一致Ｂ(200028)2008年年度报告摘要（英文版）

Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Stock Code: 000028/200028 Short Form of the Stock: Accord Pharm. Accord B Notice No.: 2009-05 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 §1. Important Notice 1.1 Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of Shenzhen Accord Pharmaceutical Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. The Summary of Annual Report is abstracted from the full text of Annual Report; the investors are suggested to read the full text of the Annual Report to understand more details. 1.2 No director, supervisor and senior executive stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. 1.3 Other directors attended the meeting on examining the Annual Report except for the following directors. Name of absent directors Reason of absence Name of entrusted Fu Mingzhong Due to business Wu Ai’min Wei Yulin Due to business Wu Ai’min 1.4 Shulun Pan Certified Public Accountants Co., Ltd. issued standard unqualified Auditors’ Report for 2008 Financial Report of the Company. 1.5 Principal of the Company Mr. Shi Jinming, General Manager Mr. Yan Zhigang, Person in Charge of Accounting Works Mr. Wei Pingxiao, and Person in Charge of Accounting Organ (Accounting Supervisor) Mr. Chi Guoguang hereby confirm that the Financial Report of the Annual Report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock Accord Pharm., Accord-B Stock code 000028, 200028 Listed stock exchange Shenzhen Stock Exchange Accord Pharm. Bulg., No. 15, Ba Gua Si Road, Futian District, Shenzhen, Registered address Guangdong Province Post code of registered address 518029 Accord Pharm. Bulg., No. 15, Ba Gua Si Road, Futian District, Shenzhen, Office address Guangdong Province Post code of office address 518029 Internet web site of the Company http://www.szaccord.com.cn E-mail investor@szaccord.com.cn 1 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 2.2 Contact person and method Secretary of the Board Securities Affairs Representative Name Chen Changbing Accord Pharm. Bulg., No. 15, Ba Gua Si Road, Contact address Futian District, Shenzhen, Guangdong Province Telephone +(86)755 25875195，25875222 Fax +(86)755 25875147 E-mail 0028@szaccord.com.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrea se this year 2008 2007 compared with 2006 that of last year (%) After Before adjustment After adjustment Before adjustment After adjustment adjustment Operating income 8,360,350,198.18 6,878,305,483.32 6,878,305,483.32 21.55% 5,708,713,814.45 5,708,713,814.45 Total profit 203,497,726.90 191,051,327.11 191,051,087.11 6.51% 115,804,263.69 115,804,189.15 Net profit attributable to shareholders of the listed 154,807,067.87 124,914,225.45 124,913,985.45 23.93% 80,224,503.01 80,224,428.47 company Net profit attributable to shareholders of the listed company after deducting 139,335,035.00 99,427,894.80 99,427,654.80 40.14% 81,756,363.32 81,756,288.78 non-recurring gains and losses Net cash flow arising from 246,580,438.99 87,698,080.01 87,697,840.01 181.17% 181,729,861.80 181,729,787.26 operating activities Increase/decrea se at the end of this year At the end of 2008 At the end of 2007 At the end of 2006 compared with that at the end of last year (%) After Before adjustment After adjustment Before adjustment After adjustment adjustment Total assets 3,683,974,196.77 2,906,088,133.89 2,911,091,112.38 26.55% 2,642,885,690.85 2,647,888,909.34 Owners’ 627,986,713.06 484,114,112.10 489,117,090.59 28.39% 390,429,533.85 395,432,752.34 equity(Shareholders’ equity) Share capital 288,149,400.00 288,149,400.00 288,149,400.00 0.00% 288,149,400.00 288,149,400.00 3.2 Major financial indexes Unit: RMB Increase/decrease this year compared 2008 2007 2006 with that of last year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment 2 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Basic earnings per share 0.537 0.434 0.434 23.73% 0.278 0.278 (RMB/Share) Diluted earnings per share 0.537 0.434 0.434 23.73% 0.278 0.278 (RMB/Share) Basic earnings per share after deducting non-recurring gains 0.484 0.345 0.345 40.29% 0.284 0.284 and losses (RMB/Share) Fully diluted return on equity 24.65% 25.80% 25.54% -0.89% 20.55% 20.29% (%) Weighted average return on 27.33% 28.26% 27.94% -0.61% 20.03% 19.81% equity (%) Fully diluted return on equity after deducting non-recurring 22.19% 20.54% 20.33% 1.86% 20.94% 20.68% gains and losses (%) Weighted average return on equity after deducting 24.59% 22.49% 22.24% 2.35% 20.41% 20.18% non-recurring gains and losses (%) Net cash flow per share arising from operating activities 0.856 0.304 0.304 181.58% 0.631 0.631 (RMB/Share) Increase/decrease at the end of this year At the end of 2008 At the end of 2007 compared with that At the end of 2006 at the end of last year (%) Before adjustment After adjustment After adjustment Before adjustment After adjustment Net asset per share attributable to shareholders of listed company 2.179 1.680 1.697 28.40% 1.355 1.372 (RMB/Share) Items of non-recurring gains and losses √Applicable □Inapplicable Unit: RMB Items of non-recurring gains and losses Amount Notes( If applicable) Gains and losses from the disposal of non-current asset 4,972,517.28 Governmental subsidy calculated into current gains and losses, while closely related with the business of the Company, excluding the fixed-amount or fixed-proportion 7,054,099.00 governmental subsidy according to the unified national standard Switch back of provision for devaluation of account 4,419,372.88 receivable which was singly taken devaluation test Other non-operating income and expenditure beside for the 1,046,085.24 above items Influenced amount of minority shareholders’ gains/losses -165,852.47 Impact on income tax -1,854,189.06 Total 15,472,032.87 3.3 Differences between CAS and IAS: □Applicable √Inapplicable 3 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital Unit: Share Before the change Increase/Decrease of this time (+, -) After the change Capitalizati New shares Bonus on of Amount Proportion Others Subtotal Amount Proportion issued shares public reserve I. Restricted shares 121,946,607 42.32% -37,966,780 -37,966,780 83,979,827 29.14% 1. State-owned shares 2. State-owned legal 112,786,386 39.14% -28,814,940 -28,814,940 83,971,446 29.14% person’s shares 3. Other domestic shares 9,149,046 3.18% -9,149,046 -9,149,046 0 0.00% Including: Domestic non-state-owned legal 9,149,046 3.18% -9,149,046 -9,149,046 0 0.00% person’s shares Domestic natural person’s shares 4. Foreign shares Including: Foreign legal person’s shares Foreign natural person’s shares 5. Senior executives’ shares 11,175 0.00% -2,794 -2,794 8,381 0.00% II. Unrestricted shares 166,202,793 57.68% 37,966,780 37,966,780 204,169,573 70.86% 1. RMB Ordinary shares 111,317,193 38.63% 37,966,780 37,966,780 149,283,973 51.81% 2. Domestically listed 54,885,600 19.05% 54,885,600 19.05% foreign shares 3. Overseas listed foreign shares 4. Others III. Total shares 288,149,400 100.00% 288,149,400 100.00% Statement on changes of restricted shares Unit: Share Increased Restricted Restricted Restricted Name of restricted Reason for shares at shares released shares at Releasing date shareholders shares in restriction year-begin in current year year-end current year SINOPHARM Share Merger Medicine Holding 112,786,386 28,814,940 0 83,971,446 May 16, 2008 Reform Co., Ltd. Shenzhen Baoan District Shiyan Share Merger Town Economic 9,149,046 9,149,046 0 0 May 16, 2008 Reform and Development Corporation Total 121,935,432 37,963,986 0 83,971,446 － － 4.2 Particulars about shares held by the top ten shareholders and the top ten shareholders with 4 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 unrestricted conditions Unit: Share Total shareholders 18,022 Particulars about shares held by the top ten shareholders Nature of Proportion of Amount of Amount of restricted Shares pledged or Names of shareholders shareholder share held share held shares held frozen SINOPHARM MEDICINE State-owned 39.14% 112,786,386 83,971,446 0 HOLDING CO., LTD. legal person BANK OF CHINA － Domestic FRANKLIN TEMPLETON non-state-owned 3.19% 9,187,902 0 SEALAND POTENTIAL legal person COMBINATION FUND BANK OF CHINA－CHINA Domestic MERCHANTS PIONEER non-state-owned 2.65% 7,636,374 0 0 FUND legal person CHINA INDUSTRIAL AND Domestic COMMERCIAL BANK － non-state-owned 2.52% 7,274,185 0 0 CHINA MERCHANTS CORE legal person VALUE MIXED FUND BANK OF CHINA － Domestic DACHENG WEALTH