(Stock Code : 3320) 2016 Annual Report

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

公司簡介 Corporate Profile 100 23 9 700 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. 02 2016 年年報 Annual Report 2016

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

公司資料 Corporate Information 26 41 總辦事處及香港主要營業地點 26 41 4104 05 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 4104 05 41/F, China Resources Building 26 Harbour Road Wanchai Hong Kong 04 2016 年年報 Annual Report 2016

公司資料 Corporate Information 183 22 UFJ http://www.crpharm.com 3320 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 http://www.crpharm.com 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

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 600062 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: 600062) 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 06 2016 年年報 Annual Report 2016

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 000999 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: 000999) director(s) of the Company 000423 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: 000423)

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 2016 08 2016 年年報 Annual Report 2016

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

Chairman s 主席報告 Statement Mr. FU Yuning, Chairman 傅育寧先生 10 2016 年年報 Annual Report 2016

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 2016. 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 2016. 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

主席報告 Chairman s Statement 156,705.2 6.9% 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 2016. 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. 12 2016 年年報 Annual Report 2016

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

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. 14 2016 年年報 Annual Report 2016

全年大事紀要 Highlights of the Year October 十月 3320.HK 15.43 140 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

獎項 Awards 華潤醫藥集團 CR Pharmaceutical Group June 六月 2015 2015 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 2015. October 十月 2016 2015, 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/ 2009 999 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. 16 2016 年年報 Annual Report 2016

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 5002015 106.05142.16 34.05% 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 RMB10.605 billion for the year 2015 to RMB14.216 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

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) 2016 2015 2014 2013 收益 Revenue Manufacturing 22,375 21,607 19,714 20,837 Distribution 130,313 121,191 111,790 91,652 Retail 3,914 3,651 3,040 2,601 Others 103 119 1,205 1,861 總數 Total 156,705 146,568 135,749 116,951 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 118 101 140 124 Others 68 58 196 290 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 133,985 127,149 121,797 104,823 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 5.5 4.9 4.2 4.9 Current ratio 1.3 1.2 1.3 1.2 (1) 20132014 2015 12 31 (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. 18 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis GDP6.7% 2030 9.7% INDUSTRY OVERVIEW Under the complex and ever-changing global environment, the PRC economy continued to face pressure and experienced challenging structural adjustments in 2016. 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. 2016 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 2016. 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

管理層討論及分析 Management Discussion and Analysis 156,705.2 146,568.1 6.9% 13.9% 11.2% 14.4% 14.2% 14.3% 83.2%2.5% 24,109.1 23,198.9 3.9%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 2015. 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 2015. 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$23,198.9 million in 2015. The gross profit margin was 15.4%, which remained stable when compared with that of 15.8% in 2015, representing a slight decrease of 0.4 percentage points. The change was mainly due to the faster revenue growth in pharmaceutical distribution business during the Reporting Period when compared with that of pharmaceutical manufacturing business. REVENUE HK$mn GROSS PROFIT HK$mn 200,000 150,000 119 3,651 146,568 +6.9% 156,705 103 3,914 30,000 20,000 +3.9% 15.8% 15.4% 20.0% 15.0% 100,000 50,000 121,191 130,313 10,000 23,199 24,109 10.0% 5.0% 21,607 22,375 0 2015 2016 0 2015 2016 0.0% Manufactuing Distribution Gross Profit Gross Profit Margin Retail Others 20 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 2,821.4 2,850.1 1.0% 0.57 0.09 1. 25,316.3 4.4% 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 2016. Earnings per Share were HK$0.57 in 2016. The Board proposed a final dividend of HK$0.09 per Share for the year ended 31 December 2016. 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$25,316.3 million, representing an increase of 4.4% when compared with 2015. Segment REVENUE Segment Gross Profit HK$mn HK$mn 30,000 20,000 1,929 383 198 9,407 24,254 +4.4% 25,316 1,691 524 244 9,646 15,000 10,000 14,159 +6.8% 58.3% 59.7% 15,124 75.0% 50.0% 10,000 12,337 13,211 5,000 25.0% 0 2015 2016 0 2015 2016 0.0% 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

管理層討論及分析 Management Discussion and Analysis 9,646.0 2.5% 13,211.07.1% 243.9 23.2% 524.4 37.1% 59.7%1.4 500 32 100.0 725.7 15 600 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. 22 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 210CFDA 32 44 26 CFDA CFDA1 (ANDA) 2. 132,295.6 7.4% 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$132,295.6 million, representing an increase of 7.4% when compared with 2015. Segment Revenue HK$mn Segment Gross Profit HK$mn 150,000 100,000 +7.4% 9,000 6,000 6.7% -1.0% 6.2% 8.0% 6.0% 8,282 8,200 4.0% 50,000 123,156 132,296 3,000 2.0% 0 2015 2016 0 2015 2016 0.0% Gross Profit Gross Profit Margin 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 23

管理層討論及分析 Management Discussion and Analysis 23 4,280 35,865 19,306 6.2% 0.5 118 200 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 2015. 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. 24 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 3. 3,914.57.2% 18.3% 0.8 3. Pharmaceutical Retail Business During the Reporting Period, the pharmaceutical retail business of the Group recorded revenue of HK$3,914.5 million, representing a year-onyear increase of 7.2%, while the gross profit margin of the retail business was 18.3%, representing a decrease of 0.8 percentage points when compared with that of 2015. This was mainly due to the rapid growth of direct delivery of high-value drugs which has a relatively low profit margin. SEGMENT REVENUE SEGMENT GROSS PROFIT HK$mn 4,000 3,000 +7.2% HK$mn 800 600 19.2% +2.5% 18.3% 20.0% 15.0% 2,000 400 700 718 10.0% 1,000 3,651 3,915 200 5.0% 0 2015 2016 0 Gross Profit 2015 2016 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

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. 26 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 65% 100% 23 220 4.66% 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

管理層討論及分析 Management Discussion and Analysis 1. 2. 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. 28 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 3. 4. 5. 3. 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

管理層討論及分析 Management Discussion and Analysis 6. 13,960.2 87.4% 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). 30 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 21.6% 62.3% 4,119.6 5,988.8 1,953.1 3,919.2 625.5 1,554.3 14,767.4 15,762.5 28,983.5 2,164.9 2,061.1 13.7%7.1% 2,585.9 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

管理層討論及分析 Management Discussion and Analysis 1,982.3 2,217.7 54,000 1,655,082,000 9.10 14,767.4 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 ). 32 2016 年年報 Annual Report 2016

管理層討論及分析 Management Discussion and Analysis 1,476.7 999.7 480.7 36.6 33.6 2.2 5,300 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 2016. 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 2017. 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

企業管治報告 Corporate Governance Report 企業管治常規董事會董事會責任及授權 The Board is pleased to present the corporate governance report of the Company for the period from the Listing Date to 31 December 2016 (the Relevant Period ). CORPORATE GOVERNANCE PRACTICES The Group is committed to maintain high standards of corporate governance in order to safeguard the interests of the Shareholders and enhance the corporate value and accountability. The Company has adopted the CG Code as its own code of corporate governance. Save as disclosed in this annual report, the Company has complied with all applicable code provisions under the CG Code throughout the Relevant Period. THE BOARD Responsibilities and Delegation by the Board The Board is responsible for the overall leadership of the Group, oversees the Group s strategic decisions and monitors business and performance. Directors may seek independent professional advice in performing their duties at the Company s expense and are encouraged to consult with the Company s senior management independently. The Board has delegated the authority and responsibility for day-to-day management and operation of the Group to the senior management of the Group. The delegated functions and responsibilities are periodically reviewed by the Board. The management is required to timely report to and seek approval from the Board before engaging in any significant transactions. To oversee particular aspects of the Company s affairs, the Board has established five Board committees, namely the Executive Committee, the Audit Committee, the Remuneration Committee, the Nomination Committee and the Corporate Governance Committee (together, the Board Committees ). The Board has delegated to the Board Committees responsibilities as set out in their respective terms of reference. All Directors have the obligations to carry out duties in good faith and in compliance with applicable laws and regulations and to act in the interests of the Company and the Shareholders at all times. The Company has arranged appropriate liability insurance in respect of legal action against the Directors. The insurance coverage will be reviewed by the Board on an annual basis. 34 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report 董事會組成主席及非執行董事 : 執行董事 : 非執行董事 : 獨立非執行董事 : 3.10(1) 3.10(2) 3.10A 3.13 Board Composition As at 31 December 2016, the Board comprises three executive Directors, five non-executive Directors and four independent non-executive Directors as follows: Chairman and non-executive Director: Mr. FU Yuning Executive Directors: Mr. WANG Chuncheng Mr. SONG Qing 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 The biographies of the Directors are set out under the section headed Biographies Directors and Senior Management of this annual report. During the Relevant Period, the Board has met the requirements under Rules 3.10(1) and 3.10(2) of the Listing Rules relating to the appointment of at least three independent non-executive Directors (with at least one independent nonexecutive Director possessing appropriate professional qualifications or accounting or related financial management expertise). The Company has also complied with Rule 3.10A of the Listing Rules relating to the appointment of independent non-executive Directors representing at least one-third of the Board. As each of the independent non-executive Directors has confirmed his independence pursuant to Rule 3.13 of the Listing Rules, the Company considers all of them to be independent parties. None of the Directors has any personal relationship (including financial, business, family or other material or relevant relationship) with any other Director, nor between the Chairman of the Board and the Chief Executive Officer of the Company. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 35

企業管治報告 Corporate Governance Report 入職及持續專業發展 A.6.5 All Directors, including independent non-executive Directors, have brought a wide spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning. Independent nonexecutive Directors are invited to serve on the Audit Committee, the Remuneration Committee, the Nomination Committee and the Corporate Governance Committee. As regards the CG Code provision requiring directors to disclose the number and nature of offices held in public companies or organisations and other significant commitments as well as the identity of the public companies or organisations and an indication of the time involved, the Directors have agreed to disclose their commitments and any subsequent change to the Company in a timely manner. Induction and Continuous Professional Development Pursuant to Code Provision A.6.5 of the CG Code, all Directors should participate in continuous professional development to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains informed and relevant. Each newly appointed Director would receive an induction package covering the statutory and regulatory obligations of a Director of a listed company. The Company has also arranged in-house trainings for Directors in the form of seminars and reading materials. From time to time, the Board arranges visits for the Directors to have a deeper understanding of the Group s business operations and matters relating to pharmaceutical industry. In July 2016, an independent non-executive Director, Mr. KWOK Kin Fun, visited the Group s pharmaceutical facilities in Shenzhen. During the visit, Mr. KWOK obtained an understanding of the business environment and day-to-day operation of the Group s pharmaceutical manufacturing segment. 36 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report According to the information provided by the Directors, a summary of training received by the Directors throughout the Relevant Period is as follows: 董事姓名 Name of Directors 接受培訓出席研討會會議及或論壇或於研討會會議及或論壇致詞 Receiving training; attending and/or giving talks at seminars, conference and/or forums 持續專業發展課程性質 Nature of Continuous Professional Development Programmes 閱讀最新監管資訊或有關本公司或其業務的資料 Reading regulatory updates or information relevant to the Company or its business 實地考察 Site visits Chairman and non-executive Director Mr. FU Yuning 3 3 Executive Directors Mr. WANG Chuncheng 3 3 Mr. SONG Qing 3 3 Mr. LI Guohui 3 3 Non-Executive Directors Mr. CHEN Rong 3 3 Mr. YU Zhongliang 3 3 Mr. WANG Chenyang 3 3 Ms. WANG Jing 3 3 Independent non-executive Directors Mr. TSANG Hing Lun 3 3 Mr. KWOK Kin Fun 3 3 3 Mr. FU Tingmei 3 3 Mr. ZHANG Kejian 3 3 主席及行政總裁 A.2.1 Chairman and Chief Executive Officer Under Code Provision A.2.1 of the CG Code, the roles of chairman of the Board and chief executive officer should be separate and performed by different individuals. The Chairman of the Board and the Chief Executive Officer of the Company are currently two separate positions held by Mr. FU Yuning and Mr. WANG Chuncheng, respectively, with clear distinction in responsibilities. The Chairman of the Board is responsible for formulating of business plans, strategies and major decisions of the Group through the Board, while the Chief Executive Officer is responsible for the overall management of the Group. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 37

企業管治報告 Corporate Governance Report 董事的委任及重選連任 A.4.1 D.1.4 A.4.1 D.1.4 董事會會議 Appointment and Re-election of Directors The procedures and process of appointment, re-election and removal of Directors are set out in the Articles of Association. The Company has not fully complied with Code Provisions A.4.1 and D.1.4 of the CG Code during the Relevant Period. In respect of Code Provision A.4.1 of the CG Code, all the non-executive Directors are not appointed for a fixed term, and in respect of Code Provision D.1.4 of the CG Code, the Company did not have formal letters of appointment for Directors. Since all Directors are subject to re-election by the Shareholders at the AGM and at least about once every three years on a rotation basis in accordance with the Articles of Association, there are sufficient measures to ensure the corporate governance of the Company complies with the same level to that required under the CG Code. None of the Directors has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation). Board Meetings The Company adopts the practice of holding Board meetings regularly, at least four times a year, and at approximately quarterly intervals. Notices of not less than fourteen days are given for all regular Board meetings to provide all Directors with an opportunity to attend and include matters in the agenda for a regular meeting. For other Board and Board Committee meetings, reasonable notice is generally given. The agenda and accompanying Board papers are dispatched to the Directors at least three days before the meetings to ensure that they have sufficient time to review the papers and are adequately prepared for the meetings. When the Directors or Board Committee members are unable to attend a meeting, they will be advised of the matters to be discussed and given an opportunity to make their views known to the Chairman of the Board or the relevant chairman of the Board Committee prior to the meeting. Minutes of the Board meetings and Board Committee meetings are recorded in sufficient detail about the matters considered by the Board and the Board Committees and the decisions made, including any concerns raised by the Directors. Draft minutes of each Board meeting and Board Committee meeting are sent to the Directors for comments within a reasonable time after the date on which the meeting is held. Minutes of the Board and Board Committee meeting are kept by the duly appointed secretary of the meeting and are open for inspection by Directors. 38 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report During the Relevant Period, one Board meeting was held and the attendance of each Director at the meeting is set out in the table below: 董事 Directors 已出席董事會次數應出席董事會次數 Attended/Eligible to attend the Board meeting Chairman and non-executive Director Mr. FU Yuning 0/1 Executive Directors Mr. WANG Chuncheng 1/1 Mr. SONG Qing 1/1 Mr. LI Guohui 1/1 Non-executive Directors Mr. CHEN Rong 1/1 Mr. YU Zhongliang 1/1 Mr. WANG Chenyang 1/1 Ms. WANG Jing 1/1 Independent non-executive Directors Mr. TSANG Hing Lun 1/1 Mr. KWOK Kin Fun 1/1 Mr. FU Tingmei 1/1 Mr. ZHANG Kejian 1/1 進行證券交易的標準守則 No general meeting was held during the Relevant Period. Model Code for Securities Transactions The Company has adopted the Model Code as its own code of conduct regarding Directors securities transactions. Having made specific enquiries of all the Directors, each of the Directors has confirmed that he/she has complied with the Model Code during the Relevant Period. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 39

企業管治報告 Corporate Governance Report 董事委員會執行委員會 1. 2. 3. 4. 5. 6. 5% 1% 7. 8. BOARD COMMITTEES Executive Committee The Executive Committee comprises all the executive Directors, namely Mr. WANG Chuncheng (chairman), Mr. SONG Qing and Mr. LI Guohui. The principal duties of the Executive Committee include but are not limited to the following: 1. to monitor the formulation, revision and implementation of the Company s strategic plans; 2. to monitor the execution of the Company s business plans and the Company s business operations; 3. to monitor the operation of the Company s subsidiaries; 4. to approve the scope of authority delegated to the Senior Management of the Company and its changes; 5. to exercise part of the power on behalf of the Board between regular Board meetings, with its power restricted to the areas that are considered by the Board as material and related to the formulation of the policy and business development direction of the Company; 6. to review and approve operational matters which constitutes below 5% (for matters within the business plan of the Group) or below 1% (for matters outside the business plan of the Group) of the audited net asset of the Group in the previous financial year (except for notifiable transactions and connected transactions for which announcements are required under the Listing Rules); 7. to review and approve the financing matters within the financing plan resolved and passed by the Board (including bank loans and trusts etc.) and their corresponding guarantee matters; 8. to review and approve on behalf of the Board the financing matters within the financing plan resolved and passed by the board of directors of the subsidiaries of the Company (including bank loans and trusts etc.) and their corresponding guarantee matters; 40 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report 9. i. 9. to exercise the following power in accordance with the needs of the Company and its subsidiaries: i. to approve on behalf of the Board banking facilities and/or financial instruments to be granted to or issued by the Company for the needs of the Company and its subsidiaries; ii. ii. to approve on behalf of the Board the grant of any loan or other financial assistance to the Company s subsidiaries and/or associates; iii. iii. to approve on behalf of the Board the provision of corporate guarantees, indemnity and/or letters of comfort by the Company for its subsidiaries and/or associates; iv. iv. to approve on behalf of the Board the opening of bank or securities related accounts and other ancillary matters of the Company and/or its subsidiaries, including appointing the signatories and approving the terms and mandate for such accounts; and v. 10. 11. 12. 13. 13.10B 13.18 v. to affix the Company s seal on any instrument or document related to the above items and approve any one or more of the Directors of the Company to sign the instrument or document. 10. to decide external donation matters which should be reviewed and approved by the Board in accordance with the Donation Management Policy of the China Resources Group ; 11. to authorize one or more Directors for executing relevant documents to be filed and/or submitted to regulatory authorities on behalf or in the name of the Company; 12. to deal with any other specific business authorized to this Committee by the Board; and 13. to approve on behalf of the Board the relevant arrangements for the publication of voluntary announcement(s), overseas regulatory announcement(s) made pursuant to Rule 13.10B of the Listing Rules, announcement(s) made pursuant to Rule 13.18 of the Listing Rules, next day disclosure return(s), or announcement(s) on the principal financial results of the subsidiaries of the Company on the HKEXNews website of the Stock Exchange and the Company s website. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 41

企業管治報告 Corporate Governance Report The written terms of reference of the Executive Committee are available on the websites of the Stock Exchange and the Company. During the Relevant Period, five meetings (by way of circulation of written resolutions) were held by the Executive Committee which primarily covered banking and financing matters of the Group. Attendance of each Executive Committee member is set out in the table below: 已出席次數應出席次數執行委員會成員 Executive Committee members Attended/Eligible to attend Mr. WANG Chuncheng (Chairman of the Executive Committee) 5/5 Mr. SONG Qing 5/5 Mr. LI Guohui 5/5 審計委員會 1. 2. 3. 4. 5. 6. Audit Committee The Audit Committee comprises six members, including four independent nonexecutive Directors, namely Mr. TSANG Hing Lun (chairman), Mr. KWOK Kin Fun, Mr. FU Tingmei and Mr. ZHANG Kejian, and two non-executive Directors, namely Mr. CHEN Rong and Ms. WANG Jing. The principal duties of the Audit Committee include but are not limited to the following: 1. to review and monitor the Auditor s independence and objectivity and the effectiveness of the audit process in accordance with applicable standards; 2. to develop and implement policy on engaging an external auditor to supply non-audit services; 3. to discuss with the external Auditor before the audit commences, the nature and scope of the audit and reporting obligations, and ensuring co-ordination where more than one audit firm is involved; 4. to monitor integrity of the Group s financial statements, annual reports and accounts, half-year reports and, if prepared for publication, quarterly reports and reviewing significant financial reporting judgments contained in them; 5. to review the Group s financial controls, risk management and internal control system; and 6. to ensure that the internal audit function is adequately resourced and has appropriate standing within the Group, and reviewing and monitoring its effectiveness. 42 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report The written terms of reference of the Audit Committee are available on the websites of the Stock Exchange and the Company. During the Relevant Period, one meeting of the Audit Committee was held to discuss and consider the following matters: reviewed the financial reporting system, compliance procedures, internal control (including the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company s accounting and financial reporting function) and risk management systems and processes. Attendance of each Audit Committee member is set out in the table below: 已出席次數應出席次數審計委員會成員 Audit Committee members Attended/Eligible to attend Mr. TSANG Hing Lun (Chairman of the Audit Committee) 1/1 Mr. CHEN Rong 1/1 Ms. WANG Jing 1/1 Mr. KWOK Kin Fun 1/1 Mr. FU Tingmei 1/1 Mr. ZHANG Kejian 1/1 提名委員會 1. 2. 3. 4. Nomination Committee The Nomination Committee currently comprises six members, including one non-executive Director, Mr. FU Yuning (chairman), one executive Director, Mr. WANG Chuncheng, and four independent non-executive Directors, namely Mr. TSANG Hing Lun, Mr. KWOK Kin Fun, Mr. FU Tingmei and Mr. ZHANG Kejian. The principal duties of the Nomination Committee include but are not limited to the following: 1. to review the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company s corporate strategy; 2. to identify individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships; 3. to assess the independence of independent non-executive Directors; and 4. to make recommendations to the Board on the appointment or reappointment of Directors and the succession planning for Directors, in particular the chairman and the chief executive officer. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 43

