PW Medtech Group Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in PW Medtech Group Limited (普華和順集團公司), you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia). This circular and the information herein do not constitute or form a part of any offer or solicitation to purchase, subscribe or sell securities in the United States.

普華和順集團公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1358)

(1) VERY SUBSTANTIAL DISPOSAL DISPOSAL OF CBPO SHARES AND

PROPOSED PRIVATIZATION OF CBPO; (2) PROPOSED SPECIAL DIVIDEND; AND (3) NOTICE OF THE EGM

Capitalized terms used in this cover shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 8 to 25 of this circular.

A notice convening the EGM to be held at Building 1, No. 23 Panlong West Road, Pinggu District, Beijing, the PRC on Friday, December 4, 2020 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Such form of proxy is also published on the websites of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the Company (www.pwmedtech.com).

In order to safeguard the health and safety of all Shareholders, as well as to prevent and control the spread of COVID-19, should Shareholders choose to attend the EGM in person, the Company would like to remind all Shareholders to strictly comply with the requirements of the PRC and the Company in relation to the prevention and control measures of COVID-19.

Whether or not you are able to attend the EGM, please complete and sign the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time scheduled for the holding of the EGM or any adjournment thereof (i.e. not later than 10:00 a.m. (Hong Kong time) on Wednesday, December 2, 2020). Completion and return of the form of proxy will not preclude the Shareholders from attending and voting in person at the EGM or any adjourned meeting thereof if they so wish.

November 16, 2020

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	I-1
APPENDIX II — FINANCIAL INFORMATION OF CBPO . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III — UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
THE REMAINING GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
NOTICE OF THE EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

‘‘2019 Circular’’

the circular of the Company dated October 18, 2019

‘‘2019 Share Purchase Agreement’’
the share purchase agreement dated September 18, 2019 entered into between the Company and Beachhead Holdings Limited, pursuant to which the Company has conditionally agreed to sell, and Beachhead Holdings Limited has conditionally agreed to purchase, 1,000,000 CBPO Shares (as amended by amendment no. 1 thereto dated March 17, 2020, amendment no. 2 thereto dated May 5, 2020 and amendment no. 3 thereto dated October 26, 2020)
‘‘Acquisition’’
a proposed acquisition by the Consortium or their controlled affiliates of all of the outstanding CBPO Shares not already owned by the members of the Consortium as envisaged in the Consortium Agreement
‘‘Acquisition Holdco’’
a new company formed under the laws of the Cayman Islands by the parties to the Consortium Agreement, which is intended to hold 100% of CBPO after the closing of the Acquisition
‘‘Biomedical Future’’
Biomedical Future Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands, whose principal business activity is investment holding. Biomedical Future is ultimately controlled by Mr. Joseph Chow, the chairman of the board of director and chief executive officer of CBPO
‘‘Biomedical Treasure’’
Biomedical Treasure Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands, whose principal business activity is investment holding. Biomedical Treasure is ultimately controlled by Mr. Joseph Chow, the chairman of the board of director and chief executive officer of CBPO
‘‘Board’’ the board of Directors
‘‘Business Day’’
any day except any Saturday, any Sunday, any day that is a federal legal holiday in the United States or any day on which banking institutions in the State of New York, the PRC, Hong Kong, or the Cayman Islands are authorized or required by law or other governmental action to close

– 1 –

DEFINITIONS

‘‘Cash Out’’
‘‘CBPO’’
‘‘CBPO Share(s)’’
‘‘CITIC Capital’’
‘‘CITIC Disposal’’
‘‘CITIC SPA’’
‘‘Company’’
‘‘connected person’’
‘‘Consortium’’
‘‘Consortium Agreement’’
‘‘controlling shareholder’’

each CBPO Share held by the Company being cancelled and converted into a right to receive the Per Share Merger Consideration in the Privatization

China Biologic Products Holdings, Inc., a Cayman Islands exempted company, which changed its place of domicile from Delaware to the Cayman Islands on July 21, 2017 and has been listed on NASDAQ since 2009
ordinary share(s) of CBPO at a par value of US$0.0001 per share
2019B Cayman Limited, an exempted company incorporated in the Cayman Islands with limited liability, whose principal business activity is investment holding. The ultimate controller of 2019B Cayman Limited is CITIC Capital Holdings Limited
the disposal of 910,167 CBPO Shares by the Company to CITIC Capital pursuant to the CITIC SPA
the share purchase agreement dated October 26, 2020 entered into between the Company and CITIC Capital, pursuant to which the Company has conditionally agreed to sell, and CITIC Capital has conditionally agreed to purchase, 910,167 CBPO Shares
PW Medtech Group Limited (普華和順集團公司), an exempted company incorporated under the laws of the Cayman Islands with limited liability on May 13, 2011, whose principal business activity is investment holding and the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 1358)
has the meaning ascribed thereto under the Listing Rules
the consortium formed under the Consortium Agreement for the purpose of the Privatization and the Acquisition
the consortium agreement dated September 18, 2019 and entered into among the Initial Consortium Members in connection with the Privatization and the Acquisition, as amended by amendment no. 1 thereto dated January 23, 2020
has the meaning ascribed thereto under the Listing Rules

– 2 –

DEFINITIONS

‘‘Covered Securities’’
all of the existing and additional securities of CBPO of which a party to the Consortium Agreement has acquired or will acquire beneficial ownership
‘‘DEHP’’ Di-2-ethylhexyl phthalate, the most common number of the class of phthalates, which is used as plasticizers in polymer products to make plastic flexible
‘‘Director(s)’’ the director(s) of the Company
‘‘Disposals’’ the Management Disposal I, the CITIC Disposal and the Management Disposal II
‘‘Dividend Record Date’’ Thursday, December 24, 2020 being the record date for determining entitlement to the proposed Special Dividend
‘‘Double Double’’ Double Double Holdings Limited, an affiliate of Beachhead Holdings Limited
‘‘EGM’’
the extraordinary general meeting of the Company to be at 10:00 a.m. on Friday, December 4, 2020 at Building 1, No. 23 Panlong West Road, Pinggu District, Beijing, the PRC for the purpose of considering and, if thought fit, approving, among others, (i) the Transaction Documents and the transactions contemplated thereunder (including the Disposals); and (ii) the declaration and payment of the proposed Special Dividend
‘‘Group’’ the Company and its subsidiaries
‘‘HKFRS’’ Hong Kong Financial Reporting Standards
‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China
‘‘HK$’’
Hong Kong dollars, the lawful currency of Hong Kong
‘‘Infusion Set Business’’
the R&D, manufacturing and sale of advanced infusion set products and intravenous cannula products
‘‘Initial Consortium Members’’
the Company, Beachhead Holdings Limited, Double Double, Point Forward, Mr. Joseph Chow, Parfield International Ltd., CITIC Capital China Partners IV, L.P., HH SUM-XXII Holdings Limited, V-Sciences Investments Pte Ltd., Biomedical Future, Biomedical Treasure and Biomedical Development Limited

– 3 –

DEFINITIONS

‘‘Latest Practicable Date’’
‘‘Letter Agreements’’
‘‘Listing Rules’’
‘‘Loan’’
‘‘Loan Agreement’’
‘‘Management Disposal I’’
‘‘Management Disposal II’’
‘‘Management SPA I’’
‘‘Management SPA II’’
November 9, 2020, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
the letter agreements dated October 26, 2020 entered into between the Company and, among others, each of Biomedical Treasure, CITIC Capital and Biomedical Future, in connection with the Management Disposal I, the CITIC Disposal and the Management Disposal II and in furtherance of the Company’s intention with regard to the Privatization
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
the loan made by Morgan Stanley Bank, N.A. to the Company in an amount of up to US$82,720,000 (equivalent to RMB567,724,000) pursuant to the Loan Agreement
the loan agreement entered into between the Company and Morgan Stanley Bank, N.A. on September 20, 2018
the disposal of 3,750,000 CBPO Shares by the Company to Biomedical Treasure pursuant to the Management SPA I
the disposal of 660,833 CBPO Shares by the Company to Biomedical Future as contemplated pursuant to the Management SPA II
the share purchase agreement dated October 26, 2020 entered into between the Company and Biomedical Treasure, pursuant to which the Company has conditionally agreed to sell, and Biomedical Treasure has conditionally agreed to purchase, 3,750,000 CBPO Shares
the share purchase agreement dated October 26, 2020 entered into between the Company and Biomedical Future, pursuant to which the Company has conditionally agreed to sell, and Biomedical Future has conditionally agreed to purchase, no less than 660,833 CBPO Shares and no more than 1,571,000 CBPO Shares

– 4 –

DEFINITIONS

‘‘Merger Agreement’’

a definitive agreement and plan of merger relating to the Acquisition, as may be entered into by and among the Consortium and/or one or more of its affiliates, on the one hand, and CBPO, on the other hand, in the form to be agreed by such parties and approved by the board of directors of CBPO

‘‘Model Code’’
the ‘‘Model Code for Securities Transactions by Directors of Listed Issuers’’ as set out in Appendix 10 to the Listing Rules
‘‘NASDAQ’’ The NASDAQ Stock Market LLC
‘‘Per Share Merger the proposed consideration per CBPO Share payable in cash to Consideration’’ CBPO’s shareholders pursuant to the Merger Agreement
‘‘Point Forward’’
Point Forward Holdings Limited, an affiliate of Beachhead Holdings Limited
‘‘PRC’’
the People’s Republic of China which, for the purpose of this circular, except where the context requires otherwise, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
‘‘Privatization’’
the proposed privatization of CBPO pursuant to which the CBPO Shares would be delisted from NASDAQ and deregistered under the Securities Exchange Act of 1934, as amended from time to time
‘‘Qualifying Shareholders’’
Shareholders whose names appear on the register of members of the Company as of the close of business on the Dividend Record Date
‘‘R&D’’
research and development
‘‘Remaining Group’’

the Group immediately after the closing of the Disposals

‘‘RMB’’
Renminbi, the lawful currency of the PRC
‘‘Rollover Securities’’ certain CBPO Shares and other securities (namely any restricted shares, share options and any other securities convertible, exercisable or exchangeable into CBPO Shares) of CBPO owned by the Initial Consortium Members and any additional member that may be admitted to the Consortium from time to time, to be contributed in exchange for newly issued shares of Acquisition Holdco

– 5 –

DEFINITIONS

‘‘Rollover Transaction’’ Consortium members contributing their Rollover Securities in exchange for newly issued shares of Acquisition Holdco (as described in the section headed ‘‘Rollover and other arrangements’’ in pages 11 and 12 of the 2019 Circular) ‘‘SEC’’ U.S. Securities and Exchange Commission ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

‘‘Share(s)’’ ordinary share(s) of US$0.0001 each in the capital of the Company or if there has been a subsequent subdivision, consolidation, reclassification or reconstruction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company
‘‘Share Exchange Agreement’’ the share exchange agreement entered into between the Company and CBPO on October 12, 2017
‘‘Share Purchase Agreements’’ Management SPA I, CITIC SPA and Management SPA II
‘‘Shareholder(s)’’ shareholder(s) of the Company from time to time
‘‘Special Dividend’’ the special dividend of approximately US$0.2034 (equivalent to approximately HK$1.5764 for illustration purpose) on each Share recommended by the Board and subject to approval by the Shareholders at the EGM and the closing of the Disposals, payable in HK$ to each Qualifying Shareholder
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Transaction Documents’’ the Share Purchase Agreements and the Letter Agreements
‘‘Tianxinfu’’ Tianxinfu (Beijing) Medical Appliance Co., Ltd. (天新福(北京)醫療器材股份有限公司), a joint stock company established in the PRC on January 18, 2002; the Company disposed of its equity interests in Tianxinfu in January 2018
‘‘United States’’ the United States of America
‘‘U.S. GAAP’’ the accounting principles generally accepted in the United States of America
‘‘US$’’
United States dollars, the lawful currency of the United States

– 6 –

DEFINITIONS

‘‘%’’ per cent

For the purpose of this circular, unless otherwise stated, the conversion of US$ into RMB is calculated by using an exchange rate of US$1.00 equal to RMB6.6123, being the central parity rate published by the State Administration of Foreign Exchange of the PRC on the Latest Practicable Date. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amounts were, may have been or will be exchanged at such rate or any other rates or at all.

For the purpose of this circular, unless otherwise stated, the conversion of US$ into HK$ is calculated by using an exchange rate of US$1.00 equal to HK$7.7504. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amounts were, may have been or will be exchanged at such rate or any other rates or at all.

– 7 –

LETTER FROM THE BOARD

PW MEDTECH GROUP LIMITED 普華和順集團公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1358)

Executive Director: Registered Office: Ms. Yue’e ZHANG (Chairman & The Grand Pavilion Commercial Centre Chief Executive Officer) Oleander Way, 802 West Bay Road P.O. Box 32052 Non-executive Directors: Grand Cayman KY1-1208 Mr. JIANG Liwei Cayman Islands Mr. LIN Junshan

Headquarters and Principal Place of Business Independent Non-executive Directors: in the PRC: Mr. WANG Xiaogang Building 1, No. 23 Panlong West Road Mr. ZHANG Xingdong Pinggu District Mr. CHEN Geng Beijing, the PRC 101204

Principal Place of Business in Hong Kong:

Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

November 16, 2020

To the Shareholders

Dear Sir/Madam,

(1) VERY SUBSTANTIAL DISPOSAL DISPOSAL OF CBPO SHARES AND PROPOSED PRIVATIZATION OF CBPO;

(2) PROPOSED SPECIAL DIVIDEND; AND (3) NOTICE OF THE EGM

I. INTRODUCTION

Reference is made to the announcements of the Company dated September 19, 2019, November 7, 2019, January 23, 2020, May 5, 2020, May 10, 2020, September 16, 2020, October 26, 2020, October 27, 2020 and November 6, 2020, and the 2019 Circular in relation to, among others, the disposal of CBPO Shares, the Consortium Agreement, the Privatization. the Disposals and the proposed Special Dividend.

– 8 –

LETTER FROM THE BOARD

As disclosed in the announcement of the Company dated September 19, 2019, the Company conditionally agreed to sell 1,000,000 CBPO Shares at the sale price of US$101.0 per CBPO Share under the 2019 Share Purchase Agreement, the completion of which took place on May 8, 2020. As disclosed in the 2019 Circular, the Company, as an Initial Consortium Member and a rollover shareholder, agreed to participate in the Privatization and contribute 5,321,000 CBPO Shares and nil cash contribution under the Consortium Agreement, in exchange for newly issued shares of the Acquisition Holdco. As disclosed in the announcement of the Company dated October 26, 2020, the Company entered into an amendment No. 3 to the 2019 Share Purchase Agreement with each of Point Forward and Double Double, pursuant to which Point Forward and Double Double agreed to pay US$7,315,000 and US$11,685,000, respectively, as adjustments to the sale price of the CBPO Shares disposed of by the Company under the 2019 Share Purchase Agreement. The amount of such adjustments is equal to the product of (i) US$19.0 (being the excess of (a) the proposed consideration of US$120.0 per CBPO Share under the Privatization over (b) the sale price of the CBPO Shares disposed of by the Company under the 2019 Share Purchase Agreement) multiplied by (ii) the number of all their respective assigned CBPO Shares (Point Forward: 385,000 CBPO Shares; Double Double: 615,000 CBPO Shares) under the 2019 Share Purchase Agreement.

After good and careful consideration and discussion with other Consortium members in relation to the Privatization and in light of the entry into the Share Purchase Agreements, the Board decided not to proceed with the Rollover Transaction with respect to the Company in the Privatization as contemplated under the Consortium Agreement, provided that (i) the closing of the Disposals shall be conducted in full pursuant to the Share Purchase Agreements; or (ii) before the Acquisition takes place in accordance with the Merger Agreement, the Share Purchase Agreements are not terminated without the closing of the Disposals having taken place. Pursuant to the Share Purchase Agreements, together with other ancillary documents, the Company has agreed to sell an aggregate of 5,321,000 CBPO Shares it holds, which represents the entire shareholding of the Company in CBPO, to Biomedical Treasure, CITIC Capital and Biomedical Future. It is expected that the Company would cease to be a Consortium member immediately after the closing of the Disposals. As at the Latest Practicable Date, the Consortium members comprise the Company, Beachhead Holdings Limited, Double Double, Point Forward, Mr. Joseph Chow, Parfield International Ltd., CITIC Capital China Partners IV, L.P., HH SUM-XXII Holdings Limited, V- Sciences Investments Pte Ltd., Biomedical Future, Biomedical Treasure and Biomedical Development Limited.

The purpose of this circular is to provide you with, among other things, (i) further details of the Transaction Documents and the transactions contemplated thereunder (including the Disposals); (ii) the proposed Special Dividend; (iii) the financial and other information of the Group; (iv) the financial and other information of CBPO; (v) the unaudited pro forma financial information of the Remaining Group; and (vi) the notice of the EGM.

– 9 –

LETTER FROM THE BOARD

II. SHARE PURCHASE AGREEMENTS

Principal Terms of the Share Purchase Agreements

The principal terms of the Share Purchase Agreements are summarized as below:

Date

October 26, 2020

Parties

Management SPA I

(1) the Company as seller; and
(2) Biomedical Treasure as purchaser.

CITIC SPA

(1) the Company as seller; and
(2) CITIC Capital as purchaser.

Management SPA II

(1) the Company as seller; and
(2) Biomedical Future as purchaser.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of Biomedical Treasure, CITIC Capital, Biomedical Future and their respective ultimate beneficial owners, if any, is a third party independent of the Company and its connected persons.

Subject Matter and Consideration

Management SPA I

Pursuant to the Management SPA I, the Company has conditionally agreed to sell, and Biomedical Treasure has conditionally agreed to purchase, 3,750,000 CBPO Shares, subject to the terms and conditions of the Management SPA I, at the sale price of US$120.0 per CBPO Share, which was determined after arm’s length negotiations between the Company and Biomedical Treasure on normal commercial terms with reference to the proposed consideration of US$120.0 per CBPO Share under the Privatization. The aggregate sale price for the CBPO Shares to be sold by the Company to Biomedical Treasure shall be US$450.0 million.

– 10 –

LETTER FROM THE BOARD

CITIC SPA

Pursuant to the CITIC SPA, the Company has conditionally agreed to sell, and CITIC Capital has conditionally agreed to purchase, 910,167 CBPO Shares (the ‘‘CITIC SPA Sale Shares’’), subject to the terms and conditions of the CITIC SPA, at the sale price of US$120.0 per CBPO Share, which was determined after arm’s length negotiations between the Company and CITIC Capital on normal commercial terms with reference to the proposed consideration of US$120.0 per CBPO Share under the Privatization. The aggregate sale price for the CBPO Shares to be sold by the Company to CITIC Capital shall be approximately US$109.2 million.

Management SPA II

Pursuant to the Management SPA II, the Company has conditionally agreed to sell, and Biomedical Future has conditionally agreed to purchase, no less than 660,833 CBPO Shares (the ‘‘Initial Management SPA II Sale Shares’’) and no more than 1,571,000 CBPO Shares, subject to the terms and conditions of the Management SPA II, at the sale price of US$120.0 per CBPO Share, which was determined after arm’s length negotiations between the Company and Biomedical Future on normal commercial terms with reference to the proposed consideration of US$120.0 per CBPO Share under the Privatization. The number of CBPO Shares to be purchased by Biomedical Future pursuant to the Management SPA II is subject to the following adjustment mechanism:

(1) in the event that the CITIC SPA is terminated before the Company’s delivery of the payment notice with respect to the Initial Management SPA II Sale Shares pursuant to the Management SPA II to Biomedical Future, the number of the Initial Management SPA II Sale Shares shall be automatically increased to include the CITIC SPA Sale Shares, being an aggregate of 1,571,000 CBPO Shares; or
(2) in the event that (i) the CITIC SPA is terminated after the Company’s delivery of the payment notice with respect to the Initial Management SPA II Sale Shares pursuant to the Management SPA II to Biomedical Future, or (ii) the CITIC Disposal has not consummated with respect to all the CITIC SPA Sale Shares in accordance with the CITIC SPA, Biomedical Future shall, in addition to (and not in lieu of) purchasing the aforementioned Initial Management SPA II Sale Shares at the Initial Management Disposal II Closing (as defined below), purchase at the Additional Management Disposal II Closing (as defined below) all of the remaining CITIC SPA Sale Shares that are not purchased by CITIC Capital under the CITIC SPA (the ‘‘Additional Management SPA II Sale Shares’’).

The number of CBPO Shares to be sold by the Company to Biomedical Future shall range from 660,833 CBPO Shares to 1,571,000 CBPO Shares, thus the corresponding aggregate sale price for such CBPO Shares to be sold shall range from approximately US$79.3 million to US$188.5 million.

– 11 –

LETTER FROM THE BOARD

Immediately prior to the entry into of the Share Purchase Agreements, the Company holds 5,321,000 CBPO Shares, which represents 13.79% of all issued and outstanding share capital in CBPO. Immediately after the closing of the Disposals, the Company will not hold any equity interest in CBPO, assuming there are no other changes in the current share capital and shareholding structure of CBPO from the date of the Share Purchase Agreements to the closing of the Disposals.

The following table sets forth the shareholding structure of CBPO before and after the Disposals, respectively:

Shareholders of CBPO The Company Biomedical Future Biomedical Treasure CITIC Capital(4) Beachhead Holdings Limited Double Double Point Forward Parfield International Ltd.(5) V-Sciences Investments Pte Ltd Hillhouse Capital Advisors, Ltd.(6) Mr. Joseph Chow Other shareholders of CBPO Total	Shareholding before the Disposals(1), (2) 5,321,000 (13.79%) Nil Nil 3,743,868 (9.70%) 7,908,726 (20.50%) 775,000 (2.00%) 1,986,265 (5.15%) 2,437,696 (6.32%) 1,240,000 (3.21%) 2,962,076 (7.68%) 111,509 (0.29%) 12,097,737 (31.35%)	Shareholding after the Disposals in the event that 660,833 CBPO Shares are disposed of under the Management SPA II(2), (3) Nil 660,833 (1.71%) 3,750,000 (9.72%) 4,654,035 (12.06%) 7,908,726 (20.50%) 775,000 (2.00%) 1,986,265 (5.15%) 2,437,696 (6.32%) 1,240,000 (3.21%) 2,962,076 (7.68%) 111,509 (0.29%) 12,097,737 (31.35%)	Shareholding after the Disposals in the event that 1,571,000 CBPO Shares are disposed of under the Management SPA II(2), (3) Nil 1,571,000 (4.07%) 3,750,000 (9.72%) 3,743,868 (9.70%) 7,908,726 (20.50%) 775,000 (2.00%) 1,986,265 (5.15%) 2,437,696 (6.32%) 1,240,000 (3.21%) 2,962,076 (7.68%) 111,509 (0.29%) 12,097,737 (31.35%)
	38,583,877 (100%)	38,583,877 (100%)	38,583,877 (100%)

Notes:

(1) Based on (i) the public information extracted from CBPO’s financial results for the second quarter of 2020 and the public filings by CBPO’s shareholders as of the Latest Practicable Date; and (ii) the disclosure of the respective Initial Consortium Members in the Consortium Agreement.
(2) The percentage shareholding may not add up to 100% due to rounding.
(3) Assuming there will be no other changes in the shareholding of CBPO except for the Disposals.
(4) CITIC Capital China Partners IV, L.P. is the parent company of CITIC Capital. As such, CITIC Capital China Partners IV, L.P. is deemed to share beneficial ownership of the CBPO Shares held by CITIC Capital.

– 12 –

LETTER FROM THE BOARD

(5) Mr. Marc Chan is the director and sole shareholder of Parfield International Ltd.
(6) HH SUM-XXII Holdings Limited is ultimately controlled by Hillhouse Capital Advisors, Ltd., and thus HH SUM-XXII Holdings Limited is an affiliate of Hillhouse Capital Advisors, Ltd. For the purpose of the Consortium Agreement, HH SUM-XXII Holdings Limited is deemed to beneficially own the 2,962,076 CBPO Shares held by Hillhouse Capital Advisors, Ltd.

The sale price of US$120.0 per CBPO Share under the Share Purchase Agreements represents:

(i) a premium of approximately 7.50% to the average closing price per CBPO Share on the NASDAQ for the 30 trading days immediately preceding the date of the Share Purchase Agreements;
(ii) a premium of approximately 6.78% to the average closing price per CBPO Share on the NASDAQ for the 20 trading days immediately preceding the date of the Share Purchase Agreements;
(iii) a premium of approximately 5.88% to the average closing price per CBPO Share on the NASDAQ for the five trading days immediately preceding the date of the Share Purchase Agreements;
(iv) a premium of approximately 6.03% to the closing price per CBPO Share on the NASDAQ on October 23, 2020, being the last trading day immediately preceding the date of the Share Purchase Agreements; and
(v) a premium of approximately 3.38% to the closing price per CBPO Share on the NASDAQ as of the Latest Practicable Date.

Closing

Management Disposal I and CITIC Disposal

Each of the closing of the Management Disposal I and the CITIC Disposal shall take place within fifteen Business Days after all the conditions precedent set out in the Management SPA I and the CITIC SPA, respectively, are satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions at the closing) or such other date as may be agreed by the Company and Biomedical Treasure and CITIC Capital, respectively.

Management Disposal II

The closing of the disposal of the Initial Management SPA II Sale Shares (including the CITIC SPA Sale Shares, if the CITIC SPA is terminated before the Company delivering a payment notice under the Management SPA II to Biomedical Future) under the Management Disposal II shall take place within fifteen business days after all the conditions precedent set out in the Management SPA II are satisfied or waived (other than those conditions that by

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LETTER FROM THE BOARD

their nature are to be satisfied at the initial closing, but subject to the satisfaction or waiver of such conditions at the initial closing) or such other date as may be agreed by the Company and Biomedical Future (the ‘‘Initial Management Disposal II Closing’’). In the event that (i) the CITIC SPA is terminated after the Company’s delivery to Biomedical Future of a payment notice with respect to the Initial Management SPA II Sale Shares pursuant to the Management SPA II, or (ii) the CITIC Disposal has not consummated with respect to all the CITIC SPA Sale Shares in accordance with the CITIC SPA, the closing of the disposal of the Additional Management SPA II Sale Shares under the Management Disposal II shall take place within ten business days after the date of the Initial Management Disposal II Closing or such other date as may be agreed by the parties (the ‘‘Additional Management Disposal II Closing’’). With respect to each of the Initial Management Disposal II Closing and the Additional Management Disposal II Closing, all actions at such respective closings are inter-dependent and will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Management SPA II due to be made at the Initial Management Disposal II Closing or the Additional Management Disposal II Closing (as applicable) have been made.

Conditions Precedent

The obligations of the Company to consummate the closing of the Management Disposal I and the CITIC Disposal, as well as the Initial Management Disposal II Closing are subject to the following conditions, among others:

(i) Biomedical Treasure, CITIC Capital or Biomedical Future (as the case may be) having performed all of its obligations to be performed prior to the respective closings as set out in the relevant Share Purchase Agreement in all material respects;
(ii) the Shareholders shall have duly approved the transactions contemplated under the relevant Share Purchase Agreement at the EGM in accordance with the requirements of the Listing Rules and the organizational documents of the Company;
(iii) (a) an amendment to the Rule 13e-3 transaction statement on Schedule 13E-3 filed by certain members of the Consortium on February 19, 2020 (as amended from time to time) in respect of the entry into the relevant Share Purchase Agreement and the transactions contemplated thereunder has been first filed with the SEC for no less than thirty days, and (b) such amendment has been disseminated in accordance with Rule 13e-3(f) under the Securities Exchange Act of 1934 for no less than twenty days; and

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(iv) no provision of any applicable treaty, law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court (including without limitation the SEC), domestic or foreign, shall prohibit the consummation of the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be).

The obligations of Biomedical Treasure, CITIC Capital or Biomedical Future (as the case may be) to consummate the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be) are subject to the following conditions, among others:

(i) the Company shall have performed all of its obligations to be performed prior to the respective closings as set out in the relevant Share Purchase Agreement in all material respects;
(ii) the Shareholders shall have duly approved the transactions contemplated under the relevant Share Purchase Agreement at the EGM in accordance with the requirements of the Listing Rules and the organizational documents of the Company;
(iii) (a) an amendment to the Rule 13e-3 transaction statement on Schedule 13E-3 filed by certain members of the Consortium on February 19, 2020 (as amended from time to time) in respect of the entry into the relevant Share Purchase Agreement and the transactions contemplated thereunder has been first filed with the SEC for no less than thirty days, and (b) such amendment has been disseminated in accordance with Rule 13e-3(f) under the Securities Exchange Act of 1934 for no less than twenty days; and
(iv) no provision of any applicable treaty, law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court (including without limitation the SEC), domestic or foreign, shall prohibit the consummation of the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be).

Termination

Each of the Share Purchase Agreements may be terminated prior to the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be) (i) by mutual written consent of the Company and Biomedical Treasure, CITIC Capital or Biomedical Future (as the case may be); (ii) by the Company or Biomedical Treasure, CITIC Capital or Biomedical Future (as the case may be) if the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be) has not occurred by the earlier of (a) the twentieth Business Day from the date on which the Shareholders have duly approved the transactions contemplated under each of the Share Purchase Agreements at the EGM and (b) the date that is six months from the

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date of the respective Share Purchase Agreements (such right of termination is not available to a party to each relevant Share Purchase Agreement which is then in material breach of such Share Purchase Agreement); or (iii) automatically without any action of the Company or Biomedical Treasure, CITIC Capital or Biomedical Future (as the case may be) immediately before the closing of the Privatization.

III. ANCILLARY DOCUMENTS

Letter Agreements

On October 26, 2020, in connection with the Management Disposal I, the CITIC Disposal and the Management Disposal II and in furtherance of the Company’s intention with regard to the Privatization as further described below under the section headed ‘‘V. Privatization’’ below, the Company has entered into the Letter Agreements with, among others, each of Biomedical Treasure, CITIC Capital and Biomedical Future, pursuant to which, the parties thereto have agreed, among others: (i) during such period from the date of the respective Letter Agreements and until the occurrence of any of the following events (whichever is the earliest), the Company shall not proceed with the Rollover Transaction with respect to the Company in the Privatization: (w) the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be); (x) the valid termination of the relevant Share Purchase Agreement; (y) the closing of the Privatization and (z) the execution of the Merger Agreement (or any amendment to the Merger Agreement) which provides that the Per Share Merger Consideration becomes less than US$120; (ii) in the event that the closing of the Privatization takes place before the closing of the Disposals, the Company shall conduct the Cash Out only when the Per Share Merger Consideration is not less than US$120; and (iii) the Company shall bear the agreed portion of all out-of-pocket costs and expenses that have been incurred and accrued by the Consortium in connection with the Privatization prior to the closing of the Disposals, while the Company shall not bear any of the out-of-pocket costs and expenses incurred by the Consortium in connection with the Privatization after the closing of the Management Disposal I or the CITIC Disposal, or the Initial Management Disposal II Closing (as the case may be), subject to the terms and conditions of the respective Letter Agreements.

Equity Commitment Letters

In relation to the considerations payable under the Share Purchase Agreements, each of Biomedical Treasure, CITIC Capital or Biomedical Future has received an equity commitment letter from an affiliate of their respective beneficial owners or a designated entity (each a ‘‘Sponsor’’ of Biomedical Treasure, CITIC Capital or Biomedical Future, as the case may be), with the Company as a third party beneficiary to each of such equity commitment letters. Pursuant to the equity commitment letters, each of the respective Sponsors has committed to fund the acquisition of the CBPO Shares contemplated under the relevant Share Purchase Agreement, and subject to certain conditions, the Company is entitled to enforce the rights

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granted to Biomedical Treasure, CITIC Capital or Biomedical Future (as the case may be) under the relevant equity commitment letter to cause the funding by the relevant Sponsor to fund the respective transactions under the relevant Share Purchase Agreement.

IV. IMPLICATIONS OF THE EXCLUSIVITY PERIOD UNDER THE CONSORTIUM AGREEMENT

As disclosed in the 2019 Circular, except as contemplated or permitted under the Consortium Agreement, each party to the Consortium Agreement (including the Company) represented, covenanted and agreed that, among others, during a period of twelve months beginning on the date of the Consortium Agreement, which may be extended by the Initial Consortium Members in writing (the ‘‘Exclusivity Period’’), it will not, and it will cause its affiliates not to, transfer any of its Covered Securities, or any voting right or power (including whether such right or power is granted by proxy or otherwise) or economic interest therein. As disclosed in the announcement of the Company dated September 16, 2020, the Exclusivity Period has been extended to December 17, 2020 as additional time is required to implement the Acquisition.

On October 26, 2020, the Company has obtained the irrevocable written consent pursuant to the Consortium Agreement permitting the Company to enter into the Share Purchase Agreements and consummate the Disposals.

V. PRIVATIZATION

It is the intention of the Company not to proceed with the Rollover Transaction with respect to the Company in the Privatization and to complete the Disposals as soon as practicable once the Disposals are approved by the Shareholders at the EGM, and the number of Rollover Securities to be contributed by the Company under the Consortium Agreement has been adjusted to zero. It is expected that the Company and other Consortium members will sign an amended and restated Consortium Agreement around the time when the Merger Agreement is signed, which is expected to provide that, subject to the terms and conditions contained therein, the Consortium Agreement would terminate with respect to the Company upon the completion of the Disposals.

VI. INFORMATION ON CBPO

CBPO is a biopharmaceutical company principally engaged in the research, development, manufacturing and sales of human plasma-based biopharmaceutical products, or plasma products, in China. CBPO has been listed on NASDAQ since 2009 and it changed its place of domicile from Delaware to the Cayman Islands on July 21, 2017.

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LETTER FROM THE BOARD

Financial information on CBPO

According to the published financial statements of CBPO, the financial results of CBPO prepared in accordance with U.S. GAAP for the two years ended December 31, 2018 and 2019 are as follows:

		For the year	ended
		December	31,
		US$
		2018	2019
		(audited)	(audited)
Profit	before taxation	166,003,295	191,493,711
Profit	after taxation	147,967,115	163,395,186

The unaudited net asset value of CBPO as of June 30, 2020 was US$1,859,085,982.

VII. INFORMATION ON BIOMEDICAL TREASURE, CITIC CAPITAL AND BIOMEDICAL FUTURE

Biomedical Treasure

Biomedical Treasure is an exempted company with limited liability incorporated under the laws of the Cayman Islands, whose principal business activity is investment holding. Biomedical Treasure is ultimately controlled by Mr. Joseph Chow, the chairman of the board of director and chief executive officer of CBPO.

CITIC Capital

CITIC Capital is an exempted company incorporated in the Cayman Islands with limited liability, whose principal business activity is investment holding. The ultimate controller of CITIC Capital is CITIC Capital Holdings Limited.

Biomedical Future

Biomedical Future is an exempted company with limited liability incorporated under the laws of the Cayman Islands, whose principal business activity is investment holding. Biomedical Future is ultimately controlled by Mr. Joseph Chow, the chairman of the board of director and chief executive officer of CBPO.

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LETTER FROM THE BOARD

VIII. INFORMATION ON THE GROUP

The Company is an exempted company incorporated under the laws of the Cayman Islands with limited liability on May 13, 2011, whose principal business activity is investment holding and the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 1358). The Group is principally engaged in the development, manufacturing and sale of advanced infusion set and intravenous cannula products.

IX. FINANCIAL EFFECTS OF THE DISPOSALS ON THE GROUP

Based on the unaudited pro forma financial information of the Remaining Group as set out in Appendix III to this circular, assuming the Disposals had taken place on June 30, 2020, it is estimated that the Group will record a gain on the Disposals of approximately RMB1,594,620, which is estimated by the Company based on the unaudited condensed consolidated balance sheets of CBPO as at June 30, 2020, and using the exchange rate of US$1= RMB7.0795 as at June 30, 2020.

Based on the unaudited pro forma financial information of the Remaining Group as set out in Appendix III to this circular, assuming the Disposals had taken place on June 30, 2020, (i) the unaudited pro forma consolidated total assets of the Remaining Group would have increased from approximately RMB4,936,609,000 to approximately RMB6,392,133,000; and (ii) the unaudited pro forma consolidated total liabilities of the Remaining Group would have remained unchanged at approximately RMB162,965,000.

The excess of the aggregate consideration under the Share Purchase Agreements over the net book value of the 5,321,000 CBPO Shares to be disposed of, based on 13.79% of the unaudited net asset value of CBPO as at June 30, 2020, amounted to approximately US$382,152,043.

X. INTENDED USE OF PROCEEDS

The total gross proceeds from the Disposals are equivalent to approximately RMB4,222 million.

The Group intends to apply the total gross proceeds from the Disposals as follows:

(1) approximately RMB2,111 million or approximately 50% of the total gross proceeds from the Disposals will be used for distribution of the proposed Special Dividend;
(2) approximately RMB28 million will be used for repayment of bank loans;
(3) approximately RMB700 million will be used for capital expenditure or long term investments; and
(4) the remaining approximately RMB1,383 million, will be used for the Group’s general corporate and working capital purposes or for future investment opportunities in the medical industry or for other purposes.

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LETTER FROM THE BOARD

In particular, in relation to the intended use of the proceeds for capital expenditure purpose and for general corporate and working capital purposes, the Group plans to expand its production capacity, and upgrade its production facilities for the existing advanced infusion set products and intravenous cannula products, and diversify its product portfolio by expansion of the diabetes therapy sector medical devices and other medical sectors, and allocate more funds into R&D and expansion of its distribution network in a proactive manner.

XI. REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Disposals will provide the Group with an immediate cash inflow and enable the Group to crystallize its investment gains in CBPO in an expedited manner. In light of the recent developments and prospects for the Company’s Infusion Set Business and its market in China, the Directors are of the view that the Disposals present an opportunity for the Company to reallocate its financial resources to and focus on (i) its Infusion Set Business through increasing production capacity and R&D capacity for advanced infusion set products and cannula products; and (ii) continue the R&D and expansion of the diabetes therapy sector medical devices and other medical sectors (such as insulin pump, insulin injection needle and pen, and etc.) to further optimize its business coverage. The Directors also believe that a divestment of a minority investment in the plasma business as operated by CBPO will help the Company to focus on its business plan as described above in the near future. In addition, the Disposals would enable the Company to optimize its capital structure and share the investment gains with its shareholders by way of distribution of the Special Dividend, which would not be made available should the Company continue with its Rollover Transaction under the Privatization.

The Directors (including the independent non-executive Directors) consider that the terms of the Transaction Documents and the transactions contemplated thereunder (including the Disposals) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

XII. LISTING RULES IMPLICATIONS

As the Management SPA I, the CITIC SPA and the Management SPA II were entered into by the Company on the same day and each of the Management Disposal I, the CITIC Disposal and the Management Disposal II involves the disposal of CBPO Shares, the Management Disposal I, the CITIC Disposal and the Management Disposal II are aggregated as a series of transactions pursuant to Rule 14.22 of the Listing Rules. As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Disposals exceed 75%, the Disposals constitute very substantial disposals of the Company which are therefore subject to the reporting, announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

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LETTER FROM THE BOARD

XIII. WAIVER FROM STRICT COMPLIANCE WITH RULE 14.68(2)(a)(i) OF THE LISTING RULES

Pursuant to Rule 14.68(2)(a)(i) of the Listing Rules, a circular issued in relation to a very substantial disposal must contain, on a disposal of a business, company or companies, financial information of either: (i) the business, company or companies being disposed of; or (ii) the listed issuer’s group with the business, company or companies being disposed of shown separately as (a) disposal group(s) or (b) discontinuing operation(s), for the relevant period (as defined in the note to Rule 4.06(1)(a) of the Listing Rules). The financial information must be prepared by the directors of the listed issuer using accounting policies of the Company and must contain at least the income statement, balance sheet, cash flow statement and statement of changes in equity. The financial information must be reviewed by the listed issuer’s auditors or reporting accountants according to the relevant standards published by the Hong Kong Institute of Certified Public Accountants or the International Auditing and Assurance Standards Board of the International Federation of Accountants or the China Auditing Standards Board of the China Ministry of Finance. The circular must contain a statement that the financial information has been reviewed by the issuer’s auditors or reporting accountants and details of any modifications in the review report.

Note 1 to Rule 14.68(2)(a)(i) of the Listing Rules states that the listed issuer may include an accountants’ report instead of a review by its auditors or reporting accountants. In that case, the accountants’ report must comply with Chapter 4 of the Listing Rules. Further, Note 2 to Rule 14.68(2)(a)(i) of the Listing Rules states that the Stock Exchange may be prepared to relax the requirements in Rule 14.68(2)(a)(i) of the Listing Rules if the assets of the company or companies being disposed of are not consolidated in the issuer’s accounts before the disposal.

