(Stock Code : 3320) 2016 Annual Report

Transcription

1 (Stock Code : 3320) 2016 Annual Report

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3 目錄 Contents 公司簡介 02 Corporate Profile 公司資料 03 Corporate Information 釋義 06 Definitions 主席報告 10 Chairman s Statement 全年大事紀要 14 Highlights of the Year 獎項 16 Awards 財務摘要 18 Financial Highlights 管理層討論及分析 19 Management Discussion and Analysis 企業管治報告 34 Corporate Governance Report 董事及高級管理人員簡歷 53 Biographies Directors and Senior Management 董事會報告 64 Report of the Directors 獨立核數師報告 77 Independent Auditor s Report 綜合損益及其他全面收益表 83 Consolidated Statement of Profit or Loss and Other Comprehensive Income 綜合財務狀況表 84 Consolidated Statement of Financial Position 綜合權益變動表 86 Consolidated Statement of Changes in Equity 綜合現金流量表 88 Consolidated Statement of Cash Flows 91 Notes to the Consolidated Financial Statements This Annual Report is printed on environmentally friendly paper

4 公司簡介 Corporate Profile China Resources Pharmaceutical Group Limited is a leading integrated pharmaceutical company in China. Established in 2007, the Group has developed to become the second largest pharmaceutical manufacturer and the second largest distributor in China within a decade. In October 2016, the Group successfully completed its global offering in Hong Kong, marking the largest IPO in the healthcare sector of the year. As a leading integrated pharmaceutical company, our business spans across manufacturing, distribution and retail of pharmaceutical and healthcare products in the PRC. Our manufacturing business encompasses the research and development, manufacturing and sale of pharmaceutical products. We manufacture a comprehensive product portfolio comprising chemical drugs, Chinese medicines and biopharmaceutical drugs as well as nutritional and healthcare products, covering a wide range of therapeutic areas including cardiovascular, alimentary tract and metabolism, large-volume IV infusion, pediatrics, respiratory system etc.. Besides, we own a series of strong well-known brand names including Sanjiu, Dong-E-E-Jiao, Double-Crane and Zizhu. We operate a national distribution network comprising more than 100 logistics centers strategically across 23 provinces in China. Leveraging our comprehensive product offerings and wide distribution networks, we directly distribute products to hospitals and other medical institutions across the country. In addition, we operate the 9th largest retail pharmacy network in China, comprising more than 700 pharmacies under national or regional premium brand names CR Care, Yibaoquanxin, Li an chain, and Tung Tak Tong 年年報 Annual Report 2016

5 公司資料 Corporate Information Board of Directors Chairman and non-executive Director Mr. FU Yuning Executive Director, Chief Executive Officer and President Mr. WANG Chuncheng Executive Director Mr. SONG Qing Executive Director, Chief Financial Officer and Vice President Mr. LI Guohui Non-executive Directors Mr. CHEN Rong Mr. YU Zhongliang Mr. WANG Chenyang Ms. WANG Jing Independent non-executive Directors Mr. TSANG Hing Lun Mr. KWOK Kin Fun Mr. FU Tingmei Mr. ZHANG Kejian Audit Committee Mr. TSANG Hing Lun (Chairman) Mr. CHEN Rong Ms. WANG Jing Mr. KWOK Kin Fun Mr. FU Tingmei Mr. ZHANG Kejian Nomination Committee Mr. FU Yuning (Chairman) Mr. WANG Chuncheng Mr. TSANG Hing Lun Mr. KWOK Kin Fun Mr. FU Tingmei Mr. ZHANG Kejian Remuneration Committee Mr. KWOK Kin Fun (Chairman) Mr. CHEN Rong Mr. TSANG Hing Lun Mr. FU Tingmei Mr. ZHANG Kejian 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 03

6 公司資料 Corporate Information 總辦事處及香港主要營業地點 Corporate Governance Committee Mr. FU Tingmei (Chairman) Mr. WANG Chuncheng Mr. LI Guohui Mr. TSANG Hing Lun Mr. KWOK Kin Fun Mr. ZHANG Kejian Executive Committee Mr. WANG Chuncheng (Chairman) Mr. SONG Qing Mr. LI Guohui Authorized Representatives Mr. WANG Chuncheng Mr. LI Guohui Company Secretary Mr. LO Chi Lik Peter Legal Advisors Clifford Chance Jia Yuan Law Offices Auditor Deloitte Touche Tohmatsu Compliance Advisor China International Capital Corporation Hong Kong Securities Limited Registered Office 41/F, China Resources Building 26 Harbour Road Wanchai Hong Kong Head office and Principal Place of Business in Hong Kong Room /F, China Resources Building 26 Harbour Road Wanchai Hong Kong 年年報 Annual Report 2016

7 公司資料 Corporate Information UFJ Share Registrar Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong Principal Bankers Agricultural Bank of China Ltd., Hong Kong Branch Agricultural Bank of China Shenzhen Overseas Chinese Town Branch Bank of America N.A. Bank of China (Hong Kong) Limited China Construction Bank Beijing Railway Branch China Merchants Bank Chang an Road Sub-Branch Beijing Industrial and Commercial Bank of China Wangfujing Branch Mizuho Bank, Ltd., Hong Kong Branch Overseas-Chinese Banking Corporation Limited Shanghai Pudong Development Bank Xuanwu Branch Sumitomo Mitsui Banking Corporation The Bank of Tokyo-Mitsubishi UFJ, Ltd., Hong Kong Branch Westpac Banking Corporation Investor Relations Strategic Financial Relations Limited Company s Website Stock Code 3320 Date of Listing 28 October 2016 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 05

8 釋義 Definitions In this annual report, the following expressions shall have the following meanings unless the context indicates otherwise: 股東週年大會 AGM 組織章程細則 Articles of Association 董事會 Board 北京國管中心 BSCOMC 企業管治守則 CG Code annual general meeting of the Company the articles of association of the Company (as amended from time to time), adopted by Special Resolution passed on 20 June 2016 board of Directors Beijing State-Owned Capital Operations and Management Centre, a state-owned enterprise incorporated in the PRC on 30 December 2008 and our substantial shareholder Corporate Governance Code set out in Appendix 14 to the Listing Rules 中國 China or PRC 公司條例 Companies Ordinance 本公司 或 華潤醫藥 Company or CR Pharmaceutical 華潤雙鶴 CR Double-Crane 華潤集團 CR Holdings People s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau SAR and Taiwan 622 the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (as amended from time to time) China Resources Pharmaceutical Group Limited China Resources Double-Crane Pharmaceutical Company Limited, formerly known as Beijing Double-Crane Pharmaceutical Co., Ltd., a company incorporated under the laws of the PRC on 16 May 1997, the shares of which are listed on the Shanghai Stock Exchange (stock code: ) China Resources (Holdings) Company Limited, a company incorporated in Hong Kong with limited liability on 8 July 1983, which is a wholly-owned subsidiary of China Resources Co., Limited and our controlling shareholder 年年報 Annual Report 2016