企業管治報告 Corporate Governance Report 董事會成員多元化政策概要可計量目標 : 監察及報告 : 董事會成員多元化政策覆核 : The Nomination Committee assesses the candidate or incumbent on criteria such as integrity, experience, skill and ability to commit time and effort to carry out the duties and responsibilities. The recommendations of the Nomination Committee will then be put to the Board for decision. The written terms of reference of the Nomination Committee are available on the websites of the Stock Exchange and the Company. During the Relevant Period, no meeting was held by the Nomination Committee. Summary of the Board Diversity Policy The Company recognizes and embraces the benefits of having a diverse Board, and sees diversity at Board level as an essential element in maintaining a competitive advantage. A truly diverse Board will include and make good use of differences in the talents, skills, regional and industry experience, background, gender and other qualities of the members of the Board. The Nomination Committee reviews and assesses the composition of the Board and makes recommendations to the Board on appointment of new Directors, and also oversees the conduct of the annual review of the effectiveness of the Board. Measurable objectives: The Nomination Committee will discuss and agree annually all measurable objectives for achieving diversity on the Board and recommend them to the Board for adoption. At any given time, the Board may seek to improve one or more aspects of its diversity and measure progress accordingly. Monitoring and reporting: The Nomination Committee will report annually, in the corporation governance report of the Company, on the process it has used in relation to Board appointments. Such report will include a summary of the Board Diversity Policy, the measurable objectives set for implementing the Board Diversity Policy and progress made towards achieving these measurable objectives. Review of the Board Diversity Policy: The Nomination Committee will review the Board Diversity Policy annually, which will include an assessment of its effectiveness. The Nomination Committee will discuss any revisions that may be required and recommend any such revisions to the Board for approval. The Company s Board Diversity Policy is available at the website of the Company. 44 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report 薪酬委員會 1. 2. 3. 4. 5. 6. 7. 8. Remuneration Committee The Remuneration Committee comprises five members, including one nonexecutive Director, Mr. CHEN Rong, and four independent non-executive Directors, namely Mr. KWOK Kin Fun (chairman), Mr. TSANG Hing Lun, Mr. FU Tingmei and Mr. ZHANG Kejian. The principal duties of the Remuneration Committee include but are not limited to the following: 1. to make recommendations to the Board on the Company s policy and structure for the remuneration of the Directors and senior management and on the establishment of a formal and transparent procedure for developing remuneration policy; 2. to review and approve the senior management s remuneration proposals with reference to the corporate goals and objectives determined by the Board; 3. to make recommendations to the Board on the remuneration packages of individual executive Directors and senior management. These include benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment; 4. to make recommendations to the Board on the remuneration of nonexecutive Directors; 5. to consider salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere in the Group; 6. to review and approve compensation payable to executive Directors and senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive; 7. to review and approve compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate; and 8. to ensure that no Director or any of his/her associates (as defined in the Listing Rules) is involved in deciding his/her own remuneration. The written terms of reference of the Remuneration Committee are available on the websites of the Stock Exchange and the Company. During the Relevant Period, no meeting was held by the Remuneration Committee. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 45

1 1 1 企業管治報告 Corporate Governance Report 企業管治委員會 Corporate Governance Committee The Corporate Governance Committee comprises six members, including two executive Directors namely Mr. WANG Chuncheng and Mr. LI Guohui and four independent non-executive Directors namely Mr. FU Tingmei (chairman), Mr. TSANG Hing Lun, Mr. KWOK Kin Fun and Mr. ZHANG Kejian. The principal duties of the Corporate Governance Committee include but are not limited to the following: (a) (b) (c) (d) (e) 1. to review and monitor the Company s policies and practices on compliance with legal and regulatory requirements; 2. to review and monitor the training and continuous professional development of Directors and senior management on corporate governance; 3. to develop, review and monitor the code of conduct and compliance manual applicable to employees and Directors; 4. to develop and review the Company s policies and practices on corporate governance and make recommendations to the Board; and 5. to review the Company s compliance with the CG Code and disclosure in the corporate governance report. 高級管理人員的薪酬 53 63 The written terms of reference of the Corporate Governance Committee are available on the websites of the Stock Exchange and the Company. During the Relevant Period, no meeting was held by the Corporate Governance Committee. Remuneration of Senior Management Details of the remuneration by band of the senior management of the Company, whose biographies are set out on pages 53 to 63 of this annual report, for the year ended 31 December 2016 are set out below: 人數酬金等級 Remuneration band Number of individuals 1,000,000 Nil HK$1,000,000 3 1,000,001 1,500,000 HK$1,000,001 to HK$1,500,000 1,500,001 2,000,000 HK$1,500,001 to HK$2,000,000 1 2,000,001 2,500,000 HK$2,000,001 to HK$2,500,000 1 2,500,001 3,000,000 HK$2,500,001 to HK$3,000,000 3 3,000,001 3,500,000 HK$3,000,001 to HK$3,500,000 3 3,500,001 4,000,000 HK$3,500,001 to HK$4,000,000 1 46 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report 董事有關財務報表的財務申報責任 80 82 內部監控及風險管理 GMP GSP DIRECTORS RESPONSIBILITIES FOR FINANCIAL REPORTING IN RESPECT OF FINANCIAL STATEMENTS The Directors acknowledge their responsibilities for preparing the financial statements for the year ended 31 December 2016 which give a true and fair view of the affairs of the Company and the Group and of the Group s results and cash flows. The management has provided to the Board such explanation and information as are necessary to enable the Board to carry out an informed assessment of the Company s financial statements, which are put to the Board for approval. The Company provides all members of the Board with monthly updates on Company s performance, positions and prospects. The Directors were not aware of any material uncertainties relating to events or conditions which may cast significant doubt upon the Group s ability to continue as a going concern. The statement by the Auditor regarding their reporting responsibilities on the consolidated financial statements of the Company is set out in the Independent Auditor s Report on pages 80 to 82 of this annual report. INTERNAL CONTROL AND RISK MANAGEMENT The Board acknowledges that it is the responsibility of the Board for maintaining an adequate risk management and internal control systems to safeguard shareholder investments and Company assets and reviewing the effectiveness of such systems on an annual basis. The Group has established a comprehensive risk management and internal control system, and devoted significant attention to internal control measures of its pharmaceutical manufacturing, pharmaceutical distribution and pharmaceutical retail businesses. It has adopted stringent internal control measures and operating procedures to regulate all stages of its pharmaceutical value chain, from research and development to manufacturing, distribution and retail. The Group s internal control system is designed according to relevant industrial and management standards, including the GMP and GSP requirements. The Group fully implements the procedures for periodic internal control audit, internal risk management, and error correction and prevention. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 47

企業管治報告 Corporate Governance Report 核數師酬金 With respect to dissemination of inside information, the Company has adopted its Information Disclosure Policy setting out the procedures of proper information disclosure. Release of inside information shall be led by the Board. Unless duly authorized, all staff members of the Company shall not disseminate inside information relating to the Group to any external parties and shall not respond to media report or market speculation which may materially affect the trading price or volume of the Shares. The Group s internal audit department plays a major role in monitoring the internal governance of the Company. The major tasks of the internal audit department include reviewing the financial condition, risk management and internal control of the Group and conducting comprehensive audits of all subsidiaries of the Company on a regular basis. The internal audit department is required to report to the Audit Committee and the Board in relation to its review of the Group s risk management and internal control system annually, and if there is any material deficiency, such issue has to be reported in a timely manner. Through the Audit Committee, the Board has conducted an annual review of the effectiveness of the Group s risk management and internal control systems and considered the systems to be effective and adequate. The Audit Committee has also assessed whether the Group s internal audit department is adequately resourced and reviewed its effectiveness. AUDITOR S REMUNERATION The remuneration for the audit and non-audit services provided by the Auditor to the Group during the year ended 31 December 2016 was approximately as follows: 金額 ( 港元 ) 服務類別 Type of Services Amount (HK$) Audit services 16,138,000 Non-audit services 1,058,000 Total 17,196,000 48 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report 公司秘書 67 15 與股東的溝通及投資者關係 http://www.crpharm.com COMPANY SECRETARY The Company Secretary, Mr. LO Chi Lik Peter, is a practicing solicitor in Hong Kong. Mr. LO, aged 67, was appointed as the Company Secretary on 20 May 2016. He was qualified as a solicitor in Hong Kong in 1976 and has been in continuous practice since qualification. He is currently a partner of Messrs. Woo, Kwan, Lee & Lo. Although Mr. LO is not a full time employee of the Company, he reports to the Board and in his capacity as Company Secretary advises the Board on governance matters. The primary contact person of the Company with Mr. LO is Mr. LI Guohui, the executive Director, chief financial officer and vice president of the Company. Mr. LO confirmed that he had fulfilled the 15 hours of Continuing Professional Development training requirement of a solicitor of Hong Kong in respect of 2016. COMMUNICATION WITH SHAREHOLDERS AND INVESTOR RELATIONS The Company considers that effective communication with the Shareholders is essential for enhancing investor relations and understanding of the Group s business, performance and strategies. The Company also recognizes the importance of timely and non-selective disclosure of information, which will enable Shareholders and investors to make the informed investment decisions. The AGMs provide opportunity for the Shareholders to communicate directly with the Directors. The Chairman of the Company and the chairmen of the Board Committees will normally attend the AGMs to answer Shareholders questions. The Auditor will also be invited to attend the AGMs to answer questions about the conduct of the audit, the preparation and content of the auditor s report, the accounting policies and auditor s independence. To promote effective communication, the Company adopts a Shareholders communication policy which aims at establishing a two-way relationship and communication between the Company and the Shareholders and maintains a website of the Company at http://www.crpharm.com, where up-to-date information on the Group s business operations and developments, financial information, corporate governance practices and other information are available for public access. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 49

企業管治報告 Corporate Governance Report 股東權利召開股東特別大會及於股東大會上提呈建議 566 5% (a) (b) (a) crpharm-ir@crpharm. com(b) 567 566 21 28 615 (a) 2.5% (b)50 (a) crpharmir@crpharm.com (b) (c) (d)(i) (ii) 616 615 (a) (b) SHAREHOLDERS RIGHTS All resolutions put forward at general meetings will be voted by poll pursuant to the Listing Rules, and the poll results will be posted on the websites of the Company and the Stock Exchange in a timely manner after each general meeting. Convening of extraordinary general meeting and putting forward proposals at the general meetings In accordance with Section 566 of the Companies Ordinance, the Directors are required to call a general meeting if the Company has received requests to do so from members of the Company representing at least 5% of the total voting rights of all the members having a right to vote at general meeting. Such requests (a) must state the general nature of the business to be dealt with at the meeting; and (b) may include the text of a resolution that may properly be moved and is intended to be moved at the meeting. Such requests (a) may be sent to the Company in hard copy form (by depositing at the registered office of the Company for the attention of the Board) or in electronic form (by email: crpharm.ir@crpharm.com); and (b) must be authenticated by the person or persons making it. In accordance with Section 567 of the Companies Ordinance, the directors must call a meeting within 21 days after the date on which they become subject to the requirement under Section 566 of the Companies Ordinance and such meeting must be held on a date not more than 28 days after the date of the notice convening the meeting. Besides, Section 615 of the Companies Ordinance provides that members may request the Company to give, to the members who are entitled to attend the AGM, notice of a resolution that may properly be moved and is intended to be moved at its annual general meeting. The Company must give such notice of resolution if it has received requests that it do so from (a) the members of the Company representing at least 2.5% of the total voting rights of all the members who have a right to vote on the resolution at the annual general meeting to which the requests relate; or (b) at least 50 members who have a right to vote on the resolution at the annual general meeting to which the requests relate. Such requests (a) may be sent to the Company in hard copy form (by depositing at the registered office of the Company for the attention of the Board) or in electronic form (by email: crpharm-ir@crpharm.com); (b) must identify the resolution of which notice is to be given; (c) must be authenticated by the person or persons making it; and (d) must be received by the Company not later than (i) six weeks before the annual general meeting to which the requests relate; or (ii) if later, the time at which notice is given of that meeting. Section 616 of the Companies Ordinance provides that the Company that is required under Section 615 of the Companies Ordinance to give notice of a resolution must send a copy of it at the Company s own expense to each member of the Company entitled to receive notice of the annual general meeting (a) in the same manner as the notice of the meeting; and (b) at the same time as, or as soon as reasonably practicable after, it gives notice of the meeting. 50 2016 年年報 Annual Report 2016

企業管治報告 Corporate Governance Report 股東提名候選董事的程序 90 1 2 2 7 7 (1) (2) (3) 13.51(2) (4) 向董事會提出查詢 26 41 4104 05 crpharm-ir@crpharm.com 852-2593 8991 183 22 2861 1465 Procedure for Shareholders to nominate a person for election as a Director Article 90 of the Articles of Association provides that the Company may from time to time in general meeting by ordinary resolution elect any person to be a Director either to fill a casual vacancy or as an addition to the Board; no person, other than a retiring Director or a person recommended by the Board, shall be eligible for election to the office of Director at any general meeting, unless notice in writing from a shareholder of his intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected as a Director shall have been lodged with the registered office of the Company; unless otherwise determined by the Directors and notified by the Company to the Shareholders, the period for lodgement of the notices referred to in paragraph (2) of this Article shall commence on a day after the dispatch of the notice of the meeting designated for such election of Director(s). If the Directors should so determine and notify the Shareholders of a different period for lodgement of the said notice referred to in paragraph (2) of this Article, such period shall in any event be a period of not less than seven days, commencing no earlier than the day after the dispatch of the said notice of the meeting and ending no later than seven days prior to the date of such meeting. Accordingly, if a Shareholder wishes to nominate a person to stand for election as a Director at the general meeting, the following documents must be validly served at the registered office of the Company, namely (1) his/her notice of intention to propose a resolution at the general meeting; (2) a notice signed by the nominated candidate of his/her willingness to be elected; (3) the nominated candidate s information as required to be disclosed under Rule 13.51(2) of the Listing Rules; and (4) the nominated candidate s written consent to the publication of his/her personal data. The aforesaid procedures are available on the website of the Company. Enquiries to the Board Shareholders may at any time send their enquiries and concerns to the Board by addressing them to the Investor Relations Department of the Company. The contact details are as follows: Investor Relations Department China Resources Pharmaceutical Group Limited Room 4104 05, 41/F, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong Email: crpharm-ir@crpharm.com Tel No.: 852-2593 8991 Shareholders should direct their questions about their shareholding to the Company s Share Registrar, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong or fax number: 2861 1465. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 51

企業管治報告 Corporate Governance Report 章程文件的更改 CHANGE IN CONSTITUTIONAL DOCUMENTS The amended Articles of Association have been adopted on 20 June 2016 and have taken effect from 14 October 2016. 52 2016 年年報 Annual Report 2016

董事及高級管理人員簡歷 Biographies Directors and Senior Management 董事傅育寧先生 60 0144 C31 600036 03968 0494 Directors Mr. FU Yuning Chairman of the Board, non-executive Director Mr. FU Yuning, aged 60, was appointed as the chairman of the Board and a Director in December 2014 and designated as a non-executive Director in June 2016. Mr. FU also serves as the chairman of CR Holdings, a member of the 12th session of the Chinese People s Political Consultative Conference, a member and vice chairman of APEC China Business Council, the honorary chairman of the Hong Kong Chinese Enterprises Association and a member of the General Committee of the Hong Kong General Chamber of Commerce. He served as the chairman of China Merchants Port Holdings Company Limited (formerly known as China Merchants Holdings (International) Company Limited), a company listed on the Stock Exchange (stock code: 0144), an independent non-executive director of CapitaLand Limited, a company listed on the Singapore Exchange Limited (stock code: C31), the chairman of China Merchants Group Limited, the chairman of China Merchants Bank Co., Ltd., a company listed on the Shanghai Stock Exchange (stock code: 600036) and the Stock Exchange (stock code: 03968) and an independent non-executive director of Li & Fung Limited, a company listed on the Stock Exchange (stock code: 0494). Mr. FU holds a doctorate degree from Brunel University in the United Kingdom. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 53

董事及高級管理人員簡歷 Biographies Directors and Senior Management 王春城先生 54 (IFPW) 宋清先生 51 Mr. WANG Chuncheng Executive Director Chief Executive Officer, President Mr. WANG Chuncheng, aged 54, was appointed as a Director in December 2014, designated as an executive Director in June 2016 and appointed as the chief executive officer and the president in June 2016. Mr. WANG also serves as an assistant general manager of CR Holdings, the chairman of CR Pharmaceutical Holdings Company Limited, the chairman of CR Pharmaceutical Commercial, the chairman of CR Sanjiu, the chairman of CR Double-Crane, the chairman of Dong-E-E-Jiao, a vice chairman of Chinese Pharmaceutical Enterprises Association, and a director of the board of the International Federation of Pharmaceutical Wholesalers (IFPW). Mr. WANG has over 20 years of experience in corporate management. He served as a deputy director of the department of human resources of the Ministry of Foreign Trade and Economic Cooperation (currently known as Ministry of Commerce), a general manager of the human resources department and an assistant general manager of China Resources National Corporation, a general manager of the standing board office of CR Holdings, the chairman of Teck Soon Hong Limited, and the chairman of China Resources Textiles Holdings Co Ltd. (() ). Mr. WANG holds a bachelor s degree in economics from Jilin Institute of Finance and Trade (currently known as Jilin University of Finance and Economics) in Changchun, the PRC. Mr. SONG Qing Executive Director Mr. SONG Qing, aged 51, was appointed as a Director in May 2016 and designated as an executive Director in June 2016. Mr. SONG also serves as a director and the president of CR Sanjiu. Mr. SONG has over 30 years of experience in the pharmaceutical industry and corporate management. He served as an inspection pharmacist of quality inspection department, a pharmacist in charge and the director of production department, the director of the enterprise management department and an assistant to president of Shenzhen South Pharmaceutical Factory (the predecessor of CR Sanjiu), the general manager and chairman of Shanxi Sanjiu Tongda Pharmaceutical Company Limited (currently known as Shanxi Tongda Pharmaceutical Company Limited ). Mr. SONG served as an assistant to general manager, the director of technology center, the director of medical & pharmaceutical department of Sanjiu Enterprise. Mr. SONG obtained his chief pharmacist title from the general logistics department of the People s Liberation Army in April 1996. Mr. SONG holds a bachelor s degree in Chinese medicine from Anhui University of Traditional Chinese Medicine in Hefei, the PRC. 54 2016 年年報 Annual Report 2016

董事及高級管理人員簡歷 Biographies Directors and Senior Management 李國輝先生 45 陳荣先生 44 291 Mr. LI Guohui Executive Director Chief Financial Officer, Vice President Mr. LI Guohui, aged 45, was appointed as a Director in March 2016 and designated as an executive Director in June 2016. Mr. LI also serves as the chief financial officer and vice president of our Company, a director of CR Double- Crane, a director of Dong-E-E-Jiao and a supervisor of CR Sanjiu. Mr. LI has over 10 years of experience in financial and business analysis and financial management. Mr. LI joined CR Holdings in 2009 and served as the chief accounting officer of the finance department from September 2011. Mr. LI obtained a bachelor s degree in shipbuilding techniques and equipment from the Faculty of Naval Architecture and Ocean Engineering of Wuhan Institute of Water Transportation Engineering (currently known as Wuhan University of Technology) in Wuhan, the PRC. He holds a master s degree in business administration from Wuhan University, the PRC and a master s degree in financial management from Nanyang Technological University in Singapore. Mr. LI is a CFA charter holder and a certified accountant of the Institute of Certified Public Accountant of Singapore. Mr. CHEN Rong Non-executive Director Mr. CHEN Rong, aged 44, was appointed as General Manager of the Finance Department of CR Holdings in February 2016. Mr. CHEN was appointed as non-executive director of China Resources Beer (Holdings) Company Limited (formerly known as China Resources Enterprise, Limited), a company listed on the Stock Exchange (stock code: 291) in April 2016 and a Director in May 2016 and designated as a non-executive Director in June 2016. Mr. CHEN has previously worked in Epson Technical Limited, Walmart China Investment Limited and Fuji Electric Technical Services Limited. Mr. CHEN joined CR Holdings in May 2007, he was the head of tax management of the Finance Department of CR Holdings and deputy general manager and chief financial officer of China Resources Vanguard Company Limited. Mr. CHEN holds MBA degree from Xi an Jiaotong University. He is an Intermediate Accountant and a Certified Tax Agent in China. He is also a nonpracticing member of the Chinese Institute of Certified Public Accountants. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 55

董事及高級管理人員簡歷 Biographies Directors and Senior Management 余忠良先生 52 1313 王晨陽先生 47 600862 6066 Mr. YU Zhongliang Non-executive Director Mr. YU Zhongliang, aged 52, was appointed as a non-executive Director in June 2016. Mr. YU also serves as a senior deputy general manager of the strategy management department of CR Holdings. Mr. YU has over 20 years of experience in investment, business analysis and strategic development. Mr. YU was successively the strategic development controller, an executive director and a vice chairman of China Resources Cement Holdings Limited, a company listed on the Stock Exchange (stock code: 1313). Mr. YU holds an MBA degree of York University in Toronto, Canada. Mr. WANG Chenyang Non-executive Director Mr. WANG Chenyang, aged 47, was appointed as a Director in June 2015 and designated as a non-executive Director in June 2016. Mr. WANG also serves as a deputy general manager of the BSCOMC, a director of Avic Aviation High- Technology Co. Ltd., a company listed on Shanghai Stock Exchange (stock code: 600862), and a non-executive director of CSC Financial Co., Ltd., a company listed on the Stock Exchange (stock code: 6066). Mr. WANG has over 10 years of experience in management. He served as a senior staff member and an assistant consultant of the Division for Management of Officials of Publicity, Education, Political-Legal Affairs of the Organization Department of Beijing Municipal Committee of the Communist Party of China, a division-level cadre of the General Office of Beijing Municipal Committee and a deputy bureau-level cadre of the General Office of Beijing Municipal Government. Mr. WANG obtained a bachelor s degree in Chinese language and literature from University of International Relations in Beijing and a master of arts degree in journalism from Renmin University of China. 56 2016 年年報 Annual Report 2016

