SPT Energy Group Inc. - M&A Activity 2011

IMPORTANT

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

If you have sold or transferred all your shares in Winteam Pharmaceutical Group Limited , you should at once hand this Composite Document and the accompanying Form of Acceptance to the purchaser(s) or transferee(s) or to the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Composite Document, 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 Composite Document.

This Composite Document should be read in conjunction with the accompanying Form of Acceptance, the contents of which form part of the terms and conditions of the Offer.

Profit United Investments Limited

(Incorporated in the British Virgin Islands (Incorporated in Hong Kong with limited liability) with limited liability) (Stock Code: 570)

COMPOSITE DOCUMENT

UNCONDITIONAL MANDATORY CASH OFFER BY

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Shenyin Wanguo Securities (H.K.) Limited

FOR AND ON BEHALF OF PROFIT UNITED INVESTMENTS LIMITED FOR ALL THE ISSUED SHARES IN WINTEAM PHARMACEUTICAL GROUP LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PROFIT UNITED INVESTMENTS LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

Financial Adviser to Profit United Investments Limited

Financial Adviser to Winteam Pharmaceutical Group Limited

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Shenyin Wanguo Capital (H.K.) Limited

Optima Capital Limited

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

Haitong International Capital Limited

The procedures for acceptance and settlement of the Offer and other related information are set out in Appendix I to this Composite Document and in the accompanying Form of Acceptance. Acceptances of the Offer should be received by the share registrars of Winteam Pharmaceutical Group Limited, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, by no later than 4:00 p.m. on Friday, 8 July 2011 or such later time(s) and/or date(s) as Profit United Investments Limited as the Offeror may determine and announce in accordance with the requirements of the Takeovers Code.

17 June 2011

	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from Shenyin Wanguo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix I – Further procedures for acceptance of the Offer . . . . . . . . . . . . .	I-1
Appendix II – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III – Property valuation on the Group . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV – General information (A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V – General information (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1

Accompanying document:

– Form of Acceptance

– i –

EXPECTED TIMETABLE

The timetable set out below is indicative only and may be subject to changes. Further announcement(s) will be made as and when appropriate. Unless otherwise expressly stated, all time and date references contained in this Composite Document and the accompanying Form of Acceptance refer to Hong Kong times and dates.

2011

Commencement date of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 17 June Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 8 July

Latest time and date for acceptance of the Offer (Note 1) . . . . 4:00 p.m. on Friday, 8 July

Announcement of the results of the Offer as at the Closing Date to be posted on the Stock Exchange’s website (Note 1) . . . . . . . . . . . . . . . . . by 7:00 p.m. on Friday, 8 July

Latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances received on or before 4:00 p.m. on the Closing Date (Note 2) . . . . . . . . . . . . . . . . . Monday, 18 July

Notes:

In accordance with the Takeovers Code, the Offer must initially be open for acceptance for at least 21 days following the date on which this Composite Document is posted. The latest time and date for acceptance of the Offer is 4:00 p.m. on Friday, 8 July 2011.
Remittances in respect of the consideration payable for the Offer Shares tendered under the Offer will be despatched to the accepting holders of the Offer Shares by ordinary post at their own risk as soon as possible but in any event within 10 days of the date of receipt of a duly completed acceptance in accordance with the Takeovers Code.

– ii –

DEFINITIONS

In this Composite Document, the following expressions have the following meanings set out below unless the context otherwise requires:

“acting in concert” has the meaning ascribed thereto in the Takeovers Code
“Board” the board of Directors
“BVI” British Virgin Islands
“CCASS”
the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited
“Closing Date”
8 July 2011, being the closing date of the Offer which is 21 days following the date on which this Composite Document is posted or any subsequent closing date(s) as may be determined and announced by the Offeror in accordance with the requirements of the Takeovers Code
“Company”
Winteam Pharmaceutical Group Limited （盈天醫藥集團有限公司）, a company incorporated in Hong Kong with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange
“Completion”
completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of the S&P Agreement
“Composite Document”
this composite offer and response document issued jointly by the Offeror and the Company in relation to the Offer
“Consideration”

the total consideration of HK$680,952,246.75 (inclusive of the First Instalment) payable by the Purchasers to the Vendor for the Sale Shares

“Directors”
directors of the Company
“Encumbrances”

any mortgage, charge, pledge, lien, (otherwise than arising by statute or operation of law), equities, hypothecation or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase or sale-and-leaseback arrangement whatsoever over or in any property, assets or rights of whatsoever nature and includes any agreement for any of the same

– 1 –

DEFINITIONS

“Executive”
the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“Extra Benefit” Extra Benefit Corp., a company incorporated in the BVI with limited liability and wholly and beneficially owned by Mr. Xu
“Facility” a standby loan facility of up to HK$466,000,000, which is secured by the personal guarantees of Mr. Yang and Mr. Xu including the charges on an aggregate of 578,076,922 Shares legally and beneficially owned by themselves and the charge on any Offer Shares to be acquired by the Offeror from time to time under the Offer, granted by Shenyin Wanguo Securities (H.K.) Limited to the Offeror
“First Instalment” HK$204,285,674.03, representing 30% of the Consideration
“Form of Acceptance” the form of acceptance and transfer of the Offer Share(s) in respect of the Offer accompanying this Composite Document
“Foshan Public Utilities” 佛山市公用事業控股有限公司 (Foshan Public Utilities Holding Co., Ltd.), a company incorporated in the PRC with limited liability whose ultimate beneficial owner is 佛山市人民政府 (Foshan Municipal People’s Government), and which holds the entire issued share capital of the Vendor through its wholly-owned subsidiary, Foshan Overseas Investment Limited（佛山海外投資有限公司）
“Group” the Company and its subsidiaries
“Hong Kong”
Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
the independent committee of the Board comprising all the independent non-executive Directors, namely Messrs. LO Wing Yat, PANG Fu Keung, WANG Bo and ZHANG Jianhui, established to give a recommendation to the Independent Shareholders regarding the terms of the Offer

– 2 –

DEFINITIONS

“Independent Financial Adviser” Haitong International Capital Limited, a corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed by the Company for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the Offer
“Independent Shareholders” Shareholders other than the Offeror and parties acting in concert with it
“Joint Announcement”
the announcement dated 27 May 2011 jointly issued by the Offeror and the Company in relation to the acquisition of the Sale Shares by the Purchasers and the Offer
“Last Trading Day” 19 May 2011, being the last trading day of the Shares immediately prior to the suspension of trading in the Shares on the Stock Exchange at 9:00 a.m. on 20 May 2011
“Latest Practicable Date” 14 June 2011, being the latest practicable date prior to the printing of this Composite Document for ascertaining certain information for inclusion in this Composite Document
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Mr. Du”
杜日成先生 (Mr. DU Richeng), the non-executive Director and the Chairman of the Company
“Mr. Xu”
徐鉄峰先生 (Mr. XU Tiefeng), an executive Director, the Executive Deputy Chairman of the Company and a substantial shareholder of the Company (as defined in the Takeovers Code and the Listing Rules)
“Mr. Yang”
楊斌先生 (Mr. YANG Bin), an executive Director, the Managing Director of the Company and a substantial shareholder of the Company (as defined in the Takeovers Code and the Listing Rules)

“Offer”

the unconditional mandatory cash offer being made by Shenyin Wanguo Securities (H.K.) Limited for and on behalf of the Offeror for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it) pursuant to Rule 26.1(d) of the Takeovers Code

– 3 –

DEFINITIONS

“Offer Period” has the meaning ascribed thereto in the Takeovers Code, being the period commencing on 21 December 2010 i.e. the date of the announcement of the Company relating to a possible general offer and ending on the Closing Date
“Offer Price” the price at which the Offer is made, being HK$1.125 per Offer Share
“Offer Share(s)” issued Share(s) other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it
“Offeror” Profit United Investments Limited, a company incorporated in the BVI with limited liability on 19 April 2011 and legally and beneficially owned as to 50% by Mr. Yang and as to 50% by Mr. Xu
“Overseas Shareholder(s)” Independent Shareholder(s) whose address(es) as shown on the register of members of the Company is/are outside Hong Kong
“PRC” the People’s Republic of China which, for the purpose of this Composite Document, shall exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“Profit Channel” Profit Channel Development Limited, a company incorporated in the BVI with limited liability and wholly and beneficially owned by Mr. Yang
“Purchasers” together (i) Profit Channel; and (ii) Extra Benefit “Registrar” Computershare Hong Kong Investor Services Limited, being the share registrars of the Company at Shops 1712-1716, 17/F Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong
“Relevant Period” the period commencing on the date falling six months preceding the commencement of the Offer Period on 21 December 2010 up to and including the Latest Practicable Date
“S&P Agreement” the sale and purchase agreement dated 19 May 2011 entered into between the Purchasers and the Vendor in relation to the sale and purchase of the Sale Shares

– 4 –

DEFINITIONS

“Sale Shares” the legal and beneficial interests of 605,290,886 Shares representing the entire shareholding interests in the Company owned by the Vendor as at the Latest Practicable Date
“SFC” Securities and Futures Commission of Hong Kong “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” ordinary share(s) of HK$0.10 each in the issued share capital of the Company
“Shareholders” holders of the Shares
“Shenyin Wanguo” Shenyin Wanguo Capital (H.K.) Limited, a corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO and the financial adviser to the Offeror in respect of the Offer
“Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers
“trading day” a day on which the Stock Exchange is open for business of dealing in securities
“Undertaking” the irrevocable undertaking given by the Vendor on 19 May 2011 in favour of the Purchasers as one of the terms of the S&P Agreement pursuant to which the voting rights attached to 181,587,266 Shares are vested upon the Purchasers during the Undertaking Period
“Undertaking Period” the period from the date of the Undertaking i.e. 19 May 2011 until the earlier of the date on which: (i) Completion takes place; and (ii) the S&P Agreement is terminated
“Vendor” Hensil Investments Group Limited, a company incorporated in the BVI with limited liability and directly, legally and beneficially interested in the Sale Shares, representing approximately 33.94% of the total issued Shares as at the Latest Practicable Date

– 5 –

DEFINITIONS

“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollars, the lawful currency of the United
	States of America
“%”	per cent.

Certain English translations of Chinese names or words or Chinese translations of English names or words in this Composite Document are included for information and identification purpose only and should not be regarded as the official English translation of such Chinese names or words or Chinese translation of such English names or words, respectively.

– 6 –

LETTER FROM SHENYIN WANGUO

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Shenyin Wanguo Capital (H.K.) Limited 28th Floor, Citibank Tower Citibank Plaza 3 Garden Road Hong Kong

17 June 2011

To the Independent Shareholders of Winteam Pharmaceutical Group Limited

Dear Sir or Madam,

UNCONDITIONAL MANDATORY CASH OFFER BY SHENYIN WANGUO SECURITIES (H.K.) LIMITED FOR AND ON BEHALF OF PROFIT UNITED INVESTMENTS LIMITED FOR ALL THE ISSUED SHARES IN WINTEAM PHARMACEUTICAL GROUP LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PROFIT UNITED INVESTMENTS LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

Reference is made to the Joint Announcement. We, Shenyin Wanguo Capital (H.K.) Limited, act as the financial adviser to the Offeror in respect of the Offer. Unless the context otherwise requires, terms used in this letter shall have the same meanings as defined in the Composite Document.

The purpose of this letter is to provide you with, among other things, the details of the Offer, information on the Offeror and the intention of the Offeror and the Purchasers in relation to the Group.

In addition, you are strongly advised to consider carefully the information contained in the “Letters from the Board, the Independent Board Committee and the Independent Financial Adviser” included in the Composite Document before reaching the decision as to whether or not to accept the Offer.

– 7 –

LETTER FROM SHENYIN WANGUO

THE S&P AGREEMENT

Pursuant to the S&P Agreement, the Vendor has agreed to sell 605,290,886 Shares and each of Profit Channel and Extra Benefit has agreed to acquire 302,645,443 Shares. The total consideration for the Sale Shares of HK$680,952,246.75 (or HK$1.125 per Sale Share) has been and will be settled in cash as follows:

(i) the First Instalment (representing 30% of the Consideration) was paid by the Purchasers to the Vendor upon signing of the S&P Agreement; and
(ii) the remaining 70% of the Consideration will be payable by the Purchasers at Completion.

The S&P Agreement is unconditional. Completion shall take place on or before 18 October 2011, being the date falling on the expiry of the five-month period after the date of the S&P Agreement, when the remaining 70% of the Consideration is settled by the Purchasers in cash.

An irrevocable undertaking has been given by the Vendor in favour of the Purchasers as one of the terms of the S&P Agreement pursuant to which the voting rights attached to 181,587,266 Shares, representing approximately 30% of the Sale Shares, are vested upon the Purchasers during the Undertaking Period.

UNCONDITIONAL MANDATORY CASH OFFER

Upon the execution of the Undertaking on 19 May 2011, the total voting rights of the Company in percentage vested upon the Offeror, the Purchasers and parties acting in concert with any of them has increased by approximately 10.18% from approximately 40.32% to 50.50%. Pursuant to Rule 26.1(d) of the Takeovers Code, the Offeror and parties acting in concert with it are mandatorily required to make the Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it).

As at the Latest Practicable Date, there were 1,783,410,807 Shares in issue and the Company had no outstanding convertible securities, warrants, options and derivatives in respect of the Shares.

Principal terms of the Offer

Shenyin Wanguo Securities (H.K.) Limited is now making the Offer for and on behalf of the Offeror in compliance with the Takeovers Code on the following terms:

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.125 in cash

The Offer Price of HK$1.125 per Offer Share is the same as the price per Sale Share paid or payable by the Purchasers under the S&P Agreement.

– 8 –

LETTER FROM SHENYIN WANGUO

The Offer is unconditional and is therefore not conditional upon any minimum level of acceptances being received nor subject to any other conditions.

Comparison of value

The Offer Price of HK$1.125 represents:

(i) a discount of approximately 19.06% to the closing price of HK$1.39 per Share as quoted on the Stock Exchange as at the Latest Practicable Date;
(ii) a discount of approximately 26.95% to the closing price of HK$1.54 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 26.66% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day of HK$1.534 per Share;
(iv) a discount of approximately 23.37% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day of HK$1.468 per Share;
(v) a discount of approximately 0.44% to the closing price of HK$1.13 per Share as quoted on the Stock Exchange on the last trading day prior to the commencement of the Offer Period; and
(vi) a premium of approximately 140.08% over the audited consolidated net asset value attributable to Shareholders of approximately HK$0.4686 per Share as at 31 December 2010.

Highest and lowest Share prices

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$1.54 per Share (on 13, 18 and 19 May 2011) and HK$1.04 per Share (on 30 August 2010) respectively.

Value of the Offer

On the basis of the Offer Price of HK$1.125 per Offer Share and 1,783,410,807 Shares in issue as at the Latest Practicable Date, the entire issued share capital of the Company was valued at HK$2,006,337,157.875. As at the Latest Practicable Date, the voting rights attached to 900,689,829 Shares, representing approximately 50.50% of the total voting rights attached to all the issued Shares, were owned or controlled or directed by the Offeror and parties acting in concert with it. Immediately after Completion, the Offeror and parties acting in concert with it will have owned 1,324,393,449 Shares, representing approximately 74.26% of the total issued Shares. Hence, 459,017,358 Offer Shares are subject to the Offer and are valued at HK$516,394,527.75 on the basis of the Offer Price.

– 9 –

LETTER FROM SHENYIN WANGUO

Financial resources available for the Offer

The financial resources of the Offeror to fund the Offer amounting to an aggregate of HK$516,394,527.75 are financed as to HK$466,000,000 by the Facility granted by Shenyin Wanguo Securities (H.K.) Limited and by the Offeror’s own cash for the remaining balance of HK$50,394,527.75.

In connection with the provision of the Facility, Shenyin Wanguo Securities (H.K.) Limited entered into a participation agreement on 26 May 2011 with Sun Hung Kai Investment Services Limited whereby Shenyin Wanguo Securities (H.K.) Limited can unconditionally draw down from Sun Hung Kai Investment Services Limited an amount of up to HK$200,000,000 in cash for the sole purpose of satisfying the Offeror’s financial obligation under the Offer. Sun Hung Kai Investment Services Limited is principally engaged in investment holding, share broking and margin financing and is a corporation licensed to carry on type 1 (dealing in securities) and type 4 (advising on securities) regulated activities under the SFO. Sun Hung Kai Investment Services Limited is presumed to be acting in concert with the Offeror under the Takeovers Code.

We, Shenyin Wanguo Capital (H.K.) Limited, are satisfied that sufficient financial resources are available to the Offeror to satisfy full acceptance of the Offer.

Effect of accepting the Offer

By accepting the Offer, Shareholders will sell their Offer Shares to the Offeror free from all Encumbrances and with all rights attached to them including but not limited to the rights to receive all dividends and distribution declared, paid or made, if any, on or after the date of the Joint Announcement. From the date of the Joint Announcement up to the Latest Practicable Date, there was no dividend or distribution declared, paid or made by the Company.

Stamp duty

In Hong Kong, seller’s ad valorem stamp duty arising in connection with acceptances of the Offer will be payable by relevant Shareholders at a rate of 0.1% of: (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, and will be deducted from the cash amount payable by the Offeror on behalf of the relevant Shareholders accepting the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the relevant Shareholders accepting the Offer and will pay the buyer’s ad valorem stamp duty in connection with the acceptances of the Offer and the transfers of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

Payment

Payment in cash in respect of acceptances of the Offer will be made as soon as possible but in any event within 10 days of the date on which the relevant documents of title are received by the Offeror to render each such acceptance complete and valid.

– 10 –

LETTER FROM SHENYIN WANGUO

Overseas Shareholders

Shareholders who have registered addresses outside Hong Kong and wish to accept the Offer should satisfy themselves as to the full observance of the applicable laws and regulations of the relevant jurisdiction in connection therewith (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer of other taxes due by such accepting Shareholders in respect of such jurisdiction).

Acceptance of the Offer by any such person will be deemed to constitute a warranty by such person that such person is permitted under all applicable laws and regulations to receive and accept the Offer, and any revision thereof, and such acceptance shall be valid and binding in accordance with all applicable laws and regulations. The Overseas Shareholders are recommended to seek professional advice on deciding whether or not to accept the Offer.

INFORMATION ON THE OFFEROR

The Offeror is an investment holding company incorporated in the BVI with limited liability and is owned as to 50% by Mr. Yang and as to 50% by Mr. Xu. Mr. Yang and Mr. Xu are the only two directors of the Offeror. The Offeror has not conducted any business since its incorporation on 19 April 2011. As at the Latest Practicable Date, the Offeror did not own any Shares.

Mr. Yang was appointed to the Board on 6 February 2009 and has been the Managing Director of the Company since 11 February 2009. As at the Latest Practicable Date, Profit Channel was wholly and beneficially owned by Mr. Yang, which directly held 77,500,000 Shares and a 50% interest in Sureplan Limited. In turn, Sureplan Limited directly owned 564,102,563 Shares.

Mr. Xu was appointed to the Board on 10 June 2009 and has been the Executive Deputy Chairman of the Company since 30 July 2009. As at the Latest Practicable Date, Extra Benefit was wholly and beneficially owned by Mr. Xu, which directly held 77,500,000 Shares and a 25% interest in Sureplan Limited. In turn, Sureplan Limited directly owned 564,102,563 Shares.

As at the Latest Practicable Date, the voting rights attached to 900,689,829 Shares, representing approximately 50.50% of the total voting rights attached to all the issued Shares, were owned or controlled or directed by the Offeror and parties acting in concert with it. Further details regarding the shareholdings of the Offeror, the Purchasers and parties acting in concert with any of them in the Company are set out in the section headed “Shareholding Structure of the Company” in the ”Letter from the Board” and in the relevant sections in Appendices IV and V in the Composite Document.

– 11 –

LETTER FROM SHENYIN WANGUO

INTENTION OF THE OFFEROR AND THE PURCHASERS IN RELATION TO THE GROUP

It is the intention of the Offeror and the Purchasers that the Group will continue with its existing principal businesses. The Offeror and the Purchasers do not intend to introduce any major changes to the existing operations and business of the Group (including the composition of the Board). The Offeror and the Purchasers will conduct a review on the operations of the Group and subject to the result of the review, the Offeror and the Purchasers may formulate a business strategy with a view to enhancing its growth. The Offeror and the Purchasers have no intention to discontinue the employment of the employees or to dispose of or deploy the fixed assets of the Group other than those in its ordinary course of business. As at the Latest Practicable Date, the Offeror and the Purchasers had no intention or plans for any acquisition or disposal of assets and/or business of the Group.

COMPULSORY ACQUISITION

The Offeror does not intend to avail itself of any powers of compulsory acquisition of the Shares after the close of the Offer.

MAINTAINENCE OF THE LISTING STATUS OF THE COMPANY

The Stock Exchange has stated that if, at the close of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25%, of the issued Shares are held by the public, or if the Stock Exchange believes that: (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend dealings in the Shares.

The Offeror intends the Company to remain listed on the Stock Exchange. The directors of the Offeror will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Shares.

ACCEPTANCE AND SETTLEMENT

Set out in Appendix I to the Composite Document and the Form of Acceptance are the procedures for acceptance and settlement of the Offer and further terms of the Offer.

TAXATION

You are advised to consult your own professional advisers if you are in any doubt as to the tax implications of your acceptance of the Offer. It is emphasised that none of the Offeror, Shenyin Wanguo Capital (H.K.) Limited and Shenyin Wanguo Securities (H.K.) Limited, any of their respective directors and any person involved in the Offer accepts responsibility for any tax effects or liabilities of any person or persons as a result of their acceptances of the Offer.

– 12 –

LETTER FROM SHENYIN WANGUO

FURTHER INFORMATION

Your attention is drawn to the expected timetable on page ii of the Composite Document and the additional information set out in the appendices to the Composite Document and the Form of Acceptance.

Yours faithfully, for and on behalf of Shenyin Wanguo Capital (H.K.) Limited Willis Ting Felix Chan Managing Director Director

– 13 –

LETTER FROM THE BOARD

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(Incorporated in Hong Kong with limited liability) (Stock Code: 570)

Non-Executive Director: Mr. DU Richeng, Chairman

Executive Directors:

Mr. XU Tiefeng, Executive Deputy Chairman Mr. YANG Bin, Managing Director Mr. SITU Min, Chief Financial Officer Mr. LI Songquan, Deputy Managing Director

Registered Office: Rooms 2801-2805, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong.

Independent Non-Executive Directors:

Mr. LO Wing Yat Mr. PANG Fu Keung Mr. WANG Bo

Mr. ZHANG Jianhui

17 June 2011

To the Independent Shareholders

Dear Sir or Madam,

INTRODUCTION

It was announced on 27 May 2011 that on 19 May 2011, the Purchasers and the Vendor entered into the S&P Agreement pursuant to which the Vendor has agreed to sell 605,290,886 Shares and each of Profit Channel and Extra Benefit has agreed to acquire 302,645,443 Shares. The total consideration for the Sale Shares is HK$680,952,246.75, representing HK$1.125 per Sale Share. An irrevocable undertaking has been given by the

– 14 –

LETTER FROM THE BOARD

Vendor in favour of the Purchasers as one of the terms of the S&P Agreement pursuant to which the voting rights attached to 181,587,266 Shares, representing approximately 30% of the Sale Shares, are vested upon the Purchasers during the Undertaking Period.

Upon the execution of the Undertaking, the total voting rights of the Company in percentage vested upon the Offeror, the Purchasers and parties acting in concert with any of them has increased from approximately 40.32% to 50.50%. Pursuant to Rule 26.1(d) of the Takeovers Code, the Offeror and parties acting in concert with it are mandatorily required to make the Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it).

The purpose of this Composite Document is to provide you with, among other things: (i) information relating to the Offer and the Group; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Offer; and (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Offer.

THE OFFER

Principal terms of the Offer

Shenyin Wanguo Securities (H.K.) Limited is making the Offer for and on behalf of the Offeror in compliance with the Takeovers Code on the following terms:

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.125 in cash

The Offer Price of HK$1.125 per Offer Share is the same as the price per Sale Share paid or payable by the Purchasers under the S&P Agreement. The Offer is unconditional and is therefore not conditional upon any minimum level of acceptances being received nor subject to any other conditions. Save for 1,783,410,807 Shares in issue as at the Latest Practicable Date, the Company did not have any outstanding options, derivatives, warrants or securities which are convertible or exchangeable into Shares.

Effect of accepting the Offer

By accepting the Offer, Shareholders will sell their Offer Shares to the Offeror free from all Encumbrances and with all rights attached to them including but not limited to the rights to receive all dividends and distribution declared, paid or made, if any, on or after the date of the Joint Announcement. Acceptance of the Offer shall be irrevocable and once given cannot be withdrawn except in the circumstances set out in Rule 19.2 of the Takeovers Code. The Executive may require that acceptors be granted a right of withdrawal, on terms acceptable to the Executive, until the requirements under Rule 19 of the Takeovers Code can be met.

The procedures for acceptance and settlement of the Offer and further terms of the Offer are set out in Appendix I to this Composite Document.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company in terms of voting rights attached to the issued Shares immediately before the date of the S&P Agreement, as at the Latest Practicable Date and during the Undertaking Period, and immediately after Completion (assuming there will be no other changes to the shareholding structure of the Company from the Latest Practicable Date to the date of Completion and excluding any Offer Shares tendered for acceptances under the Offer):

Shareholders The Vendor The Offeror, the Purchasers and parties acting in concert with any of them (Note) Public Shareholders	Immediately before the date of the S&P Agreement Voting rights Approx. % 605,290,886 33.94% 719,102,563 40.32% 459,017,358 25.74% 1,783,410,807 100.00%	As at the Latest Practicable Date and during the Undertaking Period Voting rights Approx. % 423,703,620 23.76% 900,689,829 50.50% 459,017,358 25.74% 1,783,410,807 100.00%	Immediately after Completion Voting rights Approx. % – – 1,324,393,449 74.26% 459,017,358 25.74% 1,783,410,807 100.00%	Immediately after Completion Voting rights Approx. % – – 1,324,393,449 74.26% 459,017,358 25.74% 1,783,410,807 100.00%
				100.00%

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LETTER FROM THE BOARD

Set out below is the shareholding structure of the Company in terms of legal and beneficial interests of the issued Shares immediately before the date of the S&P Agreement, as at the Latest Practicable Date and during the Undertaking Period, and immediately after Completion (assuming there will be no other changes to the shareholding structure of the Company from the Latest Practicable Date to the date of Completion and excluding any Offer Shares tendered for acceptances under the Offer):

Shareholders The Vendor The Offeror, the Purchasers and parties acting in concert with any of them (Note) Public Shareholders	Immediately before the date of the S&P Agreement Number of Shares Approx. % 605,290,886 33.94% 719,102,563 40.32% 459,017,358 25.74% 1,783,410,807 100.00%	As at the Latest Practicable Date and during the Undertaking Period Number of Shares Approx. % 605,290,886 33.94% 719,102,563 40.32% 459,017,358 25.74% 1,783,410,807 100.00%	Immediately after Completion Number of Shares Approx. % – – 1,324,393,449 74.26% 459,017,358 25.74% 1,783,410,807 100.00%	Immediately after Completion Number of Shares Approx. % – – 1,324,393,449 74.26% 459,017,358 25.74% 1,783,410,807 100.00%
				100.00%

Note: As at the Latest Practicable Date, 719,102,563 Shares were directly owned as to 564,102,563 Shares by Sureplan Limited, as to 77,500,000 Shares by Profit Channel and as to 77,500,000 Shares by Extra Benefit.

Sureplan Limited is owned as to 25% by First Linkup Development Limited, 50% by Profit Channel and 25% by Extra Benefit, each of which is in turn wholly owned by Mr. WU Chiu Kong, Mr. Yang and Mr. Xu respectively. As at the Latest Practicable Date, the directors of Sureplan Limited were Mr. WU Chiu Kong, Mr. Yang and Mr. Xu. Mr. WU Chiu Kong is presumed to be acting in concert with the Purchasers and has extensive experience in investment and international trading.

Profit Channel and Extra Benefit are together the Purchasers. The Offeror (which is owned as to 50% by Mr. Yang and as to 50% by Mr. Xu) did not own any Share as at the Latest Practicable Date.

INFORMATION ON THE GROUP

The Company is an investment holding company incorporated in Hong Kong with limited liability and, through its subsidiaries, is principally engaged in research and development, production and sale of pharmaceutical products in the PRC.

The Group recorded audited profits attributable to Shareholders of approximately HK$44,054,000 and HK$60,925,000 for the financial years ended 31 December 2009 and 2010, respectively. The audited consolidated net asset value attributable to Shareholders as at 31 December 2010 was approximately HK$835,659,000.

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LETTER FROM THE BOARD

INTENTION OF THE OFFEROR AND THE PURCHASERS IN RELATION TO THE GROUP

Your attention is drawn to the section headed “INTENTION OF THE OFFEROR AND THE PURCHASERS IN RELATION TO THE GROUP” in the letter from Shenyin Wanguo set out in this Composite Document for intentions of the Offeror and the Purchasers regarding the Group.

The Board notes the intention of the Offeror and the Purchasers in relation to the Group, is willing to render co-operation with the Offeror and the Purchasers and would continue to act in the best interests of the Group and the Shareholders as a whole.

RECOMMENDATION

Rule 2.8 of the Takeovers Code requires the Company to establish an independent committee of the Board to give a recommendation to the Independent Shareholders on the Offer and that such independent committee should comprise all the non-executive Directors who have no direct or indirect interest in the Offer other than as a Shareholder. Mr. Du was the chairman of Foshan Public Utilities from July 2006 to December 2008 and is currently a 調研員 (senior consultant[#] ) of Foshan Public Utilities. Foshan Public Utilities, through its wholly-owned subsidiary, Foshan Overseas Investment Limited （佛山海外投資有限公司*）, holds the entire issued share capital of the Vendor. In view of the role of Mr. Du in Foshan Public Utilities, the Directors consider that it is more appropriate that Mr. Du does not sit on the Independent Board Committee. Accordingly, the Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders in respect of the Offer, in particular as to whether the Offer is, or is not, fair and reasonable and as to its acceptance.

The Independent Financial Adviser has been appointed by the Company after approval by the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of the Offer and in particular as to whether the Offer is, or is not, fair and reasonable and as to its acceptance.

Your attention is drawn to the letter of recommendation from the Independent Board Committee set out on pages 20 to 21 of this Composite Document and the letter of advice from the Independent Financial Adviser set out on pages 22 to 40 of this Composite Document, which contains, among other things, its advice to the Independent Board Committee and the Independent Shareholders in relation to the Offer and the principal factors considered by it in arriving at its recommendation.

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LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the letter from Shenyin Wanguo set out in this Composite Document and the accompanying Form of Acceptance which contain further details of the Offer and the procedures for acceptance of the Offer.

Your attention is also drawn to the additional information set out in the appendices to this Composite Document.

Yours faithfully, By Order of the Board Winteam Pharmaceutical Group Limited DU Richeng Chairman

unofficial English translation only
for identification purposes only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 570)

17 June 2011

To the Independent Shareholders

Dear Sir or Madam,

UNCONDITIONAL MANDATORY CASH OFFERS BY SHENYIN WANGUO SECURITIES (H.K.) LIMITED ON BEHALF OF PROFIT UNITED INVESTMENTS LIMITED FOR ALL THE ISSUED SHARES IN WINTEAM PHARMACEUTICAL GROUP LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PROFIT UNITED INVESTMENTS LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

We refer to the Composite Document dated 17 June 2011 jointly issued by the Company and the Offeror, of which this letter forms part. Terms defined in the Composite Document shall bear the same meanings when used herein unless the context requires otherwise.

We have been appointed to constitute the Independent Board Committee to consider the terms of the Offer and to advise you as to whether, in our opinion, the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and as to its acceptance. Haitong International Capital Limited has been appointed as the Independent Financial Adviser to advise us and the Independent Shareholders in this respect, details of its advice and the principal factors and reasons taken into consideration in arriving at its recommendation are set out in the letter from the Independent Financial Adviser set out on pages 22 to 40 of the Composite Document.

We also wish to draw your attention to the letter from the Board, the letter from Shenyin Wanguo and the additional information set out in the appendices to this Composite Document.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Taking into account the terms of the Offer and the independent advice from the Independent Financial Adviser, we consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and accordingly, we recommend the Independent Shareholders can consider accepting the Offer.

However, in the event that the market price of the Shares exceeds the Offer Price during the Offer Period and the sales proceeds of such sale (net of all transaction costs) exceed the net amount receivable under the Offer, the Independent Shareholders should consider selling the Shares in the open market if they are able to do so given that the trading volume of the Shares was relatively thin during the Review Period (as defined in the “Letter from the Independent Financial Adviser” in this Composite Document) and any realization of significant number of Shares in the market might exert downward pressure on the market price of the Shares.