9 釋義 Definitions 華潤醫藥商業 CR Pharmaceutical Commercial China Resources Pharmaceutical Commercial Group Company Limited ( ), formerly known as Beijing Pharmaceutical Co., Ltd. (), a company incorporated under the laws of the PRC on 27 December 2000 and a wholly owned subsidiary of our Company 華潤三九 CR Sanjiu 董事 Director(s) 東阿阿膠 Dong-E-E-Jiao China Resources Sanjiu Medical & Pharmaceutical Company Limited, formerly known as Sanjiu Pharmaceutical Co., Ltd., a company incorporated under the laws of the PRC on 21 April 1999, the shares of which are listed on the Shenzhen Stock Exchange (stock code: ) director(s) of the Company Dong-E-E-Jiao Company Limited, formerly known as Shandong Dong-E-E-Jiao Factory, Shandong Dong-E-E-Jiao (Group) Co., Ltd. and Shandong Dong-E-E-Jiao Co., Ltd., a company incorporated under the laws of the PRC on 4 June 1994, the shares of which are listed on the Shenzhen Stock Exchange (stock code: )

10 釋義 Definitions 本集團 或 華潤醫藥集團 Group or CR Pharmaceutical Group 香港 Hong Kong 首次公開招股 IPO 上市 Listing the Company and its subsidiaries the Hong Kong SAR of the PRC initial public offering the listing of the Shares on the Main Board of the Stock Exchange 上市日期 Listing Date 28 October 2016 上市規則 Listing Rules the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time) 標準守則 Model Code Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules 招股章程 Prospectus the prospectus of the Company dated 17 October 年年報 Annual Report 2016

11 釋義 Definitions 報告期 Reporting Period the financial year ended 31 December 2016 特別行政區 SAR 國資委 SASAC Special Administrative Region, PRC the State-Owned Assets Supervision and Administration Commission of the State Council 證券及期貨條例 SFO 股份 Share(s) 股東 Shareholder(s) 聯交所 Stock Exchange 港元 HK$ or HKD 人民幣 RMB 美元 US$ or USD 571 Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (as amended from time to time) share(s) of the Company holder(s) of Shares of the Company The Stock Exchange of Hong Kong Limited Hong Kong Dollars, the lawful currency of Hong Kong Renminbi Yuan, the lawful currency of China United States Dollars, the lawful currency of the United States of America % % per cent In the event of any inconsistency in the Chinese and English versions of the names of the PRC established companies or entities, laws or regulations in this annual report, the Chinese version shall prevail. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 09

12 Chairman s 主席報告 Statement Mr. FU Yuning, Chairman 傅育寧先生 年年報 Annual Report 2016

13 主席報告 Chairman s Statement 150 IPO IPO IPO IPO Dear Shareholders, I would like to extend my sincere appreciation to the Shareholders and stakeholders for their support to the Company. As Chairman of the Board, I hereby present the annual results of the Company for the year ended 31 December Year 2016 was a monumental year in the development of the Group. The Group was incorporated in Hong Kong in 2007 in response to the requirement of the SASAC under the State Council to create a state-owned pharmaceutical platform. Since then, we have come a long way through challenges and hurdles and, in a short span of 10 years, we have undergone a series of strategic mergers and acquisitions, consolidation and reorganization to become China s leading integrated pharmaceutical group. The successful IPO listing of the Company on the Stock Exchange on 28 October 2016 raising funds of over HK$15 billion was the largest IPO in the non-financial sector and the second largest in general in the Hong Kong stock market in Our IPO has also been the second largest IPO issue ever by a Chinese pharmaceutical company and the 10th largest IPO among global pharmaceutical companies. Our successful listing has provided us with formidable capital strengths that would allow us to seize opportunities arising in the development of the PRC pharmaceutical industry and achieve phenomenal growth through these opportunities. The international community experienced a roller-coaster ride during the previous year, as the global markets were hit by a series of Black Swan events. The Chinese economy was facing continued pressure under the new economic environment, although it showed stability amidst the slowdown in growth. Under such complicated context of environment, we still received so much support from domestic and international investors to become our new shareholders. I express my deep gratitude to your trust to our Group. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 11

14 主席報告 Chairman s Statement 156, % 13.9% 2,821.4 Year 2016 was the first year for the Group s 13th Five-year Plan strategy, during which the reform of China s pharmaceutical industry has been further enhanced with the promulgation of numerous policies, while structural adjustments in the industry have accelerated with growing industrial concentration under more stringent regulatory measures. During the Reporting Period, the Group continued to drive the implementation of its strategic goals on all fronts taking into account development trends in the industry and its own business requirements. While we have benefited from policy-driven conditions and optimized our application of capital resources, we expanded to the pharmaceutical manufacturing business through external acquisitions, stepped up with the deployment of our nationwide distribution network and achieved breakthroughs in the biopharmaceutical sector. Efforts were also made to optimize our product mix, promote innovative business models, expedite international cooperation and enhance the quality of the supply of products and services. Leveraging on the strengths afforded by our integrated business model, we endeavoured to promote business synergy and sharing of resources and to improve operating and management efficiency through coordinated application of funds and IT enhancements. During the Reporting Period, the Group sustained stable growth in operating results with steady improvements in economic efficiency and overall strengths, despite the complicated economic landscapes and challenging business environment in China and the global markets. For 2016, the Group recorded total revenue of HK$156,705.2 million, representing a year-on-year increase of 6.9% (or 13.9% if denominated in RMB). Profit attributable to equity owners of the Company amounted to HK$2,821.4 million. Excluding extraordinary items and the effect of fluctuations in the RMB exchange rate, there was a satisfactory growth in profit attributable to equity owners of the Group for Looking to 2017, the domestic and global macro-economic environment will remain subject to uncertainties. Under the top-level strategy for a Healthy China, the PRC healthcare and pharmaceutical reforms will enter a stage of concrete actions, as a number of medical reform policies will be implemented with full force with the aim to optimize industrial structures, upgrade technologies and facilities, and offer more support for internationalization. Meanwhile, disparity among companies and their products will grow in the industry, resulting in a faster consolidation which will present opportunities as well as challenges and give rise to downside pressure as well as growth dynamics. Driven by factors such as the aging population, rise in health awareness, epidemiological transitions and application of new technologies, the demand for relevant products and services is expected to sustain over the long-term underpinning the development of the pharmaceutical industry. As an important sector in China relating to people s livelihood, the pharmaceutical and healthcare industry will remain one of the industries with the growth potential 年年報 Annual Report 2016