non-state-owned 2.08% 6,006,939 0 0 MANAGEMENT 2020 legal person LIFECYCLE FUND CHINA CONSTRUCTION Domestic BANK － HUAAN HONGLI non-state-owned 2.01% 5,800,000 0 0 STOCK FUND legal person BANK OF CHINA － Domestic AIG-HUATAI PROSPEROUS non-state-owned 1.79% 5,154,266 0 0 CHINA EQUITY FUND legal person CHINA INDUSTRIAL AND Domestic COMMERCIAL BANK － non-state-owned 1.72% 4,963,365 0 0 BOSHI SELECTIVE legal person STOCK FUND CHINA INDUSTRIAL AND Domestic COMMERCIAL BANK － non-state-owned 1.70% 4,912,540 0 0 GUANGFA JUFENG STOCK legal person FUND CHINA INDUSTRIAL AND Domestic COMMERCIAL BANK － non-state-owned 1.52% 4,375,188 0 0 BOC CONTINUOUS legal person GROWTH FUND Particulars about shares held by the top ten unrestricted shareholders Name of shareholder Amount of unrestricted shares held Type of share SINOPHARM MEDICINE HOLDING CO., 28,814,940 RMB common share LTD. BANK OF CHINA － FRANKLIN TEMPLETON SEALAND POTENTIAL 9,187,902 RMB common share COMBINATION FUND BANK OF CHINA － CHINA MERCHANTS 7,636,374 RMB common share 5 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 PIONEER FUND CHINA INDUSTRIAL AND COMMERCIAL BANK－CHINA MERCHANTS CORE VALUE 7,274,185 RMB common share MIXED FUND BANK OF CHINA － DACHENG WEALTH 6,006,939 RMB common share MANAGEMENT 2020 LIFECYCLE FUND CHINA CONSTRUCTION BANK － HUAAN 5,800,000 RMB common share HONGLI STOCK FUND BANK OF CHINA － AIG-HUATAI 5,154,266 RMB common share PROSPEROUS CHINA EQUITY FUND CHINA INDUSTRIAL AND COMMERCIAL 4,963,365 RMB common share BANK－BOSHI SELECTIVE STOCK FUND CHINA INDUSTRIAL AND COMMERCIAL 4,912,540 RMB common share BANK－GUANGFA JUFENG STOCK FUND CHINA INDUSTRIAL AND COMMERCIAL BANK － BOC CONTINUOUS GROWTH 4,375,188 RMB common share FUND BANK OF CHINA － CHINA MERCHANTS PIONEER FUND and CHINA Explanation on associated INDUSTRIAL AND COMMERCIAL BANK－CHINA MERCHANTS CORE VALUE relationship or accordant action MIXED FUND belong to China Merchants Fund Management Co., Ltd., it is unknown among the aforesaid that there exists no associated relationship or belongs to the consistent actionist among the shareholders other tradable shareholders regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for controlling shareholder and actual controller Name of the controlling shareholder: SINOPHARM Medicine Holding Co., Ltd. Legal representative: She Lulin Date of foundation: Jan. 8, 2003 Registered capital: RMB 1,637,037,451 Nature of economic: state-owned holding company Business scope: the wholesale of Chinese patent medicines (including ginseng, pilose antler and silver mushroom), chemical material, a chemical agent, antibiotics, biochemical, biological, diagnosis drug, industry investment, entrusted management and assets reorganization of pharmaceutical enterprises, domestic trade (barring specific permission), logistics supply and relevant consultant services (in right of exequatur to run if refers to permission operation). Name of the actual controller: China National Pharmaceutical Group Corporation Legal representative: She Lulin Date of foundation: March 1, 1988 Registered capital: RMB 857,490,000 Nature of economic: state-owned sole company Business scope: entrusted management and assets reorganization of pharmaceutical enterprises, consultant service of medicine industry investment project, holding exhibition and fair of surgical 6 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 appliance, the wholesale of Chinese medicine, Chinese patent medicines, Chinese medicine herb in pieces, chemical material medicine, a chemical agent, antibiotics, biochemical, biological. The underling exclusively invested company and controlling subsidiary of China Medicine Group Headquarter includes: China National Pharmaceutical Foreign Trade Corp., China Medical Device Industry Company, China National Group Corp. of Traditional & Herbal Medicine, Sichuan Antibiotics Industrial Institute of China National Pharmaceutical Group Corporation, Union Engineering Co. of China National Pharmaceutical Group Corporation, Sinopharm Medicine Holding Co.,Ltd., Reed Sinopharm Exhibitions Co. Ltd., National Pharmaceutical Industry Corporation and SINOPHARM Advertising Co., Ltd. 4. 3. 3 Property right and controlling relationships between the actual controller of the Company and the Company is as follows: The State-owned Assets Supervision & Administration Commission of the State Council 100% China National Shanghai Fosun Pharmaceutical (Group) Co., Ltd. Pharmaceutical Group Corporation 100% Shanghai Qishen Investment Management Co., Ltd. 51% 49% Sinopharm Industry Investment Co., Ltd. 4% 96% SINOPHARM Medicine Holding Co., Ltd. 39.14% Shenzhen Accord Pharmaceutical Co., Ltd. §5. Particulars about Directors, Supervisors, Senior Executives 7 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 5.1 Particulars about changes in shares held by directors, supervisors and senior executives and their remunerations Total remunerati Drawing on drawn remunerat from the ion from Terminating Shares held Company sharehold Beginning date Shares held Reason for Name Title Sex Age date of office at in the ers’ units of office term at year -end change term year-begin report or other period related (RMB’000 units or 0)(before not tax) Shi Jinming Chairman Male 41 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 68.30 No Fu Director Female 58 April 25, 2008 Sep. 11, 2010 0 0 Naught Yes Mingzhong Wei Yulin Director Male 51 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught Yes Lu Jun Director Male 50 Sep. 11, 2007 Dec. 26, 2008 0 0 Naught Yes Wu Ai’min Director Male 39 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught Yes Jiang Ning Director Male 49 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught Yes Independent Chen Shu Female 54 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 8.00 No Director Independent Peng Juan Female 44 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 8.00 No Director Independent Liao Li Male 42 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 8.00 No Director Song Supervisor Male 40 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught Yes Tingfeng Guan Supervisor Female 38 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught Yes Xiaohui Director, Yan General Male 49 Dec. 26, 2008 Sep. 11, 2010 0 0 Naught 58.50 No Zhigang Manager Deputy Lin General Male 41 Dec. 26, 2008 Sep. 11, 2010 0 0 Naught 57.80 No Zhaoxiong Manager Deputy Tan Guoshu General Male 54 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 56.50 No Manager Deputy Liu Jun General Female 51 Dec. 26, 2008 Sep. 11, 2010 0 0 Naught 54.50 No Manager Deputy Lin Min General Male 44 Dec. 26, 2008 Sep. 11, 2010 0 0 Naught 54.50 No Manager Deputy Lin General Male 44 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 56.50 No Xinyang Manager Deputy Ou General Male 50 Sep. 11, 2007 Dec. 26, 2008 0 0 Naught 56.50 No Jianneng Manager Wei CFO Male 45 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 51.00 No Pingxiao Chen Secretary of Legitimate Male 41 Sep. 11, 2007 Sep. 11, 2010 11,175 8,381 28.50 No Changbing the Board of Reduction 8 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Directors Wang Supervisor Male 51 Sep. 11, 2007 Sep. 11, 2010 0 0 Naught 26.20 No Huaiqin Total - - - - - - 592.80 - Stocks option of the directors, supervisors and senior executives bestowed in the report period □Applicable √Inapplicable 5.2 Presences at the meetings of the Board by the directors Whether Attending attending the the meeting Due Presence in Entrusted meeting in Name of the in way of Absence Positions Presence person presence person in directors communicat (times) (times) (times) (times) successive ion two times or (times) not Shi Jinming Chairman 8 5 3 0 0 No Fu Mingzhong Director 7 4 3 0 0 No Wei Yulin Director 8 4 3 1 0 No Jiang Ning Director 8 3 3 2 0 No Wu Ai’min Director 8 4 3 1 0 No Independent Chen Shu 8 5 3 0 0 No Director Independent Peng Juan 8 4 3 1 0 No Director Independent Liao Li 8 4 3 1 0 No Director Explanations on not attending the meeting of the Board in person in successive two times Meetings of the Board held during the year 8 (times) Of which: site meetings (times) 5 Meetings held in way of communication 3 (times) Meetings held in way of both site and 0 communication (times) §6. Report of the Board of Directors 6.1 Discussion and analysis from the management team Year 2008 was a key year for Shenzhen Accord Pharmaceutical Co., Ltd. to start its second Three Years Development