Independent Shareholders are strongly advised that their decision to realize or to hold their investments in the Shares depends on their own individual circumstances and investment objectives as well as their judgments on the overall development of the pharmaceutical industry and the business development and performance of the Group. For those Independent Shareholders who wish to retain some or all their Shares should note that it is the intention of the Offeror and the Purchasers, in particular, to maintain the listing of the Shares on the Stock Exchange after the close of the Offer and to continue the Group’s existing principal business as well as the financial performance of the Group which has been improving since Mr. Yang and Mr. Xu have become the executive Directors.

Independent Shareholders are also reminded and encouraged to monitor the market activities closely and note that there is no certainty that the current trading volume and/or current trading price level of the Shares will be sustainable during or after the Offer Period. Also, the Independent Shareholders are recommended to consult their own professional advisers if they are in doubt as to the taxation implications of accepting or rejecting the Offer.

Yours faithfully,

The Independent Board Committee

Mr. LO Wing Yat Mr. PANG Fu Keung Mr. WANG Bo Mr. ZHANG Jianhui Independent nonIndependent nonIndependent nonIndependent nonexecutive Director executive Director executive Director executive Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the letter of advice to the Independent Board Committee and Independent Shareholders from Haitong International Capital Limited for the purpose of incorporation into this Composite Document.

==> picture [122 x 43] intentionally omitted <==

25th Floor New World Tower 16-18 Queen’s Road Central Hong Kong

17 June 2011

To the Independent Board Committee and the Independent Shareholders

Winteam Pharmaceutical Group Limited Rooms 2801-2805, China Insurance Group Building 141 Des Voeux Road, Central Hong Kong

Dear Sirs,

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders with respect to the terms of the Offer, details of which are set out in the Composite Document addressed to the Shareholders dated 17 June 2011, of which this letter forms part. Terms used in this letter shall have the same respective meanings as those defined in the Composite Document unless the context otherwise requires.

The Offeror and the Company jointly announced on 27 May 2011 in relation to the sale and purchase of the Sale Shares pursuant to the S&P Agreement dated 19 May 2011 and the Offer. Pursuant to the S&P Agreement, the Vendor has agreed to sell 605,290,886 Shares and each of Profit Channel and Extra Benefit has agreed to acquire 302,645,443 Shares. The total consideration for the Sale Shares of HK$680,952,246.75 (or HK$1.125 per Sale Share) has been and will be settled in cash as follows: (i) the First Instalment (representing 30% of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Consideration) of HK$204,285,674.03 was paid by the Purchasers to the Vendor upon signing of the S&P Agreement; and (ii) the remaining 70% of the Consideration of HK$476,666,572.72 will be payable by the Purchasers at Completion. The S&P Agreement is unconditional and the Completion shall take place on or before 18 October 2011, being the date falling on the expiry of the five-month period after the date of the S&P Agreement when the remaining 70% of the Consideration is settled by the Purchasers in cash.

An irrevocable undertaking has been given by the Vendor in favour of the Purchasers as one of the terms of the S&P Agreement pursuant to which the relevant voting rights attached to 181,587,266 Shares, representing approximately 30% of the Sale Shares, are vested upon the Purchasers during the Undertaking Period. Upon the execution of the Undertaking, the total voting rights in percentage vested upon the Purchasers and the parties acting in concert with them will increase by approximately 10.18% from approximately 40.32% to approximately 50.50%. Pursuant to Rule 26.1(d) of the Takeovers Code, the Offeror and parties acting in concert with it are mandatorily required to make the Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it).

The Offer is unconditional and is therefore not conditional upon any minimum level of acceptances being received nor subject to other conditions. However, as set out in the paragraph headed “The Undertaking” in the Joint Announcement, in the event that the S&P Agreement is terminated, the Undertaking will lapse and the Vendor will no longer have to vote at any general meeting of the Company in accordance with the written instruction given by the Purchasers in respect of the voting rights attached to 181,587,266 Shares. Accordingly, the total voting rights of the Company in percentage vested upon the Vendor will restore from approximately 23.76% back to approximately 33.94%. In this case, the Vendor will not be mandatorily required to make any conditional mandatory general offer under the Takeovers Code.

The Offeror is an investment holding company incorporated in the BVI with limited liability and is owned as to 50% by Mr. Yang, who is one of the two directors of the Offeror and the managing director and an executive director of the Company, and as to 50% by Mr. Xu, who is another director of the Offeror, and the executive deputy chairman and an executive director of the Company). The Offeror has not conducted any business since its incorporation on 19 April 2011. As at the Latest Practicable Date, the Offeror did not own any Share.

Pursuant to Rule 2.8 of the Takeovers Code, the Company is required to establish an independent committee of the Board to give a recommendation to the Independent Shareholders on the Offer and that such independent committee of the Board should comprise all the non-executive Directors who have no direct or indirect interest in the Offer other than as a Shareholder. Mr. Du was the chairman of Foshan Public Utilities from July 2006 to December 2008 and is currently a 調研員 (senior consultant#) of Foshan Public Utilities. Foshan Public Utilities, through its wholly-owned subsidiary, Foshan Overseas Investment Limited (佛山海外投資有限公司*), holds the entire issued share capital of the Vendor. In view of the role of Mr. Du in Foshan Public Utilities, the Directors consider that it is more appropriate that Mr. Du does not sit on the Independent Board Committee. Accordingly, the Independent Board Committee comprising all of the four independent

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

non-executive Directors, namely Mr. LO Wing Yat, Mr. PANG Fu Keung, Mr. WANG Bo and Mr. ZHANG Jianhui, has been established to advise the Independent Shareholders whether the terms of the Offer are fair and reasonable and as to its acceptance. We, Haitong International Capital Limited, have been appointed by the Independent Board Committee as the Independent Financial Adviser to provide the Independent Board Committee and the Independent Shareholders with an independent opinion as to whether the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and to give a recommendation whether the Independent Shareholders should accept the Offer.

BASIS OF OUR OPINION

In formulating our recommendation, we have relied on the information, financial information and facts supplied to us and representations expressed by the Directors and/or management of the Group and have assumed that all such information, financial information and facts and any representations made to us, or referred to in the Composite Document, in all material aspects, are true, accurate and complete as at the time they were made and throughout the Offer Period (and should there be any material changes thereto, Shareholders would be notified as soon as possible), have been properly extracted from the relevant underlying accounting records (in the case of financial information) and made after due and careful inquiry by the Directors and/or the management of the Group. The Directors and/or the management of the Group have confirmed that, after having made all reasonable enquiries and to the best of their knowledge and belief, all relevant information has been supplied to us and that no material facts have been omitted from the information supplied and representations expressed to us.

We have also relied on certain information available to the public and have assumed such information to be accurate and reliable. We have no reason to doubt the completeness, truth or accuracy of the information and facts provided and we are not aware of any facts or circumstances which would render such information provided and representations made to us untrue, inaccurate or misleading. We have not, however, conducted any independent verification of the information nor have we conducted any form of in-depth investigation into the businesses, affairs, financial position or prospects of the Group or the Offeror and the parties acting in concert with it. Our review and analyses were based upon, among others, the information provided by the Company including the annual report of the Company for each of the financial year ended 31 December 2010 (the “2010 Annual Report”) and 31 December 2009 (the “2009 Annual Report”), the Composite Document and certain published information of the Group.

We have not considered the tax implications, if any, on the Independent Shareholders of their acceptances or non-acceptances of the Offer since these are particular to their own individual circumstances. In particular, the Independent Shareholders who are residents outside Hong Kong or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax position with regard to the Offer and, if any doubt should consult their own professional advisers.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Independent Shareholders are advised to read carefully the procedures for accepting the Offer, details of which are set out in Appendix I to the Composite Document and the accompanying Form of Acceptance. Independent Shareholders are strongly advised that the decision to realize or to continue to hold their investments in the Shares is subject to individual circumstances and investment objectives.

TERMS OF THE OFFER

1. The Offer

The terms set out below are summarized from the “Letter from Shenyin Wanguo” contained in the Composite Document. Independent Shareholders are encouraged to read the relevant section in full.

The Offer is being made by Shenyin Wanguo Securities (H.K.) Limited on behalf of the Offeror in compliance with the Takeovers Code for all the 459,017,358 Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it on the following terms:

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.125 in cash

The Offer Price of HK$1.125 per Offer Share is the same as the price per Sale Share paid or payable by the Purchasers to the Vendor under the S&P Agreement.

The Offer is unconditional and is therefore not conditional upon any minimum level of acceptances being received nor subject to any other condition.

As at the Latest Practicable Date, there were 1,783,410,807 Shares in issue and the Company had no outstanding convertible securities, warrants, options and derivatives in respect of the Shares.

2. Effect of accepting the Offer

By accepting the Offer, Shareholders will sell their Offer Shares to the Offeror free from all Encumbrances and with all rights attached to them including but not limited to the rights to receive all dividends and distribution declared, paid or made, if any, on or after the date of the Joint Announcement. From the date of the Joint Announcement up to the Latest Practicable Date, there had been no dividend or distribution declared, paid or made by the Company.

Independent Shareholders are encouraged to read the procedures for acceptance and settlement of the Offer and further terms of the Offer contained in the Appendix I to the Composite Document.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Stamp duty

In Hong Kong, seller’s ad valorem stamp duty arising in connection with acceptances of the Offer, will be payable by relevant Shareholders at a rate of 0.1% of: (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, and will be deducted from the cash amount payable by the Offeror on behalf of the relevant Shareholders accepting the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the relevant Shareholders accepting the Offer and will pay the buyer’s ad valorem stamp duty in connection with the acceptances of the Offer and the transfers of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

4. Payment

Payment in cash in respect of acceptance of the Offer will be made as soon as possible but in any event within 10 days of the date on which the relevant documents of title are received by the Offeror to render each such acceptance complete and valid.

5. Overseas Shareholders

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the terms of the Offer, we have considered the following principal factors and reasons:

1. Business, financial performance and prospects of the Group

1.1 Background information of the Group

The Company is an investment holding company incorporated in Hong Kong with limited liability and through its subsidiaries is principally engaged in research and development, production and sale of pharmaceutical products in the PRC.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group commenced engaging in the pharmaceutical business and started to deliver satisfactory performance since late 2006 when it acquired 51% interests in each of 佛山德眾藥業有限公司 (Foshan Dezhong Pharmaceutical Co., Ltd.) (“DZH”) and 佛山馮了性藥業有限公司 (Foshan Feng Liao Xing Pharmaceutical Co., Ltd.) (“FLX”). The performance of the Group was further improved after it acquired 100% interest in Smartpoint International Limited and its subsidiaries (the “Smartpoint Group”) on 6 February 2009. Such acquisition resulted in Sureplan Limited, a company owned as to 25% by First Linkup Development Limited, 50% by Profit Channel and 25% by Extra Benefit, each of which is in turn wholly owned by Mr. Wu Chiu Kong (who is a director of Sureplan Limited and is presumed to be acting in concert with the Purchasers as stated in the “Letter from the Board” contained in the Composite Document), Mr. Yang and Mr. Xu respectively, becoming a controlling Shareholder. On the same day, Mr. Yang was appointed as an executive Director and has been the managing director of the Company since 11 February 2009. Mr. Xu was appointed as an executive Director on 10 June 2009 and has been the executive deputy chairman of the Company since 30 July 2009. Since Mr. Yang and Mr. Xu became the executive Directors, the Group further acquired certain companies as set out in the table below.

Date of completion Important events 6 November 2009 � Completion of acquisition of 100% interest in 佛山市南海醫藥集團藥材有限公司 (Foshan Nanhai Pharmaceutical Group Medicinal Material Co., Ltd.*) (“Nanhai Pharmaceutical”)
28 April 2010 � Completion of acquisition of 93% interest in 佛山市安寧有限公司 (Foshan City An Ning Company Limited*), including its 49% interests in DZH (“An Ning Group”)
31 December 2010 � Completion of acquisition of 95.57% interest in 佛山仲弘有限公司 (Foshan Zhong Hong Co., Ltd.*), including its 49% interests in FLX (“Zhong Hong Group”)

1.2 Financial performance of the Group

A summary of the financial highlights of the Group after its series of acquisitions (especially since Mr. Yang and Mr. Xu have been appointed as Directors) are set out below as extracted from the 2010 Annual Report and 2009 Annual Report.

For identification purpose only

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Summary of financial performance of the Group for the three years ended 31 December 2010, 2009 and 2008:

Turnover Gross profit Gross profit margin Profit for the year Profit margin Profit for the year attributable to equity Shareholders	Year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 939,178 670,175 443,533 523,904 322,696 158,284 55.78% 48.15% 35.68% 86,079 68,226 48,467 9.17% 10.18% 10.92% 60,925 44,054 20,330	Year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 939,178 670,175 443,533 523,904 322,696 158,284 55.78% 48.15% 35.68% 86,079 68,226 48,467 9.17% 10.18% 10.92% 60,925 44,054 20,330

		158,284 35.68% 48,467 10.92% 20,330

As stated in the 2009 Annual Report, the Group recorded an increase in turnover from approximately HK$443.53 million in the year 2008 to approximately HK$670.18 million in the year 2009 (representing an increase of approximately 51.10%) mainly attributable to the consolidation of the results of the entire interests in the Smartpoint Group after it was acquired in February 2009. The Smartpoint Group’s high gross profit margin products also enhanced the product mix of the Group which led to the increase of the Group’s gross profit margin from approximately 35.68% in the year 2008 to approximately 48.15% in the year 2009. The profit for the year increased from approximately HK$48.47 million in the year 2008 to approximately HK$68.23 million in the year 2009 (representing an increase of approximately 40.76%) while the profit for the year attributable to equity Shareholders increased from approximately HK$20.33 million in the year 2008 to approximately HK$44.05 million in the year 2009 (representing an increase of approximately 116.69%).

As stated in the 2010 Annual Report, the Group recorded an increase in turnover from approximately HK$670.18 million in the year 2009 to approximately HK$939.18 million in the year 2010 (representing an increase of approximately 40.14%). It was mainly attributable to (i) the consolidation of the results of the 100% equity interests in Nanhai Pharmaceutical in late 2009 which facilitated the Group in reducing the purchasing costs of medical materials; and (ii) increase in sales volume in 2010 of “Yupingfeng Granule”（玉屏鳳顆粒）and “Biyankang Tablet” （鼻炎康片） which are patented products manufactured exclusively by the Group (since Smartpoint Group and DZH were acquired in early 2009 and late 2006, respectively) and listed on the National Essential Drugs List issued by the State Council of the PRC on 18 August 2009. The Group’s gross profit margin increased from approximately 48.15% in the year 2009 to approximately 55.78% in the year 2010. The profit for the year increased from approximately HK$68.23 million in the year 2009 to approximately HK$86.08

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

million in the year 2010 (representing an increase of approximately 26.17%) while the profit for the year attributable to equity Shareholders increased from approximately HK$44.05 million in the year 2009 to approximately HK$60.93 million in the year 2010 (representing an increase of approximately 38.30%).

Summary of consolidated assets and liabilities of the Group as at 31 December 2010, 2009 and 2008:

Consolidated assets and liabilities Total assets Total liabilities Non-controlling interests Total equity attributable to the equity Shareholders	As at 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 1,406,176 1,202,934 703,721 (556,992) (331,070) (148,607) (13,525) (185,750) (195,810) 835,659 686,114 359,304

The consolidated net asset value of the Group attributable to the equity Shareholders has been increased from approximately HK$359.30 million as at 31 December 2008 to approximately HK$686.11 million as at 31 December 2009 (representing an increase of approximately 90.96%) mainly attributable to the consolidation of the entire interests in the Smartpoint Group after it was acquired by the Group in February 2009 and further increased to HK$835.66 million as at 31 December 2010 (representing an increase of approximately 21.80%) mainly attributable to the consolidation of the 93% interest in An Ning Group (which was acquired on 28 April 2010) and 95.57% of Zhong Hong Group (which was acquired on 31 December 2010). As at 31 December 2010, the Group had bank balances and cash of approximately HK$180.89 million and bank borrowings of approximately HK$109.29 million.

1.3 Business prospect of the Group

As stated in the 2010 Annual Report, the Company believes that the improvement of living standard in the PRC will lead to the continuous increase in spending on medical needs. Together with the full implementation of the Essential Drugs System in 2010 and the continuous investment in the medical reform by various levels of governments, the market share of National Essential Drugs (over 50 items on which are manufactured by the Group) released by the State Council of the PRC is expected to increase. Accordingly, the Directors are optimistic on the growth of pharmaceutical industry in future. Nevertheless, Foshan Public Utilities (whose ultimate beneficial owner is 佛山市人民政府 (Foshan Municipal People’s Government)) through Vendor disposed the Sale Shares to the Purchasers mainly because it would like to focus on its current public utility businesses as advised by a Director who has made relevant enquiries to the Vendor. We consider that the Group’s financial performance in respect of both the profit for the year and total equity attributable to equity Shareholders has

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

been improving during the time since Mr. Yang and Mr. Xu have become executive Directors through a series of acquisitions. As stated in the 2010 Annual Report, by grasping those merger and acquisition opportunities which will benefit the Group in the aspects of brand, sales network, products, and research and development, the Directors believe that the Group is in a niche position to gain from the future golden opportunities of the pharmaceutical sector and create higher return for Shareholders. With respect to one of the Group’s future strategy, it intends to capitalize on the rich traditional Chinese medicine resources of FLX and DZH and strive to establish its corporate image as “King of Lingnan Medicine” in the PRC.

2. Information on the Offeror and the intention of the Offeror and the Purchasers in relation to the maintenance of the listing status of the Company and the business and operations of the Group

The Offeror is an investment holding company incorporated in the BVI with limited liability and is owned as to 50% by Mr. Yang who is one of the two directors of the Offeror and the managing director and an executive director of the Company, and as to 50% by Mr. Xu who is another director of the Offeror and the executive deputy chairman and an executive director of the Company. The Offeror has not conducted any business since its incorporation on 19 April 2011. As at the Latest Practicable Date, the Offeror did not own any Share.

As at the Latest Practicable Date, 564,102,563 Shares were directly owned by Sureplan Limited which was owned as to 50% by Profit Channel, a company wholly and beneficially owned by Mr. Yang, 25% by Extra Benefit, a company wholly and beneficially owned by Mr. Xu and 25% by First Linkup Development, a company wholly and beneficially owned by Mr. Wu Chiu Kong who is a director of Sureplan Limited and is presumed to be acting in concert with the Purchasers as stated in the “Letter from the Board” contained in the Composite Document. Also, each of Profit Channel and Extra Benefit had directly held 77,500,000 Shares respectively prior to their entering into the S&P Agreement with the Vendor. Based on the above shareholdings together with the voting rights attached to 181,587,266 Shares vested upon the Purchasers during the Undertaking Period as a result of the execution of the Undertaking on 19 May 2011, the aggregate voting rights attached to 900,089,829 Shares, representing approximately 50.50% of the total voting rights attached to all the issued Shares, were owned or controlled or directed by the Offeror and parties acting in concert with it. Accordingly, pursuant to Rule 26.1(d) of the Takeovers Code, the Offeror and parties acting in concert with it are mandatorily required to make the Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and the parties acting in concert with it).

Independent Shareholders should note that the Offeror intends to maintain the listing of the Shares on the Stock Exchange after the close of the Offer. As set out in the paragraph headed “The Undertaking” in the Joint Announcement, in the event that the S&P Agreement being terminated in accordance with its terms and the Undertaking being lapsed in accordance with the written instruction given by the Purchasers in respect of the voting rights attached to 181,587,266 Shares, the total voting rights of the Company in percentage

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

vested upon the Vendor will restore from approximately 23.76% back to approximately 33.94% and the Vendor will not be mandatorily required to make any conditional mandatory general offer under the Takeovers Code.

In addition, Independent Shareholders should be aware that, the Stock Exchange will consider exercising its discretion to suspend trading in the Shares if the Stock Exchange believes that: (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market. As set out in the “Letter from Shenyin Wanguo” contained in the Composite Document, as the Offeror intends to maintain the listing of the Shares on the Stock Exchange after the close of the Offer, it will undertake to the Stock Exchange to take appropriate steps as soon as possible following the close of the Offer to ensure that a sufficient public float exists for the Shares.

Further, Independent Shareholders should note that upon Completion, the total voting rights of the Company in percentage vested upon the Offeror, the Purchasers and parties acting in concert with any of them will further increase from approximately 50.50% to approximately 74.26% at the same price as the Offer Price. Such increase is in compliance with Rule 31.3 of the Takeovers Code and no further unconditional mandatory general offer obligation will be triggered accordingly.

Besides, Independent Shareholders should note that it is the intention of the Offeror and the Purchasers to continue the Group’s existing principal businesses. As stated in the “Letter from Shenyin Wanguo” contained in the Composite Document, the Offeror and the Purchasers do not intend to introduce any major changes to the existing operations and business of the Group (including the composition of the Board). The Offeror and the Purchasers will conduct a review on the operations of the Group and subject to the result of the review and may formulate a business strategy with a view to enhancing its growth. It is also noted from the “Letter from Shenyin Wanguo” contained in the Composite Document that the Offeror and the Purchasers have no intention to discontinue the employment of the employees or to dispose of or deploy the fixed assets of the Group other than those in its ordinary course of business. As at the Latest Practicable Date, the Offeror and the Purchasers had no intention or plans for any acquisition or disposal of assets and/or business of the Group.

3. Offer Price as compared with the net assets value of the Group attributable to the equity Shareholders

Based on the audited consolidated net assets value of the Group attributable to the equity Shareholders as at 31 December 2010 of approximately HK$835.66 million and the 1,783.41 million Shares in issue as at the Latest Practicable Date, the net book value per Share as at 31 December 2010 amounted to approximately HK$0.47. On this basis, the Offer Price represents a price per book ratio (“PBR”) of approximately 2.40 times or at a premium of approximately HK$1,170.68 million (approximately 140.09%) over the consolidated net assets value of the Group attributable to the equity Shareholders as at 31 December 2010.

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Historical market price and liquidity of the Shares

4.1 Share price performance

The following charts depict the movement of the closing price of the Shares (i) for the 12 month period from 18 May 2010 up to the Last Trading Date (both dates inclusive) and (ii) from 30 May 2011, the first day of trading after the publication of the Joint Announcement, up to the Latest Practicable Date (both dates inclusive) (together, the “Review Period”):

==> picture [358 x 165] intentionally omitted <==

----- Start of picture text -----

HK$ Closing Price of the Shares Offer Price of HK$1.125
2.0
1.5
1.0
0.5
0.0 Date
Source: www.hkex.com.hk
18/05/2010 02/06/2010 17/06/2010 02/07/2010 16/07/2010 30/07/2010 13/08/2010 27/08/2010 10/09/2010 27/09/2010 12/10/2010 26/10/2010 09/11/2010 23/11/2010 07/12/2010 21/12/2010 05/01/2011 19/01/2011 02/02/2011 18/02/2011 04/03/2011 18/03/2011 01/04/2011 18/04/2011 05/05/2011 30/05/2011 14/6/2011
----- End of picture text -----

During the period from 18 May 2010 up to 21 December 2010 (being the date of the Company published its first announcement (the “First Announcement”) after trading hour in relation to the intention of the immediate shareholder of the Vendor to dispose to Profit Channel and Extra Benefit of its interests in the Vendor ), the closing price of the Shares were between HK$1.04 and HK$1.19. On 21 December 2010, the price of the Shares closed at HK$1.14.

From 22 December 2010 up to 31 December 2010 (being the period after the Company published the First Announcement up to the date of an announcement published by the Company after trading hour in relation to the completion of acquisition of Zhong Hong Group), the closing price of the Shares had a slight increase and varied between HK$1.17 and HK$1.23. On 31 December 2010, the price of the Shares closed at HK$1.23 (representing a slight increase of approximately 7.89% as compared with the closing price of the Shares on 21 December 2010).

Since 1 January 2011 up to the Last Trading Day (being the period after the Company published the First Announcement and the announcement in relation to the completion of acquisition of Zhong Hong Group but before the publication of the Joint Announcement), the closing price of the Shares varied between HK$1.31 and HK$1.54 and reached HK$1.54 on 18 May 2011 and 19 May 2011 (representing an increase of approximately 25.20% as compared with the closing price of the Shares on 31 December 2010).

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On 27 May 2011, the Joint Announcement was published and the Offer Price of HK$1.125 (being set equivalent to the Price of HK$1.125 per Sale Share under the S&P Agreement) represents:

(i) a discount of approximately 26.95% to the closing price of HK$1.54 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 26.66% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day of HK$1.534 per Share;
(iii) a discount of approximately 23.37% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day of HK$1.468 per Share;
(iv) a discount of approximately 1.32% to the closing price of HK$1.14 per Share as quoted on the Stock Exchange on 21 December 2010, being the the last trading day immediately before the publication of the First Announcement;
(v) a premium of approximately 140.08% over the audited consolidated net asset value attributable to equity Shareholders of approximately HK$0.47 per Share as at 31 December 2010; and,
(vi) a premium of approximately 130.56% over the adjusted consolidated net asset value attributable to equity Shareholders of approximately HK$0.49 per Share based on the audited consolidated net asset value attributable to equity Shareholders as at 31 December 2010 and the net valuation premium (as shown in Appendix II to this Composite Document) of approximately HK$32.08 million.

After the release of the Joint Announcement and up to the Latest Practicable Date, the price of the Shares was noted to have a slight decreasing trend and

(i) closed at HK$1.49 per Share as quoted on the Stock Exchange on 30 May 2011, being the first day of trading of Shares immediately after the publication of the Joint Announcement (representing a premium of approximately 32.44 % to the Offer Price);
(ii) closed HK$1.39 per Share as quoted on the Stock Exchange as at the Latest Practicable Date (representing a premium of approximately 23.56 % to the Offer Price); and,
(iii) closed between HK$1.39 and HK$1.50 at an average of approximately HK$1.45 (representing a premium of approximately 28.89% to Offer Price).

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered that the daily trading volume as analysed in paragraph under “Liquidity” as set out in this letter is thin and the Offer Price of HK$1.125 is set at the price of HK$1.125 per Sale Share under the S&P Agreement, we considered that the Offer Price which was set at a discount to the closing price of the Shares is fair and reasonable.

==> picture [358 x 110] intentionally omitted <==

----- Start of picture text -----

HK$ Closing Price of the Shares Offer Price of HK$1.125
1.55
1.50
1.45
1.40
1.35
1.30
1.25
1.20
1.15
1.10
1.05
1.00 Date
30/05/2011 1/06/2011 3/06/2011 8/06/2011 10/06/2011 14/6/2011
----- End of picture text -----

Source: www.hkex.com.hk

4.2 Liquidity

The chart below shows the movement of the daily trading volume of the Shares during the Review Period:

==> picture [386 x 142] intentionally omitted <==

----- Start of picture text -----

Number of shares Suspension of trading of Shares
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
– Date
18/05/2010 08/06/2010 29/06/2010 20/07/2010 09/08/2010 27/08/2010 16/09/2010 08/10/2010 28/10/2010 17/11/2010 07/12/2010 28/12/2010 17/01/2011 08/02/2011 28/02/2011 18/03/2011 08/04/2011 03/05/2011 24/05/2011 14/6/2011
----- End of picture text -----

Source: www.hkex.com.hk

– 34 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following table sets out the highest, lowest and average daily turnover of the Shares during the Review Period and the percentage of average daily turnover as compared with the total number of Shares in issue and the total number of Offer Shares as at the Latest Practicable Date.

				Percentage	Percentage	Percentage
				of average	of average
				daily		daily
				turnover to	turnover to
				total		total
				number of	number of
				Shares in	Offer	Shares
				issue as at	as at the
	Highest		Average	the Latest		Latest
	daily	Lowest daily	daily	Practicable	Practicable
Month/Period	turnover	turnover	turnover	Date		Date
	(Number of	(Number of	(Number of
	Shares)	Shares)	Shares)	(Note 1)	(Note 2)
				(%)		(%)
2010
May (since 18 May 2010)	14,134,000	1,202,000	4,390,444	0.25%		0.96%
June	4,082,000	66,000	1,491,250	0.08%		0.32%
July	4,718,000	236,000	1,310,667	0.07%		0.29%
August	7,622,000	536,000	2,162,062	0.12%		0.47%
September	2,754,000	178,000	1,370,077	0.08%		0.30%
October	9,399,750	290,000	1,970,925	0.11%		0.43%
November	7,874,000	240,000	2,485,841	0.14%		0.54%
December	17,850,000	270,000	3,870,000	0.22%		0.84%
2011
January	18,132,000	808,000	4,840,964	0.27%		1.05%
February	4,220,000	418,000	1,705,819	0.10%		0.37%
March	3,062,000	472,000	1,553,783	0.09%		0.34%
April	3,126,000	102,000	1,459,000	0.08%		0.32%
May (Note 3)	8,994,000	842,000	3,090,286	0.17%		0.67%
June (up to and including the
Latest Practicable Date)	1,238,000	528,000	805,727	0.05%		0.18%

Source: www.hkex.com.hk

Notes:

Calculation is based on 1,783,410,807 Shares in issue as at the Latest Practicable Date.
Calculation is based on 459,017,358 Shares held by the Independent Shareholders as at the Latest Practicable Date.
Trading of the Shares was suspended from 20 May 2011 to 27 May 2011 pending for the publication of the Joint Announcement.

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated in the above table, the trading volume of the Shares was generally thin across the Review Period and the average daily turnover of the Shares varied between approximately 0.18% to approximately 1.05% of the total number of Offer Shares. Nevertheless, the daily turnover of the Shares had a relative increase in the below month: (i) in May 2010 after the Company published announcements in relation to the completion of acquisition of An Ning Group and the subscription of new Shares, the highest daily turnover for May 2010 reached approximately 14.1 million Shares (representing approximately 3.1% of the Offer Shares); (ii) in December 2010 and January 2011 after the Company published the First Announcement and an announcement in relation to the completion of acquisition of Zhong Hong Group, the highest daily turnover for these two months reached approximately 17.9 million Shares and approximately 18.1 million Shares respectively (representing approximately 3.9% and approximately 4.0% of the Offer Shares respectively); (iii) in May 2011, during which the Company published the Joint Announcement, the highest daily turnover for this month reached approximately 9.0 million Shares (representing approximately 2.0% of the Offer Shares). Although it was noted that the trading volume of the Shares on 30 May 2011 (being the date after the publication of the Joint Announcement) was approximately 6.1 million Shares (representing approximately 1.3% of the Offer Shares), the daily trading volume dropped back to approximately 0.3 million Shares on 10 June 2011 (representing approximately 0.1% of the Offer Shares).

5. The implied PER and PBR by the Offer Price as compared with those of the Comparable Companies

For the purpose of assessing the Offer Price, we have also reviewed and compared the price to earnings ratios (the “PERs”) and the PBRs of all other companies (the “Comparable Companies”) listed on the Stock Exchange which principal activities are engaging in pharmaceutical business in the PRC according to Bloomberg (which is substantially similar with businesses of the Group). Based on above criteria and our searches conducted on Bloomberg and the website of the Stock Exchange, we consider the list of Comparable Companies is exhaustive and those Comparable Companies are fair and representative comparables to the Group. As the Comparable Companies are in the same pharmaceutical sector of the Group, the valuation of the Comparable Companies offers a reasonable reference to the valuation of the Company.

	Stock	Historical	Historical
Names of Comparable Companies	code	PER	PBR
		times	times
		(Note 1)	(Note 1)
Mainly involving in manufacturing business
Vital Group Holdings Limited	1164	52.54	2.73
China Medical System Holdings Limited	867	32.78	5.74
Sihuan Pharmaceutical Holdings Group Ltd.	460	25.57	2.60
Yunnan Enterprises Holdings Limited	455	23.25	1.58
Lee’s Pharmaceutical Holdings Limited	950	22.50	5.57
Sino Biopharmaceutical Limited	1177	22.17	3.50
Guangzhou Pharmaceutical Company Limited	874	17.89	1.38

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	Stock	Historical	Historical
Names of Comparable Companies	code	PER	PBR
		times	times
		(Note 1)	(Note 1)
Essex Bio-Technology Limited	8151	17.40	3.49
China NT Pharma Group Company Limited	1011	16.49	4.23
China Shineway Pharmaceutical Group Limited	2877	13.58	3.44
Lijun International Pharmaceutical (Holding)	2005	12.92	1.52
Co., Ltd.
Wai Yuen Tong Medicine Holdings Limited	897	12.90	0.95
Lansen Pharmaceutical Holdings Limited	503	11.72	1.42
Hua Han Bio-Pharmaceutical Holdings Limited	587	11.63	1.22
Jilin Province Huinan Changlong Bio-pharmacy	8049	11.54	1.42
Company Limited
Shandong Luoxin Pharmacy Stock Co., Ltd.	8058	10.61	3.63
Dawnrays Pharmaceutical (Holdings) Ltd.	2348	10.46	2.10
Shandong Xinhua Pharmaceutical Company	719	10.34	0.61
Limited
Jiwa Bio-Pharm Holdings Limited	2327	9.33	1.48
Wuyi International Pharmaceutical Company	1889	8.77	0.56
Limited
China Pharmaceutical Group Limited	1093	7.33	0.96
China Grand Pharmaceutical and Healthcare	512	7.24	1.20
Holdings Limited
Tong Ren Tang Technologies Co. Ltd.	1666	5.74	0.73
Northeast Tiger Pharmaceutical Company	8197	N/A	0.14
Limited		(Note 2)
Hao Wen Holdings Limited	8019	N/A	2.04
(Note 3)		(Note 2)
Asia Resources Holdings Limited	899	N/A	0.38
		(Note 2)
Mainly not involving in manufacturing
business
China Medical and Bio Science Limited	8120	480.00	N/A
(Note 3)			(Note 2)
United Gene High-Tech Group Limited	399	139.09	4.23
Extrawell Pharmaceutical Holdings Limited	858	100.00	4.19
Venturepharm Laboratories Limited	8225	44.28	2.34
(Note 3)
Sinopharm Group Co. Ltd.	1099	43.46	4.45
Kingworld Medicines Group Limited	1110	14.81	2.29
The United Laboratories International Holdings	3933	13.27	2.64
Limited

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	Stock	Historical	Historical
Names of Comparable Companies	code	PER	PBR
		times	times
		(Note 1)	(Note 1)
For all the companies set out above
Maximum		480.00	5.74
Minimum		5.74	0.14
Average		40.32	2.35
Median		14.20	2.07
The Company @ Offer Price		32.93	2.40

Sources: Bloomberg and www.hkex.com.hk

Note 1: Calculation is based on the closing share prices of the Company and the Comparable Companies as at the Latest Practicable Date quoted by Bloomberg and the published financial information contained in the latest annual reports, interim reports or quarterly reports of the Comparable Companies.
Note 2: The PER and PBR is not available as the relevant companies was loss-making for the latest financial year or recorded a negative net assets value as at its latest interim period ended date.
Note 3: Trading of shares of these Comparable Companies was suspended as at the Latest Practicable Date.