15 主席報告 Chairman s Statement 本集團將繼續以 守護人類健康 提升生命質量 為崇高使命 把握中國醫藥健康產業發展和變革 的機遇 致力於成為中國醫藥健康產業的引領 者 審時乘勢 砥礪前行 以轉型促發展 以創 新謀未來 我們將持續優化資源配置 積極佈局 醫藥產業鏈的核心領域和核心環節 擁抱技術進 步 加快國際化業務發展 推動產業轉型升級 充分發揮一體化業務佈局的協同效應 持續提升 核心競爭力 將企業做實 做強 做大 做好 做長 不斷超越自我 邁向卓越 In line with its esteemed mission of being the guardian of human health and improving quality of life, the Group will continue to seize opportunities arising in the development and reform of the PRC pharmaceutical and healthcare industry and endeavours to become a pioneer in the PRC pharmaceutical and healthcare industry, riding on trends in a judicious manner and advancing with diligent and meticulous effort to drive development through transformation and foster future growth through innovation. We will continue to optimize resource allocation and to actively develop businesses in the core sectors and stages of the pharmaceutical chain, while driving transformation and upgrade by seeking technological progress and stepping up with international business development. We will continue to enhance our core competitiveness by bringing the synergies of our integrated business model, consolidating into full play, as we seek to fortify, strengthen, expand, improve and sustain the development of our Group and constantly strive to break through to excellence. 最後 本人謹代表董事會 再次由衷地感謝於過 去一年極具挑戰的經營環境下 各位股東 客戶 與戰略合作夥伴對本集團的持續信任與不懈支 持 以及管理團隊與全體同仁對本集團作出的辛 勤努力 Last but not least, on behalf of the Board, may I once again express my heartfelt gratitude to all shareholders, customers and strategic partners for their unfailing trust and support amidst extremely challenging business conditions during the past year, as well as to the management team and all employees for their hard work and dedication to the Group. 傅育寧 主席 FU Yuning Chairman 二零一七年三月十七日 17 March 2017 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 13

16 全年大事紀要 Highlights of the Year May 五月 June 六月 June 六月 CR Pharmaceutical and the National Center for Nanoscience and Technology entered into the Strategic Cooperation Agreement between the National Center for Nanoscience and Technology and CR Pharmaceutical Group in Beijing, and established a joint laboratory on the research of the druggability of nano-materials to carry out joint research and development of nanodrugs. China Resources Zizhu Pharmaceutical Co., Ltd. ( CR Zizhu ) entered into a strategic cooperation agreement with Uni- Bio Science Group Ltd., pursuant to which CR Zizhu was granted a sole distribution and promotion rights of Genesoft. This further expanded CR Zizhu s product lines in the eye segment and its presence in the area of eye products. CR Pharmaceutical entered into a strategic cooperation agreement with WuXi AppTech () in Shanghai, pursuant to which both parties shall commence cooperation in pharmaceutical product development in all aspects in the future. July 七月 September 九月 October 十月 100% CR Sanjiu issued an announcement in relation to the acquisition of 100% interest in Kunming Shenghuo Pharmaceutical Group Co., Ltd. () to enrich its product lines in the cardiovascular segment. CR Pharmaceutical and College of Pharmacy, Nankai University held the signing ceremony of the strategic cooperation agreement at the headquarters of CR Pharmaceutical Group to officially establish their strategic partnership. CR Chongqing Pharmaceutical Co., Ltd. ( ) completed the business registration and was officially established, and became a subsidiary of CR Pharmaceutical Commercial 年年報 Annual Report 2016

17 全年大事紀要 Highlights of the Year October 十月 3320.HK CR Pharmaceutical officially began trading of its Shares on the Main Board of the Stock Exchange (stock code: 3320.HK), issuing a total of approximately 1.54 billion Shares and raising a net proceeds of over HK$14 billion. November 十一月 CR Pharmaceutical entered into a strategic cooperation agreement with Hefei Tianmai Biotechnology Development Co. Ltd. ( ), pursuant to which both parties shall commence in-depth cooperation in recombinant human insulin to develop recombinant insulin protein technology and serial products. This marks a major milestone in CR Pharmaceutical s strategic development in the biopharmaceutical sector. December 十二月 December 十二月, CR Pharmaceutical and WuXi AppTec (Shanghai) Co., Ltd. ( ) officially entered into a cooperative development agreement to jointly develop two innovative drugs that treat diseases of the respiratory system and the blood system. December 十二月 CR Sanjiu entered into a strategic cooperation agreement with Sanofi in Shanghai to jointly explore the opportunities in the consumer healthcare market by establishing a joint venture that focused on pediatric and gynecological OTC products in China. Meanwhile, CR Sanjiu shall be responsible for distributing and promoting Essentiale, one of Sanofi s flagship OTC brands, in China. The partnership will serve as a platform for launching new products of Sanofi in China in the future. 100% CR Double-Crane acquired 100% interest in Hainan Zhong Hua Lian He Pharmaceutical Co., Ltd. ( ). Through this acquisition, CR Double- Crane and China Resources Saike Pharmaceutical Co., Ltd. further expanded their business layout and their presence in the treatment segment, building a new treatment platform based on the existing varieties of Hainan Zhong Hua Lian He Pharmaceutical Co., Ltd. and further enriching the Company s product lines in the cardiovascular segment. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 15

