WeRide Inc. — Interim / Quarterly Report 2003

Mar 31, 2003

FAR EAST PHARMACEUTICAL TECHNOLOGY COMPANY LIMITED （遠東生物制藥科技有限公司）

(Incorporated in the Cayman Islands with limited liability)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2002

The board of directors (the “Board”) of Far East Pharmaceutical Technology Company Limited (the “Company”) is pleased to announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (the “Group”) for the six months ended 31 December 2002 together with the comparative figures for the corresponding period in 2001 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes TURNOVER 2 & 3 Cost of sales GROSS PROFIT Other revenue Selling and distribution costs Administrative expenses Other operating expenses PROFIT FROM OPERATING ACTIVITIES 4 Finance costs – interest expenses Share of result of a jointly-controlled entity PROFIT BEFORE TAXATION Taxation 5 PROFIT BEFORE MINORITY INTERESTS Minority interests NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS EARNINGS PER SHARE – Basic 7 – Diluted 7

Six months ended 31 December 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 458,656 282,338 (276,642) (177,873) 182,014 104,465 3,127 1,150 (46,941) (25,062) (16,509) (12,492) – (3,563) 121,691 64,498 – (105) – (131) 121,691 64,262 (29,602) (9,079) 92,089 55,183 (4,424) (601) 87,665 54,582 HK17.2 cents HK15.3 cents HK16.8 cents HK14.1 cents

– 1 –

NOTES:

1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated interim financial statements of the Group have been prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) 25 “Interim Financial Reporting” issued by the Hong Kong Society of Accountants (“HKSA”). The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 30 June 2002 except that the Group has adopted the following new/revised SSAPs issued by HKSA which are effective for accounting periods commencing on or after 1 January 2002:

SSAP 1 (Revised) : Presentation of financial statements SSAP 11 (Revised) : Foreign currency translation SSAP 15 (Revised) : Cash flow statement SSAP 34 : Employee benefits

The adoption of these revised and new SSAPs has resulted in the adoption of the following revised and new accounting policies and changes in the presentation of cash flow statement and the statement of changes in equity.

SSAP 1 (Revised) prescribes the basis for the presentation of financial statement and sets out guidelines for their structure and minimum requirements for the content thereof. The main revision to this SSAP is to change the requirements from presenting a statement of recognised gains and losses to a statement of changes in equity. The condensed consolidated statement of changes in equity for the current interim period and the comparative figures have been presented in accordance with this revised SSAP.

SSAP 11 (Revised) has eliminated the choice of translating the income statement of overseas subsidiaries at the closing rate for the period. They are now required to be translated at an average rate. Accordingly, on consolidation, the assets and liabilities of the Group’s overseas subsidiaries are translated at the exchange rate prevailing on the balance sheet date. Income and expense items are translated at the average exchange rate for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or expense in the period in which the Group’s overseas subsidiary is disposed of.

SSAP 15 (Revised) prescribes the provision of information about the historical changes in cash and cash equivalents by means of a cash flow statement which classifies cash flows during the period into operating, investing and financing activities. The condensed consolidated cash flow statement for the current interim period and the comparative figures have been presented in accordance with this revised SSAP.

The adoption of these revised and new accounting policies had no significant effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment is required.

2. SEGMENT INFORMATION

The Group reports its primary segment information on its principal business segments and details for the six months ended 31 December 2002 together with comparative figures for the corresponding period in 2001 are as follows:

External sales Segment results Interest income Interest expense Share of result of a jointly-controlled entity Taxation Minority interests Profit attributable to shareholders	Manufacture and distribution of pharmaceutical products 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 458,656 282,338 123,781 69,377 2,525 1,118 – (105) – (131) (29,602) (9,079)	Corporate and others 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 – – (4,631) (6,029) 16 32 – – – – – –	Consolidated Total 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 458,656 282,338 119,150 63,348 2,541 1,150 – (105) – (131) (29,602) (9,079) (4,424) (601) 87,665 54,582

3. TURNOVER

Turnover represents the net invoiced value of goods sold, net of trade discount and returns.