and operate its integration strategy in practice. According to the working spirit Re-breakthrough, Re-innovation and Re-development made at year begin, and taking realization of optimized values of enterprise and optimized interests of shareholders as springboard, as well as taking rapid, good and long-term development of the enterprise as target, the Company continuously promoted harmonization construction by furthering internal integration, grasping risk management and injecting innovation into management thought. New breakthroughs were made in various works of the Company, which made sure that the Company stepped into the second rapid development period as scheduled. Since the formal operation of the new management & control pattern and organization structure in 9 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 year-begin, to the second organization structure adjustment which took accelerating distribution integration as mainline since year-end, every work was operated with efficiency firstly considered. Under the condition that no existing experience could be referred, with approximately one-year operation, adjustment, negotiation, thinking and exploration, the integrated management & control pattern gradually became matured. For achievements obtained in risk management & control and experience share such as capital, account receivable, inventory, and intelligence communication between different regions in field of purchase, sale and customer service particularly in spread implementation of instruments such as plan management, target management and performance management, teams coming from different region with different history and civilization background identified with each other and gradually got harmonized. Harmonized and high-efficient organization atmosphere was getting dense day by day. I. In 2008, the Company mainly finished the following works in medicine distribution and pharmaceutical industry: 1. Medicine distribution: strengthened core business and further integrated business According to the position made in strategy development and meeting the market demand, the Company further integrated business. Taking channel network construction and regional strategic layout as focus, and keeping hospital pure sales market, meanwhile, the distribution business department also greatly expanded terminal distribution market, developed commercial attemper market, and redefined rapid business field of Sinopharm Medicine Holding Guangdong Xinlong Co., Ltd., Guangxi Accord Pharmaceutical Co., Ltd. and Shenzhen Jianmin Pharmaceutical Co., Ltd., and programmed and promoted construction of subsidiaries and distribution sites in cities around Pearl River Delta Region such as Foshan and Dongguan, and in east and west of Guangdong province. In the aspect of industry structure: proportion of pure sales and terminal distribution in hospital to the pharmaceutical distribution was 57.84% in year 2008 with some rises compared with that in year 2007, in which the proportion of pure sales in hospital to the distribution remained the same compared with that in 2007, and the proportion of terminal distribution to the distribution climbed 1.7 percentage points compared with that in year 2007 with an increase number of RMB 0.26 billion. From the key areas of Shenzhen and Guangzhou, sales growth ratio of the third terminal business of Shenzhen Jianmin Pharmaceutical Co., Ltd exceeded 39%, number of newly-increased customers had a fast growth; number of newly-increased terminal customers of Sinopharm Medicine Holding Guangzhou Co., Ltd. in 2008 accounted for 77% in total number of newly-increased customers; meanwhile, strived for distribution qualification in Haizhu and Luogang districts in Guangzhou city for community distribution, thus its sales performance obviously raised. In 2008, sales through community distribution increased 269% compared to that of last year, and 289% for variety quantity traded. In aspect of variety resource share: 1) variety quantity shared by Guangdong and Guangxi provinces increased 28% in 2008 compared to that of 2007. Sinopharm Medicine Holding Guangzhou Co., Ltd. had totally sold exceeding 400 varieties to Guangxi province in 2008, sales amount increased 20% compared to that of last year; 2) taking advantage of variety resource in Guangzhou Company general distribution and regional distribution, the commercial variety structure of Shenzhen distribution got greatly improved and commercial sales scale presented rapid development in general. Until end of December, commercial sales increased 52.7% and gross profit increased 61.4% compared with those of the same period of last year; 3) obvious effect was obtained in leading imported joint venture variety to Guangxi. Many imported joint-venture varieties led in 2008 enjoyed great rise in sales in Guangxi. Besides, adapting to market change in medicine distribution business, the Company received the following significant achievements by accelerating strategic layout in key regions and detailing market exploration: successful sales contract of Wyeth Pei’er Bacterin in south of China, official 10 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 establishment of Sinopharm Medicine Holding Foshan Co., Ltd. as well as purchase and establishment of Dongguan Accord Pharmaceutical Co., Ltd., according to its operation strategy that Take New Business Exploration First, Pour Efforts in Many Works at the Same Time and Develop Network to Build Terminal Control. Efficiency gained by marketing strategy sinking was bigger day by day. 2. Pharmaceutical industry: Laterally extended product line and vertically completed industry chain Zhijun Pharmaceutical realized develop current target that laterally extending product line and completing industry chain basically by focusing on current operation and future development. In current operation: 1) accelerating normal operation of Guanlan new factory. Within the year since moved, the already-constructed product line could successfully finish the complicated works such as product ownership transfer and location change. Meanwhile, through continuous optimization, upgrade and reform, all product lines had reached or even exceeded the capacities original designed, among which, the capacity of cefepime fixed product line exceeded the original-designed one over 100%; 2) with reform in Yima line before international authentication, meanwhile, move of Luomake line was finished and approved GMP authentication in June; 3) two made-in-China powder needle lines were built in November and approved GMP authentication in December. In sales: 1) in the situation that supply of codein material decreased 20%, through adjusting product structure and intensified proportion in solid preparation, the Company completely built high, middle and low level sales network. Through strengthening third terminal construction, and strengthening and adjusting examination and incentive method for sales personnel, the Company realized sale amount exceeding RMB 900 million for the whole year, recovering rate of payment for goods reached 99% and sales increased 18.18% compared to that of the same period of last year; 2) promoted international authentication and cooperation with foresight, and introduced in the patent stomach medicine Revanex from Yuhan Corporation from South Korea; 3) the Company successfully purchased 75% equity of Suzhou Wanqing Pharmaceutical Co., Ltd., which laid foundation for industry chain integration in pharmaceutical industry. II. Innovate management thought 1. Discentralized management realized through shrinking equity management chain To reduce internal cross share-holding, compress management levels and cut down management cost, by public hanging out in Assets and Equity Exchange, the Company finished internal equity adjustment conformity for the following 12 level III and IV companies with cross share-holding: Accord Medicinal Materials, Guangdong Xinlong, Sinopharm Liuzhou, Shenzhen Accord Logistics, Guangdong Accord Drugstore, Main Luck Pharmaceuticals, Guangdong Yuexing, Huixin Investment, Hengchang Logistics, Sinopharm Foshan, Zhijun Medicine Trade as well as Shenzhen Accord Chain. 