18 獎項 Awards 華潤醫藥集團 CR Pharmaceutical Group June 六月 The Ministry of Commerce of the PRC published the Report of Statistical Analysis on the Operation of Pharmaceutical Distribution Industry of 2015, which shows that CR Pharmaceutical Commercial continued to ranked second among the top 100 distributors in terms of revenue. July 七月 2015 China Resources Pharmaceutical Holdings Company Limited ranked fifth among Top 100 Enterprises in the PRC Pharmaceutical Industry of October 十月 , The Blue Book of Corporate Social Responsibility of CASS published the CSR index of 2016, according to which CR Pharmaceutical Group ranked first again after 2015 in the pharmaceutical industry. 華潤三九 CR Sanjiu March 三月 WPP Millward Brown 57 CR Sanjiu ranked 57th in BrandZ Top 100 Most Valuable Chinese Brands released by Millward Brown, an authoritative market research firm under a global high-end brand communications services group WPP. November 十一月 CR Sanjiu was honoured the Most Technologically Innovative TCM Enterprise ( ) by Ministry of Science and Technology of the PRC. Sanjiu Xintailin came in second place in the national awards for progress in science and technology. November 十一月 4/ CR Sanjiu ranked first in the comprehensive ranking of PRC nonprescription manufacturing enterprises by the China Nonprescription Medicines Association for four consecutive years. CR Sanjiu s Ganmaolin granule/capsule has been named the best anti-influenza product in the PCM category for seven consecutive years since 2009, and its compound dexamethasone acetate ointment (999 Piyanping) was named the best derma product for external use in the chemicals category. Sanjiu Weitai was named the third best gastrointestinal drug in the TCM category, and Qiangli Pipalu was named the third best cough suppressant in the TCM category 年年報 Annual Report 2016

19 獎項 Awards 華潤雙鶴 CR Double-Crane April 四月 CR Double-Crane received the Honest Enterprise of Beijing City Award ( ) from Beijing Pharmaceutical Professional Association. September 九月 0 CR Double-Crane received the No. 0 Certificate of New Technology and New Product from Beijing Municipal Science & Technology Commission. June 六月 CR Double-Crane was honoured as a five-star rated enterprise for fulfilling corporate social responsibility by the China Federation of Industrial Economies. November 十一月 BFS CR Double-Crane was honored the title of Top 100 Enterprises in the PRC Pharmaceutical Industry, with its BFS technology included in Experts Consensus on Transfusion (). 東阿阿膠 Dong-E-E-Jiao March 三月 Dong-E-E-Jiao was nominated again for China Quality Award for its management model that focused on quality control across the entire industry chain. November 十一月 Dong-E E-Jiao was successfully enlisted in the National Brand Plan ( ) and received the Global Performance Excellence Award from the Asia Pacific Quality Organization. June 六月 % Dong-E E-Jiao was ranked among China s 500 Most Valuable Brands for the ninth time, with its value up by 34.05% from RMB billion for the year 2015 to RMB billion. November 十一月 Dong-E-E-Jiao received the World Class Global Performance Excellence Award. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 17

20 財務摘要 Financial Highlights (1) A summary of the Group s audited results, assets and liabilities and the key financial ratios for the last four financial years is set out as follows (1) : 年度 ( 百萬港元 ) For the year (in HK$ million) 收益 Revenue Manufacturing 22,375 21,607 19,714 20,837 Distribution 130, , ,790 91,652 Retail 3,914 3,651 3,040 2,601 Others ,205 1,861 總數 Total 156, , , ,951 Gross profit 24,109 23,199 21,490 20,149 分部業績 Segment earnings Manufacturing 7,446 7,251 6,873 7,126 Distribution 5,529 5,677 5,481 4,186 Retail Others 總數 Total 13,161 13,087 12,690 11,726 Profit for the year 5,968 6,082 5,492 5,455 於 12 月 31 日 ( 百萬港元 ) Profit attributable to owners of the company 2,821 2,850 2,646 2,640 As at 31 December (in HK$ million) Non-current assets 40,183 38,292 37,520 36,025 Current assets 93,802 88,857 84,277 68,798 Total assets 133, , , ,823 Non-current liabilities 8,699 15,079 19,175 13,276 Current liabilities 70,985 72,224 65,472 58,898 (2) Total debt (2) 25,711 37,218 37,263 31,216 Total liabilities 79,684 87,303 84,647 72,174 Total equity 54,301 39,846 37,150 32,649 比率 Ratios Gross margin 15.4% 15.8% 15.8% 17.2% Net profit margin 1.8% 1.9% 1.9% 2.3% Net debt to total equity 21.6% 62.3% 64.2% 49.1% Interest cover Current ratio (1) (2) Notes: (1) The Group s results, assets and liabilities and the key financial ratios for the years ended/as at 31 December 2013, 2014 and 2015 are extracted from the Prospectus. (2) Total debt refers to the sum of bank borrowings and bonds payable 年年報 Annual Report 2016

21 管理層討論及分析 Management Discussion and Analysis GDP6.7% % INDUSTRY OVERVIEW Under the complex and ever-changing global environment, the PRC economy continued to face pressure and experienced challenging structural adjustments in The overall macro economy continued to grow steadily, albeit slowed, with GDP growth of 6.7%. The gear-changing growth and transitioning of growth driver have become more pronounced in the new economic environment, and the emerging industries have thrived rapidly with improvement in both the quality and efficiency of economic growth; however, the structural challenges and risks in economic development still exist is the inauguration year of the 13th Five-year Plan. The PRC government introduced a number of industry policies and guidelines, such as the Guidance on Promoting the Healthy Development of the Pharmaceutical Industry ( ) and Outline of Healthy China 2030 plan ( 2030 ), which escalate Healthy China as a national strategy and help broaden the development prospect of the PRC pharmaceutical healthy industry. Due to the increase in demand and the rise in affordability, the PRC pharmaceutical industry maintained a favorable growth momentum in According to the data of National Bureau of Statistics, the revenue growth of the pharmaceutical manufacturing industry for 2016 accelerated slightly to 9.7%. The growth outpaced that of the overall macro economy. As an industry concerning people s livelihood and a strategic emerging industry, the pharmaceutical industry is subject to stringent regulations and support from government. Amidst the deepening reform of the pharmaceutical industry in 2016, the PRC government promulgated various policies successively, accelerating the promotion of the standardized evaluation of generic drugs, prioritizing the review of drug marketing licensor to enhance drug quality, and encouraging innovative development; promoted reasonable drug usage and improved economic benefits through controlling costs by tendering and reform of medical insurance payment; further implemented the two-invoice system ( ) to further reduce tiers of distribution channels to improve efficiency; and enforced supervision of the pharmaceutical industry and standardized the industry order through verification of clinical trial data, verification of process consistency and improvement of traceability system. The unprecedented frequency, effort and intensity in policy introduction had a profound impact on the development of the pharmaceutical industry. There is an enormous potential for growth and consolidation in the PRC pharmaceutical industry. Although the PRC pharmaceutical industry is facing the pressure of slowing growth and industry transformation from the stringent control of medical insurance expenditure and structural adjustment in the short term, the continuous deepening pharmaceutical reform will accelerate industry consolidation, optimize industry structure, and encourage the standardization and intensification of the industry in the long term. As a leading integrated pharmaceutical enterprise in the PRC, the Group, by leveraging on the advantages of its diversified product portfolio, economies of scale and product quality under an integrated business model and structured operations, will be a beneficiary from the deepening pharmaceutical reform. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 19

