
led to an increase in balance of
this statement item.
Development 0 0.00 800 0.00 (100.00) The change in balance of such item
expenditures was mainly due to: provision
for impairment on development
expenditures provided by the
subsidiary of the Company.
Goodwill 825,573 1.60 11,500 0.04 7,079.17 The change in balance of such item
was mainly due to: an increase
of RMB932 million in goodwill
as a result of acquisition of 30%
equity interest in GP Corp. by
the Company, provision for
impairment on such goodwill
provided of RMB118 million
at the end of the Year, which
led to an increase of RMB814
million in balance of such item.
Long-term 94,315 0.18 49,067 0.17 92.22 The change in balance of such item
prepaid was mainly due to: consolidation
expenses of GP Corp.’s accounts into the
Year, which led to an increase in
balance of this statement item.
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Deferred tax 569,145 1.11 389,629 1.38 46.07 The change in balance of such
assets item was mainly due to: (1)
consolidation of GP Corp.’s
accounts during the Year,
which led to an increase of
RMB98 million in balance of this
statement item; (2) an increase
in temporary differences
of income tax deductible
arising from compensation
for relocation and provisions
projects by the subsidiary of the
Company.
Other non-current 2,580 0.01 0 0.00 / The change in balance of such
assets item was mainly due to: an
increase in land-transferring fees
prepaid by the subsidiary of the
Company.
Short-term 5,905,703 11.47 11,500 0.04 51,253.94 The change in balance of such item
borrowings was mainly due to: consolidation
of GP Corp’s accounts into the
balance of this statement item
Notes payable 11,969,454 23.25 3,054,427 10.79 291.87 The change in balance of such item
and accounts was mainly due to: consolidation
payable of GP Corp. and Wang Lao Ji’s
billion in balance of notes
payable and accounts payable.
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Taxes payable 963,543 1.87 480,917 1.70 100.36 The change in balance of such
item was mainly due to: (1)
the amount of tax to be
resold has increase with the
revenue standard by the
Company; (2) consolidation of
GP Corp. and Wang Lao Ji’s
led to an increase in balance
of this statement item; (3) an
increase in unpaid enterprise
income tax payable and value-
added tax payable of the
subsidiary of the Company.
Other payables 3,466,357 6.73 2,445,094 8.64 41.77 The change in balance of such item
billion in balance of this
statement item.
Contract liabilities 3,686,647 7.16 1,614,438 5.70 128.35 The change in balance of such
item was mainly due to: (1) the
reclassification of “advances
from customers” to this item
with the implementation of
the new revenue standard by
the Company; (2) an increase
in advance payments from
customers by WLJ Great Health,
a wholly-owned subsidiary of
the Company, as the early arrival
of Spring Festival; (3) an increase
in advance payments from
customers by other subsidiaries
of the Company.
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Current portion 204,024 0.40 31,307 0.11 551.68 The change in balance of such
of non-current item was mainly due to: (1)
liabilities consolidation of GP Corp.’s
led to an increase in balance
of this statement item;(2)
the repayment of long term
borrowings with maturity within
a year by the subsidiaries of the
Company, leading to a decrease
in balance of this item.
Long-term 413,554 0.80 0 0.00 / The change in balance of such item
borrowings was mainly due to: consolidation
Long-term 135,796 0.26 35,127 0.12 286.59 The change in balance of such item
payables was mainly due to: consolidation
Deferred tax 249,762 0.49 114,788 0.41 117.59 The change in balance of such
liabilities item was mainly due to: (1)
in balance of this statement
item; (2) an increase in the time
discrepancy of enterprise income
tax arising from adjustment to
income tax rates of subsidiaries
of the Company.
(RMB’000)
(RMB’000) (%) (Restated) (%) (%)
Other (477) (0.00) (6,819) (0.02) 93.00 The change in balance of such item
comprehensive was mainly due to: the change
income in exchange rate differences on
conversion of foreign currencies
by subsidiaries of the Company.
Undistributed 8,825,776 17.14 6,218,195 21.96 41.93 The change in balance of such
profits item was mainly due to: (1)
consolidation of GP Corp.
and Wang Lao Ji’s accounts
into the Company’s accounts
during the Year, which led
to an increase of RMB 613
million upon consolidation of
the undistributed profit; (2) the
increase in net profit realized for
the Year by the Company and
its subsidiaries.
Minority interest 1,458,824 2.83 391,633 1.38 272.50 The change in balance of such item
led to an increase in balance of
this statement item.
(vi) Exposure to fluctuations in exchange rates
As the majority of the revenue, expenses, assets and liabilities of the Group are
denominated or settled in Renminbi, the Group did not have significant risks in exposure
to fluctuations in exchange rates.
(vii) Main cash resources and applications
As at 31 December 2018, cash and cash equivalents of the Group was amounted to
RMB15,071,612,000 with an increase of RMB3,576,077,000 as compared with the
beginning of 2018. The net cash inflow derived from operating activities amounted
to RMB5,216,888,000 with an increase of RMB3,383,197,000 as compared with
2017, mainly due to (1) consolidation of GP Corp. and Wang Lao Ji’s accounts into the
Company’s accounts during the Year; (2) Increased cash flow from daily operational
activities as a result of growth in advance payment from customers and collection of
receivables of products.
(viii) Contingent liabilities
As at 31 December 2018, the Group had no material contingent liabilities.
(ix) Charge on the Group’s assets
As at 31 December 2018, Guangyao Baiyunshan Hong Kong Company, a subsidiary of

the Company, has obtained the overdraft amounted to HK$300,000, letter of credit
and 90-day credit in the total amount of HK$100,000,000 from Bank of China (Hong
Kong) Co., Ltd., secured by buildings of fixed assets with the original value amounted
to HK$8,893,000, and net value of HK$6,293,000 and investment properties with the
original value amounted to HK$6,843,000 and net value of HK3,647,000 of investment
properties and an issued but unexpired letter of credit of EUR48 thousand, USD412
thousand from the Bank of China (Hong Kong) Co.,Ltd.
(x) Bank loans, overdraft and other borrowings
As at 31 December 2018, the bank loans of the Group amounted to RMB6,523,281,000

(31 December 2017: RMB42,807,000), with an increase of RMB6,480,474,000 as
compared with the beginning of 2018. The above bank loans included short-term loans
of RMB5,903,703,000, current portion of noncurrent liabilities of RMB204,024,000
and long-term loans of RMB413,554,000. Changes in the above indicators due to
consolidation of GP Corp.’s accounts into the Company’s accounts during the Year.
(xi) Gearing ratio
As at 31 December 2018, the Group’s gearing ratio (total liabilities/total assets×100%)

was 55.05% (31 December 2017: 31.97%). Changes in the above indicators due to
consolidation of GP Corp.’s accounts into the Company’s accounts during the Year.
(xii) Material investment
As at 31 December 2018, except for those disclosed in (2) in the section III“Company’s
Business Profile” of the annual report, the Group did not have any other material
additional investment.
(xiii) Major assets subject to restrictions at the end of the Reporting Period
□Applicable ✓Not applicable

(4) Analysis on the pharmaceutical manufacturing industry operation information
(i) Basic information of the industry and main medicine (products)
(1) Basic information of the industry
The Group’s pharmaceutical manufacturing products mainly covers the Chinese

patent medicine and chemical medicine and other subdivided industries. General
information of subdivided industries is as follows:
① Chinese patent medicine
In recent years, China has attached great importance to the development

of the traditional Chinese medicine industry. The promulgation of a
series of strategic policies such as the Outline of the Strategic Plan for
the Development of Traditional Chinese Medicine (2016-2030), the 13th
Five-year Plan for the Development of Traditional Chinese Medicine, the
Development Plan for Traditional Chinese Medicine Regarding the Belt
and Road (2016-2020), the Outline of the Healthy China Plan (2016-
2030), and the Traditional Chinese Medicine Law of the People’s Republic
of China has laid a good foundation for the sustainable development of
the pharmaceutical industry. In 2018, China’s traditional Chinese medicine
industry policies focused on facilitating the development of traditional
Chinese medicine and promoting the modernization and standardization of
traditional Chinese medicine. According to the Guidance on Strengthening
Scientific and Technological Innovation in Health Services of Traditional
Chinese Medicine, a scientific and technological innovation system for health
services of traditional Chinese medicine with the whole life cycle health
service chain of preventive health care, medical care and rehabilitation as the
core shall be established to further enhance the service capacity and level of
traditional Chinese medicine, and promote the construction of healthy China
by 2030. In general, the traditional Chinese medicine industry will embrace
new opportunities and challenges for development.
The Group is the epitome of south traditional Chinese medicine (TCM) with
obvious Chinese patent drug brands, varieties and other resource advantage
in South China and throughout the country.

(Continued)
(i) Basic information of the industry and main medicine (products) (Continued)
(1) Basic information of the industry (Continued)
② Chemical medicine
In 2018, the institutional adjustment of NMPA, NHC and NHSA was finished,
and the reform of the medical system further deepened. The “supply-
side reform” of the pharmaceutical industry continued to advance and the
policies regarding the registration, review and approval of drug further
encouraged drug innovation. The consistency evaluation was carried out
steadily, and the generic drug-related policies accelerated the substitution of
the original drug. Drug regulation has become stricter and the information
traceability system has gradually improved. The reform of the system in
respect of basic drug, medical insurance payment, and centralized drug
procurement has accelerated the concentration of the industry. The above
policies and regulations will affect the income and profit of the chemical
medicine industry. Many manufacturers with serious homogenization will
face industry reshuffle, and innovative drugs and high-quality generic drugs
will usher in support from national policies and become the main source of
income and profit for pharmaceutical companies.
The Group has a complete antibiotic production chain from raw material
medicine to preparation and male medicine, with products covering
commonly used antibiotic varieties. The Group integrated the antibiotic
brands with the famous trademark “Kang Zhi Ba”, striving to create
a market image as the number one brand of oral antibacterial anti-
inflammatory.

(Continued)
2) Policies related to the industry
A) Changes of policies and regulations in R&D, quality control and other

aspects, and resulting effects and countermeasures
① Deepening the reform of review and approval system
In 2018, National Medical Products Administration promulgated

the Measures for the Implementation of Drug Test Data Protection
(Provisional) (Draft for Comment), proposed a period of data
protection for innovative drugs and drugs specific to rare diseases and
children and expanded data protection time and scope for innovative
and specific drugs in a breakthrough. In order to encourage
innovation and speed up the creation of new drugs, National Medical
Products Administration issued the Notice on Adjusting the Review
and Approval Process for Drug Clinical Trials to adjust the matters
related to the review and approval of drug clinical trials. If the
applicant does not receive a negative or questionable opinion from
the drug review center within 60 days of the application for drug
clinical trial, the applicant may conduct a clinical trial in accordance
with the submitted program. The above policies have further spurred
pharmaceutical companies’ enthusiasm for research and development
of innovative drugs and drugs specific to rare diseases and children.
In 2018, the Ancient Classic Famous Prescription Catalogue (First

Batch) and the Announcement on Simplified Registration and
Approval Management Regulations for Ancient Classic Famous
Prescription Traditional Chinese Medicine Compound Preparations
were issued, which implemented simplified approval for ancient
classic famous prescriptions from catalogue published by the State
that have no varieties of traditional Chinese medicine compound
preparations on the market. This policy will stimulate the
development of classic famous prescriptions by traditional Chinese
medicine companies and speed up the marketing of new varieties of
traditional Chinese medicine.
Countermeasures: The Group will continue to pay close attention

to the relevant policies of review and approval system reform, play
the main role of innovation, increase investment in research and
development and strengthen research and development of new
products. In addition, the Group has speeded up the research and
development on ancient famous prescriptions. Currently, some
businesses under the Company have commenced relevant activities,
with a view to accelerating the launch of new TCM products to the
market.

(Continued)
2) Policies related to the industry (Continued)

aspects, and resulting effects and countermeasures (Continued)
② Upgrading in the systemic management of quality control
In 2018, the Drug Administration Law of the People’s Republic of

China (Revised Draft) (the “Draft”) was submitted to the Standing
Committee of the National People’s Congress for consideration,
and comments were solicited from the public. The Draft revised
around the implementation of the drug marketing license holder
system and the advancement of reform for the review and approval
system, adhered to imposition of severe punishment for problems,
and strengthened the supervision in the whole process. At the same
time, it reformed and improved the drug review and approval system,
encouraged drug innovation, and strengthened the supervision
during and after the event in order to promote the research and
development and innovation of drugs, and stimulate the enthusiasm
of pharmaceutical enterprises in the research and development of
new drugs.
Countermeasures: The Group will continue to pay attention to

the issuance of relevant implementation measures and steps and
make early strategic deployment and related work. It will strictly
comply with the requirements of relevant policy on drug quality
management, and continue to promote the integration of production
resources with the experiences in being the marketing license
holders of Qi Xing and Xing Qun. It also strengthened the research
and development of new products, and continuously promoted the
implementation of scientific research innovation projects, and the
integration of industry-college-institute.

(Continued)

aspects, and resulting effects and countermeasures (Continued)
③ Guarantee of supply and reform of use for generic drugs
In 2018, the General Office of the State Council issued the Opinions
on Reforming and improving the Supply Guarantee and Use Policy of
Generic Drugs, proposing to focus on the prominent problems faced
by the generic drug industry, promote the research and development
of generic drugs, improve the quality and efficacy, improve support
policies, and improve the ability to guarantee the supply of drugs in
order to reduce the burden of drugs in the society as a whole and
protect the demand for drugs of the broad masses of the people. For
the shortage of high-quality generic drugs, the State promotes the
research and development of generic drugs by publishing catalogues
of drugs whose copies are encouraged to be made, strengthening
technical research, and improving the protection system of
intellectual property protection of drugs. To improve the quality
and efficacy of generic drugs, we must accelerate the consistency
evaluation, improve the quality of raw materials and packaging
materials required, improve the level process manufacturing, deepen
the reform for drug review and approval system, strengthen drug
quality supervision, etc.. To promote the use of generic drugs, we
must improve support policies, timely incorporate generic drugs into
procurement catalogues, and accelerate the replacement of original
drug and speed up the formulation of payment standard for medical
insurance drugs.
In addition, the centralized drug procurement pilot (“4 + 7” city

drug centralized procurement) organized by the State was steadily
promoted. The program implements “quantity-price linked, volume-
for-price” method and procurement results showed that the price
reduction for generic drug was large, and the substitution effect for
original drug was obvious. This indicates that China’s generic drug
industry has entered the period of “small profits but high turnover”,
and industry concentration will be further enhanced.
Countermeasures: The Group will continue to pay attention to the

national development policies for generic drug, make strategic
deployment of the generic drug business in advance, and speed up
the promotion of the consistency evaluation of related products;
continue to enhance management efficiency and reduce costs; keep a
close eye on the centralized pharmaceutical procurement by national,
provincial and municipal authorities, and actively participate in the
competition on the market.

(Continued)
B) Changes of policies and regulations in industry regulation and reform, and

resulting effects and countermeasures
① Further improvement of the essential drug system
In 2018, the State Council issued the Opinions on Improving the

National Essential Drug System. Compared with the current essential
drug system, the following five aspects were adjusted: First, in the
selection for catalogue, more emphasis is placed on highlighting
the clinical value of drugs and equal attention is paid to dynamic
adjustment and admission and expulsion; second, more attention is
paid to the roles of the government and the market, and protect the
supply is guaranteed with multiple channels and in multiple ways;
third, more attention is paid to the connection between medical
institutions, helping the construction of graded diagnosis and
treatment system, and emphasizing the comprehensive equipment
and preferred us of essential drug in medical institutions at all
levels; fourth, more attention is paid to the linkage with consistency
evaluation for generic drug, the drug that has passed consistency
evaluation has the priority to be included in the catalogue, and
the drug that has not passed will be removed from the catalogue
gradually to ensure the quality of drugs; fifth, more attention is paid
to the connection with medical insurance payment reimbursement
policy. While the medical insurance department adjusts the medical
insurance catalogue, the eligible drug will have the priority to be
included in the catalogue or adjusted under the categories of A
and B. Since then, the National Health Commission and the State
Administration of Traditional Chinese Medicine have issued the
Catalogue for National Essential Drugs. Compared with the 2012
edition, the new edition has more varieties, more reasonable
structure, and more standardized dosage forms and specifications.
The coverage of clinical symptom for traditional Chinese medicine is
more complete, and clinical necessities and efficacy are more definite.
Countermeasures: The Group will optimize the structure of products

and study the tendering policies on procurement in each province
with the aim of focusing on exlusive or less competitive essential
drugs; ensure the quality and efficacy of the competitive essential
drugs so as to enter into the low-price medicine list for the expansion
into low-end market; grasp the opportunity of the increase in
medical insurance ratio, increase investment in low-end market
and put emphasis on strategic cooperation of distribution platform
so as to maximize the coverage; and act in conjunction with the
Group’s advantages and in accordance with the tendering policies
on procurement in each province to reduce its adverse impact to the
Group.

(Continued)

resulting effects and countermeasures (Continued)
② Continual improvement of drug regulatory system
In 2018, the Food and Drug Administration organized the drafting of

the Measures on Drug Inspection (Draft for Comment) and publicly
solicited opinions. The Measures showed that the scope of drug
inspection was expanded, the division of responsibility of regulatory
agencies at all levels was clearer, the inspection methods were more
novel and the frequency was higher.
In 2018, the National Medical Products Administration issued the

Guidance on the Construction of Digital Drug Tracing System,
which stipulates that drug marketing license holders, production
enterprises, operating enterprises, and users must comply with
relevant regulations and technical standards and establish sound
digital tracing and management system to earnestly fulfill the main
responsibilities. If any such entity fails to establish a tracing system
as required, and the tracing system cannot operate effectively, it
must be dealt with seriously in accordance with relevant laws and
regulations. The digital drug tracing system will be first established
in the fields of vaccines, narcotic drugs, psychotropic drugs, blood
products and other key products, and will be gradually extended to
essential drugs, medical insurance reimbursement drugs and other
drugs. The comprehensive establishment of the digital drug tracing
system means that China’s drug supervision in changing to digital
and intelligent supervision in the whole process.
Countermeasures: In 2018, the problematic vaccine incident

caused heated discussion among the people of the country, and
the supervision of drugs by relevant state departments became
increasingly strict. In view of this, the Group will endeavour in the
management of drug’s quality, and actively establish a digital drug
tracing system in accordance with regulatory requirements to further
improve the quality and safety of drugs.

(Continued)

resulting effects and countermeasures (Continued)
③ Enhanced supervision of adjuvant drugs
In 2018, the National Health Commission issued the Notice on Doing

a Good Job in the Clinical Application Management of Adjuvant
Drugs. The Notice requires that medical institutions above the
second level should report the adjuvant drugs in the order of annual
consumption amount, and finally constituted a catalogue of adjuvant
drugs for the nation, province and medical institution. All the drugs
in the catalogue for the management of adjuvant drugs will be
monitored specially. The National Health Commission will adjust the
catalogue for adjuvant drugs regularly, and the adjustment interval
is not shorter than one year in principle. At present, there is no clear
official definition of adjuvant drugs, but from the current public
information, this policy will good for rigid drug companies.
Countermeasures: The Group will continue to pay attention to

changes in the national policies regarding the regulation of adjuvant
drugs, and strengthen the management of relevant product lines
and the selection of products in accordance with the requirements of
relevant policies. At the same time, the Group will also make greater
efforts in the distribution and sale of pharmaceuticals through various
channels and terminals.

(Continued)
C) Changes in environmental protection policies and their impact and

corresponding countermeasures
In 2018, the Environmental Protection Tax Law of the PRC became effective.
Article 2 stipulates: “enterprises, public institutions and other producers or
operators that discharge taxable pollutants directly to the environment in
the territory of the PRC and other sea areas under the jurisdiction of the
PRC shall be the payers of environmental protection tax and shall pay the
environmental protection tax according to law.” The State Council’s Notice
on the Attribution of Environmental Protection Tax Revenue determines that
all environmental protection tax should be used as local revenue.
Countermeasures: The Group will continue to implement the environmental

protection tax policy, further improve production process, step up efforts in
energy conservation and emission reduction promote the green production
management concept, continue to push forward with green emission and
green production.
3) Basic information of principal medicine (products)
Basic information of principal medicine (products) partition in subdivided industry

and in therapeutic area


(Continued)
3) Basic information of principal medicine (products) (Continued)
Whether
new Production
Whether product quantity Sales
Subdivided Term of Classification protected Whether during the during the during the
Product sub- Indications/ invention of drug traditional prescription Reporting Reporting Reporting
name industry therapeutic area Functions patent registration medicine drugs Period Unit Period Period
Cefixime series Chemical medicinal Antimicrobial The product is indicated for bacterial From 16 July 2009 chemical No Yes No Thousand 320,069.82 321,948.13
preparations drugs infectious diseases caused by to 15 July 2029 medicine tablets
streptococcus (except enterococcus)
sensitive to cefixime.
Cephathiamidine Chemical medicinal Antimicrobial The product is indicated for infections From 19 May 2003 to chemical No Yes No Thousand 35,787.76 32,958.28
for Injection preparations drugs of respiratory system, hepatobiliary 18 May 2023 medicine ampoules
system, the five sense organs and
urinary tract, endocarditis and
septicemia caused by sensitive
bacteria.
Sildenafil Citrate Chemical medicinal Drugs for men he product is indicated for treatment of From 29 April 2002 to chemical No Yes No Thousand 49,030.82 47,739.87
Tablet preparations erectile dysfunction (ED). 28 April 2020 medicine boxes
Xiao Ke Pill Chinese patent medicine Drugs used in Diabetes caused by deficiency of both From 31 March 2006 Traditional No Yes No Thousand 43,747.73 35,672.59
internal qi and yin; type-II diabetes to 31 March 2026 Chinese bottles
medicine,
Xiao Chai Hu Chinese patent medicine Drugs used Relieving exterior syndrome, dispelling From 18 October 2011 Traditional No No No Thousand 33,870.71 32,219.90
Granule in internal heat and soothing the liver and to 17 October 2031 Chinese packs
medicine regulating stomach medicine
department
Cefprozil series Chemical medicinal Antimicrobial Upper respiratory tract infection, lower From 20 December chemical No Yes No Thousand 75,053.34 78, 381.68
preparations drugs respiratory tract infection, infection 2010 to 19 medicine bottles
of skin and its soft tissues December 2030
Amoxicill series Chemical medicinal Antimicrobial The product is indicated for infection No chemical No Yes No Thousand 1,224,775.88 1,149,631.29
preparations drugs caused by sensitive bacteria medicine boxes
(none- -lactamase-producing strains).
Paracetamol Chemical medicinal Drugs for easing The product is indicated for treatment No chemical No No No Thousand 24,006.00 21,682.00
Caffeine and preparations pain, clearing of fever caused by common cold medicine boxes
Aspirin Powder heat, and or influenza, and alleviation of
resisting mild to moderate pain.
inflammation,
wind-damp
and gosset

(Continued)
3) Basic information of principal medicine (products) (Continued)

Whether
new Production
Whether product quantity Sales
Subdivided Term of Classification protected Whether during the during the during the
Product sub- Indications/ invention of drug traditional prescription Reporting Reporting Reporting
name industry therapeutic area Functions patent registration medicine drugs Period Unit Period Period
Hua Tuo Zai Zao Pill Chinese patent medicine Drugs used Promoting blood circulation, removing No Traditional No Yes No Thousand 9,719.90 6,044.01
in internal blood stasis and phlegm, dredging Chinese boxes
medicine collaterals, facilitating qi circulation, medicine
department and relieving pain.
Cefixoxime respiratory infections, Antimicrobial Respiratory infections, urinary tract From February 2014 to Chemical No Yes No Thousand kilo 91.06 109.27
urinary tract medicine infections, biliary tract infections, ect February 2034 medicine
infections, biliary
tract infections, ect
Note: The above table set out the top 10 products by revenue during the Reporting Period.
4) Admission, new entrance and expulsion of the main medicine (products) in relation
to the Essential Drug List and the Medical Insurance Catalogue
On 1 November 2018, the Essential Drugs List was officially implemented. A total of
143 varieties of the Group and joint ventures were included in the Essential Drugs
List, of which, there were 9 varieties newly included in Essential Drugs List, and 2
varieties were excluded the Essential Drugs List.
In addition, the Catalogue of the List of Pharmaceutical Products under the

Medical Insurance Catalogue has not been updated, so there is no new entrance
or expulsion of product from the Medical Insurance Catalogue. As at the end of
the Reporting Period, a total of 375 varieties of the Group and joint ventures were
included in the Medical Insurance Catalogue, and 331 varieties were included in the
Provincial Medical Insurance Catalogue.

(Continued)
4) Admission, new entrance and logout of the main medicine (products) in relation to
the Essential Drug List and the Medical Insurance Catalogue (Continued)
Products that were entered or excluded from the National Essential Drugs List are as
follows:
New
Type of entrance/
Product name product Indications/Functions logout
Du Yi Wei tablet Traditional Chinese medicine Used for a variety of postoperative incisional pain, New entrance
bleeding, traumatic fractures, muscles and
bones sprains, rheumatic arthralgia and uterine
bleeding, dysmenorrhea, swollen gums and
bleeding.
Carbocisteine Chemical medicine Used for the treatment the patients with sputum New entrance
viscous, dys-expectoration caused by chronic
bronchitis, bronchial asthma and other diseases
Huo Xin Pill Traditional Chinese medicine Tonifying qi to activate blood and warming New entrance
meridians to smooth collaterals. Major for chest
discomfort and heartache. For coronary heart
disease and angina pectoris.
Compound tropicamide Chemical medicine Used for mydriasis for examination and regulating New entrance
paralyzer.
Piperacillin Sodium Chemical medicine A moderate to severe infection caused by a beta- New entrance
and Tazobactam Sodium lactamase-producing bacteria that is resistant
to piperacillin but is responsive to piperacillin
tazobactam.
Pemetrexed Chemical medicine This medicine is used for the treatment of New entrance
inoperable malignant pleural mesothelioma
with cisplatin.
Shi Hu Ye Guang Pill Traditional Chinese medicine Nourishing Yin and invigorating kidney, clearing New entrance
liver, improving vision.
Xi Huang Pill Traditional Chinese medicine Clearing heat, removing toxicity, reducing swelling New entrance
and resolving mass, used for ulcer furunculosis,
scrofula, disemboguement, cancer by heat toxin
block.
Zi Shen Yu Tai Pill Traditional Chinese medicine Kidney-nourishing, spleen-invigorating, primordial New entrance
Qi-reinforcing, blood-nourishing, miscarriage-
preventing and body-strengthening. It is
fit for those who suffer spleen and kidney
deficiency and miscarriage due to dysfunction
of thoroughfare and conception vessels (to
prevent habitual miscarriage and threatened
miscarriage)
Fluocinolone Acetonide Chemical medicine Topical corticosteroids, it was applied to the Excluded
affected part of skin to treat inflammation
caused by skin allergies
Procaine Chemical medicine Local anesthetic Excluded

(Continued)
5) The Company’s well-known or Famous Trademarks
The Group and its joint venture currently has 9 famous trademarks of China, 20
famous brands of Guangdong Province, and 25 famous brands of Guangzhou City.
Among them, the brand awareness and reputation of “BYS” has greater influence
and appeal among the consumers throughout the country, which makes it one of
most valuable medicine brands in China.
The main trademark usage of the Group is as follows:
Well-known/ Trademark Product Classification Protected

Famous Trademark registration general of drug traditional Prescription
trademark graph class name registration Indications/Functions medicine drugs
Baiyunshan – Category V Medicine Sildenafil Citrate Chemical The product is indicated No Yes
Well-known for human purposes Tablet medicine for treatment of erectile
dysfunction (ED).
BYS – Well-known
Zhong Yi-Well-known Category V Medicine Xiao Ke Pill Traditional Diabetes caused by No Yes
for human purposes Chinese deficiency of both qi and
Medicine yin; type-II diabetes.
Baiyunshan – Category V Medicine Cephathiamidine Western Antibacterial and anti- No Yes
Well-known for human purposes for Injection medicine inflammatory.
BYS – Category V Medicine Cephathiamidine Western Antibacterial and anti- No Yes
Well-know for human purposes for Injection medicine inflammatory.
Kang Zhi Ba – Category V Medicine Cefixime series Western Antibacterial and anti- No Yes
Well-known for human purposes medicine inflammatory.
Cephalopropylene
series Analgesia, antipyretic,
He Ji Gong – Category V Medicine Chemical
Paracetamol antiinflammatory, No No
Well-known for human purposes medicine
Caffeine and antirheumatic, anti gout.
Aspirin Powder
Zhong Yi – Category V Medicine Zi Shen Yu Tai Pill Traditional Tonifying kidney and No Yes
Well-known for human purposes Chinese spleen,benefiting qi,
medicine, strengthening primordial
natural qi,nourishing the blood,
medicine preventing abortion and
building strong body.
Qi Xing-Well-known Category V Medicine Hua Tuo Zai Zao Traditional Promoting blood circulation, No Yes
for human purposes Pill Chinese removing blood stasis
Medicine and phlegm, dredging
collaterals, facilitating qi
circulation, and relieving
pain.

(Continued)
5) The Company’s well-known or Famous Trademarks (Continued)
Well-known/ Trademark Product Classification Protected

Famous Trademark registration general of drug traditional Prescription
trademark graph class name registration Indications/Functions medicine drugs
Shape of Green Category V Medicine Xia Sang Ju Category-I Clearing liver, improving No No
Leaves – Famous for human purposes Granule Chinese vision, dispelling wind
patent and heat, alleviating Bi-
medicine syndrome induced by
(Drugs used dampness, and removing
in internal sore-toxin.
medicine
department)
Tian Xin-Well-known Category V Medicine Cefuroxime Chemical For respiratory tract No Yes
for human purposes sodium for medicine infections, otolaryngology
injection infections, urinary tract
infections, skin and soft
tissue infections, bone
and joint infections,
obstetrical and
gynecological infections,
gonorrhea, septicaemia
and meningitis caused
by sensitive bacteria,
prevention of surgery
infections.
Tian Xin-Well-known Category V Medicine Ceftiamidine for Chemical For respiratory system, No Yes
for human purposes injection medicine hepatobiliary system,
facial features and urinary
tract infection caused
by sensitive bacteria,
and endocarditis and
septicemia.

(Continued)
5) The Company’s well-known or Famous Trademarks (Continued)
Gross
Well-known/ profit
Famous Product Sales of Income of margin
Trademark General name 2018 2018 in 2018
(RMB’000) (%)
Kang Zhi Ba – Well-known Cefixime series (thousand pills) 321,948.13 856,990.85 75.30
Baiyunshan diamond Cephathiamidine for Injection 32,958.28 704,911.64 19.97
– +BYS – Well-known thousand ampoules)
Baiyunshan diamond Sildenafil Citrate Tablet 47,739.87 662,057.75 –
– +BYS – Well-known ((thousand pills))
Zhong Yi-Well-known Xiao Ke Pill ((thousand bottles)) 35,672.59 403,544.07 62.51
Kang Zhi Ba – Well-known Cephalopropylene series 78,381.68 213,278.74 65.08
(thousand pills)
Note: The above are the top five products in 2018 in terms of sales volume, revenue and profit margin which
used the relevant trademarks.
6) Important medicinal materials involved in major TCM products
Major TCM products of the Group include Xiao Ke Pill, Qing Kai Ling Series, Xiao
Chai Hu Granule, Xia Sang Ju Granule, Bao Ji Series, Hua Tuo Zai Zao Pill, Zi Shen
Yu Tai Pill, Shu Jin Jian Yao Pill, An Gong Niu Huang Pill and Ke Gan Li Yan Oral
Solution etc. The important medicinal materials involved and supply are as follows:
Important Supply and demand of

medicinal medicinal material varieties
Major TCM material Purchasing and the influence of price
products varieties modes fluctuation on cost
Xiao Ke Pill Mongolian snake Dominated by Supply and demand basically in balance.
gourd Root and order plantation, The market price rose generally and
stigma of corn directional the overall cost increased.
purchase,
supported by
tendering
An Gong Niu Bezoar Sentinel The price was affected by the
Huang Pill procurement manufacturer’s cost
Zi Shen Yu Tai Cuscuta chinensis, Purchasing by Supply and demand basically in balance.
Pill amomum, Invitation to Bid The market price is stable, cost
rehmannia and remained unchanged.
so on
Hua Tuo Zai Zao Ligusticum Purchasing by Supply and demand basically in balance.
Pill Chuanxiong, Invitation to Bid The market price is stable, cost
tetradium remained unchanged.
ruticarpum,
borneol, etc.

(Continued)
6) Important medicinal materials involved in major TCM products (Continued)
Important Supply and demand of

medicinal medicinal material varieties
Major TCM material Purchasing and the influence of price
products varieties modes fluctuation on cost
Qing Kai Ling Honeysuckle, isatis The procurement Supply and demand basically in balance.
root is mainly from The market price rose slightly with
planting bases, costs increased.
complemented
by bidding-based
procurement
Xia Sang Ju Prunella Purchasing by Supply and demand basically in balance.
Granule vulgaris, wild Invitation to Bid In particular, the price of wild
chrysanthemum chrysanthemum flower dropped by a
flower, folium large margin and the cost decreased
mori
Xiao Chai Hu Chinese thorowax Purchasing by Supply and demand basically in balance.
Granule root, Scutellaria Invitation to Bid The market price rose slightly with
baicalensis costs increased.
Bao Ji Pill, Bao Ji Uncaria and Purchasing by Supply and demand in balance. The
Oral Liquid chrysanthemum Invitation to Bid market price is stable, cost remained
unchanged
Ke Gan Li Yan Lonicera japonica Purchasing by Supply and demand basically in balance.
Oral Solutio and scutellaria Invitation to Bid The market price rose slightly with
baicalensis costs increased
Shu Jin Jian Yao Woodwardia, rosa Purchasing by Supply and demand basically in balance.
Pill laevigata, caulis Invitation to Bid In particular, the price of rosa laevigata
Spatholobi, etc. dropped by a large margin and the
cost decreased
Major medicinal species involved in the above main TCM products are commonly
used bulk medicinal materials. The Group purchased medicinal materials intensively
from the qualified suppliers through Chinese medicinal materials centralized
purchasing platform based on production needs, by means of bid or directional
procurement, to improve the bargaining capacity, and reduce the purchasing cost.
In addition, the Group constructed multiple planting bases for medicinal materials
to ensure the quality and quantity and control costs.

(Continued)
(ii) Research and development situation of the Company’s medicine (products)
1) The overall situation of research and development
For a long time, the Group paid attention to the research and development of
science and technology, vigorously promoting scientific and research innovation,
carried out the science and technology work through imported project and
independent research in respect of development of new drug, secondary
development of products, development of food, healthcare food, etc., and
achieved certain results.
During the Reporting Period, the Group vigorously promoting scientific and
research innovation, enhanced its intellectual property right related affairs and
made remarkable achievements, mainly including:
① Products in research
As at the end of the Reporting Period, the Group had 169 products
in research, 11 products which had made applications. The main
areas included the secondary development of chemical raw medicine,
preparations, biological medicine, and legend products of traditional
Chinese medicines.
② Approvals
During the Reporting Period, the number of the Group and its jointly
controlled entities applied for a total of 2 approvals for manufacturing and
filed 6 applications for clinical research approval.

(Continued)

(Continued)
1) The overall situation of research and development (Continued)
③ Science and Technology Awards
During the Reporting Period, the Group and its jointly controlled entities
received a total of 3 provincial-level science awards and honors, details of
which are set out below:
Classification Winning
Level enterprises Winning projects Awards
Provincial level HWBYS Chinese and western medicine joint First Prize of Provincial Science and
fundamental and translational Technology Progress
research on nonalcoholic fatty liver
disease
Zhong Yi System evaluation and research on Second Prize of Provincial Science
Chinese and western compound and Technology Progress
preparations for Xiao Ke Pill
Chen Li Ji Research on compound traditional Third Prize of Provincial Science and
Chinese medicine new drug Technology Progress
Kunxian capsules for curing
rheumatoid arthritis
④ Patents and Intellectual Property Rights
During the Reporting Period, the Group and its jointly controlled entities
had applied for a total of 125 patents, among which, there were 67 patents
for invention, 8 utility models; 50 licensed patents, 52 authorized patents;
which included 27 patent licenses for invention, 7 utility model patents and
18 appearance patent authorization.
During the Reporting Period, Baiyunshan General Factory was recognized as

the 2018 National Model Enterprise of Intellectual Property, and Wang Lao
Ji was recognized as the 2018 National Advanced Enterprise of Intellectual
Property. “Application of a Traditional Chinese Medicine Composition in the
Preparation of Drugs for Treating Osteoporosis” of Chen Li Ji, “Preparation
Method of an Egg Yolk Phosphatidylcholine for Injection” of Guangzhou
Han Fang and “A Sildenafil Citrate Tablet and its Preparation Method” of
Baiyunshan General Factory won the 20th China Patent Excellence Award.
Tian Xin, Guang Hua, Ming Xing, WLJ Great Health, Guangzhou Medicine
Company Chinese Medicine Decoction Piece Factory, Xing Qun, He Ji Gong,
Guangzhou Han Fang, Guangxi Ying Kang, Pan Gao Shou, Qi Xing, Chen Li
Ji and Guangzhou Bai Di passed the benchmark certification of the national
intellectual property management system.
Accounting policies for research and development:
The Company’s internal research and development project expenditure

is divided into research phase expenditure and development phase
expenditure.

(Continued)

(Continued)
1) The overall situation of research and development (Continued)
④ Patents and Intellectual Property Rights (Continued)
The specific criteria for the classification of expenditure on the research

phase and expenditure on the development phase is as follows: Expenditures
on the research phase are all the expenditures incurred before the
commencement of Phase III clinical trial for the medicine (including new
medicines and changes in the form of the medicines). Commencement of
Phase III clinical trial is determined based on the approval by authorities.
Expenditures on the development phase are all the expenditures incurred

after the commencement of Phase III clinical trial for the medicine (including
new medicines and changes in the form of the medicines). Commencement
of Phase III clinical trial is determined based on the approval by authorities.
Expenditure on the research phase is recognized in the profit or loss in the

period in which it is incurred.
Development expenditures are capitalized if the following conditions are

met, otherwise it will be recorded into the profits and losses in the current
year:
• the technical feasibility of completing the intangible asset so that it

will be available for use or sale;
• its intention to complete the intangible asset and use or sell it;
• how the intangible asset will generate economic benefits. Among

other things, the enterprise can demonstrate the existence of a
market for the output of the intangible asset or the intangible asset
itself or, if it is to be used internally, the usefulness of the intangible
asset;
• the availability of adequate technical, financial and other resources to

complete the development and to use or sell the intangible asset; and
• its ability to measure reliably the expenditure attributable to the

intangible asset during its development phase.
If the expenditures cannot be distinguished between research phase and

development phase, the Company recognizes all expenditures into current
profit or loss.

(Continued)

(Continued)
2) The investment situation of research and development
The top 5 varieties of products of research and development of the Group are as
follow:
Changes
Amount Amount Research and Research and of the
of the of the development development amount as
Amount expenditure capitalization investment investment compared
of the on on accounted accounted with the
research and research and Research and for the for the corresponding
development development development proportion proportion period
Company name Products investment investment investment of revenue of cost of last year
(RMB’000) (RMB’000) (RMB’000) (%) (%) (%)
Baiyunshan General Cefixime series preparations 15,295.56 15,295.56 0 0.47 0.95 218.34
Factory
Yi Gan Therapeutic twoplasmid 13,866.60 13,866.60 0 0.00 96.95 142.71
HBV DNA vaccine
Baiyunshan General Cefprozil series 9,678.22 9,678.22 0 0.30 0.60 0.00
Factory preparations
Baiyunshan General Amoxicill series 9,080.67 9,080.67 0 0.28 0.57 109.87
Factory preparations
Zhong Yi Zi Shen Yu Tai Pill 8,218.03 8,218.03 0 0.97 2.35 153.41
Notes:
a. In the above table, the proportion of R&D expenses in the revenue is the proportion of product
R&D expenses in the revenue of the enterprise manufacturing the product. The proportion of
R&D expenses in the operation cost is the proportion of product R&D expenses in the operation
cost of the enterprise manufacturing the product.
b. Since Yi Gan is a pure research and development company, the Company is not able to compile
any statistics on its income from operations.

(Continued)

(Continued)
2) The investment situation of research and development (Continued)
Explanation:
In 2018, the State issued a policy of strengthening the implementation of

consistency evaluation in quality and efficacy of generic drugs. In addition, the
State has also introduced a series of policies and regulations on innovative drugs
and biological medicines to further standardize clinical research on new drugs. The
Group intensified efforts in carrying out the study on the consistency evaluation of
great varieties generics, the research and development of biological medicines, and
the research and development of the above-mentioned varieties.
Comparison within the same industry
Research and Research and

development development
investment investment
Amount of the accounted accounted
research and for the for the
Comparable company in the same development proportion proportion
industry investment of revenue of net assets
(RMB’000) (%) (%)
Harbin Pharmaceutical Group Co., Ltd. 198,159.12 1.65 2.81

China National Medicines Co., Ltd. 40,561.98 0.11 0.50
Shanghai Pharmaceuticals Holding Co., Ltd. 836,062.60 0.64 2.46
Shanghai Fosun Pharmaceutical 1,529,291.70 8.30 6.04
(Group) Co., Ltd.
Tongrentang Chinese Medicine-Since 218,966.43 1.64 2.60
Average amount of the research and development investment 564,608.40
Amount of the research and development investment 585,498
of the Company during the Reporting Period
Research and development investment accounted for the proportion 1.39
of revenue of the Company during the Reporting Period (%)
Research and development investment accounted for the proportion 2.53
of net assets of the Company during the Reporting Period (%)
Notes:
a. Full disclosure in the annual reports of the comparable companies for year 2018 is not yet
available, the above information came from the annual reports of the comparable companies for
year 2017.
b. The average R&D investment amount in the industry is the arithmetic average of the five
companies in the same industry.

(Continued)

(Continued)
2) The investment situation of research and development (Continued)
Description on the significant changes of the research and development investment

and the reasonability of the proportion of the research and development
investment
During the Reporting Period, the Group’s research and development expenses
accounted for 1.39% of the revenue. In the face of changing market demand and
changing policies in relation to registration of new drug research and development
and quality consistency evaluation for generic drugs, the Company adjusted
research and development strategy actively, strengthened research and analysis and
selection of research and development projects initiation, followed up the reseach
progress of each project, improved research and development resources investment
management, and reappraised varieties at the stage of research to reduce research
and development risks.
The current research and development expenses of the Group can meet the
demand for future development.

(Continued)

(Continued)
3) Basic information on the main research and development project
Number of
approved
R&D Accumulated Number of domestic
R&D Basic information (Register) Research declared generic
Program of product Stage: Progress status Input manufacturers manufacturers
(RMB’000)
Standardised Studying the Chinese patent drug Study on the According to the 31,064 None None
construction of lowering sugar---Xiaoke Pill standardization indicators of the task
of Xiao Ke Pill and carrying out standardization of Chinese patent book, the research
project of Chinese medicines. drug content of the project
Upon completion of such projects, has been basically
formulating 16 certification completed, and 2
standards and specifications national standards
relating to the industry of and 14 industry
cultivation and production of standards (group
medicinal materials, including Radix standards) have been
Trichosanthis, Rhizoma Dioscoreae, drafted.
Radix Astragali and Kadsura
Longipedunculata, and formulating
another 11 corporate internal
standards.
Therapeutic DNA preparation for treating chronic IIC clinical study has The enrollment for 27,167 None None
two-plasmid hepatitis. been started. Program A has
HBV DNA been completed
vaccine and the follow-up
projects for is being conducted;
IIC clinical the enrollment for
study Program B is being
speeded up.

(Continued)

(Continued)
3) Basic information on the main research and development project (Continued)
Number of
approved
(RMB’000)
Clinical research This project adopts evidence-based Assessment and Multi-centered 18,296 None None
on the medicine method in combination research after randomized
application with the mainstream assisted marketing double-blinded
of Zi Shen Yu reproductive technology in modern IVF-ET clinical,
Tai Pill in vitro western medical system, to metabolomics,
fertilization carry out clinical research on the genomics studies
and embryo application of Zi Shen Yu Tai Pill in have been
transfer vitro fertilization-embryo transfer completed. The
(IVF-ET) treatment. results show that
Zishen Yutai Pill can
significantly increase
the rate of planting
of IVF-ET patients
and significantly
improve clinical
pregnancy of older
women and patients
with a history of
miscarriage.

(Continued)

(Continued)
Number of
approved
(RMB’000)
Study on the top Kun Xian Capsule is composed Post-marketing From 2014 to 2016, the 7,781 None None
design of Kun of Kunming Mountain malus research quality standards and
Xian Capsule spectabilis, epimedium, fructus lycii, process research of
and dodder, which has the function Kun Xian Capsule
of tonifying kidney to smooth were completed,
collaterals and removing wind and the effectiveness
pathogen to alleviate dampness. and safety tests and
Advisable for rheumatoid arthritis clinical research
due to accumulation of wind and were carried out.
dampness combined with kidney In 2017, Kun Xian
deficiency. The symptoms are joint Capsule entered the
swelling and pain, inconvenient national medical
flexing and stretching, morning insurance new
stiffness, joint tenderness, joint’s edition catalogue
liking warmness and fearing and was included in
coldness, soreness and weakness China Association of
of waist and knees, pale tongue, Chinese Medicine’s
white coating on the tongue, and guidelines for
weak pulse. the diagnosis
and treatment of
rheumatism. In
December 2018, the
clinical research of
Kun Xian Capsule
was completed, and
a clinical research
report was issued. At
present, all research
content of the project
has been completed.

(Continued)

(Continued)
Number of
approved
(RMB’000)
Study on the This project conducts the study on Study on the The experimental study 7,004 None None
reevaluation the reevaluation of An Gong Niu reevaluation after on the effect of An
of An Gong Huang Pill after launching from launching Gong Niu Huang
Niu Huang three aspects: pharmacodynamic Pill on plaque and
Pill after evaluation, discussion on neuroprotection as
launching mechanism and guidance for safe well as the study
and rational use of drug. on the effect and
mechanism of
preventing and
treating stroke have
been completed.
This project has been
basically completed.
The impact of the research projects on the Company and the risks of the research
projects
In 2018, in accordance with the Announcement on Implementing the Opinions

of the General Office of the State Council on the Consistency Evaluation of the
Quality and Efficacy of Generic Drugs (No. 106 of 2016) and the Announcement
of the CFDA on Consistency Evaluation of the Quality and Efficacy of Generic
Drugs (No. 100 of 2017), the consistency evaluation project of the drugs in the
“289” catalogue entered the most critical year. At the same time, the State
has also introduced a series of policies and regulations on innovative drugs and
biological medicines to further standardize clinical research on new drugs. Under
this macro environment, the Group proactively adjusted the new product research
and development as well as the declaration strategy so as to comply with policies
and regulations change. It focused on the new product research and development
in the professional fields and the in-depth development of the market-oriented
products in the subsidiary enterprises, and strengthened research and development
of new products including biological medicine, chemical medicine, TCM and
secondary development of famous products, and conducted study on the
consistency evaluation of the quality and efficacy of generic drugs, providing the
scientific and technological support for the development of the Group.

(Continued)

(Continued)
New drug development is exposed to high risk and featured by high investment
and long cycle. Pharmaceutical products have the characteristics of high
technology, high risk, and high added value. The long period and large number of
processes for drugs from initial research to clinical trials and from registration and
declaration to the industrialized production cycle are vulnerable to the influence
of uncertain factors. In addition, as the change in national medicines evaluation
reform, the approval threshold in the field of chemical medicine and biological
medicine enhanced gradually.
The Group will continue to paying attention to changes in the medicines evaluation
policies, strengthen the controlling strength on R&D projects, reduce the influence
of uncertain factors, improve R&D quality and decrease R&D risks.
4) Situation of the products which had been submitted to supervision department for
approval, registration and production during the Reporting Period
During the Reporting Period, the Group received a total of 2 approvals in respect
of pieces for pharmaceutical products, which will further enrich the Company’s
product varieties, and increase the Company’s products reserves. Moreover, the
Company will at appropriate time launch the product into the market based on
changes in the market.
Registry
Product name classification Indication/Major functions
Glutathione for injection Chemical ①Patients undergoing chemotherapy: including cisplatin,

(0.3g). (0.6g) medicine cyclophosphamide, doxorubicin, erythromycin, bleomycin
class 4 chemotherapy, especially in high-dose chemotherapy;
②patients undergoing radiation therapy; ③ various
hypoxemias: such as acute anemia, adult respiratory
distress syndrome, sepsis, etc.; ④liver diseases: including
liver damage caused by virus, drug toxicity, alcohol toxicity
and other chemical toxicities. ⑤it can also be used for
adjuvant treatment of organophosphorus, amine or nitro
compound poisoning.

(Continued)

(Continued)
5) Situation of the cancellation of the important research and development project

and the products which were not approved during the Reporting Period
6) Situation of the important research and development projects to be carried out in

the next year
In addition to the aforesaid “3) Basic information on the main research and
development project”, in 2019, the Company plans to carry out clinical research
on Sodium Ceftriamidine, research and development of ancient and classical
prescriptions and consistency evaluation of related product.
7) Substantial R&D subsidy, support, allowance, tax preference for the projects from
the government and relevant application by the Company.
In 2018, the Group received a total of RMB86,334,000 project subsidies. The

following table lists the subsidies given to major projects:
Name of Amount of Information

enterprise Item name Supporting type subsidy on utilization
(RMB’000)
The Company Study on consistency evaluation 2017 application-oriented technological 6,800 In the process
of a series of major variety of research and development and of being
cefixime preparations major technological achievement used
transformation special project
Research on synergistic innovation 2015 Guangzhou industry-university- 2,000 In the process
industrialization of the great research collaborative innovation of being
variety of high-efficiency major project used
targeted anti-cancer series such
as sorafenib
Baiyunshan Technical transformation 2018 Guangzhou “Made in China 2025” 5,000 Had been used
General project regarding upgrade industrial development fund technical
Factory of cephalosporin solid transformation special industrial
preparation manufacturing enterprise technical transformation
led by integration of and industrialization direction
informationization and
industrialization
Guangzhou key drug research 2016 Guangzhou industry-university- 1,520 Had been used
project based on drug research collaborative innovation
consistency evaluation process alliance special project
service platform

(Continued)

(Continued)
the government and relevant use by the Company. (Continued)

(RMB’000)
Zhong Yi Quality improvement and new Guangzhou Science Technology and 4,000 In the process
product development of the Innovation Commission of being
great variety of chinese patent used
medicines with high-quality
medicinal material astragalus as
raw material
Standardized construction of Xiao Standardization project of traditional 5,000 In the process
Ke Pill Chinese medicines in National of being
Development and Reform used
Commission’s emerging industry
major engineering package
Identification of material basis of Guangzhou Science Technology and 1,200 In the process
efficacy and clinical study of Innovation Commission-external of being
Zi Shen Yu Tai Pill based on science and technology cooperation used
quantitative-composition model program and external research and
development special topic
Subsidy for standardized Special fund for promoting the 2,000 In the process
construction of Xiao Ke Pill development of advanced of being
manufacturing industry in Guangzhou used
Development Zone in Huangpu
District, Guangzhou
Guangzhou Han Research and development and Special project for the development of 9,033 In the process
Fang industrialization of high-end strategic emerging industries of being
medicinal lipid raw materials used
Research and development Industry-university-research collaborative 4,000 In the process
and industrialization of new innovation major special project of being
distinctive medicinal lipid used
products
Study on deep processing of cell Science and technology research program 1,000 In the process
wall broken decoction pieces on people’s livelihood of being
for precious medicinal materials used
such as ganoderma lucidum,
conic gymnadenia tuber and
gastrodia elata
Industrialization of new injection National major new drug creation 2,640 In the process
lipid excipients and common of being
key technological research and used
development of application,
as well as the international
registration

(Continued)

(Continued)
the government and relevant use by the Company. (Continued)

(RMB’000)
Guangzhou Bai Di Construction of Bai Di Biological Guangzhou’s special project for 1,000 In the process
Research and Development construction of research and of being
Institution development institutions of used
enterprises
(iii) Situation of the production and sales of the Company’s products
1) Situation of the main business of the Company divided according to the therapeutic
areas
Changes of Changes of Changes of

operating operating gross profit
income costs margin
Main compared compared compared
therapeutic Operating Operating Gross with with with
areas Product name income costs profit last year last year last year
(RMB’000) (RMB’000) (%) (%) (%) (%)
Drugs used in Xiao Ke Pill 403,544.07 151,278.46 62.51 (16.11) 7.67 (8.28)
internal medicine Xiao Chai Hu Granule 264,715.84 158,781.42 40.02 8.00 4.00 0.06
department Hua Tuo Zai Zao Pill 190,856.90 129,533.29 32.13 (21.99) (21.88) (0.30)
Xiao Er Qi Xing granules 164,269.85 113,380.25 30.98 (5.63) 12.04 (10.88)
(10 bags *120 boxes)
Zi Shen Yu Tai Pill 163,512.77 26,495.92 83.80 (4.56) (45.21) 12.03
Xia Sang Ju 153,965.49 80,631.73 47.63 (36.58) (22.68) (4.88)
Granule 10g
Bao Ji oral liquid 110,041.71 37,579.30 66.85 18.30 8.39 3.12
(10 pieces)
Antimicrobial drugs Cefixime series 856,990.85 211,638.32 75.30 88.06 189.67 (8.67)
Cefathiamidine 704,911.64 564,140.44 19.97 104.02 165.92 (18.63)
for Injection
Cephalosporin series 213,278.74 74,472.45 65.08 85.14 51.21 7.84
Amoxicillin series 212,661.55 142,302.43 33.09 5.30 11.86 (3.92)
Cefixime 173,139.35 136,582.95 8.23 46.57 36.73 6.50

(Continued)
(iii) Situation of the production and sales of the Company’s products (Continued)
1) Situation of the main business of the Company divided according to the therapeutic
areas. (Continued)
Changes of Changes of Changes of

operating operating gross profit
income costs margin
Main compared compared compared
therapeutic Operating Operating Gross with with with
areas Product name income costs profit last year last year last year
(RMB’000) (RMB’000) (%) (%) (%) (%)
Andrology Sildenafil Citrate Tablet 662,057.75 83,745.41 – 17.67 101.81 –

medication
Drugs for easing Paracetamol Caffeine 196,559.00 88,845.00 54.80 4.90 (1.30) 11.00
pain, clearing Aspirin Powder
heat, and
resisting
inflammation,
wind-damp and
gout
Dermatological Feng Yong Jing series 105,941.00 49,051.00 53.70 5.20 19.70 1.30
medication
Explanation:

During the Reporting Period, the gross profit rate of the principal operation of the
Company was 23.52%, among which, the gross profit rate of the Great Southern
TCM segment was 43.13%. The huge difference in gross profit rate between Great
Southern TCM segment and the companies mentioned above was mainly due to
the difference in the products structure and huge difference in the gross profit rate
of principal products.
The gross profit rate of the companies in the industry:
Gross profit
rate of
Operation pharmaceutical Overall gross
Stock code Abbreviation revenue industry profit rate
(RMB’000) (%) (%)
600664 Harbin Pharmaceutical Group Co., Ltd. 12,017,531.25 54.48 25.88
600511 China National Medicines Co., Ltd. 36,284,746.33 42.41 7.81
601607 Shanghai Pharmaceuticals 130,847,181.88 55.14 12.78
Holding Co., Ltd.
600196 Shanghai Fosun Pharmaceutical 18,533,555.42 66.42 58.95
(Group) Co., Ltd.
600085 Tongrentang Chinese Medicine-Since 13,375,966.34 50.58 46.24
Note: Full disclosure in the annual reports of the comparable companies for 2018 is not yet available,
the above information came from the annual reports of the comparable companies for year
2017.

(Continued)
2) Analysis of the main sales model of the Company
For the details of the sales mode of each segment of the Group, please refer to
Operation Model, (ii) of COMPANY’S BUSINESS PROFILE in Section 3 of this annual
report.
3) Situation of the centralized purchase of drugs through bidding
The total
actual purchase
quantity of
Name of the main Interval of medical
medicine (products) Specifications bidding price institutions
(RMB)
Cephathiamidine for Injection 0.5g/bottles 26.26-35.50 22,830.20

thousand bottles
Cefoxime granule 50mg * 6 tablets/box 21.03-26.17 16,204.96
thousand boxes
Cephathiamidine for Injection 1.0 g/bottles 43.79-48.72 11,007.32
thousand bottles
Cefoxime capsules 0.1gx6 tablets/box 30.13-43.65 10,834.70
thousand boxes
Xiao Ke Pill 52.5g/bottle 31.84-45.60 9,223.09
thousand bottles
Ceflon dispersible tablets 0.25gx6 tablets/box 28.44-31.60 8,879.00
thousand boxes
Qing Kai Ling for injection 10ml*5 bottle/box 6.45-11.00 5,965.40
thousand boxes
Ke Gan Li Yan Oral Solutio 10ml*12 bottle/box 30.02-56.00 5,369.48
thousand boxes
Chlorfenoxamine tablet 50 tablets/bottle 28.00 4,751.20
thousand bottles
Cefazoxime sodium for injection 0.25g/ampoule 11.34-15.60 4,234.77
thousand ampoules
Qing Kai Ling capsules 0.25g*36 tablets/box 15.83-19.08 3,326.40
thousand boxes
Qing Kai Ling granule 10g*20 tablets/box 21.99-27.91 3,173.50
thousand boxes
Hua Tuo Zai Zao Pill 8g*12 tablets/box 35.70-37.44 3,063.62
thousand boxes
Zi Sheng Yu Tai Pill 5g*6 tablets/box 83.50-120.00 2,816.76
thousand bottles
Cefatini capsules 0.1g*6 tablets/box 49.00-57.40 2,774.00
thousand boxes

(Continued)
3) Situation of the centralized purchase of drugs through bidding (Continued)
The total
actual purchase
quantity of
Name of the main Interval of medical
medicine (products) Specifications bidding price institutions
(RMB)
Cefoxime capsules 50mg*6 tablets/box 19.38-25.68 2,437.69

thousand boxes
Cefatini capsules 0.1g*10 tablets/box 80.29-93.75 1,976.00
thousand boxes
Mi Lian Chuan Bei Pi Pa Confection 345g/box 22.00-44.64 1,812.00
thousand boxes
Carbocisteine Oral Solution 5g*10 ampoule/box 21.98-24.05 1,747.68
(sugar free) thousand boxes
Qing Re Xiao Yan Ning capsules 0.32g*24 tablets/box 24.77-48.00 1,366.08
thousand boxes
4) Analysis of sales expenses
Constitution of the sales expenses


(Continued)
4) Analysis of sales expenses (Continued)
Percentage
of amount
occurred for
Amount the Report
occurred for the Period in the
Items Report Period total sales cost
(RMB’000) (%)
Employee remuneration 2,084,916 41.23

Sales service fee 667,087 13.19
Transportation expenses 149,182 2.95
Office expenses 36,316 0.72
Freight and miscellaneous charges 691,761 13.68
Rental expenses 81,659 1.61
Conference expenses 88,330 1.75
Advertising and promotion fees 1,044,694 20.66
Consulting fees 46,271 0.92
Depreciation charges 42,398 0.84
Others 124,207 2.46
Total 5,056,821 100.00
Situation of the comparison in the same industry
Selling and
distribution
accounted
Selling and for the
Comparable companies distribution proportion of
in the same industry expanses revenue
(RMB’000)
Harbin Pharmaceutical Group Co.,Ltd. 761,022.40 6.33

China National Medicines Co.,Ltd. 694,011.20 1.91
Shanghai Pharmaceuticals Holding Co., Ltd. 7,11,261.80 5.66
Shanghai Fosun Pharmaceutical (Group) Co., Ltd. 5,790,535.60 31.24
Tongrentang Chinese Medicine-Since 2,659,258.10 19.88
The average amount of the sales expenses (RMB’000) 1,980,965
Total amount of the sales expenses of the Company 5,056,821
during the Reporting Period (RMB’000)
Sales expenses accounted for the proportion of revenue 11.97
of the Company during the Reporting Period (%)

(Continued)
4) Analysis of sales expenses (Continued)
Notes:
a. Full disclosure in the annual reports of the comparable companies for year 2018 is not yet
available, the above information came from the annual reports of the comparable companies for
year 2017.
b. The average amount of the sales expenses is the arithmetic average of the five companies in the
same industry.
Description on the significant changes in sales expenses and the reasonability of the
proportion of the sales expenses
Due to the inclusion of GP Corp. and Wang Lao Ji in the scope of combination
of the Company, the Company recorded an increase in selling and distribution
expenses by RMB702 million; (2) the selling and distribution expenses of other
subsidiaries increased slightly; (3) the reasons of the year-on-year change on
advertising and promotional expenses and sales service fee are: WLJ Great Health,
a subsidiary of the Company, further improved the accuracy of selling and
distribution expenses by review in 2017, sorted out the detail of the selling and
distribution expenses, reversed the product promotion fees in 2016 (including free
gifts, display, exclusive sales, barcode and others fees) incurred but not yet settled
from “selling and distribution expenses – advertising and promotion fees”, and
transferred it to “selling and distribution expenses – sales service fee”. The “selling
and distribution expenses – sales service fee” adjusted in accordance with the
actual payment of related expenses resulted in a significant decrease in advertising
and promotion fees in 2017 and a low year-on-year base during the Reporting
Period; a substantial increase in sales service fee in 2017 resulited in a high year-on-
year base during the Reporting Period. In addition to the above-mentioned reasons,
WLJ Great Health offered more sales discount method in 2018, leading to increased
sales discount and decreased sales expenses during the Reporting Period.
For details in relation to the sort-out of selling and distribution expenses, please
refer to the Announcement of Guangzhou Baiyunshan Pharmaceutical Holdings
Company Limited on the Reply to the Inquiry Letter from the Shanghai Stock
Exchange published by the Company in Shanghai Securities News (上海證券報),
Securities Times (證券時報), China Securities journal (中國證券報), Securities Daily
(證券日報) and on the websites of the SSE and HKEx on 23 November 2017.
(v) Investment situation
(i) Overall analysis on external equity investment
As at the end of the Reporting Period, the external equity investment of the Company
amounted to RMB1,759,958,000, with a decline of RMB248,523,000 as compared
with last year, mainly due to ① the decrease in long-term equity investment as a result
of the 80% equity held by the Company in GP Corp., which was consolidated into the
Company’s accounts and accounted for using the cost method for long-term equity
investment; ② the increase in long-term equity investment as a result of the accounting
change of the equity held by the Company in Yi Xin Tang from “other non-current
financial assets” to “long-term equity investment” measured at equity method; and ③the
Company completed the acquisition of 48.0465% equity interest in Wang Lao Ji, and
Wang Lao Ji became a subsidiary controlled as to 96.093% by the Company and was
consolidated into the Company’s accounts. ④ The increase in long-term equity investment
as a result of the investment gains recognized by the Group under the equity method for
joint ventures and associates.
1) Significant equity investment
① The asset delivery and change in industry and commerce registration was
completed on 31 May 2018 for the very substantial acquisition of 30%
equity interest in GP Corp. held by Alliance BMP with RMB 1094.1 million
in cash by the Company. Thereafter, GP Corp. became a subsidiary which
is controlled as to 80% by the Company and was consolidated into the
Company’s accounts, thus further promoting the development of the
Company’s “Great Commerce” segment.
② During the Reporting Period, the Company completed the acquisition of

48.0465% equity interest in Wang Lao Ji. Thereafter, Wang Lao Ji became
a subsidiary which is controlled as to 96.093% by the Company and was
consolidated into the Company’s accounts.
2) Significant non-equity investment

(v) Investment situation (Continued)
(i) Overall analysis on foreign equity investment (Continued)
3) Financial assets evaluating at fair value
(i) Investments in stocks
Number of % of stock
shares held Book value investment
The for the as at the as at the Gain/(Loss)
initial end of the end of the end of the during the
Type of Stock amount of Reporting Reporting Reporting Reporting
Number Stock Code Stock name investment Period Period Period Period
(RMB’000) (share) (RMB’000) (%) (RMB’000)
1 A Share of SSE 600038 AVIC Helicopter Co., Ltd. 1,806 57,810 2,160 1.51 (517)
Harbin Pharmaceutical Group
2 A Share of SSE 600664 Co., Ltd. 3,705 376,103 1,486 1.04 (512)
3 A Share of Shenzhen Stock Exchange 000950 C.Q.Pharmaceutical Holding 150,145 25,992,330 114,444 80.17 (135,862)
4 A Share of SSE 601328 Bank of Communications 525 394,567 2,285 1.60 104
5 A Share of SSE 601818 Everbright Bank 10,725 6,050,000 22,385 15.68 (1,022)
Other stock investments held as at the end of the Reporting Period –
Gain/(Loss) of stock investments sold during the Reporting Period –
Total 166,906 32,870,810 142,760 100.00 (137,809)
(v) Investment situation (Continued)
(i) Overall analysis on foreign equity investment (Continued)
3) Financial assets evaluating at fair value (Continued)
(ii) Details of the main subsidiaries and joint ventures of the Company
Equity
directly held Income from Profit from
Name of Business Major products Registered by the Principal Principal
enterprises nature or services capital Company Operations Operations Total assets Net assets Net profit
(RMB’000) (%) (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
WLJ Great Health Manufacturing Production and sales of 900,000 100.00 9,464,403 4,036,277 8,194,763 3,029,842 850,583
pre-packaging food,
dairy products, etc.
GP Corp. Pharmaceutical business retail of medical 2,270,000 80.00 35,762,126 2,160,880 19,824,128 3,490,418 308,110
treatment apparatus
Note: The asset transfer and change in business registration was completed on 31 May 2018
for the major asset purchase event of acquiring 30% equity interest held by Alliance
BMP in GP Corp. with RMB 1.0941 billion in cash by the Company. Thereafter, GP
Corp. became a subsidiary which is controlled as to 80% by the Company and was
consolidated into the Company’s accounts.
Except in relation to WLJ Great Health and GP Corp. as mentioned in the

above table, the Company did not derive any investment income from any
single investee company amounting to 10% or more of the net profit of the
Group during the Reporting Period.
During the Reporting Period, the Group did not have other business
operation activity having significant influence on the net profit.
3. DISCUSSION AND ANALYSIS ON FUTURE DEVELOPMENT
(1) Competition pattern, and the development trend of the industry
2018 was a critical year of changes in respect of the policy environment of the pharmaceutical
industry in China. The pharmaceutical industry was also in the process of significant
transformation driven by policies. On one hand, while pressure on operations from policies such
as fees controlled by medical insurance, price reduction in tender bidding and price negotiation
by second bargaining and volume-based purchase still existed, growth of the industry has slowed
down and it was mainly driven by innovative products and upgrading in consumption. On the
other hand, outcomes of key reforms such as a new edition of medical insurance catalogue,
consistency evaluation, acceleration in assessment and approval of innovative new drugs entered
into the rewarding period gradually. The benefits of policy reform have provided new room for
the growth of the pharmaceutical market. Meanwhile, China’s accelerated population aging,
increasing urbanization level, improvement of the medical security system, are generally beneficial
to the development of the PRC pharmaceutical industry. These changes will continue to create
new opportunities and challenges in the pharmaceutical industry in 2019, and promote the
development of the pharmaceutical industry amid the structural adjustment of the stock market
and the industry increment driven by innovation.
(2) Development strategy and annual work plan for year 2019
In 2019, the pharmaceutical industry has entered into a new era of development, and it is the
main focus across the industry to mitigate risk and improve efficiency through innovative R&D
and quality manufacturing. Based on its own situation, the Group will make great efforts on
the following the works under the development theme of “Year of Risk Control and Efficiency
Enhancement” in 2019:
1. Focus on “Big Products” to continue promoting the robust development of the Great
Southern TCM segment: promote the characteristic development of “fashionable Chinese
medicine”, promote the professionalization of “generic and innovative chemical medicine”
and promote the development of “biological pharmacy” on a large scale.
2. Promote development of the Great Health Industry by focusing on“diversified products”:

pay attention to the categories of product and subdivide the market of herbal tea,
continue to solidify and promote the position of Wang Lao Ji in the industry, while
nurturing new product markets and creating a characteristic product portfolio for the
Great Health Industry to facilitate the development of the Great Health Industry under
the pattern of “one core with multi-elements”; continue to strengthen the effect of the
terminal business management and implementation, vigorously promote “Ji culture” and
excavate the essence of “Ji culture”; and propel the synergetic development of the Wang
Lao Ji products in red and green bottles.
3. Advance the expansion and development of the Great Commerce segment under the core
strategy of “further development + expansion”: the Group will continue to explore the
hospitals and community healthcare businesses, and take forward the resource integration
between the Great Southern TCM segment and the Great Commerce segment; it will
speed up to tap into the lower areas in building the terminal delivery business network; we
will accelerate the expansion and deployment of retail business and continue our efforts in
promoting the GPC Pharmacy project.
3. DISCUSSION AND ANALYSIS ON FUTURE DEVELOPMENT (Continued)
(2) Development strategy and annual work plan for year 2019 Continued)
4. Develop a medical service industry integrating medical treatment, medicine and recovery
in the direction of “characterization and differentiation”, speed up the exploration of new
business and new modes of business, and accelerate the implementation of the medical
device project.
5. Develop under the support of technology and in an R&D manner with focus on both
generic and innovative medicine: speed up the development of innovative medicine,
generic medicine and Great Health products, optimize the technological innovation
platform, and build a more effective quality system.
6. Further strengthen basic management and prevent significant risks by starting works
such as special audits and special research on significant risks, intensifying the efforts on
rectification and supervision, and giving full play to the role of auditing and risk control in
preventing risks, improving management and enhancing economic efficiency.
7. Pursue scientific planning, coordination and layout formation by accelerating the

construction of industrial base, enhancing production capacity and optimize layout
formation, and using the drug marketing licensee system (pilot) to promote consolidation
of production capacity steadily while enhancing the intelligent production standard.
8. Continue to increase capital operation efforts by actively promoting investments and

merger and acquisition projects in the four major segments, developing new financing
channels and promoting the development of fund investment and financing businesses.
(3) Potential challenges and risks
In 2019, with the completion of the reform of super-ministry system in medical treatment and
healthcare and the accelerated medical reform, the substantial decrease in drug prices after the
implementation of the pilot centralized medicine procurement organized by the government,
the sluggish growth of traditional pharmaceutical commerce resulting from the complete
implementation of the “two-invoice system”, and the tightened regulation on adjuvant medicine
and the more stringent drug inspection, the tightened price control over the medicines covered
by medical insurance and Medical Insurance Catalogue leaning toward innovative medicine
with high performance price ratio, as well as the implementation and furtherance of other new
policies, have brought challenges to the development of the Group’s traditional business.
The Group will pay close attention to the implementation and promotion of new policies and
make strategic deployments in advance. For the corresponding measures, please refer to the
content regarding the changes in industry policies and impact in the section headed “(IV) Analysis
on the pharmaceutical manufacturing industry operation information” in Section 4 of this annual
report.
4. OTHER MATTERS
(1) Accounts
The results of the Group for the year ended 31 December 2018 are set out in the consolidated
income statement.
The financial condition of the Group as at 31 December 2018 is set out in the consolidated
balance sheet.
The cash flows of the Group for the year ended 31 December 2018 are set out in the
consolidated cash flow statement.
The cash flows of the Company for the year ended 31 December 2018 are set out in the cash
flow statement.
(2) Financial Summary
A summary of the results and of the assets and liabilities of the Group are set out in the
Discussion and Analysis of Operation contained in this annual report.
(3) Reserves
Details of the movements and amount of the reserves of the Group during the Year are set out in
the financial report contained in this annual report.
(4) Distributable Reserves
The distributable reserves of the Group as at 31 December 2018 calculated in accordance with
the PRC Accounting Standards was RMB5,261,378,000.
(5) Fixed Assets
Details of the movements of fixed assets for the year ended 31 December 2018 are set out in the
financial report contained in this annual report.
(6) Ordinary Connected Transactions
Details of connected transactions were set out on the “Major Event” section of this annual
report.
(7) Management Contracts
No contracts concerning the management and administration of the whole or any substantial
part of the business of the Company were entered into or existed during the Year.
(8) Corporate Governance
The Company complied with the Code on Corporate Governance Practices as set out in Appendix
14 to the Listing Rules of HKEx except for code provision A.6.7 as disclosed in the section headed
9 “Corporate Governance” below.
4. OTHER MATTERS (Continued)
(9) Tax Exemption
The Company shall withhold and pay the individual income tax and enterprise income tax
at a rate of 10% or other applicable tax for H shareholders pursuant to the requirements of
the Notice of State Administration of Taxation Concerning the Relevant Questions on the
Withholding and Payment of Enterprise Income Tax Relating to the Payment of Dividends, Bonus
and Interest by PRC Resident Enterprises to QFII (Guo Shui Han [2009] No. 47) 《 ( 關於中國居民
企業向 QFII 支付股息、紅利、利息代扣代繳企業所得稅有關問題的通知》 ( 國稅函〔2009〕47 號 ))
and“ Notification of Issues in relation to the Withholding and Payment of Enterprise Income Tax
for Payment of Dividend to H Shareholders who are Overseas Non-resident Enterprises by Chinese
Resident Enterprises” (Guo Shui Han [2008] No. 897) 《 ( 關於中國居民企業向境外 H 股非居民企業
股東派發股息代扣代繳企業所得稅有關問題的通知》( 國稅函〔2008〕897 號 ))。
(10) Retirement Scheme
Details of the retirement scheme and amounts of contributions of the Group are set out in the
financial report contained in this annual report respectively.
(11) There had been no changes in the newspapers designated by the Company for information disclosure
(12) Environmental policy
The environmental policy and its performance of the Group were set out on the Social
Responsibility Report in 2018 of the Company (full text of the report has been uploaded to the
website of SSE and HKEx).
V. EXPLANATION ON THE FAILURE TO DISCLOSE AS PER RULES DUE TO INAPPLICABILITY OR

SPECIAL REASONS SUCH AS STATE SECRETS AND BUSINESS SECRETS AND THE REASONS
THEREFOR

Major Events
1. PROPOSED SCHEME OF PROFIT DISTRIBUTION OR INCREASE IN SHARE CAPITAL BY

TRANSFER FROM CAPITAL RESERVE
(1) Formulation of cash distribution policy and its implementation
The Company attaches great importance to the reasonable investment returns for investors,
explicitly stipulated the distribution policy in accordance with the relevant provisions of Article
219 of the Articles of Association on distribution policy, including the principle of distribution,
method of distribution, conditions of distribution and the lowest proportion of distribution,
decision-making process of distribution and the conditions and process of the adjustment of
distribution.
During the Reporting Period, having considered factors such as profit, investment, funding needs,
cash flow and shareholders’ returns planning, etc. in conjunction with the relevant provisions
of the Article of Association relating to profit distribution, the management of the Company
submitted the proposal in relation to the distribution the proposal on profit distribution and
dividend payment for 2017 to the Board. After the proposal on profit distribution and dividend
payment for 2017 was approved by the Board unanimously, it was submitted to the annual
general meeting of the Company of 2017 for consideration, and was approved by shareholders
present at the 2017 annual general meeting holding more than half of voting rights. The
dividends had been distributed by the end of August 2018.
(2) Proposal on profit distribution and dividend payment for 2018
In accordance with the relevant provisions of the Companies Law and the Articles of Association,
and in combination with the consideration of shareholders’ return and the capital requirements
of the Company’s business development, as approved at the 20th meeting of the seventh
board of directors of the Company, the board of directors of the Company proposed the
following profit distribution plan for 2018: According to the audited financial report of the
Company for the Year of 2018, the net profit of the Group attributable to the shareholders
of the Company of 2018 amounted to RMB3,440,980,103.08. Based on the net profit of
the Company of RMB2,139,729,642.17 in 2018, a 10% statutory surplus reserve in the
amount of RMB213,972,964.22 was provided, with the addition of the undistributed profit
carried over from last year in the amount of RMB3,955,047,509.80, and after deducting the
cash dividends of 2017 by RMB619,426,351.57, the actual distributable profits amounted to
RMB5,261,377,836.18.
Based on the actual circumstances of the Company, it is proposed that based on the share capital
of 1,625,790,949 shares as at the end of 2018, a cash dividend of RMB4.24 (inclusive of tax) for
every 10 shares, an aggregate of RMB689,335,362.38 be distributed, accounting for 20.03%
of the net profit attributable to the shareholders of the listed company in the then consolidated
income statement and 32.29% of the then net profit (after the deduction of non-recurring
items) attributable to the shareholders of the listed company. The undistributed portion shall
be transferred to the next distribution. There will not be any capitalization of capital reserve for
2018.
The independent directors of the Company have expressed their opinion on the profit distribution
plan, and the above plan is still subject to the approval of the 2018 annual general meeting of
the Company. Minority shareholders will be offered sufficient opportunities to express their views
and requests at the 2018 annual general meeting of the Company through the combination of
on-site open voting and online voting to ensure that their legal rights are fully safeguarded.
Major Events
1. PROPOSED SCHEME OF PROFIT DISTRIBUTION OR INCREASE IN SHARE CAPITAL BY

TRANSFER FROM CAPITAL RESERVE (Continued)
(3) Profit distribution scheme or plan, reserved funds to equity shares scheme or plan of the
Company for the last three years (including the Reporting Period):
Net profit
attributable to the
shareholders of Proportion of
the listed Company payout
for the distribution distribution in the
Amount of profit year as shown in net profit as showed
Distribution Distribution for distribution the consolidated in the consolidated
year every 10 shares in cash financial statements financial statements
(inclusive of tax) (inclusive of tax) (After restatement)
(RMB) (RMB) (RMB) (%)
2018 4.24 689,335,362.38 3,440,980,103.08 20.03

2017 3.81 619,426,351.57 2,061,651,929.01 30.05
2016 2.80 455,221,465.72 1,508,032,671.07 30.19
Note: There was no reserved funds to equity shares scheme of the Company for the last three years.
(4) Cash offer to repurchase shares into cash dividends
(5) The parent company make profit and undistributed profit is positive but did not
proposed a scheme of profit distribution during the Reporting Period, the Company
should disclose the reason and the plan on the application of the undistributed profit

Major Events
2. PERFORMANCE OF UNDERTAKINGS BY THE COMPANY, ITS SHAREHOLDERS AND ACTUAL

CONTROLLERS
(1) Independence of listed company
Item Content
Background of Undertakings related to the Material Assets Reorganization in 2013

undertakings
Party given the Controlling shareholder

undertaking
Undertakings 1. After completion of the Material Assets Reorganization in 2013,

GPHL, the controlling shareholder of the Company, will comply
with the requirements of relevant laws and regulations, regulatory
documents and the Articles of Association of the Company, and
exercise shareholder’s right according to laws and will not affect
the independence of the Company by exerting its influence as
a controlling shareholder and will maintain the integrity and
independence of the Company in respect of assets, employees,
finance, organisation and business.
2. The undertaking letter will remain effective so long as GPC legally

and validly exists and GPHL owns controlling interest in the
Company.
Time and period of The undertaking was given on 29 February 2012 and is valid
the undertaking permanently.
Valid period for N/A

performance
Whether timely and Being performed

strictly performed
Compliance or not Yes

Major Events

CONTROLLERS (Continued)
(2) Avoiding competition
Item Content

undertakings

undertaking
Undertakings 1. After completion of the Material Assets Reorganization in 2013,

GPHL and its controlled subsidiaries should avoid engaging in
business and operations which substantially compete with those
of the Company subsisting after completion of the Material
Assets Reorganization in 2013 (“new GPC”), and avoid increasing
investment in companies and enterprises, other than new GPC
and its subsidiaries, which engages in business and operations
which substantially compete with those of new GPC. GPHL
will not and will procure its subsidiaries not to engage in the
same or similar business of new GPC to avoid direct or indirect
competition with the operation and business of new GPC.
In addition, GPHL will voluntarily and vigorously procure its
subsidiaries to give up competition with new GPC if GPHL and
its subsidiaries will bring unfair impact on new GPC in respect of
market shares, business opportunities and allocation of resources.
2. GPHL shall bear the economic losses and/or additional costs

directly and/or indirectly suffered or incurred by new GPC due to
any breach of the above undertakings.
3. The undertaking letter shall remain effective so long as new GPC

legally and validly exists and GPHL owns controlling interest in
new GPC.
undertaking permanently.

performance

strictly performed

Major Events

(3) Regulating connected transactions
Item Content

undertakings

undertaking
Undertakings 1. After completion of the Material Assets Reorganization in

2013, GPHL and its subsidiaries should minimize and regulate
connected transactions with new GPC. If there is any unavoidable
connected transaction, GPHL and its controlled subsidiaries will
sign agreement with new GPC in accordance with laws and
perform the legal procedures. They will also fulfill the information
disclosure obligations and pursue the reporting and approval
procedures according to the requirements of relevant laws and
regulations, the Listing Rules of SSE and the Listing Rules of HKEx
and the Articles of Association of Guangzhou Pharmaceutical
Company Limited, and warrant that it will not harm the legitimate
rights and interests of the subsisting new GPC after completion
of the Material Assets Reorganization in 2013 and its other
shareholders.
2. The undertaking letter will remain effective so long as new GPC

legally and validly exists and GPHL owns controlling interest in
new GPC.
the undertaking permanently.

performance

strictly performed

Major Events

(4) Undertakings related to trademarks
Item Content
Background of the Undertakings related to the Material Assets Reorganization in 2013

undertakings
Party given the Controlling shareholder, the Company

undertaking
Undertakings GPHL and the Company mutually undertake as follows in relation to

the transactions under the Trademark Custody Agreement between
Guangzhou Pharmaceutical Company Limited and Guangzhou
Pharmaceutical Holdings Limited (the “Agreement”):
1. Both parties will enter into a supplemental agreement

(“Supplemental Agreement”) to the Agreement as soon as
possible after the Agreement becoming effective and before they
enter into the first new or renewal licensing agreement relating
to the licensing of Wang Lao Ji trademarks in custody under
the Agreement, with the specific arrangement for new/renewal
trademark license to be negotiated by the parties separately. Both
parties also agreed that the Supplemental Agreement shall (i)
embody the requirement for GPHL to pay the Company a basic
custody fee of RMB1 million per year as set out in the Agreement;
and; (ii) specify that 20% of the new licenses fees will be the
custody income for the Company and the remaining 80% will be
retained by GPHL.
2. Both parties further undertake that the Supplemental Agreement

they entered into in the future under the above arrangement will
comply with applicable provisions of the Listing Rules of HKEx and
SSE (including but not limited to the requirements of Chapter 14A
of the Listing Rules of HKEx and Chapter 10 of the Listing Rules
of SSE relating to continuing connected transactions/connected
transactions in the ordinary course of business, including that
the Supplemental Agreement must specify its validity term, the
estimated annual cap of custody income, other terms that must
be set out, and etc.).
Time and period of Commitment made on 26 March 2012 and the period of validity is up to
the undertaking the date of completion of the undertakings

performance

strictly performed

Major Events

(5) Undertakings related to properties with legal defects
Item Content
Background of the Undertakings related to the Material Assets Reorganization in 2013

undertakings

undertaking
Undertakings 1. GPHL will promote the development of the subsisting listed

company, protect the interests of minority investors, and
proactively take measures to solve the issue of Baiyunshan
properties with legal defects in titles to ensure that the
interests of the subsisting listed company and investors are not
jeopardised.
2. Guaranteeing that the subsisting listed company will be

able to continue occupying and using such properties after
completion of the merger and that it will not incur any
additional cost nor suffer any material adverse impact due to
such issue.
3. After completion of the merger, GPHL will fully compensate

the Company within 2 months from the date of incurring
of the actual losses (not including the tax normally incurred
in respect of changing the registration name and transfer in
relation to the properties and the land premium in relation
to the changes from non-granted land use rights to granted
land-use rights) in case there are any penalties imposed on
or losses incurred by the Company due to the legal defects in
the building ownership or land use rights of the Baiyunshan
properties to be acquired by the Company, and such losses
include but not limited to all economic losses in connection
with any civil, administration and criminal liabilities, to ensure
that the Company and minority investors will not suffer any
damage thereunder.
Time and period of the The undertaking was given on 29 February 2012 and is valid
undertaking permanently.

performance

strictly performed

Major Events

(6) Undertakings related to trademarks
Item Content
Background of the Undertakings related to the the Material Assets Reorganization in

undertakings 2013

undertaking
Undertakings 1. GPHL undertakes that, within two years from the date of
satisfaction of any one of the conditions set out below, it
will legally transfer the trademarks in Wang Lao Ji series (25
in total) and 4 other trademarks (comprising trademarks
with registration numbers of 125321, 214168, 538308 and
5466324) to the Company according to the requirements
of laws and regulations then in force: (i) Upon the expiry on
1 May 2020, or earlier when the license agreement and its
supplemental agreement were invalidated/void/terminated as
determined by the arbitration institution, or earlier when the
agreement was terminated or released as agreed between the
parties; or (ii) Hung To (Holdings) Company Limited (鴻道(集團
(有限公司) legally ceases to own the right of pre-emption
2. On the basis of the original undertaking letter, GPHL has

further made the promise as follows: After all of the legal
disputes regarding the trademark of Wang Lao Ji have
been resolved and within two years commencing from the
transferable day, GPHL shall, pursuant to the provisions
of the effective laws and regulations then and after the
relevant procedures regarding the reporting for approval have
been processed, legally transfer to the Company such 29
trademarks of the series of “Wang Lao Ji” together with such
other trademarks related to Wang Lao Ji and 4 trademarks
obtained and owned in legal manner by GPHL after the
Execution Day (inclusive of today) for the “Supplementary
Agreement to the Agreement of Trademark Custody”. The
Company may obtain such by cash or by issuing shares for
purchasing assets wherein the transfer price shall be legally
confirmed based on such appraisal value as issued by an
appraisal institute possessing the professional qualification of
engaging in securities and as confirmed in the asset appraisal
report verified by the State-owned assets authority.
Time and period of the The original undertaking was given on 29 February 2012. GPHL gave
undertaking a supplemental undertaking in respect of the relevant contents on
15 June 2012. The undertaking remains valid until it has been fully
performed.