Based on the respective closing prices of the shares of the Comparable Companies as at the Latest Practicable Date, the PBRs of the Comparable Companies range from approximately 0.14 times to approximately 5.74 times, with an average of approximately 2.35 times and a median of approximately 2.07 times while the PERs of the Comparable Companies range from approximately 5.74 times to approximately 480.00, with an average of approximately 40.32 times and median of approximately 14.20 times. We note that the PER of China Medical and Bio Science Limited, being approximately 480.00 times, was exceptionally higher than other Comparable Companies and if that of such PER is excluded, the PERs of the Comparable Companies range from approximately 5.74 times to approximately 139.09 times, with an average of approximately 27.00 times and a median of approximately 13.58 times.

Accordingly, the implied PER and implied PBR represented by the Offer Price of approximately 32.93 times and approximately 2.40 times, respectively (i) are higher than the median of the comparable companies of approximately 14.20 times and the adjusted average and median of the PERs of the Comparable Companies of approximately 27.00 times and of approximately 13.58 times respectively; and (ii) are close to both of the average and median of the PBRs of the Comparable Companies of approximately 2.35 times and of approximately 2.07 times respectively.

Having considered all of the above factors, we consider that the terms of the Offer are fair and reasonable.

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered the above principal terms of and reasons, in particular:

the Offer Price of HK$1.125 per Share which is equivalent to the price of HK$1.125 per Sale Share under the S&P Agreement, represents (i) a discount of approximately 19.06% as compared with the closing price of HK$1.39 as at the Latest Practicable Date, (ii) a premium of approximately 140.09% over the net book value per Share as at 31 December 2010 of approximately HK$0.47; and (iii) a premium of approximately 130.56% over the adjusted consolidated net assets value attributable to equity Shareholders of approximately HK$0.49 per Share based on the audited consolidated net assets value attributable to equity Shareholders as at 31 December 2010 and the net valuation premium (as shown in the Appendix II to this Composite Document) of approximately HK$32.08 million;
the implied PER and implied PBR of the Offer Price are higher than the adjusted average and median of the PERs of the Comparable Companies and close to both of the average and median of the PBRs of the Comparable Companies; and,
the overall liquidity of the Shares was in general low during the Review Period,

we consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders can consider accepting the Offer.

However, in the event that the market price of the Shares exceeds the Offer Price during the Offer Period and the sales proceeds of such sale (net of all transaction costs) exceed the net amount receivable under the Offer, the Independent Shareholders should consider selling the Shares in the open market if they are able to do so given that the trading volume of the Shares was relatively thin during the Review Period and any realization of significant number of Shares in the market might exert downward pressure on the market price of the Shares.

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Yours faithfully, For and on behalf of Haitong International Capital Limited Derek C.O. Chan Managing Director

– 40 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

1. PROCEDURES FOR ACCEPTANCE OF THE OFFER

(a) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in your name, and you wish to accept the Offer, you must send the completed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/ or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, by post or by hand, marked “ Winteam Pharmaceutical Group Limited Share Offer ” on the envelope.
(b) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer whether in full or in part of your Shares, you must either:
(i) lodge your share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) with the nominee company, or other nominee, with instructions authorising it to accept the Offer on your behalf and requesting it to deliver in an envelope marked “ Winteam Pharmaceutical Group Limited Share Offer ” with the completed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(ii) arrange for the Shares to be registered in your name by the Company through the Registrar, and deliver in an envelope marked “ Winteam Pharmaceutical Group Limited Share Offer ” with the completed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(iii) if your Shares have been lodged with your licensed securities dealer/ registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorize HKSCC Nominees Limited to accept the Offer on your behalf on or before the deadline set by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer/registered institution in securities/ custodian bank for the timing on the processing of your instruction, and submit your instruction to your licensed securities dealer/registered institution in securities/custodian bank as required by them; or

– I-1 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

(iv) if your Shares have been lodged with your investor participant’s account maintained with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set by HKSCC Nominee Limited.
(c) If the share certificate(s) and/or transfer receipts and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are not readily available and/or is/are lost and you wish to accept the Offer in respect of your Shares, the Form of Acceptance should nevertheless be completed and delivered in an envelope marked “ Winteam Pharmaceutical Group Limited Share Offer ” to the Registrar together with a letter stating that you have lost one or more of your share certificate(s) and/or transfer receipts and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, it/they should be forwarded to the Registrar as soon as possible thereafter. If you have lost your share certificate(s), you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.
(d) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your share certificate(s), and you wish to accept the Offer in respect of your Shares, you should nevertheless complete the Form of Acceptance and deliver it in an envelope marked “ Winteam Pharmaceutical Group Limited Share Offer ” to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable instruction and authority to each of Shenyin Wanguo Securities (H.K.) Limited and/or the Offeror and/or any of their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant share certificate(s) when issued and to deliver such certificate(s) to the Registrar and to authorise and instruct the Registrar to hold such share certificate(s), subject to the terms and conditions of the Offer, as if it was/they were delivered to the Registrar with the Form of Acceptance.
(e) Acceptance of the Offer will be valid only if the completed Form of Acceptance is received by the Registrar by no later than 4:00 p.m. on the Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code and the Registrar has recorded that the Form of Acceptance and any relevant documents required have been so received, and is:
(i) accompanied by the relevant share certificate(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if those share certificate(s) is/are not in your name, such other documents (e.g. a duly stamped transfer of the relevant Share(s) in blank or in your favour executed by the registered holder) in order to establish your right to become the registered holder of the relevant Shares; or

– I-2 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

(ii) from a registered Shareholder or his personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to the Shares which are not taken into account under the other sub-paragraph of this paragraph (e)); or
(iii) certified by the Registrar or the Stock Exchange.

If the Form of Acceptance is executed by a person other than the registered Shareholder, appropriate documentary evidence of authority (such as grant of probate or certified copy of power of attorney) to the satisfaction of the Registrar must be produced.

(f) In Hong Kong, seller’s ad valorem stamp duty arising in connection with acceptances of the Offer, payable by relevant Independent Shareholders at a rate of 0.1% of the market value of the Offer Shares or consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, will be deducted from the cash amount payable by the Offeror to the relevant Independent Shareholder accepting the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of relevant Independent Shareholders accepting the Offer and will pay the buyer’s ad valorem stamp duty in connection with the acceptance of the Offer and the transfer of the Shares.
(g) No acknowledgement of receipt of any Form of Acceptance, share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

2. SETTLEMENT

(a) Provided that the Form of Acceptance and the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are in complete and good order in all respects and have been received by the Registrar by no later than 4:00 p.m. on the Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code, a cheque for the amount representing the cash consideration due to each accepting Independent Shareholder in respect of the Offer Shares tendered by him/her/it under the Offer, less seller’s ad valorem stamp duty payable by him/her/it, will be despatched to each accepting Independent Shareholder by ordinary post at his/her/its own risk as soon as possible but in any event within 10 days of the date on which all the relevant documents which render such acceptance complete and valid are received by the Registrar.
(b) Settlement of the consideration to which any Independent Shareholder is entitled under the Offer will be implemented in full in accordance with the terms of the Offer, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Shareholder.

– I-3 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

3. ACCEPTANCE PERIOD AND REVISIONS

(a) Unless the Offer has previously been revised or extended with the consent of the Executive, all acceptances of the Offer must be received by the Registrar by 4:00 p.m. on 8 July 2011, being the Closing Date. The Offer is unconditional.
(b) The Offeror reserves the right to revise the Offer in accordance with the relevant provisions of the Takeovers Code.
(c) If the Offer is extended or revised, the announcement of such extension or revision will state the next closing date and the Offer will remain open for acceptance for a period of not less than 14 days from the posting of the written notification of the extension or revision to the Independent Shareholders and, unless previously extended or revised, shall be closed on the subsequent closing date. If the Offeror revises the terms of the Offer, all Independent Shareholders, whether or not they have already accepted the Offer, will be entitled to accept the revised Offer under the revised terms. The benefit of any revision of the Offer will be available to any Independent Shareholder who has previously accepted the Offer. The execution by or on behalf of any Independent Shareholder who has previously accepted the Offer shall be deemed to constitute acceptance of the revised Offer unless such holder becomes entitled to withdraw his/her/its acceptance and duly does so.
(d) In order to be valid, acceptances must be received by the Registrar in accordance with the instructions printed on the Form of Acceptance by no later than 4:00 p.m. on the Closing Date, unless the Offer is extended or revised.
(e) If the closing date of the Offer is extended, any reference in this Composite Document and in the Form of Acceptance to the closing date shall, except where the context otherwise requires, be deemed to refer to the closing date of the Offer as so extended.

4. NOMINEE REGISTRATION

To ensure equality of treatment of all Independent Shareholders, those registered Independent Shareholders who hold the Offer Shares as nominees for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. It is essential for the beneficial owners of the Offer Shares whose investments are registered in the names of nominees to provide instructions to their nominees of their intentions with regard to the Offer.

5. ANNOUNCEMENTS

(a) By 6:00 p.m. on 8 July 2011 (or such later time as the Executive may in exceptional circumstances permit) which is the Closing Date, the Offeror must inform the Executive and the Stock Exchange of its decision in relation to the revision, extension or expiry of the Offer. The Offeror must post an announcement

– I-4 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating the results of the Offer and whether the Offer has been revised, extended or expired. The announcement must state the total number of Shares and rights over Shares:

(i) for which acceptances of the Offer have been received;
(ii) held, controlled or directed by the Offeror or persons acting in concert with it before the Offer Period; and
(iii) acquired or agreed to be acquired during the Offer Period by the Offeror or persons acting in concert with it.

The announcement must also include details of any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror or any person acting in concert with it has borrowed or lent (save for any borrowed shares which have been either on-lent or sold). The announcement must specify the percentages of the issued share capital of the Company and the percentages of voting rights of the Company represented by these numbers.

(b) In computing the total number of Offer Shares represented by acceptances, for announcement purposes, acceptances which are not in all respects in complete and good order or that are subject to verification may only be included where they could be counted towards fulfilling the acceptance condition under paragraph 1(e) of this appendix according to the requirements under Rule 30.2 of the Takeovers Code.
(c) As required under the Takeovers Code, all announcements in respect of the listed companies must be made in accordance with the requirements of the Listing Rules.

6. RIGHT OF WITHDRAWAL

Acceptance of the Offer tendered shall be irrevocable and cannot be withdrawn, except in the circumstances as set out in Rule 19.2 of the Takeovers Code, which provides that if the Offeror is unable to comply with any of the requirements of Rule 19 of the Takeovers Code, the Executive may require that the Independent Shareholders who have tendered acceptances to the Offer be granted a right of withdrawal on terms that are acceptable to the Executive until the requirements set out in that paragraph are met.

In such case, upon the Independent Shareholder withdraws the acceptance, the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of the Shares lodged with the Form of Acceptance to the Independent Shareholder(s).

– I-5 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

7. GENERAL

(a) All communications, notices, Form of Acceptance, certificates of Shares, transfer receipts, other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to settle the consideration payable under the Offer to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their designated agents by post at their own risk, and none of the Company, the Offeror, Shenyin Wanguo Securities (H.K.) Limited (“ Shenyin Wanguo Securities ”), Shenyin Wanguo Capital (H.K.) Limited, Optima Capital Limited, Haitong International Capital Limited and the Registrar nor any of their respective directors or professional advisers or other parties involved in the Offer or any of their respective agents accepts any liability for any loss or delay in postage or any other liabilities that may arise as a result thereof.
(b) The provisions set out in the Form of Acceptance form part of the terms of the Offer.
(c) The accidental omission to despatch this Composite Document and/or Form of Acceptance or any of them to any person to whom the Offer is made will not invalidate the Offer in any way.
(d) The Offer is, and all acceptances will be, governed by and construed in accordance with the laws of Hong Kong.
(e) Due execution of the Form of Acceptance will constitute an authority to the Offeror, Shenyin Wanguo Securities or such person or persons as the Offeror may direct to complete, amend and execute any document on behalf of the person or persons accepting the Offer and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as it may direct, the Offer Shares in respect of which such person or persons has/ have accepted the Offer.
(f) Acceptance of the Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror and the Company that the Offer Shares acquired under the Offer are sold by such person or persons free from all Encumbrances whatsoever and together with all rights accruing or attaching thereto including the rights to receive all future dividends or other distributions declared, paid or made on the Offer Shares, on or after the date of the Joint Announcement.
(g) References to the Offer in this Composite Document and the Form of Acceptance shall include any revision and/or extension thereof.
(h) The making of the Offer to the Overseas Shareholders may be prohibited or affected by the laws of the relevant jurisdictions. The Overseas Shareholders should inform themselves about and observe any applicable legal or regulatory requirements. It is the responsibility of each Overseas Shareholder who wishes to

– I-6 –

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFER

accept the Offer to satisfy himself/herself/itself as to the full observance of the laws and regulations of all relevant jurisdictions in connection therewith, including, but not limited to the obtaining of any governmental, exchange control or other consents and any registration or filing which may be required and the compliance with all necessary formalities, regulatory and/or legal requirements. Such Overseas Shareholders shall be fully responsible for the payment of any transfer or other taxes and duties due by such Overseas Shareholders in respect of the relevant jurisdictions. The Overseas Shareholders are recommended to seek professional advice on deciding whether or not to accept the Offer.

(i) Acceptances of the Offer by any persons will be deemed to constitute a warranty by such persons that such persons are permitted under all applicable laws and regulations to receive and accept the Offer, and any revision thereof, and such acceptances shall be valid and binding in accordance with all applicable laws and regulations. Any such persons will be responsible for any such issue, transfer and other applicable taxes or other governmental payments payable by such persons.
(j) Subject to the Takeovers Code, the Offeror reserves the right to notify any matter (including the making of the Offer) to all or any Independent Shareholders with registered address(es) outside Hong Kong or whom the Offeror or Shenyin Wanguo Securities knows to be nominees, trustees or custodians for such persons by announcement in which case such notice shall be deemed to have been sufficiently given notwithstanding any failure by any such Independent Shareholders to receive or see such notice, and all references in this Composite Document to notice in writing shall be construed accordingly. For the avoidance of doubt, this Composite Document will be despatched to the Overseas Shareholders at their registered addresses as shown on the register of members of the Company by ordinary post at their own risk.
(k) In making their decision, the Independent Shareholders must rely on their own examination of the Offeror, the Group and the terms of the Offer, including the merits and risks involved. The contents of this Composite Document, including any general advice or recommendation contained herein together with the Form of Acceptance shall not be construed as any legal or business advice on the part of the Offeror, the Company, Shenyin Wanguo Securities, Shenyin Wanguo Capital (H.K.) Limited or their respective professional advisers. The Independent Shareholders should consult their own professional advisers for professional advice.
(l) This Composite Document and the Form of Acceptance are written in English accompanied by a translation in Chinese. The English texts of this Composite Document and the Form of Acceptance shall prevail over their respective Chinese texts for the purpose of interpretation in case of any inconsistency.

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. FINANCIAL SUMMARY

The following is a summary of (i) the audited financial results of the Group for each of the three financial years ended 31 December 2010; and (ii) the assets and liabilities as at 31 December 2008, 2009 and 2010 as extracted from the audited financial statements of the Group for the relevant years. The auditors of the Company, KPMG, did not issue any qualified opinion on the financial statements of the Group for each of the three years ended 31 December 2010. The Company had no exceptional or extraordinary items for each of the three years ended 31 December 2010.

(i) CONSOLIDATED PROFIT AND LOSS ACCOUNT

Continuing operation
Turnover
Cost of sales
Gross profit
Other revenue
Other net income
Selling and distribution costs
Administrative expenses
Profit from operation
Finance costs
Profit/(loss) before taxation
Income tax
Profit/(loss) for the year
Attributable to:
– Equity shareholders of the Company
– Non-controlling interests
Profit/(loss) for the year
Dividends payable to equity shareholders of
the Company attributable to the year:
Final dividend proposed after the balance sheet
date
Dividend per share
Basic earnings per share
From continuing operation:

Year ended 31 December
2008
2009
2010
HK$’000
HK$’000
HK$’000
443,533
670,175
939,178
(285,249)
(347,479)
(415,274)
158,284
322,696
523,904
4,233
12,004
13,348
748
1,184
9,034
(66,237)
(161,625)
(317,161)
(42,245)
(78,473)
(110,064)
54,783
95,786
119,061
(1,378)
(5,321)
(3,831)
53,405
90,465
115,230
(4,938)
(22,239)
(29,151)
48,467
68,226
86,079
20,330
44,054
60,925
28,137
24,172
25,154
48,467
68,226
86,079
11,399
–
–
0.7 cents
–
–
2.45 cents
2.82 cents
3.53 cents

– II-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) ASSETS AND LIABILITIES

Total assets Total liabilities Net assets	As at 31 December 2008 2009 2010 HK$’000 HK$’000 HK$’000 703,721 1,202,934 1,406,176 148,607 331,070 556,992 555,114 871,864 849,184	As at 31 December 2008 2009 2010 HK$’000 HK$’000 HK$’000 703,721 1,202,934 1,406,176 148,607 331,070 556,992 555,114 871,864 849,184
		849,184

– II-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. AUDITED FINANCIAL STATEMENTS

The following is the full text of the audited financial statements of the Group for the year ended 31 December 2010 extracted from the annual report of the Company for the year ended 31 December 2010:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2010 (Expressed in Hong Kong dollars)

Note Turnover 3 Cost of sales Gross profit Other revenue 4 Other net income 4 Selling and distribution costs Administrative expenses Profit from operations Finance costs 5(a) Profit before taxation 5 Income tax 6 Profit for the year Attributable to: Equity shareholders of the Company Non-controlling interests Profit for the year Earnings per share 11 Basic Diluted	2010 $’000 939,178 (415,274) 523,904 13,348 9,034 (317,161) (110,064) 119,061 (3,831) 115,230 (29,151) 86,079 60,925 25,154 86,079 3.53 cents N/A	2009 $’000 670,175 (347,479) 322,696 12,004 1,184 (161,625) (78,473) 95,786 (5,321) 90,465 (22,239) 68,226 44,054 24,172 68,226 2.82 cents N/A

– II-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2010

(Expressed in Hong Kong dollars)

Note Profit for the year Other comprehensive income for the year (after tax) Exchange differences on translation of financial statements of overseas subsidiaries Available-for-sale securities: net movement in fair value reserve 10 Total comprehensive income for the year Attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive income for the year	2010 $’000 86,079 ------------ 35,444 1,974 37,418 ------------ ----------------------- 123,497 93,888 29,609 123,497	2009 $’000 68,226 ------------ 4,109 1,358
		5,467 ------------ ----------------------- 73,693

		49,258 24,435
		73,693

– II-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2010

(Expressed in Hong Kong dollars)

Note Non-current assets Fixed assets 13 – Other property, plant and equipment – Investment property – Interests in leasehold land held for own use under operating leases Construction in progress 14 Intangible assets 15 Goodwill 16 Other financial assets 18 Deferred tax assets 21(b) Current assets Other financial assets 18 Inventories 19 Trade and other receivables 20 Deposits with banks 22 Cash and cash equivalents 22	2010 $’000 237,500 3,471 192,544 41,745 475,260 115,174 192,578 9,840 12,612 805,464 ------------ 31,003 168,973 219,849 60,875 120,012 600,712 ------------	2009 $’000 247,352 2,543 97,200 14,396
		361,491 135,127 186,197 5,828 6,045
		694,688 ------------ – 115,041 159,710 22,033 211,462
		508,246 ------------

– II-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note Current liabilities Trade and other payables 23 Bank loans 24 Current taxation 21(a) Current portion of deferred government grants 25 Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities 21(b) Deferred government grants 25 NET ASSETS CAPITAL AND RESERVES Share capital 27(b) Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests TOTAL EQUITY	2010 $’000 361,291 109,294 13,466 5,038 489,089 ------------ ----------------------- 111,623 ------------ ----------------------- 917,087 ------------ 58,312 9,591 67,903 ------------ ----------------------- 849,184 178,341 657,318 835,659 13,525 849,184	2009 $’000 169,366 84,042 8,493 6,283
		268,184 ------------ ----------------------- 240,062 ------------ ----------------------- 934,750 ------------ 55,261 7,625
		62,886 ------------ ----------------------- 871,864

		162,841 523,273
		686,114 185,750
		871,864

– II-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2010 (Expressed in Hong Kong dollars)

	Interest attributable to equity	Interest attributable to equity	Interest attributable to equity	shareholders	of the Company	of the Company	Total equity $’000 555,114 68,226 5,467
Share capital $’000 83,097 – – – - - - - - - - – 79,744 – – 162,841 162,841 – – – - - - - - - - 15,500 – – 178,341	Share premium $’000 204,057 – – – - - - - - - - – 209,207 – – 413,264 413,264 – – – - - - - - - - 116,250 – – 529,514	Capital redemption reserve $’000 297 – – – - - - - - - - – – – – 297 297 – – – - - - - - - - – – – 297	Exchange reserve $’000 40,473 – 4,428 4,428 - - - - - - - – – – – 44,901 44,901 – 30,989 30,989 - - - - - - - – 42,252 – 118,142	Reserve fund $’000 18,196 – – – - - - - - - - – – 4,650 – 22,846 22,846 – – – - - - - - - - – 17,634 10,281 50,761	Fair value reserve $’000 524 – 776 776 - - - - - - - – – – – 1,300 1,300 – 1,974 1,974 - - - - - - - – 3,294 – 6,568	Retained profits $’000 12,660 44,054 – 44,054 - - - - - - - (11,399) – (4,650) – 40,665 40,665 60,925 – 60,925 - - - - - - - – (139,273) (10,281) (47,964)
							73,693 - - - - - - - (11,399) 288,951 – (34,495)
							871,864

							871,864 86,079 37,418
							123,497 - - - - - - - 131,750 (277,927) –
							849,184

– II-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2010 (Expressed in Hong Kong dollars)

Note Operating activities Profit before taxation Adjustments for: Depreciation and amortisation Impairment loss on trade receivables 5(c) Finance costs 5(a) Interest income 4 Dividend income from unlisted equity securities 4 (Gain)/loss on disposal of fixed assets 4 Foreign exchange loss Operating profit before changes in working capital Increase in inventories (Increase)/Decrease in trade and other receivables Decrease in restricted deposits Increase in trade and other payables Cash generated from operations PRC enterprise income tax paid Net cash generated from operating activities Investing activities Payment for the purchase of fixed assets Payment for the purchase of intangible assets Proceeds from disposal of fixed assets Increase in deposits with banks Payment for construction in progress Payment for purchase of available-for-sale securities Payment for lease prepayments Cash consideration paid for the acquisition of subsidiaries and non-controlling interests, net of cash acquired 31 Interest received Dividends received from unlisted equity securities Net cash used in investing activities	2010 $’000 115,230 54,214 2,464 3,831 (1,879) (365) (8,797) 19 164,717 (53,932) (62,951) – 56,973 104,807 (32,181) 72,626 (28,932) (646) 57,333 (38,842) (45,678) (30,555) (105,273) (134,132) 1,879 365 (324,481)	2009 $’000 90,465 52,173 550 5,321 (1,444) (92) 503 68 147,544 (1,238) 15,347 1,529 21,614 184,796 (13,636) 171,160 (13,417) – – (14,075) (12,532) – – (67,141) 1,444 92 (105,629)

– II-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note Financing activities Proceeds from the issue of new shares Proceeds from new bank loans Repayment of bank loans Interest paid Dividends paid to non-controlling interests Dividends paid to equity shareholders of the Company Net cash generated from/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes Cash and cash equivalents at 31 December	2010 $’000 131,750 130,914 (105,662) (3,831) – – 153,171 (98,684) 211,462 7,234 120,012	2009 $’000 70,000 199,725 (220,978) (5,321) (34,495) (11,399) (2,468) 63,063 147,764 635 211,462

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Hong Kong dollars unless otherwise indicated)

1 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (HKFRSs), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted by the Group is set out below.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group and the Company. Note 2 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements.

(b) Basis of preparation of the financial statements

The consolidated financial statements for the year ended 31 December 2010 comprise Winteam Pharmaceutical Group Limited (the “Company”) and its subsidiaries (together referred to as the “Group”).

The measurement basis used in the preparation of the financial statements is the historical cost basis except that certain financial instruments classified as available-for-sale are stated at their fair value as explained in accounting policy set out in note 1(e).

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical

– II-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 32.

(c) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Non-controlling interests (previously known as “minority interests”) represent the equity in a subsidiary not attributable directly or indirectly to the company, and in respect of which the group has not agreed any additional terms with the holders of those interests which would result in the group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group measure any non-controlling interests either at their proportionate share of the subsidiary’s net identifiable assets.

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position in accordance with notes 1(n) or (o) depending on the nature of the liability.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see note 1(k)).

(d) Goodwill

Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over
(ii) The Group’s interest in the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

– II-10 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 1(k)).

On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

(e) Other investments in equity securities and other financial instruments

The Group’s and the Company’s policies for investments in equity securities and other financial instruments, other than investments in subsidiaries, are classified as available-for-sale securities, which are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. These investments are subsequently accounted for as follows:

Investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognised in the statement of financial position at cost less impairment losses (see note 1(k)).

Other investments in equity securities and other financial instruments are remeasured at fair value at the end of the reporting period with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the fair value reserve. Dividend income from these investments is recognised in profit or loss in accordance with the policy set out in note 1(t)(iii). When these investments are derecognised or impaired (see note 1(k)), the cumulative gain or loss is reclassified from equity to profit or loss.

Investment are recognised/derecognised on the date the Group commits to purchase/sell the investments or they expire.

(f) Investment property

Investment properties are property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties are measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

(g) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 1(k)).

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, borrowing cost and any other costs directly attributable to bringing the asset to a working condition for its intended use.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Buildings situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 50 years after the date of completion

– II-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

–	Plant,	machinery	and	equipment	10-15 years
–	Motor	vehicles			5-10 years
–	Others				2-12 years

Both the useful life of an asset and its residual value, if any, are reviewed annually.

(h) Construction in progress

Construction in progress represents buildings and, various plant and equipment under construction and pending installation, and is stated at cost less any impairment losses (see note 1(k)). Cost comprises direct costs of construction as well as borrowing cost, and foreign exchange differences on related borrowed funds to the extent that they are regarded as an adjustment to borrowing costs, during the period of construction.

Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.

No depreciation is provided in respect of construction in progress.

(i) Intangible assets (other than goodwill)

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources and the intention to complete development. The expenditure capitalised includes the costs of materials, direct labour, and an appropriate proportion of overheads and borrowing costs, where applicable (see note 1(v)). Capitalised development costs are stated at cost less accumulated amortisation and impairment losses (see note 1(k)). Other development expenditure is recognised as an expense in the period in which it is incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see note 1(k)).

Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortised from the date they are available for use and their estimated useful lives are as follows:

–	product protection rights	over the product protection period
–	trademarks	10-50 years
–	distribution network	10 years

Both the period and method of amortisation are reviewed annually.

Intangible assets are not amortised while their useful lives are assessed to be indefinite. Any conclusion that the useful life of an intangible asset is indefinite is reviewed annually to determine whether events and circumstances continue to support the indefinite useful life assessment for that asset. If they do not, the change in the useful life assessment from indefinite to finite is accounted for prospectively from the date of change and in accordance with the policy for amortisation of intangible assets with finite lives as set out above.

– II-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(j) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, with the following exception:

Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (see note 1(f)).

(ii) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term except where the property is classified as an investment property (see note 1(f)).

(k) Impairment of assets

(i) Impairment of investments in equity securities and trade and other receivables

Investments in equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at each date of financial position to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

– II-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

If any such evidence exists, any impairment loss is determined and recognised as follows:

For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

For available-for-sale securities, the cumulative loss that has been recognised directly in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised in other comprehensive income.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;
investment properties;
pre-paid interests in leasehold land classified as being held under an operating lease;
construction in progress;
intangible assets; and
goodwill.

– II-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill and intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(iii) Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with HKAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (see notes 1(k)(i) and (ii)).

Impairment losses recognised in an interim period in respect of goodwill and available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognised in other comprehensive income and not profit or loss.

(l) Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

– II-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(m) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (see note 1(k)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts (see note 1(k)).

(n) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(o) Trade and other payables

Trade and other payables are initially recognised at fair value. Trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(q) Employee benefits

Short term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(r) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the date of financial position, and any adjustment to tax payable in respect of previous years.

– II-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

– II-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(s) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(t) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Sale of goods

Revenue is recognised when goods are delivered at the customers’ premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

(ii) Rental income from operating leases

Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

(iii) Dividends

Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment is established.
Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

(v) Government grants

Government grants are recognised in the statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying mount of the asset and consequently are effectively recognised in profit or loss over the useful life of the asset by way of reduced depreciation expense.

– II-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(u) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items, including goodwill arising on consolidation of foreign operations acquired on or after 1 January 2005, are translated into Hong Kong dollars at the closing foreign exchange rates ruling at the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

(v) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(w) Related parties

For the purposes of these financial statements, a party is considered to be related to the Group if:

(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;
(ii) the Group and the party are subject to common control;
(iii) the party is an associate of the Group or a joint venture in which the Group is a venturer;
(iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;
(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or
(vi) the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

– II-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(x) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

2 CHANGES IN ACCOUNTING POLICIES

The HKICPA has issued two revised HKFRSs, a number of amendments to HKFRSs and two new Interpretations that are first effective for the current accounting period of the Group and the company. Of these, the following developments are relevant to the Group’s financial statements:

HKFRS 3 (revised 2008), Business combinations
Amendments to HKAS 27, Consolidated and separate financial statements
Amendment to HKAS 39, Financial Instruments: Recognition and measurement – eligible hedged items
Improvements to HKFRSs (2009)

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

The amendment to HKAS 39 has had no material impact on the Group’s financial statements as the amendment’s conclusions were consistent with policies already adopted by the Group. The other developments resulted in changes in accounting policy but none of these changes in policy have a material impact on the current or comparative periods, for the following reasons:

As a result of the adoption of the amendments to HKAS 27, the acquisition of an additional interest in a non-wholly owned subsidiary will be accounted for as a transaction with equity shareholders (the non-controlling interests) in their capacity as owners and therefore no goodwill will be recognized as a result of such transactions. During the current period, the Group has acquired an additional 45.57% and 46.83% interest in two non-wholly owned subsidiaries respectively. Further details are disclosed in note 31 to this financial statements.
The impact of the majority of the revisions to HKFRS 3 and other revision of HKAS 27 have not yet had a material effect on the Group’s financial statements as these changes will first be effective as and when the Group enters into a relevant transaction (for example, a business combination or a disposal of a subsidiary) and there is no requirement to restate the amounts recorded in respect of previous such transactions.
The impact of the amendments to HKFRS 3 (in respect of recognition of acquiree’s deferred tax assets) and HKAS 27 (in respect of allocation of losses to non-controlling interests (previously known as minority interests) in excess of their equity interest) have had no material impact as there is no requirement to restate amounts recorded in previous periods and no such deferred tax assets or losses arose in the current period.

– II-20 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The amendment introduced by the Improvements to HKFRSs (2009) omnibus standard in respect of HKAS 17, Leases, resulted in a change of classification of certain of the Group’s leasehold land interests located in the Hong Kong Special Administrative Region, but this had no material impact on the amounts recognised in respect of these leases as the lease premiums in respect of all such leases are fully paid and are being amortised over the remaining length of the lease term.

