THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH HOLDINGS

OVERVIEW App1A-27A

As of the Latest Practicable Date, China Resources Holdings, our controlling shareholder, held App1A-28(2) through CRH (Pharmaceutical) 72% of our share capital. Immediately following completion of the [REDACTED], China Resources Holdings will own approximately [REDACTED]% of the share capital of our Company (assuming the [REDACTED] is not exercised), or approximately [REDACTED]% of the share capital of our Company (assuming the [REDACTED] is exercised in full). China Resources Holdings will remain as our controlling shareholder after the Listing.

OUR RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

Our Principal Business

Our main business includes pharmaceutical manufacturing, distribution and .

Principal Business of China Resources Holdings

China Resources Holdings is a major PRC state-owned conglomerate based in Hong Kong. Its core businesses include consumer products (including retail, beer, food and beverages), power, real estate, cement, gas, pharmaceuticals and finance. China Resources Holdings is indirectly wholly owned by China Resources National Corporation, which is a state-owned enterprise. China Resources Holdings is the only platform for China Resources National Corporation to carry out its pharmaceutical related business. Five of the members of China Resources Holdings, namely China Resources Cement Holdings Limited (stock code: 1313), (Holdings) Company Limited (stock code: 0291), China Resources Power Holdings Company Limited (stock code: 0836), China Resources Land Limited (stock code: 1109) and China Resources Gas Group Limited (stock code: 1193) are listed on the .

The table below sets forth the business scope of China Resources Holdings’ listed subsidiaries (“China Resources Holdings Listed Subsidiaries”) and its shareholding interest in each of these companies:

Shareholding Interest of China Resources Holdings Name Business Scope as of the Latest Practicable Date

China Resources Cement Holdings the production, sale and distribution of 73.45% Limited ...... clinker, cement and concrete products

China Resources Beer (Holdings) the manufacturing, sale and distribution 51.91% Company Limited ...... of beer products

China Resources Power Holdings investment, development, operation and 62.99% Company Limited ...... management of power plants

China Resources Land Limited ...... property investment, development and 61.27% management

— 298 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

Shareholding Interest of China Resources Holdings Name Business Scope as of the Latest Practicable Date

China Resources Gas Group Limited . . distribution of natural gas and 63.95% petroleum gas, operation of compressed natural gas filling stations and distribution of bottled liquefied petroleum gas

As of the Latest Practicable Date, China Resources Holdings held, through its subsidiaries, interest in J1.com. China Resources Holdings engages in pharmaceutical retail business through J1.com as disclosed below (the “Retained Business”).

J1.com

As of the Latest Practicable Date, China Resources Holdings controlled 80% interest in J1.com. J1.com is an E-commerce platform engaging in pharmaceutical products sales through both retail stores and an online platform. As of June 30, 2016, J1.com had total assets of approximately RMB154.5 million. The total revenue of J1.com for the year ended December 31, 2015 and the six months ended June 30, 2016 were approximately RMB353.3 million and RMB149 million, respectively, and it recorded losses of approximately RMB146.1 million and RMB64.7 million, respectively, for the same periods. We confirm that there is no overlap between the board and senior management of J1.com and our Company.

We believe that there is no substantive competition between the business of J1.com and our pharmaceutical distribution/retail business for the following reasons:

• Different client bases and nature of the industry. Our business model and that of J1.com are different. Most of our clients in our pharmaceutical distribution business are corporate clients such as hospitals, other medical institutions and other distributors (see “Business — Pharmaceutical Distribution” for details); on the other hand, J1.com mainly focuses on individual customers with online purchase habits. Given such differences, there is no direct competition between J1.com and our pharmaceutical distribution business. For our pharmaceutical retail business, while there are some general types of products which both J1.com and we sell to end-customers, such as prescription medicines, OTC medicines and medical devices, taking into account the wide range of pharmaceutical products covered by our pharmaceutical retail business and, in particular, the fact that the products sold by our pharmaceutical retail business are often common products which are also sold by other participants in the sizable pharmaceutical retail market, it is considered that any potential competition between J1.com and our pharmaceutical retail business is of no difference to any competition between an Independent Third Party and us in the market.