performance
Major Events

(6) Undertakings related to trademarks (Continued)
Item Content
Whether timely and In December 2014, the Company received the Letter of Amendment
strictly performed to the Undertakings of Injection of Wang Lao Ji Trademark Series
from GPHL, which proposed to amend the performance period of the
former undertakings to “two years since the commencing date of the
judgment on the law case of red can decoration”, due to the disputes
of red can decoration.
As approved at the 8th meeting of the sixth session of the Board,
the resolution on the amendment to the performance period of
injection of Wang Lao Ji trademark series was submitted to the first
extraordinary general meeting in 2016 held on 13 March 2016 and
was approved.
Remark On 16 August 2017, the Supreme People’s Court of the PRC
announced the judgment on the “case of over red can decoration”,
and the judgment is final. On the same day, GPHL and WLJ Great
Health, the Company’s wholly-owned subsidiary, received the
relevant civil judgment of the Supreme People’s Court of the PRC on
the “case over red can decoration” (For details, please refer to the
Announcement of the Final Judgement on the “Case over WangLaoJi
Red Can Decoration” of Guangzhou Baiyunshan Pharmaceutical
Holdings Co., Ltd. dated 16 August 2017). According to GPHL’s
undertaking made on 29 February 2012, the supplementary
undertaking made on 15 June 2012 and the revised undertaking
made in 2014, the conditions for GPHL to transfer “WangLaoJi”
series trademarks to the Company had been satisfied.
On 27 December 2018, the resolution regarding the proposal on
purchasing trademarks in cash and the relevant agreements and
connected transactions was considered and approved at the 18th
meeting of the seventh session of the Board of the Company, by
using the appraised value as the pricing basis, which was determined
in the Assets Evaluation Report on Proposed Transfer of Trademarks
by Guangzhou Pharmaceutical Holdings Limited Involving the
420 Exclusive Use Rights of Trademarks Owned by Guangzhou
Pharmaceutical Holdings Limited (Zhong Lian Guo Ji Ping Zi [2018]
No. WIGPZ0701) with valuation reference date of 30 June 2018,
the Company intended to acquire all rights of WangLaoJi series of
trademarks held by GPHL, the controlling shareholder (including
trademarks already registered in the PRC and other countries or
regions and trademarks under application and pending for approval)
in cash, and signed the Agreement on Acquisition of Trademarks
in Cash between Guangzhou Baiyunshan Pharmaceutical Holdings
Company Limited and Guangzhou Pharmaceutical Holdings Limited
and the Profit Compensation Agreement between Guangzhou
Baiyunshan Pharmaceutical Holdings Company Limited and
Guangzhou Pharmaceutical Holdings Limited. The above transactions
are pending for consideration and approval by the general meeting of
the Company.
Save for the above, there is no outstanding undertaking that requires specific disclosure.
Major Events
3. THE COMPANY’S ASSETS OR PROJECTS INVOLVE PROFIT FORECAST AND WERE STILL
IN THE PROFIT FORECAST PERIOD DURING THE REPORTING PERIOD, COMPANY’S
EXPLANATION ON WHETHER THE ASSETS OR PROJECTS HAVE MET THE ORIGINAL PROFIT
FORECAST AND THE REASONS THEREFOR
□Reached ✓Not reached □Not applicable
(i) Basic information
On 21 December 2017, the Company entered into the Equity Interest Transfer Agreement with
GP Corp. and Alliance BMP, pursuant to which, the Company: (1) acquired 30% equity interest
in GP Corp. held by Alliance BMP by way of cash; and (2) granted the put options to Alliance
BMP for the sales of all the remaining 20% equity interest in GP Corp. held by it to the Company
during the exercise period (the “Transaction” or “Material Assets Reorganization in 2017”).
The target asset price of this transaction is based on the asset valuation report “Guo Zhong Lian
Ping Bao Zi (2017) No. 3-0085” issued by Guo Zhong Lian, the parties agreed the transaction
price of the 30% the equity interest in GP Corp. as RMB1,094 million, which was paid in US
dollars, after arm’s length negotiations. Alliance BMP may sell its remaining 20% equity interest
in GP Corp. to the Company during the exercise period (the exercise period of the put option
commences from six months after the completion date of the Transaction up to thirty-six months
after the completion date).
The asset transfer and change in business registration of this transaction was completed on 31
May 2018. After that, GP Corp. has changed to be a subsidiary controlled by the Company.
Alliance BMP has not yet exercised the put option of the remaining 20% equity interest in the
target company.
The above resolutions were approved at the 5th meeting of the seventh session of the Board
held on 21 December 2017, the 5th meeting of the seventh session of the supervisory committee
of the Company held on 21 December 2017 and the first extraordinary general meeting,
respectively. For details, please see the “Report of Material Asset Acquisition”, “Report of
Material Asset Acquisition (Revised) and “Implementation Report on Material Asset Acquisition”
published on the SSE on 23 December 2017, 5 January 2018 and 4 June 2018 and the relevant
disclosure in the announcements on the HKEx Limited on 23 December 2017, 2 January 2018
and 4 June 2018 and the relevant disclosure in the notice on the HKEx on 12 February 2018 by
the Company.
Major Events
3. THE COMPANY’S ASSETS OR PROJECTS INVOLVE PROFIT FORECAST AND WERE STILL
IN THE PROFIT FORECAST PERIOD DURING THE REPORTING PERIOD. COMPANY PLEASE
EXPLAIN WHETHER THE ASSETS OR PROJECTS HAVE MET THE ORIGINAL PROFIT FORECAST
AND THE REASONS THEREFOR (Continued)
(ii) Profit forecast
During the Transaction, the Company announced the Asset Valuation Report on the Market
Value of All the Equity Interest of the Shareholders in Guangzhou Pharmaceuticals Corporation
in Relation to the Proposed Equity Interest Acquisition by Guangzhou Baiyunshan Pharmaceutical
Holdings Company Limited (Guo Zhong Lian Ping Bao Zi (2017) No. 3-0085) (國眾聯評報字
(2017)第3-0085號《廣州白雲山醫藥集團股份有限公司擬實施股權收購涉及廣州醫藥有限公司
股東全部權益市場價值資產評估報告》) on 23 Decemeber 2017. The asset valuation institution
evaluates the assets to be acquired by the valuation methods which are based on future earnings
forecast. The evaluation result is used as the reference for the pricing of the Transaction. The
target asset price of the Transaction was determined after arm’s length negotiations between the
parties. The counterparty has not made performance guarantee.
Set out below is the information on the achievement of the profit forecast of GP Corp. in 2018:
Actual Estimated Percentage of

Items amount amount Differences achievement
(RMB’0000) (RMB’0000) (RMB’0000) (%)
Total profit 41,629.84 51,032.29 9,402.45 81.58

Net profit 30,811.00 38,274.21 7,463.21 80.50
In 2018, GP Corp. realized a total profit of RMB 416,928,400, with a percentage of achievement
of 81.58% and a net profit of RMB308,811,000 with a percentage of achievement of 80.50%.
GP Corp. did not reach the annual estimated profit of the Transaction in 2018 as stated in
the asset valuation report, mainly due to: (1) price limit for medicine bidding, removal of the
price markups on medicine in public hospitals, stringent control on the increase in medicine
price, restrictions on prescription, medical insurance cost control and other factors; and (2) the
comprehensive implementation of “Two-invoice system”, which led to a notable decrease in the
operating results of the commercial allocation wholesale business of GP Corp. and the failure to
meet the estimated profit by the GP Corp..
The target asset price of the transaction was determined by the parties after arm’s length
negotiations. Alliance BMP did not make performance guarantee and was not required to make
profit compensation to the Company.
4. COMPLETION PROCESS OF PERFORMANCE COMMITMENT AND ITS EFFECT ON GOODWILL

IMPAIRMENT TEST
5. APPROPRIATION OF FUNDS AND PROGRESS OF PAYMENTS OF DEBTS DURING THE REPORT

PERIOD

Major Events
6. EXPLANATION GIVEN BY THE COMPANY ON THE “NON STANDARD AUDITOR’S REPORT”

ISSUED BY THE AUDITORS
7. EXPLANATION OF THE COMPANY ON THE REASONS FOR AND EFFECTS OF THE CHANGES
IN ACCOUNTING POLICIES, ACCOUNTING ESTIMATES OR THE CORRECTION OF MAJOR
ACCOUNTING ERROR
(1) Explanation and analysis of the Company on the reasons for and effects of the changes
in accounting policies and accounting estimates
① Changes in accounting policies due to the implementation of the new Accounting

Standards for Business Enterprises.
The Ministry of Finance of the People’s Republic of China issued the Accounting Standards
for Business Enterprises No. 22-Recognition and Measurement of Financial Instruments
(Revised in 2017) (Caikuai [2017] No.7), the Accounting Standards for Business Enterprises
No. 23-Transfer of Financial Assets (Revised in 2017) (Caikuai [2017] No. 8), the
Accounting Standards for Business Enterprises No. 24-Hedge Accounting (Revised in 2017)
(Caikuai [2017] No. 9) on 31 March 2017, and the Accounting Standards for Business
Enterprises No. 37-Financial Instruments Presentation (Revised in 2017) (Caikuai [2017]
No. 14) on 2 May 2017 (the abovementioned standards are collectively referred to as the
“new financial instrument standards”); The Accounting Standards for Business Enterprises
No. 14-Revenue (Revised in 2017) (Caikuai [2017] No. 22) was issued on 5 July 2017
(hereinafter referred to as the “new revenue standards”), which required that enterprises
listed both home and abroad and those listed abroad and adopting the international
financial reporting standards or accounting standards for business enterprises to prepare
financial statements shall implement these Standards from 1 January 2018.
As considered and approved at the 7th meeting of the 15th session of the Board of
Directors and the 10th meeting of the 7th session of the Supervisory Committee of the
Company, the Group began implementing the above-mentioned five accounting standards
at the time required by the Ministry of Finance of the People’s Republic of China.
All recognized financial assets are measured at amortized cost or fair value subsequent to
initial recognition under the new financial instrument standards. On the implementation
date of the new financial instrument standards, through assessing the business model of
the management on financial assets based on the Group’s existing facts and conditions on
that date, and through assessing the features of contract cash flows of the financial assets
based on the facts and conditions at the initial recognition of the financial assets, the
financial assets are classified into three categories: measured at amortized cost; measured
at fair value through comprehensive income; measured at fair value through profit or
loss for the current period. For investment in equity instrument recognized at fair value
through other comprehensive income, accumulated profit or loss recognized into other
comprehensive income in previous periods shall be transferred to retained earnings when
the financial assets are derecognized, but not profit or loss for the current period.
Under the new financial instrument standards, the Company shall accrue provision for
impairment loss and recognize impairment loss in respect of the credit for financial assets
measured at amortized cost, investment in debt instrument recognized at fair value
through other comprehensive income, lease receivables, contractual assets and guarantee
contracts based on expected credit loss.
Major Events
ACCOUNTING ERROR (Continued)
in accounting policies and accounting estimates (Continued)

Standards for Business Enterprises. (Continued)
On the implementation date of the new financial instrument standards, the Group made
the following adjustments to classification and measurement of financial assets and
financial liabilities based on relevant provisions of the new financial instrument standards:
A. Equity investment classified as available for sale financial assets in the prior years
is reclassified as financial assets measured at fair value through profit or loss for
the current period, or irrevocably designated as financial assets measured at fair
value through other comprehensive income, changes in fair value of which are
accumulatively recognized through other comprehensive income subsequent to
initial recognition and cannot be reclassified to profit or loss at disposal.
B. The receivables subsequently measured at amortized cost in the previous year are
assessed for business models based on the existing facts and circumstances of the
new standard implementation date (1 January 2018), and are tested for contractual
cash flow characteristics based on the facts and circumstances at the time of initial
recognition. According to the evaluation test results, the receivables measured
at the amortized cost are continuously measured at amortized cost. After the
assessment and testing, the adoption of the new financial instrument criteria has
no significant impact on the presentation of the Group’s receivables.
The impact of the Group and its subsidiaries’ implementation of the new financial
instrument standards on items of the consolidated balance sheet and balance sheet of the
Company as of 1 January 2018 are summarized as follows:
The Group
Carrying amount Carrying amount
prior to changes Effect of the after changes
in accounting new financial in accounting
policies as at instrument policies as at
Item 31 December 2017 standards 1 January 2018
Assets:
Financial assets held for trading 4,875,057.73 (4,875,057.73) –
Available for sale financial assets 1,038,859,674.96 (1,038,859,674.96) –
Other equity instrument investments – 62,686,231.77 62,686,231.77
Other non-current financial assets – 975,856,856.18 975,856,856.18
Deferred tax assets 388,850,739.31 778,746.71 389,629,486.02
Shareholders’ equity:
Other comprehensive income (70,206,938.27) 63,388,106.49 (6,818,831.78)
Undistributed profit 6,285,996,409.09 (67,801,004.52) 6,218,195,404.57
Major Events

Standards for Business Enterprises. (Continued)
The Company
prior to changes Impact of the after changes
Assets:
Available for sale financial assets 1,035,180,994.75 (1,035,180,994.75) –
Other equity instrument investments – 62,686,231.77 62,686,231.77
Other comprehensive income (64,737,939.47) 64,954,866.01 216,926.54
쁛 Changes in accounting policies due to the implementation of the new revenue

standards
On 5 July 2017, the Ministry of Finance issued the Accounting Standards for Business
Enterprises No. 14 – Revenue (Revised in 2017) (Caikuai [2017] No. 22) (hereinafter
referred to as the “new revenue standards”). Enterprises listed both home and abroad
and those listed abroad and adopting the international financial reporting standards
or accounting standards for business enterprises to prepare financial statements shall
implement the new revenue standards from 1 January 2018.
As approved by the resolution of the 15th meeting of the 7th session of the Board of
Directors and the 10th meeting of the 7th session of the Supervisory Committee of the
Company, the Group began implementing the new revenue standards at the time required
by the Ministry of Finance.
The Group reevaluates the recognition, measurement, calculation, presentation, etc. on

the Group’s primary revenue from contracts. The Group reviews the sources of income
and processes for contracts with customers to assess the impact of the new revenue
standards on financial statements. Over 99% of the Group’s revenue is generated
from sales of goods. The revenue is recognized when the right to control the goods
is transferred to customer. The implementation of the new revenue standards has no
significant impact on the presentation of the Group’s financial statements.
Major Events
쁛 Changes in accounting policies due to the implementation of the new revenue

standards (Continued)
The impact of the Company and its subsidiaries’ implementation of the new revenue
standards on items of the consolidated balance sheet and balance sheet of the Company
as of 1 January 2018 are summarized as follows:
The Group
Liabilities:
Advance from customers 1,888,892,476.97 (1,888,892,476.97) –
Contract liabilities – 1,614,438,014.50 1,614,438,014.50
Taxes payable 206,462,076.94 274,454,462.47 480,916,539.41
The Company
Liabilities:
Advance from customers 116,889,039.40 (116,889,039.40) –
Contract liabilities – 99,905,161.88 99,905,161.88
Taxes payable 124,918,499.55 16,983,877.52 141,902,377.07
Major Events
쁜 Adjustments in financial statements:
The financial statements for the year ended 31 December 2018 are prepared by the
Company and its subsidiaries in accordance with the format prescribed in Caikuai [2018]
No. 15. Presentation of relevant accounts are adjusted retrospectively.
Adjustments in the presentation of financial statements:
A. Affected items in the consolidated balance sheet and the Company’s balance sheet
as of 31 December 2017:
Consolidated Balance Sheet

Before After
Item adjustments Adjustments adjustments
Notes receivable 1,702,655,475.08 (1,702,655,475.08) –

Accounts receivable 1,113,769,006.51 (1,113,769,006.51) –
Notes receivable and
accounts receivable – 2,816,424,481.59 2,816,424,481.59
Dividends receivable 552,938,523.45 (552,938,523.45) –
Other receivables 209,318,838.53 552,938,523.45 762,257,361.98
Notes payable 252,226,384.82 (252,226,384.82) –
Accounts payable 2,802,200,696.28 (2,802,200,696.28) –
Notes payable and
accounts payable – 3,054,427,081.10 3,054,427,081.10
Interest payable 253,966.40 (253,966.40) –
Dividends payable 45,446,017.79 (45,446,017.79) –
Other payables 2,399,394,477.50 45,699,984.19 2,445,094,461.69
Long-term payables 20,171,809.73 14,954,855.39 35,126,665.12
Special payables 14,954,855.39 (14,954,855.39) –
Total 9,113,330,051.48 – 9,113,330,051.48
Major Events
쁜 Adjustments in financial statements: (Continued)
A. Affected items in the consolidated balance sheet and the Company’s balance sheet
as of 31 December 2017: (Continued)
the Company’s Balance Sheet

Before After
(RMB) (RMB) (RMB)
Notes receivable 679,046,805.63 (679,046,805.63) –

Accounts receivable 265,693,684.36 (265,693,684.36) –
Notes receivable and – 944,740,489.99 944,740,489.99
accounts receivable
Other receivables 1,527,015,254.36 656,897,700.00 2,183,912,954.36
Notes payable 908,082.74 (908,082.74) –
Accounts payable 331,740,567.20 (331,740,567.20) –
Notes payable and – 332,648,649.94 332,648,649.94
accounts payable
Dividends payable 477,452.11 (477,452.11) –
Other payables 1,122,916,120.25 477,452.11 1,123,393,572.36
Total 4,584,695,666.65 – 4,584,695,666.65
B. Affected items in the consolidated income statement and the income statement of
the Company for the year ended 31 December 2017:
Consolidated Income Statement

Before After
(RMB) (RMB) (RMB)
General and administrative 1,579,582,508.93 (373,287,521.71) 1,206,294,987.22

expenses
R&D expenses – 373,287,521.71 373,287,521.71
Total 1,579,582,508.93 – 1,579,582,508.93
The Company’s Income Statement

Prior to Amount After
Item adjustment adjusted adjustment
(RMB) (RMB) (RMB)
General and administrative 445,111,622.93 (130,836,506.00) 314,275,116.93

expenses
R&D expenses – 130,836,506.00 130,836,506.00
Total 445,111,622.93 – 445,111,622.93
Major Events
(2) Explanation and analysis of the Company on the reasons for and effects of the
correction of major accounting error
(3) Communication with former accounting firm
(4) Others
8. APPOINTMENT, DISMISSAL OR CHANGE IN APPOINTMENT OF AUDITORS
Previously auditors Current auditors
Name of the domestic Certified Public BDO China Shu Lun Pan Ruihua Certified Public
Accountants CPAs LLP Accountants LLP
Total remuneration of the domestic Certified
Public Accountants (RMB’000) 2,203 2,669
Term of office of the domestic Certified Public
Accountants 5 1
Name Remuneration
(RMB’000)
Internal control audit certified Ruihua Certified Public

public accountants Accountants LLP 350
Explanatory notes on the appointment of auditors
(i) As approved at the second meeting of the Audit Committee in 2018, the Company ceased
to appoint BDO China Shu Lun Pan CPAs as the auditor and internal control auditor of the
Company, and Ruihua CPAs LLP was appointed as the auditor of the Company for year 2018 and
the internal control auditor of the Company for year 2018.
(ii) The 9th meeting of the seventh session of the Board passed the resolution in relation to the
appointment of Ruihua CPAs LLP as the auditor of the Company for year 2018 and the internal
control auditor of the Company for year 2018.
(iii) Pursuant to the approval given at the annual general meeting of 2017, Ruihua CPAs LLP was
appointed as the auditor of the Company for year 2018 and the internal control auditor of the
Company for year 2018.
A statement on the employment of an accounting firm during the audit period

Major Events
9. RISK OF FACING SUSPENSION OF LISTING
10. THE SITUATION AND REASONS FOR FACING SUSPENSION OF LISTING
11. MATTERS RELEVANT TO BANKRUPTCY AND SCHEME OF ARRANGEMENT
12. MATERIAL LITIGATION, ARBITRATION OR MATTERS SUBJECT TO DOUBT BY MEDIA
(1) litigation and arbitration involving controlling shareholders
Party concerned Litigation Status Index to

announcement
GPHL Case in relation to dispute over Fujian Higher Announcement dated 29

unauthorized use of the specific People’s Court January 2018 on the
name, package and decoration of has issued the first websites of SSE and
famous product between GPHL and instance judgment HKEx
Fujian JDB Beverage Co., Ltd.
Case in relation to dispute over Zhejiang Higher Announcement dated

unauthorized use of the specific People’s Court 14 March 2018 on the
name, package and decoration of has issued the first websites of SSE and
famous product between GPHL and instance judgment HKEx
Zhejiang JDB Beverage Co., Ltd. and
Hangzhou JDB Beverage Co., Ltd.,
respectively
Case in relation to dispute over Beijing Daxing Announcement dated

unauthorized use of the specific District People’s 30 March 2018 on the
name, package and decoration of Court has issued website of SSE
famous product between GPHL and the first instance
JDB (China) Beverage Co., Ltd. judgment
Case in relation to dispute over Hubei Higher Announcement dated

unauthorized use of the specific People’s Court 24 July 2018 on the
packaging and decoration of well- has issued the first websites of SSE and
known products between GPHL and instance judgment HKEx
Wuhan JDB Beverage Co., Ltd.
Case in relation to legal dispute over Guangdong Higher Announcement dated

“Wang Lao Ji” trademark between People’s Court 27 July 2018 on the
GPHL and six companies including has issued the first websites of SSE and
Guangdong Jiaduobao Co., Ltd. instance judgment HKEx
Case in relation to legal dispute over Guangzhou Announcement dated 23

“Wang Lao Ji” trademark between Intellectual August 2018 on the
GPHL and Golden Force Pharmacy Property Court has websites of SSE and
Limited issued the second HKEx
instance judgment
Major Events

(Continued)
(2) Litigation and arbitration involving the Group
1. The litigation in relation to the “dispute case of improper competition” between

WLJ Great Health, a wholly-owned subsidiary of the Company, and GPHL, the
controlling shareholder of the Company.
WLJ Great Health, a wholly-owned subsidiary of the Company, and GPHL, the controlling
shareholder of the Company received the Civil Case Judgment of Second Instance Trial
((2016) Yue Min Zhong No. 303) issued by the People’s High Court of Guangdong
Province (廣東省高級人民法院) (“Guangdong High Court”) regarding the dispute case of
improper competition between Guangdong Jia Duo Bao, the appellant, Guangdong Lerun
Store Co., Ltd. (廣東樂潤百貨有限公司), the defendant in the first instance trial and WLJ
Great Health and GPHL, the appellees.
According to the Judgement, the judgment issued by Guangdong High Court are as
follows: “(1) Revoked the Civil Case Judgment ((2013) Sui Zhong Fa Zhi Min Chu Zi
No. 619) issued by the People’s Intermediate Court of Guangzhou City of Guangdong
Province* (廣東省廣州市中級人民法院); (2) Dismissed all the claims made by WLJ Great
Health and GPHL. The acceptance fee of RMB46,800 for the first instance trial and the
acceptance fee of RMB46,800 for the second instance trial shall be borne by WLJ Great
Health and GPHL. The acceptance fee of RMB46,800 for the second instance trial paid in
advance by Guangdong Jia Duo Bao will be returned by the Court. The judgement is final.
Currently, Guangdong Higher People’s Court has issued the second instance judgment for
this case, which will not cause estimated liability to the Company or any implications on
the Company’s results. For details, please refer to the announcement dated 14 November
2017 published in Shanghai Securities News (上海證券報), Securities Times (證券時報),
China Securities Journal (中國證券報), Securities Daily (證券日報) and the announcement
on the websites of the SSE and the HKEx.
2. The litigation in relation to the “equity dispute case” between the Company and
Golden Force Pharmacy Limited
(i) On 21 November 2014, the Company submitted a ruling request to the Committee
of South China International Economic and Trade Arbitration based on the
agreement stipulated on Guangzhou Wang Lao Ji Pharmaceutical Holdings
Shareholders Contract (“Shareholder Contract”) that Golden Force Pharmacy
Limited (“Golden Force Pharmacy”) shall transfer its 48.0465% equity interest in
Wang Lao Ji to the Company pursuant to the agreement on Shareholder Contract
at a consideration equivalent to the product of the assessed net assets per share
and 98,378,439 shares held by Golden Force Pharmacy.
On 25 December 2017, the Company received the Arbitration Award Hua Nan
Guo Zhong Shen Cai [2017] No. 578(the “Award”). The Award ruled that Golden
Force Pharmacy shall perform its share transfer obligation to transfer its entire
shareholding in Wang Lao Ji (i.e., total 98,378,439 shares) at the net asset value of
RMB3.75 per share or a total transfer price of RMB368,919,146.25 (inclusive tax)
to the Company. For details, please refer to the “Announcement of Guangzhou
Baiyunshan Pharmaceutical Holdings Company Limited in relation to the result
of the Arbitration” dated 25 December 2017 (announcement no. 2017-087) on
the website of the SSE and the announcement dated 26 December 2017 on the
website of the HKEx.
Major Events

(Continued)
(2) Litigation and arbitration involving the Group (Continued)
2. The litigation in relation to the “equity dispute case” between the Company and
Golden Force Pharmacy Limited (Continued)
(ii) In March 2018, the Company received a writ of summons (2018) Yue 03 Min
Te No. 49 served by the Intermediate People’s Court of Shenzhen, Guangdong
Province, which was mainly related to the application for revocation of judgement
made by Golden Force Pharmacy to the Intermediate People’s Court of Shenzhen,
Guangdong Province.
For more details, please refer to the announcement dated 26 March 2018
published in Shanghai Securities News (上海證券報), Securities Times (證券時
報), China Securities Journal (中國證券報), Securities Daily (證券日報) and on the
websites of the SSE and the HKEx.
(iii) The Company received a Written Civil Ruling (2018) Yue 03 Min Te No. 49
(“Written Civil Ruling”) handed down by the Intermediate People’s Court of
Shenzhen, Guangdong Province, on 11 June 2018. Pursuant to the Written Civil
Ruling, the case was determined as follows: “The Application from the Applicant,
Golden Force Pharmacy Limited, was dismissed. The cost of application RMB400 for
the case shall be borne by the Applicant, Golden Force Pharmacy Limited.”
For more details, please refer to the announcement dated 11 June 2018 published
in Shanghai Securities News (上海證券報), Securities Times (證券時報), China
Securities Journal (中國證券報), Securities Daily (證券日報) and on the websites of
the SSE and the HKEx.
3. Save as mentioned above, the Group had neither been engaged in any significant
litigation or arbitration nor subject to any doubts by media during the Reporting
Period.
13. INFORMATION ON PENALTIES, RECTIFICATION AND REFORM IN RESPECT OF THE LISTED

COMPANY, ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING
SHAREHOLDERS, ACTUAL CONTROLLER OR ACQUIRER
□Applicable　✓Not applicable
14. EXPLANATION ON THE HONESTY OF THE COMPANY AND ITS CONTROLLING

SHAREHOLDER AND ACTUAL CONTROLLER DURING THE REPORTING PERIOD
Major Events
15. EQUITY INCENTIVE, EMPLOYEE STOCK OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVE
MEASURES AND THEIR IMPACT
(1) Equity incentive
(2) Employee stock ownership plan
✓Applicable　□Not applicable
In order to motivate the employees of the Group, the Employee Stock Ownership Scheme (2015)
was approved at the Board meeting held on 12 January 2015 and at the first extraordinary (“the
Employee Ownership Scheme“) shareholders’ general meeting in 2015, the Class Meeting of
Holders of Domestic Shares, the Class Meeting of Holders of Overseas Listed Foreign Capital
Shares held on 13 March 2015 by the independent shareholders.
The Employee Stock Ownership Scheme was completed on 17 August 2016, a total of 1,209
employees participated in the Employee Stock Ownership Scheme, subscribing a total of
3,860,500 shares (“Aboved Shares”) at the amount of RMB90,953,380.00. On the same day,
the Placement Prosperous Age Exclusive Account No. 66 (as the trustee of the Employee Stock
Ownership Scheme (2015)) which held 3,860,500 A shares of the Company, completed the
registration of the newly-issued shares at the Depository Corporation. The Aboved Shares are
shares subject to trading restrictions with a lock-up period of 36 months. The Aboved Shares can
be traded on the SSE on the second trading day following the expiration of the lock-up period.
For details of the Stock Ownership Scheme, please refer to the announcements dated 12 January
2015 and 17 March 2015 published in Shanghai Securities News (上海證券報), Securities Times
(證券時報), China Securities Journal (中國證券報), Securities Daily (證券日報), the websites of SSE
and HKEx and the circulars dated 26 February 2015 and 16 February 2016.
(3) Other incentives
16. CONNECTED TRANSACTIONS
(1) Related party transactions in relation to the ordinary operations
(i) Events disclosed in temporary announcements and with no progress or change in

subsequent implementation

Major Events
16. CONNECTED TRANSACTIONS (Continued)
(1) The related party transactions in relation to the ordinary operations (Continued)
(ii) Events disclosed in temporary announcements and with progress or change in

The ordinary connected transactions of the Company is as follows:
Pricing
principle Amounts of Percentage Settlement
Relationship Type of Contents of of the connected of similar method of
Connected with the connected connected connected transactions transactions connected
parties Company transactions transactions transactions (RMB’000) (%) transactions
Hua Cheng controlled by the same Purchase of goods Medicine or Market price 4,310 0.01 Cash
parent company pharmaceutical products
HWBYS Joint Venture Purchase of goods Medicine or Market price 111,109 0.27 Cash
pharmaceutical products
GP Corp. Joint Venture Purchase of goods Medicine or Market price 41,325 0.10 Cash
Wang Lao Ji Joint Venture Purchase of goods Medicine or Market price 898,962 2.16 Cash
Baxter Qiao Guang Joint Venture Purchase of goods Medicine or Market price 12,584 0.03 Cash
Subtotal 1,068,290 2.57
HWBYS Joint Venture Sale of products Medicine or Market price 182,615 0.44 Cash
GP Corp. Joint Venture Sale of products Medicine or Market price 152,496 0.36 Cash
Wang Lao Ji Joint Venture Sale of products Medicine or Market price 476,600 1.14 Cash
Nuo Cheng Joint Venture Sale of products Medicine or Market price 112 0.00 Cash
Baxter Qiao Guang Joint Venture Sale of products Medicine or Market price 2,080 0.00 Cash
Hua Cheng controlled by the same Sale of products Medicine or Market price 132,044 0.31 Cash
parent company pharmaceutical products
Subtotal 945,947 2.25
GPHL parent company Provision of labour Advertising agency Market price 1,076 1.07 Cash
service
Hua Cheng controlled by the same Provision of labour Advertising agency Market price 5,765 5.73 Cash
parent company service
HWBYS Joint Venture Provision of labour Advertising agency Market price 45,805 45.51 Cash
service
Major Events

subsequent implementation (Continued)
Pricing
GP Corp. Joint Venture Provision of labour Advertising agency Market price 83 0.08 Cash
service
Wang Lao Ji Joint Venture Provision of labour Advertising agency Market price 44,532 44.25 Cash
service
Baxter Qiao Guang Joint Venture Provision of labour Advertising agency Market price 47 0.05 Cash
service
Wang Lao Ji Joint Venture Provision of labour Consigned processing Market price 13,480 89.23 Cash
service
HWBYS Joint Venture Provision of labour serviceConsigned processing Market price 1,755 11.62 Cash
Hua Cheng controlled by the same Provision of labour serviceConsigned processing Market price 1,626 1.62 Cash
parent company
HWBYS Joint Venture Provision of labour serviceResearch and development Market price 248 3.18 Cash
Wang Lao Ji Joint Venture Provision of labour serviceResearch and development Market price 189 2.42 Cash
Subtotal 114,606
GPHL Parent company Acceptance of Rights to use trademarks At price 139,645 80.67 Cash
patents, rights to determined by
use trademarks agreement
and others
Wang Lao Ji Joint Venture Acceptance of Rights to use trademarks At price 13,664 91.44 Cash
and others
HWBYS Joint Venture Acceptance of Rights to use trademarks At price 1,279 8.56 Cash
and others
HWBYS Joint Venture Others Leased as tenant At price 3,783 1.89 Cash
determined by
agreement
GPHL parent company Others Leased as tenant At price 7,564 3.78 Cash
determined by
agreement
Major Events

subsequent implementation (Continued)
Pricing
GPHL parent company Others Leased as landlord At price 376 0.35 Cash
determined by
agreement
GP Corp. Joint Venture Others Leased as landlord At price 978 0.90 Cash
determined by
agreement
Baxter Qiao Guang Joint Venture Others Leased as landlord At price 3,031 2.80 Cash
determined by
agreement
Nuo Cheng Joint Venture Others Leased as landlord At price 2,298 2.13 Cash
determined by
agreement
HWBYS Joint Venture Others Leased as landlord At price 12 0.01 Cash
determined by
agreement
Total 2,301,473
Notes:
a. The transaction of acquiring 30% equity interest in GP Corp. in cash by the Company and the asset
transfer and change in business registration was completed on 31 May 2018. Thereafter, GP Corp.
became a subsidiary controlled as to 80% by the Company and was consolidated into the Company’s
accounts. Thus, GP Corp. is no longer the related party to the Company from 1 June 2018.
b. The Company completed the acquisition of 48.0465% equity interests in Wang Lao Ji, and Wang Lao Ji
became a subsidiary controlled by the Company with 96.093% equity interests and was consolidated into
the Company’s accounts.
The above connected transactions were transactions carried out in the ordinary course of
business of the Group, determined with reference to market prices, and have no negative
impact on the Group’s abilities to continue its operations.
Major Events
(iii) Events undisclosed in temporary announcements
(iv) The above connected transactions were transactions carried out in the ordinary
course of business of the Group, determined with reference to market prices, and
have no negative impact on the Group’s abilities to continue its operations.
During the Reporting Period, the details of connected transactions disclosed in accordance
with the requirements of the HKEx are set out as below:
2018
(RMB’000)
Ultimate holding company

License fee for trademark of “Wang Lao Ji” 139,645
Rental expenditure 7,564
Rental income 376
Advertising agency service fee 1,076
Ultimate Holding Company and its subsidiaries
Sales of finished goods and raw materials 132,044
Purchase of finished goods and raw materials 4,310
Advertising agency service fee 5,765
Consignment processing service fee 1,626
Meanwhile, other transactions with the joint ventures, associates and the related parties
have been disclosed in the notes to the financial statements. Such transactions did not
constitute connected transactions under the Listing Rules of HKEx.
Major Events
(iv) (Continued)
The board of Directors believed that the continuing connected transactions have been
conducted in accordance with the terms of relevant agreements or contracts governing
the transactions. The directors confirm that the cap for the License fee for trademark of
“Wang Lao Ji”, rental expenditure, sales of finished goods and raw materials, purchase
of finished goods and raw materials, and rendering of advertising agency service fee and
consignment processing service fee of the Company are as follows:
Cap announced/
Announcement/ Approved
Item Approval time amount
(RMB’000)

License fee for trademark
of “Wang Lao Ji” 28 May 2018 330,000
Rental expenditure 30 March 2017 20,000
Rental income 1 August 2016 414
and its subsidiaries
Sales of finished goods
and raw material 18 April 2018 150,000
Purchases of finished goods
and raw material 18 April 2018 12,000
Advertising agency service fee 18 April 2018 9,000
Consignment processing service fee 18 April 2018 30,000
Such continuing connected transactions have been reviewed by the independent non-
executive directors of the Company and confirmed by each independent non-executive
director that all of the continuing connected transactions are conducted in the ordinary
and usual course of business of the Company. The transactions are conducted under
normal commercial terms or under terms to the Company no less favorable than (i) terms
to the independent third parties or (ii) terms from the independent third parties. Such
transactions are conducted in accordance with the terms of the relevant agreements,
which are fair and reasonable and in the interest of the shareholders as a whole. The
aggregate amount of the connected transactions between the Company and the ultimate
holding company and the ultimate holding company and its subsidiaries did not exceed
the cap as disclosed in the previous announcement(s) dated 15 July 2016, 18 April
2018, and 28 May 2018, or the amount as approved by the Strategic Development
and Investment Committee on 1 August 2016 and 30 March 2017 and by the Board of
Directors on 15 March 2019 for such transactions.
The Company’s auditors have been engaged to report on the Group’s continuing
connected transactions in accordance with Hong Kong Standard on Assurance
Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical
Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on
Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the
HKICPA. The auditor has issued a letter containing the work results on Wang Lao Ji
trademark fee, annual rental expenditure, sales of finished goods and raw materials,
purchase of finished goods and raw materials, and rendering of advertising agency services
and consignment processing services under rule 14A.56 of the Listing Rules of HKEx.
Major Events
(2) Related party transactions on acquisition or disposal of assets or equity interests

(ii) Events disclosed in temporary announcements but with progress or change in

✓Applicable □applicable
On 27 December 2018, after consideration and approval at the 18th meeting of the
seventh session of the Board of the Company and the 12th meeting of the seventh
session of the supervisory committee of the Company, the Company intended to pay the
consideration of RMB1,389.122631 (exclusive of VAT), and agreed the transfer of 420
WangLaoJi series exclusive rights of trademark (including some trademarks still under
registration) held by GPHL, the controlling shareholder to the Company. The transaction
constitutes a connected transaction and subject to the consideration and approval at the
general meeting of the Company.
For details, please refer to the announcement on the Transfer of the “WangLaoJi” Series
Trademarks and Connected Transaction of by Guangzhou Pharmaceutical Holdings Limited
to Guangzhou Baiyunshan Pharmaceutical Holding Company Limited dated 27 December
2018 published in Shanghai Securities News (上海證券報), Securities Times (證券時報),
China Securities Journal (中國證券報), Securities Daily (證券日報) and the website of SSE,
and the announcements dated 27 December 2018, 30 December 2018 and 4 January
2019 published on the website of HKEx.
(iv) Where there is agreement on financial performance, the performance

achievements during the Reporting Period shall be disclosed
(3) Material related party transactions on joint external investment


Major Events
(4) Claims and liabilities between related parties


√ Applicable □ Not applicable
Funds provided by related parties

Funds provided to related parties to listed company
Balance Balance
as at the Balance as at the Balance
beginning as at the beginning as at the
of the end of the of the end of the
Relationship with Reporting Reporting Reporting Reporting
Related party the related parties Period Amount Period Period Amount Period
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Bozhou Baiyunshan Subsidiary of joint

Pharmaceutical venture 16,239 15,619 620 – – –
Total 16,239 15,619 620 – – –
Reasons for the funds provided The Company’s other receivables from HWBYS for the Reporting Period included receivables
to/from related parties of RMB620,000 from HWBYS’ subsidiary, namely Bozhou Baiyunshan. HWBYS was originally
a joint venture with 50% equity interest held by Baiyunshan, and Bozhou Baiyunshan was
originally 80% and 20% equity interest held by Baiyunshan and HWBYS respectively. On 30
March 2013, Baiyunshan and HWBYS entered into “Equity Transfer Agreement of Bozhou
Baiyunshan Pharmaceutical Co., Ltd”,according to which Baiyunshan agreed to transfer
its equity interest and all the associated rights and obligations in Bozhou Baiyunshan to
HWBYS.
Since the absorption and merger of Baiyunshan by the Company was completed in May
2013, HWBYS became a joint venture as well as a related party of the Company. The
receivables emerged after the share transfer of Bozhou Baiyunshan had completed.
Impact of the funds provided to/from No significant impact

related parties on the Company’s
operating results and financial
position
Major Events
17. THE GROUP’S PURCHASE AND DISPOSAL OF ASSETS OR ENTERPRISE MERGER AND OTHER
TRANSACTIONS.
(1) The Group’s purchase and disposal of assets or enterprise merger and other transactions
during the Reporting Period
No. Approval body Subject matter Status
1 8th meeting of the According to the arrangements of the “Retreat into In progress.
sixth session of the Three”, 11 enterprises under the Company planned
Board, 7th meeting to relocate to the Baiyun base in the Biological
of the Strategic Medicine Town of GPHL. Four enterprises under
Development the Company, namely Ming Xing, He Ji Gong,
and Investment HYBYS and GP Corp., have in aggregate acquired
Committee in 2016 the land use rights of 303 mu of land available for
construction in the first phase.
2 11th meeting of The capital of HK$177,500,000 or the equivalent The first phase of capital
the Strategic amount of RMB will be injected to Guangyao increase of RMB58,464,000
Development Baiyunshan Hong Kong Company by the Company. has been completed on 23
and Investment December 2015 and the
Committee in 2015 second phase of capital
increase of RMB46,626,750
has been completed on 3
March 2018
3 2nd meeting of The Company contributed additional capital of Completed

the Strategic RMB20.4 million to Yi Gan, a holding subsidiary of
Development the Company, in proportion to its shareholding, after
and Investment the completion of which the register capital of Yi
Committee in 2016 Gan would be increased to RMB55 million.
4 5th meeting of The Company’s subsidiary Chemical & Pharmaceutical The Company has
the Strategic Technology Company and Zhuhai Fushan Industrial contributed additional
Development Park Management Committee entered into the capital of RMB12.47
and Investment “Investment Agreement between Zhuhai Fushan million to Chemical &
Committee in 2016 Industrial Park Management Committee and Pharmaceutical Technology
Guangzhou Baiyunshan Chemical & Pharmaceutical Company and completed
Technology Co., Ltd.” (“Zhuhai Project”), with an the environment
initial investment amount of RMB55 million. assessment, planning
design and infrastructure
1st meeting of The Company contributed additional capital in cash design of the Zhuhai
the Strategic of RMB12.47 million to Chemical & Pharmaceutical Project; in addition, the
Development Technology Company for the use of project design Company has completed
and Investment and environmental assessment of the Zhuhai Project. the first phase capital
Committee in 2017 contribution (RMB42
million) of the additional
1st meeting of The Company contributed additional capital of capital contribution of
the Strategic RMB100 million to Chemical & Pharmaceutical RMB100 million and
Development Technology Company for use in the establishment established Chemical
and Investment of Guangyao Baiyunshan Chemical Pharmaceutical Pharmaceutical (Zhuhai)
Committee in 2018 (Zhuhai) Co., Ltd. (“Chemical Pharmaceutical Company. Currently, the
(Zhuhai) Company”). Zhuhai Project has entered
into the construction
11th meeting of the Initiation of the Zhuhai Project with a total investment design stage.
seventh session of amount of RMB731,879,100.
the Board
Major Events
TRANSACTIONS. (Continued)
during the Reporting Period (Continued)
5 2nd meeting of The Company (Buyer) and GPHL (Seller) entered into Completed
the Strategic the Purchase Agreement for the Additional Legal
and Investment Properties at Rear Block, 282 Beijing Road for the
Committee in 2017 purchase of additional legal properties at Rear Block,
282 Beijing Road, the market value of which as
at the valuation date and on an “as is” basis was
RMB15.273 million, while the actual amount of
consideration paid was RMB14.5001 million after
deducting the land-grant fees and related taxes paid
by GPHL.
6 3rd meeting of The Company contributed additional capital of RMB30 Completed

the Strategic million to Xing Zhu based on 75% equity interest.
Development
and Investment
Committee in 2017
7 5th meeting of Medical Instrument Investment Company, a subsidiary Initial capital contribution of
the Strategic of the Company, set up a joint venture jointly with RMB3.4 million has been
Development Shanghai Xiecheng Investment Management Co., completed.
and Investment Ltd. (上海協成投資管理有限公司) and Guangzhou
Committee in 2017 OSMUNDA Medical Device Technology Inc., Ltd.
(廣州奧諮達醫療器械技術股份有限公司) to build
an operating platform for the medical equipment
innovation incubator park, and Medical Instrument
Investment Company intends to contribute capital in
cash of RMB17 million, accounting for 34% of the
equity interest.
8 1st meeting of GP Corp., a subsidiary of the Company, acquired In progress

the Strategic Zhuhai A&Z Pharmaceutical Co., Ltd. (珠海安士
Development 藥業有限公司) for RMB2.5 million to establish a
and Investment subsidiary in Zhongshan region.
Committee in 2018
9 2nd meeting of Guangyao Baiyunshan Hong Kong Company, a In progress

the Strategic subsidiary of the Company, acquired 33,785 shares
Development in PT Sano Gratia Farma for RMB20.496 million
and Investment (or equivalent in Indonesian Rupiah) and subscribe
Committee in 2018 for new shares issued by PT Sano Gratia Farma for
RMB15 million (or equivalent in Indonesian Rupiah).
Upon completion of the transactions, Guangyao
Baiyunshan Hong Kong Company will hold 58,510
shares in PT Sano Gratia Farma, accounting for 51%
of the paid-up capital.
Major Events
10 3rd meeting of Cai Zhi Lin, a subsidiary of the Company, and The establishment of the
the Strategic Guangzhou Hendon Medical Technology Co., Ltd. joint venture is under
Development (廣州亨頓醫藥科技有限公司) established a joint preparation.
and Investment venture Guangzhou Cai Zhi Lin Traditional Chinese
Committee in 2018 Medical Center Co., Ltd. (廣州采芝林國醫館有限公
司) with a registered capital of RMB10 million, and
Cai Zhi Lin will hold 51% of the equity interest (with
an investment of RMB5.1 million).
11 4th meeting of The Company’s subsidiary Baiyunshan Medical and Completed

the Strategic Healthcare Industry Company and Guangzhou
Development Nanfang Runkang Service Co., Ltd. established
and Investment Runkang Confinement Company, in which the
Committee in 2018 Company has contributed RMB5.10 million and
owns 51% equity interests through Baiyunshan
Medical and Healthcare industry company.
12 4th meeting of The Company invested RMB31.62 million to acquire Completed

the Strategic 25% equity of Guangzhou Xingzhou Pharmaceutical
Development Co., Ltd., another shareholder of Xing Zhu. Upon
and Investment completion, Xing Zhu will become a wholly-owned
Committee in 2018 subsidiary of the Company.
13 5th meeting of The Company made an additional contribution of Completed

the Strategic RMB26.00 million to its subsidiary Cai Zhi Lin, for the
Development establishment by Cai Zhi Lin of “Cai Zhi Lin Chinese
and Investment Medicine Industrialized Manufacturing Service Base
Committee in 2018 Project in Meizhou” and Meizhou Guangyao Cai Zhi
Lin Pharmaceutical Co., Ltd. (“Meizhou Cai Zhi Lin”)
with a total investment budget of approximately
RMB129.30 million.
14 5th meeting of The Company’s subsidiary WLJ Great Health and the The agreement has been
the Strategic Trade Promoting Bureau of Nansha Development entered into and the
Development Zone in Guangzhou entered into the Agreement on investment is in progress.
and Investment the Investment of and Cooperation with WLJ Great
Committee in 2018 Health for a Series of Projects in Nansha to construct
operation headquarters and R&D headquarters for
the Great Health segment and a bottling base of
WLJ in Nansha District, Guangzhou with a total
investment of approximately RMB1.0 billion.
18th meeting of the The Company’s subsidiary WLJ Great Health invested
seventh session of and commenced the construction of Nansha Base
the Board (Phase I) project with a total investment of RMB750
million.
Major Events
15 5th meeting of The Company’s subsidiary Cai Zhi Lin established Initial contribution completed
the Strategic Longxi Guangyao Cai Zhi Lin Pharmaceutical Co., and the construction in
Development Ltd. with 100% equity, which has a registered progress
and Investment capital of RMB50.00 million, with initial contribution
Committee in 2018 of RMB28.38 million completed through the
additional contribution made by the Company to Cai
Zhi Lin.
16 6th meeting of The Company’s subsidiary Guangzhou Bai Di and Completed

the Strategic Shenzhen Jingke Industry Co., Ltd. established
Development a joint venture named Guangzhou Bai yun shan
and Investment Weiyi Industry Co., Ltd. with a registered capital
Committee in 2018 of RMB10.00 million, where Guangzhou Bai Di
contributed RMB5.10 million and owns 51% equity.
17 6th meeting of Wang Lao Ji Great Health Industry (Ya’an) Co., Ltd. In progress
the Strategic (“WLJ Ya’an Company”), a wholly-owned subsidiary
Development of the Company’s subsidiary WLJ Great Health,
and Investment commenced the second phase construction with a
Committee in 2018 total investment of approximately RMB47.00 million.
18 6th meeting of The Company made an additional contribution of First phase of capital increase
the Strategic RMB30 million to its wholly-owned subsidiary completed.
Development Guangyao General Institute, with the first phase
and Investment of RMB18 million and the second phase of RMB12
Committee in 2018 million.
19 7th meeting of The Company granted the joint venture HWBYS Being performed accordance
the Strategic the license to use “Wang Lao Ji” trademark on its with contracts.
Development products, and signed Trademark Licensing Contract
and Investment and Supplementary Agreement to the Agreement of
Committee in 2018 Trademark Custody.
The Company granted to Xing Qun, a subsidiary,

the license to use “Wang Lao Ji” trademark on its
products, and signed Trademark Licensing Contract
and Supplementary Agreement to the Agreement of
Trademark Custody.
The Company granted to WLJ Catering, a subsidiary,

the license to use “Wang Lao Ji” trade name,
and signed Trademark Licensing Contract and
Supplementary Agreement to the Agreement of
Trademark Custody.
Major Events
20 7th meeting of The Company’s subsidiary, WLJ Great Health, intended In progress
the Strategic to build a production base in Lanzhou, Gansu with a
Development total investment of RMB350.00 million.
and Investment
Committee in 2018 The Company’s subsidiary, WLJ Great Health,
established Wang Lao Ji Great Health Industry
(Lanzhou) Co., Ltd., subject to the final approval
of name by the Administration of Industry and
Commerce, with a registered capital of RMB50.00
million.
21 7th meeting of For the construction of the logistics (phase one) Completed
the Strategic project of the Baiyun base in the Biological Medicine
Development Town of GPHL, the Company and Alliance BMP
and Investment made additional contribution of RMB527 million in
Committee in 2018 proportion to their respective shareholdings in GP
Corp., of which the Company and Alliance BMP
contributed RMB421.6 million and RMB105.4 million
according to their respective shareholdings of 80%
and 20%, respectively.
22 7th meeting of The Company’s subsidiary, GP Corp., made additional Completed

the Strategic contributions of RMB450 million in cash to its nine
Development wholly-owned subsidiaries including Guangzhou
and Investment Guoying Pharmaceuticals Corporation, and two
Committee in 2018 wholly-owned subsidiaries of GP Corp. made
additional contributions of RMB47.34 million in total
to their two whollyowned subsidiaries, respectively.
23 7th meeting of The Company’s subsidiary, GP Corp., independently Completed

the Strategic established GP Corp, Pharmacy with a registered
Development capital of RMB60.00 million.
and Investment
Committee in 2018
24 6th meeting of the The Company cooperated with Guangzhou Huiyin In progress
seventh session of Huiji Investment Fund Management Co., Ltd. in
the Board establishing a company of equity investment fund
management and the Pharmaceutical and Health
Industry Investment Fund.
Major Events
25 6th meeting of the The Company cooperated with Shenzhen Jin Shen The equity investment
seventh session of Yi Financial Investment Co., Ltd. for establishing a management company
the Board company of equity investment management and the has been established and
Pharmaceutical and Health Industry Investment Fund. is promoting the related
matters of establishment
of the Pharmaceutical and
Health Industry Investment
Fund.
26 8th meeting of the The Company established Baiyunshan Yi Xin Tang, The second phase of capital
seventh session of with a registered capital of RMB300 million which contribution completed
the Board shall be paid in installments, of which, the Company amounts to RMB72 million
contributed RMB90 million, accounting for 30% of and the remaining amounts
its registered capital. to RMB18 million.
27 11th meeting of the The Company invested in the establishment of The planning scheme has
seventh session of GYBYS Biological Medicine and Health R&D Sales been completed and the
the Board Headquarters project preparations for design and
construction is in progress.
28 13th meeting of the The Company increased its capital contribution in the Completed
seventh session of amount of RMB800 million in proportion to its 80%
the Board shareholding
(2) Acquisitions of assets and equity, interests by the Group during the Reporting Period
are as follow:
Except for those disclosed in (2) in section 3 “Company’s Business Profile” of this annual report,
the Group did not engage in any material acquisitions of assets and equity.
Major Events
18. MATERIAL CONTRACTS AND THEIR PERFORMANCE
(1) During the Reporting Period, the Group did not hold on trust or sub-contract of other
companies or vice versa, which generated profit that accounted for 10% or more of the
total profits for the Reporting Period.
(2) Guarantees
(Unit: RMB’000)
External guarantees of the Group (excluding guarantees to subsidiaries)
The Whether the Whether
relationship guarantee guarantee
between the Date of Guarantee has been Whether is for the
guarantor guarantee commencement performed Whether the Amount of counter benefit
and the listed Amount (date of date Guarantee Collateral and guarantee is guarantee guarantee is of related Connected
Guarantee company Secured party guaranteed agreement) maturity date type discharged overdue overdue provided parties relationship
– – – – – – – – – – – – – –
Total amount of guarantee provided during the reporting period
(excluding guarantee provided to its subsidiaries) –
Total balance of guarantee at the end of the reporting period
(A) (excluding guarantee provided to its subsidiaries) –
Guarantee provided by the Group for the benefit of its subsidiaries
Total amount of guarantee provided for the benefit of subsidiaries
during the reporting period 1,495,000
Total balance of guarantee provided for the benefit of subsidiaries
at the end of the reporting period (B) 1,495,000
Total amount of the external guarantees of the Group (including guarantees for subsidiaries)
Total amount of guarantee (A+B) 1,495,000
The proportion of the total amount of guarantees to the Company’s net assets (%) 6.46
Including:
Amount of guarantee provided for the benefit of shareholders,
de facto controller and their related parties (C) –
Amount of guarantee directly or indirectly provided for the benefit
of parties with a gearing ratio in excess of 70% (D) 1,495,000
Portion of the total amount of guarantee in excess of 50% of net assets (E) –
Aggregated amount of the above three amounts of guarantee (C+D+E) 1,495,000
Description of the potential joint and several repayment liability
for outstanding guarantee /
Description of guarantee /
Note: The transaction of acquiring 30% equity interest in GP Corp. in cash by the Company and the asset transfer and change in business
registration was completed on 31 May 2018. Thereafter, GP Corp. became a subsidiary controlled as to 80% by the Company and
was consolidated into the Company’s accounts. The above matters with regard to guarantees are the guarantees of GP Corp. to its
subsidiaries.
Major Events
18. MATERIAL CONTRACTS AND THEIR PERFORMANCE (Continued)
(3) Management of cash assets by entrusting third parties
(i) The Group’s entrusted wealth management activities during the Reporting Period
1) Overview of the entrusted wealth management products
Amount not
Amount not received after
Category Source of funds Amount matured yet maturity
(RMB’000) (RMB’000) (RMB’000)
Bank wealth management Fund of the Group 30,400 30,400 –
products
Bank wealth management Proceeds from 1,100,000 1,100,000 –
products fund raising
Others
2) Individual entrusted wealth management products
Any
Commencement entrusted
Type of Amount of date of Ending date financial
entrusted wealth entrusted entrusted of entrusted Method for Annualized Estimated Actual Lawsuit plan in Impairment
management wealth wealth wealth Capital Usage determination returns returns (if gains Actual involved the provision
Trustee product management management management source of funds of returns (%) any) or losses recovery or not future (RMB’000)
(RMB’000) (RMB’000)
Guangzhou branch No.333 of twelfth 600,000 25 December 2018 20 June 2019 Placement / Fixed income type 4.15 11,391 0 Not yet due Yes Yes 0
of Everbright issue of products
Bank Co. Ltd will be customized
for public
structured deposits
in 2018
Guangzhou branch Shanghai pudong 500,000 25 December 2018 20 June 2019 Placement Interbank market Fixed income type 4.10 9,378 0 Not yet due Yes Yes 0
of Shanghai development bank bill, Treasury
Pudong Co., LtdLi Duoduo bonds,
Development No.18JG2728 corporate
Bank Co., Ltd product of bonds, short
RMB corporate term notes,
structured deposit inter-bank
borrowing, etc
Note: The above table only shows those wealth management products with individual amount
accounting for 10% or above of the total amount.
Others
Major Events
18. MATERIAL CONTRACTS AND THEIR PERFORMANCE (Continued)
(3) Management of cash assets by entrusting third parties (Continued)
(i) During the Reporting Period, the Group’s entrusted wealth management activities.
(Continued)
3) Provision for impairment of entrusted wealth management products
(ii) During the Reporting Period, the Company’s entrusted loans
1) Overview of the entrusted loans
Amount not Amount not

received after received after
Category Source of funds Amount maturity maturity
(RMB’000) (RMB’000) (RMB’000)
Entrusted bank loan Fund of the Group 127,173 119,873 0

Note: The Group does not have the situation of external loan.
Others
2) One-off entrusted loans
Others
3) Provision for impairment of entrusted wealth management products
Others

Major Events
19. AS AT THE END OF THE REPORTING PERIOD, THE EXPENSES ON CONSTRUCTION AND
EQUIPMENT IN RELATION TO WHICH CONTRACTS HAD BEEN ENTERED INTO BY THE
GROUP BUT PAYMENTS HAD NOT BEEN MADE YET WAS RMB1,064,737,000AND THE
RENTAL EXPENSES IN RELATION TO WHICH CONTRACTS HAD BEEN ENTERED INTO BY THE
GROUP BUT PAYMENTS HAD NOT BEEN MADE YET WAS RMB587,027,000.
20. ACCORDING TO THE REQUIREMENTS OF RULE 23 OF APPENDIX 16 TO THE LISTING RULES

OF HKEX, THE COMPANY DID NOT HAVE ANY INVESTMENT PROPERTIES WHOSE ASSETS
RATIO, CONSIDERATION RATIO, PROFITS RATIO AND REVENUE RATIO EXCEEDED 5%
DURING THE REPORTING PERIOD.
21. ACCORDING TO THE REQUIREMENTS OF RULES 11A AND 11(8) OF APPENDIX 16 TO

THE LISTING RULES OF HKEX, THE REMAINING PROCEEDS FROM ANY ISSUE OF EQUITY
SECURITIES MADE IN PREVIOUS FINANCIAL YEAR(S) WERE BROUGHT FORWARD TO THIS
FINANCIAL YEAR, AND THE LISTED ISSUER SHALL DISCLOSE THE AMOUNT OF PROCEEDS
BROUGHT FORWARD AND THE DETAILS OF THE USE OF PROCEEDS.
Upon the receipt of The Approval on the Non-public Offering of Guangzhou Baiyunshan Pharmaceutical
Holdings Co., Ltd. (zhengjianxuke [2016] No. 826) from the CSRC, the Company, through the non-
public offering, issued 334,711,699 A shares, with the total proceeds of RMB7,885,807,628.44 and the
net proceeds of RMB7,863,446,528.33 (after deducting all relevant expenses) raised. For details, please
refer to the circular to the shareholders of the Company dated 26 February 2015 and the announcement
of the Company dated 18 August 2016 on the websites of SSE and HKEx.
The Company used the proceeds of RMB81,224,300 in 2018. As of 31 December 2018, the aggregate
proceeds invested amounted to RMB3,096,644,400, and the aggregate proceeds invested (after the
deduction of bank charges and addition of accrued interest income) amounted to RMB506,772,560. The
details are as follows:
Difference between
the accumulated
total amount
invested and the Date of
total amount the projects
Amoount committed for becoming
Proposed invested as of 31 investment as at the ready for intended
No. Name of projects investment amount December 2018 end of the year use
(RMB’0000) (RMB’0000)
1 The construction project of the 150,000.00 5,696.48 (144,303.52) 31 December 2019
Great Southern TCM research and
development platform
2 The construction project of the Great 100,000.00 3,392.03 (96,607.97) 31 January 2021
Southern production base (phase 1) (note a)
3 The extension project of modern medical 100,000.00 0 (100,000.00) Proposed change
logistics services in use (note b)
4 The project for establishment of channels 200,000.00 80,000.78 (119,999.22) N/A
and brands
5 The project for establishment of 20,000.00 2,069.95 (17,930.05) 31 December 2020
information platform (note a)
6 Replenishment of liquidity 216,344.65 218,505.20 2,160.55 N/A
(including the use
of deposits interest)
Total 786,344.65 309,664.44 (476,680.21) –
Major Events
21. ACCORDING TO THE REQUIREMENTS OF RULES 11A AND 11(8) OF APPENDIX 16 TO

THE LISTING RULES OF HKEX, THE REMAINING PROCEEDS FROM ANY ISSUE OF EQUITY
SECURITIES MADE IN PREVIOUS FINANCIAL YEAR(S) WERE BROUGHT FORWARD TO THIS
FINANCIAL YEAR, AND THE LISTED ISSUER SHALL DISCLOSE THE AMOUNT OF PROCEEDS
BROUGHT FORWARD AND THE DETAILS OF THE USE OF PROCEEDS. (Continued)
Notes:
a. The proposals in relation to the postponement of certain fund-raising investment projects was approved at the 18th
meeting of the seventh session of the Board and the 12th meeting of the seventh session of the Supervisory Committee
held on 27 December 2018, respectively. Due to the slow progress of the construction project of the Great Southern
production base (phase 1) and the project for establishment of information platform, the Company proposed to postpone
the implementation date of the construction project of the Great Southern production base (phase 1) and the project for
establishment of information platform to 31 January 2021 and 31 December 2020, respectively. For details, please refer to
the announcements of the Company dated 27 December 2018, 30 December 2018 and 4 January 2019 and the circular of
the Company dated 31 January 2019 on the websites of SSE and HKEx.
b. Taking into account the development trend of extending modern medical logistics services, changing industry landscape,
changes in the equity interest in GP Corp., the availability of the balance of proceeds for the project for establishment of
information platform, the 18th meeting of the seventh session of the Board and the 12th meeting of the seventh session
of the supervisory committee were held at which the proposals in relation to the postponement of certain fund-raising
investment projects was approved. The Company intends to change the use of RMB1,000 million and RMB80 million out
of the proceeds for the extension project of modern medical logistics services and the project for the establishment of
information platform respectively to the acquisition of the “Wang Lao Ji” series trademarks held by GPHL, the controlling
shareholder of the Company. The change of proceeds above is subject to the approval of the extraordinary general meeting
of the Company. For details, please refer to the announcements of the Company dated 27 December 2018, 30 December
2018 and 4 January 2019 and the circular of the Company dated 31 January 2019 on the websites of SSE and HKEx.
As of 31 December 2018, the use of the proceeds through the non-public offering of A shares above
was in line with the use of the proceeds as disclosed previously.
In addition, pursuant to the requirements of the Supervisory Guidelines No. 2 for Listed Companies –
Supervisory Requirements for Management and Use of Proceeds of Listed Companies (Announcement
of CSRC [2012] No.44) issued by CSRC and the Measures for the Management of Proceeds of Listed
Companies on the Shanghai Stock Exchange (revised in 2013) (Shang Zheng Gong Zi [2013] No.13)
and other relevant guidelines, the Company made a special report on the deposit and actual use of the
proceeds in 2018 (the full text of which had been uploaded to the website of SSE).
22. DURING THE REPORTING PERIOD, THE COMPANY DID NOT HAVE ANY SPECIAL
TRANSACTION WITH ITS CONNECTED PARTIES INCLUDING DIRECT DONATIONS IN CASH
OR ASSETS IN KIND, DIRECT EXEMPTION OR REPAYMENT FOR OTHERS.
Major Events
23. EXPLANATORY NOTES ON OTHER MAJOR EVENTS
1. On 21 December 2017, the Company entered into the Equity Interest Transfer Agreement and
the Joint Venture Contract with Guangzhou Pharmaceuticals Corporation and Alliance BMP for
a very substantial acquisition, pursuant to which the Company acquired 30% equity interest in
GP Corp. held by Alliance BMP by way of cash and granted the put options to Alliance BMP for
transfer all of the remaining 20% equity interest in GP Corp. held by it (for details, please see
the “Report of Material Asset Acquisition” and “Report of Material Asset Acquisition (Revised)”
published on SSE on 22 December 2017 and 5 January 2018 and the relevant disclosure in the
announcements on the HKEx on 22 December 2017 and 2 January 2018 by the Company. The
acquisition was considered and passed at the 2018 first extraordinary general meeting held on 29
March 2018 and the transfer of target assets was completed on 31 May 2018, the consideration
of which was RMB1,094,100,000.
2. In relation to the transfer of “WangLaoJi” series 420 exclusive use rights of trademarks (including
trademarks under application for registration) held by GPHL, the controlling shareholder, to the
Company, please refer to the relevant contents in “(2) Related party transactions from acquisition
and disposal of assets or equity interests” under “16. CONNECTED TRANSACTIONS” of this
section for details.
3. Pursuant to the Arbitration Award Hua Nan Guo Zhong Shen Cai [2017] No. 578 issued by
the Committee of South China International Economic and Trade Arbitration (“Shenzhen
International Court of Arbitration”), the Company transferred the consideration payment
of RMB338,436,381.95 in total (after deducting the fees in the Arbitration Ruling totaling
RMB7,444,064.44 and withholding enterprise income tax of RMB23,038,699.86) to the account
designated by the court on 1 August 2018. According to the “Notice of Assistance in Execution”
[(2018) Yue 01 Zhi No.985] issued by Guangzhou Peoples’ Intermediate Court* (廣州市中級人
民法院), the registration of change in relation to the transfter of the 48.0465% equity interest in
Wang Lao Ji held by Golden Force Pharmacy Limited (98,378,439 shares in total) to the Company
has been completed during the Reporting Period. Wang Lao Ji, included in the scope of the
combination by the Company, is a subsidiary controlled by the Company, which holds 96.093%
equity interest therein. For details, please refer to the announcement of the Company dated 6
September 2018 on the website of SSE and the website of HKEx.
Major Events
24. PERFORMANCE OF SOCIAL RESPONSIBILITIES
(1) Needy alleviation efforts of listed companies
(i) Plan of targeted approach to aid the needy
While pursing commercial values, we also actively echoed the national policy of “targeted
poverty alleviation”, and continuously improved the self-development ability of poverty-
stricken areas and poor people through development-oriented aid. Xing Qun, Guang
Hua and Cai Zhi Lin, the subsidiaries of the Company, established poverty alleviation
partnership with the three poverty-stricken villages, namely Jingkou, Wanxi and Yuanling”,
continued to follow the general concept of poverty alleviation of “targeted, early and
distinct”, and strived to achieve the fundamental targeted poverty alleviation objective
of “they no longer need to worry about food and clothes, compulsory education, basic
medical services and residential safety are guaranteed” in accordance with the guideline of
“targeted approach to aid the needy towards each village and household with the industry
driving the whole village forward”.
(ii) Outline of targeted approach to aid the needy in 2018
1) Poverty alleviation partnership
The three subsidiaries of the Company established poverty alleviation partnership

with the three poverty-stricken villages, invested in the construction of photovoltaic
power generation project and optimized the infrastructure construction, so as to
continuously improve the self-development ability and living standards of poor
people.
2) Industrial poverty alleviation
The Group took full advantage of local extensive natural resources, integrated
targeted poverty alleviation with the overall regional development, provided
positions, enhanced the human capital value of poverty-stricken family, and actively
explored the “development-oriented” poverty alleviation model.
3) Intelligent capability poverty alleviation
The Group actively carried out employment training to help surplus labour of
poverty-stricken family through employment. As at December 2018, the cumulative
number of poor people accepted employment training of 117, 96 people were
employed.
Major Events
24. PERFORMANCE OF SOCIAL RESPONSIBILITIES (Continued)
(1) Needy alleviation efforts of listed companies (Continued)
(iii) Achievement of the Targeted Poverty Alleviation
In 2018, the Group helped the poverty-stricken family to increase their production and
income through stepping up the efforts in support. As at 31 December 2018, a total of
approximately RMB6.65 million had been invested in helping 343 people out of poverty,
with poverty alleviation rate of 92%. The collective economic income of all the three
villages increased from RMB10,300 in 2015 to RMB180,000 in 2018, representing an
increase of 16.5 times. Xing Qun, Guang Hua and Cai Zhi Lin were also awarded the
honor of the Bronze Medal of Poverty Alleviation of Meizhou.
(RMB’0000)
Number and implementation

Index information of GYBYS
1. General information
Including: 1. Fund 119.88
2. Materials trade 2.24
3. Number of poor people helped to be 181
removed from administrative record for
poverty registering (Person)
2. Itemized input
(1) Poverty alleviation through industrial
development
Including: 1.1 Type of industrial poverty alleviation ■ Poverty alleviation through
projects agriculture and forestry
□ Poverty alleviation through
tourism
E-commerce
■ Poverty alleviation through
assets income
science and technology
■ Others
1.2 Number of industrial poverty 12
alleviation projects
1.3 Amount invested in industrial 0.00
poverty alleviation projects
1.4 Number of poor people helped to be 35
removed from administrative record
for poverty registering (Persons)
(2) Poverty alleviation through employment
Including: 2.1 Amount invested in vocational 0.00
training
2.2 Number of people received 117
vocational training (Persons/Time)
2.3 Number of poor people in 96
administrative record for poverty
registering employed (Persons)
(3) Poverty alleviation through relocation
Including: 3.1 Number of relocated people 0
employed (Persons)
Major Events
(iii) Achievement of the Targeted Poverty Alleviation (Continued)

(4) Poverty alleviation through education

Including: 4.1 Amount invested in subsidizing poor
students 3.53
4.2 Number of students received
allowance (Persons) 37
4.3 Amount invested in improvement of
education resources in poverty area 0.00
(5) Poverty alleviation through health
enhancement
Including: 5.1 Amount invested in medical and
health resources in poverty area 6.51
(6) Poverty alleviation through ecological
protection
Including: 6.1 Name of project ■ Launching ecological
protection and construction
□ Establishing compensation for
the ecological protection
□ Creating ecological and public
welfare positions
□ Others
6.2 Amount invested 8.89
(7) Protection for the most impoverished people
Including: 7.1 Amount invested in helping the
three left-behind groups 0.90
7.2 Number of people of the three left-
behind groups helped (Persons) 5
7.3 Amount invested in helping poor
people with disabilities 0.00
7.4 Number of poor people with
disabilities helped (Persons) 0.00
(8) Poverty alleviation in the society
Including: 8.1 Amount invested in poverty
alleviation in the east and west parts
of the country 0.00
8.2 Amount invested in fixed-point
poverty alleviation work 0.00
8.3 Poverty alleviation fund 0.00
(9) Other projects
Including: 9.1 Number of projects (Project) 14
9.2 Amount invested 102.29
9.3 Number of poor people helped to be
removed from administrative record
for poverty registering (Persons) 0
Major Events
(iii) Achievement of the Targeted Poverty Alleviation (Continued)

9.4 Details of other projects Mainly including the renovation

of the dilapidated buildings,
showing love and care,
donations, village public
welfare projects (renovation of
culture centers and complex
buildings), better living
environment projects (street
lighting improvement project).
3. Awards (details and levels) Each of Xing Qun, Guang Hua
and Cai Zhi Lin obtained the
Bronze Medal of Poverty
Alleviation of Meizhou 2017
(iv) Follow-up alleviation plan
The Group will step up the efforts in poverty alleviation and promote intelligent capability
poverty alleviation, industrial poverty alleviation, poverty alleviation through education and
infrastructure improvement in an all-round way. The Group adheres to the combination
of poverty alleviation with enhancement of determination, and stimulate the endogenous
power of poverty-stricken family. The Group broadens the range of supporting industries,
and help poverty-stricken family to increase their production and income via several
channels and modes. The Group also continue to carry out the support of education
activities to alleviate the burden of education for poverty-stricken family, and implement
people-benefit projects such as housing repair and maintenance and trash removal for
poverty-stricken family to optimize the living environment of poverty-stricken villages.
(2) Work on social responsibilities
The Company prepared the Social Responsibilities Report of 2018 (full version is available on
the website of the SSE and the HKEx) in accordance with the requirements of the “Notice on
Preparation of the 2018 Annual Report in an orderly manner by Listed Companies” issued by the
SSE.
The Company has complied with the rules of Schedule 5 to the Companies Ordinance
(Chapter 622 of the Laws of Hong Kong) and prepared the 2018 Social Responsibilities Report
(environmental quality, professional health and safety, environmental protection and social
participation and was published on the websites of the SSE and the HKEx on the same day on
which the annual report was published.
Major Events
(3) Descriptions of environmental protection status of key pollutant-discharging companies

and their subsidiaries published by the environmental protection authority
(i) Drainage information
Chemical Pharmaceutical Factory, a branch of the Company, and Xing Zhu, WLJ Ya’ An
and Weiling, all being the subsidiaries of the Company, were among the key pollutants
discharging units. The key items of waste emissions being monitored are exhaust gas and
wastewater.
Names of major Number Annual Total Approved

pollutants and of average Implementation of annual total
Company characteristic Emission emission emission pollutant emission emissions emissions Excessive
name pollutants mode ports Distribution of emission ports concentration standards (ton) (ton) emissions
(mg/m3) (mg/m3)
Chemical Sulfur dioxide Interval 1 No. 78 Tongbao Road, Tonghe Street, 6.19 “Integrated emission 0.21 2.16 None
Pharmaceutical Baiyun District, Guangzhou City, standard of air
Factory Guangdong Province, the PRC pollutants”, ≤50
Nitrogen oxides Interval 1 No. 78 Tongbao Road, Tonghe Street, 76.25 “Integrated emission 2.27 8.62 None
Baiyun District, Guangzhou City, standard of air
Guangdong Province, the PRC pollutants”, ≤200
Particulate matter Interval 4 No. 78 Tongbao Road, Tonghe Street, 9.5 “Integrated emission 1.49 17.78 None
(smoke dust) Baiyun District, Guangzhou City, standard of air
Total VOCs Interval 5 No. 78 Tongbao Road, Tonghe Street, 14.32 “Integrated emission 1.71 15.56 None
Baiyun District, Guangzhou City, standard of air
Xing Zhu Sulfur dioxide Interval 1 No. 4 Venture Avenue South, 2.80 “Integrated emission 0.02 3.83 None
Pearl Industrial Park, Conghua, standard of air
Guangzhou City, Guangdong pollutants”, ≤50
Province
Nitrogen oxides Interval 1 No. 4 Venture Avenue South, 77.50 “Integrated emission 3.64 17.92 None
Pearl Industrial Park, Conghua, standard of air
Province
Particulate matter Interval 1 No. 4 Venture Avenue South, 3.00 “Integrated emission 0.14 2.30 None
(smoke dust) Pearl Industrial Park, Conghua, standard of air
Province
WLJ Ya’ An COD Discharge after 1 No.1 Deguang Road, Ya’an Economic 52.85 “Integrated Wastewater 4.30 5.86 None
treatment Development Zone, Sichuan Discharge Standard (III-
Province class criteria)”
Weiling COD Discharge after 1 No. 36, Huancheng East Road, Heshan 71.75 “Integrated Wastewater 4.02 4.50 None
treatment Community, Hepo Street, Jiexi Discharge Standard (III-
County, Guangdong Province class criteria)”
Major Events

and their subsidiaries published by the environmental protection authority (Continued)
(ii) Construction and operation of pollution prevention and control facilities
Chemical Pharmaceutical Factory, Xing Zhu, WLJ Ya’ An and Weiling had, through various
pollution preventive facilities and measures, to ensure that the emission of exhaust gas did
not exceed the permitted limit and strictly observed the relevant requirements under the
“Integrated Emission Standard for Air Pollutants” and “Integrated Wastewater Discharge
Standard (III-class criteria)”. Details of the pollution preventive facilities and measures
undertaken by Chemical and Pharmaceutical Factory, Xing Zhu, WLJ Ya’ An and Weiling
and their implementations (exhaust gas) are as follows:
Average daily
Company Name of pollution preventing Put into processing
name facility use date Pollution category Procedure capacity
(m3/h)
Chemical Sewage treatment facility tail gas 2018.02.01 Odor, VOCs Washing+biofilter 3,895
Pharmaceutical treatment system DA008(6#)
Factory 202 production exhaust gas 2007.10.01 Particulate matter, VOCs Bag-type dust collecting+ lye 3,672
treatment facility DA010 (7#) spray+ activated carbon
adsorption
205 cephalosporin sterile APIs 2009.06.01 VOCs Condensation+absorber 360
production exhaust gas treatment recovery
facility DA004(5#)
203 oral APIs production exhaust gas 2014.10.01 VOCs, sulfuric acid mist Condensation+lye spray 714
treatment facility DA003(9#)
205 oral cephalosporin APIs 2016.01.20 VOCs, Hydrochloride Lye spray+ photo catalytic 2,579
production acidic organic gas oxidation
treatment facility DA001 (11#)
205 oral cephalosporin APIs 2016.01.20 Particulate matter Cellulose filter cylinder 5,350
production dust and exhaust gas filtration
treatment facility DA002 (10#)
203 oral raw medicine production 2014.10.01 Particulate matter Cellulose filter cylinder 4,870
dust and exhaust gas treatment filtration
facility DA009 (8#)
205 cephalosporin sterile raw 2009.06.01 Particulate matter Cellulose filter cylinder 7,205
medicine production dust filtration
treatment facility DA007(2#)
VOCs treatment system 2018.11.22 VOC Dichloromethane: water 3000; 2200
(dichloromethane; acetone and spray + L2 T-HPs resin
ethanol treatment) adsorption method
Acetone and ethanol:
closed absorption through
water circulation + water
spray + biosorption
Xing Zhu Pulse separator with filter bag + high 2017.12.15 Workshop exhaust gas Bag-type dust collecting 38,200
altitude discharge + high altitude
discharge
WLJ Ya’ An Sewage Treatment Station 2015.09.01 COD, ammonia nitrogen AO Process 40
Weiling Sewage Treatment Station 2016.06.07 COD, ammonia nitrogen AO Process 40
Note: COD refers to Chemical Oxygen Demand, VOCs refers to volatile organic compounds.
Major Events

(ii) Construction and operation of pollution prevention and control facilities

(Continued)
Environmental impact assessment of construction projects and other administrative

licenses for environmental protection
The designing, construction and trial run of plants, new projects and reconstruction and
expansion projects of each key sewage-discharging entity of the Company went through
the environmental impact assessment and the environmental protection completion
inspection in strict compliance with relevant laws and regulations. During the Reporting
Period, the environmental protection facilities were running smoothly, ensuring the legal
discharge of water, air and sound and standardized management of hazardous waste.
There was no newly-commenced project in the Reporting Period..
(iii) Environmental emergency response plan
Each key sewage-discharging entity of the Company prepared the Environmental

Emergency Response Plan according to standard specifications and organized drills of the
environmental emergency response and rescue plan on its own.
(iv) Environmental self-monitoring program
Each key sewage-discharging entity of the Company prepared the Environmental Self-
monitoring Program and strictly conducted daily monitoring according to the self-
monitoring program and disclosed information to the public. Meanwhile, such entities
entered into the Environmental Monitoring Technology and Service Contract with a
qualified third-party monitoring authority having relevant qualifications whereby such
authority is entrusted to conduct a third-party test of the sewage, exhaust gas and noise
discharged by each plant in accordance with environmental protection and administration
requirements and provide the testing report.
(v) Other environmental information that should be disclosed to the public
(vi) Companies other than the key pollutant discharging units
(vii) Explanations on subsequent status on or changes in environmental information

disclosed in the Reporting Period

Major Events

(viii) Other
On 8 June 2018, the law enforcement officers of Guangzhou Environmental Protection

Bureau conducted enforcement inspection on Xing Zhu. Upon investigation, the improper
treatment of herb residue by the herb residue treatment cooperative enterprise of Xing
Zhu (Guangzhou Conghua Honggaoliang Fruit and Vegetable Professional Cooperative
(廣州市從化紅高粱果蔬專業合作社)) was found, and Xing Zhu shall bear the joint and
several liability as the supplier of herb residue. According to the Decision of Administrative
Penalties of Guangzhou Conghua Environmental Protection Bureau (Cong Huan Fa [2018]
No. 111), which ordered Xing Zhu to halt the illegal act and to rectify within a time
period of 30 days, and imposed a penalty of RMB80,000. Xing Zhu has completed the
rectification and strengthened self-inspection on existing waste disposal work processes to
ensure green emissions.
Other than the companies named above which are key pollutant discharging units in
Guangzhou, all the other subsidiaries of the Company are low-energy consumption
and low-emission enterprises, and most of them are provincial and municipal cleaner
production units as well as national, provincial and municipal green enterprises. They have
strictly complied with national, provincial and municipal laws and regulations related to
environmental protection, and have not discharge excessive pollutants.
25. DURING THE REPORTING PERIOD, THE COMPANY DID NOT HAVE ANY CONVERTIBLE
BONDS.
Changes in Share Capital and Shareholders
1. CHANGES IN SHARE CAPITAL
(1) Changes in share capital
During the Reporting Period, the Company did not have change in share capital.
(2) Change in shares with selling restrictions
During the Reporting Period, the Company did not have change in shares with selling restrictions.
2. INTERNAL STAFF SHARES
The Company did not have any internal staff shares.
3. INFORMATION ON SHAREHOLDERS
(1) Number of shareholders as at the end of the Reporting Period
As at 31 December 2018, there were 60,014 shareholders in total, of which 59,988 were holders
of domestically listed Renminbi-denominated ordinary shares (A shares) and 26 were holders of
overseas listed shares (H shares).
As at 28 February 2019, there were 69,440 shareholders in total, of which 69,413 were holders
of domestically listed Renminbi-denominated ordinary shares (A shares) and 27 were holders of
overseas listed shares (H shares).
3. INFORMATION ON SHAREHOLDERS (Continued)
(2) As at 31 December 2018, the top ten shareholders of the Company are set out as follows
Number of
Increase/ shares held Approximate Number of
(Decrease) as at the percentage shares Number of
during the end of the of the subject shares
Reporting Reporting total issued to selling pledged or Class
Shareholders Period Period share capital restrictions locked of shares
(share) (share) (%) (share) (share)
GPHL 0 732,305,103 45.04 148,338,467 0 State-owned

legal person
HKSCC Nominees Limited 61,940 219,739,409 13.52 0 0 Overseas Legal
Person
GZ SOA Development 0 87,976,539 5.41 87,976,539 0 State-owned
legal person
GZ Chengfa 0 73,313,783 4.51 73,313,783 0 Other
China Securities Finance (325,574) 47,278,008 2.91 0 0 Other
Corporation Limited
Yufeng Investment 0 21,222,410 1.31 21,222,410 21,222,410 Other
Central Huijin Asset 0 15,260,700 0.94 0 0 Other
Management Co., Ltd.
The National Social Security 10,326,823 10,326,823 0.64 0 0 Other
Fund – One Zero Five
Combination
Hong Kong Securities Clearing 6,394,621 10,172,609 0.63 0 0 Other
Co. Ltd.
China AMC – Agricultural 3,563,400 8,795,136 0.54 0 0 Other
Bank – Huaxia China
Securities Financial Asset
Management Plan
(2) As at 31 December 2018, the top ten shareholders of the Company are set out as
follows: (Continued)
The top ten shareholders of the Company not subject to selling restrictions
Number
of shares
without selling Class of The number
Shareholders restrictions shares of shares
(share) (share)
GPHL 583,966,636 Domestic shares 732,305,103

HKSCC Nominees Limited 219,739,409 H shares 219,739,409
China Securities Finance Corporation 47,278,008 Domestic shares 47,278,008
Limited
Central Huijin Asset Management Co., Ltd. 15,260,700 Domestic shares 15,260,700
The National Social Security Fund 10,326,823 Domestic shares 10,326,823
– One One Five Combination
Hong Kong Securities Clearing Co. Ltd 10,172,609 Domestic shares 10,172,609
China AMC – Agricultural Bank 8,795,136 Domestic shares 8,795,136
– Huaxia China Securities Financial Asset
Management Plan
China European Fund-Agricultural Bank of 8,680,636 Domestic shares 8,680,636
China-Central European Central China
Financial Asset Management Plan
Boshi Fund-Agricultural Bank of 8,662,836 Domestic shares 8,662,836
China-Bo card in Financial Asset
Management Plan
Dacheng Fund-Agricultural Bank of China- 8,657,836 Domestic shares 8,657,836
Dacheng certificate of
Financial Assets Management Plan
Explanation on the connection or persons acting in concert among the above shareholders:
(A) According to the information provided by HKSCC Nominees Limited, the H shares held by
it were held on behalf of several clients.
(B) The Company was not aware of any connection among the above top ten shareholders,
or whether they were persons acting in concert as provided in the “Rules Governing the
Disclosure of Changes in Shareholders’ Shareholding in Listed Companies”.
(2) As at 31 December 2018, the top ten shareholders of the Company are set out as follows
(Continued)
Number of shares held by the top ten shareholders subject to

selling restrictions and the selling restrictions
Circumstances under which shares subject to selling restrictions can be traded

