China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

China National Accord Medicines Corporation Ltd.

Annual Report 2013

March 2014

1 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section I. Important Notice, Contents and Paraphrase

Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of China National Accord Medicines Corporation Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents.

Other directors attending the Meeting for annual report deliberation except for the followed:

Name of director absent Title for absent director Reasons for absent Attorney He Zhiyi Independent director Official business Xiong Chuxiong

The Preplan Profit Distribution of the Company deliberated and approved by the Board is: based on total stock issue of the Company 362,631,943 shares as the radix , distributed 1.8 Yuan (tax included) bonus in cash for every 10-share hold by all shareholders and no capitalizing of common reserves carried out. Yan Zhigang, Principal of the Company, Wei Pingxiao, person in charger of accounting works and Chi Guoguang, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2013 Annual Report is authentic, accurate and complete. Concerning the forward-looking statements with future planning involved in the Report, they do not constitute a substantial commitment for investors. Investors should be cautious with investment risks.

2 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Contents

Annual Report 2013 ...... 1

Section I Important Notice, Contents and Paraphrase ...... 2

Section II Company Profile ...... 6

Section III Accounting data and summary of finnaical indexes ………………………………….8

Section IV Report of the Board of Directors ...... 11

Section V Important Events ...... 29

Section VI Changes in shares and particular about shareholders ...... 41

Section VII Particulars about Directors, Supervisors,Senior Executives and Employees ...... 49

Section VIII Corporate Governance ...... 62

Section IX Internal Control ...... 71

Section X Financial Report ...... 73

Section XI Documents available for reference ...... 181

3 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Paraphrase

Items Refers to Contents

Listed Company, Company, the Company, Refers to China National Accord Medicines Corporation Ltd. Sinopharm Accord, the Group

Sinopharm Holding Refers to Sinopharm Group Co.,Ltd.; Controlling shareholder of the Company

―Twelfth Five-Year‖ Refers to Year of 2011 to 2015

Company Law Refers to Company Law of the People’s Republic of China

Securities Law Refers to Securities Law of the People’s Republic of China

Yuan, 10 thousand Yuan, 100 million Yuan Refers to RMB, RMB 10 thousand, RMB 100 million

Terminology:

Direct selling Refers to A sales method of selling drug to the hospital directly

GMP certificate Refers to Good Manufacture Practice of Drugs certificate

GSP certificate Refers to Good Supply Practice certificate

That is CMS, and information system processing workflow & Supply Chain Management Refers to procurement, inventory & sales documents

Company profile

Sinopharm Refers to China National Pharmaceutical Group Corporation

Sinopharm (CNCM LTD) Refers to China National Medicines Corporation Ltd.

Sinopharm Holding Guangzhou Refers to Sinopharm Holding Guangzhou Co., Ltd.

Sinopharm Holding Liuzhou Refers to Sinopharm Holding Liuzhou Co., Ltd.

Sinopharm Holding Guangxi Refers to Sinopharm Holding Guangxi Co., Ltd.

Zhijun Pharmaceutical Refers to Shenzhen Zhijun Pharmaceutical Co., Ltd.

Main Luck Pharmaceutical Refers to Shenzhen Main Luck Pharmaceuticals Inc.

China National Zhijun (Suzhou) Refers to China National Zhijun (Suzhou) Pharmaceutical Co., Ltd.

Zhijun Pharmacy Trade Refers to Shenzhen Zhijun Pharmacy Trade Co., Ltd.

4 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Major Risk Warning It is likely to existing risks in aspect of industrial competition, operation& management, market and national policy, and majority investors are advised to exercise caution of investment risks.

5 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section II Company profile

I. Company information

Short form of the stock Sinopharm Accord ; Accord B Stock code 000028, 200028

Stock exchange for listing Shenzhen Stock Exchange

Name of the Company (in 国药集团一致药业股份有限公司 Chinese)

Short form of the Company 国药一致 (in Chinese)

Foreign name of the China National Accord Medicines Corporation Ltd. Company(if applicable)

Short form of foreign name of Sinopharm Accord the Company(if applicable)

Legal representative Yan Zhigang

Registrations add. Accord Pharm. Bldg., No. 15, Ba Gua Si Road, Futian District, Shenzhen, Guangdong Province

Code for registrations add 518029

Offices add. Accord Pharm. Bldg., No. 15, Ba Gua Si Road, Futian District, Shenzhen, Guangdong Province

Codes for office add. 518029

Company‘s Internet Web Site http://www.szaccord.com.cn

E-mail [email protected]

II. Person/Way to contact

Secretary of the Board Rep. of security affairs

Name Chen Changbing

Accord Pharm. Bldg., No. 15, Ba Gua Si Contact add. Road, Futian District, Shenzhen, Guangdong Province

Tel. +(86)755 25875195

Fax. +(86)755 25875147

E-mail [email protected]

III. Information disclosure and preparation place

Newspaper appointed for information disclosure Securities Times; China Securities Journal; Hong Kong Commercial Daily

6 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Website for annual report publish appointed by http://www.szse.cn; http://www.cninfo.com.cn CSRC

Preparation place for annual report Secretariat of the Board of Directors

IV. Registration changes of the Company Registration NO. for No. of taxation Date for registration Place for registration enterprise legal Organization code registration license

Initial registration 1986-08-02 Shenzhen. P.R.C 4403011001677 440301192186267 19218626-7

Registration at end 2012-11-06 Shenzhen. P.R.C 440301103040048 440301192186267 19218626-7 of report period

V. Other relevant information

CPA engaged by the Company

Name of CPA PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. (LLP)

11/Floor,PWC Center, Building 2#, Corporate Avenue, No.202 Hubin Rd., Luwan District, Offices add. for CPA Shanghai, P.R.C

Signing Accountants Chen Yuntao, Tang Pianpian Sponsor engaged by the Company for performing continuous supervision duties in reporting period □ Applicable √ Not applicable Financial consultant engaged by the Company for performing continuous supervision duties in reporting period □ Applicable √ Not applicable

7 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section III. Accounting data and summary of financial indexes

I. Main accounting data and financial indexes

Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accounting error correction or not □Yes √ No

Changes over last year 2013 2012 2011 (%)

Operating income (RMB) 21,199,466,399.21 18,011,759,178.26 17.7% 15,150,128,554.59

Net profit attributable to shareholders of the listed 520,488,198.80 475,792,491.12 9.39% 328,323,616.75 company(RMB)

Net profit attributable to shareholders of the listed company 506,078,794.23 448,238,374.59 12.9% 311,849,021.90 after deducting non-recurring gains and losses(RMB)

Net cash flow arising from 465,028,099.83 323,955,332.76 43.55% 230,104,293.35 operating activities(RMB)

Basic earnings per share 1.81 1.65 9.7% 1.14 (RMB/Share)

Diluted earnings per share 1.81 1.65 9.7% 1.14 (RMB/Share)

Weighted average ROE (%) 26% 30.51% -4.51% 27.47%

Changes over end of End of 2013 End of 2012 End of 2011 last year (%)

Total assets (RMB) 11,057,896,941.31 9,295,839,939.64 18.96% 7,679,312,771.78

Net assets attributable to shareholder of listed 2,244,757,658.03 1,775,943,028.96 26.4% 1,350,093,276.86 company(RMB)

II. Explanation on differences of data under accounting standards in and out of China

No impact from differences of accounting standards in and out of China in aspect of net profit for year of 2013 and net assets at year end of 2013

III. Items and amounts of extraordinary profit (gains)/loss

8 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

In RMB

Item 2013 2012 2011 Note

RMB 3.14 million obtained from sales of Gains/losses from the disposal of real estate by non-current asset (including the write-off 3,029,150.67 -8,347,047.73 1,540,031.87 Guangdong Huixin, that accrued for impairment of assets) subsidiary of the Company

The enterprise supporting fund RMB 7.05 million allocated from Nanning Economic and Technological Development Zone, financial discount RMB Governmental subsidy reckoned into current 4.39 million, the gains/losses (not including the subsidy compensation and enjoyed in quota or ration according to 23,465,438.42 57,227,812.33 13,577,864.38 resettlement funds for national standards, which are closely housing demolition relevant to enterprise‘s business) RMB 2.7 million; R&D subsidy and modern logistics public information platform and e-commerce platform construction subsidy RMB 9.3 million

Current net gains/losses of the subsidiaries from period-begin to consolidated date -240,695.14 -1,989,842.59 occurred from enterprise merger under the common control

Switch back of provision for depreciation of account receivable which was singly taken 1,672,973.37 1,815,099.41 1,977,108.01 depreciation test

Including RMB 11.06 million that really can not afford; Accrued Other non-operating income and expenditure liabilities RMB 22.04 -9,876,088.28 -17,026,479.08 7,098,221.98 except for the aforementioned items million pending action of Chebei Project was withdrawal by principle of prudence

9 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Less: Impact on income tax 3,768,134.66 5,790,568.53 5,108,324.05

Impact on minority shareholders‘ 113,934.95 84,004.73 620,464.75 equity (post-tax)

Total 14,409,404.57 27,554,116.53 16,474,594.85 --

Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons □ Applicable √ Not applicable

10 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section IV. Report of the Board of Directors

I. Introduction

Year of 2013 was the key year for the Company for goal of the 12th ‗Five Years‘, also the key year for goal of accelerated effectiveness and transformed development. This year, macro economy rose at a slow speed, health care reform processed deeply, the ground control policies implemented, thus the pharmaceutical industry slide into a "Slow Period". In 2013, guided by the Board of Directors, senior managers led all the staff to positively face the unfavorable market, vigorously proceeded, surrounding the annual operating theme of the ―Clear Thoughts, Scientific Development, Healthy Operation and Constant Leader‖. As a result, both sales and net profit exceeded the budgeted results, creating a new record. Various works were preceded smoothly, laying a firm foundation for the structure transformation expected during the 12th Five Years and the scientific development. In 2013, the Company realized operating income of RMB 21.2 billion, increased by 17.7%. Net profit attributable to shareholders reached RMB 0.52 billion, increased by 9.39% compared with the same period of last year. We kept the state of ―Proceeding in Stability‖ and completely achieved various annual budget and tasks. (I) Particulars in 2013 for headquater In 2013, the Company focused on improvement of management level. We learned from those standing-out, largely promoted business collaboration projects, constantly perfected resources allocation. We strived to improve operation efficiency by effective management and control, to improve the Headquarter Value by quality service. We gained performance in aspects of deepening management, improving control, optimizing resources allocation and creating harmonious atmosphere. 1. Model management was started, current stage for improving group management ended. Level of basic management was improved. 2. Increased docking and sharing of internal resources, collaborative projects were started, promoted integration and win-win between the business department and the Company. 3. Continued to strengthen the leading role of the planning, enriched operational control means and protected the sustainable development of the Company. 4. NC capital platform and A8 system have been successfully on line. The government business gained improvement. Service efficiency and value were improved. 5. Led by spirit of the 18th CPC National Congress, we have strengthened construction of party, corporate culture and created good corporate atmosphere. (II) Operation of sub-division in 2013 In 2013, with intelligence chain as the core, sub-divisions optimized business procedures with chain thought, promoted function transformation of front and back system, continuously boost the sinking of the network, deepened integrated operation. We positively explored new channel and new thought of transforming commercial model. Thus traditional and innovative business was proceeding together. Marketing kept being leading up. All these laid a way for the goal of becoming model in Guangdong and Guangxi. Calculated by the point of combination, sub-division realized income of RMB 19.499 billion, increased by 20.69% compared with the same period of last year, taking up 91.98% of the total corporate income. Net profit reached RMB 0.3 billion, increased by 19.94%, taking up 56.17% of the total income. 1. We achieved new breakthroughs in intelligent supply chain, carried out a comprehensive multi-warehouse operations, thus Guangdong and Guangxi achieved inventory management. We set subsidiaries supply chain

11 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) division of functions, uniformed throughout the operation, to achieve distribution supply chain management extending across subsidiaries. WMS system was upgrade and united and GPS, TMS system were successfully full-line, function confirmation and development test for PDA system was completed, visualization system platform was initially shaped, basically realized orders, distribution visualization. 9 subsidiaries in Guangxi have received "A Multi-warehouse Database" business intelligence in modern logistics, multi-warehouse operations in full swing in Guangdong and Guangxi region, initially realized an inventory management. 2. Continued to promote the distribution network layout, speed up DTC pharmacy distribution, in order to ensure continued leading distribution with the distribution network coverage. Continuously promoted sinking the distribution network, after the completion of the acquisition of Sinopharm Group Co., Ltd., Shantou, distribution network layout completed in stage of the goal, with 29 distribution subsidiaries, Guangdong and Guangxi were both in the target area of network coverage. DTC pharmacy distribution was in full swing, we have opened nine pharmacies operating more than 6,000 varieties. 12 subsidiaries took the lead through a new version of GSP certification. 3. New businesses, new model made significant progress, such as we accelerated the pace of transformation from distribution to products and services of the pharmaceutical and health providers. B2B e-commerce formally operated. 38 clients achieved online-ordering. Thus annual sales reached 329 million Yuan; we established business innovation department, a platform for distributor business model innovation and service transformation. 4. Structural adjustment achieved new breakthroughs. Ratio of domestic products distribution and direct sales ratio constantly ascended. 5. Integration of logistic was promoted, as well as the service and efficiency. We have newly established, and added and restructured 7 projects respectively in Foshan, Shenzhen, Jiangmen and Zhanjiang. Area of new projects reached 17,000M2 while the coverage was expanded largely. (III) Production and operations of Pharmaceutical Division for year of 2013 In 2013, the pharmaceutical sector promoted organizational structure optimization, management and control process optimization and resource integration with excellent performance concept for guidelines and institutionalization, procession and standardization as core elements. And industrial integration platform was improved in the actual operation. By continuing to accelerate the pace of structural adjustment and transformation and upgrading, we developed new business, thus competitive and differentiation of pharmaceutical sector constantly grew. In the case of weakening antibiotics, we basically stabilized the market situation. On a consolidated basis, the pharmaceutical division in 2013 achieved operating income of 1.715 billion Yuan, down 8.38%, accounting for 8% of the Company's operating revenues; implemented net profit of 206 million Yuan, down 9.69%, accounting for 38.59% in the Company's net profit. 1. With institutionalization, procession and standardization as core elements and with the brand as a carrier, we constantly improved the level of integration operation. System processes, internal control standards and budget template were harmonized. We established and improved the integration of management and control systems division; erected GS system, an integrated information platform. And it will be operated under a unified brand of "Sinopharm Zhijun". 2. We accelerated the speed of new products marketing in research and development, and promoted the construction of the secondary distribution system in the marketing and continued to strengthen dumbbell system construction for pharmaceutical industry. By creating integrated development platform, confirming the R & D strategy of "Generic Drugs, Large Variety, Difference", unified research and development ideas; in aspect of accelerating the restructuring of the product line, in 2013 we newly acquired five production licenses (three specifications in cephalosporin sulfur microphone, recovered property in ondansetron capsules, acquired property in amlodipine besylate tablets), reporting 9 production (including Rui Pula green sheet), reporting 11 clinical; we

12 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) continued to enhance research and development industrial capacity, got access to six patents such as Cefozopran, cefuroxime acid preparation, cefuroxime axetil tablets and its wholly-powder pellets method. 3. Export sales of independent products reached over US$ 10 million, Large Health promoted smoothly. Ratio of sales of oral solid dosage created a new record. Pharmaceutical market transformation and product line have made significant achievements in transition, having laid a solid foundation for future sustainable development of industry. 4. Mission II Zhijun was put into use, Pingshan base was smoothly started, providing capacity protection for the future development of the industrial. 5. The new GMP certification was promoted smoothly; oral solid was through the EU certification, laying the foundation for quality differentiation strategy.

II. Main business analysis 1. Introduction

Performance and y-o-y changes: Same period of last Item This Period year +,- ratio (%)

Main business revenue 21,095,622,536.26 17,871,974,928.79 18.04%

Main business cost 19,388,139,660.12 16,316,986,605.55 18.82%

Sales expenses 486,390,181.25 448,595,419.15 8.43%

Administration expenses 422,405,979.87 392,232,990.09 7.69%

Including: R&D expenses 79,430,320.22 79,362,874.40 0.08%

Financial expenses 164,405,341.20 162,118,150.33 1.41%

Income tax expenses 124,882,778.24 119,634,955.50 4.39% Net profit attributable to owners’ of parent company 520,488,198.80 475,792,491.12 9.39% Net cash flow arising from operation activity 465,028,099.83 323,955,332.76 43.55%

Net cash flow arising from investment activity -131,241,842.13 -189,823,321.97 30.86% Net cash flow arising from financing activity -156,566,167.75 -121,276,170.42 -29.10%

Reviewing the progress of development strategy and operation planning in reporting period that disclosed in previous period In reporting period, for the strategy and operation planning disclosed in previous period, please found more in ―I. Introduction‖ in this Section.

Reasons for difference of actual operation performance has 20% lower or higher than profit forecast of the Year disclosed □ Applicable √ Not applicable

13 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

2. Revenue

Explanation: In reporting period, the Company achieved RMB 21.2 billion in operation revenue with a year-on-year growth of 17.70 percent; net profit attributable to shareholders of listed company was RMB 520 million, a year-on-year growth of 9.39 percent. The Company continues to maintaining growth trend of ―steady development‖ and accomplished annual budget index and all tasks.

Income from physical sales is over than income from labors √ Yes □ No

Unit 2012 2013 (+,-) y-o-y

Chemical agent (Zhijun + Wangqing) 10 thousand branches/box 43606 38842 -11%

Chemical Raw Medicine KG 332280 209357 -37%

Sales Chinese patent drugs 10 thousand branches/box 897 1164 30%

Massive health 10 thousand branches/box 0.80 3.48 335%

International trade 10 thousand branches/box 893 1448 62%

Chemical agent (Zhijun + Wangqing) 10 thousand branches/box 40897 37204 -9%

Chemical Raw Medicine KG 455909 247067 -46% Yielding Chinese patent drugs 10 thousand branches/box 1004 1133 13% capacity Massive health 10 thousand branches/box 4.17 4.17 0%

International trade 10 thousand branches/box 1085 1309 21%

Chemical agent (Zhijun + Wangqing) 10 thousand branches/box 8892 6851 -23%

Chemical Raw Medicine KG 55299 20772 -62%

Inventory Chinese patent drugs 10 thousand branches/box 179 181 1%

Massive health 10 thousand branches/box 5.53 2.87 -48%

International trade 10 thousand branches/box 253 88 -65%

Material orders in hands □ Applicable √ Not applicable Material changes or adjustment for products or services of the Company in reporting period □ Applicable √ Not applicable Major sales of the Company

Total top five clients in sales (RMB) 1,332,595,915.20

Proportion in total annual sales volume for top five clients 6.29% (%)

3. Cost

Industry classification

14 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

In RMB

2013 2012 Industry Y-o-y changes Item Ratio in operation Ratio in operation classification Amount Amount (%) cost (%) cost (%)

Pharmaceutical Sales cost 984,311,353.46 5.08% 1,099,955,200.59 6.74% -10.51% manufacturing

Medicine 18,378,091,996.4 15,191,216,947.0 Sales cost 94.79% 93.1% 20.98% commerce 6 7

Logistic & Transportation&s 22,278,364.39 0.11% 21,466,438.05 0.13% 3.78% storage service torage cost

Leasing & other Service cost 3,457,945.81 0.02% 4,348,019.84 0.03% -34.98% income

19,388,139,660.1 16,316,986,605.5 Total 100% 100% 18.82% 2 5

Product classification In RMB

2013 2012 Product Y-o-y changes Item Ratio in operation Ratio in operation classification Amount Amount (%) cost (%) cost (%)

Note Nil Main suppliers of the Company

Total purchase amount from top five suppliers (RMB) 3,494,518,405.15

Proportion in total annual purchase amount for top five 18.06% suppliers (%)

4. Expenses

Every expenses are in a good controlling, sales expense has a y-o-y growth of 8.43 percent, a y-o-y 7.69 percent up in administrative expenses, financial expenses rise 1.41 percent y-o-y and income tax expenses has increased 4.39 percent y-o-y, all expenses ratio down year-on-year.

5. Expenses of R&D

Subordinate industrial enterprises of the Company persist in R&D investment and improve the innovative ability. The expenses of R&D in the Period was RMB 80,047,194.42 (Y2012: RMB 80,366,881.98), accounts for 3.46 percent in net assets and 0.38 percent in operating revenue and takes 4.75 percent in revenue from pharmaceutical with RMB 79,430,320.22 (Y2012: RMB 79,362,874.4) reckoned into current gains/losses. RMB 616,874.20 (Y2012: RMB1, 004,007.58) recognized as development expenditure and there is no R&D expenditure recognized

15 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) as intangible assets in the Period.

6. Cash flow

In RMB

Item 2013 2012 Y-o-y changes (%)

Subtotal of cash in-flow from 21,496,624,309.71 17,833,363,395.20 20.54% operation activity

Subtotal of cash out-flow from 21,031,596,209.88 17,509,408,062.44 20.12% operation activity

Net cash flow from operation 465,028,099.83 323,955,332.76 43.55% activity

Subtotal of cash in-flow from 32,979,138.26 65,900,022.09 -49.96% investment activity

Subtotal of cash out-flow from 164,220,980.39 255,723,344.06 -35.78% investment activity

Net cash flow from investment -131,241,842.13 -189,823,321.97 30.86% activity

Subtotal of cash in-flow from 1,658,371,052.80 1,861,735,663.73 -10.92% financing activity

Subtotal of cash out-flow from 1,814,937,220.55 1,983,011,834.15 -8.48% financing activity

Net cash flow from financing -156,566,167.75 -121,276,170.42 -29.1% activity

Net increased amount of cash 177,200,310.92 12,863,881.39 1,277.5% and cash equivalent

Reasons for y-o-y relevant data with over 30% changes √Applicable □Not applicable Net cash flow from operation activity: increasing 43.55% y-o-y, mainly because sales increased y-o-y in the Period and reflow of corporate sales income improved; Suntotal of cash in-flow from investment activity: a y-o-y growth of -49.96%, mainly because at same period of last yera, subsidiary of the Company received a government subsidy for move and rebuild that results from the implementation of urban rebuilding the old area; Subtotal of cash out-flow from investment activity: a y-o-y up of -35.78%, mainly because at same period of last year, minority shareholder of Sinopharm Holding Zhaoqing, Sinopharm Holding Jiangmen, Sinopharm Holding Shaoguan and Wangqing were acquired by the Company, and except for the account for equity unpaid previously, there is no major enterprise acquisition in the Period; Net cash flow from investment activity: a y-o-y growth of -30.86%, mainly because there is no major enterprise acquisition in the Period; Net increased amount of cash and cash equivalent: a y-o-y growth of 1277.50%, mainly because net cash flow from operation activity in the Period gains a y-o-y increase.

16 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company □Applicable √Not applicable

III. Composition of main business

In RMB

Increase/decrease Increase/decrease Increase/decrease Gross profit ratio of operating Operating revenue Operating cost of operating cost of gross profit (%) revenue y-o-y y-o-y (%) ratio y-o-y (%) (%)

By industries

Pharmaceutical 1,650,765,125.89 984,311,353.46 40.37% -6.44% -10.51% 2.71% manufacturing

Medicine 19,402,722,544.21 18,378,091,996.46 5.28% 20.76% 20.98% -0.17% commerce

Logistic & 32,419,391.74 22,278,364.39 31.28% 6.09% 3.78% 1.53% storage service

Income from leasing& 9,715,474.42 3,457,945.81 64.41% -7.4% -20.47% 5.85% training service

By region

Domestic sales 21,036,737,455.14 19,345,046,939.49 8.04% 17.95% 18.79% -0.65%

Oversea sales 58,885,081.12 43,092,720.63 26.82% 59.92% 37.16% 12.14%

Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on latest one year‘s scope of period-end □ Applicable √ Not applicable

IV. Assets and liability analysis

1. Major changes of assets

In RMB

End of 2013 End of 2012 Ratio Ratio in total Ratio in total changes Notes of major changes Amount Amount assets (%) assets (%) (%)

1,113,562,211. Monetary fund 10.07% 953,992,070.61 10.26% -0.19% No changes 65

Account 5,675,658,506. 4,393,325,300. 51.33% 47.26% 4.07% No changes receivable 78 66

17 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

1,831,267,290. 1,734,679,063. Inventory 16.56% 18.66% -2.1% No changes 00 78

Investment real 77,269,718.14 0.7% 88,315,429.63 0.95% -0.25% No changes estate

Long-term equity 135,341,010.5 1.22% 121,019,845.50 1.3% -0.08% No changes investment 2

766,741,590.6 Fix assets 6.93% 690,487,633.12 7.43% -0.5% No changes 3

Construction in 126,606,806.0 1.14% 103,955,350.80 1.12% 0.02% No changes progress 1

2. Major changes of liability

In RMB

2013 2012 Ratio Ratio in total Ratio in total changes Notes of major changes Amount Amount assets (%) assets (%) (%)

2,744,941,589. 1,687,810,294. Short-term loans 24.82% 18.16% 6.66% No changes 11 37

Long-term loans 0% 82,205,562.71 0.88% -0.88% No changes

V. Analysis of core competitiveness

1. Competitive of distribution network The Company achieved strong distribution network through ongoing network sinking carried out in Guangdong and Guangxi and deepening integration operation. Distribution market share in Guangdong hospitals accounted for over 18%, advantage of leading gradually increased, laying a solid foundation for pole position of Guangdong and Guangxi; market share in Guangxi hospital accounted for 24.8%, gradually narrowing the gap with the competition benchmark. Currently 29 molecules existing distribution companies in Guangdong and Guangxi realized full coverage of all target areas in Guangdong and Guangxi. we have established subsidiaries in 11 and 7 cities in Guangdong and Guangxi including 5 logistics centers, 8 distribution centers, 8 distribution stations, logistics and distribution network covering Guangdong and Guangxi. In direct sales business in hospitals, we have covered all the second grade above medical institutions in Guangdong and Guangxi, and we have 100% coverage in backbone cities such as Guangzhou, Shenzhen, Nanning, Liuzhou; in the retail chain network, we have 100% coverage in large chain pharmacies in Guangdong and Guangxi, as well as providing distribution services for 2000 single pharmacy; we have covered over 4000 community health service network, small clinics and the third terminal network with NCMS representing. Company's distribution business also covers more than 1,000 pharmaceutical commercial enterprises in Guangdong and Guangxi. A comprehensive multi-warehouse operations in the construction of intelligent supply chain were comprehensively carried out, achieved an inventory management Guangdong and Guangxi, realized scalability, orders and distribution visualization of supply chain systems.

18 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

2. Competiveness of channel The Company operated the pharmaceutical industry with customer demand oriented, continued to strengthen the marketing center functions, and constantly improved the two levels of distribution models, established an orderly three-dimensional distribution network, streamlined marketing channels, maintained the price system, grasped the terminal market, thus constantly explore the ability of sustainable growth. In the domestic market we has established a marketing network and service system all over the country, and formed a marketing model pulled by reseller, medical institutions, supermarkets, pharmacies and demand. Through the "Fine Investment" and "Full-Service", you can meet market demand fully. While in the international market, we gradually established partnerships with local import agent, said the Company had sales of industrial products to the Philippines, Thailand, Vietnam, Guinea, Hong Kong, Macao and other countries and regions. Its subsidiary, Shenzhen Zhijun Pharmaceutical Co., Ltd. passed the EU EUGMP certification and opened the door to the international mainstream market. Its products have been exported to the UK, Germany, Romania, Cyprus and other major countries, while the Company will launch the U.S. FDA and thus expand the North American market.

3. Product competitiveness In the pharmaceutical distribution, Accord has a perfect network of resources all over the country, established extensive cooperative relations with domestic 29 provinces, autonomous regions and more than 1,600 commercial enterprises, as well as 350 imported and joint venture companies. Thus we got a variety of resources.

In industrial products, the Company focused on drugs and health products of anti-infective, respiratory system, digestive system. We owned modern pharmaceutical R & D and manufacturing base in line with international standards, built a number of production lines for bulk drugs, powder, oral solid dosage, is China it is the first enterprise whose self-cephalosporin powder injection preparation products certified by the EU GMP. The Company followed up strictly the quality management and control systems, created couples of brands with competitive market and multiple sales share in the forefront, and got 6 patents such as Cefozopran, cefuroxime acid preparation, cefuroxime axetil tablets and its wholly powder direct compression method; 5 industrial projects were smoothly promoted, basically realized industrialization and normal supply of azithromycin Dispersible Tablets, bisphenol pseudoephedrine capsules. While sales of ‗The Big Health‘ which was taking as health care mask for the main product achieved good momentum.

4. Brand Competitiveness In 2013, China Pharmaceutical entered the ranks of the Fortune 500 Group for the first time, according to the "12th Five-Year" strategic plan, the Company agreed to actively promote Sinopharm new brand strategy and brand building. The Company's brand and distribution and industrial sub-brands are in the same strain with major shareholders and actual controller‘s brand, relying on the strong influence of the central enterprises. The Company's reputation and influence have become increasingly prominent. While supported by the major shareholders Sinopharm Group Co. Ltd., Accord stared non-public offering of A shares program, for the first time opening a window of direct financing of capital markets, activated the finance platform and enhanced the visibility in the capital markets.

5. Management Competitiveness The Company's senior management has more than 16 years of industry experience on average with extensive management experience and experience in the pharmaceutical industry. And the Company's senior management

19 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) team own entrepreneurial spirit and prospective ability to continuously innovate, are well versed in industry characteristics and trends, timely accurately grasp market developments and innovation based on market conditions, constantly develop innovation, so that the Company has strong competitiveness and profitability. Middle management team is very capable with good stability and brilliant team communication and coordination, as well as organizational security and active innovation. Various decisions about production and operation can be effectively implemented.

6. Staff competitiveness Employees‘ average age is 33.7 years old, bachelor degree or above accounted for 34.23%, 40 employees have senior professional titles, 122 practicing pharmacists. Our staffs are young, energetic, professional and efficient, with high sense of responsibility. The Company takes care of staff with People-oriented, provide a development platform for employees, and motivate employees to seek mutual development with the Company.

7. System processes competitiveness The Company continued to optimize and improve the system processes, increase enforcement to system processes, improved the standard operation of the enterprise system processes and pushed forward the risk control. The Company currently covers the field of production and management as well as control node with headquarters, 7 categories system flow system of formats of pharmaceutical distribution and industries. Taking Smart Distribution Division in the supply chain as the core, deepen integration of Guangdong and Guangxi, and constantly improved the subsidiary management system; Pharmaceuticals Division takes institutionalize, procession and standardization as the core elements and taking the brand as the carrier, to achieve the integration of management and control processes, integration of operations and industrial brand. Institutionalization, standardization and processes, as well as strong executive oversight feedback, can enable enterprises to promote sustainable, efficient and healthy development.

VI. Investment analysis

1. Situation of equity investment

(1) Investment

Situation of investment

Investment in the Period (RMB) Same period of last year (RMB) Range of changing (%)

0.00 110,790,000.00 100%

Situation of the invested company

Equity proportion in invested company Name Main business for Listed company (%)

N/A

3. Main subsidiaries and stock-jointly companies

Particular about main subsidiaries and stock-jointly companies

20 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

In RMB Main Company Register Operating Operating Type Industries products Total assets Net Assets Net profit name capital revenue profit or service Productio n for raw medicine of chemical products, processing for Chinese traditional patent medicine, Shenzhen productio Zhijun Subsidiar Manufact n of RMB 1,241,211,990 541,076,239 1,315,222,151. 280,772,715 245,521,469 chemical Pharmaceuti y ure material 200,000,000 .16 .37 94 .92 .50 cal Co., Ltd. of medicine; Import and export trade are treated by authorized certificate s.

Chinese traditional patent medicine, chemical preparatio ns, antibiotics , Sinopharm bio-chemi Holding Subsidiar Commerc cal RMB 4,635,993,343 601,952,939 11,668,981,99 180,839,330 136,870,529 Guangzhou y e medicine, 400,000,000 .63 .09 2.93 .15 .80 Co., Ltd. biological medicine, diagnosis medicine, biological medicine with features of treatment and

21 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

diagnosis, shaped packing food, chemical products, and various commodit y and technique hold by self-suppo rt and agency as well as import & export of technolog y

Develop, research, product and Shenzhen stock-join operate Main Luck tly Manufact anticancer US$ 19,544, 734,641,815.0 384,600,768 742,577,238.9 128,154,396 120,696,689 Pharmaceuti companie ure medicine 550 9 .72 4 .92 .45 cals Inc. s preparatio ns, famotidin e injection etc. Notes of main subsidiaries and stock-jointly companies No special condition need to explain

Particular about subsidiaries obtained or disposed in report period

√ Applicable □ Not applicable

Purpose of getting and treating Influence on overall product Name of company The way of getting and treating subsidiary in the reporting and performance subsidiary in the reporting Has no material impact on Guangdong Accord Medical Not concerned with the main Liquidated overall production and Vocational Training Center business performance of the Company

Shenzhen Pharmacy Trade Co., The company stays closed for a Has no material impact on Liquidated Ltd. long time overall production and

22 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

performance of the Company

3. The significant progress of non-raised proceeds investment

In 10 thousand Yuan

Accumulation of Total investment Amount invested in Progress of the Earnings of the Name of the project actual investment amount the Period project project ended of the Period

The project covers approximately 73352 M2 in total, positioning as the production base of essential medicines (Pingshan) Medicine and special drugs, a R&D Manufacturing manufacture base of Base of China 88,137 5,528.53 6,865 15% modern traditional National Accord Chinese medicine Medicines preparations and massive health products as well as the international co-ordination processing base

Expanded two workshops of cephalosporin solid, increasing 1 billion The 2nd phase project pieces of annual of Guanlan Base of 25,000 3,598.25 17,951.29 100% productivity; Newly Zhijun built a production Pharmaceutical line of aseptic injection, increasing 0.2 billion annual productivity.

Total 113,137 9,126.78 24,816.29 -- --

Index date for extraordinary notice 2014-03-20 disclosed (if applicable)

Index website for extraordinary notice Juchao Website, Notice No.: 2014-12 disclosed (if applicable)

23 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

VII. Prospect of future development

In 2014, the Company continued to deepen the level of the standard management activities, making institutionalized management tools; around the Company's strategy to strengthen the management and control, we will improve service levels, seeking to learn best practices benchmarking with industrial and commercial synergies to enhance the core capabilities, enabling operators to enhance the efficiency and basic management.

The Company will take the management as marked as curing institutionalized management tools, continuously promoted and constantly make mentioning to manage efficiency, develop by management; take the private placement project as an opportunity to continue to develop new methods of corporate finance, new ways to continue to reduce financial costs; establish and improve employee career paths, promote implementation of training system, to further promote the talent-thriving-enterprise strategy; focused on business development, continue to optimize operational management and control processes, improve service quality, and promote the healthy and rapid development; continue to strengthen our party syndicalist organization, corporate culture and social responsibility, providing a strong organizational guarantee.

Distribution Division will continuously take the core of the intelligent supply chain, integrate the distribution and logistics services, deepen penetration of the terminal market, and improve the stepped distribution network, promoting business model innovation. Based on the steady growth of existing businesses, we will actively promote the launch of new business to broaden the products and value-added services, extend services in the supply chain, forming differentiated competitive advantage. Smart Distribution Division will continue to deepen the supply chain, and promote all aspects of the depth of collaboration, improving operational efficiencies. Continue to implement the network sinking, improve distribution, commercial, end three-dimensional network, enhance the core competitiveness of distribution; deepen the integration of the operation of Guangdong and Guangxi, improve management of subsidiary, to achieve constantly leading position from a point to the surface; actively respond to the drug tender of Guangdong Province, conduct new business, new model, accelerate the transformation to value-added service providers; improve the logistics network coverage, improve logistics visualization and refinement level, providing customers with quality distribution services.

Pharmaceutical Division will continue to improve the industrial platform as the main line, relying on the new structure, strengthen the three central functions such as research and development, marketing and production, promote functions restructuring to improve the level of industrial integration; promote structural adjustment and transformation upgrading, continue to perfect two distribution system, improve product quality and cost advantages, effectively enhance the competitive advantage of systemic of Accord. Pharmaceuticals Division will take being flatten, professional and integrated as the core to improve the industrial platform, form a competitive advantage for pharmaceutical sector as a whole; continue to strengthen research and development and marketing central features, build dumbbell pharmaceutical companies, to improve the level of intensive industries; force the production centers to co-ordinate resources through integrated management, build quality cost leadership based on production platform; take the new version of GMP, EU certification as an opportunity to improve the quality of management, strengthen brand competitiveness; continue to accelerate the pace of building bases, according to plans, we will promote industry technology projects to provide protection capacity for enterprise development.

24 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

VIII.Explanation on “Qualified Opinion” from the Certified Public Accountants in the report period by the Board of Directors

Nil

IX. Explanation on changes on accounting policies, accounting estimation and calculation compare with last year’s financial report Nil

X. Particular about major accounting errors correction that needs retroactive re-statement in reporting period

Nil

XI. Explanation on changes of consolidation range compare with last year’s financial report

The enterprise cancelled in the Period: Guangdong Accord Medical Vocational Training Center and Shenzhen Pharmacy Trade Co., Ltd. Enterprise newly established: Sinopharm Holding Guigang Co., Ltd.

XII. Profit and dividend distribution

Formulation, execution or adjustment for profit distribution policy in reporting period, cash bonus policy in particular √ Applicable □ Not applicable On 19 April 2013, the profit distribution plan for year of 2012 was deliberated and approved by annual general meeting of 2012, that is taking total 288,149,400 shares as of 31 December 2012 as the radix, distributed RMB 1.80 (tax included) for each 10 shares in cash. The announcement of 2012 interest distribution implementation was released on 30 May 2013 by the Board (published in Securities Times, China Securities Journal, Hong Kong Commercial Daily and Juchao Website http://www.cninfo.com.cn), the profit distribution plan for year of 2012 was completed, and dividend for public shares was distributed to the account of shareholders dated 7 June 2013 (A-share) and 14 June 2013 (B-share) respectively.

Special explanation on cash dividend policy

Satisfy regulations of General Meeting or requirement of Y Article of Association (Y/N):

Well-defined and clearly dividend standards and Y proportion (Y/N):

Completed relevant decision-making process and Y mechanism (Y/N):

Independent directors perform duties completely and play Y a proper role (Y/N):

Minority shareholders have opportunity to express Y opinions and demands totally and their legal rights are

25 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) fully protected (Y/N):

Condition and procedures are compliance and transparent while the cash bonus policy adjusted or changed Y (Y/N):

Statement on profit distribution plan and capitalization of capital reserve plan of the Company in latest three years (including the reporting period) (1) Profit distribution plan for year of 2011 Taking the total 288,149,400 shares as of 31 December 2011 as the radix, cash bonus of RMB 1.30(before tax) each 10 shares will be distributed to the whole shareholders. This profit distribution did not convert capital reserve into share capital.

(2) Profit distribution plan for year of 2012 Taking the total 288,149,400 shares as of 31 December 2012 as the radix, cash bonus of RMB 1.80(before tax) each 10 shares will be distributed to the whole shareholders. This profit distribution did not convert capital reserve into share capital.

(3) Profit distribution plan for year of 2013 Taking total 362,631,943 shares after completion of privately offering as the radix, cash bonus of RMB 1.8 (before tax) earch 10 shares will be distributed to whole shareholders. This profit distribution did not concert capital reserce into share capital.

Cash dividend in latest three years In RMB

Net profit attributable to Ratio in net profit attributable to Amount for cash bonus (tax shareholders of listed company shareholders of listed company Year for bonus shares included) in consolidation statement for contained in consolidation bonus year statement (%)

2013 65,273,749.74 520,488,198.80 12.54%

2012 51,866,892.00 475,792,491.12 10.9%

2011 37,459,422.00 328,323,616.75 11.41%

The Company gains profits in reporting period and the retained profit of parent company is positive but no plan of cash dividend proposed □ Applicable √ Not applicable

XIII. Preplan of profit distribution and capitalization from capital public reserve

Number of Bounus Shares Per 10 Common Shares 0 (Share)

Number of Dividends (Taxes included) Per 10 1.80 Common Shares (RMB)

Equity base of distribution preplan (Share) 362,631,943

26 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Total bonus in cash (RMB) (Texes included) 65,273,749.74

Distributable profit (RMB) 1,222,346,090.09

Ratio of cash bonus in total distributed profits (%) 100%

Cash bonus policy:

Other

Detail explanation on profit distribution or capitalization from capital public reserve Taking total 362,631,943 shares after completion of privately offering as the radix, distributed bonus of RMB 1.8 (before tax) in cash for earch 10 shares to whole shareholders. This profit distribution did not concert capital reserce into share capital.

XIV. Social responsibility

The ―Social Responsibility Report for year of 2013‖ was deliberated and approved by 15th meeting of 6th session of the Board, found more details in ―Social Responsibility Report 2013 of China National Accord Medicines Corporation Ltd.‖ released on 20 March 2014 in Juchao Website (http://www.cninfo.com.cn) The listed company and subsidiaries is in the range of heavy pollution industry that regulated by State environment protection departments □Yes √ No □Not applicable The listed company and subsidiaries owes other major social safety issues □Yes √ No □Not applicable Administrative penalty occurred in reporting period □Yes √ No □Not applicable

XIV. In the report period, reception of research, communication and interview Contents discussed and Time Place Way Type Reception material provided

Visited the Company and Industrial knew the influence of securities, Orient Accord Pharm. medical reform policy to 2013-03-29 Field research Institution Securities, Bldg. the development of the Fullgoal Fund, industry. No material China Securities provided.

Visited the Company and knew the influence of Accord Pharm. Hongta Hotland medical reform policy to 2013-05-31 Field research Institution Bldg. Fund, CITICS the development of the industry. No material provided.

2013-06-07 Accord Pharm. Field research Institution Morgan Stanley Visited the Company and

27 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Bldg. (Asia) knew the influence of medical reform policy to the development of the industry. No material provided.

Visited the Company and knew the influence of Accord Pharm. medical reform policy to 2013-07-05 Field research Institution Invesco Great Wall Bldg. the development of the industry. No material provided.

Visited the Company and knew the influence of China Merchants Accord Pharm. medical reform policy to 2013-11-26 Field research Institution Securities, Bldg. the development of the Manulife Teda industry. No material provided.

28 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section V. Important Events

I. Significant lawsuits and arbitrations of the Company

□ Applicable √ Not applicable No lawsuit or arbitration of the company in the annual.

II. Implementation of equity incentive and its influence

Nil III. Significant related transaction 1. Related transaction with daily operation concerned Market Proportio Amount Pricing n to Settlemen price of Type of Content Price of of related Related principles amount of t method Related related of related related transactio similar Disclosur Index of relationsh of related transactio of related party transactio transactio transactio n (10 e date disclosure ip transactio n or the transactio transactio n n n thousand n same type n yuan) n (%) available

Foshan Nanhai Same Juchao New controllin Sales of Sales of Market Cash 2013-03- Website, Medicine g 13116.18 13,116.18 0.62% 13116.18 goods goods price settlement sharehold 21 No. & Special er 2013-06 Medicine Co., Ltd.

Same Juchao Sinophar controllin Sales of Sales of Market Cash 2013-03- Website, m Hunan g 12950.93 12,950.93 0.61% 12950.93 goods goods price settlement sharehold 21 No. Co., Ltd. er 2013-06

Sinophar m Same Juchao Holding controllin Purchasin Purchasin Market Cash 2013-03- Website, Sub g 91957.89 91,957.89 4.75% 91957.89 g goods g goods price settlement 21 No. Marketin sharehold 2013-06 g Center er Co., Ltd.

Juchao Sinophar Parent Purchasin Purchasin Market Cash 2013-03- Website, m Group 47767.33 47,767.33 2.47% 47767.33 Company g goods g goods price settlement 21 No. Co.,Ltd. 2013-06 Same China Purchasin Purchasin Market Cash 2013-03- Juchao controllin 26779.33 26,779.33 1.38% 26779.33 g goods g goods price settlement National g 21 Website,

29 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Medicine sharehold No. er s 2013-06 Corporati on Ltd

192,571.6 Total ------6 Details of major sold-goods return N/A Necessity and sustainable of related There have been continuous related transaction between the company and each related transaction as well as reasons of related company due to the need of production and operation, and it will exist in a longer transaction with related parties(not with period of time. other marketing dealers) Influence on independence of listed No influence on the independence of listed company from the above related company from related transaction transactions. Dependence on related parties by It is indispensable of the related transaction between the company and the above related Company as well as relevant solutions (If company, and it is also necessary for the normal production and operation, so it belongs applicable) to normal continuous related transaction.

According to ―daily related transaction between the Company and its subordinate and the related parties in 2013‖ , deliberated and approved in shareholders‘ general meeting Report the actual implementation of the on April 19, 2013 ,the sales and purchase of major related parties accounted for 15.33% normal related transactions which were and 66.60% of its total estimated amount of the whole year respectively during the projected about their total amount by types reporting period. In reporting period, gross sales of related party accounts for 86.50% during the reporting period(if applicable) in total predicted amount for the whole year while total purchasing of related party takes a 81.24% in total predicted amount for the whole year.

Reasons for major difference between trading price and market reference price (If N/A applicable)

2. Credits and liability of related party Whether have non-operation related liabilities and debts relations or not □Yes √No Whether has Balance at Amount in Balance at non-operation Reasons for period-begin this period(10 period-end Related party Relationship Type fund occurring (10 thousand thousand (10 thousand occupation or yuan) yuan) yuan) not Notes payable Normal No Sinopharm Sub Same Debts payable purchase&sale Marketing Center Co., controlling to related and labor 17,575.76 -5,736.27 11,839.49 Ltd. shareholder party service activity Accounts payable Normal No Sinopharm Sub Same Debts payable purchase&sale Marketing Center Co., controlling to related and labor 22,066.69 -9,451.87 12,614.82 Ltd. shareholder party service activity Entrusted loans

Sinopharm Holding Parent Debts payable Loans No 0 40,000 40,000

30 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Company to related party

Short-term borrowing

Same ultimate Debts payable Sinopharm Group controlling to related Loans No 26,200 5,800 32,000 Financial Co., Ltd. shareholder party

3. Other significant related transactions

For more about other significant related transactions found in ―IX. Related party and related transaction‖ in ―Section X. Financial Report‖ Inquiry of disclosure website for relevant interim reports of material related transaction Notice name Dated for disclosed Website for interim report disclosed Notice No.: 2013-06, ―Notice of Related Transaction of Sinopharm Accord for year of 2013-03-21 Juchao Website 2013‖

Notice No.: 2013-25, ―Related Transaction of Sinopharm Group Financial Co., Ltd. Continue 2013-08-20 Juchao Website to Provide Financial Service to the Company‖

IV. Significant contracts and its implementation

1. Trust, contracting and lease

(1) Trust

Explanation on trust 1. As subordinate companies of majority shareholder, Foshan Nanhai Medicine Co., Ltd. (―Nanhai Medicine‖) and Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. (―Dong Fang Uptodate & Special Medicines‖) both operate pharmaceutical distribution business within Guangdong, which partially overlaps with the pharmaceutical distribution business and geographical location of the Company and constitutes peer competition. In July 2013, to solve the problem of peer competition, majority shareholder entrusted Sinopharm Accord and Sinopharm Accord agreed to take over the management of the above two companies.

2. As a subordinate enterprise of the de facto controller, Guangdong South Pharmaceutical Foreign Trade Co., ltd. operates pharmaceutical distribution business within Guangdong, which partially overlaps with the pharmaceutical distribution business and geographical location of the Company and constitutes peer competition. In September 2013, to solve the problem of peer competition, majority shareholder entrusted Sinopharm Accord and Sinopharm Accord agreed to take over the management of the above company.