2. Strengthen management & control function in operation The Company carried out discussion and stipulation for business strategic development program, carried out discussion for running pattern of new business and new market, strengthened management in budget, risk and capital, and through optimizing procedure system and smoothing key business, the Company greatly improved operation quality and efficiency; by smoothing key business points and setting index for risk alarm, the Company made analysis on difference, and formed special report, to reach balanced operation in purchase and sale business; strengthened control in risk of account receivable, optimized mechanism of credit alarm, and led the third party-professional consultation corporation to appraise and optimize Guangdong and Guangxi procedure system together. 11 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 3. Strengthen financial management function The Company made and perfected systems of statement management, account check for account receivable, account payable management for purchase, expense budget management, calculation of retail shops, monetary fund management and inventory check management; emended relevant procedures of examine-and-approve for budget, expense cancellation disposal, capital attemper, payment paid for purchase, asset purchase as well as asset cancellation; generally constructed and gradually standardized three level statement management systems of Consolidated Statement of Accord Pharmaceutical, Statement of Undertaking Department and Monomer Statement of Legal Person Unit. The Company put emphasis on risk asset management over capital, account receivable and inventory, ensuring fore-control for work of risk management. 4. Optimize and advance information technology and network to get early information in competition A series of IT develop programming was formed, and the Company made implementation plan separated by years for IT programming target and also operation maintenance of IT system, successfully finished transfer of new version CMS business systems in Shenzhen and Guangxi province, generally established marketing database for distribution and retail, carried out research on supply chain system for Guangzhou community hospitals, finished construction of finance NC platform and second development for part function, and finished optimization and popular use of human resource management system. 5. Promote and practice plan management in full round In 2008, on the basis of sharing three-years plan management experiences of Sinopharm Medicine Holding Guangzhou Co., Ltd, the various regional distributors and Zhijun Pharmaceutical carried out plan management work in succession. The general target of the Company was finally reached from clearing working target and task function of the Company, to take-over part task of the Company by various levels, then to communication between departments and finally to periodical follow and feedback. Since this year, plan management played an more and more important role day by day, and it had became an assistant tool for employee, department and senior executives to finish their working target with high efficiency, and an important guarantee to guide and assistant employees to better finish works. In 2008, after honored as Innovation Enterprise Award since 30 Years from Reform and Opening-up Policy and Enterprise with Outstanding Contribution Award since 30 Years from Reform and Opening-up Policy by Guangdong medicine industry, Accord Pharmaceutical was awarded as the Top 10 Potential Listed Companies of Guangdong province and Top 10 Listed Companies with Strongest Profit-making Ability of Guangdong province in achievement conference of Top 10 Listed Companies of Guangdong province held by Guangdong enterprise summit in 2008. Its brand influence in south area was getting up day by day. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Main operations classified according to industries Increase/decre Increase/decre Increase/decrea ase in income ase in cost of se in gross Gross profit from Classified according to Income from Cost of operations profit ratio ratio operations industries or products operations operations over the last over the last (%) over the last year year year (%) (%) (%) Industry-medicine 87,717.07 64,753.72 26.18% 18.18% 36.17% -9.75% Commerce-medical 816,457.65 777,742.29 4.74% 20.91% 21.01% -0.07% 12 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 wholesale Commerce- medical retail 34,224.58 26,356.95 22.99% 4.55% 6.17% -1.17% Non-medicine trade 5,955.31 4,546.54 23.66% 39.45% 34.58% 2.76% Lease 1,402.36 856.98 38.89% -1.24% 65.62% -24.67% Subtotal 945,756.97 874,256.48 7.56% 20.04% 21.59% -1.18% Mutual counteract of sales departments between internal 113,694.68 111,880.11 1.60% 9.45% 9.38% 0.06% enterprises Total 832,062.29 762,376.37 8.38% 21.65% 23.62% -1.46% Main operations classified according to products Respiratory antitussive 16,915.47 3,116.96 81.57% -26.13% -12.65% -2.84% medicines Anti-infectious cef- series 60,569.83 52,661.05 13.06% 36.54% 36.94% -0.26% products Including: related transaction 8,180.56 4,480.46 45.23% 18.16% 12.46% 2.77% 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Increase/decrease in income Areas Income from operations from operations over last year (%) Domestic sales 831,193.14 21.62% Overseas sales 869.15 55.47% Total 832,062.29 21.65% 6.4 Items measured by adopting fair value □Applicable √Inapplicable 6.5 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.6 Application of the proceeds not raised through shares offering √Applicable □Inapplicable Unit: RMB’0000 Name Amount Progress Earnings The new project was put into Project on manufacture base of operation, the annual sales 20,400.00 100% pharmaceutical R&D amount exceeded RMB 0.7 billion. The production capacity improved largely, in which annual production capacity of Project of technical reform 3,561.00 90.62% newly-increased 2 domestic Spasmolytic Production Line was estimated to be 200 million branches, annual production 13 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 capacity of newly-increased 2 domestic Anti-infectious Production Line was estimated to be 220 million pieces/granules, it was predicated that the sales income of RMB 65 million. Total 23,961.00 - - 6.7 Explanation of the Board of Directors on changes to the accounting policy and accounting estimates, or reasons of modification of material accounting errors and the influences □Applicable √Inapplicable 6.8 Explanation of the Board of Directors on the “Qualified Opinion” made by the CPAs □Applicable √Inapplicable 6.9 The preplan of the profit distribution and capitalization of capital public reserve of the Board of Directors The 2008 Financial Settlement of the Company has been audited and confirmed by Shulun Pan Certified Public Accountants Co., Ltd. The net profit realized by the parent company in 2008 was RMB 93,030,643.10, in accordance with the regulation of Company Law and Articles of the Association, withdrawal of surplus public reserve was RMB 9,303,064.31based on 10% of net profit, plus the undistributed profit at year-begin RMB 37,929,690.77, the Company has profit of RMB 121,657,269.56 available for distribution for shareholders ended as Dec. 31, 2008. The 2008 Preplan of Profit Distribution of the Company is: taking the total 288,149,400 shares as of Dec. 31, 2008 as the radix, cash bonus of RMB 1.00 (tax included) each 10 share will be distributed to the whole shareholders. It is predicated that the distributed dividend would be RMB 28,814,940.00, and the remained RMB 92,842,329.56 would be transferred to the next year. The Company did not tak capitalization of capital reserve in year 2008. Particulars about the cash bonus of the Company in previous three years Unit: RMB Net profit attributable to Ratio of net profit Amount of cash bonus owners of parent attributable to owners of (tax included) company in consolidated parent company in statement consolidated statement 2007 0.00 124,913,985.45 0.00% 2006 25,902,701.26 80,224,428.47 32.29% 2005 10,940,962.61 36,824,230.25 29.71% The Company didn’t put forward cash profit distribution preplan though the Company achieved the profit in the report period □Applicable √Inapplicable §7. Significant Events 7.1 Purchase of assets √Applicable □Inapplicable Unit: RMB’0000 14 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Net profit contributed to Assets Net profit the Company Related rights Credit contributed from the transaction concern and The other to the year-begin to or not(If ed liability The party of Explanation Assets Purchase Purchase Company the yes, note transfer concerne related transaction or on price purchased date price from the year-end(applic the red d relationsh final setting purchase able for principle owners shifted ip controller date to the enterprise of price hip fully or year-end merger under setting) fully or not the common not control) Taking the Guangxi book Guoda amount of Drugstore net asset as Chains Co., of July 31, The same Ltd./ Guangxi 2007 as the final reference Nanning Accord August 28, controllin 500.30 7.54 6.04 Yes evidence, Yes Yes Medicines Pharmaceuti 2008 g the price Wholesales cal Co., Ltd. sharehold was formed of Guangxi er by open Zhuang bidding in Autonomous Assets and Region Equity Exchange. Taking the assessment value as of Sep. 30, 10 percent 2007 as the China Same equities of reference National controllin Sinopharm evidence, Pharmaceutic Nov. 10, 2008 3,066.11 392.71 392.71 Yes Yes No g Medicine the price al Shanghai sharehold Holding was formed Corporation er Guangzhou by open Co., Ltd. bidding in Assets and Equity Exchange. 