Name of holders Timing at Newly increased
whose shares are Number of shares which shares number of shares Selling
subject to selling subject to selling are permitted that are permitted restrictions
restrictions restrictions to trade to trade undertaken
(share) (share)
GPHL 148,338,467 17 August 2019 0 Note

GZ SOA Development 87,976,539 17 August 2019 0 Note
GZ Chengfa 73,313,783 17 August 2019 0 Note
Yufeng Investment 21,222,410 17 August 2019 0 Note
Placement Prosperous Age
Exclusive Account No.66 3,860,500 17 August 2019 0 Note
Note: the A shares were offered by non-public offering to 5 investors, namely GPHL, Placement Prosperous Age Exclusive
Account No.66, GZ SOA Development, GZ Chengfa and Yunfeng Investment. The registration and custody
procedures for the newly-issued shares had been completed on 17 August 2016 at the Depository Corporation.
The newly-offered shares are shares subject to trading restrictions with a lock-up period of 36 months and can be
traded on the SSE on the second trading day following the expiration of the lock-up period.
(3) Shareholders’ interests and short positions in the shares and underlying shares of the
Company
As at 31 December 2018, the interests and short positions held by the persons (not being the
directors, supervisors and senior management of the Company) in the shares and underlying
shares of the Company which were required to be notified to the Company and the HKEx
pursuant to Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required
maintained by the Company under Section 336 of the SFO were as follows:
Long Positions
Approximate
% Approximate
of the total %
issued of the total
Class of Number of domestic issued H
Shareholder shares shares held Capacity shares shares
(share) (%) (%)
GPHL Domestic shares 732,305,103 Beneficial owner 52.09 –

GZ SOA Development Domestic shares 87,976,539 Beneficial owner 6.26 –
GZ Chengfa Domestic shares 73,313,783 Beneficial owner 5.21 –
Norges Bank H shares 24,948,000 Beneficial owner – 11.35
Citigroup Inc. (note 1) H shares 18,000 Person having – 0.008
(long position) a security
interest in shares
570,000 Interests of 0.259
(long position) corporation
(note 2) controlled by you
438,000 0.199
(short position)
(note 2)
21,331,106 Approved lending 9.70
(long position) agent
Note: 1. According to the notice of substantial corporate shareholders filed by the Citigroup Inc.:
a) Interests in long position of 588,000 foreign shares and short position in 438,000 foreign shares
in the Company were held by Citigroup Global Markets Limited, which was owned as to 100%
by Citigroup Global Markets Holdings Bahamas Limited. Citigroup Global Markets Holdings
Bahamas Limited was owned as to 90% by Citigroup Financial Products Inc. Citigroup Financial
Products Inc. was wholly-owned by Citigroup Global Markets Holdings Inc.. Citigroup Global
Markets Holdings Inc. was wholly-owned by Citigroup Inc.. As such, Citigroup Inc. was deemed
to be interested in the shares held by Citigroup Global Markets Limited under the SFO.
b) Interests in long position of 21,331,106 foreign shares in the Company was held by Citibank,
N.A. which was wholly owned by Citicorp LLC. Citicorp LLC was wholly-owned by Citigroup Inc.
Citigroup Inc. was deemed to be interested in the shares held by Citibank, N.A. under the SFO.
2. Long position in 294,000 foregin shares and short position in 18,000 foreign shares in the Company are
unlisted derivatives to be settled in cash.
As far as the Directors are aware, as at 31 December 2018, other than those listed above,
there was no other person or corporation having an interest or short position in the shares and
underlying shares of the Company which were required to be notified to the Company and the
HKEx pursuant to Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required
to maintained by the Company under Section 336 of the SFO.
4. INFORMATION ON CHANGES OF THE COMPANY’S CONTROLLING SHAREHOLDER AND ITS

BENEFICIAL OWNER
(1) Controlling shareholder
Name of shareholder Guangzhou Pharmaceutical Holdings Limited
Legal representative Li Chuyuan
Date of establishment 7 August 1996
Business scope To invest in and manage State-owned assets, to sell and

manufacture pharmaceutical intermediates, Chinese
and western medicine, Chinese raw medicine, bio-tech
products, medical apparatus, pharmaceutical equipment,
packing materials for pharmaceutical products, health
drinks and food, hygienic materials and pharmaceutical
related merchandise; to undertake medicine related
import and export affairs and to develop real estate.
Shareholding information of other No

domestic and overseas listed
companies during the Reporting
Period
(2) Beneficial owner(s)
As at the end of the Reporting Period, the controlling shareholder of the Company was GPHL,
the beneficial owner of which was the State-owned Assets and Administration Commission of
Guangzhou Municipal Government (“Guangzhou SASAC”).
Guangzhou SASAC
100%
GPHL
45.04%
The Company
5. OTHER SHAREHOLDERS HOLDING 10% OR MORE OF THE COMPANY’S TOTAL ISSUED

SHARES
As at the end of the Reporting Period and saved as disclosed above, the Company had no other
shareholders holding 10% or more of the Company’s total issued shares.
6. NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAD PURCHASED, SOLD OR
REDEEMED ANY OF THE COMPANY’S SHARES DURING THE REPORTING PERIOD
7. DURING THE REPORTING PERIOD, THERE WAS NO CHANGE IN THE CONTROLLING

SHAREHOLDER OF THE COMPANY
8. PUBLIC FLOAT
Based on the publicly available information and to the best knowledge of the Directors, the Company
has maintained sufficient public float as at the latest practicable date prior to the issue of this annual
report.
9. PRE-EMPTIVE RIGHTS
According to the Articles of Association and the laws of the PRC, there is no pre-emptive right which
would oblige the Company to issue new shares to existing shareholders on a pro-rata basis.
10. DESCRIPTION ON RESTRICTIONS ON SHARES
For relevant contents, please refer to the “Number of shares held by the top ten shareholders subject to
selling restrictions and the selling restrictions” under “3. Information on Shareholders” for details.
Relevant Information on Preferred Shares
DURING THE REPORTING PERIOD, THE COMPANY DID NOT HAVE ANY PREFERRED SHARES.
Directors,Supervisors,Senior Management and Staff
1. PROFILES OF DIRECTORS,SUPERVISORS AND SENIOR MANAGEMENT
(i) Profiles of existing Directors, supervisors and senior management
(1) Executive directors
Mr. Li Chuyuan, aged 53, completed postgraduate education and holds an EMBA
degree and is a senior economist as well as a senior engineer of professor grade. Mr. Li is
entitled to the special allowances granted by the State Council. He received the “National
Model Workers Award”, was selected for the “List of Chinese Good Fellows (中國好人
榜)”, and was awarded the “Top Ten Economic Figures of China”, the person of “China
Double Embrace”, “Guangdong Top 10 Innovative Persons”, “Guangdong Top 10 Most
Influential Persons in Economy” and “Guangzhou Top 10 Outstanding Youth”. He is a
member of Guangzhou Municipal People’s Congress, the representative of Guangzhou
Communist Party, Guangzhou Outstanding Management Expert, the deputy officer of
the Science and Education, Sanitation and Sport Committee of Guangdong Political
Consultative Conference and a member of the Guangdong Provincial People’s Congress.
Since Mr. Li began his career in July 1988, Mr. Li had successively served as the Deputy
Director of operation department of Baiyunshan General Factory, Deputy General
Manager, Deputy Secretary of the Communist Party and Chairman of Baiyunshan, director
and Secretary of the Communist Party of Guangzhou Baiyunshan Chinese Medicine
Factory, the General Manager, Vice Chairman and Secretary of the Communist Party of
HWBYS, General Manager, Vice Chairman, Deputy Secretary of the Communist Party
of GPHL, the Vice Chairman of the Company and the Vice Chairman of the Guangzhou
Pharmaceuticals Corporation. Mr. Li has served as the Chairman of the Company since 8
August 2013, and now is the Chairman and Secretary of the Communist Party of GPHL,
Chairman and Secretary of the Communist Party of the Company and Secretary of the
Communist Party and Vice Chairman of HWBYS. Mr. Li has extensive experience in the
fields of corporate management and marketing.
Mr. Chen Mao, aged 55, holds a bachelor degree in medicine and is a pharmaceutical
engineer. He was awarded the “National Labour Day Award”. Mr. Chen began his career
in November 1985, and has been the deputy factory manager of Guangzhou Baiyunshan
Pharmaceutical Factory* (廣州白雲山中藥廠), the chairperson of Pharmaceutical
Technology, the general manager of Baiyunshan, the factory manager of Baiyunshan
General Factory, the chairperson of Guang Hua, the chairperson and the secretary of the
Communist Party of WLJ Great Health and deputy general manager of GPHL. Mr. Chen
has been the vice chairperson of the Company since January 2014 and is also currently the
general manager, vice chairperson and deputy secretary of the Party Committee of GPHL,
deputy chairperson and deputy secretary of the Party Committee of the Company and
the chairperson of Baxter Qiao Guang. Mr. Chen has extensive experience in corporate
management and marketing.
Ms. Liu Juyan, aged 54, completed postgraduate education and holds a doctorate degree
in medicine and is a senior engineer of professor grade. She is also an expert who enjoys
special allowances from the State Council. Ms. Liu was awarded the “March 8th Flag
Bearer” of China and is a member of the Guangzhou Provincial People’s Progress. She was
an “Outstanding City Management Expert” of Guangzhou and also was a Guangzhou
“121” reserved talent. Ms. Liu began her career in July 1990 and had been the
chairperson and general manager of Guangzhou Han Fang, the head of the technology
and quality department of GPHL, the chairperson of Yi Gan and the chairperson of the
Guangyao General Institute. Since August 2005, Ms. Liu has been the chief engineer of
GPHL and the chief technical officer of the Company. Since January 2011, she has been
the deputy general manager of GPHL. Ms. Liu has been the chairperson of Nuo Cheng
since March 2014 and has been a director of the Company since December 2013. Ms. Liu
has extensive experience in scientific research and development, technological research
and quality management.
1. PROFILES OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT (Continued)
(i) Profiles of existing Directors, supervisors and senior management (Continued)
(1) Executive directors (Continued)
Ms. Cheng Ning, aged 53, completed tertiary education and is an accountant. Ms. Chen
possesses several professional qualifications, including PRC certified public accountant,
PRC certified tax consultant, senior international finance manager and senior accounting
(finance management) technician. Ms. Cheng began her career in August 1986 and had
been an officer of the finance department of Baiyunshan General Factory, the deputy head
of the finance department of Guangzhou Baiyunshan Bao De Pharmaceutical Factory*
(廣州白雲山寶得藥廠), the head of the finance department of Guangzhou Baiyunshan
Veterinary Medicine Factory* (廣州白雲山獸藥廠), the head of the settlements division
of the operations department, head of the accounts and payments division of the
settlements centre, deputy head of the finance department and a member and secretary
of the supervisory committee of Baiyunshan, the acting manager and manager of the
financial resources department and the head of the finance department of Guangzhou
Baiyunshan Enterprise Group Co., Ltd.* (廣州白雲山企業集團有限公司), the deputy head
and the head of the finance department of GPHL, a director of each of Zhong Yi, Cai Zhi
Lin, Qi Xing, Guangxi Yingkang, WLJ Investment, Wang Lao Ji Catering and GP Corp and
the chairperson of the supervisory committee of WLJ Great Health. Ms. Cheng has been
a Director since 19 September 2012, and is also currently the deputy general manager,
the financial controller and a member of the party committee of GPHL, the convenor of
the board of directors of Guangyao Baiyunshan Hong Kong Company. Ms. Cheng has
extensive experience in finance management and internal control management.
Mr. Ni Yidong, aged 47, completed postgraduate education and holds a doctorate
degree in medicine and is a senior engineer. Mr. Ni began his career in July 1994 and had
been the head of the marketing department of GPHL and the chairperson and secretary of
the Party Committee of Zhong Yi. He has been a Director since January 2014, and is also
currently the deputy general manager and a member of the party committee of GPHL. Mr.
Ni has extensive experience in corporate management, marketing and brand protection
and management.
Mr. Li Hong, aged 52, holds a bachelor degree and a MBA degree. Mr. Li also holds
the titles of engineer and senior political work engineer and possesses the qualification
of practising pharmacist. Mr. Li is a specially appointed committee member of the 11th
Chinese People’s Political Consultative Conference of Guangdong Province. Mr. Li started
his career in July 1990. He had served as a director and the chairperson of the board of
Guangzhou Baiyunshan Qiao Guang Pharmaceutical Co., Ltd.; a director and the general
manager of Tian Xin; a general manager, chairperson and secretary of the party committee
of Ming Xing; a director of Baiyunshan and an assistant to the general manager of GPHL.
Mr. Li has been a Director and general manager of the Company since 22 June 2018 and
is currently a member of the party committee of the Company.
Mr. Wu Changhai, aged 53, holds a bachelor degree and EMBA degree, and is a senior
economist. Mr. Wu began his career in August 1989 and had been the Deputy General
Manager of Guangxi Ying Kang, the Deputy General Manager, General Manager,
director, Chairman and Secretary of the Communist Party of Zhong Yi, the Chairman
and director of Qi Xing, the chairman and director of Xing Qun, Chairman of WLJ Great
Health, Chairman of WLJ Great Health Industry (Ya’an) Co., Ltd., Chairman of Wang
Lao Ji Great Health Industry (Mei Zhou) Co., Ltd., director of Chen Li Ji and Managing
Director of GPC. Mr. Wu has served as a director of the Company since 28 June 2010,
and is currently the Deputy General Manager of the Company, a director of Xing Zhu and
a director of WLJ Great Health. Mr. Wu has extensive experience in the operation and
management, marketing and scientific research and development of listed companies and
pharmaceuticals, food and beverage businesses.
(2) Independent non-executive directors
Mr. Chu Xiaoping, aged 64, holds a doctorate degree in management and is a professor
and a doctoral advisor. Mr. Chu graduated from the Xi’an Jiaotong University. He was
a lecturer, associate professor, professor, associate dean and the dean of the Business
School of Shantou University in Guangdong and a visiting scholar of the University of
Hong Kong. He had been an independent director of Shengyi Technology Co., Ltd. and
Lafang China Co., Ltd. for six years. He also served as an independent director of Oppein
Home Group Inc. and Guangzhou Haoyang Electronic Co.,Ltd.. He is currently a professor
and a doctoral advisor at the Lingnan (University) College, Sun Yat-sen University. Mr.
Chu has extensive experience in the organisation, leadership, innovation and sustainable
development of enterprises.
Mr. Jiang Wenqi, aged 61, holds a master’s degree in clinical medicine and advanced
health management and is a professor, doctoral advisor and a chief physician. Mr. Jiang
obtained his medical degree from Shanghai Medical University in 1982 and obtained his
master’s degree in oncology from the Sun Yat-sen University in 1988. He was a physician,
vice president and the head of the medical department of the Sun Yat-sen University
Cancer Center (an affiliate hospital of the Sun Yat-sen University) and the dean of the
School of Medicine of the Shenzhen University. Mr. Jiang is currently the head of the
medical department of the Sun Yat-sen University Cancer Center. Mr. Jiang has extensive
experience in pharmaceutical industry and hygiene management.
(2) Independent non-executive directors (Continued)
Mr. WONG Hin Wing, aged 56, holds a Master’s degree in Executive Business
Administration from The Chinese University of Hong Kong. He is a fellow member of
the Hong Kong Institute of Certified Public Accountants, the Institute of Chartered
Accountants in England & Wales, the Association of Chartered Certified Accountants,
the Hong Kong Institute of Directors and the Institute of Chartered Secretaries and
Administrators. He is also a member of the American Institute of Certified Public
Accountants and a chartered member of the Chartered Institute for Securities &
Investment. He is an Independent Non-executive Director of AEON Credit Service (Asia) Co.
Ltd. (a public company listed on the HKEx), Dongjiang Environmental Company Limited
(a public company with A shares listed on the Small and Medium Enterprise Board of the
Shenzhen Stock Exchange and H shares listed on the HKEx), CRCC High-Tech Equipment
Corporation Limited (a public company with H shares listed on the HKEx), Guangzhou
Baiyunshan Pharmaceutical Holdings Company Limited (a public company with A shares
listed on the SSE and H shares listed on the HKEx), Inner Mongolia Yitai Coal Co., Ltd.
(a public company with B shares listed on the SSE and H shares listed on the HKEX) and
Wine’s Link International Holdings Limited (a public company listed on the HKEx) and
Jiangxi Bank Co., Ltd. (a public company with H shares listed on the HKEx). He is also a
Member of Anhui Provincial Committee of the Chinese People’s Political Consultative
Conference, a panel member of Securities and Futures Appeals Tribunal, a member of
Nursing Council of Hong Kong and a member of the Construction Industry Council. He
is the Managing Director and has been the responsible officer of Silk Road International
Capital Limited (formerly known as Legend Capital Partners, Inc.), a licensed corporation
under the SFO since 1997. Prior to this, he had worked with an international audit firm for
four years and then a listed company as Chief Financial Officer for seven years. He has 35
years of experience in accounting, finance, investment management and advisory.
Ms. Wang Weihong, aged 56, completed postgraduate education and holds a master
degree in management. Ms. Wang is a professor, a member of each of the ninth,
tenth and eleventh session of the Chinese People’s Political Consultative Conference
of Guangdong Province, a member of the twelfth session of the Research Consultative
Committee of the Chinese People’s Political Consultative Conference and a consultant of
the People’s Government of Guangdong Province. Ms. Wang graduated from the Hunan
Institute of Economics and Finance (currently known as the Hunan University). She began
her career in July 1986 and had been a teacher of the Department of Trade and Economics
of the Hunan Institute of Finance and Economics, the head and an associate professor
of the Teaching and Research Office of the Department of Business Administration of
the Hunan Institute of Finance and Economics, an associate professor of the Department
of Marketing and Sale of the Business Faculty of the Hunan University, the head of the
Department of Marketing and Sale of Guangdong University of Foreign Studies and an
evaluation expert of the Association of the Social and Scientific Sectors of Guangdong (廣
東省社會科學界聯合會). Ms. Wang is currently the head of the Research Center of the
Business College and a third-tier professor of the Guangdong University of Foreign Studies.
Ms. Wang is also a standing director of the China Marketing Association, the deputy
secretary general of China Business Administration Association of University (中國高校商
務管理研究會), a standing director of China Marketing Association of University (中國高
校市場學研究會), the deputy secretary general of Guangdong Marketing Association and
a standing director of Guangdong Institute of Research on the Tertiary Sector (廣東省第
三產業研究會). Ms. Wang has extensive experience in strategy management, marketing
management and brand operation.
(2) Independent non-executive directors (Continued)
For details of the membership information of the board committees on which the
independent non-executive directors serve, please refer to the section headed “4.
Committees of the Board” of “4. Corporate Governance” in this report. For details of the
terms of the independent non-executive directors of the Company, please refer to the
section headed “2. Changes in Interests and Emoluments” in this report.
(3) Supervisors
Mr. Xian Jiaxiong, aged 59, holds a bachelor degree and a master’s degree in business
administration, and is an economist and senior political engineer. Mr. Xian began his
career in September 1976 and had been the deputy secretary of the Party Committee of
Guangzhou Grandbuy Co., Ltd. and assistant to the general manager and the secretary of
the disciplinary committee of Guangzhou Department Store Enterprise Group Co., Ltd. Mr.
Xian has been the chairman of the supervisory committee of the Company since October
2013, and is also currently the deputy secretary of the Party Committee of GPHL. Mr. Xian
has extensive experience in economic management, operations of the Chinese Communist
Party and legal affairs.
Ms. Li Jinyun, aged 51, obtained a bachelor’s degree from the Central Party School
of the Communist Party of China. She is a senior political engineer, an engineer, an
economist and is also a representative of the Chinese Communist Party of Guangzhou.
Ms. Li began her career in July 1990 and had been the chairperson of the labour union
of Guangzhou Baiyunshan Chinese Medicine Factory* (廣州白雲山中藥廠), the deputy
secretary of the Party Committee of Baiyunshan Chemical Factory and the deputy head
of the human resources department, the deputy head of the political works department,
the head of the organisational and personnel department, a member of the disciplinary
committee, the deputy secretary of the retirement office of the Party Committee and the
secretary of Party Committee of Baiyunshan. From March 2014 to June 2017, Ms. Li was
the head of the organisational department, the head of the human resources department
of the Company. Since September 2016, Ms. Li has been a member of the supervisory
committee of the Company and is currently the chairperson of the labour union member
of the disciplinary committee and head of the organizational department of the Party
Committee of GPHL, member of the Party Committee and chairperson of the labour union
of the Company. Ms. Li has been engaged in the political work of the Chinese Communist
Party and administration and human resource management for more than 20 years and
has extensive experience in the development and innovation aspects of the Chinese
Communist Party, talent recruitment and development.
Ms. Gao Yanzhu, aged 53, holds a bachelor degree and a MBA degree. She is a senior
economist, auditor and an engineer and a member of the 16th session of Guangzhou
City Liwan District People’s Congress. Ms. Gao started her career in July 1988 and
had been the deputy director of the office of the operation and management of the
enterprise management department of Guangzhou Baiyunshan Enterprise Group Co.,
Ltd., representative of securities affairs and company’s legal adviser of Baiyunshan
Pharmaceutical, deputy department head of the audit department and the deputy director
of the risk control office of GPHL. Ms. Gao was the deputy department head of the audit
department and the deputy director of the risk control office of the Company during
Mach 2014 to January 2017. Ms. Gao has extensive experience in audit, risk control and
securities affairs.
(4) Senior management
Mr. Zhang Chunbo, aged 42, holds a bachelor degree and a master degree of EMBA,
and is a druggist. Mr. Zhang graduated from the China Pharmaceutical University in July
2000 and began his career in the same year. In December 2010, he obtained a master
degree of EMBA from the Lingnan (University) College of the Sun Yat-Sen University.
He had served as the vice manager of the second zone, the assistant to the manager of
sales department, the vice general manager of sales department, the manager of sales
department, the vice director of marketing department of HWBYS, the vice general
manager and the vice general manager of Zhong Yi. Mr. Zhang has been as the vice
general manager of the Company since January 2015, and is currently the chairperson of
each of Zhong Yi, Qi Xing. Mr. Zhang has extensive experience in corporate management
and marketing.
Ms. Huang Xuezhen, aged 45, holds a master’s degree. She is a economist and a
member of the 15th session of the People’s Congress of Liwan District, Guangzhou City.
Ms. Huang started her career in July 1977 and joined the Company in September 2003.
She had served as the deputy officer of the Secretariat to the Board of the company,
the head of the secretariat and representative of securities affairs. She has served as the
secretary to the Board of the Company since 26 April 2017 and is currently the company
secretary of the Company, the head of the Secretariat to the Board and a director of
Golden Eagle Fund.
(ii) Information on the Changes in Directors, Supervisors and Senior Management of the
Company During the Reporting Period
Ms. Lee Mei Yi resigned as the company secretary of the Company on 16 August 2018 and had
confirmed that she had no disagreement with the Board and there is no matter in connection
with her resignation that needed to be brought to the attention of the shareholders of the
Company or HKEx. Ms. Huang Xuezhen had been appointed as the company secretary of the
Company with effect from 16 August 2018 in place of Ms. Lee Mei Yi.
2. CHANGES IN INTERESTS AND EMOLUMENTS
(1) Interests in shares (A shares) and emoluments of the current and the former Directors,
Supervisors and senior management of the Company during the Reporting Period
During the Year, the total amounts of remuneration received by the Directors, supervisors and the
senior management from the Group, the shareholder(s) of the Company and other connected
entities was RMB11,985,020.
Emoluments
Emoluments received
Shares held Shares received from the
as at the held Change in from the Company’s
Ending beginning as at the shareholding Company shareholder
Commencement date of of the end of the during the during the during the
date of term of Reporting Reporting Reporting Reasons Reporting Reporting
Name Position Gender Age term of office office Period Period Period for change Period Period
(Note) (shares) (shares) (RMB’000) (RMB’000)
(before tax)
Interest (A shares) and emoluments of the current directors, supervisors and senior management of the Company
Li Chuyuan Chairperson Male 53 2010-06-28 Note ① 100,000 100,000 0 Note ④ / 1,014.20
Chen Mao Vice chairperson Male 55 2014-01-28 Note ① 50,000 50,000 0 Note ④ / 968.74
Liu Juyan Executive director Female 54 2014-01-28 Note ① 13,000 13,000 0 Note ④ / 990.25
Cheng Ning Executive director Female 53 2012-09-19 Note ① 21,500 21,500 0 Note ④ / 970.54
Ni Yidong Executive director Male 47 2014-01-28 Note ① 0 0 0 Note ④ / 933.73
Li Hong Executive director Male 52 2018-06-22 Note ① 10,000 10,000 0 Note ④ 1,094.45 /
Wu Changhai Executive director Male 53 2010-06-28 Note ① 13,000 13,000 0 Note ④ 1,156.17 /
Chu Xiaoping Independent Male 64 2014-01-28 Note ① 0 0 0 / 100.00 /
non-executive director
Jiang Wenqi Independent Male 61 2016-03-17 Note ① 0 0 0 / 100.00 /
WONG Hin Wing Independent Male 56 2017-06-23 Note ① 0 0 0 / 100.00 /
Wang Weihong Independent Female 56 2017-06-23 Note ① 0 0 0 / 100.00 /
Xian Jiaxiong Chairperson of the Male 59 2014-01-28 Note ① 11,000 11,000 0 Note ④ / 998.47
Supervisory Committee
Li Jinyun Supervisor Female 51 2016-09-07 Note ① 10,000 10,000 0 Note ④ / 968.31
Gao Yanzhu Supervisor Female 53 2017-06-23 Note ① 5,000 5,000 0 Note ④ 556.26 /
Zhang Chunbo Deputy general manager Male 42 2015-01-12 Note ① 10,000 10,000 0 Note ④ 1,146.24 /
Huang Xuezhen Secretary to the Board Female 45 2017-04-26 Note ① 2,500 2,500 0 Note ④ 787.66 /
Total / / / / / 246,000 246,000 0 / 5,140.78 6,844.24
2. CHANGES IN INTERESTS AND EMOLUMENTS (Continued)
(1) Interests in shares (A shares) and emoluments of the current and the former Directors,
Supervisors and senior management of the Company during the Reporting Period
(Continued)
Notes:
① Except for Mr. Li Hong whose term of office commenced from 22 June 2018 until members of new session of
the board of directors are elected, the term of office of the members of the 7th session of the Board, Supervisory
Committee and senior management commenced from 23 June 2017 up to the date on which members of new
session of the Board and the Supervisory Committee are elected.
② The emoluments of Mr. Li Chuyuan, Mr. Chen Mao, Ms. Liu Juyan, Ms. Cheng Ning, Mr. Ni Yidong, Mr. Xian
Jiaxiong and Ms. Li Jinyun for the Year were the emoluments they received from the Company’s shareholder,
which included the basic salary, bonus, allowance, subsidy, staff welfare benefits, insurance premiums, statutory
surplus reserve, annuity as well as settlement of annual salary for the previous year, etc.
③ The emoluments of Mr. Li Hong, Mr. Wu Changhai, Mr. Zhang Chunbo, Mr. Chu Xiaoping, Mr. Jiang Wenqi,
Mr. WONG Hin Wing, Ms. Wang Weihong, Ms.Gao Yanzhu and Ms. Huang Xuezhen for the Year were the
emoluments they received from the Company, which included the basic salary, bonus, allowance, subsidy, staff
welfare benefits, insurance premiums, statutory surplus reserve, annuity as well as settlement of annual salary for
the previous year, etc.
④ Mr. Li Chuyuan, Mr. Chen Mao, Ms. Liu Juyan, Ms. Cheng Ning, Mr. Li Hong, Mr. Wu Changhai, Mr. Zhang
Chunbo, Mr. Xian Jiaxiong, Ms. Li Jinyun, Ms. Gao Yanzhu and Ms. Huang Xuezhen had participated in the Stock
Ownership Scheme.
(2) Equity incentives given to the Directors, supervisors and senior management

(3) Interests of Directors, supervisors and chief executives and short positions in shares,
underlying shares and debentures of the Company
(i) As at 31 December 2018, the directors, supervisors, and their associates who had any
personal, family, corporate or other interests or short positions in the shares, underlying
shares or debentures of the Company or any of its associated corporation (within the
meaning of Part XV of the SFO) which would have to be notified to the Company and
the HKEx pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short
positions which they are taken or deemed to have under such provisions of the SFO), or
which were required, pursuant to Section 352 of the SFO, to be entered in the register
referred therein, or which were required, pursuant to the Model Code, to be notified to
the Company and the HKEx were as follows:
Number of Percentage of
shares issued
Directors Capacity Company (long position) A shares
(share) (%)
Li Chuyuan Beneficial Owner Company (A shares) 100,000 0.0071

Chen Mao Beneficial Owner Company (A shares) 50,000 0.0036
Liu Juyan Beneficial Owner Company (A shares) 13,000 0.0009
Cheng Ning Beneficial Owner Company (A shares) 21,500 0.0015
Wu Changhai Beneficial Owner Company (A shares) 13,000 0.0009
Li Hong Beneficial Owner Company (A shares) 10,000 0.0007
Tian Xin 5,000 Note
Number of Percentage of
shares issued
Supervisors Capacity Company (long position) A shares
(share) (%)
Xian Jiaxiong Beneficial Owner Company (A shares) 11,000 0.0008

Li Jinyun Beneficial Owner Company (A shares) 10,000 0.0007
Gao Yanzhu Beneficial Owner Company (A shares) 5,000 0.0003
Note: In the table above, the shares of Tian Xin held by Mr. Li Hong are company shares, which are non-listed
company shares, accounting for 0.01% of the shares of Tian Xin. The A shares of the Company held by the
remaining directors and supervisors are held under the Employee Stock Ownership Scheme (2015).
(3) Interests of Directors, supervisors and chief executive and short positions in shares,
underlying shares and debentures of the Company (Continued)
(ii) Saved as disclosed above, as at 31 December 2018, none of the directors, supervisors,
chief executive of the Company and their associates had any personal, family, corporate
or other interests or short positions in the shares, underlying shares or debentures of the
Company or any of its associated corporation (within the meaning of Part XV of the SFO)
which would have to be notified to the Company and the HKEx pursuant to Divisions 7
and 8 of Part XV of the SFO (including interests or short positions which they are taken
or deemed to have under such provisions of the SFO), or which were required, pursuant
to Section 352 of the SFO, to be entered in the register referred therein, or which were
required, pursuant to the Model Code to be notified to the Company and the HKEx.
3. POSITIONS HELD IN THE COMPANY’S SHAREHOLDER BY THE CURRENT DIRECTORS,

SUPERVISORS AND SENIOR MANAGEMENT AND THOSE WHO DEPARTED DURING THE
REPORTING PERIOD
Commencement Ending
Position(s) held date of term date of term
Name Company in the shareholder of office of office
Li Chuyuan GPHL Chairperson July 2013 /

Secretary of the party committee June 2013 /
Chen Mao GPHL Vice chairperson, general manager, July 2013 /
deputy secretary of the
party committee
Liu Juyan GPHL Deputy general manager January 2011 /
Chief engineer August 2005 /
Cheng Ning GPHL Deputy general manager July 2012 /
Chief Financial Officer May 2010 /
Ni Yidong GPHL Deputy general manager July 2012 /
Xian Jiaxiong GPHL Deputy secretary of the party October 2012 /
committee
Li Jinyun GPHL Chairperson of the labor union May 2017 /
4. INFORMATION ON THE EMOLUMENTS OF DIRECTORS, SUPERVISORS AND SENIOR

MANAGEMENT
The annual emoluments for Directors and supervisors were proposed by the Board and approved at the
annual general meeting of the Company at which the Board will be authorized to determine the amount
of the emoluments and method of payment for services of the Company’s directors and supervisors. The
amount of the emoluments and payment method for the senior management were determined by the
Board after taking into account of the Company’s operating results and individual performance.
5. THE APPOINTMENTS OR DEPARTURES OF DIRECTORS, SUPERVISORS AND SENIOR

MANAGEMENT OF THE COMPANY DURING THE REPORTING PERIOD AND AFTER THE
REPORTING PERIOD
At the 2017 Annual General Meeting of the Company held on 22 June 2018, Mr. Li Hong was elected
as an executive director of the seventh session of the Board. The term of office of the directors of the
Company commenced from the date of appointment up to the date on which members of the new
session of the Board are elected.
In accordance with Rule 13.51(B)(1) of the Listing Rules of HKEx, the change in information of directors
after the publication of the interim report of the Company for the six months ended 30 June 2018 is as
follows:
Name of director Details of change
Mr. WONG Hin Wing Resigned as the independent non-executive director of China Agri-Products
Exchange Limited on 30 November 2018.
6. SERVICE CONTRACTS OF DIRECTORS AND SUPERVISORS
Each of the existing directors and existing supervisors of the 7th session has entered into a service
contract with the Company. Except for Mr. Li Hong, a executive director, the contract term commenced
from 23 June 2017 up to the date on which members of the new session of the Board are elected.
The term of the contract in relation to Mr. Li Hong, an executive director, commenced from 22 June
2018 up to the date on which members of the 8th session of the Board are elected.
The term of office of each Director and supervisor of the Company commenced from the date of their
respective appointments up to the date on which of the new sessions of the Board and the Supervisory
Committee are elected. The term of each session of the Board or the Supervisory Committee is three
years. All directors and supervisors are eligible to offer themselves for re-election.
7. PERMITTED INDEMNITY
At no time during the Year and up to the date of this report, there was or is, any permitted indemnity
provision being in force for the benefit of any of the Directors and the supervisors of the Company
(whether made by the Company or otherwise) or an associated company (if made by the Company).
The Company has arranged appropriate Directors’, supervisors’ and senior management’s liability
insurance coverage for the Directors, Supervisors and senior management.
8. INTERESTS OF DIRECTORS AND SUPERVISORS IN TRANSACTIONS, ARRANGEMENTS OR

CONTRACTS
In this year or at the end of this year, the company, each affiliated company, affiliated companies or
holding companies in the group entered into no significant transaction, arrangement or contract in
which any business of the group is involved or any director or supervisor of the company or any entity
related to such director or supervisor directly or indirectly has any material right and interest.
9. PUNISHMENTS IMPOSED BY SECURITIES REGULATORY AUTHORITIES IN THE PAST THREE

YEARS

10. MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS AND SUPERVISORS
The Company adopted the Model Code and “Measures for the Administration of Trading Shares of the
Company by directors, supervisors and senior management” as stipulated by the Company as the code
and criteria for securities transactions by directors and supervisors of the Company. After making specific
inquiry on all the directors and supervisors, the Company confirmed that its directors and supervisors
had fully complied with the standards relating to directors’ and supervisors’ dealing in securities as set
out in the above code and criteria during the Reporting Period.
11. EMPLOYEES OF THE GROUP
(1) Situation of the employees
Numbers of the employees of the parent company 2,392

Numbers of the employees of the major subsidiaries 20,739
Total 23,131
Retired employees of the Company and major
subsidiaries whose expenses were assumed
by the Company and major subsidiaries 13,393
Gross payroll of the Group RMB2.629 billion
Composition
a number of
Category constitution constitute staff
Production staff 4,396

Sales personnel 12,444
Technical staff 2,804
Finance staff 409
Administrative staff 3,078
Total 23,131
Educational Level
Number
Post Graduate 469

Undergraduate 6,557
University college 6,988
Secondary and below 9,117
Total 23,131
11. EMPLOYEES OF THE GROUP (Continued)
(2) Remuneration policy
The remuneration of the employees of the Group included salaries, bonuses and other
fringe benefits. The Group, in compliance with the relevant PRC laws and regulations, paid
different rates of remuneration to different employees, based on the employees’ performance,
qualifications, position and other factors.
(3) Training plan
In view of staffs’ career development needs, the Group improved the training organizational
structure through preparing Staff Training Management System and Internal Lecturer Training
Management Measures. By virtue of the characteristics of each type of talents, the Group
combined the internal and external training to build a comprehensive training system, with
personnel levels covering staff at all levels from frontline production to senior management of
the Company, and including the contents such as professional skills, safety education, quality
management and leadership development, so as to promote the growth of staff at all levels and
enterprises.
Corporate Governance
1. CORPORATE GOVERNANCE AND INSIDERS REGISTRATION MANAGEMENT
(1) The Company has been strictly complying with the Companies Law of the PRC, the Securities
Law of the PRC, related laws and regulations of the CSRC and the Listing Rules of the SSE and
the Listing Rules of HKEx, continuously improving the management structure and regulate the
operations of the Company.
As at the end of the Reporting Period, the corporate governance of the Company was in
compliance with the Corporate Governance Guidelines, and there were no material discrepancies
against the requirements of the CSRC.
During the Reporting Period, the Company complied with the Code on Corporate Governance
Practices as set out in Appendix 14 to the Listing Rules of HKEx (“CG Code”) and the code
provisions of the CG Code except that (i) Mr. Ni Yidong, an executive Director, and Mr. Chu
Xiaoping, an independent non-executive Director, were unable to attend the first extraordinary
general meeting in 2018 due to business reasons which constituted deviation from code provision
A.6.7, and (ii) Mr. Chen Mao, Ms. Liu Juyan, Mr. Ni Yidong and Mr. Wu Changhai, each an
executive Director, Mr. Mr. WONG Hin Wing and Ms. Wang Weihong, each an independent non-
executive Director, , were unable to attend the annual general meeting in 2017 due to business
reason which constituted a deviation from code provision A.6.7.
The Board continues to monitor and review the Company’s corporate governance practices to
ensure compliance with the provisions in the corporate governance code.
The Group is committed to: (1) the research and development, manufacturing and sales of
pharmaceutical products and great health products; and (2) wholesale, retail, import and export
of Western and Chinese pharmaceutical products and medical apparatus, and; (3) adopted
relatively flexible business model and strategies and prudent risk and capital management
structure; the Group is committed to strengthening the internal control publicity and guidance
and the establishment of systems related to the internal control, and established a relatively
standardized internal control management and risk prevention system; formulated the
strategic objectives and detailed work plans and measures of the Group, so as to ensure the
accomplishment of the strategic objectives.
The review of the business and financial position of the Company for 2018 is set out in the
section headed “Report of the Board” in this annual report.
1. CORPORATE GOVERNANCE AND INSIDERS REGISTRATION MANAGEMENT (Continued)
(1) (Continued)
The Board confirmed that it was responsible for risk management and internal control and was
responsible for continuously reviewing the effectiveness of the risk management and internal
control and overseeing management in the design, implementation and monitoring of the risk
management and internal control system. The Audit Committee under the Board monitors
the Company’s risk management and internal control system to ensure that management has
fulfilled its responsibilities to establish an effective system. The Audit Committee convened the
second Audit Committee meeting of the Company on 15 March 2019 to review and approve the
Company’s 2018 internal control evaluation report. The Audit Committee (and the Board) are of
the view that the internal control and risk management system of the Company is adequate and
effective and the Company has complied with the provisions of the CG Code regarding internal
control and risk management system, including:
(i) Procedures for identification, assessment and management of material risks
Based on comprehensive risk management, the Company, by collecting and managing

the relevant information on major risks, identifies those posing a significant risk to
corporate business and operations. Furthermore, in line with the assessment standards
for risk potentiality and impact, the Company conducts the assessment of risk events,
designates a risk rating and develops the strategies for risk management and procedures
for internal monitoring to prevent and reduce risks. The Company monitors the related
risks continuously and regularly and makes sure that appropriate procedures for internal
monitoring are available. In case of material changes, the Company is responsible for
modifying the policies on risk management and regularly reporting on the result of risk
monitoring to the management and Board of Directors.
(ii) Main features of risk management and internal monitoring system
The comprehensive risk management system of the Company covers risk events, risk
management strategies and solutions, risk mapping and risk management information
system, and the Company has established a risk management oriented internal control
system.
(iii) The Board confirmed that it is responsible for the risk management and internal control
systems and reviewing their effectiveness continuously. Such systems are designed to
manage rather than eliminate the risk of failure to achieve business objectives, and can
only provide reasonable and not absolute assurance against material misstatement or loss.
(iv) Self-assessment and risk management review of internal control are conducted semi-
annually and annually by the Company. Identify key risks based on risk assessment and
take measures for the management of key risks; base on the risks, review critical internal
control activities of key business procedures for high-risk or important business and give
the above a high-priority rating regarding effectiveness assessment and find out the
defects; take measures for implementation, sort out and perfect the internal monitoring
system towards the essential goal of risk control. The internal control system and the risk
management information system are updated at least once a year.
1. CORPORATE GOVERNANCE AND INSIDERS REGISTRATION MANAGEMENT (Continued)
(1) (Continued)
(v) Internal audit function
The Company has established the Audit Department and Risk Control Office. Under the
leadership of the Board of Directors and the supervision of the Audit Committee, the
foregoing two departments are responsible for supervising, examining and evaluating
the implementation of internal risk control of the Company and its subsidiaries, and
coordinating the audit of internal control and other related affairs. The Supervisory
Committee is responsible for supervising the Board of Directors on its establishment
and implementation of establishing and implementing the internal control system. The
management is responsible for the effective operation of internal risk control.
(2) Work related to corporate governance of the Company during the Reporting Period are
as follows:
The Company performed review on its internal control and fulfillment of social obligations for
year 2018 pursuant to the requirement of the “Notice on Proper Preparation of the 2018 Annual
Report by Listed Companies” issue by the SSE. Accordingly, the Company prepared the “Self-
assessment Report of the board of director of the Company on Internal Control for 2018” and
the “Report on Performance of Social Responsibilities for 2018”, both of which were disclosed
after being duly considered and approved at the Board meeting of the Company held on 15
March 2019.
(3) Establishment and implementation of insider information management
The Company had formulated the “Insiders Registration System” in 2010. Upon self-assessment
made by the Company, there was no trading of shares of the Company by insiders based on any
insider information before disclosure of material price sensitive information as at the end of the
Reporting Period.
The Company has established satisfactory procedures to deal with inside information and
satisfactory measures in relation to internal control. The Company has designated relevant
departments to be in charge of the monitoring, managing, registering, disclosing and record-
keeping of inside information on day-to-day basis. The supervisory committee of the Company
is responsible for monitoring the implementation of the system regarding the registration and
management system of the persons in possession of inside information, ensuring that the persons
in possession of inside information are aware of their rights, obligations and legal liabilities,
urging the relevant persons to strictly complying with the duty of confidentiality. The supervisory
committee of the Company is determined to eradicate insider dealings.
(4) Establishment and enhancement of the management system regarding the users of
external information of the Company
The Company had formulated the Management System Regarding the Users of External
Information in 2010, which strictly regulate the external disclosure of information by the
Company and the use of external information on the Company, prevent information from leaking
out and procure fair disclosure of information.
During the Reporting Period, the Company did not violate any requirement of the system.
2. SHAREHOLDERS AND GENERAL MEETINGS OF SHAREHOLDERS
The Company treats all shareholders equally, ensures that they can fully exercise their rights and protects
their legal interests; and the shareholders can request and convene shareholders’ meeting in strict
accordance with the relevant laws and regulations. The Company’s corporate governance structure
is to ensure that all shareholders, especially the minority shareholders, can enjoy equal benefits and
undertake corresponding responsibilities.
Shareholders of the Company shall enjoy the following rights according to the Articles of Association
and the Shareholders Communication Policy of the Company:
(i) Shareholders can convene the general meeting of shareholders on its own initiative, but shall
send out a written notice to the Board, and shall submit the records to the branch of CSRC where
the Company is located and the stock exchange.
(ii) Prior to the announcement of the resolution of the general meeting of shareholders, the
shareholdings of the shareholders convening the general meeting shall not be less than 10%.
Upon the issue of the notice and the announcement of resolution of the general meeting
of shareholders, the shareholders convening the general meeting shall submit the relevant
documentary information to the branch of CSRC where the Company is located and the stock
exchange.
(iii) Shareholders to enjoy the rights of access to information, participation and decision on material
matters as stipulated by law, administrative regulation and the Articles of Association.
(iv) Where the Company convenes an annual general meeting of the shareholders, the shareholders
with 3% or more of the total voting rights of the Company shall be entitled to put forth a new
resolutions in writing to the Company. The Company shall dispatch supplemental notice of the
general meeting within two days after receiving such proposal to announce the contents of such
resolutions. Any matters contained in such resolutions which are within the terms of reference of
the general meeting of the shareholders shall be included in the agenda of the meeting.
In accordance with the Shareholders Communication Policy of the Company, the shareholders of the
Company have the following rights:
(i) If shareholders have any question regarding their shareholding, they should direct their questions
to the Company’s share registrar (H shares) or the designated securities branch (A shares);
(ii) Shareholders and investors may at any time make a request for the Company’s information to the
extent that such information is publicly available;
(iii) The Company shall provide to the shareholders and investors with the designated contact person,
e-mail address and enquiry channels of the Company, so as to facilitate them to make reasonable
enquires on the Company.
Contact Ms. Huang Xuezhen, Ms. Huang Ruimei

E-mail: sec@gybys.com.cn/huangxz@gybys.com.cn/huangrm@gybys.com.cn
Internet website: http://www.gybys.com.cn
The general meetings of shareholders are convened and held in strict compliance with the Rules for
Shareholders’ General Meetings of Listed Companies issued by the CSRC and Rules and Procedures
for Shareholders’ General Meetings of the Company. The Company strictly complies with the relevant
requirements in respect of voting matters and voting procedures, protect the legal interests of the
Company and its shareholders. Accountant and the lawyer will be present at the meeting as witnesses.
The Company encourages all shareholders to attend the meetings and welcome shareholders to speak at
the meetings.
2. SHAREHOLDERS AND GENERAL MEETINGS OF SHAREHOLDERS (Continued)
Information on the general meetings of the Company held during the Reporting Period is as follows:
Newspapers
Session and Resolutions in which the
number of Date of passed resolutions Disclosure
meeting meeting Resolutions or not were published date
First 29 March 2018 (1) By ordinary resolutions: Resolution on the Passed Shanghai Securities 30 March 2018
Extraordinary conformity of the significant transaction News (上海證券
General with the provisions of the relevant laws, 報), Securities Times
Meeting in regulations and policies; Resolution on the (證券時報), China
2018 significant transaction not constituting a Securities Journal (中
connected transaction; Resolution on the 國證券報), Securities
conformity of the significant transaction with Daily (證券日報)
Rule 4 of the Regulations on standardizing
several issues concerning the significant
transactions of listed companies; Resolution on
the implementation of the legal procedures,
compliance, and the validity of the submission
of legal documents regarding the significant
transaction; Resolution on the independence
of the valuer, the reasonableness of the
appraisal assumptions, the relevance between
the appraisal method and the purposes
of the appraisal and the opinions on the
fairness of the appraised value; Resolution
on confirmation of the Audit Report and
the Valuation Report for the significant
transaction; Resolution on the current earnings
per share of the Company will not be diluted
as a result of completion of the transaction in
relation to the significant transaction;
(2) By special resolutions: Resolution on the
significant transaction proposal, the overall
proposal for the significant transaction,
the specific proposal for the significant
transaction, the base date for valuation,
transaction manner and counterparties, the
valuation of the target assets, payment of the
consideration for the acquisition, put options,
the allocation arrangement of the profit and
loss for the target assets from the base date
for valuation to completion date, employees,
compensation scheme for earnings forecast,
validity period of the resolutions; Resolution
on entering into the agreements relevant to
the significant transaction; Resolution on the
Report on the Material Acquisition of Assets
of Guangzhou Baiyunshan Pharmaceutical
Holdings Company Limited and its summary;
Resolution on granting full authority to the
Board to deal with matters concerning the
significant transaction.
Newspapers
Session and Resolutions in which the
number of Date of passed resolutions Disclosure
meeting meeting Resolutions or not were published date
The annual 22 June 2018 (1) By ordinary resolutions: Report of the Board Passed Shanghai Securities 23 June 2018
general for year 2017; Report of the supervisory News (上海證券
meeting in committee of the Company for year 2017; 報), Securities Times
2017 Financial report of the Company for year (證券時報), China
2017; Auditors’ report of the Company for
year 2017; Proposal on profit distribution Securities Journal (中
and dividend payment of the Company for 國證券報), Securities
year 2017; Proposal on the financial and Daily (證券日報)
operational targets and annual budget of
the Company for year 2018; Resolutions on
the emoluments to be paid to the directors
of the Company for year 2018 (all directors);
Resolutions on the emoluments to be paid
to the supervisors of the Company for year
2018 (all supervisors); Resolution on the
amounts of guarantees to be provided by the
Company to secure bank loans for some of
its subsidiaries; Resolution on the application
by the Company for general banking facilities
not exceeding RMB4 billion; Resolution on
the entrusted borrowing and entrusted loans
business between the Company and its
subsidiaries; Resolution on the anticipated
amounts of the ordinary and usual connected
transactions for year 2018; Shareholders’
Return Plan of Guangzhou Baiyunshan
Pharmaceutical Holdings Company Limited for
the three years from 2018 to 2020; Resolution
on changing the usage of land on which
the project of the construction of the Great
Southern TCM research and development
platform will be implemented; Resolution on
the proposed cash management of part of
the temporary idle proceeds from fund raising
of the Company; Resolution on the proposed
cash management of part of the temporary
internal idle funds of the Company and its
subsidiaries; Resolution on the appointment
of Ruihua Certified Public Accountants as
the auditor of the Company for year 2018;
Resolution on the appointment of Ruihua
Certified Public Accountants as the auditor
for the internal control of the Company for
year 2018; Resolution on amendments to the
rules of procedures of the Board of Directors
of the Company; Resolution on amendments
to the rules of procedures of the Supervisory
Committee of the Company; (2) By special
resolutions: Resolution on granting general
mandate to the Board for issuing new shares
of the Company; Resolution on amendments
to Articles of Association; Resolution on
the election of Mr. Li Hong as an executive
director of the Company and the emoluments
to be paid to him for year 2018.
Relationship between the Controlling Shareholder and the Company
GPHL, as the controlling shareholder of the Company, exercises its power and accepts its obligations in
accordance with the laws, and has not acted beyond the shareholders’ meetings to interfere directly or
indirectly in the Company’s operations. The Company and GPHL have been working separately in areas
relating to assets, business, organization, finance and human resources and are independent of each
other. The Board, the Supervisory Committee and the internal departments of the Company are able to
operate independently.
3. BOARD OF DIRECTORS
(1) Composition
The Board is the core decision-making body entrusted by general meeting of the shareholders
to be in charge of the operation and management of the Company’s assets. The Board is
accountable to the shareholders. The management is responsible for the Company’s daily
operations and daily administration management works. There is no financial, business, family or
other material relationships among members of the Board.
The present Board is the seventh session since the establishment of the Company, and is
comprised of 11 members, including Mr. Li Chuyuan(chairperson), Mr. Chen Mao (vice
chairperson), Ms. Liu Juyan, Ms. Cheng Ning, Mr. Ni Yidong, Mr. Li Hong and Mr. Wu Changhai
as executive directors, and Mr. Chu Xiaoping, Mr. Jiang Wenqi, Mr. WONG Hin Wing and
Ms. Wang Weihong as independent non-executive directors. Mr. Li Hong has a term of office
commenced from 22 June 2018 up to the date on which members of the new session of the
Board are elected, each of other directors has a term of office commenced from 23 June 2017 up
to the date on which the new session of the Board is elected.
The Board shall exercise the following powers:
(A) convention of general meetings of shareholders, and report to the general meetings;
(B) implementation of the resolutions of the general meeting;
(C) formulation of the business plan and investment scheme of the Company;
(D) formulation of the annual financial budget and financial accounting policy of the
Company;
(E) formulation of the profit distribution policy and loss recovery policy of the Company;
(F) formulation of the policy of increase or reduction of registered capital and the policy of
issue of corporate bonds of the Company;
(G) drafting of the policies of material corporate acquisition, repurchase of the shares of the
Company, or the proposals on merger, separation or dissolution of the Company;
(H) making decision on the establishment of internal management system in the Company;
(I) employment or dismissal of the general manager of the Company; based on the
nominations given by the general manager, employ or dismiss the vice general managers,
financial controller, other senior management personnel and secretary to the Board of the
Company; and decide on their remuneration;
3. BOARD OF DIRECTORS (Continued)
(1) Composition (Continued)
(J) formulation of the basic management system of the Company;
(K) formulation of the proposal on amendments to the Articles of Association;
(L) making decision on external guarantee which involves an amount of more than 10% (or
10%) of the net assets in the consolidated financial statements of the most recent fiscal
year of the Company;
(M) making decisions on matters such as external investment, acquisition and sale of assets,
mortgaged assets, external guarantee, entrusted financial management and connected
transaction, within the scope of authorization by the general meeting of shareholders;
(N) management of disclosure of information of the Company;
(O) proposing to the general meeting of shareholders on appointment or replacement of

accounting firm responsible for auditing for the Company;
(P) receiving the work report of the managers of the Company and checking the work of the
managers;
(Q) other powers granted by the Articles of Association and the general meetings of
shareholders.
The Board shall exercise the above powers by holding meetings of the Board to consider the
relevant matters and can implement only after the passing of the Board resolutions.
Directors shall be elected or replaced by general meeting of shareholders, at which a cumulative

voting system is adopted for the election of directors. Directors are eligible for re-election upon
expiration of their terms of office. All independent non-executive directors are independent
persons, and are not connected with the Company and its substantial shareholders. Their terms
of office shall not exceed six years.
The roles of chairperson and general manager of the Company are performed by separate
persons with clear division of responsibilities. The Board is presided over by the chairperson,
who is in charge of the daily business of the Board and the examination of the implementation
of the resolutions passed at Board meetings. The general manager works under the leadership
of the Board. The principal responsibilities of the general manager include management of the
Company’s daily operations and implementation of the resolutions passed at the Board. The
chairperson of the Board is Mr. Li Chuyuan and the general manager is Mr. Li Hong.
Members of the Board have different industry backgrounds, having expertise and extensive
experience in areas such as business management, accounting, finance, pharmaceutics, law and
investment planning.
The Company regularly arranges every Director to participate in the professional trainings
organized by the CSRC and the stock exchanges on which the Company are listed, and the
certificate of qualification for training or certificate recognized by the relevant authorities were
given. The secretary to the Board also participates in the relevant professional trainings of not less
than 15 hours each year. All Directors had provided the secretary to the Board with records on
their trainings during the Reporting Period.
(1) Composition (Continued)
All the Directors can obtain from the secretary of the Board and the secretariat to the Board
timely relevant information and updates of the statutory and regulatory regulations that directors
of listed companies must abide by and that are related to their continuing obligations in order to
ensure that the Directors understand their duties and that the procedures of Board meetings are
implemented and complied with appropriately. The Directors and the special committees of the
Board are both entitled within the scope of their powers to engage the services of independent
professional institutions for performing their duties or for the business operation when needed.
The Company shall bear the reasonable cost incurred thereof.
The board of directors shall perform the following functions of corporate governance
responsibilities:
(A) formulate and review the Company’s corporate governance policies and procedures;
(B) review and monitor the personnel training and continuing professional development of the
directors and senior management;
(C) review and monitor the Company’s compliance with the policies and procedures
prescribed by laws and regulations;
(D) formulate, review and monitor the ethics code of conduct and compliance manual
applicable to employees and Directors (if any); and
(E) review the Company’s compliance with the corporate governance rules and the disclosure
within the corporate governance report.
(2) Board Meetings
In 2018, 13 Board meetings were held (of which 5 were physical meetings and 8 were meetings
by way of written resolutions) to discuss the matters related to the transfer of GPHL’s “Wang
Lao Ji” series of trademarks to the Company as well as the investment projects, connected
transactions and financial matters of the Group. The Board meetings had effective discussion and
can make decisions which are serious and cautious.
(2) Board Meetings (Continued)
The attendance of Directors at Board meetings and shareholders’ meetings during the Reporting
Period is set out below:
Attendance of directors at
Participation of directors at Board meetings Shareholders’ meetings
Number of Number of Failure to Number
Number of meetings meetings participate of general Number of
Whether an Number of meetings participated participated by two meetings meetings that general
independent meetings that participated by way of appointing a Number in person should have meetings
Directors director should attend in person communication representative of absence consecutively participated participated
(note)
Li Chuyuan No 13 13 8 0 0 No 2 2
Chen Mao No 13 12 8 1 0 No 2 1
Liu Juyan No 13 13 8 0 0 No 2 1
Cheng Ning No 13 13 8 0 0 No 2 2
Ni Yidong No 13 12 8 1 0 No 2 0
Li Hong No 8 8 5 0 0 No 1 1
Wu Changhai No 13 13 9 0 0 No 1 1
Chu Xiaoping Yes 13 12 11 1 0 No 2 1
Jiang Wenqi Yes 13 12 10 1 0 No 2 2
WONG Hin Wing Yes 13 13 10 0 0 No 2 1
Wang Weihong Yes 13 13 10 0 0 No 2 1
Notes:
A. Participation by way of communication deemed participation in person.
B. Mr. Li Hong was elected as an executive director of the seventh session of the Board on 22 June 2018.
(3) Independent non-executive directors
Currently, the Company has 4 independent non-executive directors, representing more than
1/3 of the total members of the Board. All the independent non-executive directors of the
Company are familiar with the rights and obligations of the directors and independent non-
executive directors of listed companies. During the Reporting Period, the independent non-
executive directors strictly compiled with the provisions in the Articles of Association, “Rules of
Procedures of the Board”, “Independent Directors System” and “the annual reporting system
of Independent Directors”, faithfully and diligently carried out the duties of independent non-
executive directors, carefully, seriously and appropriately exercised the rights of independent non-
executive directors, proactively and seriously attended Board meetings and general meetings
of shareholders and offered their experience and strengths to the maximum extent. They had
done a lot of work on improving the Company’s corporate governance and material decision-
making, and had expressed impartial and objective opinions on relevant matters, thus effectively
safeguarding the interests of the shareholders as a whole. All of the 4 independent non-executive
directors of the Company were members of the special committees formed under the Board.
During the Reporting Period, the independent non-executive directors of the Company expressed
their independent views on the relevant transactions made during the Reporting Period and
discharged their duties as independent non-executive directors seriously.
During the Reporting Period, the independent non-executive directors of the Company expressed
no dissenting views to the Board resolutions and other matters not subject to the consideration of
the Board.
The Board confirmed the receipt from each of the independent non-executive directors a
confirmation letter in regards to his independence pursuant to Rule 3.13 of the Listing Rules of
HKEx. The Board considered that the existing independent non-executive directors complied with
the relevant guidance set out in Rule 3.13 of the Listing Rules of HKEx and still considered the
existing independent non-executive directors to be independent.
Pursuant to the “Notice on preparation of the 2018 Annual Report by Listed Companies” issued
by SSE on 28 December 2018, the independent non-executive directors studied the relevant
requirements set out in the Notice seriously. The Company reported to the independent non-
executive directors on production and operation issues and the progress of major events,
and submitted an action plan in relation to the preparation of the 2018 annual report and
auditing work and relevant information. After completion of the preliminary auditing work by
the Company’s accountants, the independent non-executive directors communicated with the
auditors on issues related to the auditing process.
(4) Loan or guarantee for loan granted to Directors
During the Reporting Period, the Group had not made any loan or provided any guarantee
for any loan, directly or indirectly, to the directors, supervisors and senior management of the
Company, the Company’s controlling shareholder or their respective connected persons.
4. COMMITTEES OF THE BOARD
(1) Audit Committee
In August 1999, the Company established the Audit Committee. Its principal responsibilities
include: to review and monitor the quality and procedure of the Group’s financial reporting; to
review the completeness and effectiveness of the Company’s internal control system; to consider
the appointment of independent auditors and to co-ordinate and to review the efficiency and
quality of their work.
The members of the Audit Committee of the seventh session of the Board comprised Mr. WONG
Hin Wing (chairman of the Audit Committee), Mr. Chu Xiaoping, Mr. Jiang Wenqi and Ms. Wang
Weihong. All four of them are independent non-executive Directors and are qualified under the
relevant requirements. The term of office of each member commenced from 23 June 2017 up to
the date on which members of the new session of the Board are elected.
Major tasks accomplished by the Audit Committee in year 2018 including:
(A) held four meetings in 2018 and each of the members of the committee attended all the
meetings, in which the members reviewed the 2017 Annual Report, 2018 Interim Report
and financial reports of the Group as well as the recommendations on management issued
by external auditors and the respective response by the Company’s management.
(B) reviewed the accounting policies adopted by the Group and the relevant issues regarding
accounting practice;
(C) reviewed the Company’s internal control evaluation report for 2017 and audit risk control
work plan for 2018.;
(D) advised the Board regarding the re-appointment of auditing firm for the Year;
(E) advised the Company on major events of the Company or reminding the management of
relevant risks and reviewed the effectiveness of risk management and internal monitoring
system.
4. COMMITTEES OF THE BOARD (Continued)
(1) Audit Committee (Continued)
The work on the annual audit for 2018 and relevant jobs regarding the preparation of the Annual
Report are as follows:
In accordance with “the Notice on preparation of the 2018 Annual Report in an orderly
manner by Listed Companies” issued by the SSE on 28 December 2018, all members of the
Audit Committee reviewed the relevant requirements seriously. The Audit Committee actively
coordinate with the Company in respect of the audit for 2018 and the preparation of the annual
report for 2018 in accordance with the Rules on the Annual Report of the Audit Committee,
including:
1) The Committee negotiated with the auditors of the Company and the Company’s Finance
Department regarding the time line for audit and the relevant arrangements and set out
the “Action plan for the Preparation of 2018 Annual Report” and reviewed the audit plan
submitted by the auditors.
2) On 5 March 2019, the Audit Committee reviewed the draft of the financial reports
prepared by the Company and issued written recommendations thereon.
3) After the auditors’ completion of the preliminary auditing work, the Audit Committee
reviewed the financial reports again and issued written recommendations regarding the
audit work. The Audit Committee believed that the 2018 financial reports of the Company
reflected the state of affairs of the Company truly, accurately and fairly, and agreed to
submit the reports to the Board for approval.
4) On 15 March 2019, the Audit Committee convened the second meeting in 2019 and
considered and passed the 2018 Annual Report and its summary and the Company’s 2018
Financial Report. At the same time, the Audit Committee finalized its evaluation on the
audit work of the auditor and believes that the auditor has carried out the audit work for
the Company with cautious, independent and objective standards, and managed to abide
by their professional work ethics, adhering the auditing regulations, fulfilled their auditing
responsibilities and submitted the auditors’ report in time, as well as having issued fair
and unbiased management recommendations to the management of the Company, and
completed the audit work with satisfactory performance.
(2) Strategic Development and Investment Committee
In February 2001, the Company established the investment management committee, which was
renamed as strategic development and investment committee as approved at the fourth Board
meeting of the fourth session of the Board. Its principal responsibilities are to research and issue
recommendations on the long-term strategic development and significant investment decisions
of the Company and, with authorization from the Board, to examine and approve investment
projects intended to be implemented by the Company.
The strategic development and investment committee of the seventh session of the Board
comprised Mr. Li Chuyuan (chairperson of the committee), Mr. Chen Mao, Ms. Liu Juyan, Mr.
Chu Xiaoping and Ms. Wang Weihong. The term of office of the aforementioned committee
members commenced from the date of their appointments on 23 June 2017 up to the date on
which members of the new session of the Board are elected.
During the Reporting Period, the strategic development and investment committee had held 7
meetings at which, among other things, acquisitions and establishments of subsidiaries by the
Company’s subsidiaries, contribution of capital to the subsidiaries, the entering into trademarks
license agreement(s) and trademarks custody supplemental agreement(s) among the Company,
GPHL and the subsidiaries of the Company were considered and approved.
(3) Nomination and Remuneration Committee
In February 2002, the Company established the Remuneration Committee, which was renamed
as Nomination and Remuneration Committee as approved at the fourth Board meeting of
the fourth session of the Board. Its principal responsibilities are to study and examine the
remuneration policies and proposals of directors and senior management, to research on the
selection standards and procedures of directors, general managers and other senior management
and to provide recommendations, and to extensively look for qualified persons to be directors
and senior management, to conduct examination on them and to provide recommendations,
review the remuneration of directors and senior management and make recommendations to the
Board.
The Nomination and Remuneration Committee of the seventh session of the Board comprised
Mr. Chu Xiaoping (chairperson of the committee), Mr. Ni Yidong, Mr. Wu Changhai, Mr. Jiang
Wenqi and Mr. WONG Hin Wing. The term of office of the aforementioned committee members
commenced from the date of their appointments on 23 June 2017 up to the date on which
members of the new session of the Board are elected.
During the Reporting Period, the Nomination and Remuneration Committee held four meetings
to review the proposals on the emoluments of directors, supervisors and senior management of
the Company for year 2017, the proposals for the emoluments of the directors of the Company
for year 2018, the proposal for the nomination of director candidates for the seventh session
of the Board, the administrative measures for the emoluments and performance appraisal of
senior management of the Company and the cashing proposal for the senior management’s
emoluments in 2018. All of the committee members had attended the meetings.
The Company has adopted the CG Code and the Nomination and Remuneration Committee has
been appointed to make recommendations regarding remunerations of executive directors and
senior management of the Company to the Board.
The Company has formulated the Diversified Policy for the Board Members, which was approved
at the Board meeting held on 26 September 2013 and has been implemented. Pursuant to the
Policy, the Company seeks to achieve Board diversity through the consideration of a number of
factors, including but not limited to gender, age, cultural and education background, ethnicity,
professional experience, skills, knowledge and length of service. The Board will consider to set
measurable objectives to implement the Policy and review such objectives from time to time to
ensure their appropriateness and ascertain the progress made towards achieving those objectives.
(4) Budget Committee
In October 2007, the Company established the Budget Committee as approved at the 4th
meeting of the fourth session of the Board. Its principal responsibilities are to provide guidance
on the formulation of the budgeting plans and business objectives of the Company for the year
and to supervise and inspect their implementations.
The Budget Committee of the seventh session of the Board comprised Ms. Wang Weihong (the
chairperson of the Committee), Ms. Cheng Ning, Mr. Wu Changhai, Mr. Jiang Wenqi and Mr.
WONG Hin Wing. The term of office of the aforementioned committee members commenced
from the date of their appointments on 23 June 2017 up to the date on which members of the
new session of the Board are elected.
During the Reporting Period, the Budget Committee held one meeting. The proposals on the
annual business objectives and budget for year 2018 were approved at the meeting. All of the
committee members had attended the meetings.
(5) The special committees of the board did not give important opinions or suggestions
during the Reporting Period when performing their duties.
5. SUPERVISORY COMMITTEE
(1) During the Reporting Period, the Supervisory Committee monitored the procedures for convening
shareholders’ meetings and Board meetings and the resolutions proposed to be considered
thereat, as well as the implementation by the Board of the resolutions passed at the shareholders’
meetings and has no dissenting view on any reports and proposals submitted by the Board
at shareholders’ meetings. The Supervisory Committee considered that during the Reporting
Period the operations conducted by the Company were in compliance with the Companies
Law, the Securities Law, the respective Listing Rules governing the securities exchanges in the
PRC and in Hong Kong, the Articles of Association and other relevant laws and regulations, and
the Company has implemented the resolutions of the shareholders’ meetings of the Company
diligently, continued to enhance the internal management and internal control systems of the
Company and has established a good internal management system. The Company’s directors
and senior management have not committed any acts in breach of the rules and regulations,
the Articles of Association, nor have they engaged in any acts involving the infringement of the
Company’s interest or infringement of shareholder’s interests.
(2) During the Reporting Period, the Supervisory Committee held seven meetings, all supervisors had
attended the meetings.
(3) The Supervisory Committee has carefully reviewed the financial statements and other financial
information of the Company during the Reporting Period, and considered that the Company’s
financial statements were fairly presented, the auditing and financial management were in line
with the relevant regulations and had not discovered any issues. The auditor issued their standard
and unqualified auditor’s reports after auditing the accounts of the Group and the Company
for year 2018, which reflected an objective, true and fair view of the financial status and the
operations results of the Company.
(4) The Supervisory Committee monitored and inspected the connected transactions of the
Company, and was of the opinion that: the connected transactions of the Company satisfied
the development strategy and actual needs of the Company; the connected transactions were
reasonable and necessary; the decision-making procedures in respect of connected transactions
complied with the relevant laws and regulations and the provisions of the Articles of Association;
and the interests of the Company and its minority shareholders were not prejudiced.
5. SUPERVISORY COMMITTEE (Continued)
(5) The Supervisory Committee expressed no dissent to the matters subject to their supervision
during the Reporting Period.
6. SEPARATION OF BUSINESS, HUMAN RESOURCES, ASSETS, ORGANIZATION AND FINANCIAL

ARRANGEMENT FROM THE CONTROLLING SHAREHOLDER
(1) Separation of business: the Company operates with its own autonomy and integrated business
structure and is independent from its controlling shareholder.
(2) Human resources: the Company maintains independence in the areas of staffing, personnel and
payroll management.
(3) Assets: the Group has an independent production system, a supplementary production system
and related facilities. It also has its own independent purchases and sales systems. The Company
itself owned 1,260 registered trademarks which are all within validity periods.
(4) Independence of organization: there was no combustion of operation return the Company
and its controller shareholder. The Company has its own independent and comprehensive
organizational structure. The Board, the Supervisory Committee and other departments
operate independently. Further, the Company has independent decision-making mechanisms
and complete production units. No supervisory or reporting relationships existed between the
functional departments of the Company and the controlling shareholder of the Company.
(5) Finance: the Company has established an independent finance department, an independent
accounting system and an independent financial management policy. The Company has
maintained separate bank accounts and paid tax independently.
7. THE ESTABLISHMENT AND IMPLEMENTATION OF ASSESSMENT MECHANISM AND

INCENTIVE MECHANISM FOR THE SENIOR MANAGEMENT OFFICERS DURING THE
REPORTING PERIOD
The Company has established the performance assessment mechanism in respect of the senior
management officers and thus can assess the performance of the senior management officers according
to the formulated assessment scheme on an annual basis. At present, the Company is actively exploring
relevant proposals regarding the incentive mechanisms, and will facilitate share incentive plans at the
appropriate time so as to improve and complete the mechanism and to mobilize the enthusiasm and
initiatives of the management officers at the medium and senior levels and business backbones to the
greatest extent, and to arouse their creativity for purposes of generating greater return to the Company
and its shareholders.
8. WHETHER TO DISCLOSE THE SELF-ASSESSMENT ON INTERNAL CONTROL
The Board performed a self-assessment on internal control for the Year and formulated the Self-
assessment Report on Internal Control (full version is available on the website of the SSE) in accordance
with the requirements of the “Notice on preparation of the 2018 Annual Report in an orderly manner by
Listed Companies” issued by SSE on 28 December 2018.
Explanation on significant defects in internal control that were found during the Reporting Period
9. AUDIT REPORT ON THE INTERNAL CONTROL
(1) The assessment opinion of the audit firm: Ruihua Certified Public Accountants LLP considered
that as at 31 December 2018, the Group has maintained effective internal control in its financial
reporting in all material aspects pursuant to the “Guidelines for Internal Control Standards” and
relevant regulations.
(2) Ruihua Certified Public Accountants LLP has verified and evaluated the Group’s internal control
for the Year (full version is available on the website of the SSE).
Whether to disclose the audit report on internal control: Yes
10. DIRECTORS’ RESPONSIBILITY IN PREPARING THE FINANCIAL STATEMENTS
The Directors acknowledge that it is their responsibilities to prepare the financial statements which
give a true and fair view of the state of affairs of the Group and of the loss and cash flows position of
the Group for the Year and which are in compliance with statutory requirements and other regulatory
requirements. As at 31 December 2018, the Board was not aware of any material misstatement or
uncertainties that might cast doubt on the Group’s financial position or ability to continue as a going
concern. The Board endeavors to ensure a balanced, clear and understandable assessment of the
Group’s performance, position and prospects in financial reporting. The statement of the Auditors
regarding their reporting responsibility for the financial statements is set out in the Independent
Auditors’ Report on pages 177 to 184 of this annual report. There are no material uncertainties relating
to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern.
11. OTHERS
(1) Other stakeholders
The Company respected and safeguarded the interests of the stakeholders and realized the
balance of interests among the shareholders, employees and the society. At the same time, the
Company also pays attention on, among other things environmental protection, public welfare
and to mutually promote the sustainable and sound development of the Company in economic
activities.
(2) Information on the disclosure and management of relationship with investors
The Company delegated the secretary to the Board to be responsible for handling the
Company’s information disclosure, receive shareholders and investors and answering enquiries
from shareholders and investors and responding to correspondence from shareholders in a
timely manner. The Company has designated Shanghai Securities News, Securities Times,
China Securities Journal and China Securities News in the PRC as newspapers for publishing
the Company’s information and disclose such at the websites designated by the SSE and the
HKEx and the Company’s website. The Company continues to disclose information in a truthful,
accurate, comprehensive and timely manner in strict compliance with the relevant rules and
regulations and the Code of Information Disclosure of the Company, and make preserve
confidentiality before disclosure. The Company also ensures that all shareholders have fair and
equitable access to information relating to the Company.
Relevant Information of Company’s Bonds
THE COMPANY DID NOT HAVE ANY BONDS DURING THE REPORTING PERIOD.
Auditor’s Report
䗮䆃ഄഔ˖࣫ҀᏖϰජऎ∌ᅮ䮼㽓Ⓖ⊇䏃 8 ো䰶 7 োὐЁ⍋ഄѻᑓഎ㽓ศ 9 ሖ
Postal Address:5-11/F,West Tower of China Overseas Property Plaza, Building 7,NO.8,Yongdingmen
Xibinhe Road, Dongcheng District, Beijing
䚂ᬓ㓪ⷕ˄Post Code˅˖100077
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RHSZ [2019] No. 44010002
To the Shareholders of Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd., :
1. OPINION
We have audited the financial statements of Guangzhou Baiyunshan Pharmaceutical Holdings Co.,
Ltd. (hereafter, the “Company”) and its subsidiaries (collectively, the “Group”), which comprise the
consolidated and the company’s balance sheets as at 31 December 2018, the consolidated and the
company’s income statements, the consolidated and the company’s statements of cash flows and the
consolidated and the company’s statements of changes in shareholders’ equity for the year then ended,
and notes to the financial statements.
In our opinion, the accompanying financial statements have been prepared in accordance with the
Accounting Standards for Business Enterprises in all material aspects and present fairly the consolidated
and the Company’s financial position as at 31 December 2018 and the consolidated and the Company’s
financial performance and cash flows for the year then ended.
2. BASIS FOR OPINION
We conducted our audit in accordance with China Standards on Auditing for Certified Public
Accountants. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are independent of
the company in accordance with China Code of Ethics for Certified Public Accountants (“the Code”) and
we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
3. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. We have determined the following matters as key audit
matters that need to be communicated in the audit report.
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3. KEY AUDIT MATTERS (Continued)
(1) Business combination not involving enterprise under the common control
a. Description
Please refer to Notes IV. 4 Accounting measurements for business combination under or
not under common control and Notes VII. 1 Business combination not involving enterprise
under the common control for further information.
As on 31 May 2018, the equity-holding ratio of Baiyunshan in Guangzhou Pharmaceuticals

Corporation (hereinafter, the “GP Corp.”), which was a joint venture originally, reached
80.00% and gained the right to control after purchasing 30% equity interests of GP Corp.
This transaction forms business combination not involving enterprise under the common
control. As at the acquisition date, the difference between the cost paid by Baiyunshan for
the business combination and the fair value of the net identifiable assets of the GP Corp.
acquired in the business combination was recognized as goodwill of RMB932 million. The
50% equity interests of GP Corp. originally held by Baiyunshan was re-measured according
to the fair value at the acquisition date and was recognized as income from investment of
RMB826 million.
As on 11 September 2018, Baiyunshan acquired 48.0465% equity interests of Guangzhou

Wanglaoji Pharmaceutical Co., Ltd. (hereinafter referred to as “Wang Lao Ji”), the original
joint venture, according to the arbitration institution’s and the court’s rulings. After the
acquisition, the equity-holding ratio of Baiyunshan in Wang Lao Ji reached 96.093%.
Baiyunshan gained the right to control, which formed a business combination not under
the common control. As at the acquisition date, the difference between the business
combination cost of Baiyunshan and the fair value of the net identifiable assets of Wang
Lao Ji acquired in the business combination was recognized as non-operating income
of RMB126 million. The 48.0465% equity interests of Wang Lao Ji originally held by
Baiyunshan was re-measured according to the fair value at the acquisition date and was
recognized as income from investment of RMB45 million.
The two transactions concerning business combination not involving enterprise under the
common control mentioned above have significant impacts on the profit in the financial
statements for the current year. Due to the fact that the identification of the acquisition
date, the determination of the combination cost, the income from investment through
re-measurement in the equity originally held at fair value, the determination of the fair
value on the acquisition date, the calculation of the goodwill, the analysis of the control
rights and the accounting treatment for the combination all involve the management’s
estimation and judgment, the matter described above has been identified as a key audit
matter.
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(1) Business combination not involving enterprise under the common control (Continued)
b. How our audit addressed the key audit matter
① By checking the conditions for the entry into force of the investment agreement,
the resolutions, relevant legal documents, and the payment conditions of the
combination price, etc., we performed assessment on whether the judgement of
Baiyunshan on the evaluation of the date from which Baiyunshan actually controls
the acquirer’s business decision and enjoys the corresponding gains and carries the
corresponding risks is appropriate or not.
② We assessed the objectivity and professional competence of unrelated appraisal

agencies engaged by the management.
③ We reviewed the rationality of the methods, assumptions and estimates adopted in

the fair value assessment of the identifiable assets and liabilities of the acquirer on
the acquisition date.
④ We performed reasonable test on the fair value of the equity at the acquisition date
which the acquiree held before the acquisition date.
⑤ We reviewed whether the calculation of goodwill adopted by Baiyunshan and

the accounting treatment of business combination are in compliance with the
requirements of the Accounting Standards for Business Enterprises.
⑥ We reviewed the adequacy of the above business combination disclosed in the

financial statements.
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(2) Goodwill Impairment
a. Description
Please refer to Notes IV. 21 Long-term Assets Impairment and Notes VI. 15 Goodwill for
further information.
As at 31 May 2018, Baiyunshan acquired 30.00% shareholding of Guangzhou

Pharmaceuticals Corporation (hereinafter, the “GP Corp.”), which forms business
combination not involving enterprise under the common control. As at the acquisition
date, the difference between the cost paid by Baiyunshan for the business combination
and the fair value of the net identifiable assets of the acquiree acquired in the business
combination was recognized as goodwill of RMB932 million.
In recent years, due to the operating environment for the pharmaceutical companies and
the changes in national medical policies, the growth rate of the sales of pharmaceutical
companies is declining, and the goodwill mentioned above has risks of impairment.
The management considers the GP Corp. as an independent cash-generating unit and

engaged an independent appraiser to evaluate the fair value of the GP Corp. in order to
assist the management in the impairment test of the goodwill of GP Corp. The impairment
assessment involves the determination of valuation parameters such as the discount rate
and the assumptions about the operating and financial conditions for the coming years,
including the revenue growth rates and gross profit rates for the coming years.
Due to that the goodwill impairment of GP Corp. has significant impacts on the financial
statements, and the reasonableness of the above judgments and assumptions has
significant impacts on the results of the goodwill impairment test, the matter described
above has been identified as a key audit matter.
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(2) Goodwill Impairment (Continued)
b. How our audit addressed the Key Audit Matter
① We gained an understanding of, and assessed the design and operational

effectiveness of key internal controls over goodwill.
② We gained an understanding of the completion of the acquiree’s performance

forecast for the goodwill forming through business combination under common
control.
③ We discussed with the management on the method of goodwill impairment

test, including the asset group or asset group portfolio related to goodwill, the
rationality of the assumptions adopted in the future income forecast and cash flow
discount rate for each asset group or asset group portfolio, and the judgment and
evaluation of the profitability of each asset group or asset group portfolio.
④ We assessed the objectivity, independence and professional competence of

valuation experts engaged by the management.
⑤ We obtained the valuation report on goodwill impairment testing, communicated

with the valuation experts and assessed the reasonableness of the valuation
method and underlying assumptions adopted in the impairment test of goodwill as
well as the appropriateness of the valuation method.
⑥ With the assistance of our internal valuation experts, we assessed the

appropriateness of the valuation method adopted by the management as well as
the reasonableness of the key assumptions and judgements used in the valuation of
goodwill. We also reviewed the calculation and the results.
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4. OTHER INFORMATION
The Management of Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. is responsible for the
other information. The other information comprises the information included in the 2018 annual report,
but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
5. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Management of Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. (hereinafter referred to
as “the Management”) is responsible for the preparation of the financial statements that give a true and
fair view in accordance with Accounting Standard for Business Enterprises, and designing, implementing
and maintaining internal control that is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
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6. AUDITOR’S RESPONSIBILITY
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with the auditing standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
As part of an audit in accordance with the auditing standards, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
1) Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
2) Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
4) Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company’s ability to continue as
a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
5) Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
6) Obtain adequate and appropriate audit evidence on the financial information of entities or
business activities of the company to express an opinion on it. We are responsible for guiding,
supervising and executing group audits. We take full responsibility for the audit opinion.
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6. AUDITOR’S RESPONSIBILITY (Continued)
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
Ruihua Certified Public Accountants Chinese Certified Public Accountant

(Special General Partnership) (The engagement partner on the audit):
Xiaojuan He
Beijing, China Chinese Certified Public Accountant:

Jing Wen
15 March 2019
English translation for reference only. Should there be any inconsistency between the Chinese and English
versions, the Chinese version shall prevail.