In this connection, the Company has applied for, and the Stock Exchange has granted, a waiver from strict compliance with Rule 14.68(2)(a)(i) of the Listing Rules on the following grounds:

(a) prior to the closing of the Disposals, CBPO is not a subsidiary of the Company and its results are not consolidated in the financial statements of the Company. The Company’s minority interest in CBPO has been treated as an investment in an associate and accounted for using the equity method of accounting. Immediately after the closing of the Disposals, the Company will not hold any equity interest in CBPO, assuming there are no other changes in the current share capital and shareholding structure of CBPO from the date of the Share Purchase Agreements to the closing of the Disposals;
(b) CBPO is required to file its financial information with the SEC periodically within prescribed deadlines. CBPO publishes its audited financial statements on a yearly basis and its unaudited financial statements on a quarterly basis on the SEC website. These financial disclosures published by CBPO were subject to regulations of NASDAQ and the SEC;

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(c) the financial statements of CBPO as of December 31, 2017, 2018, and 2019 and for the years then ended, which were prepared under U.S. GAAP, were audited by KPMG Huazhen LLP in accordance with the standards of Public Company Accounting Oversight Board (United States) and published on the SEC website. KPMG Huazhen LLP is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. KPMG Huazhen LLP is also registered with a recognized body of accountants, namely the Beijing Institute of Certified Public Accountants;
(d) as advised by CBPO, it is not able to give access to its accounting records and provide explanation in relation to the same for the Company’s auditor to audit its accounts prepared under HKFRS given (i) CBPO is bound by the relevant securities regulations of the United States which require all publicly traded companies to disclose material information to all investors at the same time, as a result CBPO cannot disclose any nonpublic financial information to the Company; (ii) it is not the prevailing market practice in the Unites States for an investor making a private minority investment in a public company to be granted access to non-public financial information; and (iii) considerable amount of additional work will be required to convert the financial information of CBPO for each of the three financial years ended December 31, 2019 and the six months ended June 30, 2020 from U.S. GAAP to HKFRS, which is not commensurate with a transaction of the same nature. Accordingly, it would be unduly burdensome, time consuming, costly and impractical for the Company to produce an accountants’ report on CBPO in the circular for the following reasons:
(i) the Company does not have access to non-public financial information of CBPO, as a result it would be impractical for the Company to prepare an accountants’ report on CBPO due to the lack of access to CBPO’s accounting records; and
(ii) the Company would incur significant costs and expenses to conduct an audit or review of CBPO’s accounts prepared in accordance with HKFRS and significantly delay the closing of the Disposals, which may not be in the best interest of the Shareholders.

As an alternative to disclosure in compliance with Rule 14.68(2)(a)(i) of the Listing Rules, the following have been included in this circular:

(a) the audited financial statements of CBPO for the three years ended December 31, 2019 and the unaudited financial statements of CBPO for the six months ended June 30, 2020 prepared under U.S. GAAP as extracted from the annual reports and quarterly report of CBPO for the aforementioned periods which have been published on the SEC website;
(b) a line-by-line reconciliation of the financial statements of CBPO for the differences between its accounting policies under U.S. GAAP and the accounting policies of the Company under HKFRS, with an explanation of the differences; and

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(c) additional information which is required for an accountants’ report under Chapter 4 of the Listing Rules but not disclosed in the published financial statements of CBPO.

Accordingly, the Company considers that this circular would provide sufficient information to the Shareholders to make a properly informed assessment of the Disposals, and that the waiver from strict compliance with Rule 14.68(2)(a)(i) of the Listing Rules would be unlikely to result in undue risks to the Shareholders.

XIV. PROPOSED SPECIAL DIVIDEND

As disclosed in the announcement of the Company dated November 6, 2020, the Board has recommended that the proposed Special Dividend of approximately US$0.2034 per Share (equivalent to approximately HK$1.5764 per Share for illustration purpose) (subject to approval of the Shareholders at the EGM and the closing of the Disposals) be declared and paid to the Qualifying Shareholders on or around January 20, 2021, to be payable out of approximately 50% of the total gross proceeds from the Disposals (being approximately RMB2,111 million). The proposed Special Dividend will be declared in US$ and paid in HK$. The proposed Special Dividend payable in HK$ will be converted from US$ at the relevant exchange rate on December 4, 2020, being the date of the EGM at which the declaration and payment of the proposed Special Dividend is proposed to be approved by the Shareholders. The Qualifying Shareholders will receive the proposed Special Dividend in cash of approximately US$0.2034 per Share (equivalent to approximately HK$1.5764 per Share for illustration purpose) (subject to approval of the Shareholders at the EGM and the closing of the Disposals).

XV. EGM AND PROXY ARRANGEMENT

The EGM will be held at 10:00 a.m. (Hong Kong time) on Friday, December 4, 2020, at Building 1, No. 23 Panlong West Road, Pinggu District, Beijing, the PRC, at which ordinary resolutions will be proposed to consider and, if thought fit, approve, (i) the Transaction Documents and the transactions contemplated thereunder (including the Disposals); and (ii) the declaration and payment of the proposed Special Dividend. The notice convening the EGM is set out on pages EGM-1 to EGM-2 of this circular.

The Company has received an undertaking from Cross Mark Limited, a controlling shareholder of the Company, to vote in favor of the resolutions to approve the Transaction Documents and the transactions contemplated thereunder (including the Disposals) at the EGM. As of the Latest Practicable Date, to the best knowledge of the Directors, Cross Mark Limited directly holds 575,061,863 Shares, representing an approximate 36.65% interest in the Company. The Company has also received a confirmation from two of its other Shareholders, Right Faith Holdings Limited and Amplewood Resources Limited, to abstain from voting on the resolutions to be proposed at the EGM. Right Faith Holdings Limited and Amplewood Resources Limited are companies wholly-owned by Mr. Marc Chan, ultimately a substantial Shareholder and the sole owner of Parfield International Ltd. which is one of the Initial Consortium Members. As of the Latest Practicable Date, to the best knowledge of the Directors, Right Faith Holdings Limited and

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Amplewood Resources Limited directly hold 393,385,962 Shares and 15,000,000 Shares, representing an approximate 25.07% and an approximate 0.96% interest in the Company, respectively.

Save as disclosed above, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, as of the Latest Practicable Date, no Shareholder had a material interest in the Transaction Documents and the transactions contemplated thereunder (including the Disposals) and therefore, no Shareholder is required to abstain from voting at the EGM for the relevant resolutions in respect of the Transaction Documents and the transactions contemplated thereunder (including the Disposals) and the declaration and payment of the proposed Special Dividend.

A form of proxy for use at the EGM is enclosed with this circular and such form of proxy is also published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.pwmedtech.com). Whether or not you are able to attend the EGM, please complete and sign the form of proxy in accordance with the instructions printed thereon and return it, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority, to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible but in any event not less than 48 hours before the time scheduled for holding the EGM (i.e. not later than 10:00 a.m. (Hong Kong time) on Wednesday, December 2, 2020) or any adjournment thereof (as the case may be). Completion and delivery of the form of proxy will not preclude you from attending and voting at the EGM if you so wish and in such event, your form of proxy shall be deemed to be revoked.

XVI. CLOSURE OF REGISTER OF MEMBERS

To ascertain Shareholders’ eligibility to attend and vote at the EGM, the register of members of the Company will be closed from Tuesday, December 1, 2020 to Friday, December 4, 2020 (both days inclusive), during which period no share transfer will be effected. In order to qualify for attending and voting at the EGM, unregistered holders of shares of the Company should ensure that all completed transfer forms accompanied by the relevant share certificates are lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited (at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong) for registration no later than 4:30 p.m. (Hong Kong time), on Monday, November 30, 2020.

To ascertain Shareholders’ entitlement to the proposed Special Dividend, the register of members of the Company will be closed from Tuesday, December 22, 2020 to Thursday, December 24, 2020 (both days inclusive), during which period no share transfer will be effected. In order to qualify for the proposed Special Dividend, unregistered holders of shares of the Company should ensure that all completed transfer forms accompanied by the relevant share certificates are lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited (at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong) for registration no later than 4:30 p.m. (Hong Kong time), on Monday, December 21, 2020.

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XVII. RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that (i) the terms of the Transaction Documents and the transactions contemplated thereunder (including the Disposals); and (ii) the declaration and payment of the proposed Special Dividend are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

XVIII. GENERAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular and the notice of the EGM as set out on pages EGM-1 to EGM-2, which form part of this circular.

As the closing of the Disposals is subject to the satisfaction and/or waiver (as applicable) of the conditions precedent in the Share Purchase Agreements, the Disposals may or may not proceed. Further, as the proposed Special Dividend is subject to the approval of the Shareholders at the EGM and the closing of the Disposals, the proposed Special Dividend may or may not be declared and paid. Shareholders and potential investors should therefore exercise caution when dealing in the securities of the Company.

Yours faithfully, By order of the Board PW Medtech Group Limited 普華和順集團公司 Yue’e Zhang

Chairman & Chief Executive Officer

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF THE FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for each of the three financial years ended December 31, 2017, 2018 and 2019 and the six months ended June 30, 2020 are disclosed in the annual reports of the Company for the years ended 2017 (pages 64 to 141), 2018 (pages 67 to 148) and 2019 (pages 74 to 148) and the interim report of the Company for the six months ended June 30, 2020 (pages 20 to 44), respectively. The said annual reports and interim report have been published on both the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.pwmedtech.com), which can be accessed by direct hyperlinks below:

(1) 2017 annual report:

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0427/ltn201804271118.pdf

(2) 2018 annual report:

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0424/ltn20190424372.pdf

(3) 2019 annual report:

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0428/2020042800700.pdf

(4) 2020 interim report:

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0917/2020091700513.pdf

2. INDEBTEDNESS STATEMENT

Bank borrowing

As at the close of business on September 30, 2020, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had an aggregate outstanding borrowing of approximately RMB28,000,000, further details of which are set as below:

(1) The Group has a bank borrowing representing trade finance advanced from the Bank of Beijing. As at September 30, 2020, bank facilities in total of RMB10,000,000 were granted to the Group’s subsidiary, Beijing Fert Technology Co. Ltd. by the Bank of Beijing, all of which had been utilised by the Company as at September 30, 2020.

All of the banking facilities are subject to the fulfillment of covenants relating to certain of the Company’s financial position ratios, as are commonly found in lending arrangements with financial institutions. If the Company was to breach the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

covenants, the drawn down facilities would become repayable on demand. The borrowings are secured by corporate guarantee, bears interest at 0.91% plus the prime rate of the Central Bank in the PRC and are stated at amortised cost.

(2) As at September 30, 2020, bank facilities in total of RMB220,000,000 were granted to the Group’s subsidiary by the Industrial and Commercial Bank of China, of which RMB18,000,000 had been utilized by the Company as at September 30, 2020.

The borrowings are secured by the leasehold land and building owned by the Group’s subsidiary, bears interest at the prime rate of the Central Bank in the PRC minus 0.10% and are stated at amortised cost.

Lease obligation

The Group leases certain of its properties under operating lease arrangements. Leases for properties are negotiated for terms of one to three years. As at September 30, 2020, the Group’s total lease liabilities recognised under HKFRS16 under non-cancellable leases contracts is RMB89,121.

Contingent liabilities

As at September 30, 2020, the Group did not have any significant contingent liabilities.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, loans, bank overdraft or other similar indebtedness, financial leases or hire purchase commitments, liabilities under acceptances or acceptance credits or guarantees or other material contingent liabilities as at September 30, 2020.

3. MATERIAL ADVERSE CHANGE

Save for the significant decrease in the revenue from the Infusion Set Business for the six months ended June 30, 2020, which is mainly due to the outbreak of COVID-19 starting in early 2020, as of the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since December 31, 2019, the date to which the latest published audited consolidated financial statements of the Group were made up. Please refer to the interim result announcement of the Company dated August 27, 2020 and the profit alert announcement of the Company dated July 6, 2020 for further details on such decrease in revenue.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. WORKING CAPITAL STATEMENT

The Directors, after due and careful enquiry, are of the opinion that, after taking into account the financial resources presently available to the Group including the internally generated funds, the currently available facilities and the effects of the Disposals, and in the absence of unforeseen circumstances, the Group has sufficient working capital for its normal business for at least the next twelve months from the date of this circular.

5. FINANCIAL AND TRADING PROSPECT OF THE GROUP

As a leading medical device company in China, the Company focuses on the fast-growing and highly profitable medical device market in China. Currently, it is mainly engaged in the Infusion Set Business.

The Company has been committed to expanding new markets with great potentials for development and seizing every opportunity in the market to maintain its leading position in the industry. In the first half of 2020, the Group continued to endeavor to expand its product portfolio, enhance its product innovation and R&D capability, while expanding the distribution network in a proactive manner.

As regards the Group’s Infusion Set Business, the Group has been focusing on the continuous improvement of manufacturing materials and function of infusion sets to offer a safer and more reliable infusion treatment solution and mitigate the risk of infusion treatment. Over the years, the Group has maintained its leading position in the domestic advanced infusion sets market in Beijing, Heilongjiang, Jiangsu and Hubei. Meanwhile, the Group’s cannula business also recorded a fast growth, driven by the expanding medical device market. As of the Latest Practicable Date, the Group has obtained two, and expects to further apply for five, registration certificates of cannula products in the next twelve months. It is expected that the cannula market, in which the Group is conducting R&D activities, will continue to grow and the Group’s market share will continue to increase.

Looking forward, as a leading enterprise in the medical device industry of China, the Group will continue to focus on the development of the advanced infusion set and cannula business while continuing to expand its market penetration and distribution network. Meanwhile, the Group will launch brand-new insulin injection needles and insulin injection pens to provide new insulin injection solutions for diabetes patients. As of the Latest Practicable Date, the Group has obtained one registration certificate for its insulin injection needle and one registration certificate for its insulin injection pen. In addition, as of the Latest Practicable Date, the Group has obtained one registration certificate for the disposable intestinal feeding device which is made from high-end plastic materials free from DEHP, expanding the Group’s product lines to enteral feeding devices. Meanwhile, as of the Latest Practicable Date, the Group has obtained one registration certificate for the disposable blood transfusion set with two-layer structure of the tube in which the inner layer is medical-grade polyurethane and the outer layer is made of plastic material free from DEHP. This is

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

the first blood transfusion set with two-layer structure of the tube in China, expanding the Group’s product lines to blood transfusion devices. The Group will be committed to expanding its business coverage and maximizing its competitive edge.

As for innovation and R&D aspects, the Group will continue to invest in product innovation and R&D through cooperation with medical specialists, hospitals (especially Class III Grade A hospitals), first-class university research centers and other research institutions. On development of the Group’s distribution network, as of the Latest Practicable Date, the Group has a team of experienced and dedicated professional sales and marketing staff to support and consolidate its distribution networks in 31 provinces, municipalities and autonomous regions in China and enhance promotion of products from all business segments.

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Immediately after the closing of the Disposals, the Company will cease to hold any interest in CBPO and the results of CBPO will no longer be classified as associate of the Company. Following the Disposals, the Remaining Group will continue to carry on its existing business. The management discussion and analysis of the Remaining Group for each of the three years ended December 31, 2017, 2018 and 2019 is disclosed in the respective annual reports of the Company, and the management discussion and analysis of the Remaining Group for the six months ended June 30, 2020 is disclosed in the relevant interim report of the Company, all of which have been published on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.pwmedtech.com).

– I-4 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

A. PUBLISHED FINANCIAL INFORMATION OF CBPO OF EACH OF THE THREE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019 AND THE SIX MONTHS ENDED JUNE 30, 2020
(1) The following is an extract of the audited financial statements of CBPO for the year ended December 31, 2017, which were prepared in accordance with U.S. GAAP, from the 2017 annual report of CBPO.

CONSOLIDATED BALANCE SHEETS

Note ASSETS Current Assets Cash and cash equivalents Time deposits Accounts receivable, net of allowance for doubtful accounts 3 Loan receivable — current 8 Inventories 5 Prepayments and other current assets, net of allowance for doubtful accounts 4 Total Current Assets Loan receivable — non current 8 Property, plant and equipment, net 6 Land use rights, net Equity method investment 7 Other non-current assets Total Assets	December 31, 2017 USD 219,336,848 22,895,200 77,267,275 45,912,000 209,570,835 18,139,453 593,121,611 — 166,812,749 24,853,163 14,903,908 9,365,986 809,057,417	December 31, 2016 USD 183,765,533 — 33,918,796 — 156,412,674 15,320,913
		389,417,916 43,245,000 132,091,923 23,389,384 10,614,755 6,198,531
		604,957,509

– II-1 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Note LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable Income tax payable 11 Other payables and accrued expenses 10 Total Current Liabilities Deferred income Non-current income tax payable 11 Other liabilities Total Liabilities Shareholders’ Equity Ordinary share: par value $0.0001; 100,000,000 shares authorized; 29,866,545 and 29,427,609 shares issued at December 31, 2017 and 2016, respectively; 27,611,841 and 27,172,905 shares outstanding at December 31, 2017 and 2016, respectively Additional paid-in capital 20 Treasury share: 2,254,704 shares at December 31, 2017 and 2016, respectively, at cost 19 Retained earnings Accumulated other comprehensive income/(losses) Total equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest 20 Total Shareholders’ Equity Commitments and contingencies 16 Total Liabilities and Shareholders’ Equity	December 31, 2017 USD 7,548,909 14,258,544 75,827,864 97,635,317 3,476,877 37,067,138 6,553,088 144,732,420 2,987 140,230,395 (56,425,094) 506,426,436 7,957,304 598,192,028 66,132,969 664,324,997 — 809,057,417	December 31, 2016 USD 6,158,601 7,484,366 59,798,145 73,441,112 3,755,648 — 6,623,926 83,820,686 2,943 105,459,610 (56,425,094) 438,483,401 (25,320,271) 462,200,589 58,936,234 521,136,823 — 604,957,509

See accompanying notes to Consolidated Financial Statements.

– II-2 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Note Sales 15 Cost of sales Gross profit Operating expenses Selling expenses General and administrative expenses Research and development expenses Income from operations Other income (expenses) Equity in income/(loss) of an equity method investee 7 Interest income Interest expense Loss from disposal of a subsidiary Total other income, net Income before income tax expense Income tax expense 11 Net income Less: Net income attributable to noncontrolling interest Net income attributable to China Biologic Products Holdings, Inc.	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 370,406,840 341,169,426 296,457,902 125,517,021 124,034,448 106,482,626 244,889,819 217,134,978 189,975,276 34,843,935 11,679,242 9,973,449 67,683,667 54,519,122 41,391,520 6,503,712 7,021,992 6,024,368 135,858,505 143,914,622 132,585,939 3,509,071 2,519,201 (1,311,278) 7,623,624 7,815,780 5,551,105 (583,432) (254,471) (1,727,335) — (75,891) — 10,549,263 10,004,619 2,512,492 146,407,768 153,919,241 135,098,431 64,171,809 25,125,820 20,992,913 82,235,959 128,793,421 114,105,518 14,292,924 24,014,114 25,062,815 67,943,035 104,779,307 89,042,703	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 370,406,840 341,169,426 296,457,902 125,517,021 124,034,448 106,482,626 244,889,819 217,134,978 189,975,276 34,843,935 11,679,242 9,973,449 67,683,667 54,519,122 41,391,520 6,503,712 7,021,992 6,024,368 135,858,505 143,914,622 132,585,939 3,509,071 2,519,201 (1,311,278) 7,623,624 7,815,780 5,551,105 (583,432) (254,471) (1,727,335) — (75,891) — 10,549,263 10,004,619 2,512,492 146,407,768 153,919,241 135,098,431 64,171,809 25,125,820 20,992,913 82,235,959 128,793,421 114,105,518 14,292,924 24,014,114 25,062,815 67,943,035 104,779,307 89,042,703
	December 31, 2017 USD 370,406,840 125,517,021 244,889,819 34,843,935 67,683,667 6,503,712 135,858,505 3,509,071 7,623,624 (583,432) — 10,549,263 146,407,768 64,171,809 82,235,959 14,292,924 67,943,035	December 31, 2016 USD 341,169,426 124,034,448 217,134,978 11,679,242 54,519,122 7,021,992 143,914,622 2,519,201 7,815,780 (254,471) (75,891) 10,004,619 153,919,241 25,125,820 128,793,421 24,014,114 104,779,307

– II-3 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Note Earnings per share of ordinary share: Basic 17 Diluted Weighted average shares used in computation: 17 Basic Diluted Net income Other comprehensive income/ (losses): Foreign currency translation adjustment, net of nil income taxes Comprehensive income Less: Comprehensive income attributable to noncontrolling interest Comprehensive income attributable to China Biologic Products Holdings, Inc.	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 2.40 3.79 3.40 2.38 3.74 3.27 27,361,561 26,848,445 25,599,153 27,605,623 27,249,144 26,567,366 82,235,959 128,793,421 114,105,518 36,861,394 (31,303,262) (24,368,360) 119,097,353 97,490,159 89,737,158 17,876,743 19,026,592 20,698,249 101,220,610 78,463,567 69,038,909	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 2.40 3.79 3.40 2.38 3.74 3.27 27,361,561 26,848,445 25,599,153 27,605,623 27,249,144 26,567,366 82,235,959 128,793,421 114,105,518 36,861,394 (31,303,262) (24,368,360) 119,097,353 97,490,159 89,737,158 17,876,743 19,026,592 20,698,249 101,220,610 78,463,567 69,038,909
	December 31, 2017 USD 2.40 2.38 27,361,561 27,605,623 82,235,959 36,861,394 119,097,353 17,876,743 101,220,610	December 31, 2016 USD 3.79 3.74 26,848,445 27,249,144 128,793,421 (31,303,262) 97,490,159 19,026,592 78,463,567

See accompanying notes to Consolidated Financial Statements.

– II-4 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Ordinary share	Ordinary share	Additional paid-in capital Treasury stock Retained earnings USD USD USD 24,008,281 (76,570,621) 244,661,391 — — 89,042,703 — — — 12,114,272 — — 1,225,941 — — 60,438,432 20,145,527 — (452,962) — — 7,745,900 — — (19) — — 105,079,845 (56,425,094) 333,704,094 — — 104,779,307 — — — — — — 24,405,511 — — 2,299,316 — — 513,397 — — (30,397,196) — — 3,558,762 — — (25) — — 105,459,610 (56,425,094) 438,483,401 — — 67,943,035 — — — — — — 33,903,283 — — 867,537 — — (35) — — 140,230,395 (56,425,094) 506,426,436	Additional paid-in capital Treasury stock Retained earnings USD USD USD 24,008,281 (76,570,621) 244,661,391 — — 89,042,703 — — — 12,114,272 — — 1,225,941 — — 60,438,432 20,145,527 — (452,962) — — 7,745,900 — — (19) — — 105,079,845 (56,425,094) 333,704,094 — — 104,779,307 — — — — — — 24,405,511 — — 2,299,316 — — 513,397 — — (30,397,196) — — 3,558,762 — — (25) — — 105,459,610 (56,425,094) 438,483,401 — — 67,943,035 — — — — — — 33,903,283 — — 867,537 — — (35) — — 140,230,395 (56,425,094) 506,426,436	Accumulated other comprehensive income (loss) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD 19,985,189 212,087,027 63,174,703 275,261,730 — 89,042,703 25,062,815 114,105,518 (20,003,794) (20,003,794) (4,364,566) (24,368,360) — 12,114,272 — 12,114,272 — 1,225,941 292,761 1,518,702 — 80,583,959 — 80,583,959 — (452,962) 452,962 — — 7,745,978 — 7,745,978 — — — — (18,605) 382,343,124 84,618,675 466,961,799 — 104,779,307 24,014,114 128,793,421 (26,315,740) (26,315,740) (4,987,522) (31,303,262) — — (10,901,312) (10,901,312) — 24,405,511 — 24,405,511 — 2,299,316 314,515 2,613,831 — 513,397 (513,397) — 1,014,074 (29,383,122) (33,608,839) (62,991,961) — 3,558,796 — 3,558,796 — — — — (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008) — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997	Accumulated other comprehensive income (loss) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD 19,985,189 212,087,027 63,174,703 275,261,730 — 89,042,703 25,062,815 114,105,518 (20,003,794) (20,003,794) (4,364,566) (24,368,360) — 12,114,272 — 12,114,272 — 1,225,941 292,761 1,518,702 — 80,583,959 — 80,583,959 — (452,962) 452,962 — — 7,745,978 — 7,745,978 — — — — (18,605) 382,343,124 84,618,675 466,961,799 — 104,779,307 24,014,114 128,793,421 (26,315,740) (26,315,740) (4,987,522) (31,303,262) — — (10,901,312) (10,901,312) — 24,405,511 — 24,405,511 — 2,299,316 314,515 2,613,831 — 513,397 (513,397) — 1,014,074 (29,383,122) (33,608,839) (62,991,961) — 3,558,796 — 3,558,796 — — — — (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008) — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997	Accumulated other comprehensive income (loss) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD 19,985,189 212,087,027 63,174,703 275,261,730 — 89,042,703 25,062,815 114,105,518 (20,003,794) (20,003,794) (4,364,566) (24,368,360) — 12,114,272 — 12,114,272 — 1,225,941 292,761 1,518,702 — 80,583,959 — 80,583,959 — (452,962) 452,962 — — 7,745,978 — 7,745,978 — — — — (18,605) 382,343,124 84,618,675 466,961,799 — 104,779,307 24,014,114 128,793,421 (26,315,740) (26,315,740) (4,987,522) (31,303,262) — — (10,901,312) (10,901,312) — 24,405,511 — 24,405,511 — 2,299,316 314,515 2,613,831 — 513,397 (513,397) — 1,014,074 (29,383,122) (33,608,839) (62,991,961) — 3,558,796 — 3,558,796 — — — — (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008) — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997	Accumulated other comprehensive income (loss) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD 19,985,189 212,087,027 63,174,703 275,261,730 — 89,042,703 25,062,815 114,105,518 (20,003,794) (20,003,794) (4,364,566) (24,368,360) — 12,114,272 — 12,114,272 — 1,225,941 292,761 1,518,702 — 80,583,959 — 80,583,959 — (452,962) 452,962 — — 7,745,978 — 7,745,978 — — — — (18,605) 382,343,124 84,618,675 466,961,799 — 104,779,307 24,014,114 128,793,421 (26,315,740) (26,315,740) (4,987,522) (31,303,262) — — (10,901,312) (10,901,312) — 24,405,511 — 24,405,511 — 2,299,316 314,515 2,613,831 — 513,397 (513,397) — 1,014,074 (29,383,122) (33,608,839) (62,991,961) — 3,558,796 — 3,558,796 — — — — (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008) — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997
Number of Shares 27,865,871 — — — — — — 780,557 188,625	Par value USD 2,787 — — — — — — 78 19
28,835,053	2,884	105,079,845
— — — — — — — 337,406 255,150	— — — — — — — 34 25
29,427,609	2,943	105,459,610				58,936,234	521,136,823
— — — — 85,242 353,694	— — — — 9 35		67,943,035 — — — — —	— 33,277,575 — — — —	67,943,035 33,277,575 — 33,903,283 867,546 —	14,292,924 82,235,959 3,583,819 36,861,394 (10,680,008) (10,680,008) — 33,903,283 — 867,546 — —
29,866,545	2,987	140,230,395		7,957,304	598,192,028	66,132,969	664,324,997

See accompanying notes to Consolidated Financial Statements.

– II-5 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization Loss on disposal of property, plant and equipment Allowance for doubtful accounts — accounts receivable, net Allowance for doubtful accounts — prepayments and other receivables Impairment for other non-current assets Write-down of obsolete inventories Deferred income tax benefit Share-based compensation Equity in (income)/loss of an equity method investee Loss from disposal of a subsidiary Excess tax benefits from share-based compensation arrangements Change in operating assets and liabilities: Accounts receivable Inventories Prepayments and other current assets Accounts payable Income tax payable Other payables and accrued expenses Deferred income Non-current income tax payable Net cash provided by operating activities	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 82,235,959 128,793,421 114,105,518 11,691,731 11,962,983 8,179,376 1,216,959 775,053 854,364 3,228,845 293,098 3,024,830 23,783 123,239 34,902 — 65,341 788 — 1,225,200 — — 256,862 76,587 (3,252,516) (3,006,541) (170,345) 33,903,283 24,405,511 12,114,272 (3,509,071) (2,519,201) 1,311,278 — 75,891 — — (2,613,831) (1,518,702) (39,918,939) (10,971,773) (7,146,311) (42,078,261) (40,077,384) (32,095,328) (1,777,783) 1,946,800 879,165 977,152 2,966,885 5,348,896 6,047,808 6,022,145 (1,926,093) 16,821,694 4,221,669 6,734,988 (493,897) (686,757) (416,185) 37,067,138 — — 102,183,885 123,258,611 109,392,000	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 82,235,959 128,793,421 114,105,518 11,691,731 11,962,983 8,179,376 1,216,959 775,053 854,364 3,228,845 293,098 3,024,830 23,783 123,239 34,902 — 65,341 788 — 1,225,200 — — 256,862 76,587 (3,252,516) (3,006,541) (170,345) 33,903,283 24,405,511 12,114,272 (3,509,071) (2,519,201) 1,311,278 — 75,891 — — (2,613,831) (1,518,702) (39,918,939) (10,971,773) (7,146,311) (42,078,261) (40,077,384) (32,095,328) (1,777,783) 1,946,800 879,165 977,152 2,966,885 5,348,896 6,047,808 6,022,145 (1,926,093) 16,821,694 4,221,669 6,734,988 (493,897) (686,757) (416,185) 37,067,138 — — 102,183,885 123,258,611 109,392,000
	December 31, 2017 USD 82,235,959 11,691,731 1,216,959 3,228,845 23,783 — — — (3,252,516) 33,903,283 (3,509,071) — — (39,918,939) (42,078,261) (1,777,783) 977,152 6,047,808 16,821,694 (493,897) 37,067,138 102,183,885	December 31, 2016 USD 128,793,421 11,962,983 775,053 293,098 123,239 65,341 1,225,200 256,862 (3,006,541) 24,405,511 (2,519,201) 75,891 (2,613,831) (10,971,773) (40,077,384) 1,946,800 2,966,885 6,022,145 4,221,669 (686,757) — 123,258,611

– II-6 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CASH FLOWS FROM INVESTING ACTIVITIES: Payment for time deposits Payment for property, plant and equipment Payment for intangible assets and land use rights Refund of payments and deposits related to land use right Proceeds from disposal of property, plant and equipment and land use rights Loans lent to a third party Proceeds from disposal of a subsidiary Receipt of government grants related to property and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock option exercised Proceeds from short-term bank loans Repayment of short-term bank loans Repayment of long-term bank loans Maturity of deposit as security for bank loans Net proceeds from reissuance of treasury stock Excess tax benefits from share-based compensation arrangements Dividend paid by subsidiaries to noncontrolling interest shareholders Dividend to the trial court to be held in escrow as to dispute with Jie’an Payment to noncontrolling interest shareholders in connection with their capital withdrawal Net cash (used in)/provided by financing activities	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD (22,669,000) — — (37,504,440) (49,371,318) (38,790,998) (786,691) (1,635,891) (13,500,526) — 10,297,893 — 64,914 393,019 827,020 — (12,332,718) (40,744,167) — 128,654 — — — 2,452,864 (60,895,217) (52,520,361) (89,755,807) 867,546 3,558,796 7,745,978 23,009,280 — 15,770,881 (23,412,060) — (47,201,255) — — (66,300,000) — 37,756,405 63,152,258 — — 80,583,959 — 2,613,831 1,518,702 (18,789,151) (7,921,952) — — — (3,690,814) — (58,091,018) — (18,324,385) (22,083,938) 51,579,709	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD (22,669,000) — — (37,504,440) (49,371,318) (38,790,998) (786,691) (1,635,891) (13,500,526) — 10,297,893 — 64,914 393,019 827,020 — (12,332,718) (40,744,167) — 128,654 — — — 2,452,864 (60,895,217) (52,520,361) (89,755,807) 867,546 3,558,796 7,745,978 23,009,280 — 15,770,881 (23,412,060) — (47,201,255) — — (66,300,000) — 37,756,405 63,152,258 — — 80,583,959 — 2,613,831 1,518,702 (18,789,151) (7,921,952) — — — (3,690,814) — (58,091,018) — (18,324,385) (22,083,938) 51,579,709
	December 31, 2017 USD (22,669,000) (37,504,440) (786,691) — 64,914 — — — (60,895,217) 867,546 23,009,280 (23,412,060) — — — — (18,789,151) — — (18,324,385)	December 31, 2016 USD — (49,371,318) (1,635,891) 10,297,893 393,019 (12,332,718) 128,654 — (52,520,361) 3,558,796 — — — 37,756,405 — 2,613,831 (7,921,952) — (58,091,018) (22,083,938)

– II-7 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flow information Cash paid for income taxes Cash paid for interest expense Noncash investing and financing activities: Acquisition of property, plant and equipment included in payables Loan receivable offset by accounts payable	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 12,607,032 (9,826,672) (7,098,233) 35,571,315 38,827,640 64,117,669 183,765,533 144,937,893 80,820,224 219,336,848 183,765,533 144,937,893 24,691,429 22,210,476 23,348,371 252,353 84,664 1,526,807 7,548,964 4,912,937 6,363,392 — 5,848,400 —	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 12,607,032 (9,826,672) (7,098,233) 35,571,315 38,827,640 64,117,669 183,765,533 144,937,893 80,820,224 219,336,848 183,765,533 144,937,893 24,691,429 22,210,476 23,348,371 252,353 84,664 1,526,807 7,548,964 4,912,937 6,363,392 — 5,848,400 —
	December 31, 2017 USD 12,607,032 35,571,315 183,765,533 219,336,848 24,691,429 252,353 7,548,964 —	December 31, 2016 USD (9,826,672) 38,827,640 144,937,893 183,765,533 22,210,476 84,664 4,912,937 5,848,400

See accompanying notes to Consolidated Financial Statements.

– II-8 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017, 2016 and 2015

NOTE 1 — DESCRIPTION OF BUSINESS AND SIGNIFICANT CONCENTRATIONS AND RISKS

China Biologic Products Holdings, Inc. (‘‘CBP’’) and its subsidiaries (collectively, the ‘‘Company’’), through its subsidiaries in the People’s Republic of China (the ‘‘PRC’’), is a biopharmaceutical company that is principally engaged in the research, development, manufacturing and sales of plasma-based pharmaceutical products in the PRC. The PRC subsidiaries own and operate plasma collection stations that purchase and collect plasma from individual donors. The plasma is processed into finished goods after passing through a series of fractionating processes. All of the Company’s plasma products are prescription medicines that require government approval before the products are sold to customers. The Company primarily sells its products to hospitals and inoculation centers directly or through distributors in the PRC.

On July 21, 2017, China Biologic Products Holdings, Inc. (the ‘‘Successor’’) succeeded to the interests of China Biologic Products, Inc. (the ‘‘Predecessor’’) following a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the ‘‘Merger Agreement’’) between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor, with the Successor surviving the merger and each issued and outstanding shares of Predecessor’s common stock being converted into the right to receive one ordinary share of the Successor. The consolidated financial statements of the Successor represents the continuation of the financial statements of the Predecessor, reflecting the assets and liabilities, retained earnings and other equity balances of the Predecessor before the domiciliation. The equity structure is restated using the exchange ratio established in the Merger Agreement to reflect the number of shares of the Successor.

Cash Concentration

The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located in Hong Kong or may exceed the insured limits for its bank accounts in China established by China Deposit Insurance Fund Management Institution. Total cash at banks and deposits, including cash and equivalents and time deposits, as of December 31, 2017 and December 31, 2016 amounted to $241,761,593 and $183,078,440, respectively, of which $2,577,139 and $2,744,704 are insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.

Sales Concentration

The Company’s two major products are human albumin and human immunoglobulin for intravenous injection (‘‘IVIG’’). Human albumin accounted for 35.8%, 39.2% and 37.6% of the total sales for the years ended December 31, 2017, 2016 and 2015, respectively. IVIG accounted for 31.7%, 34.6% and 42.2% of the total sales for the years ended December 31, 2017, 2016 and 2015, respectively. If the market demands for human albumin and IVIG cannot be sustained in the future or the price of human albumin and IVIG decreases, the Company’s operating results could be adversely affected.

Substantially all of the Company’s customers are located in the PRC. There were no customers that individually comprised 10% or more of sales during the years ended December 31, 2017, 2016 and 2015. No individual customer represented 10% or more of accounts receivables as at December 31, 2017 and 2016. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.

– II-9 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Purchase Concentration

There was one supplier, namely, Xinjiang Deyuan Bioengineering Co., Ltd. (‘‘Xinjiang Deyuan’’) (see Note 8), that comprised 10% or more of the total purchases during the year ended December 31, 2017, 2016 and 2015. Chongqing Sanda Great Exploit Pharmaceutical Co, Ltd. (‘‘Chongqing Sanda’’) represented more than 10% of accounts payables as at December 31, 2017. Chongqing Sanda and Xinjiang Deyuan represented more than 10% of accounts payables as at December 31, 2016.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (‘‘GAAP’’), and include the financial statements of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment and intangibles with definite lives, the collectability of accounts receivable and loan receivable, the fair value determinations of stock compensation awards, the realizability of deferred income tax assets and inventories, the recoverability of intangible assets, land use rights, property, plant and equipment and equity method investment, and accruals for income tax uncertainties and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

Foreign Currency Translation

The accompanying consolidated financial statements of the Company are reported in US dollar. The financial position and results of operations of the Company’s subsidiaries in the PRC are measured using the Renminbi, which is the local and functional currency of these entities. Assets and liabilities of the subsidiaries are translated at the prevailing exchange rate in effect at each period end. Revenues and expenses are translated at the average rate of exchange during the period. Translation adjustments are included in other comprehensive income/(losses).

Revenue Recognition

Revenue represents the invoiced amount of products sold, net of value added taxes (VAT).

Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred and the customer takes ownership and assumes risk of loss, the sales price is fixed or determinable and collection of the relevant receivable is probable. The Company mainly sells human albumin and human immunoglobulin to hospitals, inoculation centers and pharmaceutical distributors. For all sales, the Company requires a signed contract or purchase order, which specify pricing, quantity and product specifications. Delivery of the product occurs when the customer receives the product, which is when the risks and rewards of ownership have been transferred. Delivery is evidenced by signed customer acknowledgement. The Company’s sales agreements do not provide the customer the right of return, unless the product is defective in which case the Company allows for an exchange of product or return. For the periods presented, defective product returns were inconsequential.

– II-10 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

. Level 1 Inputs: Unadjusted quoted prices for identical assets or liabilities in active markets accessible to the entity at the measurement date.
. Level 2 Inputs: Other than quoted prices included in Level 1, inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
. Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

See Note 14 to the Consolidated Financial Statements.

Cash and Cash Equivalents

Cash consists of cash on hand and demand deposits. The Company considers all highly liquid investments with original maturities of three-month or less at the time of purchase to be cash equivalents. Cash and cash equivalents at December 31, 2017 and 2016 include $135,728,697 and $98,022,000 of certificates of deposit with an initial term of three months or less.

As of December 31, 2017 and 2016, the Company maintained cash and cash equivalents at banks in the following locations:

PRC, excluding Hong Kong U.S. Total	December 31, 2017 USD 214,157,592 4,708,801 218,866,393	December 31, 2016 USD 171,539,309 11,539,131
		183,078,440

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses, the customers’ financial condition, the amount of accounts receivables in dispute, the accounts receivables aging and the customers’ payment patterns. The Company reviews its allowance for doubtful accounts monthly. Past due balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

– II-11 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. Cost of work- in-process and finished goods comprise direct materials, direct production costs and an allocation of production overheads based on normal operating capacity. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to its estimated net realizable value based on historical and forecasted demand.

Property, Plant and Equipment

Property, plant and equipment are stated at cost.

Depreciation of property, plant and equipment attributable to manufacturing activities is capitalized as part of inventories, and recognized as cost of sales when the inventory is sold. Cost incurred in the construction of property, plant and equipment, including downpayments and progress payments, are initially capitalized as construction-in-progress and transferred into their respective asset categories when the assets are ready for their intended use, at which time depreciation commences.

Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

Buildings		30 years
Machinery	and equipment	10 years
Furniture,	fixtures, office equipment and vehicles	5–10 years

When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and the proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized and amortized over the remaining useful life.

Equity Method Investment

Investment in an investee in which the Company has the ability to exercise significant influence, but does not have a controlling interest is accounted for using the equity method. Significant influence is generally presumed to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the board of directors and participation in policy-making processes, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the Company’s share of the investee’s results of operations is included in other income (expenses) in the Company’s consolidated statements of comprehensive income. Deferred taxes are provided for the difference, if any, between the book and tax basis of the investment. The Company determines the difference between the carrying amount of the investee and the underlying equity in net assets which results in an excess basis in the investment. The excess basis is allocated to the underlying assets and equity method goodwill of the Company’s investee. The excess basis allocated to the underlying assets is either amortized or depreciated over the applicable useful lives. The equity method goodwill, which is $1,252,387 and $1,179,637 at December 31, 2017 and 2016, respectively, is not amortized or tested for impairment; instead the equity method investment is tested for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. The Company recognizes a loss if it is determined that other than temporary decline in the value of the investment exists. The process of assessing and determining whether an impairment on a particular equity investment is other than temporary requires significant amount of judgment. To determine whether an impairment is other-than-temporary, management considers whether the Company has the ability and intent to hold the investment until recovery and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. No impairment loss was recognized by the Company for the years ended December 31, 2017, 2016 and 2015.