7.2 Sales of assets □Applicable √Inapplicable Influences on the business continuity and stability of management of the Company by the matters 7.1 and 7.2 concerned The purchased assets involved did not have influences on the business continuity and stability of management of the Company. 7.3 Significant guarantees √Applicable □Inapplicable Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Name of the Complete Date of happening (Date Amount of Guarantee Guarantee Guarantee for related Company Implement of signing agreement) guarantee type term party (Yes or not) guaranteed ation or not Total amount of guarantee in the report 0.00 period 15 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Total balance of guarantee at the end of the 0.00 report period Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling 96,500.00 subsidiaries during the report period Total balance of guarantee for controlling 113,820.00 subsidiaries at the end of the report period Total amount of guarantee of the Company (including guarantee for controlling subsidiaries) Total amount of guarantees 113,820.00 Ratio of total guarantee to net assets of the 181.25% Company Including: Amount of guarantee for shareholders, 0.00 actual controller and its related parties The debts guarantee amount provided for the guarantee of which the assets-liability ratio 113,820.00 exceeded 70% directly or indirectly Proportion of total amount of guarantee in 82,420.66 net assets of the Company exceeded 50% Total amount of the aforesaid three 113,820.00 guarantees Explanations on possibly bearing joint and The Company had no matters on possibly bearing joint and several several liquidating responsibilities for undue liquidating responsibilities for undue guarantees. guarantees 7.4 Significant related transaction 7.4.1 Related transaction connected to routine operations √Applicable □Inapplicable Unit: RMB’0000 Sell product and supply labor force to Purchase and accept labor force from the related parties related parties Related parties Proportion in the Proportion in the Transaction amount amount of the same Transaction amount amount of the same transaction transaction Sinopharm Medicine Holding Shenyang 25,697.17 3.09% 0.00 0.00% Co., Ltd. China National Pharmaceutical Group 7,457.76 0.90% 0.00 0.00% Hubei Co., Ltd. Sinopharm Medicine Holding Nanning 7,157.53 0.86% 1,470.15 0.19% Co., Ltd. China National Pharmaceutical Group 5,890.56 0.71% 389.08 0.05% Southwest Medicine Co., Ltd. Sinopharm Medicine Holding Tianjin 5,471.53 0.66% 564.52 0.07% Co., Ltd. Sinopharm Medicine Holding Beijing 3,722.84 0.45% 0.00 0.00% Co., Ltd. Hubei Yibao International 3,478.89 0.42% 0.00 0.00% Pharmaceutical Co., Ltd. 16 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Sinopharm Medicine Holding Beijing 1,024.98 0.12% 0.00 0.00% Huahong Co., Ltd. Tianjin East Bokang Medical Trade Co., 787.47 0.09% 0.00 0.00% Ltd. Sinopharm Medicine Holding Jiangsu 584.45 0.07% 0.00 0.00% Co., Ltd. Sinopharm Medicine Holding Shanxi 512.01 0.06% 0.00 0.00% Co., Ltd. Sinopharm Medicine Holding 479.76 0.06% 0.00 0.00% (Zhengzhou) Jiurui Co., Ltd. Sinopharm Medicine Holding Co., Ltd. 473.00 0.06% 1,572.41 0.21% China National Medicines Corporation 339.12 0.04% 8,702.20 1.14% Ltd. Shanghai Sinopharm Wai Gaoqiao 132.89 0.02% 84,783.31 11.12% Medicine Co., Ltd. China National Pharmaceutical Group 58.03 0.01% 0.00 0.00% Northwest Medicine Co., Ltd. Sinopharm Logistics Co., Ltd. 48.87 0.01% 0.00 0.00% Sinopharm Medicine Guoda Pharmacy 37.74 0.00% 119.39 0.02% Co., Ltd. Sinopharm Group Medicine Holding 23.33 0.00% 0.00 0.00% Suzhou Co., Ltd. Sinopharm Medicine Holding Zhejiang 12.87 0.00% 0.00 0.00% Co., Ltd. Guangxi Guoda Drugstore Chains Co., 3.44 0.00% 0.00 0.00% Ltd. Sinopharm Group Medicine Holding 6,156.21 0.74% 0.00 0.00% Hunan Co., Ltd. Sinopharm Medicine Holding Shanghai 0.00 0.00% 425.12 0.06% Co., Ltd. Guangdong Dong Fang Uptodate & 0.00 0.00% 1,034.73 0.14% Special Medicines Co. Sinopharm Medicine Holding Shenzhen 0.00 0.00% 113.24 0.02% TCM China National Pharmaceutical Foreign 0.00 0.00% 1,947.45 0.26% Trade Corporation Union China National Medical 0.00 0.00% 610.20 0.08% Equipment Corp. Sinopharm Group Chemical Reagent 0.00 0.00% 23.03 0.00% Co., Ltd. Shenzhen Main Luck Pharmaceutical 0.00 0.00% 156.96 0.02% Inc. Total 69,550.45 8.36% 101,911.79 13.37% Of which: In the report period, the related transaction amount the listed companies sold products or supplied labor forced for the controlling shareholders and its subsidiaries was RMB 660,681,200. 7.4.2 Related credits and liabilities current 17 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 √Applicable □Inapplicable Unit: RMB’0000 Supply fund to the Company from Provide fund for related party Related parties related party Occurring amount Balance Occurring amount Balance Account receivable: 0.00 0.00 0.00 0.00 Sinopharm Medicine Holding Shenyang 30,064.96 5,601.39 0.00 0.00 Co., Ltd. Sinopharm Medicine Holding Hunan 7,202.76 1,321.52 0.00 0.00 Co., Ltd. China National Pharmaceutical Group 6,891.96 1,321.60 0.00 0.00 Southwest Medicine Co., Ltd. Sinopharm Medicine Holding Tianjin 6,401.69 916.92 0.00 0.00 Co., Ltd. Sinopharm Medicine Holding Beijing 4,355.72 809.73 0.00 0.00 Co., Ltd. Sinopharm Medicine Holding Nanning 8,374.31 288.86 0.00 0.00 Co., Ltd. Sinopharm Medicine Holding Shanxi 599.06 171.73 0.00 0.00 Co., Ltd. Tianjin East Bokang Medical Trade Co., 921.34 133.58 0.00 0.00 Ltd. Sinopharm Medicine Holding Co., Ltd. 553.41 103.73 0.00 0.00 China National Medicines Corporation 317.29 38.27 0.00 0.00 Ltd. China National Pharmaceutical Group 67.96 17.41 0.00 0.00 Northwest Medicine Co., Ltd. Guangdong Dong Fang Uptodate & 353.15 55.11 0.00 0.00 Special Medicines Co. Sinopharm Medicine Holding Jiangsu 650.71 92.81 0.00 0.00 Co., Ltd Sinopharm Medicine Holding Beijing 1,199.23 84.95 0.00 0.00 Huahong Co., Ltd. Sinopharm Medicine Guoda Pharmacy 44.16 40.20 0.00 0.00 Co., Ltd. Sinopharm Group Medicine Holding 27.29 4.54 0.00 0.00 Suzhou Co., Ltd. Sinopharm Medicine Holding Zhejiang 15.06 1.43 0.00 0.00 Co., Ltd. Shanghai Sinopharm Wai Gaoqiao 154.11 154.11 0.00 0.00 Medicine Co., Ltd. Sinopharm Medicine Holding 561.32 92.21 0.00 0.00 (Zhengzhou) Jiurui Co., Ltd. Hubei Yibao International 4,070.31 387.98 0.00 0.00 Pharmaceutical Co., Ltd. Guangxi Guoda Drugstore Chains Co., 3.89 0.21 0.00 0.00 Ltd. Sinopharm Group Medicine Holding 372.67 5.64 0.00 0.00 Hubei Co., Ltd. 18 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Other account receivable: 0.00 0.00 0.00 0.00 Sinopharm Medicine Guoda Pharmacy 15.29 0.00 0.00 0.00 Co., Ltd. Account payable: 0.00 0.00 0.00 0.00 Shanghai Sinopharm Wai Gaoqiao 0.00 0.00 142,253.47 11,022.08 Medicine Co., Ltd. Sinopharm Medicine Holding Co., Ltd. 0.00 0.00 1,901.90 1,850.56 China National Medicines Corporation 0.00 0.00 11,582.43 641.80 Ltd. China National Pharmaceutical Foreign 0.00 0.00 2,333.77 535.92 Trade Corporation Sinopharm Medicine Holding Shanghai 0.00 0.00 1,725.84 438.81 Co., Ltd. Sinopharm Medicine Guoda Pharmacy 0.00 0.00 1,346.52 344.36 Co., Ltd. Sinopharm Medicine Holding Nanning 0.00 0.00 2,468.18 252.86 Co., Ltd Guangdong Dong Fang Uptodate & 0.00 0.00 2,389.90 234.70 Special Medicines Co. Sinopharm Medicine Holding Tianjin 0.00 0.00 484.07 80.64 Co., Ltd Shenzhen Main Luck Pharmaceutical 0.00 0.00 2,130.17 47.09 Inc. Beijing Zhongxin Medical Trading 0.00 0.00 0.00 7.14 Company Sinopharm Medicine Group Shanghai 0.00 0.00 0.00 1.62 Medical