For the year ended 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
(English Translation for Reference Only)
Item Notes 31 December 2018 1 January 2018 31 December 2017
Current assets:
Cash at bank and on hand VI.1 16,114,883,673.51 11,697,218,882.84 11,697,218,882.84
Financial assets held for trading
Financial assets measured at fair
value through profit or loss
for the current period 4,875,057.73
Derivative financial assets
accounts receivable VI.2 13,653,056,156.35 2,816,424,481.59 2,816,424,481.59
Including: Notes receivable 2,780,597,684.01 1,702,655,475.08 1,702,655,475.08
Accounts receivable 10,872,458,472.34 1,113,769,006.51 1,113,769,006.51
Advances to suppliers VI.3 837,808,116.68 256,571,758.01 256,571,758.01
Other receivables VI.4 1,056,551,186.68 762,257,361.98 762,257,361.98
Including: Interests receivable 1,367,876.63
Dividends receivable 40,036,044.47 552,938,523.45 552,938,523.45
Inventories VI.5 9,231,739,097.84 3,700,222,896.01 3,700,222,896.01
Contract assets
Assets held for sale
Current portion of
non-current assets
Other current assets VI.6 2,137,248,054.33 2,266,983,406.82 2,266,983,406.82
Total current assets 43,031,286,285.39 21,499,678,787.25 21,504,553,844.98
Non-current assets:
Debt investments
Available-for-sale financial assets 1,038,859,674.96
Other debt investments
Hold-to-maturity investments
Long-term receivables
Long-term equity investments VI.7 1,759,958,035.39 2,008,481,257.05 2,008,481,257.05
Other equity instrument
investments VI.8 84,897,870.89 62,686,231.77
Other non-current financial assets VI.9 226,938,456.16 975,856,856.18
Investment properties VI.10 228,084,499.83 217,675,779.38 217,675,779.38
Fixed assets VI.11 3,165,746,536.73 2,082,244,551.64 2,082,244,551.64
Construction in progress VI.12 480,305,723.50 284,672,127.45 284,672,127.45
Bearer biological assets
Oil and gas assets
Intangible assets VI.13 1,013,353,424.62 728,009,270.29 728,009,270.29
Development expenditure VI.14 800,000.00 800,000.00
Goodwill VI.15 825,573,066.90 11,499,562.74 11,499,562.74
Long-term prepaid expenses VI.16 94,315,140.82 49,066,645.52 49,066,645.52
Deferred tax assets VI.17 569,144,829.25 389,629,486.02 388,850,739.31
Other non-current assets VI.18 2,580,000.00
Total non-current assets 8,450,897,584.09 6,810,621,768.04 6,810,159,608.34
Total Assets 51,482,183,869.48 28,310,300,555.29 28,314,713,453.32


Current liabilities:
Short-term borrowings VI.20 5,905,703,286.10 11,500,000.00 11,500,000.00
Financial liabilities held for trading
Financial liabilities measured at
fair value through profit or
loss for the current period
Derivative financial liabilities
Notes payable and
accounts payable VI.21 11,969,454,162.81 3,054,427,081.10 3,054,427,081.10
Advances from customers 1,888,892,476.97
Employee benefits payable VI.22 753,034,630.86 631,170,810.62 631,170,810.62
Taxes payable VI.23 963,543,253.64 480,916,539.41 206,462,076.94
Other payables VI.24 3,466,357,353.39 2,445,094,461.69 2,445,094,461.69
Including: Interests payable 41,637,538.72 253,966.40 253,966.40
Dividends payable 65,917,238.98 45,446,017.79 45,446,017.79
Contract liabilities VI.25 3,686,647,223.24 1,614,438,014.50
Liabilities held for sale
Current portion of
non-current liabilities VI.26 204,024,196.93 31,307,337.23 31,307,337.23
Other current liabilities
Total current liabilities 26,948,764,106.97 8,268,854,244.55 8,268,854,244.55
Non-current liabilities:
Long-term borrowings VI.27 413,553,706.06
Bonds payable
Including: Preferred stock
Perpetual bond
Long-term payables VI.28 135,795,848.74 35,126,665.12 35,126,665.12
Long-term employee
benefits payable VI.29 325,325.54 326,532.02 326,532.02
Provisions VI.30 49,601,312.48 55,348,585.32 55,348,585.32
Deferred income VI.31 490,423,604.73 526,890,368.97 526,890,368.97
Deferred tax liabilities 249,762,210.96 114,788,264.17 114,788,264.17
Other non-current liabilities VI.32 50,225,000.00 50,225,000.00 50,225,000.00
Total non-current liabilities 1,389,687,008.51 782,705,415.60 782,705,415.60
Total Liabilities 28,338,451,115.48 9,051,559,660.15 9,051,559,660.15


Share capital VI.33 1,625,790,949.00 1,625,790,949.00 1,625,790,949.00
Other equity instruments
Perpetual bond
Capital surplus VI.34 9,865,084,049.39 9,875,177,958.43 9,875,177,958.43
Less: Treasury shares
Other comprehensive income VI.35 (477,139.10) (6,818,831.78) (70,206,938.27)
Special reserve
Surplus reserve VI.36 1,368,735,157.63 1,154,762,193.41 1,154,762,193.41
General risk provisio
Undistributed profits VI.37 8,825,776,191.86 6,218,195,404.57 6,285,996,409.09
Total equity attributable to

shareholders of the
parent company 21,684,909,208.78 18,867,107,673.63 18,871,520,571.66
Minority interest VI.38 1,458,823,545.22 391,633,221.51 391,633,221.51
Total Shareholders’ Equity 23,143,732,754.00 19,258,740,895.14 19,263,153,793.17
Total Liabilities and

Shareholders’ Equity 51,482,183,869.48 28,310,300,555.29 28,314,713,453.32
Legal representative: Principal in charge of accounting: Head of accounting department:

Li Chuyuan Li Hong Yao Zhizhi

Item Notes 2018 2017
I. Total operating income 42,233,838,051.12 20,954,225,189.53

Including: operating income VI.39 42,233,838,051.12 20,954,225,189.53
II. Total operating costs 39,981,592,391.48 18,942,241,683.16

Including: Operating cost VI.39 32,164,391,714.16 13,063,229,348.28
Taxes and surcharges VI.40 262,959,874.17 204,088,804.03
Selling and distribution expenses VI.41 5,056,820,914.13 4,285,949,353.46
General and administrative expenses VI.42 1,699,062,484.22 1,206,294,987.22
R&D expenses VI.43 585,497,705.00 373,287,521.71
Financial expenses VI.44 (6,654,528.43) (210,571,299.44)
Including: Interest expense 222,800,930.26 1,364,023.09
Interest income 262,003,043.18 218,821,732.64
Impairment losses in respect of assets VI.45 180,187,389.00 19,962,967.90
Impairment losses in respect of credit VI.46 39,326,839.23
Add: Other income VI.47 196,111,096.12 111,775,896.26
Investment income (“-” for loss) VI.48 1,271,314,318.61 338,362,629.19
Including: Income from investments
in associates and joint ventures 317,196,606.84 281,264,687.40
Gains on hedging of net exposure
(“-” for loss)
Gains from changes in fair value
(“-” for loss) VI.49 115,575,352.23 (1,151,066.21)
Gains on disposal of assets (“-” for loss) VI.50 707,312.22
III. Operating profit (“-” for loss) 3,835,953,738.82 2,460,970,965.61

Add: Non-operating income VI.51 197,572,883.49 76,504,148.53
Less: Non-operating expenses VI.52 14,796,366.69 44,498,977.44
IV. Total profit (“-” for loss) 4,018,730,255.62 2,492,976,136.70

Less: Income tax expenses VI.53 485,014,019.72 374,220,515.80
V. Net profit (“-” for net loss) 3,533,716,235.90 2,118,755,620.90
(I) Classified by the continuity of operations

1. Net profit from continuing operations
(“-” for loss) 3,533,716,235.90 2,118,755,620.90
2. Net profit from discontinued operation
(“-” for loss)
(II) Classified by ownership of the equity
1. Net profit attributable to the parent
company’s shareholders (“-” for loss) 3,440,980,103.08 2,061,651,929.01
2. Minority interest (“-” for loss) 92,736,132.82 57,103,691.89

VI. Other comprehensive income, net of tax 6,341,692.68 (79,988,438.72)
Other comprehensive income, net of tax attributable

to the parent company’s shareholders 6,341,692.68 (79,995,005.24)
(1) Other comprehensive income that will
not be reclassified to profit or loss (2,452,981.75)
1. Changes arising from the remeasurement
of defined benefit obligation
2. Other comprehensive income that will
not be reclassified to profit or loss
under equity method
3. Change in fair value of other equity
instrument investments VI.54 (2,452,981.75)
4. Change in fair value of the company’s
own credit risk
5. Others
(2) Other comprehensive income that may
be reclassified into profit or loss 8,794,674.43 (79,995,005.24)
1. Other comprehensive income that may
be reclassified to profit or loss
under equity method VI.54 (187,789.97) 20,429.81
2. Change in fair value of other debt investments
3. Gains and losses arising from changes in
fair value of available-for-sale financial assets (75,775,613.41)
4. The amount of financial assets reclassified
into other comprehensive income
5. Gains and losses arising from reclassification
of held-to-maturity investments to
available-for-sale financial assets
6. Provision for credit loss of other
debt investments
7. Cash flow hedge reserve
8. Difference arising from the translation of
foreign currency financial statements VI.54 8,982,464.40 (4,239,821.64)
9. Others
Other comprehensive income, net of tax attributable
to minority shareholders 6,566.52
VII. Total comprehensive income 3,540,057,928.58 2,038,767,182.18
Total comprehensive income attributable to

shareholders of the parent company 3,447,321,795.76 1,981,656,923.77
Total comprehensive income attributable
to minority shareholders 92,736,132.82 57,110,258.41
VIII. Earnings per share (EPS):
1. Basic earnings per share 2.116 1.268
2. Diluted earnings per share 2.116 1.268

Consolidated Statement of Cash Flows

I. Cash flows from operating activities:

Cash receipts from the sale of goods and
the rendering of services 39,384,103,795.47 16,326,273,474.22
Receipts of taxes refunds 7,932,907.74 7,908,303.56
Other cash receipts relating to
operating activities VI.55 909,372,523.49 604,730,654.18
Subtotal of cash inflows from

operating activities 40,301,409,226.70 16,938,912,431.96
Cash payments for goods purchased

and services received 26,366,733,560.32 6,961,089,578.68
Cash payments to and on behalf of employees 4,022,127,065.94 3,232,065,014.82
Payments of all types of taxes 2,166,052,074.92 2,015,932,378.60
Other cash payments relating to
operating activities VI.55 2,529,608,039.65 2,896,134,734.29
Subtotal of cash outflows from

Net cash flows from operating activities 5,216,888,485.87 1,833,690,725.57
II. Cash flows from investing activities:

Cash receipts from returns of investments 3,602,960,010.48 2,478,600,000.00
Cash receipts from returns on investments 211,867,530.96 124,472,745.99
Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets 1,496,785.04 849,586.97
Net cash receipts from the disposals of
subsidiaries and other business units
investing activities VI.55 944,043,450.77 650,078.98

investment activities 4,760,367,777.25 2,604,572,411.94
Cash payments to acquire and construct

fixed assets, intangible assets and other
long-term assets 478,616,540.38 196,771,378.84
Cash payments to acquire investments 3,171,871,377.62 4,848,444,730.66
Net cash payments for acquisitions of
subsidiaries and other business units VI.56
investing activities VI.55 161,611.03

Net cash flows from investing activities 1,109,718,248.22 (2,440,643,697.56)

Consolidated Statement of Cash Flows

III. Cash flows from financing activities:

Cash receipts from investors making
investment in the enterprise 257,980,000.00 14,220,000.00
Including: cash receipts from minorities
making investment in subsidiaries 257,980,000.00 14,220,000.00
Cash receipts from borrowing 2,101,109,217.75 18,248,638.00
Cash receipts from issue of bonds
financing activities VI.55 958,871,915.99

financing activities 3,317,961,133.74 32,468,638.00
Cash repayments of amounts borrowed 3,570,995,757.97 31,964,062.88

Cash payments for distribution of
dividends, profits or interest expenses 1,352,569,070.75 484,778,265.87
Including: payments for distribution of
dividends or profit to minorities
of subsidiaries 482,010,418.40 21,138,212.43
financing activities VI.55 1,145,733,010.36

Net cash flows from financing activities (2,751,336,705.34) (484,273,690.75)
IV. Effect of foreign exchange rate changes

on cash and cash equivalents 807,009.93 292,035.93
V. Net increase in cash and cash equivalents VI.56 3,576,077,038.68 (1,090,934,626.81)

Add: opening balance of cash and
cash equivalents VI.56 11,495,535,159.70 12,586,469,786.51
VI. Closing balance of cash and

cash equivalents VI.56 15,071,612,198.38 11,495,535,159.70

Consolidated Statement of Changes in Shareholders’ Equity

2018
Equity attributable to the Shareholders of Parent Company
Other Total
Preferred Perpetual Less: Treasury comprehensive Special Surplus General risk Undistributed Minority shareholders’
Item Share Capital stock bond Others Capital reserve shares income reserve reserve provision profits Subtotal interests equity
I. Balance at 31 December 2017 1,625,790,949.00 9,875,177,958.43 (70,206,938.27) 1,154,762,193.41 6,285,996,409.09 18,871,520,571.66 391,633,221.51 19,263,153,793.17
Add: Changes in accounting policies 63,388,106.49 (67,801,004.52) (4,412,898.03) (4,412,898.03)
Correction of prior year’s errors
Combination of businesses
under common control
Others
II. Balance at 1 January 2018 1,625,790,949.00 9,875,177,958.43 (6,818,831.78) 1,154,762,193.41 6,218,195,404.57 18,867,107,673.63 391,633,221.51 19,258,740,895.14
III. Increase/(decrease) in the current
year (“-” for losses) (10,093,909.04) 6,341,692.68 213,972,964.22 2,607,580,787.29 2,817,801,535.15 1,067,190,323.71 3,884,991,858.86
(1) Total comprehensive income 6,341,692.68 3,440,980,103.08 3,447,321,795.76 92,736,132.82 3,540,057,928.58
(2) Shareholders’ contributions and
reduction in capital (10,093,909.04) (10,093,909.04) 1,028,886,989.92 1,018,793,080.88
1. Capital contribution from
owners 17,050,000.00 17,050,000.00
other equity instruments
holders
3. Share-based payment
recognized in
shareholders’ equity
4. Others (10,093,909.04) (10,093,909.04) 1,011,836,989.92 1,001,743,080.88
(3) Profit distribution 213,972,964.22 (833,399,315.79) (619,426,351.57) (54,432,799.03) (673,859,150.60)
1. Appropriation to surplus
reserve 213,972,964.22 (213,972,964.22)
2. Appropriation to general
risk reserve
3. Profit distribution to
shareholders (619,426,351.57) (619,426,351.57) (54,432,799.03) (673,859,150.60)
4. Others
(4) Internal carry-forward of
1. Transfer from capital
reserve to capital (or
share capital)
2. Transfer from surplus
reserve to capital (or
share capital)
3. Surplus reserve used to
offset accumulated losses
4. Transfer from changes in
defined benefit obligation
to retained earnings
5. Transfer from other
comprehensive income
6. Others
(5) Special reserve
1. Current appropriation
2. Current utilization
(6) Others
IV. Balance at 31 December 2018 1,625,790,949.00 9,865,084,049.39 (477,139.10) 1,368,735,157.63 8,825,776,191.86 21,684,909,208.78 1,458,823,545.22 23,143,732,754.00
Consolidated Statement of Changes in Shareholders’ Equity

2017
Equity attributable to the Shareholders of Parent Company
Other Total
Less: comprehensive General risk Undistributed Minority shareholders’
Item Share Capital Preferred stock Perpetual bond Others Capital reserve Treasury shares income Special reserve Surplus reserve provision profit Subtotal interests equity
I. Balance at 31 December 2016 1,625,790,949.00 9,875,172,584.68 9,788,066.97 1,052,034,418.97 4,782,293,720.24 17,345,079,739.86 308,710,708.41 17,653,790,448.27
Add: Changes in accounting policies
Combination of businesses under
common control
Others
I . Balance at 1 January 2017 1,625,790,949.00 9,875,172,584.68 9,788,066.97 1,052,034,418.97 4,782,293,720.24 17,345,079,739.86 308,710,708.41 17,653,790,448.27
I I. Increase/(decrease) in the current year
(“-” for losses) 5,373.75 (79,995,005.24) 102,727,774.44 1,503,702,688.85 1,526,440,831.80 82,922,513.10 1,609,363,344.90
(1) Total comprehensive income (79,995,005.24) 2,061,651,929.01 1,981,656,923.77 57,110,258.41 2,038,767,182.18
reduction in capital 5,373.75 5,373.75 34,841,791.25 34,847,165.00
owners 34,841,791.25 34,841,791.25
other equity instruments
holders
3. Share-based payment
recognized in shareholders’
equity
4. Others 5,373.75 5,373.75 5,373.75
(3) Profit distribution 102,727,774.44 (557,949,240.16) (455,221,465.72) (9,029,536.56) (464,251,002.28)
1. Appropriation to surplus
reserve 102,727,774.44 (102,727,774.44)
2. Appropriation to general risk
reserve
3. Profit distribution to
shareholders (455,221,465.72) (455,221,465.72) (9,029,536.56) (464,251,002.28)
4. Others
(4) Internal carry-forward of
1. Transfer from capital reserve
to capital (or share capital)
2. Transfer from surplus reserve
to capital (or share capital)
3. Surplus reserve used to offset
accumulated losses
4. Transfer from changes in
defined benefit obligation to
retained earnings
5. Transfer from other
6. Others
(5) Special reserve
(6) Others
IV. Balance at 31 December 2017 1,625,790,949.00 9,875,177,958.43 (70,206,938.27) 1,154,762,193.41 6,285,996,409.09 18,871,520,571.66 391,633,221.51 19,263,153,793.17

Balance Sheet
Current assets:
Cash at bank and on hand 6,806,911,762.32 6,148,845,583.90 6,148,845,583.90
Financial assets held for trading
Financial assets measured at
fair value through profit or loss
for the current period 4,875,057.73
Derivative financial assets
accounts receivable XIV.1 876,847,449.96 944,740,489.99 944,740,489.99
Including: Notes receivable 615,391,740.80 679,046,805.63 679,046,805.63
Accounts receivable 261,455,709.16 265,693,684.36 265,693,684.36
Advances to suppliers 12,525,525.66 8,408,955.59 8,408,955.59
Other receivables XIV.2 1,877,892,798.80 2,183,912,954.36 2,183,912,954.36
Including: Interests receivable
Dividends receivable 382,928,791.41 656,897,700.00 656,897,700.00
Inventories 946,856,781.67 579,702,447.36 579,702,447.36
Contract assets
Assets held for sale
Current portion of
non-current assets
Other current assets 1,507,451,931.22 1,503,465,702.19 1,503,465,702.19
Total current assets 12,028,486,249.63 11,369,076,133.39 11,373,951,191.12
Non-current assets:
Debt investments
Available-for-sale financial assets 1,035,180,994.75
Other debt investments
Hold-to-maturity investments
Long-term receivables
Long-term equity investments XIV.3 8,440,656,099.18 4,764,674,279.23 4,764,674,279.23
Other equity instrument
investments 84,897,870.89 62,686,231.77
Other non-current financial assets 223,325,494.09 972,178,175.97
Investment properties 214,466,738.50 208,498,363.23 208,498,363.23
Fixed assets 491,135,835.97 483,033,235.07 483,033,235.07
Construction in progress 38,386,309.01 37,984,793.35 37,984,793.35
Bearer biological assets
Oil and gas assets
Intangible assets 366,396,141.82 370,192,435.37 370,192,435.37
Development expenditure
Goodwill
Long-term prepaid expenses 1,725,586.63 2,384,650.49 2,384,650.49
Deferred tax assets 126,072,489.93 109,147,594.90 108,368,848.19
Other non-current assets
Total non-current assets 9,987,062,566.02 7,010,779,759.38 7,010,317,599.68
Total Assets 22,015,548,815.65 18,379,855,892.77 18,384,268,790.80

Balance Sheet
Current liabilities:
Short-term borrowings 954,431,644.92 154,431,644.92 154,431,644.92
Financial liabilities held for trading
Financial liabilities measured at
fair value through profit or loss
for the current period
Derivative financial liabilities
Notes payable and
accounts payable 322,318,804.97 332,648,649.94 332,648,649.94
Advances from customers 116,889,039.40
Contract liabilities 299,102,767.07 99,905,161.88
Employee benefits payable 86,313,055.87 78,032,160.23 78,032,160.23
Taxes payable 185,050,078.44 141,902,377.07 124,918,499.55
Other payables 2,116,999,352.64 1,123,393,572.36 1,123,393,572.36
Including: Interests payable
Dividends payable 567,433.79 477,452.11 477,452.11
Liabilities held for sale
Current portion of
non-current liabilities
Other current liabilities
Total current liabilities 3,964,215,703.91 1,930,313,566.40 1,930,313,566.40
Non-current liabilities:
Long-term borrowings
Bonds payable
Perpetual bond
Long-term employee
benefits payable
Provisions 252,971,219.19 170,214,675.19 170,214,675.19
Deferred income 76,572,361.85 69,548,966.56 69,548,966.56
Other non-current liabilities
Total non-current liabilities 350,285,952.82 266,157,686.33 266,157,686.33
Total Liabilities 4,314,501,656.73 2,196,471,252.73 2,196,471,252.73

Balance Sheet
Share capital 1,625,790,949.00 1,625,790,949.00 1,625,790,949.00
Perpetual bond
Capital surplus 9,820,175,495.89 9,820,175,495.89 9,820,175,495.89
Less: Treasury shares
Other comprehensive income (2,423,845.18) 216,926.54 (64,737,939.47)
Special reserve
Surplus reserve 996,126,723.03 782,153,758.81 782,153,758.81
General risk provision
Undistributed profits 5,261,377,836.18 3,955,047,509.80 4,024,415,273.84
Total Shareholders’ Equity 17,701,047,158.92 16,183,384,640.04 16,187,797,538.07
Total Liabilities and

Shareholders’ Equity 22,015,548,815.65 18,379,855,892.77 18,384,268,790.80

Income Statement
I. Operating income XIV.4 4,332,044,453.05 3,147,499,142.41

Less: Operating cost XIV.4 2,115,819,770.26 1,445,191,393.37
Taxes and surcharges 49,130,665.99 45,573,066.44
Selling and distribution expenses 497,673,650.54 537,781,498.11
General and administrative expenses 464,710,730.77 314,275,116.93
R&D expenses 283,921,217.29 130,836,506.00
Financial expenses (86,941,065.75) (126,045,833.40)
Including: Interest expense 21,351,287.90 5,276,994.77
Interest income 112,832,290.45 130,843,670.22
Impairment losses in respect of assets 19,366,231.79 4,019,821.89
Impairment losses in respect of credit 3,809,858.85
Add: Other income 14,831,714.51 35,944,618.96
Investment income (“-” for loss) XIV.5 1,183,707,198.51 320,671,360.92
Including: Income from investments in
associates and joint ventures 241,342,102.95 214,633,349.87
Gains on hedging of net exposure
(“-” for loss)
Gains from changes in fair value
(“-” for loss) 115,717,545.14 (1,151,066.21)
Gains on disposal of assets (“-” for loss)
II. Operating profit (“-” for loss) 2,298,809,851.47 1,151,332,486.74

Add: Non-operating income 11,227,625.26 8,040,488.33
Less: Non-operating expenses 1,459,323.96 2,200,109.31
III. Total profit (“-” for loss) 2,308,578,152.77 1,157,172,865.76

Less: Income tax expenses 168,848,510.60 129,895,121.40
IV. Net profit (“-” for net loss) 2,139,729,642.17 1,027,277,744.36
1. Net profit from continuing operations (“-”

for loss) 2,139,729,642.17 1,027,277,744.36
2. Net profit from discontinued operation
(“-” for loss)
Income Statement
V. Other comprehensive income, net of tax (2,640,771.72) (75,925,361.20)
(1) Other comprehensive income that will not

be reclassified to profit or loss (2,452,981.75)
1. Changes arising from the
remeasurement of defined benefit
obligation
2. Other comprehensive income that
will not be reclassified to profit or
loss under equity method
3. Change in fair value of other
equity instrument investments (2,452,981.75)
4. Change in fair value of the
company’s own credit risk
5. Others
(2) Other comprehensive income that may be
reclassified into profit or loss (187,789.97) (75,925,361.20)
1. Other comprehensive income that
may be reclassified to profit or loss
under equity method (187,789.97) 20,429.81
2. Change in fair value of other debt
investments
3. Gains and losses arising from
changes in fair value of available-
for-sale financial assets (75,945,791.01)
4. The amount of financial
assets reclassified into other
5. Gains and losses arising from
reclassification of held-to-maturity
investments to available-for-sale
financial assets
6. Provision for credit loss of other
debt investments
7. Cash flow hedge reserve
8. Difference arising from the
translation of foreign currency
financial statements
9. Others
VI. Total comprehensive income 2,137,088,870.45 951,352,383.16

Statement of Cash Flows

I. Cash flows arising from operating activities:

Cash receipts from the sale of goods
and the rendering of services 3,661,338,559.82 2,001,998,256.72
Receipts of taxes refunds
Other cash receipts relating to operating activities 4,167,305,158.72 361,574,393.15
Subtotal of cash inflows from operating

activities 7,828,643,718.54 2,363,572,649.87
Cash payments for goods purchased and

services received 1,658,621,823.66 411,707,007.31
Cash payments to and on behalf of employees 476,058,815.04 427,668,653.99
Payments of all types of taxes 495,658,325.75 411,148,256.26
operating activities 4,148,830,831.51 135,758,442.80

Net cash flows from operating activities 1,049,473,922.58 977,290,289.51
II. Cash flows from investing activities:

Cash receipts from returns of investments 3,000,000,000.00 1,500,000,000.00
Cash receipts from returns on investments 1,949,416,660.44 649,938,153.79
Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets 3,630.00 679,300.00
Other cash receipts relating to investing activities 1,437,478,578.43 1,307,864,538.86

Cash payments to acquire and construct

fixed assets, intangible assets and
other long-term assets 60,479,213.08 45,299,850.39
Cash payments to acquire investments 5,600,489,331.81 4,804,425,230.66
Net cash receipts from the disposals of
subsidiaries and other business units
Other cash payments relating to investing
activities 1,287,733,486.36 1,271,830,986.36

Net cash flows from investing activities (561,803,162.38) (2,663,074,074.76)

Statement of Cash Flows

III. Cash flows from financing activities:

Cash receipts from investors making investment
in the enterprise
Cash receipts from borrowing 1,104,431,644.92 154,431,644.92
Cash receipts from issue of bonds
Other cash receipts relating to financing activities 908,082.74

Cash repayments of amounts borrowed 304,431,644.92 184,431,644.92

Cash payments for distribution of dividends,
profits or interest expenses 649,604,581.78 463,196,446.63
financing activities 26,994,238.54

financing activities 981,030,465.24 647,628,091.55
Net cash flows from financing activities 124,309,262.42 (493,196,446.63)
IV. Effect of foreign exchange rate changes

on cash and cash equivalents (5,658.03)
V. Net increase in cash and cash equivalents 611,980,022.62 (2,178,985,889.91)

Add: opening balance of cash and
cash equivalents 6,147,937,501.16 8,326,923,391.07
VI. Closing balance of cash and cash equivalents 6,759,917,523.78 6,147,937,501.16

Statement of Changes in Shareholders’ Equity

2018
Other Total
Less: comprehensive General risk Undistributed shareholders’
Item Share capital Preferred stock Perpetual bond Others Capital reserve Treasury shares income Special reserve Surplus reserve provision profit equity
I. Balance at 31 December 2017 1,625,790,949.00 9,820,175,495.89 (64,737,939.47) 782,153,758.81 4,024,415,273.84 16,187,797,538.07

Add: Changes in accounting policies 64,954,866.01 (69,367,764.04) (4,412,898.03)
Others
II. Balance at 1 January 2018 1,625,790,949.00 9,820,175,495.89 216,926.54 782,153,758.81 3,955,047,509.80 16,183,384,640.04
III. Increase/(decrease) in the current year
(“-” for losses) (2,640,771.72) 213,972,964.22 1,306,330,326.38 1,517,662,518.88
(1) Total comprehensive income (2,640,771.72) 2,139,729,642.17 2,137,088,870.45
reduction in capital
1. Capital contribution from owners
2. Capital contribution from other equity
instruments holders
3. Share-based payment recognized in
4. Others
(3) Profit distribution 213,972,964.22 (833,399,315.79) (619,426,351.57)
1. Appropriation to surplus reserve 213,972,964.22 (213,972,964.22)
2. Appropriation to general risk reserve
3. Profit distribution to shareholders (619,426,351.57) (619,426,351.57)
4. Others
(4) Internal carry-forward of shareholders’ equity
1. Transfer from capital reserve to capital
(or share capital)
2. Transfer from surplus reserve to capital
(or share capital)
accumulated losses
4. Transfer from changes in defined
benefit obligation to retained earnings
5. Transfer from other comprehensive
income to retained earnings
6. Others
(5) Special reserve
(6) Others
IV. Balance at 31 December 2018 1,625,790,949.00 9,820,175,495.89 (2,423,845.18) 996,126,723.03 5,261,377,836.18 17,701,047,158.92
Statement of Changes in Shareholders’ Equity

2017
Other Total
Less: Treasury comprehensive General risk Undistributed shareholders’
Item Share capital Preferred stock Perpetual bond Others Capital reserve shares income Special reserve Surplus reserve provision profit equity
I. Balance at 31 December 2016 1,625,790,949.00 9,820,175,495.89 11,187,421.73 679,425,984.37 3,555,086,769.64 15,691,666,620.63

Add: Changes in accounting policies
Others
II. Balance at 1 January 2017 1,625,790,949.00 9,820,175,495.89 11,187,421.73 679,425,984.37 3,555,086,769.64 15,691,666,620.63
III. Increase/(decrease) in the current year
(“-” for losses) (75,925,361.20) 102,727,774.44 469,328,504.20 496,130,917.44
(1) Total comprehensive income (75,925,361.20) 1,027,277,744.36 951,352,383.16
reduction in capital
1. Capital contribution from owners
2. Capital contribution from other equity
instruments holders
3. Share-based payment recognized in
4. Others
(3) Profit distribution 102,727,774.44 (557,949,240.16) (455,221,465.72)
1. Appropriation to surplus reserve 102,727,774.44 (102,727,774.44)
2. Appropriation to general risk reserve
3. Profit distribution to shareholders (455,221,465.72) (455,221,465.72)
4. Others
(4) Internal carry-forward of shareholders’ equity
1. Transfer from capital reserve to capital
(or share capital)
2. Transfer from surplus reserve to capital
(or share capital)
accumulated losses
4. Transfer from changes in defined
benefit obligation to retained earnings
5. Transfer from other comprehensive
income to retained earnings
6. Others
(5) Special reserve
(6) Others
IV. Balance at 31 December 2017 1,625,790,949.00 9,820,175,495.89 (64,737,939.47) 782,153,758.81 4,024,415,273.84 16,187,797,538.07

Notes to the Financial Statements

I. GENERAL INFORMATION
1. Company overview
According to the Circular Tigaisheng [1997] No.139 issued by the State Commission for
Restructuring the Economic Systems, Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd.
(hereinafter referred to as “the Group”) was incorporated solely by Guangzhou Pharmaceutical
Holdings Limited (hereinafter referred to as “GPHL”). The 8 Chinese Patent Medicine (“CPM”)
manufacturing companies and 3 pharmaceutical trading companies under GPHL were
restructured and the stated-owned equity interest in the assets of these companies were injected
into the Company. The Company obtained its business license on 1 September 1997 and the
registered number is 440101000005674.
According to the Circular Tigaisheng [1997] No.145 issued by the State Commission for
Restructuring the Economic Systems and Circular Zhengweifa [1997] No.56 issued by the
Securities Regulatory Commission of the State Council, the Group issued 219,900,000 shares
on Hong Kong Stock Exchange (H shares) in October 1997. As approved by China Securities
Regulatory Commission on 10 January 2001, 78,000,000 ordinary shares (A share) of the Group
were issued and the Group was listed on Shanghai Stock Exchange on 6 February 2001. The
stock abbreviation is “GZ Phar.”, and the stock code was 600332.
The Group executed and completed a material asset restructuring transaction in 2013, which
includes: (1) The Group issued an addition of 445,601,005 A shares by way of share swap to
absorb and merger Baiyunshan Co., Ltd. (hereinafter referred to as “Baiyunshan”), a subsidiary
of GPHL, in May 2013. (2) The Group issued an addition of 34,839,645 A shares to GPHL, as
consideration payment, to acquire the buildings and trademarks which were owned by GPHL
or GPHL had the right to dispose of, and 100% equity interest of Guangzhou Pharmaceutical
Baiyunshan Hong Kong Company Limited (hereinafter referred to as “Guangyao Baiyunshan
Hong Kong Company”) (Previously named “Polian Development Co., Ltd.”), a subsidiary of
GPHL, and 12.5% equity interest of Baxter Healthcare Co., Ltd. (hereinafter referred to as “Baxter
Healthcare”) held by GPHL. The Company completed the registration of the shares on 5 July
2013. After the completion of the above-mentioned assets restructuring processes, the Group’s
total amount of outstanding shares was 1,291,340,650 shares. The stock abbreviation was
changed into “BYS”.
According to the Indemnification Agreement in Respect of the Difference Between Actual

Number of Net Income of Assets to be Purchased and Forecast of Net Income entered into
between the Group and GPHL, the Company repurchased 261,400 shares of A shares held by
GPHL for a total of RMB1, which was cancelled on 27 April 2015. The registration procedures of
repurchase and cancellation were completed on 7 May 2015. After the completion of the above-
mentioned restructuring, the Group’s general capital is 1,291,079,250 shares.
The Group offered 334,711,699 RMB common shares (A share) non-publicly in 2016. Capital
stock was increased by 334,711,699 shares, and the Group’s general capital increased to
1,625,790,949 shares.
The parent company and the ultimate controlling party are GPHL and Guangzhou State-owned
Assets Supervision and Administration Commission respectively.

I. GENERAL INFORMATION (Continued)
1. Company overview (Continued)
The approved business scope of the Company and its subsidiaries as included in the consolidated
financial statements includes: (1) Research, development, manufacturing and sales of Chinese
and Western medicine, chemical raw medicine, natural medicine, biological medicine,
intermediate product of chemical raw medicine; (2) The wholesale, retail, import and export
business of Western medicine, Chinese medicines and medical instruments; (3) Research,
development, manufacturing and sale of Great Health products; (4) Investment in medical, health
management and youth preservation, etc.
The major CPM products of the Group include: Xiao Ke Pill (“消渴丸”), Xia Sang Ju (“夏桑菊”),
Wu Ji Bai Feng Pill (“烏雞白鳳丸”), Hua Tuo Zai Zao Pill (“華佗再造丸”), Mi Lian Chuan Bei Pi
Pa Jelly (“蜜煉川貝枇杷膏”), Qing Kai Ling Tonic (“清開靈口服液”), Xiao Chai Hu Chong Ji (“小
柴胡沖劑”), etc. The major Western medicine products of the Group include cefathiamidine,
amoxicillin and ceftriaxone. The major pre-packaged food product of the Group is Wang Lao Ji
Herbal Tea (“王老吉凉茶”), etc.
The financial statements were authorized for issue by the Board on 15 March 2019.
2. Scope of consolidation
The Group has 93 subsidiaries included in the scope of consolidation in 2018. For more details,
please refer to Note VIII “Equity in Other Entities”. The companies in the scope of consolidation
of the Group for the current year increased by 36 and decreased by 1 comparing with the prior
year. For more details, please refer to Note VII “Changes in the Scope of Consolidation”.
Name of subsidiary Control
Guangzhou Baiyunshan Xing Qun Pharmaceutical Holdings Co., Ltd. Direct holding
(hereinafter referred to as “Xing Qun”)
Guangzhou Baiyunshan Xing Qun Health Technology Co., Ltd. Indirect holding
Guangzhou Baiyunshan Zhong Yi Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Zhong Yi”)
Guangzhou Baiyunshan Chen Li Ji Pharmaceutical Factory Co., Ltd. Direct holding

(hereinafter referred to as “Chen Li Ji”)
Guangzhou Chen Li Ji Great Health Industry Co., Ltd. Indirect holding
Guangzhou Baiyunshan Han Fang Contemporary Pharmaceutical Co., Ltd. Direct holding
(hereinafter referred to as “Guangzhou Han Fang”)
Guangzhou Baiyunshan Qi Xing Pharmaceutical Co., Ltd. Indirect holding

(hereinafter referred to as “Qi Xing”)
Guangzhou Baiyunshan Jing Xiu Tang Pharmaceutical Co., Ltd. Direct holding
(hereinafter referred to as “Jing Xiu Tang”)
Guangzhou Jing Xiu Tang 1790 Trading Co., Ltd. Indirect holding
Guangzhou Baiyunshan Pan Gao Shou Pharmaceutical Co., Ltd. Direct holding
(hereinafter referred to as “Pan Gao Shou”)

2. Scope of consolidation (Continued)
Guangzhou Pan Gao Shou Natural Healthcare Products Co., Ltd. Indirect holding
Guangzhou Wang Lao Ji Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Wang Lao Ji”)
Guangzhou Wang Lao Ji Food Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “GP Corp.”)
Guangzhou Jian Min Pharmaceutical Chain Co., Ltd. Indirect holding
Guangzhou Jian Min Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Qi Hua Medical Instruments Co., Ltd. Indirect holding
Guangzhou Wan Kang Orthopedics Medical Instruments Co., Ltd. Indirect holding
Fujian Guangyao Jie Da Pharmaceutical Co., Ltd. Indirect holding
Hubei Guangyao An Kang Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Guo Ying Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Xin Te Pharmaceutical Co., Ltd. Indirect holding
Foshan Guangyao Jian Ze Pharmaceutical Co., Ltd. Indirect holding
Shenzhen Guangyao Lian Kang Pharmaceutical Co., Ltd. Indirect holding
Hunan Guangyao Heng Sheng Pharmaceutical Co., Ltd. Indirect holding
Hainan Guangyao Chen Fei Pharmaceutical Co., Ltd. Indirect holding
Shanxi Guangyao Kang Jian Pharmaceutical Co., Ltd. Indirect holding
Guangdong Meixian Pharmaceutical Co., Ltd. Indirect holding
Jiangmen Guangyao Qiao Kang Pharmaceutical Co., Ltd. Indirect holding
Guangyao Sichuan Pharmaceutical Co., Ltd. Indirect holding
Hubei Guangyao Ji Da Pharmaceutical Co., Ltd. Indirect holding
Guangxi Guangyao Xin Shi Dai Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Pharmaceutical (Hong Kong) Co., Ltd. Indirect holding
Jian Min International Co., Ltd. Indirect holding


Zhuhai Guangyao Kang Ming Pharmaceutical Co., Ltd. Indirect holding
Foshan Guangyao Feng Kang Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Pharmacy Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Information Technology Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Nanpi Pharmacy Co., Ltd. Indirect holding
Zhongshan Guangyao Gui Kang Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Cai Zhi Lin Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Cai Zhi Lin”)
Jingyu Guangyao Dong’e Chinese Raw Medicine Development Co., Ltd. Indirect holding
Guangzhou Chinese Medicine Corporation Cai Zhi Lin Medicine Indirect holding
Chain Pharmacies
Fengshun Guangyao Chinese Raw Medicine Development Co., Ltd. Indirect holding
Guangzhou Chinese Medicine Corporation Chinese Medical Drink Indirect holding

and Pill Factory
Guangzhou Cai Zhi Lin Corporation Bei Shang Chinese Raw Indirect holding
Medicine Co., Ltd.
Guangzhou Ao Ma Medical Instruments Co., Ltd. Indirect holding
Heilongjiang Sengong Guangyao Raw Medicine Development Co., Ltd. Indirect holding
Wulanchabu Guangyao Chinese Raw Medicine Development Co., Ltd. Indirect holding
Shandong Guangyao Chinese Raw Medicine Development Co., Ltd. Indirect holding
Meizhou Guangyao Cai Zhi Lin Pharmaceutical Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Import & Export Co., Ltd. Direct holding

(hereinafter referred to as “Pharmaceutical Import & Export”)
Guangzhou Baiyunshan Bai Di Bio-Technology Co., Ltd. Direct holding

(hereinafter referred to as “Guangzhou Bai Di”)
Guangzhou Baiyunshan Wei Yi Industries Co., Ltd. Indirect holding
Tibet Linzhi Guangyao Development Co., Ltd. Indirect holding
Guangzhou Wang Lao Ji Great Health Industry Co., Ltd. Direct holding
(hereinafter referred to as “WLJ Great Health”)

Wang Lao Ji Great Health Industry (Ya’an) Co., Ltd. Indirect holding
Guangzhou Wang Lao Ji Great Health Enterprise Development Co., Ltd. Indirect holding
Guangzhou Wang Lao Ji Industry Company Indirect holding
Wang Lao Ji Great Health Industry (Beijing) Sales Co., Ltd. Indirect holding
Wang Lao Ji Great Health Industry (Meizhou) Co., Ltd. Indirect holding
Guangzhou Wang Lao Ji Great Health E-Commerce Co., Ltd. Indirect holding
Guangxi Baiyunshan Ying Kang Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Guangxi Ying Kang”)
Guangzhou Guangyao Yi Gan Biological Product Co., Ltd. Direct holding

(hereinafter referred to as “Yi Gan”)
Guangzhou Baiyunshan Medical and Healthcare Industry Investment Direct holding

Co., Ltd. (hereinafter referred to as “Baiyunshan Medical and
Healthcare Industry Company”)
Tibet Linzhi Baiyunshan Tibetan Health Castle Management Co., Ltd. Indirect holding
Guangzhou Baiyunshan Hospital Co., Ltd. Indirect holding

(hereinafter referred to as “Guangzhou Baiyunshan Hospital”)
Guangzhou Baiyunshan Run Kang Confinement Service Center Co., Ltd. Indirect holding
Guangzhou Baiyunshan Xing Zhu Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Xing Zhu”)
Guangzhou Wang Lao Ji Investment Co., Ltd. Direct holding

(hereinafter referred to as “Wang Lao Ji Investment”)
Guangzhou WLJ Catering Management Development Co., Ltd. Indirect holding

(hereinafter referred to as “WLJ Catering”)
Guangzhou Baiyunshan Tian Xin Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Tian Xin”)
Guangzhou Baiyunshan Tian Xin Pharmaceutical Technology Co., Ltd. Indirect holding
Guangzhou Baiyunshan Guang Hua Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Guang Hua”)
Guangzhou Baiyunshan Guang Hua Health Products Co., Ltd. Indirect holding
(hereinafter referred to as “Guang Hua Health”)

Guangzhou Baiyunshan Ming Xing Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Ming Xing”)
Guangzhou Xing Ji Industries Co., Ltd. Indirect holding
Baiyunshan Weiling Pharmaceutical Co., Ltd. Direct holding

(hereinafter referred to as “Weiling”)
Guangzhou Baiyunshan Pharmaceutical Technological Development Direct holding

Co., Ltd. (hereinafter referred to as “Pharmaceutical Technological”)
Wang Lao Ji Da Zhai Beverages Co., Ltd. Indirect holding
Guangzhou Wang Lao Ji Da Zhai Beverages Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Baiyunshan Hong Kong Company Direct holding

Limited (hereinafter referred to as “Guangyao Baiyunshan
Hong Kong Company”)
Guangzhou Baiyunshan Macao Co., Ltd. Direct holding
Guangzhou Baiyunshan Chemical Pharmaceutical Co., Ltd. Direct holding
Zhejiang Guang Kang Pharmaceutical Co., Ltd. Indirect holding
Guangyao Baiyunshan Chemical Pharmaceutical (Zhuhai) Co., Ltd. Indirect holding
Guangzhou Haima Pharmaceutical Advertising Co., Ltd. Direct holding

(hereinafter referred to as “Guangyao Haima”)
Guangzhou Baiyunshan Pharmaceutical Marketing Co., Ltd. Direct holding

(hereinafter referred to as “Baiyunshan Pharmaceutical Marketing”)
Guangzhou Baiyunshan Jin Ge Male Health Consulting Co., Ltd. Indirect holding
Guangzhou Pharmaceutical Research Institute Direct holding

(“Guangyao General Institute”)
Guangzhou Baiyunshan Medical Instruments investment Co., Ltd. Indirect holding
Guangzhou Baiyunshan Chemical Pharmaceutical Technology Co., Ltd. Direct holding


II. BASIS OF PREPARATION
1. Basis of Preparation
The financial statements are prepared, on a going concern basis, to recognize and measure the
transactions and events, which have occurred, in accordance with the Accounting Standards
for Business Enterprises – Basic Standard (Release of No.33 Order of the Ministry of Finance
and Amendment to No.76 Order of the Ministry of Finance), 42 specific accounting standards,
the Application Guidance for Accounting Standard for Business Enterprises, interpretations of
the Accounting Standards for Business Enterprises and other relevant regulations issued by the
Ministry of Finance on and subsequent to 15 February 2006 (hereinafter collectively referred
to as “ASBE”), and the disclosure requirements in the Preparation Convention of Information
Disclosure by Companies Offering Securities to the Public No.15 – General provisions on Financial
Reporting (Revised in 2014) issued by the China Securities Regulatory Commission.
According to relevant provisions of the ASBE, the Group’s accounting is prepared using the
accrual basis. The measurement basis of the financial statements is historical cost except for
certain financial instruments. According to the ASBE, related provision for impairment shall be
provided if asset is impaired.
2. Going Concern
The Group has the ability to continue as a going concern in the next 12 months since the end of
the reporting period. There is no material event that may cast significant doubt upon the Group’s
ability to continue as a going concern.
III. STATEMENT OF COMPLIANCE WITH ASBE
The financial statements have been prepared in accordance with the Accounting Standards for Business
Enterprises, present truly and completely, the Company’s financial position as of 31 December 2018,
and performance results and cash flows for the period then ended. In addition, the Company’s financial
statements are in compliance with all material aspects of the requirements in the Preparation Convention
of Information Disclosure by Companies Offering Securities to the Public No.15 – General provisions on
Financial Reporting (Revised in 2014) issued by the China Securities Regulatory Commission.
IV. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
The Company and its subsidiaries are engaged in pharmaceutical operations. Based on the characteristics
of the Company’s actual productions and operations, the Company and its subsidiaries have determined
several specific accounting policies and accounting estimates for revenue recognition and other
transactions and events according to ASBE. For more details, please refer to Note IV. 24 “Revenue”. For
description of significant accounting judgments and estimates made by the management, please refer to
Note IV. 30 “Significant Accounting Judgment and Estimates”.
1. Accounting Period
Accounting periods are classified into annual periods and interim periods. An interim period
is a reporting period shorter than a complete accounting year. The Company has adopted the
calendar year as its accounting year, i.e. from 1 January to 31 December.
2. Operating Cycle
A normal operating cycle refers to the time period between the acquisition of assets for
processing and their realization in cash or cash equivalents. The group’s operating cycle is of 12
months’ duration, which is used as the classification standard for liquidity of assets and liabilities.

IV. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)
3. Functional Currency
RMB is the currency of the primary economic environment in which the Company and its
domestic subsidiaries operate. The Company and its domestic subsidiaries choose RMB as the
functional currency. The Company’s foreign subsidiaries choose HKD as the functional currency
according to the primary economic environment in which the Company’s foreign subsidiaries
operate. The financial statements are prepared in RMB.
4. Business Combination
A business combination is a transaction or event that brings together two or more separate
enterprises into one reporting entity. Business combinations are classified into business
combinations under common control and business combinations not under common control.
(1) Business combination under common control
A business combination under common control is a business combination in which all the
combining enterprises are ultimately controlled by the same party or parties both before
and after the combination, and that control is not transitory. For a business combination
under common control, the absorbing party is the party that acquires the control right of
other involved enterprises on combination date. The combined party is other enterprises
involved in the combination. The combination date refers to the date on which the
absorbing party effectively obtains control of the party being absorbed.
Assets and liabilities that are obtained in a business combination by the absorbing party
shall be measured at their book values as recorded by the party being absorbed on the
combination date. The difference between the book value of the net assets obtained and
the book value of the consideration paid for the combination (or the aggregate face value
of shares issued as consideration) shall be adjusted to the capital reserve (share premium).
If the capital reserve (share premium) is not sufficient to absorb the difference, excess shall
be adjusted against retained earnings.
Cost incurred by the absorbing party that are directly attributable to the combination shall
be charged against profit or loss in the period in which the cost is incurred.
(2) Business combination not under common control
A business combination not under common control is a business combination in which all
the combining enterprises are not ultimately controlled by the same party or parties before
and after the combination. For a business combination not under common control, the
party that, on the acquisition date, obtains control of other enterprises participating in
the combination is the acquirer. Other enterprises participating in the combination are the
acquiree. Acquisition date is the date on which the acquirer effectively obtains control of
the acquiree.

4. Business Combination (Continued)
(2) Business combination not under common control (Continued)
For a business combination not under common control, combination cost is the aggregate
of the fair value of the assets given, liabilities incurred or assumed, and equity securities
issued by the acquirer in exchange for control of the acquiree on the acquisition date.
Service expense including audit fees, legal fees, valuation and consulting fees, and other
administrative expenses attributable to the business combination shall be charged against
profit or loss in the period in which the service expense is incurred. The transaction
expense of the equity securities or debt securities issued by the acquirer as combination
consideration shall be included in the initial cost of equity securities or debt securities
issued. The contingent consideration in the business combination shall be included into the
combination cost at its fair value on the acquisition date. In case that within 12 months
after the acquisition date, any new or further evidence is found regarding the existing
situation as on the acquisition date, which causes adjustment on contingent consideration,
goodwill shall be adjusted accordingly. The combination cost incurred by the acquirer and
the identifiable net assets acquired in the combination are initially measured at fair value
on the acquisition date. The positive difference between the combination cost and the
fair value of the identifiable net assets it obtains from the acquiree on the acquisition date
is recognized as goodwill. As for the negative difference between the combination cost
and the fair value of the identifiable net assets it obtains from the acquiree, it is necessary
to review the measurement of the fair values of the identifiable assets, liabilities and
contingent liabilities it obtains from the acquiree as well as the combination cost. If the
combination cost is still less than the fair value of the identifiable net assets it obtains from
the acquiree, the difference shall be recorded through profit or loss for the current year.
Where the deductible temporary difference of the acquiree obtained by the acquirer is
not recognized on the ground that the recognition condition of deferred tax asset has not
been meet on the acquisition date, within 12 months after the acquisition date, if further
information is obtained to indicate that the relevant situation on the acquisition date
existed and the economic interest brought by the deductible temporary difference of the
acquirer on the acquisition date is expected to be realized, the amount of the difference
shall be recognized as relevant deferred tax asset and goodwill shall be deducted by the
same amount. If the goodwill is insufficient to be deducted, the difference is recognized
through profit or loss for the current year; otherwise, the difference recognized as the
deferred tax asset which is relate to business combination shall be recognized through
profit or loss for the current year.
For the business combinations not under common control and completed through multiple
transactions, according to Notice of the Ministry of Finance of the People’s Republic of
China on Issuing Interpretations No.5 on Accounting Standards for Business Enterprises
(Caikuai [2012] No.19) and the criteria about “package deal” in Article 51 of Accounting
Standards for Business Enterprises No.33 – Consolidated Financial statements (refer
to Note IV, 5(2), whether these multiple transactions are included in “package deal”
shall be judged. If they are included in “package deal”, the accounting treatment shall
be conducted in accordance with the descriptions of previous paragraphs of this Part
and Note IV. 13 “Long-term Equity Investment”; if they are not included in “package
deal”, relevant accounting treatment shall be conducted differently in separate financial
statements and consolidated financial statements.

4. Business Combination (Continued)
(2) Business combination not under common control (Continued)
In separate financial statements, the sum of the book value of the equity investment of
the acquiree held before the acquisition date and the investment cost incurred on the
acquisition date shall be the initial investment cost of such an investment. If the equity of
the acquiree held before the acquisition date involves other comprehensive income, when
handling this project, relevant accounting treatment for other comprehensive income shall
be conducted on the same base as the acquiree disposes of relevant assets and liabilities
directly (all shares shall be transferred into investment income for the current year, except
the corresponding shares changed by net liabilities or net assets in benefit plan redesigned
by the acquiree under equity method).
In consolidated financial statements, the equity of the acquiree held before the acquisition
date shall be remeasured at fair value of the equity on the acquisition date, and the
difference between fair value and book value shall be recorded in the current income from
investment. If the equity of the acquiree held before the acquisition date involves other
comprehensive income, relevant accounting treatment for other comprehensive income
shall be conducted on the same base as the acquiree disposes of relevant assets and
liabilities directly (all shares shall be transferred into investment income for the current year
which consists of the acquisition date, except the corresponding shares changed by net
liabilities or net assets in benefit plan redesigned by the acquiree under equity method).
5. Preparation Method for Consolidated Financial Statements
(1) The principle for determining the scope of consolidated financial statements
The scope of consolidated financial statements shall be determined on the basis of

control. Control means the Company has power over the investee, by participating in
the relevant activities of the investee and have variable returns, and the ability to use the
power to influence the return amount of the investee. The combination scope includes the
Company and all subsidiaries. A subsidiary is a corporate body controlled by the Company.
The Company will reassess combination scope if relevant elements on the control
definition has changed due to the change of the relevant facts and circumstances.
(2) The method for preparation of consolidated financial statements
From the date the Company obtains the actual control over a subsidiary’s net assets and
production operation decision-making power the Company includes the subsidiary into
the consolidated scope; from the date the Company loses control over a subsidiary, the
subsidiary shall cease to be consolidated. For a subsidiary disposed of, the operating
results and cash flows before the disposal date are appropriately included in the
consolidated income statement and the consolidated cash flow statement; for a subsidiary
disposed during the current year, no adjustments are made to the opening balance
of the consolidated balance sheet. Where a subsidiary is acquired through a business
combination not under common control, the subsidiary’s operating results and cash
flows after the combination date are appropriately included in the consolidated income
statement and the consolidated cash flow statement, and no adjustments is made to the
opening balance and comparative figures of the consolidated financial statements. Where
a subsidiary is acquired through a business combination under common control, the
subsidiary’s operating results and cash flows from the beginning of the reporting period to
the combination date are appropriately included in the consolidated income statement and
the consolidated cash flow statement, and adjustments is made to the comparative figures
of the consolidated financial statements accordingly.

5. Preparation Method for Consolidated Financial Statements (Continued)
(2) The method for preparation of consolidated financial statements (Continued)
When preparing the consolidated financial statements, if a subsidiary and the Company
adopt the inconsistent accounting policies or accounting periods, the Company shall
adjust the financial statements of the subsidiary based on its own accounting period and
accounting policies. For a business combination not under common control, the subsidiary
shall be adjusted based on the fair value of the identifiable net asset and adjustments to
financial statements shall be made.
All material balances, transactions, and unrealized profits within the scope of consolidated
financial statements shall be eliminated in the preparation of consolidated financial
statements.
Portion of shareholders’ equity and current net profit or loss not attributable to the
Company shall be solely presented in shareholders’ equity of consolidated balance sheet
and net profit of consolidated income statements, respectively. When the amount of
loss for the current year attributable to minority shareholders of a subsidiary exceeds
the minority shareholders’ portion of the opening balance of shareholders’ equity of the
subsidiary, the excess shall be allocated against the minority interests.
If the Company loses control over a subsidiary due to the disposal of a portion of an
equity investment or other reasons, the remaining equity shall be remeasured at its fair
value at the date when control is lost. The difference obtained through the total amount
of consideration received from the disposal of equity and the fair value of the remaining
equity, less the share of net assets of the former subsidiary calculated continuously
from the acquisition date or the combination date based on the previous shareholding
proportion, shall be recognized as investment income for the current year when control
is lost. Other comprehensive income related to the original subsidiary will be transferred
into the current profit and loss in investment at the date the Company lost control
over the subsidiary. (That is, in addition to the remeasurement of changes in the net
liabilities or net assets of the defined benefit plan in the original subsidiary, the rest will
be transferred into investment income for the current year.) After that, for the remaining
part of this part of equity, according to Accounting Standards For Enterprise No.2 – Long
Term Equity Investment or Accounting Standards For Enterprises No.22 – Recognition
And Measurement Of Financial Instrument and related regulation for subsequent
measurement, and there are details in Notes IV.13 “Long-term capital investment” or
Notes IV.9 “Financial instruments”.

5. Preparation Method for Consolidated Financial Statements (Continued)
(2) The method for preparation of consolidated financial statements (Continued)
If the Company loses control over a subsidiary in multiple transactions in which it disposes
equity investments in the subsidiary in stages, the Company is required to determine
whether each transaction shall be included in a package deal. If one or more than one
of the following conditions are met by all of the terms and conditions of the transactions
and their economic effects in regard to the disposal of equity investment in subsidiaries,
the accounting treatment for these transactions shall be conducted as a package deal:
①These transactions are carried out simultaneously or in the condition that each part will
be impacted; ②These transactions as a whole will achieve a complete business results;
③The occurrence of one transaction are dependent on at least one transaction; ④One
transaction may seem to be uneconomic when considered solely, but it can be recognized
as economic when considered with other transactions. If one transaction is not included
in the package transaction, each of transaction will be according to the “Partly disposal
of subsidiaries of a long-term equity investment without losing control” and each of the
transaction will respectively follow the part disposal subsidiaries of a long-term equity
investment under the control not lost (refer to Notes IV. 13. (2) ④) and “losing control
due to disposal of part of equity investments or other reasons” of the original subsidiaries
suited for the principle as accounting treatment. If disposal of equity investments in a
subsidiary at other each transaction belonged to a package transaction until the Company
losing control, thus each transaction shall be dealt with accounting treatment in which
each transaction is recognized as one that dispose of subsidiaries until lose control.
However, the difference between the disposals prices of prior before control lost with
Company net asset shall be recognized as other comprehensive income, the profit and loss
of current year shall be transferred when control is lost.
6. Classification and Accounting Treatment of Joint Arrangements and Joint Operation
A Joint arrangement is an arrangement of which two or more parties have joint control. The
Company divides joint venture arrangement into joint operation and joint venture based on the
rights enjoyed and obligations assumed in joint venture arrangements. A joint operation is a joint
arrangement whereby the Company has rights to the assets and obligations for the liabilities,
relating to the arrangement. A joint venture is a joint arrangement whereby the Company has
rights to the net assets of the arrangement.
The Company’s investments in joint ventures are measured under equity method. Please refer
to Note IV. 13. (2) ② “Long-term equity investments measured under equity method” for
accounting policies for joint venture investment.
As a joint venture party, for joint operation, the Company recognizes the assets held solely and
liabilities assumed solely and recognizes the Company’s share of any assets held jointly and
liabilities assumed jointly; recognizes the Company’s revenue from the sale of its share of the
output arising from the joint operation; recognizes the Company’s share of the revenue from the
sale of the output by the joint operation; recognizes the expenses incurred solely by the Company
and the Company’s share of any expenses incurred jointly.

6. Classification and Accounting Treatment of Joint Arrangements and Joint Operation

(Continued)
When the Company invests or sells assets towards joint operation as a party of the joint-venture
(this asset does not constitute business, the same below), or upon purchasing assets by joint
operation but before selling such assets to the third party, the Company only recognizes the
part belonging to other participants of joint operation in profit or loss caused by this transaction.
Where such assets belong to the impairment losses for assets according to Accounting Standard
for Business Enterprises No. 8 – Impairment of Assets and other regulations, the Company
will recognize losses in full amount for investment or sales of assets from the Company to
joint operation. For assets purchased by the Company from joint operation, the Company will
recognize these losses according to its shareholding proportion.
7. Recognition Criteria for Cash and Cash Equivalents
The Company’s cash and cash equivalents comprise cash on hand, deposits that can be readily
withdrawn on demand, short-term (generally due within three months after the purchase date)
and highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of change in value.
8. Foreign Currency Transaction and Translation of Foreign Currency Financial Statements
(1) Methods for Translation of Foreign Currency Transactions
For the foreign currency transaction incurred in the Company, the amount in foreign
currency shall be translated into the amount in functional currency at initial recognition as
per the spot rate on the transaction date (usually refers to the central parity rate published
by the People’s Bank of China on that day. The same below); but for foreign exchange
businesses and transactions involving foreign exchange, the amount in foreign currency
shall be translated into the amount in functional currency as per the actual exchange rate
for recording.
(2) Methods for Translation of Monetary Items and Non-Monetary Items in Foreign
Currency
As for monetary items in foreign currency on the balance sheet date, the amount in
foreign currency shall be translated into the functional currency at the spot rate on
the balance sheet date; where, the differences arising from the translation shall be
recognized through profit or loss for the current year, except that ① differences between
foreign exchange incurred from specific borrowings in foreign currency related to assets
purchased and construction where capitalization criterion are met shall be treated as per
the borrowings capitalization principle; ② differences in foreign exchange arising from
other book balance change other than amortized cost for foreign currency monetary items
available-for-sale shall be included into other comprehensive incomes.
When preparing the consolidated financial statements involving the overseas operation, if
there are foreign-currency monetary items essentially constituting a net investment in an
overseas operation, the exchange difference incurred due to the exchange rate change
shall be listed in other comprehensive income. When overseas operations are disposed, the
difference shall be transferred to the profit or loss for the current year.


(Continued)
(2) Methods for Translation of Foreign Currency Items and Foreign Currency Non-
Monetary Items (Continued)
The foreign currency non-monetary items measured at historical cost shall continue to
be translated at the spot exchange rates at the dates of the transactions. The foreign
currency non-monetary items measured at the fair value shall be translated at the spot
exchange rate on the date when the fair value has been determined, and the difference
between the translated reporting currency amount and the original one shall be treated as
the changes in fair value and included in the current profit or loss or recognized as other
comprehensive income.
(3) Translation Method of Financial Statements Denominated in Foreign Currency
When preparing the consolidated financial statements involving the overseas operation,
if there are foreign-currency monetary items essentially constituting a net investment
in an overseas operation, the exchange difference incurred due to the exchange rate
change shall be presented in other comprehensive income as “difference arising from
the translation of foreign currency financial statements”. When overseas operations are
disposed, the difference shall be transferred to the profit or loss for the current year.
The foreign currency adopted in the foreign currency financial statements for overseas
operation shall be translated into RMB as per the following methods: Assets and liabilities
on the balance sheet shall be translated at the spot rate at the balance sheet date;
shareholders’ equity items shall be translated at the spot rate occurred except for the item
of “undistributed profit”. The income and expense items in the profit statement shall be
translated at the average rate in the current year. The opening balance of undistributed
profits are the closing balance of undistributed profits translated at the prior year; for
closing balance of undistributed profits, each item shall be calculated and presented as
per the translated profits; and the difference between the asset items and the sum of
liability items and shareholders’ equity items after translation shall be recognized into
other comprehensive incomes as translation difference from translation of foreign financial
statements. When disposing overseas operation and losing the control, difference arising
from the translation of foreign currency financial statements, which are presented under
shareholders’ equity in the balance sheet and related to the overseas operation, shall
be transferred to the profit or loss for the current year in whole or in proportion of the
disposed overseas operation.
Cash flows in foreign currencies shall be translated using the average exchange rate
for the current reporting period on the transaction date. The amount influenced by
the changes in exchange rate on cash flows shall be presented individually in cash flow
statement as a reconciling item.
Opening balance and prior year’s actual amount are presented in line with the amount
after the translation of prior year financial statements.
For the preparation of consolidated financial statements, when the disposal of all
shareholders’ equities with respect to the overseas operations by the Company, as well as
parts of equity investments, results in a lost in control over the overseas operations, the
Company shall convert the difference, which is presented under the items of the owner’s
equities of the parent company in the balance sheet and which arises from the translation
of foreign currency financial statements relating to this overseas business, into the profit or
loss of the period for disposal.


(Continued)
(3) Translation Method of Financial Statements Denominated in Foreign Currency

(Continued)
When overseas operational control is retained but the proportion of overseas operational
equity held by the Company decreases due to disposal of partial equity investments or
other reasons, the difference arising from translation of foreign currency relevant to the
disposed portion of such overseas operation will be recognized as minority shareholder
equity. The difference shall not be transferred into current profit or loss. In the event
that the disposed overseas operation involves partial equities of affiliated enterprises and
joint ventures, the difference arising from translation of foreign currency relevant to the
disposed portion of such overseas operation will be transferred into the current profit or
loss for disposal as per the disposed proportion of overseas operation.
9. Financial Instruments
The Company shall recognize a financial asset or financial liability at the date the Company enters
into a contract concerning about financial instruments.
(1) Classification, recognition and measurement of financial assets
Based on the business model of the Company’s management on the financial asset and
the features of the cash flows of the financial asset, the Company classifies financial assets
into the following categories: financial assets measured at amortized cost; financial assets
at fair value through other comprehensive income; financial assets at fair value through
profit or loss for the current period.
Financial assets are initially recognized at fair value. Relevant transaction cost of financial
assets at fair value through profit and loss for the current period, shall be recognized into
profit and loss for the current period. Relevant transaction cost of financial assets listed
in other categories shall be included in the amount recognized initially. For accounts
receivable or notes receivable arising from the sale of products or rendering of services,
exclusive of or without consideration of material financing elements, the initial recognition
shall be the amount of consideration to which the company is expected to be entitled.
① Financial assets measured at amortized cost
The business model that the company adopts to manage the financial assets
measured at amortized cost is to collect the contractual cash flows, and the
contractual cash flow characteristics of such financial assets are consistent with
the basic debit, credit arrangements. The cash flow generated on a specific date
is only the payment of principal and interest based on the amount of principal
outstanding. For such financial assets, the company adopts the effective interest
rate method and carries out subsequent measurement according to the amortized
cost. The profit or loss generated by the amortization or impairment shall be
recognized in the current profit and loss.

9. Financial Instruments (Continued)
(1) Classification, recognition and measurement of financial assets (Continued)
② Financial assets at fair value through other comprehensive income
The company’s business model for managing such financial assets is to take the
receipt of contract cash flow and sell, and the contract cash flow characteristics of
such financial assets are consistent with the basic debit, credit arrangements. The
company measures such financial assets according to the fair value and the changes
are recognized in other comprehensive income, but the impairment loss or gain,
exchange profit and loss and the interest income calculated according to the real
interest rate method are recognized in the current profit and loss.
In addition, the company designated some non-tradable equity instruments as

financial assets measured at fair value through other comprehensive income. The
company shall recognize the relevant dividend income of such financial assets
into the current profit and loss, and recognize the change of fair value in other
comprehensive income. When the recognition of the financial asset is terminated,
the accumulated gains or losses previously recognized in other comprehensive
income shall be transferred from other comprehensive income to retained earnings
and shall not be recognized in current profit and loss.
③ Financial assets at fair value through profit or loss for the current period
The company classifies the financial assets, except for financial assets measured at
amortized cost or at fair value through other comprehensive income as mentioned
above, into the financial assets measured at fair value through profit or loss for
the current period. In addition, the company shall designate some financial assets
as financial assets measured at fair value through profit or loss for the current
period upon the initial recognition to eliminate or significantly reduce accounting
mismatch. For such financial assets, the company adopts the fair value for
subsequent measurement, and changes in fair value are recognized in the profit or
loss for the current period.
(2) Classification, recognition and measurement of financial liabilities
Financial liabilities shall be classified into other financial liabilities and financial liabilities
measured at fair value through profit or loss for the current period upon initial recognition.
For financial liabilities measured at fair value through profit or loss for the current period,
relevant transaction costs are directly recognized in the current profit and loss, and
the relevant transaction costs of other financial liabilities are recognized in the initial
recognition amount.
① Financial liabilities measured at fair value through profit or loss for the current
period
Financial liabilities measured at fair value through profit or loss for the current
period comprise financial liabilities held for trading (including derivatives belonging
to financial liabilities) and financial liabilities measured at fair value through profit or
loss for the current period upon initial recognition.

(2) Classification, recognition and measurement of financial liabilities (Continued)
① Financial liabilities measured at fair value through profit or loss for the current
period (Continued)
Financial liabilities held for trading (including derivatives belonging to financial

liabilities) shall be subsequently measured at the fair value. Except for those related
to hedge accounting, changes in the fair value shall be recognized in the profit or
loss of the current period.
For financial liabilities designated to be measured at fair value through profit or loss
for the current period, liabilities caused by changes in the company’s own credit
risk of the changes in fair value recognized in other comprehensive income, when
the liability is terminated for recognition, the accumulated change in its fair value
caused by the change in its own credit risk recognized in other comprehensive
income is transferred to retained earnings. If the above treatment of the impact
of the change in the credit risk of such financial liabilities will cause or expand the
accounting mismatch in the profit and loss, the company will record all the gains or
losses of such financial liabilities (including the amount affected by the change in
the credit risk of the enterprise) into the current profit and loss.
② Other financial liabilities
In addition to financial liabilities whose transfer of financial assets does not meet
the conditions for termination of recognition or arising from the continuing
involvement in the transfer of financial assets and other financial liabilities other
than the financial security contract are classified as financial liabilities measured by
amortized cost, carry out subsequent measurement according to the amortized
cost, and record the profits or losses generated by the termination of recognition or
amortization into the current profit and loss.
(3) The confirmation basis and measurement method of financial assets transfer
Financial assets that meet one of the following conditions shall be terminated for
recognition: ① the contract right of receiving the cash flow of the financial asset is
terminated; ② the financial assets have been transferred, and the ownership of financial
assets almost all the risks and rewards transferred to the transferee; ③ the financial asset
has been transferred, although the enterprise has neither transferred nor retained almost
all risks and rewards in the ownership of the financial asset, it has given up its control over
the financial asset.
If the enterprise neither transfers nor retains nearly all the risks and rewards in the
ownership of the financial assets and does not give up its control over the financial assets,
the relevant financial assets shall be recognized according to the degree of continuing
involvement in the transferred financial assets, and the relevant liabilities shall be
recognized accordingly. The degree of continuing involvement in the transferred financial
assets refers to the level of risk faced by the enterprise due to the change in the value of
the financial assets.

(3) The confirmation basis and measurement method of financial assets transfer
(Continued)
If the overall transfer of financial assets meets the conditions for the termination of
recognition, the balance between the book value of the transferred financial assets and
the consideration received due to the transfer and the accumulative amount of changes in
the fair value originally recognized in other comprehensive income shall be recognized into
the current profit and loss.
If the partial transfer of financial assets meets the conditions for the termination of
recognition, the book value of the transferred financial assets shall be apportioned
according to its relative fair value between the terminated recognition and the non-
terminated recognition, and the difference between the consideration received as a
result of the transfer and the accumulative amount of changes in the fair value originally
recognized in other comprehensive income and the apportioned book amount shall be
recognized in the current profit and loss.
The company shall determine whether almost all risks and rewards in the ownership
of the financial assets sold by means of recourse or transferred by endorsement of the
financial assets held by the company have been transferred. Where almost all risks and
rewards in the ownership of the financial asset have been transferred to the transferee,
the recognition of the financial asset shall be terminated; If almost all risks and rewards
in the ownership of the financial asset are retained, the recognition of the financial asset
shall not be terminated; If there is no transfer or retention of nearly all risks and rewards in
the ownership of the financial asset, the enterprise shall continue to judge whether it has
retained control of the asset and conduct accounting treatment according to the principles
described in the preceding paragraphs.
(4) Derecognition of financial liabilities
If the current obligation of the financial liability (or part thereof) has been discharged, the
company shall terminate the recognition of such financial liability (or part thereof). The
company (borrower) signs an agreement with the lender to replace the original financial
liability by assuming the new financial liability. If the contract terms of the new financial
liability and the original financial liability are substantially different, the company shall
terminate the confirmation of the original financial liability and simultaneously confirm a
new financial liability. If the company materially modifies the contract terms of the original
financial liabilities (or part thereof), the original financial liabilities shall be terminated, and
a new financial liability shall be recognized according to the revised terms.
Where the recognition of financial liabilities (or part thereof) is terminated, the company
shall recognize the difference between its book value and the consideration paid (including
the transferred non-cash assets or liabilities) into the current profit and loss.
(5) Offsetting of financial assets and liabilities
When the company has offset the confirmed amount of legal rights of financial assets and
financial liabilities, and this kind of legal rights is the executable, at the same time, the
company plans to net or cash at the same time when the financial assets and liquidation
of the financial liability, financial assets and financial liabilities to offset each other after
amount listed in the balance sheet. In addition, financial assets and financial liabilities shall
be shown separately in the balance sheet and shall not be offset against each other.

(6) Method for determining the fair value of financial assets and financial liabilities
Fair value refers to the price that market participants can receive or transfer a liability to
pay for the sale of an asset in an orderly transaction on the measurement date. Where
there is an active market for a financial instrument, the company shall determine its
fair value by quoting in the active market. A quote in an active market is a price that is
readily available on a regular basis from an exchange, broker, trade association, pricing
service, etc., and represents the market price traded in a fair trade. Where there is no
active market for the financial instrument, the company shall determine its fair value by
means of valuation technology. Valuation techniques include reference to the prices used
in recent market transactions by parties familiar with and willing to trade, reference to
the current fair value of other financial instruments that are substantially the same, cash
flow discounting and option pricing models, etc. In valuation, the company uses valuation
techniques applicable in the current situation and supported by sufficient available data
and other information to select input values consistent with the characteristics of assets
or liabilities considered by market participants in transactions of related assets or liabilities,
and gives priority to relevant observable input values as far as possible. Use non-input
values where relevant observable input values are not available or are not feasible to
obtain.
(7) Equity instruments
Equity instruments are contracts that prove ownership of the residual interest in the
company’s assets after deducting all liabilities. The issuance (including refinancing),
repurchase, sale or cancellation of the equity instruments of the company shall be treated
as changes in the equity and the transaction fees related to the equity transactions shall be
deducted from the equity. The company does not recognize changes in the fair value of
equity instruments.
Where the equity instrument of the company distributes dividends (including “interest”
generated by the instrument classified as equity instrument) during the term of its
existence, it shall be treated as profit distribution.
10. Impairment of Financial Assets
The financial asset that the Company needs to confirm the impairment loss are financial
assets measured at amortized cost, debt instrument investment measured at fair value and
recognized in other comprehensive income and the leasing receivables, mainly includes notes
receivables, accounts receivables, other receivables, creditor’s rights investment, other creditor’s
rights investment, long-term receivables, etc. In addition, for the contract assets and part of
the financial security contracts, the provisions for impairment and the recognition of credit
impairment losses shall be made in accordance with the accounting policies described in this part.
(1) The recognition method of provision for impairment
Based on the expected credit loss, the Company shall calculate the provision for
impairment and confirm the credit impairment loss in accordance with its applicable
expected credit loss measurement method for the above-mentioned items.

10. Impairment of Financial Assets (Continued)
(1) The recognition method of provision for impairment (Continued)
Credit loss refers to the difference between all contract cash flows receivable under
the contract discounted at the effective interest rate and all cash flows expected to be
collected, which is the present value of the entire cash shortage. The financial assets
purchased or produced by the Company with credit impairment shall be discounted
according to the effective interest rate of the financial assets after credit adjustment.
The general method of measuring the expected credit loss refers to whether the credit risk
of financial assets (including contract assets and other applicable items, the same below)
evaluated by the Company on each balance sheet date has increased significantly since the
initial recognition. If the credit risk has increased significantly since the initial recognition,
the Company shall measure the loss provision according to the amount equivalent to the
expected credit loss in the whole duration; If the credit risk has not increased significantly
since the initial recognition, the Company shall measure the loss provision according to the
amount equivalent to the expected credit loss in the next 12 months. The company shall
take into account all reasonable and substantiated information, including forward-looking
information, in the evaluation of expected credit losses.
For financial instruments with low credit risk on the balance sheet date, the Company
assumes that the credit risk has not increased significantly since the initial recognition and
chooses to measure the loss provision according to the expected credit loss in the next 12
months.
(2) Criteria for determining whether credit risk has increased significantly subsequent
to the initial recognition
If the probability of default of a financial asset within the expected duration as determined
on the balance sheet date is significantly higher than the probability of default within the
expected duration as determined at the initial recognition, the credit risk of the financial
asset increases significantly. Except in special cases, the Company shall use the change
of default risk in the next 12 months as a reasonable estimate of the change of default
risk in the whole duration to determine whether the credit risk has increased significantly
subsequent to the initial recognition.
(3) Portfolio approach to assessing expected credit risk on a portfolio basis
The company evaluates credit risk separately for the credit risk of significantly different
notes receivables, accounts receivables and other receivables with the following
characteristics. Such as: related party accounts receivable; accounts receivables in dispute
with the other party or involving litigation or arbitration; notes receivables, accounts
receivables that have shown clear signs that the debtor is likely to be unable to meet
repayment obligations.
In addition to the financial assets that assess credit risks individually, the Company divides
financial assets into different groups based on common risk characteristics and evaluates
credit risks on the basis of combination.

(4) Accounting treatment of the impairment of financial assets
At the end of the year, the Company calculates the expected credit loss of various financial
assets. If the expected credit loss is greater than the book value of the current provision for
impairment, the difference shall be recognized as impairment loss. If the expected credit
loss is less than the book value of the current provision for impairment, the difference shall
be recognized as an impairment gain.
(5) Method for determining the credit loss of financial assets
The Company conducts credit risk evaluation individually for notes receivable, accounts
receivable and other receivables with significantly different credit risks and the following
characteristics: amounts due from related parties; receivables that are in dispute with the
other party or involve litigation or arbitration; notes receivable and accounts receivable
with indications that the debtor is likely to be unable to perform the repayment
obligations, etc.
Based on the credit risk characteristics of the financial assets without credit impairment in
the single evaluation, the Company divides them into different portfolios:
① The determination basis of credit risk characteristic combination
Project Basis for determining the combination
Portfolio 1 Except for accounts receivable and other receivables

(aging portfolio) which have been separately measured for losses,
the Company shall consider the forward-looking
information and determine the loss reserve based
on the expected credit losses of accounts receivable
portfolios with similar credit risk characteristics
according to the same or similar age segments in
previous years.
Portfolio 2 Calculating notes receivable and other receivables with

(portfolio of financial minimal credit risk based on expected credit losses
assets with extremely
low credit risk)
Portfolio 3 Other receivables of related parties

(related party portfolio)
Portfolio 4 Deposits, advances, quality guarantee deposit,

(deposit portfolio) employee loans and other receivables that should be
collected in daily regular activities
Age analysis was based on the posting date.
② The company shall calculate its expected credit loss based on the expected duration
and recognize the loss reserve of financial assets according to the combination
in credit risk evaluation, the financial assets structure and similar credit risk
characteristics (the ability of the debtor according to the terms of the contract to
repay the arrears), combined with historical default loss experience, the current
economic situation and forward-looking information.

(5) Method for determining the credit loss of financial assets (Continued)
Methods of different combinations for measuring loss provision:
Project Methods of measurement
Portfolio 1 Expected duration

(aging portfolio)

(portfolio of financial
assets with extremely
low credit risk)

(related party portfolio)

(deposit portfolio)
③ The expected credit loss rate of each portfolio is shown below
Portfolio 1 (aging portfolio): expected credit loss rate
Accounts
receivable Other receivables
expected credit expected credit
Aging loss rate(%) loss rate(%)
Within 1 year (including 1 year,

the same below) 1.00 1.00
1 to 2 years 10.00 10.00
2 to 3 years 30.00 30.00
3 to 4 years 50.00 50.00
4 to 5 years 80.00 80.00
More than 5 years 100.00 100.00
Portfolio 2 (portfolio of financial assets with extremely low credit risk): Considering
the historical default loss experience, current economic conditions and forward-
looking information, the expected credit loss rate is 0.
Portfolio 3 (related party portfolio): Considering the historical default loss

experience, current economic conditions and forward-looking information, the
expected credit loss rate is 0.
Portfolio 4 (deposit portfolio): Considering the historical default loss experience,

current economic conditions and forward-looking information, the expected credit
loss rate is 0.

11. Inventories
(1) Category of inventories
Inventories mainly includes materials in transit, raw materials, work in progress, Semi-
finished goods, finished goods, low-value consumables, packaging materials, Consigned
processing material, goods on consignment, commodity stocks, goods in transit, etc.
(2) Method/formula used to assign cost for inventories
The inventory shall be initially measured at actual costs when acquired. The cost of
inventory comprises all costs of purchase, costs of conversion and other costs. Cost is
determined using the weighted average method. The cost of finished goods, commodity
stocks and work in progress comprises raw material, direct labor and overhead allocated
based on normal capacity.
(3) Recognition of net realizable value of inventory and accruing method of provision
for the loss on decline in value of inventories.
Net realizable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale and
relevant taxes. An enterprise shall determine the net realizable value of inventories based
on solid evidence obtained and after taking into consideration the purpose for which the
inventory is held, and the effect of events occurring after the balance sheet date.
Inventories are required to be measured at the lower of cost and net realizable value on
the balance sheet date. If the cost of inventories is higher than the net realizable value, the
provision for the loss on decline in value of inventories shall be made. The provision for the
loss on decline in value of inventory is assessed based on the difference between the cost
of single inventory item and its net realizable value.
After the provision for the loss on decline in value of inventories is made, if the
circumstances that previously caused inventories to be written down below cost no longer
exist so that the net realizable value of inventories is higher than their cost, the original
provision for the loss on decline in value is reversed and the reversal is included in current
profit or loss.
(4) The perpetual inventory system is adopted.
(5) Amortization method for low value consumables
Immediate write-off method is used for low value consumables upon usage.

12. Assets Held for Sale and Disposal Company
If the Company recovers its book value primarily through the sale instead of the continuous use
of a non-current asset or disposal group (including the exchange of non-monetary assets with
commercial substance, the same below), then the assets shall be classified as assets held for
sale. The specific criteria are all of the following conditions are achieved: a non-current asset or
disposal group can be sold immediately under the current conditions based on the practice of
selling such assets or disposal groups in similar transactions; the Company has already decided
on the sale plan and obtained the purchase commitment; the sale will be completed within one
year. Among them, a disposal group refers to a group of assets that are disposed of as a whole
through sale or other methods in a transaction, and liabilities that are directly related to these
assets are transferred in the transaction. If the asset group or asset group to which the disposal
group belongs is allocated the goodwill acquired in the business combination in accordance with
Accounting Standards for Business Enterprises No. 8 – Impairment of Assets, the disposal group
shall include the goodwill allocated to the disposal group.
Upon initial measurement or re-measurement of non-current assets held for sale or disposal
group on the balance sheet date, if the book value is higher than the net amount of fair value
minus sales expense, the book value shall be written down to the net amount of fair value
minus sales expense; the amount written down is recognized as impairment losses for assets
and included in current profit or loss. Meanwhile, impairment reserves for assets held for sale is
accrued. For the disposal group, firstly, the recognized impairment losses for assets deduct the
book value of the goodwill in the disposal group. Then the loss proportionally deducts the book
value of the various non-current assets in the disposal group under the measurement regulations
based on Accounting Standards for Business Enterprises No. 42 – Non-current Assets Held for
Sale, Disposal Companies and Termination of Operations (hereinafter referred to as the “holding
for sale”). If the fair value of the disposal group held for sale on the subsequent balance sheet
date minus the sales proceeds increases, the amount previously written down shall be recovered.
This part of amount should be reversed within the impairment losses of non-current assets which
are applicable for held for sale measurement criteria after these assets are classified as assets held
for sale. The reversal amount is recognized in current profit or loss. Meanwhile, the book value of
these non-current assets (except goodwill) in disposal group should be increased proportionally
according to the book value of each non-current asset which is applicable to held for sale
measurement criteria. The book value of goodwill that has been deducted and the impairment
losses recognized before the non-current assets classified as held for sale category cannot be
reversed.
Depreciation or amortization shall not be accrued for non-current assets held for sale or non-
current assets in the disposal group held for sale. The interest of liabilities and other expenses in
the disposal group held for sale shall be recognized.
When a non-current asset or disposal group no longer meets the conditions for the held for
sale category, the Company no longer divides it into the held for sale category or removes the
non-current assets from disposal groups held for sale., and the asset or asset group is measured
by the following two items: (1) the amount of book value classified as held for trading after
depreciation, amortization, impairment or other adjustments to be recognized based on the
hypothesis that they are not classified as held for trading; (2) the recoverable amount, whichever
is lower.

13. Long-term Equity Investments
Long-term equity investments in this part refers to the long-term equity investments that the
Company can exercise control, joint control or significant influence over the investee. When the
Company can no longer exercise control, joint control or significant influence over the investee,
the long-term equity investment shall be treated as financial asset measured at fair value through
profit or loss for the current year, and for non-transactional long-term equity investment among
which, the Company can designate it to be financial asset measured at fair value through other
comprehensive income upon initial recognition. Please refer to Note IV. 9. Financial instrument for
accounting policies.
Joint control refers to joint control owned by the Company over an arrangement as per relevant
agreements and relevant activities of this arrangement must be determined upon consent of
participants sharing the right of control. The term “significant influence” refers to the power to
participate in making determinations on the financial and operating policies of an investment
entity, but not to control or do joint control together with other parties over the formulation of
these policies.
(1) Recognition of Investment Cost
If the long-term equity investment is obtained from the business combination involving
enterprises under the common control, the share of book value of shareholder’s equity
of the acquiree in consolidated financial statements of the ultimate controlling party
under the combination date shall be deemed as the initial investment cost of the long-
term equity investment. The difference between the initial investment cost and the book
value of cash paid, non-cash assets transferred, and liabilities assumed shall be adjusted
to capital reserve. If the balance of capital reserve is not sufficient, any excess shall be
adjusted to retained earnings. If the Company issues equity securities as the consideration
for combination, the book value of the shareholder’s equity of the combined party on
the combination date in consolidated financial statements of the ultimate controlling
party shall be the initial investment cost of long-term equity investments. With the total
face value of the shares issued as equity, the difference between the initial investment
cost of long-term equity investment and the total face value of the shares issued shall be
adjusted as capital reserve. If the capital reserve is insufficient to set it off, the retained
earnings shall be adjusted. If shares of the acquiree are obtained step by step through
several transactions, which results in the combination of enterprises under the different
control, it shall be treated respectively as per whether it belongs to “a package deal”:
where it belongs to “a package deal”, the accounting treatment for each transaction shall
be conducted as a transaction obtaining the right of control. Where it does not belong
to “a package deal”, the book value of the shareholder’s equity of the acquiree on the
combination date in consolidated financial statements of the ultimate controlling party
shall be the initial investment cost of long-term equity investments. The difference among
the initial investment cost of long-term equity investments, the book value of long-term
equity investment which has reached the amount before the combination and total book
value of new payment consideration obtained under the acquisition date shall be adjusted
as capital reserve. If the capital reserve is insufficient to set it off, the retained earnings
shall be adjusted. As the other comprehensive income is measured under equity method or
recognized as financial assets measured at fair value through profit or loss for the current
year, the accounting treatment on the equity investments held before the combination
date shall not be conducted.

13. Long-term Equity Investments (Continued)
(1) Recognition of Investment Cost (Continued)
For long-term equity investment obtained through business combination not involving
enterprises under the common control, the cost of combination shall be deemed as the
initial investment cost of long-term equity investments on the acquisition date, and the
cost of combination is the aggregate of the fair values, include the assets given, liabilities
incurred or assumed, and equity securities issued by the acquirer. If shares of the acquiree
are obtained step by step through several transactions, which results in the combination
of enterprises under the different control, it shall be treated respectively as per whether
it belongs to “a package deal”: where it belongs to “a package deal”, the accounting
treatment for each transaction shall be conducted as a transaction obtaining the right
of control. Where it does not belong to “a package deal”, the sum of the book value of
equity investment of the acquiree held originally and additional investment costs shall
be initial investment costs of long-term equity investment if the accounting method is
changed as cost approach. If equity held originally is accounted for using equity method,
the accounting treatment shall not be conducted on the other comprehensive income
related to it.
The intermediary costs for the business combination including the expenses for audit, legal
services and consultancy services and other relevant management costs by the merging
party and the acquirer shall be recorded into current profit or loss.
Equity investments other than long-term equity investment from business combination
are initially measured at cost. Such cost is respectively recognized at the purchase price in
cash actually paid by the Company, fair value of equity securities issued by the Company,
specified value in investment contracts or agreements, fair value or original book value of
transferred assets in non-monetary asset exchange and transactions and fair value of the
long-term equity investment itself based on different means of acquiring that long-term
equity investment. Expenses, taxes and other necessary expenditures directly related to
the acquisition of long-term equity investment are also included into investment cost. In
case of being able to implement significant influence or common control to the invested
entity due to additional investment but which does not constitute control, cost of long-
term equity investment shall be the sum of fair value of original held equity investment
recognized as per the Accounting Standards for Business Enterprises No.22-Recognition
and Measurement of Financial Instruments and newly increased investment cost.
(2) Subsequent Measurement and Method of Recognition of Profit or Loss
Where an investing enterprise can exercise joint control (except those that constitutes the
joint operators) or significant influence over the investee, a long-term equity investment
shall be accounted for using the equity method. In addition, the Company uses the cost
model in the financial statements to calculate long-term equity investment that can control
the investee.
① Long-term Equity Investment Income Accounted by Cost Method
The long-term equity investment accounted by the cost model shall be measured
at the initial investment cost. And the additional or recovered investments shall
be used to adjust the cost of long-term equity investment. Except for the cash
dividends or distributions declared and not yet distributed in the considerations
paid to acquire the investment, the cash dividend or distributions declared by the
investee that belong to the investee shall be recognized as the investment gains.