– 2 –

4. PROFIT FROM OPERATING ACTIVITIES

The Group’s profit from operating activities is arrived at after charging:

	Six months ended	Six months ended	Six months ended
	31 December
	2002		2001
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Depreciation	8,394		5,801
Amortisation of intangible asset	2,866		908
Amortisation of goodwill	513		231
Loss on written off of fixed assets	–		275

5. TAXATION

	Six months ended	Six months ended
	31 December
	2002	2001
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Overseas taxation charge	29,602	9,079

No provision for Hong Kong profits tax or overseas taxation has been provided for the period in respect of certain companies of the Group because these companies did not generate any assessable profits during the period. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Tax has not been provided by a jointly-controlled entity of the Group as no assessable profits were generated during the period (2001: Nil).

Deferred tax has not been provided because there were no significant timing differences at 31 December 2002 (2001: Nil).

No deferred tax has been provided on the revaluation surplus of the Group’s properties situated in the PRC because the Group presently does not have any intention to dispose of such properties.

6. DIVIDEND

The Board does not recommend to pay any interim dividend in respect of the six months ended 31 December 2002 (2001: Nil).

7. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the period is based on the following data:

Earnings: Profit attributable to shareholders and earnings for the purposes of basic earnings per share Effect of dilutive potential shares: Redeemable convertible bonds – interest expenses Profit attributable to shareholders and earnings for the purposes of diluted earnings per share	Six months ended 31 December 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 87,665 54,582 – 105 87,665 54,687	Six months ended 31 December 2002 2001 (Unaudited) (Unaudited) HK$’000 HK$’000 87,665 54,582 – 105 87,665 54,687
		54,687

– 3 –

Number of shares: Weighted average number of shares for the purposes of basic earnings per share Effect of dilutive potential shares: Share options Redeemable convertible bonds Weighted average number of shares for the purposes of diluted earnings per share	Six months ended 31 December 2002 2001 (Unaudited) (Unaudited) 508,932,000 356,646,043 14,045,407 11,510,057 – 20,092,515 522,977,407 388,248,615	Six months ended 31 December 2002 2001 (Unaudited) (Unaudited) 508,932,000 356,646,043 14,045,407 11,510,057 – 20,092,515 522,977,407 388,248,615
		388,248,615

The computation of diluted earnings per share for the period ended 31 December 2002 does not assume the conversion of the Company’s outstanding warrants since its exercise would result in an increase in earnings per share for the period.

MANAGEMENT DISCUSSION AND ANALYSIS

Liquidity and Financial Resources

At 31 December 2002, the Group had total assets of HK$967,872,000, current liabilities of HK$185,041,000, non-current liabilities of HK$8,075,000 and shareholders’ equity of HK$760,620,000. The gearing ratio is 25.39%, which was computed by dividing the current liabilities and debts by shareholders’ equity. The Group has consistently maintained a strong working capital during the period under review, with net current assets of HK$535,632,000 at 31 December 2002, with a current ratio of about 3.89 times. Net total assets of the Group was increased from HK$695,857,000 as at 31 December 2001 to approximately HK$760,620,000 as at 31 December 2002.

The Group had not exposed to any material exchange rate fluctuation or any related hedges during the period under review.

The Board believes that the Group had sufficient liquidity to satisfy its commitments and working capital requirements.

Contingent Liabilities

As at 31 December 2002, the Group had contingent liabilities of HK$2,262,000 (2001:Nil).

Financial Review

The Group’s turnover for the period under review was HK$458,656,000, that represented an increase of 62.45% as compared with the corresponding period of 2001. The gross profit margin was slightly increased to 39.68% compared with the corresponding period of 2001. The net profit from ordinary activities attributable to shareholders for the period under review amounted to approximately HK$87,665,000 and was increased by 60.61% to that of the corresponding period of 2001. Basic earnings per share for the current period was approximately HK17.2 cents (2001: HK15.3 cents). Diluted earnings per share for the current period was approximately HK$16.8 cents (2001: HK$14.1 cents).