Items generated over 10% gains/losses in total profit in reporting period for the Company □ Applicable √ Not applicable

31 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

2. Guarantees In 10 thousand Yuan

Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Guarante Related Actual date of Complete e for Announcem happening Name of the Guarantee Actual Guarantee Guarantee implemen related ent (Date of Company guaranteed limit guarantee limit type term tation or party disclosure signing not (Yes or date agreement) no) China National General 2012.12.5-20 Accord Medicines 2012-03-16 30,000 2012-12-05 9,000 No Yes assurance 13.12.4 Corporation Ltd.

China National General 2013.6.9-201 Accord Medicines 2013-03-21 25,000 2013-06-09 8,772.48 No Yes assurance 4.6.9 Corporation Ltd.

China National General 2013.1.24-20 Accord Medicines 2012-03-16 10,000 2013-01-24 5,000 No Yes assurance 13.12.31 Corporation Ltd.

China National General 2013.6.27-20 Accord Medicines 2013-03-21 15,000 2013-06-27 15,000 No Yes assurance 13.12.27 Corporation Ltd.

China National General 2013.10.14-2 Accord Medicines 2013-08-20 30,000 2013-10-14 2,000 No Yes assurance 014.10.14 Corporation Ltd.

China National Accord Medicines

Corporation Ltd.、 General 2013.5.30-20 2013-03-21 7,000 2013-05-30 No Yes Shenzhen Zhijun assurance 14.5.30 Pharmaceutical Co., Ltd.

Sinopharm Holding General 2013.5.29-20 2013-03-21 2,000 2013-05-29 1,000 No Yes Foshan Co., Ltd. assurance 14.5.28 Total actual occurred external Total approving external 79,000 guarantee in report period 94,497.34 guarantee in report period (A1) (A2) Total actual balance of Total approved external guarantee 119,000 external guarantee at the end 40,772.48 at the end of report period ( A3) of report period (A4) Guarantee of the Company for the subsidiaries Guarante Related Actual date of Complete e for Announcem happening Name of the Guarantee Actual Guarantee Guarantee implemen related ent (Date of Company guaranteed limit guarantee limit type term tation or party disclosure signing not (Yes or date agreement) no) China National General 2013.8.28-2 2013-03-21 8,000 2013-08-28 5,518.22 No Yes Zhijun (Suzhou) assurance 014.8.27

32 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Pharmaceutical Co., Ltd.

China National Zhijun (Suzhou) General 2013.3.21-2 2013-03-21 5,000 2013-03-21 3,379.07 No Yes Pharmaceutical Co., assurance 014.3.21 Ltd.

China National Zhijun (Suzhou) General 2013.10.12- 2013-03-21 6,000 2013-10-12 No Yes Pharmaceutical Co., assurance 2014.10.12 Ltd.

China National Zhijun (Suzhou) General 2013.11.25-2 2013-03-21 3,000 2013-11-25 500 No Yes Pharmaceutical Co., assurance 014.11.25 Ltd.

China National Zhijun (Suzhou) General 2013.10.22- 2013-03-21 5,000 2013-10-22 No Yes Pharmaceutical Co., assurance 2014.10.21 Ltd.

China National Zhijun (Suzhou) General 2013.11.16-2 2013-08-20 3,000 2013-12-16 1,692.54 No Yes Pharmaceutical Co., assurance 014.6.25 Ltd.

Sinopharm Holding General 2013.11.20-2 Shenzhen Yanfeng 2013-03-21 2,000 2013-11-20 463.24 No Yes assurance 014.5.23 Co., Ltd.

Sinopharm Holding General 2013.6.26-2 Shenzhen Yanfeng 2013-03-21 5,000 2013-06-26 3,178.05 No Yes assurance 014.6.25 Co., Ltd.

Sinopharm Holding General 2013.6.13-2 Shenzhen Yanfeng 2013-03-21 2,000 2013-06-13 1,660 No Yes assurance 013.12.27 Co., Ltd.

Shenzhen Zhijun General 2013.8.8-20 Pharmaceutical Co., 2013-03-21 20,000 2013-08-08 11,993.7 No Yes assurance 14.8.8 Ltd.

Shenzhen Zhijun General 2013.9.10-2 Pharmaceutical Co., 2013-03-21 5,000 2013-09-10 216.76 No Yes assurance 014.6.25 Ltd.

Shenzhen Zhijun Pharmaceutical Co., General 2013.9.13-2 2013-03-21 3,000 2013-09-13 No Yes Ltd. 、Shenzhen assurance 014.9.13 Zhijun Pharmacy

33 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Trade Co., Ltd.

General 2013.11.21-2 Sinopharm TCM 2013-08-20 500 2013-11-21 10 No Yes assurance 014.6.25

Sinopharm Holding General 2013.5.20-2 Guangdong Yuexing 2013-03-21 3,500 2013-05-20 3,499.42 No Yes assurance 014.5.20 Co., Ltd.

Sinopharm Holding General 2012.12.5-2 Guangdong Yuexing 2012-03-16 3,000 2012-12-05 1,870.47 No Yes assurance 013.12.4 Co., Ltd.

Sinopharm Holding General 2013.6.26-2 Guangdong Yuexing 2013-03-21 5,000 2013-06-26 22.06 No Yes assurance 014.6.25 Co., Ltd.

Sinopharm Holding General 2013.9.16-2 Guangdong Yuexing 2013-03-21 5,000 2013-09-16 No Yes assurance 014.8.13 Co., Ltd.

Sinopharm Holding General 2013.5.20-2 2013-03-21 35,000 2013-05-20 32,360.33 No Yes Guangzhou Co., Ltd. assurance 014.5.20

Sinopharm Holding General 2013.5.20-2 2013-03-21 60,000 2013-05-20 40,579.23 No Yes Guangzhou Co., Ltd. assurance 014.4.23

Sinopharm Holding General 2013.3.4-20 2012-03-16 15,000 2013-03-04 11,101.4 No Yes Guangzhou Co., Ltd. assurance 14.3.3

Sinopharm Holding General 2013.5.17-2 2013-03-21 10,000 2013-05-17 No Yes Guangzhou Co., Ltd. assurance 014.5.16

Sinopharm Holding General 2013.9.3-20 2013-03-21 40,000 2013-09-03 29,193.93 No Yes Guangzhou Co., Ltd. assurance 14.8.16

Sinopharm Holding General 2013.6.26-2 2013-03-21 35,000 2013-06-26 28,127.55 No Yes Guangzhou Co., Ltd. assurance 014.6.25

Sinopharm Holding General 2013.5.7-20 2013-03-21 30,000 2013-05-07 29,721.2 No Yes Guangzhou Co., Ltd. assurance 14.5.7

Sinopharm Holding General 2012.11.9-20 2012-03-16 5,000 2012-11-09 2,577.95 No Yes Guangzhou Co., Ltd. assurance 13.11.8

Sinopharm Holding General 2013.5.29-2 2013-03-21 16,000 2013-05-29 5,190.95 No Yes Guangxi Co., Ltd. assurance 014.5.29

Sinopharm Holding General 2013.6.26-2 2013-03-21 20,000 2013-06-26 17,759.23 No Yes Guangxi Co., Ltd. assurance 014.6.25

Sinopharm Holding General 2013.4.19-2 2013-03-21 10,000 2013-04-19 8,534.93 No Yes Guangxi Co., Ltd. assurance 014.4.18

Sinopharm Holding General 2013.5.27-2 2013-03-21 3,000 2013-05-27 6.04 No Yes Guangxi Co., Ltd. assurance 014.5.26

34 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Sinopharm Holding General 2013.8.27-2 2013-03-21 6,000 2013-08-27 5,955.08 No Yes Guangxi Co., Ltd. assurance 014.8.27

Sinopharm Holding General 2013.6.26-2 2013-03-21 6,000 2013-06-26 5,963.65 No Yes Liuzhou Co., Ltd. assurance 014.6.25

Sinopharm Holding General 2013.10.29- 2013-08-20 10,000 2013-10-29 4,847.65 No Yes Liuzhou Co., Ltd. assurance 2014.10.28

Sinopharm Holding General 2013.7.11-20 Jiangmen Renren 2013-03-21 1,000 2013-07-11 52.95 No Yes assurance 14.6.25 Co., Ltd.

Sinopharm Holding General 2013.9.16-2 Jiangmen Renren 2013-03-21 3,000 2013-09-16 No Yes assurance 014.8.13 Co., Ltd.

Sinopharm Holding General 2013.5.28-2 Jiangmen Renren 2013-03-21 3,000 2013-05-28 2,294.22 No Yes assurance 014.5.27 Co., Ltd.

Sinopharm Holding General 2013.7.1-20 Jiangmen Renren 2013-03-21 3,000 2013-07-01 453 No Yes assurance 14.6.30 Co., Ltd.

Sinopharm Holding General 2013.12.24- 2013-03-21 3,000 2013-12-24 20.39 No Yes Zhanjiang Co., Ltd. assurance 2014.6.20

Sinopharm Holding General 2013.11.26-2 Shenzhen Medicine 2013-03-21 1,000 2013-11-28 90.24 No Yes assurance 014.6.25 Co., Ltd.

Sinopharm Holding General 2013.11.28-2 Shenzhen Jianmin 2013-03-21 1,500 2013-11-28 50 No Yes assurance 014.6.25 Co., Ltd.

Sinopharm Holding General 2013.4.1-20 2013-10-24 108,500 2013-04-01 30,562.65 No Yes Guangzhou Co., Ltd. assurance 14.3.31 Total amount of actual Total amount of approving occurred guarantee for guarantee for subsidiaries in 486,000 807,222.67 subsidiaries in report period report period (B1) (B2) Total balance of actual Total amount of approved guarantee for subsidiaries at guarantee for subsidiaries at the 509,000 289,446.10 the end of reporting period end of reporting period (B3) (B4) Total amount of guarantee of the Company( total of two abovementioned guarantee) Total amount of approving Total amount of actual guarantee in report period 565,000 occurred guarantee in report 901,720.01 (A1+B1) period (A2+B2) Total amount of approved Total balance of actual guarantee at the end of report 628,000 guarantee at the end of report 330,218.58 period (A3+B3) period (A4+B4) The proportion of the total amount of actually guarantee in the 147.11% net assets of the Company (that is A4+ B4)(%)

35 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Including: Amount of guarantee for shareholders, actual controller and its 0 related parties(C) The debts guarantee amount provided for the guaranteed parties 317,948.11 whose assets-liability ratio exceed 70% directly or indirectly(D) Proportion of total amount of guarantee in net assets of the 217,980.69 Company exceed 50%(E) Total amount of the aforesaid three guarantees(C+D+E) 535,928.8 Explanations on possibly bearing joint and several liquidating N/A responsibilities for undue guarantees(if applicable) Explanations on external guarantee against regulated N/A procedures (if applicable) Explanation on guarantee with composite way Nil

V. Implementation of commitments

1.Commitments made by the Company or shareholders holding above 5% shares of the Company in reporting period or extending to reporting period

Commit Commitmen Commitmen Implementa Accepter Contents ment ts t period tion time

Share Merger Reform

As a large pharmaceutical commercial enterprise whose business involves pharmaceutical wholesale and retail, Sinopharm Holding may overlap with the Company in geographical segmentation during its future business development. To avoid the potential peer competition brought by such geographical overlap, Sinopharm Holding undertakes that, upon the transfer of shares of Sinopharm Commitmen Holding Guangzhou it held to Accord Pharma, ―1. it will not ts in report newly-establish or broaden within Guangdong any business operation Normally of Sinopharm 2005-06 Long-term that actually compete with that of Accord Pharma, or set up any new implement acquisition Holding -21 effective subsidiaries or subordinate enterprises who engage in such business. or equity 2. it will enter into business delineation with Accord Pharma and change Sinopharm Holding Guangzhou, thereby giving the three parties clear geographical areas to carry out pharmaceutical wholesale and retail businesses, so as to avoid potential peer competition. Apart from above, Sinopharm Holding will no longer newly-establish any enterprise that may compete with Accord Pharma in the production and R&D of pharmaceutical products.‖

Commitmen ts in assets reorganizati

36 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) on

Sinopharm Holding has undertaken in the Letter of Undertaking from Sinopharm Group Co. Ltd. on Avoiding Peer Competition that, ―I. the Company and the enterprises it wholly-owns, controls or has de facto control over (excluding Sinopharm Accord and its controlled Controlling enterprises, similarly hereinafter) do not exist any business or shareholder operation that would constitute substantive peer competition with is Sinopharm Accord and its controlled enterprises. II. the Company and implement the enterprises it wholly-owns, controls or has de facto control over in real will not engage in, participate in or carry out in Guangdong and earnest, Guangxi any business or activities that would constitute substantive Sinopharm competition with the pharmaceutical commercial businesses of Accord will Sinopharm Sinopharm Accord. III. the Company and the enterprises it 2013-09 Long-term actively Holding wholly-owns, controls or has de facto control over will not engage in, -05 effective urged the participate in or carry out any business or activities that would controlling constitute substantive competition with the pharmaceutical industrial shareholder businesses of Sinopharm Accord. IV. the Company will not make use and actual of its control over Sinopharm Accord to damage the legal interests of controller Sinopharm Accord and other shareholders (especially minority to fulfill shareholders). The Letter of Undertaking takes effect since the date of commitmen Commitmen issue and will remain effective during the entire period when the ts ts make in Company has been the controlling shareholder or connected party of initial public Sinopharm Accord. During the validity of the Undertaking, the offering or Company will indemnify in time Sinopharm Accord from any loss re-financing which may arise out of the Company‘s violation of the Undertaking.‖

Sinopharm Holding has undertaken in the Letter of Undertaking from Sinopharm Group Co. Ltd. on Standardization of the Connected Controlling Transactions with China National Accord Medicines Corporation Ltd. shareholder that, ―I. during the period when the Company takes control over is Sinopharm Accord, the Company and the companies or enterprises it implement directly or indirectly controls (hereinafter referred to as ―Connected in real Party‖) will strictly standardize the connected transactions with earnest, Sinopharm Accord and its controlled enterprises. II. for those Sinopharm connected transactions beyond avoidance or out of reasonable causes, Accord will Sinopharm 2013-09 Long-term the Company and Connected Party will enter into standardized actively Holding -05 effective connected transaction agreement with Sinopharm Accord according urged the to law. Sinopharm Accord will perform approval procedure according controlling to relevant laws, rules and regulations, other standardization shareholder documents and its constitutional documents, and fulfill its obligation and actual to disclose information on connected transactions. III. for those controller connected transactions beyond avoidance or out of reasonable causes, to fulfill the Company and Connected Party will determine the prices of commitmen connected transactions based on the prices of same or similar ts transactions entered into by independent third parties of no

37 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

connection while following the principles of open, fair and just to ensure the fairness. IV. when the board or shareholders‘ meeting of Sinopharm Accord votes on the relevant connected transactions involving the Company and other enterprises it controls, the Company will perform obligations including that necessary interested directors and shareholders shall be abstained from voting according to relevant regulations, and follow the legal procedures for approval of connected transactions and fulfill its information disclosure obligation. V. the Company guarantees to attend shareholders‘ meeting according to the constitutional documents of Sinopharm Accord, exercise its corresponding rights and assumed its corresponding obligations in an equitable manner, not to take advantage of its standing as controlling shareholder to seek unjust interests, or to use connected transactions to illegally transfer capital or profit out of Sinopharm Accord, or to prejudice the legal interests of Sinopharm Accord and other shareholders (especially minority shareholders). VI. the Letter of Undertaking takes effect since the date of issue and will remain effective during the entire period when the Company has been the controlling shareholder or connected party of Sinopharm Accord. During the validity of the Undertaking, the Company will indemnify in time Sinopharm Accord from any loss that may arise out of the Company‘s violation of the Undertaking.‖

‖Sinopharm Group has undertaken in the Letter of Undertaking from China National Pharmaceutical Group Corporation on Avoiding the Peer Competition with China National Accord Medicines Corporation Actual Ltd. that, ―I. in the coming five years, Sinopharm Group intends to controller take appropriate measures including replacement or acquisition of is assets or equity reorganization to solve the problem of peer implement competition between Weiqida and Sinopharm Accord. II. apart from in real the matters disclosed in the past and in the Letter of Undertaking, the earnest, Company and the enterprises it wholly-owns, controls or has de facto Sinopharm control over (excluding Sinopharm Accord and its controlled Accord will Sinopharm 2013-10 Long-term enterprises, similarly hereinafter) do not directly engage in, actively Group -16 effective participate in or carry out within the PRC any business or activities urged the that would constitute substantive competition with the production and controlling operation of Sinopharm Accord. The relative undertakings in respect shareholder of avoiding peer competition given by the Company in the past and actual remain valid. III. the Company will not take advantage of its controller control over Sinopharm Accord to damage the legal interests of to fulfill Sinopharm Accord and other shareholders (especially minority commitmen shareholders). IV. the Letter of Undertaking takes effect since the ts date of issue and will remain effective during the entire period when the Company has been the de facto controller or connected party of

38 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Sinopharm Accord.‖

Sinopharm Group has undertaken in the Letter of Undertaking from China National Pharmaceutical Group Corporation on Standardization of the Connected Transactions with China National Accord Medicines Corporation Ltd that, ―I. during the period when the Company takes control over Sinopharm Accord, the Company and the companies or enterprises it directly or indirectly controls (hereinafter referred to as ―Connected Party‖) will strictly standardize the connected transactions with Sinopharm Accord and its controlled enterprises. II. for those connected transactions beyond avoidance or out of reasonable causes, the Company and Connected Party will Actual enter into standardized connected transaction agreement with controller Sinopharm Accord according to law. Sinopharm Accord will is perform approval procedure according to relevant laws, rules and implement regulations, other standardization documents and its constitutional in real documents, and fulfill its obligation to disclose information on earnest, connected transactions. III. for those connected transactions beyond Sinopharm avoidance or out of reasonable causes, the Company and Connected Accord will Sinopharm Party will determine the prices of connected transactions based on the 2013-09 Long-term actively Group prices of same or similar transactions entered into by independent -22 effective urged the third parties of no connection while following the principles of open, controlling fair and just to ensure the fairness. IV. when the board or shareholder shareholders‘ meeting of Sinopharm Accord votes on the relevant and actual connected transactions involving the Company and other enterprises controller it controls, the Company will perform obligations including that to fulfill necessary interested directors and shareholders shall be abstained commitmen from voting according to relevant regulations, and follow the legal ts procedures for approval of connected transactions and fulfill its information disclosure obligation. V. the Company guarantees not to take advantage of its standing as actual controller to seek unjust interests, or to use connected transactions to illegally transfer capital or profit out of Sinopharm Accord, or to prejudice the legal interests of Sinopharm Accord and other shareholders (especially minority shareholders).‖VI. the Letter of Undertaking takes effect since the date of issue and will remain effective during the entire period when the Company has been the actual controller or connected party of Sinopharm Accord.

Other commitment s to minority shareholders of the Company

39 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Completed on time or Yes not VII. Appointment and non-reappointment (dismissal) of CPA Accounting firm appointed Pricewaterhouse Zhongtian Certified Public Accountants Co., Name of domestic accounting firm Ltd. (LLP)

Remuneration for domestic accounting firm (10 thousand Yuan) 210

Continuous life of auditing service for domestic accounting firm 4

Name of domestic CPA Chen Yuntao, Tang Pianpian

Name of foreign accounting firm (if applicable) N/A Remuneration for foreign accounting firm (10 thousand Yuan) (if 0 applicable) Continuous life of auditing service for foreign accounting firm (if 0 applicable) Name of foreign CPA (if applicable) N/A Whether re-appointed accounting firms in this period or not □ Yes √ No Appointment of internal control auditing accounting firm, financial consultant or sponsor √ Yes □ No The Company engaged Pricewaterhouse Coopers Zhongtian LLP as the audit body for internal control, and auditing charge for internal control and for the year totally amounting as RMB 2.1 million.

VII. Explanation from the Board and Supervisory Committee (if applicable) for “Qualified Opinion” from the CPA Nil

VIII. Other material events 1. On 19 July 2013, relevant proposals with privately offering of A-share concerned were deliberated and approved by 19th meeting of 6th session of the Board: ‖The Company conforms with the condition of Privately Offering of A-share‖, ‖Plan of Privately Offering of A-share‖, ―Preplan of Privately Offering of A-share‖, ―Feasibility Report of the Placement Utilization from Privately Offering of A-share ‖, ―Explanation on Previous Placement Utilization‖, ‖the ―Share Subscription Contract‖ with entry-into-force conditions that signed by the Company and Sinopharm Group Co., Ltd‖, ―Offering with Related transaction involved‖, ‖ Motion for authorization from the general meeting to the Board for Privately Offering matters‖, ‖ Motion for agreement that Sinopharm Group Co., Ltd. is free of increasing shares of the Company through tender offer‖, ‖Amendment on Management Methods for Raise Funds of China National Accord Medicines Corporation Ltd.‖,‖the ―Entrust Agreement‖ with entry-into-force conditions that signed by the Company and Sinopharm Group Co., Ltd‖ and ―Explanation on not convening general meeting temporary after the Board Meeting‖, relevant notice please found in Juchao Website dated 22 July 2013. 2. On 12 September 2013, proposal of the above menionted privatry offering of A-share was deliberated and approved by 3rd extraordinary general meeting of 2013, relevant notice please found in Juchao Website dated 13 September 2013. 3. On 13 Feburary 2014, the ―Notice of Approval of Privately Offering of A-sharef rom IEC of the CSRC‖ was released by the Company, relevant notice please found in Juchao Website dated 13 February 2014. 4. On 8 March 2014, the ―Application of Privately Offering of A-share of Sinopharm Accord was Examined and Approved by CSRC‖ was released by the Company, relevant notice please found in Juchao Website dated 8 March 2014.

40 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section VI. Changes in Shares and Particulars about Shareholders I. Changes in Share Capital In shares Before the Change Increase/Decrease in the Change (+, -) After the Change Capitalizat New Proportio Proportion Bonus ion of Amount shares Others Subtotal Amount n (%) shares public issued (%) reserve I. Restricted shares 3,535 0% -884 -884 2,651 0%

3. Other domestic shares 3,535 0% -884 -884 2,651 0% Domestic natural 3,535 0% -884 -884 2,651 0% person‘s shares 288,145,8 288,146,7 II. Unrestricted shares 100% 884 884 100% 65 49

233,260,2 233,261,1 1. RMB Ordinary shares 80.95% 884 884 80.95% 65 49

2. Domestically listed 54,885,60 54,885,60 19.05% 19.05% foreign shares 0 0

288,149,4 288,149,4 III. Total shares 100% 100% 00 00 Reasons for share changed √Applicable □Not applicable Share reduction of compliance from senior executives. Approval of share changed □ Applicable √ Not applicable Ownership transfer of share changed □ Applicable √ Not applicable Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common shareholders of Company in latest year and period □ Applicable √ Not applicable Other information necessary to disclose for the Company or need to disclosed under requirement from security regulators □ Applicable √ Not applicable II. Particulars about shareholder and actual controller of the Company 1. Amount of shareholders of the Company and particulars about shares holding In shares

Total shareholders ended as the 5th trading day Total shareholders in period-end 10,613 11,086 before annual report disclosed

Particulars about shares held above 5% by shareholders or the top ten shareholders Total Number of share pledged/frozen Proportio sharehold Shares of Shares of Changes Full name of Nature of n of ers at restricted unrestricte in report Shareholders shareholder shares the end of shares d shares State of share Amount period held (%) report held held period

Sinopharm State-owned 110,459,7 110,459,7 38.33% 0 0 Holding Co., Ltd. Corporation 48 48

National Council Domestic non 3.12% 9,000,040 for Social state-owned

41 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Security Corporation Fund-116

VALUE Foreign l PARTNERS 2.67% 7,697,761 Corporation CLASSIC FUND

HTHK/CMG FSGUFP-CMG Foreign l FIRST STATE 2.44% 7,032,720 Corporation CHINA GROWTH FD

National Council Domestic non for Social state-owned 2.41% 6,944,094 Security Corporation Fund-106

ICBC—Harvest Theme New Domestic non Power stock state-owned 2.05% 5,897,837 securities Corporation investment fund

CCB—China Advantage Domestic non Growth stock state-owned 1.94% 5,594,729 securities Corporation investment fund

BOC-Harvest Domestic non research selected state-owned 1.67% 4,814,288 stock securities Corporation investment fund

ICBC—UBS Domestic non Core Enterprise state-owned 1.61% 4,645,680 stock securities Corporation investment fund

Corporation Domestic non pension plan of state-owned 1.41% 4,063,741 CNPC-ICBC Corporation

ICBC—Harvest Theme New Power stock securities investment fund and BOC-Harvest research selected stock securities investment fund shares the same administrator as Harvest Explanation on associated relationship Fund Management Co., Ltd.; VALUE PARTNERS CLASSIC FUND, one of the top ten among the aforesaid shareholders shareholders, is one of the VALUE PARTNERS; it is unknown that there exists no associated relationship or belongs to the consistent actionist among the other tradable shareholders regulated by the Management Measure of Information Disclosure on Change

42 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

of Shareholding for Listed Companies.

Particular about top ten shareholders with un-restrict shares held Type of shares Shareholders‘ name Unrestricted shares held at period-end Type Amount RMB common Sinopharm Holding Co., Ltd. 110,459,748 110,459,748 shares National Council for Social Security RMB common 9,000,040 9,000,040 Fund-116 shares

VALUE PARTNERS CLASSIC Domestically 7,697,761 listed foreign 7,697,761 FUND shares HTHK/CMG FSGUFP-CMG FIRST Domestically 7,032,720 listed foreign 7,032,720 STATE CHINA GROWTH FD shares

National Council for Social Security RMB common 6,944,094 6,944,094 Fund-106 shares

ICBC—Harvest Theme New Power RMB common 5,897,837 5,897,837 stock securities investment fund shares

CCB—China Advantage Growth RMB common 5,594,729 5,594,729 stock securities investment fund shares

BOC-Harvest research selected stock RMB common 4,814,288 4,814,288 securities investment fund shares

ICBC—UBS Core Enterprise stock RMB common 4,645,680 4,645,680 securities investment fund shares

Corporation pension plan of RMB common 4,063,741 4,063,741 CNPC-ICBC shares

ICBC—Harvest Theme New Power stock securities investment fund and BOC-Harvest Expiation on associated relationship research selected stock securities investment fund shares the same administrator as Harvest or consistent actors within the top 10 Fund Management Co., Ltd.; VALUE PARTNERS CLASSIC FUND, one of the top ten un-restrict shareholders and between shareholders, is one of the VALUE PARTNERS; it is unknown that there exists no top 10 un-restrict shareholders and top associated relationship or belongs to the consistent actionist among the other tradable 10 shareholders shareholders regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies.

Agreed to buy back deals occurred in Period from shareholders □ Yes √ No 2. Particulars about controlling shareholder of the Company Legal person Legal person/person Date of Main operation Controlling shareholders Organization code Register capital in charge of foundation business the unit Industrial investment 2003-01-0 holding; management Sinopharm Holding Co., Ltd. Wei Yulin 74618434-4 RMB 2,568,293,489 8 and assets reorganization entrusted

43 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

by pharmaceutical enterprise; Chinese medicine, Chinese medicine tablets, chemical medicine preparations, chemical raw materials, antibiotics, biochemical drugs, biological products, narcotic drugs, psychotropic substances, toxic drugs for medical use (compatible with the business scope), medicine IVD Reagents, vaccine, anabolic agents, Peptide hormone and medical equipment. III: injection puncture instruments, hygienic materials & dressings, medical polymer materials and products, categories II: medical X-ray ancillary equipment and components; food marketing management (non-physical way), and domestic trade (other than special licensing), logistics, cosmetics, stationeries and related consulting services, operating various types of goods and import and export of technology (not attached directory of import and export commodities), but excluded the import and

44 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

export of goods and technology the State limits or prohibit the company. [In right of exequatur to run if refers to permission operation]

1. Results of operations: Sinopharm Group Co. Ltd., a core enterprise subordinated to CNPGC Group, has ranked first among the pharmaceutical commercial enterprises in the PRC in terms of sales for the consecutive seven years since 2005. In 2011, it was named the first pharmaceutical distributor in domestic market that achieved over RMB100 billion in sales. Since then, it has maintained a leading position among the pharmaceutical commercial enterprises in terms of sales, and a strong market position as the largest distributor of pharmaceutical and healthcare products and a leading supply chain service provider in the PRC. 2. Financial condition: As at 30 September 2013, Sinopharm Holding recorded turnover of RMB122, 561.83 million and net profit attributable to the parent company of RMB1, 718.17 million. 3. Cash flow: As at 30 September 2013, net cash flows from operating activities of Sinopharm Holding amounted to RMB902.86 million. 4. Future development strategy: The future development strategy of Sinopharm Holding mainly includes the Operation results, financial following aspects: (1) to further enhance its network layout and take advantage of the opportunities status, cash flow and future create by new Healthcare Reform; (2) continue to build a strong background, strengthen the functions development strategy of various business headquarters and carry out in-depth research on the synergies among diversified businesses; (3) continue to promote the sustainable development of various business segments and build the profitable advantages of industry chain; (4) to enhance policy research in respect of new Healthcare Reform, improve response capability, take advantage of opportunities and build up overall service capability; (5) to establish a new model of operation innovation and service innovation for retail business and promote the integrated development of retail industry; Sinopharm Holding will utilize the golden opportunity created by the Healthcare Reform to enhance its strategic goal, while at the same time, adhering to its three core strategies of operation-driven, capital-driven and innovation-driven, and will create a new Sinopharm by the end of the Twelfth Five-Year Plan period and become Asia‘s number one and an integrated pharmaceutical and healthcare service provider with international competitive edge.

Equity of other domestic/oversea listed company control by Sinopharm Group Co., Ltd. hold 44.01 percent equity of China National Medicines Corporation Ltd controlling shareholder as (Stock code: 600511) up to the end of Period well as stock-joint in report period Changes of controlling shareholders in reporting period □Applicable √ Not applicable 3. Particulars about actual controller of the Company Legal person Legal Actual controlling person/person Date of Organization code Register capital Main operation business shareholders in charge of foundation the unit Entrusted management and She Lulin 10000588-8 RMB 8,971,480,000 China National 1987-03-2 assets reorganization of

45 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Pharmaceutical Group 6 pharmaceutical enterprises, consultant service of Corporation medicine industry investment project, holding exhibition and fair of surgical appliance, the wholesale of Chinese medicine, Chinese patent medicines, Chinese medicine herb in pieces, chemical material medicine, a chemical agent, antibiotics, biochemical, biological(operation period runs in right of exequatur). 1. Results of operations: China National Pharmaceutical Group Corporation is the largest state-owned pharmaceutical and healthcare group with the fullest industry chain coverage and the strongest comprehensive strength administered directly by the State-owned Assets Supervision and Administration Commission of the State Council. Sinopharm Group, which is primarily engaged in the distribution, retail, R&D and production of healthcare-related products for prevention and treatment and diagnosis and nursing, is the only one pharmaceutical and healthcare group that achieved over RMB100 billion in sales in the PRC. 2. Financial condition: As at 30 September 2013, Sinopharm Group recorded turnover of RMB149, 079,216,600 and total profit of RMB5, 462,080,600. Cash flow: As at 30 September 2013, net cash flows from operating activities of Sinopharm Group amounted to RMB68, 902,800. 4. Future development strategy: Sinopharm Group will go all out to promote the overall construction of the five platforms of the Group, namely integrated operation platform of modern logistics and distribution, integrated scientific technological innovation platform of production, study and Operation results, financial research, integrated platform of international operation, pharmaceutical and healthcare industry status, cash flow and future platform, and integrated platform with efficient management and control and synergies, thereby development strategy forming five networks with full coverage, namely nationwide pharmaceutical logistics, distribution and delivery network, nationwide pharmaceutical retail chain network, nationwide anesthetic drugs distribution network, nationwide biological products marketing and cold chain distribution network, and nationwide medical devices and consumables distribution network, and promoting the overall development of the eleven businesses of the Group, namely modern pharmaceutical logistics and distribution, pharmaceutical retail, biological products, chemical pharmaceutical manufacturing, modern Chinese medicine, diagnostic reagents and chemical reagents, scientific instruments and medical devices, pharmaceutical science and research and engineering design, international pharmaceutical operation and overseas industry, pharmaceutical exhibition and media, and pharmaceutical and healthcare industry, constructing an innovative enterprise with pharmaceutical and healthcare industry as its core competitive edge. CNPGC aims to be established as a large pharmaceutical and healthcare group with full coverage of the pharmaceutical industry chain, and with its leadership in the industry and international competitive edge, and to become the first pharmaceutical and healthcare enterprise in the PRC to be listed in Global Top 500 Enterprises during the Twelfth Five-Year Plan period.

Equity of domestic/oversea Name Name of listed Total shareholders Ratio company with (10 thousand listed company control by shares held shares)

46 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) actual controller in report China National Wuhan Jianmin Pharmaceutical period Group 132.35 0.86% Corporation China National Sinopharm Holding Pharmaceutical Group 272.84 0.11% Corporation Sinopharm Sinopharm Holding Holding Industrial 157155.60 61.19% Investment Co., Ltd. Sinopharm Sinopharm Holding Co., 21070.15 44.01% Ltd. Sinopharm Sinopharm Accord Holding Co., 11045.97 38.33% Ltd.

China National

Medicines JLPC 321.93 2.12% Corporation

Ltd. Shanghai Modern Institute of Pharmaceutical Pharmaceutical 11975.63 41.62% Industry Chinese Hengrui Medicine Medicine Industry Co., 7020.33 5.17% Ltd. Chinese Hengrui Medicine Medicine Industry Co., 828.00 6.99% Ltd.

Sinopharm

Traditional and Wuhan Jianmin 276.44 1.80%

Herbal

Sinopharm

Traditional and UGC 810.45 3.63%

Herbal

Biosino Tiantan Biological 27472.50 53.30%

Sinopharm China TCM 101602.30 40.10% Group H.K.

47 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Co., Ltd.

Changes of actual controllers in reporting period □Applicable √ Not applicable Property right and controlling relationship between the actual controller and the Company is as follow

The State-owned Assets Supervision & Administration Commission of the State Council

100%

National Council for Social China National Pharmaceutical Security Fund &public Shanghai Fosun Pharmaceutical Group Corporation shareholder (Group) Co., Ltd.

100%

Shanghai Qishen Investment Management Co., Ltd.

49% 51% 38.7%

Sinopharm Industry

Investment Co., Ltd. 0.11%

61.19%

Sinopharm Holding Co., Ltd.

38.33%

China National Accord Medicines Corporation Ltd.

Actual controller controlling the Company by entrust or other assets management □Applicable √Not applicable

48 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section VII. Particulars about Directors, Supervisors, Senior Executives and Employees

I. Changes of shares held by directors, supervisors and senior executives

Increasin Decreasi Shares Shares Start g shares ng shares End date held at held at Working dated of held in held in Title Sex Age of office period-be period-en Name status office this this term gin d term period period (Share) (Share) (Share) (Share) Chen Secretary Currently 2011-04- 2014-04- Changbi of the M 46 3,535 0 884 2,651 in office 28 28 ng Board Total ------3,535 0 884 2,651

II. Post-holding

Major working experience of incumbent directors, supervisors and senior executive in latest five years

1. Members of the Board Chairman – Mr. Li Zhiming, college graduation, a senior economist, and he served as the follow post in latest 5 years: party secretary, chairman and GM of Xingjiang Medicine Group and had a concurrent post of party secretary, chairman and GM of Xinjiang Special and Ethnic Drugs Company from January 2008 to Feburary 2009; chairman, GM and party secretary of Sinopharm Group Xinjiang Pharmaceutical Co., Ltd. from Feburary 2009 to May 2013; deputy president of Sinopharm Group Co., Ltd. from May 2020 to November 2013; he hold a concurrent post of General Counsel of Sinopharm Group Co., Ltd. from October 2012 to January 2014; a deputy party secretary, discipline inspection commission secretary and labor union chairman of Sinopharm Group Co., Ltd. from November 2012 to November 2013; president of Sinopharm Group Co., Ltd. since November 2013; meanshile, served as Chairman of China National Medicines Corporation Ltd from August 2010 to October 2011; chairman of Sinopharm Holding Tianjin Co., Ltd. from August 2010 to December 2013; chairman of Sinopharm Holding Heilongjiang Co., Ltd. from November 2010 to April 2013; chairman of Sinopharm Holding Shenyang Co., Ltd. from October 2011 to April 2013; chairman of Sinopharm Holding Jilin Co., Ltd. from October 2011 to April 2013; chairman of Sinopharm Holding Inner Mongolia Co., Ltd. from March 2011 to December 2013; serves as chariman of Sinopharm Holding Ningxia Co., Ltd. since June 2011; chariman of Sinopharm Holding Shaanxi Co., Ltd. since October 2011; chariman of Sinopharm Holding Gansu Co., Ltd. since October 2011; he had a concurrent post of chairman of Sinopharm Holding Shanxi Co., Ltd. from October 2011 to December 2013; serves as chairman of Sinopharm Holding Qinghai Co., Ltd. since October 2011; he took post of chairman of Sinopharm Holding Mudan River Co., Ltd. from October 2011 to April 2013; serves as chairman of Sinopharm Grop Shanxi Co., Ltd. since March 2012; chairman and party secretary of Sinopharm Group Xinjiang Pharmaceutical Co., Ltd. since May 2013; president of Sinopharm Group Co., Ltd. since November 2013; Director of Sinopharm Group Hong Kong Co., Ltd. since January 2014 and chairman of China National Medicines Corporation Ltd since Feburary 2014; he serves as executive director of Sinopharm Holding Sub Marketing Center Co., Ltd. since January 2014 and chairman of 6th sesion of the Board for the Company since Feburary 2014.

Deputy Chairman--- Ms. Cui Dieling, MBA, an engineer. She served as the follow post in latest 5 years: GM of Business Division of Shanghai Parma Group Antibiotic , GM of Shanghai Asia Pioneer pharmacy Co., Ltd. and Chairman of Shanghai Xinya Pharmacy Co., Ltd. from December 2008 to December 2010; Chairman of HSDRUG from December 2010 to March 2011; Chief of Industrial

49 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Development and Management Center of Sinopharm Group Co., Ltd. from March 2011 to December 2013; assistant president of Sinopharm Group Co., Ltd. since December 2012; Chairman of Sinopharm Yixin Medicine Co., Ltd. since October 2011; Chairman of Xingsha Pharmaceuticals (Xiamen) Co., Ltd. since December 2011; she served as Chairman of 6th Session of Supervisory Committee for the Company from October 2011 to August 2012; Director of 6th session of the Board since August 2012, Chairman of Sinopharm Group Sanyi Pharmaceutical (Wuhu) Co., Ltd. since July 2012; had current post of Director of Sinopharm Group Chemical Reagent Co., Ltd. since December 2013 and deputy chairman of 6th session of the Board for the Company since February 2014.

Chairman—Mr. WeiYulin, MBA, senior economist, Licensed Pharmacist, pharmacist-in-charge and CCOM. He served as the follow post in latest 5 years: Chairman of Sinopharm Holding Beijing Huahong Co., Ltd. from August 2008 to November 2011; he serves as President and Party Secretary of Sinopharm Group Co., Ltd. since December 2009; Chairman of Beijing Tianxing Puxin Biological Medical Co., Ltd from April 2010 to November 2011; Chairman of Yujia Medical Consultancy Co., Ltd. from September 2010 to November 2011; serves as Chairman of Sinopharm Holding H.K. Co., Ltd since January 2011; Chairman of Sinopharm Le-Ren-Tang Medicine Co., Ltd. from April 2011 to June 2013 and deputy chairman of Sinopharm Le-Ren-Tang Medicine Co., Ltd. since June 2013; Chairman of Sinopharm Group Chemical Reagent Co., Ltd. from December 2011 to December 2013 and Chairman of the 6th Session of the Board of the Company from October 2011 to February 2014; He Serves as Director of Sinopharm Holding Guoda Pharmacy Co., Ltd since August 2012; Chairman and Party Secretary of Sinopharm Group Co., Ltd. since November 2013 and Director of 6th session of the Board for the Company since February 2014.

Director——Mr. Ma Wanjun, EMBA. He served as the follow post in latest 5 years: GM of Shanghai Sinopharm Waigaoqiao Medicine Co., Ltd. from October 2006 to December 2009; deputy GM of Operation Center of Sinopharm Group Co., Ltd. from December 2009 to September 2010; Director of Sinopharm Holding Shenyang Co., Ltd from January 2010 to November 2011; he sreves as Chairman of Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. since March 2010; Director of Sinopharm Holding Suzhou Co., Ltd from May 2010 to November 2011; Chairman of Sinopharm Holding Jiangsu Co., Ltd from May 2010 to November 2011; Director of Wenzhou Biomedicine-Appliances Supplies Co., Ltd. from July 2010 to November 2011; deputy President of Sinopharm Group Co., Ltd. since September 2010; Chairman of Sinopharm Holding Henan Co., Ltd from October 2010 to January 2013; Director of Sinopharm Holding Changzhou Co., Ltd from December 2010 to November 2011; Director of Shanghai Bionuo Enterprise Management Co., Ltd. from December 2010 to November 2011; general counsel of Sinopharm Group Co., Ltd. from May 2011 to October 2012; he serves as Director of Sinopharm Le-Ren-Tang Medicine Co., Ltd. since April 2011; Director of Sinopharm Group Shaanxi Co., Ltd. from April 2011 to September 2011; Director of China National Medicines Corporation Ltd since October 2011; Director of Yujia Medicine Service Co., Ltd. since November 2011; Chairman of Sinopharm Health Industry (Shanghai) Co., Ltd. since November 2011; Director of 6th Session of the Board for the Company since March 2011; Chairman of Sinopharm Holding Health Development (Shanghai ) Co., ltd since May 2012; Chairman of Sinopharm Holding Fujian Co., Ltd and Sinopharm Holding Fuzhou Co., Ltd since August 2012; he serves as executive Director of Sinopharm Holding Henan Co., Ltd. since January 2013 and executive Director of Shanghai Tongyu Information Technology Co., Ltd. since April 2013.

Director – Mr. Jiang Xiuchang, a university background, senior economists and senior accountant. He served as the follow post in latest 5 years: CFO of China National Medicines Corporation Ltd. from December 2006 to May 2010; CFO of Sinopharm Group Co., Ltd. since May 2010; he acts as deputy President of Sinopharm Group Co., Ltd. since July 2013 and hold concurrent post of Supervisor of Sinopharm Holding Guoda Pharmacy Co., Ltd since June 2010; Supervisor of Yujia Medicine Co., Ltd. since September 2010; Director of China National Medicines Corporation Ltd since February 2011; Director of Sinopharm Le-Ren-Tang Medicine Co., Ltd since April 2011; Director of Sinopharm Holding H.K. Co., Ltd since November 2011; Director of Sinopharm Group Financial Co., Ltd since November 2011; Director of Sinopharm Group Shaanxi Co., Ltd. from April 2011 to September 2011; Supervisor of Sinopharm Sub Marketing Center Co., Ltd. since April 2011; Supervisor of Sinopharm Holding Beijing Co., Ltd. and

50 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Director of Sinopharm Group Financial Co., Ltd since November 2011; he serves as Director of 6th session of the Board for the Company since March 2011, Chairman of Sinopharm Holding Jiangxi Co., Ltd. since June 2013; Chairman of Sinopharm Holding Shanxi Co., Ltd., deputy Chairman of Sinopharm Group Shaanxi Co., Ltd., Chairman of Sinopharm Holding Tianjin Co., Ltd. and Chairman of Sinopharm Holding Inner Mongolia Co., Ltd. since since December 2013.

Director—Mr.Yan Zhigang, MBA, senior engineers and Licensed Pharmacist. He served as the follow post in latest 5 years: Deputy GM of the Company from January 2005 to December 2008; Director of Sichuan Industrial Institute of Antibiotics since October 2007. He acts as GM of the Company since December 2008; Director of the 5th and 6th Session of the Board for the Company since February 2009.

Independent Director --- Mr. He Zhiyi, Doctor Degree of Fudan University, Post doctorate of Beijing University, Professor and PH.D adviser. Currently, he works as the vice Dean of New Huadu Business School. He acted as vice Dean of Antai College of Economics& Business Administration of SJTU; the professor, PH.D adviser and Dean Assistant of Guanghua Administration College of Beijing University and Office Director of Administration Case Research of Beijing University; He use to took advance study and visiting scholar in Sweden IMD, GM school of Management and Kellogg school of Management, Northwestern University of USA. He also worked as the deputy dean of Development& Research of Poverty-zone of Beijing University, executive director of Chinese Enterprise Research Center of Beijing University, executive editor of Business Comments of Beijing University magazine, vice-chairman and secretary of the Chinese Federation for Corporate Social Responsibility, vice-chairman and secretary of CNEMA and Director of IFSAM etc. Mr. He Zhiyi owes rich experience, and also served as position in government, GM in State-owned enterprises, Chairman of joint-stock enterprises, President of Beijing University Xiaochang Business Co., Ltd and Director of Office of Industrial Management, funded by school. He serves as Independent Director of 5th and 6th Session of the Board for the Company since June 2010.

Independent Director --- Mr.Xiong Chuxiong, a doctor degree, professor and a CPA. He graduated from Accounting Dept. of Southwestern University of Finance & Economics and Accounting Dept. of Xiamen University successively. After obtained the PhD. Economics in Xiamen University in 1992, he was assigned to teach in accounting majors of Shenzhen University. He used to be a visiting scholar in University of Manchester, U.K. currently; he works as professor in Shenzhen University and vice chairman of Shenzhen Accounting Association. He published many works and articles successively and shows certain influence in China due to his academic achievements. He serves as Independent Director of the 6th Session of the Board for the Company since April 2011.

Independent Director—Mr. Xiao Shengfang, attorney, a postgraduate of Civil & Commercial Law of Renmin University of China and MBA of Jinan University. Currently serves as director of Guangdong Sino-Win Law Firm, and served social position of: Director of Guangdong Lawyers Association, Standing director of Guangzhou Lawyers Association, legal consultant of People‘s Government of Guangzhou City; member of lawyers advisory group of organizing committee of 16th Asian Games, Guangzhou, vice director of professional committee of Labor Law & Social Security Law, China Lawyers Association. Lawyer Xiao Shengfang gains a solid legal theory and rich experience in aspect of Corporate Law, Civil & Commercial Law as well as Labor Law. He serves as Independent Director of 6th Session of the Board for the Company since April 2011.

2. Members of supervisors:

Chairman of Supervisory Committee--- Mr. Feng Yifeng, University background, a CPA and ACCA. He served as auditor in audit dept. of Arthur Andersen Huaqiang CPA from August 2001 to June 2002; a senior manager of PWC Zhongtian CPA from July 2002 to June 2010; and he serves as director of financial manage dept. of Sinopharm Holding Co., Ltd. and Director of Sinopharm Holding Fujian Co., Ltd., subordinate of Sinopharm Holding, Sinopharm Holding Yixin Medicine Co., Ltd. and Sinopharm Holding Hainan Co., Ltd.; serves as supervisor of Sinopharm Group Chemical Reagent Co., Ltd. , Sinopharm Holding Henan Co., Ltd., Sinopharm

51 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Holding Changzhou Co., Ltd., Sinopharm Holding Wuxi Co., Ltd., Sinopharm Holding Gansu Co., Ltd. and Sinopharm Group Sanyi Pharmaceutical (Wuhu) Co., Ltd. He serves as chairman of supervisory committee of the Company since August 2012.