(2) Subsequent Measurement and Method of Recognition of Profit or Loss (Continued)
② Long-term Equity Investment Accounted by Equity Method
If the initial cost of a long-term equity investment, accounted by equity method,

is more than attributable share of the fair value of the investee’s identifiable net
assets for the investment in the investee, the initial cost of the long-term equity
investment may not be adjusted; if the initial cost of a long-term equity investment
is less than the attributable share of the fair value of the investee’s identifiable
net assets for the investment in the investee, the difference shall be recorded into
current profit or loss and the cost of the long-term equity investment shall be
adjusted simultaneously.
When it is accounted by equity method, the investment gains and other

comprehensive incomes shall be recognized respectively, and the book value
of long-term equity investment shall be adjusted according to the net profit or
loss and other comprehensive incomes realized by the investee, which shall be
enjoyed or shared. The enjoyed part shall be accounted according to profits or
cash dividends announced to be assigned by the investee with the corresponding
decrease of the book value of long-term equity investment. For other changes of
shareholder’s equity excluding net profit or loss of investee, other comprehensive
income and profits distributed, the book value of long-term equity investments
shall be adjusted and included into capital reserve. The Company shall, on the
ground of the fair value of all identifiable assets of the investee when it obtains
the investment, recognize the attributable share of the net profit or loss of the
investee after it adjusts the net profits of the investee. If the accounting policies and
accounting period adopted by the investee do not consistent with the investor, the
financial statements of the investee shall be adjusted according to the accounting
policies and accounting periods of the Company, and according to which the
investment profits and other comprehensive incomes shall be recognized. If
investment and sales of assets cannot be constructed as business in transactions
between the Company, associates and joint ventures, the unrealized profit or loss
of internal transaction shall be offset through calculating the part attributable
to the Company based on sharing ratio so as to recognize the profit or loss of
investment. Where the unrealized losses from the internal transactions between
the Company and the invested entity belong to the impairment losses from the
transferred assets, they shall not be written off. Where the assets contributed by
the Company towards joint ventures or associates constitute business, and the
investor acquires long-term equity investment but not the control right thereof,
the fair value of the contribution shall be the initial investment cost of the newly
added long-term equity investment. The balance of book value between initial
investment cost and the contribution shall be recorded into current profit or loss in
full amount. If the assets sales, from the Company to joint ventures or associates,
constitute business, the total difference between consideration achieved and book
value of business shall be recorded into current profit or loss. Where the assets
purchased by the Company from associates and joint ventures constitute business,
accounting treatment shall be carried out based on Accounting Standards for
Business Enterprises No.20 – Business Combination and recognize the profit or loss
in relation to the transaction in full amount.

② Long-term Equity Investment Accounted by Equity Method (Continued)
The Company shall recognize the net losses of the investee until the book value
of the long-term equity investment and other long-term equity which substantially
forms the net investment made to the investee are reduced to zero. In addition,
if the Company has the extra obligation towards its investee to undertake extra
losses, the extra obligation shall be recognized as Provisions according to expected
obligation and recorded into current profit or loss. If the investee realizes any net
profits later, the Company shall, after the amount of its attributable share of profits
offsets against its attributable share of the unrecognized losses, resume recognizing
its attributable share of profits.
③ Minority Equity Purchase
When preparing consolidated financial statements, as for the difference between

the long-term equity investment increased newly due to purchase minority equity
and the net asset proportion continuously calculated from the purchase date (or
combination date) by subsidiary based and enjoyed by the Company based on
newly increasing shareholding ratio, capital reserve is adjusted. If the capital reserve
is insufficient to write down, the retained income shall be adjusted.
④ Disposal of Long-term Equity Investment
In the consolidated financial statements, the parent company disposes the

long-term equity investment of the subsidiary without losing control right. The
difference between the disposing amount and the net asset of the subsidiary
enjoyed correspondingly in disposing long-term equity investment is recorded into
shareholder’s equity; If the parent company loses its control right on the subsidiary
due to the disposal of the long-term equity investment of the subsidiary, the
relevant accounting policy as indicated in Note IV, 5(2) “Method of Preparation of
Consolidated Financial Statements” shall be followed for handling.
When disposing of a long-term equity investment under other circumstances, for

equity being disposed, the difference between its book value and actual purchase
price shall be recorded into current profit or loss.
If long-term equity investment is accounted by equity method while the residual

equity after disposal is still accounted for by equity method, the accounting
treatment of other comprehensive income included in shareholder’s equity
originally shall be conducted as per proportion on the same base as investee
disposes of relevant assets and liabilities directly. Other shareholder’s equity, which
is recognized for changes of other shareholder’s equity of the investee excluding
net profit or loss, other comprehensive incomes and profits distribution, shall be
translated into current profit or loss as per proportion.

④ Disposal of Long-term Equity Investment (Continued)
If long-term equity investment is accounted by the cost model while the residual
equity after disposal is still accounted by the cost model, the accounting treatment
of other comprehensive incomes which are recognized for being accounted by
equity method or recognition and measurement standards of financial instruments
shall be conducted on the same base as investee disposes of relevant assets and
liabilities directly, and other comprehensive incomes shall be carried over into
current profit or loss as per proportion. Owners’ equity, which is recognized for
changes of other shareholder’s equity of the investee excluding net profit or loss,
other comprehensive incomes and profits distribution when the equity method is
adopted, shall be carried over into current profit or loss as per proportion.
When the Company loses the control over investee for disposal of some shares,
the accounting method shall be changed as equity method in compiling individual
financial statements and the remaining shares shall be deemed to be adjusted by
equity method upon being obtained if the remaining shares after disposal still have
joint control or significant impacts on investee. While the remaining shares after
disposal do not have joint control or significant impacts on investee anymore, the
accounting treatment shall be conducted as per regulations related to recognition
and measurement standards of financial instruments and its difference between
fair value and book value on the date of losing the control shall be included
into current profit or loss. For other comprehensive income recognized as being
accounted by equity method or recognition and measurement standards of
financial instruments before the Company obtains the control over investee, its
accounting treatment shall be conducted on the same base as investee disposes
of relevant assets and liabilities directly upon losing the control over investee, and
other shareholder’s entity in net assets of investee accounted for by equity method,
excluding net profit or loss, other comprehensive income and profits distribution,
shall be carried over into current profit or loss in the event of losing the control
over investee. Of which, if the residual equity investment after disposal is calculated
by equity method, other comprehensive income and shareholder’s equity shall
be transferred by proportion; where the residual equity investment after disposal
changes to be conducted with accounting treatment according to standard of
recognition and measurement of financial instruments, other comprehensive
income and shareholder’s equity shall be transferred.
Where the Company’s common control or significant influence over the investee
is lost due to the disposal of partial equity investment, the residual equity after
disposal will change to be calculated by standard of recognition and measurement
of financial instruments, the balance between the fair value and book value thereof
on the date the common control or significant influence is lost shall be included
into current profit or loss. Other comprehensive income recognized by calculating
original equity investment by equity method shall go through accounting treatment
on the same basis on which the investee directly disposes the relevant assets
or liabilities when ceasing to use equity method; for the shareholder’s equity
recognized by other changes on shareholder’s equity rather than net profit or
loss, other comprehensive income and profit distribution of the investee shall be
transferred into current investment income when ceasing to use equity method.

④ Disposal of Long-term Equity Investment (Continued)
If the Company’s disposal of equity investments in a subsidiaries leading to losing

control, the foregoing transaction is package deal, accounting treatment shall be
conducted for each transaction as the transaction that the disposal of the subsidiary
with loss of control right; before loss of control right, the difference between each
price disposal and the book value of long-term equity investment correspondingly
in equity disposed shall be firstly recognized in the other comprehensive income
and then wholly transferred into current profit or loss when losing control right.
14. Investment Property
Investment property is property held to earn rentals or for capital appreciation or both, including
the land use rights which have been rented, land use right held for transfer after capital gain, and
buildings which have been rented.
Investment property is measured initially at cost. Subsequent costs related to investment property
are recognized in the cost of the investment property, if the economic benefits of the asset will
probably flow in and the cost can be measured reliably. Other subsequent costs are recognized
through profit or loss in the periods in which they are incurred.
After initial recognition, the Company uses the cost model to measure the investment property,
and depreciates and amortizes the investment property according to provisions that buildings
should be consistent with land use rights.
Please refer to Note VI. 21 “Long-term Asset Impairment” for the methods of impairment test
and preparing provisions for the impairment of investment property.
When an owner-occupied property or an inventory are transferred into an investment property,

or when an investment property is transferred into an owner-occupied property, the book value
prior to the transfer is recognized as the book value after the transfer.
When an investment property is transferred into an owner-occupied property, the investment

property is reclassified as fixed asset or intangible asset since the date of transfer. When the
purpose of an owner-occupied property is transferred to generate rent or receive capital gain, the
fixed asset or the intangible asset is transferred to investment property since the date of transfer.
After the transfer, investment property measured at cost, recognizes the book value prior to the
transfer as the book value after the transfer; for investment property transferred to be measured
under fair value model, the fair value at the transfer date shall be recognized as the book value
after transfer.
An investment property shall be derecognized on disposal or when the investment property is

permanently withdrawn from use and no future economic benefits are expected from its disposal.
Gains or losses arising from the retirement or disposal of investment property shall be determined
as the difference between the net disposal proceeds and the book value of the asset and shall be
recognized in profit or loss in the period of the retirement or disposal.

15. Fixed Assets
(1) Recognition Criteria of Fixed Assets
Fixed assets are tangible assets that are held for use in the production or supply of services,
for rental to others, or for administrative purposes, and have useful lives of more than
one accounting year. A fixed asset is recognized only when it is probable that economic
benefits associated with the asset will flow to the Company and the cost of the asset
can be measured reliably. Fixed assets are initially measured at cost and the effect of any
expected costs of abandoning the asset at the end of its use is considered.
(2) Depreciation Method of Fixed Assets
From the next month of bringing the fixed asset to the expected conditions for use, the
fixed assets are depreciated using the straight-line method over their estimated useful
lives. Estimated useful life net residual value rate and annual depreciation rate of each
category of fixed assets are as follows:
Depreciation Annual
Depreciation period Residual depreciation
Category Method (years) rate (%) rate (%)
Buildings Straight-line method 10-70 0~10 1.29~10

Machinery Straight-line method 4-18 0~10 5~25
equipment
Transportation Straight-line method 5-10 0~10 9~20
equipment
Electronic Straight-line method 5-10 0~10 9~20
equipment
Office equipment Straight-line method 4-8 0~10 11.25~25
Decoration Straight-line method 5 0 20
Estimated net residual value of a fixed asset is the estimated amount that the Company
would currently obtain from disposal of the asset, after deducting the estimated costs of
disposal, if the asset were already of the age and in the condition expected at the end of
its useful life.
(3) Impairment Testing and Accounting Treatment
As for impairment testing method and accounting treatment, please refer to Note IV. 21
“Long-term Asset Impairment”.
(4) Recognition and Measurement of Fixed Assets under Finance Lease
A finance lease is a lease that transfers in substance all the risks and rewards incidental
to ownership of an asset. Title may or may not eventually be transferred. As for the fixed
assets under finance lease, the lessee shall adopt a depreciation policy for leased assets
consistent with that for depreciable assets which are owned by the lessee in calculating
the depreciation of a leased asset. If it is reasonable to be certain that the lessee will obtain
the ownership of the leased asset when the lease term expires, the leased asset shall be
fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will
obtain the ownership of the leased asset at the expiry of the lease term, the leased asset
shall be fully depreciated over the shorter one of the lease terms or its useful life.

15. Fixed Assets (Continued)
(5) Others
The subsequent expenses related to a fixed asset, if the economic benefits pertinent to the
fixed asset are probably to flow into the enterprise and the cost of the fixed asset can be
measured reliably, shall be included in the cost of the fixed asset and the book value of the
replaced parts shall be derecognized. Any other subsequent expenses shall be recorded
into current profit or loss.
If a fixed asset is upon disposal or no future economic benefits are expected to be

generated from its use or disposal, the fixed asset is derecognized. When a fixed asset is
sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset
net of the carrying value and related taxes is recognized in current profit or loss.
The Company reviews the useful life and estimated net residual value of a fixed asset and
the depreciation method applied at least once at the end of each financial year and treats
the changes as changes of in accounting estimate.
16. Construction in Progress
The cost of construction in progress is recognized based on actual project expenditure, including
each project expenditure during the construction, capitalized borrowing costs before the
construction get ready for its intended use and other relevant expenses.
When a construction in progress is available for use, it is recognized in fixed assets and
depreciated from the next months. The construction budget, construction cost, construction
actual cost, etc. of a construction in progress, which is available for use but not yet completed
the final accounts, is recognized at the estimated cost in fixed assets since the date when it is
available for use. Provision for depreciation is accrued according to the Company’s depreciation
policies of fixed assets. The estimated value is adjusted to actual costs subsequent to the
completion of settlement.
Please refer to Note IV. 21 “Long-term Asset Impairment” for the impairment test method and
impairment provision method of construction in progress.
17. Borrowing Costs
Borrowing costs include interest, amortization of discounts or premiums related to borrowings,

ancillary costs incurred in connection with the arrangement of borrowings, and exchange
differences arising from foreign currency borrowings. Where the borrowing costs incurred to an
enterprise can be directly attributable to the acquisition and construction or production of assets
eligible for capitalization, they shall be capitalized: (i) Where the expenditures for the asset are
being incurred; (ii) Where the borrowing costs are being incurred; and (iii) where the construction
activities which are necessary to prepare the asset for its intended use or sale have commenced
capitalization of borrowing costs shall cease when the qualifying asset being acquired,
constructed or produced becomes ready for its intended use or sale. Other borrowing costs shall
be recognized as expenses in the period in which it is incurred.

17. Borrowing Costs (Continued)
The amount of interest of specific-purpose borrowings to be capitalized shall be the actual

interest expense incurred on that borrowing for the period less any bank interest earned from
depositing the borrowed funds before being used on the asset or any investment income on the
temporary investment of those funds. An enterprise shall determine the amount of interest to
be capitalized on general-purpose borrowings by applying a capitalization rate to the weighted
average of the excess amounts of cumulative expenditures on the asset over and above the
amounts of specific-purpose borrowings. The capitalization rate shall be the weighted average of
the interest rates applicable to the general-purpose borrowings.
During the period of capitalization, the exchange differences on foreign currency specific-
purpose borrowings shall be all capitalized; the exchange differences on foreign currency general-
purposes borrowings shall be recorded into current profit or loss.
Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily
take a substantial period of time for acquisition, construction or production to get ready for their
intended use or sale.
Capitalization of borrowing costs shall be suspended during periods in which the acquisition,
construction or production of a qualifying asset is interrupted abnormally, when the interruption
is for a continuous period of more than 3 months until the acquisition, construction or production
is resumed.
18. Intangible Assets
(1) Intangible Assets
An intangible asset is an identifiable non-monetary asset without physical substance

owned or controlled by the Company.
The intangible assets shall be initially measured at cost. The expenses pertinent to an
intangible asset shall form part of the cost of the intangible assets, if it is probable that
the economic profit related to the asset will flow to the Company and the cost can be
measured reliably. In addition, the expenditure of other items shall be recorded into
current profit or loss in the period in which it is incurred.
The acquisition of land use right is usually recognized as intangible assets for accounting
purposes. Building such as self-constructed plant, relevant expenditure incurred for
obtaining land use right and construction cost of the building shall be recognized as
intangible asset and fixed asset for accounting purposes. Cost incurred on purchased
building shall be allocated between land use right and building. The cost shall be
recognized as fixed asset if it cannot be reasonably allocated.
An intangible asset with a finite useful life shall be amortized using straight line method
based on the original value, less estimated residual value and the accumulative amount
of impairment provision within the estimated useful life. An intangible asset with an
indefinite useful life shall not be amortized.
At the end of the period, it is necessary to review the useful life and amortization method
of the intangible asset with limited useful life. In case of any change, it shall be treated
as changes in accounting estimation. In addition, according to the available conditions,
Intangible assets with conclusive evidence that cannot be reasonably estimated for their
useful lives shall be recognized as intangible asset with uncertain useful life.

18. Intangible Assets (Continued)
(1) Intangible Assets (Continued)
The Company owns the trademarks of Baiyunshan, Dashen products and series of Xing
Qun, Zhong Yi, Pan Gao Shou, Chen Li Ji, Jing Xiu Tang, Qi Xing, Jianzhiqiao, Guo Ying,
Jian Min, etc. The Company believes that these product trademarks shall be used and
bring expected economic benefits inflows in the foreseeable future. Therefore, these
trademarks are recognized as intangible assets with uncertain useful life.
(2) Research and development expenditure
The expenditures of the research and development project inside the Company can be
divided into research expenditure and development expenditure.
The specific qualifying criteria for the classification of expenditure on the research phase
and expenditure on the development phase is as follows: Expenditures on the research
phase are all the expenditures incurred before the commencement of Phase III clinical
trial for the medicine (including new medicines and changes in the form of the original
medicines). Commencement of Phase III clinical trial is determined based on the approval
by authorities.
Expenditures on the development phase are all the attributable expenditures incurred after
the commencement of Phase III clinical trial for the medicine (including new medicines and
changes in the form of the original medicines). Commencement of Phase III clinical trial is
determined based on the approval by authorities.
Research expenditures shall be recorded into profit or loss for the periods in which the
expenditures are incurred.
Development expenditures are capitalized when the all following conditions are met,
otherwise it will be recorded into the profits and losses in the current year:
① the technical feasibility of completing the intangible asset so that it will be available
for use or sale;
② its intention to complete the intangible asset and use or sell it;
③ how the intangible asset will generate economic benefits. Among other things,
the enterprise can demonstrate the existence of a market for the output of the
intangible asset or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset;
④ the availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
⑤ its ability to measure reliably the expenditure attributable to the intangible asset
during its development phase.
If the expenditures cannot be distinguished between research phase and development

phase, the Company recognizes all expenditures into current profit or loss.

(3) Impairment test method and impairment provision assessing method of intangible
asset
Please refer to Note IV. 21 “Long-term Asset Impairment” for the impairment test method
and impairment provision method of intangible asset.
19. Long-Term Prepaid Expenses
Long-term prepaid expenses include expenses such as improvements on leasehold fixed assets
and expenses that have been occurred but borne in the current year and in the subsequent
periods with amortization term of over one year. Amortization is carried out over the expected
beneficial period, and disclosed as the net value of the actual expenditures minus accumulated
amortization.
20. Contract Liability
Contract liabilities refer to the Company’s obligation to transfer goods to customers for
consideration received or receivable from customer. If the customer has paid contract
consideration or the Company has obtained unconditional right to receive payment prior to the
Company transferring goods to the customer, the Company shall recognize payment received or
receivable into contract liabilities at the earlier date between the date when the customer makes
payment or the due date of payment. Contract assets and contract liabilities under the same
contract shall be disclosed in net value. Contract assets and contract liabilities under different
contracts cannot be offset.
21. Long-term Asset Impairment
The Company assesses impairment indicators for fixed asset, construction in progress, the
intangible asset with limited service life, the investment properties measured at cost pattern, the
long-term equity investment in subsidiaries, associates and joint ventures and the non-current and
non-financial asset, such as goodwill on the balance sheet date. If the Company finds evidence
on asset impairment, the recoverable amount of the asset shall be measured, and impairment test
shall be conducted. Impairment test shall be conducted annually for goodwill, the intangible asset
with uncertain service life and the intangible asset not reaching available condition, no matter
there is impairment indication.
Where the measurement result of the impairment test indicates that an asset’s recoverable
amount is lower than its book value, impairment reserve shall be withdrawn based on its
differences and recorded into the impairment loss. The recoverable amount shall be determined
on the basis of the higher one of the net amounts of the fair value of the asset minus the
disposal expenses and the present value of the expected future cash flow of the asset. The
fair value of asset is recognized based on the price as stipulated in the sales agreement in the
fair transaction; where there is no sales agreement but there is an active market of assets, the
fair value is recognized based on the price bidden by the buyer of the asset; where there is no
sales agreement and no active market of assets, the fair value of an asset shall be estimated in
light of the best information available of asset. The disposal expenses shall include the relevant
legal expenses, relevant taxes, truckage as well as the direct expenses for bringing the assets
into a marketable state. The present value of the expected future cash flow of an asset shall
be determined by the discounted cash with an appropriate discount rate, on the basis of the
expected future cash flow generated during the continuous use or final disposal of an asset.
Asset impairment provision is calculated and recognized based on single asset. In case of the
difficulty to estimate the recoverable amount of single asset, the recoverable amount of asset
group is recognized in accordance with the asset group that such asset belongs to. The asset
group refers to the minimum asset portfolio that can independently generate cash inflow.

21. Long-term Asset Impairment (Continued)
When conducting impairment test for goodwill separately listed in financial statements, the book
value of the goodwill shall be apportioned to asset groups or asset group portfolios which are
expected to benefit from the synergistic effect of business combination. When the test result
indicates that the recoverable amount of asset groups or asset group portfolios containing
goodwill apportioned is less than its book value, relevant impairment loss of goodwill shall be
recognized. The impairment loss of goodwill shall offset the book value of the portion of goodwill
apportioned to the asset groups or asset group portfolios, and then offset the book value of
other assets according to the proportion of the book value of other asset in asset groups or asset
group portfolios after deducting the goodwill.
Once the above asset impairment loss is confirmed, the part that the value is restored in the
future period is not allowed to be transferred back.
22. Employee Benefits
The employee benefits of the Company mainly include short-term employee benefits, post-
employment benefits, termination benefits, and other long-term employee benefits, including:
Short-term benefits mainly include employee salaries, bonus, allowances and subsidies, staff
welfare, social insurance contributions such as premiums or contributions on medical insurance,
maternity insurance premiums, work injury insurance, housing funds, labor union running cost,
employee education costs, non-monetary benefits, etc. The Company shall recognize, in the
accounting period in which an employee provides service, actually occurred short-term employee
benefits as a liability, with a corresponding charge to profit or loss for the current year or in the
cost of relevant asset. Where, the non-monetary benefits shall be measured at its fair value.
The domestic enterprises of the Company pay basic pension insurance and unemployment
insurance for employees according to the relevant regulations of the local government. In the
accounting period in which the employees of the Company’s domestic enterprises provide
services to the Company, the payment shall be calculated according to the local payment base
and proportion, and confirmed as liabilities, which are included in current profit or loss or related
asset costs.
In addition to the basic pension insurance, most of the domestic enterprises of the Company have
established an enterprise annuity plan based on the relevant policies of the national enterprise
annuity system. The company pays the enterprise annuity according to a certain proportion of the
total wages of the employees, and the corresponding expenses are included in the current profit
and loss or related asset costs.
The Company’s Hong Kong company, Guangzhou Pharmaceuticals Baiyunshan Hong Kong
Company, provides mandatory provident fund contributions to eligible Hong Kong employees
in accordance with the Mandatory Provident Fund Schemes Ordinance of Hong Kong. The
cost settlement of all plans is deducted from the income statement for the relevant period. The
planned assets are held independently by independently managed funds and managed separately
from the assets of the Company. At the same time, according to the Employment Ordinance
of Hong Kong, for an employee who is eligible to receive a long service payment at the time of
termination of employment, such payment shall be made when the employment is terminated.
The Guangzhou Pharmaceutical Baiyunshan Hong Kong Company has made provision for long-
term service payments that are expected to be paid in the future. The provision is calculated
based on the estimation of the best service wages might be earned by the employee for
rendering of services to the Company as of the settlement date.

22. Employee Benefits (Continued)
Where the labor relationship with employees is terminated prior to the expiration of the labor
contract with employees, or compensation suggestions are made to encourage employees to
accept the cutback voluntarily, the employee payroll liabilities incurred by the dismissal welfare
shall be recognized and recorded into the current profit or loss when the Company cannot
withdraw unilaterally the dismissal welfare provided for the termination plan of labor relations
or cutback suggestions, or when the Company recognizes the cost related to reorganization
involving the payment of dismissal welfare, whichever is earlier. However, if it is anticipated that
the dismissal welfare cannot be fully paid within 12 months after the end of the annual report
period, such welfare shall be handled as other long-term Employee Payroll.
The internal retirement plan for employee shall be treated by the same principle as the above
dismissal welfare. The Company will pay the salary and contribute social insurance for the internal
retirement from the service stopped to be provided by such employee to normal retirement.
Such fee is recorded in the current profit or loss (dismissal welfare) when conforming to the
reorganization condition of estimated liability.
Accounting treatment shall be conducted on other long-term employee payrolls provided to

employees by the Company according to defined contribution plans if such plans are conformed,
and besides, accounting treatment shall be conducted according to defined benefit plans.
23. Provisions
An obligation related to a contingency shall be recognized as an estimated liability when all of the
following conditions are satisfied: (1) the obligation is a present obligation of the enterprise; (2) it
is probable that an outflow of economic benefits will be required to settle the obligation; and (3)
the amount of the obligation can be measured reliably.
As at the balance sheet date, the contingent liabilities shall be initially measured in accordance
with the best estimate of the necessary expenses for the performance of the current obligation.
To determine the best estimate, the Company shall take into full consideration the risks,
uncertainty, time value of money, and other factors pertinent to the contingencies. Where the
effect of the time value of money is material, the best estimate is determined by discounting the
related future cash outflows. The increase in the discounted amount of the provision arising from
passage of time is recognized as interest expense.
Where all or some of the expenditure required to settle a provision is expected to be

reimbursed by a third party, the reimbursement shall be recognized as a separate asset only
when it is virtually certain that reimbursement will be received. The amount recognized for the
reimbursement shall not exceed the book value of the provision.
24. Revenue
If the following conditions are met by the contract between the Company and the customer,
revenue is recognized when the customer obtains control over relevant products: (a) the parties
to the contract have approved the contract and are committed to perform their respective
obligations; (b) each party’s rights regarding the goods or services to be transferred have been
specified in the contract; (c) the entity can identify the payment terms for the goods or services
to be transferred; (d) the contract has commercial substance, such as the risk, timing or amount
of the entity’s future cash flows is expected to change as a result of the contract; and (e) it is
probable that the entity will collect the consideration to which it will be entitled in exchange for
the goods or services that will be transferred to the customer.

24. Revenue (Continued)
At the starting date of contract, the Company recognizes individual performance obligations in
the contract, and allocates transaction price into each individual performance obligation based on
the relevant proportion of the price of good promised in each individual performance obligation
when selling separately. The influence of factors such as variable consideration, the existence
of a significant financing component in the contract, non-cash consideration, and customer
consideration payables are taken into consideration when determining the transaction price.
For each individual performance obligations in the contract, the transaction price shall be
recognized into revenue based on performance progress of each individual performance
obligation within relevant performance period when one of the following conditions is met: (a)
Customer can obtain and consume the economic benefit from the performance of the company
at the same time the company performs the contractual obligations; (b) Customer has control
over the work in progress when the company performs the contractual obligations; (c) The
goods produced from the company’s performance of contractual obligations have irreplaceable
application. And the company are entitled to receive payments for the accumulated completed
portion of the whole contract. Methods of measuring progress include output methods and
input methods. When progress cannot be reliably measured, if the cost incurred is expected to be
compensated, the amount of cost incurred shall be recognized as revenue until the progress can
be reliably measured.
If none of the above-mentioned conditions are met, the portion of transaction price allocated to
the individual performance obligation shall be recognized as revenue when the customer obtains
the control over relevant goods. When judging whether the customer has obtained the right to
control the goods, the enterprise shall consider the following indications: (a) The enterprise is
entitled to charge for the goods at present, that is, the customer is obliged to pay for the goods
at present; (b) The enterprise has transferred the legal ownership of the goods to the customer,
that is, the customer has obtained the legal ownership of the goods; (c) The enterprise has
transferred physical possession of the goods to the customer, that is, the customer has physical
possession of the goods; (d) The enterprise has transferred the major risks and rewards of the
ownership of the goods to the customer, that is, the customer has obtained the major risks and
rewards of the ownership of the goods; (e) The customer has accepted the goods; (f) Other
indications showing that the customer has obtained the right to control the goods.
(1) Sale of goods
Revenue from the sale of goods shall be recognized when the Company has transferred
the control of goods to the customer.
(2) Rendering of services
The revenue from rendering of services is recognized according to the period in which
services are provided.
(3) Transfer of asset use rights
Income from transfer of asset use rights include:
① License fee income is recognized when the right to receive payment is established
over the grand period;
② Income from an operating lease is recognized on a straight-line basis over the

period of the lease.

25. Government Grants
Government grants are transfer of monetary assets or non-monetary assets from the government
to an enterprise at no consideration. However, capital contributions from the government as an
owner of the enterprise are excluded. The government grant is classified into government grant
related to assets and government grant related to incomes. Government grants of monetary
assets are measured at the amount received or receivable. Government grants of non-monetary
assets are measured at fair value. If reliably fair value cannot be obtained, nominal amount shall
be used for measurement. Government grants measured at nominal amount shall be recognized
through profit or loss for the current year.
The specific standard that the Company make classification of the asset-related grants:
Government’s documents defined the grants are used to purchase fixed assets or intangible
assets, or the financial discounts of specific borrowing, or the grants is undefined by
government’s documents but is related to the form of long-term assets of the enterprise.
The specific standard that the Company make classification of the income-related grants: It shall
be defined to the income-related when not consistent with standard of asset-related grants.
For government grants not clearly specifying subsidy object, basis of determination for asset
related government grants or income related government grants are: government grants not
clearly specifying subsidy object, but with sufficient evidence indicating that the government
supporting fund is related to the formation of long-term asset, shall be recognized as asset
related government grant. The others shall be recognized as income related government grant.
The assets-related government grants shall reduce assets-related book value or shall be
recognized as deferred income. For those recognized as deferred income, charged into current
profit or loss on stages using reasonable and systemic methods during its assets-related useful
lives (government grants related to ordinary business of the Company shall be charged into
other income; those not related to ordinary business of the Company shall be charged into non-
operating income)
The income-related government grants for compensation to the related expenses or loss of the
Company in the subsequent periods shall be recognized as deferred income and current profit
or loss during the recognition of related expenses or loss(government grants related to ordinary
business of the Company shall be charged into other income; those not related to ordinary
business of the Company shall be charged into non-operating income) or shall offset related
expenses or loss; those for compensation to the related expenses or loss incurred of the Company
shall be recognized as current profit or loss(government grants related to ordinary business of
the Company shall be charged into other income; those not related to ordinary business of the
Company shall be charged into non-operating income) or shall offset related expenses or loss.
For government grants not clearly specifying subsidy object, basis of determination for asset
related government grants or income related government grants are: government grants not
clearly specifying subsidy object, but with sufficient evidence indicating that the government
supporting fund is related to the formation of long-term asset, shall be recognized as asset
related government grant. The others shall be recognized as income related government grant.
The government subsidies that contain both the portion pertinent to assets and the portion
pertinent to income shall be subject to accounting treatment respectively according to different
portions; and those that are difficult to be distinguished shall be classified as the government
subsidies pertinent to income related as a whole.

25. Government Grants (Continued)
The government subsidies pertinent to the daily activities of the Company shall be included in
other income or used to offset relevant costs and expenses according to the substance of the
economic business. The government subsidies irrelevant with the daily activities of the Company
shall be included in non-operating revenues and expenses.
If it is necessary to refund any government subsidy which has been recognized, and there is
deferred income, the book balance of the deferred income shall be offset, and the excessive part
shall be included in the current profits and losses, or if the book value of relevant assets is offset
against when the government subsidy is initially recognized, the book value of the assets shall
be adjusted. Under any other circumstance, it shall be directly included in the current profits and
losses.
26. Deferred Tax Assets/Deferred Tax Liabilities
(1) Current Income Tax
On the balance sheet date, the current tax liabilities (or assets) incurred in the current year
or prior years shall be measured in light of the expected payable (refundable) amount of
income taxes according to the tax law. The taxable income of enterprises, the basis of the
measurement of the current tax, shall be measured according to the adjusted accounting
profit before tax for current year by tax law.
(2) Deferred tax assets and deferred tax liabilities
As for the temporary difference arising from the difference between the book value of
some asset or liability and its tax base and the difference between the book value of an
item that has not been recognized as an asset or liability with its tax base determined in
light of the tax law and its tax base, it is allowed to recognize it as the deferred income tax
assets or the deferred income tax liabilities by balance sheet liability method.
For temporary differences associated with the initial recognition of goodwill and the initial
recognition of an asset or liability arising from a transaction (not a business combination)
that affects neither the accounting profit nor taxable profits (or deductible losses) at
the time of transaction, no deferred tax asset or liability is recognized. Besides, deferred
tax liabilities will not be recognized for taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, except where the Company can
control the timing of the reversal of the temporary difference and it is probable that the
temporary difference will not be reversed in the foreseeable future. Except the above-
mentioned cases, the deferred tax liabilities generated from other all taxable temporary
difference are recognized by the Company.
Related to the initial recognition of the assets or liabilities arising from the following
transactions that is not business combination and the accounting profits will not be
affected, nor will the taxable amount (or the deductible loss) be affected at the time of
transaction, the deductible temporary differences are not allowed to recognize relevant
deferred tax assets. As for the deductible temporary differences related to the investments
in a subsidiary, associated enterprises and joint enterprises, corresponding deferred tax
asset shall not be recognized if the temporary differences are unlikely to be reversed in the
excepted future and it is likely to acquire any amount of taxable income tax that may be
used for making up the deductible temporary differences. Except the above-mentioned
cases, the Company shall recognize the deferred tax liabilities arising from a deductible
temporary difference to the extent of the amount of the taxable income which it is most
likely to obtain, and which can be deducted from the deductible temporary difference.

26. Deferred Tax Assets/Deferred Tax Liabilities (Continued)
(2) Deferred tax assets and deferred tax liabilities (Continued)
As for any deductible loss or tax deduction that can be carried forward to the next year,
the corresponding deferred tax assets shall be recognized to the extent that the amount
of future taxable income to be offset by the deductible loss or tax deduction to be likely
obtained.
On the balance sheet date, the deferred tax assets and deferred tax liabilities shall be
measured at the tax rate applicable to the period during which the assets are expected to
be recovered or the liabilities are expected to be settled.
The book value of deferred tax assets shall be reexamined at the balance sheet date. If it
is unlikely to obtain sufficient taxable income taxes to offset the benefit of the deferred
tax assets, the book value of the deferred tax assets shall be written down. When it is
probable to obtain sufficient taxable income taxes, such write-down amount shall be
subsequently reversed.
(3) Tax expenses
Tax expenses include current tax and deferred tax.
Except that other comprehensive income is recognized, the current tax and deferred
income tax related to the transactions or events directly recorded in the other
comprehensive income or shareholders’ equity and the book value of goodwill is adjusted
due to the deferred income tax arising from business combination, other current taxes and
deferred income tax expenses or incomes are recorded in the profit or loss for the period.
(4) Offset of Income Tax
When the Company has a legal right to settle on a net basis and intends either to settle on
a net basis or to realize the assets and settle the liabilities simultaneously, current tax assets
and current tax liabilities are offset and presented on a net basis.
When the Company has a legal right to settle current tax assets and liabilities on a net
basis, and deferred tax assets and deferred tax liabilities relate to income taxes levied by
the same taxation authority on either the same taxable entity or different taxable entities
which intend either to settle current tax assets and liabilities on a net basis or to realize
the assets and liabilities simultaneously, in each future period in which significant amounts
of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and
deferred tax liabilities are offset and presented on a net basis.

27. Lease
A finance lease is a lease that transfers in substance all the risks and rewards incidental to
ownership of an asset. Title may or may not eventually be transferred. All other leases are
classified as operating leases.
(1) Accounting Treatments of Operating Leases for Lessees
The rents from operating leases shall be recorded by the lessee in the relevant asset costs
or the current profits or losses by using the straight-line method over each period of the
lease term. Initial direct costs incurred are recorded into current profit or loss. Contingent
rents are charged to profit or loss for the current year in which they are actually incurred.
(2) Accounting Treatments of Operating Leases for Lessors
Rental income from operating leases is recognized in profit or loss on a straight-line basis
over the term of the relevant lease. The initial direct costs with a larger amount shall be
capitalized when they actually arise and recorded, on a phased basis, into the current
profit or loss on the ground of the recognized rent revenue during the whole lease term;
and the other ones with a smaller amount shall be directly recorded into current profit
and loss. Contingent rents are charged to profit or loss in the current year in which they
actually arise.
(3) Accounting Treatments of Finance Leases for Lessees
The Company shall, on the commencement of the lease term, record the leased asset at
an amount equal to the lower of the fair value of the leased asset and the present value
of the minimum lease payments at the inception of the lease, and recognize a long-term
payable at an amount equal to the minimum lease payments. The difference between the
recorded amounts is accounted for as unrecognized finance charge. Besides, initial direct
costs that are attributable to the leased item incurred during the process of negotiating
and securing the lease agreement are also added to the amount recognized for the leased
asset. The net amount of minimum lease payments less unrecognized finance charges is
separated into long-term liabilities and the portion of long-term liabilities due within one
year for presentation.
Unrecognized finance charges are recognized as finance charge for the period using the
effective interest method over the lease term. The contingent rents shall be recorded into
current profit or loss in which they actually arise.
(4) Accounting Treatments of Finance Leases for Lessors
A lessor shall, on the commencement date of the lease term, recognize the sum of
the minimum lease receipts on the lease beginning date and the initial direct costs as
the entering value in an account of the finance lease values receivable, and record the
unguaranteed residual value at the same time. The balance between the sums of the
minimum lease receipts, the initial direct costs and the unguaranteed residual value,
and the sum of their present values shall be recognized as unrealized financing income.
The balances between the finance lease receivable minus unrealized financing profit are
recognized in long-term liabilities and long-term liabilities due within one year respectively.
The unrealized financing profit in the lease period shall adopt the effective interest rate
method to calculate and recognize the financing income in the current year. Contingent
rents are recorded into profit or loss for the current year in which they are actually
incurred.

28. Other Important Accounting Policies and Accounting Estimates
(1) Discontinued operations
Discontinued operations is a component that meets one of the following conditions and
can be separately distinguished and disposed of by the Company or classified as held
for sale: ① this component represents an independent principal business or a separate
principal operation area; ② this component is part of an associated program to be
disposed of for an independent main business or a separate main business area; ③ this
component is a subsidiary acquired for resale.
For the accounting treatment of discontinued operations, please refer to the descriptions
in Note IV. 12. “Assets Held for Sale and Disposal Company”.
29. Significant Changes in Accounting Policies and Accounting Estimates
(1) Changes in accounting policies
① Changes in accounting policies due to the implementation of the new financial

instrument standards.
On 31 March 2017, the Ministry of Finance issued the Accounting Standards

for Business Enterprises No. 22 – Recognition and Measurement of Financial
Instruments (Revised in 2017) (Caikuai [2017] No. 7), Accounting Standards for
Business Enterprises No. 23-Transfer of Financial Assets (Revised in 2017) (Caikuai
[2017] No. 8), Accounting Standards for Business Enterprises No. 24 – Hedge
Accounting (Revised in 2017) (Caikuai [2017] No. 9), and the Accounting Standards
for Business Enterprises No. 37 – Financial Instruments Presentation (Revised in
2017) (Caikuai [2017] No. 14) on 2 May 2017 (the above guidelines are collectively
referred to as the “new financial instrument standards”); Enterprises listed both
home and abroad and those listed abroad and adopting the international financial
reporting standards or accounting standards for business enterprises to prepare
financial statements shall implement the new financial instrument standards from 1
January 2018.
As approved by the resolution of the 15th meeting of the 7th Board of Directors,
and the 10th meeting of the 7th board of supervisors of the Company, the
Company began implementing the above-mentioned new financial instrument
standards at the time required by the Ministry of Finance.
All recognized financial assets are measured at amortized cost or fair value
subsequent to initial recognition under the new financial instrument standards.
On the implementation date of the new financial instrument standards, through
assessing the business model of the management on financial assets based on
the Company’s existing facts and conditions on that date, and through assessing
the features of contract cash flows of the financial assets based on the facts and
conditions at the initial recognition of the financial assets, the financial assets are
classified into three categories: (1) measured at amortized cost; (2) measured at fair
value through comprehensive income; (3) measured at fair value through profit or
loss for the current year. For investments in equity instruments recognized at fair
value through other comprehensive income, accumulated profit or loss recognized
into other comprehensive income in previous periods shall be transferred to
retained earnings when the financial assets are derecognized, but not profit or loss
for the current year.

29. Significant Changes in Accounting Policies and Accounting Estimates (Continued)
(1) Changes in accounting policies (Continued)

instrument standards. (Continued)
Under the new financial instrument standards, the Company shall accrue provision
for impairment loss and recognize the impairment loss of credit for financial assets
measured at amortized cost, investment in debt instrument recognized at fair
value through other comprehensive income, lease receivables, contract assets and
guarantee contracts based on expected credit loss.
On the implementation date of the new financial instrument standards, the

Company made the following adjustments to classification and measurement of
financial assets and financial liabilities based on relevant provisions of the new
financial instrument standards:
A. Equity investment classified as available-for-sale financial assets in the prior

years is reclassified as financial assets measured at fair value through profit
or loss for the current year, or irrevocably designated as financial assets
measured at fair value through other comprehensive income, changes in fair
value of which are accumulatively recognized through other comprehensive
income subsequent to initial recognition and cannot be reclassified to profit
or loss at disposal.
B. The receivables subsequently measured at amortized cost in the previous

year are assessed for business models based on the existing facts and
circumstances of the new standard implementation date (1 January 2018),
and are tested for contractual cash flow characteristics based on the facts
and circumstances at the time of initial recognition. According to the
evaluation test results, the receivables measured at the amortized cost are
continuously measured at amortized cost. After the evaluation and testing,
the adoption of the new financial instrument criteria has no significant
impact on the presentation of the Company’s receivables.


instrument standards. (Continued)
The impact of the implementation of the new financial instrument standards by

the Group on items of the consolidated balance sheet and balance sheet of the
Company as of 1 January 2018 are summarized as follows:
Consolidated balance sheet
Book balance prior Book balance

to changes in Effect of the after changes in
accounting policies new financial accounting policies
as at 31 December instrument as at 1 January
Item 2017 standards 2018
Assets:
Available-for-sale financial assets 1,038,859,674.96 (1,038,859,674.96) –
Other investments in equity instruments – 62,686,231.77 62,686,231.77
Other comprehensive income (70,206,938.27) 63,388,106.49 (6,818,831.78)
The Company’s balance sheet

Assets:
Available-for-sale financial assets 1,035,180,994.75 (1,035,180,994.75) –
Other investments in equity instruments – 62,686,231.77 62,686,231.77
Other comprehensive income (64,737,939.47) 64,954,866.01 216,926.54

② Changes in accounting policies due to the implementation of the new revenue

standards
On 5 July 2017, the Ministry of Finance issued the Accounting Standards for
Business Enterprises No. 14 – Revenue (Revised in 2017) (Caikuai [2017] No. 22)
(hereinafter referred to as the “new revenue standards”). Enterprises listed both
home and abroad and those listed abroad and adopting the international financial
reporting standards or accounting standards for business enterprises to prepare
financial statements shall implement the new revenue standards from 1 January
2018.
As approved by the resolution of the 15th meeting of the 7th Board of Directors,
and the 10th meeting of the 7th board of supervisors of the Company, the Group
began implementing the new revenue standards at the time required by the
Ministry of Finance.
The Group reevaluates the recognition, measurement, calculation, presentation,

etc. on the Group’s primary revenue from contracts. The Group reviews the sources
of income and processes for contracts with customers to assess the impact of the
new revenue standards on financial statements. Over 99% of the Group’s revenue
is generated from sales of goods. The revenue is recognized when the right to
control the goods is transferred to customer. The implementation of the new
revenue standards has no significant impact on the presentation of the Group’s
financial statements.
The impact of the implementation of the new revenue standards by the Group on
items of the consolidated balance sheet and balance sheet of the Company as of 1
January 2018 are summarized as follows:

Liabilities
Advance from customers 1,888,892,476.97 (1,888,892,476.97) –
Contract liabilities – 1,614,438,014.50 1,614,438,014.50
Taxes payable 206,462,076.94 274,454,462.47 480,916,539.41

② Changes in accounting policies due to the implementation of the new revenue

standards. (Continued)

Liabilities
Advance from customers 116,889,039.40 (116,889,039.40) –
Contract liabilities – 99,905,161.88 99,905,161.88
Taxes payable 124,918,499.55 16,983,877.52 141,902,377.07
③ Adjustments on the presentation of financial statements
The financial statements for the year ended 31 December 2018 are prepared by
the Group in accordance with the format prescribed in Caikuai [2018] No. 15.
Presentation of relevant accounts are adjusted retrospectively.
The impact of adjustments in relevant financial statements is as follows:
A. Items of the affected consolidated balance sheet and the balance sheet of
the Company as of 31 December 2017:
Item Before adjustment Amount adjusted After adjustment
Notes receivable 1,702,655,475.08 (1,702,655,475.08) –

Accounts receivable 1,113,769,006.51 (1,113,769,006.51) –
accounts receivable – 2,816,424,481.59 2,816,424,481.59
Other receivables 209,318,838.53 552,938,523.45 762,257,361.98
Notes payable 252,226,384.82 (252,226,384.82) –
Accounts payable 2,802,200,696.28 (2,802,200,696.28) –
Notes payable and
accounts payable – 3,054,427,081.10 3,054,427,081.10
Interests payable 253,966.40 (253,966.40) –
Dividends payable 45,446,017.79 (45,446,017.79) –
Other payables 2,399,394,477.50 45,699,984.19 2,445,094,461.69
Special payables 14,954,855.39 (14,954,855.39) –
Total 9,113,330,051.48 – 9,113,330,051.48


③ Adjustments on the presentation of financial statements (Continued)
Notes receivable 679,046,805.63 (679,046,805.63) –

Accounts receivable 265,693,684.36 (265,693,684.36) –
accounts receivable – 944,740,489.99 944,740,489.99
Other receivables 1,527,015,254.36 656,897,700.00 2,183,912,954.36
Notes payable 908,082.74 (908,082.74) –
Accounts payable 331,740,567.20 (331,740,567.20) –
Notes payable and
accounts payable – 332,648,649.94 332,648,649.94
Dividends payable 477,452.11 (477,452.11) –
Other payables 1,122,916,120.25 477,452.11 1,123,393,572.36
Total 4,584,695,666.65 – 4,584,695,666.65
B. Affected items in the consolidated income statement and the income

statement of the Company for the year ended 31 December 2017:
Consolidated income statement
Administrative expenses 1,579,582,508.93 (373,287,521.71) 1,206,294,987.22

Research and development
expenditures – 373,287,521.71 373,287,521.71
Total 1,579,582,508.93 – 1,579,582,508.93
The Company’s income statement
Administrative expenses 445,111,622.93 (130,836,506.00) 314,275,116.93

expenditures – 130,836,506.00 130,836,506.00
Total 445,111,622.93 – 445,111,622.93


30. Significant Accounting Judgments and Estimates
In the application of the accounting policies, due to the intrinsic uncertainty of business
operations, the Company needs to judge, estimate, and make assumptions on the book
value of report item which cannot be reliably measured. These judgments, estimations, and
assumptions are made based on the Company management’s historical experiences, and with
references of other related factors. These judgments, estimations and assumptions can have
impact on the reported amount of income, expenses, assets and liabilities, and the disclosure of
contingent liabilities on the balance sheet date. It is probable that the actual results arising from
the uncertainty of these estimates are different from the current estimates of the Company’s
management, and then lead to significant adjustments to the book value of assets or liabilities
influenced in future.
The Company performs periodic revision on the above determinations, estimations, and
assumptions on the basis of constant operation. When a change in accounting estimation is just
influencing the current term, its influenced amount is recognized in the current term. When a
change is influencing not only the current term but also the future terms, its influenced amount is
recognized in the current term and also the future terms.
The following are the critical judgments that the Company has made in the process of judging,
evaluating and assuming as at balance sheet date:
(1) Revenue recognition
As stated in Note IV. 24 – Revenue, the Company makes the following significant
accounting judgments and estimates in terms of revenue recognition: identifying customer
contracts; estimating the recoverability of the considerations that are entitled to be
obtained by transferring goods to customers; identifying the performance obligation in
the contract; estimating the variable consideration in the contract and cumulative revenue
recognized where it is highly probable that a significant reversal therein will not occur
when the relevant uncertainty is resolved; assessing whether there is a significant financing
component in the contract; estimating the individual selling price of the individual
performance obligation in the contract; determining whether the performance obligation
is performed in a certain period of time or at a certain point in time; the determination of
the progress of the contract, etc.
The Company make judgments primarily based on historical experiences and works to.
Changes in these significant judgments and estimates can have significant impacts on the
operating income, operating costs, and profit or loss of the current or subsequent periods.
(2) Classification of leasing
According to the provisions of Accounting Standards for Business Enterprises No.21-

Leasing, leasing is classified into operating leasing and financing leasing. When classifying,
the management shall make analysis and judgment on whether all risks and rewards
incident upon the ownership of the leased assets have been substantially transferred to
the lessee, or whether the Company has assumed all risks and rewards incident upon the
ownership of the leased assets.

30. Significant Accounting Judgments and Estimates (Continued)
(3) Impairment of financial assets
Expected credit loss model is adopted by the Company to evaluate the impairment of
financial assets. Adopting expected credit loss model requires making significant judgment
and evaluation, considering all the reasonable and supportable information, including
forward-looking information. To conclude the expected change in of credit risk of the
debtor, the Company shall make such judgment and evaluation based on historical data
with factors such as change in economy policies, macroeconomic indicators, industry risk,
external market environment, technology environment, customer condition, etc.
(4) Provision for decline in value
The Company accrues inventory falling price reserves of inventories with higher cost
than net realizable value and obsolete and unsalable inventories according to their cost
and net realizable value, whichever is lower, based on inventory accounting policies.
The impairment of inventory to net realizable value is based on the evaluation of its sale
ability and net realizable value. The identification of impairment of inventory calls for
the management to make judgment and estimation after receiving sound evidence and
considering the purpose of holding the inventory and the influence factors of events after
balance sheet date. Difference between the actual results and the original estimation will
be calculated, provided or reversed by the influence on the book value of inventories and
inventory falling price reserves in the estimated change period.
(5) Fair value of financial instruments
The Company recognizes the fair value of financial instruments without active trading
market through various valuation methods. These valuation methods include discounted
cash flow model analysis, etc. The Company needs to evaluate the future cash flow, credit
risks, market volatility and relevance, etc. and choose the proper discount rate. These
relevant hypotheses are uncertain, and the changes will inflict impact on the fair value of
financial instruments.
Where an investment in equity instruments or contract has a public offer, the Company
does not use the cost as the best estimate of its fair value.
(6) Provision for the impairment of long-term assets
The Company will judge whether there exists indication showing that the impairment
might incur on non-current assets rather than financial assets on the balance sheet date.
Except impairment test conducted each year, when there exists indication of impairment,
then impairment test should be conducted too for intangible asset that service life is
uncertain. Impairment test should be conducted on non-current assets rather than
financial assets if the Company finds evidence that book value is unrecoverable.
When the book value of assets or asset group is higher than recoverable amount, which is
the net amount of the fair value of the asset minus the disposal expenses and the present
value of the expected future cash flow of the asset, it indicates that the impairment incurs.

(6) Provision for the impairment of long-term assets (Continued)
Net amount of the fair value minus disposal expense should be determined by reference to
sales agreement price or observable market price of similar assets in fair transaction minus
incremental cost directly attributable to such assets disposed.
Upon estimation of current value of future cash flow, significant judgment on production,
sale price, related operation cost and discount rate for current value calculation is
required. The Company may use all attainable relevant information upon estimation of
the recoverable amounts, including estimation on the capacity, sale price and relevant
operation cost made based on reasonable and supportable hypothesis.
The Company will test if the goodwill suffers from impairment at least once a year.
It requires estimation of the current value of future cash flow for asset groups or
their combinations with good will distributed. Upon estimation of future cash flow,
the Company needs to estimate cash flow generated by future asset groups or their
combinations and meanwhile choose proper discount rate to recognize the current value
of future cash flow.
(7) Depreciation and Amortization
The Company calculates and accrues depreciation and amortization by the method of line
within service life after considering the remaining value of investment properties, fixed
assets and intangible assets. The Company periodically reviews service life to decide the
amount to be included into each report period of depreciation and amortization expenses.
Service life is recognized by the Company based on past experience for the same type
of assets together with anticipated technological updates. If past estimation has been
significantly changed, expenses for depreciation and amortization should be adjusted in
the future.
(8) Deferred tax assets
If it is highly possible that there is enough taxable profit to offset losses, the Company
recognizes deferred income assets for all unused taxation losses. It requires huge judgment
of the management of the Company to estimate the time and amount of future taxable
profit together with tax payment planning strategy to decide the amount of deferred
income tax assets to recognized.
(9) Income Taxes
During regular business activities of the Company, there are uncertainties in final taxation
disposal and calculation for some transactions. Whether some projects can list approval
needed from taxation authorities before tax. If the final recognition result of these taxation
matters is different from the initially estimated amount, such difference will influence the
income tax and deferred income tax of current year during final recognition.

(10) Provisions
Based on the contract terms, existing knowledge and historical experience, the Company
estimates and makes provision for product quality assurance, estimated contract losses,
and penalty for delay in delivery. In the event that such contingent events have formed a
current obligation and the performance of such current obligations is likely to result in the
outflow of economic benefits from the Company, the Company recognizes the contingent
liabilities as the provisions according to the best estimate of the expenditure required to
perform the relevant current obligations. The recognition and measurement of Provisions
is mainly dependent on management’s judgment. In the process of making judgments,
the Company needs to assess factors such as risks, uncertainties and time value of money
related to such contingent events.
Among them, the Company will provide provisions for after-sales warranty to customers
for the sale, repair and modification of the products sold. The Company’s recent
maintenance experience data has been taken into account when estimating liabilities,
but recent maintenance experience may not reflect future maintenance. Any increase or
decrease in this preparation may affect the profit and loss of the future year.
V. TAXES
1. Main Tax Types and Tax Rate
Specified tax rate
Value added tax ("VAT") The taxable income is calculated at the tax rate of 17%, 16%,
11%, 6%, 5%, 3%, and the value-added tax is calculated based
on the difference after subtracting the input tax amount that is
allowed to be deducted in the current year.
Consumption tax Calculated and paid at 10% on taxable income of the sale of
alcohol products
Urban maintenance and Calculated and paid at 7% on the payment of turnover tax.
construction tax
Education surcharge Calculated and paid at 3% on the payment of turnover tax.
Local education surcharge Calculated and paid at 2% on the payment of turnover tax.
Real-estate tax Calculated and paid at 1.2% of the residual value of the real-
estate and 12% of rent income
Corporate income tax Please refer the details below.
Note: The tax rates of 17% and 11% applicable to the Group’s VAT taxable sale or import of goods were adjusted to
16% and 10%, respectively, on 1 May 2018, in accordance with the requirements of the Notice of the Ministry of
Finance of the People’s Republic of China and the State Administration of Taxation on Adjusting Value-Added Tax
Rates (No. 32 [2018], Ministry of Finance of the People’s Republic of China).

V. TAXES (Continued)
1. Main Tax Types and Tax Rate (Continued)
Corporate income tax
Taxpayer Income tax rate
The Group, Xing Qun, Zhong Yi, Guangzhou Han Fang, Jing Calculated and paid at 15% of the
Xiu Tang, Pan Gao Shou, Chen Li Ji, Tian Xin, Guang Hua, taxable income
Ming Xing, Guangxi Ying Kang, WLJ Great Health, WLJ
Great Health (Ya’an), Wang Lao ji
The Group’s domestic subsidiaries other than the above- Calculated and paid at 25% of the
mentioned enterprises taxable income
Guangyao Baiyunshan Hong Kong Company of the Group Calculated and paid at 16.5% of
the taxable income
2. Tax Preferential Treatments and Approval Documents
According to the state’s relevant tax preferential policies for High/New enterprises, qualified
High/New technology enterprises can enjoy preferential corporate income tax policies and pay
corporate income tax at a reduced rate of 15%.
The subsidiaries of the Group, which have obtained the Certificates of High/New Technology
Enterprises, can enjoy preferential tax rate of 15% for current year, which including: the
Company (No. GR201744003162), Xing Qun (No. GR201744011135), Zhong Yi (No.
GR201744005343), Guangzhou Han Fang (No. GR201744008646), Jing Xiu Tang (No.
GR201744000331), Pan Gao Shou (No. GR201744002878), Chen Li Ji (No. GR201744001501),
Tian Xin (No. GR201744009163), Guang Hua (No. GR201544000485), Ming Xing (No.
GR201744002496), Guangxi Ying Kang (No. GR201545000083), WLJ Great Health (No.
GR201644006480), Wang Lao Ji (No. GR201744001303).
In accordance with “The Chinese Ministry of Finance Customs Head Office the Notice on Taxation
Policy Issues concerning the In-depth Implementation of the Western Development Strategy”,
WLJ(Ya’an) Great Health Industry Co., Ltd., a subsidiary of the Group, can enjoy a preferential tax
rate of 15% for the current year.
3. Others
Nil.

VI. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unless otherwise indicated in the following notes (including notes to main items of the financial
statements of the Company), the opening balance refers to 1 January 2018, the closing balance refers
to 31 December 2018, and the closing balance of the prior year refers to 31 December 2017; the
current year refers to the year ended 31 December 2018 and the prior year refers to the year ended 31
December 2017.
1. Cash at Bank and on Hand
Item Closing balance Opening balance
Cash on hand 981,910.86 908,829.96

Cash at bank 15,049,107,347.81 11,572,752,736.19
Other currency balance 1,064,794,414.84 123,557,316.69
Total 16,114,883,673.51 11,697,218,882.84
Including: Total amount of cash kept in foreign countries 37,505,038.18 7,793,845.14
Notes: (1) Other currency balance RMB1,064,794 thousand (31 December 2017: RMB123,557 thousand) is
comprised of the Group’s the third-party payment account, agreement deposit, deposit for notes payable,
deposit for borrowings, factoring deposit for accounts receivable, term deposit, and deposit in fiscal and
tax special card.
(2) As at 31 December 2018, the amount of the Group’s cash at bank and on hand with restrictions on
ownership was RMB1,043,271 thousand (31 December 2017: RMB201,684 thousand). Breakdown of
cash at bank and on hand with restrictions on use is as follows:
Deposit for notes payable 838,954,099.58 73,825,106.18

Factoring deposit for accounts receivable 100,438,849.65 –
Frozen account funds 78,283,834.37 84,995,913.79
Term deposit 20,000,000.00 –
Deposit for borrowings 3,794,247.96 –
Housing funds 1,212,244.60 1,973,540.00
Guarantee deposits 588,198.97 585,303.08
Pledge funds – 40,303,860.09
Total 1,043,271,475.13 201,683,723.14


VI. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Notes Receivable and Accounts Receivable
Notes receivable 2,780,597,684.01 1,702,655,475.08

Accounts receivable 10,872,458,472.34 1,113,769,006.51
Total 13,653,056,156.35 2,816,424,481.59
(1) Notes receivable
① Category of notes receivable
Bank acceptance notes 2,175,757,870.03 1,650,289,946.92

Commercial acceptance notes 604,839,813.98 52,365,528.16
Total 2,780,597,684.01 1,702,655,475.08
② Notes receivable pledged at the year end
Amount pledged
Item at the year end
Bank acceptance notes 25,050,000.00

Commercial acceptance notes 2,160,000.00
Total 27,210,000.00

2. Notes Receivable and Accounts Receivable (Continued)
(1) Notes receivable (Continued)
③ Notes which are not matured as at the balance sheet date but have been endorsed
or discounted at the year end
Amount Amount
derecognized not derecognized
Item at the year end at the year end
Bank acceptance notes 2,538,901,253.79 –

Commercial acceptance notes – 52,760,469.00
Total 2,538,901,253.79 52,760,469.00
Notes: (a) Pursuant to provisions of the Negotiable Instruments Law of the People’s Republic
of China, if the bank of acceptance refuses to pay the payables, the holding party
is entitled to recover the payables (continuing involvement) from the Group.
Consequently, the Group is in continuing involvement in the notes which are not
matured at balance sheet date but have been endorsed or discounted.
(b) The Group believes that the fair value of the continuing involvement is not significant, as
the Group has transferred substantially all the risks and awards of the above-mentioned
notes receivable which have been endorsed or discounted. The Group does not
recognize any assets or liabilities arising from the continuing involvement in book.
(c) The maximum loss from the continuing involvement of the above-mentioned notes
receivable which have been endorsed or discounted is equal to its book value of
RMB2,538,901 thousand.
(d) Undiscounted cash flows payable arising from the possibility that the Group may buy
back the above-mentioned notes receivable which have been endorsed or discounted
is equal to its book value, including the balance of notes receivable as at 31 December
2018 which shall be matured by 31 December 2019.
(e) For the year ended 31 December 2018, no profit or loss is recognized at the date of the
transfer. The Group did not recognize any current or accumulated income or expenses
arising from the continuing involvement of derecognized financial assets.
(f) The above-mentioned notes receivable, which have been endorsed or discounted,
occurred roughly balanced in the current year and the distribution is roughly balanced
either.

④ As at 31 December 2018, the bank acceptance notes endorsed by the Group to

other parties but not matured was RMB2,332,235 thousand (31 December 2017:
RMB1,787,530 thousand). The top five drawers by balances are as follows:
Drawers Billing date Maturity date Closing balance
Customer 1 05 Jul 2018 04 Jan 2019 15,913,278.42

Customer 2 30 Aug 2018 28 Feb 2019 15,000,000.00
Customer 3 30 Aug 2018 28 Feb 2019 15,000,000.00
Customer 4 03 Oct 2018 30 Apr 2019 15,000,000.00
Customer 5 15 Oct 2018 15 Jan 2019 13,300,000.00
⑤ As at 31 December 2018, commercial acceptance notes endorsed by the Group

but not matured was RMB52,760 thousand (31 December 2017: RMB11,379
thousand). The top five drawers by balances are as follows:
Customer 1 28 Jun 2018 27 Jun 2019 15,476,072.00

Customer 2 28 Jun 2018 27 Jun 2019 14,535,829.00
Customer 3 28 Jun 2018 27 Jun 2019 11,594,968.00
Customer 4 28 Jun 2018 27 Jun 2019 11,000,000.00
Customer 5 18 Oct 2018 18 Apr 2019 93,600.00
⑥ As at 31 December 2018, bank acceptance notes discounted by the Group but not
matured was RMB206,666 thousand (31 December 2017: RMB217,465 thousand).
The top five drawers by balances are as follows:
Customer 1 02 Aug 2018 02 Feb 2019 10,000,000.00

Customer 2 10 Dec 2018 10 Mar 2019 9,957,698.86
Customer 3 14 Dec 2018 14 Mar 2019 6,000,000.00
Customer 4 17 Dec 2018 19 Mar 2019 5,904,463.74
Customer 5 18 Dec 2018 18 Mar 2019 5,258,317.03

⑦ As at 31 December 2018 and 31 December 2017, the Group had no commercial

acceptance notes discounted by the Group but not matured.
⑧ As at 31 December 2018 and 31 December 2017, the Group had no accounts

receivable transferred from notes receivable due to the inability of performance by
the drawer.
⑨ Notes receivable disclosed by methods of accruing provision for bad debts
Closing balance
Book balance Provision for bad debts Book value
Expected
Proportion credit loss
Category Amount (%) Amount (%)
Notes receivable subject to

separate provision – – – – –
provision by portfolio
Including: portfolio 2 2,780,597,684.01 100.00 – – 2,780,597,684.01
Total 2,780,597,684.01 100.00 – – 2,780,597,684.01
Cont.
Opening balance
Expected

Including: portfolio 2 1,702,655,475.08 100.00 – – 1,702,655,475.08
Total 1,702,655,475.08 100.00 – – 1,702,655,475.08


⑨ Notes receivable disclosed by methods of accruing provision for bad debts

(Continued)
A. The Group had no notes receivable which are subject to separate provision
for the current year.
B. Notes receivable which are subject to provision by financial asset portfolio

with extremely low credit risk
Closing balance
Expected
Provision for credit loss
Item Notes receivable bad debts (%)
Notes receivable
with extremely
low credit risk 2,780,597,684.01 – –
Total 2,780,597,684.01 – –
⑩ The Group had no provision for bad debts for the current year.
The Group had no notes receivable written off for the current year.
(2) Accounts receivable
① The aging analysis of accounts receivable based on booking date is as follows:
Aging Closing balance Opening balance
Within 1 year 10,608,071,266.73 1,025,013,019.97

1 to 2 years 296,900,276.44 16,408,005.59
2 to 3 years 21,494,905.55 14,051,869.29
3 to 4 years 24,379,618.72 118,686,993.67
4 to 5 years 149,135,708.99 6,469,782.39
Over 5 years 60,509,283.89 14,464,938.08
Total book balance of accounts receivable 11,160,491,060.32 1,195,094,608.99
Less: Provision for bad debts 288,032,587.98 81,325,602.48
Total book value of accounts receivable 10,872,458,472.34 1,113,769,006.51


(2) Accounts receivable (Continued)
② Accounts receivable disclosed by method of accruing provision for bad debts
Closing balance
Expected
Accounts receivable subject

to separate provision 190,638,700.65 1.71 94,158,214.38 49.39 96,480,486.27
to provision by portfolio of
features of credit risk
Including: portfolio 1 10,969,852,359.67 98.29 193,874,373.60 1.77 10,775,977,986.07
Total 11,160,491,060.32 100.00 288,032,587.98 2.58 10,872,458,472.34
(Cont.)
Opening balance
Expected

to separate provision 159,667,196.46 13.36 60,944,927.63 38.17 98,722,268.83
to provision by portfolio of
Including: portfolio 1 1,035,427,412.53 86.64 20,380,674.85 1.97 1,015,046,737.68
Total 1,195,094,608.99 100.00 81,325,602.48 6.80 1,113,769,006.51


A. Accounts receivable subject to separate provision at the year end
Closing balance
Accounts Expected
receivable Provision for credit loss
(by debtor) Book balance bad debts (%) Reason
Customer 1 50,998,659.40 5,099,865.94 10.00 Litigation is involved. Please refer to

Note XIV. 1. (1) ①.
Note XIV. 1. (1) ①.
Customer 3 27,725,115.90 23,725,115.90 85.57 Amount is expected to be
unrecoverable. RMB4 million has
been recovered as the Company
won the case and collected the
amount. Provision for bad debts
amounted to RMB4 million has
be reversed. Please refer to Note
XIV. 1. (1) ①.
Note XIV. 1. (1) ①.
Note XIV. 1. (2).
Customer 6 4,971,878.60 4,971,878.60 100.00 The lawsuit is won and under
implementation. Recoverability is
expected to be low.
Customer 7 4,112,133.79 4,112,133.79 100.00 The court has declared the
bankruptcy of the customer.
Recoverability is expected to be
low.
unrecoverable.
Note XIV. 1. (1) ⑤.
unrecoverable.
Others 39,991,845.95 27,349,352.62 68.39 Amount is expected to be
unrecoverable.
Total 190,638,700.65 94,158,214.38


B. Accounts receivable subject to provision by aging portfolio
Closing balance
Provision for Expected credit
Aging Book balance bad debts loss (%)
Within 1 year 10,595,318,494.61 105,939,311.19 1.00

1 to 2 years 292,704,339.66 29,270,433.98 10.00
2 to 3 years 22,461,434.74 6,738,430.45 30.00
3 to 4 years 11,636,777.53 5,818,388.78 50.00
4 to 5 years 8,117,519.60 6,494,015.67 80.00
Over 5 years 39,613,793.53 39,613,793.53 100.00
Total 10,969,852,359.67 193,874,373.60 –
Cont.
Opening balance
Provision for Expected credit
Aging Book balance bad debts loss (%)
Within 1 year 1,003,178,081.54 10,031,780.80 1.00

1 to 2 years 14,628,836.14 1,462,883.62 10.00
2 to 3 years 10,741,835.97 3,222,550.80 30.00
3 to 4 years 2,140,130.72 1,070,065.38 50.00
4 to 5 years 725,669.59 580,535.68 80.00
Over 5 years 4,012,858.57 4,012,858.57 100.00
Total 1,035,427,412.53 20,380,674.85 –


③ Provision for bad debts
Provision for bad debts provided in the current year was RMB25,718 thousand.
Provision for bad debts recovered or reversed in the current year was RMB7,200
thousand.
Including: Significant provision for bad debts recovered or reversed in the current
year
Amount
Company recovered
name or reversed Method
Customer 1 4,000,000.00 RMB4 million has been recovered as the

Company won the case. Provision for bad
debts amounted to RMB4 million has be
reversed.
Customer 2 1,224,549.96 Litigation closed. Offset balance due from
customer with balance due to supplier.
Customer 3 916,179.96 The Company improved the collection of
accounts receivable and received balance
due.
Customer 4 711,965.81 Litigation closed. Offset balance due from
customer with balance due to supplier.
Customer 5 160,000.00 After negotiation with the customer, the
amount is recovered.
Others 186,944.01 The Company improved the collection of
accounts receivable and has collected the
amount.
Total 7,199,639.74 –
④ Accounts receivable written off in the current year:
Item Amount written off
Accounts receivable written off 5,361,866.04
Including: significant accounts receivable written off
Whether
arising from
Amount Procedure related
Debtor Nature written off Reason performed transactions
Customer 1 Sale of goods 1,716,000.00 Unrecoverable Approved by the No

management

⑤ The top five customers by balances at the year end are as follows
Proportion to
total closing
balance of Closing balance
accounts of provision for
Company Nature Closing balance Aging receivable (%) bad debts
Customer 1 Sale of goods 300,108,771.42 Within 1 year, 1 to 2 years 2.69 4,675,811.31

Within 1 year, 1 to 2 years, 2 to
Customer 2 Sale of goods 281,183,629.40 3 years 2.52 3,078,031.50
Customer 5 Sale of goods 170,167,149.20 Within 1 year 1.52 1,701,671.49
Total 1,168,521,688.65 10.47 16,311,985.55
⑥ Accounts receivables derecognized due to transfer of financial assets in the current

year.
Accounts Profit or loss

receivables from the
Transfer method of financial assets derecognized derecognition
Factoring of accounts receivable 595,240,352.12 (11,416,025.80)
Total 595,240,352.12 (11,416,025.80)
⑦ The Group had no assets or liabilities arising from the transfer of the accounts
receivable with the continuing involvement for the current year.

3. Prepayments
(1) The aging analysis of prepayments is as follows:
Closing balance Opening balance

Proportion Proportion
Aging Amount (%) Amount (%)
Within 1 year 787,644,850.07 94.01 234,892,970.44 91.54

1 to 2 years 20,097,405.33 2.40 15,846,896.39 6.18
2 to 3 years 21,941,790.90 2.62 3,094,700.49 1.21
Over 3 years 8,124,070.38 0.97 2,737,190.69 1.07
Total 837,808,116.68 100.00 256,571,758.01 100.00
(2) The top five suppliers by balances are as follows:
Proportion to
total closing
balance of
Nature of advance
Company amount Closing balance Aging payments (%)
Advance
Supplier 1 payment 212,263,734.45 Within 1 year, 4 to 5 years 25.34
Advance
Supplier 2 payment 59,559,870.37 Within 1 year, 4 to 5 years 7.11
Advance
Supplier 3 payment 44,969,750.67 Within 1 year 5.37
Advance
Advance
Total 384,795,191.42 45.93


4. Other Receivables
Interest receivable 1,367,876.63 –

Dividends receivable 40,036,044.47 552,938,523.45
Other receivables 1,015,147,265.58 209,318,838.53
Total 1,056,551,186.68 762,257,361.98
(1) Interest receivable
① Interest receivable by category
Term deposit 1,367,876.63 –
Total 1,367,876.63 –
(2) Dividends receivable
① Dividends receivable are as follows
Item (or investee) Closing balance Opening balance
Guangzhou Promise Biological

Products Co., Ltd.
(hereinafter referred to as
“Nuo Cheng”) 37,938,523.45 47,938,523.45
Chuangmei Medicines
Co., Ltd. (hereinafter referred to
as “Chuangmei Medicines”) 2,097,521.02 –
GP Corp. – 455,000,000.00
Hutchison Whampoa Guangzhou
Baiyunshan Chinese Medicine
Co., Ltd. (hereinafter referred to
as “HWBYS”) – 50,000,000.00
Total 40,036,044.47 552,938,523.45
② The Group had no significant dividends receivable with aging over 1 year for the
current year.
③ The Group had no provision for bad debts for dividends receivable for the current
year.

4. Other Receivables (Continued)
(3) Other receivables
① Other receivables disclosed per aging:
Within 1 year 952,725,652.85 182,107,335.49

1 to 2 years 41,084,695.46 18,485,632.66
2 to 3 years 22,885,932.40 7,959,823.28
3 to 4 years 6,697,006.37 4,942,069.18
4 to 5 years 4,582,548.11 2,932,681.53
Over 5 years 31,682,275.57 24,249,096.47
Total book balance of other receivables 1,059,658,110.76 240,676,638.61
Total book value of other receivables 1,015,147,265.58 209,318,838.53
② Other receivables disclosed by categories are as follows:
Closing balance
Book balance Provision for bad debts
Expected
Category Amount (%) Amount (%) Book value
Other receivables subject to

separate provision 34,132,453.39 3.22 33,951,273.39 99.47 181,180.00
provision by portfolio of features
of credit risk
Including: Portfolio 1 734,557,615.59 69.32 10,559,571.79 1.44 723,998,043.80
Portfolio 2 57,419,635.84 5.42 – – 57,419,635.84
Portfolio 3 8,625,988.82 0.81 – – 8,625,988.82
Portfolio 4 224,922,417.12 21.23 – – 224,922,417.12
Total 1,059,658,110.76 100.00 44,510,845.18 4.20 1,015,147,265.58


(3) Other receivables (Continued)
② Other receivables disclosed by categories are as follows: (Continued)
Opening balance
Expected
Category Amount (%) Amount (%) Book value

provision by portfolio of
Portfolio 2 81,671,633.76 33.93 – – 81,671,633.76
Portfolio 3 28,292,445.77 11.76 – – 28,292,445.77
Portfolio 4 86,542,822.63 35.96 – – 86,542,822.63
Total 240,676,638.61 100.00 31,357,800.08 13.03 209,318,838.53
A. Other receivables which are subject to separate provision at the year end
Closing balance
Other Provision for Expected
receivables Book balance bad debts credit loss (%) Reason
Other receivables 1 10,315,700.00 10,315,700.00 100.00 Litigation is involved. Please refer to Note XIV. 1.
(1) ①.
Other receivables 2 2,868,759.75 2,868,759.75 100.00 The debtor ceased operation. Amount is
expected to be unrecoverable.
Other receivables 3 2,000,000.00 2,000,000.00 100.00 The aging of prepayments is too long. Research
didn’t achieve expected progress.
Other receivables 5 1,582,097.34 1,582,097.34 100.00 Amount is expected to be unrecoverable.
Other receivables 7 1,284,052.25 1,284,052.25 100.00 Amount is expected to be unrecoverable.
Other receivables 8 855,814.96 855,814.96 100.00 Litigation is involved. Please refer to Note XIV. 1.
(1) ②.
Other receivables 9 832,092.29 832,092.29 100.00 Amount is expected to be unrecoverable.
Other receivables 10 502,043.54 502,043.54 100.00 Amount is expected to be unrecoverable.
Others 10,570,935.66 10,389,755.66 98.29 Amount is expected to be unrecoverable.
Total 34,132,453.39 33,951,273.39


② Other receivables disclosed by categories are as follows (Continued)
B. Other receivables which are subject to provision by aging portfolio
Closing balance
Proportion Expected
in portfolio Provision credit loss
Aging Book balance (%) for bad debts (%)
Within 1 year 724,064,797.25 98.58 7,240,646.02 1.00

1 to 2 years 4,980,351.57 0.68 498,035.17 10.00
2 to 3 years 3,266,217.50 0.44 979,865.25 30.00
3 to 4 years 651,336.78 0.09 325,668.39 50.00
4 to 5 years 397,777.67 0.05 318,222.14 80.00
Over 5 years 1,197,134.82 0.16 1,197,134.82 100.00
Total 734,557,615.59 100.00 10,559,571.79 –
(Cont.)
Opening balance
Proportion Expected
in portfolio Provision for credit
Aging Book balance (%) bad debts loss (%)
Within 1 year 11,173,666.97 75.92 111,736.68 1.00

1 to 2 years 500,085.07 3.40 50,008.51 10.00
2 to 3 years 1,079,531.94 7.34 323,859.58 30.00
3 to 4 years 131,476.81 0.89 65,738.41 50.00
4 to 5 years 157,593.82 1.07 126,075.06 80.00
Over 5 years 1,674,801.00 11.38 1,674,801.00 100.00
Total 14,717,155.61 100.00 2,352,219.24 –


② Other receivables disclosed by categories are as follows: (Continued)
C. Other receivables which are subject to provision by other portfolio methods
Closing balance
Expected
Proportion Provision for credit loss
Item Book balance (%) bad debts (%)
Other receivables for

which provision
for bad debts
is accrued by
financial asset
portfolio with
extremely low
credit risk 57,419,635.84 5.42 – –
which provision
for bad debts is
accrued by related
party portfolio 8,625,988.82 0.81 – –
which provision
for bad debts
is accrued by
margins, deposit
portfolio 224,922,417.12 21.23 – –
Total 290,968,041.78 27.46 – –


③ Category of other receivables as per nature
Closing book Opening

Nature balance book balance
Petty cash 8,362,855.17 6,021,769.47

Margin, deposit and down payment 175,353,366.04 42,162,681.50
Advances to employees 68,329,344.32 38,494,782.86
Receivables due from external parties 754,837,110.46 95,045,525.40
Receivables due from related parties 9,178,773.24 28,469,898.59
Tax refund for exports 715,195.60 2,217,254.24
Others 42,881,465.93 28,264,726.55
Total book balance of other receivables 1,059,658,110.76 240,676,638.61
Total book value of other receivables 1,015,147,265.58 209,318,838.53
④ Provision for bad debts
Provision for bad debts provided in the current year was RMB13,609 thousand. The
Group had no provision for bad debts recovered or reversed for the current year.
⑤ Other receivables written off in the current year.
Amount
Item written off
Other receivables written off 447,000.00
The Group had no significant other receivables written off.


⑥ The top five debtors by balances are as follows:
Proportion
to the total
closing
balance
of other Closing balance
receivables of bad debt
Company Nature Closing balance Aging (%) provision
Receivables due
from external
Other receivables 1 parties 33,273,274.01 Within 1 year 3.14 332,732.74
Receivables due
from external
Receivables due
from external
Receivables due
from external
Receivables due
from external
Total 119,151,070.02 – 11.24 1,191,510.70
⑦ The Group had no receivables related to government grants.
⑧ The Group had no other receivables that had been derecognized due to transfer of
financial assets.
⑨ The Group had no assets or liabilities arising from the transfer accounts receivable
with the continuing involvement for the current year.

5. Inventories
(1) Disclosure of inventories by categories is as follows:
Closing balance
Provision for
Item Book balance decline in value Book value
Raw materials 1,307,647,020.59 9,294,225.68 1,298,352,794.91

Work in progress 465,859,362.21 3,763,902.17 462,095,460.04
Semi-finished goods 237,818,255.05 891,968.80 236,926,286.25
Low-value consumables 7,865,474.43 – 7,865,474.43
Packaging materials 148,227,367.49 – 148,227,367.49
Consignment processing
material 3,012,285.84 – 3,012,285.84
Commodity stocks 7,173,857,957.53 98,598,528.65 7,075,259,428.88
Others – – –
Total 9,344,287,723.14 112,548,625.30 9,231,739,097.84
Cont.
Opening balance
Provision for
Item Book balance decline in value Book value
Raw materials 819,325,060.67 3,116,836.98 816,208,223.69

Work in progress 205,524,976.16 – 205,524,976.16
Semi-finished goods 160,977,472.82 891,968.80 160,085,504.02
Low-value consumables 7,216,360.33 3,273.00 7,213,087.33
Packaging materials 105,084,792.23 – 105,084,792.23
Consignment processing
material 20,184,055.77 – 20,184,055.77
Commodity stocks 2,408,128,777.44 22,709,553.07 2,385,419,224.37
Others 503,032.44 – 503,032.44
Total 3,726,944,527.86 26,721,631.85 3,700,222,896.01


5. Inventories (Continued)
(2) Provision for decline in value of inventories and contract performance cost
Increase Decrease
Opening Transferred Closing
Item balance Provided Others or written-off Others balance
Raw materials 3,116,836.98 6,268,168.78 – 20,348.08 70,432.00 9,294,225.68
Work in progress – 3,763,902.17 – – – 3,763,902.17
Semi-finished goods 891,968.80 – – – – 891,968.80
Low-value
consumables 3,273.00 – – – 3,273.00 –
Commodity stocks 22,709,553.07 71,257,550.17 34,531,427.38 29,900,001.97 – 98,598,528.65
Total 26,721,631.85 81,289,621.12 34,531,427.38 29,920,350.05 73,705.00 112,548,625.30
(3) Basis of provision for decline in value of inventories and reason for reversing or
writing off in the current year
Reason for Reason for

the reversing writing off
provision for provision for
Basis of provision for the loss on the loss on
the loss on decline in decline in value decline in value
Item value of inventory of inventory of inventory
Book value is higher than Increase in net
Raw materials the net realizable value realizable value –
Book value is higher than
Commodity stocks net realizable value – Sold
(4) As of 31 December 2018, there is no capitalization of borrowing costs in the

inventory.
6. Other Current Assets

Structured deposits 1,530,000,000.00 1,850,000,000.00
Deductible Input VAT 519,056,234.63 193,977,863.61
Prepaid enterprise income tax 50,985,240.99 180,427,954.70
Undisposed assets for whole relocation (Note) 24,438,333.74 35,799,561.27
Bank financial products 12,035,289.38 6,300,000.00
Others 732,955.59 478,027.24
Total 2,137,248,054.33 2,266,983,406.82
Note: According to the notice of Haifuzhengfang [2015] No. 2, Haizhengbankexiezi [2015] No. 1 and
Haizhengbankexiezi [2016] No.1, Guangzhou Qi Xing Pharmaceutical Factory and Qi xing Pharmaceutical,
subsidiaries of the Group, have ceased production and moved out of the building for whole relocation before
September 2015. The values of the land and houses, machinery and equipment and inventories for compensation
shall be appraised with a professional appraisal report. In November 2018, under the supervision of government
department and valuation company, damaged inventory due to relocation amounted to RMB11,429 thousand. As
at 31 December 2018, the report is not yet issued.