董事及高級管理人員簡歷 Biographies Directors and Senior Management 王京女士 45 000725 A 200725 B 1958 6066 Ms. WANG Jing Non-executive Director Ms. WANG Jing, aged 45, was appointed as a non-executive Director in June 2016. Ms. WANG also serves as a deputy general manager of the BSCOMC, a director of BOE Technology Group Co. Ltd., a company listed on Shenzhen Stock Exchange (stock code: 000725 (A share), 200725 (B share)), a non-executive director of BAIC Motor Corporation Ltd., a company listed on the Stock Exchange (stock code: 1958), and a supervisor of CSC Financial Co., Ltd., a company listed on the Stock Exchange (stock code: 6066). Ms. WANG has over 10 years of experience in investment and management. She served as a manager of the enterprise management department of Beijing Enterprise Holdings Investment Management Co. Ltd., a deputy general manager of Beijing Holdings Investment Management Center and held various positions in Beijing Holdings Ltd., including a manager of the enterprise operation and management department and an assistant to general manager, and the chairman and general manager of Beijing Inland Port International Logistics Co. Ltd.. Ms. WANG obtained the qualification of senior economist issued by Senior Professional Qualification Appraisal Board of Beijing in September 2005 and the qualification of corporate legal advisor issued by the Ministry of Human Resources and Social Security of the PRC, the SASAC and the Ministry of Justice in October 2008. Ms. WANG obtained a bachelor of economics degree in finance from Beijing Institute of Finance and Trade (currently known as Capital University of Economics and Business), a master of law degree in economic law from Renmin University of China and a master s degree in business administration from Murdoch University in Perth, Australia. 曾慶麟先生 67 601866 2866 3377 0368 1316 1101 Mr. TSANG Hing Lun Independent non-executive Directors Mr. TSANG Hing Lun, aged 67, was appointed as an independent nonexecutive Director in June 2016. He is also the chairman of the Audit Committee. Mr. TSANG also serves as an independent non-executive director of COSCO SHIPPING Development Co., Ltd., a company listed on the Shanghai Stock Exchange (stock code: 601866) and the Stock Exchange (stock code: 2866), Sino-Ocean Group Holding Limited, a company listed on the Stock Exchange (stock code: 3377), Sinotrans Shipping Limited, a company listed on the Stock Exchange (stock code: 0368), Nexteer Automotive Group Limited, a company listed on the Stock Exchange (stock code: 1316), a director of Global Management Limited and a member of the Hong Kong Independent Non- Executive Director Association. Mr. TSANG has over 30 years of experience in financial accounting, finance and corporate management. He was an assistant general manager of the planning and development department of Hang Seng Bank Limited, an executive director of the Stock Exchange, and a deputy general manager and an alternate Chief Executive of China Construction Bank, Hong Kong Branch. Mr. TSANG served as an independent non-executive director of China Rongsheng Heavy Industries Group Holdings Limited (currently known as China Huarong Energy Company Limited, a company listed on the Stock Exchange (stock code: 1101)) from October 2010 to May 2014. Mr. TSANG obtained a bachelor s degree in business administration from the Chinese University of Hong Kong and is a fellow member of the Association of Certified Accountants and the Hong Kong Institute of Certified Public Accountants. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 57

董事及高級管理人員簡歷 Biographies Directors and Senior Management 郭鍵勳先生 67 2013 2022 傅廷美先生 50 0906 0392 1788 1658 1610 Mr. KWOK Kin Fun Independent non-executive Director Mr. KWOK Kin Fun, aged 67, was appointed as an independent non-executive Director in June 2016. Mr. KWOK also serves as an Executive Committee member of Rehabilitation International and global Vice Chairman of Social Commission of Rehabilitation International, the chairman of Incheon Strategy Group Committee of Asia and Pacific Disability Forum, a vice chairman of The Hong Kong Joint Council for People with Disabilities, a vice chairman of The Hong Kong Society for Rehabilitation, the chairman of Fu Hong Society, a member of Ethics Research Committee of Hospital Authority Kowloon Central and Kowloon East Clusters, a member of Voting Members Committee of Riding For the Disabled Association, the chairman of Accessible IT Development Association Limited. Mr. KWOK has over 30 years of experience in disability research and medical research ethics. He successively served as a senior lecturer, a principal lecturer, a university senior lecturer and an associate professor of the City University of Hong Kong from 1985 to 2009, and after retirement served as full-time and part-time senior research fellow. Mr. KWOK was appointed as a Justice of the Peace (JP) by the government of Hong Kong in 1997 and received the Bronze Bauhinia Star awarded by the government of Hong Kong SAR in 2005, Kazuo Itoga Memorial Prize awarded by the government of Shiga Prefecture, Japan in 2006, and the Promoter title of Asian and Pacific Decade of Persons with Disabilities, 2013 2022 awarded by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) in 2012. Mr. KWOK holds a bachelor s degree in social science from the University of Hong Kong, a master s degree in social science from the Chinese University of Hong Kong, and a Ph.D. degree from the University of Nottingham, the UK. Mr. FU Tingmei Independent non-executive Director Mr. FU Tingmei, aged 50, was appointed as an independent non-executive Director in June 2016. Mr. FU has over 20 years of experience in investment, finance, law and business management. Mr. FU currently serves as an independent non-executive director of CPMC Holdings Limited, a company listed on the Stock Exchange (stock code: 0906), Beijing Enterprises Holdings Limited, a company listed on the Stock Exchange (stock code: 0392), Guotai Junan International Holdings Limited, a company listed on the Stock Exchange (stock code: 1788), Postal Savings Bank of China Co., Ltd., a company listed on the Stock Exchange (stock code: 1658) and COFCO Meat Holdings Limited, a company listed on the Stock Exchange (stock code: 1610). Mr. FU holds a master s degree in law and a Ph.D. degree in law from London University, the United Kingdom. 58 2016 年年報 Annual Report 2016

董事及高級管理人員簡歷 Biographies Directors and Senior Management 張克堅先生 60 002019 高級管理人員李向明先生 52 Mr. ZHANG Kejian Independent non-executive Director Mr. ZHANG Kejian, aged 60, was appointed as an independent non-executive Director in June 2016. Mr. ZHANG also serves as an independent director of Yifan Pharmaceutical Co., Ltd. (a company listed on Shenzhen Stock Exchange, stock code: 002019), an independent director of CR Double-Crane and the Chief Scientist of The South China Center for Innovative Pharmaceuticals. Mr. ZHANG has over 20 years of experience in the pharmaceutical industry of PRC. He was employed as a professor of School of Pharmaceutical Sciences of Sun Yat-sen University and the director (Pharmacy Administration) of The South China Center for Innovative Pharmaceuticals, a researcher at the Institute of Medicine, Chinese Academy of Medical Sciences, and successively served as a deputy director of Pharmaceutical Evaluation Center and a deputy director of Medical Device Evaluation Center under the State Food and Drug Administration of the PRC. Mr. ZHANG received a master s degree in pathophysiology from China Medical University in Shenyang, the PRC and a doctor s degree in pharmacy from the School of Pharmaceutical Sciences of Chiba University in Chiba, Japan. Senior Management Mr. LI Xiangming Mr. LI Xiangming, aged 52, was appointed as a standing vice president of our Company in January 2016. Currently, Mr. LI also holds various positions in our Group, including the general manager of CR Pharmaceutical Commercial, the chairman of China Resources Henan Pharmaceutical Co., Ltd., the chairman of CR Shandong Pharmaceutical Co., Ltd., the chairman of CR Guangdong Pharmaceutical Co., Ltd. etc., a vice president of China Association of Pharmaceutical Commerce, a vice president of Beijing Logistics Association, a member of Beijing Pharmaceutical Association and a vice president of China National Narcotic Drugs Association. Mr. LI has been a deputy general manager of Beijing Pharmaceutical Economic and Technological Management Company, the general manager of Beijing Pharmaceutical Co., Ltd. (currently known as CR Pharmaceutical Commercial), the president of CR Pharmaceutical Commercial and the senior vice president of our Company. Mr. LI is a traditional Chinese pharmacist. He obtained an EMBA degree from University of International Business and Economics in Beijing, the PRC. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 59

董事及高級管理人員簡歷 Biographies Directors and Senior Management 李昕先生 59 000597 秦玉峰先生 59 MBA 4 Mr. LI Xin Mr. LI Xin, aged 59, was appointed as the president of Beijing Double-Crane Pharmaceutical Co., Ltd. (currently known as CR Double-Crane) in January 2005. Currently, Mr. LI also serves as a director of CR Double-Crane, an executive director of Beijing Double-Crane Pharmaceutical Business Co., Ltd. and the chairman of the board of directors of Beijing Double-Crane Pharmaceutical Marketing Co., Ltd.. Mr. LI has served as a deputy factory manager of Shenyang No.1 Pharmaceutical Factory (currently known as Northeast Pharmaceutical Group Shenyang No.1 Pharmaceutical Co., Ltd.), a deputy general manager of Northeast Pharmaceutical Group Co., Ltd., (a company listed on the Shenzhen Stock Exchange, stock code: 000597) and a standing deputy general manager of Beijing Pharmaceutical. Mr. LI was awarded a special government allowance by the State Council. Mr. LI obtained the qualification of a researcher-level senior engineer and a bachelor of science degree in antibiotics production from Shenyang Pharmaceutical College (currently known as Shenyang Pharmaceutical University) in Shenyang, the PRC. Mr. QIN Yufeng Mr. QIN Yufeng, aged 59, was appointed as the president of Dong-E-E-Jiao in September 2011. Currently, Mr. QIN also serves as a director of Dong-E-E-Jiao, an MBA practice tutor of Communication University of China and a guest professor of Nanjing University of Chinese Medicine. Mr. QIN has served as an assistant to the factory manager in Shandong Dong-E-E-Jiao Factory (currently known as Dong-E-E-Jiao) and a standing vice president of Shandong Dong-E-E- Jiao Co., Ltd. (currently known as Dong-E-E-Jiao). Mr. QIN has four national patents. Mr. QIN was awarded a Special government allowances of the State Council. He was awarded titles of Representative Inheritors of Dong e Donkey-Hide Gelatin s Production Techniques, a National Intangible Cultural Heritage, National Outstanding Entrepreneur, 2015 China Outstanding Quality People, Model Worker in Shandong Province and Top Ten Outstanding Engineers in Shandong Province. He was also awarded prizes like the First Class Prize for Progress of Science and Technology of Shandong Province and National May Day Labor Medal. Mr. QIN obtained the qualification of engineering technology application researcher in China and he obtained an EMBA degree from China Europe International Business School in Shanghai, the PRC. 60 2016 年年報 Annual Report 2016

董事及高級管理人員簡歷 Biographies Directors and Senior Management 吳峻先生 54 陳宏先生 56 馮毅先生 55 Mr. WU Jun Mr. WU Jun, aged 54, was appointed as a senior vice president of our Company in December 2013. Currently, Mr. WU also serves as a director of CR Sanjiu, a director of Dong-E-E-Jiao, a supervisor of CR Double-Crane, a vice president of China Nonprescription Medicines Association. Mr. WU has been a director and the general manager of China Resources Machinery and Minmetals (Holdings) Co., Ltd., a deputy general manager in the enterprise development department of CR Holdings, a director and deputy general manager of CR Investment & Development Company Limited, a deputy general manager in the internal audit department of CR Holdings and a vice president of our Company. Mr. WU obtained the qualification of senior engineer in China and he obtained an MBA degree from University of San Francisco in San Francisco, the United States of America. Mr. CHEN Hong Mr. CHEN Hong, aged 56, was appointed as a senior vice president of our Company in December 2013. Mr. CHEN has been a deputy factory manager of Beijing Second Pharmaceutical Factory, currently known as China Resources Saike Pharmaceutical Co., Ltd., the chairman of Beijing Saike Pharmaceutical Co., Ltd., currently known as China Resources Saike Pharmaceutical Co., Ltd., a vice general manager of Beijing Pharmaceutical Co., Ltd. and the vice president of our Company. Mr. CHEN was awarded prizes like Capital May Day Labor Medal, Model Workers in Beijing and National May Day Labor Medal. Mr. CHEN obtained the qualification of assistant engineer in China and he attended undergraduate class majoring in economic management in the Party School of Beijing Municipal Committee of the CPC. Mr. FENG Yi Mr. FENG Yi, aged 55, was appointed as a senior vice president of our Company in December 2015. Currently, Mr. FENG also serves as a supervisor of Dong-E-E-Jiao. Mr. FENG has served as a deputy division researcher of the fifth division of the organization bureau, the division chief of the second division of training center of the organization department of the central committee of the CPC. He acted as a deputy general manager of human resource department of CR Holdings and served as a deputy general manager of China Resources Snow Breweries (Panjin) Co., Ltd.. Mr. FENG has acted as a deputy general manager of China Resources Land (Beijing) Co., Ltd., the chief human resources officer and senior vice president of China Resources Bank of Zhuhai Co., Ltd.. Mr. FENG obtained an EMBA degree from Peking University in Beijing, the PRC. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 61

董事及高級管理人員簡歷 Biographies Directors and Senior Management 方明先生 58 Mr. FANG Ming Mr. FANG Ming, aged 58, was appointed as a vice president of our Company in December 2007. Currently, Mr. FANG also serves as a supervisor of CR Double-Crane, a supervisor of CR Sanjiu and a supervisor of Dong-E-E-Jiao. Mr. FANG was an associate researcher at the Institute of Social China Academy of Social Sciences. Mr. FANG has served as a senior manager of the research department of CR Holdings, a deputy general manager of the enterprise development department of CR Holdings, a director and the deputy general manager of China Resources Development & Investment Company Limited, the executive manager in charge of listing planning of CRNC, a member of the management board and the general manager of capital operation department of CRNC. Mr. FANG obtained a doctor of law degree in applied sociology from the Graduate School of Chinese Academy of Social Sciences in Beijing, the PRC. 殷惠軍先生 45 Mr. YIN Huijun Mr. YIN Huijun, aged 45, was appointed as a vice president of our Company in August 2014. Currently, Mr. YIN also serves as the chairman of China Pharmaceutical R&D Center Co., Ltd., a deputy secretary-general of Medical and Health sector of All-China Youth Federation, a council member of China Association of Youth Science and Technology, a standing member of Special Committee on Cardiovascular under Doctor Society of Integrative Medicine, a Ph.D. tutor of China Academy of Chinese Medical Sciences, and a graduate student tutor of Gansu University of Chinese Medicine. Mr. YIN has served as the cardiovascular laboratory officer of Xiyuan Hospital under China Academy of Chinese Medical Sciences (the former China Academy of Traditional Chinese Medicine), a standing director of Specialty Committee of Cardiovascular Diseases of World Federation of Chinese Medicine Societies, a vice president of Affiliated Hospital of Gansu University of Chinese Medicine and the chief of international cooperation department of China Academy of Chinese Medical Sciences. Mr. YIN was awarded the Star of Science and Technology by TCM Society and the Second Class Prize for Progress of National Science and Technology. Mr. YIN obtained the qualification of researcher issued by China Academy of Chinese Medical Sciences. Mr. YIN obtained a doctor s degree in Chinese internal medicine from Heilongjiang College of Chinese Medicine (currently known as Heilongjiang University of Chinese Medicine ) in Harbin, the PRC. Mr. YIN conducted his postdoctoral research in Institute of Genetics and Developmental Biology, Chinese Academy of Sciences. 62 2016 年年報 Annual Report 2016

董事及高級管理人員簡歷 Biographies Directors and Senior Management 孟慶勝先生 48 IT IT SSA (Oracle) 唐娜女士 40 靳松先生 41 趙炳祥先生 44 Mr. MENG Qingsheng Mr. MENG Qingsheng, aged 48, was appointed as a vice president of our Company in October 2016. Mr. MENG has engaged in the Information Technology (IT) consultancy and management business for over 20 years. Mr. MENG has extensive experience in areas like corporate IT strategic planning, system structural design, project management and the training of professional personnel. Mr. MENG successively held positions in SSA China Co., Ltd., Platinum China Co., Ltd. and Oracle China Co., Ltd.. Mr. MENG has also acted as a deputy director of the Information Management Department of CR Holdings. Ms. TANG Na Ms. TANG Na, aged 40, was appointed as the chief legal advisor of our Company in March 2014. Ms. TANG served as a partner of Concord & Partners and a director of legal affairs of CR Pharmaceutical Commercial. Ms. TANG obtained the qualification of PRC lawyer and the corporate counsel qualification. Ms. TANG obtained a bachelor of law degree from China University of Political Science and Law in Beijing, the PRC and attended postgraduate courses majoring in urban economics in the School of Economics at Renmin University of China in Beijing, the PRC. Mr. JIN Song Mr. JIN Song, aged 41, was appointed as an assistant president of our Company in June 2016. Mr. JIN served as a division-level consultant at the SFDA (currently known as the CFDA). Mr. JIN obtained a master s degree in international cooperation policy from Ritsumeikan University in Kyoto, Japan. Mr. ZHAO Bingxiang Mr. ZHAO Bingxiang, aged 44, was appointed as an assistant president of our Company and the chairman of China Resources Zizhu Pharmaceutical Co., Ltd. in September 2016. Mr. ZHAO has served as a marketing officer of San-jiu Pharmaceutical trade Co., Ltd., a deputy general manager of San-jiu Tongda Pharmaceutical Co., Ltd., a senior researcher of the R&D center and the general manager of the Profit Center of CR Sanjiu. Mr. ZHAO obtained a master of Pharmaceutics degree from Peking University in Beijing, the PRC. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 63

董事會報告 Report of the Directors 全球發售主要業務 22 業績 83 末期股息 0.09 暫停股份過戶登記手續 183 22 183 22 The Board is pleased to present its report together with the audited consolidated financial statements of the Group for the year ended 31 December 2016. GLOBAL OFFERING The Company was incorporated with limited liability in Hong Kong on 10 May 2007. The Shares were listed on the Stock Exchange on 28 October 2016. PRINCIPAL ACTIVITIES The Company is an investment holding company. The Group is principally engaged in the manufacturing, distribution and retail of pharmaceutical and healthcare products. Analysis of the principal activities of the Group during the year ended 31 December 2016 is set out in the note 22 to the consolidated financial statements. RESULTS The results of the Group for the year ended 31 December 2016 are set out in the consolidated statement of profit or loss and other comprehensive income on page 83 of this annual report. FINAL DIVIDENDS The Board recommended the payment of a final dividend of HK$0.09 per Share for the year ended 31 December 2016 (2015: Nil). Such final dividend will not be subject to any withholding tax in Hong Kong. The final dividend is subject to the approval of the Shareholders at the forthcoming AGM to be held on 19 May 2017 and the final dividend will be distributed on or about 9 June 2017 to the Shareholders whose names appear on the register of members of the Company on 26 May 2017. CLOSURE OF REGISTER OF MEMBERS The register of members of the Company will be closed from 15 May 2017 to 19 May 2017, both days inclusive, in order to determine the identity of the Shareholders who are entitled to attend the AGM, during which period no share transfers will be registered. To be eligible to attend the AGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged for registration with the Company s share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong not later than 4:30 p.m. on 12 May 2017. The register of members of the Company will also be closed on 26 May 2017, in order to determine the entitlement of the Shareholders to receive the final dividend, during which no share transfers will be registered. To qualify for the final dividend, all properly completed transfer forms accompanied by the relevant share certificates must be lodged for registration with the Company s share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong not later than 4:30 p.m. on 25 May 2017. 64 2016 年年報 Annual Report 2016

董事會報告 Report of the Directors 業務審視財務摘要 18 上市所得款項用途 3233 BUSINESS REVIEW A review of the Company s business, a discussion and analysis of the Group s performance during the year, the principal risks and uncertainties facing the Group, the material factors underlying its results and financial position, certain important events occurred since the end of the Reporting Period and the future development of the Company s business have been set out in the Management Discussion and Analysis of this annual report. The Group shall comply with the relevant provisions governing environmental protection and appraisal of environmental impact, as well as national and provincial standards of environmental quality established by various government authorities. The Group has carried out the relevant environmental impact assessments and has obtained all the required permits and environmental approvals for its manufacturing facilities. To ensure compliance with relevant laws, rules and regulations on pollution control, the Group has also established waste water treatment and waste management facilities at its pharmaceutical manufacturing sites. To the best knowledge and information of the Company, the Group has complied with the relevant laws, regulations and other applicable requirements that have a significant impact on the Group during the Reporting Period. The Group recognizes the importance of good governance to its sustainable growth and strives to maintain effective communication with its stakeholders, including its Shareholders, investors, employees, customers and suppliers. In addition to the above, general information regarding the Group s performance on environmental and social-related policies, as well as compliance with relevant laws and regulations which have a significant impact on the Group and an account of the Company s relationships with its key stakeholders are discussed throughout this annual report. Further details will be also disclosed in the Company s Corporate Social Responsibility Report 2016 to be published within three months from the date of this annual report. FINANCIAL HIGHLIGHTS A summary of the Group s results, assets and liabilities for the last four financial years is set out on page 18 of this annual report. This summary does not form part of the audited consolidated financial statements. USE OF NET PROCEEDS FROM LISTING For details of the use of net proceeds from the Listing, please refer to pages 32 to 33 of this annual report. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 65

董事會報告 Report of the Directors 主要客戶及供應商主要客戶 5.6% 4.4% 1.3% 1.1% 主要供應商 12.9% 21.0% 5.7% 7.6% 5% 物業廠房及設備 17 股本 34 儲備 4386 87 可供分派儲備 885.4 銀行貸款及其他借款 30 The Company does not have any intention to change the purposes of the IPO proceeds as set out in the Prospectus, and will gradually utilize the residual amount of the IPO proceeds in accordance with the intended purposes. MAJOR CUSTOMERS AND SUPPLIERS Major Customers For the year ended 31 December 2016, the Group s sales to its five largest customers accounted for 5.6% (2015: 4.4%) of the Group s total revenue and our single largest customer accounted for 1.3% (2015: 1.1%) of the Group s total revenue. Major Suppliers For the year ended 31 December 2016, the Group s five largest suppliers accounted for 12.9% (2015: 21.0%) of the Group s total purchases and our single largest supplier accounted for 5.7% (2015: 7.6%) of the Group s total purchases. During the Reporting Period, none of the Directors or any of their close associates or any Shareholders (which, to the best knowledge of the Directors, own more than 5% of the number of issued Shares) had any interest in the Group s five largest customers and suppliers. PROPERTY, PLANT AND EQUIPMENT Details of movements in the property, plant and equipment of the Group during the year ended 31 December 2016 are set out in note 17 to the consolidated financial statements. SHARE CAPITAL Details of movements in the share capital of the Company during the year are set out in note 34 to the consolidated financial statements. RESERVES Details of movements in the reserves of the Company and the Group during the Reporting Period are set out in note 43 to the consolidated financial statements and on pages 86 to 87 in the consolidated statement of changes in equity. DISTRIBUTABLE RESERVES As at 31 December 2016, the Company s reserves available for distribution, amounted to approximately HK$885.4 million. BANK LOANS AND OTHER BORROWINGS Particulars of bank loans and other borrowings of the Group as at 31 December 2016 are set out in note 30 to the consolidated financial statements. 66 2016 年年報 Annual Report 2016