3 TURNOVER

The principal activities of the Group are manufacture and sale of pharmaceutical products in the PRC. Turnover represents the sales value of goods sold less returns, discounts, value added tax, and sales tax and is analysed as follows:

Sales of pharmaceutical products – Pills and tablets – Medicine wine – Injections – Paste, granules and others	2010 $’000 487,453 42,791 109,340 299,594 939,178	2009 $’000 351,532 53,097 74,555 190,991
		670,175

4 OTHER REVENUE AND NET INCOME

Other revenue Government grants (note 25) Interest income Rental income Dividend income from unlisted equity securities Other net income Net gain/(loss) on sale of property, plant and equipment Exchange loss Others	2010 $’000 9,835 1,879 1,269 365 13,348 2010 $’000 8,797 (19) 256 9,034	2009 $’000 9,354 1,444 1,114 92
		12,004

		2009 $’000 (503) (68) 1,755
		1,184

– II-21 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

5 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

(a) Finance costs: Interest on bank advances and other borrowings wholly repayable within five years (b) Staff costs: Salaries, wages and other benefits Contributions to defined contribution retirement plans (c) Other items Auditors’ remuneration Depreciation – investment properties – assets held for use under operating leases – property, plant and equipment Amortisation – intangible assets Impairment losses – trade receivables Operating lease charges: minimum lease payments Research and development costs Rentals receivable from investment properties less direct outgoings	2010 $’000 3,831 110,073 6,607 116,680 2,107 289 2,294 26,895 24,736 2,464 2,803 37,508 (1,269)	2009 $’000 5,321 95,265 5,037 100,302 1,890 292 2,222 26,091 23,567 550 546 11,845 (1,114)

6 INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT

(a) Taxation in the consolidated income statement represents:

Current tax PRC enterprise income tax for the year Under-provision in respect of prior year Deferred tax Origination and reversal of temporary differences	2010 $’000 35,746 1,408 37,154 (8,003) 29,151	2009 $’000 25,604 717 26,321 (4,082) 22,239

– II-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

No provision has been made for the Hong Kong Profits Tax as the Company and its Hong Kong incorporated subsidiaries sustained losses in Hong Kong for taxation purposes during the year.

Pursuant to the Corporate Income Tax Law of PRC, the statutory tax rate applicable to the Group’s PRC subsidiaries is 25%, except for Foshan Feng Liao Xing Pharmaceutical Co., Ltd. (“Feng Liao Xing”), Foshan Dezhong Pharmaceutical Co., Ltd. (“Dezhong”) and Guangdong Medi-World Pharmaceutical Co., Ltd. (“Guangdong Medi-World”), which were recognised as advanced and new technology enterprises to enjoy a preferential enterprise income tax rate of 15% for a three-year period with effect from 1 January 2008 pursuant to documents issued jointly by Guangdong Science and Technology Department, Guangdong Provincial Finance Bureau, Guangdong Provincial Office of the State Administration of Taxation and Guangdong Provincial Local Taxation Bureau.

Pursuant to the Corporate Income Tax Law of the PRC and its relevant regulations, PRC-resident enterprises are levied withholding income tax at 10% on dividends to their non-PRC-resident corporate investors for earnings accumulated beginning on 1 January 2008. Undistributed earnings generated prior to 1 January 2008 are exempted from such withholding tax. Under the Sino-Hong Kong Double Tax Arrangement and its relevant regulations, a qualified Hong Kong tax resident which is the “beneficial owner” and holds 25% or more of the equity interest of a PRC-resident enterprise is entitled to a reduced withholding tax rate of 5%. The Group is subject to withholding tax rate of 5% on retained earnings beginning on 1 January 2008.

(b) Reconciliation between tax expense and accounting profit at applicable tax rates:

Profit before taxation Notional tax on profit before taxation, calculated at rates applicable to profit in the countries concerned Tax effect on non-deductible expenses Tax effect on non-taxable revenue Income tax concessions Withholding tax on undistributed profits of PRC subsidiaries Under-provision in respect of prior year Actual tax expense	2010 $’000 115,230 29,858 3,235 (435) (10,172) 5,257 1,408 29,151	2009 $’000 90,465 27,989 949 (984) (8,636) 2,204 717 22,239

– II-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

7 DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance is as follows:

*Executive directors* Yang Bin Situ Min Li Songquan Xu Tiefeng *Independent non-executive* *directors* Du Richeng Pang Fu Keung Lo Wing Yat Wang Bo Zhang Jianhui *Executive directors* Yang Bin Situ Min Li Songquan Xu Tiefeng Lam Siu Hung *Independent non-executive* *directors* Du Richeng Pang Fu Keung Lo Wing Yat Wang Bo Zhang Jianhui Chan Ting Chuen, David Cheung Kin Piu, Valiant Ng Pui Cheung, Joseph	Directors’ fees $’000 180 180 180 180 180 180 180 180 180 1,620 Directors’ fees $’000 90 100 100 56 6 100 89 89 56 56 11 5 22 780	2010 Salaries, allowances and benefits in kind Discretionary bonuses Retirement scheme contributions $’000 $’000 $’000 1,051 501 (7) 650 300 30 650 300 30 754 360 36 – – – – – – – – – – – – – – – 3,105 1,461 89 2009 Salaries, allowances and benefits in kind Discretionary bonuses Retirement scheme contributions $’000 $’000 $’000 668 501 29 555 300 25 555 300 25 462 360 20 40 – 2 – – – – – – – – – – – – – – – – – – – – – – – – 2,280 1,461 101	Total $’000 1,725 1,160 1,160 1,330 180 180 180 180 180
			6,275

			Total $’000 1,288 980 980 898 48 100 89 89 56 56 11 5 22
			4,622

– II-24 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Lam Siu Hung; Cheung Kin Piu, Valiant; Chan Ting Chuen, David; and Ng Pui Cheung, Joseph resigned on 21 January, 21 January, 11 February and 24 March 2009 respectively.

8 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, four (2009: four) are directors whose remuneration is disclosed in the above. The aggregate of the emoluments in respect of the other one (2009: one) individual was as follows:

Salaries and other emoluments Retirement scheme contributions	2010 $’000 515 19 534	2009 $’000 723 9
		732

The emoluments of the one (2009: one) individual with highest emoluments are within the following band:

$ Nil – 1,000,000	2010 Number of individuals 1	2009 Number of individuals 1

9 PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

The consolidated profit attributable to equity shareholders of the Company includes a loss of $15,205,000 (2009: loss of $12,029,000) which has been dealt with in the financial statements of the Company.

Reconciliation of the above amount to the Company’s loss for the year:

Amount of consolidated loss attributable to equity shareholders dealt with in the Company’s financial statements Final dividends from subsidiaries attributable to the profits of the previous financial year, approved and paid during the year Company’s (loss)/profit for the year (note 27(a))	2010 $’000 (15,205) – (15,205)	2009 $’000 (12,029) 28,000
		15,971

10 OTHER COMPREHENSIVE INCOME

Available-for-sale securities Change in fair value recognised during the period income tax effect	2010 $’000 2,321 (347) 1,974	2009 $’000 1,649 (291)
		1,358

– II-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11 EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of basic earnings per share is based on the profit attributable to ordinary equity shareholders of the Company of $60,925,000 (2009: $44,054,000) and the weighted average of 1,727,868,000 (ordinary shares) (2009: 1,561,958,000) in issue during the year.

Issued ordinary shares at 1 January Effect of new shares issued Weighted average number of ordinary shares at 31 December	2010 ’000 1,628,411 155,000 1,727,868	2009 ’000 830,974 797,437 1,561,958

(b) Diluted earnings per share

There were no dilutive potential ordinary shares during the years presented and, therefore, diluted earnings per share is not presented.

12 SEGMENT REPORTING

The Group manages its businesses by subsidiaries. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has identified the following five reportable segments. No operating segments have been aggregated to form the following reportable segments.

Dezhong
Feng Liao Xing
Guangdong Medi-World
Shandong Luya Pharmaceutical Co., Ltd. (“Luya”)
Nanhai Pharmaceutical

(a) Segment results, assets and liabilities

For the purposes of assessing segment performance and allocating resources between segments, the Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible, intangible assets and current assets with the exception of investment in financial assets, deferred tax assets and other corporate assets. Segment liabilities include trade creditors, accruals and bills payable attributable to the manufacturing and sales activities of the individual segments and bank borrowings managed directly by the segments.

Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments or which otherwise arise from the depreciation or amortisation of assets attributable to those segments.

The measure used for reporting segment profit is “adjusted EBITDA” i.e. “adjusted earnings before interest, taxes, depreciation and amortization”, where “interest” is regarded as including investment income and “depreciation and amortization” is regarded as including impairment losses on non-current assets. To arrive at adjusted EBITDA the Group’s earnings are further adjusted for items not specifically attributed to individual segments, such as directors’ and auditors’ remuneration and other head office or corporate administration costs.

– II-26 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

In addition to receiving segment information concerning adjusted EBITDA, management is provided with segment information concerning revenue including inter segment, interest income and expense from cash balances and borrowings managed directly by the segments, depreciation, amortisation and impairment losses and additions to non-current segment assets used by the segments in their operations. Inter-segment sales are priced with reference to prices charged to external parties for similar orders.

Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance for the years ended 31 December 2010 and 2009 is set out below.

Year ended 31 December 2010

Revenue from external customers Inter-segment revenue Consolidated turnover Reportable segment profit Interest income from bank deposit Interest expenses Depreciation and amortization for the year Reportable segment assets at year end Additions to non-current assets Reportable segment liabilities at year end	Dezhong $’000 340,015 – 340,015 226,477 1,536 265 23,715 363,728 45,416 150,134	Feng Liao Xing $’000 183,477 – 183,477 74,000 218 82 17,939 220,151 4,035 71,569	Guangdong Medi-World $’000 260,264 – 260,264 188,719 53 3,464 7,722 706,395 116,104 361,708	LUYA $’000 106,764 – 106,764 54,270 18 3 4,109 110,404 13,876 22,539	Nanhai Phar- maceutical $’000 152,655 (103,997) 48,658 13,808 53 17 89 80,048 350 64,588	Total $’000 1,043,175 (103,997)
						939,178

						557,274 1,878 3,831 53,574 1,480,726 179,781 670,538

– II-27 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Year ended 31 December 2009

Revenue from external customers Inter-segment revenue Consolidated turnover Reportable segment profit Interest income from bank deposit Interest expenses Depreciation and amortization for the year Reportable segment assets at year end Additions to non-current assets Reportable segment liabilities at year end	Dezhong $’000 223,470 – 223,470 116,601 1,152 – 22,874 258,546 4,616 71,013	Feng Liao Xing $’000 178,702 – 178,702 64,453 172 782 11,752 186,831 2,711 68,983	Guangdong Medi-World $’000 186,264 – 186,264 135,503 205 3,719 6,325 268,823 190,591 97,205	LUYA $’000 71,988 – 71,988 36,531 11 752 2,357 99,506 23,304 35,672	Nanhai Phar- maceutical $’000 19,367 (9,616) 9,751 2,230 – 97 89 30,194 501 21,980	Total $’000 679,791 (9,616) 670,175 355,318 1,540 5,350 43,397 843,900 221,723 294,853

(b) Reconciliations of reportable segment revenues, profit or loss, assets and liabilities

Revenue Reportable segment revenue Elimination of inter-segment revenue Consolidated turnover Profit Reportable segment profit Elimination of inter-segment profits Reportable segment profit derived from the Group’s external customers Other revenue and net income Depreciation and amortization Finance costs Unallocated head office and corporate expenses Consolidated profit before taxation	2010 $’000 1,043,175 (103,997) 939,178 557,274 (10,188) 547,086 22,382 (54,214) (3,831) (396,193) 115,230	2009 $’000 679,791 (9,616) 670,175 355,318 (1,107) 354,211 13,188 (52,173) (5,321) (219,440) 90,465

– II-28 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Assets Reportable segment assets Elimination of inter-segment receivables Non-current financial assets Deferred tax assets Unallocated head office and corporate assets Consolidated total assets Liabilities Reportable segment liabilities Elimination of inter-segment payables Current tax liabilities Deferred tax liabilities Unallocated head office and corporate liabilities Consolidated total liabilities	At 31 December 2010 $’000 1,480,726 (189,645) 1,291,081 9,840 12,612 92,643 1,406,176 670,538 (189,645) 480,893 13,466 58,312 4,321 556,992	At 31 December 2009 $’000 843,900 (27,638) 816,262 5,828 6,045 374,799 1,202,934 294,853 (27,638) 267,215 8,493 55,261 101 331,070

(c) Geographic information

Analysis of the Group’s turnover and results as well as analysis of the Group’s carrying amount of segment assets and additions to property, plant and equipment by geographical market has not been presented as substantially all of the Group’s assets are located in the PRC.

– II-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13 FIXED ASSETS

Cost: At 1 January 2009 Additions Acquisition of subsidiaries Transfer from construction in progress Disposals Exchange adjustments At 31 December 2009 At 1 January 2010 Additions Transfer from construction in progress Disposals Exchange adjustments At 31 December 2010 Accumulated depreciation and amortisation: At 1 January 2009 Charge for the year Written back on disposals Exchange adjustments At 31 December 2009 At 1 January 2010 Charge for the year Written back on disposals Exchange adjustments At 31 December 2010 Net book value: At 31 December 2010 At 31 December 2009	Buildings $’000 78,508 42 36,685 44,745 (369) 937 160,548 - - - - - - - - 160,548 8,057 14,074 (53,371) 6,030 135,338 - - - - - - - - 31,375 6,236 (311) 461 37,761 - - - - - - - - ------------------------------ 37,761 7,140 (32,507) 2,398 14,792 - - - - - - - - ------------------------------ 120,546 122,787	Plant, machinery and equipment $’000 150,303 6,283 9,866 21,250 (2,128) (46) 185,528 - - - - - - - - 185,528 9,173 4,981 (19,879) 7,581 187,384 - - - - - - - - 76,731 14,573 (1,876) 455 89,883 - - - - - - - - ------------------------------ 89,883 14,292 (6,943) 6,511 103,743 - - - - - - - - ------------------------------ 83,641 95,645	Motor vehicles $’000 3,617 785 423 – (302) 19 4,542 - - - - - - - - 4,542 4,387 – (269) 263 8,923 - - - - - - - - 2,755 379 (273) 72 2,933 - - - - - - - - ------------------------------ 2,933 934 (177) 134 3,824 - - - - - - - - ------------------------------ 5,099 1,609	Others $’000 45,954 5,838 11,048 882 (2,611) 1,192 62,303 - - - - - - - - 62,303 6,177 510 (16,026) 2,866 55,830 - - - - - - - - 31,758 4,903 (1,962) 293 34,992 - - - - - - - - ------------------------------ 34,992 4,529 (14,453) 2,548 27,616 - - - - - - - - ------------------------------ 28,214 27,311	Sub-total Investment properties $’000 $’000 278,382 6,572 12,948 – 58,022 – 66,877 – (5,410) (717) 2,102 (15) 412,921 5,840 - - - - - - - - - - - - - - - - 412,921 5,840 27,794 1,138 19,565 – (89,545) – 16,740 231 387,475 7,209 - - - - - - - - - - - - - - - - 142,619 3,169 26,091 292 (4,422) (160) 1,281 (4) 165,569 3,297 - - - - - - - - ------------------------------ - - - - - - - - ------------------------------ 165,569 3,297 26,895 289 (54,080) – 11,591 152 149,975 3,738 - - - - - - - - ------------------------------ - - - - - - - - ------------------------------ 237,500 3,471 247,352 2,543	Interests in leasehold land held for own use under operating leases $’000 37,038 469 66,953 – – 987 105,447 - - - - - - - - 105,447 105,273 – (15,208) 5,960 201,472 - - - - - - - - 5,971 2,222 – 54 8,247 - - - - - - - - ------------------------------ 8,247 2,294 (2,137) 524 8,928 - - - - - - - - ------------------------------ 192,544 97,200	The Group Total $’000 321,992 13,417 124,975 66,877 (6,127) 3,074
							524,208 - - - - - - - - 524,208 134,205 19,565 (104,753) 22,931
							596,156 - - - - - - - - 151,759 28,605 (4,582) 1,331
							177,113 - - - - - - - - ------------------------------ 177,113 29,478 (56,217) 12,267
							162,641 - - - - - - - - ------------------------------ 433,515

							347,095

(a) The interests in leasehold land held for own use under operating leases and investment properties are held on medium-term leases of 50 years in the PRC. At 31 December 2010, the remaining period of the land use rights is 43 years.

– II-30 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) The Group leases out investment properties under operating leases. The leases typically run for an initial period of two to five years, with an option to renew the lease after that date at which time all terms are renegotiated. One of the leases runs for twenty years with three months’ notice for termination. Lease payments of this lease are gradually increased during the lease period to reflect market rentals. None of the leases includes contingent rentals.

The Group’s total future minimum lease payments receivable under non-cancellable operating leases are as follows:

Within 1 year After 1 year but within 5 years	2010 $’000 658 – 658	2009 $’000 480 221
		701

All investment properties of the Group were stated in the consolidated statement of financial position at cost less accumulated depreciation and impairment losses. The fair value of the investment properties as at 31 December 2010 is $14,700,000 (2009: $14,170,000) by reference to net rental income allowing for reversionary income potential. The valuation of the investment properties as at 31 December 2010 and 2009 were carried out respectively by Memfus Wong Surveyor Limited and BMI Appraisals Limited, two independent firms of professional surveyors.

(c) Certain interests in leasehold land held for own use under operating leases and buildings with carrying value of $22,086,000 were pledged as securities of bank loans of the Group as at 31 December 2010 (see note 24) (2009: $91,310,000).

14 CONSTRUCTION IN PROGRESS

At 1 January Additions Acquisition of subsidiaries Transfer to fixed assets Exchange adjustments At 31 December	2010 $’000 14,396 45,678 – (19,565) 1,236 41,745	2009 $’000 1,364 12,532 67,282 (66,877) 95
		14,396

– II-31 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

15 INTANGIBLE ASSETS

Cost: At 1 January 2009 Addition through acquisition of subsidiaries Exchange adjustments At 31 December 2009 At 1 January 2010 Additions Exchange adjustments At 31 December 2010 Accumulated amortisation and impairment loss: At 1 January 2009 Amortisation for the year Exchange adjustments At 31 December 2009 At 1 January 2010 Amortisation for the year Exchange adjustments At 31 December 2010 Net book value: At 31 December 2010 At 31 December 2009	The Group Product protection rights Trademarks Distribution network $’000 $’000 $’000 74,353 41,838 – – 12,987 66,056 (78) 294 951 74,275 55,119 67,007 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 74,275 55,119 67,007 – 345 – 2,583 1,768 2,331 76,858 57,232 69,338 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 35,270 2,215 – 14,843 1,841 6,137 (26) 989 5 50,087 5,045 6,142 - - - - - - - - - - --------------------------------------- - - - - - - - - - - --------------------------------------- - - - - - - - - - - --------------------------------------- 50,087 5,045 6,142 15,022 2,925 6,776 2,091 88 373 67,200 8,058 13,291 - - - - - - - - - - --------------------------------------- - - - - - - - - - - --------------------------------------- - - - - - - - - - - --------------------------------------- 9,658 49,174 56,047 24,188 50,074 60,865	Software $’000 – – – – - - - - - - - - - - – 301 7 308 - - - - - - - - - - – – – – - - - - - - - - - - --------------------------------------- – 13 – 13 - - - - - - - - - - --------------------------------------- 295 –	Total $’000 116,191 79,043 1,167
			196,401 - - - - - - - - - - 196,401 646 6,689
			203,736 - - - - - - - - - - 37,485 22,821 968
			61,274 - - - - - - - - - - --------------------------------------- 61,274 24,736 2,552
			88,562 - - - - - - - - - - --------------------------------------- 115,174

			135,127

The amortisation charge for the year is included in “cost of sales” in the consolidated income statement.

– II-32 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

16 GOODWILL

Cost and carrying amount: At 1 January Addition acquired through business combination Exchange adjustments At 31 December	The Group 2010 2009 $’000 $’000 186,197 141,037 – 44,721 6,381 439 192,578 186,197	The Group 2010 2009 $’000 $’000 186,197 141,037 – 44,721 6,381 439 192,578 186,197
		186,197

Goodwill acquired through business combination is allocated to the Group’s cash-generating units (“CGU”) identified as follows:

Manufacture and sale of pharmaceutical products – Dezhong Manufacture and sale of pharmaceutical products – Feng Liao Xing Manufacture and sale of pharmaceutical products – Guangdong Medi-Word Manufacture and sale of pharmaceutical products – Luya Manufacture and sale of pharmaceutical products – Nanhai Pharmaceutical	The Group 2010 2009 $’000 $’000 117,980 114,015 27,808 26,873 30,634 29,604 13,278 12,924 2,878 2,781 192,578 186,197	The Group 2010 2009 $’000 $’000 117,980 114,015 27,808 26,873 30,634 29,604 13,278 12,924 2,878 2,781 192,578 186,197
		186,197

The recoverable amount of the CGU is determined based on value-in-use calculations. The key assumptions used in the valuations are those regarding the expected changes to selling prices and costs, and discount rates. The changes in selling prices and costs are based on historical operating records and expectation of future changes in the market. Discount rates applied are able to reflect the current market assessments of the time value of money and the risks specific to the CGU.

The Company determined the value-in-use by preparing cash flow projections of each of the CGU derived from the most recent financial forecast approved by the management covering a one-year period and extrapolated to cover a period of nine more years with an estimated increase in selling prices and costs of 3% (2009: 3%) and no growth in sales volume. The rate used to discount the forecast cash flows is 9.7% (2009: 12%).

17 INTEREST IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries	The Company 2010 2009 $’000 $’000 529,542 529,542 180,714 59,846 710,256 589,388	The Company 2010 2009 $’000 $’000 529,542 529,542 180,714 59,846 710,256 589,388
		589,388

The amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment. In the opinion of the directors, the amounts will not be recoverable within twelve months from the Company’s date of financial position and are therefore shown in the Company’s statement of financial position as non-current assets.

– II-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The following list contains only the particulars of subsidiaries which principally affected the results, assets or liabilities of the Group at 31 December 2010.

All of these are controlled subsidiaries as defined under note 1(c) and have been consolidated into the Group’s financial statements.

	Place of
	incorporation/	Issued and
	establishment and	paid up share	Percentage of equity
Name of company	operation	capital	interest held		Principal activities
			Directly	Indirectly
Lipromate Resources Limited	Hong Kong	Ordinary HK$1	100%	–	Provision of accounting
	14 December 2006				and management
					services to the Group
Hensil Industrial Inc. Limited	Hong Kong	Ordinary HK$1	100%	–	Investment holding
	6 July 2007
Hensil Trading &	Hong Kong	Ordinary HK$1	100%	–	Investment holding
Investments Limited	6 July 2007
Smartpoint International	BVI	HK$1,000	100%	–	Investment holding
Limited (“Smartpoint”)	10 November 2008
Foshan Dezhong	The PRC	US$5,760,000	–	96.57%	Manufacture and sale
Pharmaceutical Co., Ltd.	1 November 1998				of Chinese
(“Dezhong”) (note (i))					pharmaceutical
					products
Foshan Feng Liao Xing	The PRC	US$6,926,100	–	97.83%	Manufacture and sale
Pharmaceutical Co., Ltd.	16 March 2000				of Chinese
(“Feng Liao Xing”)					pharmaceutical
(note (i))					products
Gold Sun Development	Hong Kong	Ordinary HK$1	100%	–	Investment holding
Limited	9 September 2010
Guangdong Medi- World	The PRC	US$25,060,000	–	100%	Manufacture and sale
Pharmaceutical Co., Ltd.	13 November 1992				of pharmaceutical
(“Guangdong					products and
Medi-World”) (note (ii))					investment holding
Shandong Luya	The PRC	RMB24,529,300	–	100%	Manufacture and sale
Pharmaceutical Co., Ltd.	6 November 2000				of pharmaceutical
(“Luya”)					products
(note (iii))
Foshan Nanhai	The PRC	RMB5,500,000	–	100%	Trading of
Pharmaceutical Group	6 March 1982				pharmaceutical
Medicinal Material					products
Co., Ltd.
(“Nanhai Pharmaceutical”)
(note (iv))
Foshan City An Ning	The PRC	RMB23,353,400	–	93%	Investment holding
Company Limited	13 October 1998

– II-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

	Place of
	incorporation/	Issued and
	establishment and	paid up share	Percentage of equity
Name of company	operation	capital	interest held		Principal activities
			Directly	Indirectly
Foshan Dezhong	The PRC	RMB500,000	80%	–	Trading of
Pharmaceutical Machinery	7 June 2010				pharmaceutical
Co., Ltd.					equipment
Foshan Zhong Hong	The PRC	RMB28,066,782	–	95.57%	Investment holding
Co., Ltd.	3 December 1973
Winteam Pharmaceutical	The PRC	RMB30,000,000	–	100%	Medical research and
Development Co., Ltd	13 October 2010				property management

Notes:

(i) Dezhong and Feng Liao Xing are sino-foreign equity joint ventures established in the PRC pursuant to the law of the PRC on sino-foreign equity joint ventures. Dezhong and Feng Liao Xing have joint venture periods of 50 years expiring on 30 October 2048 and 15 March 2050, respectively.
(ii) Guangdong Medi-World is a wholly foreign owned enterprise established pursuant to the Wholly Foreign-owned Enterprise Law of the PRC. Guangdong Medi-World’s period of operation is 30 years expiring on 13 November 2022.
(iii) Luya is a sino-foreign equity joint venture established pursuant to the law of the PRC on sino-foreign equity joint ventures. Luya has joint venture periods of 15 years expiring on 6 November 2015.
(iv) Nanhai Pharmaceutical was established pursuant to the Company Law of the PRC.

18 OTHER FINANCIAL ASSETS

Non-current Available-for-sale equity securities – Listed in the PRC, at fair value – Unlisted equity securities, at cost Current Other financial instruments, at fair value Market value of listed securities	The Group 2010 2009 $’000 $’000 8,653 4,681 1,187 1,147 9,840 5,828 31,003 – 40,843 5,828 8,653 4,681	The Group 2010 2009 $’000 $’000 8,653 4,681 1,187 1,147 9,840 5,828 31,003 – 40,843 5,828 8,653 4,681
		5,828 –
		5,828

		4,681

Investments in unlisted equity securities do not have a quoted market price in an active market. Quoted prices in active market for similar financial assets or observable market data as significant inputs for valuation techniques are also not available. Therefore, the unlisted equity securities are stated at cost less impairment, if any, in the financial statements.

Other financial instruments as at 31 December 2010 represent the fair value of two wealth management products issued by the two PRC banks of $23,952,000 and $7,051,000 respectively.

– II-35 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

19 INVENTORIES

(a) Inventories in the statement of financial position comprise:

Raw materials Work in progress Finished goods Packaging materials Low value consumables	2010 $’000 48,348 48,972 57,253 154,573 10,390 4,010 168,973	2009 $’000 39,265 34,219 32,544
		106,028 5,450 3,563
		115,041

(b) The analysis of the amount of inventories recognised as an expense and included in profit or loss is as follows:

Carrying amount of inventories sold Write down of inventories	2010 $’000 414,965 309 415,274	2009 $’000 347,479 –
		347,479

20 TRADE AND OTHER RECEIVABLES

Trade debtors and bills receivables Less: allowance for doubtful debt (note 20(b)) Deposits and prepayments	The Group 2010 2009 $’000 $’000 198,585 149,172 (11,176) (8,364) 187,409 140,808 32,440 18,902 219,849 159,710	The Company 2010 2009 $’000 $’000 – – – – – – 452 296 452 296	The Company 2010 2009 $’000 $’000 – – – – – – 452 296 452 296
			– 296
			296

– II-36 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(a) Ageing analysis

Included in trade and other receivables are trade debtors and bills receivables with the following ageing analysis as of the end of the reporting period:

Within 3 months of invoice date 3 to 6 months after invoice date More than 6 months less than 12 months after invoice date More than 12 months after invoice date	The Group 2010 2009 $’000 $’000 122,343 120,040 38,009 16,473 27,057 4,295 11,176 8,364 198,585 149,172	The Group 2010 2009 $’000 $’000 122,343 120,040 38,009 16,473 27,057 4,295 11,176 8,364 198,585 149,172
		149,172

Trade debtors and bills receivables are due within 30 to 90 days from the date of billing. All of the trade and bills receivables are expected to be recovered within one year. Further details on the Group’s credit policy are set out in note 28(a).

(b) Impairment of trade and bills receivables

Impairment losses in respect of trade debtors and bills receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade debtors and bills receivables directly (see note 1(k)(i)).

The movements in the allowance for doubtful debts during the year, including both specific and collective loss components, are as follows:

At 1 January Addition through acquisition of subsidiaries Impairment loss recognised Exchange adjustments At 31 December	The Group 2010 2009 $’000 $’000 8,364 2,647 – 5,154 2,464 550 348 13 11,176 8,364	The Group 2010 2009 $’000 $’000 8,364 2,647 – 5,154 2,464 550 348 13 11,176 8,364
		8,364

At 31 December 2010, the Group’s gross trade receivables of $11,176,000 (2009: $8,364,000) were individually determined to be impaired. The individually impaired receivables related to receivables that were overdue more than one year and management assessed that receivables are not expected to be recovered. Consequently, specific allowances for doubtful debts of $11,176,000 were recognised (2009: $8,364,000). The Group does not hold any collateral over these balances.

– II-37 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(c) Trade and bills receivables that are not impaired

The ageing analysis of trade and bills receivables that are neither individually nor collectively considered to be impaired are as follows:

Within 3 months of invoice date 3 to 6 months after invoice date More than 6 months less than 12 months after invoice date More than 12 months after invoices date	The Group 2010 2009 $’000 $’000 122,343 120,040 38,009 16,473 27,057 4,295 – – 187,409 140,808	The Group 2010 2009 $’000 $’000 122,343 120,040 38,009 16,473 27,057 4,295 – – 187,409 140,808
		140,808

As at 31 December 2010, receivables that were neither past due nor impaired individually, amounted to $187,409,000 (2009: $140,808,000).

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality of the customers and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

21 INCOME TAX IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(a) Current taxation in the consolidated statement of financial position represents:

PRC corporate income tax payable	The Group 2010 2009 $’000 $’000 13,466 8,493

– II-38 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) Deferred tax assets/(liabilities) recognised

The components of deferred tax assets/(liabilities) recognised in the consolidated statement of financial position and the movements during the year are as follows:

At 1 January 2009 Addition through acquisition Credited/(charged) to profit or loss Credited to reserves Exchange adjustments At 31 December 2009 At 1 January 2010 Credited/(charged) to profit or loss Credited to reserves Exchange adjustments At 31 December 2010	Intangible assets $’000 (16,637) (17,808) 3,574 – (278) (31,149) (31,149) 4,482 – (995) (27,662)	Depreciation allowances in excess of related depreciation $’000 (8,735) (10,574) 624 – (158) (18,843) (18,843) 2,590 – (538) (16,791)	Allowance for impairment of inventories and doubtful debts $’000 554 5,067 (345) – 71 5,347 5,347 469 – 198 6,014	Available- for-sale securities $’000 (392) – – (291) (1) (684) (684) – (625) (37) (1,346)	Withholding tax on undistributed profits of PRC subsidiaries $’000 (1,496) (1,346) (2,204) – 19 (5,027) (5,027) (5,257) (2,738) 73 (12,949)	Others $’000 (1,372) 75 2,433 – 4 1,140 1,140 5,719 – 175 7,034	Total $’000 (28,078) (24,586) 4,082 (291) (343) (49,216) (49,216) 8,003 (3,363) (1,124) (45,700)

Reconciliation to the consolidated statement of financial position:

Net deferred tax assets recognised on the consolidated statement of financial position Net deferred tax liabilities recognised on the consolidated statement of financial position	The Group 2010 2009 $’000 $’000 12,612 6,045 (58,312) (55,261) (45,700) (49,216)

– II-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

22 CASH AND CASH EQUIVALENTS

Deposits with banks and other financial institutions Cash at bank and in hand Less: Bank deposits with maturity beyond three months (Note 1) Cash and cash equivalents	The Group 2010 2009 $’000 $’000 60,875 22,033 120,012 211,462 180,887 233,495 (60,875) (22,033) 120,012 211,462	The Company 2010 2009 $’000 $’000 – – 502 5,137 502 5,137 – – 502 5,137	The Company 2010 2009 $’000 $’000 – – 502 5,137 502 5,137 – – 502 5,137
			5,137 –
			5,137

Note 1: As at 31 December 2010, bank deposits with maturity beyond three months amounted to $60,875,000 were pledged as securities for certain banking facilities (2009: nil) (See note 24).