7. Long-term Equity Investments
Change in the current year

Investment gains and Adjustment to Declaration of Closing balance
losses recognized other comprehensive cash dividends Provision for of provision for
Investee Investment costs Opening balance Increase Decrease under equity method income or profits impairment provided Others Closing balance impairment
I. Joint ventures
GP Corp. 396,589,139.78 934,856,877.59 – – 62,877,104.25 (8,821.96) – – (997,725,159.88) – –
Guangzhou Wang Lao Ji Pharmaceutical Co., Ltd. 102,035,124.44 391,297,621.18 – – 94,214,740.74 – – – (485,512,361.92) – –
(hereinafter referred as “Wang Lao Ji”) (Note 1)
Nuo Cheng 42,000,000.00 141,227,391.87 – – 87,648,818.38 – – – – 228,876,210.25 –
HWBYS 100,000,000.00 333,889,342.40 – – 55,828,461.73 – – – – 389,717,804.13 –
Guangzhou Baxter Qiao Guang Pharmaceutical Co., Ltd. 37,000,000.00 39,447,376.09 – – 3,253,734.50 – – – – 42,701,110.59 –
(hereinafter referred as “Baxter Qiao Guang”)
Subtotal 677,624,264.22 1,840,718,609.13 – – 303,822,859.60 (8,821.96) – – (1,483,237,521.80) 661,295,124.97 –
I . Associates
Guangzhou Jinshen Pharmaceutical Technology Co., Ltd. 765,000.00 – – – – – – – – – –
Hangzhou Zhejiang University Han Fang Traditional 440,000.00 – – – – – – – – – –
Chinese Medicine Information Engineering Co., Ltd.
Jinying Fund Management Co., Ltd. 50,000,000.00 54,665,915.85 – – 6,128,824.20 29,136.57 – – – 60,823,876.62 –
Guangzhou Baiyunshan Weiyi Medical Investment 2,020,000.00 2,014,035.94 – – 18,020.27 – – – – 2,032,056.21 –
Management Co., Ltd.
Chuangmei Medicines Co., Ltd. 60,823,012.51 58,238,389.70 – – – – – – 4,753,574.98 62,991,964.68 –
Guangzhou Baiyunshan Southern Anti-tumor 50,225,000.00 49,475,363.28 – – (1,930,215.13) – – – – 47,545,148.15 –
Biological Products Co., Ltd.
Guangzhou Zhongcheng Medical Instruments 3,400,000.00 3,368,943.15 – – (592,910.01) – – – – 2,776,033.14 –
Industry Development Co., Ltd.
Guangzhou Baiyunshan Yi Xin Tang Pharmaceutical 45,000,000.00 – 45,000,000.00 – (37,480.99) – – – – 44,962,519.01 –
Investment Development Co., Ltd. (hereinafter referred
to as “Baiyunshan Yi Xin Tang”)
Guangdong Guangyao Jinshen Equity Investment 4,000,000.00 – 4,000,000.00 – (929,752.84) – – – – 3,070,247.16 –
Fund Management Co., Ltd.
Yunnan Hongxiang Yi Xin Tang Pharmaceutical (Group) 864,570,227.02 – 864,570,227.02 – 22,469,454.73 – 12,578,616.30 – – 874,461,065.45 –
Co., Ltd. (hereinafter referred as “Yi Xin Tang”)
Subtotal 1,081,243,239.53 167,762,647.92 913,570,227.02 – 25,125,940.23 29,136.57 12,578,616.30 – 4,753,574.98 1,098,662,910.42 –
Total 1,758,867,503.75 2,008,481,257.05 913,570,227.02 – 328,948,799.83 20,314.61 12,578,616.30 – (1,478,483,946.82) 1,759,958,035.39 –


8. Investments in Other Equity Instruments
(1) Investments in other equity instruments
South China Center for Innovative

Pharmaceuticals Co., Ltd. 10,000,000.00 10,000,000.00
Yilin Bio-industry Co., Ltd 303,733.73 200,000.00
Sino-Israel Bio-industry Investment Fund 66,916,260.65 44,808,355.26
Guangzhou Nanxin Pharmaceutical Co., Ltd. 7,677,876.51 7,677,876.51
Total 84,897,870.89 62,686,231.77
(2) Investments in non-transactional equity instruments
Amount Reason for

transferred transferred
Dividend from other from other
income comprehensive Reason for comprehensive
recognized income to designated to income to
in the Accumulated Accumulated retained be measured retained
Item current year profit loss earnings at FVTOCI earnings
South China Center for

Innovative Pharmaceuticals Long-held based on
Co., Ltd. – – – – strategic purpose –
Long-held based on
Yilin Bio-industry Co., Ltd – – – – strategic purpose –
Sino-Israel Bio-industry Long-held based on
Investment Fund – – – – strategic purpose –
Guangzhou Nanxin Long-held based on
Pharmaceutical Co., Ltd. – – – – strategic purpose –
Total – – – – – –
9. Other Non-Current Financial Assets
Financial assets classified at FVTPL 226,938,456.16 975,856,856.18

Including: Equity instrument investments 226,938,456.16 975,856,856.18
Total 226,938,456.16 975,856,856.18


10. Investment Properties
(1) Investment property measured using the cost model
Item Buildings Land use right Total
I. Original cost
1. Opening balance 379,314,400.27 18,344,900.69 397,659,300.96
2. Increase 21,696,786.05 – 21,696,786.05
(1) Purchase 14,582,518.30 – 14,582,518.30
(2) Increase arising
from business
combinations 6,789,425.25 – 6,789,425.25
(3) Changes in foreign
exchange rate 324,842.50 – 324,842.50
3. Decrease – – –
4. Closing balance 401,011,186.32 18,344,900.69 419,356,087.01
II. Accumulated
depreciation and
amortization
1. Opening balance 170,871,848.04 9,111,673.54 179,983,521.58
2. Increase 10,875,699.21 412,366.39 11,288,065.60
(1) Provision or
amortization 10,571,291.04 412,366.39 10,983,657.43
from business
combinations 286,925.25 – 286,925.25
(3) Changes in foreign
exchange rate 17,482.92 – 17,482.92
4. Closing balance 181,747,547.25 9,524,039.93 191,271,587.18
III. Provision for impairment
1. Opening balance – – –
2. Increase – – –
4. Closing balance – – –
IV. Book value – – –
1. Closing balance of
book value 219,263,639.07 8,820,860.76 228,084,499.83
2. Opening balance of
book value 208,442,552.23 9,233,227.15 217,675,779.38
(2) Depreciation for the current year is RMB10,571 thousand (2017: RMB10,199 thousand).
Amortization for the current year is RMB412 thousand (2017: RMB375 thousand).
(3) Increase in original value and accumulated depreciation of investment property due to
change in foreign exchange rate is RMB325 thousand and RMB17 thousand respectively in
2018 (2017: decreased RMB472 thousand and RMB190 thousand respectively).
(4) All of the investment properties with land use right are located in Mainland China with
useful life vary from 10 to 50 years.
(5) The Group had no transfer of properties for the current year.

11. Fixed Assets
Fixed assets 3,165,746,536.73 2,082,244,551.64

Disposal of fixed assets – –
Total 3,165,746,536.73 2,082,244,551.64
(1) Fixed assets
① Fixed assets
Machinery Electronic Office Decoration of

Item Buildings and equipment Motor vehicles equipment equipment fixed assets Total
I. Original cost
1. Opening balance 2,114,156,591.66 1,891,098,402.16 86,090,710.65 150,150,903.06 126,042,136.71 40,623,201.73 4,408,161,945.97
2. Increase 942,088,359.70 624,040,545.46 55,129,716.32 25,920,104.30 138,766,390.74 11,231,395.55 1,797,176,512.07
(1) Purchases 966,755.46 41,674,259.40 2,906,692.99 8,359,836.19 12,635,710.81 20,571.99 66,563,826.84
(2) ITransferred
fromconstruction in
progress 29,220,868.08 143,675,669.57 1,089,040.28 10,236,295.29 16,815,919.85 11,210,823.56 212,248,616.63
frombusiness
combination 911,900,736.16 438,690,616.49 51,133,983.05 7,323,972.82 109,314,760.08 – 1,518,364,068.60
3. Decrease 1,037,112.74 30,288,133.37 11,180,476.57 6,710,665.50 7,918,358.42 663,310.62 57,798,057.22
(1) Disposal or scrap 338,139.55 30,288,133.37 11,180,476.57 6,710,665.50 7,918,358.42 663,310.62 57,099,084.03
(2) Others 698,973.19 – – – – – 698,973.19
4. Closing balance 3,055,207,838.62 2,484,850,814.25 130,039,950.40 169,360,341.86 256,890,169.03 51,191,286.66 6,147,540,400.82
II. Accumulated depreciation
1. Opening balance 871,983,426.75 1,171,713,915.45 61,230,404.53 94,502,334.35 86,271,274.08 28,768,574.18 2,314,469,929.34
2. Increase 248,446,870.69 297,759,545.29 39,443,571.00 21,009,289.79 82,550,398.55 4,407,599.52 693,617,274.84
(1) Provision 66,064,876.42 142,054,744.88 7,027,227.55 15,471,171.94 14,906,470.85 4,407,599.52 249,932,091.16
(2) Increase arising from
business combinations 182,381,994.27 155,704,800.41 32,416,343.45 5,538,117.85 67,643,927.70 – 443,685,183.68
3. Decrease 531,643.36 24,386,344.21 9,984,801.89 5,727,741.36 4,814,050.37 458,726.20 45,903,307.39
(1) Disposal or scrap 316,123.71 24,386,344.21 9,984,801.89 5,727,741.36 4,814,050.37 458,726.20 45,687,787.74
(2) Others 215,519.65 – – – – – 215,519.65
4. Closing balance 1,119,898,654.08 1,445,087,116.53 90,689,173.64 109,783,882.78 164,007,622.26 32,717,447.50 2,962,183,896.79
III. Provision for impairment
1. Opening balance 4,202,432.60 5,527,252.28 158,224.47 1,556,709.26 2,846.38 – 11,447,464.99
2. Increase 7,564,797.12 1,225,225.35 – – – – 8,790,022.47
(1) Provision – 910,238.91 – – – – 910,238.91
business combinations 7,564,797.12 314,986.44 – – – – 7,879,783.56
3. Decrease – 514,176.70 – 113,343.46 – – 627,520.16
(1) Disposal or scrap – 514,176.70 – 113,343.46 – – 627,520.16
4. Closing balance 11,767,229.72 6,238,300.93 158,224.47 1,443,365.80 2,846.38 – 19,609,967.30
IV. Book value
1. Closing balance of book
value 1,923,541,954.82 1,033,525,396.79 39,192,552.29 58,133,093.28 92,879,700.39 18,473,839.16 3,165,746,536.73
2. Opening balance of book
value 1,237,970,732.31 713,857,234.43 24,702,081.65 54,091,859.45 39,768,016.25 11,854,627.55 2,082,244,551.64

(1) Fixed assets (Continued)
① Fixed assets (Continued)
Notes:
(a) Original value of fixed assets transferred from construction in progress is RMB212,249 thousand in 2018
(2017: RMB129,053 thousand).
(b) Decrease in original value and accumulated depreciation of fixed assets due to the fluctuation in foreign
exchange rate are RMB699 thousand and RMB216 thousand respectively in 2018 (2017: decreased
RMB560 thousand and RMB117 thousand respectively).
(c) Fixed assets depreciation accrued in 2018 is RMB249,932 thousand (2017: RMB210,556 thousand),
which is comprised of depreciation in operating cost RMB107,956 thousand, depreciation in selling
expenses RMB42,398 thousand, depreciation in G&A expenses RMB76,639 thousand and depreciation
in R&D expenditure RMB22,939 thousand (2017: depreciation in operating cost RMB138,501 thousand,
depreciation in selling expenses RMB2,874 thousand, depreciation in G&A expenses RMB51,532
thousand and depreciation in R&D expenditure RMB17,649 thousand).
② Temporary idle fixed assets
Accumulated Provision for

Item Original cost depreciation impairment Book value Note
Buildings 667,112.26 430,613.36 236,498.90 861,226.72

Machinery and equipment 332,553.88 444,068.69 166,276.94 610,345.63
Total 999,666.14 874,682.05 402,775.84 1,471,572.35
③ Fixed assets leased in under finance lease
Accumulated Provision for

Item Original cost depreciation impairment Book value
Machinery and equipment 306,431,189.53 259,605,015.68 46,826,173.85 519,210,031.36
Total 306,431.189.53 259,605,015.68 46,826,173.85 519,210,031.36


(1) Fixed assets (Continued)
④ Fixed assets leased out under operating lease

Item of book value of book value
Buildings 11,793,975.54 7,769,341.36
Total 11,793,975.54 7,769,341.36
⑤ Fixed assets which do not have a certificate of property right
Reason for do not Estimated time for

have certificate acquiring certificate
Item Book value of property right of property right
Buildings 49,859,572.54 Not handled yet as Unknown

necessary procedures
were not complete
Total 49,859,572.54 – –
Note:
As at 31 December 2018, Guangyao Baiyunshan Hong Kong Company, a subsidiary of the Company, has buildings
with the original costs of HK$8,893 thousand and the net book value of HK$6,293 thousand, and investment
property with the original costs of HK$6,843 thousand and the net value of HK$3,647 thousand pledged as
collateral, and obtained a credit line with a limit of HK$300 thousand, the letter of credit and the total amount of
90-day credits of HK$100,000 thousand, and an issued but unexpired letter of credit of EUR 48 thousand and USD
412 thousand from the Bank of China (Hong Kong) Co., Ltd.

12. Construction in Progress
(1) Construction in progress

Provision for Provision for
Item Book balance impairment Book value Book balance impairment Book value
Construction
in progress 480,557,457.88 251,734.38 480,305,723.50 284,923,861.83 251,734.38 284,672,127.45
Total 480,557,457.88 251,734.38 480,305,723.50 284,923,861.83 251,734.38 284,672,127.45
(2) Changes of significant construction in progress in the current year
Amount transferred Proportion of

into fixed assets in construction
Project Budget Opening balance Increase the current year Other decrease Closing balance investment Project progress Source of funds
Ming Xing relocation improvement 475,620,000.00 85,285,310.38 1,240,434.30 415,384.61 – 86,110,360.07 25.00 48.00 Self-raised funds
Base of Wang Lao Ji Great Health
Industry (Meizhou) Co., Ltd. 400,000,000.00 6,791,398.57 65,711,416.67 – – 72,502,815.24 22.51 22.51 Self-raised funds
Extension project K of Hospital
service 50,382,337.86 – 50,382,337.86 – – 50,382,337.86 100.00 62.41 Self-raised funds
Cai Zhi Lin Meizhou TCM
Industrialized production and
service base 130,000,000.00 17,215,842.20 28,462,982.18 – 17,215,842.20 28,462,982.18 21.89 21.89 Self-raised funds
Extension project F of Hospital
service 61,857,364.24 – 26,755,917.72 293,651.21 – 26,462,266.51 100.00 29.49 Self-raised funds
Project of special medical use
formula food production line 42,400,000.00 9,558,497.00 7,665,092.42 – – 17,223,589.42 41.34 41.34 Self-raised funds
Zhongluotan Wulonggang
AB08070981 block 159,750,000.00 3,257,118.81 12,344,436.65 – – 15,601,555.46 26.12 26.12 Self-raised funds
Extension project G of Hospital
service 14,716,224.85 – 14,188,592.78 141,517.03 1,293,731.82 12,753,343.93 99.90 43.36 Self-raised funds
New warehouse 17,056,000.00 4,206,139.40 6,451,685.33 – – 10,657,824.73 75.64 95.00 Self-raised funds
Baiyun project 503,382,480.00 – 8,381,430.76 – – 8,381,430.76 1.67 11.25 Self-raised funds
Extension project D of Hospital
service 30,363,514.26 – 7,963,422.26 153,547.21 129,693.96 7,680,181.09 87.33 25.47 Self-raised funds
Chinese medicine treatment before
extraction of the modernization
of products of stage 1 of GMP
improvement 97,564,100.00 14,370,345.91 28,407,527.97 5,613,381.03 29,805,829.42 7,358,663.43 102.68 43.85 Self-raised funds
VOCs waste gas pollution control
project 15,781,360.00 – 5,958,676.29 – – 5,958,676.29 37.76 37.76 Self-raised funds
Compliance preparation equipment
modification project 15,400,000.00 – 5,841,475.00 – – 5,841,475.00 37.93 37.93 Self-raised funds
Extension project B of Hospital
service 25,590,695.09 – 24,086,036.38 2,036,842.13 16,266,276.91 5,782,917.34 99.87 64.95 Self-raised funds
Extension project L of Hospital
service 4,967,586.16 – 4,967,586.16 – – 4,967,586.16 100.00 12.37 Self-raised funds
Recover Building C 30,000,000.00 17,040,128.16 9,739,452.13 12,793,584.00 10,130,387.01 3,855,609.28 100.00 99.00 Self-raised funds

12. Construction in Progress (Continued)
(2) Changes of significant construction in progress in the current year (Continued)

3rd GMP construction of

modernization of traditional
Chinese medicine 82,894,600.00 1,135,547.17 1,550,688.70 – – 2,686,235.87 3.24 3.24 Self-raised funds, loan
Extension project H of Hospital
service 9,200,000.00 – 7,678,912.67 3,686,728.18 1,322,222.23 2,669,962.26 83.47 41.83 Self-raised funds
Chengdu new warehouse project:
GP Corp. 5,178,047.95 – 5,178,047.95 1,554,258.57 1,065,949.38 2,557,840.00 50.60 50.60 Self-raised funds
Technology improvement for
penicil in oral solid dosage forms
workshop 3,000,000.00 2,092,756.49 101,860.00 – 34,600.00 2,160,016.49 73.15 72.00 Self-raised funds
Extension project I of Hospital
service 3,570,679.57 – 3,210,963.98 197,436.89 1,043,603.33 1,969,923.76 99.98 39.49 Self-raised funds
Extension project A of Hospital
service 2,919,577.64 – 2,680,574.34 1,314,090.91 – 1,366,483.43 99.96 73.64 Self-raised funds
Xinshi factory VI improvement 2,800,000.00 1,583,156.14 1,578,142.67 1,864,074.41 – 1,297,224.40 112.90 80.00 Self-raised funds
Project of rebuilding raw-food
materials with characteristic
function and product workshop 5,905,000.00 274,404.56 813,484.06 – – 1,087,888.62 29.60 60.00 Self-raised funds
Ming Xing equipment
improvement 67,430,000.00 596,563.98 4,270,529.75 3,805,004.57 115,107.06 946,982.10 92.00 93.00 Self-raised funds
Liwan oculentum GMP
improvement (2017) 12,000,000.00 5,719,820.54 1,808,748.31 7,197,799.62 – 330,769.23 105.51 64.90 Self-raised funds
Productivity improvement for oral
solid dosage forms workshop 5,130,000.00 371,200.00 – 64,529.91 10,324.78 296,345.31 7.24 7.24 Self-raised funds
HMPL-004 special production line 3,000,000.00 218,363.76 – – – 218,363.76 7.28 10.00 Self-raised funds
Extension project J of Hospital
service 9,016,723.57 – 7,704,669.39 4,048,092.05 3,446,356.95 210,220.39 96.03 61.48 Self-raised funds
Extension project C of Hospital
service 15,232,709.71 – 1,655,989.71 1,340,017.35 114,796.36 201,176.00 98.04 22.43 Self-raised funds
Program of a building with 6 floors 3,500,000.00 67,066.70 109,094.72 – 2,915.10 173,246.32 115.14 65.00 Self-raised funds
Factory project 62,950,000.00 – 65,716.98 – – 65,716.98 0.10 0.10 Self-raised funds
New established warehouse project 69,000,000.00 – 43,867.92 – – 43,867.92 0.07 0.07 Self-raised funds
Extension project E of Hospital
service 15,009,745.94 – 12,638,655.38 12,616,485.57 – 22,169.81 84.20 11.50 Self-raised funds
Properties in Nansha district 10,000,000.00 19,475.60 – – – 19,475.60 79.47 100.00 Self-raised funds
GMP improvement project of 4
workshops 6,920,000.00 11,014.44 – – – 11,014.44 0.16 0.16 Self-raised funds
Pil line of water-honeyed pil 3,500,000.00 1,434,000.00 – – 1,434,000.00 – 100.00 100.00 Self-raised funds
Project of No.5, No.36 Saiba Rd
(iron warehouse) 10,442,701.89 712,629.88 296,929.12 1,009,559.00 – – 9.67 9.67 Self-raised funds
Boiling Center 2,800,000.00 2,187,199.19 788,640.59 – 2,975,839.78 – 106.28 100.00 Self-raised funds
Si Ai Pu 15,000,000.00 9,019,892.95 933,962.26 2,109,401.70 7,844,453.51 – 66.36 100.00 Self-raised funds
Tongtai Building 8,000,000.00 170,690.29 – – 170,690.29 – 100.00 100.00 Self-raised funds
Oral cephalosporins workshop
GMP improvement 47,800,000.00 9,710,876.03 8,328,883.29 18,039,759.32 – – 81.70 85.00 Self-raised funds

(2) Changes of significant construction in progress in the current year (Continued)

Tian Xin Powder Injector & Screw

Arbor Line 19,800,000.00 600,000.00 – – 600,000.00 – 8.87 3.03 Self-raised funds
Ming Xing Decoration 17,200,000.00 189,611.10 – 189,611.10 – – 100.00 100.00 Self-raised funds
Construction of Guangyao
Baiyunshan Chemical
Pharmaceutical (Zhuhai) Co., Ltd. 722,689,100.00 3,810,922.63 532,452.83 – 4,343,375.46 – 0.60 0.60 Self-raised funds
Sterile production line 103,540,000.00 50,104,127.86 10,699,414.64 60,803,542.50 – – 100.00 100.00 Self-raised funds
Extension project M of Hospital
service 15,797,009.00 – 35,323.25 35,323.25 – – 0.22 8.72 Self-raised funds
Construction of Bio-island R&D Self-raised funds,
Headquarters 800,000,000.00 100,084.09 51,947.56 – 152,031.65 – 0.02 0.02 issuing shares
Others 220,532,965.30 37,069,678.00 140,322,595.63 70,924,994.51 14,228,358.68 92,238,920.44
Total 4,456,590,523.03 284,923,861.83 521,628,598.56 212,248,616.63 113,746,385.88 480,557,457.88


(3) The Group had no impairment of construction in progress provided for the current
year.
(4) Impairment of construction in progress
31 December
Item 31 December 2017 Increase Decrease 2018 Reason
Expansion of the Guang

Hua sewage station 251,734.38 – – 251,734.38 Project stopped
Total 251,734.38 – – 251,734.38
(5) Progress of significant construction projects:
Construction
Item progress
Project of base of Cai Zhi Lin Meizhou Chinese medicine

industrial service Construction stage
Base of Wang Lao Ji Great Health Industry (Meizhou) Co., Ltd. Construction stage
Zhongluotan Wulonggang block AB0807098-1 Construction stage
Ming Xing relocation improvement Construction stage
Construction of Guangyao Baiyunshan Chemical Pharmaceutical
(Zhuhai) Co., Ltd. Construction stage
Sterile production line Completed
Construction of Bio-island R&D Headquarters Construction stage
Chinese medicine treatment before extraction of the
modernization of products of stage 1 of GMP improvement Construction stage
Bai Yun project Construction stage
3rd GMP construction of modernization of traditional Chinese
medicine Construction stage

13. Intangible Assets
(1) Intangible assets
Industrial
property right Non-patent
Item Land use right and know-how technology Trademark Others Total
I. Original cost
1. Opening balance 649,861,206.74 16,761,190.39 64,592,721.94 172,291,280.74 24,393,003.62 927,899,403.43
2. Increase 112,315,199.71 198,884.44 81,538.46 196,000.00 290,131,523.82 402,923,146.43
(1) Purchase 17,215,842.20 198,884.44 81,538.46 – 53,525,711.33 71,021,976.43
business combinations 95,099,357.51 – – 196,000.00 236,605,812.49 331,901,170.00
3. Decrease – – – – 43,760.69 43,760.69
(1) Disposal – – – – 43,760.69 43,760.69
4. Closing balance 762,176,406.45 16,960,074.83 64,674,260.40 172,487,280.74 314,480,766.75 1,330,778,789.17
II. Accumulated amortization
1. Opening balance 119,964,924.65 9,460,166.88 20,429,004.80 32,595,688.44 16,403,432.33 198,853,217.10
2. Increase 37,328,469.86 497,222.40 5,330,855.18 196,000.00 74,207,139.88 117,559,687.32
(1) Provision 16,269,464.83 497,222.40 5,330,855.18 – 18,210,675.03 40,308,217.44
business combinations 21,059,005.03 – – 196,000.00 55,996,464.85 77,251,469.88
3. Decrease – – – – 24,455.91 24,455.91
(1) Disposal – – – – 24,455.91 24,455.91
4. Closing balance 157,293,394.51 9,957,389.28 25,759,859.98 32,791,688.44 90,586,116.30 316,388,448.51
III. Provision for impairment –
1. Opening balance – 453,343.04 – 583,573.00 – 1,036,916.04
2. Increase – – – – – –
3. Decrease – – – – – –
4. Closing balance – 453,343.04 – 583,573.00 – 1,036,916.04
IV. Book value
1. Closing balance of book value 604,883,011.94 6,549,342.51 38,914,400.42 139,112,019.30 223,894,650.45 1,013,353,424.62
2. Opening balance of book value 529,896,282.09 6,847,680.47 44,163,717.14 139,112,019.30 7,989,571.29 728,009,270.29
Note: Amortization of RMB40,308 thousand for the current year (2017: RMB23,815 thousand) are recognized in the profit or loss. All of
the lands and relevant land use right in the intangible assets are located in Mainland China with useful life vary from 10 to 50 years.

(1) Intangible assets (Continued)
Recoverable value of brand with indefinite useful life is determined through estimation
and calculation using income method. Recoverable value is determined through calculating
the total present value of expected future income generated from the brand assets with
appropriate discount rate. Expected income can be obtained through the following
formula: expected income Ri = (base for brand fees × charging rate for brand fees) – taxes
and surcharges – enterprise income tax. Significant parameter in the calculation including:
(1) Discount rate adopted here is 14%; (2) Sales growth rate, generally 2%, while some
enterprises adopt a sales growth rate of 10% to 15%; (3) Charge rate for brand fees is
obtained through multiplying excess profit margin with contribution ratio of brand. Excess
profit margin is the average of historical data of the company in the most recent four
years. Contribution ratio of brand is obtained through analytic hierarchy process. Charge
rate for brand fees usually lies with the scope of 0.90% to 1.20%
Baiyunshan brand, Dashen product brand, Xing Qun series, Zhong Yi series, Pan Gao Shou
series, Chen Li Ji series, Jing Xiu Tang series, Qi Xing series, Jianzhiqiao series, Guo Ying,
Jian Min, etc. held by the Company do not have any indication of impairment after test.
(2) The Group had no land use right which do not have certificate of title for the
current year.
(3) The Group had no intangible assets which do not have right of use or have
restricted right of use.
14. Development Expenditure
Increase Decrease
Internal Recognized Transferred into Closing balance
development as profit or loss in of provision for
Item Opening balance expenditures Others intangible assets the current year Others Closing balance impairment
Capitalized expenditures 800,000.00 – – – – – 800,000.00 800,000.00

Expensed expenditures – 585,497,705.00 – – 585,497,705.00 – – –
Total 800,000.00 585,497,705.00 – – 585,497,705.00 – 800,000.00 800,000.00
Note: Development expenditure RMB800 thousand is a patent purchased by a subsidiary of the Group in 2005, which
was recognized in development expenditure. No further research was conducted after purchase. As of the year
end, the patent technology is not expected to have practical value. Consequently, provision for impairment is
accrued in full amount.

15. Goodwill
(1) Book value of goodwill
Increase Decrease
Arising from
The investee’s name or business
the event resulting in goodwill Opening balance combination Purchase Disposal Others Closing balance
Guangzhou Baiyunshan Hospital 9,216,610.56 – – – – 9,216,610.56

Guangyao Haima 2,282,952.18 – – – – 2,282,952.18
Guangxi Ying Kang 475,756.92 – – – – 475,756.92
GP Corp. – 932,349,003.84 – – – 932,349,003.84
Total 11,975,319.66 932,349,003.84 – – – 944,324,323.50
(2) Provision for impairment of goodwill
Increase Decrease
The investee’s name or
event resulting in goodwill Opening balance Provided Others Disposal Others Closing balance
Guangxi Ying Kang 475,756.92 – – – – 475,756.92

GP Corp. – 118,275,499.68 – – – 118,275,499.68
Total 475,756.92 118,275,499.68 – – – 118,751,256.60
The Company conducted impairment test on each asset group related to goodwill at the
year end. The Company adjusted the book value of each asset group through adding
goodwill and goodwill attributable to minority interest, and then compared the adjusted
book value of each asset group with recoverable amount to determine whether the
impairment loss has incurred.

15. Goodwill (Continued)
(3) Related information of asset groups or asset group portfolio containing goodwill
① GP Corp.: GP Corp. is engaged in wholesale and retailing of medicine, biological

product, healthy food, medical apparatus and instruments, etc., and providing
transportation and storage services to domestic customers. The pharmaceutical
circulation industry business entity of GP Corp. is comprised of the parent company,
multiple wholly-owned subsidiaries and holding subsidiaries. The management of
GP Corp. shall regularly evaluate the operating outcome of the above-mentioned
activities in whole to allocate resources. Consequently, GP Corp. in whole is
recognized as an asset group.
② Guangzhou Baiyunshan Hospital: As a single entity, Guangzhou Baiyunshan

Hospital is specializing in medical treatment and is independent from other entities
in the Group. Guangzhou Baiyunshan Hospital in whole generate cash flow and
consequently is recognized as an asset group.
③ Guangyao Hai Ma: As a single entity, Guangyao Hai Ma is specializing in medicine

advertisement and is independent from other entities in the Group. Guangyao
Hai ma generates cash flow separately and consequently is recognized as an asset
group.
(4) Procedures of goodwill impairment test, parameter and recognition method of

impairment of goodwill
① Significant hypothesis and supporting
(a) Assuming the going-concern of the entity under evaluation, and no

significant change occur in key aspects of manufacturing and operating
activities such as business scope, sales mode, channel, and the management,
etc.;
(b) Assuming no great change occur in social environment and economic

environment of the entity under evaluation and no significant change occur
in relevant laws and regulations in region and country in which the entity is
located;
(c) Assuming the products provided by the entity under evaluation can adapt to
market demand, objectives and measures set can be achieved on schedule
and expected benefit can be received.
(d) Assuming no significant change occur in the interest rate, exchange rate, tax
base and tax rate within normal range specified by the government.

(4) Procedures of goodwill impairment test, parameter and recognition method of

impairment of goodwill (Continued)
② Key parameter
Key parameter
Discount
Forecast Stable rate (equity
Predictive growth growth capital cost)
Company period rate period Profit margin (%)
GP Corp. 2019-2023 (steady Note 1 Flat Calculate based on 14.44-15.19

period hereafter) expected revenue, cost,
expenses, etc.
Guangzhou Baiyunshan 2019-2023 (steady Note 2 Flat Calculate based on 12.12
Hospital period hereafter) expected revenue, cost,
expenses, etc.
Guangyao Hai Ma 2019-2023 (steady Note 3 Flat Calculate based on 13.63
period hereafter) expected revenue, cost,
expenses, etc.
Notes:
1. According to the analysis conducted by the management of GP Corp., medicine sales revenue
shall be the main source of operating revenue of GP Corp. subsequent to the valuation base
date. The management of GP Corp. analyzed the key influencing indicators of operating revenue
of the above-mentioned main businesses and their historical movement trend, such as brand,
varieties, price, customer channel, network, etc. with comprehensive consideration of variable
factors’ influence on these indicators subsequent to the valuation base date, to estimate the
operating revenue of each business of GP Corp. Estimated revenue growth rate shall be 8.44%,
8%, 7%, 6%, 5% respectively for the period from 2019 to 2023.
2. According to the analysis conducted by the management of Guangzhou Baiyunshan Hospital,

medical care and medicine sales revenue shall be the main source of operating revenue of
Guangzhou Baiyunshan Hospital subsequent to the valuation base date. The management of
Guangzhou Baiyunshan Hospital analyzed the key influencing indicators of operating revenue of
the above-mentioned main businesses and their historical movement trend, such as service times,
average price, etc. with comprehensive consideration of variable factors’ influence on these
indicators subsequent to the valuation base date, to estimate the operating revenue of each
business of GP Corp. Estimated revenue growth rate shall be 7.10%, 6.18%, 3.98%, 3.29%,
2.08% respectively for the period from 2019 to 2023.
3. Guangyao Hai Ma conducted analysis on development and change in advertising and other
services revenue, which are the main influencing factors of operating revenue and their historical
movement trend. In consideration of the fact that the businesses of Guangyao Baiyunshan,
the main client of Guangyao Hai Ma, increased rapidly in recent years, and the fact that its
advertising volume increased correspondingly, and the factors such as revival of advertising
industry, etc., business revenue of Guangyao Hai Ma shall have increasing trend. According
to forecast of revenue of each business activity for the period from 2019 to 2023 with
comprehensive consideration of variable factors’ influence on these indicators subsequent to the
valuation base date, estimated revenue growth rate shall be 8.46%, 8.00%, 6.00%, 5.00%,
3.00% respectively for the period from 2019 to 2023.

(5) Effect of goodwill impairment test
The Company conducted goodwill impairment test in the current year. Goodwill
impairment amounted to RMB118,275,499.68 of GP Corp. was recognized. No goodwill
impairment of Baiyunshan Hospital and Guangyao Haima were recognized.
16. Long-term prepaid expenses
Item Opening balance Increase Amortization Other decrease Closing balance
Decoration expenses 33,349,277.28 66,362,160.08 21,980,628.32 – 77,730,809.04

ABC Buildings certification service 5,169,667.75 2,252,035.54 4,244,601.91 – 3,177,101.38
GMP reconstruction expenses 3,760,161.64 205,410.81 1,164,044.64 – 2,801,527.81
Computer system expenses 661,984.09 1,863,930.02 646,286.49 – 1,879,627.62
Exterior wall repair of original
supplementary warehouse
and decoration 214,666.79 – 111,999.96 – 102,666.83
AAALAC certificate 146,875.79 – 45,192.60 – 101,683.19
Others 5,764,012.18 6,746,919.58 3,989,206.81 – 8,521,724.95
Total 49,066,645.52 77,430,456.03 32,181,960.73 – 94,315,140.82


17. Deferred Tax Assets and Deferred Tax Liabilities
(1) Breakdown of deferred tax assets before offset

Deductible Deductible
temporary Deferred temporary Deferred
Item difference tax assets difference tax assets
Other payables 1,318,565,303.01 263,313,163.91 1,024,052,498.80 198,774,920.91

Provision for bad debts 333,782,001.29 80,641,616.34 107,888,189.11 24,860,987.73
Deferred income 340,717,498.52 72,167,584.19 113,573,052.60 17,555,957.88
Provisions 261,961,219.19 39,294,182.88 188,543,448.64 28,281,517.30
Impact on profit arising from
elimination 198,755,669.97 33,956,188.85 130,409,689.36 31,854,782.14
Provision for decline in value of
inventories 111,955,057.11 23,857,168.73 22,535,115.85 4,230,883.10
Fixed assets depreciation
differences between
accounting and tax law 67,105,717.89 15,830,597.29 10,818,921.31 1,622,838.20
Employee benefits payable 81,056,699.08 15,512,555.91 54,161,289.28 8,409,961.32
Deductible tax losses 58,687,497.80 14,671,874.44 210,484,213.33 41,207,417.36
Other non-current financial
assets 40,820,289.39 6,123,043.41 188,774,953.48 28,362,263.51
Investments in other equity
instruments 8,331,239.35 1,249,685.90 5,191,644.74 778,746.71
Provision for impairment of
fixed assets 8,499,076.09 1,397,171.11 8,092,295.32 1,236,103.30
Long-term prepaid expenses 3,960,963.61 594,144.54 490,785.73 73,617.86
Intangible assets amortization
differences between
amounting and tax law 1,188,972.13 178,345.81 1,279,094.64 191,864.20
construction in progress 251,734.38 37,760.16 251,734.38 37,760.16
Financial assets held for trading – – 636,317.57 95,447.63
Others 1,278,983.09 319,745.78 8,504,466.68 1,275,670.00
Total 2,836,917,921.90 569,144,829.25 2,075,687,710.82 388,850,739.31


17. Deferred Tax Assets and Deferred Tax Liabilities (Continued)
(2) Breakdown of deferred tax liabilities

Taxable Taxable
temporary Deferred temporary Deferred
Item differences tax liabilities differences tax liabilities
Book value of the appreciated

intangible assets and
fixed assets in business
combination 683,899,834.68 170,974,958.67 – –
Other receivables-profit
distribution 252,471,028.00 63,117,757.00 169,714,484.00 42,428,621.00
Other non-current financial
assets 78,927,745.68 11,872,519.56 – –
Fixed assets depreciation
differences between
accounting and tax law 15,629,549.80 2,344,432.47 738,829.02 110,824.35
Book value of amortization
provided for intangible assets
appreciation 7,901,296.00 1,185,194.40 8,133,688.00 1,220,053.20
Book value of depreciation
provided for fixed assets
appreciation 1,778,592.00 266,788.80 1,872,876.00 280,931.40
Other investments in equity
instruments 3,733.73 560.06 115,864,206.59 17,416,047.68
Compensation for demolition
and relocation – – 316,040,628.57 53,241,222.90
Others – – 603,757.57 90,563.64
Total 1,040,611,779.89 249,762,210.96 612,968,469.75 114,788,264.17
(3) Deductible temporary differences and deductible losses that are not recognized as
deferred income tax assets
Deductible temporary difference 5,965,271.14 729,081.54

Deductible losses 157,357,832.42 158,967,809.87
Total 163,323,103.56 159,696,891.41


17. Deferred Tax Assets and Deferred Tax Liabilities (Continued)
(4) Deductible losses which are not recognized as deferred tax assets will expire in the
following years
Year Closing balance Opening balance
2018 – 13,108,321.95
2019 10,376,918.20 25,792,065.32
2020 31,102,837.77 31,102,837.77
2021 35,399,376.92 35,399,376.92
2022 53,565,207.91 53,565,207.91
2023 26,913,491.62 –
Total 157,357,832.42 158,967,809.87
18. Other Non-current Assets
Advance payment of land transferring fee 2,480,000.00 –

Advance payment of accounting software 100,000.00 –
Total 2,580,000.00 –

19. Provision for Assets Impairment
Increase
from business
combination
Provided in not under Decrease
Category Opening balance the current year common control Reversed Written off Other decrease Closing balance
Provision for bad debts 112,683,402.56 46,526,478.97 186,342,057.41 7,199,639.74 5,808,866.04 – 332,543,433.16
Provision for decline in value of
inventories 26,721,631.85 81,289,621.12 34,531,427.38 21,087,970.71 8,832,379.34 73,705.00 112,548,625.30
Provision for impairment of other
non-current financial assets 4,553,551.23 – – – – – 4,553,551.23
Provision for impairment of fixed
assets 11,447,464.99 910,238.91 7,879,783.56 – 627,520.16 – 19,609,967.30
construction in progress 251,734.38 – – – – – 251,734.38
intangible assets 1,036,916.04 – – – – – 1,036,916.04
goodwill 475,756.92 118,275,499.68 – – – – 118,751,256.60
development expenditure – 800,000.00 – – – – 800,000.00
Total 157,170,457.97 247,801,838.68 228,753,268.35 28,287,610.45 15,268,765.54 73,705.00 590,095,484.01
20. Short-term Borrowings
(1) Category of short-term borrowings
Pledge borrowings 205,948,057.69 –

Guarantee borrowings 915,243,860.80 –
Credit borrowings 4,784,511,367.61 –
Discount of commercial acceptance notes – 11,500,000.00
Total 5,905,703,286.10 11,500,000.00


20. Short-term Borrowings (Continued)
(1) Category of short-term borrowings (Continued)
Note:
① Please refer to Note. VI. 57. Assets with Restricted Ownership or Use Right for details on category and
amount of pledge borrowings.
② As at 31 December 2018, short-term borrowings of RMB847,800 thousand of the Group’s guarantee
borrowings are guaranteed by the Group’s internal enterprises. Other guarantee loans are guaranteed by
minority shareholders of the sub-subsidiaries.
③ As at 31 December 2018, the weighted average annual interest rate of short-term borrowings is 4.5263%
(there is no information of weighted average annual interest rate of short-term borrowings on 31
December 2017).
(2) The Group had no overdue short-term borrowings as at 31 December 2018.
21. Notes Payable and Accounts Payable
Category Closing balance Opening balance
Notes payable 2,656,176,505.09 252,226,384.82

Accounts payable 9,313,277,657.72 2,802,200,696.28
Total 11,969,454,162.81 3,054,427,081.10


21. Notes Payable and Accounts Payable (Continued)
(1) Notes payable
Category Closing balance Opening balance
Commercial acceptance notes 196,980,253.91 3,477,662.87

Bank acceptance notes 2,459,196,251.18 248,748,721.95
Total 2,656,176,505.09 252,226,384.82
Note: As at 31 December 2018, amount expected to be matured within a year is RMB2,656,177 thousand (31
December 2017: RMB252,226 thousand).
(2) The aging of accounts payable based on the booking date is as follows:
Item Closing balance (%) Opening balance (%)
Within 1 year 8,973,120,088.71 96.35 2,625,069,157.32 93.68

Over 1 year 340,157,569.01 3.65 177,131,538.96 6.32
Total 9,313,277,657.72 100.00 2,802,200,696.28 100.00
Significant accounts payable with aging over 1 year:
Reason for outstanding

Item Closing balance or carrying forward
Litigation is involved. Please refer

Supplier 1 47,405,089.60 to Note XIV. 1. (1) ①.
Supplier 2 22,576,000.00 to Note XIV. 1. (2).
Supplier 3 21,366,337.47 Payment terms not satisfied.
Supplier 4 18,440,000.00 to Note XIV. 1. (3) ①.
Supplier 5 10,387,720.45 Payment terms not satisfied.
Total 120,175,147.52

22. Employee Benefits Payable
(1) Presentation of employee benefits payable
Item Opening balance Increase Decrease Closing balance
I. Short-term employee benefits 618,402,334.34 3,797,386,006.61 3,663,953,748.53 751,834,592.42

II. Post-employment benefits-
defined contribution plan 12,508,476.28 348,994,211.86 360,302,649.70 1,200,038.44
III. Termination benefits 260,000.00 1,484,996.22 1,744,996.22 –
IV. Other benefits due within
1 year – – – –
Total 631,170,810.62 4,147,865,214.69 4,026,001,394.45 753,034,630.86
(2) Presentation of short-term benefits
1. Wages, bonuses, allowances

and subsidies 595,185,678.83 3,177,019,346.08 3,065,664,066.29 706,540,958.62
2. Employee welfare – 161,598,437.63 156,610,234.50 4,988,203.13
3. Social Insurance premium 264,270.32 162,963,022.39 163,182,959.83 44,332.88
Including: Medical insurance
premium 271,097.26 144,209,520.39 144,434,708.66 45,908.99
Industrial injury
insurance premium 2,480.59 6,909,557.81 6,909,630.91 2,407.49
Maternity insurance
premium (9,307.53) 11,843,944.19 11,838,620.26 (3,983.60)
4. Housing funds (19,916.30) 198,958,362.05 198,840,131.34 98,314.41
5. Labor-union expenditure and
employee education funds 8,939,191.89 64,054,950.39 61,834,415.70 11,159,726.58
6. Housing allowance 13,817,006.93 27,038,087.12 12,531,347.96 28,323,746.09
7. Staff and workers’ bonus and
welfare fund – – – –
8. Short-term paid absences – 4,387,524.48 4,387,524.48 –
9. Short-term profits sharing
plan – – – –
10. Other short-term benefits 216,102.67 1,366,276.47 903,068.43 679,310.71
Total 618,402,334.34 3,797,386,006.61 3,663,953,748.53 751,834,592.42


22. Employee Benefits Payable (Continued)
(3) Disclosure of defined contribution plan by categories
1. Basic pension insurance 121,564.94 264,615,650.86 264,540,060.63 197,155.17

2. Unemployment insurance
premiums 29,327.27 9,187,097.72 9,186,501.46 29,923.53
3. Enterprise annuity 11,384,891.24 56,040,097.25 67,293,025.58 131,962.91
4. Others 972,692.83 19,151,366.03 19,283,062.03 840,996.83
Total 12,508,476.28 348,994,211.86 360,302,649.70 1,200,038.44
Note: The ending balance of employee benefits payable is mainly the wages, bonuses and wages of labor
assigned by labor service intermediary agent company provided by the Group at the end of December
2018. There are no overdue employee benefits payable. The balance is expected to be paid and utilized in
next year.
23. Tax Payable
Value-added tax 592,600,257.89 319,356,251.79

Urban maintenance and construction tax 2,632,855.23 3,720,978.49
Educational surcharge 467,711.95 1,642,194.87
Local education surcharge 1,409,977.72 1,016,472.23
Enterprise income tax 338,480,579.95 125,580,026.87
Individual income tax 13,353,590.27 9,479,261.76
Property tax 9,433,165.90 11,057,545.06
Land use tax 2,086,653.07 7,468,053.71
Stamp duty 2,843,937.88 1,594,305.76
Others 234,523.78 1,448.87
Total 963,543,253.64 480,916,539.41


24. Other payables
Interests payable 41,637,538.72 253,966.40

Dividends payable 65,917,238.98 45,446,017.79
Other payables 3,358,802,575.69 2,399,394,477.50
Total 3,466,357,353.39 2,445,094,461.69
(1) Interest payable
Short-term borrowings interest payable 38,049,327.13 –

Long-term borrowings interest payable 3,588,211.59 253,966.40
Total 41,637,538.72 253,966.40
(2) Dividends payable
Minority shareholders 65,349,805.19 44,968,565.68

Domestic public shares 567,388.78 477,407.10
BYS Group 45.01 45.01
Total 65,917,238.98 45,446,017.79


24. Other payables (Continued)
(3) Other payables
① Disclosures of other payables by nature
Nature of amount Closing balance Opening balance
Sales discounts 1,100,682,395.27 624,591,585.51

Accrued expenses 797,186,017.78 1,260,413,310.58
Factoring expense for
accounts payable 503,835,176.79 –
Margin, deposit, and down
payment received 479,319,837.30 164,129,875.02
Accounts payable to external entities 213,264,061.13 220,462,889.83
Current accounts to related parties 116,971,765.85 48,866,587.27
Accruals for fixed assets 25,201,992.65 26,776,270.31
Funds received temporarily
from employees 16,424,381.22 10,189,611.56
Rental expenses 4,859,777.43 3,748,736.05
Technological development
expenditures 944,129.25 450,896.78
Others 100,113,041.02 39,764,714.59
Total 3,358,802,575.69 2,399,394,477.50


24. Other payables (Continued)
(3) Other payables (Continued)
② Breakdown of accrued expenses
Terminal expenses 272,705,084.32 809,551,481.82

Freight expenses 186,406,294.36 151,285,018.17
Advertisement and promotion
expenses 96,861,750.25 169,831,180.97
Medicine service expenses 47,838,105.35 –
expenditures 41,310,583.56 17,287,664.24
Travel expenses 24,327,813.81 21,656,537.14
Trademark fee 12,018,735.48 3,900,000.00
Conference expenses 11,255,646.44 4,150,209.40
Utilities expenses 9,721,122.70 6,982,581.16
Agency fee 4,534,858.54 11,765,279.49
Rental expenses 4,470,691.66 10,084,679.88
Consulting fee 2,060,433.96 –
Others 83,674,897.35 53,918,678.31
Total 797,186,017.78 1,260,413,310.58
③ Disclosures of other payables by aging
Item Closing balance (%) Opening balance (%)
Within 1 year 3,017,948,976.26 89.85 2,213,377,523.13 92.25

Over 1 year 340,853,599.43 10.15 186,016,954.37 7.75
Total 3,358,802,575.69 100.00 2,399,394,477.50 100.00
④ The Group had no significant other payables with aging over 1 year as at 31
December 2018 and 31 December 2017.

25. Contract Liabilities
(1) Contract liabilities are as follows:
Product sales payment received in advance 3,685,541,240.09 1,614,438,014.50

Medical payment received in advance 1,105,983.15 –
Total 3,686,647,223.24 1,614,438,014.50
(2) Contract liabilities disclosed by aging
Item Closing balance Proportion (%) Opening balance Proportion (%)
Within 1 year 3,639,753,808.83 98.73 1,580,262,885.35 97.88

Over 1 year 46,893,414.41 1.27 34,175,129.15 2.12
Total 3,686,647,223.24 100.00 1,614,438,014.50 100.00
(3) The Group had no significant contract liabilities with aging over 1 year as at 31 December
2018 and 31 December 2017.
26. Current portion of non-current liabilities
Long-term borrowings due within 1 year

(Note VI. 27) 153,000,000.00 31,307,337.23
Long-term payables due within 1 year
(Note VI. 28) 51,024,196.93 –
Total 204,024,196.93 31,307,337.23


27. Long-term Borrowings
Credit borrowings 539,553,706.06 –

Mortgage borrowings 27,000,000.00 –
Less: Long-term borrowings due within
1 year (Note VI. 26) 153,000,000.00 –
Total 413,553,706.06 –
Notes:
① Mortgage loans are guaranteed by minority shareholders of the Group’s sub-subsidiaries with the property.
Temporary value of the property is RMB43,190 thousand.
② Interest rate for long-term borrowings was 4.5751% as at 31 December 2018 (No interest rate for long-term
borrowings available as at 31 December 2017).
(2) The Group had no overdue long-term borrowings as at 31 December 2018.
28. Long-term Payables
Long-term payables 128,649,038.74 20,171,809.73

Special payables 7,146,810.00 14,954,855.39
Total 135,795,848.74 35,126,665.12


28. Long-term Payables (Continued)
(1) Long-term payables
Financing lease payable 159,208,733.67 –

State funds payable 17,486,188.17 16,902,425.90
Department of Finance of Guangxi Zhuang
Autonomous Region 2,264,426.47 2,264,426.47
State Administration of Medicine 305,000.00 305,000.00
Others 408,887.36 699,957.36
Less: Finance lease payables maturing
within 1 year 51,024,196.93 –
Total 128,649,038.74 20,171,809.73
The minimum finance lease payables after 31 December 2018 are disclosed as follows:
Item Closing balance
Within 1 year 58,546,285.03

1 to 2 years 47,391,004.21
2 to 3 years 36,323,437.66
Over 3 years 30,943,391.18
Subtotal 173,204,118.08
Less: Unrecognized finance expenses 13,995,384.41
Book value 159,208,733.67


28. Long-term Payables (Continued)
(2) Special payables
Item Opening balance Increase Decrease Closing balance Reason
Compensation for relocation 14,954,855.39 – 7,808,045.39 7,146,810.00 Government

due to policies compensation
for relocation
due to policies
Total 14,954,855.39 – 7,808,045.39 7,146,810.00
29. Long-term Employee Benefits Payable
Post-employment benefits-provision
for long service bonus 325,325.54 326,532.02
Total 325,325.54 326,532.02
30. Provisions
Item Opening balance Closing balance Cause
Estimated loss on return Estimated based

of products on the disposal
assets agreement.
It has not been
500,191.19 500,191.19 settled yet.
Employee benefits
for restructuring
of Guangyao General
Institute 51,241,106.85 47,491,349.60 Note (1)
Unemployed fee for
relocation of Qi Xing 3,607,287.28 1,609,771.69 Note (2)
Total 55,348,585.32 49,601,312.48
Notes:
(1) The Company obtained 100% of the share of Guangyao General Institute through business combination involving
enterprises under common control in year of 2015. According to the employee resettlement scheme, when agreed
in the restructuring, Guangyao General Institute should offer pension and medical benefits for the retirees, in-
service staff, family members and dependents who were enrolled as at 30 June 2014, and employee benefits are
accrued consequently.
(2) According to the employee resettlement scheme arising from the relocation of Qi Xing, the employee who has
provided continuous service for 15 years and within 5 years to the age of mandatory retirement shall be paid salary
monthly till retirement if no position is assigned to them. The settlement fee for relocation of Qi Xing were accrued
consequently.

31. Deferred income
Amount
recognized into Amount
Current non-operating recognized into Amount Appropriation
Item Opening balance increase in grants income other income offset costs to cooperators Other decrease Closing balance Reason
Government grants related

to assets 130,807,949.11 151,643,949.00 4,743,232.08 96,315,842.68 – 6,060,000.00 – 175,332,823.35
Including:
Technology funds granted by the
government 57,172,286.13 37,518,467.81 – 10,551,173.72 – 6,060,000.00 – 78,079,580.22 Government grant
Compensation for relocation 767,662.82 – 72,997.56 – – – – 694,665.26 Government grant
Government subsidies on interests – – – – – – – – Government grant
Special project funds for
environmental protection 2,663,159.28 – – 453,240.27 – – – 2,209,919.01 Government grant
Construction funds for innovation
platform and laboratory 12,780,163.15 1,673,717.99 – 2,137,186.83 – – – 12,316,694.31 Government grant
Land support funds granted by the
government 26,145,041.01 30,994,007.40 – 1,128,070.66 – – – 56,010,977.75 Government grant
Support funds for industrial
development 17,034,413.88 79,340,000.00 – 79,957,142.84 – – – 16,417,271.04 Government grant
Others 14,245,222.84 2,117,755.80 4,670,234.52 2,089,028.36 – – – 9,603,715.76 Government grant
Government grants related
to income 396,082,419.86 100,358,387.75 107,103,474.03 71,984,943.38 119,208.82 2,142,400.00 – 315,090,781.38
Including:
government 76,948,942.86 71,148,251.77 – 46,916,635.18 119,208.82 2,142,400.00 – 98,918,950.63 Government grant
Special funds for technology exports 94,962.06 – – 93,262.06 – – – 1,700.00 Government grant
Medical industrial research project
funds 5,571,453.93 8,016,182.01 – 6,705,573.37 – – – 6,882,062.57 Government grant
Special funds for energy-saving project 683,550.00 215,259.00 – 227,859.00 – – – 670,950.00 Government grant
Special fund for innovative enterprises – 758,607.74 – 758,607.74 – – – – Government grant
Compensation for relocation 311,389,731.98 – 42,127,961.18 – 64,975,512.85 – – 204,286,257.95 Government grant
Support funds for industrial
development – 13,035,459.00 – 13,035,459.00 – – – – Government grant
Others 1,393,779.03 7,184,628.23 – 4,247,547.03 – – – 4,330,860.23 Government grant
Total 526,890,368.97 252,002,336.75 46,871,193.26 168,300,786.06 65,094,721.67 8,202,400.00 – 490,423,604.73
32. Other non-current liabilities
Commitment to the investment in

Southern Antitumor Company 50,225,000.00 50,225,000.00
Total 50,225,000.00 50,225,000.00
Note: Performance obligation according to the agreement and the Article as the subsidiaries of the Group acquired 50%
shares of Southern Antitumor company.

33. Share capital
Opening balance Changes in the current year Closing balance

Capitalizing of
Item Amount Proportion (%) Issuance Share dividends capital reserves Others Subtotal Amount Proportion (%)
Restricted shares
Shares held by state-owned
companies 236,315,006.00 14.54 – – – – – 236,315,006.00 14.54
Shares held by other domestic
investors 98,396,693.00 6.05 – – – – – 98,396,693.00 6.05
Including: Shares held by companies
other than state-owned companies – – – – – – – – –
Shares held by domestic natural
persons – – – – – – – – –
Others 98,396,693.00 6.05 – – – – – 98,396,693.00 6.05
Shares held by foreign investors – – – – – – – – –
Total restricted shares 334,711,699.00 20.59 – – – – – 334,711,699.00 20.59
Unrestricted shares
Ordinary shares denominated in RMB 1,071,179,250.00 65.88 – – – – – 1,071,179,250.00 65.88
Domestically-listed shares held by
foreign investors – – – – – – – – –
Overseas-listed shares held by foreign
investors 219,900,000.00 13.53 – – – – – 219,900,000.00 13.53
Others – – – – – – – – –
Total Unrestricted shares 1,291,079,250.00 79.41 – – – – – 1,291,079,250.00 79.41
Total shares 1,625,790,949.00 100.00 – – – – – 1,625,790,949.00 100.00
34. Capital Surplus
Share premium 9,058,363,544.42 – 10,093,909.04 9,048,269,635.38

Other capital reserves 816,814,414.01 – – 816,814,414.01
Including: Capital reserve transferred under
previous accounting system 24,955,836.66 – – 24,955,836.66
Total 9,875,177,958.43 – 10,093,909.04 9,865,084,049.39
Note: In November 2018, the Company acquired 25.00% minority interest of Guangzhou Baiyunshan Xing Zhu
Pharmaceutical Co., Ltd. for RMB34,410 thousand. The difference of RMB10,094 thousand between purchase
price and shares of minority interest at purchase date is adjusted to share premium.

35. Other Comprehensive Income
Current year
Less: profit
or loss
transferred
from other
comprehensive Attributable Attributable
Opening Current income in to the parent to minority
Opening balance after amount previous Less: Income company, shareholders, Closing
Item balance adjustment before tax periods tax expense net of tax net of tax balance
I. Other comprehensive income

that will not be reclassified to
profit or loss 1,448,181.81 1,448,181.81 (2,885,860.88) – (432,879.13) (2,452,981.75) – (1,004,799.94)
Including: Other comprehensive
income that will not
be reclassified to
profit or loss under
equity method 1,448,181.81 1,448,181.81 – – – – – 1,448,181.81
Change in fair value of
investments in other equity
instruments – – (2,885,860.88) – (432,879.13) (2,452,981.75) – (2,452,981.75)
II. Other comprehensive income

that may be reclassified into
profit or loss (71,655,120.08) (8,267,013.59) 9,002,779.01 208,104.58 – 8,794,674.43 – 527,660.84
Including: Other comprehensive
income that may be
reclassified to profit
or loss under equity
method 216,926.54 216,926.54 20,314.61 208,104.58 – (187,789.97) – 29,136.57
Gains and losses arising from
changes in fair value of
available-for-sale financial
assets (original financial
instrument standards) 63,388,106.49 – – – – – – –
Difference arising from the
translation of foreign
currency financial statements (8,483,940.13) (8,483,940.13) 8,982,464.40 – – 8,982,464.40 – 498,524.27
Total other comprehensive income (70,206,938.27) (6,818,831.78) 6,116,918.13 208,104.58 (432,879.13) 6,341,692.68 – (477,139.10)

36. Surplus Reserve
Statutory surplus reserve 1,035,836,575.92 213,972,964.22 – 1,249,809,540.14

Discretionary surplus reserve 118,925,617.49 – – 118,925,617.49
Total 1,154,762,193.41 213,972,964.22 – 1,368,735,157.63
Note: In accordance with the Company Law and the Company’s Articles of Association, the Group should appropriate
10% of net profit for the year to the statutory surplus reserve, and the Group can cease appropriation when the
statutory surplus reserve accumulated reaches 50% of the registered capital.
Discretionary surplus reserve can be drawn after the Group drawing statutory surplus reserve.
Discretionary surplus reserve can be utilized to cover losses of the previous years or to increase
equity after the approval.
37. Undistributed profits
Item Current year Last period
Closing balance of undistributed profits of prior

year before adjustments 6,285,996,409.09 4,782,293,720.24
Adjustments to opening balance of undistributed
profits at the current year (Add: +; Less:-) (67,801,004.52) –
Undistributed profits at the beginning of current
year after adjustments 6,218,195,404.57 4,782,293,720.24
Add: Net profit attributable to shareholders of the
parent company for the current year 3,440,980,103.08 2,061,651,929.01
Less: Appropriation of statutory surplus reserve 213,972,964.22 102,727,774.44
Appropriation of discretionary surplus reserve – –
Appropriation of provision for general risk – –
Ordinary share dividends payable 619,426,351.57 455,221,465.72
Ordinary shares dividends converted to share
capital – –
Closing balance of undistributed profits 8,825,776,191.86 6,285,996,409.09
Notes:
(1) Adjustment to the opening balance of undistributed profits of RMB-67,801 thousand results from adjustment
to the classification of financial instruments at the first implementation date of the new financial instrument
standards. Please refer to Note IV. 29. (1) ①.
(2) As at 31 December 2018, surplus reserve of subsidiaries comprised in undistributed profit, attributable to the
parent company, was RMB1,040,761 thousand (31 December 2017: RMB753,467 thousand).
(3) According to the resolution of the 2017 annual general meeting held on 22 June 2018, the Company shall issue
cash dividends to all shareholders at RMB 0.381 per share (tax included), RMB619,426 thousand in total, based on
the 1,625,790,949 outstanding shares at the year end of 2017.

38. Minority Interest
Relationship
Investee with the Company 31 December 2018 31 December 2017
Xing Qun Holding subsidiary 23,993,154.53 25,526,996.16

Guangzhou Chen Li Ji Great Health Industry Co., Ltd. Indirectly controlled subsidiary 5,106,805.98 4,488,081.92
Guangzhou Han Fang Holding subsidiary 96,011.92 77,717.50
Jing Xiu Tang Holding subsidiary 19,921,016.34 19,231,429.97
Guangzhou Jing Xiu Tang 1790 Trading Co., Ltd. Indirectly controlled subsidiary 5,140,720.90 4,072,239.87
Pan Gao Shou Holding subsidiary 26,604,841.88 26,819,776.09
Wang Lao Ji Holding subsidiary 18,081,075.34 –
GP Corp. Holding subsidiary 725,295,512.10 –
Fujian Guangyao Jie Da Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 10,423,238.97 –
Hubei Guangyao An Kang Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 8,931,329.64 –
Foshan Guangyao Jian Ze Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 28,015,764.55 –
Hainan Guangyao Chen Fei Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 103,163,300.77 –
Shanxi Guangyao Kang Jian Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 51,180,847.15 –
Guangdong Meixian Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 17,655,502.78 –
Guangyao Sichuan Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 54,586,160.49 –
Hubei Guangyao Ji Da Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 12,002,555.85 –
Guangxi Guangyao Xin Shi Dai Pharmaceutical
Co., Ltd. Indirectly controlled subsidiary 24,860,706.74 –
Jingyu Guangyao Dong’e Chinese Raw Medicine
Development Co., Ltd. Indirectly controlled subsidiary 1,757,778.81 2,396,617.91
Fengshun Guangyao Chinese Raw Medicine
Heilongjiang Sen Gong Guangyao Raw Medicine
Wulanchabu Guangyao Chinese Raw Medicine
Development Co., Ltd. Indirectly controlled subsidiary 191,649.74 195,877.25
Shandong Guangyao Chinese Raw Medicine
Guangzhou Baiyunshan Wei Yi Industries Co., Ltd. Indirectly controlled subsidiary 4,898,526.70 –
Tibet Linzhi Guangyao Development Co., Ltd Indirectly controlled subsidiary 322,547.12 168,374.96
Guangxi Ying Kang Holding subsidiary 23,471,848.68 18,588,095.67
Yi Gan Holding subsidiary (563,224.28) (682,790.11)
Guangzhou Baiyunshan Hospital Indirectly controlled subsidiary 40,532,291.87 38,380,063.85
Guangzhou Baiyunshan Run Kang Confinement
Service Center Co., Ltd. Indirectly controlled subsidiary 4,886,633.07 –
Xing Zhu Wholly owned subsidiary – 23,424,278.65
Guangzhou WLJ Catering Management
Development Co., Ltd. Indirectly controlled subsidiary 319,557.41 1,474,378.45
Tian Xin Holding subsidiary 38,060,738.01 43,732,326.89
Guang Hua Holding subsidiary 25,608,777.44 29,865,897.41
Guang Hua Health Indirectly controlled subsidiary 344,253.55 464,823.85
Pharmaceutical Technology Holding subsidiary 139,444,227.55 108,917,961.61
Wang Lao Ji Da Zhai Beverages Co., Ltd. Indirectly controlled subsidiary 16,242,879.48 15,789,387.84
Guangzhou Wang Lao Ji Da Zhai Co., Ltd. Indirectly controlled subsidiary (879,215.80) –
Zhejiang Guang Kang Pharmaceutical Co., Ltd. Indirectly controlled subsidiary 22,633,429.10 23,010,593.25
Total 1,458,823,545.22 391,633,221.51


39. Operating Income and Operating Costs
(1) Operating Income and Operating Costs
Category Current year Prior year

Income Cost Income Cost
Main businesses 41,980,377,512.59 32,106,055,149.15 20,789,416,101.26 13,023,397,768.72

Other businesses 253,460,538.53 58,336,565.01 164,809,088.27 39,831,579.56
Total 42,233,838,051.12 32,164,391,714.16 20,954,225,189.53 13,063,229,348.28
(2) Disclosure by category
Item Current year Prior year

Great Southern TCM 9,635,377,047.64 5,479,358,848.94 7,795,967,320.80 4,256,274,924.46

Great Health 9,487,459,761.85 5,367,038,802.23 8,573,656,297.09 4,694,132,517.36
Great Commerce 22,743,867,015.42 21,171,258,480.56 4,328,826,261.87 4,002,443,482.09
Others 113,673,687.68 88,399,017.42 90,966,221.50 70,546,844.81
Total 41,980,377,512.59 32,106,055,149.15 20,789,416,101.26 13,023,397,768.72


39. Operating Income and Operating Costs (Continued)
(3) Disclosure by primary operating region

Southern China Area 28,849,803,996.53 23,915,084,915.66 11,487,792,037.27 7,599,784,427.84

Eastern China Area 4,555,823,978.77 2,450,090,423.20 3,642,066,823.73 2,083,507,350.23
Northern China Area 2,368,824,210.30 1,346,550,783.78 2,098,027,979.04 1,132,840,394.01
Northeast Area 1,043,076,134.85 896,880,723.02 387,187,836.18 218,361,767.80
Southwest Area 3,603,000,081.66 2,331,392,607.64 2,468,998,109.64 1,598,859,047.48
Northwest Area 1,515,840,283.61 1,123,178,208.19 654,256,814.80 340,150,855.44
Export 44,008,826.87 42,877,487.66 51,086,500.60 49,893,925.92
Total 41,980,377,512.59 32,106,055,149.15 20,789,416,101.26 13,023,397,768.72
(4) Total sales to the top five customers are RMB2,578,963 thousand (2017: RMB2,402,240
thousand), accounting for 6.14% of the Group’s primary operating income for the current
year (2017: 11.56%)
Proportion to
Item Income total income (%)
Customer 1 756,277,570.48 1.80

Customer 2 534,799,691.76 1.27
Customer 3 451,354,161,51 1.08
Customer 4 425,591,085.19 1.01
Customer 5 410,940,424.05 0.98
Total 2,578,962,932.99 6.14


(5) Other business income and other business cost
Category Current year Prior year

Leases of assets 111,730,449.92 32,711,108.33 79,540,199.79 16,969,230.36

Consulting fee 44,331,870.72 – 1,500,523.95 –
License fee for franchise 39,029,386.78 – 30,586,953.27 –
Property management fee 15,434,152.21 778,355.50 9,571,161.05 904,846.13
Trademark fee income 15,381,165.83 – 15,883,059.86 –
Collection of utility on behalf
of others 7,729,458.14 11,360,014.70 8,432,223.27 10,145,844.16
Sales of materials 3,385,983.36 1,780,582.16 1,858,165.61 35,310.28
Service income 3,068,234.91 4,945,425.02 3,051,211.69 4,451,745.47
Income from franchise
store management fee 3,059,397.78 – – –
Technical service income 1,071,486.80 – 1,381,812.54 2,466,115.03
Others 9,238,952.08 6,761,079.30 13,003,777.24 4,858,488.13
Total 253,460,538.53 58,336,565.01 164,809,088.27 39,831,579.56
40. Taxes and Surcharges
Urban maintenance and construction tax 109,463,501.98 85,512,430.13

Education surcharge 47,516,309.63 36,923,466.75
Local education surcharge 31,613,407.28 24,610,692.58
House property tax 31,699,058.39 26,259,030.31
Vehicle and vessel use tax 145,188.95 196,111.72
Stamp duty 33,825,378.81 21,421,427.29
Land use tax 6,652,959.61 8,849,122.21
Others 2,044,069.52 316,523.04
Total 262,959,874.17 204,088,804.03
Note: Please refer to Note V. Taxes for basic rates of the above taxes and surcharges.

41. Selling and Distribution Expenses
Employee benefits 2,084,916,436.36 1,702,286,828.76

Advertising and promotion fees 1,044,694,199.85 567,035,137.63
Freight and miscellaneous charges 691,761,052.60 458,579,746.26
Sales and service fees 667,086,742.90 1,279,604,585.41
Traveling expenses 149,181,538.93 130,483,954.15
Rental expenses 81,658,892.82 31,644,960.58
Consulting fees 46,271,334.29 12,381,167.15
Depreciation expenses 42,398,248.30 2,874,346.97
Office expenses 36,316,161.36 19,044,765.06
Others 124,206,528.11 35,578,172.91
Total 5,056,820,914.13 4,285,949,353.46
42. General and administrative Expenses
Employee benefits 978,874,628.25 742,789,551.41

Trademark license fees 173,110,774.52 105,449,398.35
Amortization 67,143,952.45 31,816,477.32
General and administrative expenses 57,056,487.54 44,014,041.85
Rental expenses 49,014,829.43 36,965,594.95
Repairing expenses 41,953,095.32 21,362,249.05
Traveling expenses 25,372,400.60 21,377,406.36
Professional service fees 23,011,971.42 19,667,982.61
Including: Audit fee 2,425,786.50 2,553,000.00
Freight and miscellaneous charges 18,483,358.49 14,997,913.64
Utilities 16,250,591.54 10,844,554.57
Consulting fees 9,405,783.09 6,318,727.68
Insurance premium 3,816,739.03 2,641,589.61
Others 147,805,683.72 91,325,986.78
Total 1,699,062,484.22 1,206,294,987.22


43. Research and development expenditures
Employee benefits 195,942,572.79 171,384,504.18

Raw materials 167,907,992.11 51,556,644.96
Special research and development 65,898,697.14 31,796,956.30
Trial production expenses 48,780,880.61 16,657,124.59
Clinical trial expenses 23,666,935.39 10,694,817.94
Technique research expenses 4,837,987.58 1,092,433.24
Amortization 4,197,091.78 3,538,628.60
Others 51,326,833.51 68,202,384.19
Total 585,497,705.00 373,287,521.71
44. Financial expenses
Interest expenses 222,800,930.26 1,065,465.65

Interest expenses of notes 4,540,898.58 5,757,678.99
Interest income (262,003,043.18) (218,821,732.64)
Exchange losses/(gains) 5,093,953.48 (1,758,873.67)
Service change of finance institutions 7,871,312.37 2,680,535.69
Cash discount 10,700,313.47 298,557.44
Finance lease interest 4,236,933.29 –
Others 104,173.30 207,069.10
Total (6,654,528.43) (210,571,299.44)


45. Impairment loss in respect of Assets
Loss on bad debts – 13,656,344.39

Loss on decline in value of inventories 60,201,650.41 4,451,623.12
Fixed asset impairment loss 910,238.91 1,855,000.39
Goodwill impairment loss 118,275,499.68 –
Development expenditure impairment loss 800,000.00 –
Total 180,187,389.00 19,962,967.90
46. Impairment Losses in respect of Credit
Loss on bad debts of notes receivable and

accounts receivable 25,717,696.04 –
Including: Loss on bad debts of notes receivable – –
Loss on bad debts of accounts receivable 25,717,696.04 –
Loss on bad debts of other receivables 13,609,143.19 –
Total 39,326,839.23 –

47. Other Income
Amount
recognized into
non-recurring Asset
profit or loss related/income
Item Current year Prior year in the current year related

government 10,414,003.89 15,719,489.26 10,414,003.89 Asset related
Special project fund for environmental
protection 280,963.36 1,046,508.32 280,963.36 Asset related
Construction funds for innovation
platform and laboratory 1,718,315.69 2,063,567.79 1,718,315.69 Asset related
Land support funds granted by the
government 1,745,213.50 – 1,745,213.50 Asset related
Support funds for industrial development – 965,586.12 – Asset related
Others 553,217.89 1,400,102.38 553,217.89 Asset related
Subtotal 14,711,714.33 21,195,253.87 14,711,714.33

government 48,452,015.90 63,308,279.42 48,452,015.90 Income related
Special fund for Technology export 93,262.06 – 93,262.06 Income related
Medical industrial research project funds 6,525,573.37 8,813,472.10 6,525,573.37 Income related
Special funds for energy-saving project 12,075.00 12,600.00 12,075.00 Income related
Special fund for innovative firms 1,057,800.00 – 1,057,800.00 Income related
Compensation for demolition and
relocation 7,808,045.39 – 7,808,045.39 Income related
Support funds for industrial development 92,890,000.00 11,280,000.00 92,890,000.00 Income related
Others 24,560,610.07 7,166,290.87 24,560,610.07 Income related
Subtotal 181,399,381.79 90,580,642.39 181,399,381.79
Total 196,111,096.12 111,775,896.26 196,111,096.12


48. Investment Income
Long-term equity investment income

under equity method 317,196,606.84 281,264,687.40
Investment income from disposal
of long-term equity investment 1,099,377.08 –
Investment income from the period
in which the Group held the
financial assets at FVTPL – 201,347.70
Investment income from available-for-sale
financial assets – 13,230,314.11
Proceed from remeasurement of share to
fair value at the acquisition of control 870,677,046.64 –
Investment income from the period in
which the Group held the
non-current financial assets 14,096,380.82 –
Interest income from finance
products and structured deposits 68,244,907.23 43,666,279.98
Total 1,271,314,318.61 338,362,629.19
49. Gains from changes in fair value
Sources of gains from changes in fair value
Sources of gains from change in fair value Current year Prior year
Financial assets held for trading – (1,151,066.21)

Other non-current financial assets 115,575,352.23 –
Total 115,575,352.23 (1,151,066.21)


50. Proceed from disposal of assets
Amount
recognized into
non-recurring
profit or loss in the
Item Current year Prior year current year
Gains on damaging and scrapping

of non-current assets 707,312.22 – 707,312.22
Including: proceed from disposal
of fixed assets 707,312.22 – 707,312.22
Total 707,312.22 – 707,312.22
51. Non-operating income
Amount
recognized into
non-recurring
Proceed from damage and scrapping

of non-current assets 929,680.36 457,099.43 929,680.36
Government grant 47,139,280.96 59,772,941.97 47,139,280.96
Penalty income 119,263.29 487,018.84 119,263.29
Income from sale of scrap 4,436,055.06 3,937,105.85 4,436,055.06
Debt forgiveness 5,815,876.61 2,150,627.20 5,815,876.61
and relocation 610,793.12 – 610,793.12
Compensation 580,464.02 2,113,626.18 580,464.02
Remuneration of expatriates 3,741,084.51 1,953,014.82 3,741,084.51
The difference between the
business combination
cost and the book value
of the share of net
identifiable assets acquired 125,981,938.96 – 125,981,938.96
Others 8,218,446.60 5,632,714.24 8,218,446.60
Total 197,572,883.49 76,504,148.53 197,572,883.49


51. Non-operating income (Continued)
Government grant recognized into profit or loss for the current year:
Amount
recognized into
non-recurring Asset
profit or loss in the related/income
Item Current year Prior year current year related

and relocation 42,127,961.18 365,644.44 42,127,961.18 Asset related
Special project fund for
environmental protection – 10,687.50 – Asset related
Others 4,670,234.52 4,670,234.52 4,670,234.52 Asset related
Subtotal 46,798,195.70 5,046,566.46 46,798,195.70

and relocation – 38,766,556.51 – Income related
Support funds for industrial development – 15,959,819.00 – Income related
Special funds for energy-saving project 313,730.00 – 313,730.00 Income related
Others 27,355.26 – 27,355.26 Income related
Subtotal 341,085.26 54,726,375.51 341,085.26
Total 47,139,280.96 59,772,941.97 47,139,280.96
52. Non-operating expenses
Amount
recognized into
non-recurring
Losses on damage and scrapping

of non-current assets 2,072,428.85 2,140,625.46 2,072,428.85
Public welfare donation expenditure 6,998,480.92 7,076,366.67 6,998,480.92
Penalty and overdue fines 3,476,160.83 1,344,601.25 3,476,160.83
Reward of family planning 854,898.80 238,809.39 854,898.80
Expenses accrued based on court decision – 26,376,110.52 –
Others 1,394,397.29 7,322,464.15 1,394,397.29
Total 14,796,366.69 44,498,977.44 14,796,366.69


53. Income Tax Expenses
(1) Income tax expenses
Current tax expenses 699,010,875.25 294,299,835.26

Deferred tax expenses (213,996,855.53) 79,920,680.54
Total 485,014,019.72 374,220,515.80
(2) Adjustment processes of accounting profit and income tax expenses
Item Current year
Total profit 4,018,730,255.62

Income tax expenses calculated at statutory/applicable rates 602,809,538.34
Tax effect of different rates applicable to subsidiaries 38,281,956.35
Adjustment effect of income tax of prior year (2,114,519.29)
Tax effect of non-taxable income (218,163,324.75)
Tax effect of costs, expenses and losses not deductible
for tax purposes 95,336,456.38
Tax effect of R&D expenditure deduction (30,049,379.28)
Tax effect of use of deductible loss of previously
unrecognized DTA (7,996,296.88)
Tax effect of deductible temporary differences or deductible
loss of unrecognized DTA in the current year 6,909,588.85
Income tax expenses 485,014,019.72

54. Other comprehensive income
Please refer to Note VI. 35.
55. Items in the Cash Flow Statement
(1) Cash received from other operating activities
Interest income 262,003,043.18 218,821,732.64

Other operating income 253,460,538.53 164,809,088.27
Government grant 235,951,130.84 146,324,666.15
Non-operating income 146,980,773.32 14,123,479.94
Deposit received and other items 10,977,037.62 60,651,687.18
Total 909,372,523.49 604,730,654.18
(2) Cash paid for other operating activities
Cash paid for selling and

distribution expenses 1,479,632,629.07 2,180,112,251.00
Cash paid for general and
administrative expenses 332,882,219.57 562,357,630.15
Deposit paid 80,084,277.94 –
Term deposit 20,000,000.00 –
Financial expenses – bank charges 7,871,312.37 2,680,535.69
Others 609,137,600.70 150,984,317.45
Total 2,529,608,039.65 2,896,134,734.29


55. Items in the Cash Flow Statement (Continued)
(3) Cash received from other investing activities
The difference between consideration

paid and cash or cash equivalents
of the acquired company 928,379,998.71 –
Repayment of internal borrowings 15,618,641.39 –
Interest 44,810.67 30,116.53
Internal borrowings interest received – 619,962.45
Total 944,043,450.77 650,078.98
(4) Cash paid to other investing activities
Book balance of currency assets

at the time the Group’s
subsidiaries are excluded
from consolidation scope 161,611.03 –
Total 161,611.03 –
(5) Cash received from other financing activities
Return of deposit for notes 958,871,915.99 –
Total 958,871,915.99 –
(6) Cash paid to other financing activities
Deposit for notes paid 993,041,430.98 –

Factoring deposit for accounts
receivable paid 100,438,849.65 –
Deposit for borrowings paid 3,794,247.96 –
Finance lease 48,458,481.77 –
Total 1,145,733,010.36 –

56. Supplementary Information of Cash Flow Statement
(1) Supplementary information of cash flow statement
Supplementary information Current year Prior year
1. Reconciliation from net profit to cash flows from

operating activities:
Net profits 3,533,716,235.90 2,118,755,620.90
Add: Provision for assets impairment 180,187,389.00 19,962,967.90
Provision for credit impairment 39,326,839.23 –
Depreciation of fixed assets, depletion of oil and gas
assets, depreciation of bearer biological assets
(“-” refers to income) 260,915,748.59 221,130,196.83
Amortization of intangible assets (“-” refers to
income) 40,308,217.44 23,815,087.25
Amortization of long-term prepaid expenses (“-”
refers to income) 32,181,960.73 9,749,458.46
Losses on disposal of fixed assets, intangible assets
and other long-term assets (“-” refers to income) (707,312.22) 1,683,526.03
Losses on scrapping of fixed assets (“-” refers to
income) 1,142,748.49 –
Loss on changes in fair value (“-” refers to income) (115,575,352.23) 1,151,066.21
Financial expenses (“-” refers to income) 238,413,961.66 6,829,666.15
Investment losses (“-” refers to income) (1,271,314,318.61) (338,362,629.19)
Decrease in deferred tax assets (“-” refers to
income) (79,875,823.19) 43,459,704.05
Increase in deferred tax liabilities (“-” refers to
income) (35,549,957.95) 36,460,976.49
Decrease in inventories (“-” refers to income) (2,003,344,782.55) (917,263,177.25)
Decrease of operating receivables (“-” refers to
income) 27,962,057.35 35,182,106.13
Increase of operating payables (“-” refers to income) 4,369,100,874.23 571,136,155.61
Others (“-” refers to income) – –
Net cash flows from operating activities 5,216,888,485.87 1,833,690,725.57
2. Significant investing and financing activities that do not

involve cash receipts and payments:
Conversion of debt into capital – –
Convertible company bonds due within one year – –
Fixed assets held under finance leases – –
3. Net changes in cash and cash equivalents

Cash at the end of period 15,071,612,198.38 11,495,535,159.70
Less: Cash at the beginning of year 11,495,535,159.70 12,586,469,786.51
Add: Cash equivalents at the end of the period – –
Less: Cash equivalents at the beginning of the year – –
Net increases in cash and cash equivalents 3,576,077,038.68 (1,090,934,626.81)

56. Supplementary Information of Cash Flow Statement (Continued)
(2) Net cash paid for acquisition of subsidiaries in the current year
Item Amount
Cash or cash equivalents paid in the current year

for business combination in the current year 1,455,575,081.81
Including: GP Corp. 1,094,100,000.00
Wang Lao Ji 361,475,081.81
Less: Cash and cash equivalents held by the subsidiaries
at the purchase date 2,383,955,080.52
Including: GP Corp. 1,509,277,153.74
Wang Lao Ji 874,677,926.78
Add: Cash and cash equivalents paid in the current year
for combinations in the prior years –
Net cash paid for acquisition of subsidiaries (928,379,998.71)
(3) Net cash received for disposal of subsidiaries in the current year
Item Amount
Cash or cash equivalents received for disposal

of subsidiaries in the current year –
Including: Guangzhou Guangyao Baiyunshan
Great Health Hotel Co., Ltd. –
Less: Cash and cash equivalents held by the subsidiaries
at the date the Group loss control over the subsidiaries 161,611.03
Including: Guangzhou Guangyao Baiyunshan Great
Health Hotel Co., Ltd. 161,611.03
Add: Cash and cash equivalents received in the current year
for disposal of subsidiaries in previous periods –
Net cash received for disposal of subsidiaries (161,611.03)

56. Supplementary Information of Cash Flow Statement (Continued)
(4) Breakdown of cash and cash equivalents
I. Cash 15,071,612,198.38 11,495,535,159.70

Including: Cash on hand 981,910.86 908,829.96
Bank deposits that are
readily available for
payment 15,049,107,347.81 11,487,756,822.40
Other cash that are
readily available for
payment 21,522,939.71 6,869,507.34
II. Cash equivalents – –
Including: Debt investment maturing
within three months – –
III. Closing balance of cash and cash
equivalents 15,071,612,198.38 11,495,535,159.70
Including: Cash and cash equivalents

in the parent or subsidiaries
with restriction in use – –
Note: Cash and cash equivalents do not include those of the parent company and subsidiaries with restriction in
use.
57. Assets with Restriction on Ownership or Use Right
Closing balance
Item of book value Reason for restriction
Currency funds 1,043,271 The Group’s deposit of notes payable is RMB838,954

thousand thousand, factoring deposit for account receivable
of RMB100,439 thousand, deposit for borrowings of
RMB3,798 thousand, guarantee deposit of RMB1,212
thousand, frozen account funds of RMB78,284
thousand, term deposit of RMB20,000 thousand, and
housing fund is RMB588 thousand.
Accounts 475,291 The Group’s short-term borrowings of RMB475,291

receivable thousand thousand is derived from accounts receivable as
pledge or factoring.
Notes 2,138,092 The Group’s notes receivable pledged is RMB27,210

receivable thousand thousand. Notes receivable discounted but not yet
due is RMB206,666 thousand. Notes receivable
endorsed but not yet due is RMB1,904,216 thousand.

58. Foreign Currency Funds Items
(1) Foreign Currency Funds Item
Closing balance
Closing Balance of of RMB
Item Foreign Currency Exchange rate in equivalent
Cash at bank and on hand

Including: USD 5,452,751.85 6.8632 37,423,319.65
HKD 14,934,814.49 0.8762 13,085,611.04
EUR 22,678.04 7.8473 177,961.37
JPY 52.03 0.061887 3.22
Accounts receivable
Including: USD 2,357,370.36 6.8632 16,179,104.25
HKD 10,632,597.38 0.8762 9,316,281.82
EUR 41,160.00 7.8473 322,994.87
Other receivables
Including: HKD 680,679.49 0.8762 596,411.37
Contract liabilities
Including: USD 6,501.54 6.8632 44,621.36
Other payables
Including: HKD 999,645.75 0.8762 875,889.61

VII. CHANGE IN THE SCOPE OF CONSOLIDATION
1. Business combination not under the common control
(1) Business combinations not under common control in the current year
Income of Net profits of

the acquiree from acquiree from
Shareholding Acquisition Recognition basis of the purchase date the purchase date
Acquiree Acquisition date Acquisition cost (%) method Purchase date purchase date to the year end to the year end
GP Corp. 31 May 2018 2,917,600,000.00 80.00 Business 31 May 2018 The share transfer agreement 20,449,195,492.03 161,238,313.42
combinations not has been approved by the
under common Group’s board of directors;
control All purchase price has been
paid; Property rights have been
transferred; The Group obtains
control over the acquiree’s
finance and operating policies,
enjoys relevant benefits and
undertakes relevant risks
Wang Lao Ji 11 September 2018 899,333,714.69 96.093 Business 11 September 2018 Share equity dispute is supported 83,616,417.79 (157,921,052.93)
combinations not by the decision of the board
under common of arbitration. All purchase
control price has been paid; Property
rights have been transferred;
The Group obtains control
over the acquiree’s finance
and operating policies,
enjoys relevant benefits and
undertakes relevant risks
Condition about realizing business combination by steps and acquiring control over the
reporting period
Acquiree’s Shareholding Acquisition

name Acquisition date Acquisition cost (%) method
GP Corp. 31 May 2018 1,094,100,000.00 30.00 Cash

Wang Lao Ji 11 November 2018 368,919,146.25 48.0465 Cash

VII. CHANGE IN THE SCOPE OF CONSOLIDATION (Continued)
1. Business combination not under the common control (Continued)
(2) Combination cost and goodwill
Item GP Corp. Wang Lao Ji
Combination cost
– Cash 1,094,100,000.00 368,919,146.25
– Fair value of non-cash assets – –
– Fair value of debt issued or assumed – –
– Fair value of equity securities issued – –
– Fair value of contingent consideration – –
– Fair value on purchase date of equity
held before purchase date 1,823,500,000.00 530,414,568.44
– Others –
Total combination costs 2,917,600,000.00 899,333,714.69
Less: Fair value of identifiable net

assets obtained 1,985,250,996.16 1,025,315,653.65
Goodwill/combination cost lower than

the fair value of identifiable net assets 932,349,003.84 (125,981,938.96)
① Recognition of the fair value of combination cost
The fair value of the non-cash assets in the combination cost of GP Corp. has been
adjusted and determined by the valuation results determined using the income
method valuation method by Guozhonglian Assets Evaluation and Land and Real
Estate Appraisal Co., Ltd.
The fair value of the non-cash assets in the combination cost of GP Corp. has been
adjusted and determined by the valuation results determined using the income
method valuation method by Guangzhou Heng Ding Real Estate, Land, and Assets
Evaluation and Appraisal Co., Ltd.
② Explanation of contingent considerations and explanation for change
Nil.
③ The main reason for the significant amount of goodwill
The acquiree has engaged in pharmaceutical circulation industry for several

years. Both the business network it builds that radiates across the country with
Guangdong as the center and the basically stable suppliers it maintains contribute
to the generation of a significant amount of goodwill.