– II-12 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Government Grants

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received. Grants that compensate research and development expenses are recognized as a reduction to the related research and development expenses. Grants that compensate the Company for the cost of property, plant and equipment and land use rights are recognized as deferred income and are recognized as a reduction of depreciation and amortization during the useful life of the asset.

For the year ended December 31, 2017, the Company received government grants of RMB2,405,210 (approximately $368,093), which have been recognized as a reduction of research and development expenses.

For the year ended December 31, 2016, the Company received government grants of RMB5,056,361 (approximately $728,874), which have been recognized as a reduction of research and development expenses.

For the year ended December 31, 2015, the Company received government grants of RMB15,000,000 (approximately $2,452,864) related to the new manufacturing facilities for factor products in Shandong Taibang, which was recorded as deferred income. These grants are amortized as the related assets are depreciated. The grants amortized amounted to $222,143, $410,369 and $118,751 for the year ended December 31, 2017, 2016 and 2015, respectively. For the year ended December 31, 2015, government grants of RMB7,280,600 (approximately $1,188,907), have been recognized as a reduction of research and development expenses.

For the year ended December 31, 2012, the Company received government grants of RMB18,350,000 (approximately $2,989,215) related to the technical upgrade of the manufacturing facilities in Guizhou Taibang. The grants amortized amounted to $271,754, $276,388 and $297,434 for the years ended December 31, 2017, 2016 and 2015, respectively.

Land Use Rights

Land use rights represent the exclusive right to occupy and use a piece of land in the PRC for a specified contractual term. Land use rights are carried at cost, less accumulated amortization. Amortization is calculated using the straight-line method over the contractual period of the rights ranging from 40 to 50 years.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses for the years ended December 31, 2017, 2016 and 2015 were $6,503,712, $7,021,992 and $6,024,368, respectively. These expenses include the costs of the Company’s internal research and development activities.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of comprehensive income in the period that includes the enactment date. A valuation allowance is provided to reduce the amount of deferred income tax assets if it is considered more likely than not that some portion or all of the deferred income tax assets will not be realized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses.

– II-13 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Employee Benefit Plans

Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 25% to 43% on a standard salary base as determined by local social security bureau. Contributions to the defined contribution plans are charged to the consolidated statements of comprehensive income when the related service is provided. For the years ended December 31, 2017, 2016 and 2015, the costs of the Company’s contributions to the defined contribution plans amounted to US$3,763,276, US$3,258,629, and US$2,981,962, respectively.

The Company has no other obligation for the payment of employee benefits associated with these plans beyond the contributions described above.

Share-based Payment

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. For graded vesting awards, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date.

Long-lived Assets

Long-lived assets, including property, plant and equipment, land use rights and purchased intangible asset subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Earnings per Share

Basic earnings per ordinary share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary share outstanding during the year using the two-class method. Under the two-class method, net income is allocated between ordinary share and other participating securities based on their participating rights in undistributed earnings. The Company’s nonvested shares were considered participating securities since the holders of these securities participate in dividends on the same basis as ordinary shareholders. Diluted earnings per share is calculated by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary share equivalent, if any, by the weighted average number of ordinary share and dilutive ordinary share equivalent outstanding during the year. Potential dilutive securities are not included in the calculation of diluted earnings per share if the impact is antidilutive.

Segment Reporting

The Company has one operating segment, which is the human plasma products segment. Substantially all of the Company’s operations and customers are located in the PRC, and therefore, no geographic information is presented.

– II-14 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations and tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Disclosure will be made if an unfavorable outcome is determined to be reasonably possible but not probable, or if the amount of loss cannot be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter of 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) — Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09. The new revenue standard may be applied retrospectively to each prior period presented (‘‘full retrospective method) or retrospectively with the cumulative effect recognized as of the date of adoption (‘‘modified retrospective method’’). The Company plans to apply the modified retrospective method to those contracts that are not completed contracts on January 1, 2018 upon adoption of ASU 2014-09. The Company has completed its evaluation by the third quarter of 2017 and concluded that no impact on the retained earnings as of January 1, 2018 and no material impact on its consolidated financial statements and related disclosures as a result of the new adoption of the guidance.

In July 2015, the FASB issued ASU No.2015-11, Simplifying the Measurement of Inventory (‘‘ASU 2015-11’’), which eliminated previous analysis of measurement of inventory and requires to measure most inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. The Company adopted ASU 2015-11 on January 1, 2017 and concluded that no impact on its consolidated financial statements as a result of the new adoption of the guidance.

In February 2016, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2016-02, Leases (Topic 842) (‘‘ASU 2016-02’’), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. ASU 2016-02 is effective for public companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2016-02 on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addressed and provided guidance for each of eight specific cash flow issues with the objective of reducing the existing diversity in practice. This standard will be effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has early adopted ASU 2016-15 on its consolidated financial statements since January 1, 2017 and there was no impact as a result of the adoption.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This standard required that companies recognize the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs. Current guidance prohibits companies from recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This standard will be effective for public companies for annual periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has adopted ASU 2016-16 on its consolidated financial statements and there was no impact as a result of the adoption.

– II-15 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Effective January 1, 2017, on a retrospective basis, the Company adopted the Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Update (‘‘ASU’’) 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740). This update required that deferred income tax assets and liabilities be classified as noncurrent. As a result of adoption of this guidance, the Company reclassified current deferred income tax assets in the amount of $4,625,996, which had been included in prepayments and other current assets, to other noncurrent assets as of December 31, 2016. There was no impact on results of operations or cash flows as a result of the adoption of this guidance.

Effective January 1, 2017, the Company adopted the FASB ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The standard simplified certain aspects of the accounting for share-based payment transactions, including recognition of excess tax benefits and deficiencies, classification of awards and classification in the statement of cash flows. As a result of adoption, the Company elected to adopt the change regarding income taxes on a prospective basis to recognize excess tax benefits and deficiencies from stock-based compensation as a discrete item in income tax expense, which were historically recorded as additional paid-in-capital. In addition, the Company elected to apply the change regarding classification in the statement of cash flows prospectively to record excess tax benefits from stock-based compensation from cash flows from financing activities to cash flows from operating activities. Excess tax benefits for the year ended December 31, 2017 was $621,381 and the adoption of this standard had no material impact on the Company’s financial statements.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. If substantially all of the fair value is concentrated in a single asset or a group of similar assets, the acquired set is not a business. If this is not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. Determining whether a set constitutes a business is critical because the accounting for a business combination differs significantly from that of an asset acquisition. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. ASU 2017-01 will be applied prospectively to any transactions occurring within the period of adoption. Early adoption is permitted, including for interim or annual periods in which the financial statements have not been issued or made available for issuance. The Company will adopt ASU 2017-01 from January 1, 2018 for the acquisition of Tianxinfu and management conclude that no impact on the conclusion of it being a business combination (see Note 21 to the consolidated financial statements).

NOTE 3 — ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2017 and 2016 consisted of the following:

Accounts receivable Less: Allowance for doubtful accounts Total	December 31, 2017 USD 77,858,266 (590,991) 77,267,275	December 31, 2016 USD 34,452,392 (533,596) 33,918,796

– II-16 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

The activity in the allowance for doubtful accounts — accounts receivable for the years ended December 31, 2017, 2016 and 2015 are as follows:

Beginning balance Provisions Foreign currency translation adjustment Ending balance	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2017 USD 533,596 23,783 33,612 590,991	December 31, 2016 USD 443,624 123,239 (33,267) 533,596	December 31, 2015 USD 433,948 34,902 (25,226)
			443,624

NOTE 4 — PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets as of December 31, 2017 mainly represented other receivables of $10,412,739 and prepayments of $4,886,604. Prepayments and other current assets as of December 31, 2016 mainly represented other receivables of $10,117,032 and prepayments of $2,921,069.

The activity in the allowance for doubtful accounts — prepayments and other receivables for the years ended December 31, 2017, 2016 and 2015 are as follows:

Beginning balance Provisions Foreign currency translation adjustment Ending balance	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2017 USD 4,671,896 — 288,124 4,960,020	December 31, 2016 USD 4,924,063 65,341 (317,508) 4,671,896	December 31, 2015 USD 5,207,840 788 (284,565)
			4,924,063

NOTE 5 — INVENTORIES

Inventories at December 31, 2017 and 2016 consisted of the following:

Raw materials Work-in-process Finished goods Total	December 31, 2017 USD 107,651,325 42,202,306 59,717,204 209,570,835	December 31, 2016 USD 80,781,903 24,994,839 50,635,932
		156,412,674

– II-17 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 6 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2017 and 2016 consisted of the following:

Buildings Machinery and equipment Furniture, fixtures, office equipment and vehicles Total property, plant and equipment, gross Accumulated depreciation Total property, plant and equipment, net Construction in progress Prepayment for property, plant and equipment Property, plant and equipment, net	December 31, 2017 USD 41,669,081 41,102,242 9,980,062 92,751,385 (33,862,836) 58,888,549 105,226,787 2,697,413 166,812,749	December 31, 2016 USD 34,131,032 52,467,764 7,843,567 94,442,363 (39,315,011) 55,127,352 61,825,470 15,139,101 132,091,923

As a result of the planned commencement of operation of the new facility, the Company disposed certain machinery and equipment in the old facility of Shandong Taibang and incurred a disposal loss of $3,228,845 for the year ended December 31, 2017. Loss on disposal of property, plant and equipment for the years ended December 31, 2016 and 2015 was 293,098 and 3,024,830, respectively.

Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $11,691,731, $11,962,983 and $8,179,376, respectively. No interest expenses were capitalized into construction in progress for the years ended December 31, 2017, 2016 and 2015.

NOTE 7 — EQUITY METHOD INVESTMENT

The Company’s equity method investment as of December 31, 2017 and 2016 represented 35% equity interest investment in Xi’an Huitian Blood Products Co., Ltd. (‘‘Huitian’’).

In October 2008, Shandong Taibang entered into an equity purchase agreement with one of the equity owners of Huitian (‘‘Seller’’) to acquire 35% equity interest in Huitian.

NOTE 8 — LOAN RECEIVABLE

In August 2015, the Company entered into a cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan. Pursuant to the agreement, Guizhou Taibang agreed to provide Xinjiang Deyuan with an interest-bearing loan at an interest rate of 6% per annum with an aggregate principal amount of RMB300,000,000 (approximately $45,912,000). The loan is due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan. Interest will be paid on the 20th day of the last month of each quarter.

Interest income of $2,514,936 was recognized and received by Guizhou Taibang for the year ended December 31, 2017. $2,661,700 was recognized and $1,985,767 was received in cash by Guizhou Taibang and $675,933 was offset by accounts payable for the purchase of plasma from Xinjiang Deyuan for the year ended December 31, 2016. Interest income of $496,170 was accrued and received by Guizhou Taibang for the year ended December 31, 2015.

– II-18 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 9 — SHORT-TERM BANK LOANS

In March 2017, the Company obtained a one-year unsecured loan of RMB60,000,000 (approximately $8,715,000) from Bank of China (Taishan Branch) at an interest rate of 4.5675% per annum. The loan is due on March 21, 2018 and interest will be paid on the 21th day of each month. In May 2017, the Company repaid the loan before maturity date.

In April 2017, the Company obtained a one-year unsecured loan of RMB98,000,000 (approximately $14,465,780) from China Everbright Bank at an interest rate of 4.35% per annum. The loan is due on March 31, 2018 and interest will be paid on the 20th day of each month. In July 2017, the Company repaid the loan before maturity date.

NOTE 10 — OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses at December 31, 2017 and 2016 consisted of the following:

Payables to a potential investor(1) Salaries and bonuses payable Accruals for sales promotion fee Dividends payable to noncontrolling interest(2) Payables for construction work Other tax payables Advance from customers Deposits received Others Total	December 31, 2017 USD 8,679,073 19,770,025 19,346,659 — 9,135,810 2,891,714 2,425,975 6,662,705 6,915,903 75,827,864	December 31, 2016 USD 7,941,013 16,740,846 4,391,160 7,952,467 5,364,441 1,918,248 3,976,832 4,640,244 6,872,894
		59,798,145

(1) The payables to a potential investor comprises deposits received from a potential investor in the amount of $5,227,846 and $4,924,164 as of December 31, 2017 and 2016, respectively, and related interest plus penalty on these deposits totaling $3,451,227 and $3,016,849 as of December 31, 2017 and 2016, respectively.
(2) In March and July 2017, Shandong Taibang declared a cash dividend distribution amounting RMB220,000,000 (approximately $31,955,000) and RMB200,000,000 (approximately $29,994,000), of which RMB37,928,000 (approximately $5,509,042) and RMB34,480,000 (approximately $5,170,966) represented the dividends payable to a noncontrolling interest shareholder. In August 2017, all dividends payable balance was fully paid to the noncontrolling interest shareholder.

NOTE 11 — INCOME TAX

The Company and each of its subsidiaries file separate income tax returns.

– II-19 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

The United States of America

China Biologic Products Inc. was originally incorporated on December 20, 1989 under the laws of the State of Texas as Shepherd Food Equipment, Inc. On November 20, 2000, Shepherd Food Equipment, Inc. changed its corporate name to Shepherd Food Equipment, Inc. Acquisition Corp., or Shepherd. Shepherd is the survivor of a May 28, 2003 merger between Shepherd and GRC Holdings, Inc., or GRC, a Texas corporation. In the merger, the surviving corporation adopted the articles of incorporation and bylaws of GRC and changed its corporate name to GRC Holdings, Inc. On January 10, 2007, a plan of conversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc.

With the completion of domiciliation to the Cayman Islands on July 21, 2017, China Biologic Products Inc. was merged with and into China Biologic Products Holdings, Inc., with China Biologic Products Holdings, Inc. as the surviving company.

China Biologic Products Holdings, Inc. continued to be a U.S. corporation for U.S. federal income tax purposes and is subject to U.S. federal corporate income tax at gradual rates of up to 35% for year 2017.

On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was enacted. The Tax Act has made significant changes to the U.S. Internal Revenue Code, including the taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, disallowing certain deductions that had previously been allowed, altering the expensing of capital expenditures, adopting elements of a territorial tax system, assessing a repatriation tax or ‘‘toll-charge’’ on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions. The Company recorded a charge of approximately $40.3 million for the repatriation tax on deemed repatriation to the United States of accumulated earnings. The charge for deemed repatriation will be payable by the Company over an eight-year period commencing April 2018.

$40.3 million repatriation tax, as a provisional amount, represents the Company’s reasonable estimate for income tax effects of the Tax Act, to the extent that the Company’s accounting for certain income tax effects is incomplete as additional information is needed to be prepared, analyzed and computations.

The actual impact of the U.S. Tax Reform on the Company may differ from management’s estimates, and management may update the provisional amount upon obtaining, preparing or analyzing additional information, based on its review of future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.

Cayman Islands

Under the current laws of Cayman Islands, China Biologic Products Holdings, Inc. is not subject to tax on its income or capital gains.

British Virgin Islands

Taibang Biological is incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands (BVI), Taibang Biological is not subject to tax on income or capital gains. In addition, upon payments of dividends by Taibang Biological, no British Virgin Islands withholding tax is imposed.

Hong Kong

Taibang Holdings (Hong Kong) Limited (‘‘Taibang Holdings’’, formerly known as ‘‘Logic Holdings (Hong Kong) Limited’’) is incorporated in Hong Kong and is subject to Hong Kong’s profits tax rate of 16.5% for the years ended December 31, 2017, 2016 and 2015. Taibang Holdings did not earn any income that was derived in Hong Kong for the years ended December 31, 2017, 2016 and 2015. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

– II-20 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

PRC

The PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% unless otherwise specified.

In October 2014, Shandong Taibang obtained a notice from the Shandong provincial government that granted it the High and New Technology Enterprise certificate. This certificate entitled Shandong Taibang to enjoy a preferential income tax rate of 15% for a period of three years from 2014 to 2016. In October 2017, Shandong Taibang renewed its high and new technology enterprise qualification, which entitled it to enjoy a preferential income tax rate of 15.0% for a period of three years from 2017 to 2019.

According to CaiShui [2011] No. 58 dated July 27, 2011, Guizhou Taibang, being a qualified enterprise located in the western region of the PRC, enjoys a preferential income tax rate of 15% effective retroactively from January 1, 2011 to December 31, 2020.

The components of earnings (losses) before income tax expense by jurisdictions are as follows:

PRC, excluding Hong Kong U.S. BVI Hong Kong Total	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 171,787,763 170,830,607 147,580,488 (28,866,395) (19,408,283) (11,711,102) 3,488,680 2,498,629 (1,336,183) (2,280) (1,712) 565,228 146,407,768 153,919,241 135,098,431	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 171,787,763 170,830,607 147,580,488 (28,866,395) (19,408,283) (11,711,102) 3,488,680 2,498,629 (1,336,183) (2,280) (1,712) 565,228 146,407,768 153,919,241 135,098,431
	December 31, 2017 USD 171,787,763 (28,866,395) 3,488,680 (2,280) 146,407,768	December 31, 2016 USD 170,830,607 (19,408,283) 2,498,629 (1,712) 153,919,241

Income tax expense for the years ended December 31, 2017, 2016 and 2015 represents current income tax expense and deferred income tax benefit:

Current income tax expense Deferred income tax benefit Total income tax expense	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 67,424,325 28,132,361 21,163,258 (3,252,516) (3,006,541) (170,345) 64,171,809 25,125,820 20,992,913	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 67,424,325 28,132,361 21,163,258 (3,252,516) (3,006,541) (170,345) 64,171,809 25,125,820 20,992,913
	December 31, 2017 USD 67,424,325 (3,252,516) 64,171,809	December 31, 2016 USD 28,132,361 (3,006,541) 25,125,820

– II-21 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

The effective income tax rate based on income tax expense and earnings before income taxes reported in the consolidated statements of comprehensive income differs from the PRC statutory income tax rate of 25% due to the following:

PRC statutory income tax rate Non-deductible expenses: Share-based compensation Others Tax rate differential Effect of PRC preferential tax rate Bonus deduction on research and development expenses Change in valuation allowance Repatriation tax Tax effect of equity method investment Excess tax benefits from stock option exercises Effective income tax rate	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 (in percentage to earnings before income tax expense) 25.0% 25.0% 25.0% 3.7% — 1.3% 1.1% 1.6% 0.1% (0.9)% (3.6)% — (11.1)% (10.9)% (10.5)% (1.5)% (1.5)% (1.5)% (0.6)% 5.3% 1.3% 29.4% — — (0.6)% 0.4% (0.2)% (0.7)% — — 43.8% 16.3% 15.5%

The PRC tax rate has been used because the majority of the Company’s consolidated pre-tax earnings arise in the PRC.

As of December 31, 2017 and 2016, significant temporary differences between the tax basis and financial statement basis of assets and liabilities that gave rise to deferred taxes were principally related to the following:

Deferred income tax assets arising from: — Accrued expenses — Deferred income — Property, Plant and Equipment — Other non-current assets — Tax loss carryforwards Gross deferred income tax assets Less: valuation allowance Net deferred income tax assets	December 31, 2017 USD 6,558,359 258,255 1,210,006 146,918 5,031,657 13,205,195 (5,031,657) 8,173,538	December 31, 2016 USD 3,954,375 275,687 257,550 138,384 27,783,051 32,409,047 (26,629,179) 5,779,868

– II-22 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Deferred income tax liabilities arising from: — Intangible assets — Equity method investment — Dividend withholding tax Deferred income tax liabilities Classification on consolidated balance sheets: Deferred income tax assets, included in other non-current assets Deferred income tax liabilities, included in other liabilities	December 31, 2017 USD (148,467) — (6,085,290) (6,233,757) 8,173,538 (6,233,757)	December 31, 2016 USD (235,217) (1,153,872) (6,085,290) (7,474,379) 4,625,996 (6,320,507)

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and tax loss carryforwards are utilized. Management considers the scheduled reversal of deferred income tax liabilities (including the impact of available carryforwards periods), projected future taxable income, and tax planning strategies in making this assessment.

The deferred income tax assets of $5,031,657 for tax loss carry forwards as of December 31, 2017 represented tax loss carryforwards of certain PRC subsidiaries. For PRC income tax purposes, certain of the Company’s PRC subsidiaries had tax loss carryforwards of $20,126,629, of which $5,019,226, $5,048,268, $4,416,172, $4,878,108 and $764,855 would expire by 2018, 2019, 2020, 2021 and 2022, respectively, if unused. In view of their cumulative losses positions, management determined it is more likely than not that deferred income tax assets of these PRC subsidiaries will not be realized, and therefore full valuation allowances of $5,031,657 and $6,139,906 were provided as of December 31, 2017 and 2016, respectively.

For United States federal income tax purposes, CBP had nil tax loss carry forwards as of December 31, 2017. All tax loss brought forwards of CBP has been utilized by December 31, 2017 as a result of the repatriation tax on deemed repatriation of accumulated earnings to the United States.

The following table presents the movement of the valuation allowance for deferred income tax assets for the years ended December 31, 2017, 2016 and 2015:

Beginning balance Addition (deduction) during the year Foreign currency translation adjustment Ending balance	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 26,629,179 8,160,611 6,661,139 (21,927,117) 18,676,456 1,703,771 329,595 (207,888) (204,299) 5,031,657 26,629,179 8,160,611	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD 26,629,179 8,160,611 6,661,139 (21,927,117) 18,676,456 1,703,771 329,595 (207,888) (204,299) 5,031,657 26,629,179 8,160,611
	December 31, 2017 USD 26,629,179 (21,927,117) 329,595 5,031,657	December 31, 2016 USD 8,160,611 18,676,456 (207,888) 26,629,179

– II-23 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

According to the prevailing PRC income tax law and relevant regulations, dividends relating to earnings accumulated beginning on January 1, 2008 that are received by non-PRC-resident enterprises from PRC-resident enterprises are subject to withholding tax at 10%, unless reduced by tax treaties or similar arrangement. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, dividends received by the Company from its overseas subsidiaries are subject to the U.S. federal income tax at 34%, less any qualified foreign tax credits. Based on the dividend policy the Company has provided the deferred income tax liabilities of $7,351,023 on undistributed earnings of $74 million, approximately 50% of Shandong Taibang’s total undistributed earnings at December 31, 2014. During the year ended December 31, 2016, the deferred income tax liabilities of $1,265,733 was reversed following a sum of RMB82,760,000 (approximately $11,929,854) dividend distribution to Taibang Holdings (Hong Kong) Limited by Taibang Biotech (Shandong) Co., Ltd. in 2016, which was generated from distributed earnings of Shandong Taibang. Due to the Company’s plan and intention of reinvesting its earnings in its PRC business, the Company has not provided for the related deferred income tax liabilities on the remaining undistributed earnings of the PRC subsidiaries totaling $550.0 million as of December 31, 2017.

As of January 1, 2015 and for each of the years ended December 31, 2015, 2016 and 2017, the Company and its subsidiaries did not have any unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. The Company does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months.

The Company and each of its PRC subsidiaries file income tax returns in the United States and the PRC, respectively. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2007. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 (approximately $15,304). In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiaries are open to examination by the PRC tax authorities for the tax years beginning in 2012.

NOTE 12 — OPTIONS AND NONVESTED SHARES

Options

Effective May 9, 2008, the Board of Directors adopted the China Biologic 2008 Equity Incentive Plan, (‘‘the 2008 Plan’’). The 2008 Plan provides for grants of stock options, stock appreciation rights, performance units, restricted stock, restricted stock units and performance shares. A total of five million shares of the Company’s ordinary share may be issued pursuant to the 2008 Plan. The exercise price per share for the shares to be issued pursuant to an exercise of a stock option will be no less than the fair market value per share on the grant date, except that, in the case of an incentive stock option granted to a person who holds more than 10% of the total combined voting power of all classes of the Company’s stock or any of its subsidiaries, the exercise price will be no less than 110% of the fair market value per share on the grant date. No awards may be granted under the 2008 Plan after May 9, 2018, except that any award granted before then may extend beyond that date. All the options to be granted will have 10-year terms.

For the year ended December 31, 2017, 2016 and 2015, no stock options to purchase ordinary share were granted to any directors or employees.

– II-24 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

A summary of stock options activity for the years ended December 31, 2017, 2016 and 2015 is as follows:

Outstanding as of January 1, 2015
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2015
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2016
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2017
Vested as of December 31, 2017
Exercisable as of December 31, 2017

Number of
Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term in years
Aggregate
Intrinsic Value
USD
USD
1,432,454
10.16
6.53
81,753,119
—
—
(780,557)
9.92
(68,089,712)
—
—
651,897
10.44
5.24
86,064,461
—
(337,406)
10.55
(35,180,367)
—
—
314,491
10.32
3.84
30,568,083
—
—
(85,242)
10.18
(7,868,258)
—
—
229,249
10.37
2.61
15,168,276
229,249
10.37
2.61
15,168,276
229,249
10.37
2.61
15,168,276

For the years ended December 31, 2017, 2016 and 2015, the Company recorded stock compensation expense of nil, $649,203 and $1,117,994, respectively, in general and administrative expenses.

Nonvested shares

For the years ended December 31, 2017, 2016 and 2015, nonvested shares were granted to certain directors and employees (collectively, the ‘‘Participant’’). Pursuant to the nonvested share grant agreements between the Company and the Participant, the Participant will have all the rights of a shareholder with respect to the nonvested shares. The nonvested shares granted to directors generally vest in one or two years. The nonvested shares granted to employees generally vest in four years.

– II-25 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

A summary of nonvested shares activity for the year ended December 31, 2017, 2016 and 2015 is as follow:

Outstanding as of January 1, 2015 Granted Vested Forfeited Outstanding as of December 31, 2015 Granted Vested Forfeited Outstanding as of December 31, 2016 Granted Vested Forfeited Outstanding as of December 31, 2017	Number of nonvested shares 552,125 313,100 (188,625) (7,500) 669,100 511,200 (255,150) (12,500) 912,650 356,150 (353,694) (1,080) 914,026	Grant date weighted average fair value USD 37.78 120.62 34.78 28.80
		77.49 119.75 66.04 66.74
		104.51 89.94 91.32 98.20
		103.95

For the years ended December 31, 2017, 2016 and 2015, the Company recorded stock compensation expense of $33,903,283, $23,756,308 and $10,996,278 in general and administrative expenses, respectively.

As of December 31, 2017, approximately $79,691,474 of stock compensation expense with respect to nonvested shares is to be recognized over weighted average period of approximately 2.65 years.

NOTE 13 — STATUTORY RESERVES

NOTE 14 — FAIR VALUE MEASUREMENTS

Management used the following methods and assumptions to estimate the fair value of financial instruments at the relevant balance sheet dates:

Short-term financial instruments (including cash and cash equivalents, time deposits, accounts receivable, other receivables, loan receivable-current, accounts payable, and other payables and accrued expenses) — The carrying amounts of the short-term financial instruments approximate their fair values because of the short maturity of these instruments.

– II-26 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 15 — SALES

The Company’s sales by product categories for the years ended December 31, 2017, 2016 and 2015 are as follows:

Human Albumin Immunoglobulin products: Human Immunoglobulin for Intravenous Injection Other Immunoglobulin products Placenta Polypeptide Others Total	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2017 USD 132,498,791 117,511,797 50,147,328 49,199,288 21,049,636 370,406,840	December 31, 2016 USD 133,712,663 117,891,410 40,105,561 32,178,681 17,281,111 341,169,426	December 31, 2015 USD 111,422,258 125,136,104 22,518,554 27,194,800 10,186,186
			296,457,902

NOTE 16 — COMMITMENTS AND CONTINGENCIES

Commitments

As of December 31, 2017, commitments outstanding for operating lease approximated $1.3 million.

As of December 31, 2017, commitments outstanding for the purchase of property, plant and equipment approximated $12.9 million.

As of December 31, 2017, commitments outstanding for the purchase of plasma in 2018 approximated $8.7 million.

NOTE 17 — EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2017 USD 67,943,035 (2,188,633) 65,754,402 27,361,561 244,062 27,605,623 2.40 2.38	December 31, 2016 USD 104,779,307 (2,987,429) 101,791,878 26,848,445 400,699 27,249,144 3.79 3.74	December 31, 2015 USD 89,042,703 (2,070,762)
		86,971,941
		25,599,153 968,213
		26,567,366
		3.40 3.27

– II-27 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

During the year ended December 31, 2017, 2016 and 2015, no potential ordinary shares outstanding were excluded from the calculation of diluted earnings per ordinary share.

NOTE 18 — CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. (PARENT COMPANY)

The following represents condensed unconsolidated financial information of the Parent Company only:

Condensed Balance Sheets:

Cash Time deposits Prepayments and prepaid expenses Total Current Assets Property, plant and equipment, net Investment in and amounts due from subsidiaries Total Assets Other payables and accrued expenses Income tax payable — current Total Current Liabilities Income tax payable — non current Total Liabilities Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity	December 31, 2017 USD 4,708,801 3,000,000 87,070 7,795,871 145 634,245,590 642,041,606 3,559,211 3,223,229 6,782,440 37,067,138 43,849,578 598,192,028 642,041,606	December 31, 2016 USD 11,539,131 — 85,879
		11,625,010 211 454,309,702
		465,934,923
		3,734,334 —
		3,734,334 —
		3,734,334
		462,200,589
		465,934,923

Condensed Statements of Comprehensive Income:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2017 USD 137,099,797 (28,879,890) 13,495 108,233,402 40,290,367 67,943,035	December 31, 2016 USD 124,187,590 (19,408,283) — 104,779,307 — 104,779,307	December 31, 2015 USD 100,753,805 (10,693,991) (1,017,111)
		89,042,703 —
		89,042,703

– II-28 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Condensed Statements of Cash Flows:

Net cash used in operating activities Net cash used in investing activities Net cash provided by financing activities Net (decrease) increase in cash Cash at beginning of year Cash at end of year	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD (3,830,330) (2,400,188) (3,904,038) (3,000,000) — — — — 15,192,269 (6,830,330) (2,400,188) 11,288,231 11,539,131 13,939,319 2,651,088 4,708,801 11,539,131 13,939,319	For the Years Ended December 31, 2017 December 31, 2016 December 31, 2015 USD USD USD (3,830,330) (2,400,188) (3,904,038) (3,000,000) — — — — 15,192,269 (6,830,330) (2,400,188) 11,288,231 11,539,131 13,939,319 2,651,088 4,708,801 11,539,131 13,939,319
	December 31, 2017 USD (3,830,330) (3,000,000) — (6,830,330) 11,539,131 4,708,801	December 31, 2016 USD (2,400,188) — — (2,400,188) 13,939,319 11,539,131

NOTE 19 — FOLLOW-ON OFFERING OF COMMON STOCK

On June 15, 2015, the Company completed a follow-on offering of 3,450,000 shares of common stock at a price of $105.00 per share, less the underwriting discounts and commissions and offering expenses. In this June 2015 follow-on offering, the Company sold 805,000 shares (including 105,000 shares sold pursuant to the exercise by the underwriters of their option to purchase additional shares from the Company) and certain selling holders sold 2,645,000 shares (including 345,000 shares sold pursuant to the exercise by the underwriters of their option to purchase additional shares from such selling stockholders). The Company raised net proceeds of approximately $80.6 million from this offering, after deducting the underwriting discounts and commissions and offering expenses payable by the Company. The Company did not receive any proceeds from the sale of the shares by the selling stockholders.

NOTE 20 — CAPITAL WITHDRAWAL BY TWO FORMER NONCONTROLLING INTEREST SHAREHOLDERS OF GUIZHOU TAIBANG

On October 26, 2016, Guizhou Taibang completed the requisite legal and administrative procedures, through which two former minority shareholders, holding a combined 15.3% equity interest in Guizhou Taibang, withdrew their respective capital contributions in Guizhou Taibang for an aggregate consideration of RMB415,000,000 (approximately $59,822,250) pursuant to an agreement dated July 31, 2016.

NOTE 21 — SUBSEQUENT EVENT

On October 12, 2017, the Company entered into a definitive agreement with PW Medtech Group Limited (‘‘PWM’’), a company listed on the Stock Exchange of Hong Kong Limited, to acquire 80% equity interest of Tianxinfu (Beijing) Medical Appliance Co., Ltd. (‘‘Tianxinfu’’) in exchange for 5,521,000 ordinary shares of CBP. Tianxinfu is a medical device company primarily engaging in the manufacturing and sale of regenerative medical biomaterial products, of which 80% equity interest was owned by PWM and 20% by a third party before this acquisition. The Company completed the acquisition on January 1, 2018.

The transaction will be accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The initial accounting for this business combination is incomplete as the Company is in the process of determining the fair value of assets acquired and liabilities assumed at the acquisition date.

– II-29 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

(2) The following is an extract of the audited financial statements of CBPO for the year ended December 31, 2018, which were prepared in accordance with U.S. GAAP, from the 2018 annual report of CBPO.

CONSOLIDATED BALANCE SHEETS

Note ASSETS Current Assets Cash and cash equivalents Time deposits Short term investments Accounts receivable, net of allowance for doubtful accounts 4 Loan receivable — current 10 Inventories 6 Prepayments and other current assets, net of allowance for doubtful accounts 5 Total Current Assets Property, plant and equipment, net 7 Intangible assets, net 8 Land use rights, net Equity method investment Prepayments for investments in equity securities 9 Loan receivable — non current 10 Goodwill 3 Other non-current assets Total Assets	December 31, 2018 USD 338,880,559 537,478,040 76,048,594 125,115,842 — 243,295,512 36,369,275 1,357,187,822 178,327,361 53,258,871 32,204,342 15,428,028 10,812,893 39,942,591 313,588,803 9,227,970 2,009,978,681	December 31, 2017 USD 219,336,848 22,895,200 — 77,267,275 45,912,000 209,570,835 18,139,453
		593,121,611 166,812,749 536,338 24,853,163 14,903,908 — — — 8,829,648
		809,057,417

– II-30 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Note LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable Income tax payable 12 Other payables and accrued expenses 11 Total Current Liabilities Deferred income Non-current income tax payable 12 Other liabilities Total Liabilities Shareholders’ Equity Ordinary share: par value $0.0001; 100,000,000 shares authorized; 41,616,320 and 29,866,545 shares issued at December 31, 2018 and 2017, respectively; 39,361,616 and 27,611,841 shares outstanding at December 31, 2018 and 2017, respectively Additional paid-in capital Treasury share: 2,254,704 shares at December 31, 2018 and 2017, respectively, at cost Retained earnings Accumulated other comprehensive (losses)/income Total equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total Shareholders’ Equity Commitments and contingencies 17 Total Liabilities and Shareholders’ Equity	December 31, 2018 USD 11,404,642 11,010,347 99,933,793 122,348,782 2,824,212 26,899,038 13,203,485 165,275,517 4,162 1,189,698,494 (56,425,094) 634,482,738 (45,710,701) 1,722,049,599 122,653,565 1,844,703,164 — 2,009,978,681	December 31, 2017 USD 7,548,909 14,258,544 75,827,864 97,635,317 3,476,877 37,067,138 6,553,088 144,732,420 2,987 140,230,395 (56,425,094) 506,426,436 7,957,304 598,192,028 66,132,969 664,324,997 — 809,057,417

See accompanying notes to Consolidated Financial Statements.

– II-31 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Note Sales 16 Cost of sales Gross profit Operating expenses Selling expenses General and administrative expenses Research and development expenses Income from operations Other income (expenses) Equity in income of an equity method investee Interest income Interest expense Loss from disposal of a subsidiary Other income, net Total other income, net Income before income tax expense Income tax expense 12 Net income Less: Net income attributable to noncontrolling interest Net income attributable to China Biologic Products Holdings, Inc.	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 466,877,569 370,406,840 341,169,426 146,787,236 125,517,021 124,034,448 320,090,333 244,889,819 217,134,978 95,575,830 34,843,935 11,679,242 68,817,340 67,683,667 54,519,122 9,524,412 6,503,712 7,021,992 146,172,751 135,858,505 143,914,622 2,368,995 3,509,071 2,519,201 13,706,750 7,623,624 7,815,780 (338,136) (583,432) (254,471) — — (75,891) 4,092,935 — — 19,830,544 10,549,263 10,004,619 166,003,295 146,407,768 153,919,241 18,036,180 64,171,809 25,125,820 147,967,115 82,235,959 128,793,421 19,910,813 14,292,924 24,014,114 128,056,302 67,943,035 104,779,307	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 466,877,569 370,406,840 341,169,426 146,787,236 125,517,021 124,034,448 320,090,333 244,889,819 217,134,978 95,575,830 34,843,935 11,679,242 68,817,340 67,683,667 54,519,122 9,524,412 6,503,712 7,021,992 146,172,751 135,858,505 143,914,622 2,368,995 3,509,071 2,519,201 13,706,750 7,623,624 7,815,780 (338,136) (583,432) (254,471) — — (75,891) 4,092,935 — — 19,830,544 10,549,263 10,004,619 166,003,295 146,407,768 153,919,241 18,036,180 64,171,809 25,125,820 147,967,115 82,235,959 128,793,421 19,910,813 14,292,924 24,014,114 128,056,302 67,943,035 104,779,307
	December 31, 2018 USD 466,877,569 146,787,236 320,090,333 95,575,830 68,817,340 9,524,412 146,172,751 2,368,995 13,706,750 (338,136) — 4,092,935 19,830,544 166,003,295 18,036,180 147,967,115 19,910,813 128,056,302	December 31, 2017 USD 370,406,840 125,517,021 244,889,819 34,843,935 67,683,667 6,503,712 135,858,505 3,509,071 7,623,624 (583,432) — — 10,549,263 146,407,768 64,171,809 82,235,959 14,292,924 67,943,035

– II-32 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Note Earnings per share of ordinary share: 18 Basic Diluted Weighted average shares used in computation: 18 Basic Diluted Net income Other comprehensive (losses)/ income: Foreign currency translation adjustment, net of nil income taxes Comprehensive income Less: Comprehensive income attributable to noncontrolling interest Comprehensive income attributable to China Biologic Products Holdings, Inc.	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 3.54 2.40 3.79 3.53 2.38 3.74 35,304,294 27,361,561 26,848,445 35,432,959 27,605,623 27,249,144 147,967,115 82,235,959 128,793,421 (60,783,829) 36,861,394 (31,303,262) 87,183,286 119,097,353 97,490,159 12,794,989 17,876,743 19,026,592 74,388,297 101,220,610 78,463,567	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 3.54 2.40 3.79 3.53 2.38 3.74 35,304,294 27,361,561 26,848,445 35,432,959 27,605,623 27,249,144 147,967,115 82,235,959 128,793,421 (60,783,829) 36,861,394 (31,303,262) 87,183,286 119,097,353 97,490,159 12,794,989 17,876,743 19,026,592 74,388,297 101,220,610 78,463,567
	December 31, 2018 USD 3.54 3.53 35,304,294 35,432,959 147,967,115 (60,783,829) 87,183,286 12,794,989 74,388,297	December 31, 2017 USD 2.40 2.38 27,361,561 27,605,623 82,235,959 36,861,394 119,097,353 17,876,743 101,220,610

See accompanying notes to Consolidated Financial Statements.