董事會報告 Report of the Directors 董事主席及非執行董事 : 執行董事 : 非執行董事 : 獨立非執行董事 : 2016 3 29 2016 5 10 2016 6 20 88(1) 董事和高級管理人員 5363 DIRECTORS The Directors up to the date of this annual report are: Chairman and non-executive Director: Mr. FU Yuning Executive Directors: Mr. WANG Chuncheng Mr. SONG Qing 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 Note: Mr. LI Fuzuo resigned as a Director on 29 March 2016, Ms. CHEN Jisheng and Mr. WEI Bin resigned as Directors on 10 May 2016, and Mr. YIN Rongyan, Mr. WANG Shouye and Mr. CHEN Ying resigned as Directors on 20 June 2016. In accordance with article 88(1) of the Articles of Association, Mr. LI Guohui, Mr. CHEN Rong, Mr. YU Zhongliang and Ms. WANG Jing shall retire by rotation, and being eligible, have offered themselves for re-election at the AGM. Details of the Directors to be re-elected at the AGM are set out in the circular to the Shareholders dated 13 April 2017. DIRECTORS AND SENIOR MANAGEMENT Biographical details of the Directors and senior management of the Company are set out on pages 53 to 63 of this annual report. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 67

董事會報告 Report of the Directors 獨立非執行董事獨立性的確認 3.13 董事的服務合約董事於重大交易安排或合約的權益管理合約薪酬政策 12 退休及僱員福利計劃 44 CONFIRMATION OF INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS The Company has received an annual confirmation of independence pursuant to rule 3.13 of the Listing Rules from each of the independent non-executive Directors and the Company considers such Directors to be independent throughout the year ended 31 December 2016 and remain so as of the date of this annual report. DIRECTORS SERVICE CONTRACTS None of the Directors has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation). DIRECTORS INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS OF SIGNIFICANCE No Director or his/her connected entities had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance to the business of the Group to which the Company, its parent company or any of its subsidiaries or fellow subsidiaries was a party during the year ended 31 December 2016 and up to the date of this annual report. MANAGEMENT CONTRACTS No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the Reporting Period and up to the date of this annual report. EMOLUMENT POLICY The Remuneration Committee was set up for reviewing the Group s emolument policy and structure for all remuneration of the Directors and senior management of the Group, having regard to the Group s operating results, individual performance of the directors and senior management and comparable market practices. Details of the emoluments of the Directors, and five highest paid individuals during the Reporting Period are set out in note 12 to the consolidated financial statements. RETIREMENT AND EMPLOYEE BENEFITS SCHEME Details of the retirement and employee benefits scheme of the Group are set out in note 44 to the consolidated financial statements. 68 2016 年年報 Annual Report 2016

董事會報告 Report of the Directors 董事及最高行政人員於股份相關股份及債權證中擁有的權益及淡倉 XV XV 7 8 352 董事購買股份或債權證的權利 18 主要股東於股份及相關股份中的權益及淡倉 XV2 3 336 DIRECTORS AND CHIEF EXECUTIVE S INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES As at 31 December 2016, none of the Directors or the chief executive of the Company had or was deemed to have any interest or short position in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) that was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have taken under such provisions of the SFO), or required to be recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code. DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBENTURES Save as otherwise disclosed in this annual report, at no time during the Reporting Period was the Company, its parent company or any of its subsidiaries or fellow subsidiaries a party to any arrangement that would enable the Directors to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate, and none of the Directors or any of their spouses or children under the age of 18 were granted any right to subscribe for the equity or debt securities of the Company or any other body corporate or had exercised any such right. SUBSTANTIAL SHAREHOLDERS INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES As at 31 December 2016, to the best knowledge of the Directors, the following persons (not being a Director or chief executive of the Company) had interests or short positions in the Shares or underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO: 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 69

董事會報告 Report of the Directors 股東名稱 Name of Shareholder 身份權益性質 Capacity/Nature of Interest 所持有之股份數目 Number of Shares held 好倉淡倉 Long/ short position 佔本公司股權之概約百分比 Approximate Percentage of Shareholding in the Company (%) 1 3,333,185,612 53.04 China Resources National Corporation (1) Interest in controlled Long position corporation 1 3,333,185,612 53.04 China Resources Co., Limited (1) Interest in controlled Long position corporation CRC Bluesky Limited (1) 3,333,185,612 53.04 Interest in controlled Long position corporation 1 3,333,185,612 53.04 CR Holdings (1) Interest in controlled Long position corporation 1 3,333,185,612 53.04 CRH (Pharmaceutical) Limited (1) Beneficial owner Long position 2, 3 1,296,238,849 20.63 (2, 3) BSCOMC Interest in controlled Long position corporation 3 1,094,800,000 17.42 Beijing Pharmaceutical Holdings Limited (3) Interest in controlled Long position corporation 3 1,094,800,000 17.42 Beijing Pharmaceutical Investment Limited (3) Beneficial owner Long position (1) 3,333,185,612 CRC Bluesky Limited CRC Bluesky Limited CRC Bluesky Limited (1) CRH (Pharmaceutical) Limited ( CRH (Pharmaceutical) ) directly held 3,333,185,612 Shares. CRH (Pharmaceutical) is a wholly-owned subsidiary of CR Holdings. CR Holdings is a beneficially wholly-owned subsidiary of CRC Bluesky Limited, which is in turn wholly-owned by China Resources Co., Limited. China Resources Co., Limited is an ultimately beneficially wholly-owned subsidiary of China Resources National Corporation. By virtue of the SFO, each of China Resources National Corporation, China Resources Co., Limited, CRC Bluesky Limited and CR Holdings is deemed to have an interest in the Shares held by CRH (Pharmaceutical). 70 2016 年年報 Annual Report 2016

董事會報告 Report of the Directors (2) Beijing Equity Investment Development Fund (Cayman II) L.P. 201,438,849 5% (3) 1,094,800,000 XV2 3 336 購股權計劃股票掛鈎協議購買贖回或出售上市證券不競爭承諾 (2) By virtue of the SFO, BSCOMC is deemed to have an interest in the 201,438,849 Shares held by Beijing Equity Investment Development Fund (Cayman II) L.P., an exempted limited partnership registered in the Cayman Islands, by reason of a series of funds and corporate structures each of which, individually, is interested in less than 5% in the voting Shares. (3) Beijing Pharmaceutical Investment Limited ( Beijing Pharmaceutical Investment ) directly held 1,094,800,000 Shares. Beijing Pharmaceutical Investment is a wholly-owned subsidiary of Beijing Pharmaceutical Holdings Limited ( Beijing Pharmaceutical Holdings ), which is in turn wholly owned by BSCOMC. By virtue of the SFO, each of BSCOMC and Beijing Pharmaceutical Holdings is deemed to have an interest in the Shares held by Beijing Pharmaceutical Investment. Save as disclosed above, as at 31 December 2016, the Directors were not aware of any persons (who were not Directors or chief executive of the Company) who had an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or which would be required, pursuant to Section 336 of the SFO, to be entered in the register referred to therein. SHARE OPTION SCHEME As at the date of this annual report, the Company had not adopted any share option scheme or incentive scheme. EQUITY-LINKED AGREEMENTS No equity-linked agreements were entered into during the year or subsisted at the end of the year. PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES From the Listing Date to 31 December 2016, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company s listed securities. NON-COMPETITION UNDERTAKING For details of the non-competition undertaking given by CR Holdings, please refer to the Prospectus. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 71

董事會報告 Report of the Directors 董事於競爭業務的權益持續關連交易 DIRECTORS INTEREST IN COMPETING BUSINESS Save as disclosed in this annual report, as at 31 December 2016, none of the Directors or their respective associates had engaged in or had any interest in any business which competes or is likely to compete, either directly or indirectly, with the businesses of the Group. CONTINUING CONNECTED TRANSACTIONS The Group has entered into the following continuing connected transactions during the year ended 31 December 2016: 持續關連交易 Continuing Connected Transactions 涉及之關連人士 Connected Parties involved 性質 Nature 涉及之本集團實體 Group Entities involved 上市規則所容許的年度上限 Annual cap permitted under the Listing Rules 2016 年交易金額 Transaction amount in 2016 HK$million HK$million 1) 126.0 8.8 Procurement Framework Agreement (Note 1) CR Holdings Procurement of supplies and products China Resources Pharmaceutical Holdings Company Limited 1) 126.0 79.2 Procurement Framework Agreement (Note 1) CR Holdings Procurement of supplies and products China Resources Pien Tze Huang Pharmaceutical Company Limited 1) 13.1 13.1 Procurement Framework Agreement (Note 1) CR Holdings Procurement of services China Resources Pharmaceutical Retail Group Limited 2) 2,750 2,746 Strategic Cooperation China Resources Bank Maximum daily deposit The Company Agreements (Note 2) of Zhuhai Co., Ltd. amount placed 2) Strategic Cooperation China Resources SZITIC The Company N/A N/A Agreements (Note 2) Trust Co., Ltd. 72 2016 年年報 Annual Report 2016

董事會報告 Report of the Directors 1. 2016 9 14 2018 12 31 2. 2016 10 11 2016 10 11 14A.56 3000 740 14A.56 7782 Notes: 1. The Company have entered into a procurement framework agreement with CR Holdings on 14 September 2016 (the Procurement Framework Agreement ), pursuant to which our Group may from time to time purchase from CR Holdings and its subsidiaries various types of supplies and products which include raw materials, ingredients, apparel and software products (but excluding our procurement of gas supplies from China Resources Gas Group Limited and/or its subsidiaries), as well as services which include logistics services (but excluding the services which are covered under the Property Leasing Framework Agreement and the Construction, Decoration and Furniture Services Framework Agreement) in support of our business. The Procurement Framework Agreement has a term commencing from the Listing Date until 31 December 2018, subject to renewal by mutual consent and negotiation between the parties. 2. We have entered into a strategic cooperation agreement with China Resources Bank of Zhuhai Co., Ltd. ( ) ( CR Bank ) on 11 October 2016 (the CR Bank Strategic Cooperation Agreement ), pursuant to which our Group may use the deposit services and other financial services and products provided by CR Bank from time to time. The services and products will be provided by CR Bank on normal commercial terms which apply to its other independent customers. The CR Bank Strategic Cooperation Agreement has a term commencing from the Listing Date until the date of the first annual general meeting of our Company after the Listing, subject to renewal by the parties. We have also entered into a strategic cooperation agreement with China Resources SZITIC Trust Co., Ltd. ( ) ( CR Trust ) on 11 October 2016 (the CR Trust Strategic Cooperation Agreement, pursuant to which our Group may use the financial or trust services and products provided by CR Trust from time to time. The services and products will be provided by CR Trust on normal commercial terms which apply to its other independent customers. The CR Trust Strategic Cooperation Agreement has a term commencing from the Listing Date until the date of the first annual general meeting of our Company after the Listing, subject to renewal by the parties. For details of the above continuing connected transaction, please refer to the Prospectus. Pursuant to Rule 14A.56 of the Listing Rules, the Board engaged the auditor of Company to report on the Group s continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and with reference to Practice Note 740 Auditor s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules issued by Hong Kong Institute of Certified Public Accountants. The auditor has issued his unqualified letter containing its findings and conclusions in respect of the continuing connected transactions disclosed by the Group on pages 77 to 82 of the Annual Report in accordance with Rule 14A.56 of the Listing Rules. A copy of the auditor s letter has been provided by the Company to the Stock Exchange. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 73

董事會報告 Report of the Directors The independent non-executive Directors have reviewed the aforesaid continuing connected transactions and confirmed that the transactions have been entered into: (i) (i) in the ordinary and usual course of business of the Group; (ii) (ii) on normal commercial terms or better; and (iii) (iii) in accordance with relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole. (1) (2) (3) (4) 42 A A A The auditor of the Company has performed agreed-upon procedures regarding the continuing connected transactions entered into by the Group during the year ended 31 December 2016 as set out above and states that: (1) nothing has come to its attention that causes it to believe that the disclosed continuing connected transactions have not been approved by the Board; (2) for transactions involving the provision of goods or services by the Group, nothing has come to its attention that causes it to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Group; (3) nothing has come to its attention that causes it to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions; and (4) with respect to the aggregate amount/daily balance of each of the relevant continuing connected transactions, nothing has come to its attention that causes it to believe that such continuing connected transactions have exceeded the annual cap/maximum daily balance set and disclosed in the Prospectus. Certain related party transactions as disclosed in Note 42 to the consolidated financial statements constituted as connected transactions or continuing connected transactions as defined in Chapter 14A of the Listing Rules and in compliance with the disclosure requirements under Chapter 14A of the Listing Rules. Save as disclosed in this annual report, during the Reporting Period, the Company had no connected transactions or continuing connected transactions which fell to be disclosed in accordance with the provisions under Chapter 14A of the Listing Rules in relation to the disclosure of connected transactions and continuing connected transactions. 74 2016 年年報 Annual Report 2016

董事會報告 Report of the Directors 慈善捐款 14,332,000 附屬公司董事 www. crpharm.com 獲准許的彌償條文 468(4) 結算日後事項 45 審計委員會 DONATIONS During the Reporting Period, the charitable and other donations made by the Group amounted to HK$14,332,000. DIRECTORS OF SUBSIDIARIES The name of directors who have served on the board of the subsidiaries of the Company during the year and up to the date of this annual report is available on the Company s website at www.crpharm.com under Investor Relations- Corporate Governance. PERMITTED INDEMNITY PROVISION The Articles of Association provide that every Director or other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities (including any such liability as mentioned in Section 468(4) of the Companies Ordinance) which he may sustain or incur in the execution of the duties of his office or otherwise in relation thereto, and no Director or other officer shall be liable for any loss, damages or misfortune which may happen to or be incurred by the Company in the execution of the duties of his office or in relation thereto, provided that this Article shall only have effect in so far as it is not invalidated by the Companies Ordinance. So far as may be permitted by the Companies Ordinance, if any Director or other person shall become personally liable for the payment of any sum primarily due from the Company, the Board may execute or cause to be executed any mortgage, charge, or security over or affecting the whole or any part of the assets of the Company by way of indemnity to secure the Director or person so becoming liable as aforesaid from any loss in respect of such liability. The Company has taken out insurance against the liability and costs associated with defending any proceedings which may be brought against the directors of the Company and its subsidiaries. POST BALANCE SHEET EVENTS The material post balance sheet events are disclosed in note 45 to the consolidated financial statements. AUDIT COMMITTEE The Audit Committee had, together with the management and external auditor of the Company, reviewed the accounting principles and policies adopted by the Group and the consolidated financial statements for the year ended 31 December 2016. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 75

董事會報告 Report of the Directors 企業管治守則 3452 公眾持有量 25% 核數師 CORPORATE GOVERNANCE The Company is committed to maintaining high standards of corporate governance practices. Information on the corporate governance practices adopted by the Company is set out in the Corporate Governance Report on pages 34 to 52 of this annual report. SUFFICIENCY OF PUBLIC FLOAT Based on information publicly available to the Company and to the best knowledge of the Directors, at least 25% of the total issued Shares, the prescribed minimum percentage of public float approved by the Stock Exchange and permitted under the Listing Rules, was held by the public at all times during the Reporting Period and as of the date of this annual report. AUDITOR Deloitte Touche Tohmatsu was appointed as the Auditor for the year ended 31 December 2016. The accompanying financial statements prepared in accordance with Hong Kong Financial Reporting Standards have been audited by Deloitte Touche Tohmatsu. Deloitte Touche Tohmatsu shall retire at the forthcoming AGM and, being eligible, will offer itself for re-appointment. A resolution for the re-appointment of Deloitte Touche Tohmatsu as Auditor will be proposed at the AGM. 王春城 On behalf of the Board WANG Chuncheng Executive Director Hong Kong, 17 March 2017 76 2016 年年報 Annual Report 2016

獨立核數師報告 Independent Auditor s Report 致華潤醫藥集團有限公司成員意見 83 224 意見的基礎關鍵審計事項 TO THE MEMBERS OF CHINA RESOURCES PHARMACEUTICAL GROUP LIMITED (incorporated in Hong Kong with limited liability) Opinion We have audited the consolidated financial statements of China Resources Pharmaceutical Group Limited (the Company ) and its subsidiaries (collectively referred to as the Group ) set out on pages 83 to 224, which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ) and have been properly prepared in compliance with the Hong Kong Companies Ordinance. Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing ( HKSAs ) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA s Code of Ethics for Professional Accountants (the Code ), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 77

獨立核數師報告 Independent Auditor s Report 關鍵審計事項商譽及無形資產減值 20 21 17,404.83,806.7 Key Audit Matters (continued) Impairment of goodwill and intangible assets We identified the impairment of goodwill and intangible assets as a key audit matter due to the significance to the consolidated financial statements as a whole and significant judgement involved in the management s assessment process. As disclosed in notes 20 and 21 to the consolidated financial statements, the carrying value of goodwill and intangible assets as at 31 December 2016 were HK$17,404.8 million and HK$3,806.7 million respectively. In estimating the recoverable amount of the cash generating units to which goodwill and intangible assets have been allocated, the management has made a number of key assumptions in the value in use calculation. The key assumptions include growth rates, discount rates applied and the forecast performance based on management s view of future business prospects. Our procedures in relation to the impairment of goodwill and intangible assets included: Engaging our internal valuation specialist to evaluate the appropriateness of the valuation methodology adopted by management and the discount rate applied by benchmarking against independent data; Evaluating the independent external valuer s competence, capabilities and objectivity; Challenging the reasonableness of key assumptions based on our knowledge of the business and industry; Evaluating the historical accuracy and the growth rate of the financial budget used in the discounted cash flows by comparing the historical budget to actual results; Testing a selection of data inputs underpinning the cash flow forecasts against appropriate supporting evidence, such as approved budgets, to assess the accuracy and reliability; Assessing the sensitivity analysis prepared by management on the significant assumptions to evaluate the extent of impact on the discounted cash flows; and Assessing whether the disclosures of impairment assessment in the consolidated financial statements are sufficient and appropriate. 78 2016 年年報 Annual Report 2016

獨立核數師報告 Independent Auditor s Report 關鍵審計事項對東阿阿膠股份有限公司 ( 東阿阿膠 ) 的控制權 5 ( ) 其他信息 Key Audit Matters (continued) Control over Dong-E-E Jiao Company Limited ( 東阿阿膠股份有限公司 ) ( Dong-E-E-Jiao ) We identified the control over Dong-E-E-Jiao as a key audit matter due to the significant judgement associated with the management s assessment of control over Dong-E-E-Jiao. As disclosed in note 5 to the consolidated financial statements, the directors of the Company assessed the Group s practical ability to direct the relevant activities of Dong-E-E-Jiao unilaterally by considering the Group s absolute size of holding in Dong-E-E-Jiao and the relative size of and dispersion of the shareholdings owned by the other shareholders and the practical right to appoint the majority members of the board of directors of Dong-E-E-Jiao. Our procedures in relation to the control over Dong-E-E-Jiao included: Understanding and challenging the basis of the management s assessment of control against the requirements of relevant accounting standards; Assessing on the Group s absolute size of holding with reference to the percentage of equity interest in Dong-E-E-Jiao owned by the Group, the voting rights of the Group conferred by the statutory documents of Dong-E-E-Jiao, and other evidence such as composition of the board of directors, resolutions of the shareholders and board of directors meetings of Dong-E-E-Jiao; and Assessing the relative size of the holding by other shareholders and its extent of dispersion with reference to the number, percentage of equity interest and voting rights of the other shareholders. Other Information The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 79

獨立核數師報告 Independent Auditor s Report 董事及治理層就綜合財務報表須承擔的責任核數師就審計綜合財務報表承擔的責任 405 Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group s financial reporting process. Auditor s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 80 2016 年年報 Annual Report 2016

獨立核數師報告 Independent Auditor s Report 核數師就審計綜合財務報表承擔的責任 Auditor s Responsibilities for the Audit of the Consolidated Financial Statements (continued) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 81

獨立核數師報告 Independent Auditor s Report 核數師就審計綜合財務報表承擔的責任 Auditor s Responsibilities for the Audit of the Consolidated Financial Statements (continued) From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in the independent auditor s report is Wu Chung Ming. 德勤關黃陳方會計師行 Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 17 March 2017 82 2016 年年報 Annual Report 2016

綜合損益及其他全面收益表 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2016 2016 2015 港幣千元 Notes Revenue 8 156,705,203 146,568,105 Cost of sales (132,596,104) (123,369,243) Gross profit 24,109,099 23,198,862 Other income 1,287,789 1,002,378 Other gains and losses 10 250,706 1,160,888 Selling and distribution expenses (10,947,479) (10,111,546) Administrative expenses (3,882,186) (3,844,892) Other expenses (956,502) (1,363,157) Share of results of associates 48,164 58,224 Listing expenses (70,864) Finance costs 11 (1,796,062) (2,050,462) Profit before tax 8,042,665 8,050,295 Income tax expense 13 (2,074,576) (1,968,061) Profit for the year 14 5,968,089 6,082,234 Other comprehensive income Item that may be reclassified to profit or loss: Share of changes in translation reserve of associates (121,984) (21,468) Items that will not be reclassified subsequently to profit or loss: Exchange differences arising on translation to presentation currency (2,772,622) (2,267,401) Gain on revaluation of property, plant and equipment upon transfer to investment properties, net of income tax 172,239 2,046 Other comprehensive expense for the year, net of income tax (2,722,367) (2,286,823) Total comprehensive income for the year 3,245,722 3,795,411 Profit for the year attributable to: Owners of the Company 2,821,410 2,850,076 Non-controlling interests 3,146,679 3,232,158 5,968,089 6,082,234 Total comprehensive income for the year attributable to: Owners of the Company 1,532,010 1,674,146 Non-controlling interests 1,713,712 2,121,265 3,245,722 3,795,411 Basic earnings per share (HK$) 16 0.57 0.62 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 83