Supervisor——Ms. Guan Xiaohui, Master of Accounting, Certified Public Accountant and Economist. She served as the follow post in latest 5 years: vice CFO of Shanghai Fosun Pharmaceutical (Group) Co., Ltd. since November 2004; serves as supervisor of 5th and 6th Session of Supervisory Committee of the Company since September 2007.

Employee Supervisor——Mr. Wang Huaiqin, 3-years regular college graduate, political commissar, assistant accountant. He served as the follow post in latest 5 years: Chairman of First Union since September 2005 to March 2009; member of Party Committee, deputy secretary of discipline & inspection committee and chairman of Union of the Company since September 2008; serves as employee supervisor of 5th and 6th Session of Supervisory Committee of the Company since September 2007.

3. Senior executives:

General Manager-- Mr. Yan Zhigang, referring to the aforesaid introduction of members of directors for details

Deputy General Manger——Mr. Lin Zhaoxiong, senior MBA, Pharmacist-in-charge. He began to work in Guangzhou Medicine Industry Research Institute in July 1990; worked in Hangzhou MSD Pharmaceutical Co., Ltd from Jan. 1993 to Oct. 1997; Guangdong Huajian Pharmaceutical Co., Ltd from Nov. 1997 to Dec. 1998; worked in Sinopharm Holding Guangzhou Co., Ltd. with successively taking the posts of deputy general manger and manager of Pharmacy Department, and manger of Pharmaceutical Company and majordomo of Operation Management Department from Jan. 1999 to Dec. 2003; deputy general manager of Sinopharm Holding Guangzhou Co., Ltd from Jan. 2004 to Dec. 2006; serves as GM of Sinopharm Holding Guangzhou Co., Ltd. since December 2006 and deputy GM of the Company since December 2008.

Deputy General Manger——Mr. Tan Guoshu, on-study postgraduate, assistant economist and political commissar, ever took the post of deputy director of Gongxiaoshe, Dalonghua, Fengshun County, manager of affiliated corporation, deputy GM of Labor Service Company, Labor Bureau, Fengshun, GM of Labor Service Company, Boned Zone, Shatoujiao District, Shenzhen, deputy GM of Shenzhen Best Machinery Electronic Company, organization charger of Labor Service Company of Shenzhen Food Headquarter, and so on; from Apr. 1996 took the post of deputy director, minister of personnel minister and GM associate, etc. of supervision administration office of Shenzhen Medicine Produce & Supply Headquarter, and concurrently GM of Shenzhen Xiannuo Medicine Company, manager of Shatoujiao Medicine Company and manager of Nanshan Medicine Company, etc. during that time; held the position of minister of talents resources department of the Company and later concurrently vice secretary of DSC of the Company from Jan. 2001, and deputy GM and later concurrently vice secretary of Party Committee of the Company from Jun. 2003.

Deputy General Manger——Mr. Lin Min, senior MBA, Pharmaceutical Engineer, Licensed Pharmacist, worked in GuangDong Medical College from July 1986 to April 1992; took the posts of marketing minister, assistant to general manager of Guangdong Global Pharmaceutical Company Ltd. from April 1992 to Dec. 1997; deputy factory director of Manufacturing Factory of Guangdong Pharmaceutical University from Jan. 1998 to Dec. 2000; ever worked in China National Pharmaceutical Group Guangzhou Corporation with successively taking the posts of assistant to manager, deputy general manger of Pharmacy Department and deputy general manger of purchasing in Pharmaceutical Company from Jan. 2001 to Nov. 2003; supervisor of Guangzhou pharmacy sales of Sinopharm Holding Guangzhou Co., Ltd from Nov. 2003 to Jan. 2005; general manager of Sinopharm Holding Liuzhou Co., Ltd from March 2006 to Nov. 2007; from Jan. 2005 to Dec. 2008, deputy general manager of Sinopharm Holding Guangzhou Co., Ltd; serves as deputy GM of the Company since December 2008.

Deputy General Manger——Mr. Lin Xinyang, MBA, Licensed Pharmacist, from Jan. 1996 took the turns of deputy GM of Nanfang

52 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Pharm. Co., deputy GM of China Medicine Group (Guangzhou) Company Yuexing Company, general supervisor of PD of Sinopharm Holding Guangzhou Company; took the post of deputy GM of Sinopharm Holding Guangzhou Company from Jan. to Dec. 2004; serves as deputy GM of the Company since January 2005.

Deputy General Manger——Mr. Deng Baojun, an MBA, senior engineer and Licensed Pharmacist, worked as the doctor in Hospital of Personnel of 8-Bureau of Water-Electricity from July 1983 to July 1988; worked as the development personnel in Shenzhen Pharmaceutical Plant from September 1991 to May 1996; took the position of vice minister and minister of the market department and sales department respectively in Shenzhen Pharmaceutical Plant from May 1996 to September 2000; took the position of assistant of factory manager and sales majordomo in Shenzhen Pharmaceutical from September 2000 to August 2003; took the position of deputy general manager of Shenzhen Zhijun Pharmaceutical Co., Ltd. from August 2003 to December 2008; took the position as General Manager of Shenzhen Zhijun Pharmaceutical Co., Ltd. from December 2008 till now; took the position of general manager of pharmaceutical business department of China National Accord Medicines Corporation Ltd. since December 2010.

Chief Financial Officer——Mr. Wei Pingxiao, MBA, an accountant, took the turns of Financial department of State-owned Beijing Electronic Tube Plant, Modern Electronic Shenzhen Industrial Company, China Electronic Industrial Headquarter from Aug. 1985; and took the turns of deputy section chief of financial department of China Electronic Information Industry Group, financial director of AMOI, section chief of planning financial department of China Electronic Finance Leasing Company, Deputy GM of AMOI Beijing branch, financial charger of AMOI and director of its subsidiary from Apr. 1993; and hold the post of CFO of the Company since December 2004.

Secretary of the Board——Mr. Chen Changbing, Master Degree. He served as secretary of the Board of 3rd and 4th Session of the Board for the Company since December 2000; and serves as Chief of Planning Investment Management Dept. and Secretary of the Board of 5th and 6th Session of the Board for the Company since September 2007.

Post-holding in shareholder‘s unit

√Applicable □Not applicable Receiving

Start date of End date of remuneration from Name Name of shareholder‘s units Position office term office term shareholder‘s units (Y/N) President Executive director Wei Yulin Sinopharm Group Co., Ltd. 2013-11-01 2016-11-01 Y CPC secretary

Li Zhiming Sinopharm Group Co., Ltd. President 2013-11-01 2016-11-01 Y

Deputy president General Ma Wanjun Sinopharm Group Co., Ltd. 2011-05-01 2014-09-20 Y counsel Secretary of the Board

Jiang Xiuchang Sinopharm Group Co., Ltd. CFO 2010-06-01 2014-09-20 Y

53 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Assistant president director of Industry Cui Dieling Sinopharm Group Co., Ltd. 2011-03-01 2014-09-20 Y development & management center Director of financial Feng Yifeng Sinopharm Group Co., Ltd. 2010-06-01 2014-12-31 Y management dept. Post-holding in other unit

√Applicable □Not applicable End date Receiving Start date of remunerati Name Name of shareholder‘s unit Position of office offic on from term e other term units(Y/N) Sinopharm Holding H.K. Co., Ltd Chairman Jan. 2011

Sinopharm Group Chemical Reagent Co., Ltd. Chairman Dec. 2011

April Wei Yulin Sinopharm Le-Ren-Tang Medicine Co., Ltd. Chairman N 2011

Aug. Sinopharm Holding Guoda Pharmacy Co., Ltd Director 2012

Sinopharm Group Xinjiang Pharmaceutical Co., Ltd. Chairman May 2013

Sinopharm Holding Ningxia Co., Ltd Chairman June 2011

Sinopharm Holding Shaanxi Co., Ltd. Chairman Oct. 2011

Sinopharm Holding Gansu Co., Ltd. Chairman Oct. 2011 Li Zhiming N Sinopharm Holding Qinghai Co., Ltd. Chairman Oct. 2011

China National Medicines Corporation Ltd Chairman Oct. 2011

Sinopharm Holding H.K. Co., Ltd Director Jan. 2014

Sinopharm Holding Sub Marketing Center Co., Ltd. Executive Director Jan.2014

Guangdong Dong Fang Uptodate & Special Medicines March Chairman Co., Ltd. 2010

Sinopharm Holding Henan Co., Ltd Chairman Oct. 2010

Sinopharm Holding Henan Co., Ltd Executive Director Jan. 2013

Sinopharm Holding Changzhou Co., Ltd Director Dec. 2010 Ma Wanjun N Shanghai Bionuo Enterprise Management Co., Ltd. Director Dec. 2010

April Sinopharm Le-Ren-Tang Medicine Co., Ltd. Director 2011

April Sinopharm Group Shaanxi Co., Ltd. Director 2011

54 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

China National Medicines Corporation Ltd Director Oct. 2011

Nov. Yujia Medicine Service Co., Ltd. Director 2011

Sinopharm Health Industry (Shanghai) Co., Ltd. Chairman Nov.2011 Sinopharm Holding Health Development (Shanghai) Chairman May 2012 Co., ltd. Aug. Sinopharm Holding Fujian Co., Ltd Chairman 2012

Aug. Sinopharm Holding Fuzhou Co., Ltd Chairman 2012

Sinopharm Holding Guoda Pharmacy Co., Ltd Supervisor June 2010

Sept. Yujia Medicine Co., Ltd. Supervisor 2010

China National Medicines Corporation Ltd Director Feb. 2011

April Sinopharm Le-Ren-Tang Medicine Co., Ltd. Director 2011

Nov. Sinopharm Holding H.K. Co., Ltd Director Jiang 2011 N Xiuchang Nov. Sinopharm Group Financial Co., Ltd Director 2011

April Sinopharm Group Shaanxi Co., Ltd. Director 2011

April Sinopharm Holding Sub Marketing Center Co., Ltd. Supervisor 2011

Nov. Sinopharm Holding Beijing Co., Ltd Supervisor 2011

Sinopharm Yixin Medicine Co., Ltd. Chairman Oct. 2011

Sinopharm Xingsha Pharmaceuticals (Xiamen) Co., Chairman Dec. 2011 Ltd.

Sinopharm Group Sanyi Pharmaceutical (Wuhu) Co., Cui Dieling Chairman July 2012 N Ltd.

Chairman of China National Medicines Corporation Ltd Supervisory Dec. 2011 Committee

April Sinopharm Holding Fujian Co., Ltd Director 2012 Feng Yifeng N Sinopharm Yixin Medicine Co., Ltd. Director May 2012

Sinopharm Holding Hainan Co., Ltd Director May 2012

55 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Sinopharm Group Chemical Reagent Co., Ltd. Supervisor May 2012

Sinopharm Holding Henan Co., Ltd Supervisor June 2012

Sinopharm Holding Changzhou Co., Ltd Supervisor Dec. 2010

Sinopharm Holding Wuxi Co., Ltd Supervisor Dec. 2012

Sinopharm Holding Gansu Co., Ltd Supervisor May 2012 Sinopharm Holding Health Development (Shanghai) Supervisor May 2012 Co., ltd. Sinopharm Group Sanyi Pharmaceutical (Wuhu) Co., Supervisor July 2012 Ltd.

Shenzhen Main Luck Pharmaceuticals Inc. Chairman May 2010 Yan Zhigang N Sichuan Industrial Institute of Antibiotics Director Oct. 2007

He Zhiyi Newhuadu Business School Vice dean Jan. 2009 N

Shenzhen University Professor

April Xiong Shenzhen Zhongjin Lingnan Nonfemet Co., Ltd. Independent Director 2011 Y Chuxiong Shenzhen International Enterprise Co., Ltd. Independent Director July 2010

Hytera Communications Co., Ltd. Independent Director Jan. 2010

Xiao Guangdong Sino-Win Law Firm Director Y Shengfang III. Remuneration for directors, supervisors and senior executives

Decision-making procedures, recognition basis and payment for directors, supervisors and senior executives (I) Remuneration decision procedure of directors, supervisors, senior management: The Company implemented the annual salary system for senior executives based on the 2013 annual performance appraisal (scheme) on management staff, paid annual salary remuneration according to the appraisal results. Remuneration and appraisal committee of the company's board of directors is responsible for the formulation and examination of salary plan and program as well as formulation and examination of salary plan and assessment standards of directors (not including the independent directors), supervisors and senior executives. They also evaluate the performance assessment of directors, supervisors and senior officers in accordance with the assessment criteria, compensation scheme.

(II) Remuneration determining basis The main principles of making standard of compensation are: (1) the company's overall business and the profit level; (2) the overall salary level and dynamic index over past years; (3) difference in position and duty; (4) relative importance and risks of position; (5) related post salary level in the same industry; (6) individual professional ability.

(III) Actual payment Executives get monthly basic salary and annual salary after the issuance of annual examination.

Remuneration for directors, supervisors and senior executives in reporting period In 10 thousand Yuan

Post-holding Total Remuneration Name Title Sex Age status remuneration actually

56 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

obtained from obtained at the Company period-end

Currently in Li Zhiming Chairman M 50 0 office

Currently in Wei Yulin Director M 56 0 office

Shi Jinming Director M 46 Office leaving 0

Currently in Ma Wanjun Director M 44 0 office

Currently in Jiang Xiuchang Director M 50 0 office

Currently in Cui Dieling Director F 48 0 office

Currently in Yan Zhigang GM M 54 180 180 office

Independent Currently in He Zhiyi M 58 8 8 director office

Xiong Independent Currently in M 58 8 8 Chuxiong director office

Xiao Independent Currently in M 44 8 8 Shengfang director office

Chairman of Currently in Feng Yifeng supervisory M 35 0 office committee

Currently in Guan Xiaohui Supervisor F 43 0 office

Currently in Wang Huiqin Supervisor M 56 51 51 office

Currently in Lin Zhaoxiong Deputy GM M 46 146 146 office

Currently in Tan Guoshu Deputy GM M 59 117 117 office

Currently in Lin Min Deputy GM M 49 126 126 office

Currently in Lin Xinyang Deputy GM M 49 117 117 office

Currently in Deng Baojun Deputy GM M 52 146 146 office

Wei Pingxiao CFO M 50 Currently in 117 117

57 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

office

Secretary of Currently in Chen Changbin M 46 52 52 the Board office

Total ------1,076 1,076 Delegated equity incentive for directors, supervisors and senior executives in reporting period

□ Applicable √ Not applicable

IV. Post-leaving and dismissals for directors, supervisors and senior executives

Name Title Type Date Reasons Shi Jinming Director Office leaving 2014-01-09 Director resignation

Li Zhiming Director Election 2014-02-18 Director supplement

Li Zhiming Chairman Election 2014-02-27 Elected by the Board

Deputy Cui Dieling Election 2014-02-27 Elected by the Board Chairman V. Changes of core technology team or key technicians in reporting period (not including directors, supervisors and senior executives)

Nil. VI. Particulars of workforce The Company has 4280 practitioners at end of 2013 in total, and 593 people labor dispatching,76 people labor outsourcing, total working hours amounting to 1.4 million, laboring remuneration paid amounting as RMB 35.5747 million in total, there are 665 people in retired who enjoy the partial expenses paid from the Company

Professional structure for year of 2013:

Category Number Ratio Production personnel 1158 27.06% Sales persons 1202 28.08% Logistic persons 161 3.76% Technical personnel 565 13.20% Administrative and 1194 27.90% other personnel Total 4280 100%

58 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Education background for year of 2013: Education Number Ratio Master degree or above 155 3.62% Bachelor degree 1310 30.61% 3-years regular college 1135 26.52% graduate Polytechnic school 1680 39.25% graduate or below Total 4280 100%

59 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Average age for all employee of the Company was 33.7 years old, including 34.23 percent with bachelor degree or above, 40 people with advanced level accountant and 122 licensed pharmacist.

Remuneration policy for employee: Sinopharm Accord and subordinate enterprises provides the perfect salary and welfare for employees. Salary level closely linked with organization (total amount of artificial, compensation strategy, position value), employees (capacity development, performance results), market (market level, the competition for talent). Each year we regulate remuneration of those capable staff through duty carding, job evaluation, salary interval mapping, annual assessment on performance and ability. At the same time, bonus and performance are closely linked, thus achieve a win-win interests and benefits between the Company and employees.

The Company continued to promote the implementation of annuity plan, further to implement this welfare policy in place, performed new application procedures for eligible employees, to take the initiative to assist with retirement payment procedures and guarantee a retirement security for employees. As the end of 2013, staff eligible to participate in the enterprise annuity plan reached more than 22%.

Training plan: Sinopharm Accord and its subordinate entperises, paid great attention to the occupation development and traning of employees. Training management systems of the Company were improved gradually with purpose of carrying out effective employee training, including construction of training mechanism, construction of management

60 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) training, establishement of curriculum system and examination & assessment system. In 2013, according to the charateristic and training requirement for different training objects of managers, core business talent and worker at the production line, carried out vary targeted training in aspect of standards, category and region. By the end of 2013, aprpoximately RMB 2.762 million costs in training for perfoming vary training of generic competencies, professional qualities and management quality as well as job qualification training and continuing education of technical qualification regularly. Total 31344 person-time completed for training and continuing education, covers employees of jounio & senior manager, front-line manager, professionals & technical and operators, class hour per person up to 19 hours.

61 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section VIII. Corporate Governance

I. Basic situation of corporate governance

Articles of Association are formulated at governance level. In compliance with requirements of Articles, rules of procedures for shareholders‘ meeting, board and board of supervisors, working system of strategy committee, nomination committee, internal risk control and audit committee, remuneration and evaluation committee, general manager and secretary to board, corporate governance system regarding information disclosure, connected transactions, fund raising, performance of social responsibilities, inside information and informant management, investor relation management, engagement of accounting firm and prevention of occupation by major shareholders and connected parties of capital of listing companies are also established.

During the Reporting Period, the Administrative Measures for Fund Raising has been revised according to regulatory requirements and governance needs to standardize and refine the management and control on the storage, use, change of purpose and supervision of raised capital. The effective implementation of the above corporate governance system ensures the effective performance of duties and responsibilities of respective committees, thereby facilitating the board of supervisors to play a supervisory role and offering help for the board to make scientific decisions.

Is there any difference between the corporate government, the Company Laws and relevant regulations from CSRC

√ Yes □ No

Explanation on difference existed among the corporate governance, Corporation Law and related regulations of China Securities Regulatory Commission

As a state-holding listed enterprise, the Company executed relevant regulations of state-owned assets management by controlling shareholder and actual controller. Details are as:

Serial Information Relationship with the Type Basis for submitted Submitted cycle submitted object listed company 1 Sinopharm Group First largest shareholder Financial Needs of consolidated statement of Regular statement largest shareholder Co., Ltd. 2 China National Actual controller Assets Management method of state-owned Temporary Evalution property right transfer and equity Pharmaceutical Report ect. investment management of China Group Corporation National Pharmaceutical Group Corp.

According to requirements of the "Notice on Strengthening Supervision on Condition that Listing Corporation Offering Undisclosed Information to Shareholders and Actual Controllers" and the "Appending Notice on Strengthening Supervision and Governance on Non-normative Behavior such as Listing Corporation Offering Undisclosed Information to Shareholders and Actual Controllers issued by the Shenzhen securities regulatory bureau, in September of 2007, the company's board of directors and board of supervisors approved the "Bill on

62 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Implementing Staff Report of Insider Trading Information and Governance on Non-standard Special Information Disclosure" which agreed that the Company implements enforcement of secrecy and staff report system for insider trading information when conducting relevant provisions of the management of state-owned assets, regularly submitting the financial statements to major shareholders and reporting to the major shareholder about state-owned assets disposal. From September of 2007, the company reports the "Statistics about Unpublished Information Offered to Major Shareholders and Actual Controllers‖ to the Shenzhen securities regulatory bureau.

Progress of special activity in relation to corporate governance and determination and implementation of insider registration management system The ―Management Mechanism of inside Information and Insiders for Sinopharm Accord‖ was formulated by the Company, responsibilities, range of insiders, regulation of information privacy, information approval, registration & filing for insiders and accountability are well-defined in the Mechanism. Self-evaluation of the internal control of the Company shows that the Company was strictly, in line with regulations, performed the management of information privacy during the Period. II. In the report period, the Company held annual general meeting and extraordinary general meeting

1. Annual General Meeting in the report period Name of meeting Session of meeting Date Situation Date of disclosure Index of disclosure motion ―Report of the Board for year of 2012‖; ―Report of Supervisory Committee for year of 2012‖; ―Annual Report and Summary of 2012‖ ; ―Profit Distribution Juchao Plan for year of Website—(http://ww 2012‖ ; w.cninfo.com.cn) Annual general 2013-04-19 ―Application of All pass 2013-04-20 ―Resolution Notice meeting 2012 Comprehensive of Annual General Credit Line Limit Meeting 2012‖ No.: and Guarantee 2013-10 Arrangement for the year of 2013 ‖(special resolution); ‖Daily related transaction with related party from the Company and its subordinate enterprise for year of

63 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

2013‖; ―Re-engagement of Auditing Institution for Annual Report and Internal Control‖

2. Extraordinary general meeting in the report period Name of meeting Session of meeting Date Situation Date of disclosure Index of disclosure motion Juchao Website—(http://w ‖Increase of the ww.cninfo.com.cn) First extraordinary predicted amount for ―Resolution general meeting of 2013-01-17 daily related All pass 2013-01-18 Notice of First 2013 transaction for year extraordinary of 2012‖ general meeting of 2013‖ No.: 2013-01

‖Adjustment of Bank Credit Limited and Guarantee Arrangement for year of 2013‖(special resolution); ―Financial service Juchao offering from Website—(http://ww Sinopharm Group Second w.cninfo.com.cn) Financial Co.,Ltd for extraordinary ―Resolution Notice 2013-09-06 the All pass 2013-09-07 general meeting of of Second Company‖; ‖Increas 2013 extraordinary e of registration general meeting of quota for short-term 2013‖ No.: 2013-44 financing bonds‖; ‖Fi nancial transfer between the Company and controlling subsidiary through entrust loans‖

Third ‖The Company Juchao 2013-09-12 All pass 2013-09-13 extraordinary conforms with the Website—(http://w

64 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) general meeting of condition of ww.cninfo.com.cn) 2013 Privately Offering of ―Resolution A-share‖; ‖Plan of Notice of Third Privately Offering of extraordinary A-share‖; general meeting of ―Preplan of Privately 2013‖ No.: Offering of 2013-45 A-share‖; ―Feasibility Report of the Placement Utilization from Privately Offering of A-share ‖ ; ―Explanation on Previous Placement Utilization‖; ‖the ―Share Subscription Contract‖ with entry-into-force conditions that signed by the Company and Sinopharm Group Co., Ltd‖; ―Offering with Related transaction involved‖;‖ Motion for authorization from the general meeting to the Board for Privately Offering matters‖;‖ Motion for agreement that Sinopharm Group Co., Ltd. is free of increasing shares of the Company through tender offer‖; ‖Amen dment on Management Methods for Raise

65 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Funds of China National Accord Medicines Corporation Ltd.‖

Juchao Website—(http://w ‖Offering Joint ww.cninfo.com.cn) Fourth Liability Assurance ―Resolution extraordinary 2013-11-12 Guarantee to All pass 2013-11-13 Notice of Fourth general meeting of Wholly-owned extraordinary 2013 Subsidiary‖ general meeting of 2013‖ No.: 2013-48 III. Responsibility performance of independent directors in report period

1. The attending of independent directors to Board meetings and general meeting The attending of independent directors Times of Board Absent the meeting Times of Times of Times of Times of Meeting for the Independent director supposed to attending by entrusted Presence Absence second time in attend in the communication presence a row (Y/N) report period He Zhiyi 8 1 7 0 0 N

Xiong Chuxiong 8 1 7 0 0 N

Xiao Shengfang 8 1 7 0 0 N Times of the attending of independent directors to general 5 meeting Explanation of absent the Board Meeting for the second time in a row

2. Objection for relevant events from independent directors

Whether independent directors come up with objection about company‘s relevant matters or not

□ Yes √ No

Independent directors has no objections for relevant events in reporting period

3. Other explanation about responsibility performance of independent directors

Whether the opinions from independent directors have been adopted or not

√Yes □ No

66 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Explanation of independent directors on accepted or unaccepted suggestions During the reporting period, the independent directors performed their duties in a careful, diligent, dedicated attitude in accordance with requirements of the "Working System of Independent Director", offered some useful suggestions and opinions on business decision-making, legal affairs, financial management and other aspects; carefully examined important matters those needed opinions of independent directors, made independent judgments and issued a written independent opinion on major related transactions, daily related transactions, accountancy hiring and other matters, playing a positive role in safeguarding the legitimate rights and interests of small shareholders. Besides, independent directors played an important role in operation of special committee. At the same time, the Company can guarantee independent directors and other directors of the same right to know. During the reporting period, the independent directors have no objection on the related issues of the Company

IV. Responsibility performance of subordinate special committee of the Board in report period

(I) Duties fulfillment of the board of directors and audit committee on internal control over risk

Internal control on risk and Audit Committee of the board of directors of the company comprises 3 independent non-executive directors and 3 directors, including the convener (professional accountant) is an independent director. In accordance with relevant provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange and working system, Internal control on risk and Audit Committee of the board of directors seriously performed duties in a dedicated attitude. In the annual financial report audit, they acted as supervisors, maintained individuality of audit and issued a series of notices such as the Written Opinion on Financial Accounting Statements Issued by the Company before CPA of Annual Examination Entered, the Written Opinion on Financial Accounting Statements after Preliminary Audit Issued by CPA of Annual Examination, the Summary Report of Internal Risk Control and Audit Committee on the Annual Audit Work of CPA as well as the Resolution on Rehire the Audit Institution. Its main duties comprise the following: 1. Risk internal control and audit committee is responsible for determining the audit work schedule, negotiating with CPA who engages in audit; 2. Before CPA enters, audit committee should review the financial statements prepared by the Company and issue written opinions; 3. Strengthen communication with the CPA, and urge them to submit audit report within stipulated time with urgency letter; 4. Review again the financial statements after the CPA issues preliminary opinion, and issue written opinions; 5. The Committee held annual work conference 2013, approved proposal of financial accounting report, summary report of annual audit work of CPA and rehiring PWC Zhongtian CPA as the audit institution, and then formed a resolution to submit to board of directors for approval.

67 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

(II) Duties fulfillment of Remuneration and Appraisal Committee As special working mechanism of the board of directors, the remuneration and appraisal committee is responsible for approving the assessment standard of directors and senior executives, formulating and reviewing compensation policies and programs of directors and executive. And they take charge in examining according to the standard and policies. The remuneration and appraisal committee is composed of 3 directors, including 2 independent directors; convener is He Zhiyi, an independent director.

During the reporting period, remuneration and assessment committee actively performed duty; clearly defined their responsibilities; did serious research and appraisal on the remuneration and appraisal system, especially salary, assessment system and program over directors, supervisors and senior executive. According to working rules of the remuneration and appraisal committee, they have rights to check regular reports, meetings records, business planning and other materials by telephone, interviews and other methods to learn the performance of directors, executives. And they‘re required to submit problems existing in implementation of system to the Board of Directors and raise up suggestion on them. Their contents are as follows:

1. In 2013, the remuneration and appraisal committee carried out the performance evaluation of executives according to the 2012 Annual operation standard and performance. 2. It proposed the "2014 Evaluation Scheme of Operating Performance", and submitted it to the board of directors for approval. 3. The remuneration and appraisal committee approved salary of directors, supervisors and senior executives disclosed in 2013 annual report. And it issued the following opinions: Compensation decision procedures of directors, supervisors and senior management personnel was in accordance with the provisions; the standard was in accordance with the remuneration system; the disclosure of 2013 annual report about personnel salary of the directors, supervisors and senior management is real and accurate.

68 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

V. Works from Supervisory Committee

Whether the Company has risks or not in reporting period that found in supervisory activity from supervisory committee

□ Yes √ No

Supervisory committee has no objection about supervision events in reporting period

VI. Independency of the Company relative to controlling shareholders’ in aspect of businesses, personnel, assets, organization and finance

The Company totally separates from the controlling shareholders in business, personnel, assets, institutions, financial and other aspects, with independent and complete self-management ability. 1. The business: in the business, the Company was independent from controlling shareholders, having a complete business system and self-managing ability; the company has independent procurement and sales system thus all procurement and sales of drugs and raw materials is in charge of the purchasing department and subordinate subsidiary, branch and production enterprises; production, supply, marketing and R & D separate from each other; the Company is a legal market person with independent operation. 2. Personnel: procedures of the controlling shareholder nominating directors and general and deputy general manager are legal; no intervene on the appointment and removal of personnel made by the board of directors and shareholders‘ meeting happened; the Company set up independent human resource department, responsible for assessment, training and salary review on staff, making rules and regulations and handbook the employees should abide by. Labor, personnel, wages and pension, medical insurance and other insurance are independently managed. 3. Institution: production and operation mechanism and administrative management is completely independent from the controlling shareholder or actual controller; offices and sites of business operation separate from the controlling shareholder; the Company established corporate governance structure where the board of directors, board of supervisors and managers carry out their duties and exercise their respective duties in accordance with relevant provisions of the articles of association. 4. Asset: property and rights relationship between the Company and the controlling shareholder is clear, with independent operations; the company has independent production system, auxiliary production system and supporting system; industrial property rights, trademarks, non-patented technology and other intangible assets owned by the Company and its subsidiary. 5. Financial aspects: the Company established independent financial departments and independent financial accounting system; the Company opened a bank account independently; there is no funds having been saved in financial companies or settlement account controlled by large shareholders or other related parties; the financial staff is independent without taking part-time and receiving remuneration in the controlling shareholder; the Company pays tax independently.

69 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

VII. Horizontal Competition 1. As subordinate companies of majority shareholder, Foshan Nanhai Medicine Co., Ltd. (―Nanhai Medicine‖) and Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. (―Dong Fang Uptodate & Special Medicines‖) both operate pharmaceutical distribution business within Guangdong, which partially overlaps with the pharmaceutical distribution business and geographical location of the Company and constitutes peer competition. In July 2013, to solve the problem of peer competition, majority shareholder entrusted Sinopharm Accord and Sinopharm Accord agreed to take over the management of the above two companies.

2. As a subordinate enterprise of the de facto controller, Guangdong South Pharmaceutical Foreign Trade Co., ltd. operates pharmaceutical distribution business within Guangdong, which partially overlaps with the pharmaceutical distribution business and geographical location of the Company and constitutes peer competition. In September 2013, to solve the problem of peer competition, majority shareholder entrusted Sinopharm Accord and Sinopharm Accord agreed to take over the management of the above company. 3. As a subordinate pharmaceutical enterprise of de facto controller, the primary business of Sinopharm Group Weiqida Pharmaceutical Co., Ltd. is similar to the pharmaceutical industrial products of the Company, which constitutes peer competition. To solve the peer competition, Sinopharm Group issued in September 2013 the Letter of Undertaking from China National Pharmaceutical Group Corporation on Avoiding the Peer Competition with China National Accord Medicines Corporation Ltd. and undertook that, in the coming five years, Sinopharm Group intends to take appropriate measures including the disposal of assets, equity injection and stoppage of production to solve the problem of peer competition between Weiqida and Sinopharm Accord.

VIII. Appraisal and incentive mechanism for senior executives

Senior executives of the Company took responsibility for the board of directors, in the report period, the board of directors implemented the performance checking mechanism that the remuneration of senior executives related with their performance checking, with achievement as direction, and made relevant reward and punishment according to target completion. The Company‘s relevant incentive and restriction mechanism gradually in order to further exert the enthusiasm and creativity of senior executives, urge the senior executives to perform the obligations of being honest and diligent. The Company had no incentive mechanism for senior executives such as stock option, purchase of management team and equity held by owner.

70 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) Section IX. Internal control

I. Internal control construction

During the Reporting Period, the Company continued to perfect governance structure and further improve internal management pursuant to Company Law of the PRC, Securities Law of the PRC, the Standard of Corporate Governance for PRC Listed Companies and the Basic Standard for Enterprise Internal Control jointly issued by the Ministry of Finance and CSRC, and Guidelines of Shanghai Stock Exchange for Internal Control of Listed Companies. Currently, a relatively complete internal control system has been established to basically cover all control aspects in operation including management control, finance control and production and operation. Meanwhile, the Company organized annual revision and irregular improvement of internal control system and self-assessment criteria based on the change in internal and external business environment, adjustment of business pattern, new format and organizational structure, and exercised strict control over authorization and approval through self-assessment on internal control, field auditing surveillance, special auditing, analysis and standardized procedures for all types of systems including OA office\NC finance\overall budget\CMS distribution\WMS distribution and logistics\inspur pharmaceuticals), thereby ensuring the effective implementation of internal control system and laying a sound foundation for the Company‘s normal operation. a. Corporate management control During the Reporting Period, the Company at governance level has revised the Administrative Measures for Fund Raising according to regulatory requirements and governance needs to standardize and refine the management and control on the storage, use, change of purpose and supervision of raised capital. The Company at management level has newly-established systems such as supplementary pension, benevolent fund, social responsibility and Three Important Matters and One Big Concern, and focused on the revision of systems and procedures of overall risk management, overall budget, performance, remuneration, brand management, OA office, press publicity, seal management, external donation and internal auditing. b. Financial management control During the Reporting Period, the Company has newly-established financial system in respect of the financial management of infrastructure project, profit distribution of subsidiaries and NC capital management, and focused on the revision of fund raising, approval procedure in terms of receipts and payments, accountability of loss on assets and tax management system. c. Production and operation control During the Reporting Period, the Company has revised and improved the quality management system involving various business aspects including R&D, procurement, marketing, production, quality, safety, storage and customer service pursuant to requirements of Good Manufacture Practice of Drugs, Good Supply Practice for Pharmaceutical Products and Good Agricultural Practice for Chinese Crude Drugs. Also, distribution business has optimized all types of systems and procedures with a focus on the intelligent supply chain, and pharmaceutical business has promoted the construction of integrated management and control with a focus on R&D and marketing management.

II. Declaration of board of directors on internal control responsibilities The establishment, completion and effective implementation of internal control is task of the board of 71 China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text) directors. Internal control was made for legal compliance of operation, ensuring the security and integrity of assets, ensuring timeliness, authenticity, accuracy and integrity of the accounting information, and guarding against all kinds of risks as well as promoting the implementation of development strategy. In the Period, the board effectively and comprehensively evaluated design and implementation of the Company‘s internal control system, they think: the company's existing internal control was in accordance with the relevant state laws and regulations, playing a role in major risk, fraud and serious errors management in aspects of control and protection. The Company has established a customer and market oriented internal control risk management system, under which the operation and management are standardized, orderly and controllable, thereby implementing a functioning mechanism deeply integrating the risk internal control with daily operation. In addition, due to the fact that any change in external situation may result in improper internal control or reduced compliance of control policy and procedure, there is certain risk to conjecture the effectiveness of internal control in future based on the assessment on internal control.

III. Basis of establishing internal control over financial reporting

According to the "Basic Norms of Internal Control", "Accounting Law", "Accounting Standards for Business Enterprises" and relevant normative documents of regulatory authorities, the Company established internal control system of the financial report

IV. Evaluation report of internal control Details of major defects in evaluation report that found in reporting period No major defects of internal control been found in the Period Date of evaluation report of internal control disclosed 2014-03-22 (Full-text) Index of evaluation report of Juchao Website: (http://www.cninfo.com.cn); ‖Self-evaluation Report of Internal internal control Control of China National Accord Medicines Corporation Ltd for year of 2013‖ disclosed(Full-text)

V. Audit report of internal control

√ Applicable □ Not applicable Auditing comments section for audit report of internal control According to relevant regulations and ―Basic Norms of Internal Control‖, the Company maintained an efficiency internal control of financial report, in all material aspects, dated 31 December 2013 Disclosure date of audit report of 2014-03-22 internal control (full-text) Index of audit report of internal ‖Audit report of internal control for year of 2013 of China National Accord Medicines control (full-text) Corporation Ltd.‖ published on Juchao Website (www.cninfo.com.cn) Is the CPA carries out qualified opinion for audit report of the internal control □ Yes √ No Is the internal control audit report, issued by CPA, consistent with the opinions of self-evaluation report issued from the Board? √ Yes □ No

VI. Establishment and enforcement of Accountability Mechanism for Major Errors in Annual Report

The ―Accountability Mechanism for Major Errors in Annual Report Disclosure‖ was deliberated and approved on 15th Meeting of 5th Session of the Board dated 20 March 2010, and has been published and implemented. No major errors are found in the Company during reporting period. 72 CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated and company balance sheets For the year ended 31 December 2013 (All amounts Renminbi ―RMB‖ unless otherwise stated)

Section X Financial Report

ASSETS Note Consolidated Company 31 December 2013 31 December 2012 31 December 2013 31 December 2012

Current assets

Cash at bank and on hand V(1) 1,113,562,211.65 953,992,070.61 218,342,947.03 160,633,355.13 Notes receivable V(2) 739,061,141.72 650,860,240.37 34,964,767.24 376,521.35 Accounts receivable V(3), XII(1) 5,675,658,506.78 4,393,325,300.66 427,376,566.55 364,688,936.84 Advances to suppliers V(4) 64,367,040.17 89,512,381.34 35,982.02 2,944,282.55 Other receivables V(5), XII(2) 29,620,899.71 32,985,425.60 1,160,527,938.29 971,859,991.32 Interest receivable - - 1,650,552.45 -

Inventories V(6) 1,831,267,290.00 1,734,679,063.78 172,165,830.98 130,552,057.09 Other current assets V(7) 12,203,752.77 8,080,607.66 2,657,068.36 262,096.80 Total current assets 9,465,740,842.80 7,863,435,090.02 2,017,721,652.92 1,631,317,241.08

Non -current assets

Long-term equity investments V(8),XII(3) 135,341,010.52 121,019,845.50 1,583,340,504.90 1,469,049,339.88 Investment properties V(10) 77,269,718.14 88,315,429.63 7,060,731.46 7,392,314.49 Fixed assets V(11) 766,741,590.63 690,487,633.12 20,722,267.75 27,728,901.07 Construction in progress V(12) 126,606,806.01 103,955,350.80 54,974,475.13 545,247.24 Intangible assets V(13) 150,561,964.46 155,155,071.20 37,966,282.04 37,903,901.08 Development costs V(13) 5,619,315.47 5,002,441.27 - - Goodwill V(14) 85,228,833.15 85,228,833.15 - -

Long-term prepaid expenses V(15) 35,985,621.47 19,742,990.45 6,787,267.98 7,893,858.54 Deferred income tax assets V(16) 68,895,938.25 49,509,529.97 2,941,603.89 2,929,885.67 Other non-current assets V(18) 139,905,300.41 113,987,724.53 29,152,556.06 8,350,000.00 Total non-current assets 1,592,156,098.51 1,432,404,849.62 1,742,945,689.21 1,561,793,447.97

TOTAL ASSETS 11,057,896,941.31 9,295,839,939.64 3,760,667,342.13 3,193,110,689.05

73 CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated and company balance sheets (continued) For the year ended 31 December 2013 (All amounts Renminbi ―RMB‖ unless otherwise stated)

LIABILITIES AND OWNER’S EQUITY Note Consolidated Company 31 December 31 December 2013 2012 31 December 2013 31 December 2012 Current liabilities Short-term borrowings V(19) 2,744,941,589.11 1,687,810,294.37 1,079,500,000.00 452,004,475.38 Notes payable V(20) 1,495,401,188.09 1,105,275,538.24 247,283,090.92 176,012,796.90 Accounts payable V(21) 3,436,936,497.16 3,197,354,275.46 318,141,136.49 282,426,136.11 Advances from customers V(22) 38,570,231.44 35,002,695.02 291,691.40 477,717.18 Employee benefits payable V(23) 159,466,364.12 155,994,408.20 16,512,245.17 28,849,468.43 Taxes payable V(24) 76,045,260.04 51,390,674.43 1,509,173.93 715,642.50 Interests payable V(25) 13,065,850.14 13,035,821.07 1,834,864.78 7,091,864.58 Other payables V(26) 496,102,247.39 413,831,307.40 421,121,969.02 575,130,189.97 Current portion of long-term Borrowings V(27) 7,800,000.00 71,127,275.00 - - Other current liabilities V(28) 22,040,000.00 399,014,838.05 - 399,014,838.05 Total current liabilities 8,490,369,227.49 7,129,837,127.24 2,086,194,171.71 1,921,723,129.10

No n-current liabilities Long-term borrowings V(29) - 82,205,562.71 - - Long-term payables - 32,259.60 - - Payables for specific projects V(30) 4,287,000.00 4,487,000.00 800,000.00 1,000,000.00 Deferred income tax liabilities V(16) 24,644,887.76 26,619,273.68 3,773,319.00 3,773,319.00 Other non-current liabilities V(31) 221,958,761.49 213,607,504.21 - - Total non-current liabilities 250,890,649.25 326,951,600.20 4,573,319.00 4,773,319.00

Total liabilities 8,741,259,876.74 7,456,788,727.44 2,090,767,490.71 1,926,496,448.10

OWNERS’ EQUITY Share capital V(32) 288,149,400.00 288,149,400.00 288,149,400.00 288,149,400.00 Capital surplus V(33) 5,750,338.57 5,550,338.57 14,548,726.93 14,348,726.93 Surplus reserve V(34) 144,855,634.40 99,360,384.15 144,855,634.40 99,360,384.15 Undistributed profits V(35) 1,806,002,285.06 1,382,882,906.24 1,222,346,090.09 864,755,729.87 Total equity attributable to equity holders of the Company 2,244,757,658.03 1,775,943,028.96 1,669,899,851.42 1,266,614,240.95 Minority interest V(36) 71,879,406.54 63,108,183.24 - - Total owners' equity 2,316,637,064.57 1,839,051,212.20 1,669,899,851.42 1,266,614,240.95

TOTAL LIABILITIES AND OWNERS’ EQUITY 11,057,896,941.31 9,295,839,939.64 3,760,667,342.13 3,193,110,689.05

The accompanying notes form an integral part of these financial statements.

Legal Principal in charge Head of accounting representative: of accounting : department:

74 CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated and company income statements For the year ended 31 December 2013 (All amounts in Renminbi ―RMB‖ unless otherwise stated)

Consolidated Company Item Note 2013 2012 2013 2012

Sales V(37) ,XII(4) 21,199,466,399.21 18,011,759,178.26 2,518,386,572.81 2,147,556,432.06 Less: Cost of sales V(37),XII(4) (19,436,081,887.14) (16,408,719,921.19) (2,409,832,221.55) (2,044,635,214.38) Taxes and surcharges V(38) (45,650,849.46) (46,174,700.06) (4,632,584.72) (4,882,214.24) Selling and distribution expenses V(39) (486,390,181.25) (448,595,419.15) (46,654,161.93) (43,326,298.64) Administration expenses V(40) (422,405,979.87) (392,232,990.09) (36,859,396.97) (37,786,919.53) Financial expenses – net V(41) (164,405,341.20) (162,118,150.33) (6,348,006.40) (17,722,941.70) Asset impairment losses V(42) (41,996,906.63) (21,194,171.49) (438,806.80) (46,806.15) Add: Investment income V(43),XII(5) 42,473,165.02 38,740,679.55 432,316,666.66 358,010,583.42 Including: Share of profits of associates 42,473,165.02 38,740,679.55 42,473,165.02 38,740,679.55

Operating profit 645,008,418.68 571,464,505.50 445,938,061.10 357,166,620.84 Add: Non-operating income V(44) 36,964,713.17 60,039,015.85 9,707,048.59 4,327,227.13 Less: Non-operating expenses V(45) (22,870,954.38) (28,186,730.33) (2,050.00) (291,650.26) Including: Loss on disposal of non-current assets (357,911.01) (9,104,166.55) - (78,534.03)

Total profit 659,102,177.47 603,316,791.02 455,643,059.69 361,202,197.71 Less: Income taxes expenses V(46) (124,882,778.24) (119,634,955.50) (690,557.22) (2,405,807.85)

Net profit 534,219,399.23 483,681,835.52 454,952,502.47 358,796,389.86 Including: Net losses of the entity acquired in a business combination involving

enterprises under common control before the combination date - (240,695.14) - -

Attributable to equity holders of the Company 520,488,198.80 475,792,491.12 454,952,502.47 358,796,389.86 Minority interest 13,731,200.43 7,889,344.40 - -

Earnings per share V(47) Basic earnings per share 1.81 1.65 N/A N/A Diluted earnings per share 1.81 1.65 N/A N/A

Other comprehensive income - - - -

Total comprehensive income 534,219,399.23 483,681,835.52 454,952,502.47 358,796,389.86

Attributable to equity holders of the Company 520,488,198.80 475,792,491.12 454,952,502.47 358,796,389.86 Minority interest 13,731,200.43 7,889,344.40 - -

The accompanying notes form an integral part of these financial statements.

Legal Principal in charge Head of accounting representative: of accounting : department:

- 75 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated and company cash flows statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

Consolidated Company Item Note 2013 2012 2013 2012

I. Cash flows from operating activities: Cash received from sales of goods or rendering of services 21,400,046,466.55 17,722,401,123.78 2,656,050,222.94 2,269,887,274.51

Refund of taxes and surcharges 7,839,165.67 12,958,157.91 - - Cash received relating to other operating activities V(48)(a) 88,738,677.49 98,004,113.51 23,527,672.03 15,838,615.72

Sub-total of cash inflows 21,496,624,309.71 17,833,363,395.20 2,679,577,894.97 2,285,725,890.23

Cash paid for goods and services (19,677,678,243.79) (16,254,350,304.84) (2,590,167,718.93) (2,208,712,936.78)

Cash paid to and on behalf of employees (501,918,206.39) (451,772,578.57) (49,821,490.43) (42,916,969.26)

Payments of taxes and surcharges (494,426,455.04) (474,305,269.77) (18,103,777.98) (23,556,020.56) Cash paid relating to other operating activities V(48)(b) (357,573,304.66) (328,979,909.26) (35,493,382.49) (32,352,826.84)

Sub-total of cash outflows (21,031,596,209.88) (17,509,408,062.44) (2,693,586,369.83) (2,307,538,753.44) V(49)(a) Net cash flows from operating activities XII(6)(a) 465,028,099.83 323,955,332.76 (14,008,474.86) (21,812,863.21)

II. Cash flows from investing activities Cash received from returns on investments 28,152,000.00 13,520,461.47 453,046,506.41 383,466,230.79 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 4,827,138.26 2,379,560.62 65,000.00 204,373.93 Cash received from disposal of subsidiaries and other business units - - - 5,424,600.00

Cash received relating to other investing activities V(48)(c) - 50,000,000.00 1,616,152,164.08 424,483,271.97

Sub-total of cash inflows 32,979,138.26 65,900,022.09 2,069,263,670.49 813,578,476.69 Cash paid to acquire fixed assets, intangible assets and other long-term assets (150,496,228.82) (193,571,581.84) (60,206,411.53) (14,986,981.93)

Cash paid to acquire Investments - (38,350,000.00) (100,000,000.00) (41,650,000.00) Net cash paid to acquire subsidiaries and other business units V(49)(b) (13,724,751.57) (23,801,762.22) (12,372,731.71) (53,948,000.00) Cash paid relating to other investing activities - - (1,748,600,000.00) (936,980,000.00)

Sub-total of cash outflows (164,220,980.39 ) (255,723,344.06) (1,921,179,143.24) (1,047,564,981.93)

Net cash flows from investing activities (131,241,842.13) (189,823,321.97) 148,084,527.25 (233,986,505.24)

- 76 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated and company cash flows statements (continued) For the year ended 31 December 2013 (All amounts Renminbi (RMB) unless otherwise stated)

Consolidated Company Item Note 2013 2012 2013 2012

III. Cash flows from financing activities

Cash received from borrowings 791,774,722.93 1,168,194,502.63 605,000,000.00 422,000,000.00 Cash received from issuance of debentures - 398,400,000.00 - 398,400,000.00 Cash received relating to other financing Activities V(48)(d) 866,596,329.87 295,141,161.10 1,501,427,875.82 641,653,852.39

Sub-total of cash inflows 1,658,371,052.80 1,861,735,663.73 2,106,427,875.82 1,462,053,852.39

Cash repayments of borrowings (1,187,511,626.83) (1,201,083,961.04) (792,000,000.00) (250,299,459.99) Cash payments for interest expenses and distribution of dividends or profits (222,292,874.22) (187,027,873.11) (118,808,721.08) (92,362,168.68) Including: Cash payments for dividends or profit to minority shareholders of subsidiaries (4,966,654.86) (3,026,090.85) - - Cash payments relating to other financing activities V(48)(e) (405,132,719.50) (594,900,000.00) (1,271,985,615.23) (867,800,000.00)

Sub-total of cash outflows (1,814,937,220.55) (1,983,011,834.15) (2,182,794,336.31) (1,210,461,628.67)

Net cash flows from financing activities (156,566,167.75) (121,276,170.42) (76,366,460.49) 251,592,223.72

IV. Effect of foreign exchange rate changes on cash (19,779.03) 8,041.02 - -

V. Net increase/(decrease) in cash 177,200,310.92 12,863,881.39 57,709,591.90 (4,207,144.73)

Add: Cash at beginning of year 920,748,043.53 907,884,162.14 160,633,355.13 164,840,499.86 V(49)(c) VI. Cash at end of year XII(6)(c) 1,097,948,354.45 920,748,043.53 218,342,947.03 160,633,355.13

The accompanying notes form an integral part of these financial statements.