— 299 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

• Different sales channels. The pharmaceutical products of our Group are mainly distributed through wholesale distributors and offline retail stores, whilst the sales model of J1.com is “B-to-C Model,” namely sale of the pharmaceuticals directly through J1.com, which serves as a platform, to its customers. J1.com is not approved by relevant authorities to sell pharmaceuticals to distributors.

• Different models and locations. The main strategy of J1.com is to develop online retail sales of pharmaceuticals. Revenue generated from J1.com’s online sales business accounted for approximately 82%, 91%, 90% and 87% of its total revenue for the three years ended December 31, 2015 and the six months ended June 30, 2016, respectively. The revenue generated from J1.com products sold through retail stores only represented an insignificant portion of its total revenue. In addition, the retail stores of J1.com are located mainly in Shanghai, whereas our Group has a broad presence across the PRC.

For reasons stated above, we believe that there is no substantive competition between the online business of J1.com and our pharmaceutical distribution/retail business.

No Competition with China Resources Holdings under Rule 8.10 of the Listing Rules

Except as disclosed above, China Resources Holdings does not hold 10% or more equity interest in any other company which is principally engaged in the pharmaceutical manufacturing and sales business. On the basis of the above, our Directors are of the view that China Resources Holdings, a controlling shareholder of our Company, is not interested in a business, apart from our Company’s business and as disclosed in this document, which competes or is likely to compete, either directly or indirectly, with our Company’s business under Rule 8.10 of the Listing Rules as of the Latest Practicable Date.

COMPETING INTEREST OF DIRECTORS

Our Directors have confirmed that they are not interested in any business, which competes or is likely to compete, either directly or indirectly, with our Company’s business under Rule 8.10 of the Listing Rules as of the Latest Practicable Date.

NON-COMPETITION UNDERTAKING

Non-competition Agreement with the Controlling Shareholder

We have entered into the Non-competition Agreement with China Resources Holdings on [●], pursuant to which China Resources Holdings agreed that, except for the Retained Business, it will not engage in, participate in or assist others to engage or participate in any business that competes or is likely to compete, directly or indirectly, with our business within the PRC (the “Competing Business”), and will procure its subsidiaries (as defined in the Non-competition Agreement, excluding our Group and our subsidiaries, as well as China Resources Holdings Listed Subsidiaries and their subsidiaries) not to engage in any business that competes or is likely to compete, directly or indirectly, with the Competing Businesses.

— 300 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

The controlling shareholder has also undertaken in the Non-competition Agreement that, during the term of such agreement, it will not, and will procure its subsidiaries (excluding our Group and our subsidiaries, as well as the China Resources Holdings Listed Subsidiaries and their subsidiaries) not to:

• directly or indirectly engage in or participate in, or assist others to engage in or participate in, any Competing Businesses in any form (including, but not limited to, investment, mergers and acquisitions, joint operations, joint venture, cooperation agreement, partnership, contractor agreement, lease or purchase of shares of listed companies) within the PRC; or

• assist any entity other than our Group or its affiliates to engage in any Competing Businesses within the PRC; or

• engage in any Competing Businesses (directly or indirectly) in any manner.

The non-competition undertaking set forth above does not apply to the following circumstances:

• China Resources Holdings having interests in any member of our Group;

• China Resources Holdings having interests in a company other than our Group, provided that:

(i) any Competing Businesses conducted or engaged in by such company (and assets relating thereto) account for less than 10% of our Group’s consolidated revenues and consolidated assets as shown in our Group’s latest audited financial statements;

(ii) the total interest held by China Resources Holdings and its subsidiaries shall not amount to more than 20% of the total issued share capital of that company. In addition, that company shall at all times have at least one shareholder whose shareholding is higher than the shareholding owned by China Resources Holdings and its subsidiaries in aggregate; and

(iii) China Resources Holdings and its subsidiaries are not entitled to appoint a majority of the directors of that company.