22 管理層討論及分析 Management Discussion and Analysis 156, , % 13.9% 11.2% 14.4% 14.2% 14.3% 83.2%2.5% 24, , %15.4% 15.8% 0.4 Group Results The year 2016 marked the inauguration year of the 13th Five-year Plan. The Group, in accordance with the development and changes in the industrial environment and its business needs, promoted the implementation of strategies, explored development potential of its businesses and improved the standard of operation control so as to achieve a solid growth in its overall results. During the Reporting Period, the Group recorded total revenue of HK$156,705.2 million, representing an increase of 6.9% when compared with that of HK$146,568.1 million in The continuous depreciation in RMB against HKD had exerted certain impact on the results of the Group, which were denominated in HKD. In terms of RMB, total revenue of the Group in 2016 recorded a year-on-year increase of 13.9%, which had exceeded the average growth of the PRC pharmaceutical industry, and the revenue of major business segments including pharmaceutical manufacturing, pharmaceutical distribution and pharmaceutical retail business grew by 11.2%, 14.4% and 14.2%, respectively, when compared with During the Reporting Period, the revenue of pharmaceutical manufacturing, pharmaceutical distribution and pharmaceutical retail businesses accounted for 14.3%, 83.2% and 2.5% of total revenue, respectively. During the Reporting Period, the Group achieved a gross profit of HK$24,109.1 million, representing an increase of 3.9% when compared with that of HK$23,198.9 million in The gross profit margin was 15.4%, which remained stable when compared with that of 15.8% in 2015, representing a slight decrease of 0.4 percentage points. The change was mainly due to the faster revenue growth in pharmaceutical distribution business during the Reporting Period when compared with that of pharmaceutical manufacturing business. REVENUE HK$mn GROSS PROFIT HK$mn 200, , , , % 156, ,914 30,000 20, % 15.8% 15.4% 20.0% 15.0% 100,000 50, , ,313 10,000 23,199 24, % 5.0% 21,607 22, % Manufactuing Distribution Gross Profit Gross Profit Margin Retail Others 年年報 Annual Report 2016

23 管理層討論及分析 Management Discussion and Analysis 2, , % , % Profits attributable to owners of the Company was HK$2,821.4 million in 2016, representing a decrease of 1.0% when compared with that of HK$2,850.1 million in 2015, which was mainly due to the one-off gain recorded for the disposal of subsidiaries and land in 2015, and the one-off charges of the listing expenses and the deferred tax arising from payment of special dividends. Should the non-recurring profit and loss and the impact of RMB exchange rate fluctuation be excluded, profits attributable to owners of the Company grew satisfactorily in Earnings per Share were HK$0.57 in The Board proposed a final dividend of HK$0.09 per Share for the year ended 31 December RESULTS REVIEW 1. Pharmaceutical Manufacturing Business In 2016, the pharmaceutical manufacturing business of the Group improved its operation efficiency and reduced manufacturing costs through the measures such as product mix optimization, process integration, industrial technology reform and lean management. It also enhanced its overall marketing ability through combining multi-brands by comprehensive allocation of marketing resources, the strengthening of academic marketing ability, and carrying out differentiated marketing efforts such as intelligent Chinese medicines pharmacy and cultural experience. During the Reporting Period, the segment revenue in pharmaceutical manufacturing business of the Group recorded HK$25,316.3 million, representing an increase of 4.4% when compared with Segment REVENUE Segment Gross Profit HK$mn HK$mn 30,000 20,000 1, ,407 24, % 25,316 1, ,646 15,000 10,000 14, % 58.3% 59.7% 15, % 50.0% 10,000 12,337 13,211 5, % % Chinese Medicines Chemical Drugs Gross Profit Gross Profit Margin Biopharm Others Nutritional & Healthcare Products 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 21

24 管理層討論及分析 Management Discussion and Analysis 9, % 13, % % % 59.7% By product categories, during the Reporting Period, the revenue from sale of chemical drugs was HK$9,646.0 million, representing an increase of 2.5% when compared with 2015, which was mainly due to the revenue growth in chronic and anti-infective drugs. The revenue from sale of Chinese medicines was HK$13,211.0 million, representing a yearon-year increase of 7.1%, which was mainly due to revenue increased in the E-Jiao products and Chinese medicine formula granules. The revenue from sale of biopharmaceutical drugs was HK$243.9 million, representing a year-on-year increase of 23.2%. The revenue from sale of nutritional and health products HK$524.4 million, representing a yearon-year increase of 37.1%, which was mainly due to the increasing market demand in nutritional and health products in China and the strengthened promotion to end-users. During the Reporting Period, the gross profit margin of pharmaceutical manufacturing business of the Group was 59.7%, representing an increase of 1.4 percentage points when compared with that of 2015, which was mainly due to product mix optimization, increase in product value such as E-Jiao products and continuous improvement in the manufacturing process. As of 31 December 2016, a total of more than 500 pharmaceutical products was produced and sold in our pharmaceutical manufacturing business. During the Reporting Period, the Group had 32 pharmaceutical products with an annual revenue of over HK$100.0 million, among which 6 pharmaceutical products achieved an annual revenue of over HK$1 billion. The Group regards the research and development innovation as an important driver for its long-term development and continues to increase its investments in research and development. During the Reporting Period, the research and development expenditure were HK$725.7 million. The Group follows the government policies, industrial technology development trends and market demands as directions to implement its integrated research and development layout, continues to focus on those research and development areas such as cardiovascular system, oncology, alimentary tract and metabolism as well as the central nervous system, with a view to improve its core competitiveness. As of the end of the Reporting Period, the Group operated two nationally certified engineering and technological centers, two nationally certified enterprise technical centers and 15 provincially or municipally certified research centers, and had over 600 research and development personnel 年年報 Annual Report 2016