Legal Principal in charge Head of accounting representative: of accounting : department:

- 77 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated statement of changes in owners’ equity For the year ended 31 December 2012 (All amounts Renminbi (RMB) unless otherwise stated)

Attributable to the shareholders of the Company Total Item Note Undistributed Minority interest owners’ equity Paid-in capital Capital surplus Surplus reserves profits

Balanc e at 1 January 2012 288,149,400.00 8,735,305.04 63,480,745.16 989,727,826.66 76,582,397.01 1,426,675,673.87 Movements for the year ended 31 December 2012 Net profit - - - 475,792,491.12 7,889,344.40 483,681,835.52 Other comprehensive income ------Capital contribution and withdrawals by owners - Capital contribution by owners - - - - 5,097,215.66 5,097,215.66 - Business combination under common control - (3,416,966.47) - (1,083,033.53) - (4,500,000.00) - Acquisition of minority interest - - - (8,215,317.02) (23,434,682.98) (31,650,000.00) - Others - 232,000.00 - - - 232,000.00 Profit distribution - Appropriation to surplus reserves V(34) - - 35,879,638.99 (35,879,638.99) - - - Profit distribution to equity owners V(35) - - - (37,459,422.00) (3,026,090.85) (40,485,512.85) Balance at 31 December 2012 288,149,400.00 5,550,338.57 99,360,384.15 1,382,882,906.24 63,108,183.24 1,839,051,212.20

- 78 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Consolidated statement of changes in owners’ equity (continued) For the year ended 31 December 2013 (All amounts Renminbi (RMB) unless otherwise stated)

Attributable to the shareholders of the Company Total Item Note Paid-in capital Capital surplus Surplus reserves Undistributed profits Minority interest owners’ equity

Balance at 1 January 2013 288,149,400.00 5,550,338.57 99,360,384.15 1,382,882,906.24 63,108,183.24 1,839,051,212.20 Movements for the year ended 31 December 2013 Net profit - - - 520,488,198.80 13,731,200.43 534,219,399.23 Other comprehensive income ------Capital contribution and withdrawals by owners - Others - 200,000.00 - (6,677.73) 6,677.73 200,000.00 Profit distribution - Appropriation to surplus reserves V(34) - - 45,495,250.25 (45,495,250.25) - - - Profit distribution to equity owners V(35) - - - (51,866,892.00) (4,966,654.86) (56,833,546.86) Balance at 31 December 2013 288,149,400.00 5,750,338.57 144,855,634.40 1,806,002,285.06 71,879,406.54 2,316,637,064.57

The accompanying notes form an integral part of these financial statements.

Legal Principal in charge Head of accounting representative: of accounting : department:

- 79 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Company statement of changes in owners’ equity For the year ended 31 December 2013 (All amounts Renminbi (RMB) unless otherwise stated)

Total Items Surplus Paid-in capital Capital surplus reservesUndistributed profits owners’ equity

Balance at 1 January 2012 288,149,400.00 14,116,726.93 63,480,745.16 579,298,401.00 945,045,273.09 Movements for the year ended 31 December 2012 Net profit - - - 358,796,389.86 358,796,389.86 Other comprehensive income - - - - - Capital contribution and withdrawals by owners - Others - 232,000.00 - - 232,000.00 Profit distribution - Appropriation to surplus reserves - - 35,879,638.99 (35,879,638.99) - - Profit distribution to equity owners - - - (37,459,422.00) (37,459,422.00) Balance at 31 December 2012 288,149,400.00 14,348,726.93 99,360,384.15 864,755,729.87 1,266,614,240.95

Balance at 1 January 2013 288,149,400.00 14,348,726.93 99,360,384.15 864,755,729.87 1,266,614,240.95 Movements for the year ended 31 December 2013 Net profit - - - 454,952,502.47 454,952,502.47 Other comprehensive income - - - - - Capital contribution and withdrawals by owners - Others - 200,000.00 - - 200,000.00 Profit distribution - Appropriation to surplus reserves - - 45,495,250.25 (45,495,250.25) - - Profit distribution to equity owners - - - (51,866,892.00) (51,866,892.00) Balance at 31 December 2013 288,149,400.00 14,548,726.93 144,855,634.40 1,222,346,090.09 1,669,899,851.42

The accompanying notes form an integral part of these financial statements.

. Legal Principal in charge Head of accounting representative: of accounting : department:

- 80 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

I Profile of company

China National Accord Medicines Co., Ltd. (hereinafter referred to as the ―Company‖), formerly known as Shenzhen Health Mineral Water Co., Ltd., was approved by the People‘s Government of Shenzhen with SFBF (1993) No.356 document to establish on 1 February 1993 through stock restructure as a company limited by shares. In March 1993, with the approval from the Shenzhen Branch of the People‘s Bank of China, the Company issued 30 million A-shares (including 16.5 million public shares, 3.5 million employee shares and 10 million corporation shares) and 20 million B-shares. After this issuance, the Company‘s share capital was RMB105 million. Through transfer of capital surplus to share capital and bonus issues for years, the share capital of the Company increased to RMB288,149,400 up to 31 December 2012. The employee shares, domestic public shares and foreign public shares have all been listed on the Shenzhen Stock Exchange.

In November 2000, the Company entered into an Assets Exchange Agreement with Shenzhen Investment Management Company, the original main shareholder of the Company, to exchange all the assets and liabilities of the Company as of 31 August 2000 for Shenzhen Investment Management Company‘s 100% equity interests in 11 pharmaceutical companies and certain properties as well as 51% equity interests in Shenzhen Tefa Modern Computer Co., Ltd. On December 29, 2000, the above assets exchange proposal was approved by shareholder‘s voting in the second extraordinary general meeting in 2000. The transaction was completed on 8 January 2001. On 8 January 2001, the Company changed its name to Shenzhen Accord Pharmaceutical Co., Ltd., and belongs to the pharmaceutical manufacturing industry.

On 18 February 2004, the Company‘s original main shareholder, Shenzhen Investment Management Company, entered into a Stock Transfer Agreement with Sinopharm Group Co., Ltd. (hereinafter referred to as ―Sinopharm Group‖) to transfer its 43.33% shares in the Company to Sinopharm Group. The legal procedures of the above equity transfer were completed on 9 December 2004. At the same time, as approved by GZCQ (2004) No.525 document from the State-owned Assets Supervision and Administration Commission of the State Council and ZJGSZ (2004) No.94 document from the China Securities Regulatory Commission, the nature of these shares was transferred from state-owned stock to state-owned legal entity stock and Sinopharm Group became the top shareholder of the Company.

On 14 April 2006, the Company‘s proposal on reformation of segregated stocks was approved. To gain liquidity for the restricted stocks of the Company, the holders of the restricted stocks of the Company agreed to pay the following consideration: based on the stock registration as of 27 April 2006, the Company issued bonus shares on 28 April 2006 at the ratio of 3 shares to every 10 A-shares to liquidated A-share holders which went public on the same day. After this bonus issue, the total number of shares of the Company remained unchanged with corresponding changes in the composition of share holdings. The Company issued 288,149,400 shares as on 31 December 2013.

The Company is registered with Shenzhen Administration for Industry & Commerce. Its business license number is 440301103040048 and the serial number of the license is N24657. The operation period of the Company is from 2 August 1986 to 2 August 2036. The registered capital of the Company is RMB288,149,400. The legal representative of the Company is Yan Zhigang.

- 81 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

I Profile of company (continued)

The approved scope of business of the Company and its subsidiaries (together ―the Group‖) includes wholesale of traditional Chinese medicine preparations, bulk pharmaceutical drugs, chemical preparations, bulk antibiotic drugs, antibiotic preparations, biochemical drugs, biological products (including vaccines and in vitro diagnostic reagents), psychotropic drugs and preparations, narcotic drugs, toxic drugs for medical use, protein assimilation preparation and peptide hormones; trade of dietary supplement; research, development and consultation services of pharmaceutical packaging materials and pharmaceutical industry products; industrial investment holding; domestic trade (other than special licensing), sale of ambulances; trade of medical equipment; project investment; property management and lease of self-owned properties; pharmacovigilance and medical information consulting; parking operation; logistics and related services; package agency business; logistic design; operating various types of goods and import and export of technology (not attached directory of import and export commodities), but excluded the import and export of goods and technology the State limits or prohibit the company.

These financial statements were authorised for issue by the board of directors of the Company on 21 March 2014.

II Summary of significant accounting policies and accounting estimates

(1) Basis of preparation

The financial statements were prepared in accordance with the Basic Standard and 38 specific standards of the Accounting Standards for Business Enterprises issued by the Ministry of Finance on 15 February 2006, and the Application Guidance for Accounting Standards for Business Enterprises, Interpretations of Accounting Standards for Business Enterprises and other relevant regulations issued thereafter (hereafter collectively referred to as the ―Accounting Standards for Business Enterprises‖ or ―CAS‖) and the disclosure requirements in the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No.15 – General Rules on Financial Reporting (2010 revised) issued by the China Securities Regulatory Commission.

(2) Statement of compliance with the Accounting Standards for Business Enterprises

The financial statements of the Company for the year ended 31 December 2013 are in compliance with the Accounting Standards for Business Enterprises, and truly and completely present the financial position of the Group and the Company as of 31 December 2013 and the operating results, cash flows and other information of the Group and the Company for the year then ended.

(3) Accounting year

The Company‘s accounting year starts on 1 January and ends on 31 December.

(4) Functional currency

The functional currency is Renminbi (RMB).

- 82 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(5) Business combinations

(a) Business combinations involving enterprises under common control

The consideration paid and net assets obtained by the absorbing party in a business combination are measured at the carrying amount. The difference between the carrying amount of the net assets obtained from the combination and the carrying amount of the consideration paid for the combination is treated as an adjustment to capital surplus (share premium). If the capital surplus (share premium) is not sufficient to absorb the difference, the remaining balance is adjusted against retained earnings. Costs directly attributable to the combination are included in profit or loss in the period in which they are incurred. Transaction costs associated with the issue of equity or debt securities for the business combination are included in the initially recognised amounts of the equity or debt securities.

(b) Business combinations involving enterprises not under common control

The cost of combination and identifiable net assets obtained by the acquirer in a business combination are measured at fair value at the acquisition date. Where the cost of the combination exceeds the acquirer‘s interest in the fair value of the acquirer‘s identifiable net assets, the difference is recognised as goodwill; where the cost of combination is lower than the acquirer‘s interest in the fair value of the acquirer‘s identifiable net assets, the difference is recognised in profit or loss for the current period. Costs directly attributable to the combination are included in profit or loss in the period in which they are incurred. Transaction costs associated with the issue of equity or debt securities for the business combination are included in the initially recognised amounts of the equity or debt securities.

(6) Preparation of consolidated financial statements

The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries.

Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary that is acquired in a business combination involving enterprises under common control, it is included in the consolidated financial statements from the date when it, together with the Company, comes under common control of the ultimate controlling party. The portion of the net profits realised before the combination date is presented separately in the consolidated income statement.

In preparing the consolidated financial statements, where the accounting policies and the accounting periods of the Company and subsidiaries are inconsistent, the financial statements of the subsidiaries are adjusted in accordance with the accounting policies and the accounting period of the Company. For subsidiaries acquired from business combinations involving enterprises not under common control, the individual financial statements of the subsidiaries are adjusted based on the fair value of the identifiable net assets at the acquisition date.

All significant intra-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The portion of a subsidiary‘s equity and the portion of a subsidiary‘s net profits, losses and comprehensive income for the period not attributable to Company are recognised as minority interests and presented separately in the consolidated financial statements within equity, net profits and total comprehensive income respectively.

- 83 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(7) Acquisition of minority interest in controlled subsidiaries

The Company acquires equity from the minority shareholders after taking control of the subsidiary, in the consolidated financial statement, the subsidiary‘s assets, liabilities should be measured from combination or acquisition date. The difference between the carrying amount of acquisition of minority interst and the net assets proportion calculated by original share percentage since the acquisition date should be recognised in capital surplus. If the capital surplus is insufficient to dilute, the retained earnings shall be adjusted.

(8) Cash and cash equivalent

Cash and cash equivalent comprise cash on hand, deposits that can be readily drawn on demand, and short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(9) Foreign currency translation

Foreign currency transactions are translated into RMB using the exchange rates prevailing at the dates of the transactions.

At the balance sheet date, monetary items denominated in foreign currencies are translated into RMB using the spot exchange rates on the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

(10) Financial Instruments

(a) Financial assets

(i) Classification of financial assets

Financial assets are classified into the following categories at initial recognition: financial assets at fair value through profit or loss, receivables, available-for-sale financial assets and held-to-maturity investments. The classification of financial assets depends on the Group‘s intention and ability to hold the financial assets. The Group currently holds the financial assets including receivables. Receivables, including notes receivables, accounts receivable and other receivables, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

(ii) Recognition and measurement

Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. The transaction expenses are included in receivables‘ original book value, which is measured at amortised cost using the effective interest method.

- 84 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(10) Financial Instruments(continued)

(a) Financial assets(continued)

(iii) Impairment of financial assets

The Group assesses the carrying amounts of receivables other than those at fair value through profit or loss at each balance sheet date. If there is objective evidence that a financial asset is impaired, an impairment loss is provided for. The objective evidence are matters occur after the financial assets been recognised, affect its estimated future cash flow and could be measured accuractly by the Group. When an impairment loss on a financial asset carried at amortised cost has occurred, the amount of loss is provided for at the difference between the asset‘s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and the amount of reversal is recognised in profit or loss.

(iv) Derecognition of financial assets

A financial asset is derecognised when any of the below criteria is met: (i) the contractual rights to receive the cash flows from the financial asset expire; (ii) the financial asset has been transferred and the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee; or (iii) the financial asset has been transferred and the Group has not retained control of the financial asset, although the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received and the cumulative changes in fair value that had been recognised directly in equity, is recognised in profit or loss.

(b) Financial liabilities

Financial liabilities are classified into the following categories at initial recognition: financial liabilities at fair value through profit or loss and other financial liabilities. The financial liabilities of the Group mainly comprise other financial liabilities, including payables and borrowings

Payables, including notes payable, accounts payable and other payables, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently carried at amortised costs using the effective interest method.

Other financial liabilities with maturities no more than one year are classified as current liabilities. Other financial liabilities with maturities over one year but are due within one year at the balance sheet date are classified as the current portion of non-current liabilities. Others are classified as non-current liabilities.

A financial liability is derecognised or partly derecognised when the current obligation is discharged or partly discharged. The difference between the carrying amount of the financial liability or the derecognised part of the financial liability and the consideration paid is recognised in profit or loss.

- 85 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(11) Receivables

Receivables comprise notes receivable, accounts receivable and other receivables. Accounts receivable arising from sale of goods or rendering of services are initially recognised at fair value of the contractual payments from the buyers or service recipients.

(a) Receivables with amounts that are individually significant and subject to separate assessment for provision for bad debts

Receivables with amounts that are individually significant are subject to assessment for impairment on the individual basis. If there exists objective evidence that the Group will not be able to collect the amount under the original terms, a provision for impairment of that receivable is made.

The criterion for determing individually significant amounts is that any individual amount is more than RMB5 million.

The method of providing for bad debts for those individually significant amounts is as follows: the amount of the present value of the future cash flows expected to be derived from the receivable below its carrying amount.

(b) Receivables that are subject to provision for bad debts on the grouping basis

Receivables with amounts that are not individually significant and those receivables that have been individually assessed for impairment and have not been found impaired are classified into certain groupings based on their credit risk characteristics.The provision for bad debts is determined based on the historical loss experience for the groupings of receivables with similar credit risk characteristics, taking into consideration of the current circumstances.

A provision for impairment of the receivables is made based on the ageing of receivables at the following percentage:

Provision ratios used for accounts Provision ratios used for other receivables receivables

Within 1 year - - 1 to 2 years 5% 5% 2 to 3 years 10% 10% More than 3 years 20% 20%

(c) Receivables with amounts that are not individually significant but subject to separate assessment for provision for bad debts

The reason for making separate assessment for provision for bad debts is that there exists objective evidence that the Group will not be able to collect the amount under the original terms of the receivable.

The provision for bad debts is determined based on the amount of the present value of the future cash flows expected to be derived from the receivable below its carrying amount.

(d) When the Group transfers the accounts receivable to the financial institutions without recourse, the difference between the proceeds received from the transaction and their carrying amounts and the related taxes is recognised in profit or loss for the current period.

- 86 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(12) Inventories

(a) Classification

Inventories include raw materials, work in progress, finished goods and turnover materials, and are measured at the lower of cost and net realisable value.

(b) Costing of inventories

Cost is determined on the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour and an allocation of systematically allocated overhead expenditures incurred based on normal operating capacity.

(c) Basis for determining net realisable values of inventories and method for making provision for decline in the value of inventories

Provisions for declines in the value of inventories are determined at the excess amount of the carrying value of the inventories over their net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.

(d) The Group adopts the perpetual inventory system.

(e) Amortisation methods of low value consumables and packaging materials

Turnover materials include low value consumables and packaging materials, which are expensed when issued.

(13) Long-term equity investments

Long-term equity investments comprise the Company‘s long-term equity investments in its subsidiaries and the Group‘s long-term equity investments in its associates.

Subsidiaries are the investees over which the Company is able to exercise control. Associates are the investees that the Group has significant influence on their financial and operating policies.

Investments in subsidiaries are measured using the cost method in the Company‘s financial statements, and adjusted by using the equity method when preparing the consolidated financial statements. Interests in associates are accounted for using the equity method.

(a) Determination of investment cost

For long-term equity investments acquired through a business combination: for long-term equity investments acquired through a business combination involving enterprises under common control, the investment cost shall be the absorbing party‘s share of the carrying amount of owners‘ equity of the party being absorbed at the combination date; for long-term equity investment acquired through a business combination involving enterprises not under common control, the investment cost shall be the combination cost.

- 87 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(13) Long-term equity investments (continued)

(b) Subsequent measurement and recognition of related profit and loss

For long-term equity investments accounted for using the cost method, they are measured at the initial investment costs, and cash dividends or profit distribution declared by the investees are recognised as investment income in profit or loss.

For long-term equity investments accounted for using the equity method, where the initial investment cost of a long-term equity investment exceeds the Group‘s share of the fair value of the investee‘s identifiable net assets at the acquisition date, the long-term equity investment is measured at the initial investment cost; where the initial investment cost is less than the Group‘s share of the fair value of the investee‘s identifiable net assets at the acquisition date, the difference is included in profit or loss and the cost of the long-term equity investment is adjusted upwards accordingly.

For long-term equity investments accounted for using the equity method, the Group recognises the investment income according to its share of net profit or loss of the investee. The Group discontinues recognising its share of net losses of an investee after the carrying amount of the long-term equity investment together with any long-term interests that, in substance, form part of the investor‘s net investment in the investee are reduced to zero. However, if the Group has obligations for additional losses and the criteria with respect to recognition of provisions under the accounting standards on contingencies are satisfied, the Group continues recognising the investment losses and the provisions. For changes in owners‘ equity of the investee other than those arising from its net profit or loss, the Group records its proportionate share directly into capital surplus, provided that the Group‘s proportion of shareholding in the investee remains unchanged. The carrying amount of the investment is reduced by the Group‘s share of the profit distribution or cash dividends declared by an investee. The unrealised profits or losses arising from the intra-group transactions amongst the Group and its investees are eliminated in proportion to the Group‘s equity interest in the investees, and then based on which the investment gains or losses are recognised. For the loss on the intra-group transaction amongst the Group and its investees attributable to asset impairment, any unrealised loss is not eliminated.

(c) Basis for determing existence of control, jointly control or significant influence over investees

Control is the power to govern the financial and operating policies of the investee so as to obtain benefits from its operating activities. In determining whether the Company is able to exercise control over the investee, the effect of potential voting rights over the investee is considered, such as convertible debts and warrants currently exercisable, etc.

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

(d) Impairment of long-term equity investments

The carrying amount of long-term equity investments in subsidiaries and associates is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II (21)).

- 88 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(14) Investment properties

Investment properties, including land use rights that have already been leased out, buildings that are held for the purpose of leasing, and buildings that are being constructed or developed for the purpose of leasing in future, are measured initially at cost. Subsequent expenditures incurred in relation to an investment property are included in the cost of the investment property when it is probable that the associated economic benefits will flow to the Group and their costs can be reliably measured; otherwise, the expenditures are recognised in profit or loss in the period in which they are incurred.

The Group adopts the cost model for subsequent measurement of investment properties. Buildings and land use rights are depreciated or amortised to their estimated net residual values over their estimated useful lives. The estimated useful lives, the estimated net residual values that are expressed as a percentage of cost and the annual depreciation (amortisation) rates of investment properties are as follows:

Estimated useful Estimated residual Annual lives value depreciation (amortisation) rates

Buildings 20-35 years 5% 2.71% to 4.75% Land use rights 30-50 years - 2.00% to 3.33%

When an investment property is transferred to owner-occupied properties, it is reclassified as fixed asset or intangible asset at the date of the transfer. When an owner-occupied property is transferred out for earning rentals or for capital appreciation, the fixed asset or intangible asset is reclassified as investment properties at its carrying amount at the date of the transfer.

The investment property‘s estimated useful life, net residual value and depreciation (amortisation) method applied are reviewed and adjusted as appropriate at each year-end.

An investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The net amount of proceeds from sale, transfer, retirement or damage of an investment property after its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

The carrying amount of an investment property is reduced to the recoverable amount if the recoverable amount is below the carrying amount (Note II (21)).

(15) Fixed assets

(a) Recoginition and initial measurement of fixed assets

Fixed assets comprise buildings, machinery and equipment, motor vehicles, other equipment and leasehold improvements.

Fixed assets are recognised when it is probable that the related economic benefits will flow to the Group and the costs can be reliably measured. Fixed assets purchased or constructed by the Group are initially measured at cost at the acquisition date. The fixed assets contributed by the State shareholders at the reorganisation of the Company into a corporation entity are recognised based on the revaluated amounts approved by the state-owned assets administration department.

Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Group and the related cost can be reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent expenditures are recognised in profit or loss in the period in which they are incurred.

- 89 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(15) Fixed assets (continued)

(b) Depreciation methods of fixed assets

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation rates are as follows:

Estimated useful Estimated residual Annual lives value depreciation rates

Buildings 20-35 years 5% 2.71% to 4.75% Machinery and equipment 10-14 years 5% 6.79% to 9.5% Motor vehicles 5-10 years 5% 9.5% to 19% Other equipment 5-10 years 5% 9.5% to 19% Leasehold improvements Within 5 years - Above 20%

The estimated useful life, the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at least at each year-end.

(c) The carrying amount of fixed assets is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II (21)).

(d) Disposal of fixed assets

A fixed asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds from disposal on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.

(16) Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation begins from the following month. The carrying amount of construction in progress is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II (21)).

(17) Borrowing costs

The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset that needs a substantially long period of time for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use and the borrowing costs incurred thereafter are recognised in profit or loss for the current period. Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.

- 90 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(17) Borrowing costs (continued)

For the specific borrowings obtained for the acquisition or construction of a fixed asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by deducting any interest income earned from depositing the unused specific borrowings in the banks or any investment income arising on the temporary investment of those borrowings during the capitalisation period.

For the general borrowings obtained for the acquisition or construction of a fixed asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by applying the weighted average effective interest rate of general borrowings, to the weighted average of the excess amount of cumulative expenditures on the asset over the amount of specific borrowings. The effective interest rate is the rate at which the estimated future cash flows during the period of expected duration of the borrowings or applicable shorter period are discounted to the initial amount of the borrowings.

(18) Intangible assets

Intangible assets include land use rights, computer softwares, technology patents,trademarks and distribution network, which initially recognised at cost. Intangible assets contributed by state-owned shareholders during the company reorganisation were recorded based on the valuation amount approved by the state-owned assets supervision and management department.

(a) Land use rights

A land use right granted by government with a infinite useful life would not be amortised. Other land use rights are amortised on the straight-line basis over their approved useful period. If the acquisition costs of land use rights and the buildings located thereon cannot be reliably allocated between the land use rights and the buildings, all of the acquisition costs are recognised as fixed assets.

(b) Computer softwares

Computer softwares purchased by the Group are initially measured at cost, which are amortised on the straight-line basis over their approved useful period of 3 to 5 years.

(c) Trademarks and Technology Patents

Trademarks are amortised on the straight-line basis over their effective periods as stipulated by law of 5 to 10 years. Technology Patents are amortised on the straight-line basis over their effective useful period of 5 years.

(d) Distribution network

Distribution network includes customer relationships and distribution channels, which is amortised on the straight-line basis over its approved useful lives, which is 9 to 20 years.

(e) Periodical review of useful life and amortisation method

For an intangible asset with a finite useful life, review of its useful life and amortisation method is performed at each year-end, with adjustment made as appropriate.

For an intangible asset without a definite useful life, review of its useful life are performed at each year-end.

- 91 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(18) Intangible assets (continued)

(f) Research and development

The expenditure on an internal research and development project is classified into expenditure on the research phase and expenditure on the development phase based on its nature and whether there is material uncertainty that the research and development activities can form an intangible asset at end of the project.

Expenditure on the research phase is recognised in profit or loss in the period in which it is incurred. Expenditure on the development phase is capitalised only if all of the following conditions are satisfied:

 it is technically feasible to complete the intangible asset so that it will be available for use;  management intends to complete the intangible asset, and use or sell it;  it can be demonstrated how the intangible asset will generate economic benefits;  adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; and  the expenditure attributable to the intangible asset during its development phase can be reliably measured.

Other development expenditures that do not meet the conditions above are recognised in profit or loss in the period in which they are incurred. Development costs previously recognised as expenses are not recognised as an asset in a subsequent period. Capitalised expenditure on the development phase is presented as development costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended use.

(g) Impairment of intangible assets

The carrying amount of intangible assets is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note II (21)).

(19) Long-term prepaid expenses

Long-term prepaid expenses include the expenditure for improvements to fixed assets under operating leases, and other expenditures that have been made but should be recgonised as expenses over more than one year in the current and subsequent periods. Long-term prepaid expenses are amortised on the straight-line basis over the expected beneficial period and are presented at actual expenditure net of accumulated amortisation.

(20) Governmental medical reserve funds and specially approved reserving materials

Appointed by the PRC Government, China National Pharmaceutical Group Corporation (―CNPGC") is responsible for purchasing, allocating and providing the governmental medical reserves, which include the medical products, traditional Chinese medicine and medical appliances for nation-wide emergency rescue and disaster relief. Appointed by the Government of Guangxi Province, Sinopharm Medicine Holding Guangxi Co., Ltd. (―Sinopharm Guangxi‖), a subsidiary of the Company, is responsible for purchasing, allocating and providing the medical reserves, which include the medical products needed for common disease and emergencies triggered by major disasters, epidemics and other situations in Guangxi Province. In accordance with the regulation of CNPGC, as being the enterprise who bears the obligation for specially approved medical reserving materials, the medical reserve funds received from the PRC Government or local government are recognised in other Non-current liabilities. The Group reserves the specially approved medical reserving materials according to the reserve program (by category and by quantity), applies dynamic management and recognises in other non-current assets.

- 92 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(21) Impairment of long-term assets

Fixed assets, construction in progress, intangible assets with finite useful lives, long-term prepaid expenses and investment properties measured using the cost model and long-term equity investments in subsidiaries, joint ventures and associates are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised for the amount by which the asset‘s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset‘s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognised on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

Goodwill that is separately presented in the financial statements，intangible assets with infinite useful lives and capitalized development expenditures are tested at least annually for impairment, irrespective of whether there is any indication that it may be impaired. In conducting the test, the carrying value of goodwill is allocated to the related asset groups or groups of asset groups which are expected to benefit from the synergies of the business combination. If the result of the test indicates that the recoverable amount of an asset group or group of asset groups, including the goodwill allocated, is lower than its carrying amount, the corresponding impairment loss is recognised. The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the asset group or group of asset groups, and then deducted from the carrying amounts of other assets within the asset groups or groups of asset groups in proportion to the carrying amounts of other assets.

Once the above asset impairment loss is recognised, it will not be reversed for the value recovered in the subsequent periods.

(22) Employee benefits

Employee benefits mainly include wages or salaries, bonuses, allowances and subsidies, staff welfare, annuity, social security contributions, housing funds, labour union funds, employee education funds and other expenditures incurred in exchange for service rendered by employees.

Where the Group terminates the employment relationship with employees before the end of the employment contract or offers compensation for encouraging employees to accept voluntary redundancy, a provision for termination benefits for the compensation arising from termination of the employment relationship with employees is recognised, with a corresponding charge to profit or loss when the Group has made a formal plan for termination of the employment relationship or an offer for voluntary redundancy which will be implemented immediately and cannot be withdrawn by the Group unilaterally.

Except for compensation paid for termination of employment, employee benefits are recognised as salaries and wages payable in the accounting period in which an employee has rendered service, as costs of assets or expenses to whichever the employee service is attributable.

- 93 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(22) Employee benefits (continued)

Certain subsidiaries have the defined benefit plans. The Group recognises salaries, social insurance premiums, etc., to be paid for the early retired employees, during the period from the date when the employees stop rendering service to the normal retirement date, as employee benefits payable through administrative expenses for the current period, when the above conditions for the recognition of termination benefit plan are satisfied.

The liability recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit t obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of the RMB denominated (the currency in which the benefits will be paid) PRC government bonds, and that have terms to maturity approximating to the terms of the related pension liability.

(23) Dividend distribution

Cash dividends distribution is recognised as a liability in the period in which it is approved by the annual shareholders‘ meeting.

(24) Provisions

Provisions for product warranties, onerous contracts etc. are recognised when the Group has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. 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 recognised as interest expense.

The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.

(25) Revenue recognition

The amount of revenue is determined in accordance with the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group‘s activities. Revenue is shown net of discounts and returns.

Revenue is recognised when the economic benefits associated with the transaction will flow to the Group, the related revenue can be reliably measured, and the specific revenue recognition criteria have been met for each type of the Group‘s activities as described below:

(a) Sale of goods

Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and it is probable that the economic benefit associated with the transaction will flow to the Company and the relevant revenue and costs can be measured reliably.

- 94 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(25) Revenue recognition (continued)

(b) Rendering of services

The Group provides freight，storage and other service to external parties. The freights are recognised as revenue right after the goods are transported to the place of delivery according to contracts or agreements, received and confirmed by the purchasers. The storage charges are recognised as revenue on the basis of services provided during the storage period. Other revenue arising from the rendering of services is determined in accordance with the amount stipulated in the contract or agreement signed by the enterprise and the party who receives the services.

(c) Transfer of asset use rights

Interest income is determined by using the effective interest method, based on the length of time for which the Group‘s cash is used by others.

Income from an operating lease is recognised on a straight-line basis over the period of the lease.

(d) Customer Loyalty Programme

The group, offers loyalty points programmes where points earned through the purchase of goods can only be redeemed for goods provided by Zhijun Pharm or other free goods. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits and the other components of the sale. Fair value of award points is measured on the basis of the value of the awards (that is, goods or services) for which they could be redeemed, the fair value of the award credits should take account of expected forfeitures as well as the discounts or incentives that would otherwise be offered to customers who have not earned award credits from an initial sale.

(26) Government grants

Government grants are transfers of monetary or non-monetary assets from the government to the Group at nil consideration, including refund of taxes and financial subsidies, etc.

A government grant is recognised when the conditions attached to it can be complied with and the government grant can be received. For a government grant in the form of transfer of monetary assets, the grant is measured at the amount received or receivable. For a government grant in the form of transfer of non-monetary assets, it is measured at fair value; if the fair value is not reliably determinable, the grant is measured at nominal amount.

A government grant related to an asset is grant received aimed to create long-term asset by contructing or other methods. And government grant related to income is any grant other than government grant related to an asset.

A government grant related to an asset is recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset. Government grants measured at nominal amounts are recognised immediately in profit or loss for the current period.

For government grants related to income, where the grant is a compensation for related expenses or losses to be incurred by the Group in the subsequent periods, the grant is recognised as deferred income, and included in profit or loss over the periods in which the related costs are recognised; where the grant is a compensation for related expenses or losses already incurred by the Group, the grant is recognised immediately in profit or loss for the current period.

- 95 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(27) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred tax asset is recognised for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No deferred tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognised for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilised.

Deferred tax assets and liabilities are offset when:

 the deferred taxes are related to the same tax payer within the Group and the same taxation authority; and,

 that tax payer has a legally enforceable right to offset current tax assets against current tax liabilities.

Deferred tax liabilities are recognised for temporary differences arising from investments in subsidiaries and associates, except where the Group is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries and associates will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilised, the corresponding deferred tax assets are recognised.

(28) Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the leaser are classified as operating leases. Lease payments under an operating lease are recognised on a straight-line basis over the period of the lease, and are either capitalised as part of the cost of related assets or charged as an expense for the current period.

(29) Segment information

The Group identifies operating segments based on the internal organisation structure, management requirements and internal reporting system, and discloses segment information of reportable segments which is determined on the basis of operating segments.

An operating segment is a component of the Group that satisfies all of the following conditions: (1) the component is able to earn revenues and incur expenses from its ordinary activities; (2) whose operating results are regularly reviewed by the Group‘s management to make decisions about resources to be allocated to the segment and to assess its performance, and (3) for which the information on financial position, operating results and cash flows is available to the Group. If two or more operating segments have similar economic characteristics and satisfy certain conditions, they are aggregated into one single operating segment.

- 96 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

II Summary of significant accounting policies and accounting estimates (continued)

(30) Changes in significant accounting policies

The Group has no changes in significant accounting policies in 2012.

(31) Critical accounting estimates and judgments

The Group continually evaluates the critical accounting estimates and key judgments applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable.

(a) Critical accounting estimates and key assumptions

The critical accounting estimates and key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting year are outlined below:

(i) Accounting estimates on impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amount of asset groups and groups of asset groups is the present value of the future cash flows expected to be derived from them. These calculations require use of estimates (Note V (14)).

If management revises the gross margin that is used in the calculation of the future cash flows of asset groups and groups of asset groups, and the revised gross margin is lower than the one currently used, the Group would need to recognise further impairment against goodwill and fixed assets.

If management revises the pre-tax discount rate applied to the discounted cash flows, and the revised pre-tax discount rate is higher than the one currently applied, the Group would need to recognise further impairment against goodwill and fixed assets.

If the actual gross margin/pre-tax discount rate is higher/lower than management‘s estimates, the impairment loss of goodwill previously provided for is not allowed to be reversed by the Group.

(ii) Accounting estimates on impairment of accounts receivable

In accordance with the Group‘s accounting policy (Note II (11)), the Group‘s management tests annually whether receivables have suffered any impairment, Impairment of receivables has been assessed by taking into account the customers‘ credit history and financial position together with the current market conditions. Even if the Group‘s management has made bad debt provision for the expected loss at its best estimate, there is a possibility that changes in customers‘ financial position or market conditions will alter the result.

(iii) Accounting estimates on impairment of inventories

In accordance with the Group‘s accounting policy (Note II (12) (c)), the Group‘s management estimates the net realizable value of the inventory. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes. Even if the Group‘s management has made stock provision for the expected impairment at its best estimate, there is a possibility that changes in market conditions will alter the result.

- 97 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

III Taxation

(1) The types and rates of taxes applicable to the Group are set out below:

Type Taxable base Tax rate

Enterprise income Taxable income tax(―EIT‖) 15%、20% or 25% Value added tax (―VAT‖) Taxable value added amount (Tax payable is 0%、3%、4%、6%、 calculated using the taxable sales amount 11%、13% or 17% multiplied by the effective tax rate less deductible VAT input of current period) Business tax Rental income, storage income and etc. 3%、5% City maintenance and VAT and business tax construction tax 7% Education surcharge VAT and business tax 3% Regional/Local education VAT and business tax surcharge 2%

According to the Notice of Pilot Work of Levying Value-Added Tax in Lieu of Business Tax in the Transportation Industry and Some Modern Service Industries in nationwide issued by the Ministry of Finance and the State Administration of Taxation (No. 37 [2013]). Since 1 August 2013, Value Added Tax in lieu of Business Tax is levied at different tax rates on revenue arising from the following business of the subsidiaries registered in Guangxi province: 11% on transportation; 6% on logistics auxiliary business; This business is applied business tax before 1 August 2013.

(2) Tax preferences

Sinopharm Holding Guangxi Chinese Herbal Pieces Co., Ltd. (―Guangxi Chinese Herbal Pieces‖ ) is regarded as a small enterprise with an Enterprise income tax rate of 20% in 2013 (2012: 20%).

In 2011, Shenzhen Zhijun Pharmaceutical Co., Ltd. (―Zhijun Pharm‖) and Sinoppharm Group Zhijun (Suzhou) Pharmaceutical Co., Ltd. (formally known as ―Suzhou Zhijun Wangqing Pharmaceutical Co., Ltd.‖, hereinafter referred to as ―Suzhou Zhijun‖), subsidiaries of the Company, separately obtained the certificate of High and New Technology Enterprises with effective period of 3 years, 2011 to 2013.

In 2012, Sinopharm Holding Shenzhen Medicine Co., Ltd. (―Sinopharm Shenzhen Medicine‖) obtained the certificate of High and New Technology Enterprises with effective period of 3 years, 2012 to 2014.

Under the relevant regulations of article 28 of the Corporate Income Tax Law, the applicable tax rates for Zhijun Pharm, Suzhou Wanqing and Sinopharm Shenzhen Medicine in year 2013 are 15% (2012: 15%).

- 98 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements

(1) Subsidiaries

(a) Subsidiaries acquired not under common control

Registered Principal activities Legal The holding type Place of Nature of capital Enterprise Repres-enta of investment registration business ( RMB‘0000) Type tive

Sinopharm Holding Guilin Co., Indirect Guilin Comercial 1,000.00 Wholesale of Traditional Chinese medicine, Chinese patent Limited Zhou Ruili Ltd. drugs, raw materials for chemical medicine, chemical company (―Sinopharm Guilin‖) ( Note (i)) material drugs, antibiotics, bio-chemical drugs and biological products (excluding vaccines), narcotic drugs, anabolic agent, Pericarpium Papaveris,etc. Sinopharm Holding Baise Co., Indirect Baise Comercial 1,000.00 Traditional Chinese medicine, Chinese patent drugs, raw Limited Zhou Ruili Ltd. materials for chemical medicine, chemical material drugs, company (―Sinopharm Baise‖) ( Note (i)) antibiotics, bio-chemical drugs and biological products (excluding vaccines), narcotic drugs, anabolic agent. Sinopharm Holding Zhongshan Direct Zhongshan Comercial 1,000.00 Wholesale of Traditional Chinese medicine, Chinese patent Limited Yang Yan Co., Ltd. drugs, raw materials for chemical medicine, chemical company (―Sinopharm Zhongshan‖) material drugs, antibiotics, bio-chemical drugs and biological products (excluding vaccines) Sinopharm Holding Guigang Co., Indirect Guigang Comercial 1,000.00 Wholesale of Traditional Chinese medicine, Chinese patent Limited Zhou Ruili Ltd. drugs, raw materials for chemical medicine, chemical company (―Sinopharm Guigang‖) ( Note material drugs, antibiotics, bio-chemical drugs and (i)) biological products (excluding vaccines), narcotic drugs, anabolic agent, Pericarpium Papaveris,etc.

Year-end balance of Other assets constitute Equity Voting rights held Consolidated or Minority Loss shared by minority interests investment investment in substance interest held (%) not interests ( RMB‘0000) (%) (RMB‘0000) Sinopharm Guilin ( Note (i)) 1,000.00 - 100 100 Yes - - Sinopharm Baise ( Note (i)) 1,000.00 - 100 100 Yes - - Sinopharm Zhongshan 1,000.00 - 100 100 Yes - - Sinopharm Guigang ( Note (i)) 1,000.00 - 100 100 Yes - -

(i) Sinopharm Guilin and Sinopharm Baise are wholly owned subsidiaries of Sinopharm Guangxi, indirectly held of 100% in equity by the Company.

- 99 -

CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements

(1) Subsidiaries(continued)

(b) Subsidiaries acquired under common control

The holding Registered Legal type of Place of Nature of capital Enterprise Repres-entati investment registration business ( RMB‘0000) Principal activities Type ve

Zhijun Pharm Direct Shenzhen Manufacturing 20,000.00 Original chemical medicine manufacture, Chinese patent medicine Limited Yan Zhigang processing, chemical raw material of medicine, the imports and company exports business which transacted according to examined and approved certificate Sinopharm Holding Jianming Co., Ltd. Direct Shenzhen Commercial 500.00 Wholesale of chemical agent, antibiotics agent, chemical and Limited Lin Xinyang (―Sinopharm Jianming‖) biological agent, blood products, raw material of chemical product, company Chinese medicine and diagnosis products Sinopharm Holding Material Co., Ltd. Direct Shenzhen Commercial 600.00 Chinese patent medicine, western medicine, medicine treatment Limited Zhao Yuhe (―Sinopharm Material‖) apparatus company Shenzhen Zhijun Pharmaceutical trade Direct Shenzhen Commercial 189.00 Purchase and sale of Chinese traditional,medicinal materials, Chinese Limited Deng Baojun Co., Ltd. (―Zhijun Trade‖) patent medicine,chemical raw material for medical company treatment,antibiotic preparation, chemical medicine preparation etc. Sinopharm Holding Shenzhen Logistics Direct Shenzhen Service 100.00 Storage service, convey, liquidation of cargo external package and Limited Lin Min Co., Ltd. (―Shenzhen Logistics‖) common transportation of road company Sinopharm Holding Guangzhou Co., Direct Guangzhou Commercial 40,000.00 Chinese patent medicine, chemical medicine preparation, antibiotics, Limited Yan Zhigang Ltd. (―Sinopharm Guangzhou‖) biochemical medicine, biological products, diagnosis medicine, company treatment diagnosis biological products, finalised packing food, chemical products, self-support and surrogate the imports and exports of various merchandise and skills. Sinopharm Holding Guangdong Direct Guangzhou Commercial 4,000.00 Drugs, medical apparatus sales Limited Lin Hengxing Pharmaceutical Co., Ltd. company Zhaoxiong (―Sinopharm Hengxing ‖) Sinopharm Holding Yulin Co., Ltd. Indirect Yulin Commercial 500.00 Drug sales Limited Zhou Ruili (―Sinopharm Yulin‖)(Note iii) company Sinopharm Medicine Holding Liuzhou Direct Liuzhou Commercial 2,053.06 Chinese traditional medicinal materials, Chinese patent medicine, Limited Lin Zhaoxiong Co., Ltd. (―Sinopharm Liuzhou‖) Chinese traditional medicine in pieces, chemical raw material, company chemical medicine preparation, antibiotics, biochemical drugs, psychotropic drugs, chemical raw material drug and its preparation. (that involving specific examination and approve should be operated based on the scope that checked and ratified by the license)

- 100 -

CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements (continued)

(1) Subsidiaries (continued)

(b) Subsidiaries acquired under common control (continued)

The holding Place of Nature of Registered Principal activities Enterprise Legal type of registration business capital Type Repres-entative investment (RMB‘0000)

Guangxi Chinese Herbal Pieces Indirect Liuzhou Manufacturing 200.00 Manufacturing and sales of Chinese herbal pieces Limited Lei Chaotian (Note ii) company Guangdong Huixin Investment Co., Direct Guangzhou Service 500.00 Project investment, property management and leasing, medical Limited Lin zhaoxiong Ltd. (―Huixin Investment‖) information consultancy, car park management company Sinopharm Holding Foshan Co., Ltd. Direct Foshan Commercial 1,000.00 Drug sales Limited Lin Xinyang (―Sinopharm Foshan‖) company Sinopharm Holding Guangdong Direct Guangzhou Commercial 3,000.00 Sales of medicine and medical treatment apparatus Limited Luo Qin Yuexing Co., Ltd. (―Sinopharm company Yuexing‖) Sinopharm Holding Guangdong Direct Guangzhou Service 500.00 Storage loading and unloading Limited Lin Min Logistics Co., Ltd. company (―Guangdong Logistics‖) Sinopharm Guangxi Direct Nanning Commercial 10,000.00 Drug sales Limited Lin Zhaoxiong company Sinopharm Holding Guangxi Indirect Nanning Service 710.07 Storage loading and unloading, consultation service Limited Lin Zhaoxiong Logistics Co., Ltd. (―Guangxi company Logistics‖) (Note iii) Sinopharm Shenzhen Medicine Direct Shenzhen Manufacturing 5,000.00 Manufacturing of granules, lotion, tablet, capsule, oral liquid Limited Deng Baojun and mixture, and syrup; manufacturing and sale of hair company products, bath foam and cosmetics, and detergent (antibiosis washing liquid); manufacturing of plastic bottle; manufacturing and sale of health food. Sinopharm Holding Wuzhou Co., Ltd. Indirect Wuzhou Commercial 1,000.00 Traditional Chinese medicine, Chinese patent drugs, raw Limited Zhou (―Sinopharm Wuzhou‖) materials for chemical medicine, chemical material drugs, company Ruili antibiotics, bio-chemical drugs and biological products, narcotic drugs, anabolic agent, Pericarpium Papaveris,etc.