(3) Identifiable assets and liabilities of acquiree at the purchase date
GP Corp. Wang Lao Ji

Fair value at Book value at Fair value at Book value at
Item the purchase date the purchase date the purchase date the purchase date
Assets:
Cash at bank and on hand 2,091,914,169.84 2,091,914,169.84 874,677,926.78 874,677,926.78
Financial assets held for trading 745,378.34 745,378.34 – –
accounts receivable 11,402,687,240.77 11,402,687,240.77 89,392,844.69 89,392,844.69
Prepayments 480,420,214.12 480,420,214.12 2,382,992.21 2,382,992.21
Other receivables 804,794,691.48 805,250,142.03 17,529,013.92 17,529,013.92
Inventories 3,415,844,222.20 3,415,844,222.20 219,050,758.92 200,010,664.32
Other current assets 80,732,420.57 80,732,420.57 225,000,000.01 225,000,000.01
Other non-current financial assets – – 100,000.00 100,000.00
Investment properties 6,502,500.00 124,276.05 – –
Fixed assets 866,610,501.48 338,096,751.59 230,782,003.34 190,243,936.55
Construction in progress 54,151,645.64 54,151,645.64 1,482,558.91 1,482,558.91
Intangible assets 247,710,677.72 112,935,483.44 6,951,252.44 5,544,801.11
Goodwill – 50,941,295.57 – –
Long-term prepaid expenses 26,899,032.11 26,899,032.11 – –
Deferred tax assets 88,990,218.67 73,035,799.22 – –
Liabilities:
Short-term borrowings 6,489,095,825.15 6,489,095,825.15 – –
Notes payable and accounts payable 7,778,249,741.47 7,778,249,741.47 244,123,126.84 244,123,126.84
Contract liabilities 48,806,283.66 48,806,283.66 85,414,935.76 85,414,935.76
Employee benefits payable 46,533,213.84 46,533,213.84 99,460,305.09 99,460,305.09
Taxes payable 82,276,190.24 82,276,190.24 13,005,596.36 13,005,596.36
Other Payables 1,368,894,001.96 1,368,894,001.96 547,799,656.17 547,799,656.17
Current portion of
non-current liabilities 70,079,623.29 70,079,623.29 – –
Long-term borrowings 666,153,706.06 666,153,706.06 – –
Long-term payables 107,861,341.84 107,861,341.84 583,762.27 583,762.27
Deferred income 2,883,392.79 2,883,392.79 588,087.37 3,920,582.44
Net assets 2,735,996,251.06 2,270,339,484.65 666,726,315.19 612,056,773.57
Less: Minority interest 254,432,505.87 251,867,551.12 – –
Net assets acquired 2,481,563,745.19 2,018,471,933.53 666,726,315.19 612,056,773.57
Notes:
① Fair value of net identifiable assets and liabilities of GP Corp. is valued by Zhonglian International Appraisal
and Consultation Co., Ltd. under cost method.
② Fair value of net identifiable assets and liabilities of Wang Lao Ji is valued by Guangzhou Heng Ding Real
Estate, Land, and Assets Evaluation and Appraisal Co., Ltd. under cost method.

(4) Gains or losses arising from the re-measurement of equity held before the date of
purchase at fair value
Amount of
Book value on Gains or OCI related to
the purchase Fair value on loss from re- The method of equity held
date of the purchase date measurement determining and the originally
originally held of originally of equity main assumption of fair before purchase
equity prior to held share originally held value on purchase date date transferred
the purchase before purchase before purchase of originally held share to investment
Acquiree date date date before purchase date income
GP Corp. 997,725,159.89 1,823,500,000.00 825,774,840.12 Adjustments of matters 208,104.58

affecting fair value on the
basis of the income approach
Wang Lao Ji 485,512,361.92 530,414,568.44 44,902,206.52 Adjustments of matters

affecting fair value on the
basis of the income approach
(5) Related information of the fair value of the acquiree’s identifiable net assets and liabilities
and consideration for combination, which cannot be obtained reliably on the purchase
date or at the current year end.
Nil.
2. Changes in Consolidation Scope due to Other Reasons
The reasons for the addition of 7 companies in scope of consolidation comparing to the prior year
are:
(1) The Company established Guangzhou Baiyunshan Chemical Pharmaceutical Co., Ltd in
January 2018, and registered capital of the Company accounts for 100% of registered
capital amounted to RMB100,000 thousand.
(2) Chemical Pharmaceutical Technology Co., Ltd., a subsidiary of the Company, established
Guangyao Baiyunshan Chemical Pharmaceutical (Zhuhai) Co., Ltd. in January 2018, and
registered capital of Chemical Pharmaceutical Technology Co., Ltd. accounts for 100% of
registered capital amounted to RMB49,600 thousand.
(3) Tian Xin Pharmaceutical Co., Ltd., a subsidiary of the Company, established Guangzhou
Baiyunshan Tian Xin Pharmaceutical Technology Co., Ltd. in January 2018, capital
contribution subscribed by Guangzhou Baiyunshan Tian Xin Pharmaceutical Co., Ltd.
accounts for 100% of registered capital amounted to RMB800 thousand.

2. Changes in Consolidation Scope due to Other Reasons (Continued)
(4) Guangyao Baiyunshan Hong Kong Co., Ltd., a subsidiary of the Company, established
Guangyao Baiyunshan Macao Co., Ltd. in January 2018, capital contribution subscribed
by Guangyao Baiyunshan Hong Kong Co., Ltd. accounts for 99.90% of registered capital
amounted to MOP 1,000 thousand.
(5) Ming Xing Pharmaceutical Co., Ltd., a subsidiary of the Company, established Guangzhou
Xing Ji Industries Co., Ltd. in January 2018, capital contribution subscribed by Ming Xing
Pharmaceutical Co., Ltd. accounts for 100% of registered capital amounted to RMB100
thousand.
(6) Guangzhou Baiyunshan Medical and Healthcare Industry Co., Ltd., a subsidiary of the
Company, established Guangzhou Baiyunshan Run Kang Confinement Service Center
Co., Ltd. in July 2018, capital contribution subscribed by Guangzhou Baiyunshan Medical
and Healthcare Industry Co., Ltd. accounts for 51% of registered capital amounted to
RMB10,000 thousand.
(7) Guangzhou Bai Di, a subsidiary of the Company, established Guangzhou Wei Yi Industries
Co., Ltd. in November 2018, capital contribution subscribed by Guangzhou Baiyunshan
Medical and Healthcare Industry Co., Ltd. accounts for 51% of registered capital
amounted to RMB10,000 thousand.
The reasons for the reduction of 1 company in scope of consolidation comparing to the prior year
are:
In May 2018, according to the application lodged by the Company, the Intermediate People’s
Court of Guangzhou accepted the application of liquidation from Guangzhou Guangyao
Baiyunshan Great Health Hotel Co., Ltd. Guangdong Qiyuan Law Firm was assigned to be the
insolvency administrator for Guangzhou Guangyao Baiyunshan Great Health Hotel Co., Ltd. The
Company cannot have effective control over Guangzhou Guangyao Baiyunshan Great Health
Hotel Co., Ltd. Consequently, the company is excluded from the scope of consolidation.

VIII. EQUITY IN OTHER ENTITIES
1. Equity in subsidiaries
(1) Composition of Enterprises Group
Registered
Main place of Registration capital Shareholding (%) Voting (%) Acquisition
Subsidiary business place Nature of business (RMB’000) Direct Indirect Direct Indirect method
Xing Qun Guangzhou Guangzhou Pharmaceutical 77,168.90 88.99 – 88.99 – Establishment or

manufacturing Investment
Guangzhou Baiyunshan Xing Qun Guangzhou Guangzhou Pharmaceutical 3,000.00 – 88.99 – 100.00 Establishment or
Health Technology Co., Ltd. manufacturing Investment
Zhong Yi Guangzhou Guangzhou Pharmaceutical 217,410.00 100.00 – 100.00 – Establishment or
Chen Li Ji Guangzhou Guangzhou Pharmaceutical 112,845.41 100.00 – 100.00 – Establishment or
Guangzhou Chen Li Ji Great Health Guangzhou Guangzhou Pharmaceutical 15,000.00 – 44.00 – 44.00 Establishment or
Industry Co., Ltd. (2) manufacturing Investment
Guangzhou Han Fang Guangzhou Guangzhou Pharmaceutical 246,046.30 99.96 – 100.00 – Establishment or
Guangzhou Qi Xing Pharmaceutical Guangzhou Guangzhou Pharmaceutical 82,406.78 100.00 – 100.00 – Establishment or
Factory Co., Ltd. manufacturing Investment
Qi Xing Guangzhou Guangzhou Pharmaceutical 100,000.00 – 100.00 – 100.00 Establishment or
Jing Xiu Tang Guangzhou Guangzhou Pharmaceutical 86,230.00 88.40 – 88.40 – Establishment or
Guangzhou Jing Xiu Tang 1790 Guangzhou Guangzhou Pharmaceutical trading 3,000.00 – 45.08 – 51.00 Establishment or
Trading Co., Ltd. (1) Investment
Pan Gao Shou Guangzhou Guangzhou Pharmaceutical 65,436.20 87.77 – 87.77 – Establishment or
Guangzhou Pan Gao Shou Natural Guangzhou Guangzhou Pharmaceutical 14,000.00 – 87.77 – 100.00 Establishment or
Healthcare Products Co., Ltd. (1) manufacturing Investment
Wang Lao Ji Guangzhou Guangzhou Food manufacturing 204,756.88 96.093 – 96.093 – Business combination
not under
common control
Guangzhou Wang Lao Ji Food Co., Ltd. Guangzhou Guangzhou Trading 1,000.00 – 96.093 – 96.093 Business combination
not under
common control
GP Corp. Guangzhou Guangzhou Pharmaceutical trading 700,000.00 80.00 – 80.00 – Business combination
not under
common control
Guangzhou Jian Min Pharmaceutical Guangzhou Guangzhou Pharmaceutical trading 86,000.00 – 80.00 – 80.00 Business combination
Chain Co., Ltd. not under
common control
Guangzhou Jian Min Pharmaceutical Guangzhou Guangzhou Pharmaceutical trading 8,000.00 – 80.00 – 80.00 Business combination
Co., Ltd. not under
common control
Guangzhou Qi Hua Medical Guangzhou Guangzhou Pharmaceutical trading 11,880.00 – 80.00 – 80.00 Business combination
Instruments Co., Ltd. not under
common control
Guangzhou Wan Kang Orthopedics Guangzhou Guangzhou Pharmaceutical trading 10,000.00 – 80.00 – 80.00 Business combination
Medical Instruments Co., Ltd. not under
common control

1. Equity in subsidiaries (Continued)
(1) Composition of Enterprises Group (Continued)
Registered
Fujian Guangyao Jie Da Pharmaceutical Fuzhou Fuzhou Pharmaceutical trading 30,100.00 – 41.60 – 41.60 Business combination
Co., Ltd. not under
common control
Hubei Guangyao An Kang Wuhan Wuhan Pharmaceutical trading 60,00.00 – 40.80 – 40.80 Business combination
Pharmaceutical Co., Ltd. not under
common control
Guangzhou Guo Ying Pharmaceutical Guangzhou Guangzhou Pharmaceutical trading 465,000.00 – 80.00 – 80.00 Business combination
Co., Ltd. not under
common control
Guangzhou Xin Te Pharmaceutical Guangzhou Guangzhou Pharmaceutical trading 50,000.00 – 80.00 – 80.00 Business combination
Co., Ltd. not under
common control
Foshan Guangyao Jian Ze Foshan Foshan Pharmaceutical trading 13,500.00 – 48.00 – 48.00 Business combination
common control
Shenzhen Guangyao Lian Kang Shenzhen Shenzhen Pharmaceutical trading 15,000.00 – 80.00 – 80.00 Business combination
common control
Hunan Guangyao Heng Sheng Changsha Changsha Pharmaceutical trading 55,000.00 – 80.00 – 80.00 Business combination
common control
Hainan Guangyao Chen Fei Haikou Haikou Pharmaceutical trading 56,000.00 – 48.00 – 48.00 Business combination
common control
Shanxi Guangyao Kang Jian Xi’an Xi’an Pharmaceutical trading 87,500.00 – 48.00 – 48.00 Business combination
common control
Guangdong Meixian Pharmaceutical Meizhou Meizhou Pharmaceutical trading 14,000.00 – 48.00 – 48.00 Business combination
Co., Ltd. not under
common control
Jiangmen Guangyao Qiao Kang Jiangmen Jiangmen Pharmaceutical trading 15,000.00 – 80.00 – 80.00 Business combination
common control
Guangyao Sichuan Pharmaceutical Chengdu Chengdu Pharmaceutical trading 50,000.00 – 40.80 – 40.80 Business combination
Co., Ltd. not under
common control
Hubei Guangyao Ji Da Pharmaceutical Wuhan Wuhan Pharmaceutical trading 30,500.00 – 56.00 – 56.00 Business combination
Co., Ltd. not under
common control
Guangxi Guangyao Xin Shi Dai Nanning Nanning Pharmaceutical trading 50,000.00 – 56.00 – 56.00 Business combination
common control
Guangzhou Pharmaceutical (Hong Hong Kong Hong Kong Pharmaceutical trading 5,000.00 – 80.00 – 80.00 Business combination
Kong) Co., Ltd. not under
common control

Registered
Jian Min International Co., Ltd. Hong Kong Hong Kong Pharmaceutical trading HKD300.00 – 80.00 – 80.00 Business combination
not under
common control
Zhuhai Guangyao Kang Ming Zhuhai Zhuhai Pharmaceutical trading 550.00 – 80.00 – 80.00 Business combination
common control
Foshan Guangyao Feng Kang Foshan Foshan Pharmaceutical trading 5,700.00 – 80.00 – 80.00 Business combination
common control
Guangzhou Pharmaceutical Pharmacy Guangzhou Guangzhou Pharmaceutical trading 60,000.00 – 80.00 – 80.00 Business combination
Co., Ltd. not under
common control
Guangzhou Pharmaceutical Guangzhou Guangzhou Service 60,000.00 – 80.00 – 80.00 Establishment or
Information Technology Co., Ltd. Investment
Guangzhou Pharmaceutical Nanpi Guangzhou Guangzhou Pharmaceutical trading 1,500.00 – 52.00 – 52.00 Establishment or
Great Pharmacy Co., Ltd. Investment
Zhongshan Guangyao Gui Kang Guangzhou Guangzhou Pharmaceutical trading 6,000.00 – 80.00 – 80.00 Establishment or
Pharmaceutical Co., Ltd. Investment
Cai Zhi Lin Guangzhou Guangzhou Pharmaceutical trading 32,202.00 100.00 – 100.00 – Establishment or
Investment
Jingyu County Dong’e Guangyao Jingyu Jingyu Pharmaceutical trading 3,000.00 – 57.50 – 60.00 Establishment or
Chinese Raw Medicine Development Investment
Co., Ltd (1)
Guangzhou Chinese Medicine Guangzhou Guangzhou Pharmaceutical trading 2,940.00 – 100.00 – 100.00 Establishment or
Corporation Cai Zhi Lin Medicine Investment
Chain Pharmacies
Fengshun Guangyao Chinese Raw Fengshun Fengshun Pharmaceutical trading 2,000.00 – 60.00 – 60.00 Establishment or
Medicine Development Co., Ltd. Investment
Guangzhou Chinese Medicine Guangzhou Guangzhou Pharmaceutical 20,000.00 – 100.00 – 100.00 Establishment or
Corporation Chinese Medical Drink manufacturing Investment
and Pill Factory
Guangzhou Cai Zhi Lin Corporation Guangzhou Guangzhou Pharmaceutical trading 5,000.00 – 100.00 – 100.00 Establishment or
Beishang Chinese Raw Medicine Investment
Co., Ltd.
Guangzhou Ao Ma Medical Guangzhou Guangzhou Pharmaceutical trading 6,680.00 – 100.00 – 100.00 Establishment or
Instruments Co., Ltd. Investment
Heilongjiang Sen Gong Guangyao Raw Ha’erbin Ha’erbin Pharmaceutical trading 3,000.00 – 60.00 – 60.00 Establishment or
Wulanchabu Guangyao Chinese Raw Wulanchabu Wulanchabu Pharmaceutical trading 1,000.00 – 80.00 – 80.00 Establishment or
Shandong Guangyao Chinese Raw Linyi Linyi Pharmaceutical trading 2,000.00 – 60.00 – 60.00 Establishment or
Meizhou Guangyao Cai Zhi Lin Meizhou Meizhou Pharmaceutical 10,000.00 – 100.00 – 100.00 Establishment or
Pharmaceutical Co., Ltd. manufacturing Investment
Pharmaceutical Import & Export Guangzhou Guangzhou Pharmaceutical trading 24,000.00 100.00 – 100.00 – Establishment or
Co., Ltd. Investment

Registered
Guangzhou Bai Di Guangzhou Guangzhou Pharmaceutical 131,600.00 100.00 – 100.00 – Establishment or

Guangzhou Baiyunshan Wei Yi Guangzhou Guangzhou Trading 10,000.00 – 51.00 – 51.00 Establishment or
Industries Co., Ltd. Investment
Tibet Linzhi Guangyao Development Linzhi Linzhi Pharmaceutical trading 2,000.00 – 54.82 – 55.00 Establishment or
Co., Ltd (1) Investment
Wang Lao Ji Great Health Guangzhou Guangzhou Food manufacturing 900,000.00 100.00 – 100.00 – Establishment or
Investment
Wang Lao Ji Great Health Industry (Ya’an (Ya’an Pharmaceutical 50,000.00 – 100.00 – 100.00 Establishment or
(Ya’an) Co., Ltd. manufacturing Investment
Guangzhou Wang Lao Ji Great Health Guangzhou Guangzhou Food manufacturing 10,000.00 – 100.00 – 100.00 Establishment or
Enterprise Development Co., Ltd. Investment
Guangzhou Wang Lao Ji Industry Co., Guangzhou Guangzhou Food manufacturing 1,000.00 – 100.00 – 100.00 Establishment or
Ltd. Investment
Wang Lao Ji Great Health Industry Beijing Beijing Trading 5,000.00 – 100.00 – 100.00 Establishment or
(Beijing) Sales Co., Ltd. Investment
Wang Lao Ji Great Health Industry Meizhou Meizhou Food manufacturing 50,000.00 – 100.00 – 100.00 Establishment or
(Meizhou) Co., Ltd. Investment
Guangzhou Wang Lao Ji Great Health Guangzhou Guangzhou Trading 10,000.00 – 100.00 – 100.00 Establishment or
E-Commerce Co., Ltd. Investment
Guangxi Ying Kang Nanning Nanning Pharmaceutical 31,884.50 51.00 – 51.00 – Business combination
manufacturing not under
common control
Yi Gan Guangzhou Guangzhou Pharmaceutical 29,500.00 60.00 – 60.00 – Establishment or
Baiyunshan Medical and Healthcare Guangzhou Guangzhou Commercial services 116,000.00 100.00 – 100.00 – Establishment or
Industry Co., Ltd. Investment
Tibet Linzhi Baiyunshan Tibetan Health Linzhi Linzhi Pharmaceutical 50,000.00 – 100.00 – 100.00 Establishment or
Castle Management Co., Ltd. manufacturing Investment
Guangzhou Baiyunshan Hospital Guangzhou Guangzhou Medical 40,816.00 – 51.00 – 51.00 Business combination
not under
common control
Guangzhou Baiyunshan Run Kang Guangzhou Guangzhou Service 10,000.00 – 51.00 – 51.00 Establishment or
Confinement Service Center Co., Investment
Ltd.
Xing Zhu Guangzhou Guangzhou Pharmaceutical 126,480.00 100.00 – 100.00 – Establishment or
Wang Lao Ji Investment Co., Ltd. Guangzhou Guangzhou Commercial services 10,000.00 100.00 – 100.00 – Establishment or
Investment
Guangzhou WLJ Catering Guangzhou Guangzhou Commercial services 20,000.00 – 80.00 – 80.00 Establishment or
Management Development Co., Ltd. Investment
Tian Xin Pharmaceutical Guangzhou Guangzhou Pharmaceutical 45,693.00 82.49 – 82.49 – Business combination
manufacturing under common
control
Guangzhou Baiyunshan Tian Xin Guangzhou Guangzhou Pharmaceutical 800.00 – 100.00 – 100.00 Establishment or
Pharmaceutical Technology Co., Ltd. manufacturing Investment

Registered
Guang Hua Guangzhou Guangzhou Pharmaceutical 55,285.00 84.48 – 84.48 – Business combination
control
Guang Hua Health (1) Guangzhou Guangzhou Pharmaceutical 10,000.00 – 63.36 – 75.00 Establishment or
Ming Xing Pharmaceutical Guangzhou Guangzhou Pharmaceutical 46,091.90 100.00 – 100.00 – Business combination
control
Guangzhou Xing Ji Industries Co., Ltd. Guangzhou Guangzhou Manufacturing 100.00 – 100.00 – 100.00 Establishment or
Investment
Weiling Pharmaceutical Jiexi Jiexi Pharmaceutical 11,790.00 100.00 – 100.00 – Business combination
control
Pharmaceutical Technological Guangzhou Guangzhou Pharmaceutical trading 2,000.00 51.00 – 51.00 – Business combination
under common
control
Wang Lao Ji Da Zhai Beverages Yangquan Yangquan Food manufacturing 50,000.00 – 60.00 – 60.00 Establishment or
Co., Ltd. Investment
Guangzhou Wang Lao Ji Da Zhai Guangzhou Guangzhou Food manufacturing 35,000.00 – 60.00 – 60.00 Establishment or
Beverages Co., Ltd. Investment
Guangyao Baiyunshan Hong Kong Hong Kong Hong Kong Pharmaceutical trading HKD132,500.00 100.00 – 100.00 – Business combination
Company under common
control
Guangyao Baiyunshan Macao Co., Ltd. Macao Macao Pharmaceutical trading MOP 1,000.00 99.90 – 99.90 – Establishment or
Investment
Guangzhou Baiyunshan Chemical Guangzhou Guangzhou Pharmaceutical trading 163,470.00 100.00 – 100.00 – Establishment or
Pharmaceutical Technology Co., Ltd. Investment
Zhejiang Guang Kang Pharmaceutical Shengzhou Shengzhou Pharmaceutical 85,000.00 – 51.00 – 51.00 Establishment or
Co., Ltd. manufacturing Investment
Guangyao Baiyunshan Chemical Guangzhou Guangzhou Pharmaceutical 49,600.00 – 100.00 – 100.00 Establishment or
Pharmaceutical (Zhuhai) Co., Ltd. manufacturing Investment
Guangyao Hai Ma Guangzhou Guangzhou Advertising 500.00 100.00 – 100.00 – Business combination
not under
common control
Guangzhou Baiyunshan Guangzhou Guangzhou Pharmaceutical trading 40,000.00 100.00 – 100.00 – Establishment or
Pharmaceutical Marketing Co., Ltd Investment
Guangzhou Baiyunshan Jin Ge Male Guangzhou Guangzhou Consulting 1,000.00 – 100.00 – 100.00 Establishment or
Health Consulting Co., Ltd. Investment
Guangyao General Institute Guangzhou Guangzhou Medical research 80,000.00 100.00 – 100.00 – Business combination
under common
control
Guangzhou Baiyunshan Medical Guangzhou Guangzhou Commercial services 10,000.00 – 100.00 – 100.00 Establishment or
Instruments Investment Co., Ltd. Investment
Guangzhou Baiyunshan Chemical Guangzhou Guangzhou Pharmaceutical 100,000.00 100.00 – 100.00 – Establishment or
Pharmaceutical Co., Ltd. manufacturing Investment

Notes:
① The reason of difference between the ratio of equity interest held and the ratio of voting rights held of
these 6 companies is that the Company indirectly holds these 6 companies through subsidiaries which
are not wholly-owned by the Company, leading to the ratio of equity interest held lower than the ratio of
voting rights held.
② Reasons for the Group that controlling this company with less than half voting rights held is that the
Group has the power to decide on its financial and operating policies and profit from its operating
activities.
(2) Significant non-wholly owned subsidiaries
Profit or loss
attributable
Shareholding to minority Dividend paid Closing balance
of minority shareholders to minority of minority
shareholders in the shareholders in shareholders’
Subsidiary (%) current year the current year equity
GP Corp. 20.00 28,988,282.47 – 725,301,031.51

Wang Lao Ji 3.907 (6,169,975.54) 17,333,228.79 18,184,621.62
(3) Primary financial information of significant non-wholly owned subsidiaries
Closing balance
Non-current Non-current
Subsidiary Current assets assets Total assets Current liabilities liabilities Total liabilities
GP Corp. 19,027,761,085.33 1,405,773,512.96 20,433,534,598.29 15,807,319,952.93 688,872,436.93 16,496,192,389.86

Wang Lao Ji 937,113,928.36 229,335,394.05 1,166,449,322.41 695,189,403.63 5,814,718.79 701,004,122.42
Current year
Total
comprehensive Operating cash
Subsidiary Operating income Net profit income flows
GP Corp. 20,449,195,492.03 161,328,313.42 161,328,313.42 1,780,119,668.37

Wang Lao Ji 83,616,417.79 (157,921,052.93) (157,921,052.93) (172,273,678.15)

VIII. EQUITY IN OTHER ENTITIES (Continued)
2. Equity in Joint Ventures or Associates
(1) Summary for financial information of insignificant associates and joint ventures
Closing balance/ Opening balance/

Joint ventures:
Total book balance of investments 661,295,124.97 1,840,718,609.13
Calculated by rate of interests held:
– Net profit 305,162,068.66 275,058,851.60
– Other comprehensive income (8,821.96) 20,429.81
– Total comprehensive income 305,153,246.70 275,079,281.41
Associates
Total book balance of investments 1,098,662,910.42 167,762,647.93
Calculated by rate of interests held:
– Net profit 70,921,573.37 13,259,282.01
– Other comprehensive income 29,136.57 –
– Total comprehensive income 70,950,709.94 13,259,282.01

IX. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
The Group’s operating activities are subject to various financial risks: market risk (mainly foreign
exchange risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management
plan addresses the unpredictability of financial markets and seeks to reduce potential adverse effects on
the Group’s financial performance.
1. Market risk
(1) Foreign exchange risk
Foreign exchange risk refers to the risk of loss due to exchange rate changes. The Group’s
foreign exchange risk is mainly related to the US Dollar, the Euro, the Japanese Yen and
the Hong Kong Dollar. Except that the purchase and sale of several subsidiaries of the
Group are in US dollars, Euros, Japanese Yen and Hong Kong dollars, the Group’s other
major business activities are settled in Renminbi (“RMB”). As at 31 December 2018, except
for the assets or liabilities described in the following table, which are in US dollars, Euros,
Japanese Yen, and Hong Kong Dollars, the Group’s assets and liabilities balances are all in
Renminbi. The foreign exchange risk arising from the assets and liabilities of these foreign
currency balances may have an impact on the Group’s operating results.
Item Closing Balance Opening Balance
Cash at bank and on hand 50,686,895.28 10,187,248.89

Accounts receivable 25,818,380.94 26,545,890.62
Prepayments – 936,351.27
Other receivables 596,411.37 516,764.75
Total financial assets in foreign currency 77,101,687.59 38,186,255.53
Accounts payable 11,311,566.29 13,890,397.99
Advances from customers 32,378.59 156,950.18
Other payables 205,308.23 980,294.04
Current portion of non-current liabilities – 31,307,337.23
Total financial liabilities in foreign currency 11,549,253.11 46,334,979.44
Note: The financial department of the Group’s headquarters is responsible for monitoring the scale of the
Group’s foreign currency transactions and foreign currency assets and liabilities in order to minimize the
foreign exchange risks; for this reason, the Group may sign forward exchange agreements or currency
swap agreements to achieve the purpose of avoiding foreign exchange risks.
As at 31 December 2018, for all types of financial assets and financial liabilities of the
Group in US dollar and Hong Kong dollar, if the RMB appreciates or depreciates against
the US dollar and Hong Kong dollar by 10% and other factors remain unchanged, the
Group’s net profit will increase or decrease by approximately RMB5,074 thousand (As at
31 December 2017: approximately RMB611 thousand).

IX. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (Continued)
1. Market risk (Continued)
(2) Interest rate risk
As at 31 December 2018, the Group’s long-term interest-bearing debt balance was

RMB413,554 thousand. If the annual interest rate decreased by 50 basis points and other
factors remained unchanged, the Group’s net profit will increase by RMB16,908 thousand
(As at 31 December 2017: RMB 0).
(3) Other price risks
The equity investments in listed companies held by the Company are as below:
Other investments in equity instruments – –

Other non-current financial assets 142,759,160.02 891,777,560.04
Total 142,759,160.02 891,777,560.04
As at 31 December 2018, if all other variables remain unchanged and the value of equity
instruments rises or falls by 10%, the Company’s net profit will increase or decrease by
RMB14,276 thousand (As at 31 December 2017: net profit and other comprehensive
income will increase by RMB488 thousand and RMB75,382 thousand respectively). The
management believes that 10% reasonably reflects the reasonable range of possible
changes in the value of equity instruments in the next year.
2. Credit risk
The Group manages credit risk by portfolio. Credit risk mainly arises from bank deposits, accounts
receivable, other receivables, notes receivable, etc.
The Group’s bank deposits are mainly deposited in state-owned banks and other large and
medium-sized listed banks. The Group believes that it does not have significant credit risk and will
not incur any significant losses due to default by the other party.
In addition, for accounts receivable, other receivables and notes receivable, the Group
has established relevant policies to control credit risk exposure. The Group assesses the
creditworthiness of customers and sets the corresponding credit period based on their financial
status, the possibility of obtaining guarantees from third parties, credit history and other factors
such as current market conditions. The Group also monitors customers’ credit records regularly.
For customers with poor credit history, the Group will adopt methods such as sending written
reminders, shortening credit terms or cancelling credit terms to ensure that the Group’s overall
credit risk stays within the controllable range.

3. Liquidity risk
Each subsidiary of the Group is responsible for its own cash flows forecast. Based on the
summary of cash flows forecasts of the subsidiaries, the finance department of the headquarter
continuously monitors short-term and long-term capital needs at the group level to ensure that
sufficient cash reserves and marketable securities are readily available; meanwhile the finance
department of the headquarter continuously monitors compliance with the terms of the loan
agreement and obtains commitments from major financial institutions to provide sufficient
backup funds to meet short-term and long-term funding needs.
As at the balance sheet date, the Group’s financial assets and financial liabilities stated in
undiscounted contractual cash flows by the expiration date are as following:
Period Closing balance

No fixed
Item Within 1 year 1-2 years 2-5 years Over 5 years maturity date Total
Financial assets:
Cash at bank and on hand 16,144,883,673.51 – – – – 16,144,883,673.51
accounts receivable 13,653,056,156.35 – – – – 13,653,056,156.35
Other receivables 1,056,551,186.68 – – – – 1,056,551,186.68
Subtotal 30,854,491,016.54 – – – – 30,854,491,016.54
Financial liabilities:
Short-term borrowings 5,905,703,286.10 – – – – 5,905,703,286.10
Current portion of
non-current liabilities 153,000,000.00 – – – – 204,024,196.93
Notes payable and
accounts payable 11,969,454,162.81 – – – – 11,969,454,162.80
Other payables 3,466,357,353.39 – – – – 3,466,357,353.41
Long-term payables 128,649,038.74 – – 84,771,651.81 – 135,795,848.74
Subtotal 21,623,163,841.04 – – 84,771,651.81 – 21,707,935,492.85


3. Liquidity risk (Continued)
(cont.)
Period Opening balance

No fixed
Item Within 1 year 1-2 years 2-5 years Over 5 years maturity date Total
Financial assets:
Cash at bank and on hand 11,697,218,882.84 – – – – 11,697,218,882.84
accounts receivable 2,897,750,084.07 – – – – 2,897,750,084.07
Other receivables 762,257,361.98 – – – – 762,257,361.98
Subtotal 15,275,900,726.41 – – – – 15,275,900,726.41
Financial liabilities:
Short-term borrowings 11,500,000.00 – – – – 11,500,000.00
Current portion of
non-current liabilities 31,634,633.80 – – – – 31,634,633.80
Notes payable and
accounts payable 3,054,427,081.1 – – – – 3,054,427,081.10
Other payables 2,399,394,477.50 – – – – 2,399,394,477.50
Long-term payables – – – 20,171,809.73 – 20,171,809.73
Subtotal 5,496,956,192.40 – – 20,171,809.73 – 5,562,827,986.32
X. DISCLOSURE OF FAIR VALUE
1. Financial instruments not measured at fair value
Financial assets and financial liabilities not measured at fair value comprise: receivables, short-
term borrowings, payables and long-term payables.
Difference between book value and fair value of financial assets and financial liabilities not
measured at fair value is insignificant.

X. DISCLOSURE OF FAIR VALUE (Continued)
2. Financial instruments measured at fair value
According to the lowest hierarchy of input value, which is significant to the overall measurement,
in the measurement of fair value, hierarchies of the fair value can be divided into:
The first hierarchy: Quoted price (unadjusted) of the same assets or liabilities in active market;
The second hierarchy: Direct (i.e. price) or indirect (i.e. estimated results based on price)
observable input value of assets or liabilities excluding quoted market price in the first hierarchy;
The third hierarchy: Input value of assets or liabilities based on variables excluding observable
market date (unobservable input value).
The hierarchy of a fair value measurement result is determined by the bottom level of the input
value, which is significant to the overall measurement of fair value.
(1) Closing balance of fair value of assets and liabilities measured at fair value
Closing balance of fair value

The first The second
Item hierarchy hierarchy The third hierarchy Total
I. Continuous measurement
at fair value
A. Financial assets held
for trading – – – –
1. Financial assets
measured at
FVTPL – – – –
2. Financial assets
designated at
FVTPL – – – –
B. Other debt
investments – – – –
C. Other investments in
equity instruments – – – –
1. Equity
instrument
investments – – 84,897,870.89 84,897,870.89
D. Other non-current
financial assets – – – –
1. Equity
instrument
investments 28,314,931.38 – 198,623,524.78 226,938,456.16
E. Investment property – – – –
F. Biological assets – – – –
Total assets continuously
measured at fair value 28,314,931.38 – 283,521,395.67 311,836,327.05

X. DISCLOSURE OF FAIR VALUE (Continued)
3. The basis for determining the market price of the first-level fair value measurement
project:
The fair value of the listed company’s stock is determined according to the closing price of the
exchange on the last trading day of the period.
4. Valuation methods and qualitative and quantitative information of important

parameters adopted in valuation techniques for the continuing third hierarchy fair value
measurement projects are as follows:
Closing balance Valuation Significant Influence on

Item of fair value method unobservable input fair value
Equity instrument 84,897,870.89 Market discount Lack of liquidity The higher

investment method discount the discount,
the lower the
liquidity
Other non-current 198,623,524.78 Market discount Lack of liquidity The higher
financial assets method discount the discount,
the lower the
liquidity
5. Adjustment information between the beginning and closing book value of the
continuing third hierarchy fair value measurement projects is as follows
Purchase, Gains and losses

Total amount of profit or loss issuance, sale recognized
for the current year and settlement through profit
Recognized or loss at the
Transferred Transferred in other year end of
Opening to the third from the third Recognized in comprehensive assets held at
Item balance hierarchy hierarchy profit or loss income Disposal Closing balance the year end
Other investments in
equity instruments 62,686,231.77 – – – (2,885,860.88) 25,097,500.00 84,897,870.89 –
Other non-current
financial assets 944,029,037.38 – – 119,064,714.42 – 864,570,227.02 198,623,524.78 –

XI. RELATED PARTIES AND RELATED PARTY TRANSACTIONS
1. Information of the Parent Company
Shareholding Proportion of the

Registered capital of the parent voting right held
Parent Registration Nature of (RMB in 10 company in the by the parent
company place business thousand) Group (%) company (%)
GPHL No. 45, North Shamian Manufacturing 1,252,810.98 45.04 45.04

Street, Liwan District, and trading
Guangzhou
Note: The ultimate control party of the Group is State-owned Assets Supervision and Administration Commission of
Guangzhou Municipal Government.
2. Subsidiaries of the Group
Please refer to Note VIII. 1. Equity in subsidiaries.
3. Associates and joint ventures of the Group
Information of associates or joint ventures which have had transactions with the Company in the
current year, or had had transactions with the Company in prior years and formed a balance in
current year is as follows:
Relationship with
Associates or joint ventures the Company
GP Corp. Joint venture

Wang Lao Ji Joint venture
Nuo Cheng Joint venture
HWBYS Joint venture
Baxter Qiao Guang Joint venture
Chuangmei Medicines Associates
Guangzhou Baiyunshan Southern Anti-tumor Biological Products Co., Ltd. Associates
Yi Xin Tang Associates
Baiyunshan Yi Xin Tang Associates
Notes:
① On 31 May 2018, by purchasing additional 30.00% of equity of GP Corp. from other shareholders, the Group’s
shareholding proportion reached 80.00%. GP Corp. was included in the scope of consolidation. Therefore,
Pharmaceutical Company was no longer a joint venture since 1 June 2018.
② On 11 September 2018, by purchasing additional 48.0465% of equity of Wang Lao Ji from other shareholders,
the Group’s shareholding proportion reached 96.093%. Wang Lao Ji was included in the scope of consolidation.
Therefore, Wang Lao Ji was no longer a joint venture since 12 September 2018.

XI. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
4. Other Related Parties without Control Relationship
Relationship with
Other related parties the Company
Controlled by the same

Guangzhou Yu Fa Medical Instruments Co., Ltd. parent company
Controlled by the same
Guangzhou South China Medical Instruments Co., Ltd. parent company
Guangzhou Hua Cheng Pharmaceutical Co., Ltd. Controlled by the same
(hereinafter referred to as “Hua Cheng”) parent company
5. Related Party Transactions
(1) Related party transaction of purchase and sales of goods, rendering and receiving
of services
① Purchase of goods from related parties
Pricing policy
and decision- % of total % of total
making (similar (similar
Related party Type Content procedure Current year category) Prior year category)
HWBYS Purchase of goods Medicinal material Market price 111,109,170.28 0.27 24,954,015.81 0.24
or medicine
GP Corp. Purchase of goods Medicinal material Market price 41,325,294.07 0.10 286,177,077.81 2.81
or medicine
Wang Lao Ji Purchase of goods Medicinal material Market price 898,962,329.29 2.16 872,214,455.47 8.55
or medicine
Baxter Qiao Guang Purchase of goods Medicinal material Market price 12,584,109.35 0.03 – –
or medicine
Chuangmei Medicines Purchase of goods Medicinal material Market price 21,994,996.93 0.05 16,368,263.44 0.16
or medicine
Hua Cheng Purchase of goods Medicinal material Market price 4,309,981.67 0.01 7,986,777.28 0.08
or medicine
Yi Xin Tang Purchase of goods Medicinal material Market price 822,832.72 – – –
or medicine
Total 1,091,108,714.31 2.62 1,207,700,589.81 11.84


5. Related Party Transactions (Continued)
of services (Continued)
② Sales of goods to related parties
Pricing policy
Southern Anti-tumor Sales of good Medicinal material Market price – – 707.69 0.02
Biological Products or medicine
HWBYS. Sales of good Medicinal material Market price 182,614,716.16 0.44 209,169,141.32 1.01
or medicine
GP Corp. Sales of good Medicinal material Market price 152,495,945.38 0.36 1,019,758,204.85 4.95
or medicine
Wang Lao Ji Sales of good Medicinal material Market price 476,599,653.08 1.14 562,242,250.42 2.73
or medicine
Nuo Cheng Sales of good Medicinal material Market price 111,620.68 0.00 23,097.44 0.00
or medicine
Baxter Qiao Guang Sales of good Medicinal material Market price 2,079,676.82 0.00 927,514.52 0.00
or medicine
Chuangmei Medicine Sales of good Medicinal material Market price 451,354,161.51 1.08 326,372,536.13 1.58
or medicine
Hua Cheng Sales of good Medicinal material Market price 132,044,378.63 0.31 72,693,961.41 0.35
or medicine
Baiyunshan Yixin Tang Sales of good Medicinal material Market price 46,363,332.52 0.11 – –
or medicine
132,044,378.63 0.31 72,693,961.41 0.35
Total 1,443,663,474.78 3.44 2,191,187,413.78 10.62


of services (Continued)
③ Rendering of services to related parties
Pricing policy
GPHL Rendering of services Advertising Market price 1,076,291.49 1.07 1,189,977.61 0.92
agency service
HWBYS Rendering of services Advertising Market price 45,805,389.40 45.51 43,597,886.40 33.87
agency service
GP Corp. Rendering of services Advertising Market price 82,696.23 0.08 342,920.18 0.27
agency service
Wang Lao Ji Rendering of services Advertising Market price 44,531,828.07 44.25 74,602,790.97 57.96
agency service
Baxter Qiao Guang Rendering of services Advertising Market price 47,490.57 0.05 39,245.28 0.03
agency service
Hua Cheng Rendering of services Advertising Market price 5,764,818.95 5.73 4,992,802.34 3.88
agency service
Baiyunshan Yi Xin Tang Rendering of services Advertising Market price 1,748.58 0.00 – –
agency service
132,044,378.63 0.31 72,693,961.41 0.35
Subtotal 97,310,263.29 – 124,765,622.78 –

132,044,378.63 0.31 72,693,961.41 0.35
Wang Lao Ji Rendering of services Consigned processing Market price 13,479,531.38 79.95 23,754,475.51 82.57
HWBYS Rendering of services Consigned processing Market price 1,754,945.87 10.41 2,284,247.18 7.94
Hua Cheng Rendering of services Consigned processing Market price 1,626,428.25 9.65 – –
132,044,378.63 0.31 72,693,961.41 0.35
Subtotal 16,860,905.50 – 26,038,722.69 –

132,044,378.63 0.31 72,693,961.41 0.35
HWBYS Rendering of services Research and Market price 247,641.50 3.18 742,924.54 6.68
development services
Wang Lao Ji Rendering of services Research and Market price 188,679.24 2.42 – 0.01
development services
132,044,378.63 0.31 72,693,961.41 0.35
Subtotal 436,320.74 – 742,924.54 –

132,044,378.63 0.31 72,693,961.41 0.35
Total 114,607,489.53 – 151,547,270.01 –
(2) The Group had no associated trusteeship/Entrusted management for the current year.
(3) The Group had no associated contracting for the current year.

(4) Leases
① The Group as the lessor
A. Office Tenancy Agreement – 5th Floor, Front building, North Shamian Street
According to the tenancy agreement entered into by the Company and

GPHL on 27 June 2013, the Company leases 5th Floor of the Front building
located at No. 45 North Shamian Street to GPHL for office use. The lease is
renewed on 1 July 2016, with a term of three years. And GPHL should pay
the company RMB376 thousand for the current year (for the year ended 31
December 2017: RMB367 thousand).
B. Warehouse and Office Building Tenancy Agreement

GP Corp., the Company leases certain buildings to GP Corp. for the use of
warehouse and office. Rent is paid at the price specified in the agreement
annually. The lease term is from 1 January 2017 to 31 December 2019, and
the rent for current year is RMB545 thousand due from GP Corp. (for the
year ended 31 December 2017: RMB1,458 thousand).
According to the tenancy agreement entered into by the Company and GP

Corp., the Company leases the first floor of the building located in No.74 of
Duobao Road to GP Corp. as a shop. Rent is paid at the price specified in the
agreement annually with a lease term from 1 January 2016 to 31 October
2021. The rent is RMB259 thousand for the current year (for the year ended
31 December 2017: RMB572 thousand).

Baxter Qiao Guang, the Company leases the building located on No. 25 of
Fangcun Dadao Road, Guangzhou to Baxter Qiao Guang as workshop. The
lease agreement started on 10 May 2007 to the relocation date. The rent is
RMB3,031 thousand for the current year (for the year ended 31 December
2017: RMB2,971 thousand)
According to the tenancy agreement entered into by the Company’s

subsidiaries, Guangzhou Bai Di and Nuo Cheng, Guangzhou Bai Di leases
the building located in No.1 of North Wanbao Street, Panyu District,
Guangzhou to Nuo Cheng for the use as a plant. Rent is paid at the price
specified in the agreement annually with a lease term from 15 March 2016
to 14 March 2019. And Nuo Cheng should pay Guangzhou Bai Di the rent
of RMB2,298 thousand (for the year ended 31 December 2017: RMB2,258
thousand).

(4) Leases (Continued)
① The Group as the lessor (Continued)
B. Warehouse and Office Building Tenancy Agreement (Continued)

subsidiaries, Guang Hua and HWBYS, Guang Hua leases part of No.355 of
North Shatai Road in Guangzhou to HWBYS for the use of parking lot. Rent
is paid at the price specified in the agreement monthly with a lease term
from 10 September 2017 to 9 March 2018. And HWBYS should pay Guang
Hua the rent of RMB12 thousand (for the year ended 31 December 2017:
RMB70 thousand).

subsidiaries, Guang Hua and GP Corp., Guang Hua leases part of No.355
of North Shatai Road, Guangzhou to GP Corp. Rent is paid at the price
specified in the agreement monthly with a lease term from 15 July 2015 to
14 July 2020. And GP Corp. should pay Guang Hua the rent of RMB174
thousand (for the year ended 31 December 2017: RMB637 thousand).
② The Group as the lessee
A. Tenancy Agreement
According to the tenancy agreement entered into by the Company

and GPHL, GPHL leases certain premises to the Company for the use of
warehouse and office. Rent is paid at the price specified in the agreement
annually with a lease term from 1 January 2017 to 31 December 2019. The
Group should pay GPHL the rent of RMB7,564 thousand for the current year
(for the year ended 31 December 2017: RMB1,458 thousand).
According to the tenancy agreement entered into by HWBYS and

Baiyunshan Pharmaceutical Marketing, a subsidiary of the Company,
Baiyunshan Pharmaceutical Marketing is authorized by HWBYS to use 704
room on the 7 floor and the 8 to 11 floor of Shennong Building on No. 389
of North Sha Tai Road, Baiyun District, Guangzhou as office place. Rent is
paid at the price specified in the agreement annually. Thereinto, the lease
term for 704 room on the 7 floor started from 1 April 2018 to 31 December
2023; the lease term for the 8 to 11 floor started from 1 January 2018 to 31
December 2023. Baiyunshan Pharmaceutical Marketing shall pay rental of
RMB3,783 thousand for the above-mentioned place to HWBYS (for the year
ended 31 December 2017: nil).
(5) The Group had no guarantee for related parties for the current year.
(6) The Group had no borrowing or lending between related parties for the current year.
(7) The Group had no transfer of asset and debt restructuring for the current year.

(8) Employee benefits of key management personnel
Employee benefits of the Group’s key management personnel amounted to RMB4,185

thousand for the year ended 31 December 2018 (for the year ended 31 December 2017:
RMB3,151 thousand). The Group’s key management personnel of current year include 9
persons, such as director, general manager, vice general manager, and secretary to the
Board of Director (for the six months ended 31 December 2017: 10 persons). Among
them, 4 received their salaries from the Group (for the year ended 31 December 2017: 5).
(9) Remuneration of directors and supervisors
Remuneration of each directors and supervisors are as follows:
Remuneration
of director/ Salary and Pension severance
Name supervisors subsidy scheme Bonus Entry bonus packages Other Total
Director name
Li Chuyuan – – – – – – – –
Chen Mao – – – – – – – –
Liu Juyan – – – – – – – –
Cheng Ning – – – – – – – –
Ni Yidong – – – – – – – –
Li Hong (Note 1) – 382,038.00 107,030.00 579,606.50 – – 25,778.00 1,094,452.50
Wu Changhai – 370,098.00 82,046.00 678,244.00 – – 25,778.00 1,156,166.00
Huang Xianrong 100,000.00 – – – – – – 100,000.00
Wang Weihong 100,000.00 – – – – – – 100,000.00
Chu Xiaoping 100,000.00 – – – – – – 100,000.00
Jiang Wenqi 100,000.00 – – – – – – 100,000.00
Supervisor name
Xian Jiaxiong – – – – – – – –
Li Jinyun – – – – – – – –
Gao Yanzhu – 236,664.00 65,414.00 236,429.00 – – 17,750.00 556,257.00

(9) Remuneration of directors and supervisors (Continued)
Remuneration of each directors and supervisors in the prior year are as follows:
Remuneration
of director/ Salary and Pension severance
Name supervisors subsidy scheme Bonus Entry bonus packages Other Total
Director name
Li Chuyuan – – – – – – – –
Chen Mao – – – – – – – –
Liu Juyan – – – – – – – –
Cheng Ning – – – – – – – –
Ni Yidong – – – – – – – –
Wu Changhai – 499,952.00 78,494.00 375,719.00 – – 51,343.00 1,005,508.00
Wang Wenchu (Note 2) – 187,885.00 45,215.00 128,600.00 – – – 361,700.00
Chu Xiaoping 100,000.00 – – – – – – 100,000.00
Jiang Wenqi 100,000.00 – – – – – – 100,000.00
Qiu Hongzhong (Note 3) 50,000.00 – – – – – – 50,000.00
Patrick Wong (Note 4) 50,000.00 – – – – – – 50,000.00
WONG Hin Wing (Note 5) 52,222.00 – – – – – – 52,222.00
Wang Weihong (Note 6) 52,222.00 – – – – – – 52,222.00
Supervisor name
Xian Jiaxiong – – – – – – – –
Li Jinyun – 138,297.00 25,293.00 58,500.00 – – – 222,090.00
Gao Yanzhu (Note 7) – 240,265.00 17,619.00 70,220.00 – – – 328,104.00
Wu Yan (Note 8) – 25,000.00 – – – – – 25,000.00
Notes:
① Mr. Li Hong was erected as the executive director of the Company’s 7th Board of Director on 22 June
2018. Term of office starts from the date of being elected to the date of election for member of the next
generation of Board of Director.
② Applied for resignation from the Company’s executive director due to personal reason on 28 August
2017.
③ Retired at the expiration of term of office on 23 June 2017.
④ Retired at the expiration of term of office on 23 June 2017.
⑤ Mr. WONG Hin Wing was erected as the independent non-executive director of the Company’s 7th Board
of Director on 23 June 2017. Term of office is three years, starting from the date of being elected to the
date of election for member of the next generation of Board of Director.
⑥ Ms Wang Weihong was erected as the independent non-executive director of the Company’s 7th Board
of Director on 23 June 2017. Term of office is three years, starting from the date of being elected to the
date of election for member of the next generation of Board of Director.
⑦ Ms Gao Yanzhu was erected as the supervisor of the Company’s 7th Board of Supervisors on 23 June
2017. Term of office is three years, starting from the date of being elected to the date of election for
member of the next generation of Board of Director.
⑧ Applied for resignation from the Company’s supervisor due to work reason on 4 February 2016.

(9) Remuneration of directors and supervisors (Continued)
In addition to the remuneration of directors and supervisors disclosed above, president

Li Chuyuan, vice president Chen Mao, director Liu Juyan, director Cheng Ning, director
Ni Yidong, chairman of the Board of Supervisor Xian Jiaxiong and supervisor Li Jinyun
received remuneration of RMB1,014,199.00, RMB968,743.00, RMB990,249.00,
RMB970,539.00, RMB953,100.00, RMB998,469.00, RMB968,313.00 from the controlling
shareholders of the Company (2017: president Li Chuyuan, vice president Chen Mao,
director Liu Juyan, director Cheng Ning, director Ni Yidong, chairman of the Board of
Supervisor Xian Jiaxiong received remuneration of RMB2,269,476.00, RMB1,222,443.00,
RMB1,060,714.00, RMB1,076,117.00, RMB1,119,997.00, RMB1,100,584.00 from the
controlling shareholders of the Company). A portion of the remuneration is paid for their
services rendered to the Group. The Board of Director hold that it is difficult to divide the
amount between the services rendered to the Group and the services rendered to the
holding companies of the Company and entities under common control. Subsequently,
this amount is not apportioned.
For the year ended 31 December 2018, no director has foregone or agreed to forego any
remuneration (2017: nil).
(10) The top five remuneration
The top five persons of the Group as per remuneration in 2018 are comprised of 1 director
(2017: 3 directors and 1 supervisor). The aggregate amount of remuneration paid to the
other 4 persons (2017: 1 person) are as follows:
Item 2018 2017
Salary and subsidy 1,416,781.00 536,875.00

Pension scheme 206,904.00 29,222.00
Bonus 3,233,455.00 578,644.00
Others 23,367.00 450.00
Total 4,880,507.00 1,145,191.00
Number
Remuneration range 2018 2017
0-1,000,000 0 0
Over 1,000,000 4 1

(11) Other related party transactions
① License Agreement
(a) Pursuant to the Trademark License Agreements entered into by Wang Lao Ji
Great Health and GPHL on 25 May 2012 and 26 April 2013 respectively, and
the Confirmation letter signed based on the Trademark License Agreements.
GPHL authorized the use of 5 trademarks by Wang Lao Ji Great Health.
Wang Lao Ji Great Health agreed to pay license fees to GPHL at 2.1% of
net sales. The payment is made to GPHL and the Company at 53% and
47% respectively. The Trademark License Agreement has expired on 24 May
2018. The two parties entered into the Trademark License Agreement on 28
May 2018, the trademark license fee is agreed to be paid to the Company
by Wang Lao Ji Great Health at 2.5% × (1 + VAT rate) of net sales of the
audited annual financial statements prepared in accordance with China
Accounting Standards. According to the Trademark License Agreement
signed by the Company and GPHL in 2012 and the Supplemental
Agreement to the Trademark License Agreement signed on 28 May 2018,
the Company should pay 80% of the trademark license fee it collects
during the trademark custody period to GPHL. The term of the license use
right is three years, which is from 25 May 2018 to 24 May 2021 (after the
expiration of the contract, the two parties may give priority to renewal if
there is no objection).
Pursuant to the Supplemental Agreement of the Trademark License

Agreement entered into by the Company, Wang Lao Ji and GPHL on 28
July 2005, Wang Lao Ji agreed to pay license fees to GPHL for the use of
the trademarks at 2.1% of its net sales on and before 1 January 2019 since
Wang Lao Ji became a foreign-invested company limited. GPHL and the
Company are entitled to get 53% and 47% of the license fee respectively.
The Company should receive license fee amounted to RMB76,469 thousand

for the current year (for the year ended 31 December 2017: RMB89,683
thousand) and GPHL should receive RMB155,094 thousand (for the year
ended 31 December 2017: RMB101,132 thousand).

(11) Other related party transactions (Continued)
① License Agreement (Continued)
(b) The arrangement of the Trademark Trusteeship Agreement and Trademark

Trusteeship Supplementary Agreement entered into by GPHL and the
Company, (GPHL is consignor and the Company is consignee), include:
(1) during the period of validity of Trusteeship Agreement, consignor shall
authorizes all the use rights of “Wang Lao Ji” trademark to consignee; (2)
during the period of validity of Trusteeship Agreement, consignee shall pay
the expenses arising from trusteeship (but consignor shall pay the expenses
arising from dispute to the authority and the expenses arising from the
dispute to the previous Trademark Trusteeship Agreement and Trademark
Trusteeship Supplementary Agreement); (3) consignee shall directly receive
the trademark license fee which is arranged in the Trademark License
Agreement signed during the trusteeship (including the supplementary
agreement or new agreement which is signed by consignor or consignee);
(4) during the period of validity of Trusteeship Agreement, consignor
should pay the company RMB1,000 thousand for the basic trusteeship
fee before the end of every March; (5) on the premise of non-violation to
the Trademark License Agreement or supplementary which is entered into
by consignor and third party before this Agreement takes effect, for the
Trademark License Agreement which is signed during the period of validity
of Trusteeship Agreement (including the supplementary agreement or new
agreement which is signed during the expiry date of Trusteeship), consignee
should pay consignor 80% of the trademark license fee of the previous year
before the end of every March (or the lower portion which is negotiated
by consignor and consignee, the portion could not higher than 80% in any
case, it could be 80% if both parties failed to reach an agreement for that)
as the authorized income for consignor (the basic trusteeship fee of previous
year of consignor shall directly deducted from these expenses by consignee).
As the confirmed trademark “Wang Lao Ji”, the portion to be shared of
consignor and consignee shall be confirmed in accordance with the previous
arrangement before this agreement was signed, and shall not be limited
to the trademark trusteeship agreement. This agreement took effect on 5
July 2013, and will expire on the date of trademark transfer or the date of
termination from both parties’ negotiation.
Meanwhile, when the legal dispute is settled, GPHL committed to legally

transfer the trademark “Wang Lao Ji” and other 4 trademarks authorized
to Wang Lao Ji exclusively to the company within 2 years since the above-
mentioned trademarks can be transferred in accordance with the effective
laws and regulation.
Pursuant to Notice of Guangzhou Baiyunshan Pharmaceutical Holdings

Co., Ltd. on Unfulfilled Commitment in respect of Shareholders, Related
Parties and the Company issued on 25 June 2014, the term of contract
expire on 20 January 2015. On 13 March 2015, the first Extraordinary
General Meeting 2015 of the Company adopted Solution of Guangzhou
Pharmaceutical Group Co., Ltd. Revise Trademark of “Wang Lao Ji”, GPHL
revised the term of contract, which will expire within 2 years from the date
of “Red jar decoration” dispute coming into force.
GPHL started to authorize the Group and its joint-control entity to use the
registered trademark “GPC” without compensation in June 2000.

(c) Pursuant to Trademark License Agreement entered into by Xing Qun and
the Company on 7 March 2016, Xing Qun is authorized to use 32 kinds
of trademark owned by GPHL on 32 kinds of designated plant beverage
and coke products from 5 September 2013 to 6 March 2019 (both parties
otherwise agreed to extend the term if need to). 2.1% of net sale volume
for the authorized products, as audited in annual financial statements
according prepared under ASBE, shall be paid to the Company as a license
fee. Trademark License Agreement will expire on 6 March 2019. The
Company entered into License Agreement for Chamomile with Xing Qun.
License fee (in weak endorsement form) is 0.8% of net sale volume, as
audited in annual financial statements according prepared under ASBE. Xing
Qun should pay the Company license fee amounted to RMB664 thousand at
current year. (For the year ended 31 December 2017: RMB782 thousand).
Based on the arrangement of the Trademark Trusteeship Agreement and

Trademark Trusteeship Supplementary Agreement entered into by GPHL
and the Company, Xing Qun should pay the Company the above license
fee amounted to RMB664 thousand for the year ended 31 December 2018
(for the year ended 31 December 2017: RMB782 thousand), and should
totally pay GPHL RMB531 thousand (for the year ended 31 December 2017:
RMB625 thousand).
(d) Pursuant to multiple Trademark License Contracts entered into by

Guangzhou Baiyunshan He Huang Great Health Products Co., Ltd. and
the Company for the period from 2014 to 2017, Guangzhou Baiyunshan
He Huang Great Health Products Co., Ltd. is authorized to use 32 kinds
of trademark owned by GPHL on 32 kinds of plant beverages and non-
alcoholic beverages. 2.1% * (1+VAT rate) of net sale volume for the
authorized products, as audited in annual financial statements according
prepared under ASBE, shall be paid to the Company as a license fee. In
December 2018, as the License Contract has expired, the Company and He
Huang Great Health entered into the contract again, license fee of which is
2.1% prior to 19 June 2018 and 0.8% after 19 June 2018. On 18 December
2018, the Company and He Huang Great Health signed the Confirmation
Letter that, for authorized products of which license contract not mature
yet, trademark license fee is calculated at 0.8% * (1+VAT rate) of net
sale volume for the authorized products, as audited in annual financial
statements according prepared under ASBE. In addition, the Company and
He Huang Great Health entered into license Contract for new products
(retro style tea product series and lemon tea products) with trademark fee
of 0.8%. Guangzhou Baiyunshan Hehuang Great Health Products Co., Ltd.
should pay the Company license fee amounted to RMB1,279 thousand
for the current year (for the year ended 31 December 2017: RMB1,814
thousand).

(d) (Continued)
Based on The Arrangement of the Trademark Trusteeship Agreement and

Trademark Trusteeship Supplementary Agreement entered into by GPHL and
the Company, Guangzhou Baiyunshan Hehuang Great Health Products Co.,
Ltd. should pay the Company the above license fee amounted to RMB1,279
thousand for the year ended 31 December 2018 (For the year ended
31 December 2017: RMB1,814 thousand), and should totally pay GPHL
RMB1,023 thousand (For the year ended 31 December 2017: RMB1,451
thousand).
(e) Pursuant to Trademark License Agreement entered into by Guangzhou

Wang Lao Ji Da Zhai Beverages Co., Ltd. and the Company on 6 September
2017, Guangzhou Wang Lao Ji Da Zhai Beverages Co., Ltd. is able to use
32 kinds of trademark owned by GPHL for 32 kinds of herbal beverages
and non-alcoholic beverages from 6 September 2017 to 5 September 2020
(both parties otherwise agreed to extend the term if need to), 2.1% of
net sale volume for the products which use these 32 kinds of trademark
shall be paid to the Company as a license fee by Guangzhou Wang Lao Ji
Da Zhai Beverages Co., Ltd. Trademark License Agreement will expire on
5 September 2020. Guangzhou Wang Lao Ji Da Zhai Beverages Co., Ltd.
should pay the Company license fee amounted to RMB558 thousand at
current year. (for the year ended 31 December 2017: RMB145 thousand).
Based on the Arrangement of the Trademark Trusteeship Agreement and

Trademark Trusteeship Supplementary Agreement entered into by GPHL and
the Company, Guangzhou Wang Lao Ji Da Zhai Beverages Co., Ltd. should
pay the Company the above license fee amounted to RMB558 thousand for
the year ended 31 December 2018 (for the year ended 31 December 2017:
RMB145 thousand), and should totally pay GPHL RMB446 thousand (for the
year ended 31 December 2017: RMB116 thousand).

6. Receivables and Payables of Related Parties
(1) Receivables
Closing Balance Opening Balance

Item Book value bad debts Book value bad debts
Receivables:
HWBYS 45,851,564.23 458,515.64 36,112,366.62 388,503.17
Baxter Qiao Guang 231,360.00 2,313.60 – –
Chuangmei Medicines 106,497,509.92 1,065,173.77 30,876,904.42 308,886.62
GPHL 3,120.00 31.20 8,400.00 84.00
Hua Cheng 10,730,644.45 107,306.44 8,306,091.67 83,060.92
Wang Lao Ji – – 127,536,422.67 1,744,923.79
Yi Xin Tang 13,405,525.06 137,258.97 – –
GP Corp. – – 108,315,583.96 1,774,228.39
Total 176,719,723.66 1,770,599.62 311,155,769.34 4,299,686.89
Notes receivable:
Chuangmei Medicines 67,778,737.45 – 64,423,774.86 –
Hua Cheng 967,279.69 – – –
Yi Xin Tang 424,149.97 – – –
HWBYS – – 8,175,000.00 –
GP Corp. – – 150,931,623.28 –
Total 69,170,167.11 – 223,530,398.14 –
Prepayments:
HWBYS 27,610,685.72 – 1,073,298.64 –
Hua Cheng 8,302.97 – 71,663.26 –
Wang Lao Ji – – 918,115.80 –
Guangzhou Yu Fa Medical
Instruments Co., Ltd. – – 210,278.62 –
GP Corp. – – 929.44 –
Total 27,618,988.69 – 2,274,285.76 –
Other receivables:
HWBYS 3,950,767.44 – 20,542,631.61 –
GPHL 2,032,085.00 – 3,228,120.78 –
Hua Cheng 1,816,800.00 – – –
Baxter Qiao Guang 1,279,120.80 – 3,094,266.79 –
Guangzhou South China
Medical Instruments
Co., Ltd. 100,000.00 100,000.00 100,000.00 100,000.00
Wang Lao Ji – – 1,374,386.91 –
Guangzhou Baiyunshan
Southern Anti-tumor
Biological Products
Co., Ltd. – – 77,452.83 –
GP Corp. – – 53,039.67 –
Total 9,178,773.24 100,000.00 28,469,898.59 100,000.00


6. Receivables and Payables of Related Parties
(2) Payables
Accounts payables:
Baxter Qiao Guang 3,682,927.03 –
HWBYS 3,285,233.23 4,181,609.48
Chuangmei Medicines 8,704,951.71 9,283,262.12
Hua Cheng 1,471,492.91 473,175.67
Yi Xin Tang 511,970.00 –
GP Corp. – 52,049,347.91
Total 17,656,574.88 65,987,395.18
Notes payable:
HWBYS 37,612,860.00 1,517,296.64
Chuangmei Medicines 5,000,000.00 –
Hua Cheng 168,218.00 –
Total 42,781,078.00 1,517,296.64
Contract liabilities:
Chuangmei Medicines 30,791,568.30 16,204,394.49
HWBYS 5,738,465.12 1,991,966.08
Hua Cheng 141,400.00 –
Yi Xin Tang 33,801.25 –
Nuo Cheng 150.00 –
GP Corp. – 27,046,074.94
Total 36,705,384.67 45,242,435.51
Other payables:
GPHL 116,611,943.50 47,902,394.11
HWBYS 339,822.35 668,878.04
Baxter Qiao Guang – –
GP Corp. – 217,599.54
Wang Lao Ji – 77,715.58
Total 116,951,765.85 48,866,587.27


XII. COMMITMENTS OR CONTINGENCY
1. Significant Commitments
(1) Capital commitments
Signed but not recognized in the

financial statement
– Commitment on purchasing
long-term assets 1,064,737,221.31 246,645,887.83
– Large amount contract – –
– Commitments on external investment – 100,300,000.00
Total 1,064,737,221.31 346,945,887.83
(2) Commitments of operating lease
As of the balance sheet date, the irrevocable operating leases that the Group has signed
are as follows:
Minimum lease payment of irrevocable

operating lease:
1 year subsequent to balance sheet date 116,778,536.53 74,880,300.79
Over 3 year subsequent to balance sheet date 247,566,091.45 206,131,969.07
Total 587,027,369.52 389,429,431.52
Note: Operating lease rent recognized into profit or loss for the period from January to December of year 2018
was RMB200,353 thousand (January to December of year 2017: RMB97,908 thousand)
(3) As of 31 December 2018, the Group has no unrecognized commitment related to

investment in joint ventures.

XII. COMMITMENTS OR CONTINGENCY (Continued)
1. Significant Commitments (Continued)
(4) Other commitments
① The Group’s share of the capital expenditures commitments of the joint ventures is
as follows:
Buildings, machineries and equipment 5,000.00 737,286,295.70
Total 5,000.00 737,286,295.70
② Capital expenditures commitments authorized by the management but are not yet
contracted for:
Buildings, machineries and equipment 877,784,270.00 1,025,443,400.94

Commitments on external investments 320,000,000.00 320,000,000.00
Total 1,197,784,270.00 1,345,443,400.94
③ Fulfillment of commitments for the prior year
The Group has fulfilled the capital expenditures and operating lease commitments
as at 31 December 2018.

XII. COMMITMENTS OR CONTINGENCY (Continued)
2. Contingencies
(1) Alliance BMP’s put option
According to the Equity Transfer Contract entered into by the listed company, Alliance
BMP Limited (hereinafter referred to as “Alliance BMP”) and GP Corp., the listed company
granted Alliance BMP a put option. Alliance BMP can choose to sell its remaining 20%
equity of GP Corp. to the listed company within the exercise period.
The exercise period of the put option starts from the day six months subsequent to the
settlement date, on which the listed company buys 30% equity of GP Corp. held by
Alliance BMP in cash from Alliance BMP, to anytime within thirty-six months subsequent to
the settlement date. Within the exercise period, Alliance BMP has the right (no obligation)
to transfer all of its remaining equity of GP Corp. to Guangzhou Baiyunshan according
to the Contract. Guangzhou Baiyunshan is obliged to accept the equity according to the
Contract.
If Alliance BMP exercises the put option, the exercise price of the put option shall be
determined based on the valuation result by the qualified independent valuer. The
transaction price shall not be lower than the transaction consideration adjusted for the
30% equity of GP Corp., and should be within the scope accepted by the relevant laws
and regulations, normative documents, regulatory policies of Chinese law in respect
of the management of state-owned assets, China Securities Regulatory Commission,
Shanghai Stock Exchange and/or Hong Kong Exchanges and Clearing Limited. If GP Corp.
has an increase in capital or the board of director makes a resolution to pay dividends to
shareholders subsequent to the signature date but prior to the date on which Alliance
BMP exercises the put option, the listed company and Alliance BMP shall take the
impact of such capital increase or dividends into consideration and make corresponding
adjustments with the same proportion to the transaction price. After the listed company
accepts the equity and completes the purchase of the remaining 20% equity of GP Corp.,
GP Corp. shall be a wholly-owned subsidiary of the listed company.
If Alliance BMP does not exercise the put option, the listed company still holds 80% equity
of GP Corp, and GP Corp. is still a holding subsidiary of the listed company.
(2) Please refer to Note XIV (1) for contingencies related to litigation.

XIII. EVENTS AFTER THE BALANCE SHEET DATE
(1) Acquisition of the trademark of “Wang Lao Ji”
In 2013, based on solving the potential horizontal competition between listed companies and
controlling shareholders and their affiliates, by integrating and organizing the pharmaceutical
resources of GPHL, the listed companies implemented material assets reorganization: merging
Guangzhou Baiyunshan Pharmaceutical Co., Ltd. (formerly known as Baiyunshan A) via share
swap by issuing A shares while issuing A shares to purchase the relevant assets of the remaining
main pharmaceutical business of GPHL.
On 28 February 2012, as the trademark dispute of “Wang Lao Ji” with registration number
626155 has not been determined yet and there were legal obstacles to its transfer while
the thirteenth session of the fifth board of directors of Guangzhou Pharmaceutical Co., Ltd.
(formerly known as “Guangzhou Pharmaceutical”, and renamed as “Guangzhou Baiyunshan
Pharmaceutical Group Co., Ltd.” in July 2013) reviewed the reorganization plan, a total of 33
trademarks, which are comprised of the 29 trademarks of the “Wang Lao Ji” series and the other
4 trademarks of the “Wang Lao Ji” exclusively used by Wang Lao Ji Pharmaceutical licensed by
GPHL under certain conditions, except for the 8 trademarks of “Wang Lao Ji” series, are not
included in the scope of the assets to be purchased.
In order to avoid potential horizontal competition, improve the efficiency of trademarks,

and enhance the profitability of listed companies, GPHL and listed companies have signed
the “Trademark Escrow Agreement” and the “Supplemental Agreement of the Trademark
Escrow Agreement”. At the same time, in order to ensure the integrity of the assets of listed
companies, GPHL issued the “Commitment Letter on transfer “Wang Lao Ji” Brand” and further
supplementary commitments in February 2012 and June 2012 respectively:
(a) GPHL promises that within two years from the date of any of the following conditions
is satisfied, GPHL will transfer the trademarks of Wang Lao Ji series (25 in total) and the
other four trademarks (including the trademarks with registration numbers of 125321,
214168, 538308, 5466324 respectively) to Guangzhou Pharmaceutical in accordance
with the laws and regulations in effect at that time: ① On the expiration date of 1 May
2020, or the license agreement and its supplemental agreement is determine invalidation/
invalidation/termination by the arbitral institution prior to the expiration date, or the
agreement is terminated with the agreement of both parties; ② Hongdao (Group) Co.,
Ltd. no longer has the right to preempt the Wang Lao Ji trademark in the agreement in
accordance with the laws.
(b) On the basis of the original letter of commitment, GPHL further committed to the
following: after all legal disputes concerning the trademark of Wang Lao Ji are resolved,
within two years from the date of transfer, after fulfilling the relevant approval procedures,
GPHL will transfer the 29 series of trademarks of Wang Lao Ji and the trademarks the
Company obtained legally and the other four trademarks of the “Wang Lao Ji” exclusively
used by Wang Lao Ji Pharmaceutical licensed by GPHL under certain conditions after the
signing date of the “Supplemental Agreement of the Trademark Escrow Agreement”
(including the signing date) to Guangzhou Pharmaceutical (listed company) in accordance
with the laws and regulations in effect at that time. Guangzhou Pharmaceuticals can
obtain the assets in the settlement of cash or the issuance of shares. The transfer price is
determined on the basis of the evaluation value determined in the valuation report, which
should be issued by the appraisal agency with securities qualification and approved by the
of department of state-owned property.

XIII. EVENTS AFTER THE BALANCE SHEET DATE (Continued)
(1) Acquisition of the trademark of “Wang Lao Ji” (Continued)
In December 2014, GPHL made adjustments to the original commitment to execution period
to lower uncertainty and protect the legal interest of the shareholders of the listed company,
due to the fact that the result of sentence of “Red Jar Decoration Dispute” will have significant
impact on the trademark right and sales of red jar Wang Lao Ji herbal tea, which will influence
the valuation of the Wang Lao Ji trademark. The execution period in the original commitment
is modified to “until two years within the effective date of judgment on “Red Jar Decoration
Dispute”.
On 16 August 2017, the Supreme People’s Court carried out public trial on the Red Jar
Decoration Dispute and issued the final judgment. According to the commitment made by
GPHL in February 2012, supplementary commitment in June 2012 and revised commitment in
December 2014, the conditions for GPHL to inject “Wang Lao Ji” series trademark into the listed
company were satisfied. In view of this, Guangzhou Baiyunshan planned to accept the transfer
the right to exclusive use of 420 trademarks, both registered after approval and still under
application of register, owned by GPHL, which are comprised of 14 basic trademark and 406
defensive trademarks, collectively referred to as “Wang Lao Ji” series trademarks.
On 27 December 2018, the 18th meeting of the Company’s 7th board of directors approved
the Proposal on Purchasing Trademarks in Cash and the Relevant Agreements and Connected
Transactions after discussion. The Company planned to adopt the assessed value, which was
determined on the Asset Evaluation Report on the Planned Transfer of Right to Exclusive Use of
420 Trademarks Owned by Guangzhou Pharmaceutical Holdings Co., Ltd. (ZhongLianGuoJiPingZi
[2018] No. WIGPZ0701) with base date of evaluation on 30 June 2018, in the pricing policy
and to purchase the “Wang Lao Ji” series trademarks (including trademarks both registered
and under application of register in domestic China and other countries or regions) held by the
controlling shareholder GPHL in cash. The Company has signed The Agreement on Purchase
of Trademarks in Cash between Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd.
and Guangzhou Pharmaceutical Holdings Limited. and The Agreement on Compensation for
Performance between Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. and Guangzhou
Pharmaceutical Holdings Limited.
Currently, the above-mentioned transactions are yet to be submitted to the first Extraordinary
General Meeting 2019 to be held on 28 March 2019 for approval.
(2) Profit distribution
According to the actual situation of the Company, cash dividends of RMB4.24 (tax included) are
to be distributed for every 10 shares based on the total share capital of 1,625,790,949 shares at
the end of 2018. Total cash dividends distributed shall be RMB689,335,362.38. The remaining
undistributed profits shall be transferred into next distribution. No capital reserve shall be
converted into share capital in the current year.

XIV. OTHER SIGNIFICANT MATTERS
(1) Litigations
① Litigation of the Group’s Subsidiary A
(a) Guangdong Guangsheng Nonferrous Metal Group Co., Ltd. filed a claim with the
Court on the unreceived payment of RMB 36,880 thousand against the Group’s
Subsidiary A on 5 February 2015, and claimed compensation for the due payment
and the overdue interest.
Pursuant to the Paper of Civil Judgment numbered (2015) SuiYueFaMinErChuZi

No.328-3 issued by the People’s Court of Guangzhou Yuexiu District on 14 March
2016, the prosecution by Guangdong Guangsheng Nonferrous Metal Group Co.,
Ltd. was dismissed.
On 23 March 2016, Guangdong Guangsheng Nonferrous Metal Group Co., Ltd.

lodged an appeal.
Pursuant to Paper of Civil Judgment numbered (2016) Yue01MinZhong No.10682

issued by the Intermediate People’s Court of Guangzhou on 16 December 2016,
Paper of Civil Judgment numbered (2015) SuiYueFaMinErChuZi No.328-3 issued by
the People’s Court of Guangzhou Yuexiu District was quashed, and the case was
referred to the People’s Court of Guangzhou Yuexiu District.
On 5 February, 2018, the People’s Court of Guangzhou Yuexiu District rendered

a judgment of the first instance that: lacking sufficient fact and without merit,
the claims of Guangdong Guangsheng Nonferrous Metal Group Co., Ltd., which
seeks for compensation from Subsidiary A, were dismissed by the Court because
Guangdong Guangsheng Nonferrous Metal Group Co., Ltd. failed to present
evidence to prove that the goods involved had been delivered to Subsidiary A.
Hence, Subsidiary A had no need to pay the due payment and the overdue interest
mentioned in the above case.
On 12 March 2018, Guangdong Guangsheng Nonferrous Metal Group Co., Ltd.

lodged an appeal against the case. On August 30, 2018, the second trial was
held in the Intermediate People’s Court of Guangzhou. On November 6, 2018,
the Intermediate People’s Court of Guangzhou made a Paper of Civil Judgement
numbered 2018 Yue01MinZhong No.12715, and decided that the appeal of
Guangdong Guangsheng Nonferrous Metals Group Co., Ltd. was not established.
The appeal was dismissed, and the original judgment was upheld.
Guangdong Guangsheng Nonferrous Metal Group Co., Ltd. filed a claim against
Subsidiary A for the unreceived payment of RMB 18,440 thousand on 4 February
2015, and required Subsidiary A to pay the due payment and the overdue interest.
Pursuant to Paper of Civil Judgement numbered (2015) SuiLiFaMinErChuZi

No.774-3 issued by the People’s Court of Guangzhou Liwan District on 21
December 2015, the prosecution by Guangdong Guangsheng Nonferrous Metal
Group Co., Ltd. was dismissed, and transferred to public security organization to
handle as criminal case. Guangdong Guangsheng Nonferrous Metal Group Co.,
Ltd. has lodged an appeal.

XIV. OTHER SIGNIFICANT MATTERS (Continued)
(1) Litigations (Continued)
① Litigation of the Group’s Subsidiary A (Continued)
(a) (Continued)

issued by the Intermediate Court of Guangzhou on 16 December 2016, Paper
of Civil Judgment numbered (2015) SuiYueFaMinErChuZi No.774-3 issued by
the People’s Court of Guangzhou Liwan District was quashed, and the case was
referred to the People’s Court of Guangzhou Liwan District.
On 27 December 2017, the People’s Court of Guangzhou Liwan District made a

civil judgment that all the claims of Guangdong Guangsheng Nonferrous Metal
Group Co., Ltd. were dismissed.
On 10 January 2018, Guangdong Guangsheng Nonferrous Metal Group Co., Ltd.

appealed to the Intermediate People’s Court of Guangzhou. On 9 May 2018, the
meeting was held at the Intermediate People’s Court of Guangzhou. The judgment
made by the Intermediate People’s Court of Guangzhou on 27 August on the
second trial of the re-examination of the Guangsheng case, case number: (2018)
Yue01MinZhong No.6503, dismissed the appeal of Guangsheng and upheld the
original judgment. On 21 September 2018, the Intermediate People’s Court of
Guangzhou issued a Proof for the effectuation of the judgment.
Guangdong Guangsheng Investment Group Energy Co., Ltd. filed a claim with the
Court on the unreceived payment of RMB 47,400 thousand against the Group’s
Subsidiary A on 25 December 2014, and seek for freezing the bank accounts of
Subsidiary A, and required Subsidiary A to pay the due payment and the overdue
interest.
Pursuant to Paper of Civil Judgement numbered (2015) SuiLiFaMinErChuZi

No.454-1 to No.468-1 issued by the People’s Court of Guangzhou Liwan District on
21 December 2015, the prosecution by Guangdong Guangsheng Investment Group
Energy Co., Ltd. was dismissed, and the case was transferred to public security
organization to handle as criminal case. Guangdong Guangsheng Investment
Group Energy Co., Ltd. lodged an appeal to the Intermediate People’s Court of
Guangzhou.
Pursuant to a total of 15 Paper of Civil Judgements numbered (2016)

Yue01MinZhong No.3437 to No. 3445, No.5158 to No. 5163 issued by the
Intermediate Court of Guangzhou on 16 December 2016, a total of 15 Paper of
Civil Judgements numbered (2015) SuiLiFaMinErChuZi No.454-1 to No. 468-1
issued by the People’s Court of Guangzhou Liwan District was quashed, and the
case was referred to the People’s Court of Guangzhou Liwan District.
On 27 December 2017, the People’s Court of Guangzhou Liwan District made a

civil judgment that all the claims of Guangdong Guangsheng Investment Group
Energy Co., Ltd. were dismissed.

(a) (Continued)
On 4 January 2018, Guangdong Guangsheng Investment Group Energy Co., Ltd.

appealed to the Intermediate People’s Court of Guangzhou. The second instance
review of the case was tried at the Intermediate People’s Court of Guangzhou on 9
May 2018 and a court order was to be made.
On 6 November 2018, the Intermediate People’s Court of Guangzhou finalized

the judgment, Guangdong Guangsheng Investment Group Energy Co., Ltd. could
not prove that it had delivered the goods involved to Subsidiary A. The appeal was
finally dismissed, and the original judgment was upheld considering the fact that a
sales contract between the two parties existed and the goods had been delivered so
that Subsidiary A had to pay is lack of evidence.
According to professional opinions provided by external lawyers, upstream suppliers

of Subsidiary A could not provide Delivery Orders which can prove that the goods
had been delivered to Guangzhou Defenghang Petrochemical Co., Ltd. and
Guangzhou Tongtai Fuel Chemical Co., Ltd., thus the debtor-creditor relationship
was not proven. Subsidiary A may not need to pay to the upstream suppliers, and
there are no overdue accounts receivable.
With the assessment of the case and the consideration of the professional
opinions provided by external lawyers, the management of Subsidiary A made
separate provision for bad debts for both the accounts receivable for Guangzhou
Defenghang Petrochemical Co., Ltd. and Guangzhou Tongtai Fuel Chemical
Co., Ltd., with a provision rate of 10%. The amounts that had been paid, which
includes other receivables of RMB 10,315.7 thousand of Guangzhou Defenghang
Petrochemical Co., Ltd., and accounts receivable of RMB 10,541.8 thousand of
Sinogas (Zhuhai) Petrochemical Co. Ltd., made provision for bad debts, with a
provision rate of 100%.

(b) On 29 October 2014, the Group’s Subsidiary A received a response to prosecution

concerning about the contract dispute of financial borrowings of Subsidiary A,
Jiangmen Yuehui Fuel Co., Ltd. and another 7 companies accused by Guangdong
Nanyue Bank and its Jiangmen Branch from the People’s court of Guangdong
Zhanjiang Xiashan District. According to the indictment, Jiangmen Yuehui Fuel
Co., Ltd. applied to Guangdong Nanyue Bank for factoring financing of RMB 30
million by the receivable due from Subsidiary A which amounted to RMB 37,500
thousand as a pledge, and Yuehui charged Subsidiary A to take the responsibility of
the settlement or compensation. Subsidiary A alleged that the Company seal and
signature on the documents presented as evidence were fake, and thus they should
not bear any legal responsibility.
On 22 December 2016, the People’s Court of Jiangmen Pengjiang selected

Guangdong Huasheng Judicial Expertise Center as an agency of this case, and paid
the accreditation fee of RMB 70,240. In accordance with the summons, Subsidiary
A was required to appear in court for appraisal and to provide an original copy of
signature of “Feng Yaowen” as a sample.

issued by the Intermediate People’s Court of Jiangmen on 10 July 2017, all claims
of Guangdong Nanyue Bank Jiangmen Branch were dismissed, and the case was
transferred to Jiangmen public security organization. Guangdong Nanyue Bank
Jiangmen Branch shall bear the accreditation fee.
On 5 January 2018, Guangdong Nanyue Bank filed a claim with the Higher People’s
Court of Guangdong for retrial.
On 30 March 2018, Subsidiary A received a notice of case conclusion numbered

(2018) Yue0703Zhi No.26 issued by the People’s Court of Jiangmen Pengjiang
District, in regard of the case that Subsidiary A applied for court enforcement of the
contract dispute with Jiangmen Branch of Guangdong Nanyue Bank Co., Ltd. As
the person subjected to execution had undertaken all the obligations in this case,
the enforcement implementation was concluded, and a decision was made to close
the case.