綜合財務狀況表 Consolidated Statement of Financial Position As at 31 December 2016 2016 2015 港幣千元 Notes 非流動資產 NON-CURRENT ASSETS Property, plant and equipment 17 12,500,077 12,578,257 Prepaid lease payments 18 2,223,555 2,320,735 Investment properties 19 1,390,245 1,020,149 Goodwill 20 17,404,821 16,394,509 Intangible assets 21 3,806,670 3,893,795 Interests in associates 23 1,948,742 441,225 Available-for-sale investments 24 123,506 148,300 Deferred tax assets 32 448,305 422,518 Other non-current assets 25 337,180 1,072,234 40,183,101 38,291,722 流動資產 CURRENT ASSETS Inventories 26 18,859,121 15,251,983 Trade and other receivables 27 54,337,396 47,514,249 Prepaid lease payments 18 62,653 57,232 Available-for-sale investments 24 3,648,846 6,310,350 Amounts due from related parties 42 244,861 105,464 Taxation recoverable 14,600 20,651 Pledged bank deposits 28 2,674,739 2,241,283 Bank balances and cash 28 13,960,197 12,378,606 93,802,413 83,879,818 Assets classified as held for sale 38 4,977,059 93,802,413 88,856,877 流動負債 CURRENT LIABILITIES Trade and other payables 29 50,960,961 41,953,090 Amounts due to related parties 42 171,673 878,886 Taxation payable 525,333 656,033 Bank borrowings due within one year 30 13,737,020 24,335,485 Bonds payable due within one year 31 5,589,650 70,984,637 67,823,494 Liabilities directly associated with assets classified as held for sale 38 4,400,302 70,984,637 72,223,796 流動資產淨值 Net current assets 22,817,776 16,633,081 總資產減流動負債 Total assets less current liabilities 63,000,877 54,924,803 84 2016 年年報 Annual Report 2016

綜合財務狀況表 Consolidated Statement of Financial Position As at 31 December 2016 2016 2015 港幣千元 Notes 非流動負債 NON-CURRENT LIABILITIES Deferred tax liabilities 32 938,447 862,353 Bank borrowings due after one year 30 2,025,493 4,648,000 Bonds payable due after one year 31 4,359,269 8,234,853 Other non-current liabilities 33 1,375,814 1,334,032 8,699,023 15,079,238 資產淨值 NET ASSETS 54,301,854 39,845,565 資本及儲備 CAPITAL AND RESERVES Share capital 34 27,241,289 12,473,920 Reserves 10,379,056 10,028,315 Equity attributable to owners of the Company 37,620,345 22,502,235 Non-controlling interests 35 16,681,509 17,343,330 總權益 TOTAL EQUITY 54,301,854 39,845,565 83224 The consolidated financial statements on pages 83 to 224 were approved and authorised for issue by the Board of Directors on 17 March 2017 and are signed on its behalf by: 王春城 WANG CHUNCHENG DIRECTOR 李國輝 LI GUOHUI DIRECTOR 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 85

綜合權益變動表 Consolidated Statement of Changes in Equity For the year ended 31 December 2016 本公司擁有人應佔 Attributable to owners of the Company 股本 Share capital 資本儲備 Capital reserve 法定盈餘儲備 Statutory surplus reserve 合併儲備 Merger reserve 物業重估儲備匯兌儲備保留盈利總計非控股權益總權益 Property revaluation reserve Translation reserve Retained earnings Total Noncontrolling interests Total equity a b c (Note a) (Note b) (Note c) Balance at 1 January 2015 12,473,920 (3,324,547) 78,905 (513,534) 999,608 10,801,967 20,516,319 16,634,135 37,150,454 Profit for the year 2,850,076 2,850,076 3,232,158 6,082,234 Exchange differences arising on translation (1,156,508) (1,156,508) (1,110,893) (2,267,401) Share of changes in translation reserve of associates (21,468) (21,468) (21,468) Revaluation gain on property, plant and equipment upon transfer to investment properties, net of income tax 2,046 2,046 2,046 Other comprehensive expense for the year 2,046 (1,177,976) (1,175,930) (1,110,893) (2,286,823) Profit and total comprehensive income for the year 2,046 (1,177,976) 2,850,076 1,674,146 2,121,265 3,795,411 Acquisition of subsidiaries 370,404 370,404 d Acquisition of additional interest in a subsidiary (Note d) 107,321 107,321 (444,120) (336,799) Shareholders contribution 302,758 302,758 302,758 Deemed disposal of a subsidiary (Note e) e (98,309) (98,309) 98,309 Disposal of subsidiaries (23,490) (23,490) Disposal of subsidiaries that have been included in assets classified as held for sale (384,505) (384,505) Dividends to non-controlling shareholders (1,028,668) (1,028,668) Appropriation 32,924 (32,924) Balance at 31 December 2015 12,473,920 (3,012,777) 111,829 (513,534) 2,046 (178,368) 13,619,119 22,502,235 17,343,330 39,845,565 Profit for the year 2,821,410 2,821,410 3,146,679 5,968,089 Exchange differences arising on translation (1,339,655) (1,339,655) (1,432,967) (2,772,622) Share of changes in translation reserve of associates (121,984) (121,984) (121,984) Revaluation gain on property, plant and equipment upon transfer to investment properties, net of income tax 172,239 172,239 172,239 Other comprehensive expense for the year 172,239 (1,461,639) (1,289,400) (1,432,967) (2,722,367) Profit and total comprehensive income for the year 172,239 (1,461,639) 2,821,410 1,532,010 1,713,712 3,245,722 36 Acquisition of subsidiaries (note 36) 108,792 108,792 f Acquisition of additional interest in subsidiaries (Note f) (1,181,269) (1,181,269) (431,649) (1,612,918) 37 Disposal of subsidiaries (note 37) (52,398) (52,398) Disposal of subsidiaries classified as held for sale in previous year (291,285) (291,285) 34 Ordinary shares issued (note 34) 15,061,246 15,061,246 15,061,246 34 Transaction costs attributable to issue of new ordinary shares (note 34) (293,877) (293,877) (293,877) Dividends to non-controlling shareholders (1,708,993) (1,708,993) Appropriation 30,486 (30,486) Balance at 31 December 2016 27,241,289 (4,194,046) 142,315 (513,534) 174,285 (1,640,007) 16,410,043 37,620,345 16,681,509 54,301,854 86 2016 年年報 Annual Report 2016

綜合權益變動表 Consolidated Statement of Changes in Equity For the year ended 31 December 2016 : a: (1) (2) China Resources Medic Investments Limited 302,758,0002 b: c: d: 10.87% e: 59.99% 98,309,000 f: 4.66% Notes: a. Capital reserve mainly represents (1) the difference between the amounts by which the non-controlling interests are adjusted and the fair value of the consideration paid to acquire the additional interest in subsidiaries, and (2) a shareholder s contribution of HK$302,758,000 resulted from the combination of China Resources Pharmaceutical Retail Group Limited (formerly known as China Resources Medic Investments Limited) ( CR Care ) and its subsidiaries as detailed in note 2 to the consolidated financial statements. b. Merger reserve represents the amount of issued capital and premium of the entities acquired under group reorganisations completed on 4 January 2016. c. Property revaluation reserve represents the gain on revaluation of the property, plant and equipment upon transfer to investment properties during the year ended 31 December 2016. d. During the year ended 31 December 2015, the Group acquired additional equity interest of 10.87% in China Resources Double-Crane Pharmaceutical Company Limited ( ) ( CR Double-Crane ). e. During the year ended 31 December 2015, the Group completed a group restructuring by transferring a wholly-owned subsidiary, China Resources Saike Pharmaceutical Company Limited ( ) ( CR Saike ) to CR Double-Crane in which it is a 59.99% owned subsidiary of the Group. As a result, deemed disposal of a subsidiary of HK$98,309,000 resulted. f. During the year ended 31 December 2016, the Group acquired additional equity interest of 4.66% in Dong-E-E-Jiao Company Limited () ( Dong-E-E-Jiao ). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 87

綜合現金流量表 Consolidated Statement of Cash Flows For the year ended 31 December 2016 88 2016 年年報 Annual Report 2016 2016 2015 港幣千元 Notes 經營活動 Operating activities Profit before tax 8,042,665 8,050,295 Adjustments for: Finance costs 1,796,062 2,050,462 Share of results of associates (48,164) (58,224) Interest income (264,949) (231,957) Dividend income (3,903) (12,596) Investment income on available-for-sale investments (38,075) (189,669) Loss on disposal of property, plant and equipment 18,206 7,622 Gain on disposal of intangible assets (527) Gain on disposal of subsidiaries classified as held for sale 38 (49,288) (840,647) (Gain) loss on disposal of available-for-sale investments (5,841) 15,806 Gain on disposal of associates (31,737) (41,711) Gain on disposal of prepaid lease payments (148,542) Gain on disposal of subsidiaries 37 (74,174) (32,033) Impairment loss recognised on property, plant and equipment 11,019 21,514 Impairment loss recognised on intangible assets 3,231 Impairment loss recognised on trade and other receivables, net 80,177 54,842 Impairment loss (reversed) recognised on other receivables 34,895 (4,083) Impairment loss recognised on goodwill 60,109 Allowance for slow-moving and obsolete inventories 44,423 79,968 Depreciation of property, plant and equipment 1,010,051 1,090,257 Amortisation of intangible assets 201,760 198,358 Amortisation of prepaid lease payments 62,653 57,232 Gain arising on change in fair value of investment properties (218,260) (69,334) Government grants (117,478) (100,058) Operating cash flows before movements in working capital 10,452,746 9,957,611 Increase in inventories (4,506,517) (157,600) Increase in trade and other receivables (8,736,521) (6,218,789) Decrease in amounts due to associates (530) Increase in amounts due from fellow subsidiaries (132,819) (22,492) Decrease in other non-current assets 1,621 52,032 Increase in trade and other payables 9,191,161 4,140,630 Increase (decrease) in amounts due to fellow subsidiaries 2,498 (26,596) Increase in other non-current liabilities 28,146 19,373 Increase (decrease) in amounts due to non-controlling interests 401 (1,163) Increase in amounts due to associates 569 (Decrease) increase in amounts due to companies held by non-controlling interests (1,269) 1,436 Cash generated from operations 6,298,917 7,745,011 Income tax paid (2,179,270) (1,756,221) Net cash from operating activities 4,119,647 5,988,790

綜合現金流量表 Consolidated Statement of Cash Flows For the year ended 31 December 2016 2016 2015 港幣千元 Notes 投資活動 Investing activities Purchases of available-for-sale investments (15,513,005) (16,626,038) Payment of consideration for acquisition of subsidiaries in prior years (315,124) (153,413) Purchases of property, plant and equipment (1,718,434) (1,246,284) Acquisition of subsidiaries 36 (2,380,820) (2,141,047) Deposits for property, plant and equipment 106,522 (576,905) Purchases of intangible assets (121,273) (368,045) Deposits for prepaid lease payments 54,191 (140,772) Advances to fellow subsidiaries (16,054) (49,945) Purchases of prepaid lease payments (141,227) (4,525) Advance to companies held by non-controlling interest (911) Purchases of investment properties (1,382) (40,611) Proceeds from disposal of available-for-sale investments 18,267,800 15,480,293 Increase in pledged bank deposits (585,638) (683,526) Decrease in amounts due from non-controlling shareholders 640 Usage of compensation for demolition (17,016) Investment income on available-for-sale investments received 38,075 189,669 Interest received 264,949 163,849 Proceeds from disposal of property, plant and equipment 195,748 147,516 Proceeds from disposal of associates 71,247 94,710 Proceeds from disposal of prepaid lease payments 38,476 211,097 Receipt of government grants 135,002 176,234 Receipt of consideration for disposal of subsidiaries in prior year 19,020 Proceeds from disposal of investment properties 1,495 730 Dividend received 3,903 7,399 Dividend received from associate 4,757 6,846 Disposal of subsidiaries 37 464,951 25,006 Repayment from fellow subsidiaries 2,631 Proceeds from disposal of intangible assets 19,745 33,520 Deposits for intangible assets 43,678 (58,620) Proceeds from disposal of subsidiaries classified as held for sale 38 (488,204) 1,721,336 Investment in associates (404,996) (69,545) Repayment from (advance) to associates 2,898 (2,855) Net cash used in investing activities (1,953,060) (3,919,222) 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 89

綜合現金流量表 Consolidated Statement of Cash Flows For the year ended 31 December 2016 2016 2015 港幣千元 Notes 融資活動 Financing activities Proceeds from bank borrowings 30,677,481 44,455,902 Proceeds from issue of new shares 15,061,246 Expenses on issue new shares (293,877) Proceeds from issuances of corporate bonds 5,263,007 2,491,369 Loans from intermediate holding company 800,000 Advances from fellow subsidiaries 429,953 Repayment of bank borrowings (42,284,110) (42,346,261) Repayment of loans from intermediate holding company (1,100,000) Payment of consideration for acquisition of additional interests in subsidiaries (1,612,918) (1,495,925) Interests paid (1,704,876) (1,963,397) Dividends paid to non-controlling interests (2,158,987) (951,512) Repayment to fellow subsidiaries (648,799) (6,252) Repayment of corporate bonds (2,923,625) (1,868,160) Net cash used in financing activities (625,458) (1,554,283) Net increase in cash and cash equivalents 1,541,129 515,285 Cash and cash equivalents at 1 January 13,214,946 13,735,944 Effect of foreign exchange rate changes (783,823) (1,036,283) Cash and cash equivalents at 31 December 13,972,252 13,214,946 Represented by: Bank balances and cash 13,960,197 12,378,606 Restricted time deposits with maturity less than three months 28 12,055 13,376 Bank balances and cash classified as held for sale 38 822,964 13,972,252 13,214,946 90 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 1. 一般資料 26 41 26 41 4104 05 22 23 1. GENERAL The Company is a limited company incorporated in Hong Kong and its shares are listed on the Stock Exchange of Hong Kong Limited with effect from 28 October 2016. Its immediate holding company is CRH (Pharmaceutical) Limited ( CRHP ), a company incorporated in the British Virgin Islands ( BVI ) and its ultimate holding company is China Resources National Corporation (the CRNC ), a state-owned enterprise established in the People s Republic of China (the PRC ). The address of the registered office of the Company is 41/F, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong. The principal place of business of the Company is Room 4104 05, 41/F, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong. The Company acts as an investment holding company. The principal activities of its principal subsidiaries and associates are set out in notes 22 and 23, respectively. The functional currency of the Company is Renminbi ( RMB ). The consolidated financial statements are presented in Hong Kong dollars ( HK$ ), as most of the users of the consolidated financial statements are located in Hong Kong. Therefore, the directors of the Company consider that HK$ is preferable in presenting the operating results and financial position of the Group, which is more beneficial to the users of the consolidated financial statements. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 91

For the year ended 31 December 2016 2. 綜合財務報表編製基準 100% 1 7.75395,000,000 482,125,000 5 2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS On 31 December 2015, the Company entered into a sale and purchase agreement with China Resources Retail (Group) Company Limited, a fellow subsidiary of the Company, to acquire 100% equity interest in CR Care, which is mainly engaged in the pharmacy business, as well as the operation of CR Care healthcare stores, for the consideration of US$1 (equivalent to HK$7.75) and the shareholders loan amounting to RMB395,000,000 (equivalent to HK$482,125,000). The transaction was completed on 4 January 2016. The acquisition was accounted for under the principles of merger accounting in accordance with Accounting Guideline 5 Merger Accounting for Common Control Combinations issued by the HKICPA. The assets and liabilities, income and expenses of CR Care and its subsidiaries have been combined under merger accounting and then consolidated since 1 January 2015. The consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended 31 December 2015 include the results, changes in equity and cash flows of the companies now comprising the Group as if the current group structure had been in existence as at 1 January 2015, or since their respective dates of establishment and taking into account the respective dates of acquisition/ disposal, where there is a shorter period. The consolidated statement of financial position of the Group as at 31 December 2015 have been prepared to present the assets and liabilities of the companies now comprising the Group, as if the current group structure had been in existence as at those dates, taking into account the respective dates of establishment/acquisition/disposal, where applicable. 92 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 3. 採用新訂及經修訂香港財務報告準則 ( 香港財務報告準則 ) 於本年度強制生效的香港財務報告準則之修訂本已頒佈但尚未生效的新訂及經修訂香港財務報告準則 9 15 16 2 1 1 2 1 4 4 9 1 10 28 3 7 4 12 4 ( ) 5 1 2 3 4 5 ( ) 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) Amendments to HKFRSs that are mandatorily effective for the current year The Group has already adopted all amendments to HKFRSs which are effective for annual accounting periods beginning on 1 January 2016 in these consolidated financial statements. New and amendments to HKFRSs in issue but not yet effective The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective: HKFRS 9 Financial Instruments 1 HKFRS 15 HKFRS 16 Leases 2 Amendments to HKFRS 2 Amendments to HKFRS 4 Amendments to HKFRS 10 and HKAS 28 Revenue from Contracts with Customers and the related Amendments 1 Classification and Measurement of Share-based Payment Transactions 1 Amendments to HKAS 7 Disclosure Initiative 4 Amendments to HKAS 12 Amendments to HKFRSs Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts 1 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 3 Recognition of Deferred Tax Assets for Unrealised Losses 4 Annual Improvements to HKFRSs 2014 2016 Cycles 5 1 Effective for annual periods beginning on or after 1 January 2018. 2 Effective for annual periods beginning on or after 1 January 2019. 3 Effective for annual periods beginning on or after a date to be determined. 4 Effective for annual periods beginning on or after 1 January 2017. 5 Effective for annual periods beginning on or after 1 January 2017 or 1 January 2018, as appropriate. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 93

For the year ended 31 December 2016 3. 採用新訂及經修訂香港財務報告準則 ( 香港財務報告準則 ) 香港財務報告準則第 9 號金融工具 9 9 9 9 9 39 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (continued) HKFRS 9 Financial Instruments HKFRS 9 introduces new requirements for the classification and measurement of financial assets, financial liabilities, general hedge accounting and impairment requirements for financial assets. Key requirements of HKFRS 9 which are relevant to the Group are: all recognised financial assets that are within the scope of HKFRS 9 are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at fair value through other comprehensive income ( FVTOCI ). All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. with regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss presented in profit or loss. 94 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 3. 採用新訂及經修訂香港財務報告準則 ( 香港財務報告準則 ) 香港財務報告準則第 9 號金融工具 39 9 39 9 9 9 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (continued) HKFRS 9 Financial Instruments (continued) in relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. the new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in HKAS 39. Under HKFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of nonfinancial items that are eligible for hedge accounting. In addition, the retrospective quantitative effectiveness test has been removed. Enhanced disclosure requirements about an entity s risk management activities have also been introduced. The directors of the Company anticipate that the application of HKFRS 9 in the future may have financial impact on amounts reported in respect of the Group s financial assets (e.g. the impairment on receivables) based on expected credit loss model. The Group s available-for-sale investments, including those currently stated at cost less impairment, will either be measured at fair value through profit or loss or be designated as FVTOCI (subject to fulfillment of the designation criteria). Currently, the directors of the Company is in the midst of assessing the financial impact of the application of HKFRS 9 and a reasonable estimate of the effect will be available once the detailed review is completed. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 95

For the year ended 31 December 2016 3. 採用新訂及經修訂香港財務報告準則 ( 香港財務報告準則 ) 香港財務報告準則第 15 號來自客戶合約的收入 15 15 18 11 15 5 15 15 15 15 15 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (continued) HKFRS 15 Revenue from Contracts with Customers HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related Interpretations when it becomes effective. The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. In 2016, the HKICPA issued Clarifications to HKFRS 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance. The directors of the Company has performed a review of the existing contractual arrangement with its customers and the directors of the Company do not expect the adoption of HKFRS 15 would result in significant impact on the revenue recognition of its sales activities and the consolidated financial statements. 96 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 3. 採用新訂及經修訂香港財務報告準則 ( 香港財務報告準則 ) 香港財務報告準則第 16 號租賃 16 16 17 16 16 17 16 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (continued) HKFRS 16 Leases HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. HKFRS 16 will supersede HKAS 17 Leases and the related interpretations when it becomes effective. HKFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees, except for short-term leases and leases of low value assets. The right-of-use asset is initially measured at cost and subsequently measured at cost less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. For the classification of cash flows, the Group currently presents upfront prepaid lease payments as investing cash flows in relation to leasehold lands for owned use and those classified as investment properties while other operating lease payments are presented as operating cash flows. Under the HKFRS 16, lease payments in relation to lease liability will be allocated into a principal and an interest portion which will be presented as financing and operating cash flows respectively. Under HKAS 17, the Group has already recognised an asset and a related finance lease liability for finance lease arrangement and prepaid lease payments for leasehold lands where the Group is a lessee. The application of HKFRS 16 may result in potential changes in classification of these assets depending on whether the Group presents right-of-use assets separately or within the same line item at which the corresponding underlying assets would be presented if they were owned. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 97