Capital Structure

The Group’s primary sources of funding were provided by internally generated cash flow. As at 31 December 2002, the Group had cash and bank balances of a total amount of HK$475,580,000.

Analysis of Turnover

• (1) Anti-viral drugs

Sale of anti-viral drugs during the period under review was approximately HK$116,246,000, accounting for 25.34% of the total turnover of the Group and representing approximately 8.23% increase when compared with the corresponding period of last year. Increase of the turnover was due to the increased cases of viral flu during the winter of 2002.

– 4 –

(2) Anti-inflammatory

Sale of anti-inflammatory during the period under review was approximately HK$64,324,000, accounting for 14.02% of the total turnover of the Group. Due to its excellent therapeutic effect, especially for antiinflammation and anti-germ, the product was popular in eastern and southern provinces of China.

• (3) Anti-hypotensive drugs

Sale of “复方降壓膠囊”, during the period under review was approximately HK$45,907,000, accounting for 10.01% of the total turnover of the Group and representing approximately 87.24% increase when compared with the corresponding period of last year. It is expected that, with the excellent therapeutic effect to the treatment of high blood pressure and the competitive pricing over other similar products, “复方降壓膠囊” will become one of the major products of the Group in the future.

Expenses

Selling and distribution costs for the period under review amounted to HK$46,941,000 (2001: HK$25,062,000), accounting for 10.23% of turnover, increased by 87.30% when compared with the corresponding period of 2001. Such increase was due to the rise in advertising cost for expanding the distribution and sales network of the Group. Administrative expenses increased from the corresponding period of last year’s HK$12,492,000 to the current period’s HK$16,509,000. Such increase is due to the hiring of additional management professionals and related expenses, the increase in depreciation charge for the new manufacturing plant and the increase in amortization of goodwill and intangible assets.

Future Prospects

Product Development

The Group will particular emphasis on the absorption of hi-tech research projects and professionals, with the aim of launching new product each and every year after 2003 and maintaining excellent development prospects for the Group.

Horizontal and Vertical Integration of Business

With the steady growth of economy and the ongoing reform of the public health system in the PRC and its entry into the World Trade Organisation, the PRC market continues to provide a golden business opportunity for pharmaceutical producers. With the strong financial position of the Group, it will strive to capitalize on these favourable trends in acquiring other pharmaceutical companies with quality assets and an impressive category of registered medical products, similar to the strategical acquisition and re-engineering of Fujian Yannian Pharmaceutical Company Limited, Xiamen Talent Biotech Company Limited, 上海五洋藥業健康產品有限公司 and 安徽安慶製藥有限公司.

Looking ahead, the Group is fully confident of the prospects for its operation in the PRC pharmaceutical market. It will continue to push forward with the Group’s high-quality medical products in the existing sales network, and will step up its efforts in exploring new drugs via biotechnology.

Charges on the Group’s Assets

As at 31 December 2002, none of the Group’s assets was pledged as security for liability.

Employees

As at 31 December 2002, the Group had 2,606 employees, of which 2,600 were based in the PRC and 6 stationed in Hong Kong.

The remuneration policy and package of the Group’s employees are reviewed and approved by the Board on a periodical basis. Besides provident funds and double pay, discretionary bonuses and share options may be rewarded to employees based on individual performance as recognition of and reward for their contribution.

AUDIT COMMITTEE

The Audit Committee of the Company presently comprises two independent non-executive directors of the Company, namely Ms. Hu Ling Po and Mr. Yu Er Feng. The Audit Committee has reviewed this unaudited interim report for the six months ended 31 December 2002 and discussed with the Board on the internal control and financial reporting matters.

– 5 –

PUBLICATION OF INTERIM RESULTS ON THE STOCK EXCHANGE’S WEBSITE

All the information of the unaudited consolidated interim results of the Group for the six months ended 31 December 2002 required by paragraphs 46(1) to 46(6) inclusive of Appendix 16 of the Listing Rules of the Stock Exchange will be published on the Stock Exchange’s website in due course.

On behalf of the Board Cai Chong Zhen Chairman

Hong Kong, 28 March 2003

Please also refer to the published version of this announcement in The Standard.

– 6 –