- 101 -

CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements (continued)

(1) Subsidiaries (continued)

(b) Subsidiaries acquired under common control (continued)

Year-End balance of Other assets constitute Equity interest Voting Consolidated or Minority Loss shared by investment investment in substance held (%) rights held not interests minority (RMB‘0000) (%) (RMB‘0000) interests

Zhijun Pharm 23,706.17 - 100 100 Yes - - Sinopharm Jianmin 5,348.29 - 100 100 Yes - - Sinopharm Material 816.74 - 100 100 Yes - - Zhijun Trade 373.40 - 100 100 Yes - - Shenzhen Logistics 101.91 - 100 100 Yes - - Sinopharm Guangzhou 48,388.83 - 100 100 Yes - - Sinopharm Hengxing 3,714.17 - 100 100 Yes - - Sinopharm Yulin (Note iii) 542.50 - 100 100 Yes - - Sinopharm Liuzhou 2,220.58 - 51 51 Yes 4,195.41 - Guangxi Chinese Herbal Pieces (Note ii) 200.00 51 51 Yes - - Huixin Investment 6,441.69 - 100 100 Yes - - Sinopharm Foshan 1,499.51 - 100 100 Yes - - Sinopharm Yuexing 4,345.93 - 100 100 Yes - - Guangdong Logistics 559.60 - 100 100 Yes - - Sinopharm Guangxi 10,404.90 - 100 100 Yes - - Guangxi Logistics (Note iii) 710.10 - 100 100 Yes - - Sinopharm Shenzhen Medicine 4,808.05 - 100 100 Yes - - Sinopharm Wuzhou 315.00 - 99.9 99.9 Yes 0.74 -

(ii) Guangxi Chinese Herbal Pieces, a wholly owned subsidiary of Sinopharm Liuzhou, is indirectly held of 51% in equity by the Company.

(iii) Sinopharm Yulin and Guangxi Logistics, wholly owned subsidiaries of Sinopharm Guangxi, is indirectly held of 100% in equity by the Company.

- 102 -

CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements (continued)

(1) Subsidiaries (continued)

(c) Subsidiaries acquired not under common control

The holding Place of Nature of Registered Principal activities Enterprise Type Legal type of registration business capital Repres-entative investment (RMB‘0000)

Suzhou Zhijun Direct Suzhou Manufacturing 18,000.00 Production and sales of general raw materials of medicine, raw Limited Huang Kai medicine and preparation of cephalosporin; do export company business of production and technology of the Company Sinopharm holding Dongguan Co., Direct Dongguan Commercial 1,000.00 Wholesales of Chinese traditional medicinal materials, Chinese Limited Lin Xinyang Ltd.(―Sinopharm Dongguan‖) patent medicine, Chinese traditional medicine in pieces, company chemical raw material; sales of daily general merchandise and heath protection food Sinopharm Holding Zhanjiang Co., Direct Zhanjiang Commercial 1,500.00 Wholesale of medicine Limited Lin Xinyang Ltd.(―Sinopharm Zhanjiang‖) company Sinopharm Yanfeng Direct Shenzhen Commercial 3,000.00 Wholesale of medicine Limited Lin Zhaoxiong company Sinopharm Holding Meizhou Co., Direct Meizhou Commercial 120.00 Wholesale of medicine Limited Yang Yan Ltd.(―Sinopharm Meizhou‖) company Sinopharm Holding Huizhou Co., Direct Huizhou Commercial 700.00 Wholesale of medicine Limited Yang Yan Ltd.(―Sinopharm Huizhou‖) company Sinopharm Holding Zhaoqing Co., Direct Zhaoqing Commercial 200.00 wholesale of Chinese patent drugs, raw materials for chemical Limited Yang Yan Ltd.(―Sinopharm Zhaoqing‖) medicine, chemical material drugs, antibiotics, bio-chemical company drugs and biological products (excluding vaccines), narcotic drugs, toxic drugs for medical use, pericarpium papaveris,anabolic agents Sinopharm Holding Jiangmen Co., Direct Jiangmen Commercial 1,000.00 wholesale of Chinese patent drugs, raw materials for chemical Limited Yang Yan Ltd.(―Sinopharm Jiangmen‖) medicine, chemical material drugs, antibiotics, bio-chemical company drugs and biological products (excluding vaccines), narcotic drugs, toxic drugs for medical use, pericarpium papaveris,anabolic agents Sinopharm Holding Shaoguan Co., Direct Shaoguan Commercial 360.00 wholesale of Traditional Chinese medicin, raw materials for Limited Yang Yan Ltd. (―Sinopharm shaoguan‖) chemical medicine and chemical material drugs, ect.; company

- 103 -

CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements (continued)

(1) Subsidiaries (continued)

(c) Subsidiaries acquired not under common control(continued)

Year-end balance Other assets constitute Equity interest Voting rights Consolidated or Minority interests Loss shared by minority of investment investment in substance held (%) held (%) not (RMB‘0000) interests ( RMB‘0000)

Suzhou Zhijun 26,590.00 - 100 100 Yes - - Sinopharm Dongguan 994.20 - 100 100 Yes - - Sinopharm Zhanjiang 1,576.99 - 100 100 Yes - - Sinopharm Yanfeng 3,820.78 - 51 51 Yes 2,341.08 - Sinopharm Meizhou 448.19 - 100 100 Yes - - Sinopharm Huizhou 564.42 - 100 100 Yes - - Sinopharm Zhaoqing 354.20 - 100 100 Yes - - Sinopharm Jiangmen 5,010.00 - 100 100 Yes - - Sinopharm Shaoguan 1,358.00 - 70 70 Yes 650.71 -

- 104 -

CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

IV Business combinations and consolidated financial statements (continued)

(2) New subsidiaries excluded in the scope of consolidation in the current year:

Net assets as at Net loss after acquisition 31 December 2013

Guangdong Accord Pharmaceutical Vocational Skills Training Center (―Training Center‖) (Note (i)) 36,180.28 (830.57) Shenzhen Medicine Trade Co., Ltd. (―Shenzhen Trade‖) (Note (ii)) - -

(i) The Training Center has been approved by the Board for liquidation on 14 October 2013 and was disconsolidated.

(ii) The Shenzhen Trade has been approved by the Board for liquidation on 14 October 2013 and was disconsolidated.

V Notes to the consolidated financial statements

(1) Cash at bank and on hand

31 December 2013 31 December 2012

Cash on hand 65,660.84 73,828.10 Cash at bank 1,097,882,693.61 920,674,215.43 Other cash balances 15,613,857.20 33,244,027.08 - deposits for bank acceptance notes 14,507,046.10 17,606,346.59 - depostis for letter of credit 1,106,811.10 8,937,680.49 - temporary capital verification - 6,700,000.00

1,113,562,211.65 953,992,070.61

As at 31 December 2013, except a deposit of USD which was equivalent to RMB134.32 (31 December 2012: RMB80.13), all other cash at bank and on hand are in RMB.

(2) Notes receivable

31 December 2013 31 December 2012

Trade acceptance notes 324,806,645.60 293,109,440.31 Bank acceptance notes 414,254,496.12 357,750,800.06 739,061,141.72 650,860,240.37

(a) Endorsed undue notes receivable

As at 31 December 2013, the Group endorsed the undue notes receivable of RMB559,034,616.93 (31 December 2012: RMB738,797,785.69). The top five notes receivable are analysed as below.

Issuer Issue date Expiry date Amount

People's Hospital of Dongguan City 25 November 2013 25 February 2014 6,058,056.34 Chongqing Medical (Group) Co., Ltd. 19 December 2013 19 June 2014 5,977,950.00 People's Hospital of Dongguan City 10 October 2013 10 January 2014 5,161,345.03 Chongqing Medical (Group) Co., Ltd. 19 July 2013 17 January 2014 4,313,220.00 Sinopharm Holding Hunan Co., Ltd. 20 November 2013 20 February 2014 4,080,019.87 25,590,591.24

- 105 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(2) Notes receivable (continued)

(b) Discounted undue notes receivable

As at 31 December 2013, notes receivable including undue commercial notes of RMB122,197,293.96 (31 December 2012: RMB39,200,449.89) (NoteV(19)), and undue bank acceptance notes of RMB216,288,519.38 (31 December 2012: RMB161,748,174.98) have been discounted.

(c) As at 31 December 2013, the Group has no notes receivable which need to be reclassified as accounts receivable.

(d) As at 31 December 2013，the Group‘s notes receivable of RMB26,286,066.66 (31 December 2012: Nil) have been pledged to the banks for issurance of bank acceptance note of RMB28,173,366.73 (31 December 2012: Nil). The 5 largest and other pledged note receivables are as follow:

Dawer Date of issue Due date Amount

Harbin Pharmaceutical Group 30 August 2013 28 February 2014 3,083,300.00 Yuekang Pharmaceutical Group Co., Ltd. 18 October 2013 18 April 2014 3,000,000.00 Harbin Pharmaceutical Group 30 September 2013 30 March 2014 1,991,088.00 Harbin Pharmaceutical Group 31 October 2013 30 April 2014 1,767,960.00 The People‘s Hospital of Henan Province 16 July 2013 16 January 2014 1,726,244.00 Others 14,717,474.66 26,286,066.66

(3) Accounts receivable

31 December 2013 31 December 2012

Accounts receivable 5,700,717,918.33 4,415,763,459.61 Less: provision for bad debts (25,059,411.55) (22,438,158.95) 5,675,658,506.78 4,393,325,300.66

(a) The aging of accounts receivable and related provision for bad debts are analysed below:

31 December 2013 31 December 2012 Amount Provision for bad Amount Provision for bad debts debts

Within 1 year 5,666,484,029.89 (2,536,716.74) 4,383,349,130.24 (733,430.98) 1 to 2 years 11,872,413.00 (1,899,306.50) 9,935,593.59 (2,373,495.91) 2 to 3 years 4,156,756.90 (2,418,669.77) 12,223,635.68 (10,467,212.99) Over 3 years 18,204,718.54 (18,204,718.54) 10,255,100.10 (8,864,019.07) 5,700,717,918.33 (25,059,411.55) 4,415,763,459.61 (22,438,158.95)

- 106 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(3) Accounts receivable (continued)

(b) The accounts receivable and related provision for bad debts by category are analysed below:

31 December 2013 31 December 2012

Carrying amount Bad debt provision Carrying amount Bad debt provision amount % of total amount rate amount % of total amount rate balance balance

individually significant are subject to separate impairment assessment 27,376,507.20 0.48% (17,791,726.54) 64.99% 32,230,166.51 0.73% (17,332,089.17) 53.78% receivable accounts within similar credit risk group 5,647,154,773.79 99.06% (479,964.75) 0.01% 4,371,020,555.42 98.99% (943,122.18) 0.02% individually not significant but individually evaluated for impairment 26,186,637.34 0.46% (6,787,720.26) 25.92% 12,512,737.68 0.28% (4,162,947.60) 33.27% 5,700,717,918.33 100.00% (25,059,411.55) 0.44% 4,415,763,459.61 100.00% (22,438,158.95) 0.51%

(c) As at 31 December 2013, impairment provision for accounts receivable individually significant are analysed as below.

Carrying Bad debt amount provision Rate Assessment for impairment

Guangdong Liyuan Disputed receivable with higher Pharmaceutical Co., Ltd. 15,686,460.93 (15,686,460.93) 100.00% risk of recoverability. The Second People's Hospital Disputed receivable with higher of Shenzhen 6,375,231.69 (1,434,789.46) 22.51% risk of recoverability Peking University Shenzhen Disputed receivable with higher Hospital 5,314,814.58 (670,476.15) 12.62% risk of recoverability 27,376,507.20 (17,791,726.54)

(d) Provisions for impairment of the receivables which have a similar risk level are analysed below:

31 December 2013 31 December 2012 Carrying amount Bad debt provision Carrying amount Bad debt provision amount % of total rate amount % of total amount rate balance amount balance

Within 1 year 5,639,111,868.62 99.86% - - 4,359,367,831.85 99.74% - 0.00% 1 to 2 years 6,486,515.25 0.11% (324,325.76) 5.00% 7,962,291.52 0.18% (400,193.84) 5.03% 2 to 3 years 1,556,389.92 0.03% (155,638.99) 10.00% 1,951,580.77 0.04% (195,158.08) 10.00% Over 3 years - 0.00% - 0.00% 1,738,851.28 0.04% (347,770.26) 20.00% 5,647,154,773.79 100.00% (479,964.75) 0.01% 4,371,020,555.42 100.00% (943,122.18) 0.02%

- 107 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(3) Accounts receivable (continued)

(e) As at 31 December 2013, accounts receivable individually not significant but individually evaluated for impairment are analysed below:

Carrying Bad debt amount provision Rate Assessment for impairment

Difference of balance account The First People‘s Hospital of Hechi 3,653,036.09 (7,177.72) 0.20% cannot be verified Zengcheng Yongning Street Yonghe Difference of balance account Community Health Service 2,302,554.03 (233,200.86) 10.13% cannot be verified Difference of balance account Liuzhou Municipal Liutie Central Hospital 2,275,456.10 (215,023.77) 9.45% cannot be verified Zengcheng Shitan Town Central Health Service Uncertainty in recoverability Station 1,830,701.95 (307,025.11) 16.77% Zengcheng Xianchun Town Health Station 1,373,811.63 (112,787.14) 8.21% Uncertainty in recoverability Zengcheng Zhongxin Hospital 1,341,014.81 (253,569.29) 18.91% Uncertainty in recoverability The Red Cross Hospital of Liuzhou 1,279,428.88 (12,682.17) 0.99% Uncertainty in recoverability Zengcheng Licheng Street Community Health Uncertainty in recoverability Service Station 1,164,657.29 (96,018.36) 8.24% Jilin Yongtai Pharmaceutical Co., Ltd. 1,099,178.55 (775,795.95) 70.58% Uncertainty in recoverability Jilin Kaining Pharmaceutical Co., Ltd. 943,456.49 (943,456.49) 100.00% Uncertainty in recoverability Zengcheng Xintang Town Central Health Uncertainty in recoverability Center Shapu Branch 918,026.36 (54,810.15) 5.97% Shenzhen Maternal and Children Care Difference of balance account Service Center 902,613.84 (412,992.00) 45.76% cannot be verified Guangdong Da Shenlin Pharmaceutical Uncertainty in recoverability Chain Co., Ltd. 773,956.27 (773,956.27) 100.00% Zengcheng Yongning Street Ningxi Community Uncertainty in recoverability Health Service Station 707,850.71 (114,751.97) 16.21% Guangzhou Huadu District Xinhua Hospital 601,170.27 (143,478.41) 23.87% Uncertainty in recoverability Others 5,019,724.07 (2,330,994.60) 46.44% Uncertainty in recoverability 26,186,637.34 (6,787,720.26)

(f) Accounts receivable, which have been fully or partly made impairment provision, recovered in current year are listed below:

Recovered Reason for Original assessment for bad debt Recovered recoverability providing impairment provisions amount

Guangdong Shantou Chuangmei Differences cannot be Medicine Trading Co., Ltd. Amount received reconciled with counted party 249,407.80 (249,407.80) Guangdong Foshan Chuangmei Differences cannot be Medicine Trading Co., Ltd. Amount received reconciled with counted party 151,671.40 (151,671.40) Guangdong Jointown Pharmaceutical Differences cannot be Co., Ltd. Amount received reconciled with counted party 50,170.08 (50,170.08) Differences cannot be Others reconciled with counted party 144,096.70 (144,096.70) 595,345.98 (595,345.98)

(g) Accounts receivable written off in current year are analysed as below:

Nature of the Related party receivable Amount Reason transaction or not

Huizhou Quanyi Medicine Account Aged over 5 years, recoverability in Chain Co., Ltd. receivable 443,692.12 significant doubt No Wuhan Military Hosptial of Account Aged over 5 years, recoverability in Guangzhou receivable 337,701.85 significant doubt No Account Aged over 5 years, recoverability in Other receivable 402,087.52 significant doubt No 1,183,481.49

- 108 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(3) Accounts receivable (continued)

(h) Accounts receivable due from shareholders with more than 5% (including 5%) of the Company‘s equity interest are analysed as below:

31 December 2013 31 December 2012

Sinopharm Group(Note VII(6)) 4,693,304.80 2,863,144.40

(i) As at 31 December 2013, the top five accounts receivable by customer are analysed as below:

% of the total Relationship with accounts the Group Amount Ageing receivable

Disease Control and Prevention Center of Guangdong Province Third party 161,463,600.00 Within 1 year 2.84% The Third Affiliated Hospital of ZhongShan University Third party 117,738,728.44 Within 1 year 2.07% The First Affiliated Hospital of GuangXi Medical University Third party 101,064,401.47 Within 1 year 1.77% The First Affiliated Hospital of ZhongShan University Third party 74,953,212.27 Within 1 year 1.31% Zhujiang Hospital of Southern Medical Univesity Third party 74,161,060.78 Within 1 year 1.30% 529,381,002.96 9.29%

(j) Accounts receivable due from related party

As at 31 December 2013, accounts receivable from related party amounted to RMB272,941,955.43 (31 December 2012: RMB227,117,446.69), which is 4.78% of the total accounts receivable (31 December 2012: 5.14%) (Note VII(6)).

(k) In 2013, accounts receivable of RMB1,175,804,439.93 have been factored to financial institute(2012: RMB861,524,125.42).

(l) As at 31 December 2013, the Group‘s accounts receivable totalling RMB34,340,216.50 (31 December 2012: RMB34,274,932.13) have been pledged to bank as security for short-term loan of RMB27,472,173.20 (31 December 2012: RMB34,274,932.13) (Note V(19))

(m) Accounts receivable denominated in foreign currencies are as follows:

31 December 2013 31 December 2012 Foreign Exchange Foreign Exchange Currency Rate RMB Currency Rate RMB

USD 2,498,855.43 6.0969 15,235,271.66 1,647,256.71 6.2855 10,353,832.05 EUR - - 325,000.00 8.3176 2,703,220.00 GBP 17,688.80 10.0556 177,871.50 102,600.00 10.1611 1,042,528.86

HKD 394,001.47 0.7862 309,763.96 60,338.00 0.8108 48,922.05 15,722,907.12 14,148,502.96

- 109 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(4) Advances to suppliers

(a) The aging of advances to suppliers is analysed below:

31 December 2013 31 December 2012 amount % of total balance amount % of total balance

Within 1 year 63,940,204.79 99.34% 88,614,241.91 99.00% 1 to 2 years 344,224.38 0.53% 579,455.00 0.65% 2 to 3 years 42,900.00 0.07% 209,787.70 0.23% Above 3 years 39,711.00 0.06% 108,896.73 0.12% 64,367,040.17 100.00% 89,512,381.34 100.00%

(b) As at 31 December 2013, the top five advances to suppliers by customer are analysed below:

Relationship Reason for with the Group Amount Proportion Ageing unsettlement

Jiangsu Huawei Pharmaceutical Advances for Logistics Co., Ltd. Third party 19,684,827.32 30.58% Within 1 year procurement Advances for Abraxis Biose Science,LLC Third party 5,618,025.00 8.73% Within 1 year procurement Advances for Seiko Eiyo Yakuhin Co., Ltd. Third party 4,534,857.82 7.05% Within 1 year procurement Qinghai Pharmaceutical Co., Ltd. Controlled by Advances for CNPGC 3,838,364.55 5.96% Within 1 year procurement Lanzhou Fuzheng Medicine Advances for Marketing Co., Ltd. Third party 3,412,537.40 5.30% Within 1 year procurement 37,088,612.09 57.62%

(c) Advances due from related party

As at 31 December 2013, there are advances of RMB5,445,796.87 due from related party (31 December 2012: RMB8,315,884.21), which is 8.46% of the total advances to suppliers (31 December 2012: 9.29%), and no bad debt provision was provided (31 December 2012: Nil). (Note VII(6)).

(5) Other receivables

31 December 2013 31 December 2012

Deposit 8,338,022.65 10,436,780.98 Receivable of equity transaction(Note (c)) 8,980,000.00 8,980,000.00 Petty cash advance to employees 5,772,436.51 8,118,858.69 Receivable due from related party(Note(h)) 2,450,920.81 1,215,000.00 Others 14,955,273.23 17,356,156.64 40,496,653.20 46,106,796.31 Less: provision for bad debts (10,875,753.49) (13,121,370.71) 29,620,899.71 32,985,425.60

(a) The ageing of other receivables and related provision for bad debts are analysed below:

31 December 2013 31 December 2012

Within 1 year 24,095,302.72 24,400,128.34 1 to 2 years 967,739.44 3,598,448.64 2 to 3 years 763,087.00 2,594,617.98 Over 3 years 14,670,524.04 15,513,601.35 40,496,653.20 46,106,796.31

- 110 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(5) Other receivables (continued)

(b) Other receivables and related provision for bad debts by category are analysed below: 4 31 December 2013 31 December 2012 Carrying amount Bad debt provision Carrying amount Bad debt provision % of total % of total amount amount amount rate amount amount amount rate

Individually significant are subject to separate impairment assessment 8,980,000.00 22.17% (8,980,000.00) 100.00% 8,980,000.00 19.48% (8,980,000.00) 100.00% Receivable accounts within similar credit risk group 26,647,155.69 65.80% (341,346.42) 1.28% 28,877,007.59 62.63% (452,946.84) 1.57% Individually not significant but individually evaluated for impairment 4,869,497.51 12.03% (1,554,407.07) 31.92% 8,249,788.72 17.89% (3,688,423.87) 44.71% 40,496,653.20 100.00% (10,875,753.49) 26.86% 46,106,796.31 100.00% (13,121,370.71) 28.46%

(c) As at 31 December 2013, impairment provision for other receivables individually significant are analysed as below.

Bad debt Assessment for Amount provision Rate impairment

Shenzhen Yinghai Technology Uncertainty in Investment Co., Ltd. 8,980,000.00 (8,980,000.00) 100.00% recoverability

(d) Provisions for impairment of the receivables which have a similar risk group are analysed below:

31 December 2013 31 December 2012 Carrying amount Bad debt provision Carrying amount Bad debt provision % of total % of total amount amount amount rate amount amount amount rate

Within 1 year 24,063,233.50 90.30% - - 24,181,262.27 83.74% - - 1 to 2 years 932,329.44 3.50% (46,110.87) 4.95% 2,279,422.77 7.89% (113,357.72) 4.97% 2 to 3 years 350,830.00 1.32% (35,083.00) 10.00% 1,436,757.98 4.98% (143,675.80) 10.00% Over 3 years 1,300,762.75 4.88% (260,152.55) 20.00% 979,564.57 3.39% (195,913.32) 20.00% 26,647,155.69 100.00% (341,346.42) 1.28% 28,877,007.59 100.00% (452,946.84) 1.57%

(e) As at 31 December 2013, other receivables individually not significant but individually evaluated for impairment are analysed below:

Amount Bad debt provision Rate Assessment for impairment

Shenzhen Health Food I&E Co., Ltd. 1,157,860.00 (1,157,860.00) 100.00% Uncertainty in recoverability Others 3,711,637.51 (396,547.07) 10.68% Uncertainty in recoverability 4,869,497.51 (1,554,407.07) 31.92%

- 111 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(5) Other receivables (continued)

(f) Other receivables, which have been fully or partly made impairment provision, recovered in current year are listed below:

Reason for Assessment for Recovered bad recoverability impairment debt provisions Amount

Uncertainty in Nanning Shunan Trading Co., Ltd. Amount received recoverability 46,389.76 (46,389.76) Guangxi Changhong Pharmacy Co., Uncertainty in Ltd. Sharehlder repaid recoverability 40,000.00 (40,000.00) Uncertainty in Livzon Pharmaceutical Group Inc., Amount received recoverability 30,000.00 (30,000.00) Uncertainty in Others Amount received recoverability 385,262.05 (385,262.05) 501,651.81 (501,651.81)

(g) Other receivables written off in current year are analysed as below:

Related party Nature Amount Reason for written off transaction or not

Due to unclear debt procedures and fully Written off of long aging and drawing bad debts, the uncollectable other receivables Deposit 2,556,968.95 collectability is low No

(h) Other receivables due from shareholders with more than 5% (including 5%) of the Company‘s equity interest are analysed as below:

31 December 2013 31 December 2012

Sinopharm Group (Note VII(6)) 250,000.00 -

(i) As at 31 December 2013, the top five other receivables by customer are analysed below:

Relationship % of the total with the Group Amount Ageing other receivable

Shenzhen Yinghai Technology&Investment Co., Ltd. Third party 8,980,000.00 Above 5 years 22.17% Guangxi Autonomous Region Housing System Reformed Department Third party 1,907,846.59 Above 5 years 4.71% Liuzhou Housing Provident Fund Management Center- Specific Account for Housing Fund Third party 1,305,390.82 Above 5 years 3.22% Shenzhen Health Food I&E Co., Ltd. Third party 1,157,860.00 3-4 years 2.86% China International Capital Co., Ltd. Third Party 1,000,000.00 Within 1 year 2.47% 14,351,097.41 35.44%

(j) Other receivables due from related party

As at 31 December 2013, there are other receivables of RMB2,450,920.81due from related party (31 December 2012: RMB1,215,000.00), which is 6.05% of the total other receivables(31 December 2012: 2.64%), without bad debt provided (31 December 2012: Nil). (Note VII(6)).

- 112 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(6) Inventories

(a) Inventories by category are analysed as below:

31 December 2013 31 December 2012 Book value Provision Net book Book value Provision Net book Value Value

Raw materials 125,355,376.95 (5,666,854.74) 119,688,522.21 118,474,602.02 (3,689,458.00) 114,785,144.02 Packaging materials 545,583.87 (18,076.22) 527,507.65 586,659.80 (1,790.66) 584,869.14 Consigned processing materials 520,289.18 - 520,289.18 665,881.85 - 665,881.85 Finished goods 1,673,005,932.68 (17,091,438.82) 1,655,914,493.86 1,603,544,644.54 (13,615,739.67) 1,589,928,904.87 Work in progress 53,983,888.09 - 53,983,888.09 28,048,150.68 - 28,048,150.68 Low cost consumables 632,589.01 - 632,589.01 666,113.22 - 666,113.22 1,854,043,659.78 (22,776,369.78) 1,831,267,290.00 1,751,986,052.11 (17,306,988.33) 1,734,679,063.78

(b) Provision for declines in value of inventories is analysed as below:

Decreases 31 December 2012 Increases Reversal Written off 31 December 2013

Raw materials 3,689,458.00 2,678,295.24 (615,791.85) (85,106.65) 5,666,854.74 Finished goods 13,615,739.67 31,430,464.57 (332,739.02) (27,622,026.40) 17,091,438.82 Packaging materials 1,790.66 97,438.83 (17,552.86) (63,600.41) 18,076.22 Goods in transition - 160,675.24 - (160,675.24) - 17,306,988.33 34,366,873.88 (966,083.73) (27,931,408.70) 22,776,369.78

(c) Provision for decline in the value of inventories are as follows:

Reason of recognise Reason of reverse Reversed Amount/ impairment provision impairment provision Total Inventory

Raw material Carrying amount of raw materials Increase in net realisable 0.49% is lower than the net realisable value resulted from sales value caused by decline price increasing in the price of product Finished goods Carrying amount of finished Increase in net realisable value 0.02% goods is lower than the net resulted from sales price realisable value caused by decline increasing in the price of product Packaging Carrying amount of package Increase in net realisable value 3.22% materials materials is lower than the net resulted from sales price realisable value caused by decline increasing in the price of product Goods in transition Carrying amount of the goods in NA NA trasition is lower than the net realisable value caused by decline in the price of product

(7) Other current assets

31 December 2013 31 December 2012

Corporate income tax to be deducted 244,354.28 226,501.90 VAT to be deducted 10,474,150.59 7,854,105.76 Other 1,485,247.90 - 12,203,752.77 8,080,607.66

(8) Long-term equity investments

31 December 2013 31 December 2012

Associates - Without quoted price (a) 135,341,010.52 121,019,845.50

The Group has no liquidity restriction on its long-term equity investments.

- 113 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(8) Long-term equity investments (continued)

(a) Associates

Increases/(Decreases) Cash dividends Equity Voting Explanation for the inconsistence between Accounting Original Share of profit of declared by 31 December interest rights held equity interest held method investment cost 31 December 2012 associate associate 2013 held (%) (%) and voting rights held Note V(43) Board of the directors is the highest decision making organization, which is Shenzhen Wanle Medical formed by 3 shareholders of Wanle Co., Ltd. (―Wanle Equity Medical evenly, each shareholder appoints Medical‖) method 4,457,400.00 121,019,845.50 42,473,165.02 (28,152,000.00) 135,341,010.52 35.19 33.33 2 directors set up the borad

(9) Investment in associates

Equity interest held Voting rights held As at 31 December 2013 For the year ended 31 December 2013 Total assets Total liabilities Net assets Revenues Net profit (%) (%)

Wanle Medical 35.19 33.33 734,641,815.09 350,041,046.37 384,600,768.72 742,577,238.94 120,696,689.45

- 114 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(10) Investment properties

31 December 2012 Increase in Decrease in 31 December 2013 Current year Current year

Cost 182,895,666.22 1,031,618.34 (16,691,561.52) 167,235,723.04 Buildings 162,739,072.21 1,031,618.34 (15,717,833.73) 148,052,856.82 Land use rights 20,156,594.01 - (973,727.79) 19,182,866.22

Accumulated depreciation/ amortisation (93,280,236.59) (5,964,141.44) 10,578,373.13 (88,666,004.90) Buildings (91,200,873.61) (5,614,439.02) 10,491,062.09 (86,324,250.54) Land use rights (2,079,362.98) (349,702.42) 87,311.04 (2,341,754.36)

Net book value 89,615,429.63 78,569,718.14 Buildings 71,538,198.60 61,728,606.28 Land use rights 18,077,231.03 16,841,111.86

Provision for impairment loss (1,300,000.00) - - (1,300,000.00) Buildings (1,300,000.00) - - (1,300,000.00) Land use rights - - - -

Carrying amount 88,315,429.63 77,269,718.14 Buildings 70,238,198.60 60,428,606.28 Land use rights 18,077,231.03 16,841,111.86

In 2013, the amount of depreciation and amortization were RMB5,932,256.16 (2012: RMB6,736,996.41)

In 2013, the Group changed the use of buildings with a carrying amount of RMB4,277,762.83 (cost of RMB9,093,174.75, accumulated depreciation RMB4,815,411.92) to self-use properties,and therefore,such assets were transferred from investment properties to fixed assets at the dates of change in use. The investment properties were respectively transferred to fixed assets (cost of RMB8,119,446.96, accumulated depreciation RMB4,728,100.88) and intangible assets (cost of RMB973,727.79 , accumulated depreciation RMB87,311.04).

In 2013, the Group changed the use of buildings with a carrying amount of RMB734,872.56 (cost of RMB766,757.84, accumulated depreciation RMB31,885.28) to lease-out properties,and therefore,such assets were transferred from fixed assets to investment properties at the dates of change in use.

In 2013, the Group disposed buildings with a carrying amount of RMB1,835,425.56 (cost of RMB7,598,386.77, accumulated depreciation RMB5,762,961.21), the gain of disposal was RMB2,524,742.02.

- 115 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(11) Fixed assets

31 December Transfer from Current year other Transfer to Current year 31 December 2012 Investment additions investment disposals 2013 properties properties

Cost 1,090,165,781.29 8,119,446.96 168,196,021.88 (766,757.84) (15,267,088.81) 1,250,447,403.48 Buildings 430,504,407.95 8,119,446.96 91,223,071.90 (766,757.84) (6,004,449.10) 523,075,719.87 Machinery and equipment 433,908,817.29 - 22,006,513.80 - (2,677,007.75) 453,238,323.34 Motor vehicles 56,362,679.72 - 4,307,994.25 - (3,091,996.84) 57,578,677.13 Other 144,294,679.20 - 47,851,847.02 - (3,220,780.15) 188,925,746.07 Leasehold improvements 25,095,197.13 - 2,806,594.91 - (272,854.97) 27,628,937.07

Accumulated depreciation (399,678,148.17) (4,728,100.88) (84,513,425.96) 31,885.28 10,521,902.02 (478,365,887.71) Buildings (100,053,162.74) (4,728,100.88) (18,944,943.82) 31,885.28 2,448,640.93 (121,245,681.23) Machinery and equipment (158,389,377.86) - (41,394,005.42) - 2,073,762.66 (197,709,620.62) Motor vehicles (29,050,984.46) - (6,013,598.72) - 2,791,426.17 (32,273,157.01) Other (100,399,801.69) - (14,437,533.01) - 2,947,427.48 (111,889,907.22) Leasehold improvements (11,784,821.42) - (3,723,344.99) - 260,644.78 (15,247,521.63)

Net book value 690,487,633.12 772,081,515.77 Buildings 330,451,245.21 401,830,038.64 Machinery and equipment 275,519,439.43 255,528,702.72 Motor vehicles 27,311,695.26 25,305,520.12 Other 43,894,877.51 77,035,838.85 Leasehold improvements 13,310,375.71 12,381,415.44

provision for diminution in value - - (5,339,925.14) - - 5,339,925.14 Buildings - - (2,405,177.30) - - 2,405,177.30 Machinery and equipment - - (2,930,449.81) - - 2,930,449.81 Motor vehicles ------Other - - (1,948.24) - - 1,948.24 Leasehold improvements - - (2,349.79) - - 2,349.79

Carrying amount 690,487,633.12 766,741,590.63 Buildings 330,451,245.21 399,424,861.34 Machinery and equipment 275,519,439.43 252,598,252.91 Motor vehicles 27,311,695.26 25,305,520.12 Other 43,894,877.51 77,033,890.61 Leasehold improvements 13,310,375.71 12,379,065.65

In 2013, the Group transferred buildings with carring amount of RMB1,921,175.13 (Cost: RMB2,753,631.10, accumulated depreciation: RMB832,455.97) into construction in progress due to reconstruction.

- 116 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(11) Fixed assets (continued)

In 2013, details of the depreciation charged arebelow:

31 December 2013 31 December 2012

Cost of goods sold 44,656,023.05 42,673,062.37 Selling expenses 5,487,442.01 3,907,835.02 General and administrative expenses 27,534,817.22 25,481,039.32 Research and development expenses 6,835,143.68 5,900,780.24 84,513,425.96 77,962,716.95

In 2013, fixed assets transferred from construction in progress are RMB119,351,273.16 (2012: RMB102,925,085.72).

(12) Construction in progress

31 December 2013 31 December 2012

Pingshan Pharmaceutical Research & Development Manufacturing Base 54,720,588.89 291,361.00 Zhijun Production Workshop Technological Transformation Project 21,852,704.06 11,269,919.29 Cephalosporin Powder Injection Preparation Workshop Transformation Project 19,393,066.62 - Peinan Project 11,438,747.84 11,438,747.84 Shenzhen Logistics Center Stage II Warehouse Transformation Project 4,555,429.58 - Sewage Transformation Project etc. 4,417,283.79 570,000.00 Warehouse Transformation Project 879,037.82 - Zhijun Zhiyao Guanglan Stage II Project - 71,032,092.95 Other projects 9,349,947.41 9,353,229.72 126,606,806.01 103,955,350.80

- 117 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(12) Construction in progress (continued)

Changes of construction in progress in 2013 are below:

Name of project Budget of project 31 December Current year Transfer out during 31 December 2013 Cost up Construction Accumulated Borrowing Weighted Financed 2012 additions current year to date in capitalized cost average by out of progress borrowing capitalized interest budget (%) cost in 2010 rate (%) (%)

Pingshan Pharmaceutical Research & Development Manufacturing Base 881,370,000.00 291,361.00 54,429,227.89 - 54,720,588.89 8% 15% - Working capital Zhijun Production Workshop Working capital Technological Transformation Project 100,707,000.00 11,269,919.29 24,492,077.11 (13,909,292.34) 21,852,704.06 58% 80% - Cephalosporin Powder Injection Working capital Preparation Workshop Transformation Project 35,000,000.00 - 19,393,066.62 - 19,393,066.62 55% 75% - Peinan Project 40,000,000.00 11,438,747.84 - - 11,438,747.84 28% 28% - Working capital Shenzhen Logistics Center Stage Working capital II Warehouse Transformation Project 5,750,000.00 - 4,555,429.58 - 4,555,429.58 81% 81% - Sewage Transformation Project Working capital etc. 6,300,000.00 570,000.00 3,847,283.79 - 4,417,283.79 70% 90% - Zhijun Zhiyao Guanglan Stage II Working capital Project 250,000,000.00 71,032,092.95 29,916,590.91 (100,948,683.86) - 72% 100% 3,154,294.79 2,004,494.09 6.76% and borrowings Warehouse Transformation Working capital Project 21,790,000.00 - 19,278,916.06 (18,399,878.24) 879,037.82 88% 89% - Other projects - 9,353,229.72 3,823,062.51 (3,826,344.82) 9,349,947.41 - - - Working capital 1,340,917,000.00 103,955,350.80 159,735,654.47 (137,084,199.26) 126,606,806.01

- 118 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(13) Intangible assets

31 December Current year Current year 2012 additions decreases 31 December 2013

Cost 250,346,106.81 4,226,849.31 - 254,572,956.12 Land use rights 144,876,761.43 973,727.79 - 145,850,489.22 Computer software 18,531,419.19 2,451,234.75 - 20,982,653.94 Proprietary technology 53,083,933.33 801,886.77 - 53,885,820.10 Trademarks 196,850.00 - - 196,850.00 Sales network 33,657,142.86 - - 33,657,142.86

Accumulated amortization (92,191,035.61) (8,819,956.05) - (101,010,991.66) Land use rights (30,815,831.14) (3,342,577.23) - (34,158,408.37) Computer software (12,213,237.12) (2,117,788.86) - (14,331,025.98) Proprietary - technology (47,953,926.87) (1,676,732.82) (49,630,659.69) Trademarks (196,850.00) - - (196,850.00) Sales network (1,011,190.48) (1,682,857.14) - (2,694,047.62)

Net book value 158,155,071.20 153,561,964.46 Land use rights 114,060,930.29 111,692,080.85 Computer software 6,318,182.07 6,651,627.96 Proprietary technology 5,130,006.46 4,255,160.41 Trademarks - - Sales network 32,645,952.38 30,963,095.24

Provision for impairment loss (3,000,000.00) - - (3,000,000.00) Land use rights - - - - Computer software - - - - Proprietary technology (3,000,000.00) - - (3,000,000.00) Trademarks - - - - Sales network - - - -

Carrying amount 155,155,071.20 150,561,964.46 Land use rights 114,060,930.29 111,692,080.85 Computer software 6,318,182.07 6,651,627.96 Proprietary technology 2,130,006.46 1,255,160.41 Trademarks - - Sales network 32,645,952.38 30,963,095.24

Amortization amount of intangible asset is RMB8,732,645.01 in 2013(2012: RMB10,002,898.36).

- 119 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(13) Intangible assets(continued)

Expenditures on research and development incurred in 2013 are listed as below:

31 December 2012 additions 31 December 2013

Development costs 5,002,441.27 616,874.20 5,619,315.47

Expenditures on research and development incurred in 2013 amount to RMB80,047,194.42 (2012: RMB80,366,881.98) in total, of which RMB79,430,320.22 (2012: RMB79,362,874.40) is recognised in profit or loss for the current period, RMB616,874.20 (2012: RMB1,004,007.58) is recognised as development costs. No research and development costs are capitialized.

(14) Goodwill

31 December 2013 31 December 2012

Goodwill 85,228,833.15 85,228,833.15 Less: provision for impairment (a) - - 85,228,833.15 85,228,833.15

(a) Impairment

The goodwill allocated to the asset groups and groups of asset groups are summarised by operating segments as follows:

31 December 2013 31 December 2012

Pharmaceutical distribution- Sinopharm Jiangmen 27,392,317.73 27,392,317.73 Sinopharm Yanfeng 16,868,644.87 16,868,644.87 Sinopharm Zhaoqing 2,594,341.53 2,594,341.53 Sinopharm Shaoguan 1,686,496.80 1,686,496.80 Sinopharm Meizhou 1,610,819.66 1,610,819.66 Sinopharm Huizhou 923,184.67 923,184.67 Sinopharm Zhanjiang 282,135.55 282,135.55 Sinopharm Dongguan 1,499.02 1,499.02 Pharmaceutical manufacturing - Suzhou Zhijun 33,869,393.32 33,869,393.32 85,228,833.15 85,228,833.15

The recoverable amount of asset groups and groups of asset groups is calculated using the estimated cash flows determined according to the five-year budget approved by management. The cash flows beyond the five-year period are calculated based on the following estimated growth rates.

The main assumptions applied in calculating discounted future cash flows are as follows:

Pharmaceutical Pharmaceutical distribution manufacturing

Gross margin 6% 12% Discount rate 15% 14.8%

Management determines budgeted gross margin based on historical experience and forecast on market development. The discount rates determined by management are the pre-tax interest rates which reflect the risks specific to the related asset groups and groups of asset groups(Pharmaceutical distribution after-tax discount rate 15%, Manufactruing afer-tax discount rate 14.8%) . The above assumptions are used to assess the recoverable amount of each asset group and group of asset groups within the corresponding operating segment. As at 31 December 2013, management of the Group considered there was no impairment to goodwill recognised according to the impairment assessment

- 120 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(15) Long-term prepaid expenses

31 December Current year Current year 31 December 2013 2012 additions amortisation

Leasehold improvements 17,804,416.48 20,763,758.82 (4,602,761.49) 33,965,413.81 Others 1,938,573.97 970,930.16 (889,296.47) 2,020,207.66 19,742,990.45 21,734,688.98 (5,492,057.96) 35,985,621.47

Current year addition is mainly transferred from construction in progress of RMB17,732,926.10 in 2013(2012: Nil).

(16) Deferred income tax assets and deferred income tax liabilities

(a) Deferred income tax assets

31 December 2013 31 December 2012 Deferred income Deductible Deferred income Deductible tax assets temporary tax assets temporary differences differences

Provision for accounts receivable 6,032,385.45 25,059,411.55 5,546,717.33 22,438,158.95 Provision for other receivables 2,711,760.38 10,875,753.49 3,093,982.75 13,121,370.71 Provision for declines in value of inventories 3,640,508.27 22,776,369.78 2,775,337.75 17,306,988.33 Provision for fixed assets impairment 638,247.96 3,844,571.35 161,012.70 644,050.78 Accrued expenses 9,323,398.38 51,691,587.96 6,724,770.78 43,761,198.02 Accrued payroll 14,401,729.27 70,542,501.21 12,339,208.94 62,680,920.93 Deferred revenue 13,056,138.55 84,518,146.08 10,590,957.10 70,603,980.67 Deductible losses 10,009,584.17 64,531,193.67 4,523,540.07 29,125,619.28 Accrued liabilities 5,510,000.00 22,040,000.00 - - Others 3,572,185.82 15,362,493.44 3,754,002.55 16,539,607.42 68,895,938.25 371,242,028.53 49,509,529.97 276,221,895.09

(b) Deferred income tax liabilities

31 December 2013 31 December 2012 Deferred income Deductible Deferred income Deductible tax liabilities temporary tax liabilities temporary differences differences

Business combination involving entities not under common control 9,219,687.61 40,822,520.57 10,275,178.70 46,737,223.16 Changes in fair value 11,613,211.10 46,452,844.40 12,409,124.61 49,636,498.44 Others 3,811,989.05 15,351,076.30 3,934,970.37 16,170,951.78 24,644,887.76 102,626,441.27 26,619,273.68 112,544,673.38

- 121 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(16) Deferred income tax assets and deferred income tax liabilities (continued)

(c) As at 31 December 2013, the Group has not recognised deferred tax assets in respect of deductible losses and other deductible temporary differences are listed as below.

31 December 2013 31 December 2012

Deductible losses(Note(i)) 1,627,172.87 30,188,798.83

(i) For those loss-making subsidiaries, the Group does not recognise deferred tax assets arising from accumulated losses amounting to RMB1,627,172.87which are tax deductible under the tax law within 2014 to 2018.

As at 31 December 2013, the unrecognised deferred tax assets in respect of deductible losses will be expired as follows:

Year 31 December 2013 31 December 2012

2014 - - 2015 1,627,172.87 9,050,596.00 2016 - 16,478,931.41 2017 - 4,659,271.42 2018 - - 1,627,172.87 30,188,798.83

(17) Provision for asset impairment

Reversal of Decreases written off 31 December amount in 31 December 2012 2012 Increases Reversal Written off 2013

Bad debt provision 35,559,529.66 859,894.48 6,185,129.54 (2,928,938.20) (3,740,450.44) 35,935,165.04 Including: Provision for ccounts receivable 22,438,158.95 859,894.48 5,372,126.00 (2,427,286.39) (1,183,481.49) 25,059,411.55 Provision for other receivables 13,121,370.71 - 813,003.54 (501,651.81) (2,556,968.95) 10,875,753.49 Provision for declines in value of inventories 17,306,988.33 - 34,366,873.88 (966,083.73) (27,931,408.70) 22,776,369.78

Provision for fixed assets - - 5,339,925.14 - - 5,339,925.14 Provision for investment property impairment 1,300,000.00 - - - - 1,300,000.00 Provision for intangible assets impairment 3,000,000.00 - - - - 3,000,000.00

57,166,517.99 859,894.48 45,891,928.56 (3,895,021.93) (31,671,859.14) 68,351,459.96

- 122 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(18) Other non-current assets 31 December 2013 31 December 2012

Medical reserve fund 44,071,813.66 40,053,062.53 Prepayment for equipment 23,336,486.75 3,684,662.00 Equity money in advance 2,247,000.00 - Non-monetary compensation of resettlement (Note V(31)) 70,250,000.00 70,250,000.00 139,905,300.41 113,987,724.53

(19) Short-term borrowings

(a) Bank borrowings are analysed by catagories as follows:

Currency 31 December 2013 31 December 2012

Unsecured borrowings (Note(i)) RMB 1,643,740,120.17 1,281,821,210.14 Guaranteed borrowings (Note(ii)) RMB 551,532,001.78 332,513,702.21 Pledged borrowings (Note V(3)(l)) RMB 27,472,173.20 34,274,932.13 Discounted notes (Note V(2)(b)) RMB 122,197,293.96 39,200,449.89 Entrusted borrowings (Note iii) RMB 400,000,000.00 - 2,744,941,589.11 1,687,810,294.37

(i) As at 31 December 2013, unsecured borrowings of RMB1,323,740,120.17 (31 December 2012: RMB1,019,821,210.14) are guaranteed by the Company and its subsidiaries, unsecured borrowings of RMB320,000,000.00 (31 December 2012: RMB262,000,000.00) are lent by Sinopharm Group Financial Co., Ltd. (―Group Financial Co.‖).

(ii) As at 31 December 2013, bank borrowings of RMB551,532,001.78 (31 December 2012: RMB332,513,702.21) are guaranteed by Sinopharm Group;

(iii) As at 31 December 2013，consigned loan of RMB400,000,000.00 is lend by the Sinopharm Group through Bank of Communications Co., Ltd. Shanghai Hongkou Branch.

As at 31 December 2013, the weighted average interest rate of short-term borrowings is 5.83% per annum (31 December 2012: 5.42%).

(b) As at 31 December 2013, there were no expired bank borrowings(31 December 2012: Nil).

(20) Notes payable

31 December 2013 31 December 2012

Trade acceptance notes 357,654,446.00 336,196,648.99 Bank acceptance notes 1,137,746,742.09 769,078,889.25 1,495,401,188.09 1,105,275,538.24

As at 31 December 2013, notes receivable of RMB1,495,401,188.09 would be expired within 1 year (31 December 2012: RMB1,105,275,538.24).

- 123 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(21) Accounts payable

31 December 2013 31 December 2012

Trade payable 3,436,936,497.16 3,197,354,275.46

(a) Accounts payable due from shareholders with more than 5% (including 5%) of the Company‘s equity interest are analysed as below:

31 December 2013 31 December 2012

Sinopharm Group(Note VII(6)) 38,114,764.12 55,869,134.08

(b) Accounts payable due to related party

As at 31 December 2013, there are accounts payable of RMB249,787,825.63 due to related party (31 December 2012: RMB353,535,340.93), which accounts for 7.27% of the total accounts payable(31 December 2012: 11.06%).(Note VII(6)).