For the year ended 31 December 2016 3. 採用新訂及經修訂香港財務報告準則 ( 香港財務報告準則 ) 香港財務報告準則第 16 號租賃 1617 16 40 1,007,560,000 16 4. 重大會計政策 3. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (continued) HKFRS 16 Leases (continued) In contrast to lessee accounting, HKFRS 16 substantially carries forward the lessor accounting requirements in HKAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by HKFRS 16. As set out in note 40, total operating lease commitment of the Group in respect of offices, warehouses and properties as at 31 December 2016 amounted to HK$1,007,560,000, the directors of the Company do not expect the adoption of HKFRS 16 as compared with the current accounting policy would result in significant impact on the Group s result but it is expected that certain portion of these lease commitments will be required to be recognized in the consolidated statement of financial position as right-of-use assets and lease liabilities. Except as described above, the directors of the Company do not expect the application of the new and amendments to HKFRSs in issue but not yet effective in the current year will have material impact on the Group s financial performance and positions and/or on the disclosures set out in the consolidated financial statements or future financial statements of the Group. 4. SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ( Listing Rules ) and by the Hong Kong Companies Ordinance ( CO ). The consolidated financial statements have been prepared on the historical cost basis except for investment properties and certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. 98 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策 17 2 36 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing transactions that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 99

For the year ended 31 December 2016 4. 重大會計政策綜合基準 4. SIGNIFICANT ACCOUNTING POLICIES (continued) The principal accounting policies are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group s voting rights in an investee are sufficient to give it power, including: the size of the Group s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Group, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. 100 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策綜合基準 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of consolidation (continued) Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group s ownership interests in existing subsidiaries Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s relevant components of equity including reserves and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted after re-attribution of the relevant equity component and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 101

For the year ended 31 December 2016 4. 重大會計政策綜合基準 (i) (ii) 39 涉及受共同控制實體的業務合併的合併會計法 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of consolidation (continued) Changes in the Group s ownership interests in existing subsidiaries (continued) When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary attributable to the owners of the Company. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. Merger accounting for business combination involving entities under common control The consolidated financial statements incorporate the financial statements items of the combining businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining businesses are consolidated using the existing book values from the controlling party s perspective. No amount is recognised in respect of goodwill or bargain purchase gain at the time of common control combination. The consolidated statement of profit or loss and other comprehensive income includes the results of each of the combining businesses from the earliest date presented or since the date when the combining businesses first came under the common control, where this is a shorter period. 102 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策涉及受共同控制實體的業務合併的合併會計法業務合併 12 19 2 5 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Merger accounting for business combination involving entities under common control (continued) Acquisition of a subsidiary not constituting a business When the Group acquires a group of assets and liabilities that do not constitute a business, the Group identifies and recognises the individual identifiable assets acquired and liabilities assumed by allocating the purchase price first to the financial assets and financial liabilities at the respective fair values, the remaining balance of the purchase price is then allocated to the other individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction does not give rise to goodwill or bargain purchase gain. Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisitiondate fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 103

For the year ended 31 December 2016 4. 重大會計政策業務合併商譽 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Business combinations (continued) Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer s previously held equity interest in the acquiree (if any) over the net amount of the identifiable assets acquired and the liabilities assumed as at acquisition date. If, after re-assessment, the net amount of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the relevant subsidiary s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests proportionate share of the recognised amounts of the acquiree s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value. Goodwill Goodwill arising on an acquisition of a business is carried at cost established at the date of acquisition of the business (see the accounting policy above) less any accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group s cash-generating units, or groups of cash-generating units, that is expected to benefit from the synergies of the combination, which represent the lowest level at which the goodwill is monitored for internal management purposes and not larger than an operating segment. A cash-generating unit, or groups of cash-generating units, to which goodwill has been allocated is tested for impairment annually or more frequently when there is indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cashgenerating unit, or groups of cash-generating units, to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other assets of the unit on a pro rata basis on the carrying amount of each asset in the unit, or groups of cash-generating units. 104 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策商譽於聯營公司的投資 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Goodwill (continued) On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal. The Group s policy for goodwill arising on the acquisition of an associate is described at Investments in associates below. Investments in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group s share of the profit or loss and other comprehensive income of the associate. When the Group s share of losses of an associate exceeds the Group s interest in that associate (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 105

For the year ended 31 December 2016 4. 重大會計政策於聯營公司的投資 39 36 36 39 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Investments in associates (continued) The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases. When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in the investee with a resulting gain or loss being recognised in profit or loss. When the Group retains an interest in the former associate and the retained interest is a financial asset within the scope of HKAS 39, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition. The difference between the carrying amount of the associate and the fair value of any retained interest and any proceeds from disposing the relevant interest in the associate is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. When a group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the consolidated financial statements only to the extent of interests in the associate that are not related to the Group. Any excess of the initial cost of acquisition of the investee over the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the investee attributable to the ownership interests acquired in the date of exchange transaction is recognised as goodwill, which is included within the carrying amount of the investments in associates and is assessed for impairment as part of investment. 106 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策持作出售的非流動資產收益確認 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group s activities, as described below. Revenue from the sale of goods is recognised when the goods are delivered and titles have passed. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Dividend income from investments is recognised when the shareholders rights to receive payment have been established. The Group s policy for recognition of revenue from operating leases is described in the accounting policy for leasing below. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 107

For the year ended 31 December 2016 4. 重大會計政策物業廠房及設備 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Property, plant and equipment Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Depreciation is recognised so as to write off the cost of assets other than construction in progress less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. If an item of property, plant and equipment becomes an investment property because its use has changed as evidenced by end of owneroccupation, any difference between the carrying amount and the fair value of that item at the date of transfer is recognised in other comprehensive income and accumulated in property revaluation reserve. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to retained earnings. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 108 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策投資物業 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Investment properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair value. All of the Group s property interests held under operating leases to earn rentals or for capital appreciation purposes are accounted for as investment properties and are measured using the fair value model. Gains and losses arising from changes in the fair value of investment properties are included in profit or loss in the period in which they arise. If an item of investment property is transferred to property, plant and equipment when there is a change in use evidenced by commencement of owner occupation, the fair value at the date of transfer becomes the deemed cost for subsequent accounting as property, plant and equipment. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 109

For the year ended 31 December 2016 4. 重大會計政策租賃預付租賃款項無形資產 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessor Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset. Other than investment properties measured under fair value model, such costs are recognised as an expense on a straight-line basis over the lease term. The Group as lessee Operating lease payments are recognised as an expense on a straightline basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straightline basis. Prepaid lease payments Payments for obtaining land use rights are accounted for as prepaid lease payments under operating lease and are charged to profit or loss on a straight-line basis over the lease terms as stated in the relevant land use rights certificates granted for usage by the Group in the People s Republic of China (the PRC ) or the remaining terms of the operating licence of the PRC entity, whichever is the shorter. Intangible assets Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less any subsequent accumulated impairment losses. 110 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策無形資產 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Intangible assets (continued) Internally-generated intangible assets research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internallygenerated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible asset is reported at cost less accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible assets that are acquired separately. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 111

For the year ended 31 December 2016 4. 重大會計政策無形資產存貨金融工具 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Intangible assets (continued) Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are reported at costs less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets that are acquired separately. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. Inventories Inventories are stated at the lower of cost and net realisable value. Cost of inventories are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Financial Instruments Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Financial assets Financial assets are classified into the following specified categories: available-for-sale financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. 112 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策金融工具 (a)(b) (c) 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial assets (continued) Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the year. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit of loss. The Group designated the investments in unlisted equity securities issued by private entities established in the PRC and the investments in structured deposits entered by the Group with the banks and the financial institutions as available-for-sale investments on initial recognition of those items. Equity and debt securities held by the Group that are classified as available-for-sale financial assets and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of available-for-sale monetary financial assets relating to interest income calculated using the effective interest method are recognised in profit or loss. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group s right to receive the dividends is established. Other changes in the carrying amount of available-for-sale financial assets are recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets below). Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period (see the accounting policy in respect of impairment loss on financial assets below). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 113

For the year ended 31 December 2016 4. 重大會計政策金融工具 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial assets (continued) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amounts due from related parties, pledged bank deposits and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment (see the accounting policy in respect of impairment loss on financial assets below). Interest income is recognised by applying the effective interest rate. Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected. For available-for-sale equity investment, a significant or prolonged decline in the fair value of that security below its cost is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or breach of contract, such as default or delinquency in interest and principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation. 114 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策金融工具 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial assets (continued) Impairment of financial assets (continued) Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets that are carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods (see the accounting policy below). The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade and other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Subsequent recoveries of amount previously written off are credited to profit or loss. When an available-for-sale financial asset is considered to be impaired, cumulative losses previously recognised in other comprehensive income are reclassified to profit or loss in the period. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 115

For the year ended 31 December 2016 4. 重大會計政策金融工具 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial assets (continued) Impairment of financial assets (continued) For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity investments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-forsale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. Financial liabilities and equity instruments Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Financial liabilities at amortised cost Financial liabilities including trade and other payables, amounts due to related parties, bank borrowings and bonds payable are subsequently measured at amortised cost, using the effective interest method. 116 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策金融工具 37 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial liabilities and equity instruments (continued) Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the year. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis. Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts issued by the Group are initially measured at their fair values and, if not designated as at fair value through profit of loss, are subsequently measured at the higher of: the amount of the obligation under the contract, as determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and the amount initially recognised less, where appropriate, cumulative amortisation recognised over the guarantee period. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 117

For the year ended 31 December 2016 4. 重大會計政策金融工具撥備 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Instruments (continued) Financial liabilities and equity instruments (continued) Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss. The Group derecognises financial liability when, and only when, the Group s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 118 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策有形及無形資產減值 ( 商譽除外 ( 見上文有關商譽的會計政策 )) 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above) At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 119

For the year ended 31 December 2016 4. 重大會計政策有形及無形資產減值 ( 商譽除外 ( 見上文有關商譽的會計政策 )) 外幣 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above) (continued) If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit. An impairment loss is recognised immediately in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 120 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策外幣 (i) (ii) 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currencies (continued) Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. For the purposes of presenting consolidated financial statements, (i) the assets and liabilities of the Group s foreign operations are translated into RMB; and (ii) the assets and liabilities of the Group denominated or translated in RMB are then translated into the presentation currency of the Group (i.e. Hong Kong dollars), using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributed to non-controlling interests as appropriate). Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income. Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation before 1 January 2005 is treated as non-monetary foreign currency items of the acquirer and reported using the historical cost prevailing at the date of acquisition. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 121

For the year ended 31 December 2016 4. 重大會計政策借貸成本政府補助 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. 122 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 4. 重大會計政策稅項 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated statement of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 123

For the year ended 31 December 2016 4. 重大會計政策稅項退休福利成本 4. SIGNIFICANT ACCOUNTING POLICIES (continued) Taxation (continued) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For the purposes of measuring deferred tax for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. Retirement benefit costs Payments to the Mandatory Provident Fund Scheme or state-managed retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to the contributions. 124 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 5. 4 應用會計政策的關鍵性判斷 56.62% 23.14% 76.86% 4.66% 13.10%17.76% 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group s accounting policies, which are described in note 4, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations (see below), that the directors of the Company have made in the process of applying the Group s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements. Control over Dong-E-E-Jiao During the year ended 31 December 2015, Dong-E-E-Jiao is a subsidiary of the Group, and is listed on the Shenzhen Stock Exchange. The Group holds Dong-E-E-Jiao through China Resources Dong-E-E-Jiao Company Limited () ( CR Donge ), a 56.62% subsidiary of the Company which holds a 23.14% equity interest in Dong-E-E-Jiao. The remaining 76.86% of shareholdings of Dong-E-E-Jiao are owned by thousands of shareholders that are unrelated to the Group. During the year ended 31 December 2016, the Group acquired an additional equity interest of 4.66% in Dong-E-E-Jiao and the Group s equity interest in Dong-E-E-Jiao was increased from 13.10% to 17.76% accordingly. The directors of the Company assessed whether or not the Group has control over Dong-E-E-Jiao based on whether the Group has the practical ability to direct the relevant activities of Dong-E-E-Jiao unilaterally. In making their judgement, the directors of the Company considered the Group s absolute size of holding in Dong-E-E-Jiao and the relative size of and dispersion of the shareholdings owned by the other shareholders and in addition, the Group has the practical right to appoint the majority members of the board of directors of Dong-E-E-Jiao. After assessment, the directors of the Company concluded that the Group has sufficiently dominant voting interest to direct the relevant activities of Dong-E-E-Jiao and therefore the Group has control over Dong-E-E-Jiao. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 125

For the year ended 31 December 2016 5. 應用會計政策的關鍵性判斷 21 273,876,000 172,856,000 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) Critical judgements in applying accounting policies (continued) Indefinite useful lives of certain intangible assets Note 21 describes certain trademarks of the Group are renewable continuously every ten years at minimal costs. The directors of the Company are of the opinion that the Group would renew the trademarks continuously and has the ability to do so. Various studies including product life cycle studies, market, competitive and environmental trends, and brand extension opportunities have been performed by management of the Group, which supports that the trademarks have no foreseeable limit to the period over which the trademarked products are expected to generate net cash flows for the Group. As a result, the trademarks are considered by the directors of the Company as having indefinite useful lives because they are expected to contribute to net cash inflows indefinitely. Deferred taxation on investment properties For the purpose of measuring deferred tax arising from investment properties that are measured using the fair value model, the directors of the Company have reviewed the Group s investment property portfolios and concluded that the Group s investment properties are held under a business model whose objective to consume substantially all of the economic benefits embodied in the investment properties over time. Therefore, in determining the Group s deferred taxation on investment properties, the directors of the Company have determined that the presumption that the carrying amounts of investment properties measured using the fair value model are recovered entirely through sale is rebutted. As a result, the Group has recognised deferred tax on changes in fair value of investment properties on the basis that the deferred tax reflects the tax consequences that will follow from the manner in which the Group expects at the end of the reporting period to recover the carrying amount of the investment properties. The deferred tax liabilities recognised are HK$273,876,000 as at 31 December 2016 (2015: HK$172,856,000). 126 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 5. 估計不確定因素的主要來源 17,404,821,000 16,394,509,000 3,806,670,000 3,893,795,000 20 21 60,109,000 1,948,742,000 441,225,000 36 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Estimated impairment of goodwill and intangible assets Determining whether goodwill and intangible assets are impaired requires an estimation of the recoverable amount of the cash-generating units to which goodwill and intangible assets have been allocated, which is the higher of the value in use or fair value less costs of disposal. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, or change in facts and circumstances which results in downward revision of future cash flows, a material impairment loss/further impairment loss may arise. The carrying amounts of goodwill are HK$17,404,821,000 as at 31 December 2016 (2015: HK$16,394,509,000) and intangible assets are HK$3,806,670,000 as at 31 December 2016 (2015: HK$3,893,795,000). Details of the recoverable amount calculation are disclosed in notes 20 and 21, respectively. There are no impairment losses recognised in respect of goodwill during the year ended on 31 December 2016 (2015: HK$60,109,000). Impairment of interests in associates The carrying amount of interests in associates amounting to HK$1,948,742,000 (2015: HK$441,225,000) is reviewed for impairment in accordance with HKAS 36 whenever certain events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group determines the recoverable amount which is the higher of value in use and fair value less costs of disposal. The value in use is based on the estimations of future expected cash flows from the associates and a suitable discount rate. Where the actual future cash flows are less than or more than expected, or there are favourable or unfavourable events and changes in facts and circumstances which result in revision of future estimated cash flows, a material impairment loss may arise or reverse. No impairment loss has been recognised in respect of interests in associates for the years ended 31 December 2015 and 2016. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 127

For the year ended 31 December 2016 5. 估計不確定因素的主要來源 12,500,077,000 12,578,257,000 11,019,000 21,514,000 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) Key sources of estimation uncertainty (continued) Estimation of useful lives of property, plant and equipment Management estimates the useful lives of property, plant and equipment based on the expected lifespan of those property, plant and equipment. The useful lives of property, plant and equipment could change significantly as a result of technical obsolescence. When the actual useful lives of property, plant and equipment due to the change of commercial and technological environment are different from their estimated useful lives, such difference will impact the depreciation charges and the amounts of assets written down for future periods. The carrying amounts of property, plant and equipment are HK$12,500,077,000 as at 31 December 2016 (2015: HK$12,578,257,000). Estimated impairment of property, plant and equipment The Group assesses annually whether property, plant and equipment have any indication of impairment, in accordance with the relevant accounting policies. The recoverable amounts of property, plant and equipment have been determined based on the higher of the fair value less cost of disposal and value in use calculations. These calculations and valuations require the use of judgment and estimates on future operating cash flows and discount rates adopted. In case where the recoverable amounts of property, plant and equipment assessed are higher or less than expected, a material reversal or recognition of impairment of property, plant and equipment may arise, which would be recognised in profit or loss in the period in which such recognition takes place. The Group recognised impairment losses in respect of property, plant and equipment of HK$11,019,000 during the year ended 31 December 2016 (2015: HK$21,514,000). Allowance for doubtful debts The Group makes allowance for doubtful debts based on an assessment of the recoverability of debtors. Allowances are made on trade and other receivables whenever there is objective evidence that the balances may not be collectible. The Group makes judgement in assessing the collectability based on observable data including creditworthiness and payment history of the customers. When objective evidence for impairment exists, the amount of allowance is the difference between the carrying amounts of the debts and the present value of estimated future cash flows, discounted at the original effective interest rate. Where the expectation on the recoverability of the debts is different from the original estimate, such difference will impact the carrying amounts of debtors and doubtful debt expenses in the periods in which such estimate has been changed. 128 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 5. 估計不確定因素的主要來源 54,337,396,000 47,514,249,000 115,072,000 50,759,000 ) 18,859,121,000 15,251,983,000 448,305,000 422,518,000 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) Key sources of estimation uncertainty (continued) Allowance for doubtful debts (continued) The carrying amounts of trade and other receivables, net of allowance, are HK$54,337,396,000 as at 31 December 2016 (2015: HK$47,514,249,000). The Group recognised net impairment losses in respect of trade and other receivables of HK$115,072,000 during the year ended on 31 December 2016 (2015: HK$50,759,000). Allowance for inventories The Group makes allowance for inventories based on an assessment of the net realisable value of inventories. Allowances are applied to inventories where events or changes in circumstances indicate that the net realisable value is lower than the cost of inventories. The identification of obsolete inventories requires the use of judgement and estimates on the conditions and usefulness of the inventories. In cases where the net realisable value of inventories assessed are less than expected, a material recognition of allowance for inventories may arise, which would be recognised in profit or loss in the period in which such recognition takes place. The carrying amounts of inventories, net of allowance for slow-moving and obsolete inventories, are HK$18,859,121,000 as at 31 December 2016 (2015: HK$15,251,983,000). Income tax As at 31 December 2016, a deferred tax assets of HK$448,305,000 (2015: HK$422,518,000), in relation to unused tax losses and deductible temporary differences have been recognised in the Group s consolidated statement of financial position. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the taxable future profits generated are less or more than expected, or change in facts and circumstances which result in revision of future taxable profits estimation, a material reversal or further recognition of deferred tax assets may arise, which would be recognised in profit or loss for the period in which such a reversal or further recognition takes place. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 129

For the year ended 31 December 2016 6. 30 31 7. 金融工具 7a. 金融工具的種類 6. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances. The capital structure of the Group consists of net debts, which includes the bank borrowings and bonds payable disclosed in notes 30 and 31, respectively, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital, retained earnings and other reserves. Management of the Group reviews the capital structure on a periodic basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management, the Group will balance its overall structure through the payment of dividends and new shares issues as well as the issue of new debt or the repayment of existing debts. 7. FINANCIAL INSTRUMENTS 7a. Categories of Financial Instruments 2016 2015 港幣千元金融資產 Financial assets Available-for-sale investments 3,772,352 6,458,650 Loans and receivables (including cash and cash equivalents) 68,494,722 58,656,806 金融負債 Financial liabilities At amortised cost 74,105,211 77,414,304 130 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 7. 金融工具 7b. 金融風險管理目標 (i) 7. FINANCIAL INSTRUMENTS (continued) 7b. Financial risk management objectives The Group s major Financial Instruments include trade and other receivables, available-for-sale investments, amounts due from/to related parties, pledged bank deposits, bank balances and cash, trade and other payables, bank borrowings and bonds payable. Details of these Financial Instruments are disclosed in respective notes. The risks associated with these Financial Instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. Market risk (i) Foreign currency risk The carrying amounts of the Group s monetary assets and monetary liabilities denominated in foreign currencies, which are mainly trade and other receivables, amounts due from/to related parties, pledged bank deposits, bank balances and cash, trade and other payables, and bank borrowings of the Group, at the end of the reporting period are as follows: 2016 2015 港幣千元資產 Assets United States dollars ( USD ) 73,961 223,729 Euro ( EUR ) 1,643 1,782 HK$ 6,083,621 184,736 負債 Liabilities USD 1,275,982 EUR 117,982 HK$ 1,984,571 11,107,185 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 131

For the year ended 31 December 2016 7. 金融工具 7b. 金融風險管理目標 (i) 5%( 5%) 5%( 5%) 5% 5% 5%( 5%) 5%(5%) 7. FINANCIAL INSTRUMENTS (continued) 7b. Financial risk management objectives (continued) Market risk (continued) (i) Foreign currency risk (continued) The management of Group manages the foreign currency risk by closely monitoring the movements of foreign currency exchange rates. The Group currently has not entered into any foreign currency forward contracts to hedge against foreign currency risk. Management will consider hedging foreign currency exposure should the need arise. Sensitivity analysis The Group is mainly exposed to fluctuation in USD, EUR, and HK$ against RMB. The following table details the Group s sensitivity to a 5% (2015: 5%) increase and decrease in RMB, against relevant foreign currencies. 5% (2015: 5%) is the sensitivity rate which represents management s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% (2015: 5%) change in foreign currency rates. A positive (negative) number indicates an increase (decrease) in post-tax profit of the Group for the year when RMB strengthens 5% (2015: 5%) against the relevant currency. For a 5% (2015: 5%) weakening of RMB against the relevant currency, there would be an equal but opposite impact on the profit of the Group for both years. 2016 2015 港幣千元美元 USD Post-tax profit for the year (3,088) 43,932 歐元 EUR Post-tax profit for the year (69) 4,852 港幣 HK$ Post-tax profit for the year (171,135) 456,012 In management s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year. 132 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 7. 金融工具 7b. 金融風險管理目標 (ii) 5050 7. FINANCIAL INSTRUMENTS (continued) 7b. Financial risk management objectives (continued) Market risk (continued) (ii) Interest rate risk The Group is exposed to fair value interest rate risk in relation to fixed-rate borrowings and cash flow interest rate risk in relation to the floating rate bank borrowings. The Group does not have any interest rate hedging policy. However, the management monitors the related interest rate risk exposure closely and will consider hedging the interest rate risk exposure should the need arise. The Group is also exposed to cash flow interest rate risk in relation to bank balances due to the fluctuation of the prevailing market interest rate. The management considers the Group s exposure of the short-term bank deposits to interest rate risk is not significant as interest bearing bank balances are mainly within short maturity period. The Group s exposure to cash flow interest rate risk is mainly concentrated on the fluctuation of Hong Kong Interbank Offered Rate arising from the Group s borrowings denominated in Hong Kong dollars and People s Bank of China Base Rate arising from the Group s borrowings denominated in RMB. Sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for interest bearing bank balances, floating rate borrowings at the end of the reporting period. The analysis is prepared assuming that those balances outstanding at the end of the reporting period were outstanding for the whole year. A 50 basis points (2015: 50 basis points) increase or decrease which represents the management s assessment of the reasonably possible charge in interest rates is used. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 133