23 TRADE AND OTHER PAYABLES

Trade creditors Other creditors and accrued charges Advances received from customers	The Group 2010 2009 $’000 $’000 85,824 63,672 241,606 74,427 33,861 31,267 361,291 169,366	The Company 2010 2009 $’000 $’000 – – 1,922 2,076 – – 1,922 2,076	The Company 2010 2009 $’000 $’000 – – 1,922 2,076 – – 1,922 2,076
			2,076

Included in trade and other payables are trade creditors with the following ageing analysis as of the end of the reporting period:

							The
							2010	2009
							$’000	$’000
Due	within	1	month	or	on	demand	85,824	63,672

Other creditors and accrued charges mainly include payable for acquisition of non-controlling interest on Foshan Zhong Hong Co., Ltd (note 31), accrued staff costs and benefits and advertising expenses payable.

All of the trade and other payables are expected to be settled within one year or payable on demand.

24 BANK LOANS

At 31 December 2010, the Group’s bank loans were repayable as follows:

Within 1 year or on demand	The Group 2010 2009 $’000 $’000 109,294 84,042

– II-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

At 31 December 2010, the Group’s bank loans were secured as follows:

Bank loans Secured Unsecured	The Group 2010 2009 $’000 $’000 109,294 65,871 – 18,171 109,294 84,042	The Group 2010 2009 $’000 $’000 109,294 65,871 – 18,171 109,294 84,042
		84,042

As at 31 December 2010, bank loans of $49,358,000 (2009: $59,511,000) were guaranteed by Mr. Xu Tiefeng and Mr. Yang Bin, two executive directors of the Company, and were secured by interests in leasehold land and buildings of the Group with carrying amount of $14,811,000 (2009: $91,310,000) (see note 13(c)).

Bank loan of $15,278,000 (2009: $6,360,000) was secured by the interests in leasehold land of Foshan Hanyu Pharmaceutical Co., Ltd. (“Hanyu Pharmaceutical”), previously known as Foshan Winteam Pharmaceutical Co., Ltd., a company in which Mr. Yang Bin and Mr. Xu Tiefeng jointly hold 72.7% equity interest.

Bank loan of $21,154,000 (2009: nil) was secured by interests in leasehold land and building of the Group with carrying amount of $7,275,000. (2009: nil) (See note 13(c)).

Banking facilities of $47,008,000 (2009: nil) were secured by deposits with bank of $60,875,000 (2009: nil). The facilities were utilised to the extent of $23,504,000 and the bank loan drawn was also guaranteed by Foshan Nanhai Yikang Pharmaceutical Co., Ltd., a company in which Mr. Yang Bin and Mr. Xu Tiefeng jointly hold 100% equity interest.

Parts of the Group’s banking facilities, $23,504,000 (2009: $34,071,000) are subject to the fulfilment of covenants relating to certain of the Group’s consolidated statement of financial position ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in note 28(b). As at 31 December 2010 and 2009, none of the covenants relating to drawn down facilities had been breached.

25 DEFERRED GOVERNMENT GRANTS

The Group has been awarded various government grants for technological improvements and for research and development on new and existing pharmaceutical products. Deferred government grants represent the portion of government grants that compensate the Group for expenses to be incurred in future periods. The portion of deferred government grants that will be recognised as income in the next year amounted to $5,038,000 (2009: $6,283,000) has been classified as current and the remaining portion of $9,591,000 (2009: $7,625,000) has been classified as non-current.

26 EMPLOYEES RETIREMENT BENEFITS

The Group operates a Mandatory Provident Fund Scheme (“the MPF scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employee’s relevant income, subject to a cap of monthly relevant income of $20,000. Apart from the mandatory contributions, the employer would make monthly voluntary contributions. The aggregate of the mandatory and voluntary contributions made by the employer represents 5% of the basic salary of the employees. Mandatory contributions to the plan vest immediately. Where there are employees who leave the Group prior to vesting fully in the voluntary contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

– II-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Employees in the Group’s PRC subsidiaries are members of the state-managed retirement scheme. The PRC subsidiaries are required to contribute a specified percentage of the payroll to the scheme. The only obligation of the Group with respect to the retirement scheme is to make the specified contributions.

The Group has no other material obligation for payment of retirement benefits beyond the annual contributions as described above.

27 CAPITAL AND RESERVES

(a) Movements in components of equity

The reconciliation between the opening and closing balances of each component of the Group’s consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in the Company’s individual components of equity between the beginning and the end of the year are set out below:

The Company

At 1 January 2009 Profit for the year Other comprehensive income Total comprehensive income for the year Dividends approved in respect of the previous year New shares issued during the year At 31 December 2009 At 1 January 2010 Loss for the year Other comprehensive income Total comprehensive income for the year New shares issued during the year At 31 December 2010	Share capital $’000 83,097 – – – - - - - - - - - - - – 79,744 162,841 162,841 – – – - - - - - - - - - - 15,500 178,341	Share premium $’000 204,057 – – – - - - - - - - - - - – 209,207 413,264 413,264 – – – - - - - - - - - - - 116,250 529,514	Capital redemption reserve $’000 297 – – – - - - - - - - - - - – – 297 297 – – – - - - - - - - - - - – 297	Retained profits $’000 11,771 15,971 – 15,971 - - - - - - - - - - (11,399) – 16,343 16,343 (15,205) – (15,205) - - - - - - - - - - – 1,138	Total $’000 299,222 15,971 – 15,971 - - - - - - - - - - (11,399) 288,951 592,745 592,745 (15,205) – (15,205) - - - - - - - - - - 131,750 709,290

– II-42 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) Share capital

Authorized: Ordinary shares of $0.10 each Ordinary shares, issued and fully paid: At 1 January New shares issued during the year At 31 December	2010 Number of shares Nominal value ’000 $’000 3,000,000 300,000 1,628,411 162,841 155,000 15,500 1,783,411 178,341	2009 Number of shares Nominal value ’000 $’000 3,000,000 300,000 830,974 83,097 797,437 79,744 1,628,411 162,841	2009 Number of shares Nominal value ’000 $’000 3,000,000 300,000 830,974 83,097 797,437 79,744 1,628,411 162,841

			83,097 79,744
			162,841

(i) On 6 February 2009, the Company allotted and issued 564,102,563 ordinary shares of $0.10 each at the issue price of $0.39 per share to settle the consideration for a business combination, details of which are set out in note 32.
(ii) On 6 February 2009, the Company allotted and issued 233,334,000 ordinary shares of $0.10 each at the issue price of $0.30 per share for cash.
(iii) On 10 May 2010, the Company allotted and issued 155,000,000 ordinary shares of $0.10 each at the issue price of 0.85 per share. The proceeds were used to settle the consideration for the acquisition of the 93% equity interest in Foshan City An Ning Company Limited. Details of the acquisition are set out in note 31.

(c) Share premium and capital redemption reserve

The application of the share premium account and the capital redemption reserve is governed by sections 48B and 49H respectively of the Hong Kong Companies Ordinance.

(d) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of subsidiaries of foreign operations as well as the effective portion of any foreign exchange differences arising from hedges of the net investment in these foreign operation. The reserve is dealt with in accordance with the accounting policy set out in note 1(u).

(e) Reserve fund

In accordance with the accounting principles and financial regulations applicable in the PRC, the PRC subsidiaries are required to transfer part of its profit after taxation to the reserve fund. The transfer amounts are determined by the subsidiary’s board of directors in accordance with the articles of association and the transfers are made before profit distribution to the equity holders of the subsidiary. Reserve fund can only be used to make good losses, if any, and for increasing paid-in capital.

(f) Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale equity securities held and other financial instruments at the end of the reporting period, and is dealt with in accordance with the accounting policy set out in note 1(e).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(g) Capital reserve

The capital reserve comprises the portion of the grant date fair value of unexercised share options granted to employees of the Company that has been recognised in accordance with the accounting policy adopted for share-based payments.

(h) Distributability of reserves

At 31 December 2010, the aggregate amount of reserves available for distribution to equity shareholders of the Company was $1,138,000 (2009: $16,343,000). No final dividend per ordinary share was proposed after the end of the reporting period (2009: nil).

(i) Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholders returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Group monitors its capital structure on the basis of an adjusted net debt-to-capital ratio. For this purpose, adjusted net debt is defined as total debt (which includes interest-bearing loans and borrowings, and obligations under finance leases but excludes redeemable preference shares) plus unaccrued proposed dividends, less cash and cash equivalents. Adjusted capital comprises all components of equity and redeemable preference shares, other than amounts recognised in equity relating to cash flow hedges, less unaccrued proposed dividends.

During 2010, the Group’s strategy, which was unchanged from 2009, is to maintain the capital in order to cover any debt position.

The adjusted debt-to-equity ratios at 31 December 2010 and 2009 are as follows:

Current liabilities: Trade and other payables Bank loans Add: Proposed dividends Adjusted net debt Total equity Less: Proposed dividends Adjusted equity Adjusted net debt-to-equity ratio	2010 $’000 361,291 109,294 470,585 – 470,585 849,184 – 849,184 55%	2009 $’000 169,366 84,042
		253,408 –
		253,408

		871,864 –
		871,864

		29%

Neither the Company nor its subsidiary is subject to externally imposed capital requirements.

– II-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

28 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. The Group is also exposed to equity price risk arising from its equity investments in other entities and movements in its own equity share price.

The Group’s exposure to these risks and the financial risk management policies and practises used by the Group to manage these risks are described below.

(a) Credit risk

The Group’s credit risk is primarily attributable to trade and other receivables. Credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. These receivables are due within 30 to 90 days from the date of billing. Debtors with balances that are more than three months overdue are requested to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from customers.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. At 31 December 2010, the Group has no certain concentration of credit risk.

The maximum exposure to credit risk is represented by the carrying amount of the asset in the consolidated statement of financial position after deducting any impairment allowance. The Group does not provide any guarantees which would expose the Group to credit risk.

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade receivables are set out in note 20.

(b) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

– II-45 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The following table details the remaining contractual maturities at the date of financial position of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the date of financial position) and the earliest date the Group can be required to pay:

The Group

Trade and other payables Bank loans	Carrying amount $’000 361,291 109,294 470,585	2010 Total contractual undiscounted cash flow $’000 (361,291) (112,333) (473,624)	Within 1 year or on $’000 (361,291) (112,333) (473,624)	Carrying amount $’000 169,366 84,042 253,408	2009 Total contractual undiscounted cash flow $’000 (169,366) (85,761) (255,127)	Within 1 year or on demand $’000 (169,366) (85,761)
						(255,127)

The Company

Trade and other payables	Carrying amount $’000 1,922	2010 Total contractual undiscounted cash flow $’000 (1,922)	Within 1 year or on $’000 (1,922)	Carrying amount $’000 2,076	2009 Total contractual undiscounted cash flow $’000 (2,076)	Within 1 year or on demand $’000 (2,076)

(c) Interest rate risk

The Group’s interest rate risk arises primarily from short-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group’s interest rate profile as monitored by management is set out below.

(i) Interest rate profile

The following table details the interest rate profile of the Group’s total borrowings at the date of financial position.

	2010	2010		2009	2009
	Effective	One	year or	Effective	One	year or
	interest rate		less	interest rate		less
	%		$’000	%		$’000
Variable rate borrowings:
Bank loans	5.34%		109,294	5.60%		84,042

(ii) Sensitivity analysis

As at 31 December 2010, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have increased/decreased the Group’s profit after tax and retained profits by approximately $929,000 (2009: $714,000). Other components of equity would not be affected by the changes in interest rates.

– II-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

This sensitivity analysis has been determined assuming that the change in interest rates had occurred at the dates of financial position and had been applied to the exposure to interest risk for financial investments in existence at those dates.

(d) Foreign currency risk

Individual companies within the Group has limited foreign currency risk as most of the transactions are denominated in the same currency as the functional currency of the operations in which they relate. However, as the principal subsidiaries, Dezhong, Feng Liao Xing, Guangdong Medi-World and Luya, mainly carried out transactions in RMB, therefore any appreciation or depreciation of HKD against RMB will affect the Group’s financial position and be reflected in the exchange reserve.

(e) Equity price risk

The Group is exposed to equity price changes arising from equity investments classified as available-for-sale equity securities (see note 18), which are listed on the Stock Exchange of Shenzhen, the PRC. The available-for-sale investments have been chosen based on their longer term growth potential and are monitored regularly for performance against expectations.

The following table indicates the approximate change in the Group’s equity in response to reasonably possible changes in the share price of equity securities to which the Group has significant exposure at the date of financial position.

Change in market price of equity investments: – increase – decrease	Increase/ (decrease) in share price 20% (20%)	2010 Effect on equity $’000 1,471 (1,471)	2009 Effect on equity $’000 796 (796)

The sensitivity analysis has been determined assuming that the reasonably possible changes in share price of equity investments had occurred at the date of financial position and had been applied to the exposure to equity price risk in existence at that date. The stated changes represent management’s assessment of reasonably possible changes in the share price over the period until the next annual date of financial position. The analysis is performed on the same basis for 2009.

(f) Fair values

The following table presents the carrying value of financial instruments measured at fair value at the date of financial position across the three levels of the fair value hierarchy defined in HKFRS 7, Financial Instruments: Disclosures, with the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:

Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments
Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data
Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data

– II-47 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Assets Available-for-sale equity securities: – Listed in the PRC – Unlisted financial instruments, at fair value Total	level 1 $’000 8,653 – 8,653	2010 level 2 level 3 $’000 $’000 – – 31,003 – 31,003 –	Total $’000 8,653 31,003
			39,656

29 COMMITMENTS

(a) Capital commitments of the Group outstanding at 31 December 2010 not provided for in the financial statements were as follows:

Contracted for	The Group 2010 2009 $’000 $’000 25,658 7,502

(b) At 31 December 2010, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within 1 year After 1 year but within 5 years	The Group 2010 2009 $’000 $’000 5,892 360 12,168 – 18,060 360	The Group 2010 2009 $’000 $’000 5,892 360 12,168 – 18,060 360
		360

Operating lease payments represent rentals payable by the Group for its office premises. The lease was negotiated for an average term of two years with fixed rental. The lease did not include any contingent rentals.

– II-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

30 MATERIAL RELATED PARTY TRANSACTIONS

(a) Key management personnel remuneration

Remuneration for key management personnel, including amounts paid to the Group’s directors as disclosed in note 7, is as follows:

Short-term employee benefits Post-employments benefits	2010 $’000 6,701 108 6,809	2009 $’000 4,816 110
		4,926

Total remuneration is included in “staff costs” (see note 5(b)).

(b) Other related party transactions

During the year ended 31 December 2010, the following parties were considered as related party transaction of the Group as they are under the control of key management personnel of the Group:

		Relationship from
	Relationship before	15 November 2010 to
Name of related party	15 November 2010	30 December 2010
Foshan Nanhai New & Specific	Effectively 25.5% owned by	Effectively 50% owned by Mr.
Pharmaceutical Co., Ltd.	Mr. Yang Bin and 25.5%	Yang Bin and 50% owned by
(“Nanhai New & Specific	owned by Mr. Xu Tiefeng,	Mr. Xu Tiefeng, directors of
Pharmaceutical”)	directors of the Company	the Company
Foshan Nanhai Pharmaceutical	Effectively 25.5% owned by	Effectively 50% owned by Mr.
Group Pharmaceutical Co.,	Mr. Yang Bin and 25.5%	Yang Bin and 50% owned by
Ltd. (“NPGP”)	owned by Mr. Xu Tiefeng,	Mr. Xu Tiefeng, directors of
	directors of the Company	the Company
Foshan Nanhai Yikang	Effectively 25.5% owned by	Effectively 50% owned by Mr.
Pharmaceutical Co., Ltd.	Mr. Yang Bin and 25.5%	Yang Bin and 50% owned by
(“Nanhai Yikang”)	owned by Mr. Xu Tiefeng,	Mr. Xu Tiefeng, directors of
	directors of the Company	the Company
Foshan Nanhai Pharmaceutical	Effectively 25.5% owned by	Effectively 50% owned by Mr.
Group Co., Ltd. (“Nanhai	Mr. Yang Bin and 25.5%	Yang Bin and 50% owned by
Pharmaceutical Group”)	owned by Mr. Xu Tiefeng,	Mr. Xu Tiefeng, directors of
	directors of the Company	the Company
Hanyu Pharmaceutical	Effectively 45.32% owned by	Effectively 45.32% owned by
	Mr. Yang Bin and 27.34%	Mr. Yang Bin and 27.34%
	owned by Mr. Xu Tiefeng,	owned by Mr. Xu Tiefeng,
	directors of the Company	directors of the Company

– II-49 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Sale of goods to Nanhai New & Specific Pharmaceutical Sale of goods to NPGP Sale of goods to Nanhai Yikang Acquisition of the entire interest of a subsidiary from Nanhai Pharmaceutical Group	Year ended 31 December 2010 2009 $’000 $’000 9,405 831 4,154 – 7,090 – 20,649 831 – 4,540	Year ended 31 December 2010 2009 $’000 $’000 9,405 831 4,154 – 7,090 – 20,649 831 – 4,540
		831

		4,540

As at 31 December 2010, the Group’s trade receivable balances due from related parties are as below:

Nanhai New & Specific Pharmaceutical NPGP Nanhai Yikang	Year ended 31 December 2010 2009 $’000 $’000 2,213 122 1,252 – 1,361 – 4,826 122	Year ended 31 December 2010 2009 $’000 $’000 2,213 122 1,252 – 1,361 – 4,826 122
		122

As at 31 December 2010, bank loans of $49,358,000 (2009: $59,511,000) were guaranteed by Mr. Xu Tiefeng and Mr. Yang Bin, two executive directors of the Company. Bank loan of $15,278,000 (2009: $6,360,000) was secured by the interests in leasehold land of Hanyu Pharmaceutical, previously known as Foshan Winteam Pharmaceutical Co., Ltd., a company in which Mr. Yang Bin and Mr. Xu Tiefeng jointly hold 72.7% equity interest, and bank loan of $23,504,000 (2009: $nil) was guaranteed by Nanhai Yikang, a company in which Mr. Yang Bin and Mr. Xu Tiefeng jointly hold 100% equity interest. (see note 24).

31 ACQUISITION OF SUBSIDIARIES AND NON-CONTROLLING INTERESTS

(a) Acquisition of Foshan City An Ning Company Limited (“An Ning”).

In April 2010, the Group acquired 93% equity interests in An Ning with cash consideration of RMB116,000,000 (approximately equivalent of $131,953,000), the assets of which were the 49% equity interest in Dezhong and cash in bank of $22,000 as of the acquisition date. The transaction cost for the acquisition was $1,900,000. Through the acquisition, the Group increased its effective equity interest in Dezhong from 51% to 96.57%. The carrying amount of Dezhong’s net assets in the consolidated financial statements on the date of the acquisition was $262,756,000. The Group recognised a decrease in non-controlling interests of $119,738,000 and a decrease in reserves of $15,673,000 including deferred tax of withholding tax in the amount of $1,558,000.

– II-50 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The following table summarises the effect of changes in the Group’s equity interest in Dezhong:

Equity interest in Dezhong at beginning of year Effect of increase in Dezhong’s equity interest Share of comprehensive income during the year ended 31 December 2010 Equity interest in Dezhong at the end of the year	Year ended 31 December 2010 $’000 118,836 119,738 32,025
	270,599

(b) Acquisition of Foshan Zhong Hong Co., Ltd (“Zhong Hong”).

In December 2010, the Group acquired 95.57% equity interest in Zhong Hong with cash consideration of RMB 120,000,000 (approximately equivalent of $140,600,000), the assets and liabilities of which were the 49% equity interests in Feng Liao Xing, cash in bank of $435,000 and other creditors of $435,000 as of the acquisition date. The transaction cost for the acquisition was $736,000. The consideration has been settled subsequently after the reporting period date. Through the acquisition, the Group increased its effective equity interest in Feng Liao Xing from 51% to 97.83%. The carrying amount of Feng Liao Xing’s net assets in the consolidated financial statements on the date of acquisition was $175,309,000. The Group recognized a decrease in non-controlling interest of $82,096,000 and a decrease in reserves of $60,420,000 including deferred tax of withholding tax in the amount of $1,180,000. The following table summarises the effect of changes in the Group’s equity interest in Feng Liao Xing:

Equity interest in Feng Liao Xing at the beginning of year Effect of increase in Feng Liao Xing’s equity interest Share of comprehensive income during the year ended 31 December 2010 Equity interest in Feng Liao Xing at the end of the year	Year ended 31 December 2010 $’000 74,496 82,096 14,913
	171,505

32 ACCOUNTING JUDGEMENTS AND ESTIMATES

The Group’s financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions that the Group believes to be reasonable and which form the basis for making judgements about matters that are not readily apparent from other sources. On an on-going basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.

The selection of critical accounting policies, the judgements and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the financial statements. The significant accounting policies are set forth in note 1. The Group believes the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the financial statements.

(a) Impairment

If circumstances indicate that the net book value of property, plant and equipment, goodwill, intangible assets and interests in leasehold land held for own use under operating leases may not be recoverable, these assets may be considered “impaired”, and an impairment loss may be recognised in accordance with HKAS 36, Impairment of assets. The carrying amounts of these assets are reviewed

– II-51 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. The recoverable amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for the Group’s assets are not readily available. In determining the value in use, expected cash flows generated by the asset are discounted to their present value, which requires significant judgement relating to level of sales volume, selling price, material costs and amount of operating costs. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including sales volume, expected changes to selling prices and operating costs, and discount rate.

In addition, the Group estimates impairment losses for bad and doubtful debts resulting from the inability of the debtors to make the required payments. The Group bases the estimates on the ageing of the trade and other receivables balance, credit-worthiness of the debtors and historical write-off experience. If the financial condition of the debtors were to deteriorate, actual write-offs would be higher than estimated.

(b) Depreciation and amortisation

Fixed assets and intangible assets are depreciated and amortised on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value, if any. The Group reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation and amortisation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and taking into account upgrading and improvement work performed, anticipated technological changes, and legal or similar limits on the use of assets. The depreciation and amortisation expense for future periods is adjusted if there are significant changes from previous estimates.

(c) Write down of inventories

The Group determines the write-down for obsolescence of inventories. These estimates are based on the current market condition and the historical experience in selling goods of similar nature. It could change significantly as a result of change in market condition.

33 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 DECEMBER 2010

Up to the date of issue of these financial statements, the HKICPA has issued of certain amendments and interpretations and one new standard which are not yet effective for the year ended 31 December 2010 and which have not been adopted in these financial statements.

	Effective for accounting
	periods beginning on or after
Revised HKAS 24, Related party disclosures	1 January 2011
HKFRS 9, Financial Instruments	1 January 2013
Improvements to HKFRSs 2010	1 July 2010 or 1 January 2011
Amendments to HKAS 12, Income taxes	1 January 2012

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to result in a restatement of the Group’s results of operations and financial position.

– II-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

34 COMPARATIVE FIGURES

The following items in the comparative figures have been reclassified to conform with the current year’s presentation to facilitate comparison.

(i) The carrying amount of investment property in the amounts of $4,762,000 has been reclassified to interest in leasehold land held for own use under operating leases to reflect more appropriately the substance of the asset and conform with the current year’s presentation.
(ii) The carrying amount of technical know-how of $64,028,000 under intangible asset has been reclassified to trademark and distribution network amounted to $11,476,000 and $52,552,000 respectively, to reflect more appropriately, the nature of intangible assets and conform with the current year’s presentation.

– II-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. INDEBTEDNESS

At the close of business on 31 March 2011, being the latest practicable date for the purpose of the indebtedness statement prior to the printing of this Composite Document, the Group had an aggregate of outstanding bank loans of approximately HK$110,410,000, of which approximately HK$86,666,000 were secured by (i) the Group’s interests in leasehold land and buildings with an aggregate carrying value of approximately HK$54,978,000; (ii) personal guarantee provided by Mr. Yang and Mr. Xu with a maximum guarantee amount of approximately HK$74,794,000; and (iii) interests in leasehold land and buildings with a carrying value of approximately HK$20,359,000 held by 佛山市瀚宇生物製藥有限公司 (Foshan Hanyu Pharmaceutical Co., Ltd.*), a company in which Mr. Yang and Mr. Xu jointly and indirectly held an aggregate of 72.7% equity interest. The remaining loan amounted to approximately HK$23,744,000 were unsecured.

Save as disclosed above and apart from intra-group liabilities and normal trade payables, the Group had no other outstanding mortgages, charges, debentures or loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities at the close of business on 31 March 2011.

As at the Latest Practicable Date, save for the addition of unsecured bank loan of approximately RMB 5,000,000, the Directors were not aware of any other material changes in the indebtedness position and contingent liabilities of the Group since 31 March 2011.

4. MATERIAL CHANGE

As disclosed in the announcements of the Company dated 22 November 2010 and 31 December 2010 and the circular of the Company dated 8 December 2010, the Company entered into an agreement in relation to the acquisition of a 95.57% equity interest in 佛山仲弘有限公司 (Foshan Zhong Hong Co., Ltd), the principal asset of which is the holding of a 49% equity interest in 佛山馮了性藥業有限公司 (Foshan Feng Liao Xing Pharmaceutical Co., Ltd), an indirectly non wholly-owned subsidiary of the Company, at a cash consideration of RMB120 million (equivalent to approximately HK$140.6 million). The acquisition was completed on 31 December 2010 and the consideration for the aforesaid acquisition has been fully settled by the Company by 20 April 2011, as a result of which the cash balance of the Group was reduced.

As disclosed in the annual report of the Company for the year ended 31 December 2010, outstanding capital commitments of the Group which were contracted but not provided for as at 31 December 2010 amounted to approximately RMB21.8 million (equivalent to approximately HK$25.7 million), which were mainly related to the construction of a modernized traditional Chinese medicinal materials extraction and preliminary treatment center （中藥材提取和前處理中心）at 佛山市高明區 (Gao Ming District, Foshan City*). As at the Latest Practicable Date, capital commitments contracted but not provided for increased to approximately RMB43.3 million (equivalent to approximately HK$51.4 million). The Directors considered that the Group will have sufficient financial resources and available banking facilities to meet its capital commitments.

– II-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Since 2004, the Ministry of Health of the PRC has implemented certain policies to monitor and govern the use of anti-biotics in the PRC. In April 2011, the Ministry of Health of the PRC conducted public consultation regarding the tightening of control over the use of anti-biotics in the PRC and new policies may be promulgated in this connection. The Directors considered that the sale of the Group’s major anti-biotics product, Gaode (Cefodizime Sodium for injection), accounting for approximately 9.8% of the total sales of the Group in 2010, may be affected if new policies are to be implemented by the Ministry of Health of the PRC. The Directors however were not able to estimate the impact of the possible implementation of new policies on the trading position of the Group as the Ministry of Health of the PRC has yet to release any new policies as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, the Directors confirmed that there had been no material change in the financial or trading position or outlook of the Group subsequent to 31 December 2010, being the date to which the last published audited consolidated financial statements of the Company were made up.

– II-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. RECONCILIATION STATEMENT OF PROPERTY ASSETS OF THE GROUP

Set out below is the reconciliation of the (i) net book value of the Group’s property assets included in the audited consolidated statement of financial position as at 31 December 2010; (ii) net book value of the Group’s property assets included in the unaudited management accounts of the Group as at 31 March 2011; and (iii) the fair value of the Group’s property assets as at 31 March 2011 as stated in the property valuation report in Appendix III to this Composite Document.

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000

Group I – Properties held and occupied by the Group in the PRC

1 2 land parcels, 16 buildings 24,831 – 357 24,474 41,059 65,533 and various structures located at No. 89 Fo Ping Road, Chancheng District, Foshan City, Guangdong Province, The PRC

位於中國廣東省佛山市禪城區佛平路89號之兩塊土地， 16棟房屋及若干構築物

– II-56 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book	(i) Net book								(iii)	Fair
			value							value		as at
		included in									31 March
		the audited					(ii) Net book				2011 as
		consolidated						value		shown in the
		statement of					included in				valuation
		financial			Depreciation			the		report as set
		position of			charge and		management				out in
		the Group as		Addition	amortisation		accounts of			Appendix III
			at 31	from January	for January		the Group as				to this
		December		2011 to	2011 to		at 31 March		Valuation	Composite
No.	Property		2010	March 2011	March	2011		2011	difference	Document
		HKD’000		HKD’000	HKD’000		HKD’000		HKD’000		HKD’000
2	Unit 701,		127	–		2		125	314			439
	No. 23 Dong Sheng Nei Street,
	Chancheng District,
	Foshan City,
	Guangdong Province,
	The PRC
	中國廣東省
	佛山市禪城區
	東升內街23號
	701室
3	Units 205 and 305 and 2 ancillary car		378	–		5		373	458			831
	parking rooms,
	No. 9 Hua Yuan East Street,
	Chancheng District,
	Foshan City,
	Guangdong Province,
	The PRC
	位於中國廣東省
	佛山市禪城區
	華遠東路9號
	205及305單位及
	兩個配套車庫

– II-57 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
4	Unit 807,	112	–	2	110	127	237
	No. 2 Jian Hua Street,
	Shunde District,
	Foshan City,
	Guangdong Province,
	The PRC
	中國廣東省
	佛山市順德區
	建華街2號807號室
5	2 land parcels, 16 buildings	47,539	–	602	46,937	25,601	72,538
	and various structures located at
	No. 35 Fo Luo Main Road,
	Chancheng District,
	Foshan City,
	Guangdong Province,
	The PRC

中國廣東省佛山市禪城區佛羅公路35號之兩塊土地， 16棟房屋及若干構築物

– II-58 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
6	A land parcel, 5 buildings	11,919	–	141	11,778	1,281	13,059
	and various structures located at
	Shiban Village Committee
	Industrial Zone,
	Lunjiao Road Workplace,
	Shunde District,
	Foshan City,
	Guangdong Province,
	The PRC
	位於中國廣東省
	佛山市順德區
	倫教街道辦事處
	仕版村委會工業區之一塊土地，
	5棟房屋及若干構築物

7 6 residential units (Unit Nos. 302, 972 – 16 956 1,656 2,612 502, 604, 702, 704 and 705), Block 1, Shu Yuan Road, Zhenhua Management Zone Workplace, Rong Gui County, Shunde District, Foshan City, Guangdong Province, The PRC 中國廣東省佛山市順德區容桂鎮振華管理區辦事處書院路一座 6個住宅單位（302號, 502號, 604號, 702號, 704號及705號單位）

– II-59 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
8	A land parcel, 7 buildings	78,332	–	716	77,616	(5,316)	72,300
	and various structures located at
	No. 2 Ke Yuan Heng
	Third Road,
	Xiaohuangpu Neighbourhood
	Committee High Tech Zone (Rong Gui),
	Ronggui Town Workplace,
	Shunde District,
	Foshan City,
	Guangdong Province,
	The PRC
	位於中國廣東省
	佛山市順德區
	容桂鎮街道辦事處
	小黃圃居委會高新區（容桂）科苑
	橫三路2號之一塊土地，7棟房屋及若干構築物

9 A land parcel and 17 buildings 22,721 429 267 22,883 505 23,388 and various structures located at Huan Cheng West Road and Hong Xing Xi North Road, Central District, Jining City, Shandong Province, The PRC

位於中國山東省濟寧市市中區紅星西路北，環城西路西之一塊土地，17棟房屋及若干構築物

– II-60 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

No. Property

10 A land parcel and a building located at No. 86 Li Yu Sha Road, Chancheng District, Foshan City, Guangdong Province, The PRC

(i) Net book					(iii) Fair
value					value as at
included in					31 March
the audited			(ii) Net book		2011 as
consolidated			value		shown in the
statement of			included in		valuation
financial		Depreciation	the		report as set
position of		charge and	management		out in
the Group as	Addition	amortisation	accounts of		Appendix III
at 31	from January	for January	the Group as		to this
December	2011 to	2011 to	at 31 March	Valuation	Composite
2010	March 2011	March 2011	2011	difference	Document
HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
700	–	3	697	965	1,662

位於中國廣東省佛山市禪城區鯉魚沙道86號之一塊土地及一棟房屋 Sub-total 187,631 429 2,111 185,949 66,650 252,599 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Group II – Properties held by the Group for investment in the PRC 11 A land parcel and a building located at 55 – – 55 610 665 No. 81 Sheng Ping Road, Chancheng District, Foshan City, Guangdong Province, The PRC

位於中國廣東省. 佛山市禪城區升平路81號之一塊土地及一棟房屋

– II-61 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
12	A land parcel and a building	1,346	–	14	1,332	698	2,030
	located at
	No. 49 Rui Qing Sub-district,
	Mazhang District,
	Zhanjiang City,
	Guangdong Province,
	The PRC
	位於中國廣東省湛江市麻章區
	瑞慶小區49號之
	一塊土地及一楝房屋
13	Shop No. 3, Level 1,	1,070	–	16	1,054	311	1,365