– II-33 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Ordinary share	Ordinary share	Additional paid-in capital Treasury stock Retained earnings USD USD USD 105,079,845 (56,425,094) 333,704,094 — — 104,779,307 — — — — — — 24,405,511 — — 2,299,316 — — 513,397 — — (30,397,196) — — 3,558,762 — — (25) — — 105,459,610 (56,425,094) 438,483,401 — — 67,943,035 — — — — — — 33,903,283 — — 867,537 — — (35) — — 140,230,395 (56,425,094) 506,426,436 — — 128,056,302 — — — — — — 23,130,570 — — 590,264,415 — — 434,888,618 — — 1,184,522 — — (26) — — 1,189,698,494 (56,425,094) 634,482,738	Accumulated other comprehensive income (loss) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD (18,605) 382,343,124 84,618,675 466,961,799 — 104,779,307 24,014,114 128,793,421 (26,315,740) (26,315,740) (4,987,522) (31,303,262 — — (10,901,312) (10,901,312 — 24,405,511 — 24,405,511 — 2,299,316 314,515 2,613,831 — 513,397 (513,397) — 1,014,074 (29,383,122) (33,608,839) (62,991,961 — 3,558,796 — 3,558,796 — — — — (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008 — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997 — 128,056,302 19,910,813 147,967,115 (53,668,005) (53,668,005) (7,115,824) (60,783,829 — — (10,145,395) (10,145,395 — 23,130,570 — 23,130,570 — 590,265,000 — 590,265,000 — 434,889,170 53,871,002 488,760,172 — 1,184,534 — 1,184,534 — — — — (45,710,701) 1,722,049,599 122,653,565 1,844,703,164	Accumulated other comprehensive income (loss) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD (18,605) 382,343,124 84,618,675 466,961,799 — 104,779,307 24,014,114 128,793,421 (26,315,740) (26,315,740) (4,987,522) (31,303,262 — — (10,901,312) (10,901,312 — 24,405,511 — 24,405,511 — 2,299,316 314,515 2,613,831 — 513,397 (513,397) — 1,014,074 (29,383,122) (33,608,839) (62,991,961 — 3,558,796 — 3,558,796 — — — — (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008 — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997 — 128,056,302 19,910,813 147,967,115 (53,668,005) (53,668,005) (7,115,824) (60,783,829 — — (10,145,395) (10,145,395 — 23,130,570 — 23,130,570 — 590,265,000 — 590,265,000 — 434,889,170 53,871,002 488,760,172 — 1,184,534 — 1,184,534 — — — — (45,710,701) 1,722,049,599 122,653,565 1,844,703,164
Number of Shares 28,835,053 — — — — — — — 337,406 255,150	Par value USD 2,884 — — — — — — — 34 25
29,427,609	2,943	105,459,610
— — — — 85,242 353,694	— — — — 9 35
29,866,545	2,987	140,230,395
— — — — 5,850,000 5,521,000 121,945 256,830	— — — — 585 552 12 26
41,616,320	4,162	1,189,698,494	122,653,565	1,844,703,164

See accompanying notes to Consolidated Financial Statements.

– II-34 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization Loss on disposal of property, plant and equipment Allowance for doubtful accounts — accounts receivable, net Allowance for doubtful accounts — prepayments and other receivables Impairment for other non-current assets Write-down of obsolete inventories Deferred income tax benefit Share-based compensation Equity in income of an equity method investee Loss from disposal of a subsidiary Excess tax benefits from share-based compensation arrangements Change in operating assets and liabilities, net of effect of acquisition of TianXinFu: Accounts receivable Inventories Prepayments and other current assets Accounts payable Income tax payable Other payables and accrued expenses Deferred income Non-current income tax payable Net cash provided by operating activities	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 147,967,115 82,235,959 128,793,421 13,809,041 11,691,731 11,962,983 9,416,310 1,216,959 775,053 1,001,000 3,228,845 293,098 655,148 23,783 123,239 96,267 — 65,341 2,671,528 — 1,225,200 — — 256,862 (4,159,890) (3,252,516) (3,006,541) 23,130,570 33,903,283 24,405,511 (2,368,995) (3,509,071) (2,519,201) — — 75,891 — — (2,613,831) (53,879,876) (39,918,939) (10,971,773) (42,594,485) (42,078,261) (40,077,384) (9,387,783) (1,777,783) 1,946,800 8,140,553 977,152 2,966,885 (3,575,544) 6,047,808 6,022,145 23,693,979 16,821,694 4,221,669 (504,886) (493,897) (686,757) (10,168,100) 37,067,138 — 103,941,952 102,183,885 123,258,611	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 147,967,115 82,235,959 128,793,421 13,809,041 11,691,731 11,962,983 9,416,310 1,216,959 775,053 1,001,000 3,228,845 293,098 655,148 23,783 123,239 96,267 — 65,341 2,671,528 — 1,225,200 — — 256,862 (4,159,890) (3,252,516) (3,006,541) 23,130,570 33,903,283 24,405,511 (2,368,995) (3,509,071) (2,519,201) — — 75,891 — — (2,613,831) (53,879,876) (39,918,939) (10,971,773) (42,594,485) (42,078,261) (40,077,384) (9,387,783) (1,777,783) 1,946,800 8,140,553 977,152 2,966,885 (3,575,544) 6,047,808 6,022,145 23,693,979 16,821,694 4,221,669 (504,886) (493,897) (686,757) (10,168,100) 37,067,138 — 103,941,952 102,183,885 123,258,611
	December 31, 2018 USD 147,967,115 13,809,041 9,416,310 1,001,000 655,148 96,267 2,671,528 — (4,159,890) 23,130,570 (2,368,995) — — (53,879,876) (42,594,485) (9,387,783) 8,140,553 (3,575,544) 23,693,979 (504,886) (10,168,100) 103,941,952	December 31, 2017 USD 82,235,959 11,691,731 1,216,959 3,228,845 23,783 — — — (3,252,516) 33,903,283 (3,509,071) — — (39,918,939) (42,078,261) (1,777,783) 977,152 6,047,808 16,821,694 (493,897) 37,067,138 102,183,885

– II-35 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired from acquisition of TianXinFu Purchase of time deposit Proceeds from maturity of time deposit Purchase of short term investments Proceeds from maturity of short term investments Payment for property, plant and equipment Payment for intangible assets and land use rights Refund of payments and deposits related to land use right Proceeds from disposal of property, plant and equipment and land use rights Loans lent to a third party Proceeds from disposal of a subsidiary Prepayments for investments in equity securities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock option exercised Proceeds from short-term bank loans Repayment of short-term bank loans Maturity of deposit as security for bank loans Excess tax benefits from share-based compensation arrangements Dividend paid by subsidiaries to noncontrolling interest shareholders Proceeds from issuance of ordinary shares Prepayment to an investment bank for potential share repurchase Payment to noncontrolling interest shareholders in connection with their capital withdrawal Net cash provided by/(used in) financing activities	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 97,702,278 — — (1,871,773,012) (22,669,000) — 1,349,949,821 — — (855,074,467) — — 767,654,706 — — (31,743,146) (37,504,440) (49,371,318) (4,973,244) (786,691) (1,635,891) — — 10,297,893 124,560 64,914 393,019 — — (12,332,718) — — 128,654 (10,812,893) — — (558,945,397) (60,895,217) (52,520,361) 1,184,534 867,546 3,558,796 — 23,009,280 — — (23,412,060) — — — 37,756,405 — — 2,613,831 (10,145,395) (18,789,151) (7,921,952) 590,265,000 — — (10,000,000) — — — — (58,091,018) 571,304,139 (18,324,385) (22,083,938)	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 97,702,278 — — (1,871,773,012) (22,669,000) — 1,349,949,821 — — (855,074,467) — — 767,654,706 — — (31,743,146) (37,504,440) (49,371,318) (4,973,244) (786,691) (1,635,891) — — 10,297,893 124,560 64,914 393,019 — — (12,332,718) — — 128,654 (10,812,893) — — (558,945,397) (60,895,217) (52,520,361) 1,184,534 867,546 3,558,796 — 23,009,280 — — (23,412,060) — — — 37,756,405 — — 2,613,831 (10,145,395) (18,789,151) (7,921,952) 590,265,000 — — (10,000,000) — — — — (58,091,018) 571,304,139 (18,324,385) (22,083,938)
	December 31, 2018 USD 97,702,278 (1,871,773,012) 1,349,949,821 (855,074,467) 767,654,706 (31,743,146) (4,973,244) — 124,560 — — (10,812,893) (558,945,397) 1,184,534 — — — — (10,145,395) 590,265,000 (10,000,000) — 571,304,139	December 31, 2017 USD — (22,669,000) — — — (37,504,440) (786,691) — 64,914 — — — (60,895,217) 867,546 23,009,280 (23,412,060) — — (18,789,151) — — — (18,324,385)

– II-36 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flow information Cash paid for income taxes Cash paid for interest expense Noncash investing and financing activities: Acquisition of property, plant and equipment included in payables Set-off loan receivable against accounts payable Fair value of noncash assets acquired and liabilities assumed in acquisition of TianXinFu	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 3,243,017 12,607,032 (9,826,672) 119,543,711 35,571,315 38,827,640 219,336,848 183,765,533 144,937,893 338,880,559 219,336,848 183,765,533 35,449,581 24,691,429 22,210,476 — 252,353 84,664 3,687,742 7,548,964 4,912,937 3,784,297 — 5,848,400 337,186,892 — —	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 3,243,017 12,607,032 (9,826,672) 119,543,711 35,571,315 38,827,640 219,336,848 183,765,533 144,937,893 338,880,559 219,336,848 183,765,533 35,449,581 24,691,429 22,210,476 — 252,353 84,664 3,687,742 7,548,964 4,912,937 3,784,297 — 5,848,400 337,186,892 — —
	December 31, 2018 USD 3,243,017 119,543,711 219,336,848 338,880,559 35,449,581 — 3,687,742 3,784,297 337,186,892	December 31, 2017 USD 12,607,032 35,571,315 183,765,533 219,336,848 24,691,429 252,353 7,548,964 — —

See accompanying notes to Consolidated Financial Statements.

– II-37 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018, 2017 and 2016

NOTE 1 — DESCRIPTION OF BUSINESS AND SIGNIFICANT CONCENTRATIONS AND RISKS

China Biologic Products Holdings, Inc. (‘‘CBP’’) and its subsidiaries (collectively, the ‘‘Company’’), are principally engaged in the research, development, manufacturing and sales of biopharmaceutical products in the People’s Republic of China (the ‘‘PRC’’).

Biopharmaceutical products include plasma-based products and placenta polypeptide. All of the biopharmaceutical products are prescription medicines administered in the form of injections. The principal plasma products are human albumin and human immunoglobulin for intravenous injection (‘‘IVIG’’). The PRC subsidiaries own and operate plasma collection stations that purchase and collect plasma from individual donors. The plasma is processed into finished goods after passing through a series of fractionating processes.

All of the Company’s plasma products require government approval before the products are sold to customers. The Company primarily sells its products to hospitals and inoculation centers directly or through distributors in the PRC.

On July 21, 2017, China Biologic Products Holdings, Inc. (the ‘‘Successor’’) succeeded to the interests of China Biologic Products, Inc. (the ‘‘Predecessor’’) following a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the ‘‘Merger Agreement’’) between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor, with the Successor surviving the merger and each issued and outstanding shares of Predecessor’s common stock converted into the right to receive one ordinary share of the Successor. The consolidated financial statements of the Successor represents the continuation of the financial statements of the Predecessor, reflecting the assets and liabilities, retained earnings and other equity balances of the Predecessor before the domiciliation. The equity structure is restated using the exchange ratio established in the Merger Agreement to reflect the number of shares of the Successor.

Cash Concentration

The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located in Hong Kong or may exceed the insured limits for its bank accounts in China established by the People’s Bank of China. Total cash at banks and deposits, including cash and equivalents, time deposits and short term investments as of December 31, 2018 and December 31, 2017 amounted to $951,336,787 and $241,761,593, respectively, of which $3,227,530 and $2,577,139 are insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.

Sales Concentration

The Company’s two major biopharmaceutical products are human albumin and IVIG. Human albumin accounted for 32.0%, 35.8% and 39.2% of the total sales for the years ended December 31, 2018, 2017 and 2016, respectively. IVIG accounted for 24.3%, 31.7% and 34.6% of the total sales for the years ended December 31, 2018, 2017 and 2016, respectively. The Company expects sales from these two products to represent a substantial portion of its sales in the future. If the market demands for human albumin and IVIG cannot be sustained in the future or the price of human albumin and IVIG decreases, the Company’s operating results could be adversely affected.

– II-38 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Substantially all of the Company’s customers are located in the PRC. There were no customers that individually comprised 10% or more of sales during the years ended December 31, 2018, 2017 and 2016. No individual customer represented 10% or more of accounts receivables as at December 31, 2018 and 2017. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.

Purchase Concentration

There was one supplier, namely, Xinjiang Deyuan Bioengineering Co., Ltd. (‘‘Xinjiang Deyuan’’) (see Note 10), that comprised 10% or more of the total purchases during the years ended December 31, 2018, 2017 and 2016. No individual supplier represented 10% or more of accounts payables as at December 31, 2018. Chongqing Sanda Great Exploit Pharmaceutical Co, Ltd. represented more than 10% of accounts payables as at December 31, 2017.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (‘‘GAAP’’), and include the financial statements of the Company and its subsidiaries in which CBP, directly or indirectly, has a controlling financial interest. All intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment and intangibles with definite lives, the collectability of accounts receivable and loan receivable, the fair value determinations of stock compensation awards and short term investments, identifiable assets acquired and liabilities assumed and noncontrolling interest in business combinations, the realizability of deferred income tax assets and inventories, the recoverability of intangible assets, land use rights, property, plant and equipment, goodwill and equity method investment, and accruals for income tax uncertainties and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

Foreign Currency Translation

Revenue Recognition

During the years ended December 31, 2017 and 2016, revenue was recognized when persuasive evidence of an arrangement existed, delivery of the product has occurred and the customer took ownership and assumed risk of loss, the sales price was fixed or determinable and collection of the relevant receivable was probable. For all sales, the Company required a signed contract or purchase order, which specified pricing, quantity and product specifications. Delivery of the product occurred when the customer received the product, which was when the risks and rewards of ownership have been transferred. Delivery was evidenced by signed customer acknowledgement. The Company’s sales agreements did not provide the customer the right of return, unless the product was defective in which case the Company allowed for an exchange of product or return. For the periods presented, defective product returns were inconsequential. Revenue represents the invoiced amount of products sold, net of value added taxes (VAT).

– II-39 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Effective January 1, 2018, the Company adopted the new guidance of ASC Topic 606, Revenue from Contracts with Customers (‘‘Topic 606’’), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. Topic 606 requires the Company to recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company sells biopharmaceutical and biomaterial products to hospitals, inoculation centers and distributors. For all sales, the Company requires a signed contract or purchase order, which specifies pricing, quantity and product specifications. The Company recognizes revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g. valueadded taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to customers’ premises and evidenced by signed customer acknowledgement. The selling price, which is specified in the signed contracts or purchase orders, is fixed. The Company has unconditional right to receive full payment of the sales price, upon the delivery of the products to customers and the signing of the customer acknowledgement. Customers are required to pay under the customary payment terms, which is generally less than six months. Advances from customers (a contract liability) is recognized when the Company has an unconditional right to a payment before it transfer the products to customers, and are included in other payables and accrued expenses.

Fair Value Measurements

. Level 1 Inputs: Unadjusted quoted prices for identical assets or liabilities in active markets accessible to the entity at the measurement date.
. Level 2 Inputs: Other than quoted prices included in Level 1, inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
. Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

See Note 15 to the Consolidated Financial Statements.

Cash and Cash Equivalents

Cash consists of cash on hand and demand deposits. The Company considers all highly liquid investments with original maturities of three-month or less at the time of purchase to be cash equivalents.

– II-40 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

As of December 31, 2018 and 2017, the Company maintained cash and cash equivalents at banks in the following locations:

PRC, excluding Hong Kong Hong Kong U.S. Total	December 31, 2018 USD 158,739,504 3,936,815 175,133,834 337,810,153	December 31, 2017 USD 214,157,592 — 4,708,801
		218,866,393

Short term investments

The Company’s short term investments represent bank financial products with original maturity of less than one year when purchased. The Company elects to apply the fair value option for the short term investments to more accurately reflect market and economic events in its earnings. Gains or losses from the short term investments is recorded in other income, net in the statements of comprehensive income.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable is recognized when the Company has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due. Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses, the customers’ financial condition, the amount of accounts receivables in dispute, the accounts receivables aging and the customers’ payment patterns. The Company reviews its allowance for doubtful accounts monthly. Past due balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. Cost of work-in-process and finished goods comprise direct materials, direct production costs and an allocation of production overheads based on normal operating capacity. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to its estimated net realizable value based on historical and forecasted demand.

Property, Plant and Equipment

Property, plant and equipment are stated at cost.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

Buildings		20–45 years
Machinery	and equipment	10 years
Furniture,	fixtures, office equipment and vehicles	5–10 years

Business Combination

The Company accounts for its business combination using the acquisition method in accordance with ASC Topic 805 (‘‘ASC 805’’): Business Combinations. An acquirer is required to recognize the identifiable acquired assets, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. The consideration transferred of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. The excess of (i) the total purchase price and fair value of the noncontrolling interests over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but is tested for impairment at the reporting unit level on at least an annual basis and more frequently when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. When performing an evaluation of goodwill impairment, the Company has elected the option to first assess qualitative factors, such as significant events and changes to expectations and activities that may have occurred since the last impairment evaluation, to determine if it is more likely than not that goodwill might be impaired. If as a result of the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative fair value test is performed to determine if the fair value of the reporting unit exceeds its carrying value.

No impairment of goodwill was recognized for any of the years presented.

Equity Method Investment

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APPENDIX II

FINANCIAL INFORMATION OF CBPO

whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. The Company recognizes a loss if it is determined that other than temporary decline in the value of the investment exists. The process of assessing and determining whether an impairment on a particular equity investment is other than temporary requires significant amount of judgment. To determine whether an impairment is other-than-temporary, management considers whether the Company has the ability and intent to hold the investment until recovery and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. No impairment loss was recognized by the Company for the years ended December 31, 2018, 2017 and 2016.

The Company’s equity method investment as of December 31, 2018 and 2017 represented 35% equity interest investment in Xi’an Huitian Blood Products Co., Ltd. (‘‘Huitian’’), which the Company acquired in October 2008.

Government Grants

For the years ended December 31, 2018, 2017 and 2016, the Company received government grants of RMB4,837,300 (approximately $704,795), RMB2,405,210 (approximately $368,093) and RMB5,056,361 (approximately $728,874), respectively, which have been recognized as a reduction of research and development expenses.

For the year ended December 31, 2012, the Company received government grants of RMB18,350,000 (approximately $2,989,215) related to the technical upgrade of the manufacturing facilities in Guizhou Taibang, which was recorded as deferred income. The grants amortized amounted to $277,801, $271,754 and $276,388 for the years ended December 31, 2018, 2017 and 2016, respectively.

For the year ended December 31, 2015, the Company received government grants of RMB15,000,000 (approximately $2,452,864) related to the new manufacturing facilities for factor products in Shandong Taibang, which was recorded as deferred income. These grants are amortized as the related assets are depreciated. The grants amortized amounted to $227,085, $222,143 and $410,369 for the year ended December 31, 2018, 2017 and 2016, respectively.

Intangible Assets

Intangible assets with finite useful life are amortized on a straight-line basis, as the pattern of economic benefit of intangible assets cannot be reliably determined, over the estimated useful lives of the respective assets. The Company’s amortizable intangible assets consist of permits and license, customer relationships, technical know-how and others with the following estimated useful lives.

Permits and license	5–10 years
Customer relationships	7 years
Technical know-how	3–12 years
Others	5–10 years

The estimated useful life is the period over which the intangible asset is expected to contribute directly or indirectly to the future cash flows of the Company.

The in-process research and development assets acquired in a business combination are accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development activities.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Land Use Rights

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses for the years ended December 31, 2018, 2017 and 2016 were $9,524,412, $6,503,712 and $7,021,992, respectively. These expenses include the costs of the Company’s internal research and development activities.

Income Taxes

Employee Benefit Plans

Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 25% to 43% on a standard salary base as determined by local social security bureau. Contributions to the defined contribution plans are charged to the consolidated statements of comprehensive income when the related service is provided. For the years ended December 31, 2018, 2017 and 2016, the costs of the Company’s contributions to the defined contribution plans amounted to $5,581,682, $3,763,276, and $3,258,629, respectively.

The Company has no other obligation for the payment of employee benefits associated with these plans beyond the contributions described above.

Share-based Payment

Impairment of Long-lived Assets

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Earnings per Share

Segment Reporting

The Company uses the management approach in determining reportable operating segments. The management approach consider the internal reporting used by the chief operating decision maker for making operating decisions about the allocation of resources of the segment and the assessment of its performance in determining the Company’s reportable operating segments. As a result of the business combination completed on January 1, 2018 as described in Note 3, the Company classified the reportable operating segments for the year ended December 31, 2018 into (i) biopharmaceutical products and (ii) biomaterial products. Biopharmaceutical products currently include plasma products and placenta polypeptide. The Company had one operating segment, biopharmaceutical products segment, which included plasma-based products and placenta polypeptide for the years of 2017 and 2016.

Substantially all of the Company’s operations and customers are located in the PRC, and therefore, no geographic information is presented.

Contingencies

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter of 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) — Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09. The new revenue standard may be applied retrospectively to each prior period presented (‘‘full retrospective method) or retrospectively with the cumulative effect recognized as of the date of adoption (‘‘modified retrospective method’’). The Company applied the modified retrospective method to those contracts that are not completed contracts on January 1, 2018 upon adoption of ASU 2014-09. Results for reporting periods beginning after January 1, 2018 are

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

presented under the new revenue recognition, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605. The adoption of new revenue standard did not impact retained earnings as of January 1, 2018. There are no changes between the reported results under Topic 606 and those have been reported under legacy US GAAP.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (‘‘ASU 2016-02’’). In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (‘‘ASU 2018-11’’). The guidance modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. The guidance is effective for public companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company will adopt the guidance for financial statements periods beginning January 1, 2019 using the modified retrospective transition method and initially apply the transition provisions at January 1, 2019, which allows the Company to continue to apply the legacy guidance in ASC 840 for periods prior to 2019. This adoption approach will result in a balance sheet presentation that will not be comparable to the prior period in the first year of adoption. The adoption of this ASU will result in the recognition of right-of-use assets and lease liabilities for operating lease of approximately $2.0 million and $1.9 million, respectively.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (‘‘ASU 2016-15’’), which addressed and provided guidance for each of eight specific cash flow issues with the objective of reducing the existing diversity in practice. This standard will be effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has early adopted ASU 2016-15 on its consolidated financial statements since January 1, 2017 and there was no impact as a result of the adoption.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (‘‘ASU 2016-16’’). This standard required that companies recognize the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs. Current guidance prohibits companies from recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This standard will be effective for public companies for annual periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has adopted ASU 2016-16 on its consolidated financial statements in 2017 and there was no impact as a result of the adoption.

Effective January 1, 2017, on a retrospective basis, the Company adopted FASB ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740). This update required that deferred income tax assets and liabilities be classified as noncurrent. As a result of adoption of this guidance, the Company reclassified current deferred income tax assets in the amount of $4,625,996, which had been included in prepayments and other current assets, to other noncurrent assets as of December 31, 2016. There was no impact on results of operations or cash flows as a result of the adoption of this guidance.

Effective January 1, 2017, the Company adopted FASB ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. The standard simplified certain aspects of the accounting for share-based payment transactions, including recognition of excess tax benefits and deficiencies, classification of awards and classification in the statement of cash flows. As a result of adoption, the Company elected to adopt the change regarding income taxes on a prospective basis to recognize excess tax benefits and deficiencies from stock-based compensation as a discrete item in income tax expense, which were historically recorded as additional paid-in-capital. In addition, the Company elected to apply the change regarding classification in the statement of cash flows prospectively to record excess tax benefits from stock-based

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

compensation from cash flows from financing activities to cash flows from operating activities. Excess tax benefits for the year ended December 31, 2017 was $621,381 and the adoption of this standard had no material impact on the Company’s financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business (‘‘ASU 2017-01’’), which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. If substantially all of the fair value is concentrated in a single asset or a group of similar assets, the acquired set is not a business. If this is not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. Determining whether a set constitutes a business is critical because the accounting for a business combination differs significantly from that of an asset acquisition. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. ASU 2017-01 will be applied prospectively to any transactions occurring within the period of adoption. Early adoption is permitted, including for interim or annual periods in which the financial statements have not been issued or made available for issuance. The Company has adopted ASU 2017-01 from January 1, 2018 for the acquisition of TianXinFu (see Note 3).

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (‘‘ASU 2017-04’’). ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. As a result of ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and then recognize an impairment charge, as necessary, for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company has early adopted ASU 2017-04 from January 1, 2018.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) (‘‘ASU 2018-13’’). ASU 2018-13 modifies certain disclosure requirements on fair value measurements, including (i) clarifying narrative disclosure regarding measurement uncertainty from the use of unobservable inputs, if those inputs reasonably could have been different as of the reporting date, (ii) adding certain quantitative disclosures, including (a) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and (iii) removing certain fair value measurement disclosure requirements, including (a) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (b) the policy for timing of transfers between levels of the fair value hierarchy and (c) the valuation processes for Level 3 fair value measurements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the effect of the disclosure requirements of ASU 2018-13 will have on its consolidated financial statements and does not expect the impact to have a material effect.

NOTE 3 — BUSINESS COMBINATION

On October 12, 2017, the Company entered into a definitive agreement with PW Medtech Group Limited (‘‘PWM’’), a company listed on the Stock Exchange of Hong Kong Limited, to acquire 80% equity interest of TianXinFu (Beijing) Medical Appliance Co., Ltd. (‘‘TianXinFu’’) in exchange for 5,521,000 ordinary shares of CBP. TianXinFu is a medical device company primarily engaging in the manufacturing and sale of regenerative medical biomaterial products, of which 80% equity interest was owned by PWM and 20% by a third party before this acquisition.

The Company completed the acquisition on January 1, 2018.

– II-47 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

The transaction was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The results of TianXinFu’s operations have been included in the Company’s consolidated financial statements since January 2, 2018. For the year ended December 31, 2018, total sales and net income for TianXinFu which have been included in the Company’s consolidated financial statements were $44.7 million and $16.4 million, respectively.

The following table presents the amounts recognized for assets acquired and liabilities assumed for TianXinFu as of the acquisition date. The noncontrolling interest represents the fair value of the 20% equity interest not held by the Company:

Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment Land use rights Intangible assets Deferred income tax assets Current liabilities Deferred income tax liabilities Fair value of noncontrolling interest Goodwill Total purchase consideration	As of January 01, 2018 USD 97,702,278 312,832 2,745,771 283,824 6,522,447 4,135,141 63,725,856 480,334 (6,129,418) (10,382,902) (53,871,002) 329,364,009 434,889,170

The intangible assets consist of customer relationship, technical know-how and in-process research and development assets. The fair values of the customer relationship of $54,956,664 and technical know-how of $7,514,256 are amortized over 7 years and 3–12 years, respectively on a straight line basis. The fair value of in-process research and development assets of $1,254,937 are indefinite-lived until the completion or abandonment of the associated research and development activities.

The estimated fair value of the noncontrolling interest in TianXinFu was determined by an independent valuer by using discount cash flow model.

The goodwill resulting from the business combination primarily attributed to the synergies and economic scale anticipated to be achieved from combining the operations of the Company and TianXinFu, and the assigned assembled workforce. None of the goodwill is expected to be deductible for income tax purpose.

As of the acquisition date, the goodwill acquired in the business combination was assigned to the biomaterial products segment of $182 million and to the biopharmaceutical products segment of $147 million. The exchange difference during the period for goodwill is $15,775,206.

Unaudited Pro Forma Financial Information

The following unaudited pro forma consolidated financial information for the year ended December 31, 2017 are presented as if the acquisition had been consummated on January 1, 2017 after giving effect to purchase accounting adjustments. These pro forma results have been prepared for comparative purpose only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on the date indicated and may not be indicative of future operating results.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Unaudited pro forma consolidated statements of comprehensive income for the year ended December 31, 2017:

	December 31,
	2017
	USD
Sales	412,248,989
Net income	100,749,486

NOTE 4 — ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2018 and 2017 consisted of the following:

Accounts receivable Less: Allowance for doubtful accounts Total	December 31, 2018 USD 126,352,173 (1,236,331) 125,115,842	December 31, 2017 USD 77,858,266 (590,991)
		77,267,275

The activity in the allowance for doubtful accounts — accounts receivable for the years ended December 31, 2018, 2017 and 2016 are as follows:

Beginning balance Provisions Foreign currency translation adjustment Ending balance	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2018 USD 590,991 655,148 (9,808) 1,236,331	December 31, 2017 USD 533,596 23,783 33,612 590,991	December 31, 2016 USD 443,624 123,239 (33,267)
			533,596

NOTE 5 — PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets as of December 31, 2018 mainly represented other receivables of $15,897,405, prepayment to an investment bank for a share repurchase program of $10,000,000 and other prepayments of $9,081,680. On November 1, 2018, the Company announced a share repurchase program, which was approved by the Board of Directors on October 30, 2018. Under the share repurchase program, CBP may repurchase up to US$100 million worth of shares over 6 months following the date of approval.

Prepayments and other current assets as of December 31, 2017 mainly represented other receivables of $10,412,739 and prepayments of $4,886,604.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

The activity in the allowance for doubtful accounts -prepayments and other receivables for the years ended December 31, 2018, 2017 and 2016 are as follows:

Beginning balance Provisions Foreign currency translation adjustment Ending balance	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2018 USD 4,960,020 96,267 (273,194) 4,783,093	December 31, 2017 USD 4,671,896 — 288,124 4,960,020	December 31, 2016 USD 4,924,063 65,341 (317,508)
			4,671,896

NOTE 6 — INVENTORIES

Inventories at December 31, 2018 and 2017 consisted of the following:

Raw materials Work-in-process Finished goods Total	December 31, 2018 USD 124,408,741 57,457,153 61,429,618 243,295,512	December 31, 2017 USD 107,651,325 42,202,306 59,717,204
		209,570,835

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 7 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2018 and 2017 consisted of the following:

Buildings Machinery and equipment Furniture, fixtures, office equipment and vehicles Construction in progress Total property, plant and equipment, gross Accumulated depreciation Impairment of property, plant and equipment Total property, plant and equipment, net Prepayment for property, plant and equipment Property, plant and equipment, net	December 31, 2018 USD 86,923,161 111,797,936 11,670,963 7,713,523 218,105,583 (42,447,406) (2,060,844) 173,597,333 4,730,028 178,327,361	December 31, 2017 USD 41,669,081 41,102,242 9,980,062 105,226,787 197,978,172 (33,862,836) — 164,115,336 2,697,413 166,812,749

As a result of the planned commencement of operation of the new facility, the Company disposed certain machinery and equipment in the old facility of Shandong Taibang and incurred a disposal loss of $1,001,000 and $3,228,845 for the years ended December 31, 2018 and 2017. Loss on disposal of property, plant and equipment for the year ended December 31, 2016 was $293,098.

Depreciation expense for the years ended December 31, 2018, 2017 and 2016 was $13,809,041, $11,691,731 and $11,962,983, respectively. No interest expenses were capitalized into construction in progress for the years ended December 31, 2018, 2017 and 2016.

NOTE 8 — INTANGIBLE ASSETS

Intangible assets at December 31, 2018 and 2017 consisted of the following:

Permits and license Customer relationship Technical know-how In-process research and development assets Others Total intangible assets Accumulated amortization Total intangible assets, net	December 31, 2018 USD 4,579,081 52,320,870 7,153,870 1,194,740 1,041,652 66,290,213 (13,031,342) 53,258,871	December 31, 2017 USD 4,809,764 — — — 542,997 5,352,761 (4,816,423) 536,338

Amortization expense for the years ended December 31, 2018, 2017 and 2016 was $8,742,607, $497,344 and $570,288, respectively.

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APPENDIX II

FINANCIAL INFORMATION OF CBPO

The estimated annual amortization expense for intangible assets in each of the next five years is as follows:

For the Years Ended December 31, 2019 2020 2021 2022 2023 Total	Amount USD 8,115,855 8,108,251 8,107,674 8,103,936 8,040,120
	40,475,836

NOTE 9 — RELATED PARTY TRANSACTIONS

Private Placement

On August 24, 2018, the Company entered into (i) a share purchase agreement with Beachhead Holdings Limited (‘‘Centurium’’) and Double Double Holdings Limited (‘‘DD’’), which are affiliated with two directors of the Company, Mr. David Hui Li and Mr. Joseph Chow (ii) a share purchase agreement with PWM, the largest shareholder of the Company with a director representative, Ms. Yue’e Zhang (iii) share purchase agreements with two third party investors, for the issuance and sale of 3,050,000, 800,000 and 2,000,000 ordinary shares of CBP at a per share purchase price of $100.9, respectively, to raise aggregate gross proceeds of approximately $590 million. The transaction was approved by a special committee formed by the board of directors of the Company, consisting of two independent directors. On the same date, CBP issued 1,800,000 ordinary shares to Centurium and 2,000,000 ordinary shares to two third party investors, pursuant to their respective share purchase agreements. On September 4, 2018, DD assigned its rights and obligations under the share purchase agreement to Centurium and CBP issued 1,250,000 additional ordinary shares to Centurium thereafter. On September 21, 2018, CBP issued 800,000 ordinary shares to PWM.

Prepayments for Investments in Equity Securities

On November 28, 2018, the Company entered into a share transfer agreement with Smart Step Investments Limited (‘‘Smart Step’’), the then largest shareholder of Beijing Taijie Weiye Technology Co., Ltd. (‘‘TJWY Medical’’), pursuant to which the Company purchased approximately 11.55% equity interests of TJWY Medical from Smart Step in a cash consideration of $10,812,893. Pursuant to the share transfer agreement, the Company has the right to request Smart Step to redeem full or part of the equity interests in TJWY transferred at the original purchase price plus 6% compound interest rate per annum. Such right can be exercised by the Company within 6 months from the third anniversary of the closing date of the transaction.

The Company paid the 100% cash consideration on December 21, 2018. The transaction was completed on January 23, 2019.

TJWY Medical is a manufacturer of interventional products. The ultimate beneficial owner of Smart Step is the mother of Ms. Yue’e Zhang, a director of the Company.

NOTE 10 — LOAN RECEIVABLE

In August 2015, the Company entered into a cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan (‘‘Deyuan Shareholder’’). Pursuant to the agreement, (i) Xinjiang Deyuan agreed to sell to Guizhou Taibang no less than 500 tonnes of source plasma in batches over the next three years, before July 31, 2018, and (ii) Guizhou Taibang agreed to provide Xinjiang Deyuan with an interest-bearing loan at an interest rate of 6% per annum with an aggregate principal amount of RMB300,000,000 (approximately $43,710,000). The loan was due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

In August 2018, the Company extended this cooperation agreement with Xinjiang Deyuan and Deyuan Shareholder for another 3 years to purchase at least an additional 500 tonnes of source plasma and to extend the due date of the loan to July 31, 2021.The loan is secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan. $3,784,297 of the loan principal was set off against the equivalent amount in accounts payable for purchase of plasma from Xinjiang Deyuan for the year ended December 31, 2018.

Interest income of $2,904,886, $2,514,936 and $2,661,700 were recognized and $695,757, $2,514,936 and $1,985,767 were received in cash by Guizhou Taibang and $2,062,426,nil and $675,933 were set off against the equivalent amounts in accounts payable for the purchase of plasma from Xinjiang Deyuan for the year ended December 31, 2018, 2017 and 2016, respectively.

NOTE 11 — OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses at December 31, 2018 and 2017 consisted of the following:

Payables to a potential investor(1) Payable to Guizhou Eakan Investing Corp.(2) Salaries and bonuses payable Accruals for sales promotion fee Payables for construction work Other tax payables Advance from customers(3) Deposits received Others Total	December 31, 2018 USD 8,574,254 2,121,392 23,543,535 29,401,827 8,181,773 1,456,184 9,101,834 7,463,172 10,089,822 99,933,793	December 31, 2017 USD 8,679,073 2,228,262 19,770,025 19,346,659 9,135,810 2,891,714 2,425,975 4,434,443 6,915,903
		75,827,864

(1) The payables to a potential investor comprises deposits received from a potential investor in the amount of $4,977,112 and $5,227,846 as of December 31, 2018 and 2017, respectively, and related interest plus penalty on these deposits totaling $3,597,142 and $3,451,227 as of December 31, 2018 and 2017, respectively.
(2) Guizhou Taibang has payables to Guizhou Eakan Investing Corp., amounting to approximately $2,121,392 and $2,228,262 as of December 31, 2018 and 2017, respectively. The Company borrowed this interest free advance for working capital purpose for Guizhou Taibang. The balance is due on demand. See Note 17.
(3) The change in advance from customers primarily represents the cash received, less amounts recognized as sales during the year.

NOTE 12 — INCOME TAX

The Company and each of its subsidiaries file separate income tax returns.

The United States of America

– II-53 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

the articles of incorporation and bylaws of GRC and changed its corporate name to GRC Holdings, Inc. On January 10, 2007, a plan of conversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc.

On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was enacted. The Tax Act has made significant changes to the U.S. Internal Revenue Code, including the taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, disallowing certain deductions that had previously been allowed, altering the expensing of capital expenditures, adopting elements of a territorial tax system, assessing a repatriation tax or ‘‘toll-charge’’ on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions. In 2017, the Company recorded a charge of approximately $40.3 million as a provisional amount for the repatriation tax on deemed repatriation to the United States of accumulated earnings. The charge for deemed repatriation will be payable by the Company over an eight-year period commencing April 2018. In the second quarter of 2018, $3,250,000 repatriation tax was paid by the Company to the U.S. tax bureau.

In August 2018, based on additional implementation guidance issued by the U.S. Treasury Department and the Internal Revenue Service, the Company adjusted the provisional amount by reversing income tax payable and income tax expense of $7.5 million. The accounting for the income tax effect of the Act has been completed.

Cayman Islands

Under the current laws of Cayman Islands, China Biologic Products Holdings, Inc. is not subject to tax on its income or capital gains.

British Virgin Islands

Hong Kong

Taibang Holdings (Hong Kong) Limited (‘‘Taibang Holdings’’, formerly known as ‘‘Logic Holdings (Hong Kong) Limited’’) is incorporated in Hong Kong and is subject to Hong Kong’s profits tax rate of 16.5% for the years ended December 31, 2018, 2017 and 2016. Taibang Holdings did not earn any income that was derived in Hong Kong for the years ended December 31, 2018, 2017 and 2016.

Health Forward Holdings Limited (‘‘Health Forward’’) is incorporated in Hong Kong and is subject to Hong Kong’s profits tax rate of 16.5% for the year ended December 31, 2018. Health Forward did not earn any income that was derived in Hong Kong for the year ended December 31, 2018.

The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

PRC

The PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% unless otherwise specified.

– II-54 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

In October 2014, Shandong Taibang obtained a notice from the Shandong provincial government that granted it the High and New Technology Enterprise certificate. This certificate entitled Shandong Taibang to enjoy a preferential income tax rate of 15% for a period of three years from 2014 to 2016. In December 2017, Shandong Taibang renewed its high and new technology enterprise qualification, which entitled it to enjoy a preferential income tax rate of 15% for a period of three years from 2017 to 2019.

TianXinFu was recognized by Beijing provincial government as a high and new technology enterprise in 2009 and the latest renewal of its qualification was obtained in 2018, which entitled TianXinFu to enjoy a preferential income tax rate of 15% for a period of three years from 2018 to 2020.

The components of earnings (losses) before income tax expense by jurisdictions are as follows:

PRC, excluding Hong Kong U.S. BVI Hong Kong Total	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 175,225,854 171,787,763 170,830,607 (11,303,223) (28,866,395) (19,408,283) 2,341,136 3,488,680 2,498,629 (260,472) (2,280) (1,712) 166,003,295 146,407,768 153,919,241	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 175,225,854 171,787,763 170,830,607 (11,303,223) (28,866,395) (19,408,283) 2,341,136 3,488,680 2,498,629 (260,472) (2,280) (1,712) 166,003,295 146,407,768 153,919,241
	December 31, 2018 USD 175,225,854 (11,303,223) 2,341,136 (260,472) 166,003,295	December 31, 2017 USD 171,787,763 (28,866,395) 3,488,680 (2,280) 146,407,768

Income tax expense for the years ended December 31, 2018, 2017 and 2016 represents current income tax expense and deferred income tax (benefit)/expense:

Current income tax expense — PRC Current income tax expense — US Deferred income tax benefit — PRC Deferred income tax expense — US Total income tax expense	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 29,715,744 27,133,958 28,132,361 (7,519,674) 40,290,367 — (4,657,379) (3,252,516) (3,006,541) 497,489 — — 18,036,180 64,171,809 25,125,820	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 29,715,744 27,133,958 28,132,361 (7,519,674) 40,290,367 — (4,657,379) (3,252,516) (3,006,541) 497,489 — — 18,036,180 64,171,809 25,125,820
	December 31, 2018 USD 29,715,744 (7,519,674) (4,657,379) 497,489 18,036,180	December 31, 2017 USD 27,133,958 40,290,367 (3,252,516) — 64,171,809

– II-55 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

PRC statutory income tax rate Non-deductible expenses: Share-based compensation Others Tax rate differential Effect of PRC preferential tax rate Bonus deduction on research and development expenses Change in valuation allowance Repatriation tax Tax effect of equity method investment Excess tax benefits from stock option exercises Effective income tax rate	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 (in percentage to earnings before income tax expense) 25.0% 25.0% 25.0% 1.4% 3.7% — 0.9% 1.1% 1.6% (0.5)% (0.9)% (3.6)% (9.0)% (11.1)% (10.9)% (2.3)% (1.5)% (1.5)% 0.4% (0.6)% 5.3% (4.5)% 29.4% — 0.3% (0.6)% 0.4% (0.8)% (0.7)% — 10.9% 43.8% 16.3%

The PRC tax rate has been used because the majority of the Company’s consolidated pre-tax earnings arise in the PRC.