(c) As at 31 December 2013, accounts payable of RMB92,581,168.79 (31 December 2012: RMB75,430,864.69) were aged over 1 year, which were mainly for quality deposit. Before the financial statement is approved, no such long aged accounts payable have been settled.

(d) Accounts payable denominated in foreign currency as belows：

31December 2013 31 December 2012 Foreign Currency Exchange RMB Foreign Currency Exchange RMB rate rate

USD 1,025,442.00 6.0969 6,252,017.33 1,674,700.00 6.2855 10,526,326.85

(22) Advances from customers

31 December 2013 31 December 2012

Sales received in advance 38,570,231.44 35,002,695.02

As at 31 December 2013, there are RMB129,139.99 of advances due to related party (31 December 2012: RMB450,782.23), which accounts for 0.33% of the total accounts payable(31 December 2012: 1.29%). (Note VII(6)).

As at 31 December 2013, advances from customers of RMB1,307,064.22(31 December 2012: RMB1,687,040.75) were aged over 1 year. Before the financial statement is approved, no such long aged advance has been settled.

- 124 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(23) Employee benefits payable

31 December Current year Current year 31 December 2012 additions reductions 2013

Wages and salaries, bonuses, allowances and subsidies 130,864,940.58 396,457,464.02 (393,258,266.00) 134,064,138.60 Staff welfare 142,310.00 25,168,966.95 (24,095,709.95) 1,215,567.00 Social security contributions 1,214,727.89 51,297,089.48 (51,599,674.40) 912,142.97 Including: Medical insurance 228,365.34 13,702,800.37 (13,837,873.59) 93,292.12 Basic pensions 859,408.80 33,272,734.21 (33,439,460.70) 692,682.31 Unemployment insurance 77,427.95 2,144,392.47 (2,134,127.47) 87,692.95 Work injury insurance 23,237.80 1,125,783.46 (1,129,938.30) 19,082.96 Maternity insurance 26,288.00 1,051,378.97 (1,058,274.34) 19,392.63 Housing funds 869,640.45 16,650,781.15 (16,741,035.77) 779,385.83 Supplemental pensions 718,519.21 4,310,236.52 (4,434,894.76) 593,860.97 Labor union funds and employee education funds 11,479,089.40 13,151,098.55 (12,022,527.98) 12,607,659.97 Compensation for employee dismission 2,637,073.09 836,532.61 (65,197.86) 3,408,407.84 Early retirement benefits 6,949,127.27 350,137.31 (2,490,024.58) 4,809,240.00 Others 1,118,980.31 1,613,592.28 (1,656,611.65) 1,075,960.94 155,994,408.20 509,835,898.87 (506,363,942.95) 159,466,364.12

As at 31 December 2013, there are no payroll payables in arrears. Most part of the payroll payables would be paid out in the coming year 2014.

(24) Taxes payable

31 December 2013 31 December 2012

Enterprise income tax payable 42,539,425.26 27,804,706.06 Value-added-tax payable 16,407,977.00 9,283,848.26 Water conservancy fund payable 4,830,062.90 4,782,099.19 Anti-flood fund payable 4,517,546.01 3,793,862.54 Stamp duty tax payable 1,660,657.55 1,172,199.70 City maintenance and construction tax payable 1,296,993.82 719,058.90 Real estate tax payable 1,110,392.16 855,659.63 Business tax payable 967,037.88 1,046,033.24 Educational surcharge payable 933,092.63 518,694.99 Rivers management fee payable 428,177.78 423,867.19 Land use tax payable 129,500.80 1,050.20 Individual income tax payable 1,224,396.25 989,594.53 76,045,260.04 51,390,674.43

- 125 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(25) Interests payable

31 December 2013 31 December 2012

Short term borrowing interests payable 13,065,850.14 6,561,038.88 Short-term financing bond interest - 6,326,666.69 Long term borrowing interests payable - 148,115.50 13,065,850.14 13,035,821.07

(26) Other payables

31 December 2013 31 December 2012

Accrued selling and distribution expenses 179,075,786.05 159,665,190.99 Amount collected on behalf of third party 135,601,089.66 69,004,759.79 Payables for construction in progress and equipment 66,609,945.42 33,092,434.64 Deposit 19,990,983.83 13,243,877.98 Compensation payment for suspension of chebei project (Note V (29)) 12,620,000.00 12,620,000.00 Equity transaction payable 11,415,803.17 23,524,217.03 Others 70,788,639.26 102,680,826.97 496,102,247.39 413,831,307.40

(a) Other payables due to shareholders with more than 5% (including 5%) of the Company‘s equity interest are analysed as below:

31 December 2013 31 December 2012

Sinopharm Group(Note VII (6)) 4,530,696.87 3,930,696.87

(b) Other payables due to related party

As at 31 December 2013, there are other payables of RMB12,732,813.77due to related party (31 December 2012: RMB12,988,560.64), which accounts for 2.57% of the total other payables (31 December 2012: 3.14%). (Note VII(6)).

(c) As at 31 December 2013, other payables of RMB81,693,772.92 (31 December 2012: RMB86,616,880.71) were aged over 1 year, which were mainly for accrued selling expenses. Before the financial statement is approved, other payables of RMB14,223,282.39have been paid out (Note X(1)).

- 126 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(27) Current portion of long-term borrowings

31 December 2013 31 December 2012

Promotion rewards program - due within one year 7,800,000.00 9,000,000.00 Current portion of long term borrowings - 62,127,275.00 7,800,000.00 71,127,275.00

(28) Other non-current liabilities 31 December 2013 31 December 2012

Accured liabilities (Note(a)) 22,040,000.00 - Short-term financing bond - 399,014,838.05 22,040,000.00 399,014,838.05

(a) In March 2010, the Group signed a contract about real estate development project cooperation on the Group‘s Land (hereinafter referred to as "the Cooperative Contract")with a real estate development company (hereinafter referred to as "the Other Contract Party"). The project had never substantively started after the contract was signed. In 2012, the Group determined to terminate the contract based on development plannning. As of 31 December 2012, the management accrued compensation payable of RMB17.60 million based on communication with the Other Contract Party together with the best estimation of the case. Deducting the prepaid earnest money of RMB4.98 million in 2012, the remaining was recognised as Other Payable. However, the Other Contract Party took legal proceeding against the Group to the People‘s Court of Tianhe District to pay for the remaining compensation, late penalty and double the compensation. On 10 May 2013, the Group received the first civil judgement that the Group need to pay the Other Contract Party the remaining compensation RMB11.02 million, later penalty RMB11.02 million and the doubled compensation RMB11.02 million. The Group appeal against the judgement made by People‘s Court of Tianhe District, as the Group wasn‘t satisfied with the judgement. As of 14 February 2014, the Group received the final civil judgement from Intermediate People‘s Court of Tianhe District, that the late penalty of RMB11.02 million was rejected. As both parties are entitled to apply to People's Court for retrial within six months, Management believes it‘s not able to make a reliable estimate of the final outcome of the contract dispute. Therefore, the Group accrued the provision and recognised non-operating expenses of RMB22.04 for prudence.

(29) Long-term borrowings

Currency 31 December 2013 31 December 2012

Unsecured borrowings RMB - 82,205,562.71

As at 31 December 2013, the borrowings has been repaid in advance.

(30) Payables for specific projects

31 December 2012 Addition Reclassification 31 December 2013

Sepecial funds granted by Government 852,000.00 - - 852,000.00 Government grants for ERP system construction 435,000.00 - - 435,000.00 Industrial technology funds 3,200,000.00 - (200,000.00) 3,000,000.00 4,487,000.00 - (200,000.00) 4,287,000.00

(31) Other non-current liabilities

31 December 2013 31 December 2012

Deferred income(Note(a)) 176,531,418.18 168,180,160.90 Medical reserve funds (Note(b)) 45,427,343.31 45,427,343.31 221,958,761.49 213,607,504.21

- 127 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(31) Other non-current liabilities(continued)

(a) Deferred income

31 December 2013 31 December 2012

Government grants Resettlement Compansation(i) 89,047,483.97 91,745,892.53 Cephalosporin Solid Preparations Development Project 15,000,000.00 15,000,000.00 Guangxi Logistics Project 6,006,695.79 6,277,100.67 R&D Library (in progress) 5,000,000.00 5,000,000.00 Medical R&D Center II (in progress) 5,000,000.00 5,000,000.00 Medication for Stomach Disease R&D Project 5,000,000.00 5,000,000.00 Cephalosporin Powder Injection Passing EU-GMP Authentication 5,000,000.00 5,000,000.00 Esomeprazole Magnesium Enteric-coated Pellets Industrial R&D Projects 2,700,000.00 - Cefpirome Sulfate R&D Project 2,637,395.56 2,879,967.43 Shared Logistics Center(completed) 2,163,761.90 3,034,277.40 Cefixime Particles Prescription Process Improvement and Industrial Project 2,000,000.00 -

New Cephalosporin R&D Project 1,829,887.42 2,440,380.94 Other Projects(in progress) 10,091,515.54 3,993,037.26 151,476,740.18 145,370,656.23

Promotion Rewards Program 25,054,678.00 22,809,504.67 176,531,418.18 168,180,160.90

(i) Government grants programme Amount included 31 December Current year in non-operating 31 December Related to 2012 addition income in 2013 2013 income/assets

Resettlement Compansation(i) 91,745,892.53 - (2,698,408.56) 89,047,483.97 Related to assets Cephalosporin Solid Preparations Development Project 15,000,000.00 - - 15,000,000.00 Related to assets Guangxi Logistics Project 6,277,100.67 - (270,404.88) 6,006,695.79 Related to assets R&D Library 5,000,000.00 - - 5,000,000.00 Related to assets Medical R&D center II 5,000,000.00 - - 5,000,000.00 Related to assets Medication for Stomach Disease R&D Project 5,000,000.00 - - 5,000,000.00 Related to assets Cephalosporin Powder Injection Passing EU-GMP Authentication 5,000,000.00 - - 5,000,000.00 Related to assets Esomeprazole Magnesium Enteric-coated Pellets Industrial R&D Projects - 2,700,000.00 - 2,700,000.00 Related to assets Cefpirome Sulfate R&D Project 2,879,967.43 - (242,571.87) 2,637,395.56 Related to assets Shared Logistics Center 3,034,277.40 - (870,515.50) 2,163,761.90 Related to assets Cefixime Particles Prescription Process Improvement and Industrial Project - 2,000,000.00 - 2,000,000.00 Related to assets New Cephalosporin R&D Project 2,440,380.94 - (610,493.52) 1,829,887.42 Related to assets Other projects 3,993,037.26 7,859,416.00 (1,760,937.72) 10,091,515.54 Related to assets 145,370,656.23 12,559,416.00 (6,453,332.05) 151,476,740.18 (i) Because the Nanning Government planned to reconstruction of the old urban area, a subsidiary of the company, Guangxi Logistics, which located in Nanning Longteng Road need to relocated. According to compensation agreement signed in May, 2012, the company obtained RMB120,250,000.00 compensation for the demolition carried out by the government, including cash compensation amounted RMB50,000,000.00 and another physical compensation amounted RMB70,250,000.00 would be received in year 2015 when completion( Note V(18)). Amounting to RMB93,320,000.00 relating to capital expenditure for reconstruction was recognised as deferred income, which would be amortised to profit or loss over the useful life of the related asset; others was recognised in profit or loss in 2012.

(b) Certain medical reserves funds were received by the Group from the PRC government for it to purchase medical products (including medicines) required to respond to major disasters, epidemics and other emergencies.

- 128 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(32) Share capital

31 December 2013 31 December 2012

Listed shares without restriction of trading: A shares, listed 233,263,800.00 233,263,800.00 B shares, listed 54,885,600.00 54,885,600.00 288,149,400.00 288,149,400.00

As at 31 December 2013 and 2012,there is no change with share capital.

(33) Capital surplus

31 December Current year Current year 31 December 2012 addition reductions 2013

Other Capital surplus Share of changes in equity other than profits of investees 2,380,016.57 - - 2,380,016.57 Transfer of capital surplus recognised under the previous accounting system 2,650,322.00 - - 2,650,322.00 Other 520,000.00 200,000.00 - 720,000.00 5,550,338.57 200,000.00 - 5,750,338.57

31 December Current year Current year 31 December 2011 addition reductions 2012

Capital surplus- Business combination under common control 3,416,966.47 - (3,416,966.47) - Other Capital surplus Share of changes in equity other than profits of investees 2,380,016.57 - - 2,380,016.57 Transfer of capital surplus recognised under the previous accounting system 2,650,322.00 - - 2,650,322.00 Other 288,000.00 232,000.00 - 520,000.00 8,735,305.04 232,000.00 (3,416,966.47) 5,550,338.57

- 129 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(34) Surplus reserve

31 December Current year Current year 31 December 2013 2012 additions reductions

Statutory surplus reserve 99,360,384.15 45,495,250.25 - 144,855,634.40

31 December Current year Current year 31 December 2012 2011 additions reductions

Statutory surplus reserve 63,480,745.16 35,879,638.99 - 99,360,384.15

(35) Undistributed profits

2013 2012 Amount Appropriation Amount Appropriation rate rate

Undistributed profits at beginning of year 1,382,882,906.24 989,727,826.66 Add:net profit attributable to the shareholders of the company 520,488,198.80 475,792,491.12 Less:appropriation of statutory surplus reserve (Note V(33)) (45,495,250.25) 10% (35,879,638.99) 10% Dividends (c) (51,866,892.00) (37,459,422.00) Other outflow (b) (6,677.73) (9,298,350.55) Add: other inflow - Ending balance of retained earnings 1,806,002,285.06 1,382,882,906.24

(a) In January 2013, subsidiary company Sinopharm Guangxi raised capital of RMB6,700,000 in Sinopharm Wuzhou, the proportion of minority shareholding decreased from 0.3% to 0.1%

(b) Pursuant to the resolution of General Meeting on 19 April 2013, cash dividends of RMB51,866,892.00 (RMB1.8 per 10 shares) was paid based on the issued shares of 288,149,400.

Pursuant to the resolution of board of directors of the company on 21 March 2014, cash dividends of RMB65,273,749.74 (RMB1.80 per 10 shares) was proposed based on the issued shares of 362,631,943 after non-public offering. This proposed dividend is subject to the approval of General Meeting (Note X(2)).

(36) Minority Interest

Minority interests are analysed as below:

31 December 2013 31 December 2012

Sinopharm Liuzhou 41,954,133.73 33,861,951.95 Sinopharm Yanfeng 23,410,777.54 23,859,797.47 Sinopharm Shaoguan 6,507,084.81 5,386,400.42 Sinopharm Wuzhou 7,410.46 33.40 71,879,406.54 63,108,183.24

- 130 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(37) Sales and cost of sales

2013 2012

Revenue of main operations 21,095,622,536.26 17,871,974,928.79 Other operating income 103,843,862.95 139,784,249.47 21,199,466,399.21 18,011,759,178.26

2013 2012

Cost of main operations (19,388,139,660.12) (16,316,986,605.55) Other operating expenses (47,942,227.02) (91,733,315.64) (19,436,081,887.14) (16,408,719,921.19)

(a) Revenue and cost of main operations

Revenue and cost of main operations analysed by industries are set out below:

2013 2012 Revenue of Cost of main Revenue of Cost of main main operations operations main operations operations

Pharmaceutical distribution 19,402,722,544.21 (18,378,091,996.46) 16,066,518,752.13 (15,191,216,947.07) Pharmaceutical manufacturing 1,650,765,125.89 (984,311,353.46) 1,764,407,339.41 (1,099,955,200.59) Logistics and freights 32,419,391.74 (22,278,364.39) 30,557,165.18 (21,466,438.05) Rental and training income 9,715,474.42 (3,457,945.81) 10,491,672.07 (4,348,019.84) 21,095,622,536.26 (19,388,139,660.12) 17,871,974,928.79 (16,316,986,605.55)

(b) Other operating income and expenses

2013 2012 Other operating Other operating Other operating Other operating income expenses income expenses

Sales of raw materials 34,507,631.23 (36,059,535.58) 80,145,178.94 (82,992,360.18) Rental income 21,814,029.35 (2,474,310.35) 19,270,725.92 (3,205,131.47) Rendering of services 40,922,202.37 (5,333,123.11) 40,368,344.61 (5,535,823.99) The income of disposal the investment real estate 6,600,000.00 (4,075,257.98) - - 103,843,862.95 (47,942,227.02) 139,784,249.47 (91,733,315.64)

(c) Top five customers are analysed as follows:

The sales to top five customers of the Group amounted to RMB1,332,595,915.20, which accounted for 6.29% of the total revenue from main operations. Details are set out below:

Sales % of total sales of the Group

Disease Control and Prevention Center of Guangdong Province 278,795,507.59 1.32% GuangDong Province People's Hospital 273,434,254.42 1.29% The First Affiliated Hospital of GuangXi Medical University 272,162,280.16 1.28% The First Affiliated Hospital of Sun Yat-Sen University 260,640,263.61 1.23% Nanfang Hospital of Southern Medical University 247,563,609.42 1.17% 1,332,595,915.20 6.29%

- 131 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(38) Tax and surcharges

2013 2012

Business tax 5,959,369.73 11,210,887.72 City maintenance and construction tax 21,234,560.21 18,756,982.09 Educational surcharge 15,310,331.03 13,371,191.53 Others 3,146,588.49 2,835,638.72 45,650,849.46 46,174,700.06

(39) Selling and distribution expenses

2013 2012

Employees payroll and welfare benefits 196,211,700.73 167,831,532.51 Transportation charges 66,447,565.86 67,952,768.73 Promotion and marketing expenses 41,726,848.42 56,774,037.20 Conference expenses 23,315,375.60 22,061,115.23 Travel allowances 25,675,829.98 20,168,006.01 Entertainment expenses 21,762,258.84 21,518,039.95 Advertising expenses 19,833,923.71 15,776,012.54 Storage expenses 14,695,469.13 15,230,877.76 Rental expenses 13,743,220.34 5,511,697.18 Office allowances 6,983,018.23 7,772,539.28 Depreciation expenses 5,487,442.01 3,907,835.02 Others 50,507,528.40 44,090,957.74 486,390,181.25 448,595,419.15

(40) Governance and administrative expense

2013 2012

Employees payroll and welfare benefits 183,319,710.57 171,684,570.22 Research and development expenses 79,430,320.22 79,362,874.40 Depreciation expenses 27,534,817.22 25,481,039.32 Taxations 26,479,597.24 25,339,053.10 Entertainment expenses 12,543,177.38 12,009,913.28 Office allowances 8,885,859.94 10,227,434.25 Amortisation of intangible assets 8,732,645.01 10,002,898.36 Rental expenses 8,774,850.89 5,974,476.64 Vehicle management expenses 6,995,195.97 6,720,772.72 Conference expenses 6,911,872.66 8,714,661.19 Maintenance and other charges 5,378,660.47 4,248,569.14 Travel allowances 4,474,768.02 4,452,499.63 Utilities 4,304,998.97 4,549,703.56 Others 38,639,505.31 23,464,524.28 422,405,979.87 392,232,990.09

(41) Financial expenses – net 2013 2012

Interest expenses 182,162,992.78 156,874,380.29 Less: interest income (5,098,158.42) (4,003,700.35) discount in cash (23,837,106.81) (2,983,290.45) Exchange losses 127,141.13 324,864.45 Others 11,050,472.52 11,905,896.39 164,405,341.20 162,118,150.33

- 132 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(42) Assets impairment losses 2013 2012

Bad debts 3,256,191.34 (948,623.24) Declines in values of inventories 33,400,790.15 22,142,794.73 Impairment in intangible assets 5,339,925.14 - 41,996,906.63 21,194,171.49

(43) Investment income

2013 2012

Share of profit of investees under equity method (Note a) 42,473,165.02 38,740,679.55

(a) The investment income from long-term investment under equity method represented the profit from Wanle Medical. The increase was due to improved business performance of that associate.

There is no significant restriction on the remittance of investment income to the Group.

(44) Non-operating income

2013 2012

Gain on disposal of fixed assets 862,319.66 757,118.82 Government grants (Note a) 23,465,438.42 57,227,812.33 Payment written off 11,060,849.25 81,267.91 Others 1,576,105.84 1,972,816.79 36,964,713.17 60,039,015.85

Non-operating income is wholly classified as non-recurring profit.

(a) Government grants

2013 2012 Note

Government grants related to assets Resettlement compensation- Transfer from deferred amortization of assets 2,698,408.56 1,574,071.66 amortization income Transfer from deferred Others 3,754,923.49 3,588,811.86 amortization income

Government grants related to income Resettlement compansation - 26,930,035.81 Resettlement compansation Tax return 7,052,996.58 10,696,855.00 Tax return Government-funded interest discount 890,000.00 5,000,000.00 Fiscal interest discount Government grants for medicine reserve expenses 4,889,439.00 3,500,000.00 Subsidy for medical reserve Other 4,179,670.79 5,938,038.00 Subsidy for contribution 23,465,438.42 57,227,812.33

- 133 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(45) Non-operating expenses 2013 2012

Compensation payment for suspension of chebei project (Note VII (28)(a)) 22,040,000.00 17,600,000.00 Losses on disposal of fixed assets 357,911.01 274,130.74 Donation - 202,000.00 Resettlement costs and losses(Note(i)) - 9,520,609.61 Others 473,043.37 589,989.98 22,870,954.38 28,186,730.33

Non-operating cost is wholly classified as non-recurring and loss.

(46) Income taxes expenses

2013 2012

Current income tax 146,243,572.44 126,267,081.82 Deferred income tax (21,360,794.20) (6,632,126.32) 124,882,778.24 119,634,955.50

The reconciliation from income tax calculated based on applicable tax rates and total profit presented in the consolidated financial statements to the income tax expenses is listed below:

2013 2012

Total profit 659,102,177.47 603,316,791.02

Income tax expenses calculated at applicable tax rates 164,775,544.37 150,829,197.76 Differences in preferential tax rates of certain companies (22,933,988.22) (26,574,499.46) Income not subject to tax (11,292,893.40) (10,078,687.82) Expenses not deductible for tax purposes 5,294,687.18 6,493,227.63 Utilisation of previously unrecognised tax losses (7,140,406.49) (1,077,340.06) Super deduction for development cost (3,820,165.20) (3,581,197.65) Tax losses for which no deferred income tax asset was recognised - 1,164,817.86 Others - 2,459,437.24 Income taxes 124,882,778.24 119,634,955.50

(47) Earnings per share

(a) Basic earnings per share

Basic earnings per share is calculated by consolidated net profit attributable to shareholders of the Company dividing by the weighted average number of ordinary shares in issue:

2013 2012

Consolidated net profit attributable to shareholders of the Company 520,488,198.80 475,792,491.12 Weighted average number of ordinary shares in issue 288,149,400.00 288,149,400.00 Basic earnings per share 1.81 1.65 Including: Basic earnings per share on going 1.81 1.65

(b) Diluted earnings per share

Diluted earnings per share is calculated by dividing the consolidated net profit attributable to shareholders of the Company by the weighted average number of ordinary shares in issue, which both should be adjusted for the effects of all potential dilutive factors. The Company has no potential outstanding ordinary shares (2012: nil), the diluted earnings per share equals the basic earnings per share.

- 134 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(48) Cash received relating to other operating activities

(a) Cash received relating to other operating activities

2013 2012

Government grants 22,518,525.79 38,133,438.00 Receival of deposit 17,630,169.88 18,521,978.34 Interest income 5,098,158.42 4,003,700.35 Others 43,491,823.40 37,344,996.82 88,738,677.49 98,004,113.51

(b) Cash paid relating to other operating activities

2013 2012

Entertainment expenses 34,305,436.22 33,527,953.23 Rental expenses 22,518,071.23 11,486,173.82 Advertising expenses 19,833,923.71 15,776,012.54 Bank charges 10,021,062.89 8,922,605.94 Conference expenses 30,227,248.26 30,775,776.42 Travel expenses 30,150,598.00 24,620,505.64 Research and development expenses 26,861,483.23 31,514,734.73 Office expenses 15,868,878.17 17,999,973.53 Other 167,786,602.95 154,356,173.41 357,573,304.66 328,979,909.26

(c) Cash received relating to other investing activities

2013 2012

Resettlement compensation (Note V(32)) - 50,000,000.00

(d) Cash received relating to other financing activities

2013 2012

Entrusted borrowings borrowed from Sinopharm Group 800,000,000.00 252,630,000.00 Other 66,596,329.87 42,511,161.10 866,596,329.87 295,141,161.10

(e) Cash payments relating to other financing activities

2013 2012

Repayment of entrusted borrowings lent by Sinopharm Group 400,000,000.00 590,000,000.00 Repayment of short-term financing bonds expenses 5,132,719.50 - Repayment of borrowings lent by related parties - 4,900,000.00 405,132,719.50 594,900,000.00

- 135 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(49) Supplementary information of cash flow statements

(a) Supplementary information of cash flow statements

Reconciliation of net profit to cash flows from operating activities

2013 2012

Net profit 534,219,399.23 483,681,835.52 Add: Provision for assets impairment 41,996,906.63 21,194,171.49 Depreciation of fixed assets and investment properties 90,445,682.12 84,699,713.36 Amortisation of intangible assets 8,732,645.01 10,002,898.36 Amortisation of long-term prepaid expenses 5,492,057.96 5,033,448.25 Losses/(Gains) on disposal of fixed assets, and other non-current assets (3,029,150.67) 8,347,047.73 Financial expenses 182,290,133.91 157,199,244.74 Investment income (42,473,165.02) (38,740,679.55) Increase of deferred tax assets (19,386,408.28) (4,936,326.99) Decrease of deferred tax liabilities (1,974,385.92) (1,695,799.33) Increase of inventory (134,007,767.50) (436,773,288.50) Increase in operating receivables (1,401,599,294.21) (810,442,583.76) Increase in operating payables 1,186,691,276.69 827,863,673.10 Increase in operating cash with restriction 17,630,169.88 18,521,978.34 Net cash flow from operating activities 465,028,099.83 323,955,332.76

Significant non-cash investing activities

2013 2012

Properties constructed with endorsed notes receivables 39,499,982.82 15,983,305.52

Movement of cash

2013 2012

Cash at end of year 1,097,948,354.45 920,748,043.53 Less: cash at beginning of year (920,748,043.53) (907,884,162.14) Net increase in cash 177,200,310.92 12,863,881.39

(b) Acquisition of subsidiaries and operating unit

2013 2012

The consideration of acquisition - 80,622,217.03

Consideration settled in cash - 57,098,000.00 Less: cash in the subsidiaries and business acquired - (33,296,237.78) Add: cash paid for prior year acquisition 11,477,751.57 - Equity money in advance 2,247,000.00 - Net cash outflow on acquisition of the subsidiaries and business 13,724,751.57 23,801,762.22

- 136 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

V Notes to the consolidated financial statements (continued)

(49) Supplementary information of cash flow statements (continued)

(c) Cash

31 December 2013 31 December 2012

Cash at end of year 1,097,948,354.45 920,748,043.53 Including: Cash on hand 65,660.84 73,828.10 Call deposits with banks 1,097,882,693.61 920,674,215.43 Restricted cash 15,613,857.20 33,244,027.08 Cash at bank and on hand 1,113,562,211.65 953,992,070.61

VI Segment information

The reportable segments of the Group are the business units that provide different products or service. Different businesses or areas require different technologies and marketing strategies, the Group, therefore, separately manages the production and operation of each reportable segment and evaluates their operating results respectively, in order to make decisions about resources to be allocated to these segments and to assess their performance.

The Group identified 3 reportable segments as follows:

- The Group, which is mainly engaged in investing and managing business - Pharmaceutical distribution, which is mainly engaged in distribution of medicine and pharmaceutical products to customers, including hospitals, other distributors, retail drug stores and clinics; - Pharmaceutical manufacturing, which is mainly engaged in the manufacture and sale of medicine.

Inter-segment transfers are measured by reference to sales to third parties.

The assets and liabilities are allocated based on the operations of the segment.

- 137 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VI Segment information (continued)

(a) Segment information as at and for the year ended 31 December 2013 is as follows:

The Group Pharmaceutical Pharmaceutical Elimination Total distribution manufacturing

Revenue from external customers 4,919,670.87 19,498,940,661.38 1,695,606,066.96 - 21,199,466,399.21 Inter-segment revenue 1,353,900.00 93,333.33 19,214,969.00 (20,662,202.33) - Interest income 63,102,516.46 3,737,408.46 2,832,809.52 (64,574,576.02) 5,098,158.42 Interest expense (53,933,806.00) (186,023,241.20) (6,780,521.60) 64,574,576.02 (182,162,992.78) Share of profit of subsidiaries 389,837,321.36 - - (389,837,321.36) - Share of profit of associates 42,473,165.02 - - - 42,473,165.02 Impairment (2,169.35) (2,671,011.14) (39,323,726.14) - (41,996,906.63) Depreciation and Amortizations (5,539,418.46) (36,545,938.71) (62,683,840.18) - (104,769,197.35) Gross profit 417,837,773.46 390,994,148.85 240,107,576.52 (389,837,321.36) 659,102,177.47 Income taxes - (90,917,388.56) (33,965,389.68) - (124,882,778.24) Net profit 417,837,773.46 300,076,760.29 206,142,186.84 (389,837,321.36) 534,219,399.23

Total Assets 2,890,561,097.18 9,111,898,250.44 1,864,292,078.47 (2,808,854,484.78) 11,057,896,941.31

Total liabilities (1,257,379,456.76) (7,714,448,512.66) (1,130,286,897.72) 1,360,854,990.40 (8,741,259,876.74)

Long-term equity investment in associates 135,341,010.52 - - - 135,341,010.52

Additions to non-current assets other than long-term equity investments 68,798,272.14 11,867,427.69 45,377,975.76 - 126,043,675.59

- 138 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VI Segment information (continued)

(b) Segment information as at and for the year ended 31 December 2012 is as follows:

The Group Pharmaceutical Pharmaceutical Elimination Total distribution manufacturing

Revenue from external customers 4,759,376.00 16,155,509,003.28 1,851,490,798.98 - 18,011,759,178.26 Inter-segment revenue 98,400.00 500,561.39 20,078,304.18 (20,677,265.57) - Interest income 47,071,634.01 2,768,886.33 5,566,506.18 (51,403,326.17) 4,003,700.35 Interest expense (50,817,545.74) (147,650,514.66) (9,809,646.06) 51,403,326.17 (156,874,380.29) Share of profit of subsidiaries 318,833,223.58 - - (318,833,223.58) - Share of profit of associates 38,740,679.55 - - - 38,740,679.55 Impairment - 1,575,679.64 (22,769,851.13) - (21,194,171.49) Depreciation and Amortizations (5,706,788.17) (31,522,784.77) (62,506,487.03) - (99,736,059.97) Gross profit 324,060,503.59 332,230,014.23 265,859,496.78 (318,833,223.58) 603,316,791.02 Income taxes - (82,039,460.00) (37,595,495.50) - (119,634,955.50) Net profit 324,060,503.59 250,190,554.23 228,264,001.28 (318,833,223.58) 483,681,835.52

Total Assets 2,504,424,257.73 7,520,238,614.88 1,791,225,072.62 (2,520,048,005.59) 9,295,839,939.64

Total liabilities (1,274,464,456.57) (6,199,236,502.96) (1,155,106,279.12) 1,172,018,511.21 (7,456,788,727.44)

Long-term equity investment in associates 121,019,845.50 - - - 121,019,845.50

Additions to non-current assets other than long-term equity investments 3,383,989.51 130,411,384.23 76,573,364.42 - 210,368,738.16

- 139 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions

(1) The parent company

(a) General information of the parent company:

Enterprise Place of Legal Type registration representative Principal business Industrial Investment Holding, Trustee of Company pharmaceutical enterprise, Distribution and limited by retailof medicines and pharmaceutical Sinopharm Group shares Shanghai Wei Yulin products, etc

The Company‘s ultimate controlling equity holder is CNPGC.

(b) Registered capital and changes in registered capital of the parent company

31 December 2012 Current yearaAddition 31 December 2013 (RMB‘0,000) (RMB‘0,000) (RMB‘0,000)

Sinopharm Group 240,262.53 16,566.82 256,829.35

(c) The proportions of equity interests and voting rights in the Company held by the parent company:

31 December 2013 31 December 2012 % interest held % voting rights % interest held % voting rights

Sinopharm Group 38.33 38.33 38.33 38.33

(2) Subsidiaries of the Company

The general background and other related information of the subsidiaries is set out in Note V.

(3) Associates

Enterprise Place of Legal Principal Register % interest % voting Type Registration Representative business capital held rights

Wanle Foreign Medicine USD Medical capital Shenzhen Yan Zhigang manufacture 19,544,550 35.19% 33.33%

(4) Other related parties

Relationship with the Company

Sinopharm Holding Sub Marketing Center Co., Ltd. Controlled by CNPGC China National Medicines Co., Ltd. Controlled by CNPGC Sinopharm Holding Hunan Co., Ltd. Controlled by CNPGC Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. Controlled by CNPGC Foshan Nanhai Uptodate & Special Medicines Co., Ltd. Controlled by CNPGC Sinopharm Holding Beijing Co., Ltd. Controlled by CNPGC Sinopharm Holding JIangsu Co., Ltd. Controlled by CNPGC Sinopharm Holding Hainan Co., Ltd. Controlled by CNPGC Sinopharm Group Chemical Reagent Co., Ltd. Controlled by CNPGC Sinopharm Holding Guizhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Zhangzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Beijing Huahong Co., Ltd. Controlled by CNPGC

- 140 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(4) Other related parties (continued)

Relationship with the Company

Sinopharm Holding Hubei Co., Ltd. Controlled by CNPGC Sinopharm Holding Fujian Co., Ltd. Controlled by CNPGC Sinopharm Yixin Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Fuzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Suzhou Co., Ltd. Controlled by CNPGC Foshan Nanhai Medicine Co., Ltd. Controlled by CNPGC Foshan Nanhai Medicine Group Co., Ltd. Controlled by CNPGC Sinopharm Group Chemical Reagent Suzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Chongqing Co., Ltd. Controlled by CNPGC Sinopharm Group Guorui Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Dezhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Hainan Hongyi Co., Ltd. Controlled by CNPGC Sinopharm Holding Yunnan Co., Ltd. Controlled by CNPGC Sinopharm Holding Sanyi Medicine(Wuhu) Co., Ltd. Controlled by CNPGC Sinopharm Holding Putian Co., Ltd. Controlled by CNPGC Sinopharm Holding (Yangzhou) Chinese Western Medicine Branch Co., Ltd. Controlled by CNPGC Sinopharm Guoda Drug Store(Shenzhen) Chain Co., Ltd. Controlled by CNPGC Sinopharm Holding Meitai Medical Equipment (Shanghai) Co., Ltd. Controlled by CNPGC Sinopharm Le -Ren-Tang Shijiazhuang Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Shandong Co., Ltd. Controlled by CNPGC Sinopharm Le -Ren-Tang Medicine Co., Ltd. Controlled by CNPGC Sinopharm Group Xinjiang Special Drugs National Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Group Southwest Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Ningxia Co., Ltd. Controlled by CNPGC Sinopharm Holding Tianjin Co., Ltd. Controlled by CNPGC Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. Controlled by CNPGC Sinopharm Holding Zhejiang Co., Ltd. Controlled by CNPGC Sinopharm Holding Nantong Co., Ltd. Controlled by CNPGC Sinopharm Holding Gansu Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinjiang Special Drugs Western Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Shenyang Co., Ltd. Controlled by CNPGC Sinopharm Holding Wenzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Jinzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Henan Co., Ltd. Controlled by CNPGC Sinopharm Holding Shanxi Co., Ltd. Controlled by CNPGC Sinopharm Holding Heilongjiang Co., Ltd. Controlled by CNPGC Sinopharm Holding Yangzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Shaanxi Co., Ltd. Controlled by CNPGC Sinopharm Holding Shanxi Co., Ltd. Controlled by CNPGC Sinopharm Holding Xuzhou Co., Ltd. Controlled by CNPGC Sinopharm Guoda Drug Store Jiangmen Chain Co., Ltd. Controlled by CNPGC Sinopharm Holding Jilin Co., Ltd. Controlled by CNPGC Sinopharm Holding Wuxi Co., Ltd. Controlled by CNPGC Sinopharm Holding Guoda Pharmacy Co., Ltd. Controlled by CNPGC Sinopharm Holding Yancheng Co., Ltd. Controlled by CNPGC Sinopharm Holding Dalian Co., Ltd. Controlled by CNPGC Sinopharm Holding Linyi Co., Ltd. Controlled by CNPGC Sinopharm Holding Taizhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Inner Mongolia Co., Ltd. Controlled by CNPGC Sinopharm Holding Tianjin North Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Qinghai Co., Ltd. Controlled by CNPGC Sinopharm Holding Shanghai Likang Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Changzhou Medical logistics center Co., Ltd. Controlled by CNPGC Sinopharm Holding Longyan Co., Ltd. Controlled by CNPGC Sinopharm Holding Ningde Co., Ltd. Controlled by CNPGC Sinopharm Lerentang Tangshan Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Jinan Co., Ltd. Controlled by CNPGC

- 141 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(4) Other related parties (continued)

Relationship with the Company

Shanghai Yunnuo Marketing Consulting Co., Ltd. Controlled by CNPGC Sinopharm Holding Qingdao Co., Ltd. Controlled by CNPGC Sinopharm Holding Jiangxi Co., Ltd. Controlled by CNPGC Sinopharm Holding Yantai Co., Ltd. Controlled by CNPGC Shanghai Donghong Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Wuhu Co., Ltd. Controlled by CNPGC Sinopharm Lerentang Langfang Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Anqing Co., Ltd. Controlled by CNPGC Sinopharm Holding Quanzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Huaian Co., Ltd. Controlled by CNPGC Sinopharm Holding Sanming Co., Ltd. Controlled by CNPGC Sinopharm Lerentang Qinhuangdao Medicine Co., Ltd. Controlled by CNPGC Sinopharm Holding Changzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Anhui Co., Ltd. Controlled by CNPGC Sinopharm Holding ChiFeng Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinjiang New Kashi Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding HongKong Co., Ltd. Controlled by CNPGC Shanxi Guoyi Drug Store Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinjiang Xinte Karamay Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Zunyi Co., Ltd. Controlled by CNPGC Sinopharm Holding Shiyan Co., Ltd. Controlled by CNPGC Sinopharm Holding Qujing Co., Ltd. Controlled by CNPGC Sinopharm Xinjiang Korla Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Zhoukou Co., Ltd. Controlled by CNPGC Sinopharm Holding Shangqiu Co., Ltd. Controlled by CNPGC Sinopharm Holding Jingmen Co., Ltd. Controlled by CNPGC Sinopharm Holding Xiangtan Co., Ltd. Controlled by CNPGC Shanghai Nutraceuticals (Shanghai) Co., Ltd. Controlled by CNPGC Sinopharm Holding Yueyang Co., Ltd. Controlled by CNPGC Sinopharm Holding Beijing Kangchen Bio-Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Nanping Co., Ltd. Controlled by CNPGC Sinopharm Holding Lishui Co., Ltd. Controlled by CNPGC Sinopharm Holding Tongliao Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinxiang Co., Ltd. Controlled by CNPGC Sinopharm Holding Puyang Co., Ltd. Controlled by CNPGC Sinopharm Holding Qiannanzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Guoda Drug Store Guangzhou Chain Co., Ltd. Controlled by CNPGC Sinopharm Holding Siping Co., Ltd. Controlled by CNPGC Sinopharm Holding Yanbian Co., Ltd. Controlled by CNPGC Sinopharm Holding Wenshan Co., Ltd. Controlled by CNPGC Sinopharm Holding Jingzhou Co., Ltd. Controlled by CNPGC Sinopharm Holding Medical Devices Co., Ltd. Controlled by CNPGC Sinopharm Holding Qianxinan Co., Ltd. Controlled by CNPGC Sinopharm Holding Honghe Co., Ltd. Controlled by CNPGC Shanghai Huyong Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Jiaozuo Co., Ltd. Controlled by CNPGC Sinopharm Holding Hebei Medcine Co., Ltd. Controlled by CNPGC Sinopharm Holding Changde Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinjiang Special Ginsheng and Pilose Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Anyang Co., Ltd. Controlled by CNPGC Sinopharm Holding Kaifeng Co., Ltd. Controlled by CNPGC Sinopharm Holding Jiangsu Co., Ltd. Taizhou Branch Controlled by CNPGC Sinopharm Holding Xinjiang Hami Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinjiang Yili Tongde Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Pingdingshan Limited Co., Ltd. Controlled by CNPGC Sinopharm Holding Shenyang Co., Ltd. Dalian Branch Controlled by CNPGC Sinopharm Holding Shangluo Co., Ltd. Controlled by CNPGC Sinopharm Holding Xinyu Co., Ltd. Controlled by CNPGC

- 142 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated) VII Related party relationships and significant related party transactions (continued)

(4) Other related parties (continued)

Relationship with the Company

Sinopharm Group Medicine Logistic Co., Ltd. Controlled by CNPGC Sinopharm Holding Guoda Drug Store Guangdong Co., Ltd. Controlled by CNPGC Shanghai Tongyu Information Technology Co., Ltd. Controlled by CNPGC Sinopharm Holding Bengbu Co., Ltd. Controlled by CNPGC Sinopharm Holding Hunan Guoda Minshengtang Drug Store Chain Co., Ltd. Controlled by CNPGC Sinopharm Holding Guoda Drugstore Shenyang Chain Co., Ltd. Controlled by CNPGC Sinopharm Holding Qingyang Co., Ltd. Controlled by CNPGC Sinopharm Holding Beijing Tianxing Puxin Biological Medical Co., Ltd. Controlled by CNPGC China National Pharmaceutical Group Shanghai Co., Ltd. Controlled by CNPGC Sinopharm Group (Tianjin) Eastern Bokang Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Pharmaceutical Logistics Co., Ltd. Guangzhou Branch Controlled by CNPGC Wuhu Sanyi Pharmaceutical Co., Ltd. Controlled by CNPGC Sinopharm Holding Liaocheng Co., Ltd. Controlled by CNPGC Sinopharm Jiankun (Beijing) Medicines Co., Ltd. Controlled by CNPGC Sinopharm Xingsha Pharmaceuticals (Xiamen) Co., Ltd. Controlled by CNPGC Xiamen Xingsha Huaideju Pharmaceutical Co., Ltd. Controlled by CNPGC Group Financial Co. Controlled by Sinopharm Group Guang dong South Pharmaceutical Foreign Trade Co., Ltd. Controlled by Sinopharm Group Chengdu Rongsheng Pharmacy Co., Ltd. Controlled by Sinopharm Group Winteam Pharmaceutical Group Ltd. Controlled by Sinopharm Group Lanzhou Institute of Biological Products Co., Ltd. Controlled by Sinopharm Group Wuhan Institute of Biological Products Co., Ltd. Controlled by Sinopharm Group Sinopharm Group Weiqida Medicine Co., Ltd. Controlled by Sinopharm Group Guizhou Tongjitang Pharmaceutical Co., Ltd. Controlled by Sinopharm Group China National Pharmaceutical Foreign Trade Co., Ltd. Controlled by Sinopharm Group Shanghai Shyndec Pharmaceutical Co., Ltd. Controlled by Sinopharm Group Sinopharm Group Rongsheng Pharmaceutical Co., Ltd. Controlled by Sinopharm Group Anhui Jingfang Pharmaceutical Co., Ltd. Controlled by Sinopharm Group Shanghai Institute of Biological Products Co., Ltd. Controlled by Sinopharm Group Shandong Lu Ya Pharmaceutical Co., Ltd. Controlled by Sinopharm Group Shanghai Modern Hasen (Shangqiu) Pharmacertical Co., Ltd. Controlled by Sinopharm Group Sinopharm Group Shanghai Medicine Device Co., Ltd. Controlled by Sinopharm Group Sichuan Jiang You Zhong Ba Science and Technology Development Co., Ltd. Controlled by Sinopharm Group Guizhou Longlife Pharmacertical Co., Ltd. Controlled by Sinopharm Group Guangdong Medi-World Pharmacertical Co., Ltd. Controlled by Sinopharm Group Qinghai Pharmaceutical Factory Co., Ltd. Controlled by Sinopharm Group Lanzhou Biotechnology Development Co., Ltd. Controlled by Sinopharm Group Guilin Huagui Sinopharm Associate Co., Ltd Controlled by Sinopharm Group China National Corp of Traditional and Herbal Medicine Controlled by Sinopharm Group Wuhan Zhonglian Pharmaceutical Group Co., Ltd. Controlled by Sinopharm Group China Sinopharm International Corporation Controlled by Sinopharm Group Reed Sinopharm Exhibitions Co., Ltd. Controlled by Sinopharm Group China National Scientific Instruments & Materials Corporation Controlled by Sinopharm Group Heilongjiang Sinopharm Medical Herbs Co., Ltd. Controlled by Sinopharm Group Group Financial Co. Controlled by Sinopharm Group Sinopharm Fortuneway Company Controlled by Sinopharm Group Changchun Institute of Biological Products Co., Ltd. Controlled by Sinopharm Group Sinopharm United Engineering Corporation Controlled by Sinopharm Group Beijing Fusheng Tiandi Property Management Ltd. Controlled by Sinopharm Group Sinopharm (Shanghai) E-Health Co,.Ltd. Controlled by Sinopharm Group Beijing Tiantan Biological Products Co., Ltd. Controlled by Sinopharm Group Sinopharm Group Guangdong Medicine Device Co., Ltd. Controlled by Sinopharm Group Shanghai Institute of Pharmaceutical Industry Controlled by Sinopharm Group

- 143 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(4) Other related parties (continued)

Relationship with the Company

Sinopharm Chongqing Pharmaceutical and Medical Industry Design Institute Controlled by Sinopharm Group China State Institute of Pharmaceutical Industry Controlled by Sinopharm Group Foshan Dezhong Pharmaceutical Co., Ltd. Controlled by Sinopharm Group Sinopharm Group Beijing Medical equipment Co., Ltd. Controlled by Sinopharm Group Foshan Fengliaoxing Pharmaceutical Co., Ltd. Controlled by Sinopharm Group The Fourth Pharmaceutical Co., Ltd. of Zhonglian Group Controlled by Sinopharm Group Beijing Huasheng Pharmaceutical Biotechnology Development Co., Ltd. Controlled by Sinopharm Group Sinopharm ChuanKong pharmaceutical Co., Ltd. Controlled by Sinopharm Group Shareholders have signigicant Shanghai Fosun Pharmaceutical (Group) Co., Ltd.("Fosun Pharm") influence on Sinopharm Group Jiangsu Wanbang Pharmacy Marketing Co., Ltd. Subsdiary of Fosun Pharm Chongqing Yaoyou Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Chongqing Haisiman Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Guilin South pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Handan Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Hunan Dongting Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Shanghai Chaohui Pharmecurical Co., Ltd. Subsdiary of Fosun Pharm Foshan Chancheng District Central Hospital Subsdiary of Fosun Pharm Sichuan Hexin Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Wanbang Biopharmaceuticals Subsdiary of Fosun Pharm Shanghai Fosun Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Shenyang Hongqi Pharmaceutical Co., Ltd. Subsdiary of Fosun Pharm Yang Wenjie Minority interest of subsidiary Tan Min Minority interest of subsidiary Jiang Jianmin Minority interest of subsidiary Zhou Weilin Minority interest of subsidiary Fang Zhongqin Minority interest of subsidiary Kang Liting Minority interest of subsidiary Family member of minority interest Wang Yang of subsidiary Shaoguan Wujiang District Muyang Medicine Information Controlled by minority interest of Consultant Co., Ltd. subsidiary Shanghai Guoda Shuguang Pharmacy Co., Ltd. Associate of Sinopharm Group Yichang Humanwell Pharmaceutical Co., Ltd. Associate of Sinopharm Group Changchun Changsheng Gene Pharmaceutical Co., Ltd. Associate of Sinopharm Group Sino-Swed Pharmaceutical Corp.Ltd. Associate of Sinopharm Group China Otsuka Pharmaceutical Co., Ltd. Associate of Sinopharm Group Shanghai Sailun Biological Technology Co., Ltd. Associate of Sinopharm Group Shenzhen Wanwei Medicine trading Co., Ltd. Controlled by Wanle Controlled by subsidiary's key Jiang Meng Renren Medical instrument Co., Ltd. management