13 Shop No. 3, Level 1, No. 33 Wei Guo Road, Chancheng District, Foshan City, Guangdong Province, The PRC

中國廣東省佛山市禪城區衛國路33號第一層3號店

– II-62 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

No. Property (i) Net book value included in the audited consolidated statement of financial position of the Group as at 31 December 2010 Addition from January 2011 to March 2011 Depreciation charge and amortisation for January 2011 to March 2011 (ii) Net book value included in the management accounts of the Group as at 31 March 2011 HKD’000 HKD’000 HKD’000 HKD’000 14 A land parcel, 8 buildings and various structures located at No. 43 Qing Ning Road, Chancheng District, Foshan City, Guangdong Province, The PRC 位於中國廣東省佛山市禪城區慶寧路43號之一塊土地，8棟房屋及若干構築物 5,262 – 88 5,174 Sub-total 7,733 – 118 7,615 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Group III – Property partly held under development and partly held and occupied by the Group in the PRC 15 An industrial development located at No. 95 Geng He Main Road, Genghe Town, Gaoming District, Foshan City, Guangdong Province, The PRC 位於中國廣東省佛山市高明區更合鎮更合大道95號之一個工業發展項目 23,380 – 194 23,186 Sub-total 23,380 – 194 23,186 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Valuation difference HKD’000 9,072 10,691 - - - - - - - - - - 34,702 34,702 - - - - - - - - - -	(iii) Fair value as at 31 March 2011 as shown in the valuation report as set out in Appendix III to this Composite Document HKD’000 14,246
		18,306 - - - - - - - - - - 57,888
		57,888 - - - - - - - - - -

– II-63 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

No. Property

(i) Net book					(iii) Fair
value					value as at
included in					31 March
the audited			(ii) Net book		2011 as
consolidated			value		shown in the
statement of			included in		valuation
financial		Depreciation	the		report as set
position of		charge and	management		out in
the Group as	Addition	amortisation	accounts of		Appendix III
at 31	from January	for January	the Group as		to this
December	2011 to	2011 to	at 31 March	Valuation	Composite
2010	March 2011	March 2011	2011	difference	Document
HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000

Group IV – Property held by the Group for future development in the PRC

16	A land parcel (Land Parcel No. C08-2)	6,512	–	36	6,476	11,332	17,808
	located at Xiaohuangpu Neighbourhood
	Committee High Tech Zone (Rong Gui),
	Ronggui Town Workplace,
	Shunde District,
	Foshan City,
	Guangdong Province,
	The PRC

位於中國廣東省佛山市順德區容桂鎮街道辦事處小黃圃居委會高新區（容桂）之一塊土地（地號C08-2） Sub-total	6,512 - - - - - - - - - -	– - - - - - - - - - -	36 - - - - - - - - - -	6,476 - - - - - - - - - -	11,332 - - - - - - - - - -
						17,808 - - - - - - - - - -

Group V – Properties to be owner-occupied and held by the Group under contractual rights in the PRC

17	A land parcel located at	90,561	–	–	90,561	(90,561)	No
	the south of Kuiqi Road and the						Commercial
	east of Lingnan Main Road,						Value
	Chancheng District,
	Foshan City,
	Guangdong Province,
	The PRC
	位於中國廣東省
	佛山市禪城區
	魁齊路南側、嶺南大道東側
	之一塊土地

– II-64 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

No. Property 18 A non-residential unit in a proposed development at Tang Bian Street, Shang Shi Jiao, Chaodong Village, Huanshi Town, Chancheng District, Foshan City, Guangdong Province, The PRC 中國廣東省佛山市禪城區環市鎮朝東村上石角塘邊街一個發展項目中之一個非住宅單位 Sub-total	(i) Net book value included in the audited consolidated statement of financial position of the Group as at 31 December 2010 HKD’000 744 91,305 - - - - - - - - - -	Addition from January 2011 to March 2011 HKD’000 – – - - - - - - - - - -	Depreciation charge and amortisation for January 2011 to March 2011 HKD’000 5 5 - - - - - - - - - -	(ii) Net book value included in the management accounts of the Group as at 31 March 2011 HKD’000 739 91,300 - - - - - - - - - -	Valuation difference HKD’000 (739) (91,300) - - - - - - - - - -	(iii) Fair value as at 31 March 2011 as shown in the valuation report as set out in Appendix III to this Composite Document HKD’000 No Commercial Value
						Nil - - - - - - - - - -

– II-65 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

No. Property

(i) Net book					(iii) Fair
value					value as at
included in					31 March
the audited			(ii) Net book		2011 as
consolidated			value		shown in the
statement of			included in		valuation
financial		Depreciation	the		report as set
position of		charge and	management		out in
the Group as	Addition	amortisation	accounts of		Appendix III
at 31	from January	for January	the Group as		to this
December	2011 to	2011 to	at 31 March	Valuation	Composite
2010	March 2011	March 2011	2011	difference	Document
HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000

Group VI – Properties rented by the Group in the PRC

19 A land parcel and 2 buildings located at No. 2 Qiao Xi Road, Rongshan Neighbourhood Committee, Ronggui Road Workplace, Shunde District, Foshan City, Guangdong Province, The PRC

No Commercial Value

位於中國廣東省佛山市順德區容桂街道辦事處容山居委會橋西路2號之一塊土地及兩棟房屋

– II-66 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
20	Warehouse Nos. 1-4 and 7,						No
	an office unit, a workshop and						Commercial
	a dormitory located in						Value
	Bainikan Village,
	Xiebian Township,
	Dali Town,
	Nanhai District,
	Foshan City,
	Guangdong Province,
	The PRC
	位於中國廣東省
	佛山市南海區
	大瀝鎮謝邊鄉
	白泥坎村
	之一個辦公單位，一個車間，
	一個宿舍及一至四及七號倉庫
21	Levels 1-2 of Front Block and						No
	the Warehouse of Rear Block,						Commercial
	No. 21 Xin Di Road,						Value
	Chancheng District,
	Foshan City,
	Guangdong Province,
	The PRC
	中國廣東省
	佛山市禪城區
	新堤路21號
	前座1-2層及後座倉庫

– II-67 –

APPENDIX II

No. Property

22 Shop No. 1, No. 114 Yong An Road, Chancheng District, Foshan City, Guangdong Province, The PRC

FINANCIAL INFORMATION OF THE GROUP

(i) Net book					(iii) Fair
value					value as at
included in					31 March
the audited			(ii) Net book		2011 as
consolidated			value		shown in the
statement of			included in		valuation
financial		Depreciation	the		report as set
position of		charge and	management		out in
the Group as	Addition	amortisation	accounts of		Appendix III
at 31	from January	for January	the Group as		to this
December	2011 to	2011 to	at 31 March	Valuation	Composite
2010	March 2011	March 2011	2011	difference	Document
HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
					No
					Commercial
					Value

中國廣東省佛山市禪城區永安路114號一號舖

23 Warehouse Nos. 7, 8-3 and 8-4, Foshan City Guangtai Trading Company Limited Dazhousha Warehouse, No. 45 Fo Luo Road, Chancheng District, Foshan City, Guangdong Province, The PRC

No Commercial Value

中國廣東省佛山市禪城區佛羅路45號佛山市廣泰貿易有限公司大洲沙倉庫 7號，8-3號及8-4號倉庫

– II-68 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

		(i) Net book					(iii) Fair
		value					value as at
		included in					31 March
		the audited			(ii) Net book		2011 as
		consolidated			value		shown in the
		statement of			included in		valuation
		financial		Depreciation	the		report as set
		position of		charge and	management		out in
		the Group as	Addition	amortisation	accounts of		Appendix III
		at 31	from January	for January	the Group as		to this
		December	2011 to	2011 to	at 31 March	Valuation	Composite
No.	Property	2010	March 2011	March 2011	2011	difference	Document
		HKD’000	HKD’000	HKD’000	HKD’000	HKD’000	HKD’000
24	Room 525,						No
	No. 5 Jin Sha First Street,						Commercial
	Chancheng District,						Value
	Foshan City,
	Guangdong Province,
	The PRC

中國廣東省佛山市禪城區金沙一街5號 525室 Sub-total Group VII – Property rented by the Group in Hong Kong 25 Rooms 2801-2805, 28th Floor, China Insurance Group Building, No. 141 Des Voeux Road Central, Hong Kong Sub-total - - - - - - - - - - Total 316,561	- - - - - - - - - - 429	- - - - - - - - - - 2,464	- - - - - - - - - - 314,526	- - - - - - - - - - 32,075
					Nil - - - - - - - - - - No Commercial Value
					Nil - - - - - - - - - - 346,601

For illustration purpose, all amounts denominated in RMB in this appendix have been translated into HK$ at the exchange rate of RMB1 = HK$1.1872, and they do not form any representations or guarantees of any person that any one of the aforesaid currencies could be, have been, or will be converted into the other currency at the exchange rate used in this appendix.

– II-69 –

APPENDIX III

PROPERTY VALUATION ON THE GROUP

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this Composite Document received from BMI Appraisals Limited, an independent valuer, in connection with its valuations as at 31 March 2011 of the property interests of the Group.

==> picture [227 x 77] intentionally omitted <==

17 June 2011

The Directors Winteam Pharmaceutical Group Limited Rooms 2801-2805 China Insurance Group Building 141 Des Voeux Road Central Central, Hong Kong

Dear Sirs,

INSTRUCTIONS

We refer to the instructions from Winteam Pharmaceutical Group Limited (the “Company”) for us to value the properties held / to be acquired / rented by the Company and / or its subsidiaries (together referred to as the “Group”) located in the People’s Republic of China (the “PRC”) and Hong Kong. We confirm that we have conducted inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the properties as at 31 March 2011 (the “date of valuation”).

BASIS OF VALUATION

Our valuations of the concerned properties have been based on the Market Value, which is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

– III-1 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

PROPERTY CATEGORISATIONS

In the course of our valuations, the portfolio of properties of the Group is categorized into the following groups:

Group I – Properties held and occupied by the Group in the PRC Group II – Properties held by the Group for investment in the PRC Group III – Property partly held under development and partly held and occupied by the Group in the PRC Group IV – Property held by the Group for future development in the PRC Group V – Properties to be owner-occupied and held by the Group under contractual rights in the PRC Group VI – Properties rented by the Group in the PRC Group VII – Property rented by the Group in Hong Kong

VALUATION METHODOLOGIES

For Property Nos. 2 to 4, 7 and 16, we have valued them on market basis by the Comparison Approach assuming sale in their existing states with the benefit of vacant possession and by making reference to comparable sales evidence as available in the market. Appropriate adjustments have then been made to account for the differences between the properties and the comparables in terms of age, time, location and other relevant factors.

In valuing Property Nos. 1, 5, 6, 8, 9, 10 and 15, we have adopted the Depreciated Replacement Cost Approach. Depreciated replacement cost is defined as “the aggregate amount of the value of the land for the existing use or a notional replacement site in the same locality, and the new replacement cost of the buildings and other site works, from which appropriate deductions may then be made to allow for the age, condition, economic or functional obsolescence and environmental factors, etc.; all of these might result in the existing property being worth less to the undertaking in occupation than would a new replacement.” This basis has been used due to the lack of an established market upon which to base comparable transactions, which generally furnishes the most reliable indication of values for assets without a known used market. This opinion of value dos not necessarily represent the amount that might be realized form the disposition of the subject asset in the market and is subject to adequate profitability of the business compared to the value of the total assets employed.

For Property Nos. 11 to 14, we have adopted the Investment Approach by taking into account the current passing rents of the properties being held under existing tenancies and the reversionary potential of the tenancies if they have been or would be let to tenants.

For Property Nos. 17 to 25, we have attributed no commercial value to the properties due either to the title of the properties are not vested in the Group or the short-term nature of the leases or the prohibition against assignment or sub-letting or otherwise due to the lack of substantial profit rents.

– III-2 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

TITLE INVESTIGATION

For the properties located in the PRC, we have been provided with copies of title documents / tenancy agreements and have been advised by the Group that no further relevant documents have been produced. However, we have not examined the original documents to verify ownership or to ascertain the existence of any amendment documents, which may not appear on the copies handed to us. In the course of our valuations, we have relied upon the advice and information given by the Group’s PRC legal advisor – King’s Law Firm （廣東金信方正律師事務所） regarding the titles of the properties. All documents have been used for reference only.

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the properties are sold in the market in their existing state without the benefit of deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the values of the properties.

In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the properties and no forced sale situation in any manner is assumed in our valuations.

VALUATION CONSIDERATIONS

We have inspected the exterior and wherever possible, the interior of the properties. During the course of our inspections, we did not note any serious defects. However, no structural surveys have been made. We are, therefore, unable to report whether the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

In the course of our valuations, we have relied to a considerable extent on the information given by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenures, particulars of occupancy, site / floor areas, completion dates of the buildings, identification of the properties and other relevant information.

We have not carried out detailed on-site measurements to verify the correctness of the site / floor areas in respect of the properties but have assumed that the site / floor areas shown on the documents handed to us are correct. Dimensions, measurements and site / floor areas included in the valuation certificates are based on information contained in the leases and other documents provided to us and are therefore only approximations.

We have no reason to doubt the truth and accuracy of the information provided to us by the Group and we have relied on your advice that no material facts have been omitted from the information so supplied. We consider that we have been provided with sufficient information for us to reach an informed view.

– III-3 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties or for any expenses or taxation, which may be incurred in effecting a sale or purchase.

Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

For the purpose of compliance with Rule 11.3 of the Code on Takeovers and Mergers and as advised by the Company, the potential tax liabilities which may arise from the sale of the properties include:

Business tax at a rate of 5% of consideration for the property in the PRC;
Profits tax on the profit from the sale at a rate of 25% for the property in the PRC; and
Land value appreciation tax for the property in the PRC at progressive tax rates ranging from 30% to 60% on the appreciation.

As advised by the Group, the likelihood of any potential tax liability being crystalised is remote as the Group has no intention to sell the properties.

Our valuations have been prepared in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors.

Our valuations have been prepared under the generally accepted valuation procedures and are in compliance with the requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Rule 11 of the Codes on Takeovers and Mergers and Share Repurchases published by the Securities and Futures Commission.

REMARKS

We hereby certify that we neither have any present nor any prospective interest in the Group or the appraised properties or the values reported.

Unless otherwise stated, all money amounts stated herein are in Renminbi (RMB) and no allowances have been made for any exchange transfer.

– III-4 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

Our summary of values and the valuation certificates are attached herewith.

Yours faithfully, For and on behalf of

BMI APPRAISALS LIMITED

Joannau W.F. Chan

Dr. Tony C.H. Cheng Joannau W.F. BSc, MUD, MBA (Finance), MSc (Eng), PhD (Econ), BSc. MSc. MRICS MHKIS MHKIS, MCIArb, AFA, SIFM, FCIM, Senior Director MASCE, MIET, MIEEE, MASME, MIIE

BSc. MSc. MRICS MHKIS RPS(GP)

Managing Director

Notes: Dr. Tony C.H. Cheng is a member of The Hong Kong Institute of Surveyors (General Practice) who has over 18 years’ experience in valuations of properties in Hong Kong and the People’s Republic of China.

Ms. Joannau W.F. Chan is a member of The Hong Kong Institute of Surveyors (General Practice) who has over 18 years’ experience in valuations of properties in Hong Kong and over 12 years’ experience in valuations of properties in the People’s Republic of China.

– III-5 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

Group I – Properties held and occupied by the Group in the PRC

2 land parcels, 16 buildings 55,200,000 and various structures located at No. 89 Fo Ping Road, Chancheng District, Foshan City, Guangdong Province, The PRC 位於中國廣東省佛山市禪城區佛平路89號之兩塊土地，16棟房屋及若干構築物
Unit 701, 370,000 No. 23 Dong Sheng Nei Street, Chancheng District, Foshan City, Guangdong Province, The PRC 中國廣東省佛山市禪城區東升內街23號 701室 3. Units 205 and 305 and 2 ancillary car parking rooms, 700,000 No. 9 Hua Yuan East Street, Chancheng District, Foshan City, Guangdong Province, The PRC

中國廣東省佛山市禪城區華遠東路9號 205及305單位及兩個配套車庫

– III-6 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Unit 807, No. 2 Jian Hua Street, Shunde District, Foshan City, Guangdong Province, The PRC 中國廣東省佛山市順德區建華街2號807號室
2 land parcels, 16 buildings and various structures located at No. 35 Fo Luo Main Road, Chancheng District, Foshan City, Guangdong Province, The PRC 位於中國廣東省佛山市禪城區佛羅公路35號之兩塊土地，16棟房屋及若干構築物 6. A land parcel (Land Parcel No. 147065-008), 5 buildings and various structures located at Shiban Village Committee Industrial Zone, Lunjiao Road Workplace, Shunde District, Foshan City, Guangdong Province, The PRC

Market Value in existing state as at 31 March 2011 RMB 200,000

61,100,000

11,000,000

位於中國廣東省佛山市順德區倫教街道辦事處仕版村委會工業區之一塊土地（地號︰147065-008）， 5棟房屋及若干構築物

– III-7 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

6 residential units (Unit Nos. 302, 502, 604, 702, 704 and 705), Block 1, Shu Yuan Road, Zhenhua Management Zone Workplace, Rong Gui County, Shunde District, Foshan City, Guangdong Province, The PRC 中國廣東省佛山市順德區容桂鎮振華管理區辦事處書院路一座 6個住宅單位（302號, 502號, 604號, 702號, 704號及705號單位）
A land parcel, 7 buildings and various structures located at No. 2 Ke Yuan Heng Third Road, Xiaohuangpu Neighbourhood Committee High Tech Zone (Rong Gui), Ronggui Town Workplace, Shunde District, Foshan City, Guangdong Province, The PRC

Market Value in existing state as at 31 March 2011 RMB

2,200,000

60,900,000

位於中國廣東省佛山市順德區容桂鎮街道辦事處小黃圃居委會高新區（容桂）科苑橫三路2號之一塊土地，7棟房屋及若干構築物

– III-8 –

APPENDIX III

PROPERTY VALUATION ON THE GROUP

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

A land parcel and 17 buildings and various structures located at No. 3 Hong Xing West Road, Central District, Jining City, Shandong Province, The PRC 位於中國山東省濟寧市市中區紅星西路3號之一塊土地，17棟房屋及若干構築物

19,700,000

A land parcel and a building located at No. 86 Li Yu Sha Road, Chancheng District, Foshan City, Guangdong Province, The PRC

1,400,000

位於中國廣東省佛山市禪城區鯉魚沙道86號之一塊土地及一棟房屋

Sub-Total: 212,770,000

– III-9 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

Group II – Properties held by the Group for investment in the PRC

A land parcel and a building located at No. 81 Sheng Ping Road, Chancheng District, Foshan City, Guangdong Province, The PRC 位於中國廣東省佛山市禪城區升平路81號之一塊土地及一棟房屋

560,000

A land parcel and a building 1,710,000 located at No. 49 Rui Qing Sub-district, Mazhang District, Zhanjiang City, Guangdong Province, The PRC

位於中國廣東省湛江市麻章區瑞慶小區49號之一塊土地及一楝房屋

Shop No. 3, Level 1, No. 33 Wei Guo Road, Chancheng District, Foshan City, Guangdong Province, The PRC

1,150,000

中國廣東省佛山市禪城區衛國路33號第一層3號店

– III-10 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

A land parcel, 8 buildings and various structures located at No. 43 Qing Ning Road, Chancheng District, Foshan City, Guangdong Province, The PRC

12,000,000

位於中國廣東省佛山市禪城區慶寧路43號之一塊土地，8棟房屋及若干構築物

Sub-Total: 15,420,000

Group III – Property partly held under development and partly held and occupied by the Group in the PRC

An industrial development located at 48,760,000 No. 95 Geng He Main Road, Genghe Town, Gaoming District, Foshan City, Guangdong Province, The PRC

位於中國廣東省佛山市高明區更合鎮更合大道95號之一個工業發展項目

Sub-Total: 48,760,000

– III-11 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

Group IV – Property held by the Group for future development in the PRC

A land parcel (Land Parcel No. C08-2) located at Xiaohuangpu Neighbourhood Committee High Tech Zone (Rong Gui), Ronggui Town Workplace, Shunde District, Foshan City, Guangdong Province, The PRC
15,000,000

位於中國廣東省佛山市順德區容桂鎮街道辦事處小黃圃居委會高新區（容桂）之一塊土地（地號C08-2）

Sub-Total: 15,000,000

Group V – Properties to be owner-occupied and held by the Group under contractual rights in the PRC

A land parcel (Land Parcel No. Fo Chan (Gua) 2010-009) located at the south of Kuiqi Road and the east of Lingnan Main Road, Chancheng District, Foshan City, Guangdong Province, The PRC
No Commercial Value

位於中國廣東省佛山市禪城區魁齊路南側、嶺南大道東側之一塊土地（宗地編號︰佛禪（掛）2010-009）

– III-12 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

A non-residential unit in a proposed development (Land Parcel No. 060024010012) at Tang Bian Street, Shang Shi Jiao, Chaodong Village, Huanshi Town, Chancheng District, Foshan City, Guangdong Province, The PRC

No Commercial Value

位於中國廣東省佛山市禪城區環市鎮朝東村上石角塘邊街一個發展項目中（地號︰060024010012）之一個非住宅單位

Sub-Total: Nil

Group VI – Properties rented by the Group in the PRC

A land parcel and 2 buildings located at No. 2 Qiao Xi Road, Rongshan Neighbourhood Committee, Ronggui Road Workplace, Shunde District, Foshan City, Guangdong Province, The PRC

No Commercial Value

位於中國廣東省佛山市順德區容桂街道辦事處容山居委會橋西路2號之一塊土地及兩棟房屋

– III-13 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Warehouse Nos. 1-4 and 7, an office unit, a workshop and a dormitory located in Bainikan Village, Xiebian Township, Dali Town, Nanhai District, Foshan City, Guangdong Province, The PRC

Market Value in existing state as at 31 March 2011 RMB

No Commercial Value

位於中國廣東省佛山市南海區大瀝鎮謝邊鄉白泥坎村之一個辦公單位，一個車間，一個宿舍及一至四及七號倉庫

Levels 1-2 of Front Block and the Warehouse of Rear Block, No. 21 Xin Di Road, Chancheng District, Foshan City, Guangdong Province, The PRC

No Commercial Value

中國廣東省佛山市禪城區新堤路21號前座1-2層及後座倉庫

– III-14 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

SUMMARY OF VALUES

No. Property

Shop No. 1, No. 114 Yong An Road, Chancheng District, Foshan City, Guangdong Province, The PRC 中國廣東省佛山市禪城區永安路114號一號舖
Warehouse Nos. 7, 8-3 and 8-4, Foshan City Guangtai Trading Company Limited Dazhousha Warehouse, No. 45 Fo Luo Road, Chancheng District, Foshan City, Guangdong Province, The PRC

Market Value in existing state as at 31 March 2011 RMB

No Commercial Value

中國廣東省佛山市禪城區佛羅路45號佛山市廣泰貿易有限公司大洲沙倉庫 7號，8-3號及8-4號倉庫

– III-15 –

APPENDIX III

PROPERTY VALUATION ON THE GROUP

SUMMARY OF VALUES

No. Property

Market Value in existing state as at 31 March 2011 RMB

Room 525, No. 5 Jin Sha First Street, Chancheng District, Foshan City, Guangdong Province, The PRC

No Commercial Value

中國廣東省佛山市禪城區金沙一街5號 525室

Sub-Total: Group VII – Property rented by the Group in Hong Kong 25. Rooms 2801-2805, 28th Floor, China Insurance Group Building, No. 141 Des Voeux Road Central, Hong Kong Sub-Total: Grand Total:	Nil
	No Commercial Value
	Nil
	291,950,000

– III-16 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group I – Properties held and occupied by the Group in the PRC

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
1.	2 land parcels, 16	The property comprises 2	The property is	55,200,000
	buildings and various	parcels of land with a total	occupied by the
	structures located at	site area of approximately	Group for industrial,
	No. 89 Fo Ping Road,	21,955 sq.m. and 16 buildings	storage, office and
	Chancheng District,	and various structures	ancillary purposes.
	Foshan City,	completed in various stages
	Guangdong Province,	between 1968 and 2004
	The PRC	erected thereon.
	位於中國廣東省	The total gross floor area
	佛山市禪城區	(“GFA”) of the property is
	佛平路89號	approximately 34,046.1 sq.m.
	之兩塊土地，16棟房屋
	及若干構築物	The land use rights of the
		property have been granted for
		a common term expiring on
		15 November 2048 for
		industrial use.

Notes:

Pursuant to 2 State-owned Land Use Rights Certificates, Fo Fu Guo Yong (2002) Zi Di Nos. 06000616769 and 06000616681, the land use rights of the land parcels of the property have been granted to Foshan Dezhong Pharmaceutical Co., Ltd. （佛山德眾藥業有限公司） (“Dezhong”) for a common term expiring on 15 November 2048 for industrial use.
Pursuant to 13 Real Estate Title Certificates, Yue Fang Di Zheng Zi Di Nos. 2070312, 2070327, 2087199, 2087200, 2088483 to 2088489, C4726916 and C4726925, the building ownership rights of 13 buildings of the property with a total GFA of approximately 33,134.1 sq.m. are legally owned by Dezhong.
For the remaining 3 buildings of the property with a total GFA of approximately 912 sq.m., the title certificates have not been obtained. As advised by the Company, these buildings are not directly involved in production.

As advised by the Group’s PRC legal advisor, the risk of being subject to any cost or fine due to the absence of title certificates is relatively low. As advised by the Company, there should be no material adverse impact on the Group’s financial position.

In the valuation of this property, we have attributed no commercial value to the buildings stated in Note 3 as relevant title certificates of the buildings have not been obtained. However, for your reference purpose, we are of the opinion that the depreciated replacement cost of the buildings (excluding the land) as at the date of valuation would be in the sum of approximately RMB250,000 assuming all relevant title certificates have been obtained and the buildings could be freely transferred in the market.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property (except 3 buildings stated in Note 3) are legally vested in Dezhong;

– III-17 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

b. Dezhong is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except 3 buildings stated in Note 3);
c. The property is not subject to any mortgages or other encumbrances; and
d. The buildings stated in Note 3 may be ordered by relevant authorities to be demolished and to apply for the planning permits and construction permits of the buildings. After the planning permits and construction permits have been obtained, there exist no material legal impediments for Dezhong to obtain the relevant Building Ownership Certificates of these buildings. After the relevant Building Ownership Certificates have been obtained, Dezhong is entitled to use, lease, transfer, dispose of and mortgage these buildings.
Dezhong is an indirectly 96.57%-owned subsidiary of the Company.

– III-18 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
2.	Unit 701,	The property comprises a	The property is	370,000
	No. 23	residential unit on Level 7 of	occupied by the
	Dong Sheng Nei Street,	an 8-storey residential	Group for staff
	Chancheng District,	building completed in 1990’s.	quarters purpose.
	Foshan City,
	Guangdong Province,	The gross floor area (“GFA”)
	The PRC	of the property is
		approximately 73.98 sq.m.
	中國廣東省
	佛山市禪城區	The land use rights of the
	東升內街23號	property have been granted for
	701室	a term expiring on 22 June
		2069 for residential use.

Notes:

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C0556130, the land use rights of the property are held by Foshan Dezhong Pharmaceutical Co., Ltd.（佛山德眾藥業有限公司） (“Dezhong”) for a term expiring on 22 June 2069 for residential use and the building ownership rights of the property with a GFA of approximately 73.98 sq.m. are legally owned by Dezhong.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Dezhong;
b. Dezhong is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Dezhong is an indirectly 96.57%-owned subsidiary of the Company.

– III-19 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
3.	Units 205 and 305 and 2	The property comprises 2	The residential units	700,000
	ancillary car	residential units and 2	of the property are
	parking rooms,	ancillary car parking rooms of	occupied by the
	No. 9	a 9-storey residential building	Group for staff
	Hua Yuan East Street,	completed in 1990’s.	quarters purpose
	Chancheng District,		whilst the car parking
	Foshan City,	The total gross floor area	rooms of the property
	Guangdong Province,	(“GFA”) of the residential	are occupied by the
	The PRC	units of the property is	Group for ancillary
		approximately 140.5 sq.m.	storage purpose.
	中國廣東省	whilst the car parking rooms
	佛山市禪城區	have a total GFA of
	華遠東路9號	approximately 13.55 sq.m.
	205及305單位及
	兩個配套車庫	The land use rights of the
		property have been granted for
		a common term expiring on
		25 May 2070 for residential
		use.

Notes:

Pursuant to 2 Real Estate Title Certificates, Yue Fang Di Zheng Zi Di Nos. C0657393 and C0657394, the land use rights of the residential units of the property are held by Foshan Dezhong Pharmaceutical Co., Ltd. (佛山德眾藥業有限公司) (“Dezhong”) for a common term expiring on 25 Mary 2070 for residential use and the building ownership rights of the residential units of the property with a total GFA of approximately 140.5 sq.m. are legally owned by Dezhong.
Pursuant to 2 Real Estate Title Certificates, Yue Fang Di Zheng Zi Di Nos. C0657383 and C0657395, the land use rights of the car parking rooms of the property are held by Dezhong for a common term expiring on 25 Mary 2070 for residential use and the building ownership rights of the car parking rooms of the property with a total GFA of approximately 13.55 sq.m. are legally owned by Dezhong.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Dezhong;
b. Dezhong is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Dezhong is an indirectly 96.57%-owned subsidiary of the Company.

– III-20 –

PROPERTY VALUATION ON THE GROUP

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VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 4. Unit 807, The property comprises a The property is 200,000 No. 2 Jian Hua Street, residential unit on Level 8 of occupied by the Shunde District, an 8-storey residential Group for staff Foshan City, building completed in 1990’s. quarters purpose. Guangdong Province, The PRC The gross floor area (“GFA”) of the property is 中國廣東省 approximately 65.27 sq.m. 佛山市順德區建華街2號807室 The land use rights of the property have been granted for a term expiring on 31 December 2063 for residential use.

Notes:

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C0556131, the land use rights of the property are held by Foshan Dezhong Pharmaceutical Co., Ltd. (佛山德眾藥業有限公司) (“Dezhong”) and the building ownership rights of the property with a GFA of 65.27 sq.m. are legally owned by Dezhong.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Dezhong;
b. Dezhong is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Dezhong is an indirectly 96.57%-owned subsidiary of the Company.

– III-21 –

PROPERTY VALUATION ON THE GROUP

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VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 5. 2 land parcels, 16 The property comprises 2 The property is 61,100,000 buildings and various parcels of land with a total occupied by the structures located at site area of approximately Group for industrial, No. 35 34,377.11 sq.m. and 16 storage, office and Fo Luo Main Road, buildings and various ancillary purposes. Chancheng District, structures completed in Foshan City, various stages between 1986 Guangdong Province, and 2004 erected thereon. The PRC The total gross floor area 位於中國廣東省 (“GFA”) of the property is 佛山市禪城區 approximately 46,657.72 sq.m. 佛羅公路35號之兩塊土地，16棟房屋 The land use rights of the 及若干構築物 property have been granted for terms with the earliest expiry date on 1 January 2050 for industrial use.

Notes:

Pursuant to 2 State-owned Land Use Rights Certificates, Fo Fu Guo Yong (2001) Zi Di No. 06000614403 and Nan Fu Guo Yong (2001) Zi Di No. Te 090139, the land use rights of the property with a total site area of 34,377.11 sq.m. have been granted to Foshan Feng Liao Xing Pharmaceutical Company Limited（佛山馮了性藥業有限公司）(“Feng Liao Xing”) for terms with the earliest expiry date on 1 January 2050 for industrial use.
Pursuant to 12 Real Estate Title Certificates, Yue Fang Di Zheng Zi Di Nos. C0653502 to C0653505, C0653507 to C0653510, C4387040 and C4584058 to C4584060, the building ownership rights of 12 buildings of the property with a total GFA of approximately 45,850.63 sq.m. are legally owned by Feng Liao Xing.
For the remaining 4 buildings with a total GFA of approximately 807.09 sq.m., the title certificates have not been obtained. As advised by the Company, these buildings are not directly involved in production.

In the valuation of this property, we have attributed no commercial value to the buildings stated in Note 3 as relevant title certificates of the buildings have not been obtained. However, for your reference purpose, we are of the opinion that the depreciated replacement cost of the buildings (excluding the land) as at the date of valuation would be in the sum of approximately RMB450,000 assuming all relevant title certificates have been obtained and the buildings could be freely transferred in the market.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property (except 4 buildings stated in Note 3) are legally vested in Feng Liao Xing;

– III-22 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

b. Feng Liao Xing is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except 4 buildings stated in Note 3);
c. The property is not subject to any mortgages or other encumbrances; and
d. The buildings stated in Note 3 may be ordered by relevant authorities to be demolished and to apply for the planning permits and construction permits of the buildings. After the planning permits and construction permits have been obtained, there exist no material legal impediments for Feng Liao Xing to obtain the relevant Building Ownership Certificates of these buildings. After the relevant Building Ownership Certificates have been obtained, Feng Liao Xing is entitled to use, lease, transfer, dispose of and mortgage these buildings.
Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-23 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 6. A land parcel (Land The property comprises a The property is 11,000,000 Parcel No. 147065-008), parcel of land with a site area occupied by the 5 buildings and various of approximately 5,625 sq.m. Group for industrial, structures located at and 5 buildings and various storage, office and Shiban Village structures completed in ancillary purposes. Committee Industrial various stages between 2001 Zone, and 2007 erected thereon. Lunjiao Road Workplace, Shunde District, The total gross floor area Foshan City, (“GFA”) of the property is Guangdong Province, approximately 5,018.7 sq.m. The PRC The land use rights of the 位於中國廣東省 property have been granted for 佛山市順德區 a term expiring on 5 October 倫教街道辦事處 2049 for industrial use. 仕版村委會工業區之一塊土地 (地號︰147065-008)， 5棟房屋及若干構築物

Notes:

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C4766703, the land use rights of the property with a site area of 5,625 sq.m. are held by Guangdong Medi-World Pharmaceutical Co., Ltd.（廣東環球製藥有限公司）(“Guangdong Medi-World”) for a term expiring on 5 October 2049 for industrial use and the building ownership rights of the property with a total GFA of approximately 5,018.7 sq.m. are legally owned by Guangdong Medi-World.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Guangdong Medi-World;
b. The property is subject to a mortgage but no other encumbrances; and
c. Guangdong Medi-World is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except the restriction in relation to the mortgage).
Guangdong Medi-World is an indirect wholly-owned subsidiary of the Company.