New Business Opportunities

Pursuant to the Non-competition Agreement, China Resources Holdings has undertaken that, during the term of the Non-competition Agreement, if China Resources Holdings or its subsidiaries (for the purpose of the Non-competition Agreement, excluding our Group and our subsidiaries, as well as China Resources Holdings Listed Subsidiaries and their subsidiaries) become aware of any new business opportunity (which is not a Retained Business) which is or is likely to be the Competing Businesses (the “New Business Opportunity”), China Resources Holdings shall immediately notify our Company in writing and provide all relevant information of the New Business Opportunity (the “Offer Notice”) and use its best efforts to procure the New Business Opportunity be made available

— 301 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS to our Company or our subsidiaries on terms and conditions fair and reasonable to us. Our Company shall promptly (in any case no later than 30 Business Days from receipt of the Offer Notice) notify China Resources Holdings in the event that our Company decides not to take up the New Business Opportunity. The controlling shareholder can then decide whether to take up such New Business Opportunity if our Company decides not to or fails to reply within the requisite timeframe.

Right of First Offer

Pursuant to the Non-competition Agreement, China Resources Holdings has undertaken that, during the term of the Non-competition Agreement, if China Resources Holdings intends to transfer, sell, lease, license or otherwise dispose of any of the Competing Businesses (including Retained Business), to any third parties, China Resources Holdings shall immediately notify our Company in writing of its intention (the “Selling Notice”) and procure all necessary information to facilitate an investment decision be made available to our Company.

Our Company will decide whether or not to acquire such Competing Businesses, and shall notify China Resources Holdings in writing within 30 Business Days from the date of the Selling Notice whether we wish to acquire the relevant Competing Businesses.

If we decide not to or fail to reply within the requisite timeframe, China Resources Holdings may transfer, sell, lend or license the relevant Competing Businesses to any third parties on terms no more favorable than those stated in the Selling Notice.

Further Undertakings

Pursuant to the Non-competition Agreement, China Resources Holdings has further irrevocably represented, undertaken and warranted, among other things, that:

• it shall, upon request of our independent non-executive Directors, provide our independent non-executive Directors with all information necessary for their annual review or any review made in accordance with the request of relevant regulatory authorities of compliance with and implementation of the Non-competition Agreement;

• it agrees that our Company will disclose the review made by our independent non-executive Directors (as the case may be) on compliance with and implementation of the Non-competition Agreement in our annual reports, interim reports, announcements or circulars;

• it shall not disclose any trade secrets of our Group to any person or use any of such trade secrets for advancing its business without our written consent; and

• it shall conduct appropriate conflict search against customers before entering into any agreement in respect of a Competing Business, and it shall not enter into any sales contract or concession agreement with our existing customers in respect of a Competing Business for the purpose of excluding our Company.

— 302 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

Termination

The Non-competition Agreement shall continue to be effective until the earlier of the occurrence of the following situations:

• the date on which China Resources Holdings and its subsidiaries, in aggregate, directly or indirectly hold less than 30% of the share capital of our Company, or cease to have control over the Board, resulting in China Resources Holdings ceasing to be a “controlling shareholder” as defined under the Listing Rules; or

• the date on which the Shares cease to be listed on the Hong Kong Stock Exchange, except when trading in the Shares is temporarily suspended for any reason.

INDEPENDENCE FROM CHINA RESOURCES HOLDINGS

Taking into consideration the following factors, our Directors believe that we can conduct our business independently from China Resources Holdings and its associates after the [REDACTED].

Operational Independence

We operate our businesses independently from China Resources Holdings. We have obtained relevant qualifications and licenses, independent operating premises, domain names and electronic information systems needed for our businesses.

We have our own organizational structure with self-governing departments, each with specific areas of responsibility. We also maintain a set of comprehensive internal control procedures to facilitate the effective operation of our business. We have adopted a set of corporate governance manuals, including the terms of reference for general meetings and terms of reference for Board meetings, both of which are based on relevant laws, rules and regulations.

We have entered into certain continuing connected transactions with China Resources Holdings in relation to services provided to or by China Resources Holdings and/or its associates. Such services are not provided to or by China Resources Holdings and/or its associates on an exclusive basis and may be offered to or by Independent Third Parties on similar terms. See the section “Connected Transactions” for details.

Based on the above, our Directors are of the view that our Company operates independently from China Resources Holdings.