25 管理層討論及分析 Management Discussion and Analysis 210CFDA CFDA CFDA1 (ANDA) , % As of 31 December 2016, the Group had 210 projects including researches on innovative drugs, generic drugs and product improvements, and 32 projects were pending registration approval by China Food and Drug Administration ( CFDA ). During the Reporting Period, the Group obtained 44 patents and had 26 products approved by CFDA for clinical trials. The Group had 2 products approved by CFDA for production and the supplemental abbreviated new drug application (ANDA) for one product was approved by the United States Food and Drug Administration. The Group collaborates with domestic and overseas research and development institutes through various flexible channels such as technology licensing, service outsourcing and establishment of joint laboratories. During the Reporting Period, the Group conducted strategic cooperation with partners including National Center for Nanoscience and Technology of Chinese Academy of Sciences ( ), Union Institute of Materia Medica ( ) and WuXi AppTech () in the oncology and cardiovascular product sectors through joint laboratories. 2. Pharmaceutical Distribution Business In 2016, the Group accelerated its network expansion in pharmaceutical distribution, enhanced terminal coverage, optimized and adjusted product portfolios and promoted innovative models to improve operation efficiency and quality. During the Reporting Period, the Group s pharmaceutical distribution business recorded a segment revenue of HK$132,295.6 million, representing an increase of 7.4% when compared with Segment Revenue HK$mn Segment Gross Profit HK$mn 150, , % 9,000 6, % -1.0% 6.2% 8.0% 6.0% 8,282 8, % 50, , ,296 3, % % Gross Profit Gross Profit Margin 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 23

26 管理層討論及分析 Management Discussion and Analysis 23 4,280 35,865 19, % HLI NHLI During the Reporting Period, the Group s pharmaceutical distribution business successfully entered into four central-western provinces, namely Yunnan, Guangxi, Sichuan and Chongqing. Through solidifying the foundation of its provincial platform and penetrating into municipal markets, the competitive edge of the Group s pharmaceutical distribution business in the regional markets has been further strengthened. As at 31 December 2016, the pharmaceutical distribution network of the Group covered 23 provinces, municipalities and autonomous regions nationwide, with customers including 4,280 Class II and Class III hospitals, 35,865 primary medical institutions and 19,306 retail pharmacies. In 2016, under the regime of controlled medical insurance expenditure, the profitability of pharmaceutical distribution industry in China was inevitably compressed. As a result, the Group s pharmaceutical distribution business recorded a gross profit margin of 6.2% during the Reporting Period, representing a decrease of 0.5 percentage points when compared with that of During the Reporting Period, the Group strengthened its supply chain management and promoted the distribution business operation integration through various measures. In light of the implementation of the two-invoice system and the formulation and implementation of the 13th Five-Year logistics strategic plan, the Group accelerated the development of its logistic distribution and established a professional, scalable and integrated modern logistics system. As at 31 December 2016, the Group s distribution businesses had 118 logistics centers, and the Group continued to expand its upstream resources, optimized product structure and provided one-stop import services. Meanwhile, taking into consideration the customers demand, the Group promoted various innovative distribution businesses models to enhance the valueadded services to its downstream customers. As at 31 December 2016, the Group provided hospital logistic intelligence ( HLI ) services to around 200 hospitals cumulatively, and commenced network hospital logistics intelligence ( NHLI ) projects 年年報 Annual Report 2016

27 管理層討論及分析 Management Discussion and Analysis 3. 3, % 18.3% Pharmaceutical Retail Business During the Reporting Period, the pharmaceutical retail business of the Group recorded revenue of HK$3,914.5 million, representing a year-onyear increase of 7.2%, while the gross profit margin of the retail business was 18.3%, representing a decrease of 0.8 percentage points when compared with that of This was mainly due to the rapid growth of direct delivery of high-value drugs which has a relatively low profit margin. SEGMENT REVENUE SEGMENT GROSS PROFIT HK$mn 4,000 3, % HK$mn % +2.5% 18.3% 20.0% 15.0% 2, % 1,000 3,651 3, % Gross Profit Gross Profit Margin 0.0% 739 DTP 6427 As at 31 December 2016, the Group had 739 retail pharmacies in total. During the Reporting Period, the Group established an unified pharmaceutical retail management platform, integrated the pharmaceutical retail resources and gradually unified the brand, strategic investment, operational management and information system. At the same time, the Group expanded its innovative businesses actively and as at the end of Reporting Period, the Group had 64 direct-to-pharmacy (DTP) pharmacies for high-value drugs covering 27 cities. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 25

28 管理層討論及分析 Management Discussion and Analysis 20% OPPORTUNITIES BROUGHT BY INTERNATIONAL CO-OPERATION In November 2016, CR Holdings entered into an agreement with FUJIFILM Corporation ( FUJIFILM ) to establish a business alliance. FUJIFILM is a leading corporation in Japan and is expanding its business into the healthcare segment by leveraging on its strength in the medical system segment. It is also one of the cornerstone investors in the Company s global offering. Under the agreement, CR Holdings and FUJIFILM agreed to jointly pursue the business opportunities in the manufacturing and distribution segments of the PRC healthcare industry. In December 2016, CR Sanjiu, a non-wholly-owned subsidiary of the Company, entered into a framework agreement with Sanofi, pursuant to which they agreed to form a strategic partnership to jointly explore the opportunities in the PRC consumer healthcare market. A joint venture company will be jointly set up to focus on the pediatric and gynecological OTC products. In addition, CR Sanjiu would engage in distributing one of Sanofi s flagship liver healthcare OTC products Essentiale in China exclusively. Also, CR Sanjiu has been granted the right of priority negotiation for distributing and promoting other Sanofi s consumer healthcare products. LONG-TERM GROWTH DRIVEN BY MERGERS AND ACQUISITIONS Since its establishment, the Group has grown through a series of mergers and acquisitions. With proven track records and merger and acquisition capabilities, the Group excels in improving the business performance of its target companies and transforming them into market leaders. Since its listing on the Stock Exchange in October 2016, the Group has successfully facilitated a number of merger and acquisition projects. For pharmaceutical manufacturing business, in December 2016, the Company entered into a strategic cooperation agreement with Hefei Tianmai Biotechnology Development Co. Ltd. () ( Tianmai ) in relation to the proposed acquisition of 20% interest in Tianmai. Tianmai is a biopharmaceutical company focusing on the research and development, production and sales of a series of insulin products. It owns a well-established roadmap for insulin product lines and has completed the development of technologies and products regarding the second generation recombinant human insulin and third generation long-acting insulin analogs in China, which marks a major milestone in the Group s strategic development in the biopharmaceutical sector 年年報 Annual Report 2016