For the year ended 31 December 2016 7. 金融工具 7b. 金融風險管理目標 (ii) 50 50 70,051,000 ( 57,848,000 ) 50 43,450,000 116,217,000 39 7. FINANCIAL INSTRUMENTS (continued) 7b. Financial risk management objectives (continued) Market risk (continued) (ii) Interest rate risk (continued) If the interest rate on bank balances and pledged bank deposits carried at variable rates had been 50 basis points (2015: 50 basis points) higher/lower and all other variables were held constant, the post-tax profit of the Group would increase/decrease by approximately HK$70,051,000 for the year ended 31 December 2016 (2015: HK$57,848,000). If the interest rate on floating rate borrowings had been 50 basis points higher/lower and all other variables were held constant the post-tax profit of the Group would decrease/ increase by approximately HK$43,450,000 (2015: HK$116,217,000) for the year ended 31 December 2016. In management s opinion, the sensitivity analysis is unrepresentative of the inherent interest rate risk as the exposure at the end of each reporting period does not reflect the exposure at the end of each reporting period. Credit risk As at 31 December 2016 and 2015, the Group s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position and the amount of contingent liabilities in relation to financial guarantee issued by the Group as disclosed in note 39. In order to minimise the credit risk, the Group has policies in place for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Before accepting any new customer, the management of the Group carries out researches on the creditability of the new customer and assesses the potential customer s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed once a year. In addition, the Group reviews the recoverability of each individual trade debt on a regular basis to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group s credit risk is significantly reduced. 134 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 7. 金融工具 7b. 金融風險管理目標 7. FINANCIAL INSTRUMENTS (continued) 7b. Financial risk management objectives (continued) Credit risk (continued) The credit risk on liquid funds and structured deposits is limited because the counterparties are financial institutions with high credit ratings assigned by international credit-rating agencies. The Group does not have any significant concentration of credit risk. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Liquidity risk In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group s operations and mitigate the effects of fluctuations in cash flows. The management also monitors the utilisation of bank borrowings and ensures compliance with loan covenants, if any. The following table details the Group s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of the reporting period. 加權平均利率 Weighted average interest rate 按要求償還 Repayable on demand 1 年以內 Less than 1 year 1 至 2 年 1 2 years 2 年以上 Over 2 years 未貼現現金流量總額 Total undiscounted cash flows 賬面值 Carrying amounts % 港幣千元港幣千元港幣千元港幣千元港幣千元港幣千元 % 於二零一六年十二月三十一日 At 31 December 2016 Trade and other payables 48,222,106 48,222,106 48,222,106 Amounts due to related parties 148,399 23,274 171,673 171,673 Bank borrowings Fixed rate 3.94 4,319,031 7,137 572,698 4,898,866 4,671,778 Floating rate 3.12 892,550 8,960,371 1,127,329 477,214 11,457,464 11,090,735 Bonds payable 4.08 5,817,708 2,300,214 2,520,847 10,638,769 9,948,919 1,040,949 67,342,490 3,434,680 3,570,759 75,388,878 74,105,211 於二零一五年十二月三十一日 At 31 December 2015 Trade and other payables 39,317,080 39,317,080 39,317,080 Amounts due to related parties 855,146 23,740 878,886 878,886 Bank borrowings Fixed rate 4.54 2,266,269 2,266,269 2,159,132 Floating rate 2.51 3,000,000 19,658,372 928,714 4,055,324 27,642,410 26,824,353 Bonds payable 4.51 371,177 3,910,975 5,312,072 9,594,224 8,234,853 Financial guarantee contracts (note) 13,786 13,786 3,868,932 61,636,638 4,839,689 9,367,396 79,712,655 77,414,304 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 135

For the year ended 31 December 2016 7. 金融工具 7b. 金融風險管理目標 39(a) 892,550,000 ( 3,000,000,000 ) 7. FINANCIAL INSTRUMENTS (continued) 7b. Financial risk management objectives (continued) Liquidity risk (continued) Note: The amounts for financial guarantee contracts are the maximum amounts the Group could be required to settle under the arrangement for the full guaranteed amount as stated in note 39 (a) if those amounts are claimed by the counterparties to the guarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely than not that such amount will not be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparties claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparties which are guaranteed suffer credit losses. Bank borrowings with a repayment on demand clause is included in the repayable on demand time band in the above maturity analysis. As at 31 December 2016, the aggregate carrying amount of these bank borrowings amounted to approximately HK$892,550,000 (2015: HK$3,000,000,000). Taking into account the Group s financial position, the directors of the Company do not believe that it is probable that the banks will exercise their discretionary right to demand immediate repayment. The directors of the Company believe that such bank borrowings of the Group will be repaid after the end of reporting period in accordance with the scheduled repayment dates set out in the bank borrowing agreement. For the purpose of managing liquidity risk, the directors of the Company review the expected cash flows information of the Group s bank borrowings based on the scheduled repayment dates set out in the bank borrowing agreements as set out in the table below: 加權平均利率 Weighted average interest rate 1 年以內 Less than 1 year 1 至 2 年 1 2 years 2 年以上 Over 2 years 未貼現現金流量總額 Total undiscounted cash flows 賬面值 Carrying amounts % % Bank borrowings As at 31 December 2016 1.40 905,046 905,046 892,550 As at 31 December 2015 1.21 36,300 73,039 3,110,223 3,219,562 3,000,000 The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period. 136 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 7. 金融工具 7c. 金融工具公允價值量度 8. 收益 7. FINANCIAL INSTRUMENTS (continued) 7c. Fair value measurements of Financial Instruments The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. 8. REVENUE The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values at the end of each reporting period. Revenue represents revenue arising on sale of pharmaceutical products, medical equipment and others for the year. An analysis of the Group s revenue for the year from continuing operations is as follows: 2016 2015 港幣千元 Sales of pharmaceutical products 156,602,553 146,448,740 * Others* 102,650 119,365 156,705,203 146,568,105 * 9. 分部資料 * included rental income and sales of medical equipment and others 9. SEGMENT INFORMATION Management has determined the operating segment based on the reports reviewed by the board of directors that are used to make strategic decisions. The board of directors of the Company, being the chief operating decision maker (CODM), considers resource allocation and assesses segment performance from a different business type perspective. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 137

For the year ended 31 December 2016 9. 分部資料 8 9. SEGMENT INFORMATION (continued) Specifically, the Group s reportable segments under HKFRS 8 are as follows: (a) (a) Pharmaceutical business (Manufacturing segment) research and development, manufacture and sale of a broad range of pharmaceutical and healthcare products; (b) (b) Pharmaceutical business (Distribution segment) distribution, warehousing, logistics, and other value-added pharmaceutical supply chain solutions and related services to pharmaceutical manufacturers and dispensers, such as hospitals, distributors and retail pharmacies; (c) (c) Pharmaceutical retail (Retail segment) operation of retailing of pharmacy stores; and (d) (d) Other business operations (Others) manufacturing and sales of medical equipment and property holding. No operating segments have been aggregated to derive the reportable segments of the Group. Inter-segment sales are conducted at prices and terms mutually agreed amongst those operating segments. The board of directors assesses the performance of the operating segments based on a measure of revenue and segment results. 138 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 9. 分部資料截至二零一六年十二月三十一日止年度 9. SEGMENT INFORMATION (continued) Segment revenue and results The following is an analysis of the Group s revenue and results by reportable and operating segment. For the year ended 31 December 2016 製造分部 Manufacturing segment 分銷分部 Distribution segment 零售分部 Retail segment 其他 Others 抵消 Elimination 總計 Total 港幣千元港幣千元港幣千元港幣千元港幣千元港幣千元 External sales 22,375,141 130,312,955 3,914,457 102,650 156,705,203 Inter-segment sales 2,941,146 1,982,621 (4,923,767) Segment revenue 25,316,287 132,295,576 3,914,457 102,650 (4,923,767) 156,705,203 Segment results 7,445,921 5,529,452 118,362 67,885 13,161,620 Other income 1,287,789 Other gains and losses 250,706 Administrative expenses (3,882,186) Other expenses (956,502) Share of results of associates 48,164 Listing expenses (70,864) Finance costs (1,796,062) Profit before tax 8,042,665 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 139

For the year ended 31 December 2016 9. 分部資料 9. SEGMENT INFORMATION (continued) Segment revenue and results (continued) For the year ended 31 December 2015 製造分部 Manufacturing segment 分銷分部 Distribution segment 零售分部 Retail segment 其他 Others 抵消 Elimination 總計 Total External sales 21,606,656 121,190,915 3,651,169 119,365 146,568,105 Inter-segment sales 2,646,973 1,965,510 (4,612,483) Segment revenue 24,253,629 123,156,425 3,651,169 119,365 (4,612,483) 146,568,105 Segment results 7,250,850 5,677,168 100,907 58,391 13,087,316 Other income 1,002,378 Other gains and losses 1,160,888 Administrative expenses (3,844,892) Other expenses (1,363,157) Share of results of associates 58,224 Finance costs (2,050,462) Profit before tax 8,050,295 4 The accounting policies of the operating segments are the same as the Group s accounting policies described in note 4. Segment results represent the profit earned by each segment without allocation of other income, other gains and losses, administrative expenses, other expenses, share of results of associates, listing expenses and finance costs. This is the measure reported to the CODM for the purpose of resource allocation and performance assessment. The Group did not allocate certain depreciation of property, plant and equipment, amortisation of intangible assets, amortisation of prepaid lease payments and interest income to reportable segments. 140 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 9. 分部資料於二零一六年十二月三十一日 : 9. SEGMENT INFORMATION (continued) Segment assets and liabilities The following is an analysis of the Group s assets and liabilities by reportable and operating segments: As at 31 December 2016 製造分部 Manufacturing segment 分銷分部 Distribution segment 零售分部 Retail segment 其他 Others 抵消 Elimination 總計 Total 港幣千元港幣千元港幣千元港幣千元港幣千元港幣千元 Segment assets 40,068,527 82,505,432 1,546,925 51,339,694 (41,937,969) 133,522,609 Deferred tax assets 448,305 Taxation recoverable 14,600 Total assets 133,985,514 Segment liabilities 8,410,328 56,875,213 1,329,362 8,634,318 (23,570,848) 51,678,373 Unallocated liabilities 28,005,287 Total liabilities 79,683,660 As at 31 December 2015 製造分部 Manufacturing segment 分銷分部 Distribution segment 零售分部 Retail segment 其他 Others 抵消 Elimination 總計 Total Segment assets 38,565,153 80,089,578 1,598,451 49,252,809 (42,800,561) 126,705,430 Deferred tax assets 422,518 Taxation recoverable 20,651 Total assets 127,148,599 Segment liabilities 8,011,165 52,150,499 1,273,142 2,956,154 (17,158,682) 47,232,278 Unallocated liabilities 40,070,756 Total liabilities 87,303,034 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 141

For the year ended 31 December 2016 9. 分部資料 : 截至二零一六年十二月三十一日止年度 : 9. SEGMENT INFORMATION (continued) Segment assets and liabilities (continued) For the purposes of monitoring segment performance and allocating resources between segments: all assets (including investments in subsidiaries and the amounts due from group entities within the Group) are allocated to reportable segment assets other than deferred tax assets and taxation recoverable; and all liabilities (including the amounts due to group entities within the Group) are allocated to reportable segment liabilities other than taxation payable, deferred tax liabilities, bank borrowings, bonds payable and other non-current liabilities. Other Segment Information Amounts included in the measure of segment profit or loss and segment assets: For the year ended 31 December 2016 製造分部 Manufacturing segment 分銷分部 Distribution segment 零售分部 Retail segment 其他 Others 抵消 Elimination 總計 Total 港幣千元港幣千元港幣千元港幣千元港幣千元港幣千元 Amounts included in the measure of segment profit or loss: Amortisation of prepaid lease payments 12,571 5,028 210 3,142 20,951 Depreciation of property, plant and equipment 519,266 199,672 7,488 9,151 735,577 Amortisation of intangible assets 23,224 12,840 36,064 Amounts regularly provided to the board of directors of the Company but not included in the measure of segment profit or loss or segment assets: Gain arising on change in fair value of investment properties 218,260 218,260 Impairment loss recognised on trade and other receivables 8,441 103,282 3,000 349 115,072 Allowance for slow-moving and obsolete inventories 13,327 29,763 1,333 44,423 Impairment loss recognised on property, plant and equipment 8,264 2,534 198 23 11,019 Amortisation of prepaid lease payments 25,441 10,840 208 5,213 41,702 Depreciation of property, plant and equipment 200,366 68,618 2,470 3,020 274,474 Amortisation of intangible assets 102,552 63,144 165,696 Capital expenditure 1,219,482 680,581 26,937 55,316 1,982,316 142 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 9. 分部資料 9. SEGMENT INFORMATION (continued) Other Segment Information (continued) For the year ended 31 December 2015 製造分部 Manufacturing segment 分銷分部 Distribution segment 零售分部 Retail segment 其他 Others 抵消 Elimination 總計 Total Amounts included in the measure of segment profit or loss: Amortisation of prepaid lease payments 2,351 1,124 504 3,979 Depreciation of property, plant and equipment 618,030 211,912 5,958 7,145 843,045 Amortisation of intangible assets 18,659 11,418 330 30,407 Amounts regularly provided to the board of directors of the Company but not included in the measure of segment profit or loss or segment assets: Gain on disposal of prepaid lease payments 148,542 148,542 Gain arising on change in fair value of investment properties 69,334 69,334 Impairment loss recognised on trade and other receivables 4,432 45,926 396 5 50,759 Allowance for slow-moving and obsolete inventories 22,704 54,674 2,590 79,968 Impairment loss recognised on property, plant and equipment 16,167 5,165 182 21,514 Amortisation of prepaid lease payments 31,601 14,862 45 6,745 53,253 Depreciation of property, plant and equipment 190,285 49,827 3,249 3,851 247,212 Amortisation of intangible assets 103,059 63,068 1,824 167,951 Capital expenditure 1,216,737 977,706 20,765 2,491 2,217,699 Capital expenditure comprises mainly additions to prepaid lease payments, investment properties, property, plant and equipment and intangible assets, excluding additions resulting from acquisitions through business combination. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 143

For the year ended 31 December 2016 9. 分部資料 9. SEGMENT INFORMATION (continued) Revenue by products The information about the Group s revenue by products is not available and the cost to develop it would be excessive. Geographical information Revenue by geographical location The Group s customers are mainly located in the PRC and Hong Kong. An analysis of the Group s revenue by geographical market based on where the goods are delivered to is as below: 2016 2015 港幣千元 PRC 155,789,350 145,635,048 Hong Kong 915,853 933,057 156,705,203 146,568,105 10% Non-current assets by geographical location The Group s operations are mainly located in the PRC and substantially all non-current assets are located in the PRC by location of assets. Information about major customers No revenue from customers in each reporting period, individually contributes to over 10% of the total revenue of the Group. 144 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 10. 其他收益及虧損 10. OTHER GAINS AND LOSSES 2016 2015 港幣千元 Gain on disposal of associates 31,737 41,711 Gain (loss) on disposal of available-for-sale investments 5,841 (15,806) 37 Gain on disposal of subsidiaries (Note 37) 74,174 32,033 38 Gain on disposal of subsidiaries classified as held for sale (Note 38) 49,288 840,647 Loss on disposal of property, plant and equipment (18,206) (7,622) Gain on disposal of prepaid lease payments 148,542 Gain on disposal of intangible assets 527 Impairment loss recognised on property, plant and equipment (11,019) (21,514) Impairment loss recognised on trade receivables, net (80,177) (54,842) Impairment loss recognised on intangible assets (3,231) (Impairment loss of) reversal of impairment recognised on other receivables, net (34,895) 4,083 Impairment loss recognised on goodwill (60,109) Investment income on available-for-sale investments 38,075 189,669 Gain arising on change in fair value of investment properties 218,260 69,334 Others (19,668) (5,238) 250,706 1,160,888 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 145

For the year ended 31 December 2016 11. 11. FINANCE COSTS 2016 2015 港幣千元 Interest on bank borrowings 1,360,202 1,746,652 Interest on bonds payable 470,782 341,182 Interest on borrowings from intermediate holding company 4,030 Less: Interest capitalised in property, plant and equipment (Note) (34,922) (41,402) 1,796,062 2,050,462 5.8% ( 5.6%) 12. 董事最高行政人員及僱員薪酬 12a. 董事 Note: Borrowing costs capitalised during the year ended 31 December 2016 arose on funds borrowed specifically for the purpose of obtaining qualifying assets and on the general borrowing pool which are calculated by applying a capitalisation rate of 5.8% (2015: 5.6%) per annum to expenditure on qualifying assets. 12. DIRECTORS, CHIEF EXECUTIVE S AND EMPLOYEES EMOLUMENTS 12a. Directors Directors and chief executives remuneration for the year, disclosed pursuant to the applicable Listing Rules and CO, is as follows: 袍金 Fee 薪金及其他津貼 Salaries and other allowance 酌情花紅 Discretionary bonus 退休福利計劃供款 Retirement benefit scheme contributions 其他 Others 總計 Total 港幣千元港幣千元港幣千元港幣千元港幣千元港幣千元截至二零一六年十二月 Year ended 31 December 2016 三十一日止年度 A) 執行董事 (A) EXECUTIVE DIRECTORS Mr. Wang Chuncheng 5,330 78 211 5,619 Mr. Li Guohui (appointed on 29 March 2016) 3,125 18 128 3,271 Mr. Song Qing (appointed on 10 May 2016) 3,335 15 3,350 11,790 111 339 12,240 146 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 12. 董事最高行政人員及僱員薪酬 12a. 董事 12. DIRECTORS, CHIEF EXECUTIVE S AND EMPLOYEES EMOLUMENTS (continued) 12a. Directors (continued) The executive directors emoluments shown above were for their services in connection with the management of the affairs of the Group. Mr. Wang Chuncheng is the chief executive officer of the Group and the emoluments disclosed above include those for services rendered by him as the chief executive officer. 袍金 Fee 薪金及其他津貼 Salaries and other allowance 酌情花紅 Discretionary bonus 退休福利計劃供款 Retirement benefit scheme contributions 總計 Total 港幣千元港幣千元港幣千元港幣千元港幣千元截至二零一六年十二月三十一日 Year ended 31 December 2016 止年度 B 非執行董事 : (B) NON-EXECUTIVE DIRECTORS Mr. Fu Yuning Ms. Chen Jisheng (resigned on 10 May 2016) 30 30 Mr. Chen Rong (appointed on 10 May 2016) Mr. Yu Zhongliang (appointed on 20 June 2016) Mr. Wang Chenyang Ms. Wang Jing (appointed on 20 June 2016) Mr. Li Fuzuo (resigned on 29 March 2016) Mr Wei Bin (resigned on 10 May 2016) Mr. Yin Rongyan (resigned on 20 June 2016) Mr. Wang Shouye (resigned on 20 June 2016) Mr. Chen Ying (resigned on 20 June 2016) 30 30 The non-executive directors emoluments shown above were for their services as directors of the Company or its subsidiaries. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 147

For the year ended 31 December 2016 12. 董事最高行政人員及僱員薪酬 12a. 董事 12. DIRECTORS, CHIEF EXECUTIVE S AND EMPLOYEES EMOLUMENTS (continued) 12a. Directors (continued) 袍金 Fee 薪金及其他津貼 Salaries and other allowance 酌情花紅 Discretionary bonus 退休福利計劃供款 Retirement benefit scheme contributions 總計 Total 港幣千元港幣千元港幣千元港幣千元港幣千元截至二零一六年十二月三十一日 Year ended 31 December 2016 止年度 (C) 獨立非執行董事 (C) INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. Tsang Hing Lun (appointed on 20 June 2016) 133 133 Mr. Kwok Kin Fun (appointed on 20 June 2016) 133 133 Mr. Fu Tingmei (appointed on 20 June 2016) 133 133 Mr. Zhang Kejian (appointed on 20 June 2016) 203 203 602 602 The independent non-executive directors emoluments shown above were for their services as directors of the Company or its subsidiary. 148 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 12. 董事最高行政人員及僱員薪酬 12a. 董事 12. DIRECTORS, CHIEF EXECUTIVE S AND EMPLOYEES EMOLUMENTS (continued) 12a. Directors (continued) 袍金 Fee 薪金及其他津貼 Salaries and other allowance 酌情花紅 Discretionary bonus 退休福利計劃供款 Retirement benefit scheme contributions 總計 Total 截至二零一五年十二月三十一日 Year ended 31 December 2015 止年度 Director: Mr. Li Fuzuo (resigned on 29 March 2016) 6 2,285 2,291 Mr. Wei Bin (resigned on 10 May 2016) Mr. Yin Rongyan (resigned on 20 June 2016) Mr. Wang Shouye (resigned on 20 June 2016) Mr. Chen Ying (resigned on 20 June 2016) 131 131 Mr. Fu Yuning Mr. Wang Chuncheng 1,892 120 2,012 Ms. Chen Jisheng (resigned on 10 May 2016) 30 3,202 3,232 Mr. Wang Chenyang (appointed on 11 June 2015) Mr. Zhao Jifeng (resigned on 11 June 2015) 167 7,379 120 7,666 The directors emoluments shown above were for their services in connection with the management of the affairs of the Group. Certain directors have also been employed by CRNC and the payments of their emoluments were borne by CRNC for both years. There was no arrangement under which a director or the chief executive waived or agreed to waive any remuneration during the year. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 149

