THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RELATIONSHIP WITH CHINA RESOURCES HOLDINGS OVERVIEW App1A-27A As of the Latest Practicable Date, China Resources Holdings, our controlling shareholder, held App1A-28(2) through CRH (Pharmaceutical) 72% of our share capital. Immediately following completion of the [REDACTED], China Resources Holdings will own approximately [REDACTED]% of the share capital of our Company (assuming the [REDACTED] is not exercised), or approximately [REDACTED]% of the share capital of our Company (assuming the [REDACTED] is exercised in full). China Resources Holdings will remain as our controlling shareholder after the Listing. OUR RELATIONSHIP WITH CHINA RESOURCES HOLDINGS Our Principal Business Our main business includes pharmaceutical manufacturing, distribution and retail. Principal Business of China Resources Holdings China Resources Holdings is a major PRC state-owned conglomerate based in Hong Kong. Its core businesses include consumer products (including retail, beer, food and beverages), power, real estate, cement, gas, pharmaceuticals and finance. China Resources Holdings is indirectly wholly owned by China Resources National Corporation, which is a state-owned enterprise. China Resources Holdings is the only platform for China Resources National Corporation to carry out its pharmaceutical related business. Five of the members of China Resources Holdings, namely China Resources Cement Holdings Limited (stock code: 1313), China Resources Beer (Holdings) Company Limited (stock code: 0291), China Resources Power Holdings Company Limited (stock code: 0836), China Resources Land Limited (stock code: 1109) and China Resources Gas Group Limited (stock code: 1193) are listed on the Hong Kong Stock Exchange. The table below sets forth the business scope of China Resources Holdings’ listed subsidiaries (“China Resources Holdings Listed Subsidiaries”) and its shareholding interest in each of these companies: Shareholding Interest of China Resources Holdings Name Business Scope as of the Latest Practicable Date China Resources Cement Holdings the production, sale and distribution of 73.45% Limited .................. clinker, cement and concrete products China Resources Beer (Holdings) the manufacturing, sale and distribution 51.91% Company Limited ............ of beer products China Resources Power Holdings investment, development, operation and 62.99% Company Limited ............ management of power plants China Resources Land Limited ...... property investment, development and 61.27% management — 298 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RELATIONSHIP WITH CHINA RESOURCES HOLDINGS Shareholding Interest of China Resources Holdings Name Business Scope as of the Latest Practicable Date China Resources Gas Group Limited . distribution of natural gas and 63.95% petroleum gas, operation of compressed natural gas filling stations and distribution of bottled liquefied petroleum gas As of the Latest Practicable Date, China Resources Holdings held, through its subsidiaries, interest in J1.com. China Resources Holdings engages in pharmaceutical retail business through J1.com as disclosed below (the “Retained Business”). J1.com As of the Latest Practicable Date, China Resources Holdings controlled 80% interest in J1.com. J1.com is an E-commerce platform engaging in pharmaceutical products sales through both retail stores and an online platform. As of June 30, 2016, J1.com had total assets of approximately RMB154.5 million. The total revenue of J1.com for the year ended December 31, 2015 and the six months ended June 30, 2016 were approximately RMB353.3 million and RMB149 million, respectively, and it recorded losses of approximately RMB146.1 million and RMB64.7 million, respectively, for the same periods. We confirm that there is no overlap between the board and senior management of J1.com and our Company. We believe that there is no substantive competition between the business of J1.com and our pharmaceutical distribution/retail business for the following reasons: • Different client bases and nature of the industry. Our business model and that of J1.com are different. Most of our clients in our pharmaceutical distribution business are corporate clients such as hospitals, other medical institutions and other distributors (see “Business — Pharmaceutical Distribution” for details); on the other hand, J1.com mainly focuses on individual customers with online purchase habits. Given such differences, there is no direct competition between J1.com and our pharmaceutical distribution business. For our pharmaceutical retail business, while there are some general types of products which both J1.com and we sell to end-customers, such as prescription medicines, OTC medicines and medical devices, taking into account the wide range of pharmaceutical products covered by our pharmaceutical retail business and, in particular, the fact that the products sold by our pharmaceutical retail business are often common products which are also sold by other participants in the sizable pharmaceutical retail market, it is considered that any potential competition between J1.com and our pharmaceutical retail business is of no difference to any competition between an Independent Third Party and us in the market. — 299 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RELATIONSHIP WITH CHINA RESOURCES HOLDINGS • Different sales channels. The pharmaceutical products of our Group are mainly distributed through wholesale distributors and offline retail stores, whilst the sales model of J1.com is “B-to-C Model,” namely sale of the pharmaceuticals directly through J1.com, which serves as a platform, to its customers. J1.com is not approved by relevant authorities to sell pharmaceuticals to distributors. • Different models and locations. The main strategy of J1.com is to develop online retail sales of pharmaceuticals. Revenue generated from J1.com’s online sales business accounted for approximately 82%, 91%, 90% and 87% of its total revenue for the three years ended December 31, 2015 and the six months ended June 30, 2016, respectively. The revenue generated from J1.com products sold through retail stores only represented an insignificant portion of its total revenue. In addition, the retail stores of J1.com are located mainly in Shanghai, whereas our Group has a broad presence across the PRC. For reasons stated above, we believe that there is no substantive competition between the online business of J1.com and our pharmaceutical distribution/retail business. No Competition with China Resources Holdings under Rule 8.10 of the Listing Rules Except as disclosed above, China Resources Holdings does not hold 10% or more equity interest in any other company which is principally engaged in the pharmaceutical manufacturing and sales business. On the basis of the above, our Directors are of the view that China Resources Holdings, a controlling shareholder of our Company, is not interested in a business, apart from our Company’s business and as disclosed in this document, which competes or is likely to compete, either directly or indirectly, with our Company’s business under Rule 8.10 of the Listing Rules as of the Latest Practicable Date. COMPETING INTEREST OF DIRECTORS Our Directors have confirmed that they are not interested in any business, which competes or is likely to compete, either directly or indirectly, with our Company’s business under Rule 8.10 of the Listing Rules as of the Latest Practicable Date. NON-COMPETITION UNDERTAKING Non-competition Agreement with the Controlling Shareholder We have entered into the Non-competition Agreement with China Resources Holdings on [●], pursuant to which China Resources Holdings agreed that, except for the Retained Business, it will not engage in, participate in or assist others to engage or participate in any business that competes or is likely to compete, directly or indirectly, with our business within the PRC (the “Competing Business”), and will procure its subsidiaries (as defined in the Non-competition Agreement, excluding our Group and our subsidiaries, as well as China Resources Holdings Listed Subsidiaries and their subsidiaries) not to engage in any business that competes or is likely to compete, directly or indirectly, with the Competing Businesses. — 300 — THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RELATIONSHIP WITH CHINA RESOURCES HOLDINGS The controlling shareholder has also undertaken in the Non-competition Agreement that, during the term of such agreement, it will not, and will procure its subsidiaries (excluding our Group and our subsidiaries, as well as the China Resources Holdings Listed Subsidiaries and their subsidiaries) not to: • directly or indirectly engage in or participate in, or assist others to engage in or participate in, any Competing Businesses in any form (including, but not limited to, investment, mergers and acquisitions, joint operations, joint venture, cooperation agreement, partnership, contractor agreement, lease or