— 303 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

Financial Independence

We have established our own finance department with a team of independent financial staff who are responsible for our financial management, accounting, reporting, funding and internal control functions independently from China Resources Holdings. As of the Latest Practicable Date, we had certain payables to the subsidiaries of China Resources Holdings, one of which in the amount of approximately RMB98.8 million was the remainder of the acquisition price concerning the acquisition of 100% interest in CR Pharmaceutical Retail Group, pending satisfaction of the final condition precedent and we currently expect that such sum will be settled before the Listing, and the other payables in the aggregate amount of approximately HK$373.0 million which arose from the business conducted between us and the subsidiaries of China Resources Holdings such as rental payment and office facilities charges. None of the above would affect the financial independence of our Company given our robust financial position.

We can make financial decisions independently, and China Resources Holdings does not interfere with our use of funds. We have also established an independent audit system, a standardized accounting system and a comprehensive financial management system. In addition, we maintain and manage bank accounts independently and China Resources Holdings does not share any bank accounts with us. We have made independent tax registration in accordance with applicable laws and paid tax independently pursuant to applicable PRC tax laws and regulations, rather than on a combined basis with China Resources Holdings or other enterprises under its control.

Based on the above, our Directors are of the view that our Company is financially independent from China Resources Holdings.

Management Independence

Currently, four of the 12 members of our Board also hold positions in China Resources Holdings. The following table sets forth the positions held by our Board in China Resources Holdings:

Major position held in China Name Major position held in our Company Resources Holdings

Fu Yuning...... Chairman of the Board, non-executive Chairman of the board of directors Director

Chen Rong ...... Non-executive Director Chief officer of finance department

Yu Zhongliang ...... Non-executive Director Senior vice director of strategic management department

Wang Chuncheng ...... Executive Director, chief executive Assistant general manager officer and president

Mr. Fu Yuning, Mr. Chen Rong and Mr. Yu Zhongliang are our non-executive Directors and do not participate in our daily business operations and management. As members of the Board, Mr. Fu Yuning, Mr. Chen Rong and Mr. Yu Zhongliang only participate in formulating our corporate and business strategies and the decision-making process of significant events.

— 304 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

RELATIONSHIP WITH CHINA RESOURCES HOLDINGS

As an assistant general manager of China Resources Holdings, Mr. Wang Chuncheng does not participate in the daily business operations and management of China Resources Holdings, and is mainly responsible for the matters related to the management of our Company. Therefore, Mr. Wang does not expect that his position with China Resources Holdings will take up a substantial amount of his time. He will be able to devote sufficient time to the management of our Company.

Save as disclosed above, as of the Latest Practicable Date, none of our Directors or senior management held any position in China Resources Holdings.

We believe our Directors and senior management can independently perform their duties in our Company and we can operate independently from China Resources Holdings due to the following reasons:

(a) the decision-making mechanism of the Board as specified in the Articles of Association has set out relevant provisions to avoid conflicts of interest, including, but not limited to: (i) if the relevant proposal causes conflicts of interest between us and China Resources Holdings, the Director(s) associated with China Resources Holdings should abstain from voting and should not be included in the quorum of the meeting of the Board, and the remaining Directors have sufficient relevant knowledge and experience to make decisions for us; and (ii) when connected transaction(s) are considered, independent non-executive Directors of our Company shall give their independent opinions to the Board and/or our Shareholders on such connected transaction(s) pursuant to the Listing Rules;

(b) we have four independent non-executive Directors (representing one-third of the Board members) to balance the numbers of interested Director(s) and independent non-executive Directors for the protection of the interests of our Group and the Shareholders as a whole; and

(c) our Directors are well aware of their fiduciary duties which, among other things, require them to act in the best interests of our Group and the Shareholders as a whole.

On the basis of the above, and taking into consideration the fact that there is no substantive competition between us and China Resources Holdings and its associates as defined under Rule 8.10 of the Listing Rules, the Directors are of the view that our management is independent from China Resources Holdings.

Non-Competition Undertaking given by China Resources Holdings to CR Sanjiu

Pursuant to a non-competition undertaking provided by China Resources Holdings to CR Sanjiu, China Resources Holdings undertook that China Resources Holdings and its controlled entities will not directly engage in any business which competes with any business of CR Sanjiu through legal procedures. China Resources Holdings also undertook to further indemnify CR Sanjiu for any losses caused by its non-compliance with the above undertaking.

— 305 —