Equipment Co., Ltd. Sinopharm Medicine Holding Shenzhen 0.00 0.00 206.85 0.93 TCM Sinopharm Medicine Group Beijing 0.00 0.00 0.00 0.88 Medical Equipment Co., Ltd. Sinopharm Medicine Holding Beijing 0.00 0.00 0.00 0.40 Co., Ltd. Guangdong Renbo Medical Equipment 0.00 0.00 0.00 0.05 Co., Ltd. Union China National Medical 0.00 0.00 1,017.04 -21.08 Equipment Corp. China National Pharmaceutical Group 0.00 0.00 455.23 0.00 Southwest Medicine Co., Ltd. Sinopharm Group Chemical Reagent 0.00 0.00 65.27 0.00 Co., Ltd. Other account payable: 0.00 0.00 0.00 0.00 Sinopharm Medicine Holding Nanning 0.00 0.00 5.00 0.00 Co., Ltd. Sinopharm Medicine Holding Co., Ltd. 0.00 0.00 7,000.00 6,000.00 Sichuan Antibiotics Industrial Institute 0.00 0.00 0.00 285.18 Co., Ltd. 19 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 China National Pharmaceutical Group 0.00 0.00 1,533.06 1,533.06 Shanghai Co., Ltd. Sinopharm Medicine Guoda Pharmacy 0.00 0.00 192.21 192.21 Co., Ltd. Sinopharm Logistics Co., Ltd. 0.00 0.00 8.91 80.00 Sinopharm Medicine Holding Shenzhen 0.00 0.00 0.00 2.49 TCM Total 73,217.65 11,643.93 179,099.82 23,531.70 Of which: In the report period, the occurring amount which the Company provided funds to the controlling shareholder and its subsidiaries was RMB 687,750,100 and the balance was RMB 112,006,300. 7.4.3 Occupation and its progress of paying off on the fund in year 2008 □Applicable √Inapplicable 7.5 Entrusted assets management □ Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable 1. SINOPHARM Medicine Holding Co., Ltd. (1) Not selling original non-tradable equities through stock exchange in 24 months from the day they become tradable. (2) Original non-tradable equities sold after the 24 months through stock exchange take up no more than 10% of the Company’s total shares in the following 12 months, and the price is no lower than 110% of the stock weighted average price, that is RMB 5.05, of the 30 trading days before Accord Pharmaceutical’s Board of Directors publish the Reform Plan (from the day of implementing Non-tradable Shares Reform to the day when Sinopharm Medicine Holding sells equities, Ex Warrant/Ex Dividend on the price will be implemented if dividend, allotment or transferring of public capital to equity and so on happens ). Commitment implementation: Implementing 2. Shenzhen Baoan District Shiyan Town Economic and Development Corporation (1)Not trading or transferring within 12 months from the day when Reform Plan is carried out; on basis of the aforementioned time limited, original non-tradable equities sold through stock exchange take up no more than 5% of the Company’s total shares in the following 12 months; (2) no mare than 10% within 24 months. Commitment implementation: Ended May 16, 2008, the commitment has been accomplished already. Commitments made by the Company or the shareholders with holding above 5% shares in the report period or lasting until the report period. √Applicable □Inapplicable Commitments Content of commitments Implementation (1) Not selling original non-tradable equities through stock exchange in 24 months from the day they become Commitments for Share Merger tradable. (2) Original non-tradable Implementing Reform equities sold after the 24 months through stock exchange take up no more than 10% of the Company’s total shares in the following 12 months, and 20 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 the price is no lower than 110% of the stock weighted average price, that is RMB5.05, of the 30 trading days before Accord Pharmaceutical’s Board of Directors publish the Reform Plan (from the day of implementing Non-tradable Shares Reform to the day when Sinopharm Medicine Holding sells equities, Ex Warrant/Ex Dividend on the price will be implemented if dividend, allotment or transferring of public capital to equity and so on happens ). Commitments made in Acquisition Report or Reports on Change in Naught Naught Interests Commitments made in Material Naught Naught Assets Reorganization Commitments made in issuing Naught Naught Other commitments made for medium and small shareholders of Naught Naught the Company 7.7 Significant lawsuit and arbitrations □ Applicable √Inapplicable 7.8 Other significant events and analysis on their influences and solutions 7.8.1 Particulars about securities investment □Applicable √Inapplicable 7.8.2 Equity of other listed companies held □Applicable √Inapplicable 7.8.3 Equity of non-listed financial enterprises □Applicable √Inapplicable 7.8.4 Particulars about the purchases and selling on equity of other listed company □Applicable √Inapplicable §8. Report of the Supervisory Committee √Applicable □Inapplicable I. Works of the Supervisory Committee In 2008, the Supervisory Committee of Shenzhen Accord Pharmaceutical Co., Ltd. earnestly performed its duty according to the regulations of the Company Law, the Article of Association of the Company and Rules of Procedure of the Supervisory Committee. Totally four meetings have been held by the Supervisory Committee of the Company. II. Independent opinion on the operation of the Company issued by the Supervisory Committee In the report period, the members of the Supervisory Committee presented all meetings of the Board of the Company, performed their supervisory duty on the content and procedure of the Article of the 21 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Association carried out by the Board, and also supervised the execution of the resolutions of the Board by the operation personnel. (1) Operation by law In 2008, according to the relevant regulations of the Company Law, Securities Law, Listing Rules of Stock Market and Articles of Association, the board of directors legally managed, operated, made decisions in law and constructed and perfected internal control system. The procedures of holding shareholders’ meeting and meeting of the board of directors accorded with relevant regulations, and there was no behavior breaking relevant regulations and laws of the Article of Association of the Company and behavior violating the profit of the Company and shareholders when the directors and managers implemented their office duty. (II) Check on financial management of the Company In the report period, the Supervisory Committee seriously checked the financial status of the Company and thought that the financial management was standardized, the financial report objectively and truly reflected the financial status and operation achievement of the Company and the profit distribution plan for 2008 complied with the actual condition of the Company. The financial report 2008 was true and accurate, and fairly reflected the present financial status and operation achievement. The audit report with standard unqualified opinion issued by Shulun Pan Certified Public Accountants Co., Ltd. was objective and just. (III) Application of raised proceeds There was no application of raised proceeds in the report period. (IV) The purchases and sales of assets In the report period, the price for the purchases and sales of assets of the Company was reasonable. There was neither secret transaction nor behavior hurting the interests of shareholders. (V) Related transaction The daily related transaction and other related transaction of the Company were equal and rational and of obedience to the market principle. There was no behavior hurting profit of non-related shareholders and the Company; the Board of the Company implemented their duty of earnest, trust and responsibility when they made the resolutions related to related transactions. The manager tier could effectively implement the resolutions of the board of directors and shareholders’ meeting on related transaction. There was no behavior violating laws, regulation or the Articles of Association in the process of related transaction. (VI) Self-evaluation of internal control Details could be found in Section VI (III) of Chapter V - Supervisory Committee’s opinions on Self-evaluation of its Internal Control System. §9. Financial Report 9.1 Auditor’s opinions Auditor’s report Standard unqualified auditor’s opinions Text of Auditor’s Report Auditors’ report Shulun Pan BaoZi(2009) No. 10598 To the shareholders of Shenzhen Accord Pharmaceutical Co., Ltd., We have audited the accompanying financial statements of Shenzhen Accord Pharmaceutical Co., Ltd. (“the Company”), including balance sheet and consolidated balance sheet of 31 December 2008, 22 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 