As of December 31, 2018 and 2017, significant temporary differences between the tax basis and financial statement basis of assets and liabilities that gave rise to deferred taxes were principally related to the following:

Deferred income tax assets arising from: —Accrued expenses — Deferred income — Property, Plant and Equipment — Other non-current assets — Tax loss carryforwards Gross deferred income tax assets Less: valuation allowance Net deferred income tax assets	December 31, 2018 USD 7,587,118 213,086 1,149,033 158,607 4,300,813 13,408,657 (4,300,813) 9,107,844	December 31, 2017 USD 6,558,359 258,255 1,210,006 146,918 5,031,657 13,205,195 (5,031,657) 8,173,538

– II-56 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Deferred income tax liabilities arising from: — Property, plant and equipment — Intangible assets — Land use rights — Equity method investment — Dividend withholding tax Deferred income tax liabilities Classification on consolidated balance sheets: Deferred income tax assets, included in other non-current assets Deferred income tax liabilities, included in other liabilities	December 31, 2018 USD (129,636) (7,947,786) (552,602) (497,489) (3,774,778) (12,902,291) 9,107,844 (12,902,291)	December 31, 2017 USD — (148,467) — — (6,085,290) (6,233,757) 8,173,538 (6,233,757)

The deferred income tax assets of $4,300,813 for tax loss carry forwards as of December 31, 2018 represented tax loss carryforwards of certain PRC subsidiaries. For PRC income tax purposes, these PRC subsidiaries had tax loss carryforwards of $18,526,347, of which $4,806,145, $4,204,366, $4,644,148, $728,172 and $4,143,516 would expire by 2019, 2020, 2021, 2022 and 2023, respectively, if unused. In view of their cumulative losses positions, management determined it is more likely than not that deferred income tax assets of these PRC subsidiaries will not be realized, and therefore full valuation allowances of $4,300,813 and $5,031,657 were provided as of December 31, 2018 and 2017, respectively.

For United States federal income tax purposes, CBP had nil tax loss carry forwards as of December 31, 2018 and 2017. All tax loss brought forwards of CBP has been utilized by December 31, 2017 as a result of the repatriation tax on deemed repatriation of accumulated earnings to the United States.

The following table presents the movement of the valuation allowance for deferred income tax assets for the years ended December 31, 2018, 2017 and 2016:

Beginning balance Addition (deduction) during the year Foreign currency translation adjustment Ending balance	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 5,031,657 26,629,179 8,160,611 (507,897) (21,927,117) 18,676,456 (222,947) 329,595 (207,888) 4,300,813 5,031,657 26,629,179	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 5,031,657 26,629,179 8,160,611 (507,897) (21,927,117) 18,676,456 (222,947) 329,595 (207,888) 4,300,813 5,031,657 26,629,179
	December 31, 2018 USD 5,031,657 (507,897) (222,947) 4,300,813	December 31, 2017 USD 26,629,179 (21,927,117) 329,595 5,031,657

– II-57 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

According to the prevailing PRC income tax law and relevant regulations, dividends relating to earnings accumulated beginning on January 1, 2008 that are received by non-PRC-resident enterprises from PRC-resident enterprises are subject to withholding tax at 10%, unless reduced by tax treaties or similar arrangement. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, dividends received by the Company from its overseas subsidiaries are subject to the U.S. federal income tax less any qualified foreign tax credits. Based on the dividend policy the Company has provided the deferred income tax liabilities of $7,351,023 on undistributed earnings of $74 million, approximately 50% of Shandong Taibang’s total undistributed earnings at December 31, 2014. During the years ended December 31, 2018, 2017 and 2016, the deferred income tax liabilities of $2,310,512, nil and $1,265,733 were paid following a sum of RMB148,760,000 (approximately $21,674,332), nil and RMB82,760,000 (approximately $11,929,854) dividend distribution to Taibang Holdings (Hong Kong) Limited by Taibang Biotech (Shandong) Co., Ltd. in 2018, 2017 and 2016, respectively, which was generated from distributed earnings of Shandong Taibang. Due to the Company’s plan and intention of reinvesting its earnings in its PRC business, the Company has not provided for the related deferred income tax liabilities on the remaining undistributed earnings of the PRC subsidiaries totaling $613.6 million as of December 31, 2018.

As of January 1, 2016 and for each of the years ended December 31, 2018, 2017 and 2016, the Company and its subsidiaries did not have any unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. The Company does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months.

The Company and each of its PRC subsidiaries file income tax returns in the United States and the PRC, respectively. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2007. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 (approximately $14,570). In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiaries are open to examination by the PRC tax authorities for the tax years beginning in 2012.

NOTE 13 — OPTIONS AND NONVESTED SHARES

Options

Effective May 9, 2008, the Board of Directors adopted the China Biologic 2008 Equity Incentive Plan, (‘‘the 2008 Plan’’). The 2008 Plan provides for grants of stock options, stock appreciation rights, performance units, restricted stock, restricted stock units and performance shares. A total of five million shares of the Company’s ordinary share may be issued pursuant to the 2008 Plan. The exercise price per share for the shares to be issued pursuant to an exercise of a stock option will be no less than the fair market value per share on the grant date, except that, in the case of an incentive stock option granted to a person who holds more than 10% of the total combined voting power of all classes of the Company’s stock or any of its subsidiaries, the exercise price will be no less than 110% of the fair market value per share on the grant date. All the options to be granted will have 10-year terms. The 2008 Plan expired on May 9, 2018 and all ordinary shares reserved under the 2008 Plan had been granted.

For the years ended December 31, 2018, 2017 and 2016, no stock options to purchase ordinary share were granted to any directors or employees.

– II-58 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

A summary of stock options activity for the years ended December 31, 2018, 2017 and 2016 is as follows:

Outstanding as of January 1, 2016
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2016
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2017
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2018
Vested as of December 31, 2018
Exercisable as of December 31, 2018

Number of
Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term in years
Aggregate
Intrinsic Value
USD
USD
651,897
10.44
5.24
86,064,461
—
—
(337,406)
10.55
(35,180,367)
—
—
314,491
10.32
3.84
30,568,083
—
—
(85,242)
10.18
(7,868,258)
—
—
229,249
10.37
2.61
15,168,276
—
—
(121,945)
9.71
(9,137,231)
—
—
107,304
11.13
2.28
7,570,681
107,304
11.13
2.28
7,570,681
107,304
11.13
2.28
7,570,681

For the years ended December 31, 2018, 2017 and 2016, the Company recorded stock compensation expense of nil, nil and $649,203, respectively, in general and administrative expenses.

Nonvested shares

For the years ended December 31, 2018, 2017 and 2016, nonvested shares were granted to certain directors and employees (collectively, the ‘‘Participant’’). Pursuant to the nonvested share grant agreements between the Company and the Participant, the Participant will have all the rights of a shareholder with respect to the nonvested shares. The nonvested shares granted to directors generally vest in one or two years. The nonvested shares granted to employees generally vest in four years.

– II-59 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

A summary of nonvested shares activity for the year ended December 31, 2018, 2017 and 2016 is as follow:

Outstanding as of January 1, 2016 Granted Vested Forfeited Outstanding as of December 31, 2016 Granted Vested Forfeited Outstanding as of December 31, 2017 Granted Vested Forfeited Outstanding as of December 31, 2018	Number of nonvested shares 669,100 511,200 (255,150) (12,500) 912,650 356,150 (353,694) (1,080) 914,026 333,620 (256,830) (385,425) 605,391	Grant date weighted average fair value USD 77.49 119.75 66.04 66.74
		104.51 89.94 91.32 98.20
		103.95 79.23 100.91 98.86
		94.85

For the years ended December 31, 2018, 2017 and 2016, the Company recorded stock compensation expense of $23,130,570, $33,903,283 and $23,756,308 in general and administrative expenses, respectively.

As of December 31, 2018, approximately $44,891,282 of stock compensation expense with respect to nonvested shares is to be recognized over weighted average period of approximately 2.32 years.

NOTE 14 — STATUTORY RESERVES

The Company’s PRC subsidiaries are required to allocate at least 10% of its after tax profits as determined under generally accepted accounting principles in the PRC to its statutory surplus reserve until the reserve balance reaches 50% of respective registered capital. For the years ended December 31, 2018, 2017 and 2016, the Company’s PRC subsidiaries made appropriations to the reserve fund of $18,844,626, $5,051 and $348,583, respectively. The accumulated balance of the statutory reserve as of December 31, 2018 and 2017 was $53,358,414 and $34,513,788, respectively.

NOTE 15 — FAIR VALUE MEASUREMENTS

Financial assets and liabilities of the Company primarily comprise of cash and cash equivalents, time deposits, short term investments, accounts receivable, loan receivable-current, other receivables, loan receivable-non-current, accounts payable, and other payables and accrued expenses. Management used the following methods and assumptions to estimate the fair value of financial assets and liabilities at the relevant balance sheet dates:

Fair Value of Financial Instruments

Short-term financial assets and liabilities (including cash and cash equivalents, time deposits, accounts receivable, loan receivable- current, other receivables,accounts payable, and other payables and accrued expenses) — The carrying amounts of the short-term financial assets and liabilities approximate their fair values because of the short maturity of these instruments.

– II-60 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Loan receivable-non-current — The carrying amounts of loan receivable approximate their fair value. The fair value is estimated using discounted cash flow analysis based on the borrower’s incremental borrowing rates for similar borrowing.

Recurring Fair Value Measurements

The Company elects the fair value option to account for short term investments. The Company values its short term investments using the effective interest method with inputs of annualized rate of return provided by issuing banks. The annualized rate of return may range from 3.00% to 4.65% depending on the amount and time period invested. The Company classifies the valuation techniques that use these inputs as Level 2.

NOTE 16 — SALES

The Company’s sales by product categories for the years ended December 31, 2018, 2017 and 2016 are as follows:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2018 USD 149,369,846 113,490,790 59,470,912 31,677,439 68,157,257 422,166,244 40,644,561 4,066,764 44,711,325 466,877,569	December 31, 2017 USD 132,498,791 117,511,797 50,147,328 21,049,636 49,199,288 370,406,840 — — — 370,406,840	December 31, 2016 USD 133,712,663 117,891,410 40,105,561 17,281,111 32,178,681
		341,169,426
		— —
		—
		341,169,426

– II-61 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

The Company’s sales by channel for the years ended December 31, 2018, 2017 and 2016 are as follows:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2018 USD 174,698,620 179,310,367 354,008,987 68,157,257 422,166,244 42,717,750 1,993,575 44,711,325 466,877,569	December 31, 2017 USD 126,381,596 194,825,956 321,207,552 49,199,288 370,406,840 — — — 370,406,840	December 31, 2016 USD 120,297,097 188,693,648
		308,990,745 32,178,681
		341,169,426
		— —
		—
		341,169,426

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Commitments

As of December 31, 2018, commitments outstanding for operating lease approximated $2,129,052.

As of December 31, 2018, commitments outstanding for the purchase of property, plant and equipment approximated $10,238,706.

As of December 31, 2018, commitments outstanding for the purchase of plasma approximated $58,234,770.

– II-62 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

The following table sets forth the Company’s material contractual obligations as of December 31, 2018:

Contractual Obligations Operating lease commitment Purchase of plasma commitment(1) Capital commitment Total		Payments due by period	Payments due by period	Payments due by period
	Less than one year 848,731 14,018,867 9,214,835 24,082,433	One to two years 938,551 27,925,833 1,023,871 29,888,255	Two to three years 167,378 16,290,070 — 16,457,448	Three to four years 4,095 — — 4,095	Four to five years 4,095 — —
					4,095

(1) See Note 10.

Legal proceedings

PRC Lawsuit

In June 2017, an individual brought a lawsuit against Guizhou Taibang and Guizhou Eakan Investing Corp. (‘‘Guizhou Eakan’’), an entity affiliated with one of Guizhou Taibang’s former noncontrolling shareholders, requesting repayment of RMB14,560,000 (approximately $2,121,392) and related fund possession cost amounting to approximately RMB37,141,600 (approximately $5,411,531). The plaintiff alleged that he entered into an agreement with Guizhou Eakan in May 2007, according to which he provided RMB14,560,000 for Guizhou Eakan to satisfy Guizhou Taibang’s loan request.

On February 28, 2018, the trial was set in Shanghai Pudong New Area People’s Court. In March 2018, the court dismissed the trial for lack of jurisdiction and then transferred the trial to Shanghai No.1 Intermediate People’s Court (‘‘No.1 Court’’). In January 2019, the No.1 Court held the trial and as of reporting date the ruling is still pending.

The Company does not expect the plaintiff to prevail in this trial, but the Company cannot assure that the final outcome will be in favor of Guizhou Taibang. As of December 31, 2018, Guizhou Taibang has maintained RMB14,560,000 (approximately $2,121,392) payable to Guizhou Eakan on its balance sheet.

Cayman Lawsuit

On August 27, 2018, the Company’s former Chairman and CEO Mr. David (Xiaoying) Gao commenced a proceeding against the Company in the Grand Court of the Cayman Islands (the ‘‘Court’’), principally seeking (a) a declaration that the private placement that was announced by the Company on August 24, 2018 was invalid and void, (b) an order requiring the Company to reverse and/or rescind any transactions carried out pursuant to the private placement, and (c) an injunction to prevent further shares from being issued by the Company to the entities participating in the private placement. The private placement was completed on September 21, 2018. On October 5, 2018, the Company made an application to the Court for dismissal of Mr. Gao’s lawsuit on the ground, among others, that Mr. Gao lacked standing to pursue the claims. On December 13, 2018, the Court granted the Company’s application and dismissed Mr. Gao’s lawsuit. On December 21, 2018, the Court granted Mr. Gao leave to appeal its December 13, 2018 order. Pursuant to the Cayman Islands Court of Appeal Rules, Mr. Gao was required to lodge a Notice of Appeal within 14 days of being granted leave to appeal. As of reporting date, the Company has not been served with a Notice of Appeal or any further documents relating to this litigation.

– II-63 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 18 — EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:

Net income attributable to China Biologic Products Holdings, Inc. Earnings allocated to participating nonvested shares Net income used in basic and diluted earnings per ordinary share Weighted average shares used in computing basic earnings per ordinary share Diluted effect of stock option Weighted average shares used in computing diluted earnings per ordinary share Basic earnings per ordinary share Diluted earnings per ordinary share	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 128,056,302 67,943,035 104,779,307 (3,072,170) (2,188,633) (2,987,429) 124,984,132 65,754,402 101,791,878 35,304,294 27,361,561 26,848,445 128,665 244,062 400,699 35,432,959 27,605,623 27,249,144 3.54 2.40 3.79 3.53 2.38 3.74	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD 128,056,302 67,943,035 104,779,307 (3,072,170) (2,188,633) (2,987,429) 124,984,132 65,754,402 101,791,878 35,304,294 27,361,561 26,848,445 128,665 244,062 400,699 35,432,959 27,605,623 27,249,144 3.54 2.40 3.79 3.53 2.38 3.74
	December 31, 2018 USD 128,056,302 (3,072,170) 124,984,132 35,304,294 128,665 35,432,959 3.54 3.53	December 31, 2017 USD 67,943,035 (2,188,633) 65,754,402 27,361,561 244,062 27,605,623 2.40 2.38

During the years ended December 31, 2018, 2017 and 2016, no potential ordinary shares outstanding were excluded from the calculation of diluted earnings per ordinary share.

– II-64 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 19 — CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. (PARENT COMPANY)

The following represents condensed unconsolidated financial information of the Parent Company only:

Condensed Balance Sheets: Cash Time deposits Prepayments and prepaid expenses Total Current Assets Property, plant and equipment, net Investment in and amounts due from subsidiaries Total Assets Other payables and accrued expenses Income tax payable — current Total Current Liabilities Income tax payable — non current Other liabilities Total Liabilities Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity	December 31, 2018 USD 175,133,834 430,000,000 12,140,443 617,274,277 88 1,139,337,487 1,756,611,852 4,544,071 2,621,655 7,165,726 26,899,038 497,489 34,562,253 1,722,049,599 1,756,611,852	December 31, 2017 USD 4,708,801 3,000,000 87,070
		7,795,871 145 634,245,590
		642,041,606
		3,559,211 3,223,229
		6,782,440 37,067,138 —
		43,849,578
		598,192,028
		642,041,606

Condensed Statements of Comprehensive Income:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2018 USD 132,337,339 (16,575,019) 5,271,797 121,034,117 (7,022,185) 128,056,302	December 31, 2017 USD 137,099,797 (28,879,890) 13,495 108,233,402 40,290,367 67,943,035	December 31, 2016 USD 124,187,590 (19,408,283) —
		104,779,307 —
		104,779,307

– II-65 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Condensed Statements of Cash Flows:

Net cash used in operating activities Net cash used in investing activities Net cash provided by financing activities Net increase (decrease) in cash Cash at beginning of year Cash at end of year	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD (6,211,606) (3,830,330) (2,400,188) (404,812,895) (3,000,000) — 581,449,534 — — 170,425,033 (6,830,330) (2,400,188) 4,708,801 11,539,131 13,939,319 175,133,834 4,708,801 11,539,131	For the Years Ended December 31, 2018 December 31, 2017 December 31, 2016 USD USD USD (6,211,606) (3,830,330) (2,400,188) (404,812,895) (3,000,000) — 581,449,534 — — 170,425,033 (6,830,330) (2,400,188) 4,708,801 11,539,131 13,939,319 175,133,834 4,708,801 11,539,131
	December 31, 2018 USD (6,211,606) (404,812,895) 581,449,534 170,425,033 4,708,801 175,133,834	December 31, 2017 USD (3,830,330) (3,000,000) — (6,830,330) 11,539,131 4,708,801

NOTE 20 — CAPITAL WITHDRAWAL BY TWO FORMER NONCONTROLLING INTEREST SHAREHOLDERS OF GUIZHOU TAIBANG

On October 26, 2016, Guizhou Taibang completed the requisite legal and administrative procedures, through which two former minority shareholders, holding a combined 15.3% equity interest in Guizhou Taibang, withdrew their respective capital contributions in Guizhou Taibang for an aggregate consideration of RMB415,000,000 (approximately $58,091,018) pursuant to an agreement dated July 31, 2016.

NOTE 21 — SEGMENT INFORMATION

The Company’s principal operating segments coincide with the types of products to be sold. The products from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s reportable segments for the year ended December 31, 2018 were biopharmaceutical products and biomaterial products as a result of the acquisition of TianXinFu completed on January 1, 2018 as described in Note 3. The Company had one operating segment, biopharmaceutical products segment, which included plasma-based products and placenta polypeptide for the years of 2017 and 2016.

The Company’s chief operating decision-maker (‘‘CODM’’) has been identified as the chief executive officer. The CODM regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance. There are no inter-segment revenue transactions and, therefore, revenues are only generated from external customers.

The accounting policies of the segments are the same as those used by the Company.

– II-66 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

Segment information for the year ended and as of December 31, 2018 are as follows:

Year ended December 31, 2018 Sales Cost of sales Gross profit Income from operations Net income Equity in income of an equity method investee Interest income Share-based compensation Depreciation and Amortization Income tax expense Segment assets Capital expenditures Equity method investment	Biopharmaceutical Products USD 422,166,244 141,683,089 280,483,155 128,980,355 131,561,108 2,368,995 13,704,954 23,130,570 13,902,507 15,353,208 2,095,996,321 35,245,016 15,428,028	Biomaterial Products USD 44,711,325 5,104,147 39,607,178 17,192,396 16,406,007 — 1,796 — 9,322,844 2,682,972 348,885,628 1,471,374 —	Total USD 466,877,569 146,787,236
			320,090,333 146,172,751 147,967,115 2,368,995 13,706,750 23,130,570 23,225,351 18,036,180 2,444,881,949 36,716,390 15,428,028

Reconciliation of segment assets to consolidated total assets:

Year ended December 31, 2018 Total segment assets Elimination of intercompany investment balances Consolidated total assets	December 31, 2018 USD 2,444,881,949 (434,903,268)
	2,009,978,681

As substantially all of the Company’s revenue is derived from the PRC and substantially all of the Company’s longlived assets are located in the PRC, no geographical information is presented. In addition, revenue derived from and longlived assets located in Cayman Islands, the Company’s country of domicile, are immaterial.

NOTE 22 — SUBSEQUENT EVENTS

PRC Legal Proceedings

In January 2019, another individual who claimed to be a strategic investor of Guizhou Taibang brought a lawsuit against Guizhou Taibang, requesting to register her alleged ownership interest in Guizhou Taibang with the local Administration for Market Regulation (‘‘AMR’’, formerly known as the Administration of Industry and Commerce). The plaintiff alleged that she entered into an Equity Purchase Agreement with Guizhou Taibang in May 2007, according to which she paid RMB11,200,000 (approximately $1,631,840) to Guizhou Taibang in exchange for approximately 4.71% of Guizhou Taibang’s equity interests.

The plaintiff and Guizhou Taibang are scheduled to exchange evidence on March 20, 2019. The Company does not expect the plaintiff to prevail in this trial, but the Company cannot assure that the final outcome will be in favor of Guizhou Taibang.

– II-67 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Extension to Previously Announced Share Repurchase Program

On March 4, 2019, the Board of Directors of the Company approved the extension to the Company’s previously authorized $100 million share repurchase program for another six months until October 31, 2019. The Company’s repurchases may be made from time to time on the open market at prevailing market prices, in negotiated transactions off the market, in block trades or through other legally permissible means. The timing and extent of any purchases will depend upon market conditions, the trading price of its shares and other factors, and are subject to the restrictions relating to volume, price and timing under applicable law.

– II-68 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

(3) The following is an extract of the audited financial statements of CBPO for the year ended December 31, 2019, which were prepared in accordance with U.S. GAAP, from the 2019 annual report of CBPO.

CONSOLIDATED BALANCE SHEETS

Note ASSETS Current Assets Cash and cash equivalents Time deposits Short term investments Accounts receivable, net of allowance for doubtful accounts 4 Inventories 6 Prepayments and other current assets 5 Total Current Assets Property, plant and equipment, net 7 Intangible assets, net 8 Land use rights, net 11 Equity method investment Prepayments for investments in equity securities Long term equity investments 9 Loan receivable 10 Goodwill 3 Other non-current assets 11 Total Assets	December 31, 2019 USD 161,750,425 497,676,069 267,830,790 100,270,436 250,728,260 21,469,418 1,299,725,398 177,596,563 44,068,061 28,458,944 16,725,513 — 10,812,893 35,642,340 308,509,397 16,319,388 1,937,858,497	December 31, 2018 USD 338,880,559 537,478,040 76,048,594 125,115,842 243,295,512 36,369,275
		1,357,187,822 178,327,361 53,258,871 32,204,342 15,428,028 10,812,893 — 39,942,591 313,588,803 9,227,970
		2,009,978,681

– II-69 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Note LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable Income tax payable 13 Other payables and accrued expenses 12 Total Current Liabilities Deferred income Non-current income tax payable 13 Other liabilities 11 Total Liabilities Shareholders’ Equity Ordinary share: par value $0.0001; 100,000,000 shares authorized; 41,910,701 and 41,616,320 shares issued at December 31, 2019 and 2018, respectively; 38,459,769 and 39,361,616 shares outstanding at December 31, 2019 and 2018, respectively Additional paid-in capital Treasury share: 3,450,932 and 2,254,704 shares at December 31, 2019 and 2018, respectively, at cost Retained earnings Accumulated other comprehensive losses Total equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total Shareholders’ Equity Commitments and contingencies 19 Total Liabilities and Shareholders’ Equity	December 31, 2019 USD 6,262,256 13,303,085 99,743,350 119,308,691 2,300,428 24,905,728 16,491,793 163,006,640 4,191 1,158,274,206 (167,432,883) 773,290,486 (68,421,408) 1,695,714,592 79,137,265 1,774,851,857 — 1,937,858,497	December 31, 2018 USD 11,404,642 11,010,347 99,933,793 122,348,782 2,824,212 26,899,038 13,203,485 165,275,517 4,162 1,189,698,494 (56,425,094) 634,482,738 (45,710,701) 1,722,049,599 122,653,565 1,844,703,164 — 2,009,978,681

See accompanying notes to Consolidated Financial Statements.

– II-70 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Note Sales 18 Cost of sales Gross profit Operating expenses Selling expenses General and administrative expenses Research and development expenses Income from operations Other income (expenses) Equity in income of an equity method investee Interest income Interest expense Other income, net Total other income, net Income before income tax expense Income tax expense 13 Net income Less: Net income attributable to noncontrolling interest Net income attributable to China Biologic Products Holdings, Inc.	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 503,744,922 466,877,569 370,406,840 174,666,544 146,787,236 125,517,021 329,078,378 320,090,333 244,889,819 80,319,448 95,575,830 34,843,935 73,376,457 68,817,340 67,683,667 11,734,590 9,524,412 6,503,712 163,647,883 146,172,751 135,858,505 1,587,067 2,368,995 3,509,071 21,322,239 13,706,750 7,623,624 (557,597) (338,136) (583,432) 5,494,119 4,092,935 — 27,845,828 19,830,544 10,549,263 191,493,711 166,003,295 146,407,768 28,098,525 18,036,180 64,171,809 163,395,186 147,967,115 82,235,959 24,587,438 19,910,813 14,292,924 138,807,748 128,056,302 67,943,035	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 503,744,922 466,877,569 370,406,840 174,666,544 146,787,236 125,517,021 329,078,378 320,090,333 244,889,819 80,319,448 95,575,830 34,843,935 73,376,457 68,817,340 67,683,667 11,734,590 9,524,412 6,503,712 163,647,883 146,172,751 135,858,505 1,587,067 2,368,995 3,509,071 21,322,239 13,706,750 7,623,624 (557,597) (338,136) (583,432) 5,494,119 4,092,935 — 27,845,828 19,830,544 10,549,263 191,493,711 166,003,295 146,407,768 28,098,525 18,036,180 64,171,809 163,395,186 147,967,115 82,235,959 24,587,438 19,910,813 14,292,924 138,807,748 128,056,302 67,943,035
	December 31, 2019 USD 503,744,922 174,666,544 329,078,378 80,319,448 73,376,457 11,734,590 163,647,883 1,587,067 21,322,239 (557,597) 5,494,119 27,845,828 191,493,711 28,098,525 163,395,186 24,587,438 138,807,748	December 31, 2018 USD 466,877,569 146,787,236 320,090,333 95,575,830 68,817,340 9,524,412 146,172,751 2,368,995 13,706,750 (338,136) 4,092,935 19,830,544 166,003,295 18,036,180 147,967,115 19,910,813 128,056,302

– II-71 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2019 USD 3.55 3.53 38,657,553 38,897,964 163,395,186 (20,376,586) 143,018,600 21,694,640 121,323,960	December 31, 2018 USD 3.54 3.53 35,304,294 35,432,959 147,967,115 (60,783,829) 87,183,286 12,794,989 74,388,297	December 31, 2017 USD 2.40
		2.38
		27,361,561
		27,605,623
		82,235,959 36,861,394
		119,097,353 17,876,743
		101,220,610

See accompanying notes to Consolidated Financial Statements.

– II-72 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Ordinary share	Ordinary share	Additional paid-in capital Treasury stock Retained earnings USD USD USD 105,459,610 (56,425,094) 438,483,401 — — 67,943,035 — — — — — — 33,903,283 — — 867,537 — — (35) — — 140,230,395 (56,425,094) 506,426,436 — — 128,056,302 — — — — — — 23,130,570 — — 590,264,415 — — 434,888,618 — — 1,184,522 — — (26) — — 1,189,698,494 (56,425,094) 634,482,738 — — 138,807,748 — — — — — — 26,600,015 — — — (111,007,789) — (58,636,048) — — 611,769 — — (24) — — 1,158,274,206 (167,432,883) 773,290,486	Additional paid-in capital Treasury stock Retained earnings USD USD USD 105,459,610 (56,425,094) 438,483,401 — — 67,943,035 — — — — — — 33,903,283 — — 867,537 — — (35) — — 140,230,395 (56,425,094) 506,426,436 — — 128,056,302 — — — — — — 23,130,570 — — 590,264,415 — — 434,888,618 — — 1,184,522 — — (26) — — 1,189,698,494 (56,425,094) 634,482,738 — — 138,807,748 — — — — — — 26,600,015 — — — (111,007,789) — (58,636,048) — — 611,769 — — (24) — — 1,158,274,206 (167,432,883) 773,290,486	Accumulated other comprehensive income (losses) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008) — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997 — 128,056,302 19,910,813 147,967,115 (53,668,005) (53,668,005) (7,115,824) (60,783,829) — — (10,145,395) (10,145,395) — 23,130,570 — 23,130,570 — 590,265,000 — 590,265,000 — 434,889,170 53,871,002 488,760,172 — 1,184,534 — 1,184,534 — — — — (45,710,701) 1,722,049,599 122,653,565 1,844,703,164 — 138,807,748 24,587,438 163,395,186 (17,483,788) (17,483,788) (2,892,798) (20,376,586) — — (10,124,707) (10,124,707) — 26,600,015 — 26,600,015 — (111,007,789) — (111,007,789) (5,226,919) (63,862,967) (55,086,233) (118,949,200) — 611,774 — 611,774 — — — — (68,421,408) 1,695,714,592 79,137,265 1,774,851,857	Accumulated other comprehensive income (losses) Equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total equity USD USD USD USD (25,320,271) 462,200,589 58,936,234 521,136,823 — 67,943,035 14,292,924 82,235,959 33,277,575 33,277,575 3,583,819 36,861,394 — — (10,680,008) (10,680,008) — 33,903,283 — 33,903,283 — 867,546 — 867,546 — — — — 7,957,304 598,192,028 66,132,969 664,324,997 — 128,056,302 19,910,813 147,967,115 (53,668,005) (53,668,005) (7,115,824) (60,783,829) — — (10,145,395) (10,145,395) — 23,130,570 — 23,130,570 — 590,265,000 — 590,265,000 — 434,889,170 53,871,002 488,760,172 — 1,184,534 — 1,184,534 — — — — (45,710,701) 1,722,049,599 122,653,565 1,844,703,164 — 138,807,748 24,587,438 163,395,186 (17,483,788) (17,483,788) (2,892,798) (20,376,586) — — (10,124,707) (10,124,707) — 26,600,015 — 26,600,015 — (111,007,789) — (111,007,789) (5,226,919) (63,862,967) (55,086,233) (118,949,200) — 611,774 — 611,774 — — — — (68,421,408) 1,695,714,592 79,137,265 1,774,851,857	Noncontrolling interest Total equity USD USD 58,936,234 521,136,823 14,292,924 82,235,959 3,583,819 36,861,394 (10,680,008) (10,680,008) — 33,903,283 — 867,546 — —	Noncontrolling interest Total equity USD USD 58,936,234 521,136,823 14,292,924 82,235,959 3,583,819 36,861,394 (10,680,008) (10,680,008) — 33,903,283 — 867,546 — —
Number of Shares 29,427,609 — — — — 85,242 353,694	Par value USD 2,943 — — — — 9 35
29,866,545	2,987	140,230,395		7,957,304	598,192,028	66,132,969	664,324,997
— — — — 5,850,000 5,521,000 121,945 256,830	— — — — 585 552 12 26		128,056,302 — — — — — — —
41,616,320	4,162	1,189,698,494
— — — — — — 49,900 244,481	— — — — — — 5 24
41,910,701	4,191	1,158,274,206				79,137,265	1,774,851,857

See accompanying notes to Consolidated Financial Statements.

– II-73 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization Loss on disposal of property, plant and equipment Fair value changes of short term investments (Reversal of)/Allowance for doubtful accounts — accounts receivable (Reversal of)/Allowance for doubtful accounts — prepayments and other receivables Impairment for other non-current assets Write-down of inventories to net realizable value Deferred income tax benefit Share-based compensation Equity in income of an equity method investee Change in operating assets and liabilities, net of effect of acquisition of TianXinFu: Accounts receivable Inventories Prepayments and other current assets Accounts payable Income tax payable Other payables and accrued expenses Deferred income Non-current income tax payable Net cash provided by operating activities	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 163,395,186 147,967,115 82,235,959 16,517,254 13,809,041 11,691,731 9,723,617 9,416,310 1,216,959 297,504 1,001,000 3,228,845 350,816 — — (77,624) 655,148 23,783 (24,959) 96,267 — — 2,671,528 — 3,379,600 — — (2,437,244) (4,159,890) (3,252,516) 26,600,015 23,130,570 33,903,283 (1,587,067) (2,368,995) (3,509,071) 22,132,899 (53,879,876) (39,918,939) (14,848,008) (42,594,485) (42,078,261) 4,403,945 (9,387,783) (1,777,783) (1,298,670) 8,140,553 977,152 2,499,525 (3,575,544) 6,047,808 2,792,697 23,693,979 16,821,694 (483,833) (504,886) (493,897) (1,993,310) (10,168,100) 37,067,138 229,342,343 103,941,952 102,183,885	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 163,395,186 147,967,115 82,235,959 16,517,254 13,809,041 11,691,731 9,723,617 9,416,310 1,216,959 297,504 1,001,000 3,228,845 350,816 — — (77,624) 655,148 23,783 (24,959) 96,267 — — 2,671,528 — 3,379,600 — — (2,437,244) (4,159,890) (3,252,516) 26,600,015 23,130,570 33,903,283 (1,587,067) (2,368,995) (3,509,071) 22,132,899 (53,879,876) (39,918,939) (14,848,008) (42,594,485) (42,078,261) 4,403,945 (9,387,783) (1,777,783) (1,298,670) 8,140,553 977,152 2,499,525 (3,575,544) 6,047,808 2,792,697 23,693,979 16,821,694 (483,833) (504,886) (493,897) (1,993,310) (10,168,100) 37,067,138 229,342,343 103,941,952 102,183,885
	December 31, 2019 USD 163,395,186 16,517,254 9,723,617 297,504 350,816 (77,624) (24,959) — 3,379,600 (2,437,244) 26,600,015 (1,587,067) 22,132,899 (14,848,008) 4,403,945 (1,298,670) 2,499,525 2,792,697 (483,833) (1,993,310) 229,342,343	December 31, 2018 USD 147,967,115 13,809,041 9,416,310 1,001,000 — 655,148 96,267 2,671,528 — (4,159,890) 23,130,570 (2,368,995) (53,879,876) (42,594,485) (9,387,783) 8,140,553 (3,575,544) 23,693,979 (504,886) (10,168,100) 103,941,952

– II-74 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired from acquisition of TianXinFu Purchase of time deposits Proceeds from maturity of time deposits Purchase of short term investments Proceeds from maturity of short term investments Payment for property, plant and equipment Payment for intangible assets and land use rights Proceeds from disposal of property, plant and equipment and land use rights Prepayments for investments in equity securities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock options exercised Proceeds from short term bank loans Repayment of short term bank loans Dividend paid by subsidiaries to noncontrolling interest shareholders Proceeds from issuance of ordinary shares Prepayment to an investment bank for potential share repurchase Payment to an investment bank for share repurchase Refund of prepayment to an investment bank for share repurchase Acquisition of noncontrolling interest Net cash (used in)/provided by financing activities	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD — 97,702,278 — (1,682,444,149) (1,871,773,012) (22,669,000) 1,718,265,827 1,349,949,821 — (924,056,075) (855,074,467) — 727,962,833 767,654,706 — (24,287,087) (31,743,146) (37,504,440) (149,010) (4,973,244) (786,691) 4,563,433 124,560 64,914 — (10,812,893) — (180,144,228) (558,945,397) (60,895,217) 611,774 1,184,534 867,546 — — 23,009,280 — — (23,412,060) (10,124,707) (10,145,395) (18,789,151) — 590,265,000 — — (10,000,000) — (110,042,776) — — 9,034,987 — — (118,949,200) — — (229,469,922) 571,304,139 (18,324,385)	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD — 97,702,278 — (1,682,444,149) (1,871,773,012) (22,669,000) 1,718,265,827 1,349,949,821 — (924,056,075) (855,074,467) — 727,962,833 767,654,706 — (24,287,087) (31,743,146) (37,504,440) (149,010) (4,973,244) (786,691) 4,563,433 124,560 64,914 — (10,812,893) — (180,144,228) (558,945,397) (60,895,217) 611,774 1,184,534 867,546 — — 23,009,280 — — (23,412,060) (10,124,707) (10,145,395) (18,789,151) — 590,265,000 — — (10,000,000) — (110,042,776) — — 9,034,987 — — (118,949,200) — — (229,469,922) 571,304,139 (18,324,385)
	December 31, 2019 USD — (1,682,444,149) 1,718,265,827 (924,056,075) 727,962,833 (24,287,087) (149,010) 4,563,433 — (180,144,228) 611,774 — — (10,124,707) — — (110,042,776) 9,034,987 (118,949,200) (229,469,922)	December 31, 2018 USD 97,702,278 (1,871,773,012) 1,349,949,821 (855,074,467) 767,654,706 (31,743,146) (4,973,244) 124,560 (10,812,893) (558,945,397) 1,184,534 — — (10,145,395) 590,265,000 (10,000,000) — — — 571,304,139

– II-75 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2019 USD 3,141,673 (177,130,134) 338,880,559 161,750,425 30,358,013 — 3,154,835 3,716,055 111,007,789 —	December 31, 2018 USD 3,243,017 119,543,711 219,336,848 338,880,559 35,449,581 — 3,687,742 3,784,297 — 337,186,892	December 31, 2017 USD 12,607,032
		35,571,315
		183,765,533
		219,336,848
		24,691,429 252,353 7,548,964 — — —

See accompanying notes to Consolidated Financial Statements.

– II-76 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019, 2018 and 2017

NOTE 1 — DESCRIPTION OF BUSINESS AND SIGNIFICANT CONCENTRATIONS AND RISKS

On January 1, 2018, the Company acquired 80% equity interest in TianXinFu (Beijing) Medical Appliance Co., Ltd. (‘‘TianXinFu’’), a medical device company primarily engaging in manufacturing and sale of regenerative medical biomaterial products. Biomaterial products include artificial dura mater and spinal dura mater products, with extracted collagen as the main raw material, which are applied in brain and spinal surgeries. On June 28, 2019, Taibang Biotech (Shandong) Co., Ltd., an indirect wholly-owned subsidiary of the Company, entered into a share purchase agreement with Fujian Pingtan Centurium Investment Partnership (Limited Partnership) and Xinyu Yongshuo Management and Consulting Partnership (Limited Partnership) to purchase 15% and 5%, respectively, of the equity interest in TianXinFu from such sellers for a total cash consideration of $118.9 million and as a result, TianXinFu became an indirect wholly-owned subsidiary of the Company.

On July 21, 2017, China Biologic Products Holdings, Inc. (the ‘‘Successor’’) succeeded to the interests of China Biologic Products, Inc. (the ‘‘Predecessor’’) following a redomicile merger pursuant to an agreement and plan of merger dated as of April 28, 2017 (the ‘‘Merger Agreement’’) between the Successor and the Predecessor. Pursuant to the Merger Agreement, the Predecessor merged with and into the Successor, with the Successor surviving the merger and each issued and outstanding shares of Predecessor’s common stock converted into the right to receive one ordinary share of the Successor. The consolidated financial statements of the Successor represents the continuation of the financial statements of the Predecessor, reflecting the assets and liabilities, retained earnings and other equity balances of the Predecessor before the domiciliation. The equity structure is restated using the exchange ratio established in the Merger Agreement to reflect the number of shares of the Successor.

Cash Concentration

The Company maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located in Hong Kong or may exceed the insured limits for its bank accounts in China established by the People’s Bank of China. Total cash at banks and deposits, including cash and equivalents, time deposits and short term investments as of December 31, 2019 and December 31, 2018 amounted to $925,817,723 and $951,336,787, respectively, of which $2,661,396 and $3,227,530 are insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.

– II-77 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Sales Concentration

The Company’s two major biopharmaceutical products are human albumin and IVIG. Human albumin accounted for 37.3%, 32.0% and 35.8% of the total sales for the years ended December 31, 2019, 2018 and 2017, respectively. IVIG accounted for 23.2%, 24.3% and 31.7% of the total sales for the years ended December 31, 2019, 2018 and 2017, respectively. The Company expects sales from these two products to represent a substantial portion of its sales in the future. If the market demands for human albumin and IVIG cannot be sustained in the future or the price of human albumin and IVIG decreases, the Company’s operating results could be adversely affected.

Substantially all of the Company’s customers are located in the PRC. There were no customers that individually comprised 10% or more of sales during the years ended December 31, 2019, 2018 and 2017. No individual customer represented 10% or more of accounts receivables as at December 31, 2019 and 2018. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.