29 管理層討論及分析 Management Discussion and Analysis 65% 100% % 5% 23.14% 28.14% In July 2016, CR Sanjiu announced its merger and acquisition of Kunming Shenghuo Pharmaceutical Limited ( ( ) ), and introduced products including Xuesaitong soft capsules (), to enrich its product lines in cardiovascular segment. In January 2017, CR Sanjiu announced the acquisition of the 65% stake in Jilin Jin Fu Kang Pharmaceutical Limited ( ) which manufactures anti-tumor drugs. In the same month, CR Double-Crane, a non-wholly-owned subsidiary of the Company, announced its acquisition of 100% equity interests in Hainan Zhong Hua Lian He Pharmaceutical Company Limited ( ), which focuses on the manufacturing of alimentary tract, antiinflective and anti-tumor drugs. For distribution businesses, the Group continued to implement the merger and acquisition strategy of establishing platforms at provincial level with distribution networks at municipal level for its pharmaceutical distribution segment and facilitated the establishment of its nationwide layout. Through mergers and acquisitions, the Group has marked its footprints in provinces like Yunnan, Chongqing, Guangxi and Sichuan and established its layout and platform successfully. By the end of 2016, the Group increased its distribution coverage to 23 provinces to further pursue its strategic goal of nationwide network layout. Moreover, in January 2017, China Resources Pharmaceutical Investment Company Limited further acquired approximately 2.2 million listed shares of Dong-E-E-Jiao, increasing its direct interests in Dong-E-E-Jiao from 4.66% to 5%. Taking into the 23.14% equity interests in Dong-E-E-Jiao held through China Resources Dong-E-E-Jiao Company Limited (), a non-wholly-owned subsidiary of the Company, the Group indirectly controls 28.14% equity interests in Dong-E-E-Jiao. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 27

30 管理層討論及分析 Management Discussion and Analysis HLI DTP B2B O2O OUTLOOK AND FUTURE STRATEGIES With the gradual advancement of national healthcare and pharmaceutical reform, the pharmaceutical industry in China has entered into its deepening reform stage where industrial competition intensifies, industrial transformation and upgrading expedites and opportunities coexist with challenges. By relying on its own advantages and following the new industry trends, the Group will speed up the development through strategic mergers and acquisitions and international collaboration. It will improve its intrinsic development potential through optimizing product mix and innovative services, enhancing the research and development capabilities and deepening synergy effects, so as to achieve the long-term stable and sustainable development in the pharmaceutical manufacturing, pharmaceutical distribution and pharmaceutical retail segments and continue to reinforce and elevate the Group s leading position in the pharmaceutical industry in China. 1. Continue to expand its pharmaceutical manufacturing business and enrich product portfolio to generate its sustainable growth By leveraging on its existing brand superiority, production and marketing resources, and also through external mergers and acquisitions and its research and innovation measures, the Group will expand the fastgrowing business in cardiovascular, anti-tumor and central nervous sectors, improve product mix of chemical drugs which combine the treatment in chronic disease, intravenous therapies and specialty therapies, enhance the clinical and market value of Chinese medicine products, extend its brand and further consolidate the market positioning of E-Jiao products and other healthcare products. At the same time, the Group will enhance its production standard and upgrade its product techniques by improving the production process and quality, optimizing the production layout and implementing other measures in order to achieve the sustainable development of its pharmaceutical manufacturing business. 2. Improve its network distribution and innovative service patterns to become the pharmaceutical supply chain intelligent service provider By grasping the opportunities of the full implementation of the twoinvoice system, the Group will expedite the layout of uncovered provinces, deepen the municipal network and continue to increase the coverage of medical institutions. The Group will constantly optimize its product mix to offer more products with high clinical and market value. At the same time, with the help of the advanced information systems and professional logistic networks, the Group will continue to promote the HLI, DTP and other emerging business models, develop chronic disease management and other innovative health services and explore e-commerce businesses such as B2B and O2O, so as to transform the Group into a pharmaceutical supply chain intelligent service provider and fortify the Group s market leading position as a pharmaceutical distribution solution provider 年年報 Annual Report 2016

31 管理層討論及分析 Management Discussion and Analysis Position strategically in biopharmaceutical sector, optimize research and innovation system and accelerate product development and industrialization The Group will further accelerate its investments in the biopharmaceutical sector and acquire biopharmaceutical companies with unique products and technological competitive advantages, and will promote in-depth cooperation with external research institutions to gain technological and operational experience. Moreover, the Group will further invest in research and development to build a comprehensive research and development platform and set up an industry-leading research and development team, so as to continue to enhance its research and development capabilities. The Group will expand new products through external cooperation, strengthen its product offerings in core areas, proactively develop new therapeutic segments and accelerate industrialization of special projects. 4. Accelerate development through strategic acquisitions to further consolidate the leading position in pharmaceutical industry For pharmaceutical manufacturing business, the Group will improve the establishment of its biopharmaceutical platform through strategic investments, expand health businesses and acquire products selectively with differentiated product portfolios or products that are complementary to its existing product portfolios, especially in the therapeutic segments such as the cardiovascular system, oncology and other high-growth therapeutic segments. For pharmaceutical distribution and pharmaceutical retail businesses, the Group will improve the breadth and depth of its business coverage by investing or acquiring regional leading pharmaceutical distributors and retailers that have strong relationships with hospitals and other medical institutions. 5. Enhance international cooperation, facilitate international business operation and enhance comprehensive competitiveness The Group will continue to strengthen the expansion and establishment of international cooperation platforms, push forward international cooperation and communication, position the PRC market as the core direction of its businesses, and seek breakthroughs in its overseas business layouts. For pharmaceutical manufacturing business, the Group plans to enhance its product and technology achievement through international cooperation to complement its existing product portfolios. The Group plans to enhance its cooperation with large multinational pharmaceutical corporations in research and development, manufacturing and marketing. For pharmaceutical distribution and pharmaceutical retail businesses, the Group aims to optimize its product portfolios and strengthen its competitive advantages through enhanced cooperation with leading international pharmaceutical suppliers and international medical device manufacturers. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 29