– III-24 –

PROPERTY VALUATION ON THE GROUP

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VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 7. 6 residential units (Unit The property comprises 6 The property is 2,200,000 Nos. 302, 502, 604, 702, residential units of a 7-storey occupied by the 704 and 705), Block 1, composite building completed Group for staff Shu Yuan Road, in 1990’s. quarters purpose. Zhenhua Management Zone Workplace, The total gross floor area Rong Gui County, (“GFA”) of the property is Shunde District, approximately 676.6 sq.m. Foshan City, Guangdong Province, The land use rights of the The PRC property have been granted for a term commencing on 1 中國廣東省佛山市 November 1995 and expiring 順德區容桂鎮 on 31 October 2065 for 振華管理區辦事處 residential use. 書院路一座 6個住宅單位（302號，502號， 604號, 702號, 704號及705 號單位）

Notes:

Pursuant to 6 Real Estate Title Certificates, Yue Fang Di Zheng Zi Di Nos. 1626388, 1626390, 1626392, 1626393, 1626394 and 1626395, the land use rights of the property are held by Guangdong Medi-world Dazhong Pharmaceutical Co., Ltd.（廣東環球大冢製藥有限公司）(now known as Guangdong Medi-World Pharmaceutical Co., Ltd.（廣東環球製藥有限公司）) (“Guangdong Medi-World”) for a term expiring on 31 October 2065 for residential use and the building ownership rights of the property with a total GFA of approximately 676.6 sq.m. are legally owned by Guangdong Medi-World.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Guangdong Medi-World;
b. Guangdong Medi-World is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Guangdong Medi-World is an indirect wholly-owned subsidiary of the Company.

– III-25 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 8. A land parcel, 7 buildings The property comprises a The property is 60,900,000 and various structures parcel of land with a site area occupied by the located at No. 2 Ke Yuan of approximately 34,902.68 Group for industrial, Heng Third Road, sq.m. and 7 buildings and storage, office and Xiaohuangpu various structures completed ancillary purposes. Neighbourhood in various stages between Committee High Tech 2009 and 2011 erected Zone (Rong Gui), thereon. Ronggui Town Workplace, The total gross floor area Shunde District, (“GFA”) of the property is Foshan City, approximately 20,545.99 sq.m. Guangdong Province, The PRC The land use rights of the property have been granted for 位於中國廣東省 a term expiring on 24 佛山市順德區 November 2054 for industrial 容桂鎮街道辦事處 use. 小黃圃居委會高新區（容桂）科苑橫三路2號之一塊土地， 7棟房屋及若干構築物

Notes:

Pursuant to a State-owned Land Use Rights Grant Contract, No. (2004)2737 entered into between Guangdong Province Foshan City Shunde District Land and Recourses Bureau and Guangdong Medi-World Pharmaceutical Co., Ltd. （廣東環球製藥有限公司） (“Guangdong Medi-World”) dated 23 November 2004, the land use rights of the property together with those of Property No. 16 with a site area of approximately 64,293.1 sq.m. were contracted to be granted to Guangdong Medi-World with the following salient conditions:

Use	:	Industrial
Plot Ratio	:	�2.0
Density	:	�55%
Height Restriction	:	�20m
Green Area	:	�30%

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C6782214, the land use rights of the property with a site area of 34,902.68 sq.m. are held by Guangdong Medi-World for a term expiring on 24 November 2054 for industrial use and the building ownership rights of 3 buildings of the property with a total GFA of approximately 18,332.09 sq.m. are legally owned by Guangdong Medi-World.
For the remaining 4 buildings of the property with a total GFA of approximately 2,213.9 sq.m., the title certificates have not been obtained. As advised by the Company, these buildings are not directly involved in production.

– III-26 –

PROPERTY VALUATION ON THE GROUP

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In the valuation of this property, we have attributed no commercial value to the buildings stated in Note 3 as relevant title certificates of the buildings have not been obtained. However, for your reference purpose, we are of the opinion that the depreciated replacement cost of the buildings (excluding the land) as at the date of valuation would be in the sum of approximately RMB3,800,000 assuming all relevant title certificates have been obtained and the buildings could be freely transferred in the market.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property (except 4 buildings stated in Note 3) are legally vested in Guangdong Medi-World;
b. The property is subject to a mortgage but no other encumbrances;
c. Guangdong Medi-World is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except the restriction in relation to the mortgage and the 4 buildings stated in Note 3); and
d. The buildings stated in Note 3 may be ordered by relevant authorities to be demolished and to apply for the planning permits and construction permits of the buildings. After the planning permits and construction permits have been obtained, there exist no material legal impediments for Guangdong Medi-World to obtain the relevant Building Ownership Certificates of these buildings. After the relevant Building Ownership Certificates have been obtained, Guangdong Medi-World is entitled to use, lease, transfer, dispose of and mortgage these buildings.
Guangdong Medi-World is an indirect wholly-owned subsidiary of the Company.

– III-27 –

PROPERTY VALUATION ON THE GROUP

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VALUATION CERTIFICATE

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
9.	A land parcel and 17	The property comprises a	The property is	19,700,000
	buildings and various	parcel of land with a site area	occupied by the
	structures located at	of approximately 17,186.5	Group for industrial,
	No. 3 Hong Xing West	sq.m. and 17 buildings and	storage, office and
	Road,	various structures completed	ancillary purposes.
	Central District,	in various stages between
	Jining City,	1979 and 2009 erected
	Shandong Province,	thereon.
	The PRC
		The total gross floor area
	位於中國山東省	(“GFA”) of the property is
	濟寧市市中區	approximately 11,445.65 sq.m.
	紅星西路3號
	之一塊土地，17棟房屋	The land use rights of the
	及若干構築物	property have been granted for
		a term expiring in December
		2052 for industrial use.

Notes:

Pursuant to a State-Owned Land Use Rights Certificate, Ji Zhong Guo Yong (2002) Zi Di No. 0802000450, the land use rights of the property with a site area of approximately 17,186.5 sq.m. have been granted to Shandong Lukang Pharmaceutical Group Luya Company Limited（山東魯抗醫藥集團魯亞有限公司）(now known as Shandong Luya Pharmaceutical Company Limited（山東魯亞製藥有限公司）) (“Luya”) for a term expiring in December 2052 for industrial use.
Pursuant to 4 Building Ownership Certificates, Ji Ning Shi Fang Quan Zheng Gu Zi Di Nos. 04488 and 04503 to 04505, the building ownership rights of 18 buildings with a total GFA of approximately 7,840.75 sq.m. are legally owned by Luya. As advised by the Group, 4 out of the 18 buildings with a total GFA of approximately 322.33 sq.m. have been demolished and therefore are excluded from our valuation.
Pursuant to a Construction Works Planning Permit, No. ZQJ-0720, a building of the property with a GFA of approximately 3,470 sq.m. was permitted to be developed by Luya.
Pursuant to a Construction Works Commencement Permit, No. Ji Qu 2008-007, the construction work of the building stated in Note 3 was permitted to commence.
For the remaining 2 buildings of the property with a total GFA of approximately 457.23 sq.m., the title certificates have not been obtained. As advised by the Company, these buildings are not directly involved in production.

In the valuation of this property, we have attributed no commercial value to the buildings stated in Notes 3 and 5 as relevant title certificates of the buildings have not been obtained. However, for your reference purpose, we are of the opinion that the depreciated replacement cost of the buildings (excluding the land) as at the date of valuation would be in the sum of approximately RMB10,900,000 assuming all relevant title certificates have been obtained and the buildings could be freely transferred in the market.

– III-28 –

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The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property (except 3 buildings stated in Notes 3 and 5) are legally vested in Luya;
b. Luya is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except 3 buildings stated in Notes 3 and 5);
c. The property is not subject to any mortgages or other encumbrances;
d. The construction of the building stated in Note 3 is in compliance with the local planning and construction requirements. There exist no material legal impediments for Luya to apply for relevant building ownership certificates of the building; and
e. The buildings stated in Note 5 may be ordered by relevant authorities to be demolished and to apply for the planning permits and construction permits of the buildings. After the planning permits and construction permits have been obtained, there exist no material legal impediments for Luya to obtain the relevant Building Ownership Certificates of these buildings. After the relevant Building Ownership Certificates have been obtained, Luya is entitled to use, lease, transfer, dispose of and mortgage these buildings.
Luya is an indirect wholly-owned subsidiary of the Company.

– III-29 –

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VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 10. A land parcel and a The property comprises a The property is 1,400,000 building located at parcel of land with a site area occupied by the No. 86 Li Yu Sha Road, of approximately 429 sq.m. Group for storage Chancheng District, and a 2-storey warehouse purpose. Foshan City, completed in about 2006 Guangdong Province, erected thereon. The PRC The gross floor area (“GFA”) 位於中國廣東省 of the property is 佛山市禪城區 approximately 919.86 sq.m. 鯉魚沙道86號之一塊土地及一棟房屋 The land use rights of the property have been granted for a term expiring on 1 May 2049 for warehouse use.

Notes:

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C6810584, the land use rights of the property with a site area of approximately 429 sq.m. are held by Foshan Dezhong Pharmaceutical Co., Ltd. (佛山德眾藥業有限公司) (“Dezhong”) for a term expiring on 1 May 2049 for warehouse use and the building ownership rights of the property with a GFA of approximately 919.86 sq.m. are legally owned by Dezhong.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Dezhong;
b. Dezhong is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Dezhong is an indirectly 96.57%-owned subsidiary of the Company.

– III-30 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group II – Properties held by the Group for investment in the PRC

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
11.	A land parcel and a	The property comprises a	As advised by the	560,000
	building located at	parcel of land with a site area	Group, the property is
	No. 81 Sheng Ping Road,	of approximately 39 sq.m. and	leased to an
	Chancheng District,	a 2-storey commercial	independent third
	Foshan City,	building completed in about	party on a monthly
	Guangdong Province,	1972 erected thereon.	basis at a monthly
	The PRC		rent of RMB1,000
		The gross floor area (“GFA”)	exclusive of water and
	位於中國廣東省	of the property is	electricity charges.
	佛山市禪城區	approximately 72.37 sq.m.
	升平路81號
	之一塊土地及一棟房屋	The land use rights of the
		property have been granted for
		a term expiring on 15
		November 2038 for
		commercial use.

Notes:

Pursuant to a State-owned Land Use Rights Certificate, Fo Fu Guo Yong (1998) Zi Di No. 06000304899, the land use rights of the property have been granted to Foshan Dezhong Pharmaceutical Co., Ltd. （佛山德眾藥業有限公司）(“Dezhong”) for a term expiring on 15 November 2038 for commercial use.
Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. 2063661, the building ownership rights of the property with a GFA of 72.37 sq.m. are legally owned by Dezhong.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Dezhong;
b. Dezhong is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Dezhong is an indirectly 96.57%-owned subsidiary of the Company.

– III-31 –

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VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 12. A land parcel and a The property comprises a Pursuant to a Tenancy 1,710,000 building located at parcel of land with a site area Agreement, the No. 49 Rui Qing of approximately 338 sq.m. property is leased to Sub-district, and a 5-storey composite an independent third Mazhang District, commercial/residential party for a term Zhanjiang City, building completed in about expiring on 31 March Guangdong Province, 1997 erected thereon. 2012 at a monthly The PRC rent of RMB5,000 The gross floor area (“GFA”) exclusive of 位於中國廣東省 of the property is management fee and 湛江市麻章區 approximately 1,866.2 sq.m. water, electricity, 瑞慶小區49號之 telephone, television 一塊土地及一棟房屋 The land use rights of the and cleaning charges. property have been granted for a term expiring on 22 March 2063 for commercial and residential uses.

Notes:

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C3660682, the land use rights of the property with a site area of approximately 338 sq.m. are held by Foshan Feng Liao Xing Pharmaceutical Company Limited (佛山馮了性藥業有限公司) (“Feng Liao Xing”) for a term expiring on 22 March 2063 for commercial and residential uses and the building ownership rights of the property with a GFA of approximately 1,866.2 sq.m. are legally owned by Feng Liao Xing.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Feng Liao Xing;
b. Feng Liao Xing is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-32 –

PROPERTY VALUATION ON THE GROUP

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VALUATION CERTIFICATE

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
13.	Shop No. 3, Level 1,	The property comprises a	Pursuant to a tenancy	1,150,000
	No. 33 Wei Guo Road,	commercial unit on Level 1 of	agreement provided
	Chancheng District,	a 9-storey composite	by the Group, the
	Foshan City,	commercial/residential	property is subject to
	Guangdong Province,	building completed in 1990’s.	a tenancy for a term
	The PRC		of 2 years
		The gross floor area (“GFA”)	commencing on 1
	中國廣東省	of the property is	September 2009 and
	佛山市禪城區	approximately 104.8 sq.m.	expiring on 31 August
	衛國路33號		2011 at a monthly rent
	第一層3號店	The land use rights of the	of RMB15,000
		property have been granted for	exclusive of
		a term expiring on 30 April	telephone, water,
		2041 for commercial use.	electricity and other
			charges.

Notes:

Pursuant to a Real Estate Title Certificate, Yue Fang Di Zheng Zi Di No. C653506, the land use rights of the property are held by Foshan Feng Liao Xing Pharmaceutical Company Limited (佛山馮了性藥業有限公司) (“Feng Liao Xing”) and the building ownership rights of the property with a GFA of approximately 104.8 sq.m. are legally owned by Feng Liao Xing.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property are legally vested in Feng Liao Xing;
b. Feng Liao Xing is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-33 –

PROPERTY VALUATION ON THE GROUP

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VALUATION CERTIFICATE

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
14.	A land parcel, 8 buildings	The property comprises a	Pursuant to a Real	12,000,000
	and various structures	parcel of land with a site area	Estate Tenancy
	located at	of approximately 5,543.6	Contract and the
	No. 43 Qing Ning Road,	sq.m. and 8 buildings and	relevant
	Chancheng District,	various structures completed	Supplementary
	Foshan City,	in various stages between	Contract, the property
	Guangdong Province,	1960 and 1982 erected	is leased to an
	The PRC	thereon.	independent third
			party (See Notes 7
	位於中國廣東省	The total gross floor area	and 8).
	佛山市禪城區	(“GFA”) of the property is
	慶寧路43號之	approximately 8,521.26 sq.m.
	一塊土地，8棟房屋
	及若干構築物	The land use rights of the
		property have been granted for
		a term expiring on 1 January
		2050 for industrial use.

Notes:

Pursuant to a State-owned Land Use Rights Certificate, Fo Fu Guo Yong (2001) Zi Di No. 06000409576, the land use rights of a parcel of land with a site area of approximately 5,649 sq.m. have been granted to Foshan Feng Liao Xing Pharmaceutical Company Limited（佛山馮了性藥業有限公司）(“Feng Liao Xing”) for a term expiring on 1 January 2050 for industrial use.
Pursuant to a Foshan City Building Demolition & Removal Contract entered into between Foshan City 12th Primary School（佛山市第十二小學）, an independent third party, and Feng Liao Xing, dated 1 March 2003, a portion of land with a site area of approximately 62.9 sq.m. was acquired by Foshan City No.12 Primary School and therefore is excluded from our valuation.
Pursuant to a Land Transfer Agreement entered into between Feng Liao Xing and Foshan Dongjian Group Company Limited（佛山東建有限公司）, a portion of land with a site area of approximately 42.5 sq.m. was transferred to Foshan City Dong Jian Group Limited effective from 31 January 2004 and therefore is excluded from our valuation.
Pursuant to 7 Real Estate Title Certificates, Yue Fang Di Zheng Zi Di Nos. C0653511, C0653512 and C0653515 to C0653519, the building ownership rights of 7 buildings of the property with a total GFA of approximately 8,210.26 sq.m. and the land use rights of a parcel of land with a site area of approximately 5,649 sq.m. are legally held by Feng Liao Xing for a term expiring on 1 January 2050 for industrial use.
For the remaining building of the property with a GFA of approximately 311 sq.m., the title certificates have not been obtained. As advised by the Company, the building is not directly involved in production.

In the valuation of this property, we have attributed no commercial value to the building stated in Note 5 as relevant title certificates of the building have not been obtained. However, for your reference purpose, we are of the opinion that the depreciated replacement cost of the building

– III-34 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

(excluding the land) as at the date of valuation would be in the sum of approximately RMB100,000 assuming all relevant title certificates have been obtained and the building could be freely transferred in the market.

Pursuant to a Real Estate Tenancy Contract, the land use rights of the property and 11 buildings with a total GFA of approximately 9,460.2 sq.m. were leased to an independent third party for a term of 30 years. The details of the tenancy are summarized as follows:

Year Duration Annual Rent 1st – 3rd Year 1 March 2004 – 28 February 2007 RMB500,000 4th – 6th Year 1 March 2007 – 28 February 2010 RMB700,000 7th – 10th Year 1 March 2010 – 28 February 2014 RMB800,000 11th – 20th Year 1 March 2014 – 29 February 2024 RMB1,200,000 21st – 30th Year 1 March 2024 – 1 March 2034 RMB1,500,000

The annual rents are exclusive of all outgoings. As advised by the Group, 3 buildings stated in the Real Estate Tenancy Contract with a total GFA of approximately 938.94 sq.m. were demolished and therefore are excluded from our valuation.

Pursuant to a Supplemental Agreement dated 29 May 2007, the lease term of the property has been revised from 30 years to 20 years and the lessee has the rights to renew the tenancy for a further term of 10 years at the rents in accordance with the Real Estate Tenancy Contract.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property (except the building stated in Note 5) are legally vested in Feng Liao Xing;
b. Feng Liao Xing is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except the building stated in Note 5);
c. Pursuant to the PRC Contract Law, tenancy term can not exceed 20 years, thus the last 10 years’ tenancy stated in Note 7 and the lessee’s rights to renew the tenancy for a further term of 10 years stated in Note 8 are invalid;
d. The terms of the Real Estate Tenancy Contract within the first 20 years of the tenancy are legally valid;
e. The property is not subject to any mortgages or other encumbrances; and
f. The building stated in Note 5 may be ordered by relevant authorities to be demolished and to apply for the planning permits and construction permits of the building. After the planning permits and construction permits have been obtained, there exist no material legal impediments for Feng Liao Xing to obtain the relevant Building Ownership Certificates of the building. After the relevant Building Ownership Certificates have been obtained, Feng Liao Xing is entitled to use, lease, transfer, dispose of and mortgage the building.
Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-35 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group III – Property partly held under development and partly held and occupied by the Group in the PRC

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 15. An industrial The property comprises 2 The Completed 48,760,000 development located at parcels of land with a total Property is occupied No. 95 site area of approximately by the Group for Geng He Main Road, 70,624.49 sq.m. and 2 storage and ancillary Genghe Town, buildings (the “Completed purposes. Gaoming District, Property”) completed in 2006 Foshan City, erected thereon. The CIP is under Guangdong Province, development. The PRC The total gross floor area (“GFA”) of the buildings of 位於中國廣東省佛山市 the Completed Property is 高明區更合鎮 approximately 10,215 sq.m. 更合大道95號之一個工業發展項目 In addition to the Completed Property, the property also comprises 2 buildings and various structures which are under construction (the “CIP”). The planned total GFA of the buildings of the CIP will be approximately 23,854.76 sq.m. upon completion. The estimated total construction cost is approximately RMB90,000,000, of which approximately RMB25,460,000 had been paid up to the date of valuation. The construction works of the CIP are scheduled to be completed in 2011.

The land use rights of the property have been granted for terms with the earliest expiry date on 25 August 2050 for industrial use.

– III-36 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

Notes:

Pursuant to a State-owned Construction Land Use Rights Grant Contract, No. 440608-2010-000187, entered into between Guangdong Province Foshan City Land & Recourses Bureau and Foshan Dezhong Pharmaceutical Co., Ltd. Gaoming Branch （佛山德眾藥業有限公司高明分公司） (“Dezhong Gaoming”) dated 26 August 2010, the land use rights of a land parcel of the property with a site area of approximately 54,843.25 sq.m. were contracted to be granted to Dezhong Gaoming with the following salient conditions:

Use : Industrial Plot Ratio : �0.8 Density : �35% and �55% Height Restriction : �20m Green Area : �10% Land Premium : RMB11,250,000 Land Use Term : 50 years expiring on 25 August 2060 Other : Development must be completed before 25 August 2014

As advised by the Group, the land parcels and the Completed Property of the property were acquired by the Group in 2010 with a total consideration of RMB20,000,000.
Pursuant to 2 State-owned Land Use Rights Certificates, Fo Gao Guo Yong (2010) Di Nos. 0800105 and 0800112, the land use rights of the property with a total site area of approximately 70,624.49 sq.m. have been granted to Dezhong Gaoming for terms expiring on 24 December 2053 and 25 August 2050 respectively for industrial use.
Pursuant to a Real Estate Title Certificate, Yue Fang Di Quan Zheng Fo Zi Di No. 0508000610, the building ownership rights of a building of the Completed Property with a GFA of approximately 10,200 sq.m. are legally owned by Dezhong Gaoming.
For the remaining building of the Completed Property with a GFA of approximately 15 sq.m., the title certificates have not been obtained. As advised by the Company, the building is not directly involved in production.

Pursuant to a Construction Works Planning Permit, Jian Zi Di No. 440608201040030, 2 buildings of the CIP with a proposed total GFA of approximately 23,854.76 sq.m. are permitted to be developed by Dezhong Gaoming.
Pursuant to a Construction Works Commencement Permit, No. 4406842011011102, the construction work of the buildings stated in Note 6 was permitted to commence.
The estimated market value of the property as if completed as at the date of valuation, would be approximately RMB113,900,000.
In the valuation of this property, we have attributed no commercial value to the building of the Completed Property stated in Note 5 as relevant title certificates of the building have not been obtained. However, for your reference purpose, we are of the opinion that the depreciated replacement cost of the building (excluding the land) as at the date of valuation would be in the sum of approximately RMB20,000 assuming all relevant title certificates have been obtained and the building could be freely transferred in the market.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights and building ownership rights of the property (except the building stated in Note 5 and 2 buildings stated in Note 6) are legally vested in Feng Liao Xing;

– III-37 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

b. Feng Liao Xing is entitled to use, lease, mortgage and transfer the land use rights and building ownership rights of the property (except the building stated in Note 5 and 2 buildings stated in Note 6);
c. The property is not subject to any mortgages or other encumbrances;
d. The planning and construction of the CIP of the property are in compliance with the requirements of the local government authorities and there exist no material legal impediments for Dezhong Gaoming to construct the CIP until completion. There exist no material legal impediments for Dezhong Gaoming to obtain the relevant Building Ownership Certificates of the buildings of the CIP upon completion; and
e. The building stated in Note 5 may be ordered by relevant authorities to be demolished and to apply for the planning permits and construction permits of the building. After the planning permits and construction permits have been obtained, there exist no material legal impediments for Dezhong Gaoming to obtain the relevant Building Ownership Certificates of the building. After the relevant Building Ownership Certificates have been obtained, Dezhong Gaoming is entitled to use, lease, transfer, dispose of and mortgage the building.
As advised by the Group, Dezhong Gaoming is a branch of Foshan Dezhong Pharmaceutical Co., Ltd.（佛山德眾藥業有限公司）, which is an indirectly 96.57%-owned subsidiary of the Company.

– III-38 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group IV – Property held by the Group for future development in the PRC

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
16.	A land parcel (Land	The property comprises a	The property is	15,000,000
	Parcel No. C08-2)	parcel of land with a site area	vacant.
	located at	of approximately 29,285.1
	Xiaohuangpu	sq.m.
	Neighbourhood
	Committee High Tech	As advised by the Company,
	Zone (Rong Gui),	the property is planned to be
	Ronggui Town	developed into an industrial
	Workplace,	complex. The detailed
	Shunde District,	planning of the development
	Foshan City,	is under preparation and it is
	Guangdong Province,	expected that the construction
	The PRC	of the property will commence
		by the end of 2011.
	位於中國廣東省
	佛山市順德區	The land use rights of the
	容桂鎮街道辦事處	property have been granted for
	小黃圃居委會高新區（容桂）	a term expiring on 24
	之一塊土地（地號C08-2）	November 2054 for industrial
		use.

Notes:

Pursuant to a State-owned Land Use Rights Grant Contract, No. (2004)2737 (the “Contract”) entered into between Guangdong Province Foshan City Shunde District Land and Recourses Bureau and Guangdong Medi-World Pharmaceutical Co., Ltd.（廣東環球製藥有限公司）(“Guangdong Medi-World”) dated 23 November 2004, the land use rights of the property together with those of Property No. 8 with a site area of approximately 64,293.1 sq.m. were contracted to be granted to Guangdong Medi-World with the following salient conditions:

Use	:	Industrial
Plot Ratio	:	�2.0
Density	:	�55%
Height Restriction	:	�20m
Green Area	:	�30%

Pursuant to a State-owned Land Use Rights Certificate, Shun Fu Guo Yong (2004) Di No. 1002310 issued by the People’s Republic of China State-owned Land Resources Bureau, dated 24 November 2004, the land use rights of the property with a site area of 29,285.1 sq.m. have been granted to Guangdong Medi-World for a term expiring on 24 November 2054 for industrial use.
Pursuant to a State-owned Land Use Rights Grant Contract Supplementary Agreement, Shun Guo Chu Rang Zi (2004) Di. No. 2737 Bu No. 01, dated 8 December 2008, the construction of the proposed development has to be commenced by 31 December 2009 and has to be completed by 30 December 2011.

– III-39 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

As advised by the Group’s PRC legal advisor, if the construction works have not been commenced by 31 December 2009, the State-owned Land Resources Bureau has the right to levy a land idling fee. If the construction works have not been commenced by 30 December 2011, the State-owned Land Resources Bureau has the right to repossess the land parcel without compensation. In the course of our valuation, we have not taken into account this issue.

As advised by the Company, the risk of being subject to the idling fee is relatively low in accordance with the communications between the Company and the relevant government authorities. Thus, there should be no material adverse impact on the Group’s operation and financial position.

The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The land use rights of the property are legally vested in Guangdong Medi-World;
b. Guangdong Medi-World is entitled to use, lease, mortgage and transfer the land use rights of the property; and
c. The property is not subject to any mortgages or other encumbrances.
Guangdong Medi-World is an indirect wholly-owned subsidiary of the Company.

– III-40 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group V – Properties to be owner-occupied and held by the Group under contractual rights in the PRC

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
17.	A land parcel (Land	The property comprises a	The property is	No Commercial Value
	Parcel No. Fo Chan	parcel of land with a site area	occupied for
	(Gua) 2010-009)	of approximately 22,047.01	temporary car parking
	located at	sq.m.	purpose.
	the south of Kuiqi Road
	and the east of Lingnan	As advised by the Group, the
	Main Road,	property is planned to be
	Chancheng District,	developed into a composite
	Foshan City,	office/research development.
	Guangdong Province,
	The PRC	As advised by the Group, the
		detailed planning of the
	位於中國廣東省	development is yet to be
	佛山市禪城區	determined.
	魁齊路南側、嶺南大道東側
	之一塊土地(宗地編號︰佛禪	The land use rights of the
	(掛)2010-009)	property will be granted for a
		term of 50 years for research
		and education uses.

Notes:

Pursuant to a State-owned Land Use Rights Grant Contract, No. 440601-2010-100235 (the “Contract”) and a State-owned Land Use Rights Grant Contract Supplementary Agreement (the “Supplementary Agreement”) both entered into between Guangdong Province Foshan City Land and the Company, dated 4 May 2010 and 26 July 2010 respectively, the land use rights of the property were contracted to be granted to the Company with the following salient conditions:

Use : Research and education Plot Ratio : �2.5 Density : �40% Height Restriction : �150m Green Area : �35% Land Premium : RMB77,060,000 Other : The Company should move its headquarter to the property within a year after completion of the development.

We have attributed no commercial value to the property as relevant title certificates have not been obtained.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:

The Contract and the Supplementary Agreement are legally valid and binding on the contracting parties.

– III-41 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

No. Property

A non-residential unit in a proposed development (Land Parcel No. 060024010012) at Tang Bian Street, Shang Shi Jiao, Chaodong Village, Huanshi Town, Chancheng District, Foshan City, Guangdong Province, The PRC

Description and tenure

The property comprises a non-residential unit with a proposed area of approximately 1,250 sq.m. in a proposed development. As advised by the Group, the property will be used for commercial purpose upon completion.

Market Value Particulars of in existing state occupancy as at 31 March 2011 RMB The construction No Commercial Value works of the proposed development had not been commenced as at the date of valuation.

位於中國廣東省佛山市禪城區環市鎮朝東村上石角塘邊街一個發展項目中 (地號︰060024010012) 之一個非住宅單位

Notes:

Pursuant to a Foshan City Building Demolition & Removal Contract (the “Contract”), No. A0108193D, and a Supplemental Agreement (the “Supplementary Agreement”) both entered into between Foshan Dongjian Group Company Limited（佛山市東建集團有限公司）and Foshan Feng Liao Xing Pharmaceutical Company Limited （佛山馮了性藥業有限公司） (“Feng Liao Xing”), dated 31 August 2008, the property with a proposed area of 1,250 sq.m. was contracted to be transferred to Feng Liao Xing after the development has been completed for the resettlement of a land which was formerly owned by the latter.
We have attributed no commercial value to the property as relevant title certificates have not been obtained.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:

The Contract and the Supplementary Agreement are legally valid and binding on the contracting parties.

Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-42 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group VI – Properties rented by the Group in the PRC

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 19. A land parcel and 2 The property comprises a The land parcel of No Commercial Value buildings located at parcel of land with a site area the property is No. 2 Qiao Xi Road, of approximately 3,277.5 occupied by the Rongshan Neighbourhood sq.m. and 2 buildings Group for car parking Committee, completed in 1990’s within an purpose whilst the Ronggui Road industrial complex. buildings of the Workplace, property are occupied Shunde District, The total gross floor area by the Group for Foshan City, (“GFA”) of the buildings of office and canteen Guangdong Province, the property is approximately purposes. The PRC 9,861 sq.m. 位於中國廣東省佛山市順德區容桂街道辦事處容山居委會橋西路2號之一塊土地及兩棟房屋

Notes:

Pursuant to a Tenancy Agreement, the property is leased to Guangdong Medi-World Pharmaceutical Company Limited（廣東環球製藥有限公司）(“Guangdong Medi-World”) from an independent third party for a term expiring on 30 June 2015 at a monthly rent of RMB246,525 exclusive of water, electricity and cleaning charges and other relevant outgoings.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:

The Tenancy Agreement is legally valid and binding on the contracting parties.

Guangdong Medi-World is an indirect wholly-owned subsidiary of the Company.

– III-43 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Market Value

No. Property

Description and tenure

Particulars of in existing state occupancy as at 31 March 2011 RMB

Warehouse Nos. 1-4 and 7, an office unit, a workshop and a dormitory located in Bainikan Village, Xiebian Township, Dali Town, Nanhai District, Foshan City, Guangdong Province, The PRC
The property comprises 5 warehouse units, an office unit, a workshop and a dormitory within an industrial complex completed in 1980’s. The total gross floor area (“GFA”) of the property is approximately 4,812.78 sq.m.

The property is No Commercial Value occupied by the Group for storage, workshop, ancillary office and staff quarters purposes.

位於中國廣東省佛山市南海區大瀝鎮謝邊鄉白泥坎村之一個辦公單位，一個車間，一個宿舍及一至四及七號倉庫

Notes:

Pursuant to a Real Estate Tenancy Contract (the “Contract”), the property is leased to Foshan Nanhai Pharmaceutical Group Medicinal Material Company Limited （佛山市南海醫藥集團藥材有限公司） (“Nanhai Pharmaceutical”) from an independent third party for a term expiring on 30 October 2011. The monthly rent of the property together with Property No. 21 is RMB50,000 exclusive of water, electricity and cleaning charges and management fee.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The Contract is legally valid and is binding on the contracting parties; and
b. The Contract has not been registered, however, the non-registration will not affect the validity of the Contract.
Nanhai Pharmaceutical is an indirect wholly-owned subsidiary of the Company.