Purchase Concentration

There was one supplier, namely, Xinjiang Deyuan Bioengineering Co., Ltd. (‘‘Xinjiang Deyuan’’) (see Note 10), that comprised 10% or more of the total purchases during the years ended December 31, 2019, 2018 and 2017. Chongqing Sanda Great Exploit Pharmaceutical Co, Ltd. represented more than 10% of accounts payables as at December 31, 2019. No individual supplier represented 10% or more of accounts payables as at December 31, 2018.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (‘‘GAAP’’), and include the financial statements of the Company and its subsidiaries in which CBP, directly or indirectly, has a controlling financial interest. All intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment and intangibles with definite lives, the collectability of accounts receivable and loan receivable, the fair value determinations of stock compensation awards and short term investments, identifiable assets acquired and liabilities assumed and noncontrolling interest in business combinations, the realizability of deferred income tax assets and inventories, the recoverability of intangible assets, land use rights, property, plant and equipment, goodwill and equity method investment, and accruals for income tax uncertainties and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

Foreign Currency Translation

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Revenue Recognition

Prior to January 1, 2018, revenue was recognized when persuasive evidence of an arrangement existed, delivery of the product has occurred and the customer took ownership and assumed risk of loss, the sales price was fixed or determinable and collection of the relevant receivable was probable. For all sales, the Company required a signed contract or purchase order, which specified pricing, quantity and product specifications. Delivery of the product occurred when the customer received the product, which was when the risks and rewards of ownership have been transferred. Delivery was evidenced by signed customer acknowledgement. The Company’s sales agreements did not provide the customer the right of return, unless the product was defective in which case the Company allowed for an exchange of product or return. For the periods presented, defective product returns were inconsequential. Revenue represents the invoiced amount of products sold, net of value added taxes (VAT).

The Company sells biopharmaceutical and biomaterial products to hospitals, inoculation centers and distributors. For all sales, the Company requires a signed contract or purchase order, which specifies pricing, quantity and product specifications. The Company recognizes revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g. valueadded taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to customers’ premises and evidenced by signed customer acknowledgement. The selling price, which is specified in the signed contracts or purchase orders, is fixed. The Company has unconditional right to receive full payment of the sales price, upon the delivery of the products to customers and the signing of the customer acknowledgement. Customers are required to pay under the customary payment terms, which is generally less than six months. Advances from customers (a contract liability) is recognized when the Company has an unconditional right to a payment before it transfers the products to customers, and are included in other payables and accrued expenses.

Fair Value Measurements

. Level 1 Inputs: Unadjusted quoted prices for identical assets or liabilities in active markets accessible to the entity at the measurement date.
. Level 2 Inputs: Other than quoted prices included in Level 1, inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
. Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

See Note 16 to the Consolidated Financial Statements.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Cash and Cash Equivalents

Cash consists of cash on hand and demand deposits. The Company considers all highly liquid investments with original maturities of three-month or less at the time of purchase and readily convertible into known amounts of cash to be cash equivalents.

As of December 31, 2019 and 2018, the Company maintained cash and cash equivalents at banks in the following locations:

PRC, excluding Hong Kong Hong Kong U.S. Total	December 31, 2019 USD 78,412,035 1,153,006 80,745,824 160,310,865	December 31, 2018 USD 158,739,504 3,936,815 175,133,834
		337,810,153

Time deposits

The Company’s time deposits represent bank financial products with original maturity of less than one year when purchased with insured principle and interest based on the stated interest rate in the agreement with the Company upon maturity. The interest earned is recorded in interest income in the statements of comprehensive income.

Short term investments

The Company’s short term investments represent bank financial products not readily available to be converted to cash with terms less than one year when purchased with floating interest rate. The Company elects to apply the fair value option for short term investments. Investment income and fair value changes from short term investments are recorded in other income, net in the statements of comprehensive income.

Accounts Receivable and Allowance for Doubtful Accounts

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. Cost of work-in-process and finished goods comprise direct materials, direct production costs and an allocation of production overheads based on normal operating capacity. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to its estimated net realizable value based on historical and forecasted demand.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less than accumulated depreciation and impairment, if any.

Cost incurred in the construction of property, plant and equipment, including downpayments and progress payments, are initially capitalized as construction-in-progress and transferred into their respective asset categories when the assets are ready for their intended use, at which time depreciation commences.

Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

Buildings		20–45 years
Machinery	and equipment	10 years
Furniture,	fixtures, office equipment and vehicles	5–10 years

Business Combination

Goodwill

The Company has adopted Accounting Standards Update (‘‘ASU’’) 2017-04, Simplifying the Test for Goodwill Impairment, for annual goodwill impairment tests from January 1, 2018. This guidance removes Step 2 of the goodwill impairment test, which required the estimation of an implied fair value of goodwill in the same manner as the calculation of goodwill upon a business combination. Under the new amendments, the Company’s goodwill impairment review involves the following steps: 1) qualitative assessment — evaluate qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The factors the Company considers include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, financial performance or events-specific to that reporting unit. If or when the Company determines it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill, the Company would move to the quantitative method; 2) quantitative method -the Company performs the quantitative fair value test by comparing the fair value of a reporting unit with its carrying amount and an impairment charge is measured as the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

In 2019, the Company only performed qualitative assessments to determine that it is not more likely than not that the fair value of each reporting unit was less than its carrying amount. No impairment of goodwill was recognized for any of the years presented.

Lease

The Company is a lessee in a number of noncancellable operating leases, primarily for warehouses and office space.

Prior to the adoption of ASC 842, operating leases were not recognized on the balance sheet of the Company, but rent expenses with fixed escalating payments and/or rent holidays were recognized on a straight-line basis over the lease term.

From January 1, 2019, the Company accounts for leases in accordance with ASC Topic 842, Leases. The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right-of-use (ROU) asset and a lease liability at the lease commencement date.

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date.

Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value of the underlying leased asset or the amount of the lessor’s deferred initial direct costs. Instead, the Company uses its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because the Company does not generally borrow on a collateralized basis, it uses the interest rate it pays on its noncollateralized borrowings as an input to derive an appropriate incremental borrowing rate, adjusted for the amount of the lease payments, the lease term and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.
. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company’s option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
. Lease payments included in the measurement of the lease liability comprise the following:
Fixed payments, including in-substance fixed payments, owed over the lease term (which includes termination penalties the Company would owe if the lease term assumes the Company to exercise a termination option);
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date;
Amounts expected to be payable under a Company-provided residual value guarantee; and
The exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise the option.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expense in the Company’s consolidated statements of income in the same line item as expense arising from fixed lease payments (operating leases).

ROU assets for operating and finance leases are periodically reduced by impairment losses. The Company uses the long- lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment — Overall, to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

Operating lease ROU assets are presented in other non-current assets on the consolidated balance sheet. The current portion of operating lease liabilities is included in other payables and accrued expenses and the long-term portion is presented separately as other liabilities on the consolidated balance sheets.

The Company has made accounting policy elections whereby it (i) does not recognize ROU assets or lease liabilities for short term leases (those with original terms of 12-months or less) and (ii) combines lease and non-lease components for facilities leases, which primarily relate to ancillary expenses such as common area maintenance charges and management fees of its operating leases. As of December 31, 2019, the Company did not have any finance leases.

Land Use Rights

Equity Method Investment

Investment in an investee in which the Company has the ability to exercise significant influence, but does not have a controlling interest is accounted for using the equity method. Significant influence is generally presumed to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the board of directors and participation in policy-making processes, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the Company’s share of the investee’s results of operations is included in other income (expenses) in the Company’s consolidated statements of comprehensive income. Deferred taxes are provided for the difference, if any, between the book and tax basis of the investment. The Company determines the difference between the carrying amount of the investee and the underlying equity in net assets which results in an excess basis in the investment. The excess basis is allocated to the underlying assets and equity method goodwill of the Company’s investee. The excess basis allocated to the underlying assets is either amortized or depreciated over the applicable useful lives. The equity method goodwill, which is $1,173,008 and $1,192,320 at December 31, 2019 and 2018, respectively, is not amortized or tested for impairment; instead the equity method investment is tested for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. The Company recognizes a loss if it is determined that other than temporary decline in the value of the investment exists. The process of assessing and determining whether an impairment on a particular equity investment is other than temporary

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

requires significant amount of judgment. To determine whether an impairment is other-than-temporary, management considers whether the Company has the ability and intent to hold the investment until recovery and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. No impairment loss was recognized by the Company for the years ended December 31, 2019, 2018 and 2017.

The Company’s equity method investment as of December 31, 2019 and 2018 represented 35% equity interest investment in Xi’an Huitian Blood Products Co., Ltd. (‘‘Huitian’’), which the Company acquired in October 2008.

Government Grants

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received. Grants that compensate research and development expenses are recognized as a reduction to the related research and development expenses. Grants that compensate the Company for the cost of property, plant and equipment are recognized as deferred income and are recognized as a reduction of depreciation and amortization during the useful life of the asset.

For the years ended December 31, 2019, 2018 and 2017, the Company received government grants of RMB8,468,100 (approximately $1,225,147), RMB4,837,300 (approximately $704,795) and RMB2,405,210 (approximately $368,093), respectively, which have been recognized as a reduction of research and development expenses.

For the year ended December 31, 2012, the Company received government grants of RMB18,350,000 (approximately $2,989,215) related to the technical upgrade of the manufacturing facilities in Guizhou Taibang, which was recorded as deferred income. The grants amortized amounted to $266,217, $277,801 and $271,754 for the years ended December 31, 2019, 2018 and 2017, respectively.

For the year ended December 31, 2015, the Company received government grants of RMB15,000,000 (approximately $2,452,864) related to the new manufacturing facilities for factor products in Shandong Taibang, which was recorded as deferred income. These grants are amortized as the related assets are depreciated. The grants amortized amounted to $217,616, $227,085 and $222,143 for the year ended December 31, 2019, 2018 and 2017, respectively.

Intangible Assets

Permits and license	5–10 years
Customer relationships	7 years
Technical know-how	3–12 years
Others	5–10 years

The estimated useful life is the period over which the intangible asset is expected to contribute directly or indirectly to the future cash flows of the Company.

The in-process research and development assets acquired in a business combination are accounted for as an indefinite- lived intangible asset until completion or abandonment of the associated research and development activities.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development expenses for the years ended December 31, 2019, 2018 and 2017 were $11,734,590, $9,524,412 and $6,503,712, respectively. These expenses include the costs of the Company’s internal research and development activities.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

Income Taxes

Employee Benefit Plans

Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 25% to 43% on a standard salary base as determined by local social security bureau. Contributions to the defined contribution plans are charged to the consolidated statements of comprehensive income when the related service is provided. For the years ended December 31, 2019, 2018 and 2017, the costs of the Company’s contributions to the defined contribution plans amounted to $5,941,209, $5,581,682, and $3,763,276, respectively.

The Company has no other obligation for the payment of employee benefits associated with these plans beyond the contributions described above.

Share-based Payment

Impairment of Long-lived Assets

Long-lived assets, including property, plant and equipment, land use rights and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Earnings per Share

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

these securities participate in dividends on the same basis as ordinary shareholders. Diluted earnings per share is calculated by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary share equivalent, if any, by the weighted average number of ordinary share and dilutive ordinary share equivalent outstanding during the year. Potential dilutive securities are not included in the calculation of diluted earnings per share if the impact is antidilutive.

Segment Reporting

The Company uses the management approach in determining reportable operating segments. The management approach considers the internal reporting used by the chief operating decision maker for making operating decisions about the allocation of resources of the segment and the assessment of its performance in determining the Company’s reportable operating segments. As a result of the business combination completed on January 1, 2018 as described in Note 3, the Company classified the reportable operating segments for the year ended December 31, 2019 and 2018 into (i) biopharmaceutical products and (ii) biomaterial products. Biopharmaceutical products currently include plasma products and placenta polypeptide. The Company had one operating segment, biopharmaceutical products segment, which included plasma-based products and placenta polypeptide for the years of 2017.

Substantially all of the Company’s operations and customers are located in the PRC, and therefore, no geographic information is presented.

Contingencies

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (‘‘ASU 2014-09’’), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter of 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) — Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09. The new revenue standard may be applied retrospectively to each prior period presented (‘‘full retrospective method) or retrospectively with the cumulative effect recognized as of the date of adoption (‘‘modified retrospective method’’). The Company applied the modified retrospective method to those contracts that are not completed contracts on January 1, 2018 upon adoption of ASU 2014-09. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue recognition, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605. The adoption of new revenue standard did not impact retained earnings as of January 1, 2018. There are no changes between the reported results under Topic 606 and those have been reported under legacy US GAAP.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (‘‘ASU 2016-02’’). In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (‘‘ASU 2018-11’’). The guidance modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. The guidance is effective for public companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted the guidance for financial statements periods beginning January 1, 2019 using the modified retrospective transition method and initially apply the transition provisions at January 1, 2019, which allows the Company to continue to apply the legacy guidance in ASC 840 for periods prior to 2019.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (‘‘ASU 2017-04’’). ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. As a result of ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and then recognize an impairment charge, as necessary, for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company has early adopted ASU 2017-04 from January 1, 2018.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (‘‘ASU 2019-04’’). ASU 201904 includes the codification improvements resulting from the June 11, 2018 and November 1, 2018 Credit Losses Transition Resource Group (TRG) Meetings and the codification improvements to Update 2016-13 (Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments), etc. ASU 2019-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the adoption of ASU 2016- 13 and ASU 2019-04 is not expected to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Tax (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12) (‘‘ASU 2019-12’’). ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years,

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APPENDIX II

beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect of the disclosure requirements of ASU 2019-12 will have on its consolidated financial statements and does not expect the impact to have a material effect.

NOTE 3 — BUSINESS COMBINATION

On October 12, 2017, the Company entered into a definitive agreement with PW Medtech Group Limited (‘‘PWM’’), a company listed on the Stock Exchange of Hong Kong Limited, to acquire 80% equity interest of TianXinFu in exchange for 5,521,000 ordinary shares of CBP. TianXinFu is a medical device company primarily engaging in the manufacturing and sale of regenerative medical biomaterial products, of which 80% equity interest was owned by PWM and 20% by a third party before this acquisition.

The Company completed the acquisition on January 1, 2018.

Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment Land use rights Intangible assets Deferred income tax assets Current liabilities Deferred income tax liabilities Fair value of noncontrolling interest Goodwill Total purchase consideration	As of January 01, 2018 USD 97,702,278 312,832 2,745,771 283,824 6,522,447 4,135,141 63,725,856 480,334 (6,129,418) (10,382,902) (53,871,002) 329,364,009 434,889,170

The estimated fair value of the noncontrolling interest in TianXinFu was determined by an independent valuer by using discount cash flow model.

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

The carrying amount of goodwill as of December 31, 2018 and 2019 was $313,588,803 and $308,509,397, respectively. The exchange difference during the years ended December 31,2018 and 2019 for goodwill was $15,775,206, and $5,079,406.

Unaudited Pro Forma Financial Information

Unaudited pro forma consolidated statements of comprehensive income for the year ended December 31, 2017:

	December 31,
	2017
	USD
Sales	412,248,989
Net income	100,749,486

NOTE 4 — ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2019 and 2018 consisted of the following:

Accounts receivable Less: Allowance for doubtful accounts Total	December 31, 2019 USD 101,379,309 (1,108,873) 100,270,436	December 31, 2018 USD 126,352,173 (1,236,331)
		125,115,842

The activity in the allowance for doubtful accounts — accounts receivable for the years ended December 31, 2019, 2018 and 2017 are as follows:

Beginning balance Provisions Reversal of allowance Foreign currency translation adjustment Ending balance	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2019 USD 1,236,331 — (77,624) (49,834) 1,108,873	December 31, 2018 USD 590,991 655,148 — (9,808) 1,236,331	December 31, 2017 USD 533,596 23,783 — 33,612
			590,991

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APPENDIX II

NOTE 5 — PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets as of December 31, 2019 mainly represented other receivables of $12,595,296, and prepayments of $7,181,729.

The activity in the allowance for doubtful accounts — prepayments and other receivables for the years ended December 31, 2019, 2018 and 2017 are as follows:

Beginning balance Provisions Reversal of allowance Foreign currency translation adjustment Ending balance	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2019 USD 4,783,093 — (24,959) (45,331) 4,712,803	December 31, 2018 USD 4,960,020 96,267 — (273,194) 4,783,093	December 31, 2017 USD 4,671,896 — — 288,124
			4,960,020

NOTE 6 — INVENTORIES

Inventories at December 31, 2019 and 2018 consisted of the following:

Raw materials Work-in-process Finished goods Total	December 31, 2019 USD 106,799,042 75,439,226 68,489,992 250,728,260	December 31, 2018 USD 124,408,741 57,457,153 61,429,618
		243,295,512

Raw materials mainly comprised of human plasma collected from the Company’s plasma collection stations. Workin- process represented intermediate products in the process of production. Finished goods mainly comprised of plasma products. Provisions to write-down the carrying amount of inventories to its estimated net realizable value amounted to $3,379,600, nil and nil for the years ended December 31, 2019, 2018 and 2017, respectively, and were recorded as cost of sales in the consolidated statements of comprehensive income. As of December 31, 2019, there were approximately 19 tons of source plasma purchased from Xinjiang Deyuan, which were expected to go out of date and could not be put into production for lacking subsequent quarantine information, which was an essential requirement by the PRC government. Accordingly, management has accrued 100% write-down of these source plasma to its estimated net realizable value of nil.

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APPENDIX II

NOTE 7 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2019 and 2018 consisted of the following:

Buildings Machinery and equipment Furniture, fixtures, office equipment and vehicles Construction in progress Total property, plant and equipment, gross Accumulated depreciation Impairment of property, plant and equipment Total property, plant and equipment, net Prepayment for property, plant and equipment Property, plant and equipment, net	December 31, 2019 USD 87,496,197 124,893,555 12,616,722 10,960,485 235,966,959 (58,459,783) (2,045,875) 175,461,301 2,135,262 177,596,563	December 31, 2018 USD 86,923,161 111,797,936 11,670,963 7,713,523 218,105,583 (42,447,406) (2,060,844) 173,597,333 4,730,028 178,327,361

Loss on disposal of property, plant and equipment for the year ended December 31, 2019 was $297,504. As a result of the planned commencement of operation of the new facility, the Company disposed certain machinery and equipment in the old facility of Shandong Taibang and incurred a disposal loss of $1,001,000 and $3,228,845 for the years ended December 31, 2018 and 2017.

Depreciation expense for the years ended December 31, 2019, 2018 and 2017 was $16,517,254, $13,809,041 and $11,691,731, respectively. No interest expenses were capitalized into construction in progress for the years ended December 31, 2019, 2018 and 2017.

NOTE 8 — INTANGIBLE ASSETS

Intangible assets at December 31, 2019 and 2018 consisted of the following:

Permits and license Customer relationship Technical know-how In-process research and development assets Others Total intangible assets Accumulated amortization Total intangible assets, net	December 31, 2019 USD 4,275,567 51,473,394 7,037,994 751,102 983,526 64,521,583 (20,453,522) 44,068,061	December 31, 2018 USD 4,579,081 52,320,870 7,153,870 1,194,740 1,041,652 66,290,213 (13,031,342) 53,258,871

Amortization expense for the years ended December 31, 2019, 2018 and 2017 was $8,116,160, $8,742,607 and $497,344, respectively.

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APPENDIX II

The estimated annual amortization expense for intangible assets in each of the next five years is as follows:

For the Years Ended December 31, 2020 2021 2022 2023 2024 Total	Amount USD 7,998,798 7,987,360 7,983,682 7,925,391 7,860,769
	39,756,000

NOTE 9 — RELATED PARTY TRANSACTIONS

Private Placement

On August 24, 2018, the Company entered into (i) a share purchase agreement with Beachhead Holdings Limited (‘‘Centurium’’) and Double Double Holdings Limited (‘‘DD’’), which were then affiliated with two directors of the Company, Mr. David Hui Li and Mr. Joseph Chow, and is affiliated with Mr. David Hui Li, (ii) a share purchase agreement with PWM, the then largest shareholder of the Company with a director representative, Ms. Yue’e Zhang (iii) share purchase agreements with two third party investors, for the issuance and sale of 3,050,000, 800,000 and 2,000,000 ordinary shares of CBP at a per share purchase price of $100.9, respectively, to raise aggregate gross proceeds of approximately $590 million. The transaction was approved by a special committee formed by the board of directors of the Company, consisting of two independent directors. On the same date, CBP issued 1,800,000 ordinary shares to Centurium and 2,000,000 ordinary shares to two third party investors, pursuant to their respective share purchase agreements. On September 4, 2018, DD assigned its rights and obligations under the share purchase agreement to Centurium and CBP issued 1,250,000 additional ordinary shares to Centurium thereafter. On September 21, 2018, CBP issued 800,000 ordinary shares to PWM.

Long term equity investments

The Company’s investments without readily determinable fair values are measured using the measurement alternative, defined by ASC Topic 321, Investment-Equity Securities, at cost, less impairments, and adjusted up or down based on observable price changes in orderly transactions for identical or similar investments of the same issuer. Any adjustments resulting from impairments and/or observable price changes will be recorded in consolidated statements of comprehensive income.

On November 28, 2018, the Company entered into a share transfer agreement with Smart Step Investments Limited (‘‘Smart Step’’), the then largest shareholder of Beijing Taijie Weiye Technology Co., Ltd. (‘‘TJWY Medical’’), pursuant to which the Company purchased approximately 11.55% equity interests of TJWY Medical from Smart Step in a cash consideration of $10,812,893. Pursuant to the share transfer agreement, the Company has the right (the ‘‘put option’’) to request Smart Step to redeem full or part of the equity interests in TJWY transferred at the original purchase price plus 6% compound interest rate per annum. Such put option can be exercised by the Company within 6 months from the third anniversary of the closing date of the transaction. The investment and put option are both accounted under ASC 321. The Company measured this put option at cost, less impairments. The carry amount of investment and put option are $10.0 million and $0.8 million based on the relative fair value upon completion of the transaction.

The Company paid 100% cash consideration on December 21, 2018. The transaction was completed on January 23, 2019.

TJWY Medical is a manufacturer of interventional products. The ultimate beneficial owner of Smart Step is the mother of Ms. Yue’e Zhang, a director of the Company.

No impairment loss was recognized by the Company for the year ended December 31, 2019.

– II-92 –

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APPENDIX II

Acquisition of Remaining 20% Equity Interest in TianXinFu

On June 28, 2019, Taibang Biotech (Shandong) Co., Ltd., an indirect wholly-owned subsidiary of the Company, entered into a share purchase agreement with Fujian Pingtan Centurium Investment Partnership (Limited Partnership) and Xinyu Yongshuo Management and Consulting Partnership (Limited Partnership) to purchase 15% and 5%, respectively, of the equity interest in TianXinFu from such sellers for a total cash consideration of $118.9 million (the ‘‘TianXinFu Transaction’’). The Company previously acquired 80% equity interest in TianXinFu in January 2018. Upon the completion of the TianXinFu Transaction, TianXinFu became an indirect wholly-owned subsidiary of the Company.

Fujian Pingtan Centurium Investment Partnership (Limited Partnership) is an affiliate of Centurium Capital, which beneficially owned approximately 25.2% of the Company’s outstanding share capital as of March 9, 2020 and at the time of the TianXinFu Transaction was affiliated with two directors on the board of directors of the Company (the ‘‘Board’’), Mr. Joseph Chow and Mr. David Hui Li.

According to ASC810, the TianXinFu Transaction is accounted for as an equity transaction, and is recognized by reducing the carrying amount of the noncontrolling interest by $55.1 million. The $63.8 million which represented excess of the cash paid ($118.9 million) over the carrying amount of the noncontrolling interest is recognized as a decrease in additional paid-in capital. In addition, the noncontrolling interest’s share of accumulated other comprehensive income is adjusted by $5.2 million through a corresponding increase in additional paid-in capital.

NOTE 10 — LOAN RECEIVABLE

In August 2015, the Company entered into a cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan (‘‘Deyuan Shareholder’’). Pursuant to the agreement, (i) Xinjiang Deyuan agreed to sell to Guizhou Taibang no less than 500 tonnes of source plasma in batches over the next three years, before July 31, 2018, and (ii) Guizhou Taibang agreed to provide Xinjiang Deyuan with an interest-bearing loan at an interest rate of 6% per annum with an aggregate principal amount of RMB300,000,000 (approximately $43,002,000). The loan was due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan.

In August 2018, the Company extended this cooperation agreement with Xinjiang Deyuan and Deyuan Shareholder for another 3 years to purchase at least an additional 500 tonnes of source plasma and to extend the due date of the loan to July 31, 2021.The loan is secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan. $3,716,055 and $3,784,297 of the loan principal was set off against the equivalent amount in accounts payable for purchase of plasma from Xinjiang Deyuan for the years ended December 31, 2019 and 2018, respectively.

Interest income of $2,162,210, $2,904,886 and $2,514,936 were recognized and nil, $695,757 and $2,514,936 were received in cash by Guizhou Taibang and $2,308,913, $2,062,426 and nil were set off against the equivalent amounts in accounts payable for the purchase of plasma from Xinjiang Deyuan for the years ended December 31, 2019, 2018 and 2017, respectively.

Since November 2019, Xinjiang Deyuan has significantly reduced the plasma volume delivered to the Company due to its operating cash shortfall and its disagreement with the Company regarding payment arrangements for purchase of plasma. As of the date of this report, the Company is still in negotiation with Xinjiang Deyuan and endeavoring to resolve the disagreement. As of December 31, 2019, no allowance was provided for the loan receivable considering the amount of loan receivable, the fair value of Deyuan shareholder’s equity interest pledged in the cooperation agreement and the ability of assets realization and solvency of Xinjiang Deyuan.

NOTE 11 — LEASES

As of December 31, 2019, the Company has seven operating leases for land, warehouse and office with remaining terms expiring from 2020 through 2064 and a weighted average remaining lease term of 13.44 years. The Company has fair value renewal options for many of the Company’s existing leases, none of which are considered reasonably certain of being exercised or included in the minimum lease term. Weighted average discount rates used in the calculation of the

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APPENDIX II

lease liability is 4.75%. The discount rates reflect the estimated incremental borrowing rate, which includes an assessment of the credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to the lease payments in a similar economic environment.

Rent expense for the year ended December 31, 2019 was $906,670. There was no variable lease costs or sublease income for leased assets for the year ended December 31, 2019.

The impact of Topic 842 on the December 31, 2019 condensed consolidated balance sheet was as follows:

Other non-current assets Other payables and accrued expenses Other liabilities Total lease liabilities	December 31, 2019 USD 5,566,093 1,172,158 4,372,418
	5,544,576

Supplemental cash flow information related to leases was as follows:

	December 31,
	2019
	USD
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	827,089
Right of use assets obtained in exchange for lease obligations:	5,566,093

A maturity analysis of the Company’s operating leases as of December 31, 2019 was as follows:

Future undiscounted cash flows:

2020 2021 2022 Thereafter Total Discount factor Lease liability Amounts due within 12 months Non-current lease liability	Amount USD 1,410,155 1,207,870 1,211,943 2,468,904
	6,298,872 (754,296)
	5,544,576 1,172,158
	4,372,418

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APPENDIX II

FINANCIAL INFORMATION OF CBPO

As previously disclosed in the consolidated financial statements for the year ended December 31, 2018 and under the previous lease standard (Topic 840), future minimum annual lease payments for the years subsequent to December 31, 2018 and in aggregate are as follows:

2019 2020 2021 2022 Thereafter Total minimum payments	Amount USD 848,731 938,551 167,378 4,095 170,297
	2,129,052

Rent expense for the year ended December 31, 2018 was approximately $807,088.

NOTE 12 — OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses at December 31, 2019 and 2018 consisted of the following:

Payables to a potential investor(1) Payable to Guizhou Eakan Investing Corp.(2) Salaries and bonuses payable Accruals for sales promotion fee Payables for construction work Other tax payables Advance from customers(3) Deposits received Lease liability — current Others Total	December 31, 2019 USD 8,723,540 2,087,030 26,439,393 32,335,868 3,591,000 1,802,797 7,631,941 3,120,134 1,172,158 12,839,489 99,743,350	December 31, 2018 USD 8,574,254 2,121,392 23,543,535 29,401,827 8,181,773 1,456,184 9,101,834 7,463,172 — 10,089,822
		99,933,793

(1) The payables to a potential investor comprises deposits received from a potential investor in the amount of $4,896,494 and $4,977,112 as of December 31, 2019 and 2018, respectively, and related interest plus penalty on these deposits totaling $3,827,046 and $3,597,142 as of December 31, 2019 and 2018, respectively.
(2) Guizhou Taibang has payables to Guizhou Eakan Investing Corp., amounting to approximately $2,087,030 and $2,121,392 as of December 31, 2019 and 2018, respectively. The Company borrowed this interest free advance for working capital purpose for Guizhou Taibang. The balance is due on demand. See Note 19.
(3) The change in advance from customers primarily represents cash received, less amounts recognized as sales during the year. All the advance from customers at December 31, 2018 was recognized in sales during the year ended December 31, 2019.

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APPENDIX II

NOTE 13 — INCOME TAX

The Company and each of its subsidiaries file separate income tax returns.

The United States of America

On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was enacted. The Tax Act has made significant changes to the U.S. Internal Revenue Code, including the taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, disallowing certain deductions that had previously been allowed, altering the expensing of capital expenditures, adopting elements of a territorial tax system, assessing a repatriation tax or ‘‘toll-charge’’ on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions. In 2017, the Company recorded a charge of approximately $40.3 million as a provisional amount for the repatriation tax on deemed repatriation to the United States of accumulated earnings. The charge for deemed repatriation will be payable by the Company over an eight-year period commencing April 2018. In 2019 and 2018, $1,993,310 and $3,250,000 repatriation tax were paid by the Company to the U.S. tax bureau.

The Company file U.S. federal income tax returns on a consolidated basis at a tax rate of 21% for the year of 2019.

Cayman Islands

Under the current laws of Cayman Islands, China Biologic Products Holdings, Inc. is not subject to tax on its income or capital gains.

British Virgin Islands

Hong Kong

Taibang Holdings (Hong Kong) Limited (‘‘Taibang Holdings’’, formerly known as ‘‘Logic Holdings (Hong Kong) Limited’’) is incorporated in Hong Kong and is subject to Hong Kong’s profits tax rate of 16.5% for the years ended December 31, 2019, 2018 and 2017. Taibang Holdings did not earn any income that was derived in Hong Kong for the years ended December 31, 2019, 2018 and 2017.

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APPENDIX II

Health Forward Holdings Limited (‘‘Health Forward’’) is incorporated in Hong Kong and is subject to Hong Kong’s profits tax rate of 16.5% for the years ended December 31, 2019 and 2018. Health Forward did not earn any income that was derived in Hong Kong for the years ended December 31, 2019 and 2018.

The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

PRC

The PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% unless otherwise specified.

In October 2014, Shandong Taibang obtained a notice from the Shandong provincial government that granted it the High and New Technology Enterprise certificate. This certificate entitled Shandong Taibang to enjoy a preferential income tax rate of 15% for a period of three years from 2014 to 2016. In December 2017, Shandong Taibang renewed its high and new technology enterprise qualification, which entitled it to enjoy a preferential income tax rate of 15% for a period of three years from 2017 to 2019. Shandong Taibang will apply for an additional three years from 2020 to 2022 upon the expiration of such certificate.

In September 2014, Guizhou Taibang obtained a notice from the Guizhou provincial government that granted it the High and New Technology Enterprise certificate. This certificate entitled Guizhou Taibang to enjoy a preferential income tax rate of 15% for a period of three years from 2014 to 2016. In November 2017, Guizhou Taibang renewed its high and new technology enterprise qualification, which entitled it to enjoy a preferential income tax rate of 15% for a period of three years from 2017 to 2019. Guizhou Taibang will apply for an additional three years from 2020 to 2022 upon the expiration of such certificate.

The components of earnings (losses) before income tax expense by jurisdictions are as follows:

PRC, excluding Hong Kong U.S. BVI Hong Kong Total	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 202,870,388 175,225,854 171,787,763 (12,932,509) (11,303,223) (28,866,395) 1,563,160 2,341,136 3,488,680 (7,328) (260,472) (2,280) 191,493,711 166,003,295 146,407,768	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 202,870,388 175,225,854 171,787,763 (12,932,509) (11,303,223) (28,866,395) 1,563,160 2,341,136 3,488,680 (7,328) (260,472) (2,280) 191,493,711 166,003,295 146,407,768
	December 31, 2019 USD 202,870,388 (12,932,509) 1,563,160 (7,328) 191,493,711	December 31, 2018 USD 175,225,854 (11,303,223) 2,341,136 (260,472) 166,003,295

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APPENDIX II

Income tax expense for the years ended December 31, 2019, 2018 and 2017 represents current income tax expense and deferred income tax (benefit)/expense:

Current income tax expense — PRC Current income tax expense — US Deferred income tax benefit — PRC Deferred income tax expense — US Total income tax expense	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 30,228,726 29,715,744 27,133,958 307,043 (7,519,674) 40,290,367 (2,770,534) (4,657,379) (3,252,516) 333,290 497,489 — 28,098,525 18,036,180 64,171,809	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 30,228,726 29,715,744 27,133,958 307,043 (7,519,674) 40,290,367 (2,770,534) (4,657,379) (3,252,516) 333,290 497,489 — 28,098,525 18,036,180 64,171,809
	December 31, 2019 USD 30,228,726 307,043 (2,770,534) 333,290 28,098,525	December 31, 2018 USD 29,715,744 (7,519,674) (4,657,379) 497,489 18,036,180

PRC statutory income tax rate Non-deductible expenses: Share-based compensation Others Tax rate differential Effect of PRC preferential tax rate Bonus deduction on research and development expenses Change in valuation allowance Repatriation tax Tax effect of equity method investment Excess tax benefits from stock option exercises Effective income tax rate	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 (in percentage to earnings before income tax expense) 25.0% 25.0% 25.0% 1.8% 1.4% 3.7% 0.4% 0.9% 1.1% (0.3)% (0.5)% (0.9)% (9.4)% (9.0)% (11.1)% (2.4)% (2.3)% (1.5)% 0.0% 0.4% (0.6)% — (4.5)% 29.4% 0.2% 0.3% (0.6)% (0.6)% (0.8)% (0.7)% 14.7% 10.9% 43.8%

The PRC tax rate has been used because the majority of the Company’s consolidated pre-tax earnings arise in the PRC.

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APPENDIX II

As of December 31, 2019 and 2018, significant temporary differences between the tax basis and financial statement basis of assets and liabilities that gave rise to deferred taxes were principally related to the following:

Deferred income tax assets arising from: — Accrued expenses — Deferred income — Property, Plant and Equipment — Other non-current assets — Tax loss carryforwards Gross deferred income tax assets Less: valuation allowance Net deferred income tax assets Deferred income tax liabilities arising from: — Property, plant and equipment — Intangible assets — Land use rights — Equity method investment — Dividend withholding tax Deferred income tax liabilities Classification on consolidated balance sheets: Deferred income tax assets, included in other non-current assets Deferred income tax liabilities, included in other liabilities	December 31, 2019 USD 8,982,660 177,383 1,079,536 190,440 3,120,172 13,550,191 (3,120,172) 10,430,019 (115,677) (6,575,677) (529,090) (830,779) (3,774,778) (11,826,001) 10,430,019 (11,826,001)	December 31, 2018 USD 7,587,118 213,086 1,149,033 158,607 4,300,813 13,408,657 (4,300,813) 9,107,844 (129,636) (7,947,786) (552,602) (497,489) (3,774,778) (12,902,291) 9,107,844 (12,902,291)

The deferred income tax assets of $3,120,172 for tax loss carry forwards as of December 31, 2019 represented tax loss carryforwards of certain PRC subsidiaries. For PRC income tax purposes, these PRC subsidiaries had tax loss carryforwards of $14,696,748, of which $4,136,265, $4,568,923, $716,377, $4,076,401 and $1,198,782 would expire by 2020, 2021, 2022, 2023 and 2024, respectively, if unused. In view of their cumulative losses positions, management determined it is more likely than not that deferred income tax assets of these PRC subsidiaries will not be realized, and therefore full valuation allowances of $3,120,172 and $4,300,813 were provided as of December 31, 2019 and 2018, respectively.

For United States federal income tax purposes, CBP had nil tax loss carry forwards as of December 31, 2019 and 2018. All tax loss brought forwards of CBP has been utilized by December 31, 2017 as a result of the repatriation tax on deemed repatriation of accumulated earnings to the United States.

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APPENDIX II

The following table presents the movement of the valuation allowance for deferred income tax assets for the years ended December 31, 2019, 2018 and 2017:

Beginning balance Addition (deduction) during the year Foreign currency translation adjustment Ending balance	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 4,300,813 5,031,657 26,629,179 (1,123,767) (507,897) (21,927,117) (56,874) (222,947) 329,595 3,120,172 4,300,813 5,031,657	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 4,300,813 5,031,657 26,629,179 (1,123,767) (507,897) (21,927,117) (56,874) (222,947) 329,595 3,120,172 4,300,813 5,031,657
	December 31, 2019 USD 4,300,813 (1,123,767) (56,874) 3,120,172	December 31, 2018 USD 5,031,657 (507,897) (222,947) 4,300,813

According to the prevailing PRC income tax law and relevant regulations, dividends relating to earnings accumulated beginning on January 1, 2008 that are received by non-PRC-resident enterprises from PRC-resident enterprises are subject to withholding tax at 10%, unless reduced by tax treaties or similar arrangement. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, dividends received by the Company from its overseas subsidiaries are subject to the U.S. federal income tax less any qualified foreign tax credits. Based on the dividend policy the Company has provided the deferred income tax liabilities of $7,351,023 on undistributed earnings of $74 million, approximately 50% of Shandong Taibang’s total undistributed earnings at December 31, 2014. The balance of the deferred income tax liabilities was reduced by $2,310,512 during the year ended December 31, 2018 when the dividends of RMB148,760,000 (approximately $21,674,332) was distributed to Taibang Holdings (Hong Kong) Limited by Taibang Biotech (Shandong) Co., Ltd.. Due to the Company’s plan and intention of reinvesting its earnings in its PRC business, the Company has not provided for the related deferred income tax liabilities on the remaining undistributed earnings of the PRC subsidiaries totaling $806.2 million as of December 31, 2019.

As of January 1, 2017 and for each of the years ended December 31, 2019, 2018 and 2017, the Company and its subsidiaries did not have any unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. The Company does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months.

The Company and each of its PRC subsidiaries file income tax returns in the United States and the PRC, respectively. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2007. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 (approximately $14,334). In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiaries are open to examination by the PRC tax authorities for the tax years beginning in 2013.

NOTE 14 — OPTIONS AND NONVESTED SHARES

Options

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FINANCIAL INFORMATION OF CBPO

APPENDIX II

any of its subsidiaries, the exercise price will be no less than 110% of the fair market value per share on the grant date. All the options to be granted will have 10-year terms. The 2008 Plan expired on May 9, 2018 and all ordinary shares reserved under the 2008 Plan had been granted.

For the years ended December 31, 2019, 2018 and 2017, no stock options to purchase ordinary share were granted to any directors or employees.

A summary of stock options activity for the years ended December 31, 2019, 2018 and 2017 is as follows:

Outstanding as of January 1, 2017
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2017
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2018
Granted
Exercised
Forfeited and expired
Outstanding as of December 31, 2019
Vested as of December 31, 2019
Exercisable as of December 31, 2019

Number of
Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term in years
Aggregate
Intrinsic Value
USD
USD
314,491
10.32
3.84
30,568,083
—
—
(85,242)
10.18
(7,868,258)
—
—
229,249
10.37
2.61
15,168,276
—
—
(121,945)
9.71
(9,137,231)
—
—
107,304
11.13
2.28
7,570,681
—
—
(49,900)
12.26
(3,910,884)
—
—
57,404
10.14
1.93
4,106,623
57,404
10.14
1.93
4,106,623
57,404
10.14
1.93
4,106,623

For the years ended December 31, 2019, 2018 and 2017, no stock compensation expense relating to stock options was recorded in general and administrative expenses by the Company.

Nonvested shares

For the years ended December 31, 2019, 2018 and 2017, nonvested shares were granted to certain directors and employees (collectively, the ‘‘Participant’’). Pursuant to the nonvested share grant agreements between the Company and the Participant, the Participant will have all the rights of a shareholder with respect to the nonvested shares. The nonvested shares granted to directors generally vest in one or two years. The nonvested shares granted to employees generally vest in four years.

– II-101 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

A summary of nonvested shares activity for the year ended December 31, 2019, 2018 and 2017 is as follow:

Outstanding as of January 1, 2017 Granted Vested Forfeited Outstanding as of December 31, 2017 Granted Vested Forfeited Outstanding as of December 31, 2018 Granted Vested Forfeited Outstanding as of December 31, 2019	Number of nonvested shares 912,650 356,150 (353,694) (1,080) 914,026 333,620 (256,830) (385,425) 605,391 — (244,481) (6,300) 354,610	Grant date weighted average fair value USD 104.51 89.94 91.32 98.20
		103.95 79.23 100.91 98.86
		94.85 — 100.93 96.71
		90.63

For the years ended December 31, 2019, 2018 and 2017, the Company recorded stock compensation expense in the amount of $22,317,649, $23,130,570 and $33,903,283 relating to nonvested shares in general and administrative expenses, respectively.