32 管理層討論及分析 Management Discussion and Analysis 6. 13, % 12.6% 29.6% 70.4% 87.1% 1.3:1 1.2:1 6. Promote business collaboration, optimize resources allocation and improve operation efficiency The Group will continue to explore the synergies in its integrated business layout, strengthen the overall management in strategy, finance, human resources and other internal resources, promote the synergies among the pharmaceutical manufacturing, distribution and retail businesses as well as the sub-sectors of each business segment in those aspects such as market entry, product resources and marketing channels to optimize resources allocation. The Group will control its operational risks by strengthening fund supervision and control as well as business assessment and intensifying its scalable and intensive operation, so as to further enhance the Group s overall operation efficiency. LIQUIDITY AND FINANCIAL RESOURCES The Group adopts a prudent treasury management policy to maintain a solid and healthy financial position. The Group funds its operations principally from cash generated from its operations, bank loans and other debt instruments and equity financing from investors. Its cash requirements relate primarily to production and operating activities, business expansion, repayment of liabilities as they become due, capital expenditures, interest and dividend payments. As at 31 December 2016, the Group had bank balances and cash of HK$13,960.2 million, which were primarily in RMB, USD and HKD. As at 31 December 2016, the RMB-denominated, and HKD-denominated bank borrowings accounted for approximately 87.4% and 12.6%, respectively, of the Group s total bank borrowings, and the bank borrowings which carried interests at fixed and variable rates accounted for 29.6% and 70.4%, respectively, of the Group s total bank borrowings. Among the Group s total bank borrowings as at 31 December 2016, a substantial portion of approximately 87.1% would be due within one year. The Group s current ratio (being the ratio of total current assets to total current liabilities) was 1.3:1 as at 31 December 2016 (2015: 1.2:1) 年年報 Annual Report 2016

33 管理層討論及分析 Management Discussion and Analysis 21.6% 62.3% 4, , , , , , , , , , %7.1% 2, ,320.4 As at 31 December 2016, the Group s gearing ratio (being the ratio of net debt divided by total equity) was 21.6% (2015: 62.3%). In 2016, the Group s net cash from operating activities remained solid at HK$4,119.6 million (2015: HK$5,988.8 million). The Group s net cash used in investment activities in 2016 amounted to HK$1,953.1 million (2015: HK$3,919.2 million). The Group s net cash used in financing activities in 2016 amounted to HK$625.5 million (2015: HK$1,554.3 million), including the net proceeds of HK$14,767.4 million raised from its global offering. As at 31 December 2016, the Group had not used any financial instruments for hedging purposes. PLEDGE OF ASSETS As at 31 December 2016, the Group s total borrowings amounted to HK$15,762.5 million (31 December 2015: HK$28,983.5 million), of which HK$2,164.9 million (31 December 2015: HK$2,061.1 million) were secured and accounted for 13.7% (31 December 2015: 7.1%) of the total borrowings. Certain of the Group s trade and bills receivables with an aggregate net book value of HK$2,585.9 million (31 December 2015: HK$2,320.4 million) have been pledged as security. CONTINGENT LIABILITIES As at 31 December 2016, the Group had no material contingent liabilities (31 December 2015: nil). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 31

34 管理層討論及分析 Management Discussion and Analysis 1, , ,000 1,655,082, ,767.4 FOREIGN EXCHANGE RISK MANAGEMENT The Group s operations are located in the PRC and most of its transactions are denominated and settled in RMB. The Group is exposed to foreign exchange risks on certain cash and cash equivalents, borrowings from banks and trade payables denominated in foreign currencies, the majority of which are denominated in HKD and USD. During the Reporting Period, the Group did not enter into any derivatives contracts to hedge the foreign exchange exposure. CAPITAL EXPENDITURE The Group s capital expenditure comprised mainly additions to property, plant and equipment, intangible assets, investment properties and prepaid lease payments, but excluding additions resulting from acquisitions through business combination. The Group s capital expenditure in 2016 amounted to HK$1,982.3 million (2015: HK$2,217.7 million), which was primarily utilised for expansion and upgrade of manufacturing facilities, development of distribution networks, and upgrading of logistic systems. Such capital expenditure was funded primarily by using cash generated from the Group s operating activities, bank borrowings and proceeds from the Company s initial public offering. HUMAN RESOURCES As at 31 December 2016, the Group employed around 54,000 staff in the PRC and Hong Kong. The Group remunerates its employees based on their performance, experience and prevailing market rate while performance bonuses are granted on a discretionary basis. Other employee benefits include, for example, medical insurance and training. USE OF NET PROCEEDS FROM LISTING The Company was listed on the main board of the Stock Exchange on 28 October 2016 by way of a Global Offering, under which a total of 1,655,082,000 Shares (including Shares issued upon partial exercise of the over-allotment option) were issued at an offer price of HK$9.10 per Share, raising total net proceeds of HK$14,767.4 million after deducting professional fees, underwriting commissions and other related listing expenses (the IPO proceeds ) 年年報 Annual Report 2016

35 管理層討論及分析 Management Discussion and Analysis 1, ,300 5,780 As stated in the Prospectus, the Company had plans to use the IPO proceeds. As of 31 December 2016, the Company has used approximately HK$1,476.7 million for repayment of bonds; approximately HK$999.7 million for working capital for its pharmaceutical distribution business; approximately HK$480.7 million for partial payment of strategic acquisitions; approximately HK$36.6 million for establishment of more advanced logistics centers and warehouses; approximately HK$33.6 million for HLI Solutions; and approximately HK$2.2 million for development of its research and development platform. To optimise the fund allocation of the Group, approximately HK$5,300 million out of the residual amount of the IPO proceeds was used by the Company for early repayment of its outstanding bank facilities in December Following such early repayment, unsecured banking facilities in an aggregate principal amount equivalent to HK$5,780 million at a lower interest rate have been extended to the Company by 28 February The Company does not have any intention to change the purposes of the IPO proceeds as set out in the Prospectus, and will gradually utilise the residual amount of the IPO proceeds in accordance with the intended purposes. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 33