(c) Guangzhou Linhai Trade Industry Co., Ltd. filed a claim for the unreceived payment
of RMB 8,364.9 thousand against the Group’s Subsidiary A on 11 November 2014,
and required Subsidiary A to pay the due payment and the overdue interest.
In accordance with the Paper of Civil Judgment numbered (2014)

SuiLiFaMinErChuZi No. 2424 and No.2425-4 issued by the People’s Court of
Guangzhou Liwan District on 30 December 2015, Subsidiary A was sentenced to
pay the due payment and the overdue interest to Guangzhou Linhai Trade Industry
Co., Ltd.
In accordance with the Paper of Civil Judgment numbered (2016) Yue01MinZhong

No. 7733 and No.7734 issued by the Intermediate People’s Court of Guangzhou
on 21 December 2016, the Paper of Civil Judgement numbered (2014)
SuiLiFaMinErChuZi No. 2424 and No.2425-4 issued by the People’s Court of
Guangzhou Liwan District was quashed, and claims of Guangzhou Linhai Trade
Industry Co., Ltd., the appellant, was dismissed.
In accordance with the Paper of Civil Judgment numbered (2017) YueMinShen No.
6100 issued by the Higher People’s Court of Guangdong on 7 November 2017, the
retrial application of Guangzhou Linhai Trade Industry Co., Ltd., was dismissed.
On 15 March 2018, Subsidiary A received the Notification of Acceptance of

civil case with reference of SuiJianKongShenKongMinShou (2018) No. 357
from Guangzhou People’s Procuratorate. The content of the notification is that
Guangzhou Linhai Trade Industry Co., Ltd. applied to Guangzhou People’s
Procuratorate for supervision because Guangzhou Linhai Trade Industry Co., Ltd.
refused to accept the results of the court judgment of Paper of Civil Judgement
numbered (2016) Yue01Minzhong No. 7733 and No.7734 issued by the
Intermediate People’s Court of Guangzhou, on the case of the sales contract
dispute with Subsidiary A. The Procuratorate has accepted the case.
On 13 July 2018, Subsidiary A received the written decision of not support the
supervisory from Guangzhou People’s Procuratorate’s SuiJianMin (Hang) Jian (2018)
No.44010000573, and SuiJianMin (Hang) Jian (2018) No.44010000574. According
to the Article 90 of Rules for the Supervision over Civil Proceedings by the People’s
Procuratorates (for Trial Implementation), the Procuratorate decided not to approve
the supervisory application from Guangzhou Linhai Trade Industry Co., Ltd.
As at the reporting date, the above cases had completed the trial and Subsidiary A
had no direct economic losses in the litigation case.

(d) On 6 September 2018, Guangdong Guangsheng Nonferrous Metals Group Co.,

Ltd. filed a claim against Subsidiary A with the People’s Court of Guangzhou Tianhe
District. Guangdong Guangsheng filed a claim with the court on the private lending
dispute, claiming that the Subsidiary A and the other five defendants jointly pay the
outstanding principal of RMB 18 million together with the compensation for the
due payment and the overdue interest, which totaled to RMB 4,216,500 from due
date to the date of actual repayment, at the rate of 6% per annum.
As at the reporting date, the above case were still on trial. On the basis of full
reference to professional opinions provided by external lawyers, the management
of Subsidiary A had evaluated the case and considered that it was unlikely that
Subsidiary A would lose the case and incur direct economic losses.
(e) For the sales contract dispute between Subsidiary A and Hainan Lanhui New Energy
Development Co., Ltd. (hereinafter, “Lanhui Company”), Guangzhou Yongyi
Energy Technology Development Co., Ltd. (hereinafter, “Yongyi Company”),
after Subsidiary A made the payment according to the contract, Lanhui Company
and Yongyi Company forged the goods delivery notes (the legal representative of
both companies is Zhang Dajun). Subsidiary A had the right to claim the refund
of the payment to Yongyi Company as no goods were actually received and its
payment was defrauded. At the same time, because Lanhui Company issued the
“guarantee” for Yongyi Company, it should bear the guarantee responsibility.
Subsidiary A filed a claim against Lanhui Company, Yongyi Company and
Zhongshan Jinneng Battery Co., Ltd. on sales contract disputes, claiming that
the two defendants jointly return the payment of RMB 3 million together with
the interest of RMB 630,000, which totaled to about RMB 3,630 thousand, to
Subsidiary A.
After the trial, and considering the first-instance court in the trial, Subsidiary A had
applied to the court of first instance for withdrawal. On 3 December 2018, the
Liwan Court of Guangzhou made a Paper of Civil Judgment numbered No. 2 of
(2018) Yue0103MinChu 2868, allowing Subsidiary A withdraws the lawsuit and re-
sue after the corresponding evidence were fully compiled.
After evaluating the case and considering the professional opinions provided by
external lawyers, the management of Subsidiary A considered that the relevant
accounts receivable were unlikely to be recovered and decided to make a provision
for bad debts at the ratio of 100%.

② Other litigation of the Group’s Subsidiary A
(i) The Group’s Subsidiary A filed a claim for the unreceived payment of RMB 5,191.2
thousand against Hengshan Zhongkong International Paper Co., Ltd. with the
Intermediate People’s Court of Hunan Hengyang on 10 December 2014, and required
Hengshan Zhongkong International Paper Co., Ltd. to pay the due payment and the
overdue interest.
On 5 December 2014, the People’s Court of Hunan Hengshan County accepted and
heard the bankruptcy liquidation case of Hengshan Zhongkong International Paper Co.,
Ltd. according to the application of Hengshan County Urban and Rural Construction
Investment Co., Ltd. The litigation of Hengshan Zhongkong International Paper Co., Ltd.
was dismissed. Creditor’s rights of Subsidiary A will be dealt with in the procedure of
bankruptcy liquidation.
On 20 November 2015, the bankruptcy administrator considered that the seal of the
contract for declaring creditor’s right by Subsidiary A was inconsistent with the one
used by Hengshan Zhongkong International Paper Co., Ltd., and Subsidiary A was not a
qualified creditor. Subsidiary A had reported to Guangzhou Public Security Bureau Liwan
District Economic Crime Investigation Brigade on 29 February 2016.
At the end of year 2015, management of Subsidiary A assessed the case with
consideration of professional opinions provided by external lawyers. The above accounts
receivable with amount of RMB 5,191.2 thousand were subjected to separate provision for
bad debts, with a provision rate of 100%.
As at the reporting date, the judgment has taken effect and Hengshan Zhongkong
International Paper Co., Ltd. is implementing the bankruptcy liquidation procedure.
③ Litigation of the Group’s Subsidiary G
(a) On 27 December 2016, Guangzhou Keyun branch of Ping’an Bank Co., Ltd. filed
a claim for the unreceived repayment from Guangdong Huaqiang Pharmaceutical
Co., Ltd. (hereinafter referred to as “Huaqiang”) of the loan obtained from a
transfer of accounts receivable to the Group’s Subsidiary G, against Huaqiang, and
several guarantors, and Subsidiary G which is the debtor of the accounts receivable.
During the period from April to June of 2014, Huaqiang obtained the loan through
transferring the accounts receivable due from Subsidiary G to Ping’an Bank without
notifying Subsidiary G. Subsidiary G was the debtor of the accounts receivable but
was not aware of the transfer and has paid the involved payments for goods of
RMB 66,340 thousand to Huaqiang. Ping’an Bank alleged that Subsidiary G should
repay payments for goods because Huaqiang did not repay the loan in time. On 10
August 2018, the case is tried at the Intermediate People’s Court of Guangzhou.

③ Litigation of the Group’s Subsidiary G (Continued)
(a) (Continued)
On 29 December 2018, the first-instance judgment was received. The court of first
instance dismissed all the claims of Ping’an Bank Co., Ltd. Guangzhou Branch Yun
Branch to the Subsidiary G. After preliminary confirmation with the Intermediate
People’s Court of Guangzhou, no appeal was received from Ping’an Bank as of 28
February 2019.
external lawyers, the management of Subsidiary G considered that the Subsidiary
G was not responsible for the liabilities of the supplier to the bank. Therefore, no
provision had been recognized.
(b) On 10 November 2017, Guangdong Zirui Pharmaceutical Co., Ltd. (hereinafter

referred to as “Zirui Pharmaceutical”) filed a claim for the unreceived payments
for goods of RMB 10,853.7 thousand in total against the Group’s Subsidiary G.
It has been confirmed by the procurement department of Subsidiary G that the
payment for goods is overdue. The reason for Subsidiary G not paying the payment
for goods for the present is because of the unpaid price difference due from Zirui
Pharmaceutical during that period. The case had completed the trial and the Court
sentenced Subsidiary G to pay the payment for goods of RMB 10,505.5 thousand
to Zirui Pharmaceutical. Subsidiary G was dissatisfied with the judgment and lodged
an appeal to the court on 4 June 2018. The Court has accepted the case.
The court of second instance considered that Subsidiary G should pay RMB
10,505.5 thousand and relevant interest to Zirui while Zirui should pay the
difference of RMB 313,100 to Subsidiary G. As at the reporting date, the case has
been closed.
(c) On 31 May 2018, Zirui Pharmaceutical filed a claim for the unreceived price
difference of RMB 387.1 thousand in total and interest (calculated at overdue bank
loan interest rate at the same period). On 6 July 2018, the case was tried, and the
Court dismissed all the claims of Zirui Pharmaceutical. Zirui Pharmaceutical was
dissatisfied with the judgment and lodged an appeal on 30 July 2018. Subsidiary G
received relevant material on 8 August 2018. The judgment of the second instance
court upheld the original judgment, which is that all the claims of Guangdong
Ruirui were dismissed.
As at the reporting date, the above case had been closed. The Subsidiary G did not
incur any direct economic losses in the lawsuit.

④ Prosecution of the Group’s Subsidiary G
(a) On 24 July 2015, the Group’s Subsidiary G filed a claim with the Intermediate
People’s Court of Wuhan and filed a claim against Hubei Hongqiao Pharmaceutical
Co., Ltd. (hereinafter referred to as “Hubei Hongqiao”) for the due payment
amounted to RMB 27,725.1 thousand. The Subsidiary G required Hubei Hongqiao
to pay the due payment, the overdue interest and liquidated damages with a total
of RMB 37,124.8 thousand, and implemented property preservation before the
lawsuit.
On 24 January 2017, the Intermediate People’s Court of Wuhan made a first-

instance judgment on the case, and sentenced Hubei Hongqiao to pay Subsidiary G
a total amount of RMB 27,725.1 thousand and pay part of the liquidated damages
and interest loss (calculated to the date of actual settlement of the arrears) from the
date of the effective date of the judgment. The judgment has entered into force
and the defendant failed to perform the court judgment. The Subsidiary G had
commissioned local lawyers to submit information to the court for enforcement. In
this case, the pre-litigation property preservation measures were taken before the
prosecution, and the land use rights and bank accounts of Hubei Hongqiao were
sealed up and frozen. Up to now, the preserved property in the previous period
is still in a valid state of sealing up and freezing. The court has commissioned the
assessment agency to evaluate the relevant preservation property. In March 2018,
the court notified that the evaluation report had been sent to Hubei Hongqiao and
was subsequently auctioned by the court. In October 2018, the auction succeed.
The next step will be to verify the rights and interests of the auction fund in
accordance with the relevant laws and regulations.
external lawyers, the management of Subsidiary G decided to make a provision
for bad debts at the ratio of 85.57% to the above accounts receivable of RMB
27,725,100.

④ Prosecution of the Group’s Subsidiary G (Continued)
(b) On 5 April 2017, the Group’s Subsidiary G filed a claim against Guangxi Liuzhou
Baicaotang Pharmaceutical Co., Ltd. (hereinafter referred to as “Liuzhou
Baicaotang”) for defaults on the payment for goods with an amount of RMB
14,443.5 thousand with the People’s Court of Guangzhou Liwan District,
requesting Liuzhou Baicaotang to pay the due payment and the overdue interest.
On 24 July 2018, the People’s Court of Guangzhou Liwan District made a first-
instance judgment and sentenced Liuzhou Baicaotang to pay the Subsidiary G a
payment of RMB 14,443,500 and the overdue interest which is charged on the
payment at a rate of five ten thousandth per day since 1 January 2018 (calculated
to the date of actual settlement of the arrears), and compensate Subsidiary
G’s lawyer fee of RMB 416 thousand and return the appraisal fee of RMB 44.8
thousand which Subsidiary G had paid within 10 days from the effective date of the
judgment.
In this case, the pre-litigation property preservation measures were taken before
the prosecution, and the property rights and bank accounts of Liuzhou Baicaotang
were sealed up and frozen. Up to now, the preserved property in the previous
period is still in a valid state of sealing up and freezing.
Baicaotang appealed in August 2018. The dispute was transferred to the

Intermediate People’s Court of Guangzhou. On 7 January 2019, the second trial
was held, and there is no judgment yet.
external lawyers, the management of Subsidiary G decided to make a provision
for bad debts at the ratio of 100% to the above accounts receivable of RMB
14,443,500.00.

(c) On 7 February 2018, the Group’s Subsidiary G filed a claim with the court
against Guangdong Zirui pharmacy Co., Ltd. for the arrears from its 2015-2017
replenishment of a total of RMB 2,341.9 thousand (a total of 39 cases). The case
had been accepted and filed. After the trial, as of 13 August 2018, a total of 14
cases had been settled to judgments. Among them, 3 cases numbered (2018)
Yue0103Minchu No. 1902, 1913, 1926 respectively, have a total amount of RMB
2,659.20. As the evidence presented by Zirui proved that the amount was actually
paid, the court dismissed the claim of Subsidiary G (the judgment had taken
effect). Among them, 11 cases numbered (2018) Yue0103Minchu No. 1928, 1932,
1933, 1936, 1939, 1941, 1943, 1944, 1947, 1893, 1894 respectively, have a total
amount of RMB 421,410.29. The court supported Subsidiary G’s claim request that
the Zirui pay for the replenishment, but dismissed the Subsidiary G’s request of the
interest of the overdue payment.
As at the reporting date, only the case numbered (2018) Yue 0103 MinChu
No.1919 was not yet closed, involving an amount of RMB 229,520.64. The
remaining 38 cases were all closed. The court finally decided that the total amount
of these 38 cases was RMB 1,187,952.69 which has been received by Subsidiary G.
(d) On 18 August 2016, the Group’s Subsidiary G filed a claim against Guilin
Pharmaceutical Group Co., Ltd. (hereinafter referred to as “Guilin Medicine”)
for a total overdue payment of RMB 4,130.8 thousand and applied for property
preservation. The People’s Court of Guangzhou made the final the judgment that
Guilin Medicine is required to pay Subsidiary G the due payment of RMB 4,130.8
thousand, the liquidated damages (from 22 August 2014 to the date of the actual
payment is made, at the rate of five ten thousandth per day), the legal fees, and
the litigation fees and litigation preservation fees for this case within 10 days from
the effective date of the judgment. Both the first and second trials succeeded, and
the relevant assets were seized in full, including 3 sets of real estate. The Subsidiary
G applied to the court for enforcement, and is waiting for the court to auction the
seized property.
external lawyers, the management of Subsidiary G decided to make a provision for
bad debts at the ratio of 100% to the above accounts receivable of RMB 4,130.8
thousand.

(e) On 29 March 2018, the Group’s Subsidiary G filed a claim against Weihai Qinuo
Medical Instruments Co., Ltd. (hereinafter referred to as “Qinuo Medical”) to
refund the Subsidiary G’s prepayments of RMB 1,521.39 thousand in total. The
case was judged on the first instance on 6 July 2018. According to the judgment of
the first trial, Qinuo Medical was sentenced to pay RMB 951.39 thousand and the
interest to Subsidiary G, and the insurance premium of RMB 5 thousand and the
case acceptance fee of RMB 5.555 thousand were borne by Qinuo Medical. The
Subsidiary G was dissatisfied with the judgment and has filed an appeal.
As at the reporting date, Subsidiary G had received the judgment of the second
instance. The court of second instance ruled that QiNuo Medical paid the
prepayment of RMB 1,521,390.00 together with relevant interests.
(f) Sub-subsidiary J filed a claim against Hebei Xinglin Pharmaceutical Co., Ltd. for
arrear of RMB 2,797,654.40 together with relevant interest.
After the second trial of the case on 26 February 2018, the defendant, Hebei
Xinglin Pharmaceutical Co., Ltd., applied for judicial identification on the
authenticity of the “Contract seal of Hebei Xinglin Pharmaceutical Co., Ltd.” on the
“Purchase and Sales Contract” and on whether the signatures of “Su Xueliang”
on the three documents were signed by Su Xueliang himself. On 8 May 2018, the
third trial were opened for the sample discussion. On the morning of 18 May 2018,
the Intermediate People’s Court of Nanning chose Guangxi Guigongming Forensic
Center as the judicial appraisal institution through plate lottery. On 18 December
2018, Sub-subsidiary J sent the original contract and receipt to the Guangxi
Guigongming Forensic Center for appraisal. On 8 April 2018, the People’s Court
of Nanning Qingxiu District, Guangxi Zhuang Autonomous Region, continued to
freeze the bank deposit of Hebei Xinglin Pharmaceutical Co., Ltd., the defendant,
for RMB 2,842,153.00, and the freezing period was til 7 April 2019.
external lawyers, the management of Sub-subsidiary J decided to make a provision
for bad debts at the ratio of 50% to the above accounts receivable

⑤ Litigation against the Group’s Sub-subsidiary H
On 7 September 2016, Huarun Guokang (Beijing) Pharmaceutical Co., Ltd. filed a claim
for the unreceived medicine goods from Sub-subsidiary H to Huaqiang, a third party in the
transaction against Sub-subsidiary H and required Sub-subsidiary H to repay the payment
for medicine goods of RMB 15,297.1 thousand.
Huarun Guokang purchased medicine from Sub-subsidiary H in 2014 and paid RMB
15,297.1 thousand. The plaintiff sold the above-mentioned medicine to Huaqiang,
the third party on 30 May 2014. As Sub-subsidiary H and the third party are located in
the same city and the two companies are close to each other, Huarun Guokang and
Sub-subsidiary H agreed to transport medicine directly to the third party to save the
transportation expenses. Huarun Guokang filed a claim for the unreceived payment for
goods against the third party to the People’s Court of Beijing Fengtai District. The first
instance was tried on 21 July 2016. As the third party claimed that it has no obligation for
paying the payment for goods because no medicine has been received, Huarun Guokang
required Sub-subsidiary H to return the payment for medicine of RMB 15,297.1 thousand.
Sub-subsidiary H raised an objection to jurisdiction during the period of submitting
statement of defense. On 19 December 2016, the Court overruled the objection to
jurisdiction lodged by Sub-subsidiary H and Huaqiang.
On 12 September 2017, the Second People’s Court of Beijing made the final judgment
and Paper of Civil Judgment numbered (2017) Jing02MinXiaZhong No. 827. The Court
overruled the objection to jurisdiction lodged by Sub-subsidiary H and affirmed the original
judgment.
On 12 June 2018, the first session was tried by the People’s Court of Beijing Fengtai
District and the case is currently under trial.
After evaluating the case and considering the professional opinions provided by external
lawyers, the management of Sub-subsidiary H believed that the company had fulfilled
the purchase and sales contract, made the payment to the supplier, and obtained the
receipt confirmation form of Huarun Guokang which proved that it had fulfilled its
supply obligation to Huarun Guokang; the management of Sub-subsidiary H expects no
compensation and thus does not recognize any provisions.

⑥ Respond to prosecution of other subsidiaries of the Group
(a) On 17 November 2014, the Group applied for arbitration from Shenzhen Court
of International Arbitration (hereinafter, “SCIA”) with the case number of SHEN
T2014811. The arbitration request was: in accordance with the contract, Tongxing
Pharmaceutical Co., Ltd. shall transfer all of the 48.0465% shares of Wang Lao Ji
Pharmaceuticals it held (the number of shares held is 98,378,439) to the Group,
with RMB 468,126,196.35 as the consideration. Tongxing Pharmaceutical Co.,
Ltd. paid the Group for the legal fees and arbitration fees paid by the Group for
the case (Including but not limited to case filing fees, case acceptance fees, actual
expenditures of arbitration, etc.).
On 11 January 2016, the Group proposed to the SCIA to change the above
arbitration application (case number: SHEN T2014811), and the arbitration
request is changed to: Tongxing Pharmaceutical Co., Ltd. shall transfer all of the
48.0465% shares of Wang Lao Ji Pharmaceuticals it held (the number of shares
held is 98,378,439) to the Group, with RMB 358,245,085.62 (tax included) as
the consideration. Meanwhile, the corresponding registration procedures involved
in the equity transfer of Wang Lao Ji Pharmaceutical shall be handled. Tongxing
Pharmaceutical Co., Ltd. paid the Group for the legal fees and arbitration fees paid
by the Group for the case (including arbitration fees such as case filing fees and
case arbitration fees).
On 20 February 2016, SCIA conducted the first trial of the above-mentioned

cases. With the court’s approval process by mutual consent, both of the two
parties decided to engage a professional agency to conduct audit and appraisal on
the company’s net asset value per share mentioned in the Shareholder Contract
for Guangzhou Wang Lao Ji Pharmaceutical Co., Ltd. The Group and Tongxing
Pharmaceutical Co., Ltd. jointly selected Deloitte Consulting (Beijing) Co., Ltd.
as the appraisal agency, and Deloitte Touche Tohmatsu CPA (Special General
Partnership) Beijing Branch as the audit agency. The above audit and appraisal were
completed on 10 April 2017.
On 22 December 2017, SCIA issued the award numbered

HuaNanGuoZhongShenCai [2017] No. 578 in which it stated that Tongxing
Pharmaceutical Co., Ltd. shall transfer all of the shares of Wang Lao Ji
Pharmaceutical (98,378,439 shares in total) to the Group with the net asset value
per share of RMB 3.75 and the total transfer price of RMB 368,919,146.25 (tax
included).
On 8 February 2018, the Company applied to Guangzhou Intermediate People’s

Court for enforcement, and Guangzhou Intermediate People’s Court has filed a
case numbered (2018) Yue01Zhi No. 985. After Tongxing Pharmaceutical filed a
claim against the Intermediate People’s Court of Shenzhen to withdraw the arbitral
award, the case was suspended and has been resumed for now.

⑥ Respond to prosecution of other subsidiaries of the Group (Continued)
(a) (Continued)
The case Tongxing Pharmaceutical Co., Ltd. applied to the Intermediate

People’s Court of Shenzhen for the cancellation of the arbitral award
(HuaNanGuoZhongShenCai [2017] No. 578 “Attachment”), numbered (2018)
Yue03MinTe No. 49. The Company received the notice of the lawsuit issued by the
Intermediate People’s Court of Shenzhen on 19 March 2018 concerning the case.
On 1 June 2018, the Intermediate People’s Court of Shenzhen dismissed the claims
for the withdrawal of Tongxing Pharmaceutical.
On 13 June 2018, the Company applied to the Intermediate People’s Court of

Guangzhou for the resumption of the implementation of the case of (2018) Yue
01 Zhi No. 985, and received the “Executive Notice” issued by the Intermediate
People’s Court of Guangzhou on 14 June 2018. Tongxing Pharmaceutical also
filed an enforcement arbitrage with the Intermediate People’s Court of Guangzhou
after the dismissal of the arbitral award was dismissed. The case number is (2018)
Yue01Zhi No. 3133.
On 20 September 2018 and 25 September 2018, the above two arbitration

enforcement cases have been completed and the Intermediate People’s Court of
Guangzhou issued notices respectively.
(b) For the dispute between Wang Lao Ji Great Health, a wholly-owned subsidiary
of the Company, and Wuhan Jiaduobao Beverage Co., Ltd. in Changsha City
arising from the slogan of “The red cans herbal tea – national top sales-JDB”,
“7 of 10 cans of herbal tea sold in China are JDB. Many more people drink JDB
to avoid suffering from excessive internal heat. Many more people drink JDB
as its formula is more authentic.” or “JDB is approved as a national intangible
cultural heritage masterpiece” which constitute false propaganda, under both the
1st trial ((2013) ChangZhongMinWuChuZi No.00308) and the 2nd trial((2016)
XiangMinZhong No.94), the slogan of Wuhan Jiaduobao Beverage Co., Ltd. and
JDB (China) Beverage Co., Ltd. constitute false propaganda, and the infringement
was sentenced to stop. And according to the judgment of the first trial, Wuhan
Jiaduobao Beverage Co., Ltd. and JDB (China) Beverage Co., Ltd. were sentenced to
pay Wang Lao Ji Great Health pecuniary loss of RMB 9,022,978.20 and reasonable
rights protection fee of RMB 239,779.00. The court of the second trial upheld the
judgment of the lower court except for the compensation of to RMB 6 million,
which is paid to Wang Lao Ji Great Health. Wuhan Jiaduobao Beverage Co., Ltd.
and JDB (China) Beverage Co., Ltd. was dissatisfied with the first-instance judgment
and applied for a retrial to the high court. The Supreme Court decided to arraign
this case on 23 December 2016 as there are some applicable issues of this case,
with reference of (2017) ZuiGaoFaMinZai No. 155. The Supreme People’s Court
started the trial on 30 November 2017. The case was tried on 8 March 2019, and is
at a retrial stage at present.

(b) (Continued)
For the dispute between Wang Lao Ji Great Health, a wholly-owned subsidiary of
the Group, and Wuhan Jiaduobao Beverage Co., Ltd. in Chongqing City arising
from the slogan of “The red cans herbal tea – national top sales-renamed JDB”,
both the first trial (case number: (2013) YuWuZhongMinFaChuZi No.00345), and
the second trial (case number: (2014) YuGaoFaMinZhongZi No.318) made the
judicial decision that the slogan involved in the case constitutes false propaganda
and Jiaduobao (China) Beverage Co., Ltd. was sentenced to stop the infringement.
And according to the judgment of the first trial, JDB (China) Beverage Co., Ltd.
were required to pay Wang Lao Ji Great Health pecuniary loss and reasonable
expenditures on safeguarding the legal rights of RMB 400,000.00. The court of
the second trial upheld the judgment of the first trial. JDB (China) Beverage Co.,
Ltd. was dissatisfied with the first-instance judgment and applied for a retrial to the
Supreme Court. The Supreme Court decided to arraign this case on 23 December
2016 as there are some applicable issues of this case, with reference of (2017)
ZuiGaoFaMinZai No. 151. The Supreme People’s Court started the first trial and
second trial on 30 November 2017 and 8 March 2019 respectively. So far, the case
is at a retrial stage.
For the dispute between Wang Lao Ji Great Health, a wholly-owned subsidiary
of the Group, and Guangdong Jiaduobao Beverage Co., Ltd. in Guangzhou City
arising from the slogan of “I, Wang Jianyi, am the great-great grandson of Wang
Lao Ji”, “I gave the exclusive formula to the Jiaduobao Group.”, “The herbal tea
produced by Jiaduobao is prepared by my ancestral exclusive formula” and so on
which constitute false propaganda and commercial slander, under both the first
trial (case number: (2014) SuiZhongFaZhiMinChuZi No.2) and the second trial (case
number: (2016) YueMinZhong No.293), the slogan of JDB (China) Beverage Co.,
Ltd. constitute false propaganda, and the infringement was sentenced to stop
and make an apology. According to the judgment of the first trial, Guangdong
Jiaduobao Beverage Co., Ltd. and JDB (China) Beverage Co., Ltd. were sentenced
to pay Wang Lao Ji Great Health pecuniary loss and reasonable expenditures on
safeguarding the legal rights of RMB 5,000,000.00. The court of the second trial
upheld the judgment. Guangdong Jiaduobao Beverage Co., Ltd. and JDB (China)
Beverage Co., Ltd. were dissatisfied with the first-instance judgment and applied
for a retrial to the Supreme Court, numbered (2017) ZuiGaoFaMinShen No. 509.
The Supreme People’s Court started the trial on 27 December 2017, and the
decision of whether to accept its retrial application or not is under trial.
As at the reporting date, the case is currently at the review stage. The management
of the Group considered that it is not probable that it will lose the case which
results in direct economic loss after the assessment which takes the professional
opinions provided by external lawyers into consideration.

(c) In year 2015, Guangzhou Hao Cheng Estate Management Development Co.,
Ltd. filed a claim to the dispute of lease contract by the Group’s Subsidiary B and
applied for termination to contract and compensation for the loss. Subsidiary B also
filed a claim for the unreceived rental and penalty of Guangzhou Hao Cheng Estate
Management Development Co., Ltd and its guarantor.
Pursuant to Paper of Civil Judgment numbered (2015) SuiYueFaMinSanChuZi

No.186, issued by the People’s Court of Guangzhou Yuexiu District on 30
June 2017, Lease Contract and Lease Supplementary Contract entered into by
Guangzhou Hao Cheng Estate Management Development Co., Ltd. and Subsidiary
B on 28 February 2014 was terminated on 9 September 2016. Subsidiary B shall
fully pay Guangzhou Hao Cheng Estate Management Development Co., Ltd. the
compensation of RMB 1,955,325.00 within 10 days from the date when this Paper
of Civil Judgement takes effect, and other claims of Guangzhou Hao Cheng Estate
Management Development Co., Ltd. were dismissed.
Pursuant to Paper of Civil Judgment numbered (2015) SuiYueFaMinSanChuZi

No.639, issued by the People’s Court of Guangzhou Yuexiu District on 30 June
2017, Guangzhou Hao Cheng Estate Management Development Co., Ltd. shall
pay Subsidiary B penalty and rental of to RMB9,800 thousand for the period from
1 October 2014 to 31 January 2015, its guarantor shall undertake joint liability for
the debts, and other claims of Subsidiary B were dismissed.
Pursuant to Paper of Civil Judgment numbered (2016) Yue0104MinChu No.100

issued by the People’s Court of Guangzhou Yuexiu District on 30 June 2017,
Guangzhou Hao Cheng Estate Management Development Co., Ltd. shall pay
Subsidiary B rental and the penalty of RMB 33,205 thousand for the period from
1 February 2015 to 31 December 2015. Its guarantor shall undertake joint liability
for the debts. Other claims of Subsidiary B were dismissed. Guangzhou Hao Cheng
Estate Management Development Co., Ltd. refused to accept the above-mentioned
civil judgment and lodged an appeal. Subsidiary B filed a claim against Guangzhou
Hao Cheng Estate Management Development Co., Ltd. and its guarantor on delays
in paying rental and breach of contract damages for the period from 1 January
2016 to 9 September 2016 numbered (2018) Yue0104Minchu No. 813.
The final judgment on 28 May 2018 included three cases in which Subsidiary
B recovered the rent arrears from October 2014 to December 2015. The final
judgment announced that rental shall be halved based on the contracted rental,
and the interest on the rental payable was calculated based by the bank benchmark
interest rate of similar loans. The estimated residual value of the renovation
investment was 50% of the other leases except for the RMB 1,955,325.00 which
was agreed by Subsidiary B.

(c) (Continued)
On 28 June 2018, Subsidiary B and Guangzhou Hao Cheng Estate Management

Development Co., Ltd. signed the Settlement Agreement after Guangzhou Hao
Cheng Estate Management Development Co., Ltd. paid the principal and interest of
RMB 27,966,723.12 to Subsidiary B and provided invoice of valuation fee of RMB
128,000, assets of RMB 230,000, invoice of RMB 1,725,325, and cash voucher
of RMB 2,278,382.50 to Subsidiary B, and received the receipt from Subsidiary B
for receiving refund of the deposit of RMB 5,800,000. On 29 June, Subsidiary B
handed in the written application of unblocking the assets of Haocheng and Cai
Song, and the written application of withdrawal of the appealed but not judged
case which was numbered as (2018) Yue0104Minchu No. 813.
Both parties of the case had settled and had fulfilled the main part of the
settlement agreement. Some legal settlement documents for the case are still being
processed. Cai Song, one of the defendants in the latter two cases, filed a retrial
application (case number: (2018) YueMinShen No. 12750 & No. 12751). Subsidiary
B has filed a reply to the High Court, and the retrial application is still under review.
(d) Guangdong Guangsheng Investment Group Energy Co., Ltd. filed a claim for the
unreceived payment of RMB 58,900 thousand against a branch of the Group,
and applied for freezing the branch’s bank account in 2014. The branch has filed
a claim against the party related to the case, Guangdong Hua Zi Investment Co.,
Ltd. (hereinafter referred to as “Hua Zi”), and applied for freezing related assets.
The branch has reported this case to Guangzhou Public Security seeking for
investigation of criminal responsibility of Hua Zi.
Pursuant to Paper of Civil Judgment numbered (2014) SuiTianHeFaMinErChuZi

No.4583-2 issued by People’s Court of Guangzhou Tianhe District on 5 February
2016, the prosecution by Guangsheng Energy was dismissed, and the case was
transferred to the public security organization to treated as a criminal case.
Guangsheng Energy lodged an appeal.
Pursuant to Paper of Civil Judgment numbered (2016) Yue01MinZhong No.5365,

issued by the Intermediate People’s Court of Guangzhou on 16 December 2016,
Paper of Civil Judgement numbered (2014) SuiTianFaMinErChuZi No.4583-2 issued
by People’s Court of Tianhe District was quashed, and the case was referred to
People’s Court of Tianhe District.

No.4583 issued by People’s Court of Tianhe District on 6 April 2017, the
prosecution by Guangsheng Energy was dismissed. Guangsheng Energy lodged
an appeal to the Intermediate People’s Court of Guangzhou with second instance
numbered (2017) Yue01MinZhong No.10908. On 4 September 2017, the
Intermediate People’s Court of Guangzhou issued the second-instance judgment,
and dismissed the claim of Guangsheng Energy Co., Ltd as well as affirmed the
original judgment.

(d) (Continued)
On 25 September 2017, pursuant to the Paper of Civil Judgment numbered (2014)

SuiTianFaMinErChuZi No. 4583 to No. 4584-4, the Court has sentenced to revoke
the frozen.

No.4584-2 issued by People’s Court of Tianhe District on 9 August 2016, the
prosecution by Guangsheng Energy was dismissed, and this judgment has become
legally effective since 1 September 2016.
On 1 June 2017, Guangsheng Energy lodged an appeal to the People’s Court

of Tianhe District for the dispute with a case numbered (2017) Yue0106MinChu
No.13720. Pursuant to Paper of Civil Judgment numbered (2017) Yue0106Minchu
No.13720 issued by the People’s Court of Guangzhou Tianhe District on 23 August
2017, claims of Guangsheng Energy were dismissed. Guangsheng Energy lodged
an appeal to the Intermediate People’s Court of Guangzhou for the second trial
numbered (2017) Yue01Minzhong No. 23351. The Intermediate People’s Court of
Guangzhou has rendered a ruling of second instance to dismiss the appeal from
Guangsheng Energy and affirmed the original judgment.
Pursuant to Paper of Civil Judgment numbered (2014) SuiTianFaMinErChuZi

No.4619 and No.4620-1, issued by People’s Court of Tianhe District on 16 August
2016, all claims against Hua Zi by the subsidiary of the Group were dismissed.
A subsidiary of the Group lodged an appeal. In accordance with Paper of Civil
Judgment numbered (2016Yue01MinZhong No.16382 and No.16383 issued by
Intermediate People’s Court of Guangzhou on 21 December 2016, Paper of Civil
Judgment numbered (2014) SuiTianFaMinErChuZi No.4619 and No.4620-1 issued
by People’s Court of Tianhe District was quashed, and the case was referred to
People’s Court of Tianhe District.
Pursuant to Paper of Civil Judgment numbered (2014) SuiTianFaMinErChuZi

No.4619 issued by People’s Court of Tianhe District on 6 April 2017, Hua Zi shall
pay the payment of goods with an amount of RMB 29,697 thousand, the penalty,
the interests and the lawyer fee to a subsidiary of the Group. And at present this
judgment has taken effect. On 17 August 2017, the subsidiary applied to the
People’s Court of Tianhe District for enforcement of (2017) Yue0106Zhi No. 9947.
Currently, the subsidiary is notified by the People’s Court of Tianhe District that the
current enforcement is terminated because no asset of the person subject to the
enforcement was found.

No.4620 issued by the People’s Court of Tianhe District on 6 April 2017, the
prosecution by a subsidiary of the Group was dismissed. The subsidiary lodged
an appeal to the Intermediate People’s Court of Guangzhou with second
instance numbered (2017) Yue01MinZhong No.10910. On 25 August 2017,
the Intermediate People’s Court of Guangzhou had made a judgment of second
instance to dismiss the appeal from the branch and affirmed the original judgment.

(d) (Continued)
In order to prevent Huazi Company from evading the responsibility of payment, and
to ensure the execution of the judgment numbered (2014) SuiTianFaMinErChuZi
No. 4619 and 4620, the branch of the Group has applied to the People’s Court of
Tianhe District for property preservation before litigation. And by providing Hua
Zi’s bank account and the matured claim [Execution Number: (2013) SuiHaiFaZhiZi
No.1978] on Southern Company and Suinan Company as property clues, the
branch applied to the People’s Court of Tianhe District to freeze the bank account
and to rule that Southern Company and Suinan Company, the 2 debtors of Hua
Zi, shall not repay the debts, and requested the People’s Court of Guangzhou Hai
Zhu District (hereinafter referred to as “Hai Zhu Court”) to assist in execution. As
Guangzhou Yue Cai Investment Holdings Co., Ltd., the execution applicant of the
case numbered (2013) SuHaiFaZhiZi No.1978, had not been changed to Hua Zi,
People’s Court of Tianhe District has merely sent the Paper of Civil Judgment of
property preservation to Hai Zhu Court in October 2014.
In order to avoid the payment to a branch of the Group and to transfer property,
Hua Zi made up a fictional fact for assignment of debt by signing a contract
with Cai Li, who accepted creditor’s right without receiving the payment of
consideration. The contract stipulates that the aforementioned due debts will be
transferred to Cai Li in attempt to transfer the property maliciously. Then Cai Li
filed a claim to the People’s Court of Yuexiu District (hereinafter referred to as
the “Yuexiu District Court”) by maliciously confirmed the validity of the credit
assignment contract by way of court judgment, so as to achieve the purpose of
transferring property. In accordance with Paper of Civil Judgment numbered (2015)
SuiYueFaMinErChuZi No. 1367 and No.1368 subsequently issued by the Yuexiu
District Court relating to the case of the claim transfer contract between Hua Zi
Company and Cai Li, the contract entered into by Hua Zi and Cai Li is valid.
The branch filed a claim to the Yuexiu District Court for the above credit
assignment between Hua Zi and Caili, and requested for cancellation of Paper of
Civil Judgment numbered (2015) SuiYueFaMinErChuZi No. 1367 and No.1368 and
confirming that the transfer is invalid [Paper of Civil Judgment numbered (2017)
Yue0104MinChu No. 5562 and No.5561]. The trial was held on 14 August 2017.
On 25 August 2017, the People’s Court of Yuexiu District had made a civil
judgment to dismiss the appeal from the branch. The branch lodged an appeal to
the Intermediate People’s Court of Guangzhou. The Court accepted the case on
6 December 2017 with reference of (2017) Yue01Minzhong No. 22319 and No.
22321. On 23 December 2017, the Intermediate People’s Court of Guangzhou
dismissed the retrial application from the subsidiary.
Pursuant to Paper of Civil Judgment numbered (2018) YueMinShen No. 2229

issued on 25 May 2018, the Higher People’s Court of Guangdong made a civil
judgment to dismiss the retrial application from Guangsheng Group Energy Co.,
Ltd.
As at the reporting date, the above-mentioned cases are now all closed. The
subsidiary did not suffer direct economic loss in cases with Guangsheng Energy and
Hua Zi.

(e) Pursuant to Administrative Resolution (SuiGuoFangZi [2015] No.56) issued

by Guangzhou Land Resources and Planning Commission on 23 June 2015,
Guangdong Construction Engineering Corporation Real Estate Development
Company and the Group’s Subsidiary E were required to pay up land-transferring
fees of RMB13,160,051.26, and the penalty of RMB13,216,059.26 calculated till
23 June 2015, which were RMB26,376,110.52 in total.
Subsidiary E and Guangdong Construction Engineering Corporation Real Estate

Development Company applied for administrative reconsideration to People’s
Government of Guangzhou. In accordance with Administrative Resolution
(SuiFuXingFu [2015] No.872 and No.879) issued by People’s Government of
Guangzhou on 5 January 2017, the Administrative Resolution (SuiGuoFangZi [2015]
No.56) issued by Guangzhou Land Resources and Planning Commission on 23 June
2015 is maintained effect.
Subsidiary E filed a claim to the First Railway Transportation Court of Guangzhou

on 15 January 2017, and requested for withdraw the above administrative
resolution and reconsideration.
Pursuant to Administrative Resolution [(2017) Yue7101XingChu No.558] issued

by the First Railway Transportation Court of Guangzhou, all claims of Subsidiary E
were dismissed.
For cancellation of the above administrative resolutions, Subsidiary E lodged an

appeal to the First Railway Transportation Court of Guangzhou on 30 June 2017.
Pursuant to the Administrative Judgment numbered (2017) Yue71xingzhong

No. 1288 issued on 17 October 2017, the Intermediate Railroad Transportation
Court of Guangzhou issued the final judgment which dismissed the appeal from
Subsidiary E and the original judgment was upheld. According to the principle
of prudence, Subsidiary E accrued land-transferring fees and penalty of RMB
26,376,110.52 in non-operating expenses for the current period. Subsidiary E
applied for a retrial for this case and the Higher People’s Court of Guangdong has
accepted the retrial appeal on 22 March 2018. No re-trial notice has been received
by Subsidiary E so far.
On 5 March 2019, the Guangzhou Railway Transport Court issued a notice of

execution to the Subsidiary E numbered (2019) Yue7101Zhi No. 254, requesting
Subsidiary E and Guangdong Construction Engineering Corporation Real Estate
Development Company to pay the unpaid land transfer fee of RMB 13,160,051.26
and penalty of RMB 13,216,059.26, which is RMB 26,376,110.52 in total,
immediately.
On 12 March 2019, Subsidiary E and Guangzhou Municipal Land Resources and

Planning Commission reached an implementation settlement that if Subsidiary E
could pay the land transfer fee of RMB 13,160,051.26 and liquidated damages
of RMB 13,216,059.26 to Guangzhou Municipal Land Resources and Planning
Commission in advance, Guangzhou Municipal Land Resources and Planning
Commission will no longer request Subsidiary E to pay the interest for the land
transfer fee, liquidated damages and the interest during the delay period of the
enforcement. As at the reporting date, the implementation has been closed.

(f) On 1 June 2015, Guangzhou Ruigu Enterprise Management Consulting Co., Ltd.
filed a claim for the dispute on the contract for legal service against the Group’s
Subsidiary F and required Subsidiary F to pay the legal service fee and the overdue
interest of RMB 22,421,800.00.
Pursuant to Paper of Civil Judgment (SuiNanFangMinErChuZi [2015] No.254)

issued by the People’s Court of Guangzhou Nansha District on 8 January 2016,
Subsidiary F shall pay service fee of RMB13,192,825.00 to Guangzhou Ruigu
Enterprise Management Consulting Co., Ltd. within 10 days from the date when
the judgment takes effect.
Subsidiary F and Guangzhou Ruigu Enterprise Management Consulting Co., Ltd.

were dissatisfied with the judgment of 1st trial, and they lodged an appeal to the
Intermediate People’s Court of Guangzhou. Pursuant to Paper of Civil Judgment
((2016) Yue01MinZhong No.5137) issued by the Intermediate People’s Court of
Guangzhou on 17 May 2016, Subsidiary F shall pay Guangzhou Ruigu Enterprise
Management Consulting Co., Ltd. service fee of RMB4,352,350.00 within 10 days
from the date when the judgment takes effect.
Guangzhou Ruigu Enterprise Management Consulting Co., Ltd. was dissatisfied

with the judgment of the second trial, and lodged an appeal to the Higher
People’s Court of Guangdong on 1 September 2016. In accordance with Notice
of Responding to Prosecution on Civil Retrial Cases [Case (2016) YueMinShen
No.6609] issued by the Higher People’s Court of Guangdong on 24 October 2016,
Subsidiary F was informed about it. On 13 December 2017, the Higher People’s
Court of Guangdong held hearings on determining whether to accept the retrial
application from Guangzhou Ruigu Enterprise Management Consulting Co., Ltd.
One 12 March 2018, the Higher People’s Court of Guangdong issued a

judgment and dismissed the retrial application from Guangzhou Ruigu Enterprise
Management Consulting Co., Ltd.
On 12 September 2018, Guangzhou Ruigu Enterprise Management Consulting Co.,

Ltd. filed a claim for the dispute of the contract for legal service against Subsidiary
F again and required Subsidiary F to pay legal service fee and the overdue interest
of RMB 18,069,450.00. The case was heard on 23 October 2018. On 15 November
2018, Guangzhou Ruigu Enterprise Management Information Consulting Co., Ltd.
applied to the court to withdraw the lawsuit. On 19 November 2018, the People’s
Court of Nansha District of Guangzhou City ruled that Guangzhou Ruigu Enterprise
Management Information Consulting Co., Ltd. was allowed to withdraw the
lawsuit.
As at the reporting date, Guangzhou Ruihao Enterprise Management

Information Consulting Co., Ltd. has not re-prosecuted. After evaluating the
case and considering the professional opinions provided by external lawyers, the
management of Subsidiary F considered that no compensation is expected to be
paid by Subsidiary F and no accounting treatment has been made.

(g) Yinghui Food Store filed a claim for the advance payment of expenses on behalf
of Subsidiary F with a total amount of RMB 2,130,444.00 in 2017. On 4 August
2017, the People’s Court of Guangzhou Nan Sha District made a judgment of first
instance and dismissed the appeal lodged by Yinghui Food Store. Yinghui Food
Store was dissatisfied with the judgment of the first instance, and lodged an appeal
to the Intermediate People’s Court of Guangzhou on 21 August 2017, which was
numbered (2017) Yue01minzhong No. 19018. The Intermediate People’s Court of
Guangzhou had held three inquiries on 7 November 2017, 21 November 2017 and
19 December 2017 respectively.
On 9 April 2018, the Intermediate People’s Court of Guangzhou rendered a

judgment of the second instance which dismissed the appeal lodged by Yinghui
Food Store in Kunming Pan Long District and affirmed the original judgment.
On 4 September 2018, Yinghui Food Store filed a retrial application with the Higher
People’s Court of Guangdong Province.
As at the reporting date, the Guangdong Higher People’s Court’s ruling concerning
about whether to accept the application for retrial of Yinghui Food Store or not
is still under trial. With the assessment of the case and the consideration of the
professional opinions provided by external lawyer, the management of Subsidiary F
has evaluated the case and considered that it is unlikely that Subsidiary F will suffer
from direct economic losses.
(h) In 2018, Dali Baoxunfeng Trading Co., Ltd. filed a claim against the Group’s
Subsidiary F and requested Subsidiary F to pay a total of RMB 2,538,709.83 for the
prepayments Baoxunfeng paid on behalf of Subsidiary F. On 7 September 2018,
the People’s Court of Guangzhou Nansha District made a first-instance judgment
that sentenced Subsidiary F to pay Dali Baoxunfeng Trading Co., Ltd. RMB 39,244
for goods received and RMB 4,551.43 for the prepayment Baoxunfeng paid on
behalf of Subsidiary F, and dismissed all other claims of Dali Baoxunfeng Trading
Co., Ltd. Dali Baoxunfeng Trading Co., Ltd. was dissatisfied with the judgment
of the first instance and filed an appeal with the Intermediate People’s Court of
Guangzhou on 10 September 2018. The case number of the second instance is
(2018) Yue01MinZhong No. 21300.
On 26 December 2018, the Intermediate People’s Court of Guangzhou made a

second-instance judgment which dismissed the appeal of Dali Baoxunfeng Trading
Co., Ltd. and affirmed the original judgment.
As at the reporting date, the case has been closed.


(i) In January 2018, Guangdong Guangsheng Investment Group Energy Co., Ltd.
required the Group’s Subsidiary I, to pay RMB 81,408,500.00 for the “Ownership
Transfer of the Goods” which did not exist. The plaintiff of this case filed a claim
on 11 March 2015 for the same reason, and was dismissed on 17 August 2016 by
the Court of Tianhe District as the case involves criminal proceedings. This time,
Guangdong Guangsheng Investment Group Energy Co., Ltd. re-claimed on the
grounds that “there is no evidence to reflect the alleged economic crimes in this
case”. The court dismissed the claim in the first instance. Guangdong Guangsheng
Investment Group Energy Co., Ltd. filed an appeal, and court of the second
instance sent the case back to the first instance court for retrial.
As at the reporting date, after a discussion with the attorney, the management of
Subsidiary I did not take any accounting treatment as they believe that Guangdong
Guangsheng Investment Group Energy Co., Ltd. failed to present any new evidence
which has strong effects on the case, and the risk of Subsidiary I for losing the
retrial is pretty low.
(j) In January 2018, Guangzhou Rural Commercial Bank Co., Ltd. Haizhu Branch
requested the Group’s Subsidiary I to pay an amount of RMB 38,549,941.94
due to Guangdong Zhonghui Sunshine Pharmaceutical Co., Ltd. to a specific
bank account, as the right to accounts receivable due from Subsidiary I had been
transferred to Guangzhou Rural Commercial Bank Co., Ltd. Haizhu Branch from
Guangdong Zhonghui Sunshine Pharmaceutical Co., Ltd. The court of the first
instance dismissed the claim. Guangzhou Rural Commercial Bank Co., Ltd. Haizhu
Branch filed an appeal, and the second trial has not held yet.
As at the reporting date, after a discussion with the attorney, the management of
Subsidiary I did not make any accounting treatment as they believe that Guangzhou
Rural Commercial Bank Co., Ltd. failed to present any new evidence or new
opinion, and the risk of Subsidiary I for losing the retrial is pretty low.

XV. INFORMATION OF SEGMENTS
(1) Recognition Basis and Accounting Policies for Reporting Segments
With the strategic management and business development, the Group basically completed
the industrial chain layout and internal structure of 4 sectors in 2015, including “Great
Southern TCM”, “Great Commerce”, “Great Health”, “Great Medical Care”. According to the
requirements of regulatory laws, regulations and company management, four major sectors are
identified as operating segments. As the business scale of “Great Medical Care” is lower than
10%, this segment is temporarily listed in “Others” column. Segment information is as follows:
• Great Southern TCM segment: research, development, manufacturing and sales for
Chinese and Western medicine, chemical raw medicine, natural drug, biological medicine
and intermediates of chemical raw medicine;
• Great Health segment: research, development, manufacturing and sales for the products
of Great Health;
• Great Commerce segment: wholesale, retail, import and export for Western medicine,
Chinese medicine and Medical Instruments.
Price transfer between segments is carried out in accordance with the price policy of sales to third
party.
Assets and liabilities are allocated based on the segment operations, expenses attributable
indirectly to each segment are allocated among segments based on the portion of revenue.

XV. INFORMATION OF SEGMENTS (Continued)
(2) Reporting financial Information of Segments
① The segment information for the year ended 31 December 2018 and as of 31 December
2018 is as follows:
Great Great Offset between

Item Southern TCM Great Health Commerce Other segments Total
External revenue 9,796,024,948.68 9,492,904,408.94 22,811,449,928.90 133,458,764.60 – 42,233,838,051.12

Inter-segment revenue 144,351,843.81 33,647,788.65 7,310,785,592.07 242,413,790.42 (7,731,199,014.95) –
Interest income (54,532,656.59) (96,941,364.91) (18,459,600.71) (94,846,307.77) 2,776,886.80 (262,003,043.18)
Interest expenses 17,455,028.42 – 264,232,320.54 24,294,787.91 (83,181,206.61) 222,800,930.26
Gains from investments in
associates and joint ventures 85,838,488.29 755,108.60 2,166,026.75 240,749,192.94 (12,312,209.74) 317,196,606.84
Impairment losses in respect
of assets 35,358,983.53 – 26,552,905.79 – 118,275,499.68 180,187,389.00
Impairment losses in respect
of credit 2,958,625.66 (292,637.27) 31,274,555.15 8,423,529.03 (3,037,233.34) 39,326,839.23
Depreciation and
amortization expenses 222,464,191.81 42,282,814.77 147,687,704.53 27,985,379.02 (144,105.00) 440,275,985.13
Total profit 1,384,538,275.78 852,020,464.44 254,159,649.94 1,398,199,922.59 129,811,942.87 4,018,730,255.62
Income tax expenses 25,185,162.42 166,647,851.61 60,763,086.40 205,667,620.32 26,750,298.97 485,014,019.72
Net profit (Including minority
shareholders’ profit and losses) 1,359,353,113.36 685,372,612.83 193,396,563.54 1,192,532,302.27 103,061,643.90 3,533,716,235.90
Total assets 11,583,817,470.30 9,419,956,280.11 24,868,693,118.24 20,624,199,398.47 (15,014,482,397.64) 51,482,183,869.48
Total liabilities 6,887,053,492.19 5,896,869,489.81 20,476,717,007.50 2,871,177,504.92 (7,793,366,378.94) 28,338,451,115.48
Long-term equity investment in
associates and joint ventures 276,421,358.40 – 62,991,964.68 1,420,544,712.31 – 1,759,958,035.39
Increase in other non-current
assets excluding long-term
equity investment 413,426,962.68 488,603,396.02 1,852,610,818.57 78,551,367.54 – 2,833,192,544.81

XV. INFORMATION OF SEGMENTS (Continued)
(2) Reporting financial Information of Segments
② The segment information for the year ended 31 December 2017 and as of 31 December
2017 is as follows:
Great Great Offset between

Item Southern TCM Great Health Commerce Other segments Total
External revenue 7,920,991,000.47 8,574,140,675.28 4,347,030,285.90 112,063,227.88 – 20,954,225,189.53

Inter-segment revenue 206,420,129.57 14,639,317.32 6,646,327,048.34 157,223,363.39 (7,024,609,858.62) –
Interest income (28,847,134.42) (64,754,810.30) (1,660,878.11) (123,558,909.81) – (218,821,732.64)
Interest expenses 18,087,138.51 – 48,411,253.25 5,293,854.77 (64,670,544.45) 7,121,702.08
Gains from investments in
associates and joint ventures 58,522,548.73 – 2,796,697.03 214,602,293.03 5,343,148.61 281,264,687.40
Impairment losses of assets 2,019,902.11 (49,905.93) 7,811,480.94 6,788,238.77 3,393,252.01 19,962,967.90
Impairment loss of credit – – – – – –
Depreciation and
amortization expenses 207,493,926.36 18,262,232.17 7,226,184.84 21,856,504.17 (144,105.00) 254,694,742.54
Total profit 1,141,613,236.46 754,765,230.42 66,824,009.16 500,858,946.13 28,914,714.53 2,492,976,136.70
Income tax expenses 55,336,427.94 131,204,377.83 15,759,901.66 153,081,430.85 18,838,377.52 374,220,515.80
Net profit (Including minority
shareholders’ profit and losses) 1,086,276,808.52 623,560,852.59 51,064,107.50 347,777,515.28 10,076,337.01 2,118,755,620.90
Total assets 9,766,674,401.97 5,941,353,309.61 4,198,165,473.57 16,969,629,127.74 (8,561,108,859.57) 28,314,713,453.32
Total liabilities 5,472,206,232.20 3,727,005,385.06 3,864,261,178.27 1,061,262,999.58 (5,073,176,134.96) 9,051,559,660.15
Long-term equity investment in
associated and joint ventures 190,702,755.14 – 58,238,389.70 1,759,540,112.21 – 2,008,481,257.05
Increase in other non-current
assets excluding long-term
equity investment 337,184,429.82 52,757,149.44 27,021,750.62 90,631,857.68 – 507,595,187.56
③ The Group’s total revenue from external customers in the PRC and other countries/regions,
and the total non-current assets other than financial assets and deferred tax assets located
in the PRC and other countries/regions are summarized as follows:
2018 2017
External revenue
PRC 42,189,829,224.25 20,903,138,688.93
Other countries/regions 44,008,826.87 51,086,500.60
Total 42,233,838,051.12 20,954,225,189.53
Total non-current assets

PRC 8,120,762,664.12 5,515,922,789.70
Other countries/regions 18,298,592.95 18,483,577.02
Total 8,139,061,257.07 5,534,406,366.72


XVI. NOTES TO THE MAIN ITEMS OF THE COMPANY’S FINANCIAL STATEMENTS
1. Notes receivable and accounts receivable
Notes receivable 615,391,740.80 679,046,805.63

Accounts receivable 261,455,709.16 265,693,684.36
Total 876,847,449.96 944,740,489.99
(1) Notes receivable
① Notes receivable disclosed by category
Closing balance
Bank acceptance notes 615,391,740.80 679,046,805.63

Commercial acceptance notes – –
Total 615,391,740.80 679,046,805.63
② The Group had no pledged notes receivable for the current year.
③ Notes receivable that are not matured at the balance sheet date but have been
discounted or endorsed are summarized as follows
Amount Amount not

derecognized derecognized
at the end at the end
Item of the period of the period
Bank acceptance notes 453,387,389.83 176,984,967.33

Commercial acceptance notes – –
Total 453,387,389.83 176,984,967.33


XVI. NOTES TO THE MAIN ITEMS OF THE COMPANY’S FINANCIAL STATEMENTS (Continued)
1. Notes receivable and accounts receivable (Continued)
③ Notes receivable that are not matured at the balance sheet date but have been
discounted or endorsed are summarized as follows (Continued)
Notes:
(a) Pursuant to provisions of the Negotiable Instruments Law of the People’s Republic of China, if
the bank of acceptance refuses to pay the payables, the holding party is entitled to recover the
payables (continuing involvement) from the Company. Consequently, the Company is in the
continuing involvement of the notes receivable which are not matured at balance sheet date but
have been discounted or endorsed.
(b) The Company believes that the fair value of the continuing involvement is not significant, as the
Company has transferred substantially all the risks and awards of the above-mentioned notes
receivable which have been discounted or endorsed. The Company does not recognize any assets
or liabilities arising from the continuing involvement on book value.
(c) The maximum loss from the continuing involvement of the above-mentioned notes receivable
which have been discounted or endorsed is equal to its book value of RMB453,387 thousand.
(d) Undiscounted cash flows payable arising from the possibility that the Company may buy back
the above-mentioned notes receivable which have been discounted or endorsed is equal to its
book value. And the balance of notes receivable on 31 December 2018 shall mature before 31
December 2019.
(e) For the year ended 31 December 2018, no profit or loss are recognized at the date of transfer.
The Company has no current or accumulated income or expenses arising from the continuing
involvement of derecognized financial assets.
(f) The occurrence of the above-mentioned notes receivable which have been discounted or
endorsed is roughly balanced in the current year and the distribution is roughly balanced either.
④ As of 31 December 2018 and 31 December 2017, the Company has no accounts

receivable transferred from notes receivable due to drawer’s inability to perform the
obligation.

⑤ Disclosed by method of accruing provision for bad debts
Closing balance
Expected
Category Amount Proportion (%) Amount credit loss (%) Book value

Including: portfolio 2 615,391,740.80 100.00 – – 615,391,740.80
Total 615,391,740.80 100.00 – – 615,391,740.80
Opening balance
Expected
Category Amount Proportion (%) Amount credit loss (%) Book value
Notes receivable subject to separate

provision – – – – –
Notes receivable subject to provision
by portfolio
Including: portfolio 2 679,046,805.63 100.00 – – 679,046,805.63
Total 679,046,805.63 100.00 – – 679,046,805.63


⑤ Disclosed by method of accruing provision for bad debts (Continued)
A. The Group had no notes receivable that are individually significant and for
which bad debt provision has been individually assessed for the current year.
B. Notes receivable for which provision for bad debts are accrued according to
financial asset portfolios with extremely low credit risk
Closing balance
Provision Expected
Notes for bad credit loss
Item receivable debts (%)
Notes receivable with

extremely low credit risk 615,391,740.80 – –
Total 615,391,740.80 – –
⑥ The Group had no provision for bad debts for the current year.
⑦ The Group had no notes receivable written off for the current year.
(2) Accounts receivable
① The aging analysis of accounts receivable disclosed by booking date is as follows:
Within 1 year 263,355,485.52 267,228,797.84

1 to 2 years – –
2 to 3 years – 1,624,535.00
3 to 4 years 1,467,557.00 –
4 to 5 years – –
Over 5 years 3,288,606.52 3,288,606.52
Total closing balance of
accounts receivable 268,111,649.04 272,141,939.36
Total net amount of
accounts receivable 261,455,709.16 265,693,684.36

② Accounts receivable disclosed by category
Closing balance
Expected
Category Amount (%) Amount ratio (%) Book value
Accounts receivable subject to

separate provision 2,354,626.24 0.88 2,354,626.24 100.00 –
Including: portfolio 1 265,757,022.80 99.12 4,301,313.64 1.62 261,455,709.16
Total 268,111,649.04 100.00 6,655,939.88 2.48 261,455,709.16
(Cont.)
Opening balance
Expected

eatures of credit risk
Including: portfolio 1 269,787,313.12 99.14 4,093,628.76 1.52 265,693,684.36
Total 272,141,939.36 100.00 6,448,255.00 2.36 265,693,684.36


② Accounts receivable disclosed by category
A. Accounts receivable subject to separate provision at the year end
Closing balance
Expected
Accounts receivable Accounts Provision for credit loss
(by company) receivable bad debts ratio (%) Reason
Customer 1 1,500,000.00 1,500,000.00 100.00 Customer bankruptcy.

Amount is expected
to be unrecoverable.
Customer 2 470,000.00 470,000.00 100.00 Amount is expected
Total 2,354,626.24 2,354,626.24 100.00 –


② Accounts receivable disclosed by category (Continued)
B. Accounts receivable subject to provision by aging portfolio
Closing balance
Expected
Provision credit loss
Aging Book balance for bad debts ratio (%)
Within 1 year 263,355,485.52 2,633,554.86 1.00

1 to 2 years – – –
2 to 3 years – – –
3 to 4 years 1,467,557.00 733,778.50 50.00
4 to 5 years – – –
Over 5 years 933,980.28 933,980.28 100.00
Total 265,757,022.80 4,301,313.64 –
Cont.
Opening balance
Expected
Provision credit loss
Aging Book balance for bad debts ratio (%)
Within 1 year 267,228,797.84 2,672,287.98 1.00

1 to 2 years – – –
2 to 3 years 1,624,535.00 487,360.50 30.00
3 to 4 years – – –
4 to 5 years – – –
Over 5 years 933,980.28 933,980.28 100.00
Total 269,787,313.12 4,093,628.76 –
③ Provision for bad debts
Provision for bad debts provided in the current year is RMB208 thousand. The
Group had no provision for bad debts recovered or reversed for the current year.
④ There is no accounts receivables written off in the current year.


⑤ The top five customers by closing balance of accounts receivable:
Proportion of
total closing
balance of Closing balance
accounts of provision for
Company Nature Closing balance Aging receivable (%) bad debts
Customer 1 Payment for goods 199,059,888.83 Within 1 year 74.25 1,990,598.89

Customer 2 Payment for goods 21,131,250.80 Within 1 year 7.88 211,312.51
Total 236,672,389.25 88.27 2,366,723.90
⑥ The Group had no accounts receivables derecognized due to transfer of financial

assets for the current year.
⑦ The Group had no assets or liabilities arising from the transfer of and the
continuing involvement of accounts receivable for the current year.
2. Other receivables
Dividends receivable 382,928,791.41 656,897,700.00

Other receivables 1,494,964,007.39 1,527,015,254.36
Total 1,877,892,798.80 2,183,912,954.36


2. Other receivables (Continued)
(1) Dividends receivable
① Dividends receivable are as follows:
Item (or investee) Closing balance Opening balance
Tian Xin 104,502,080.90 71,940,605.32

Guang Hua 102,009,719.65 43,882,205.44
Ming Xing 43,385,945.08 36,074,889.24
Wang Lao Ji 41,665,953.14 –
Chen Li Ji 28,461,301.81 –
Pan Gao Shou 21,128,116.20 –
Guangzhou Qi Xing Pharmaceutical
Factory Co., Ltd. 17,653,846.37 –
Zhong Yi 14,022,774.24 –
Xing Qun 7,550,441.54 –
Guangzhou Pharmaceutical Import
& Export Co., Ltd. 2,548,612.48 –
HWBYS – 50,000,000.00
GP Corp. – 455,000,000.00
Total 382,928,791.41 656,897,700.00
② The Group had no significant dividends receivables with aging over one year for the
current year.
(2) Other receivables
① Other receivables disclosed by aging are as follows:
Within 1 year 1,493,036,443.65 1,520,293,135.28

1 to 2 years 556,846.55 4,288,858.19
2 to 3 years 2,549,613.86 1,158,143.04
3 to 4 years 403,590.42 48,885.81
4 to 5 years 48,885.81 65,210.21
Over 5 years 7,524,842.18 6,715,060.94
Total book balance of other receivables 1,504,120,222.47 1,532,569,293.47
Total book value of other receivables 1,494,964,007.39 1,527,015,254.36


② Other receivables disclosed by category
Closing balance
Expected

Portfolio 2 5,725,972.16 0.38 – – 5,725,972.16
Portfolio 3 1,451,241,604.25 96.49 – – 1,451,241,604.25
Portfolio 4 5,422,053.46 0.36 – – 5,422,053.46
Total 1,504,120,220.47 100.00 9,156,213.08 0.61 1,494,964,007.39
Opening balance
Expected

Portfolio 2 17,575,091.63 1.15 – – 17,575,091.63
Portfolio 3 1,485,727,079.23 96.95 – – 1,485,727,079.23
Portfolio 4 19,037,303.35 1.24 – – 19,037,303.35
Total 1,532,569,293.47 100.00 5,554,039.11 0.36 1,527,015,254.36


② Other receivables disclosed by category (Continued)
A. Other receivables that are individually significant and for which provision for
bad debts is provided individually
Closing balance
Expected
Other receivables Provision for credit loss Reason for
(By debtors) Book balance bad debts ratio (%) provision
Other receivable 1 1,582,097.34 1,582,097.34 100.00 The amount is expected

Other receivable 2 1,284,052.25 1,284,052.25 100.00 The amount is expected
Other receivable 3 502,043.54 502,043.54 100.00 The amount is expected
Others 2,859,979.88 2,789,979.88 97.55 The amount is expected
Total 8,296,179.85 8,114,999.85 – –


B. Other receivables for which credit risk is assessed and provision for bad
debts is accrued by aging portfolio
Closing balance
Proportion Provision for Expected credit
Aging Book balance (%) bad debts loss ratio (%)
Within 1 year 32,601,097.04 97.51 326,009.00 1.00

1 to 2 years 120,454.02 0.36 12,045.40 10.00
2 to 3 years 1,400.00 – 420.00 30.00
3 to 4 years – – – –
4 to 5 years 43,604.31 0.13 34,883.45 80.00
Over 5 years 667,855.38 2.00 667,855.38 100.00
Total 33,434,410.75 100.00 1,041,213.23 –
Cont.
Opening balance
Aging Book balance (%) bad debts loss ratio (%)
Within 1 year 4,691,634.34 77.52 46,916.34 1.00

1 to 2 years 1,400.00 0.02 140.00 10.00
2 to 3 years – – – –
3 to 4 years 43,604.31 0.72 21,802.16 50.00
4 to 5 years 40,000.00 0.66 32,000.00 80.00
Over 5 years 1,275,490.06 21.08 1,275,490.06 100.00
Total 6,052,128.71 100.00 1,376,348.56 –


C. Other receivables subject to provision by other portfolio methods
Closing balance
Item Book balance (%) bad debts loss ratio (%)

to provision by portfolio
of related parties 1,451,241,604.25 96.48 – –
to provision by portfolio
of financial asset with
extremely low credit risk 5,725,972.16 0.38 – –
to provision by margins,
deposit portfolio 5,422,053.46 0.36 – –
Total 1,462,389,629.87 97.23 – –
③ Category of other receivables as per nature
Closing Opening
Nature book balance book balance
Receivables due from related parties 1,451,241,604.25 1,485,727,079.23

Including: Entrusted loans 1,271,733,486.36 1,170,033,486.36
Other receivables due from
related parties 179,508,117.89 315,693,592.87
Rental, margins, deposit, advances
to employees 30,635,244.06 19,037,303.35
Others 22,243,372.16 27,804,910.89
Total 1,504,120,220.47 1,532,569,293.47
④ Information of Bad debts provided, recovered or reversed for the current year
Provision for bad debts provided in the current year is RMB3,602 thousand. The
Group had no provision for bad debts recovered or reserved for the current year.
⑤ The Group had no other receivables written off for the current year.

⑥ The top five amount of the closing balance of other receivables by customers
Proportion
of total
closing Provision
balance for bad
of other debts
receivables Closing
Company Nature Closing balance Aging (%) balance
Receivables due from

Other receivables 1 related parties 565,867,612.46 Within 1 year 37.62 –
Total 1,328,780,243.30 88.34 –
⑦ There is no receivables related to government grants for the current year.
⑧ There is no other receivables that had been derecognized due to transfer of

financial assets
⑨ There is no assets or liabilities arising from the transfer of and the continuing
involvement of other receivables
3. Long-term Equity Investment
(1) Category of long-term equity investment

Item Book balance impairment Book value Book balance impairment Book value
Investment in subsidiaries 7,198,539,281.83 171,000,000.00 7,027,539,281.83 3,181,465,863.78 171,000,000.00 3,010,465,863.78

Investment in joint ventures
and associates 1,413,116,817.35 – 1,413,116,817.35 1,754,208,415.45 – 1,754,208,415.45
Total 8,611,656,099.18 171,000,000.00 8,440,656,099.18 4,935,674,279.23 171,000,000.00 4,764,674,279.23


3. Long-term Equity Investment (Continued)
(2) Investment in subsidiaries
Provision for Closing balance

impairment provided of provision for
Investee Opening balance Increase Decrease Closing balance in the current year impairment
Xing Qun 125,322,300.00 – – 125,322,300.00 – –

Zhong Yi 324,320,391.34 – – 324,320,391.34 – –
Chen Li Ji 142,310,800.00 – – 142,310,800.00 – –
Guangzhou Han Fang 249,017,109.58 – – 249,017,109.58 – 55,000,000.00
Guangzhou Qi Xing.
Pharmaceutical Factory Co., Ltd. 126,775,500.00 – – 126,775,500.00 – –
Jing Xiu Tang 101,489,800.00 – – 101,489,800.00 – –
Pan Gao Shou 144,298,200.00 – – 144,298,200.00 – –
Wang Lao Ji – 854,431,508.17 – 854,431,508.17 – –
GP Corp. – 2,891,825,159.88 – 2,891,825,159.88 – –
Cai Zhi Lin 105,978,900.00 59,480,000.00 – 165,458,900.00 – 69,000,000.00
Pharmaceutical Import & Export 18,557,303.24 – – 18,557,303.24 – –
Guangzhou Bai Di 129,145,812.38 – – 129,145,812.38 – 47,000,000.00
WLJ Great Health 900,000,000.00 – – 900,000,000.00 – –
Guangxi Ying Kang 21,536,540.49 – – 21,536,540.49 – –
Guangzhou Guangyao Yi Gan
Biological Product Co, Ltd. 18,600,000.00 7,200,000.00 – 25,800,000.00 – –
Guangzhou Baiyunshan Medical
and Healthcare Industry
Investment Co., Ltd. 106,500,000.00 5,100,000.00 – 111,600,000.00 – –
Xing Zhu 92,070,000.00 34,410,000.00 – 126,480,000.00 – –
Wang Lao Ji Investment Co., Ltd. 24,000,000.00 – – 24,000,000.00 – –
Tian Xin 96,192,658.47 – – 96,192,658.47 – –
Guang Hua 53,659,963.75 – – 53,659,963.75 – –
Ming Xing 95,381,794.18 – – 95,381,794.18 – –
Weiling Pharmaceutical 10,444,783.48 – – 10,444,783.48 – –
Pharmaceutical Technological 1,020,000.00 – – 1,020,000.00 – –
Guangzhou GPHL Guangyao
Baiyunshan Great Health Hotel
Co., Ltd. 500,000.00 – – 500,000.00 – –
Guangyao Baiyunshan
Hong Kong Co., Ltd. 93,874,006.87 46,626,750.00 – 140,500,756.87 – –
Guangzhou Baiyunshan Chemical
Pharmaceutical Technology
Co., Ltd. 63,470,000.00 100,000,000.00 – 163,470,000.00 – –
Guangyao Hai Ma 7,000,000.00 – – 7,000,000.00 – –
Guangzhou Baiyunshan
Pharmaceutical Marketing Co., Ltd 40,000,000.00 – – 40,000,000.00 – –
Guangyao General Institute 80,000,000.00 18,000,000.00 – 98,000,000.00 – –
Guangzhou Baiyunshan Medical
Instruments investment Co., Ltd. 10,000,000.00 – – 10,000,000.00 – –
Total 3,181,465,863.78 4,017,073,418.05 – 7,198,539,281.83 – 171,000,000.00


3. Long-term Equity Investment (Continued)
(3) Investments in joint ventures and associates
Current year
Investment
gains or losses Adjustment Declaration of
recognized to other the payment of Provision for Closing balance
Investment Opening under equity comprehensive cash dividends impairment Closing of provision for
Investee costs balance Increase Decrease method income or profits provided Others balance impairment
I. Joint ventures
GP Corp. 396,589,139.78 934,828,267.57 – – 62,905,714.27 (8,821.96) – – (997,725,159.88) – –
Wang Lao Ji 102,035,124.44 390,518,555.35 – – 94,993,806.57 – – – (485,512,361.92) – –
HWBYS 100,000,000.00 332,734,264.65 – – 52,331,677.66 – – – – 385,065,942.31 –
Baxter Qiao Guang 37,000,000.00 39,447,376.09 – – 3,253,734.50 – – – – 42,701,110.59 –
Subtotal 635,624,264.22 1,697,528,463.66 – – 213,484,933.00 -8,821.96 – – -1,483,237,521.80 427,767,052.90
II. Associates
Guangzhou Jinshen Pharmaceutical
Technology Co., Ltd. 765,000.00 – – – – – – – – – –
Golden Eagle Asset Management Co., Ltd. 50,000,000.00 54,665,915.85 – – 6,128,824.20 29,136.57 – – – 60,823,876.62 –
Guangzhou Baiyunshan Weiyi Medical
Investment Management Co., Ltd. 2,020,000.00 2,014,035.94 – – 18,020.27 – – – – 2,032,056.21 –
Guangzhou Baiyunshan Yi Xin Tang
Pharmaceutical Investment Development
Co., Ltd. 45,000,000.00 – 45,000,000.00 – -37,480.99 – – – – 44,962,519.01 –
Guangdong Guangyao Jinshen Equity
Investment Fund Management Co., Ltd. 4,000,000.00 – 4,000,000.00 – -929,752.84 – – – – 3,070,247.16 –
Yi Xin Tang 864,570,227.02 – 864,570,227.02 – 22,469,454.73 – 12,578,616.30 – – 874,461,065.45 –
Subtotal 966,355,227.02 56,679,951.79 913,570,227.02 – 27,649,065.37 29,136.57 12,578,616.30 – – 985,349,764.45 –
Total 1,601,979,491.24 1,754,208,415.45 913,570,227.02 – 241,133,998.37 20,314.61 12,578,616.30 – -1,483,237,521.80 1,413,116,817.35


4. Operating Income and Operating Costs
(1) Operating Income and Operating Costs
Current year Prior Period

Category Income Cost Income Cost
Main businesses 3,822,126,064.48 1,897,829,832.96 2,761,283,959.77 1,266,866,455.36

Other businesses 509,918,388.57 217,989,937.30 386,215,182.64 178,324,938.01
Total 4,332,044,453.05 2,115,819,770.26 3,147,499,142.41 1,445,191,393.37
(2) Category by business
Current year Prior year

Item Income Cost Income Cost
Great Southern TCM 3,822,101,089.04 1,897,814,213.61 2,761,252,808.73 1,266,846,448.80

Great Commerce 24,975.44 15,619.35 31,151.04 20,006.56
Great Health – – – –
Total 3,822,126,064.48 1,897,829,832.96 2,761,283,959.77 1,266,866,455.36
(3) Category by major operating region
Current year Prior year

Item Income Cost Income Cost
Southern China Area 2,008,595,375.80 1,043,706,446.43 2,081,792,463.40 951,742,055.26

Eastern China Area 828,066,454.70 331,244,020.10 261,551,660.01 125,418,267.96
Northern China Area 405,626,386.77 195,550,066.90 109,667,564.30 61,876,688.77
Northeast Area 115,180,891.90 73,157,215.39 51,261,482.29 26,864,595.29
Southwest Area 363,310,208.51 204,164,804.70 197,154,701.72 81,266,041.23
Northwest Area 101,346,746.80 50,007,279.44 59,856,088.05 19,698,806.85
Total 3,822,126,064.48 1,897,829,832.96 2,761,283,959.77 1,266,866,455.36


(4) Information of the top five customers as per sales: the total sales to the top five customers
are RMB1,564,293 thousand, which account for 40.93% of the Company’s main business
income for the year ended 31 December 2018.
Proportion
of total
Customer Sales revenue (%)
Customer 1 1,339,394,280.99 35.04

Customer 2 62,678,078.79 1.64
Customer 3 60,233,594.88 1.58
Customer 4 54,240,848.80 1.42
Customer 5 47,745,963.17 1.25
Total 1,564,292,766.63 40.93
5. Investment income
Investment Income from long-term equity

investments under cost method 865,519,930.33 64,322,657.08
Investment Income from long-term equity
investments under equity method 241,342,102.95 214,633,349.87
Investment income from the period in which the
financial assets which is measured at FVTPL
during their holding period – 201,347.70
Investment income from available-for-sale
financial assets – 13,105,244.32
Investment income from the holding period of
other non-current financial assets 13,808,915.55 –
Interest income from financial products and
structured deposits 63,036,249.68 28,408,761.95
Total 1,183,707,198.51 320,671,360.92


XIX. SUPPLEMENTARY INFORMATION
1. Breakdown of Non-Recurring Profit and Loss for the Current Period
Item Amount Note
Profit or loss from disposal of non-current assets 707,312.22

Tax return or exemption with unauthorized approval, or without
formal approval, or occurred occasional
Government grants included in the profit or loss for the current year except for 243,250,377.08
the government grants that are closely related to enterprise’s normal business
and is enjoyed by the Company continuously in quota or by the quantity
of unified national standards in accordance with the national policy
Fund possession costs included in the profit or loss for the current year
and collected from non-financial enterprises
Gains generated from the amount of the enterprise’s investment costs 125,981,938.96
for acquisition of subsidiaries, joint ventures and associates lower than
the earnings from the fair value of the net identifiable assets of the
invested entity that the enterprise should enjoy upon acquisition
Profit or loss from non-monetary assets exchange
Profit or loss from the assets which are invested or managed by others entrusted
Provision for asset impairments provided due to force majeure,
such as natural disaster
Profit or loss from debt restructuring
Enterprise restructuring expenses, such as expenditures for employee
allocation and integration expenses
Profit or loss generated from the amount of the transaction
with the unfair transaction price exceeding the fair value
Current profit or loss of the subsidiary from business combination under
common control from the beginning of the period to the date of combination
Profit or loss from contingencies irrelevant to normal businesses of the Company
Except for effective hedging business related to normal business of the Company, 115,575,352.23
profit or loss from change of fair value from financial assets and liabilities
held for trading, and investment income from disposal of financial assets
and liabilities held for trading and available-for-sale financial assets
Reverse of provision for impairment of receivables under individual 7,199,639.74
impairment test

XIX. SUPPLEMENTARY INFORMATION (Continued)
1. Breakdown of Non-Recurring Profit and Loss for the Current Period (Continued)
Item Amount Note
Profit or loss from entrusted loans

Profit or loss from change of fair value of investment properties
measured subsequently at fair value
Effects on the profit or loss for the current year by one-off adjustment
of profit or loss for the current year according to the requirements of laws
and regulations for tax, accounting, etc.
income from custody fee of entrusted operation
Other non-operating incomes and expenses except for the 9,655,296.88
above-mentioned items
Investment gains from long-term equity investment measured at fair value 870,677,046.64
Other profit and loss items that meet the definition of non-recurring gains
and losses
Subtotal 1,373,046,963.75
Amount of income tax influence (59,293,849.88)

Amount of minority equity impact (net of tax) (4,258,288.62)
Total 1,309,494,825.25

XIX. SUPPLEMENTARY INFORMATION (Continued)
1. Breakdown of Non-Recurring Profit and Loss for the Current Period (Continued)
Note: For non-recurring profit or loss, “+” expressed for gains and incomes and “-” expressed for losses or expenses.
The Company recognition of non-recurring profit or loss is in accordance with the requirements
of Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their
Securities to the Public-Non-recurring profit or loss (Announcement of China Securities Regulatory
Commission [2008] No. 43).
2. Return on Equity and Earnings per Share
Weighted
Average Earnings per share
Return on Diluted
Profits for the current year Equity (%) Basic EPS EPS
Net profits attributable to the ordinary shareholders

of the Company 16.93 2.116 2.116
Net profits attributable to the ordinary shareholders
after subtracting the non-recurring profit or loss 10.48 1.311 1.311
Documents Available for Inspection
1. The financial statements signed by the legal representative and the Financial Controller of the Company;
2. The auditor’s reports signed by Ruihua Certified Public Accountants LLP together with the financial
statements prepared in accordance with PRC Accounting Standards;
3. The original company documents disclosed and announcements published in Shanghai Securities News
(上海證券報), Securities Times (證券時報), China Securities Journal (中國證券報) and Securities Daily (證
券日報) during the Reporting Period;
4. The documents listed above are kept at the Secretariat to the Board.

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Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited • Annual Report 2018 1

IX. Warning on Significant Risks

Company/the Company/GYBYS Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited

PRC or China the People’s Republic of China

Group the Company and its subsidiaries

Board the board of directors of the Company

Supervisory Committee the supervisory committee of the Company

CSRC China Securities Regulatory Commission

SSE The Shanghai Stock Exchange

HKEx The Stock Exchange of Hong Kong Limited

Articles of Association the articles of association of the Company

Listing Rules of SSE the Listing Rules of the SSE

GPHL Guangzhou Pharmaceutical Holdings Limited (廣州醫藥集團有限公司)

GPC Guangzhou Pharmaceutical Company Limited (廣州藥業股份有限公司)

Zhong Yi Guangzhou Baiyunshan Zhong Yi Pharmaceutical Company Limited (廣州白

Chen Li Ji Guangzhou Baiyunshan Chen Li Ji Pharmaceutical Factory Company Limited

Qi Xing Guangzhou Baiyunshan Qi Xing Pharmaceutical Co., Ltd. (廣州白雲山奇星藥

Wang Lao Ji Guangzhou Wang Lao Ji Pharmaceutical Co., Ltd. (廣州王老吉藥業股份有限

Guangzhou Bai Di Guangzhou Baiyunshan Bai Di Bio-technology Co., Ltd. (廣州白雲山拜迪生

Guangxi Ying Kang Guangxi Yingkang Pharmaceutical Company Limited (廣西盈康藥業有限公

GP Corp. Guangzhou Pharmaceuticals Corporation (廣州醫藥有限公司)

Nuo Cheng Guangzhou Promise Biological Products Co., Ltd. (廣州諾誠生物製品股份有

Baiyunshan Guangzhou Baiyunshan Pharmaceutical Co., Ltd. (廣州白雲山製藥股份有限

Baiyunshan General Factory Guangzhou Baiyunshan Pharmaceutical General Factory (廣州白雲山醫藥集

Chemical Pharmaceutical Factory Guangzhou Baiyunshan Chemical Pharmaceutical Factory (廣州白雲山醫藥

He Ji Gong Guangzhou Baiyunshan Pharmaceutical Co., Ltd. Baiyunshan He Ji Gong

HWBYS Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company

Pharmaceutical Technology Guangzhou Baiyunshan Pharmaceutical Technology Development Co., Ltd.

Weiling Baiyuanshan Weiling Pharmaceutical Co., Ltd. (白雲山威靈藥業有限公司)

Guangyao General Institute Guangzhou Pharmaceutical Research General Institute (廣州醫藥研究總院有

Baiyunshan Pharmaceutical Guangzhou Baiyunshan Pharmaceutical Marketing Co., Ltd. (廣州白雲山醫

Medical Instrument Guangzhou Baiyunshan Medical Instrument Investment Company (廣州白雲

Guangzhou Baiyunshan Hospital Guangzhou Baiyunshan Hospital Co., Ltd. (廣州白雲山醫院有限公司)

Yi Gan Guangzhou Guangyao Yigan Biological Products Co., Ltd. (廣州廣藥益甘生

Hua Cheng Guangzhou Hua Cheng Pharmaceutical Co., Ltd. (廣州花城藥業有限公司)

GMP the English abbreviation of Good Manufacturing Practice, being a set of

GPO group purchasing organizations

OEM Original Equipment Manufacture

GZ SOA Development Guangzhou State-owned Asset Development Holdings Limited (廣州國資發

GZ Chengfa Guangzhou China Life Urban Development Industry Investment Enterprise

Placement Prosperous Age Fund of Huitianfu-Citic bank-Guangzhou Baiyunshan Pharmaceutical

Alliance BMP Alliance BMP Limited (聯合美華有限公司)

Sino-Israel Fund Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) ( 廣州中以生物產

C.Q. Pharmacentical Holding Chongqing Pharmaceutical Holding Company Limited（重藥控股股份有限公

Company Profile and Financial Highlights

(1) Legal Chinese Name: 廣州白雲山醫藥集團股份有限公司

(2) Secretary to the Board: Huang Xuezhen

(4) Designated newspapers for Mainland China: Shanghai Securities News

(5) Stock exchanges, names and codes A Shares: SSE

(6) Other information:

Company Profile and Financial Highlights

2. PRINCIPAL FINANCIAL DATA AND FINANCIAL INDICATORS AS AT THE END OF THE

(1) Principal financial data

Year As at 31 December 2014

Net assets attributable to

Company Profile and Financial Highlights

2. PRINCIPAL FINANCIAL DATA AND FINANCIAL INDICATORS AS AT THE END OF THE

(2) Principal financial indicators

Company Profile and Financial Highlights