As of December 31, 2019, approximately $21,964,345 of stock compensation expense with respect to nonvested shares is to be recognized over weighted average period of approximately 1.72 years.

Restricted share units

Effective May 10, 2019, the Board of Directors adopted the China Biologic 2019 Equity Incentive Plan, (‘‘the 2019 Plan’’). The 2019 Plan provides for grants of stock options, restricted shares, restricted share units, share appreciation rights, and other share-based awards. A maximum of 1,650,000 Shares will be available for issuance under the 2019 Plan. The shares may be authorized and unissued Shares or shares now held or subsequently acquired by the Company. For the years ended December 31, 2019, restricted share units were granted to certain directors and employees (collectively, the ‘‘Participant’’). Pursuant to the restricted share units grant agreements between the Company and the Participant, the Participant will not have any of the rights of a shareholder with respect to the restricted share units until vested. The restricted share units granted to directors generally vest in one or two years. The restricted share units granted to employees generally vest in four years.

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APPENDIX II

A summary of restricted share units activity for the year ended December 31, 2019 is as follow:

Outstanding as of January 1, 2019 Granted Vested Forfeited Outstanding as of December 31, 2019	Number of restricted share units — 407,786 — — 407,786	Grant date weighted average fair value USD — 96.78 — —
		96.78

For the years ended December 31, 2019, the Company recorded stock compensation expense in the amount of $4,282,366 relating to restricted share units in general and administrative expenses.

As of December 31, 2019, approximately $35,183,796 of stock compensation expense with respect to restricted shares units is to be recognized over weighted average period of approximately 3.50 years.

NOTE 15 — STATUTORY RESERVES

The Company’s PRC subsidiaries are required to allocate at least 10% of its after tax profits as determined under generally accepted accounting principles in the PRC to its statutory surplus reserve until the reserve balance reaches 50% of respective registered capital. For the years ended December 31, 2019, 2018 and 2017, the Company’s PRC subsidiaries made appropriations to the reserve fund of $1,393,320, $18,844,626 and $5,051, respectively. The accumulated balance of the statutory reserve as of December 31, 2019 and 2018 was $54,751,734 and $53,358,414, respectively.

NOTE 16 — FAIR VALUE MEASUREMENTS

Financial assets and liabilities of the Company primarily comprise of cash and cash equivalents, time deposits, short term investments, accounts receivable, other receivables, loan receivable, accounts payable, and other payables and accrued expenses. Management used the following methods and assumptions to estimate the fair value of financial assets and liabilities at the relevant balance sheet dates:

Fair Value of Financial Instruments

Short term financial assets and liabilities (including cash and cash equivalents, time deposits, accounts receivable, loan receivable, other receivables,accounts payable, and other payables and accrued expenses) — The carrying amounts of the short term financial assets and liabilities approximate their fair values because of the short maturity of these instruments.

Loan receivable — The carrying amounts of loan receivable approximate their fair value. The fair value is estimated using discounted cash flow analysis based on the borrower’s incremental borrowing rates for similar borrowing.

Recurring Fair Value Measurements

The Company elects the fair value option to account for short term investments. The Company values its short term investments using the effective interest method with inputs of annualized rate of return provided by issuing banks. The annualized rate of return range from 2.80% to 4.00% depending on the amount and time period invested. The Company classifies the valuation techniques that use these inputs as Level 2.

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APPENDIX II

NOTE 17 — SHARE REPURCHASE

On November 1, 2018, the Company announced a share repurchase program, which was approved by the Board of Directors on October 30, 2018. Under the share repurchase program, CBP may repurchase up to $100 million worth of shares over 6 months following the date of approval.

In late April 2019, the Company completed the share repurchase program previously authorized by its board of directors in 2018, having repurchased an aggregate of 1,074,376 shares for a total consideration of $100 million.

In May 2019, the Company’s board of directors authorized an additional share repurchase program under which the Company may repurchase up to $150 million worth of shares over a 12-month period. As of December 31, 2019, the Company had repurchased 121,852 shares for a total consideration of $11.0 million under this program.

NOTE 18 — SALES

The Company’s sales by product categories for the years ended December 31, 2019, 2018 and 2017 are as follows:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2019 USD 187,835,401 117,147,536 72,071,759 53,706,467 26,977,805 457,738,968 42,275,272 3,730,682 46,005,954 503,744,922	December 31, 2018 USD 149,369,846 113,490,790 59,470,912 31,677,439 68,157,257 422,166,244 40,644,561 4,066,764 44,711,325 466,877,569	December 31, 2017 USD 132,498,791 117,511,797 50,147,328 21,049,636 49,199,288
		370,406,840
		— —
		—
		370,406,840

– II-104 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

The Company’s sales by channel for the years ended December 31, 2019, 2018 and 2017 are as follows:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2019 USD 220,149,266 210,611,897 430,761,163 26,977,805 457,738,968 43,774,081 2,231,873 46,005,954 503,744,922	December 31, 2018 USD 174,698,620 179,310,367 354,008,987 68,157,257 422,166,244 42,717,750 1,993,575 44,711,325 466,877,569	December 31, 2017 USD 126,381,596 194,825,956
		321,207,552 49,199,288
		370,406,840
		— —
		—
		370,406,840

NOTE 19 — COMMITMENTS AND CONTINGENCIES

Commitments

As of December 31, 2019, commitments outstanding for the purchase of property, plant and equipment approximated $11,021,364.

As of December 31, 2019, commitments outstanding for the purchase of plasma approximated $33,659,897.

The following table sets forth the Company’s material contractual obligations as of December 31, 2019:

Contractual Obligations Purchase of plasma commitment(1) Capital commitment Total		Payments due by period	Payments due by period	Payments due by period
	Less than one year 17,633,688 9,919,228 27,552,916	One to two years 16,026,209 1,102,136 17,128,345	Two to three years — — —	Three to four years — — —	Four to five years — —
					—

(1) See Note 10.

– II-105 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Legal proceedings

PRC Lawsuit

— Dispute with an Individual over a Due-on-demand Loan of Guizhou Taibang

In June 2017, an individual brought a lawsuit against Guizhou Taibang and Guizhou Eakan Investing Corp. (‘‘Guizhou Eakan’’), an entity affiliated with one of Guizhou Taibang’s former noncontrolling shareholders, requesting repayment of RMB14,560,000 (approximately $2,087,030) and related fund possession cost amounting to approximately RMB37,141,600 (approximately $5,323,877). The plaintiff alleged that he entered into an agreement with Guizhou Eakan in May 2007, according to which he provided RMB14,560,000 for Guizhou Eakan to satisfy Guizhou Taibang’s loan request.

On December 26, 2019, the plaintiff applied for withdrawal of action. The No.1 Court granted approval of the plaintiff’s application on December 27, 2019.

As of December 31, 2019, Guizhou Taibang has maintained RMB14,560,000 (approximately $2,087,030) payable to Guizhou Eakan on its balance sheet.

Dispute with an Individual over Capital Injection into Guizhou Taibang

In January 2019, another individual who claimed to be a strategic investor of Guizhou Taibang brought a lawsuit against Guizhou Taibang, requesting to register her alleged ownership interest in Guizhou Taibang with the local Administration for Market Regulation (‘‘AMR’’, formerly known as the Administration of Industry and Commerce). The plaintiff alleged that she entered into an Equity Purchase Agreement with Guizhou Taibang in May 2007, according to which she paid RMB11,200,000 (approximately $1,605,408) to Guizhou Taibang in exchange for approximately 4.71% of Guizhou Taibang’s equity interests.

On March 14, 2019, Shanghai Xuhui District People’s Court notified Guiyang Dalin Biologic Technologies Co., Ltd., requesting its participation in the action as a third party in the case. On January 2, 2020, the plaintiff applied for withdrawal of action. Shanghai Xuhui District People’s Court granted approval of the plaintiff’s application on January 2, 2020.

Dispute with an Individual over a Technical Cooperation Development Contract of TianXinFu

On March 20, 2015, an individual brought a lawsuit against TianXinFu, alleging that he was entitled to 15% of the profits of TianXinFu from selling biomaterial products during the period from January 1, 2000 to August 31, 2014 pursuant to a technical cooperation development contract and other related agreements. The plaintiff requested the payment of RMB10,000,000 by TianXinFu.

On October 15, 2019, Beijing Dongcheng People’s Court ruled that TianXinFu should pay RMB10,000,000 to the plaintiff.

In October 2019, TianXinFu filed an appeal to the Beijing Intellectual Property Court and the first-instance judgment ruled by the Beijing Dongcheng People’s Court is not yet in force accordingly. As of the reporting date, no loss contingency regarding this lawsuit was accrued since it is not probable that a liability will incur and the amount of loss cannot be reasonably estimated.

– II-106 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Cayman Lawsuit

On August 27, 2018, the Company’s former Chairman and CEO Mr. David (Xiaoying) Gao commenced a proceeding against the Company in the Grand Court of the Cayman Islands (the ‘‘Court’’), principally seeking (a) a declaration that the private placement that was announced by the Company on August 24, 2018 was invalid and void, (b) an order requiring the Company to reverse and/or rescind any transactions carried out pursuant to the private placement, and (c) an injunction to prevent further shares from being issued by the Company to the entities participating in the private placement. The private placement was completed on September 21, 2018. On October 5, 2018, the Company made an application to the Court for dismissal of Mr. Gao’s lawsuit on the ground, among others, that Mr. Gao lacked standing to pursue the claims. On December 13, 2018, the Court granted the Company’s application and dismissed Mr. Gao’s lawsuit. On December 21, 2018, the Court granted Mr. Gao leave to appeal its December 13, 2018 order. Pursuant to the Cayman Islands Court of Appeal Rules, Mr. Gao was required to lodge a Notice of Appeal within 14 days of being granted leave to appeal. As of the date of this report, the Court of Appeal had no record of a Notice of Appeal relating to this case, and the Company has not been served with a Notice of Appeal or any further documents relating to this litigation.

NOTE 20 — EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:

Net income attributable to China Biologic Products Holdings, Inc. Earnings allocated to participating nonvested shares Net income used in basic and diluted earnings per ordinary share Weighted average shares used in computing basic earnings per ordinary share Diluted effect of stock option and restricted share units Weighted average shares used in computing diluted earnings per ordinary share Basic earnings per ordinary share Diluted earnings per ordinary share	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 138,807,748 128,056,302 67,943,035 (1,690,519) (3,072,170) (2,188,633) 137,117,229 124,984,132 65,754,402 38,657,553 35,304,294 27,361,561 240,411 128,665 244,062 38,897,964 35,432,959 27,605,623 3.55 3.54 2.40 3.53 3.53 2.38	For the Years Ended December 31, 2019 December 31, 2018 December 31, 2017 USD USD USD 138,807,748 128,056,302 67,943,035 (1,690,519) (3,072,170) (2,188,633) 137,117,229 124,984,132 65,754,402 38,657,553 35,304,294 27,361,561 240,411 128,665 244,062 38,897,964 35,432,959 27,605,623 3.55 3.54 2.40 3.53 3.53 2.38
	December 31, 2019 USD 138,807,748 (1,690,519) 137,117,229 38,657,553 240,411 38,897,964 3.55 3.53	December 31, 2018 USD 128,056,302 (3,072,170) 124,984,132 35,304,294 128,665 35,432,959 3.54 3.53

During the years ended December 31, 2019, 2018 and 2017, no potential ordinary shares outstanding were excluded from the calculation of diluted earnings per ordinary share.

– II-107 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

NOTE 21 — CHINA BIOLOGIC PRODUCTS HOLDINGS, INC. (PARENT COMPANY)

The following represents condensed unconsolidated financial information of the Parent Company only:

Condensed Balance Sheets: Cash Time deposits Prepayments and prepaid expenses Total Current Assets Property, plant and equipment, net Investment in and amounts due from subsidiaries Total Assets Other payables and accrued expenses Income tax payable — current Total Current Liabilities Income tax payable — non current Other liabilities Total Liabilities Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity	December 31, 2019 USD 80,745,824 432,000,000 2,443,868 515,189,692 49 1,214,913,704 1,730,103,445 5,723,648 2,928,698 8,652,346 24,905,728 830,779 34,388,853 1,695,714,592 1,730,103,445	December 31, 2018 USD 175,133,834 430,000,000 12,140,443
		617,274,277 88 1,139,337,487
		1,756,611,852
		4,544,071 2,621,655
		7,165,726 26,899,038 497,489
		34,562,253
		1,722,049,599
		1,756,611,852

Condensed Statements of Comprehensive Income:

For the Years Ended	For the Years Ended	For the Years Ended
December 31, 2019 USD 152,380,590 (25,944,997) 13,012,488 139,448,081 640,333 138,807,748	December 31, 2018 USD 132,337,339 (16,575,019) 5,271,797 121,034,117 (7,022,185) 128,056,302	December 31, 2017 USD 137,099,797 (28,879,890) 13,495
		108,233,402 40,290,367
		67,943,035

– II-108 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Condensed Statements of Cash Flows:

Net cash provided by/(used in) operating activities Net cash used in investing activities Net cash (used in)/provided by financing activities Net (decrease)/increase in cash Cash at beginning of year Cash at end of year	For the Years Ended	For the Years Ended	For the Years Ended
	December 31, 2019 USD 8,008,005 (2,000,000) (100,396,015) (94,388,010) 175,133,834 80,745,824	December 31, 2018 USD (6,211,606) (404,812,895) 581,449,534 170,425,033 4,708,801 175,133,834	December 31, 2017 USD (3,830,330) (3,000,000) — (6,830,330) 11,539,131
			4,708,801

NOTE 22 — SEGMENT INFORMATION

The Company’s principal operating segments coincide with the types of products to be sold. The products from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s reportable segments for the years ended December 31, 2019 and 2018 were biopharmaceutical products and biomaterial products as a result of the acquisition of TianXinFu completed on January 1, 2018 as described in Note 3. The Company had one operating segment, biopharmaceutical products segment, which included plasma-based products and placenta polypeptide for the year of 2017.

The accounting policies of the segments are the same as those used by the Company.

Segment information for the years ended and as of December 31, 2019 and December 31, 2018 are as follows:

Year ended December 31, 2019 Sales Cost of sales Gross profit Income from operations Net income Equity in income of an equity method investee Interest income Share-based compensation Depreciation and Amortization Segment assets Capital expenditures Equity method investment	Biopharmaceutical Products USD 457,738,968 170,119,887 287,619,081 146,889,589 138,237,792 1,587,067 21,292,269 26,600,015 17,729,392 2,195,660,575 22,966,579 16,725,513	Biomaterial Products USD 46,005,954 4,546,657 41,459,297 16,758,294 25,157,394 — 29,970 — 8,511,479 368,932,329 3,826,444 —	Total USD 503,744,922 174,666,544
			329,078,378 163,647,883 163,395,186 1,587,067 21,322,239 26,600,015 26,240,871 2,564,592,904 26,793,023 16,725,513

– II-109 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

Biopharmaceutical Products USD Year ended December 31, 2018 Sales 422,166,244 Cost of sales 141,683,089 Gross profit 280,483,155 Income from operations 128,980,355 Net income 131,561,108 Equity in income of an equity method investee 2,368,995 Interest income 13,704,954 Share-based compensation 23,130,570 Depreciation and Amortization 13,902,507 Income tax expense 15,353,208 Segment assets 2,095,996,321 Capital expenditures 35,245,016 Equity method investment 15,428,028 Reconciliation of segment assets to consolidated total assets:	Biomaterial Products USD 44,711,325 5,104,147 39,607,178 17,192,396 16,406,007 — 1,796 — 9,322,844 2,682,972 348,885,628 1,471,374 —	Total USD 466,877,569 146,787,236
		320,090,333 146,172,751 147,967,115 2,368,995 13,706,750 23,130,570 23,225,351 18,036,180 2,444,881,949 36,716,390 15,428,028

Total segment assets Elimination of intercompany investment balances Consolidated total assets	December 31, 2019 USD 2,564,592,904 (626,734,407) 1,937,858,497	December 31, 2018 USD 2,444,881,949 (434,903,268)
		2,009,978,681

NOTE 23 — SUBSEQUENT EVENTS

Because of the outbreak of coronavirus in China from January, the Company has closed all plasma collection stations since late January, and most plasma collection stations were approved by local government to commence collection operation as of the date of this report. Due to the mechanism of the Company’s production cycle, the impact of the reduced collection volume of raw material, plasma, would be reflected in the second half year of 2020 or in the next year. However, the outbreak has a positive impact on the sales of certain plasma products.

The Company will continue to monitor and modify the operating strategies. Given the dynamic nature of these circumstances, the reduced collection volume of plasma, the increased sales volume of certain plasma products and related financial impact cannot be reasonably estimated at this time.

– II-110 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

(4) The following is an extract of the unaudited financial statements of CBPO for the three and six months ended June 30, 2020, which were prepared in accordance with U.S. GAAP, from the quarterly report of CBPO for its fiscal quarter ended June 30, 2020.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS Current Assets Cash and cash equivalents Time deposits Short term investments Accounts receivable, net of allowance for doubtful accounts Inventories Prepayments and other current assets Total Current Assets Property, plant and equipment, net Intangible assets, net Land use rights, net Equity method investment Long term equity investments Loan receivable Goodwill Other non-current assets Total Assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable Income tax payable Other payables and accrued expenses Total Current Liabilities Deferred income Non-current income tax payable Other liabilities Total Liabilities	June 30, 2020 USD 545,137,430 20,967,792 474,864,844 114,636,338 225,577,753 21,335,033 1,402,519,190 172,368,672 39,516,491 28,260,837 15,151,878 10,812,893 35,122,650 304,011,108 16,660,772 2,024,424,491 9,354,604 14,176,278 100,370,255 123,901,137 2,031,352 22,284,072 17,121,948 165,338,509	December 31, 2019 USD 161,750,425 497,676,069 267,830,790 100,270,436 250,728,260 21,469,418
		1,299,725,398 177,596,563 44,068,061 28,458,944 16,725,513 10,812,893 35,642,340 308,509,397 16,319,388
		1,937,858,497
		6,262,256 13,303,085 99,743,350
		119,308,691 2,300,428 24,905,728 16,491,793
		163,006,640

– II-111 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

Shareholders’ Equity Ordinary share: par value $0.0001; 100,000,000 shares authorized; 42,034,809 and 41,910,701 shares issued at June 30, 2020 and December 31, 2019, respectively; 38,583,877 and 38,459,769 shares outstanding at June 30, 2020 and December 31, 2019, respectively Additional paid-in capital Treasury share: 3,450,932 shares at June 30, 2020 and 3,450,932 at December 31, 2019, respectively, at cost Retained earnings Accumulated other comprehensive losses Total equity attributable to China Biologic Products Holdings, Inc. Noncontrolling interest Total Shareholders’ Equity Commitments and contingencies Total Liabilities and Shareholders’ Equity	June 30, 2020 USD 4,203 1,172,202,322 (167,432,883) 862,356,620 (87,467,824) 1,779,662,438 79,423,544 1,859,085,982 — 2,024,424,491	December 31, 2019 USD 4,191 1,158,274,206 (167,432,883) 773,290,486 (68,421,408) 1,695,714,592 79,137,265 1,774,851,857 — 1,937,858,497

– II-112 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Sales: Plasma products: Human Albumin Immunoglobulin products: Human Immunoglobulin for Intravenous Injection Other Immunoglobulin products Others Placenta Polypeptide Biopharmaceutical products Artificial Dura Mater Others Biomaterial products Cost of sales Gross profit Operating expenses Selling expenses General and administrative expenses Research and development expenses Income from operations Other income (expenses) Equity in (loss)/income of an equity method investee Interest expense Interest income Other income, net Total other income, net	For the Three Months Ended June 30, 2020 June 30, 2019 USD USD 111,112,381 135,696,199 42,425,977 48,909,671 17,245,114 27,378,416 20,732,209 19,025,521 12,668,424 15,639,597 4,459,116 11,314,880 97,530,840 122,268,085 12,954,955 12,567,201 626,586 860,913 13,581,541 13,428,114 34,738,039 44,793,259 76,374,342 90,902,940 14,413,905 25,642,174 16,440,301 14,658,433 2,828,602 2,431,379 42,691,534 48,170,954 (555,499) 851,981 (73,866) (125,032) 2,687,216 5,920,033 2,406,844 1,981,106 4,464,695 8,628,088	For the Six Months Ended June 30, 2020 June 30, 2019 USD USD 273,703,774 265,480,266 83,922,761 105,722,460 95,455,143 56,422,596 34,287,223 32,114,741 29,145,538 25,509,605 7,738,081 18,973,870 250,548,746 238,743,272 21,999,370 24,881,234 1,155,658 1,855,760 23,155,028 26,736,994 96,340,432 89,033,704 177,363,342 176,446,562 28,874,015 44,370,433 33,201,414 35,255,993 4,571,144 4,762,204 110,716,769 92,057,932 (1,341,679) 1,445,011 (178,768) (188,809) 7,216,217 12,445,872 4,601,284 3,581,482 10,297,054 17,283,556
	June 30, 2020 USD 111,112,381 42,425,977 17,245,114 20,732,209 12,668,424 4,459,116 97,530,840 12,954,955 626,586 13,581,541 34,738,039 76,374,342 14,413,905 16,440,301 2,828,602 42,691,534 (555,499) (73,866) 2,687,216 2,406,844 4,464,695	June 30, 2020 USD 273,703,774 83,922,761 95,455,143 34,287,223 29,145,538 7,738,081 250,548,746 21,999,370 1,155,658 23,155,028 96,340,432 177,363,342 28,874,015 33,201,414 4,571,144 110,716,769 (1,341,679) (178,768) 7,216,217 4,601,284 10,297,054

– II-113 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

For the Three Months

	For the Three Months
Income before income tax expense Income tax expense Net income Less: Net income attributable to noncontrolling interest Net income attributable to China Biologic Products Holdings, Inc. Earnings per share of ordinary share: Basic Diluted Weighted average shares used in computation: Basic Diluted Net income Other comprehensive income/(losses): Foreign currency translation adjustment, net of nil income taxes Comprehensive income Less: Comprehensive income attributable to noncontrolling interest Comprehensive income attributable to China Biologic Products Holdings, Inc.	Ended June 30, 2020 June 30, 2019 USD USD 47,156,229 56,799,042 6,596,604 8,161,639 40,559,625 48,637,403 4,877,900 6,990,249 35,681,725 41,647,154 0.92 1.07 0.91 1.06 38,519,992 38,496,323 38,962,048 38,586,250 40,559,625 48,637,403 1,059,428 (27,689,871) 41,619,053 20,947,532 4,936,485 3,369,049 36,682,568 17,578,483	For the Six Months Ended June 30, 2020 June 30, 2019 USD USD 121,013,823 109,341,488 18,219,525 16,080,081 102,794,298 93,261,407 13,728,164 13,922,146 89,066,134 79,339,261 2.29 2.01 2.27 2.01 38,513,676 38,911,830 38,964,735 39,003,195 102,794,298 93,261,407 (20,122,049) (3,373,450) 82,672,249 89,887,957 12,652,531 12,121,308 70,019,718 77,766,649
	June 30, 2020 USD 47,156,229 6,596,604 40,559,625 4,877,900 35,681,725 0.92 0.91 38,519,992 38,962,048 40,559,625 1,059,428 41,619,053 4,936,485 36,682,568	June 30, 2020 USD 121,013,823 18,219,525 102,794,298 13,728,164 89,066,134 2.29 2.27 38,513,676 38,964,735 102,794,298 (20,122,049) 82,672,249 12,652,531 70,019,718

– II-114 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
Amortization
Loss on disposal of property, plant and equipment
Fair value changes of short term investments
Allowance for doubtful accounts — accounts receivable
Reversal of doubtful accounts — prepayments and other
receivables
Deferred income tax benefit
Share-based compensation
Equity in loss/(income) of an equity method investee
Change in operating assets and liabilities:
Accounts receivable
Inventories
Prepayments and other current assets
Accounts payable
Income tax payable
Other payables and accrued expenses
Deferred income
Non-current income tax payable
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of time deposits
Proceeds from maturity of time deposits
Purchase of short term investments
Proceeds from maturity of short term investments
Payment for property, plant and equipment
Payment for intangible assets and land use rights
Proceeds from disposal of property, plant and equipment
Net cash provided by/(used in) investing activities

For the Six Months Ended
June 30,
2020
June 30,
2019
USD
USD
102,794,298
93,261,407
8,264,084
7,983,092
4,939,901
4,527,682
10,096
82,137
(1,529,697)
(2,288,576)
495,274
430,927
(2,897)
(19,560)
(811,372)
(2,054,341)
13,627,693
12,791,884
1,341,679
(1,445,011)
(16,872,471)
(15,232,984)
21,983,643
(3,923,388)
1,370,615
2,687
3,207,773
(4,500,433)
1,075,245
3,558,375
(1,565,206)
3,297,026
(237,335)
(245,956)
(2,621,656)
(1,993,310)
135,469,667
94,231,658
(651,415,200)
(908,002,883)
1,127,127,492
920,485,867
(887,512,817)
(357,025,912)
674,903,547
242,169,502
(6,370,158)
(12,731,955)
(682,739)
(2,385,371)
3,381
1,907
256,053,506
(117,488,845)

June 30,
2020
USD
102,794,298
8,264,084
4,939,901
10,096
(1,529,697)
495,274
(2,897)
(811,372)
13,627,693
1,341,679
(16,872,471)
21,983,643
1,370,615
3,207,773
1,075,245
(1,565,206)
(237,335)
(2,621,656)
135,469,667
(651,415,200)
1,127,127,492
(887,512,817)
674,903,547
(6,370,158)
(682,739)
3,381
256,053,506

– II-115 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised
Payment to an investment bank for share repurchase
Dividend paid by subsidiaries to noncontrolling interest
shareholders
Net cash used in financing activities
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
NET INCREASE/(DECREASE)IN CASH AND
CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information
Cash paid for income taxes
Noncash investing and financing activities:
Acquisition of property, plant and equipment
included in payables
Set-off loan receivable against accounts payable
Share repurchase using the prepayment to
an investment bank
Land use right acquired with prepayments made in
prior periods

For the Six Months Ended
June 30,
2020
June 30,
2019
USD
USD
300,435
237,231
—
(110,042,776)
(7,302,864)
(5,062,353)
(7,002,429)
(114,867,898)
(1,133,739)
1,695,609
383,387,005
(136,429,476)
161,750,425
338,880,559
545,137,430
202,451,083
20,413,869
16,812,861
410,228
2,226,126
—
2,160,070
—
110,965,013
—
2,689,467

June 30,
2020
USD
300,435
—
(7,302,864)
(7,002,429)
(1,133,739)
383,387,005
161,750,425
545,137,430
20,413,869
410,228
—
—
—

– II-116 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Income from Operations
Non-cash employee share-based compensation
Amortization of acquired intangible assets and land use rights
Adjusted Income from Operations — Non GAAP
Net Income Attributable to the Company
Non-cash employee share-based compensation
Amortization of acquired intangible assets and land use rights
Adjusted Net Income Attributable to the Company —
Non GAAP
Diluted EPS — Non GAAP
Weighted average number of shares used in computation of
Non GAAP diluted EPS
Income from Operations
Non-cash employee share-based compensation
Amortization of acquired intangible assets and land use rights
Adjusted Income from Operations — Non GAAP
Net Income Attributable to the Company
Non-cash employee share-based compensation
Amortization of acquired intangible assets and land use rights
Adjusted Net Income Attributable to the Company —
Non GAAP
Diluted EPS — Non GAAP
Weighted average number of shares used in computation of
Non GAAP diluted EPS

For the Three Months Ended

June 30,
2020
June 30,
2019
USD
USD
42,691,534
48,170,954
6,696,075
6,485,917
1,982,058
2,036,171
51,369,667
56,693,042
35,681,725
41,647,154
6,073,233
5,630,041
1,684,749
1,384,596
43,439,707
48,661,791
1.11
1.24
38,962,048
38,586,250
For the Six Months Ended

June 30,
2020
June 30,
2019
USD
USD
110,716,769
92,057,932
13,627,693
12,791,884
3,971,631
4,091,203
128,316,093
108,941,019
89,066,134
79,339,261
12,356,026
11,080,132
3,375,886
2,782,018
104,798,046
93,201,411
2.67
2.36
38,964,735
39,003,195

– II-117 –

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APPENDIX II

B. DIFFERENCES BETWEEN THE ACCOUNTING POLICIES ADOPTED BY THE COMPANY (HKFRS) AND CBPO (U.S. GAAP)

As described in ‘‘Letter from the Board — XIII. Waiver from Strict Compliance with Rule 14.68(2)(a)(i) of the Listing Rules’’, the Company has applied to the Stock Exchange for, and has been granted, a waiver from the requirement to produce an accountants’ report on CBPO in accordance with Rule 14.69(4)(a)(i) of the Listing Rules.

Instead, this circular contains a copy of:

(a) the audited consolidated financial statements of CBPO for the financial years ended December 31, 2017, 2018 and 2019 prepared in accordance with U.S. GAAP, extracted from the annual reports of CBPO for each of those years (together the ‘‘CBPO Historical 3 Years’ Accounts’’); and
(b) the unaudited condensed consolidated financial statements of CBPO for the six months ended June 30, 2020 prepared in accordance with U.S. GAAP, extracted from the quarterly report of CBPO for the aforementioned period (the ‘‘CBPO Q2 2020 Accounts’’).

The CBPO Historical 3 years’ Accounts and CBPO Q2 2020 Accounts cover the balance sheets of CBPO as of December 31, 2017, 2018, 2019 and June 30, 2020 and the results of CBPO for each of the three years ended December 31, 2017, 2018 and 2019 and the six months ended June 30, 2020 (the ‘‘Relevant Periods’’).

The accounting policies adopted in the preparation of the CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts differ in certain material respects from the accounting policies presently adopted by the Company which comply with HKFRS (the ‘‘Company’s Policies’’). Differences which would have a significant effect on the CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts, had they been prepared in accordance with the accounting policies presently adopted by the Company rather than in accordance with U.S. GAAP, are set out below in ‘‘CBPO’s Unaudited Adjusted Financial Information under the Company’s Policies’’, with the following disclosures:

(a) a comparison between CBPO’s consolidated statements of operations and consolidated statements of comprehensive income as extracted from the CBPO Historical 3 years’ Accounts and CBPO Q2 2020 Accounts, respectively, prepared in accordance with U.S. GAAP, and adjusted consolidated income statement and consolidated statement of comprehensive income had they instead been prepared in accordance with the accounting policies adopted by the Company which are in compliance with HKFRS. The process applied in the preparation of such a comparison is set out in the ‘‘Basis of Preparation’’ and ‘‘Reconciliation Process’’ sections below;

– II-118 –

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APPENDIX II

(b) a comparison between CBPO’s consolidated balance sheets as extracted from the CBPO Historical 3 years’ Accounts and CBPO Q2 2020 Accounts, prepared in accordance with U.S. GAAP, and adjusted consolidated balance sheet had they instead been prepared in accordance with the accounting policies adopted by the Company which are in compliance with HKFRS. The process applied in the preparation of such a comparison is also set out in the ‘‘Basis of Preparation’’ and ‘‘Reconciliation Process’’ sections below; and
(c) a discussion of the material financial statement line item differences arising out of the exercise outlined in (a) and (b) above.

The above referenced items are collectively referred to as the ‘‘Reconciliation Information’’.

Basis of Preparation

The Reconciliation Information for the Relevant Periods, which presents the ‘‘Unadjusted Financial Information under U.S. GAAP’’ of CBPO as if it had been prepared in accordance with the accounting policies presently adopted by the Company which are in compliance with HKFRS, has been prepared on the assumption that the transition provisions of HKFRS 1, First-time Adoption of Hong Kong Financial Reporting Standards (‘‘HKFRS 1’’) are applicable to CBPO. CBPO’s HKFRS transition date is deemed to be January 1, 2018 and as such, CBPO has applied the mandatory exceptions and certain optional exemptions afforded by HKFRS 1 for the preparation of the Reconciliation Information for the Relevant Periods.

Reconciliation Process

The Reconciliation Information has been prepared by comparing and analyzing the differences between the accounting policies adopted by CBPO for the preparation of the CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts in accordance with U.S. GAAP and the accounting policies adopted by the Company which are in compliance with HKFRS, and quantifying the relevant material financial effects of such differences.

BDO Limited (‘‘BDO’’) was engaged by the Company to conduct work in accordance with the Hong Kong Standard on Assurance Engagements 3000 ‘‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’’ (‘‘HKSAE 3000’’) issued by the HKICPA on the Reconciliation Information. The work consisted primarily of:

(i) comparing the Unadjusted Financial Information under U.S. GAAP with the audited or reviewed financial statements of the CBPO Group as set out in Appendix IV of the Circular;

– II-119 –

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APPENDIX II

(ii) comparing the accounting policies of the CBPO Group as set out in Appendix IV of the Circular with the accounting policies of the Group as set out in the published audited consolidated financial statements of the Company for the year ended December 31, 2017, 2018 and 2019 and the published unaudited consolidated interim financial information of the Company for the six months ended June 30, 2020;
(iii) reviewing the adjustments, if any, made by the Directors of the Company in arriving at the CBPO’s Unaudited Adjusted Financial Information under the Company’s Policies and evidence supporting the adjustments; and
(iv) checking the arithmetic accuracy of the computation of the CBPO’s Unaudited Adjusted Financial Information under the Company’s Policies.

BDO’s engagement did not involve independent examination of any of the underlying financial information. The work carried out in accordance with HKSAE 3000 is different in scope from an audit or a review conducted in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA and consequently, BDO Hong Kong did not express an audit opinion nor a review conclusion on the Reconciliation Information. BDO Hong Kong’s engagement was intended solely for the use of the Directors in connection with this circular and may not be suitable for another purpose. Based on the work performed, BDO Hong Kong has concluded that:

(i) the Unadjusted Financial Information under U.S. GAAP has been properly extracted from the CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts;
(ii) in all material respects there were no differences between the accounting policies of the CBPO as set out in CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts and the accounting policies of the Group as set out in the published audited consolidated financial statements of the Company for the year ended December 31, 2017, 2018 and 2019 and the published unaudited consolidated interim financial information of the Company for the six months ended June 30, 2020 requiring adjustments to the Unadjusted Financial Information under U.S. GAAP to arrive at the CBPO’s Unaudited Adjusted Financial Information under the Company’s Policies; and
(iii) the computation of the Adjusted Financial Information under the Company’s Policies is arithmetically accurate.

– II-120 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

CBPO’s Unaudited Adjusted Financial Information under the Company’s Policies

The CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts for the Relevant Periods have been prepared and presented in accordance with U.S. GAAP. There are no material measurement differences between the CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts, as prepared in accordance with U.S. GAAP, compared to that applying the accounting policies presently adopted by the Company which are in compliance with HKFRS, other than as set out below:

1 — Share-based Payments (note i)
2 — Income Taxes (note k)

The Reconciliation Information also includes reclassification adjustments to align the presentation of the CBPO Historical 3 Years’ Accounts and CBPO Q2 2020 Accounts with the Company’s presentation.