- 144 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions

(a) Purchase of goods

2013 2012 Pricing Amount % of same Amount % of same Related party policies transaction transaction

Sinopharm Holding Sub Marketing Center Co., Ltd. Market price 91,957.89 4.75% 89,649.87 4.54% Sinopharm Group Market price 47,767.33 2.47% 32,857.29 1.67% China National Medicines Co., Ltd. Market price 26,779.33 1.38% 22,065.01 1.12% Sino-Swed Pharmaceutical Co., Ltd. Market price 8,092.47 0.42% 7,653.40 0.39% Guang dong South National Pharmaceutical Foreign Trade Co., Ltd. Market price 4,155.73 0.21% 2,397.32 0.12% Wanle Medicine Market price 3,335.44 0.17% 4,301.69 0.22% Chengdu Rongsheng Pharmacy Co., Ltd. Market price 3,180.69 0.16% 1,648.50 0.08% Winteam Pharmaceutical Group Ltd. Market price 2,593.43 0.13% - 0.00% Jiangsu Wanbang Pharmacy Marketing Co., Ltd. Market price 2,376.53 0.12% 1,635.61 0.08% Sinopharm Holding Hunan Co., Ltd. Market price 1,936.72 0.10% 33.59 0.00% Shenzhen Wanwei Medicine trading Co., Ltd. Market price 1,699.19 0.09% 936.18 0.05% Lanzhou Institute of Biological Products Co., Ltd. Market price 1,694.89 0.09% - - Chongqing Yaoyou Pharmaceutical Co., Ltd. Market price 1,565.79 0.08% 994.01 0.05% Wuhan Institute of Biological Products Co., Ltd. Market price 1,364.70 0.07% 129.11 0.01% Chongqing Haisiman Pharmaceutical Co., Ltd. Market price 968.00 0.05% 1,172.74 0.06% Sinopharm Group Weiqida Medicine Co., Ltd. Market price 512.35 0.03% 900.90 0.05% Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. Market price 369.14 0.02% 299.12 0.02% Guizhou Tongjitang Pharmaceutical Co., Ltd. Market price 330.95 0.02% - - China National Pharmaceutical Foreign Trade Co., Ltd. Market price 242.15 0.01% 1,133.69 0.06% Foshan Nanhai Uptodate & Special Medicines Co., Ltd. Market price 236.65 0.01% 127.34 0.01% Sinopharm Holding Beijing Co., Ltd. Market price 227.13 0.01% 505.56 0.03% Shanghai Shyndec Pharmaceutical Co., Ltd. Market price 208.54 0.01% 86.56 0.00% Sinopharm Holding Jiangsu Co., Ltd. Market price 199.51 0.01% - - Sinopharm Group Rongsheng Pharmaceutical Co., Ltd. Market price 146.19 0.01% 127.70 0.01% Sinopharm Group Chemical Reagent Co., Ltd. Market price 93.36 0.00% 116.42 0.01% Sinopharm Holding Guizhou Co., Ltd. Market price 93.34 0.00% 1,278.24 0.06% Sinopharm Holding Zhangzhou Co., Ltd. Market price 93.16 0.00% 0.35 0.00% Sinopharm Holding Beijing Huahong Co., Ltd. Market price 82.34 0.00% - - Sinopharm Holding Hainan Co., Ltd. Market price 81.83 0.00% 82.23 0.00% Anhui Jingfang Pharmaceutical Co., Ltd. Market price 78.18 0.00% - - Shanghai Institute of Biological Products Co., Ltd. Market price 67.55 0.00% 290.73 0.01% Shandong Lu Ya Pharmaceutical Co., Ltd. Market price 67.22 0.00% - - To next page 202,597.72 10.42% 170,423.16 8.65%

- 145 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions

(a) Purchase of goods(continued)

2013 2012 Pricing Amount % of same Amount % of same Related party policies transaction transaction

continued 202,597.72 10.42% 170,423.16 8.65% Sinopharm Holding Hubei Co., Ltd. Market price 64.59 0.00% 13.98 0.00% Shanghai Guoda Shuguang Pharmacy Co., Ltd. Market price 60.54 0.00% - - China Otsuka Pharmaceutical Co., Ltd. Market price 53.52 0.00% 21.13 0.00% Sinopharm Holding Fujian Co., Ltd. Market price 50.74 0.00% 609.31 0.03% Guilin South pharmaceutical Co., Ltd. Market price 43.66 0.00% 32.48 0.00% Sinopharm Yixin Medicine Co., Ltd. Market price 31.46 0.00% 107.16 0.01% Sinopharm Holding Fuzhou Co., Ltd. Market price 27.39 0.00% - - Sinopharm Holding Suzhou Co., Ltd. Market price 24.07 0.00% 32.22 0.00% Foshan Nanhai Medicine Co., Ltd. Market price 19.40 0.00% 36.37 0.00% Shanghai Modern Hasen (Shangqiu) Pharmacertical Co., Ltd. Market price 18.93 0.00% 16.09 0.00% Sinopharm Group Chemical Reagent Suzhou Co., Ltd. Market price 17.24 0.00% 30.78 0.00% Sinopharm Holding Chongqing Co., Ltd. Market price 14.59 0.00% - - Sinopharm Group Guorui Medicine Co., Ltd. Market price 12.55 0.00% 1.67 0.00% Handan Pharmaceutical Co., Ltd. Market price 11.96 0.00% 7.64 0.00% Sinopharm Holding Dezhou Co., Ltd. Market price 9.51 0.00% - - Shenyang Hongqi Pharmaceutical Co., Ltd. Market price 8.38 0.00% 6.47 0.00% Hunan Dongting Pharmaceutical Co., Ltd. Market price 7.86 0.00% - - Sinopharm Group Shanghai Medicine Device Co., Ltd. Market price 5.46 0.00% 13.36 0.00% Yichang Humanwell Pharmaceutical Co., Ltd. Market price 5.07 0.00% 4.75 0.00% Sichuan Jiang You Zhong Ba Science and Technology Development Co., Ltd. Market price 4.25 0.00% 5.89 0.00% Sinopharm Holding Hainan Hongyi Co., Ltd. Market price 3.49 0.00% 5.37 0.00% Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. Market price 3.03 0.00% 2.13 0.00% Sinopharm Holding Yunnan Co., Ltd. Market price 1.63 0.00% 38.18 0.00% Guizhou Longlife Pharmacertical Co., Ltd. Market price 0.77 0.00% - - Shanghai Sailun Biological Technology Co., Ltd. Market price 0.27 0.00% 0.32 0.00% Sinopharm Holding Sanyi Medicine (Wuhu) Co., Ltd. Market price 0.17 0.00% - - Guangdong Medi-World Pharmacertical Co., Ltd. Market price 0.01 0.00% - - Sinopharm Holding Putian Co., Ltd. Market price - - 79.81 0.00% Sinopharm Holding (Yangzhou) Chinese Western Medicine Branch Co., Ltd. Market price - - 29.58 0.00% Sinopharm Holding Meitai Medical Equipment (Shanghai) Co., Ltd. Market price - - 1.42 0.00% Qinghai Pharmaceutical Factory Co., Ltd. Market price - - 1,577.26 0.08% Lanzhou Biotechnology Development Co., Ltd. Market price - - 40.50 0.00% Guilin Huagui Sinopharm Associate Co., Ltd. Market price - - 22.38 0.00% Sinopharm Le -Ren-Tang Shijiazhuang Medicine Co., Ltd. Market price - - 68.44 0.00% Wuhan Zhonglian Pharmaceutical Group Co., Ltd. Market price - - 36.66 0.00% The Fourth Pharmaceutical Co., Ltd. of Zhonglian Group Market price - - 0.16 0.00% Sinopharm Holding Guoda Drug Store Guangdong Co., Ltd. Market price (0.03) 0.00% 110.74 0.01% Total 203,098.23 10.42% 173,375.41 8.78%

- 146 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(b) Sales of goods 2013 2012 Amount % of same Amount % of same Related party Pricing policies transaction transaction

Foshan Nanhai Uptodate & Special Medicines Co., Ltd. Market price 13,116.18 0.62% 10,780.95 0.60% Sinopharm Holding Hunan Co., Ltd. Market price 12,950.93 0.61% 11,090.04 0.62% Sinopharm Holding Beijing Huahong Co., Ltd. Market price 6,703.26 0.32% 5,176.99 0.29% Sinopharm Holding Shandong Co., Ltd. Market price 6,517.00 0.31% 2,162.90 0.12% Sinopharm Holding Hubei Co., Ltd. Market price 6,514.45 0.31% 6,779.93 0.38% Sinopharm Holding Guoda Drug Store Guangdong Co., Ltd. Market price 6,457.79 0.31% 6,974.56 0.39% Sinopharm Holding Hainan Co., Ltd. Market price 6,301.39 0.30% 4,345.44 0.24% Sinopharm Holding Beijing Co., Ltd. Market price 5,742.64 0.27% 7,008.10 0.39% Chongqing Yaoyou Pharmaceutical Co., Ltd. Market price 5,665.36 0.27% 8,355.28 0.47% Foshan Nanhai Medicine Co., Ltd. Market price 5,347.73 0.25% 3,903.04 0.22% Sinopharm Le -Ren-Tang Medicine Co., Ltd. Market price 5,108.90 0.24% 2,553.42 0.14% Sinopharm Group (Tianjin) Eastern Bokang Pharmaceutical Co., Ltd. Market price 4,872.75 0.23% 5,142.56 0.29% Sinopharm Group Xinjiang Special Drugs National Pharmaceutical Co., Ltd. Market price 4,813.17 0.23% 3,738.47 0.21% Sinopharm Group Southwest Medicine Co., Ltd. Market price 4,349.37 0.21% 7,699.48 0.43% Sinopharm Holding Ningxia Co., Ltd. Market price 3,708.36 0.18% 3,034.37 0.17% Sinopharm Holding Tianjin Co., Ltd. Market price 3,512.12 0.17% 2,742.23 0.15% Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. Market price 3,404.03 0.16% 3,211.84 0.18% Sinopharm Holding Zhejiang Co., Ltd. Market price 3,400.55 0.16% 3,058.70 0.17% Sinopharm Holding Sub Marketing Center Co., Ltd. Market price 2,695.15 0.13% 2,731.61 0.15% Sinopharm Holding Hainan Hongyi Co., Ltd. Market price 2,436.80 0.12% 2,191.90 0.12% Sinopharm Holding Nantong Co., Ltd. Market price 2,339.36 0.11% 1,785.99 0.10% Sinopharm Holding Gansu Co., Ltd. Market price 2,251.13 0.11% 1,614.56 0.09% Sinopharm Holding Xinjiang Special Drugs Western Pharmaceutical Co., Ltd. Market price 2,076.55 0.10% 2,713.11 0.15% Sinopharm Group Market price 1,939.79 0.09% 2,213.13 0.12% Sinopharm Holding Shenyang Co., Ltd. Market price 1,880.90 0.09% 2,395.44 0.13% Sinopharm Holding Wenzhou Co., Ltd. Market price 1,849.14 0.09% 1,406.26 0.08% Sinopharm Holding Fuzhou Co., Ltd. Market price 1,778.51 0.08% 908.99 0.05% Sinopharm Holding Chongqing Co., Ltd. Market price 1,712.96 0.08% 1,887.98 0.11% Sinopharm Holding Jinzhou Co., Ltd. Market price 1,706.13 0.08% 1,107.56 0.06% Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. Market price 1,613.77 0.08% 1,641.52 0.09% Sinopharm Holding Yunnan Co., Ltd. Market price 1,491.70 0.07% 1,815.13 0.10% Sinopharm Holding Henan Co., Ltd. Market price 949.23 0.04% 713.16 0.04% Sinopharm Holding Shanxi Co., Ltd. Market price 843.17 0.04% 159.50 0.01% Sinopharm Holding Heilongjiang Co., Ltd. Market price 771.42 0.04% 538.97 0.03% China National Medicines Co., Ltd. Market price 759.93 0.04% 799.98 0.04% Sinopharm Holding Yangzhou Co., Ltd. Market price 746.68 0.04% 946.23 0.05% Sinopharm Holding Shaanxi Co., Ltd. Market price 691.90 0.03% 1,432.12 0.08% Sinopharm Holding Shanxi Co., Ltd. Market price 606.44 0.03% 856.11 0.05% Sinopharm Holding Xuzhou Co., Ltd. Market price 596.86 0.03% 257.05 0.01% Sinopharm Group Weiqida Medicine Co., Ltd. Market price 498.44 0.02% 253.71 0.01% Sinopharm Guoda Drug Store Jiangmen Chain Co., Ltd. Market price 474.17 0.02% - - Shanghai Chaohui Pharmecurical Co., Ltd. Market price 414.36 0.02% 303.42 0.02% Sinopharm Holding Guizhou Co., Ltd. Market price 412.79 0.02% 238.30 0.01% To next page 142,023.26 6.75% 128,670.03 7.16%

- 147 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(b) Sales of goods (continued) 2013 2012 Pricing Amount % of same Amount % of same Related party policies transaction transaction

continued 142,023.26 6.75% 128,670.03 7.16% Sinopharm Holding Jilin Co., Ltd. Market price 335.12 0.02% 421.55 0.02% Sinopharm Holding Wuxi Co., Ltd. Market price 325.34 0.02% 208.49 0.01% Sinopharm Holding Guoda Pharmacy Co., Ltd. Market price 274.73 0.01% 219.90 0.01% Sinopharm Holding Yancheng Co., Ltd. Market price 238.93 0.01% 173.98 0.01% Sinopharm Holding Fujian Co., Ltd. Market price 234.38 0.01% 732.65 0.04% Sinopharm Holding Dalian Co., Ltd. Market price 234.08 0.01% 188.37 0.01% Sinopharm Holding Linyi Co., Ltd. Market price 214.30 0.01% - - Sinopharm Holding Taizhou Co., Ltd. Market price 202.77 0.01% 203.76 0.01% Foshan Chancheng District Central Hospital Market price 197.37 0.01% - - Sinopharm Holding Inner Mongolia Co., Ltd. Market price 196.02 0.01% 302.69 0.02% Guangdong South National Pharmaceutical Foreign Trade Co., Ltd. Market price 195.28 0.01% 260.66 0.01% Sinopharm Holding Tianjin North Medicine Co., Ltd. Market price 186.83 0.01% 221.47 0.01% Sinopharm Holding Suzhou Co., Ltd. Market price 147.54 0.01% 232.16 0.01% Sinopharm Holding Qinghai Co., Ltd. Market price 144.32 0.01% 68.66 0.00% Sinopharm Holding (Yangzhou) Chinese Market price 137.76 0.01% 285.05 0.02% Western Medicine Branch Co., Ltd. Sinopharm Holding Shanghai Likang Pharmaceutical Co., Ltd. Market price 137.13 0.01% 77.95 0.00% China Sinopharm International Corporation Market price 132.85 0.01% - - Sinopharm Holding Jiangsu Co., Ltd. Market price 132.67 0.01% 166.76 0.01% Sinopharm Holding Changzhou Medical Logistics center Co., Ltd. Market price 124.48 0.01% 54.11 0.00% Sinopharm Holding Changde Co., Ltd. Market price 120.04 0.01% 178.39 0.01% Sinopharm Holding Longyan Co., Ltd. Market price 113.73 0.01% 194.41 0.01% Sinopharm Holding Ningde Co., Ltd. Market price 106.94 0.01% 190.48 0.01% Sinopharm Lerentang Tangshan Medicine Co., Ltd. Market price 102.29 0.00% - - Sinopharm Holding Jinan Co., Ltd. Market price 94.35 0.00% 22.45 0.00% Jiang Meng Renren Medical instrument Co., Ltd. Market price 84.29 0.00% 52.12 0.00% Shanghai Yunnuo Marketing Consulting Co., Ltd. Market price 63.39 0.00% - - Sinopharm Holding Qingdao Co., Ltd. Market price 60.80 0.00% - - Sinopharm Holding Jiangxi Co., Ltd. Market price 54.43 0.00% 71.74 0.00% Sinopharm Holding Yantai Co., Ltd. Market price 53.16 0.00% 68.77 0.00% Sinopharm Holding Putian Co., Ltd. Market price 46.45 0.00% 61.05 0.00% Shanghai Donghong Medicine Co., Ltd. Market price 30.02 0.00% - - Sinopharm Holding Anqing Co., Ltd. Market price 26.27 0.00% 38.37 0.00% Sinopharm Holding Wuhu Co., Ltd. Market price 25.39 0.00% 43.09 0.00% Sinopharm Lerentang Langfang Medicine Co., Ltd. Market price 20.78 0.00% - - Sinopharm Holding Quanzhou Co., Ltd. Market price 19.86 0.00% - - Sinopharm Holding Huaian Co., Ltd. Market price 19.35 0.00% 5.88 0.00% Sinopharm Holding Sanming Co., Ltd. Market price 17.10 0.00% 5.96 0.00% Sinopharm Lerentang Qinhuangdao Medicine Co., Ltd. Market price 15.32 0.00% - - Sinopharm Holding Changzhou Co., Ltd. Market price 14.87 0.00% 13.34 0.00% CNPGC Market price 13.69 0.00% - - Sinopharm Holding Anhui Co., Ltd. Market price 12.68 0.00% 180.36 0.01% Reed Sinopharm Exhibitions Co., Ltd. Market price 10.43 0.00% 15.09 0.00% Sinopharm Holding Chifeng Co., Ltd. Market price 10.39 0.00% - - China National Scientific Instruments & Materials Corporation Market price 8.88 0.00% 9.52 0.00% Guangzhou Accord Pharm Chain Co., Ltd. Market price 8.35 0.00% 80.66 0.00% Heilongjiang Sinopharm Medical Herbs Co., Ltd. Market price 7.74 0.00% 19.15 0.00% Sinopharm Holding Xinjiang New Kashi Pharmaceutical Co., Ltd. Market price 7.30 0.00% 29.32 0.00% Sinopharm Jiankun (Beijing) Medicines Co., Ltd. Market price 7.21 0.00% - - Sinopharm Holding HongKong Co., Ltd. Market price 6.19 0.00% 4.90 0.00% Shanxi Guoyi Drug Store Co., Ltd. Market price 6.01 0.00% - - To next page 147,002.86 6.99% 133,773.29 7.36%

- 148 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(b) Sales of goods (continued)

2013 2012 Pricing Amount % of same Amount % of same Related party policies transaction transaction

Continued 147,002.86 6.99% 133,773.29 7.36% Group Financial Co. Market price 5.36 0.00% 2.00 0.00% Sinopharm Holding Xinjiang Xinte Karamay Pharmaceutical Co., Ltd. Market price 4.74 0.00% 4.53 0.00% Sinopharm Holding Zunyi Co., Ltd. Market price 3.57 0.00% - - Sinopharm Holding Zhangzhou Co., Ltd. Market price 3.35 0.00% 168.89 0.01% Sinopharm Fortuneway Company Market price 3.27 0.00% - - Changchun Institute of Biological Products Co., Ltd. Market price 3.25 0.00% - - Sinopharm United Engineering Corporation Market price 3.20 0.00% 2.58 0.00% Beijing Fusheng Tiandi Property Management Ltd. Market price 2.81 0.00% - - Sinopharm Holding Shiyan Co., Ltd. Market price 2.30 0.00% 2.18 0.00% Sinopharm Holding Qujing Co., Ltd. Market price 2.00 0.00% 2.86 0.00% Sinopharm Holding Anyang Co., Ltd. Market price 1.79 0.00% 0.97 0.00% Sinopharm Xinjiang Korla Pharmaceutical Co., Ltd. Market price 1.66 0.00% 1.30 0.00% Sinopharm Holding Zhoukou Co., Ltd. Market price 1.18 0.00% - - Sinopharm Holding Shangqiu Co., Ltd. Market price 1.12 0.00% - - Sinopharm (Shanghai) E-Health Co,.Ltd. Market price 0.88 0.00% - - Sinopharm Holding Jingmen Co., Ltd. Market price 0.81 0.00% - - Sinopharm Holding Xiangtan Co., Ltd. Market price 0.71 0.00% - - Shanghai Shyndec Pharmaceutical Co., Ltd. Market price 0.66 0.00% - - Shanghai Nutraceuticals (Shanghai) Co., Ltd. Market price 0.64 0.00% - - Sinopharm Holding Kaifeng Co., Ltd. Market price 0.61 0.00% 0.29 0.00% Sinopharm Holding Yueyang Co., Ltd. Market price 0.58 0.00% - - Sinopharm Holding Beijing Kangchen Bio-Pharmaceutical Co., Ltd. Market price 0.53 0.00% - - Sinopharm Holding Nanping Co., Ltd. Market price 0.51 0.00% - - Sinopharm Holding Lishui Co., Ltd. Market price 0.48 0.00% 4.65 0.00% Sinopharm Holding Tongliao Co., Ltd. Market price 0.45 0.00% - - Sinopharm Holding Xinxiang Co., Ltd. Market price 0.42 0.00% - - Sinopharm Holding Puyang Co., Ltd. Market price 0.41 0.00% - - Sinopharm Holding Qiannanzhou Co., Ltd. Market price 0.38 0.00% - - Sinopharm Yixin Medicine Co., Ltd. Market price 0.33 0.00% - - Sinopharm Holding Siping Co., Ltd. Market price 0.29 0.00% 0.29 0.00% Sinopharm Holding Yanbian Co., Ltd. Market price 0.28 0.00% - - Lanzhou Institute of Biological Products Co., Ltd. Market price 0.27 0.00% - - Sinopharm Xingsha Pharmaceuticals (Xiamen) Co., Ltd. Market price 0.26 0.00% 0.26 0.00% Sinopharm Holding Wenshan Co., Ltd. Market price 0.26 0.00% - - Beijing Tiantan Biological Products Co., Ltd. Market price 0.25 0.00% - - Sinopharm Holding Jingzhou Co., Ltd. Market price 0.24 0.00% 1.42 0.00% Sinopharm Holding Medical Devices Co., Ltd. Market price 0.22 0.00% - - Sinopharm Holding Qianxinan Co., Ltd. Market price 0.21 0.00% - - Sinopharm Holding Honghe Co., Ltd. Market price 0.11 0.00% - - Shanghai Huyong Pharmaceutical Co., Ltd. Market price 0.09 0.00% - - Sinopharm Holding Jiaozuo Co., Ltd. Market price 0.05 0.00% - - Sinopharm Holding Hebei Medcine Co., Ltd. Market price - - 1,736.09 0.10% Sichuan Hexin Pharmaceutical Co., Ltd. Market price - - 181.78 0.01% Sinopharm Holding Xinjiang Special Ginsheng and Pilose PharmaceuticalCo., Ltd. Market price - - 5.79 0.00% Sinopharm Holding Jiangsu Co., Ltd. Taizhou Branch Market price - - 0.14 0.00% Sinopharm Holding Xinjiang Hami Pharmaceutical Co., Ltd. Market price - - 5.82 0.00% To next page 147,053.39 6.99% 135,357.56 7.51%

- 149 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(b) Sales of goods (continued)

2013 2012 Amount % of same Amount % of same Related party Pricing policies transaction transaction

Continued 147,053.39 6.99% 135,357.56 7.51% Sinopharm Holding Xinjiang Yili Tongde Pharmaceutical Co., Ltd. Market price - - 1.71 0.00% Sinopharm Holding Pingdingshan Limited Co., Ltd. Market price - - 0.05 0.00% Sinopharm Holding Shenyang Co., Ltd. Dalian Branch Market price - - 15.47 0.00% Sinopharm Holding Shangluo Co., Ltd. Market price - - 1.10 0.00% Sinopharm Holding Xinyu Co., Ltd. Market price (2.32) 0.00% - - Total 147,051.07 6.99% 135,913.46 7.51%

(c) Lease

The Group as leaser:

Type of assets Contract beginning Contract terminated Rental Leasers Lessees use for date date income

Sinopharm liuzhou Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. Building 1 July 2009 31 December 2015 155.11 The Company Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. Building 1 June 2009 31 December 2015 9.95 Huixin Investment Sinopharm Guoda Drug Store Guangdong Chain Co., Ltd. Building 1 January 2012 31 May 2013 16.53 Huixin Investment Sinopharm Group Shanghai Medicine Device Co., Ltd. Building 1 January 2012 30 September 2013 18.23 Huixin Investment Sinopharm Group Guangdong Medicine Device Co., Ltd. Building 18 September 2013 31 December 2015 6.44 Huixin Investment China National Medicines Co., Ltd. Building 1 January 2013 31 December 2013 4.32 Huixin Investment Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. Building 1 June 2013 31 December 2013 35.55 Huixin Investment Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. Building 1 January 2013 31 May 2013 1.66 Huixin Investment Sinopharm Guoda Drug Store Guangdong Chain Co., Ltd. Building 1 January 2013 31 May 2013 6.65 Guangxi Logistic Sinopharm Guoda Drug Store Chain Co., Ltd. Building 1 July 2009 31 December 2015 37.88 Sinopharm Materials Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. Building 1 January 2011 31 December 2013 5.40 297.72

Rental income received from related parties is negotiated by both parties involved in the lease and by making reference to the market price.

- 150 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(c) Lease(continued)

The Group as lessee:

Type of assets Contract Contract terminated Lease Lessees Leasers use for beginning date date expenses

Sinopharm Sinopharm Group Medicine Guanghzou Logistic Co., Ltd. Equipment 1 January 2013 31 December 2013 750.00 Sinopharm Sinopharm Group Medicine Guanghzou Logistic Co., Ltd. Building 1 January 2013 31 December 2013 708.00 Shaoguan Wujiang Muyang Sinopharm Medicine Information Building Shaoguan Cousulting Co., Ltd. 1 August 2012 31 July 2020 80.42 Sinopharm Yanfeng Wang Yang Building 1 January 2013 31 December 2013 55.20 Sinopharm Foshan Nanhai Medicine Co., Foshan Ltd. Building 1 March 2013 28 February 2015 14.78 Guangdong Sinopharm Pharmaceutical Logistic Logistics Co., Ltd. Guangzhou Branch Vehicles 1 January 2013 30 September 2013 5.38 1,613.78

Lease charges paid to related parties are negotiated by both parties involved in the lease and by making reference to the market price.

(d) Guarantees provided

Guarantee Amount Beginning date of Maturity date of obligation Guarantor Guarantee (RMB‘0,000) guarantee contract guarantee contract expired

Sinopharm Group Sinopharm Guangzhou 49,653.20 3 June 2013 3 June 2014 No The Company Sinopharm Guangzhou 40,579.23 20 May 2013 23 April 2014 No The Company Sinopharm Guangzhou 32,360.33 20 May 2013 20 May 2014 No The Company Sinopharm Guangzhou 30,562.65 1 April 2013 31 March 2014 No The Company Sinopharm Guangzhou 29,721.20 7 May 2013 7 May 2014 No The Company Sinopharm Guangzhou 29,193.93 3 September 2013 16 August 2014 No The Company Sinopharm Guangzhou 28,127.55 26 June 2013 25 June 2014 No The Company Sinopharm Guangxi 17,759.23 26 June 2013 25 June 2014 No Zhijun Medicine The Company 15,000.00 27 June 2013 27 December 2013 No The Company Zhijun Medicine 11,993.70 8 August 2013 8 August 2014 No The Company Sinopharm Guangzhou 11,101.40 4 March 2013 3 March 2014 No Sinopharm Guangzhou & Zhijun Medicine The Company 9,000.00 5 December 2012 4 December 2013 No Zhijun Medicine The Company 8,772.48 9 June 2013 9 June 2014 No The Company Sinopharm Guangxi 8,534.93 19 April 2013 18 April 2014 No The Company Sinopharm Liuzhou 5,963.65 26 June 2013 25 June 2014 No The Company Sinopharm Guangxi 5,955.08 27 August 2013 27 August 2014 No The Company Suzhou Zhijun 5,518.22 28 August 2013 27 August 2014 No The Company Sinopharm Guangxi 5,190.95 29 May 2013 29 May 2014 No Zhijun Medicine The Company 5,000.00 24 January 2013 31 December 2013 No The Company Sinopharm Liuzhou 4,847.65 29 October 2013 28 October 2014 No Sinopharm Group The Company 3,500.00 24 September 2013 23 March 2014 No The Company Sinopharm Yuexing 3,499.42 20 May 2013 20 May 2014 No The Company Suzhou Zhijun 3,379.07 21 March 2013 21 March 2014 No The Company Sinopharm Yanfeng 3,178.05 26 June 2013 25 June 2014 No The Company Sinopharm Guangzhou 2,577.95 9 November 2012 8 November 2013 No The Company Sinopharm Jiangmen 2,294.22 28 May 2013 27 May 2014 No Zhijun Medicine The Company 2,000.00 14 October 2013 14 October 2014 No Sinopharm Group The Company 2,000.00 31 October 2013 31 October 2014 No The Company Sinopharm Yuexing 1,870.47 5 December 2012 4 December 2013 No The Company Suzhou Zhijun 1,692.54 16 December 2013 25 June 2014 No The Company Sinopharm Yanfeng 1,660.00 13 June 2013 27 December 2013 No Sinopharm Guangzhou Sinopharm Foshan 1,000.00 29 May 2013 28 May 2014 No 383,487.10

- 151 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated) VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(d) Guarantees provided (continued)

Guarantee Amount Beginning date of Maturity date of obligation Guarantor Guarantee (RMB‘0,000) guarantee contract guarantee contract expired

Continued 383,487.10 The Company Suzhou Zhijun 500.00 25 November 2013 25 November 2014 No The Company Sinopharm Yanfeng 463.24 20 November 2013 23 May 2014 No The Company Sinopharm Jiangmen 453.00 1 July 2013 30 June 2014 No The Company Zhijun Medicine 216.76 10 September 2013 25 June 2014 No The Company Sinopharm Drugs 90.24 26 November 2013 25 June 2014 No The Company Sinopharm Jiangmen 52.95 11 July 2013 25 June 2014 No The Company Sinopharm Jianmin 50.00 28 November 2013 25 June 2014 No The Company Sinopharm Yuexing 22.06 26 June 2013 25 June 2014 No The Company Sinopharm Zhanjiang 20.39 24 December 2013 20 June 2014 No The Company Sinopharm Drugs 10.00 21 November 2013 25 June 2014 No The Company Sinopharm Guangxi 6.04 27 May 2013 26 May 2014 No 385,371.78

(e) Financing

Category Amount Effective date Maturity date (RMB‘0,000)

2013 Borrowed from- Sinopharm Group Entrusted borrowings 40,000.00 1 November 2013 30 April 2014 Sinopharm Group(i) Entrusted borrowings 40,000.00 6 August 2013 6 November 2013 Group Financial Co.(i) Short-term borrowings 3,000.00 4 March 2013 4 March 2014 Group Financial Co. Short-term borrowings 7,000.00 2 April 2013 2 April 2014 Group Financial Co. Short-term borrowings 4,300.00 27 May 2013 27 May 2014 Group Financial Co. Short-term borrowings 2,500.00 29 May 2013 29 May 2014 Group Financial Co. Short-term borrowings 5,500.00 3 July 2013 3 July 2014 Group Financial Co. Short-term borrowings 4,700.00 16 July 2013 16 July 2014 Group Financial Co. Short-term borrowings 5,000.00 26 July 2013 26 July 2014 Group Financial Co. Short-term borrowings 3,000.00 8 October 2013 8 October 2014 To next page 115,000.00

- 152 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(e) Financing (continued)

Category Amount Effective date Maturity date (RMB‘0,000)

Continued 115,000.00 Group Financial Co. Discount on bank acceptance notes 500.00 28 June 2013 22 August 2013 Group Financial Co. Discount on bank acceptance notes 500.00 28 June 2013 30 August 2013 Group Financial Co. Discount on bank acceptance notes 350.00 28 June 2013 4 September 2013 Group Financial Co. Discount on bank acceptance notes 60.16 28 June 2013 7 September 2013 Group Financial Co. Discount on bank acceptance notes 235.77 19 November 2013 29 March 2014 Group Financial Co. Discount on bank acceptance notes 411.48 19 November 2013 3 Jan 2014 Group Financial Co. Discount on bank acceptance notes 50.17 19 November 2013 12 April 2014 Group Financial Co. Discount on bank acceptance notes 160.83 19 November 2013 12 January 2014 Group Financial Co. Discount on bank acceptance notes 230.64 19 November 2013 18 April 2014 Group Financial Co. Discount on bank acceptance notes 79.41 19 November 2013 18 January 2014 Group Financial Co. Discount on bank acceptance notes 100.00 19 November 2013 24 April 2014 Group Financial Co. Discount on bank acceptance notes 100.00 19 November 2013 25 January 2014 Group Financial Co. Discount on bank acceptance notes 350.00 19 November 2013 28 January 2014 Group Financial Co. Discount on bank acceptance notes 211.21 19 November 2013 29 January 2014 Group Financial Co. Discount on bank acceptance notes 58.05 19 November 2013 30 January 2014 Group Financial Co. Discount on bank acceptance notes 810.60 19 November 2013 31 January 2014 Group Financial Co. Discount on bank acceptance notes 508.53 19 November 2013 7 February 2014 119,716.85

(i) The borrowing was pre-paid in 2013 in advance.

2012 Borrowed from- Sinopharm Group Entrusted borrowings 5,000.00 12 January 2012 11 July 2012 Sinopharm Group Entrusted borrowings 801.00 22 May 2012 21 November 2012 Sinopharm Group Entrusted borrowings 4,199.00 22 May 2012 21 November 2012 Sinopharm Group(i) Entrusted borrowings 2,000.00 23 August 2012 22 February 2013 Sinopharm Group Entrusted borrowings 5,000.00 7 March 2012 6 September 2012 Sinopharm Group Entrusted borrowings 4,263.00 9 January 2012 8 July 2012 Sinopharm Group Entrusted borrowings 4,000.00 14 March 2012 13 September 2012 Group Financial Co. Short-term borrowings 4,000.00 26 December 2012 26 June 2013 Group Financial Co. Short-term borrowings 4,000.00 22 October 2012 22 April 2013 Group Financial Co. Short-term borrowings 3,400.00 23 October 2012 23 April 2013 Group Financial Co. Short-term borrowings 3,000.00 18 September 2012 18 September 2013 Group Financial Co. (i) Short-term borrowings 3,000.00 15 October 2012 15 April 2013 Group Financial Co. (i) Short-term borrowings 3,000.00 12 October 2012 12 April 2013 Group Financial Co. Short-term borrowings 3,000.00 11 October 2012 11 April 2013 Group Financial Co. Short-term borrowings 3,000.00 21 September 2012 21 March 2013 To next page 51,663.00

- 153 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(e) Financing (continued)

Category Amount Effective date Maturity date (RMB‘0,000)

Continued 51,663.00 Group Financial Co. Short-term borrowings 500.00 6 December 2012 6 June 2013 Group Financial Co. Short-term borrowings 1,000.00 6 December 2012 6 June 2013 Group Financial Co. Short-term borrowings 1,200.00 22 November 2012 22 May 2013 Group Financial Co. Short-term borrowings 1,100.00 22 November 2012 22 May 2013 Group Financial Co. Short-term borrowings 1,000.00 23 November 2012 23 May 2013 Group Financial Co. Short-term borrowings 1,000.00 23 November 2012 23 May 2013 Discount on bank Group Financial Co. acceptance notes 151.82 26 September 2012 23 January 2013 Discount on bank Group Financial Co. acceptance notes 200.00 26 September 2012 16 February 2013 Discount on bank Group Financial Co. acceptance notes 263.79 26 September 2012 16 February 2013 Discount on bank Group Financial Co. acceptance notes 200.00 26 September 2012 16 February 2013 Discount on bank Group Financial Co. acceptance notes 120.00 26 September 2012 25 January 2013 Discount on bank Group Financial Co. acceptance notes 59.45 26 September 2012 28 February 2013 Discount on bank Group Financial Co. acceptance notes 200.00 18 October 2012 28 November 2012 Discount on bank Group Financial Co. acceptance notes 250.00 18 October 2012 3 January 2013 Discount on bank Group Financial Co. acceptance notes 250.00 18 October 2012 3 January 2013 Discount on bank Group Financial Co. acceptance notes 105.00 18 October 2012 3 January 2013 Discount on bank Group Financial Co. acceptance notes 50.00 18 October 2012 3 January 2013 Discount on bank Group Financial Co. acceptance notes 50.00 18 October 2012 3 January 2013 Discount on bank Group Financial Co. acceptance notes 50.00 18 October 2012 25 December 2012 Discount on bank Group Financial Co. acceptance notes 50.00 18 October 2012 25 December 2012 Discount on bank Group Financial Co. acceptance notes 200.00 18 October 2012 27 December 2012 Discount on bank Group Financial Co. acceptance notes 200.00 18 October 2012 27 December 2012 Discount on bank Group Financial Co. acceptance notes 294.57 18 October 2012 27 December 2012 60,157.63

(i) The borrowing was repaied in 2012 in advance.

(f) Remuneration of key management

2013 2012 (RMB‘0,000) (RMB‘0,000)

Remuneration of key management 1,076.00 1,045.37

- 154 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(g) Interest expenses

2013 2012 Related party Type of transaction (RMB‘0,000) (RMB‘0,000)

Group Financial Co. Interest paid for the loans from Group Financial Co. 1,513.97 286.09 Sinopharm Group Interest paid for the entrusted loans 939.56 1,214.86 Sinopharm Holding Sub Marketing Center Co., Ltd. Charges of discounted notes payable 864.16 473.93 Sinopharm Group Charges of discounted notes payable 71.62 159.70 Group Financial Co. Charges of discounted notes payable 64.88 37.51 Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. Interest paid for the loans from related party - 12.64 3,454.19 2,184.73

(h) Interest income

2013 2012 Related party Type of transaction (RMB‘0,000) (RMB‘0,000)

Group Financial Co. Deposit interest 1.21 0.64

(i) Rendering of service

Related party Type of transaction 2013 2012 (RMB‘0,000) (RMB‘0,000)

Dispatching and Sinopharm Group Medicine Logistic Co., Ltd. transportation charges 1,201.55 1,233.82 Dispatching and China National Medicines Co., Ltd. transportation charges 417.13 290.14 Dispatching and Sinopharm Holding Guoda Drug Store Guangdong Co., Ltd. transportation charges 354.05 302.45 Dispatching and China National Medicines Co., Ltd. transportation charges 156.77 - Dispatching and Sinopharm Group Medicine Logistic Co., Ltd. transportation charges 85.15 - Sinopharm Group Entrusted revenue 25.00 - Wanle Medicine Consultation revenue 21.10 26.08 Dispatching and Foshan Nanhai Medicine Co., Ltd. transportation charges 11.65 4.91 Shenzhen Wanwei Medicine Trading Co., Ltd. Consultation revenue 11.20 5.57 Dispatching and Foshan Nanhai Uptodate & Special Medicines Co., Ltd. transportation charges 10.37 3.98 Guangdong South Pharmaceutical Foreign Trading Co., Ltd. Entrusted revenue 8.33 - Dispatching and Wanle Medicine transportation charges 0.16 - Guangzhou Accord Pharm Chain Co., Ltd. Parking fees 0.10 - 2,302.56 1,866.95

- 155 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(5) Related party transactions (continued)

(j) Other services

Related party Type of transaction 2013 2012 (RMB‘0,000) (RMB‘0,000)

Shanghai Institute of Pharmaceutical Research and development Industry expenses 436.00 281.00 Sinopharm Chongqing Pharmaceutical and Medical Industry Design Institute Designing fee 345.40 0.00 Sinopharm Chongqing Pharmaceutical and Medical Industry Design Institute Pinshan management fees 186.33 - Sinopharm Group Medicine Dispatching and Logistic Co., Ltd. transportation charges 170.17 - Shanghai Tongyu Information Technology Co., Ltd CMS system maintenance 134.10 191.16 Dispatching and Sinopharm Holding Shenyang Co., Ltd. transportation charges 119.54 - Reed Sinopharm Exhibitions Co., Ltd. Exhibition expenses 13.75 1.92 Shanghai Institute of Pharmaceutical Industry Exhibition expenses 9.72 0.26 Sinopharm Group Medicine Logistic CMS system operating Co., Ltd. charges - 33.56 Sinopharm United Engineering Construction design and Corporation management - 16.00 1,415.01 523.90

(6) Accounts receivable from and payables to related parties

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Notes receivable Sinopharm Holding Shandong Co., Ltd. 848.54 - Chongqing Yaoyou Pharmaceutical Co., Ltd. 479.85 - Sinopharm Holding Hunan Co., Ltd. 407.58 339.33 Sinopharm Holding Guoda Drug Store Guangdong Co., Ltd. 309.88 130.72 Sinopharm Holding Hainan Co., Ltd. 208.67 8.69 Sinopharm Holding Hubei Co., Ltd. 199.04 142.16 Shanghai Chaohui Pharmecurical Co., Ltd. 150.50 - Sinopharm Holding Hainan Hongyi Co., Ltd. 105.20 - Sinopharm Holding Shaanxi Co., Ltd. 98.75 97.58 Sinopharm Holding Beijing Huahong Co., Ltd. 92.33 46.31 Sinopharm Holding Gansu Co., Ltd. 71.31 163.34 Sinopharm Holding Guizhou Co., Ltd. 71.08 160.21 China National Medicines Co., Ltd. 66.50 - Sinopharm Holding Tianjin Co., Ltd. 62.92 188.14 Sinopharm Holding Fuzhou Co., Ltd. 56.70 - Sinopharm Holding Yancheng Co., Ltd. 55.40 10.00 Sinopharm Holding Xuzhou Co., Ltd. 52.67 10.00 Sinopharm Holding Chongqing Co., Ltd. 20.05 63.35 Sinopharm Holding Shenyang Co., Ltd. 15.28 2.84 Sinopharm Holding Bengbu Co., Ltd. 15.00 - Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. 10.80 146.06 Sinopharm Holding Yangzhou Co., Ltd. 10.00 - Sinopharm Holding Heilongjiang Co., Ltd. 8.83 6.32 Sinopharm Holding Hunan Guoda Minshengtang Drug Store Chain Co., Ltd. 8.60 - Sinopharm Holding Guoda Drugstore Shenyang Chain Co., Ltd. 4.01 - Sinopharm Holding Yantai Co., Ltd. 3.02 1.80 To next page 3,432.51 1,516.85

- 156 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Notes receivable Continued 3,432.51 1,516.85 Sinopharm Group (Tianjin) Eastern Bokang Pharmaceutical Co., Ltd. - 89.72 Sinopharm Holding Changde Co., Ltd. - 46.00 Sinopharm Holding Taizhou Co., Ltd. - 4.37 Sinopharm Holding Longyan Co., Ltd. - 6.00 Sinopharm Holding Zhangzhou Co., Ltd. - 108.77 Sinopharm Holding Henan Co., Ltd. - 736.42 Sinopharm Holding Wuhu Co., Ltd. - 7.17 Sinopharm Holding Qingyang Co., Ltd. - 10.88 Sinopharm Holding Beijing Tianxing Puxin Biological Medical Co., Ltd. - 18.85 Sinopharm Holding Huaian Co., Ltd. - 3.91 3,432.51 2,548.94

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Accounts receivable Sinopharm Holding Hunan Co., Ltd. 2,857.02 1,720.03 Sinopharm Holding Shandong Co., Ltd. 2,051.41 267.35 Foshan Nanhai Uptodate & Special Medicines Co., Ltd. 1,704.67 1,827.63 Sinopharm Group Xinjiang Special Drugs National Pharmaceutical Co., Ltd. 1,381.80 1,323.44 Sinopharm Holding Beijing Huahong Co., Ltd. 1,347.20 942.30 Sinopharm Le -Ren-Tang Medicine Co., Ltd. 1,313.68 604.94 Sinopharm Holding Hainan Co., Ltd. 1,260.47 860.91 Sinopharm Holding Hubei Co., Ltd. 1,158.86 698.00 Sinopharm Holding Guoda Drug Store Guangdong Co., Ltd. 1,100.37 1,019.10 Sinopharm Holding Beijing Co., Ltd. 946.84 950.87 Sinopharm Holding Zhejiang Co., Ltd. 753.76 692.43 Sinopharm Group (Tianjin) Eastern Bokang Pharmaceutical Co., Ltd. 676.72 626.75 Sinopharm Holding Tianjin Co., Ltd. 650.50 552.46 Sinopharm Group Southwest Medicine Co., Ltd. 642.34 1,451.10 Foshan Nanhai Medicine Co., Ltd. 634.33 447.41 Sinopharm Holding Hainan Hongyi Co., Ltd. 489.49 395.11 Sinopharm Group 469.33 286.31 Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. 467.60 688.36 Sinopharm Holding Fuzhou Co., Ltd. 426.40 133.50 Sinopharm Holding Sub Marketing Center Co., Ltd. 397.32 438.38 Sinopharm Holding Xinjiang Special Drugs Western Pharmaceutical Co., Ltd. 394.44 395.01 Sinopharm Holding Wenzhou Co., Ltd. 385.01 204.36 Sinopharm Holding Nantong Co., Ltd. 375.65 250.37 Sinopharm Holding Ningxia Co., Ltd. 352.55 482.16 Sinopharm Holding Chongqing Co., Ltd. 345.65 807.28 Foshan Chancheng District Central Hospital 337.12 - Chongqing Yaoyou Pharmaceutical Co., Ltd. 333.73 910.08 Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. 331.81 365.45 Sinopharm Group Medicine Logistic Co., Ltd. 324.48 445.96 China National Medicines Co., Ltd. 250.94 148.57 To next page 24,161.49 19,935.62

- 157 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Accounts receivable Continued 24,161.49 19,935.62 Sinopharm Holding Jinzhou Co., Ltd. 243.44 268.06 Sinopharm Holding Yunnan Co., Ltd. 221.05 212.85 Sinopharm Holding Shenyang Co., Ltd. 217.46 479.55 Sinopharm Holding Henan Co., Ltd. 214.39 85.69 Sinopharm Holding Heilongjiang Co., Ltd. 193.73 73.12 Sinopharm Holding Gansu Co., Ltd. 169.01 277.31 Sinopharm Holding Yangzhou Co., Ltd. 167.90 138.01 Sinopharm Holding Shanxi Co., Ltd. 144.57 128.53 Sinopharm Holding Shaanxi Co., Ltd. 137.78 143.89 Sinopharm Holding Shanxi Co., Ltd. 135.02 46.94 Sinopharm Holding Wuxi Co., Ltd. 124.61 33.68 Sinopharm Holding Guoda Pharmacy Co., Ltd. 106.17 52.46 Sinopharm Lerentang Tangshan Medicine Co., Ltd. 95.52 - Sinopharm Guoda Drug Store Jiangmen Chain Co., Ltd. 89.31 - Sinopharm Holding Xuzhou Co., Ltd. 69.25 31.75 Sinopharm Holding Jilin Co., Ltd. 67.63 22.91 Sinopharm Holding Dalian Co., Ltd. 66.00 48.34 Sinopharm Holding Qingdao Co., Ltd. 63.35 - Sinopharm Holding Guizhou Co., Ltd. 52.09 40.45 Sinopharm Holding Yancheng Co., Ltd. 45.71 31.72 Sinopharm Holding Fujian Co., Ltd. 45.52 27.42 Guang dong South National Pharmaceutical Foreign Trade Co., Ltd. 42.34 61.92 Sinopharm Holding Inner Mongolia Co., Ltd. 35.66 58.79 Sinopharm Holding Jiangsu Co., Ltd. 33.74 21.83 Sinopharm Holding Changzhou Medical Logistics Center Co., Ltd. 33.01 18.95 Sinopharm Holding Changde Co., Ltd. 32.08 11.71 Sinopharm Holding Shanghai Likang Pharmaceutical Co., Ltd. 30.01 15.96 Sinopharm Holding Qinghai Co., Ltd. 28.70 14.03 Sinopharm Holding Tianjin North Medicine Co., Ltd. 27.82 34.77 Sinopharm Holding Taizhou Co., Ltd. 27.60 20.40 Sinopharm Holding Suzhou Co., Ltd. 25.19 43.53 Sinopharm Holding Yantai Co., Ltd. 17.68 12.53 Sinopharm Holding Putian Co., Ltd. 17.30 6.20 Shanghai Donghong Medicine Co., Ltd. 16.34 - Sinopharm Holding Longyan Co., Ltd. 15.56 18.98 Sinopharm Holding Ningde Co., Ltd. 10.62 11.70 Shanghai Yunnuo Marketing Consulting Co., Ltd. 10.07 - Sinopharm Holding Anqing Co., Ltd. 8.82 4.25 Sinopharm Holding Quanzhou Co., Ltd. 8.72 - Sinopharm Holding Huaian Co., Ltd. 7.85 4.76 Sinopharm Lerentang Qinhuangdao Medicine Co., Ltd. 5.70 - Sinopharm Holding (Yangzhou) Chinese Western Medicine Branch Co., Ltd. 5.23 19.24 Sinopharm Holding Changzhou Co., Ltd. 4.30 5.26 Sinopharm Holding Jiangxi Co., Ltd. 3.87 0.59 Sinopharm Holding Zunyi Co., Ltd. 3.02 - Sinopharm Holding Qujing Co., Ltd. 2.34 -

To next page 27,284.57 22,463.70

- 158 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Accounts receivable Continued 27,284.57 22,463.70 Heilongjiang Sinopharm Medical Herbs Co., Ltd. 1.20 - Shanxi Guoyi Drug Store Co., Ltd. 1.19 - Sinopharm Holding Shiyan Co., Ltd. 1.09 1.13 Sinopharm Holding Sanming Co., Ltd. 0.91 0.52 Sinopharm Jiankun (Beijing) Medicines Co., Ltd. 0.80 - Sinopharm Holding Anhui Co., Ltd. 0.75 - Sinopharm Holding Anyang Co., Ltd. 0.70 - Sinopharm Holding Yueyang Co., Ltd. 0.68 - Sinopharm Holding Beijing Kangchen Bio-Pharmaceutical Co., Ltd. 0.62 - Sinopharm United Engineering Corporation 0.35 - Sinopharm Holding Xinjiang Xinte Karamay Pharmaceutical Co., Ltd. 0.34 - Lanzhou Institute of Biological Products Co., Ltd. 0.32 - Shanghai Nutraceuticals (Shanghai) Co., Ltd. 0.16 - Sinopharm Holding Kaifeng Co., Ltd. 0.14 - Sinopharm Holding Honghe Co., Ltd. 0.13 - Sinopharm Holding Xinxiang Co., Ltd. 0.13 - Sinopharm Holding Wuhu Co., Ltd. 0.12 - Sinopharm Holding Puyang Co., Ltd. 0.04 - Sinopharm Holding Jinan Co., Ltd. - 6.05 Shanghai Chaohui Pharmecurical Co., Ltd. - 55.33 Sinopharm Group Wei qida Medicine Co., Ltd. - 104.81 Sinopharm Holding HongKong Co., Ltd. - 4.89 Sinopharm Holding Lishui Co., Ltd. - 0.50 Sinopharm Holding Xinjiang New Kashi Pharmaceutical Co., Ltd. - 2.78 Sinopharm Holding Shangluo Co., Ltd. - 1.28 Guangzhou Accord Pharm Chain Co., Ltd. - 14.26 Sinopharm Holding Hebei Medcine Co., Ltd. - 56.49 Total 27,294.24 22,711.74

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Sinopharm Group Medicine Logistic Other receivables Co., Ltd. 211.76 121.50 Sinopharm Group 25.00 - Guangdong South Pharmaceutical Foreign Trade Co., Ltd. 8.33 - 245.09 121.50

Balance of other receivables is caused by hosting service from the Company to the Sinopharm Group and China National Pharmaceutical Foreign Trade Corporation. According to the contract, total balance will be received in 2 months since the fisical year ends.