and profit statement and consolidated profit statement, and cash flow statement and consolidated cash flow statement, and statement on changes of owners’ equity and consolidated statement on changes of owners’ equity for the year ended, and notes to the financial statements for the year ended. I. Management's responsibility for the financial statements The Company's management is responsible for the preparation and fair presentation of the financial statements in accordance with the Enterprises Accounting Standards and Enterprises Accounting System. The responsibility includes: (1) designing, performing and maintaining internal control related to the preparation and fair presentation of the financial statements, which are free from material misstatements whether due to frauds or errors; (2) choosing and applying right accounting policies; (3) making reasonable accounting estimates. II. Auditor's responsibility Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed our audit in accordance with Chinese Certified Public Accountants' Auditing Standards. Those standards require us to comply with professional ethics, and to plan and perform our audit so as to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial statements. The selective audit procedures depend on auditor's judgment, including the evaluation of the risk of material misstatement of the consolidated financial statements due to frauds or errors. When evaluating risk, we consider internal control related to financial statements, in order to design auditing procedures, but not for the purpose of expressing an opinion on the internal control's effectiveness. An audit also includes assessing the appropriateness of the accounting policies adopted and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that we have obtained sufficient and appropriate audit evidences to provide a basis for our audit opinion. III. Auditing opinion In our opinion, the Company’s financial statements have been prepared in accordance with the Enterprises Accounting Standards and Enterprises Accounting System, and they fairly present, in all material respects, the financial position of the Company as of December 31, 2008, and its operation results and cash flows for the year ended. Shulun Pan Certified Public Accountants Co., Ltd. China Accountant: Lu Guohao Shanghai, P.R.C China Accountant: Tan Hongmei March, 2009 9.2 Financial statement 9.2.1 Balance Sheet Prepared by Shenzhen Accord Pharmaceutical Co., Ltd. December 31, 2008 Unit: RMB Balance at period-end Balance at year-begin Items Merger Parent Company Merger Parent Company Current assets: Monetary funds 345,259,516.47 62,369,583.65 254,837,411.30 54,841,676.10 Settlement provisions 23 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Capital lent Transaction finance asset Notes receivable 221,876,250.45 254,500.00 166,838,281.78 575,727.24 Accounts receivable 1,726,711,922.82 243,301,803.10 1,286,649,082.59 266,608,019.71 Accounts paid in advance 40,034,923.45 4,919,683.46 54,122,228.36 1,845,633.24 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Dividend receivable 228,443.24 228,443.24 Other receivables 32,606,307.59 242,415,823.08 37,748,343.14 100,105,321.32 Purchase restituted finance asset Inventories 735,661,642.08 94,249,578.90 574,318,139.76 71,473,576.82 Non-current asset due within one year Other current assets Total current assets 3,102,150,562.86 647,510,972.19 2,374,741,930.17 495,678,397.67 Non-current assets: Granted loans and advances Finance asset available for sales Held-to-maturity securities Long-term account receivable Long-term equity investment 69,578,981.80 323,756,562.92 57,373,856.63 262,526,712.89 Investment property 22,848,031.69 2,140,353.75 37,094,592.40 2,291,009.00 Fixed assets 374,870,446.95 36,732,350.96 340,639,114.64 45,496,890.76 Construction in progress 18,756,982.97 253,886.24 7,531,515.44 253,886.24 Engineering material Disposal of fixed asset Productive biological asset Oil and gas asset Intangible assets 57,607,282.99 30,622,772.31 53,299,711.82 29,437,449.09 Expense on Research and Development Goodwill Long-term expenses to be 16,414,181.91 276,057.82 12,625,298.34 338,545.86 apportioned Deferred income tax asset 7,869,895.86 13,675,921.06 Other non-current asset 13,877,829.74 14,109,171.88 Total non-current asset 581,823,633.91 393,781,984.00 536,349,182.21 340,344,493.84 Total assets 3,683,974,196.77 1,041,292,956.19 2,911,091,112.38 836,022,891.51 Current liabilities: Short-term loans 378,948,301.38 80,171,729.25 254,396,407.94 55,000,000.00 Loan from central bank 24 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Absorbing deposit and interbank deposit Capital borrowed Transaction financial liabilities Notes payable 791,513,252.27 129,298,292.87 494,788,218.16 91,246,553.68 Accounts payable 1,357,026,915.55 268,335,731.42 1,054,606,346.77 214,598,852.16 Accounts received in advance 18,487,835.55 4,626,342.73 15,666,567.23 1,732,574.54 Selling financial asset of repurchase Commission charge and commission payable Wage payable 74,195,821.61 14,678,407.64 104,917,442.34 22,849,376.49 Taxes payable 14,379,964.47 -963,780.92 19,811,311.90 -157,294.23 Interest payable 742,393.70 39,700.00 329,027.27 145,100.64 Dividend payable 3,746,270.05 3,746,270.05 Other accounts payable 271,731,949.89 119,209,791.88 323,560,290.20 114,127,379.52 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Long-term liabilities due within 57,720,000.00 1 year Other current liabilities Total current liabilities 2,968,492,704.47 615,396,214.87 2,271,821,881.86 499,542,542.80 Non-current liabilities: Long-term loans 30,000,000.00 77,720,000.00 Bonds payable Long-term account payable 51,261.00 113,625.83 Special accounts payable 800,000.00 800,000.00 1,800,000.00 800,000.00 Projected liabilities 898,409.16 Deferred income tax liabilities 12,174,180.87 13,071,193.57 Other non-current liabilities 23,085,874.07 23,085,874.07 Total non-current liabilities 66,111,315.94 800,000.00 116,689,102.63 800,000.00 Total liabilities 3,034,604,020.41 616,196,214.87 2,388,510,984.49 500,342,542.80 Owner’s equity (or shareholders’ equity): Paid-in capital (or share capital) 288,149,400.00 288,149,400.00 288,149,400.00 288,149,400.00 Capital public reserve 5,055,838.57 2,508,769.94 9,801,131.71 2,508,769.94 Less: Inventory shares Surplus public reserve 9,303,064.31 12,781,301.82 7,092,488.00 7,092,488.00 Provision of general risk Retained profit 325,478,410.18 121,657,269.56 184,074,070.88 37,929,690.77 Balance difference of foreign currency translation Total owner’s equity attributable to 627,986,713.06 425,096,741.32 489,117,090.59 335,680,348.71 25 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 parent company Minority interests 21,383,463.30 33,463,037.30 Total owner’s equity 649,370,176.36 425,096,741.32 522,580,127.89 335,680,348.71 Total liabilities and owner’s equity 3,683,974,196.77 1,041,292,956.19 2,911,091,112.38 836,022,891.51 9.2.2 Profit Statement Prepared by Shenzhen Accord Pharmaceutical Co., Ltd. January-December, 2008 Unit: RMB Amount in this period Amount in last period Items Merger Parent Company Merger Parent Company I. Total operating income 8,360,350,198.18 1,393,395,233.76 6,878,305,483.32 1,236,948,653.24 Including: Operating income 8,360,350,198.18 1,393,395,233.76 6,878,305,483.32 1,236,948,653.24 Interest income Insurance gained Commission charge and commission income II. Total operating cost 8,192,562,587.02 1,402,155,815.39 6,743,064,873.98 1,248,505,099.97 Including: Operating cost 7,627,811,018.21 1,324,050,202.14 6,171,204,306.69 1,166,634,525.46 Interest expense Commission charge and commission expense Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Operating tax and extras 11,132,572.30 567,924.96 12,245,830.36 547,571.00 Sales expenses 298,326,776.58 38,226,318.17 331,526,963.41 34,439,954.72 Administration expenses 204,915,589.20 41,371,738.60 188,972,655.10 44,065,623.81 Financial expenses 53,526,702.97 35,768.35 29,865,732.85 661,836.20 Losses of devaluation of asset -3,150,072.24 -2,096,136.83 9,249,385.57 2,155,588.78 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is 16,510,914.22 95,694,628.72 34,086,953.88 98,338,366.71 listed with “-”) Including: Investment income on affiliated company and joint 16,507,296.06 -47,794.59 8,209,843.29 -1,074,707.13 venture Exchange income (Loss is listed with “-”) III. Operating profit (Loss is 184,298,525.38 86,934,047.09 