– II-121 –

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APPENDIX II

AUDITED ADJUSTED CONSOLIDATED INCOME STATEMENT UNDER THE COMPANY’S POLICIES

FOR THE YEAR ENDED DECEMBER 31, 2017

Unadjusted Financial Information under U.S. GAAP US$’000 370,407 (125,517	Measurement Adjustments US$’000 — ) —	Classification Adjustments US$’000 — —
135,858	(8,450	) (1
7,624 (583	— ) —	— 1
7,041	—	1
3,509 146,408 (64,172
82,236	(8,723	) —
67,943 14,293
82,236	(8,723	) —

– II-122 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

AUDITED ADJUSTED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME UNDER THE COMPANY’S POLICIES

FOR THE YEAR ENDED DECEMBER 31, 2017

Unadjusted Financial Information under U.S. GAAP US$’000 82,236 36,861	Measurement Adjustments Classification Adjustments US$’000 US$’000 (8,723) — — — — — (8,723) — (7,244) — (1,479) — (8,723) —	Measurement Adjustments Classification Adjustments US$’000 US$’000 (8,723) — — — — — (8,723) — (7,244) — (1,479) — (8,723) —	Adjusted Financial Information under the Company’s Policies US$’000 73,513 36,861
36,861	—	—	36,861
119,097	(8,723	) —	110,374
101,220 17,877			93,976 16,398
119,097	(8,723	) —	110,374

– II-123 –

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APPENDIX II

AUDITED ADJUSTED CONSOLIDATED BALANCE SHEET UNDER THE COMPANY’S POLICIES

AS OF DECEMBER 31, 2017

Unadjusted Financial Information under U.S. GAAP US$’000 24,853 166,813 — — — 9,366 14,904	Measurement Adjustments US$’000 — — — 1,054 — — —	Measurement Adjustments US$’000 — — — 1,054 — — —
215,936	1,054	—
209,571 77,267 219,337 18,139 22,895 45,912
593,121	(1,757	) —
809,057	(703	) —
3 — 140,230 28,220 (56,425) — 7,958 — 506,426 (23,076		— — — — ) —
598,192	5,144	—
66,133	(5,847	) —
664,325	(703	) —

– II-124 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

Unadjusted Financial Information under U.S. GAAP US$’000 — 3,477 6,553 37,067	Measurement Adjustments US$’000 — — — —	Classification Adjustments Adjusted Financial Information under the Company’s Policies US$’000 US$’000 6,234 6,234 — 3,477 (6,234) 319 — 37,067 — 47,097 75,828 83,377 (75,828) — — 14,258 — 97,635 — 144,732 ) — 808,354	Classification Adjustments Adjusted Financial Information under the Company’s Policies US$’000 US$’000 6,234 6,234 — 3,477 (6,234) 319 — 37,067 — 47,097 75,828 83,377 (75,828) — — 14,258 — 97,635 — 144,732 ) — 808,354
47,097	—	—	47,097
7,549 75,828 14,258	— — —
97,635	—	—	97,635
144,732	—	—	144,732
809,057	(703	) —	808,354

– II-125 –

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APPENDIX II

AUDITED ADJUSTED CONSOLIDATED INCOME STATEMENT UNDER THE COMPANY’S POLICIES

FOR THE YEAR ENDED DECEMBER 31, 2018

Unadjusted Financial Information under U.S. GAAP US$’000 466,877 (146,787	Measurement Adjustments US$’000 — ) —	Classification Adjustments US$’000 — —
320,090 — (95,576) — (68,817) 3,289 (9,524) — — —
146,173	3,289	18
13,707 — (338) — — —
13,369	—	6,395
2,369 4,092	— —	— (6,413
166,003	3,289	—
(18,036	) (457	) —
147,967	3,746	—
128,056 19,911	3,242 504	— —
147,967	3,746	—

– II-126 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

AUDITED ADJUSTED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME UNDER THE COMPANY’S POLICIES

FOR THE YEAR ENDED DECEMBER 31, 2018

Unadjusted Financial Information under U.S. GAAP US$’000 147,967 (60,784	Measurement Adjustments US$’000 3,746 ) (2,822	Classification Adjustments US$’000 — ) —
(60,784	) (2,822	) —
87,183	924	—
74,388 12,795	985 (61	— ) —
87,183	924	—

– II-127 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

AUDITED ADJUSTED CONSOLIDATED BALANCE SHEET UNDER THE COMPANY’S POLICIES AS OF DECEMBER 31, 2018

Unadjusted Financial Information under U.S. GAAP US$’000 32,204 178,327 53,259 — — 9,228 10,813 15,428 39,943 313,589	Unadjusted Financial Information under U.S. GAAP US$’000 32,204 178,327 53,259 — — 9,228 10,813 15,428 39,943 313,589	Unadjusted Financial Information under U.S. GAAP US$’000 32,204 178,327 53,259 — — 9,228 10,813 15,428 39,943 313,589
652,791	(818	) —
243,296 125,116 338,881 537,478 76,049 36,368	— — — — — (1,200	— 35,168 — — — ) (35,168
1,357,188	(1,200	) —
2,009,979	(2,018	) —
4 — 1,189,698 11,923 (56,425) — (45,711) 11,994 634,483 (20,376		— — — — ) —
1,722,049	3,541	—
122,654	(5,987	) —
1,844,703	(2,446	) —

– II-128 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

Unadjusted Financial Information under U.S. GAAP US$’000 26,899 — 2,825 13,203	Measurement Adjustments Classification Adjustments Adjusted Financial Information under the Company’s Policies US$’000 US$’000 US$’000 — — 26,899 (498) (12,902) (13,400) — — 2,825 — 12,902 26,105 (498) — 42,429 — 99,934 111,339 — (99,934) — 926 — 11,936 926 — 123,275 428 — 165,704 (2,018) — 2,007,961	Measurement Adjustments Classification Adjustments Adjusted Financial Information under the Company’s Policies US$’000 US$’000 US$’000 — — 26,899 (498) (12,902) (13,400) — — 2,825 — 12,902 26,105 (498) — 42,429 — 99,934 111,339 — (99,934) — 926 — 11,936 926 — 123,275 428 — 165,704 (2,018) — 2,007,961
42,927	(498	) —
11,405 99,934 11,010	— — 926
122,349	926	—
165,276	428	—
2,009,979	(2,018	) —

– II-129 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

AUDITED ADJUSTED CONSOLIDATED INCOME STATEMENT UNDER THE COMPANY’S POLICIES

FOR THE YEAR ENDED DECEMBER 31, 2019

Unadjusted Financial Information under U.S. GAAP US$’000 503,745 (174,667	Measurement Adjustments US$’000 — ) —	Classification Adjustments US$’000 — —
329,078 — (80,319) — (73,376) 2,342 (11,735) — — —
163,648	2,342	—
20,765	(5	) 5,906
1,587 5,494	— —	— (5,906
191,494 (28,099	2,337 ) (1,315	— ) —
163,395	1,022	—
138,808 24,587	853 169	— —
163,395	1,022	—

– II-130 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

AUDITED ADJUSTED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME UNDER THE COMPANY’S POLICIES

FOR THE YEAR ENDED DECEMBER 31, 2019

Unadjusted Financial Information under U.S. GAAP Measurement Adjustments US$’000 US$’000 163,395 1,022 (20,376) — (20,376) —	Unadjusted Financial Information under U.S. GAAP Measurement Adjustments US$’000 US$’000 163,395 1,022 (20,376) — (20,376) —	Classification Adjustments US$’000 — — —
143,019	1,022	—
121,324 21,695	853 169	— —
143,019	1,022	—

– II-131 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

AUDITED ADJUSTED CONSOLIDATED BALANCE SHEET UNDER THE COMPANY’S POLICIES AS OF DECEMBER 31, 2019

Unadjusted Financial Information under U.S. GAAP US$’000 28,459 177,597 44,068 — — 16,319 10,813 16,726 35,642 308,509 —	Unadjusted Financial Information under U.S. GAAP US$’000 28,459 177,597 44,068 — — 16,319 10,813 16,726 35,642 308,509 —	Unadjusted Financial Information under U.S. GAAP US$’000 28,459 177,597 44,068 — — 16,319 10,813 16,726 35,642 308,509 —
638,133	2,325	—
250,728 100,270 161,751 497,676 267,831 21,469
1,299,725	(1,580	) —
1,937,858	745	—
4 — 1,158,274 15,026 (167,433) — (68,420) 10,260 773,290 (19,682		— — — — ) —
1,695,715	5,604	—
79,137	(5,275	) —
1,774,852	329	—

– II-132 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

Unadjusted Financial Information under U.S. GAAP US$’000 24,906 — 2,300 — 16,492	Measurement Adjustments US$’000 — — — 4,372 (4,372	Classification Adjustments US$’000 — 11,826 — — ) (11,826	Adjusted Financial Information under the Company’s Policies US$’000 24,906 11,826 2,300 4,372 ) 294
43,698	—	—	43,698
6,262 99,743 13,303 —
119,308	416	—	119,724
163,006	416	—	163,422
1,937,858	745	—	1,938,603

– II-133 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

UNAUDITED ADJUSTED CONSOLIDATED INCOME STATEMENT UNDER THE COMPANY’S POLICIES

FOR THE SIX MONTHS ENDED JUNE 30, 2020

Unadjusted Financial Information under U.S. GAAP US$’000 273,704 (96,340	Measurement Adjustments US$’000 — ) —	Classification Adjustments US$’000 — —
7,037	(125	) 4,601
(1,341) — 4,601 —		— (4,601
121,014 (18,220
102,794	(537	) —
89,066 13,728
102,794	(537	) —

– II-134 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

UNAUDITED ADJUSTED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME UNDER THE COMPANY’S POLICIES

FOR SIX MONTHS ENDED JUNE 30, 2020

Unadjusted Financial Information under U.S. GAAP Measurement Adjustments Classification Adjustments US$’000 US$’000 US$’000 102,794 (536) — (20,122) — — (20,122) — — 82,672 (536) — 70,020 (451) — 12,652 (85) — 82,672 (536) —	Unadjusted Financial Information under U.S. GAAP Measurement Adjustments Classification Adjustments US$’000 US$’000 US$’000 102,794 (536) — (20,122) — — (20,122) — — 82,672 (536) — 70,020 (451) — 12,652 (85) — 82,672 (536) —	Unadjusted Financial Information under U.S. GAAP Measurement Adjustments Classification Adjustments US$’000 US$’000 US$’000 102,794 (536) — (20,122) — — (20,122) — — 82,672 (536) — 70,020 (451) — 12,652 (85) — 82,672 (536) —
82,672	(536	) —
70,020 12,652
82,672	(536	) —

– II-135 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

UNAUDITED ADJUSTED CONSOLIDATED BALANCE SHEET UNDER THE COMPANY’S POLICIES AS OF JUNE 30, 2020

Unadjusted Financial Information under U.S. GAAP US$’000 — 172,369 39,516 — — 16,660 10,813 15,152 35,123 304,011 28,261	Unadjusted Financial Information under U.S. GAAP US$’000 — 172,369 39,516 — — 16,660 10,813 15,152 35,123 304,011 28,261	Unadjusted Financial Information under U.S. GAAP US$’000 — 172,369 39,516 — — 16,660 10,813 15,152 35,123 304,011 28,261
621,905	1,633	—
225,578 114,636 545,137 20,968 474,865 21,335
1,402,519	(1,449	) —
2,024,424	184	—
4 — 1,172,202 4,050 (167,433) — (87,468) 21,557 862,357 (20,307		— — — — ) —
1,779,662	5,300	—
79,424	(5,360	) —
1,859,086	(60	) —

– II-136 –

APPENDIX II

FINANCIAL INFORMATION OF CBPO

Unadjusted Financial Information under U.S. GAAP US$’000 22,284 — 2,031 — 17,122	Measurement Adjustments US$’000 — — — 3,812 (3,812	Classification Adjustments US$’000 — 12,011 — — ) (12,011	Adjusted Financial Information under the Company’s Policies US$’000 22,284 12,011 2,031 3,812 ) 1,299
41,437	—	—	41,437
9,355 100,370 14,176 —
123,901	244	—	124,145
165,338	244	—	165,582
2,024,424	184	—	2,024,608

– II-137 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

a. Other gains (losses) — net

CBPO net off government grant for reimbursing expenses incurred for certain schemes against G&A expense directly. The Company presents such government grant as ‘‘Other gains’’. Therefore, such expenses and government grant received have been reclassified to ‘‘Other gains — net’’.

In addition, CBPO net off government grant for reimbursing expenses incurred for specific research and development programs against R&D expense directly. The Company presents such government grant as ‘‘Other gains’’. Therefore, such expenses and government grant received have been reclassified to ‘‘Other gains (losses) — net’’.

b. Finance income

CBPO presents interest income as a component of ‘‘Other income’’. The Company presents all interest income as ‘‘Finance income’’. Therefore, interest income have been reclassified to ‘‘Finance income’’.

c. Foreign Exchange Gains or Losses

CBPO presents foreign exchange gains or losses as a component of ‘‘General and administrative expenses’’. The Company presents all foreign exchange gains or losses within ‘‘Finance costs’’. Therefore, foreign exchange gains and losses have been reclassified to ‘‘Finance costs’’.

d. Prepayment and Other Receivables

CBPO presents prepayment and other receivables as a separate line item on its consolidated balance sheets. The Company presents prepayment and other receivables as a component of ‘‘Trade and other receivables’’. Accordingly, prepayment and other receivables have been reclassified to ‘‘Trade and other receivables’’.

e. Long-term prepayment

CBPO presents prepayment for property, plant and equipment as a component of ‘‘property, plant and equipment’’. In addition, CBPO presents prepayment for investment and other long-term prepayment as ‘‘Other non-current assets’’. The Company presents these prepayment as ‘‘Long-term prepayment’’. Hence, prepayment with long-term nature have been reclassified to ‘‘Long-term ’’ prepayment .

f. Intangible assets

CBPO presents intangible assets as a component of ‘‘Non-current assets’’. The Company presents intangible assets separately on its consolidated balance sheets. As such, intangible assets have been reclassified from ‘‘Non-current assets’’ to ‘‘Intangible assets.’’

– II-138 –

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APPENDIX II

g. Deferred Income Taxes

CBPO presents deferred income tax assets as ‘‘prepayment and other current assets’’ or ‘‘other non-current assets’’ and presents deferred income tax liabilities as ‘‘other liabilities’’ as of December 31, 2017, 2018 and 2019 and classified all deferred income taxes as non-current assets or liabilities as of December 31, 2017 and June 30, 2020, respectively. The Company presents deferred income taxes separately on its consolidated balance sheets and classifies all deferred income taxes balances as non-current assets or liabilities regardless of the period in which the underlying timing differences are expected to reverse. Therefore, deferred income taxes balances as of December 31, 2017, 2018, 2019 and June 30, 2020 were reclassified accordingly.

h. Other payable and accrued expenses

CBPO record other payable and accrued expenses as a separate line on its consolidated balance sheet, while the Company presents all payables as ‘‘Trade and other payables.’’ As such, other payable and accrued expenses have been reclassified to ‘‘Trade and other payables’’.

i. Prepayments for investments in equity securities

CBPO represents prepayments for investments in equity securities as a separate line on its consolidated balance sheet, while the Company presents as ‘‘Long-term prepayments’’. As such, prepayments for investments in equity securities have been reclassified to ‘‘Long-term ’’ prepayments .

Measurement Adjustments

j. Share-based Payments

Share-based payment expenses arising in connection with CBPO’s equity classified sharebased payment arrangements (i.e. its stock options and time-based Restricted Stock Units (‘‘RSUs’’)) are recognized on a straight-line basis over the vesting period. The Company accounts for each award separately and accordingly, recognizes expenses over the period that the employees unconditionally become entitled to the awards. The difference between expense attribution under CBPO’s policy versus the Company’s policy resulted in additional or (reduced) pre-tax share-based payment expense of US$8.5 million, (US$3.3 million) and (US$2.3 million) for the years ended December 31, 2017, 2018 and 2019, respectively, and (US$2.4 million) and US$1.0 million for the six months period ended June 30, 2019 and 2020, respectively.

k. Unrealized gain on intra-group sales

Income taxes paid by the seller on intra-group profits related to inventory that remain within the consolidated group, including the tax effect of any reversing temporary differences in the seller’s tax jurisdiction, are deferred. CBPO recognizes the amount of tax effect in prepayment and other current assets in the statement of balance sheet until such time as the asset leaves the consolidated group, at which point the amount is reclassified to income tax expense. The Company accounts for the related deferred tax effect based on the tax rate of the purchaser, recognizes the

– II-139 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

amount in deferred tax assets. The current tax effects for the seller are recognized in the current tax position. The difference between expense attribution under CBPO’s policy versus the Company’s policy resulted in income tax expense of US$189,691, US$1,078,556 and US$58,680 for the years ended December 31, 2017, 2018 and 2019, respectively, and US$6,294 and US$36,864 for the six months ended June 30, 2019 and 2020, respectively.

l. Adoption of IFRS16 — Leases

Operating leases were not recognized on the balance sheet of the Company under CBPO’s policies, but rent expenses with fixed escalating payments and/or rent holidays were recognized on a straight-line basis over the lease term. Upon adoption of IFRS16 by the Company on 1 January 2019, the new IFRS16 introduced a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Specifically, under IFRS 16, a lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Accordingly, a lessee should recognise depreciation of the right-of use asset and interest on the lease liability, and also presents cash repayment of lease liabilities in the statement of cash flows. Also, the right-of-use asset and the lease liability are initially measured on a present value basis. The measurement includes noncancellable lease payments and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or to exercise an option to terminate the lease. This accounting treatment resulted in increase in finance cost of US$179,000 for the years ended December 31, 2019 and a decrease in administrative expenses of US$25,000.

m. Measurement of financial assets

The Company’s investments without readily determinable fair values are measured using the measurement alternative under CBPO’s policies at cost, less impairments, and adjusted up or down based on observable price changes in orderly transactions for identical or similar investments of the same issuer. Under the Company’s policies, the financial assets at fair value through profit and loss shall not be measured at cost. In circumstances when observable inputs of the financial assets cannot be obtained, it is required to be measured at the fair value determined by level 3 inputs under IFRS13, which is inputs for the asset or liability that are not based on observable market data. This accounting difference resulted in increase in a fair value gains on financial assets at fair value through profit and loss amounted to US$174,000 for the years ended December 31, 2019.

n. Exchange differences of non-current assets of a subsidiary

Under the Company’s policies, the exchange rate used for translation to presentation currency was the closing rate at every period end, which also applies to translate fair value changes on acquisition of the non-current assets of a subsidiary denominated in RMB to US$ (which is CBPO’s presentation currency). The exchange rate use by the Company under its policies was different from the exchange rate used by CBPO under CBPO’s accounting policy. The accounting difference resulted in adjustment on exchange reserves.

– II-140 –

FINANCIAL INFORMATION OF CBPO

APPENDIX II

o. Income Taxes

Income tax adjustments reflect the tax effect of the measurement adjustments noted in j above.

– II-141 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is an illustrative unaudited pro forma consolidated statement of financial position, an illustrative unaudited pro forma consolidated statement of comprehensive income and an illustrative unaudited pro forma consolidated statement of cash flows of the Group (the ‘‘Unaudited Pro Forma Financial Information’’) which have been prepared by the Directors to illustrate the effect of the disposal of 5,321,000 shares of China Biologic Products Holdings, Inc. (‘‘CBPO’’) held by the Group (the ‘‘Disposal’’), which represented approximately 13.79% of the issued share capital of CBPO, for a consideration of US$120.0 per share as if it had taken place on 30 June 2020 for the unaudited pro forma consolidated balance sheet and on 1 January 2019 for the unaudited pro forma consolidated income statement, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows. For the preparation of an illustrative unaudited pro forma consolidated statement of comprehensive income and an illustrative unaudited pro forma consolidated statement of cash flows of the Group for the year ended 31 December 2019, the Directors assumed that the disposal of 1,000,000 shares of CBPO held by the Group, which was completed on 8 May 2020, had taken place on 1 January 2019.

The Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position, results of operations and cash flows of the Group had the Transactions been completed on 1 January 2019 or 30 June 2020 where applicable, or at any future dates.

– III-1 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019

Revenue Cost of revenue Gross profit Other gains/(losses) — net Fair value loss on investment properties Selling and marketing expenses Administrative expenses Provision for expected credit losses Research and development expenses Operating profit Finance cost — net Share of result of an associate Profit before income tax Income tax expense Profit for the year Other comprehensive income Items that maybe subsequently reclassified to profit of loss: Currency translation differences Share of exchange reserve of an associate Reclassification from exchange differences reserve to profit and loss on — deemed disposal of an associate — disposal of an associate — deregistration of a subsidiary Other comprehensive income for the year Total comprehensive income for the year Profit/(loss) for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the year attributable to: Owners of the Company Non-controlling interests	Audited consolidated income statement of the Group for the year ended 31 December 2019 Pro forma adjustments RMB’000 RMB’000 RMB’000 (unaudited) (unaudited) (Note a) (Note b(i)) (Note b(ii)) 362,183 (140,056) 222,127 (11,398) 26,188 1,593,280 (1,650) (101,157) (65,240) (15,497) (25,514) 1,671 (28,684) 112,821 (112,821) 85,808 (3,839) 81,969 (10,062) 44,057 (44,057) (195) 195 — (64,910) (1,417) 32,383 114,352 81,982 (13) 81,969 114,365 (13) 114,352	Unaudited pro forma consolidated income statement of the Group for the year ended 31 December 2019 RMB’000 (unaudited) 362,183 (140,056)
		222,127 1,608,070 (1,650) (101,157) (65,240) (15,497) (25,514)
		1,621,139 (28,684) —
		1,592,455 (3,839)
		1,588,616 (10,062) — — (64,910) (1,417)
		(76,389)
		1,512,227
		1,588,629 (13)
		1,588,616
		1,512,240 (13)
		1,512,227

– III-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

ASSETS AND LIABILITIES NON-CURRENT ASSETS Right of use assets Property, plant and equipment Investment properties Intangible assets Interests in associates Deferred income tax assets Long-term prepayments Trade receivables CURRENT ASSETS Trade and other receivables Inventories Amounts due from an associate Cash and cash equivalents CURRENT LIABILITIES Trade and other payables Amount due to an associate Lease liabilities Bank loan Tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities Deferred government grant NET ASSETS EQUITY Share capital Share premium Other reserves Retained earnings Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	Unadjusted amount of the Group RMB’000 RMB’000 RMB’000 (unaudited) (unaudited) (Note a) (Note d(i)) (Note d) 22,849 716,422 262,506 179,506 3,199,388 (3,199,388) 13,659 24,020 2,800 4,421,150 157,346 39,988 27,507 290,618 4,654,912 515,459 99,842 27,799 2,604 10,000 2,552 142,797 372,662 4,793,812 3,000 17,168 20,168 4,773,644 965 1,492,937 527,989 (139,096) 2,751,914 1,594,620 4,773,805 (161) 4,773,644	Pro forma adjusted amount of the Remaining Group RMB’000 (unaudited) 22,849 716,422 262,506 179,506 — 13,659 24,020 2,800
		1,221,762
		157,346 39,988 27,507 4,945,530
		5,170,371
		99,842 27,799 2,604 10,000 2,552
		142,797
		5,027,574
		6,249,336
		3,000 17,168
		20,168
		6,229,168
		965 1,492,937 388,893 4,346,534
		6,229,329 (161)
		6,229,168

– III-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

OPERATING ACTIVITIES Net cash used in operations Income tax paid Net cash used in operating activities INVESTING ACTIVITIES Proceeds from disposal of an associate Purchase of property, plant and equipment Payments for construction in progress Interest received Net cash (used in)/generated from investing activities FINANCING ACTIVITIES Repayment of lease liabilities Increase in bank borrowings Interest paid Exercise of share options Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year	Unadjusted amount of the Group RMB’000 RMB’000 (unaudited) (Note a) (Note b) 86,710 (7,757) 78,953 — 5,097,276 (2,551) (25,212) 1,626 (26,137) (202) 10,000 (30,114) 62 (20,254) 32,562 98,964 1,072 132,598	Pro forma adjusted amount of the Remaining Group RMB’000 (unaudited) 86,710 (7,757) 78,953 5,097,276 (2,551) (25,212) 1,626 5,071,139 (202) 10,000 (30,114) 62 (20,254) 5,129,838 98,964 1,072 5,229,874

– III-4 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

(a) The amounts are extracted from the unaudited consolidated balance sheet of the Group as at 30 June 2020 as published in the Interim Report 2020 of the Group on 17 September 2020; the audited consolidated income statement, the audited consolidated statement of comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2019 as published in the Annual Report 2019 of the Group on 28 April 2020.
(b) The following pro forma adjustments have been made to the unaudited pro forma consolidated statement of comprehensive income assuming the Disposal had taken place on 1 January 2019:
(i) The adjustment reflects the exclusion of the share of profits of CBPO and loss from deemed disposal of an associate, assuming the Disposal had been taken place on 1 January 2019.
(ii) The adjustment represents the estimated net gain on the Disposal assuming the Disposal had taken place on 1 January 2019. The estimated gain is calculated as follows:

Total consideration
— From the disposal of 5,321,000 shares of CBPO (Note (i))
— From the disposal of 1,000,000 shares of CBPO (Note (ii))
Less: carrying amount of interest in an associate, ie. Interest in CBPO,
as at 1 January 2019
Add: Release of exchange fluctuation reserve upon the Disposal
Gain on the Disposal before taxation
Estimated income tax effect on the Disposal (Note (iii))
Gain on the Disposal after taxation

RMB’000
4,290,873
806,403
(3,568,906)
64,910
1,593,280
—
1,593,280

Notes:

(i) The estimated consideration is amounted to of USD638,520,000 (equivalent to RMB4,290,873,000) being the estimated consideration of the Disposal to be received upon the completion of the Disposal, based on 5,321,000 shares of CBPO at a selling price in cash equal to US$120 per share.
(ii) On 8 May 2020, in accordance with a share purchase agreement (the ‘‘Share Purchase Agreement’’), the Company sold 1,000,000 ordinary shares to an independent third party for a cash consideration of US$101 million, representing US$101 per share disposed. As disclosed in the announcement of the Company dated October 26, 2020, the Company entered into an amendment No. 3 to the Share Purchase Agreement with each of the buyers, pursuant to which the buyers agreed to pay US$19.0 per shares as adjustments to the sale price of the 1,000,000 shares disposed of by the Company under the Share Purchase Agreement. The management prepared the unaudited pro forma consolidated statement of comprehensive income for the year ended 31 December 2019 as if this disposal of 1,000,000 shares had taken place on 1 January 2019 at a consideration of US$120 per share (equivalent to RMB806,403,000).
(iii) Pursuant to the Circular 698 and Bulletin [2015] No.7 issued by China’s State Administration Taxation, a non-resident enterprise transferring shares in an offshore intermediary enterprise that directly or indirectly holds an equity interest in a PRC enterprise are subject to PRC tax on the gains. However, Article 5 of Bulletin [2015] No.7 specified that if the non-resident enterprise derive income from

– III-5 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

transfer of shares in an offshore listed enterprise, it is not subject to the application of Circular 698. Since CBPO is listed in NASDAQ, the Company is not subject to the application of Circular 698 and Bulletin [2015] No.7 and no provision for taxation is required for the Disposal and the disposal of 1,000,000 shares mentioned in Note (ii).

(c) The following pro forma adjustments are made to the unaudited pro forma consolidated statement of cash flows assuming the Disposal had taken place on 1 January 2019. It represents the consideration received or to be received calculated as below:

Consideration received or to be received — From the disposal of 5,321,000 shares of CBPO (Note (b)(ii)(i)) — From the disposal of 1,000,000 shares of CBPO (Note (b)(ii)(ii))	RMB’000 4,290,873 806,403
	5,097,276

(d) The pro forma adjustments have been made to the unaudited pro forma consolidated balance sheet assuming the Disposal had taken place on 30 June 2020. It represents the exclusion of the interest in an associate, release of exchange reserves upon the Disposal and recognition of the estimated cash consideration of the Disposal.

The adjustment represents the estimated net gain on the Disposal assuming the Disposal had taken place on 30 June 2020. The estimated gain is calculated as follows:

Total consideration
— From the disposal of 5,321,000 shares of CBPO (Note (i))
— From the disposal of 1,000,000 shares of CBPO (Note (ii))
Less: carrying amount of interest in an associate, ie. Interest in CBPO, as at 30 June 2020
Add: Release of exchange fluctuation reserve upon the Disposal
Gain on the Disposal before taxation
Estimated income tax effect on the Disposal (Note (iii))
Gain on the Disposal after taxation

RMB’000
4,520,402
134,510
(3,199,388)
139,096

1,594,620
—

1,594,620

Notes:

(i) The estimated consideration is amounted to of USD638,520,000 (equivalent to RMB4,520,402,000) being the estimated consideration of the Disposal to be received upon the completion of the Disposal, based on 5,321,000 shares of CBPO at a selling price in cash equal to US$120 per share.
(ii) On 8 May 2020, in accordance with a share purchase agreement (the ‘‘Share Purchase Agreement’’), the Company sold 1,000,000 ordinary shares to an independent third party for a cash consideration of US$101 million, representing US$101 per share disposed. As disclosed in the announcement of the Company dated October 26, 2020, the Company entered into an amendment No. 3 to the Share Purchase Agreement with each of the buyers, pursuant to which the buyers agreed to pay US$19.0 per shares as adjustments to the sale price of the 1,000,000 shares disposed of by the Company under the Share Purchase Agreement. As such, the Group will receive an additional cash consideration of US$19,000,000 upon the completion of the proposed transaction (equivalent to RMB139,096,000).

– III-6 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(iii) Pursuant to the Circular 698 and Bulletin [2015] No.7 issued by China’s State Administration Taxation, a non-resident enterprise transferring shares in an offshore intermediary enterprise that directly or indirectly holds an equity interest in a PRC enterprise are subject to PRC tax on the gains. However, Article 5 of Bulletin [2015] No.7 specified that if the non-resident enterprise derive income from transfer of shares in an offshore listed enterprise, it is not subject to the application of Circular 698. Since CBPO is listed in NASDAQ, the Company is not subject to the application of Circular 698 and Bulletin [2015] No.7 and no provision for taxation is required for the Disposal and the disposal of 1,000,000 shares mentioned in Note (ii).

The corresponding adjustment to equity is represented by:

Gain on the Disposal after taxation Release of exchange fluctuation reserve upon the Disposal to profit or loss	RMB$’000 1,594,620 (139,096) 1,455,524

(e) Apart from above, no adjustments have been made to the unaudited pro forma consolidated balance sheet and the unaudited pro form consolidated income statement, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows to reflect any trading results or other transactions of the Group entered into subsequent to 30 June 2020 or 31 December 2019, respectively.

– III-7 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

TO THE BOARD OF DIRECTORS OF PW MEDTECH GROUP LIMITED

(incorporated in Cayman Islands with limited liability)

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of PW Medtech Group Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) by the directors of the Company (the ‘‘Directors’’) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at 30 June 2020, the unaudited pro formal consolidated statement of comprehensive income for the year ended 31 December 2019, the unaudited pro forma consolidated statement of cash flows for the year ended 31 December 2019, and related notes as set out on pages III-1 to III-7 of the circular dated 16 November 2020 (the ‘‘Circular’’) issued by the Company in connection with the proposed disposal (the ‘‘Disposal’’) of 5,321,000 shares of China Biologic Products Holdings, Inc. (‘‘CBPO’’). The applicable criteria on the basis of which the directors have compiled the unaudited pro forma financial information are described on page III-1 of Appendix III to the Circular.

The unaudited pro forma financial information has been compiled by the directors to illustrate the impact of the Disposal on the Group’s financial position as at 30 June 2020 and the Group’s financial performance and cash flows for the year ended 31 December 2019 as if the transaction had taken place at 30 June 2020 and 1 January 2019, respectively. As part of this process, the Unaudited Pro Forma Financial Information is prepared based on (i) the Group’s financial position, financial performance and cash flows has been extracted by the directors from the Group’s financial statements for the period ended 30 June 2020 and for the year ended 31 December 2019; (ii) CBPO’s unaudited adjusted financial information under the Company’s policies as at 30 June 2020 or for the year ended 31 December 2019 and as set out in appendix IV to the Circular.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’)’’.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the ‘‘Code of Ethics for Professional Accountants’’ issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

– III-8 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Our firm applies Hong Kong Standard on Quality Control 1 ‘‘Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements’’ issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’, issued by the HKICPA. This standard requires that the reporting accountant comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of the unaudited pro forma financial information included in the circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 June 2020 or 1 January 2019 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

. The related unaudited pro forma adjustments give appropriate effect to those criteria; and

– III-9 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

. The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

BDO Limited Certified Public Accountants Ng Wai Man Practicing Certificate Number P05309

Hong Kong, November 16, 2020

– III-10 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Interests of Directors and Chief Executive in Securities

As of the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein; or (c) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code, were as follows:

(A) Long position in the Shares

			Approximate
			percentage of
		Number of	the Company’s
		Shares	issued share
Name of Director	Capacity	interested	capital+
Ms. Yue’e ZHANG	Beneficial owner	50,000	0.003%
Mr. JIANG Liwei	Beneficial owner	2,638,714	0.17%
Mr. LIN Junshan	Beneficial owner	1,673,427	0.11%
Mr. CHEN Geng	Beneficial owner	636,943	0.04%

– IV-1 –

GENERAL INFORMATION

APPENDIX IV

(B) Long position in underlying Shares — physically settled unlisted equity derivatives

			Approximate
		Number of	percentage of
		underlying	underlying
		Shares in	Shares over
		respect of the	the Company’s
		share options	issued share
Name of Director	Capacity	granted	capital+
Mr. WANG Xiaogang	Beneficial owner	118,471*	0.008%

The exercise price per Share of the share options granted is RMB0.626.

The percentage represents the number of Shares/underlying Shares interested divided by the number of issued Shares as of the Latest Practicable Date.

Save as disclosed above, none of the Directors or the chief executive of the Company has any interests and/or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

3. DIRECTORS’ SERVICE CONTRACTS

As of the Latest Practicable Date, there was no existing or proposed service contract, excluding contract expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation) between any of the Directors of the Company and any member of the Group.

4. LITIGATION

As of the Latest Practicable Date, none of the members of the Group were engaged in any litigation or arbitration or claim of material importance affecting its business operation, and the Directors were not aware of any litigation or arbitration or claim of material importance affecting its business operation which was pending or threatened by or against any member of the Group.

– IV-2 –

GENERAL INFORMATION

APPENDIX IV

5. MATERIAL CONTRACTS

The following material contracts have been entered into by the Group (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the Latest Practicable Date:

(a) the Share Purchase Agreements;
(b) the 2019 Share Purchase Agreement;
(c) the Consortium Agreement;
(d) the amendment no. 1 to the Consortium Agreement dated January 23, 2020 entered into between the Initial Consortium Members and two affiliates of Beachhead Holdings Limited (namely, Double Double and Point Forward), to reflect, among others, certain changes in the Rollover Securities held by the members of the Consortium and their respective affiliates as a result of certain share transfer transactions among certain CBPO shareholders other than the Company;
(e) the amendment no. 1 to the 2019 Share Purchase Agreement dated March 17, 2020 entered into between the Company and Beachhead Holdings Limited to extend the long stop date in relation to the disposal of CBPO Shares by the Company pursuant to the 2019 Share Purchase Agreement;
(f) the amendment no. 2 to the 2019 Share Purchase Agreement dated May 5, 2020 entered into between the Company and Beachhead Holdings Limited to waive the condition precedent of the 2019 Share Purchase Agreement in relation to the entry into of the Merger Agreement; and
(g) the amendment no. 3 to the 2019 Share Purchase Agreement dated October 26, 2020 entered into by the Company with each of Double Double and Point Forward to, among others, adjust the sale price of the CBPO Shares disposed of by the Company to Double Double and Point Forward pursuant to the 2019 Share Purchase Agreement.

6. COMPETING INTERESTS OF DIRECTORS

As of the Latest Practicable Date, none of the Directors or, so far as is known to them, any of their respective associates (as defined in the Listing Rules) was interested in any business (apart from the Group’s businesses) which competes or is likely to compete, either directly, or indirectly with the Group’s businesses (as would be required to be disclosed under Rule 8.10 of the Listing Rules as if each of them were a controlling shareholder).

– IV-3 –

GENERAL INFORMATION

APPENDIX IV

INTEREST OF DIRECTORS IN ASSETS ACQUIRED OR DISPOSED OF BY OR LEASED TO ANY MEMBER OF THE GROUP

As of the Latest Practicable Date, none of the Directors had any interest in any asset which has been, since December 31, 2019 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or is proposed to be acquired or disposed of by or leased to any member of the Group.

CONTRACTS OR ARRANGEMENTS WHICH DIRECTORS ARE MATERIALLY INTERESTED AND ARE SIGNIFICANT IN RELATION TO THE BUSINESS OF THE GROUP

As of the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date and which is significant in relation to the businesses of the Group.

9. EXPERT AND CONSENT

The following is the qualification of the expert who has been named in this circular or has given opinions or letters contained in this circular:

Name Qualification

BDO Limited Certified Public Accountants

As of the date of this circular, the above expert had given and had not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or report and/or references to its name, in the form and context in which they respectively appear.

As of the date of this circular, the above expert had no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group and had no direct or indirect interest in any assets which have been, since December 31, 2019, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

10. MISCELLANEOUS

(a) The secretary of the Company is Mr. WONG Tin Yu, a Chartered Secretary and an Associate of both the Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute (formerly The Institute of Chartered Secretaries and Administrators) in the United Kingdom.

– IV-4 –

GENERAL INFORMATION

APPENDIX IV

(b) The registered office of the Company is situated at the Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman KY1-1208, Cayman Islands. The headquarters and principal place of business of the Company and its principal subsidiaries in the PRC is situated at Building 1, No. 23, Panlong West Road, Pinggu District, Beijing, the PRC 101204. The principal place of business in Hong Kong of the Company is situated at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The Company’s branch share registrar and transfer office in Hong Kong is Tricor Investor Services Limited, located at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) In the event of any inconsistency, the English text of this circular shall prevail over its Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s principal place of business in Hong Kong at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong from the date of this circular up to 14 days thereafter:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the three years ended December 31, 2019 and the interim report of the Company for the six months ended June 30, 2020;
(c) the audited financial information of the CBPO Group for each of the financial years ended December 31, 2017, 2018 and 2019 and the unaudited financial information of the CBPO Group for the three and six months ended June 30, 2020 prepared under U.S. GAAP, the text of which is set out in Appendix II to this circular;
(d) a line-by-line reconciliation of CBPO’s financial information for the differences between CBPO’s accounting policies under U.S. GAAP and the Company’s accounting policies under HKFRS, the text of which is set out in Appendix II to this circular;
(e) the report in respect of the unaudited pro forma financial information of the Remaining Group prepared by BDO Limited, the text of which is set out in Appendix III to this circular;
(f) the material contracts referred to in the section headed ‘‘5. Material Contracts’’ in this appendix;
(g) the written letter of consent referred to in the section headed ‘‘9. Expert and Consent’’ in this appendix; and
(h) this circular.

– IV-5 –

NOTICE OF THE EGM

PW MEDTECH GROUP LIMITED

普華和順集團公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1358)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘EGM’’) of PW Medtech Group Limited (普華和順集團公司) (the ‘‘Company’’) will be held at 10:00 a.m. on Friday, December 4, 2020 at Building 1, No. 23 Panlong West Road, Pinggu District, Beijing, the PRC for the purposes of considering and, if thought fit, passing the following resolutions as ordinary resolutions of the Company. Unless otherwise defined, capitalized terms used herein shall have the same meanings as those defined in the circular of the Company dated November 16, 2020.

ORDINARY RESOLUTIONS

‘‘THAT
(a) the Transaction Documents and all the transactions contemplated thereunder, be and are hereby confirmed, approved and ratified; and
(b) the executive director of the Company be and is hereby authorized on behalf of the Company to do all such acts and sign all such documents and to enter into all such transactions and arrangements as may be necessary or expedient in order to ensure smooth implementation of and to give effect to the Transaction Documents and the transactions contemplated thereunder.’’
To declare the proposed Special Dividend of approximately US$0.2034 per Share (equivalent to approximately HK$1.5764 per Share for illustration purpose) (subject to the closing of the Disposals), and the Board be and is hereby authorised to effect the payment of the proposed Special Dividend in HK$ at the relevant exchange rate on December 4, 2020 and to do all acts and things and to take such steps as they may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the payment of the proposed Special Dividend on or around January 20, 2021.

Yours faithfully, By order of the Board

PW Medtech Group Limited 普華和順集團公司

Yue’e Zhang

Chairman & Chief Executive Officer

Hong Kong, November 16, 2020

– EGM-1 –

NOTICE OF THE EGM

Notes:

Any member of the Company entitled to attend and vote at the EGM is entitled to appoint a proxy to attend and vote instead of him/her/it. A proxy need not be a member of the Company. A member who is the holder of two or more shares of the Company may appoint more than one proxy to represent him/her/it to attend and vote on his/her/ its behalf. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
In order to be valid, a form of proxy together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, must be deposited at the Company’s branch share registrar in Hong Kong (i.e. Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong) as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof (i.e. not later than 10:00 a.m. (Hong Kong time) on Wednesday, December 2, 2020). Delivery of the form of proxy shall not preclude a member of the Company from attending and voting in person at the EGM and, in such event, the form of proxy shall be deemed to be revoked.
The register of members of the Company will be closed during the following periods and during these periods, no transfer of the shares of the Company will be registered:
(i) To attend and vote at the EGM

To ascertain Shareholders’ eligibility to attend and vote at the EGM, the register of members of the Company will be closed from Tuesday, December 1, 2020 to Friday, December 4, 2020 (both days inclusive), during which period no share transfer will be effected. In order to qualify for attending and voting at the EGM, unregistered holders of shares of the Company should ensure that all completed transfer forms accompanied by the relevant share certificates are lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited (at its address shown in Note 2 above) for registration no later than 4:30 p.m. (Hong Kong time), on Monday, November 30, 2020.

(ii) To qualify for the proposed Special Dividend

To ascertain Shareholders’ entitlement to the proposed Special Dividend, the register of members of the Company will be closed from Tuesday, December 22, 2020 to Thursday, December 24, 2020 (both days inclusive), during which period no share transfer will be effected. In order to qualify for the proposed Special Dividend, unregistered holders of shares of the Company should ensure that all completed transfer forms accompanied by the relevant share certificates are lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited (at its address shown in Note 2 above) for registration no later than 4:30 p.m. (Hong Kong time), on Monday, December 21, 2020.

As of the date of this notice, the Board comprises one executive Director, namely, Ms. Yue’e Zhang; two nonexecutive Directors, namely, Mr. Jiang Liwei and Mr. Lin Junshan; and three independent non-executive Directors, namely, Mr. Wang Xiaogang, Mr. Zhang Xingdong and Mr. Chen Geng.

For the purpose of this notice, unless otherwise stated, the conversion of US$ into HK$ is calculated by using an exchange rate of US$1.00 equal to HK$7.7504. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amounts were, may have been or will be exchanged at such rate or any other rates or at all.

– EGM-2 –

AI assistant

PW Medtech Group Limited — Proxy Solicitation & Information Statement 2020

49875_rns_2020-11-13_d654373d-9b77-4d2e-9f9f-b97892923b26.pdf

PW MEDTECH GROUP LIMITED

普 華 和 順 集 團 公 司

(1) VERY SUBSTANTIAL DISPOSAL DISPOSAL OF CBPO SHARES AND

PROPOSED PRIVATIZATION OF CBPO; (2) PROPOSED SPECIAL DIVIDEND; AND (3) NOTICE OF THE EGM

DEFINITIONS

DEFINITIONS

PW MEDTECH GROUP LIMITED 普 華 和 順 集 團 公 司

To the Shareholders

(1) VERY SUBSTANTIAL DISPOSAL DISPOSAL OF CBPO SHARES AND PROPOSED PRIVATIZATION OF CBPO;

(2) PROPOSED SPECIAL DIVIDEND; AND (3) NOTICE OF THE EGM

I. INTRODUCTION

II. SHARE PURCHASE AGREEMENTS

Principal Terms of the Share Purchase Agreements

Date

Parties

Management SPA I

CITIC SPA

Management SPA II

Subject Matter and Consideration

Management SPA I

CITIC SPA

Management SPA II

LETTER FROM THE BOARD

Closing

Management Disposal I and CITIC Disposal

Management Disposal II

Conditions Precedent

Termination

III. ANCILLARY DOCUMENTS

Letter Agreements

Equity Commitment Letters

IV. IMPLICATIONS OF THE EXCLUSIVITY PERIOD UNDER THE CONSORTIUM AGREEMENT

V. PRIVATIZATION

VI. INFORMATION ON CBPO

Financial information on CBPO

VII. INFORMATION ON BIOMEDICAL TREASURE, CITIC CAPITAL AND BIOMEDICAL FUTURE

Biomedical Treasure

CITIC Capital

Biomedical Future

VIII. INFORMATION ON THE GROUP

IX. FINANCIAL EFFECTS OF THE DISPOSALS ON THE GROUP

X. INTENDED USE OF PROCEEDS

XI. REASONS FOR AND BENEFITS OF THE TRANSACTIONS

XII. LISTING RULES IMPLICATIONS

XIII. WAIVER FROM STRICT COMPLIANCE WITH RULE 14.68(2)(a)(i) OF THE LISTING RULES

XIV. PROPOSED SPECIAL DIVIDEND

XV. EGM AND PROXY ARRANGEMENT

LETTER FROM THE BOARD

XVI. CLOSURE OF REGISTER OF MEMBERS

XVII. RECOMMENDATION

XVIII. GENERAL INFORMATION

1. SUMMARY OF THE FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS STATEMENT

Bank borrowing

Lease obligation

Contingent liabilities

3. MATERIAL ADVERSE CHANGE

4. WORKING CAPITAL STATEMENT

5. FINANCIAL AND TRADING PROSPECT OF THE GROUP

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS AND SIGNIFICANT CONCENTRATIONS AND RISKS

Cash Concentration

Sales Concentration

Purchase Concentration

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

Use of Estimates

Foreign Currency Translation

Revenue Recognition

Fair Value Measurements

Cash and Cash Equivalents

Accounts Receivable and Allowance for Doubtful Accounts

PW Medtech Group Limited Proxy Solicitation & Information Statement 2020

普華和順集團公司

PW MEDTECH GROUP LIMITED 普華和順集團公司