- 159 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Advances to suppliers Qinghai Pharmaceutical Factory Co., Ltd. 383.84 74.99 Sinopharm Chongqing Pharmaceutical and Medical Industry Design Institute 111.80 125.00 Shanghai Institute of Pharmaceutical Industry 20.25 - Sinopharm Group Guorui Medicine Co., Ltd. 12.06 - Sinopharm ChuanKong pharmaceutical Co., Ltd. 10.00 - Foshan Nanhai Medicine Co., Ltd. 2.75 - China National Medicines Co., Ltd. 2.50 - Sinopharm Holding Jiangsu Co., Ltd. 0.49 - Sinopharm Holding Fujian Co., Ltd. 0.44 - Hunan Dongting Pharmaceutical Co., Ltd. 0.31 - Chengdu Rongsheng Pharmacy Co., Ltd. 0.05 383.40 Foshan Nanhai Uptodate & Special Medicines Co., Ltd. 0.04 - Sinopharm Holding Guizhou Co., Ltd. 0.04 - Sinopharm Group Chemical Reagent Co., Ltd. 0.02 - Wuhan Institute of Biological Products Co., Ltd. - 235.50 Sinopharm Holding Meitai Medical Equipment (Shanghai) Co., Ltd. - 0.18 China National Scientific Instruments & Materials Corporation - 8.46 Sinopharm Holding Sub Marketing Center Co., Ltd. - 3.99 Sinopharm Group - 0.07 544.59 831.59

Management consider that there is no recoverability risk in related to receivables due from other related party. Therefore, no provision has been made.

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Notes payable Sinopharm Holding Sub Marketing Center Co., Ltd. 11,839.49 17,575.76 Sinopharm Group 2,611.93 3,243.41 China National Medicines Co., Ltd. 1,185.05 - Chongqing Haisiman Pharmaceutical Co., Ltd. 242.08 241.24 Jiangsu Wanbang Pharmacy Marketing Co., Ltd. 216.49 - Lanzhou Institute of Biological Products Co., Ltd. 186.00 - Chongqing Yaoyou Pharmaceutical Co., Ltd. 173.88 109.18 Wanle Medicine 73.21 87.20 Sinopharm Holding Beijing Co., Ltd. 29.11 - Shanghai Shyndec Pharmaceutical Co., Ltd. 23.01 10.77 Sinopharm Group Chemical Reagent Suzhou Co., Ltd. 10.99 17.76 Sinopharm Group Wei qida Medicine Co., Ltd. - 165.57 Sinopharm Group Rongsheng Pharmaceutical Co., Ltd. - 17.69 16,591.24 21,468.58

- 160 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Accounts payable Sinopharm Holding Sub Marketing Center Co., Ltd. 12,614.82 22,066.69 Sinopharm Group 3,811.48 5,586.91 China National Medicines Co., Ltd. 3,019.50 2,504.04 Sino-Swed Pharmaceutical Co., Ltd. 1,461.94 964.64 Winteam Pharmaceutical Group Ltd. 755.74 - Wanle Medicine 578.28 674.82 Guang dong South National Pharmaceutical Foreign Trade Co., Ltd. 436.16 467.66 Shenzhen Wanwei Medicine trading Co., Ltd. 360.23 276.87 Chongqing Yaoyou Pharmaceutical Co., Ltd. 358.13 167.12 Jiangsu Wanbang Pharmacy Marketing Co., Ltd. 268.24 309.78 Sinopharm Holding Hunan Co., Ltd. 233.13 - Lanzhou Institute of Biological Products Co., Ltd. 150.00 - Chongqing Haisiman Pharmaceutical Co., Ltd. 139.17 295.93 Sinopharm Group Medicine Logistic Co., Ltd. 139.13 30.05 China National Pharmaceutical Foreign Trade Co., Ltd. 95.05 1,173.76 Shanghai Shyndec Pharmaceutical Co., Ltd. 61.81 24.60 Sinopharm Holding Hubei Co., Ltd. 57.48 10.00 Sinopharm Group Wei qida Medicine Co., Ltd. 56.72 152.66 Jiangsu Wanbang Pharmacy Marketing Co., Ltd. 51.06 Guizhou Tongjitang Pharmaceutical Co., Ltd. 36.49 - Sinopharm Group Rongsheng Pharmaceutical Co., Ltd. 32.18 - Sinopharm Holding Fujian Co., Ltd. 31.75 260.90 Foshan Nanhai Uptodate & Special Medicines Co., Ltd. 28.89 5.59 Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. 27.67 31.77 China Otsuka Pharmaceutical Co., Ltd. 20.25 15.24 To next page 24,825.30 35,019.03

- 161 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Accounts payable Continued 24,825.30 35,019.03 Sinopharm Holding Chongqing Co., Ltd. 17.07 - Sinopharm Holding Hainan Co., Ltd. 16.90 9.05 Guilin South Pharmaceutical Co., Ltd. 13.73 11.24 Shandong Lu Ya Pharmaceutical Co., Ltd. 13.68 - Anhui Jingfang Pharmaceutical Co., Ltd. 11.78 - Sinopharm Group Chemical Reagent Co., Ltd. 11.37 0.08 Sinopharm Holding Beijing Co., Ltd. 10.57 10.55 Handan Pharmaceutical Co., Ltd. 8.51 3.40 Sinopharm Holding Dezhou Co., Ltd. 6.84 - Sinopharm Pharmaceutical Logistics Co., Ltd. Guangzhou Branch 6.30 - Foshan Dezhong Pharmaceutical Co., Ltd. 5.83 - Hunan Dongting Pharmaceutical Co., Ltd. 4.90 - Guizhou Longlife Pharmacertical Co., Ltd. 3.46 - Guangdong Medi-World Pharmacertical Co., Ltd. 3.05 - Sinopharm Group Shanghai Medicine Device Co., Ltd. 3.02 3.16 Wuhan Zhonglian Pharmaceutical Group Co., Ltd. 2.71 2.70 Sinopharm Holding Yunnan Co., Ltd. 1.91 - Wuhu Sanyi Pharmaceutical Co., Ltd. 1.79 - Changchun Changsheng Gene Pharmaceutical Co., Ltd. 1.79 1.79 Sinopharm Holding Suzhou Co., Ltd. 1.62 36.50 Sinopharm Holding Liaocheng Co., Ltd. 1.62 - Shanghai Modern Hasen (Shangqiu) Pharmacertical Co., Ltd. 1.38 0.99 Sinopharm Group Beijing Medical Equipment Co., Ltd. 0.88 0.88 Shanghai Chaohui Pharmecurical Co., Ltd. 0.75 0.75 Shenyang Hongqi Pharmaceutical Co., Ltd. 0.55 1.26 Foshan Fengliaoxing Pharmaceutical Co., Ltd. 0.39 - Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. 0.30 0.39 Shanghai Sailun Biological Technology Co., Ltd. 0.29 0.29 Sinopharm Holding Sanyi Medicine (Wuhu) Co., Ltd. 0.17 - Xiamen Xingsha Huaideju Pharmaceutical Co., Ltd. 0.11 0.11 Wuhan Zhonglian Pharmaceutical Group Co., Ltd. 0.08 0.26 Beijing Huasheng Pharmaceutical Biotechnology Development Co., Ltd. 0.06 - Yichang Humanwell Pharmaceutical Co., Ltd. 0.05 3.69 Shanghai Fosun Pharmaceutical Co., Ltd. 0.02 0.02 Sinopharm Holding Guizhou Co., Ltd. - 142.27 Foshan Nanhai Medicine Co., Ltd. - 3.88 Sinopharm Yixin Medicine Co., Ltd. - 40.24 Chengdu Rongsheng Pharmacy Co., Ltd. - 1.84 Sinopharm Group Guorui Medicine Co., Ltd. - 0.72 Sichuan Jiang You Zhong Ba Science and Technology Development Co., Ltd. - 1.65 Guilin Huagui Sinopharm Associate Co., Ltd. - 56.79 24,978.78 35,353.53

- 162 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Other payables Sinopharm Group 453.07 393.07 Sinopharm Chongqing Pharmaceutical and Medical Industry Design Institute 216.83 - CNPGC 170.00 - China National Pharmaceutical Group Shanghai Co., Ltd. 166.04 166.04 China National Corp of Traditional and Herbal Medicine 150.00 150.00 Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. 56.76 56.76 Sinopharm Holding Guoda Drug Store Guangzhou Chain Co., Ltd. 30.00 - China State Institute of Pharmaceutical Industry 15.00 - China National Scientific Instruments & Materials Corporation 4.40 10.10 Sinopharm Group Shanghai Medicine Device Co., Ltd. 4.40 3.00 Sinopharm Holding Shanxi Co., Ltd. 1.50 1.50 Sinopharm Holding Tianjin Co., Ltd. 1.00 1.00 Sinopharm Group (Tianjin) Eastern Bokang Pharmaceutical Co., Ltd. 1.00 1.00 Sinopharm Group Southwest Medicine Co., Ltd. 0.50 0.50 Sinopharm Holding Hubei Co., Ltd. 0.50 0.50 Sinopharm Holding Sub Marketing Center Co., Ltd. 0.50 0.50 Sinopharm Holding Wuxi Co., Ltd. 0.50 0.50 Sinopharm Le -Ren-Tang Medicine Co., Ltd. 0.50 0.50 Sinopharm Holding Yangzhou Co., Ltd. 0.50 - Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. 0.28 - Yang Wenjie - 203.70 Shanghai Institute of Pharmaceutical Industry - 75.00 Tan Min - 40.74 Jiang Jianmin - 40.74 Zhou Weilin - 40.74 Fang Zhongqin - 40.74 Kang Liting - 40.74 Sinopharm United Engineering Corporation - 16.00 China National Medicines Co., Ltd. - 14.49 Sinopharm Holding Taizhou Co., Ltd. - 0.50 Sinopharm Holding (Yangzhou) Chinese Western Medicine Branch Company - 0.50 1,273.28 1,298.86

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Advances from Sinopharm Guoda Drug Store Guangxi customers Chain Co., Ltd. 9.47 9.47 Sinopharm Holding Fujian Co., Ltd. 2.58 - Sinopharm Holding Zhangzhou Co., Ltd. 0.53 3.08 Sinopharm Holding Beijing Huahong Co., Ltd. 0.10 - Sinopharm Holding Changzhou Medical Logistics Center Co., Ltd. 0.10 - Sinopharm (Shanghai) E-Health Co,.Ltd. 0.08 - Sinopharm Holding Gansu Co., Ltd. 0.04 - Wanle Medicine 0.01 - Guangdong Dong Fang Uptodate & Special Medicines Co., Ltd. - 30.27 Sinopharm Le -Ren-Tang Medicine Co., Ltd. - 1.34 Sinopharm Holding Henan Co., Ltd. - 0.63 Sinopharm Holding Jiangsu Co., Ltd. - 0.29 12.91 45.08

- 163 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VII Related party relationships and significant related party transactions (continued)

(6) Accounts receivable from and payables to related parties (continued)

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Interests payable Sinopharm Group 68.44 - Group Financial Co. 52.80 47.12 121.24 47.12

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Entrusted loans Sinopharm Group 40,000.00 -

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Other non-current liabilities Sinopharm Group 3,506.18 3,506.18

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Short-term loans Group Financial Co. 32,000.00 26,200.00

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Cash at related party Group Financial Co. 27.28 12.38

(7) Commitment with related parties

Undertaking contracted for at the balance sheet date but not recognised in balance sheet are anaylsed as follows:

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000) Lease -As a lessee Shaoguan Wujiang Distrct Muyang Consulting Co., Ltd. 194.42 624.61 Foshan Nanhai Medicine Co., Ltd. 25.87 - 220.29 624.61 -As a leaser Sinopharm Guoda Drug Store Guangxi Chain Co., Ltd. 333.88 602.62 Sinopharm Guoda Drug Store (Shenzhen) Chain Co., Ltd. 25.90 - Sinopharm Holding Guoda Pharmacy Co., Ltd. 75.75 - Sinopharm Group Guangdong Medicine Device Co., Ltd. 55.41 24.66 490.94 627.28

Guarantee - Guaranteed by related party Sinopharm Group 8,346.80 29,303.94

- 164 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

VIII Contingencies

As at 31 December 2013, material contingency of the Group.Note (X(iv))

IX Commitments

(1) Capital commitments

Capital expenditures contracted for at the balance sheet date but not recognised in balance sheet are analysed as follows:

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Buildings, machinery and equipment 21,398.14 7,129.45

(2) Operating lease commitments

The future minimum lease payments due under the signed irrevocable operating leases contracts are summarised as follows:

31 December 2013 31 December 2012 (RMB‘0,000) (RMB‘0,000)

Within one year 2,272.32 1,605.68 Between 1 and 2 years 2,120.22 1,389.87 Between 2 and 3 years 2,148.15 1,287.97 Over 3 years 15,782.29 9,282.60 22,322.98 13,566.12

(3) Execution of commitments of prior years

The Group has fulfilled the commitments as of 31 December 2012 according to the relevant contracts.

X Subsequent events after the balance sheet date

(1) Major subsequent events after the balance sheet date

Item Content Influence to financial performance of the Group

Other payable Imbursement of large amount other Decline on assets & liabilities imbursement(Note V(26)(c)) payables aging over 1 year RMB14,223,282.39

(2) Profit appropriation after the balance sheet date Amount

Proposed dividends (a) 65,273,749.74

(a) In accordance with the resolution at the Board of Directors‘ meeting dated on 21 March 2014, Board of Directors proposed a dividend in the amount of RMB65,273,749.74 to the shareholders, which is not recorded as liability in the financial statements for the current year (Note V(35)).

(3) In 2013, the Company proceed an additional non-public offering to Sinopharm Group no more than 74,482,543 common shares (A Share), with the issuing price of RMB26.07, prosed by Nineteenth meeting of the Sixth board and approved by Shareholders in the third Extraordinary General Meeting. As the report date, the Company has obtained the approval from China Securities Regulatory Commission of the non-public offering and completed the non-public offering of 74,482,543 common shares (A Share) to Sinopharm group, as well as received the equity subscription money RMB1,941,759,896.01. Therefore the Company increase the Share Capital of RMB74,482,543.00 and recognised Capital surplus for the remaining balance after deducting underwriting fees and other transaction costs.

(4) The Group is involved in a outstanding legal issue(Note five (28)(a)).

- 165 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XI Financial instrument and risk

The Group's activities expose it to a variety of financial risks: market risk (primarily foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

(1) Market risk

(a) Foreign exchange risk

The Group‘s major operational activities are carried out in Mainland China and a majority of the transactions are denominated in RMB. The Group is exposed to foreign exchange risk arising from the recognised assets and liabilities, and future transactions denominated in foreign currencies, primarily with respect to US dollars. The Group‘s finance department at its headquarters is responsible for monitoring the amount of assets and liabilities, and transactions denominated in foreign currencies. The Group may consider entering into forward exchange contracts or currency swap contracts to mitigate the foreign exchange risk. During 2013 and 2012, the Group did not enter into any forward exchange contracts or currency swap contracts.

The following table presents the structure analysis of the Group‘s financial assets and financial liabilities by currencies as at 31 December 2013 and 31 December 2012.

31 December 2013 USD Others Total

Financial assets denominated in foreign currency - Cash at bank and on hand 134.32 - 134.32 Accounts Receivables 15,235,271.67 487,635.45 15,722,907.12 15,235,405.99 487,635.45 15,723,041.44

Financial assets denominated in foreign currency - Accounts Payables 6,252,017.33 - 6,252,017.33

31 December 2012 USD Others Total

Financial assets denominated in foreign currency - Cash at bank and on hand 80.13 - 80.13 Accounts Receivables 10,353,832.05 3,794,670.91 14,148,502.96 10,353,912.18 3,794,670.91 14,148,583.09

Financial assets denominated in foreign currency - Accounts Payables 10,526,326.85 - 10,526,326.85

As at 31 December 2013, if the currency had weakened/strengthened by 5 % against the USD while all other variables had been held constant, the Group‘s net profit for the year would have been approximately RMB336,877.07 (2012: RMB6,465.55) lower/higher for various financial assets and liabilities denominated in USD.

- 166 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XI Financial instrument and risk (continued)

(1) Market risk (continued)

(b) Interest rate risk

The Group's interest rate risk arises from long-term borrowings from bank. Financial liabilities issued at floating rates expose the Group to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the Group to fair value interest rate risk. The Group determines the relative proportions of its fixed rate and floating rate contracts depending on the prevailing market conditions. As at 31 December 2013, There is no long-term interest bearing borrowings (31 December 2012: RMB82,205,562.71).

Increases in interest rates will increase the cost of new borrowing and the interest expenses with respect to the Group‘s outstanding floating rate borrowings, and therefore could have a material adverse effect on the Group‘s financial position. The Group‘s finance department at its headquarters continuously monitors the interest rate position of the Group and makes decisions with reference to the latest market conditions. The Group may enter into interest rate swap agreements to mitigate its exposure to interest rate risk. During 2013 and 2012, the Group did not enter into any interest rate swap agreements.

For the year ended 31 December 2013, if interest rates on the floating rate borrowings had been 5% higher/lower while all other variables had been held constant, there is no impact on the Group‘s net profit (2012:approximately decrease/increase RMB2,182,145.47).

(2) Credit risk

Credit risk is managed on a Group basis. Credit risk mainly arises from cash at bank and on hand, accounts receivable, other receivables, notes receivable etc.

The Group expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.

In addition, the Group has policies to limit the credit exposure on accounts receivable, other receivables and notes receivable. The Group assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The Group will confirm with its client for the accouts receivable semi-annually, and assess the recoverability of each account receivable, by using individual evaluation and similar credit rist group method. The credit history of the customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Group will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group is limited to a controllable extent.

(3) Liquidity risk

Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the Group‘s finance department in its headquarters. The Group‘s finance department at its headquarters monitors rolling forecasts of the Group's short-term and long-term liquidity requirements to ensure it has sufficient cash and securities that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institution so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.

- 167 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XI Financial instrument and risk (continued)

(3) Liquidity risk (continued)

The financial assets and liabilities of the Group at the balance sheet date are analysed by their maturity date below at their undiscounted contractual cash flows :

31 December 2013 Within 1year 1 to 2 years 2 to 4 years Total Financial assets - Cash at bank and on hand 1,113,562,211.65 - - 1,113,562,211.65 Notes receivable 739,061,141.72 - - 739,061,141.72 Accounts receivable 5,675,658,506.78 - - 5,675,658,506.78 Other receivables 29,620,899.71 - - 29,620,899.71 7,557,902,759.86 - - 7,557,902,759.86 Financial liabilities - Short-term loans 2,788,010,131.81 - - 2,788,010,131.81 Notes payable 1,495,401,188.09 - - 1,495,401,188.09 Accounts payable 3,436,936,497.16 - - 3,436,936,497.16 Interests payable 13,065,850.14 - - 13,065,850.14 Other payables 496,102,247.39 - - 496,102,247.39 8,229,515,914.59 - - 8,229,515,914.59

31 December 2012 Within 1year 1 to 2 years 2 to 4 years Total Financial assets - Cash at bank and on hand 953,992,070.61 - - 953,992,070.61 Notes receivable 650,860,240.37 - - 650,860,240.37 Accounts receivable 4,393,325,300.66 - - 4,393,325,300.66 Other receivables 32,985,425.60 - - 32,985,425.60 6,031,163,037.24 - - 6,031,163,037.24 Financial liabilities - Short-term loans 1,706,727,868.97 - - 1,706,727,868.97 Notes payable 1,105,275,538.24 - - 1,105,275,538.24 Accounts payable 3,197,354,275.46 - - 3,197,354,275.46 Interests payable 13,035,821.07 - - 13,035,821.07 Other payables 413,831,307.40 - - 413,831,307.40 Current portion of Long-term loans 64,949,772.49 - - 64,949,772.49 Other current liabilities 416,120,000.00 - - 416,120,000.00 47,653,581.8 Long-term loans 5,378,503.15 41,691,425.23 8 94,723,510.26 47,653,581.8 6,922,673,086.78 41,691,425.23 8 7,012,018,093.89

(4) Financial instruments not measured at fair value

Financial assets and liabilities not measured at fair value mainly represent receivables, short-term loans, payables and long-term loans. The carrying amount of financial assets and liabilities not measured at fair value is a reasonable approximation of their fair value.

- 168 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company

(1) Accounts receivable

31 December 2013 31 December 2012

Accounts receivable 428,545,652.48 365,858,022.77 Less: provision for bad debts (1,169,085.93) (1,169,085.93) 427,376,566.55 364,688,936.84

(a) The ageing of accounts receivable is analysed below:

31 December 2013 31 December 2012

Within 1 year 427,376,566.55 364,688,936.84 Over 3 years 1,169,085.93 1,169,085.93 428,545,652.48 365,858,022.77

(b) The accounts receivable and related provision for bad debts by category are analysed below:

31 December 2013 31 December 2012 Carrying amount Bad debt provisions Carrying amount Bad debt provisions % of total % of total amount balance amount rate amount balance amount rate Receivable accounts within similar credit risk group 427,376,566.55 99.73% - - 364,688,936.84 99.68% - - Individually not significant but individually evaluated for impairment 1,169,085.93 0.27% (1,169,085.93) 100.00% 1,169,085.93 0.32% (1,169,085.93) 100.00% 428,545,652.48 100.00% (1,169,085.93) 0.27% 365,858,022.77 100.00% (1,169,085.93) 0.32%

(c) As at 31 December 2013, accounts receivable individually not significant but individually evaluated for impairment are analysed below:

Bad debt % of Reason Per book provisions provision

Disputed receivables with Guangdong Liyuan Pharmaceutical uncertainty in Co., Ltd. 1,169,085.93 (1,169,085.93) 100.00% recoverability

(d) As at 31 December 2013, there is no accounts receivable due from shareholders who holds more than 5% (including 5%) shares of the Company (31 December 2012: Nil).

- 169 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(1) Accounts receivable (continued)

(e) As at 31 December 2012, the top five accounts receivable by customer are analysed as below:

% of the total Relationship accounts with the Company Amount Ageing receivable

Shenzhen People‘s Hospital The third party 35,023,378.90 Within 1 year 8.17% Peking University Shenzhen Hospital The third party 26,175,433.22 Within 1 year 6.11% Shenzhen Second People‘s Hospital The third party 20,163,183.22 Within 1 year 4.71% Shenzhen Nanshan Center People‘s Hospital The third party 19,239,421.34 Within 1 year 4.49% Shenzhen Baoan People‘s Hospital The third party 16,344,753.45 Within 1 year 3.81% 116,946,170.13 27.29%

(f) Accounts receivable due from related party

As at 31 December 2013, there are accounts receivable of RMB27,194,712.47due from related party (31 December 2012: RMB23,963,914.86), which is 6.35% of the total accounts receivable (31 December 2012: 6.55%), without any bad debt provided (31 December 2012: Nil).

(g) In 2013, accounts receivable of RMB261,331,421.64are derecognised given that irrevocable factoring contracts agreed with financial institute (2012: RMB189,149,295.62).

(2) Other receivables

31 December 2013 31 December 2012

Amounts due from subsidiaries(Note h) 1,156,486,010.97 967,467,455.73 Receivable from equity transaction 8,980,000.00 8,980,000.00 Borrowings due from employees 979,997.96 144,348.64 Others 4,222,309.36 5,476,351.55 1,170,668,318.29 982,068,155.92 Less: provision for bad debts (10,140,380.00) (10,208,164.60) 1,160,527,938.29 971,859,991.32

(a) The ageing of other receivables is analysed as follows:

31 December 2013 31 December 2012

Within 1 year 1,160,480,058.29 971,856,835.49 1 to 2 years 50,400.00 69,953.95 2 to 3 years - 1,161,366.48 Over 3 years 10,137,860.00 8,980,000.00 1,170,668,318.29 982,068,155.92

- 170 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(2) Other receivables (continued)

(b) Other receivables and related provision for bad debts by category are analysed below:

31 December 2013 31 December 2012 Carrying amount Bad debt provision Carrying amount Bad debt provision % of % of total total amount amount amount rate amount amount amount rate

Individually significant are subject to separate impairment assessment 8,980,000.00 0.77% (8,980,000.00) 100.00% 8,980,000.00 0.91% (8,980,000.00) 100.00% Receivable accounts within similar credit risk group 1,160,530,458.29 99.13% (2,520.00) 0.00% 971,860,341.97 98.96% (350.65) 0.00% Individually not significant but individually evaluated for impairment 1,157,860.00 0.10% (1,157,860.00) 100.00% 1,227,813.95 0.13% (1,227,813.95) 100.00% 1,170,668,318.29 100.00% (10,140,380.00) 0.87% 982,068,155.92 100.00% (10,208,164.60) 1.04%

(c) As at 31 December 2013, impairment provision for other receivables individually significant is analysed as below.

Bad debt Assessment for Amount provision Rate impairment

Shenzhen Yinghai Technology Uncertainty in Investment Co., Ltd. 8,980,000.00 (8,980,000.00) 100.00% recoverability

(d) Provisions for impairment of the receivables which have a similar risk group are analysed below:

31 December 2013 31 December 2012 Carrying amount Bad debt provision Carrying amount Bad debt provision % of total % of total amount amount amount rate amount amount amount rate

Within 1 year 1,160,480,058.29 100.00% - - 971,856,835.49 100.00% - - 1 to 2 years 50,400.00 0.00% (2,520.00) 5.00% - - - - 2 to 3 years - - - - 3,506.48 0.00% (350.65) 10.00% 1,160,530,458.29 100.00% (2,520.00) 0.00% 971,860,341.97 100.00% (350.65) 0.00%

(e) As at 31 December 2013, other receivables individually not significant but individually evaluated for impairment are analysed below: Assessment for Amount Bad debt provision Rate impairment

Shenzhen Health Food I&E Co., Uncertainty in Ltd. 1,157,860.00 (1,157,860.00) 100.00% recoverability

(f) As at 31 December 2013, there is RMB250,000.00 due from shareholders who holds more than 5% (including 5%) shares of the Company (31 December 2012: Nil).

- 171 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(2) Other receivables (continued)

(g) As at 31 December 2013, the top five other receivables by customer are analysed below:

Relationship Amount Ageing % of the total with the other receivable Company

Sinopharm Guangxi Subsidiary 280,200,000.00 Within 1 year 23.94% Sinopharm Yuexing Subsidiary 164,066,000.00 Within 1 year 14.01% Sinopharm Zhanjiang Subsidiary 114,000,000.00 Within 1 year 9.74% Guangxi Logistics Subsidiary 84,300,000.00 Within 1 year 7.20% Suzhou Zhijun Subsidiary 84,049,500.00 Within 1 year 7.18% 726,615,500.00 62.07%

(h) Other receivables due from related parties are analysed as below:

As at 31 December 2013, there are other receivables of RMB1,156,486,010.97 due from related party (31 December 2012: RMB967,467,455.73), which is 98.79% of the total other receivables (31 December 2012: 98.51%), without any bad debt provided (31 December 2012: Nil).

(3) Long-term equity investments 31 December 2013 31 December 2012

Investments in subsidiaries (a) 1,447,999,494.38 1,355,718,721.07 Investments in associates (b) 135,341,010.52 121,019,845.50 1,583,340,504.90 1,476,738,566.57 Less: provision for impairment of long-term equity investments (c) - (7,689,226.69) 1,583,340,504.90 1,469,049,339.88

The long-term equity investments of the Company are not subject to restriction on conversion into cash.

- 172 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(3) Long-term equity investments (continued)

(a) Subsidiaries

Increases/(decreases) Equity interest Voting rights held Accounting method Original investment cost 31 December 2012 in investment cost 31 December 2013 held (%) (%)

Zhijun Pharm Cost method 73,903,284.87 204,903,284.87 - 204,903,284.87 100 100 Sinopharm Jianmin Cost method 45,054,911.04 45,054,911.04 - 45,054,911.04 100 100 Sinopharm Materials Cost method 5,400,000.00 6,450,875.93 - 6,450,875.93 100 100 Shenzhen Logistics Cost method 900,000.00 1,019,062.68 - 1,019,062.68 100 100 Sinopharm Guangzhou Cost method 58,283,114.68 435,440,323.63 - 435,440,323.63 100 100 Zhijun Trade Cost method 3,006,866.42 3,006,866.42 - 3,006,866.42 100 100 Sinopharm Hengxing Cost method 8,421,544.08 35,763,288.00 - 35,763,288.00 100 100 Training Center(i) Cost method 30,000.00 30,000.00 (30,000.00) - - - Sinopharm Liuzhou Cost method 21,407,965.79 21,407,965.79 - 21,407,965.79 51 51 Sinopharm Dongguan Cost method 2,742,000.00 9,942,000.00 - 9,942,000.00 100 100 Huixin Investment Cost method 109,416,937.72 64,416,937.72 - 64,416,937.72 100 100 Guangdong Logistic Cost method 1,269,502.30 5,596,006.21 - 5,596,006.21 100 100 Sinopharm Yuexing Cost method 16,459,326.27 43,459,326.27 - 43,459,326.27 100 100 Sinopharm Foshan Cost method 6,995,065.51 14,995,065.51 - 14,995,065.51 100 100 Suzhou Zhijun Cost method 134,250,000.00 165,900,000.00 100,000,000.00 265,900,000.00 100 100 Sinopharm Guangxi Cost method 33,048,985.28 104,048,985.28 - 104,048,985.28 100 100 Sinopharm Zhanjiang Cost method 1,369,864.65 15,769,864.65 - 15,769,864.65 100 100 Sinopharm Yanfeng Cost method 38,207,800.00 38,207,800.00 - 38,207,800.00 51 51 Sinopharm Meizhou Cost method 4,481,900.00 4,481,900.00 - 4,481,900.00 100 100 Shenzhen Medicine Cost method 37,850,830.38 37,850,830.38 - 37,850,830.38 100 100 Sinopharm Huizhou Cost method 20,939,177.19 5,644,200.00 - 5,644,200.00 100 100 Shenzhen Trade(i) Cost method 7,689,226.69 7,689,226.69 (7,689,226.69) - - - Sinopharm Zhaoqing Cost method 5,060,000.00 5,060,000.00 - 5,060,000.00 100 100 Sinopharm Jiangmen Cost method 56,000,000.00 56,000,000.00 - 56,000,000.00 100 100 Sinopharm Zhongshan Cost method 10,000,000.00 10,000,000.00 - 10,000,000.00 100 100 Sinopharm Shaoguan Cost method 13,580,000.00 13,580,000.00 - 13,580,000.00 70 70 1,355,718,721.07 92,280,773.31 1,447,999,494.38

(i) The Training center and Shenzhen Trade have been write-off in 2013.

- 173 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(3) Long-term equity investments (continued)

(b) Associates

Movement Explanation for the inconsistence Accounting Initial investment Share of Dividend Equity interest Voting rights between equity interest held and method cost 31 December 2012 profit or loss declared 31 December 2013 held (%) held (%) voting rights held

Board of the directors is the highest decision making organization, which is formed by Wanle Equity 3 shareholder of Wanle Medical Medical method 4,457,400.00 121,019,845.50 42,473,165.02 (28,152,000.00) 135,341,010.52 35.19 33.33 evenly

- 174 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(3) Long-term equity investments (continued)

(c) Provision for impairment of long-term equity investments

31 December Increase in Write-off in 31 December 2012 Current year Current year 2013 Subsidiary Shenzhen Trade 7,689,226.69 - (7,689,226.69) -

(4) Sales and cost of sales

2013 2012

Revenue of main operations 2,508,735,021.86 2,139,498,652.77 Other operating income 9,651,550.95 8,057,779.29 2,518,386,572.81 2,147,556,432.06

2013 2012

Cost of main operations (2,405,330,439.13) (2,040,826,575.94) Other operating expenses (4,501,782.42) (3,808,638.44) (2,409,832,221.55) (2,044,635,214.38)

(a) Revenue and cost of main operations

Analysed by industry:

2013 2012 Revenue of main Cost of main Revenue of main Cost of main operations operations operations operations

Pharmaceutical distribution 2,508,735,021.86 (2,405,330,439.13) 2,139,498,652.77 (2,040,826,575.94)

(b) Other operating income and expenses

2013 2012 Other operating Other operating Other operating Other operating income expenses income expenses

Rental income 5,597,637.54 (1,433,573.12) 4,857,776.00 (1,269,472.01) Rendering of services 4,053,913.41 (3,068,209.30) 3,200,003.29 (2,539,166.43) 9,651,550.95 (4,501,782.42) 8,057,779.29 (3,808,638.44)

- 175 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(4) Sales and cost of sales (continued)

(c) Top five customers are analysed as follows:

The sales to the top five customers of the Company totaling to RMB842,563,123.98 (2012: RMB755,434,746.02), which accounted for 33.45% (2012: 35.18%) of the total revenue from main operations. Details are set out below:

% of total revenue from Sales main operations

Sinopharm Jianmin 348,363,870.84 13.83% Shenzhen People‘s Hospital 157,811,311.45 6.27% Shenzhen Second People‘s Hospital 128,991,735.88 5.12% Peking University Shenzhen Hospital 122,447,642.57 4.86% Shenzhen Nanshan Center People‘s Hospital 84,948,563.24 3.37% 842,563,123.98 33.45%

(5) Investment income

2013 2012

Cash dividends declared by subsidiaries (a) 389,837,321.36 318,833,223.58 Share of profit in an associated company (b) 42,473,165.02 38,740,679.55 Investment income from disposal of long-term equity investment 6,180.28 436,680.29 432,316,666.66 358,010,583.42

There is no significant restriction on the investment income remittance to the Company.

(a) Cash dividends declared by subsidiaries

Investment income from the top five investees are analysed as below:

2013 2012 Reason of Fluctuation

Zhijun Pharm 208,233,461.30 170,527,785.07 Profit increased comparing 2012 Sinopharm Guangzhou 111,653,923.40 99,439,823.03 Profit increased comparing 2012 Sinopharm Guangxi 30,056,575.76 30,121,638.83 Profit increased comparing 2012 Sinopharm Yuexing 8,334,758.40 4,704,136.15 Profit increased comparing 2012 Sinopharm Yanfeng 5,169,375.46 3,149,604.76 Profit increased comparing 2012 363,448,094.32 307,942,987.84

(b) Share of profit in an associated company

2013 2012 Reason of Fluctuation

Wanle Medical 42,473,165.02 38,740,679.55 Profit increased comparing 2012

- 176 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

XII Notes to the main items of financial statement of the Company (continued)

(6) Notes to cash flow statement

(a) Reconciliation of net profit to cash flows from operating activities

2013 2012

Net profit 454,952,502.47 358,796,389.86 Add: Provision for assets impairment reversal 438,806.80 46,806.15 Depreciation of fixed assets 7,291,733.12 7,473,528.98 Amortisation of intangible assets 1,455,525.48 1,773,435.37 Amortisation of long-term prepaid expenses 1,106,590.56 1,136,868.23 (Losses) /gains on disposal of fixed assets, intangible assets and other long-term assets (725,088.68) 32,563.65 Financial expenses 6,350,262.58 18,551,632.37 Investment income (432,316,666.66) (358,010,583.42) (Increase) /decrease in deferred income tax assets (11,718.22) 2,405,807.85 Increase in inventories (42,050,411.34) (5,441,038.23) Increase in operating receivables (93,411,307.86) (63,613,193.02) Increase in operating payables 82,911,296.89 15,034,919.00 Net cash flows from operating activities (14,008,474.86) (21,812,863.21)

(b) Net increase in cash 2013 2012

Cash at end of year 218,342,947.03 160,633,355.13 Less: cash at beginning of year (160,633,355.13) (164,840,499.86) Net increase /(decrease) in cash and cash equivalents 57,709,591.90 (4,207,144.73)

(c) Cash 2013 2012

Cash at bank and on hand 218,342,947.03 160,633,355.13 Less: restricted other cash balance - - Cash at end of year 218,342,947.03 160,633,355.13

- 177 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Supplemental notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

I Non-routine items

2013 2012

Gains / (Losses) on disposal of non-current assets 3,029,150.67 (8,347,047.73) Government grants 23,465,438.42 57,227,812.33 Net profit gained for the period from 1 January 2012 to the date of business combination under common control - (240,695.14) Receivables impairment reversal by individual assessment 1,672,973.37 1,815,099.41 Non-operating expenses recognised due to provision of outstanding legal issue (22,040,000.00) - Other non-operating (expenses)/income, net 12,163,911.72 (17,026,479.08) 18,291,474.18 33,428,689.79 Tax impact of above non-routine items (3,768,134.66) (5,790,568.53) Share of minority interests of above non-routine items after tax (113,934.95) (84,004.73) 14,409,404.57 27,554,116.53

Basis of preparation for non-routine items

According to the ―Information Disclosures Requirement Interpretation for Listed Companies No.1 - non-routine gain and loss‖, non-routine gain and loss represent those gain or loss that are not related to the daily operation of the Group or even if being related to the daily operation, separate disclosure of these items will help a better understanding of results and profitability of the Group‘s operation by considering their nature and frequency.

II Return on equity and earnings per share

Weighted average return on Earnings per share equity Basic earnings per share Diluted earnings per share (%) 2013 2012 2013 2012 2013 2012 Consolidated net profit attributable to the shareholders of the Company 26.00% 30.51% 1.81 1.65 1.81 1.65 Consolidated net profit attributable to the shareholders of the Company, excluding non-routine items 25.37% 29.00% 1.76 1.55 1.76 1.55

- 178 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Supplemental notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

III Notes for significant fluctuation of major accounts in financial statements

Fluctuation with 30% or above, and balance accounting for 5% or above of total assets or transaction accounting for 10% or above of profit before tax are analysed as below:

(1) Consolidated Balance Sheet

31 December Notes 2013 31 December 2012 Fluctuation % Consolidated Consolidated

Cash at bank and on hand 1.1 1,113,562,211.65 953,992,070.61 159,570,141.04 16.73% Notes receivable 1.2 739,061,141.72 650,860,240.37 88,200,901.35 13.55% Accounts receivable 1.3 5,675,658,506.78 4,393,325,300.66 1,282,333,206.12 29.19% Inventories 1.4 1,831,267,290.00 1,734,679,063.78 96,588,226.22 5.57% Other current assets 1.5 12,203,752.77 8,080,607.66 4,123,145.11 51.03% Fixed assets 1.6 766,741,590.63 690,487,633.12 76,253,957.51 11.04% Long term prepaid expenses 1.7 35,985,621.47 19,742,990.45 16,242,631.02 82.27% Deferred tax liabilities 1.8 68,895,938.25 49,509,529.97 19,386,408.28 39.16% Short-term borrowings 1.9 2,744,941,589.11 1,687,810,294.37 1,057,131,294.74 62.63% Notes payable 1.10 1,495,401,188.09 1,105,275,538.24 390,125,649.85 35.30% Tax payable 1.11 76,045,260.04 51,390,674.43 24,654,585.61 47.97% Current portion of non-current liabilities 1.12 7,800,000.00 71,127,275.00 (63,327,275.00) (89.03%) Other current assets 1.13 22,040,000.00 399,014,838.05 (376,974,838.05) (94.47%) Surplus reserve 1.14 144,855,634.40 99,360,384.15 45,495,250.25 45.79% Undistributed profits 1.15 1,806,002,285.06 1,382,882,906.24 423,119,378.82 30.60%

Increase was due to the increase of balance of cash inflow from operating activities minus cash outflow from investing 1.1 and financing activities.

1.2 Increase was mainly due to increase of sales.

1.3 Increase was mainly due to increase of sales.

1.4 Increase was mainly due to increase of purchase.

1.5 Increase was mainly due to the increased of excess VAT paid.

1.6 Increase was mainly because of completion of partial construction in process.

1.7 Increase was mainly because of transfer from construction in process to Long-term prepaid expenses.

Increase was mainly because of the estimated liabilities resulted from Chebei Project‘s pending litigation and the 1.8 deferred incomes from government grants received in this year.

1.9 Increase was mainly because the increase of note receivable ,credit borrowings and guarantee borrowings.

1.10 Increase was mainly due to the increase of purchase.

1.11 Increase was mainly due to the increase of sale and purchase and the increase of profit.

1.12 Decrease was mainly due to the payment of current portion of non-current liabilities.

1.13 The litigation compensation was provisioned due to the principle of prudence.

1.14 Increase in surplus reserve resulted from the provision of legal surplus reserve.

1.15 Increase was mainly due to the profit increase.

- 179 - CHINA NATIONAL ACCORD MEDICINES CO., LTD. Supplemental notes to financial statements For the year ended 31 December 2013 (All amounts in Renminbi (RMB) unless otherwise stated)

III Notes for significant fluctuation of major accounts in financial statements (Continued)

(2) Consolidated Income Statement

Notes 2013 2012 Fluctuation % Consolidated Consolidated

Sales 2.1 21,199,466,399.21 18,011,759,178.26 3,187,707,220.95 17.70% Cost of sales 2.2 19,436,081,887.14 16,408,719,921.19 3,027,361,965.95 18.45% Selling and distribution expenses 2.3 486,390,181.25 448,595,419.15 37,794,762.10 8.43% General and administrative expenses 2.4 422,405,979.87 392,232,990.09 30,172,989.78 7.69% Financial expenses - net 2.5 164,405,341.20 162,118,150.33 2,287,190.87 1.41% Assets impairment 2.6 41,996,906.63 21,194,171.49 20,802,735.14 98.15% Income tax expenses 2.7 124,882,778.24 119,634,955.50 5,247,822.74 4.39% Profit and loss of minority shareholders 2.8 13,731,200.43 7,889,344.40 5,841,856.03 74.05%

2.1 Increase in sales was mainly due to the increase in sales volume.

2.2 Increase in cost of sales was mainly due to the increase in sales volume.

Increase in selling and distribution expenses was mainly due to the increase in logistic expenses and marketing expenses 2.3 which increased in line with sales and the staff expenses increased due to the company purchased.

Increase in general and administrative expenses was mainly due to the increase in tax and R&D expenses and the staff 2.4 expenses increased due to the company purchased.

2.5 Increase in financial expenses was mainly because the borrowing increased in line with sales and the cost increased.

Increased due to the regulations of restricting the use of antibiotics in the pharmaceuticals industry and local bidding 2.6 policies.

2.7 Increase in income tax expenses was mainly the profit increased.

2.8 Increase mainly because of the profit increase from the subsidiaries.

- 180 - China National Accord Medicines Corporation Ltd. Annual Report 2013(Full-text)

Section XI. Documents available for Reference

1. Accounting Statement carrying the signatures and seals of the legal representative, financial chief and person in charge of accounting;

2. Original of Auditors‘ Report carrying the seals of Certified Public Accountants, and signatures and seals of the CPAs;

3. Originals of all the documents and notifications of the Company ever disclosed in the report period in Securities Times, China Securities Journal and Hong Kong Commercial Daily designated by CSRC;

4. Original of the Annual Report carrying the signature of the Chairman of the Board.

5. The Place Where the document placed: Office of Secretariat of the Board of Directors, Accord Pharm Bldg., No. 15, Ba Gua Si Road, Futian District, Shenzhen.

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