– III-44 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 21. Levels 1-2 of Front The property comprises The property is No Commercial Value Block and the Warehouse portions of a 7-storey building occupied by the of Rear Block, completed in about 1990. Group for storage and No. 21 Xin Di Road, office purposes. Chancheng District, The total gross floor area Foshan City, (“GFA”) of the property is Guangdong Province, approximately 3,228.36 sq.m. The PRC

中國廣東省佛山市禪城區新堤路21號前座1-2層及後座倉庫

Notes:

Pursuant to a Real Estate Tenancy Contract (the “Contract”), the property is leased to Foshan Nanhai Pharmaceutical Group Medicinal Material Company Limited （佛山市南海醫藥集團藥材有限公司） (“Nanhai Pharmaceutical”) from an independent third party for a term expiring on 30 October 2011. The monthly rent of the property together with Property No. 20 is RMB50,000 exclusive of water, electricity and cleaning charges and management fee.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The Contract is legally valid and is binding on the contracting parties; and
b. The Contract has not been registered, however, the non-registration will not affect the validity of the Contract.
Nanhai Pharmaceutical is an indirect wholly-owned subsidiary of the Company.

– III-45 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 22. Shop No. 1, The property comprises a shop Pursuant to a No Commercial Value No. 114 Yong An Road, unit on Level 1 of a 9-storey Tenancy Contract (the Chancheng District, composite commercial/ “Contract”), the Foshan City, residential building completed property is sublet to Guangdong Province, in about 1996. an independent third The PRC party by the Group for The gross floor area (“GFA”) a term expiring on 31 中國廣東省 of the property is December 2013 at a 佛山市禪城區 approximately 139.96 sq.m. monthly rent of 永安路114號 RMB6,000 exclusive 一號舖 of water and electricity charges for commercial purpose.

Notes:

Pursuant to a Real Estate Tenancy Deed (the “Deed”) , the property was leased to Foshan Feng Liao Xing Pharmaceutical Company Limited （佛山馮了性藥業有限公司） (“Feng Liao Xing”) from an independent third party for a term expiring on 30 September 2003 at a monthly rent of RMB1,002.47. As advised by the Group, the tenancy has been renewed on a monthly basis at a monthly rent of RMB1,002.47 exclusive of water and electricity charges.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:

The Deed and the Contract are both legally valid.

Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-46 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

No. Property

Description and tenure

Market Value Particulars of in existing state occupancy as at 31 March 2011 RMB

Warehouse Nos. 7, 8-3 and 8-4, Foshan City Guangtai Trading Company Limited Dazhousha Warehouse, No. 45 Fo Luo Road, Chancheng District, Foshan City, Guangdong Province, The PRC

The property comprises the whole of a single-storey warehouse and portions of a single-storey warehouse completed in 1980’s.

The total gross floor area (“GFA”) of the property is approximately 1,095 sq.m.

The property is No Commercial Value occupied by the Group for storage purpose.

中國廣東省佛山市禪城區佛羅路45號佛山市廣泰貿易有限公司大洲沙倉庫 7號，8-3號及8-4號倉庫

Notes:

Pursuant to 3 Warehouse Tenancy Agreements (the “Agreements”), the property is leased to Foshan Feng Liao Xing Pharmaceutical Company Limited（佛山馮了性藥業有限公司）(“Feng Liao Xing”) from an independent third party for various terms with the earliest expiry date on 15 October 2011 at a total monthly rent of RMB13,687.5 exclusive of water and electricity charges.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The Agreements are legally valid and are binding on the contracting parties; and
b. The Agreements have not been registered, however, the non-registration will not affect the validity of the Agreements.
Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-47 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Market Value Particulars of in existing state No. Property Description and tenure occupancy as at 31 March 2011 RMB 24. Room 525, The property comprises a The property is No Commercial Value No. 5 residential unit on Level 5 of occupied by the Jin Sha First Street, a 7-storey residential building Group for staff Chancheng District, completed in about 2000. quarters purpose. Foshan City, Guangdong Province, The gross floor area (“GFA”) The PRC of the property is approximately 89 sq.m.

中國廣東省佛山市禪城區金沙一街5號 525室

Notes:

Pursuant to a Tenancy Contract (the “Contract”), the property is leased to Foshan Feng Liao Xing Pharmaceutical Company Limited（佛山馮了性藥業有限公司）(“Feng Liao Xing”) from an independent third party for a term expiring on 31 December 2011 at a monthly rent of RMB1,500 exclusive of water, electricity, telephone, television and cleaning charges and management fee.
The opinion of the PRC legal advisor to the Group contains, inter alia, the following:
a. The Contract is legally valid and is binding on the contracting parties; and
b. The Contract has not been registered, however, the non-registration will not affect the validity of the Contract.
Feng Liao Xing is an indirectly 97.83%-owned subsidiary of the Company.

– III-48 –

PROPERTY VALUATION ON THE GROUP

APPENDIX III

VALUATION CERTIFICATE

Group VII – Property rented by the Group in Hong Kong

				Market Value
			Particulars of	in existing state
No.	Property	Description and tenure	occupancy	as at 31 March 2011
				RMB
25.	Rooms 2801-2805,	The property comprises 5	The property is	No Commercial Value
	28th Floor,	office units on the 28th floor	occupied by the
	China Insurance Group	of a high-rise commercial	Group for office
	Building,	building completed in 1967.	purpose.
	No. 141
	Des Voeux Road Central,	As advised by the Group, the
	Hong Kong	total gross floor area of the
		property is approximately
		2,500 sq.ft. (or about 232.26
		sq.m.).

Notes:

Pursuant to a Tenancy Agreement entered into between an independent third party and Lipromate Resources Limited, the property was leased to the latter for a term of 2 years commencing on 1 April 2009 and expiring on 31 March 2011 at a monthly rent of HK$30,000 exclusive of Government rates and management fee.
Pursuant to a Tenancy Agreement entered into between an independent third party and Lipromate Resources Limited, the property is leased to the latter for a term of 2 years commencing on 1 April 2011 and expiring on 31 March 2013 at a monthly rent of HK$50,000 exclusive of Government rates and management fee.
Lipromate Resources Limited is a wholly-owned subsidiary of the Company.

– III-49 –

GENERAL INFORMATION (A)

APPENDIX IV

RESPONSIBILITY STATEMENT

All directors of the Offeror accept full responsibility for the accuracy of the information contained in this Composite Document (other than the information relating to the Group and the Vendor), and confirm, having made all reasonable enquires, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Group and the Vendor) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

MARKET PRICES

Set out below are the closing prices of the Shares which are the subject of the Offer quoted on the Stock Exchange on (a) the last trading day for each of the calendar months during the Relevant Period on which trading in the Shares took place; (b) the Last Trading Day; and (c) the Latest Practicable Date:

	Closing
	price per
Date	Share
	HK$
30 June 2010	1.08
30 July 2010	1.10
31 August 2010	1.05
30 September 2010	1.09
29 October 2010	1.10
30 November 2010	1.12
20 December 2010 (being the day immediately before the commencement
of the Offer Period)	1.13
31 December 2010	1.23
31 January 2011	1.45
28 February 2011	1.39
31 March 2011	1.38
29 April 2011	1.39
19 May 2011 (being the Last Trading Day)	1.54
31 May 2011	1.50
14 June 2011 (being the Latest Practicable Date)	1.39

– IV-1 –

GENERAL INFORMATION (A)

APPENDIX IV

SHAREHOLDINGS AND DEALINGS

As at the Latest Practicable Date,

(a) the Offeror itself did not own any Share;
(b) Mr. Yang and Mr. Xu as the only two directors of the Offeror were interested in the Shares as follows: (i) Profit Channel (wholly and beneficially owned by Mr. Yang) directly held 77,500,000 Shares and a 50% interest in Sureplan Limited which in turn directly owned 564,102,563 Shares; and (ii) Extra Benefit (wholly and beneficially owned by Mr. Xu) directly held 77,500,000 Shares and a 25% interest in Sureplan Limited which in turn directly owned 564,102,563 Shares;
(c) 719,102,563 Shares were directly owned as to 564,102,563 Shares by Sureplan Limited, as to 77,500,000 Shares by Profit Channel and as to 77,500,000 Shares by Extra Benefit, whereby Sureplan Limited is owned as to 25% by First Linkup Development Limited, 50% by Profit Channel and 25% by Extra Benefit (each of which is in turn wholly owned by Mr. Wu Chiu Kong, Mr. Yang and Mr. Xu respectively); and taking into account the increase in the voting rights as a result of the Undertaking, the voting rights attached to 900,689,829 Shares were owned or controlled or directed by the parties acting in concert with the Offeror; and
(d) there was no shareholding in the Company which the Offeror or any parties acting in concert with it had borrowed or lent.

None of the persons whose shareholdings are disclosed in (a) – (d) above, in the section headed “Arrangement in relation to dealings” and in (d) in the section headed “Miscellaneous” in this appendix dealt for value in the shares, convertible securities, warrants, options and derivatives in respect of the shares in question during the Relevant Period.

ARRANGEMENTS IN CONNECTION WITH THE OFFER

(a) The Offer Shares to be acquired by the Offeror from time to time under the Offer by the use of the Facility provided by Shenyin Wanguo Securities (H.K.) Limited shall be deposited to an account opened by the Offeror with Shenyin Wanguo Securities (H.K.) Limited as collateral for the Facility which shall be released to the Offeror upon full repayment of all the outstanding amount of the Facility (including all the outstanding principal amount, accrued interest, fees and charges) by the Offeror to Shenyin Wanguo Securities (H.K.) Limited.

– IV-2 –

GENERAL INFORMATION (A)

APPENDIX IV

any events of default according to the terms of the Facility, Sun Hung Kai Investment Services Limited may require Shenyin Wanguo Securities (H.K.) Limited to transfer part of the security interest in the charge on the Offer Shares to be acquired by the Offeror from time to time under the Offer in respect of the outstanding amount to Sun Hung Kai Investment Services Limited.

Save as disclosed, there was no agreement, arrangement or understanding whereby any securities to be acquired pursuant to the Offer will be transferred, charged or pledged to any other persons.

(b) Included in (c) in the section headed “Shareholdings and dealings” in this appendix is the shareholding structure of Sureplan Limited which directly owns 564,102,563 Shares. Upon or soon after the close of the Offer, the Purchasers (i.e. Profit Channel and Extra Benefit) and First Linkup Development Limited, being all the shareholders of Sureplan Limited, intend to conduct an internal reorganisation with a view to facilitating their direct holding of the Shares such that the Purchasers and First Linkup Development Limited will be allocated according to their respective shareholdings in Sureplan Limited (Sureplan Limited is owned as to 50% by Profit Channel, 25% by Extra Benefit and 25% by First Linkup Development Limited), and will directly hold, the 564,102,563 Shares that are currently and directly owned by Sureplan Limited. If such internal reorganisation materialises before Completion and assuming there is no change to the existing shareholding structure of the Company, it is expected that (i) Sureplan Limited will no longer hold any Shares; (ii) Profit Channel will increase its direct holding of the Shares by 282,051,281 Shares (representing approximately 50% of Sureplan Limited’s existing direct holding of the 564,102,563 Shares) from 77,500,000 Shares to 359,551,281 Shares (representing approximately 20.16% of the total issued Shares); (iii) Extra Benefit will increase its direct holding of the Shares by 141,025,641 Shares (representing approximately 25% of Sureplan Limited’s existing direct holding of the 564,102,563 Shares) from 77,500,000 Shares to 218,525,641 Shares (representing approximately 12.25% of the total issued Shares); and (iv) First Linkup Development Limited will directly hold 141,025,641 Shares (representing approximately 25% of Sureplan Limited’s existing direct holding of the 564,102,563 Shares and approximately 7.91% of the total issued Shares). It is expected that only nominal or nil considerations will be involved in respect of the share transfers for the purpose of such internal reorganisation. Such internal reorganisation will be carried out in compliance with all applicable Takeovers Code and the Listing Rules. Further announcement will be made by the Company in this regard after the Board is informed by Sureplan Limited and/or the Purchasers of the implementation of such internal reorganisation.

Save as disclosed, there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror or any parties acting in concert with it and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependent upon the Offer.

(c) As at the Latest Practicable Date, there was no agreement or arrangement to which the Offeror is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a condition to the Offer.

– IV-3 –

GENERAL INFORMATION (A)

APPENDIX IV

ARRANGEMENT IN RELATION TO DEALINGS

As at the Latest Practicable Date, there was no arrangement of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code which existed between the Offeror or any parties acting in concert with it and any other person.

MISCELLANEOUS

(a) The registered office of the Offeror is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI.
(b) Shenyin Wanguo Securities (H.K.) Limited is located at 28th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong.
(c) The principal members of the parties acting in concert with the Offeror are Mr. Yang and Mr. Xu whose correspondence address is Rooms 2801-2805, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong.
(d) No persons, prior to the posting of this Composite Document, had irrevocably committed themselves to accept or reject the Offer.

– IV-4 –

GENERAL INFORMATION (B)

APPENDIX V

RESPONSIBILITY STATEMENT

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Document (other than the information relating to the Offeror and the Purchasers), and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Offeror and the Purchasers), have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

SHARE CAPITAL OF THE COMPANY

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

Authorised	HK$
3,000,000,000 Shares of HK$0.10 each	300,000,000.00
Issued and fully paid
1,783,410,807 Shares of HK$0.10 each	178,341,080.70

All existing Shares rank equally in all respects, including in particular as to dividend, voting rights and capital.

No new Shares were issued since 31 December 2010 (being the date on which the latest published audited consolidated financial statements of the Group were made up) and up to the Latest Practicable Date.

As at the Latest Practicable Date, the Company had no outstanding options, warrants or convertible or exchangeable securities carrying rights to subscribe for, convert or exchange into, Shares.

DISCLOSURE OF INTERESTS

(a) Interest of the Company in the Offeror

As at the Latest Practicable Date, the Company did not have any interest in the shares, warrants, options, derivatives, and securities carrying conversion or subscription rights into shares of the Offeror.

– V-1 –

GENERAL INFORMATION (B)

APPENDIX V

(b) Interest of the Directors in the Offeror

Save as disclosed below, as at the Latest Practicable Date, the Directors did not have any interest in the shares, warrants, options, derivatives, and securities carrying conversion or subscription rights into shares of the Offeror.

			Percentage of
			total interest to
		Number of	the total issued
		shares of the	share capital of
Name of Directors	Capacity	Offeror	the Offeror
Mr. Xu	Beneficial owner	100	50%
Mr. Yang	Beneficial owner	100	50%

(c) Interests of the Directors in the Company

As at the Latest Practicable Date, details of the interests in the Shares held by the Directors were set out below:

			Approximate
			percentage of
			total interest to
			the total issued
		Number of	share capital of
Name of Directors	Capacity	Shares	the Company
Mr. Xu (Note 4)	Interest of controlled	641,602,563	35.98%
	corporations	(Notes 1 & 2)
Mr. Yang (Note 4)	Interest of controlled	641,602,563	35.98%
	corporations	(Notes 1 & 3)

Notes:

Of the 641,602,563 Shares, 564,102,563 Shares are held by Sureplan Limited (“Sureplan”), which is 25% owned indirectly by Mr. Xu and 50% owned indirectly by Mr. Yang. Both Mr. Xu and Mr. Yang are deemed to be interested in Sureplan’s interest in the Company under the SFO. Mr. Xu and Mr. Yang both are directors of Sureplan.
Of the 641,602,563 Shares, 77,500,000 Shares are held by Extra Benefit. Extra Benefit is wholly owned by Mr. Xu.
Of the 641,602,563 Shares, 77,500,000 Shares are held by Profit Channel. Profit Channel is wholly owned by Mr. Yang.
Mr. Xu and Mr. Yang are also deemed to be interested in 605,290,886 Shares, pursuant to the sale and purchase of the Sale Shares as contemplated under the S&P Agreement under the SFO.

Save as disclosed above, as at the Latest Practicable Date, the Directors did not have any interests in the Shares, warrants, options, derivatives, and securities carrying conversion or subscription rights into the Shares.

– V-2 –

GENERAL INFORMATION (B)

APPENDIX V

(d) Other Interest in the Company

As at the Latest Practicable Date,

(i) none of the subsidiaries of the Company, nor pensions fund of the Company or any of the Company’s subsidiaries, nor any advisers to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; and
(ii) neither the Company nor any Directors had borrowed or lent any Shares or any convertible securities, warrants, options or derivatives in respect of any Shares.

DEALINGS IN SECURITIES

(a) Dealing in securities of the Company by the Directors

Save for the sale and purchase of the Sale Shares as contemplated under the S&P Agreement, none of the Directors had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period.

(b) Dealing in securities of the Offeror by the Company

The Company had not dealt for value in any relevant securities (as defined Note 4 to Rule 22 of the Takeovers Code) of the Offeror during the Relevant Period.

(c) Dealing in securities of the Offeror by the Directors

On 16 May 2011, 100 shares at US$1.00 per share of the Offeror were allotted to Mr. Xu and 100 shares at US$1.00 per share of the Offeror were allotted to Mr. Yang, both of them are executive Directors and the only directors of the Offeror. Save as disclosed above, none of the Directors had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror during the Relevant Period.

(d) During the period commencing on 21 December 2010 up to and including the Latest Practicable Date,

(i) none of the subsidiaries of the Company, nor pension funds of the Company or any of the Company’s subsidiaries, nor any advisers to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code had dealt for value in any Shares or other convertible securities, warrants, options or derivatives in respect of any Shares; and
(ii) no fund managers connected with the Company who managed funds on a discretionary basis had dealt for value in any Shares or any other convertible securities, warrants, options or derivatives in respect of any Shares.

– V-3 –

GENERAL INFORMATION (B)

APPENDIX V

OTHER ARRANGEMENT RELATING TO THE OFFER

Save as disclosed, as at the Latest Practicable Date,

(i) there was no arrangement of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code which existed between the Company, or any person who was an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of “associate” in the Takeovers Code and any other person. The Directors were not aware of any such arrangements between any other associate of the Company and any other person; and
(ii) no fund managers connected with the Company had managed any Shares or any convertible securities, warrants, options or derivatives in respect of any Shares on a discretionary basis.

ARRANGEMENTS AFFECTING AND RELATING TO DIRECTORS

As at the Latest Practicable Date:

(a) no benefit was or would be given to any Director as compensation for loss of office or otherwise in connection with the Offer;
(b) no agreement or arrangement existed between any Director and any other person which was conditional or dependent upon the outcome of the Offer or otherwise connected with the Offer;
(c) no material contract had been entered into by the Offeror in which any Director had a material personal interest; and
(d) as none of the Directors (other than Mr. Yang and Mr. Xu as disclosed in this appendix) had any beneficial shareholdings in the Company, the Directors were not entitled to participate in the Offer.

SERVICE AGREEMENTS OF DIRECTORS

As at the Latest Practicable Date, each of the following Directors had entered into a service contract with the Company, the terms and conditions of which are set out below:

	Term of service
Director	contract	Remuneration
ZHANG Jianhui	10 June 2011 to	HK$180,000 per annum, without variable
	9 June 2013	remuneration payable under the
		contract
WANG Bo	10 June 2011 to	HK$180,000 per annum, without variable
	9 June 2013	remuneration payable under the
		contract

– V-4 –

GENERAL INFORMATION (B)

APPENDIX V

	Term of service
Director	contract	Remuneration
LO Wing Yat	11 February 2011 to	HK$180,000 per annum, without variable
	10 February 2013	remuneration payable under the
		contract
PANG Fu Keung	11 February 2011 to	HK$180,000 per annum, without variable
	10 February 2013	remuneration payable under the
		contract

As at the Latest Practicable Date, save as disclosed above, none of the Directors had any existing or proposed service contract with the Company or any of its subsidiaries or associated companies which (i) (including both continuous and fixed term contracts) had been entered into or amended within 6 months before the date of the announcement of the Company dated 21 December 2010; or (ii) was a continuous contract with a notice period of 12 months or more; or (iii) was a fixed term contract with more than 12 months to run irrespective of the notice period; or (iv) was not determinable by the employer within one year without payment of compensation (other than statutory compensation).

MATERIAL CONTRACTS

The following contracts, not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of it subsidiaries, had been entered into by the Group after the date falling two years before the commencement of the Offer Period up to and including the Latest Practicable Date:

(a) a termination agreement dated 25 December 2008 entered into between 廣東環球制藥有限公司 (Guangdong Medi-World Pharmaceutical Co., Ltd.), a wholly-owned subsidiary of the Company (“ Guangdong Medi-World ”) and 佛山巿盈天製藥有限公司 (now known as 佛山市瀚宇生物製藥有限公司) (Foshan Winteam Pharmaceutical Co., Ltd.) (now known as Foshan Hanyu Pharmaceutical Co., Ltd.*) to terminate (i) Trademark Use Licence Agreement 1 for the use of trademark “立力安”, (ii) Trademark Use License Agreement 2 for the use of trademark “吉瑞斯“ and (iii) Trademark Use Licence Agreement 3 for the use of trademark “酸雨停”, at nil consideration;
(b) a tenancy agreement dated 28 April 2009 entered into between Lucky Crown Holdings Limited （福冠集團有限公司） as landlord and Lipromate Resources Limited （利富美資源有限公司）, a wholly-owned subsidiary of the Company, as tenant, pursuant to which Lucky Crown Holdings Limited shall let and Lipromate Resources Limited shall take the premises at Rooms 2801-2805, 28th Floor, China Insurance Group Building, No. 141 Des Voeux Road Central, Hong Kong for the term from 1 April 2009 to 31 March 2011 and at the rent of HK$30,000 per month;
(c) a tenancy agreement dated 7 May 2009 between 佛山馮了性藥業有限公司 (Foshan Feng Liao Xing Pharmaceutical Co., Ltd.), a sino-foreign joint venture owned indirectly as to 51% by the Company (“ FLX* ”) and 佛山巿健民醫藥連鎖有限公司

– V-5 –

GENERAL INFORMATION (B)

APPENDIX V

(Foshan City Jian Min Pharmaceutical Chain Co., Ltd.*), an independent third party, whereby FLX agreed to lease a shop located at No. 33 Wei Guo Road, Foshan City, Guangdong Province, the PRC with a construction area of approximately 103 sq.m to 佛山巿健民醫藥連鎖有限公司 from 1 September 2009 to 31 August 2011 at a monthly rental of RMB15,000 exclusive of all utility expenses;

(d) a tenancy agreement dated 30 October 2009 entered into between 佛山巿南海醫藥集團有限公司 (Foshan Nanhai Pharmaceutical Group Co., Ltd) as landlord and 佛山巿南海醫藥集團藥材有限公司 (Foshan Nanhai Pharmaceutical Group Medicinal Material Co., Ltd.) as tenant, pursuant to which 佛山巿南海醫藥集團有限公司 shall let and 佛山巿南海醫藥集團藥材有限公司 shall take the land use rights of certain factories with an aggregate area of 8,041.14 sq.m. for the term from 1 November 2009 to 30 October 2011 at the rent of RMB50,000 per month;
(e) an equity transfer agreement dated 2 July 2009 between 佛山巿南海醫藥集團有限公司 (Foshan Nanhai Pharmaceutical Group Co., Ltd) as transferor and Guangdong Medi-World as transferee in relation to the transfer of the entire equity interest in 佛山巿南海醫藥集團藥材有限公司 (Foshan Nanhai Pharmaceutical Group Medicinal Material Co., Ltd.) at a consideration of RMB4,000,000. The acquisition was completed on 6 November 2009;
(f) a tenancy agreement dated 9 December 2009 entered into between 佛山德眾藥業有限公司 (Foshan Dezhong Pharmaceutical Co., Ltd.), a sino-foreign joint venture owned indirectly as to 51% by the Company (“ DZH ”) and 佛山巿徐其修涼茶有限公司 (Foshan City Xu Qixiu Herbal Tea Limited), an independent third party, relating to the lease of a property located at No. 81 Sheng Ping Road, Urban District, Foshan City, Guangdong Province, the PRC with a gross floor area of approximately 72 sq.m. to 佛山巿徐其修涼茶有限公司 for a term commencing from 1 January 2010 to 31 December 2010 at a monthly rental of RMB3,250 (exclusive of tax) and the management fees, water and electricity charges shall be borne by 佛山巿徐其修涼茶有限公司;
(g) a land use right transfer agreement dated 20 January 2010 entered into between 佛山巿高明區更合鎮建設房產管理所 (Foshan Gao Ming District Geng He Town Construction and Real Estate Management Office*) as the transferor and DZH and FLX as the transferees, pursuant to which 佛山巿高明區更合鎮建設房產管理所 agreed to transfer the land use right in relation to a piece of industrial land located at Xin Yu Lu Gang Industrial District, Geng He Town, Gao Ming District, Foshan City with an area of 71,248.8 sq.m. to DZH and FLX at a consideration of RMB17,500,000;
(h) an equity transfer agreement dated 30 January 2010 entered into between Guangdong Medi-World as purchaser, and Mr. HE Zhaojian as vendor in relation to an acquisition of the capital contribution in the total amount of RMB21,715,300 in 佛山巿安寧有限公司 (Foshan City An Ning Company Limited*), (representing a 93% equity interest in 佛山巿安寧有限公司) legally and beneficially then owned by Mr. HE Zhaojian for a consideration of RMB116 million and the

– V-6 –

GENERAL INFORMATION (B)

APPENDIX V

right granted by Mr. HE Zhaojian to Guangdong Medi-World for Guangdong Medi-World to purchase from Mr. HE Zhaojian any of the remaining minority interest in 佛山巿安寧有限公司 which may be offered to sell to Mr. HE Zhaojian by minority shareholders for a maximum consideration of RMB8,190,500;

(i) a conditional subscription agreement dated 30 January 2010 entered into among the Company as issuer, Profit Channel and Extra Benefit as subscribers and Mr. Yang and Mr. Xu as guarantors in relation to the subscription of 155,000,000 new Shares to be allotted and issued by the Company at the subscription price of HK$0.85 per new Share;
(j) an industrial factory transfer agreement dated 11 February 2010 entered into between the Purchaser as transferor and 佛山巿順德區凱匯投資有限公司 (Foshan Shunde District Kaihui Investment Company Limited) as the transferee, pursuant to which the Purchaser agreed to transfer the industrial land, factory and the ancillary facilities located at 佛山巿順德區容桂街道辦事處容山居委會橋西路2號 (No. 2, Rong Shan Ju Wei Hui Qiao Xi Road, Rong Gui Street Office, Shunde District, Foshan City) on an as-is basis, with an area of the land of 22,376.8 sq.m. and a gross floor area of the factory of 21,222.8 sq.m., to 佛山巿順德區凱匯投資有限公司, at a consideration of RMB41,000,000;
(k) a land use right of State-owned land transfer agreement dated 4 May 2010 (“Transfer Agreement”) entered into between 佛山市國土資源局禪城分局 (Foshan Municipal Bureau of State Land and Resources Chancheng Branch*) as the transferor and the Company as the transferee, pursuant to which 佛山市國土資源局禪城分局 agreed to transfer the land use right in relation to a plot of land acquired by the Company through public auction which has a net usable area of 22,047.01 square metres, and is located at East of Lingnan Road and South of Kuiqi Road, Chancheng District, Foshan City, Guangdong Province, the PRC to the Company at a consideration of RMB 77,060,000, together with a supplemental agreement dated 28 July 2010 entered into between 佛山市國土資源局禪城分局 and the Company relating to certain amendments to the Transfer Agreement; and
(l) an equity transfer agreement dated 22 November 2010 entered into between Guangdong Medi-World as purchaser, and Ms. TAN Zhen as vendor in relation to an acquisition of the capital contribution in the total amount of RMB26,824,265 in 佛山仲弘有限公司 (Foshan Zhong Hong Co., Ltd.*), (representing a 95.57% equity interest in 佛山仲弘有限公司) legally and beneficially then owned by Ms. TAN Zhen for a consideration of RMB 120 million and the right granted by Ms. TAN Zhen to Guangdong Medi-World for Guangdong Medi-World to purchase from Ms. TAN Zhen any of the remaining minority interest in 佛山仲弘有限公司 which may be offered to sell to Ms. TAN Zhen by minority shareholders for a maximum consideration of RMB5,318,906.

* For identification purpose only

– V-7 –

GENERAL INFORMATION (B)

APPENDIX V

MATERIAL LITIGATION

As at the Latest Practicable Date, none of the Company or any of its subsidiaries were engaged in any litigation or arbitration or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against the Company or any member of the Group.

EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given their opinions and advices which are included in this Composite Document:

Name	Qualification
BMI Appraisals Limited	independent professional	surveyors and valuers
Haitong International Capital	a corporation licensed	to carry out type 6
Limited	(advising on corporate finance) regulated activity
	under the SFO
Shenyin Wanguo Capital (H.K.)	a corporation licensed to	carry out type 1 (dealing
Limited	in securities), type 4 (advising on securities) and
	type 6 (advising on corporate finance) regulated
	activities under the SFO

BMI Appraisals Limited, Haitong International Capital Limited and Shenyin Wanguo Capital (H.K.) Limited have given and have not withdrawn their respective written consents to the issue of this Composite Document with the inclusion of their respective opinions or letters and/or the references to their names in the form and context in which they are respectively included.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection (i) during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at the registered office of the Company in Hong Kong at Rooms 2801-2805, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong; (ii) on the website of the SFC (www.sfc.hk); and (iii) on the Company’s website (www.winteamgroup.com) from the date of this Composite Document until the end of the Offer Period:

(a) the memorandum and articles of association of the Company;
(b) the memorandum and articles of association of the Offeror;
(c) the annual reports of the Company for the two years ended 31 December 2009 and 2010;
(d) a copy of the letter from Shenyin Wanguo as set out in this Composite Document;
(e) a copy of the letter from the Board as set out in this Composite Document;

– V-8 –

GENERAL INFORMATION (B)

APPENDIX V

(f) a copy of the letter from the Independent Board Committee as set out in this Composite Document;
(g) a copy of the letter from the Independent Financial Adviser as set out in this Composite Document;
(h) the written consents referred to in the section headed “Experts and Consents” in this appendix;
(i) the valuation report from BMI Appraisals Limited in respect of the property interest of the Group, the text of which is set out in Appendix III to this Composite Document;
(j) the material contracts referred to in the section headed “Material Contracts” in this appendix; and
(k) the service contracts of the Directors referred to in the paragraph headed “Service Agreements of Directors” in this appendix.

– V-9 –

AI assistant

SPT Energy Group Inc. — M&A Activity 2011

49801_rns_2011-06-16_896d0cce-d416-4ba4-a4a2-4121ade59579.pdf

IMPORTANT

Profit United Investments Limited

COMPOSITE DOCUMENT

UNCONDITIONAL MANDATORY CASH OFFER BY

Shenyin Wanguo Securities (H.K.) Limited

FOR AND ON BEHALF OF PROFIT UNITED INVESTMENTS LIMITED FOR ALL THE ISSUED SHARES IN WINTEAM PHARMACEUTICAL GROUP LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PROFIT UNITED INVESTMENTS LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

Haitong International Capital Limited

CONTENTS

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

INTRODUCTION

THE S&P AGREEMENT

UNCONDITIONAL MANDATORY CASH OFFER

Principal terms of the Offer

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.125 in cash

Comparison of value

Highest and lowest Share prices

Value of the Offer

Financial resources available for the Offer

Effect of accepting the Offer

Stamp duty

Payment

Overseas Shareholders

INFORMATION ON THE OFFEROR

INTENTION OF THE OFFEROR AND THE PURCHASERS IN RELATION TO THE GROUP

COMPULSORY ACQUISITION

MAINTAINENCE OF THE LISTING STATUS OF THE COMPANY

ACCEPTANCE AND SETTLEMENT

TAXATION

LETTER FROM SHENYIN WANGUO

FURTHER INFORMATION

INTRODUCTION

LETTER FROM THE BOARD

THE OFFER

Principal terms of the Offer

Effect of accepting the Offer

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

LETTER FROM THE BOARD

INTENTION OF THE OFFEROR AND THE PURCHASERS IN RELATION TO THE GROUP

RECOMMENDATION

ADDITIONAL INFORMATION

unofficial English translation only

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

TERMS OF THE OFFER

1. The Offer

2. Effect of accepting the Offer

3. Stamp duty

4. Payment

5. Overseas Shareholders

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Business, financial performance and prospects of the Group

1.1 Background information of the Group

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 Financial performance of the Group

1.3 Business prospect of the Group

2. Information on the Offeror and the intention of the Offeror and the Purchasers in relation to the maintenance of the listing status of the Company and the business and operations of the Group

3. Offer Price as compared with the net assets value of the Group attributable to the equity Shareholders

4. Historical market price and liquidity of the Shares

4.1 Share price performance

4.2 Liquidity

5. The implied PER and PBR by the Offer Price as compared with those of the Comparable Companies

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. PROCEDURES FOR ACCEPTANCE OF THE OFFER

2. SETTLEMENT

3. ACCEPTANCE PERIOD AND REVISIONS

4. NOMINEE REGISTRATION

5. ANNOUNCEMENTS

SPT Energy Group Inc. M&A Activity 2011