169,327,563.22 86,781,919.98 listed with “-”) Add: Non-operating income 19,774,350.12 6,143,458.54 23,484,253.71 3,943,239.07 Less: Non-operating expense 575,148.60 46,862.53 1,760,729.82 517,568.73 Including: Disposal loss of 492,133.28 32,132.03 626,437.92 307,564.63 26 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 non-current asset IV. Total Profit (Loss is listed 203,497,726.90 93,030,643.10 191,051,087.11 90,207,590.32 with “-”) Less: Income tax 41,043,599.94 52,333,330.06 V. Net profit (Net loss is listed 162,454,126.96 93,030,643.10 138,717,757.05 90,207,590.32 with “-”) Net profit attributable to 154,807,067.87 93,030,643.10 124,913,985.45 90,207,590.32 owner’s equity of parent company Minority shareholders’ gains 7,647,059.09 13,803,771.60 and losses VI. Earnings per share i. Basic earnings per share 0.537 0.323 0.434 0.313 ii. Diluted earnings per share 0.537 0.323 0.434 0.313 9.2.3 Cash Flow Statement Prepared by Shenzhen Accord Pharmaceutical Co., Ltd. January-December, 2008 Unit: RMB Amount in this period Amount in last period Items Merger Parent Company Merger Parent Company I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 9,482,544,445.66 1,654,449,631.15 8,085,599,499.72 1,439,359,660.64 services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Insured savings and net increase of investment Net increase of disposal of transaction financial asset Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received 1,147,948.71 2,548,876.31 Other cash received concerning 28,677,323.33 18,311,540.59 52,658,123.94 101,749,994.73 operating activities Subtotal of cash inflow arising 9,512,369,717.70 1,672,761,171.74 8,140,806,499.97 1,541,109,655.37 from operating activities Cash paid for purchasing commodities and receiving labor 8,555,202,289.04 1,457,665,870.25 7,339,461,307.31 1,455,126,883.48 service Net increase of customer loans and advances 27 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and 278,835,376.12 39,084,324.95 251,959,425.42 33,609,313.69 workers Taxes paid 167,927,252.04 9,801,028.19 173,647,167.23 14,249,465.84 Other cash paid concerning 263,824,361.51 169,043,027.67 288,040,760.00 147,862,737.38 operating activities Subtotal of cash outflow arising 9,265,789,278.71 1,675,594,251.06 8,053,108,659.96 1,650,848,400.39 from operating activities Net cash flows arising from 246,580,438.99 -2,833,079.32 87,697,840.01 -109,738,745.02 operating activities II. Cash flows arising from investing activities: Cash received from recovering 26,588,726.02 0.65 investment Cash received from investment 4,534,232.29 99,987,068.69 3,457,479.92 99,413,073.19 income Net cash received from disposal of fixed, intangible and other 10,405,932.56 34,613.39 28,017,753.45 415,971.93 long-term assets Net cash received from disposal 1,922,100.00 1,922,101.00 of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from 16,862,264.85 101,943,783.08 58,063,959.39 99,829,045.77 investing activities Cash paid for purchasing fixed, 84,982,286.53 1,956,678.00 71,410,213.94 3,694,492.21 intangible and other long-term assets Cash paid for investment 30,000.00 Net increase of mortgaged loans Net cash received from 20,333,528.49 134,598,033.49 subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow from 105,315,815.02 136,554,711.49 71,410,213.94 3,724,492.21 investing activities Net cash flows arising from -88,453,550.17 -34,610,928.41 -13,346,254.55 96,104,553.56 investing activities III. Cash flows arising from financing activities Cash received from absorbing investment Including: Cash received from absorbing minority shareholders’ investment by subsidiaries Cash received from loans 646,549,462.94 220,000,000.00 305,000,000.00 85,000,000.00 Cash received from issuing bonds Other cash received concerning 56,762,100.00 56,762,100.00 4,788,000.00 28 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 financing activities Subtotal of cash inflow from 703,311,562.94 276,762,100.00 309,788,000.00 85,000,000.00 financing activities Cash paid for settling debts 611,566,139.63 225,000,000.00 274,000,000.00 40,000,000.00 Cash paid for dividend and 50,581,025.64 6,790,184.72 61,717,855.64 27,673,764.58 profit distributing or interest paying Including: Dividend and profit of minority shareholder paid by 374,028.45 subsidiaries Other cash paid concerning 110,000,000.00 financing activities Subtotal of cash outflow from 772,147,165.27 231,790,184.72 335,717,855.64 67,673,764.58 financing activities Net cash flows arising from -68,835,602.33 44,971,915.28 -25,929,855.64 17,326,235.42 financing activities IV. Influence on cash due to 1,130,818.68 1,070,627.47 -115.00 fluctuation in exchange rate V. Net increase of cash and cash 90,422,105.17 7,527,907.55 49,492,357.29 3,691,928.96 equivalents Add: Balance of cash and cash 254,837,411.30 54,841,676.10 205,345,054.01 51,149,747.14 equivalents at the period -begin VI. Balance of cash and cash 345,259,516.47 62,369,583.65 254,837,411.30 54,841,676.10 equivalents at the period -end 29 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 9.2.4 Statement on Changes of Owners' Equity Prepared by Shenzhen Accord Pharmaceutical Co., Ltd. 2008 Amount in this report period Owners' equity attributable to the parent company Owners' equity at Paid-up TotalPaid-up Items Less: General Minority Less: capital Capital Surplus Retained owners’ capital Capital Treasury risk Others interest Treasur (Share reserves reserves profit equity (Share reserves Stock provision Stock capital) capital) I. Balance at the end of the last 288,149, 9,801,13 7,092,48 184,074, 33,463,0 522,580, 288,149, 23,044,0 year 400.00 1.71 8.00 070.88 37.30 127.89 400.00 74.54 Add: Changes of accounting -7,915,9 policy 96.89 Error correction of the last period Others II. Balance at the beginning of 288,149, 9,801,13 7,092,48 184,074, 33,463,0 522,580, 288,149, 15,128,0 this year 400.00 1.71 8.00 070.88 37.30 127.89 400.00 77.65 III. Increase/ Decrease in this -4,745,2 2,210,57 141,404, -12,079,5 126,790, -5,326,9 year (Decrease is listed 93.14 6.31 339.30 74.00 048.47 45.94 with'"-") 154,807, 7,647,05 162,454, (I) Net profit 067.87 9.09 126.96 (II) Profits and losses 254,706. -7,092,4 -4,099,66 -10,937, -5,326,9 calculating into owners' equity 86 88.00 4.26 445.40 45.94 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 1. Net changing amount of fair -7,317,1 value of financial assets 05.65 available for sale 2. Effect of changes of other owners' equity of invested units under equity method 3. Effect of income tax related to owners' equity 254,706. -7,092,4 -4,099,66 -10,937, 1,990,15 4. Others 86 88.00 4.26 445.40 9.71 254,706. -7,092,4 150,707, 7,647,05 151,516, -5,326,9 Total of (I)and (II) 86 88.00 403.61 9.09 681.56 45.94 (III) Owners' devoted and -5,000,0 -5,000,0 decreased capital 00.00 00.00 -5,000,0 -5,000,0 1. Owners' devoted capital 00.00 00.00 2. Amount calculated into owners' equity paid in shares 3. Others 9,303,06 -9,303,06 (IV) Profit distribution 4.31 4.31 1. Withdrawal of surplus 9,303,06 -9,303,06 reserves 4.31 4.31 2. Withdrawal of general risk provisions 3. Distribution for owners Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 (shareholders) 4. Others (V) Carrying forward internal -19,726,6 -19,726, owners' equity 33.09 633.09 1. Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3. Remedying loss with profit surplus -19,726,6 -19,726, 4. Others 33.09 633.09 IV. Balance at the end of the 288,149, 5,055,83 9,303,06 325,478, 21,383,4 649,370, 288,149, 9,801,13 report period 400.00 8.57 4.31 410.18 63.30 176.36 400.00 1.71 Shenzhen Accord Pharmaceutical Co., Ltd. Summary of Annual Report 2008 9.3 Explanation on changes of accounting policy, accounting estimation and settlement method compared with the latest annual report □Applicable √Inapplicable 9.4 Contents, correct amount, reason and its influence of significant accounting errors □Applicable √Inapplicable 9.5 Explanation on change of consolidated scope compared with the latest annual report √Applicable □Inapplicable 1. One consolidated unit was increased this year, and the reasons were as follows: The Company purchased Guangxi Accord Pharmaceutical Co., Ltd in 2008. 2. Two consolidated units were decreased this year, and the reasons were as follows: The subsidiaries Guangzhou Qingyun Hotel Co., Ltd. and Guangdong Dongshi Enterprise Development Co., Ltd which were invested by Huixin---- the subordinate company of the Company had been written off in 2007. 33