For the year ended 31 December 2016 12. 董事最高行政人員及僱員薪酬 12b. 五名最高薪酬僱員 : 12. DIRECTORS, CHIEF EXECUTIVE S AND EMPLOYEES EMOLUMENTS (continued) 12b. Five highest paid employees The five highest paid individuals of the Group during the year included three directors (2015: nil), details of their emoluments are set out above. Details of the remuneration for the year of remaining two (2015: five) highest paid employees who are neither a director nor chief executive of the Company are as follows: 2016 2015 港幣千元 Salaries and other benefit 7,425 17,840 Retirement benefit scheme contributions 94 170 7,519 18,010 Their emoluments fall within the following bands: 2016 2015 僱員人數 Number of employees Number of employees 3,000,0013,500,000 HK$3,000,001 to HK$3,500,000 3 3,500,0014,000,000 HK$3,500,001 to HK$4,000,000 2 2 No emoluments were paid by the Group to the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office during the years ended 31 December 2016 and 2015. 150 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 13. 所得稅開支 13. INCOME TAX EXPENSE 2016 2015 港幣千元 Current tax: PRC Enterprise Income Tax 1,928,324 1,976,926 Hong Kong Profits Tax 380 9,864 1,928,704 1,986,790 Under (over) provisions in previous years: PRC Enterprise Income Tax 120,443 (203) Deferred tax: 32 Current year (Note 32) 25,429 (18,526) 2,074,576 1,968,061 16.5% 25% 15% 2012 12 2011 58 15% 15% Current tax provision represents provision for PRC Enterprise Income Tax ( PRC EIT ) and Hong Kong Profits Tax. Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for the year. Under the Law of People s Republic of China on Enterprise Income Tax (the EIT Law ) and Implementation Regulation of the EIT Law, the tax rate of PRC subsidiaries is 25% from 1 January 2008 onwards, except for those subsidiaries described below. Certain subsidiaries operating in the PRC were accredited as High and New Technology Enterprise by the Science and Technology Bureau of relevant provinces and other authorities for a term of three years, and were registered with the local tax authorities to be eligible to the reduced 15% enterprise income tax rate in period from 2015 2018. Apart from that, according to the Guo Shui 2012 No. 12 and Cai Shui 2011 No. 58, certain PRC subsidiaries of the Group are engaged in the encouraged business activities under the Development of Western Region Program, and a preferential tax rate of 15% is granted for an extended period from 2011 to 2020. As a result, the tax rate of 15% is used to calculate the amount of current taxation. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 151

For the year ended 31 December 2016 13. 所得稅開支 13. INCOME TAX EXPENSE (continued) The tax charge for the year can be reconciled to the profit before tax per the consolidated statement of profit or loss and other comprehensive income as follows: 2016 2015 港幣千元 Profit before tax 8,042,665 8,050,295 25% 25% Tax at the PRC Enterprise Income Tax rate 25% (2015: 25%) 2,010,666 2,012,574 Tax effect of share of results of associates (12,041) (14,556) Tax effect of income not taxable for tax purposes (59,440) (60,145) Tax effect of expenses not deductible for tax purpose 189,212 213,177 Special deduction of research and development costs (94,805) (46,751) Income tax on concessionary rate (386,721) (280,322) Effect of different tax rates of group entities operating in Hong Kong 54,174 66,547 Utilisation of tax losses not recognised (74,138) (100,444) Utilisation of deductible temporary differences previously not recognised (27,180) (46,156) Tax effect of tax losses not recognised 187,701 144,624 Tax effect of deductible temporary differences not recognised 38,478 10,387 Under (over) provisions in previous years 120,443 (203) Deferred tax on undistributed earnings of PRC subsidiaries 203,406 Others (75,179) 69,329 Tax charge for the year 2,074,576 1,968,061 152 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 14. 年內溢利 14. PROFIT FOR THE YEAR 2016 2015 Profit for the year has been arrived at after charging: 港幣千元 Staff costs Directors remuneration Fees 632 167 Salaries and other benefits 11,790 7,379 Retirement benefit schemes contributions 111 120 Salaries and other benefits for other staff 6,204,393 5,870,856 Retirement benefit schemes contributions for other staff 638,927 603,339 Total staff costs 6,855,853 6,481,861 Auditors remuneration 16,138 13,330 Depreciation of property, plant and equipment 1,010,051 1,090,257 Amortisation of intangible assets 201,760 198,358 Amortisation of prepaid lease payments 62,653 57,232 Allowance for slow-moving and obsolete inventories 44,423 79,968 Cost of inventories recognised as an expense 131,901,522 122,202,090 Research and development expenditure (included in other expenses) 725,691 708,876 Operating lease payments in respect of rented premises 488,109 462,833 Exchange loss, net 170,064 569,956 Donations 14,332 16,797 and after crediting: Dividend income 3,903 12,596 Government grants (Note) 293,695 255,522 Interest income 264,949 231,957 Gross rental income from investment properties 102,650 88,364 Less: direct operating expenses incurred for investment properties that generated rental income during the year (34,765) (29,973) 67,885 58,391 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 153

For the year ended 31 December 2016 14. 年內溢利 176,217,000 155,464,000 117,478,000 100,058,000 33 15. 股息 0.09 565,606,000 16 90 9.9 156,624,000 175,095,000588,619,000 658,035,000 71,723,000 80,181,000 14. PROFIT FOR THE YEAR (continued) Note: Included in government grants, approximately HK$176,217,000 during the year ended 31 December 2016 (2015: HK$155,464,000), represent compensation for expenses or costs already incurred or for the purpose of giving immediate financial support to the Group with no future related cost or without any conditions and accordingly, recognised in profit or loss during the year ended 31 December 2016. The remaining amounts of HK$117,478,000 during the year ended 31 December 2016 (2015: HK$100,058,000), represent government grants in relation to the purchase, construction or acquisition of non-current assets and accordingly, recognised as other non-current liabilities, as disclosed in note 33. 15. DIVIDENDS Subsequent to the end of the reporting period, a final dividend in respect of the year ended 31 December 2016 of HK$0.09 (2015: nil) per ordinary share, in an aggregate amount of HK$565,606,000 (2015: nil), has been proposed by the directors of the Company and is subject to approval by the shareholders in the forthcoming general meeting. Subsequent to the end of the reporting period, a final dividend of subsidiaries in respect of the year ended 31 December 2016 of subsidiaries, namely China Resources Sanjiu Medical & Pharmaceutical Company Limited ( ) ( CR Sanjiu Pharmaceutical ), Dong-E-E-Jiao and CR Double-Crane, of RMB16 cents, RMB90 cents and RMB9.9 cents per ordinary share, in an aggregate amount of RMB156,624,000 (equivalent to HK$175,095,000), RMB588,619,000 (equivalent to HK$658,035,000) and RMB71,723,000 (equivalent to HK$80,181,000) respectively has been proposed by the directors of the subsidiaries respectively, and is subject to approval by the shareholders of the subsidiaries in the forthcoming general meeting. 154 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 16. 每股盈利 16. EARNINGS PER SHARE The calculation of the basic earnings per share attributable to the owners of the Company is based on the following data: 2016 2015 港幣千元盈利股份數目 Earnings Profit for the year attributable to owners of the Company for the purpose of basic earnings per share 2,821,410 2,850,076 Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share 4,912,481,540 4,629,424,461 The calculation of diluted earnings per share for the current year does not assume the exercise of the over-allotment option granted upon the Listing as the exercise price of this option was higher than the average market price per share during the exercisable period of this option. No diluted earnings per share is presented for the year ended 31 December 2015 as the Group had no potential ordinary shares in issue during the year. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 155

For the year ended 31 December 2016 17. 物業廠房及設備 17. PROPERTY, PLANT AND EQUIPMENT 樓宇 Buildings 機械及設備 Machinery and equipment 租賃物業裝修 Leasehold improvements 汽車 Motor vehicles 傢具及裝置 Furniture and fixtures 在建工程 Construction in progress 總計 Total COST At 1 January 2015 8,621,337 4,694,475 375,956 329,382 943,348 1,985,651 16,950,149 Additions 104,724 290,788 11,375 40,166 185,996 1,045,221 1,678,270 Disposals (35,285) (182,458) (4,773) (55,463) (131,551) (110) (409,640) 36 Acquisition of subsidiaries (Note 36) 167,637 115,271 670 6,585 8,728 45,477 344,368 37 Disposal of subsidiaries (Note 37) (18,746) (280) (886) (2,535) (22,447) 38 Reclassified as held for sale (Note 38) (627,142) (145,596) (46,084) (21,894) (37,894) (47,939) (926,549) 19 Transfer from investment properties (Note 19) 3,042 3,042 19 Transfer to investment properties (Note 19) (24,046) (24,046) Transfers 993,767 361,566 514 (115) 78,494 (1,434,226) Exchange realignment (436,471) (137,626) (15,017) (19,833) (53,890) (108,902) (771,739) At 31 December 2015 8,748,817 4,996,140 322,641 277,942 990,696 1,485,172 16,821,408 Additions 628,318 209,053 81,717 151,234 151,932 496,180 1,718,434 Disposals (91,008) (145,136) (70,310) (79,875) (95,304) (63,690) (545,323) 36 Acquisition of subsidiaries (Note 36) 171,190 29,412 9,625 9,827 8,006 2,373 230,433 37 Disposal of subsidiaries (Note 37) (34,960) (81,592) (3,347) (2,543) (6,634) (129,076) 19 Transfer from investment properties (Note 19) 48,643 48,643 19 Transfer to investment properties (Note 19) (147,841) (147,841) Transfers 133,011 430,499 17,969 1,742 94,248 (677,469) Exchange realignment (499,484) (176,311) (21,196) (17,788) (63,405) (95,051) (873,235) At 31 December 2016 8,956,686 5,262,065 340,446 339,735 1,083,630 1,140,881 17,123,443 DEPRECIATION At 1 January 2015 1,162,498 1,634,600 213,342 159,571 389,446 3,559,457 Provided for the year 307,340 512,375 30,850 60,724 178,968 1,090,257 Eliminated on disposals (23,996) (141,356) (2,066) (33,341) (31,603) (232,362) 37 Eliminated on disposal of subsidiaries (Note 37) (5,603) (22) (108) (667) (6,400) 38 Reclassified as held for sale (Note 38) (147,401) (95,745) (7,027) (15,348) (21,584) (287,105) 19 Transfer to investment properties (Note 19) (12,092) (12,092) Transfers 2,567 (895) (2,531) 859 Exchange realignment (44,266) (72,130) (13,386) (8,781) (27,655) (166,218) 156 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 17. 物業廠房及設備 17. PROPERTY, PLANT AND EQUIPMENT (continued) 樓宇 Buildings 機械及設備 Machinery and equipment 租賃物業裝修 Leasehold improvements 汽車 Motor vehicles 傢具及裝置 Furniture and fixtures 在建工程 Construction in progress 總計 Total At 31 December 2015 1,239,047 1,836,827 221,713 160,186 487,764 3,945,537 Provided for the year 233,004 527,581 42,455 52,381 154,630 1,010,051 Eliminated on disposals (45,985) (111,153) (62,358) (19,845) (87,550) (326,891) 37 Eliminated on disposal of subsidiaries (Note 37) (10,605) (37,886) (3,230) (1,878) (53,599) 19 Transfer to investment properties (Note 19) (40,341) (40,341) Exchange realignment (54,395) (97,943) (9,381) (13,059) (20,169) (194,947) At 31 December 2016 1,320,725 2,117,426 192,429 176,433 532,797 4,339,810 IMPAIRMENT At 1 January 2015 42,800 32 274,044 316,876 Recognised for the year 2,797 8,383 10,334 21,514 Eliminated on disposals (5,549) (6,536) (10,055) (22,140) 38 Reclassified as held for sale (Note 38) (74) (74) Exchange realignment (1,955) (408) (311) (15,888) (18,562) At 31 December 2015 38,019 1,439 258,156 297,614 Recognised for the year 8,157 2,862 11,019 Eliminated on disposals (3,109) (1,185) (184) (4,478) 37 Eliminated on disposal of subsidiaries (Note 37) (597) (597) Exchange realignment (2,556) (92) (247) (17,107) (20,002) At 31 December 2016 39,914 162 2,431 241,049 283,556 CARRYING VALUE At 31 December 2016 7,635,961 3,104,725 147,855 163,302 548,402 899,832 12,500,077 At 31 December 2015 7,509,770 3,121,294 99,489 117,756 502,932 1,227,016 12,578,257 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 157

For the year ended 31 December 2016 17. 物業廠房及設備 11,019,000 21,514,000 1,870,784,000 2,012,506,000 30 19,507,000 34,922,000 41,402,000 17. PROPERTY, PLANT AND EQUIPMENT (continued) Due to physical damage and technical obsolescence in respect of the Group s certain property, plant and equipment, the carrying values of these property, plant and equipment were fully impaired and impairment losses of HK$11,019,000 have been recognised for the year ended 31 December 2016 (2015: HK$21,514,000). The recoverable amounts of the relevant assets have been determined on the basis of their value in use. The Group s buildings are all situated in the PRC and are held under medium term leases. The Group s buildings with carrying value of HK$1,870,784,000 as at 31 December 2016 (2015: HK$2,012,506,000), are still in the process of application of title certificates. The Group has no building were pledged to secure the bank borrowings granted to the Group (Note 30) as at 31 December 2016 (2015: HK$19,507,000). The interest expenses of HK$34,922,000 during the year ended 31 December 2016 (2015: HK$41,402,000), were capitalised into construction in progress. The above items of property, plant and equipment, other than construction in progress, are depreciated over their estimated useful lives and after taking into account their estimated residual values, using the straight-line method, as follows: 20 35 5 10 5 5 5 Buildings Machinery and equipment Leasehold improvements Motor vehicles Furniture and fixtures 20 to 35 years or over the relevant lease terms, whichever is shorter 5 to 10 years 5 years or over the relevant lease terms, whichever is shorter 5 years 5 years 158 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 18. 預付租賃款項 18. PREPAID LEASE PAYMENTS 2016 2015 港幣千元 COST At the beginning of the year 2,674,034 2,788,200 Additions 141,227 78,663 Disposals (39,353) (65,771) 36 Acquisition of subsidiaries (Note 36) 30,928 181,428 37 Disposal of subsidiaries (Note 37) (4,235) 38 Reclassified as held for sale (Note 38) (134,605) Exchange realignment (179,207) (173,881) At the end of the year 2,623,394 2,674,034 AMORTISATION At the beginning of the year 280,853 264,005 Provided for the year 62,653 57,232 Written off on disposals (877) (3,216) 37 Eliminated on disposal of subsidiaries (Note 37) (825) 38 Reclassified as held for sale (Note 38) (19,717) Exchange realignment (18,866) (17,451) At the end of the year 322,938 280,853 IMPAIRMENT At the beginning of the year 15,214 16,156 Exchange realignment (966) (942) At the end of the year 14,248 15,214 CARRYING VALUES At the end of the year 2,286,208 2,377,967 Analysis by: Current portion 62,653 57,232 Non-current Portion 2,223,555 2,320,735 Total 2,286,208 2,377,967 43,459,000 30 The Group s prepaid lease payments comprise leasehold interest in land situated in the PRC on medium term leases. There are no prepaid lease payments pledged to secure certain bank borrowings granted to the Group (Note 30) as at 31 December 2016 (2015: HK$43,459,000). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 159

For the year ended 31 December 2016 19. 投資物業 19. INVESTMENT PROPERTIES 2016 2015 港幣千元公允價值 FAIR VALUE At the beginning of the year 1,020,149 956,058 Additions 1,382 40,611 Disposal (1,495) (730) 37 Disposal of subsidiaries (Note 37) (3,036) Increase in fair value recognised in profit or loss 218,260 69,334 Transfer from property, plant and equipment 279,739 14,000 17 Transfer to property, plant and equipment (Note 17) (48,643) (3,042) Exchange realignment (76,111) (56,082) At the end of the year 1,390,245 1,020,149 公允價值計量及估值程序 Fair value measurements and valuation processes In estimating the fair value of investment properties, it is the Group s policy to engage third party qualified external valuer to perform the valuation. The management works closely with the qualified external valuers to establish the appropriate valuation technique and inputs to the model. The fair value of the Group s investment properties as at 31 December 2016 have been arrived at on the basis of a valuation carried out on those dates by Vocation (Beijing) International Asset Valuation Co., Ltd, an independent qualified professional valuers not connected with the Group. As at 31 December 2016, the fair value was determined based on the income approach, where the market rentals of all lettable units of the properties are assessed and discounted at the market yield expected by investors for this type of properties. The market rentals are assessed by reference to the rentals achieved in the lettable units of the properties as well as other lettings of similar properties in the neighbourhood. The discount rate is determined by reference to the yields derived from analysis the sales transactions of similar commercial properties in the PRC and adjusted to take into account the market expectation from property investors to reflect factors specific to the Group s investment properties. There has been no change from the valuation technique used during the year. 160 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 19. 投資物業公允價值計量及估值程序 19. INVESTMENT PROPERTIES (continued) Fair value measurements and valuation processes (continued) In estimating the fair value of the properties, the highest and best use of the properties is their current use. The following table gives information about how the fair values of these investment properties are determined as at 31 December 2016 and 2015, (in particular, the valuation techniques and inputs used), as well as the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable. 於綜合財務狀況表中本集團持有的投資物業 Investment properties held by the Group in the combined statements of financial position 公允價值層級 Fair value hierarchy 估值技巧及主要輸入數據 Valuation technique(s) and key input(s) 不可觀察輸入數據與公允價值的關係 Relationship of unobservable inputs to fair value Commercial property units Level 3 Income approach The key inputs for the year ended 31 December 2016 are (1) Average monthly rental: RMB72 (2015: RMB66) per square meter. (1) 72 66 An increase in the monthly rental used would result in an increase in fair value measurement of the investment properties in similar extent, and vice versa. (2) Discount rate: approximately 7.5% (2015: 7.5%). (2)7.5% 7.5% A slight increase in discount rate used would result in a significant decrease in fair value measurement to the investment properties, and vice versa. (3) Rental yield: 9.8% (2015: 8.7%). A slight increase in rental yield used would result in a significant increase in fair value measurement to investment properties, and vice versa. (3)9.8% 8.7% 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 161

For the year ended 31 December 2016 19. 投資物業公允價值計量及估值程序 19. INVESTMENT PROPERTIES (continued) Fair value measurements and valuation processes (continued) Details of the Group s investment properties and information about the fair value hierarchy at the end of each reporting period are as follows: 二零一六年 2016 第三級 Level 3 港幣千元於二零一六年十二月三十一日的公允價值 Fair value as at 31.12.2016 港幣千元 Commercial property units located in the PRC 1,390,245 1,390,245 二零一五年 2015 第三級 Level 3 於二零一五年十二月三十一日的公允價值 Fair value as at 31.12.2015 Commercial property units located in the PRC 1,020,149 1,020,149 20. 商譽 There were no transfers into or out of Level 3 during the year. 20. GOODWILL 2016 2015 港幣千元成本 COST At the beginning of the year 16,516,258 15,387,575 36 Acquisition of subsidiaries/businesses (Note 36) 2,155,042 1,604,828 38 Reclassified as held for sale (Note 38) (15,892) Exchange realignment (1,152,451) (460,253) At the end of the year 17,518,849 16,516,258 減值 IMPAIRMENT At the beginning of the year 121,749 65,915 Impairment loss recognised 60,109 Exchange realignment (7,721) (4,275) At the end of the year 114,028 121,749 賬面值 CARRYING VALUE At the end of the year 17,404,821 16,394,509 162 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 20. 商譽 21 (1) (2) (3) 20. GOODWILL (continued) For the purposes of impairment testing, goodwill and trademarks with indefinite useful lives (as disclosed in note 21) have been allocated to individual cash generating units ( CGUs ) which are grouping into three categories: (1) distribution of pharmaceutical products, (2) manufacturing of pharmaceutical products, and (3) retailing of pharmaceutical products. The carrying amounts of goodwill (net of accumulated impairment losses) allocated to the different CGUs are as follows: 2016 2015 港幣千元 Distribution of pharmaceutical products CGU: A Company A 2,017,064 2,153,648 B Company B 1,473,806 1,573,604 C Company C 998,184 1,065,776 D Company D 788,554 841,951 E Company E 770,239 822,395 F Company F 580,230 619,520 G Company G 538,085 574,521 H Company H 517,150 552,169 I Company I 369,071 394,062 J Company J 314,053 335,319 K Company K 240,752 257,054 L Company L 218,177 232,951 M Company M 167,035 178,346 N Company N 106,936 114,177 V Company V 193,909 Others 1,509,349 1,293,356 Total goodwill under distribution of pharmaceutical products 10,802,594 11,008,849 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 163

For the year ended 31 December 2016 20. 商譽 20. GOODWILL (continued) 2016 2015 港幣千元 Manufacturing of pharmaceutical products CGU: O Company O 2,160,013 2,306,277 P Company P 1,144,064 1,221,533 Q Company Q 344,374 367,693 R Company R 306,141 326,871 S Company S 297,780 317,944 T Company T 95,589 102,061 W Company W 1,647,507 Others 506,294 635,706 Total goodwill under manufacturing of pharmaceutical products 6,501,762 5,278,085 Retailing of pharmaceutical products U CGU: Company U 100,465 107,575 17,404,821 16,394,509 藥品分銷 12% 8% 12% 4% 27.5% 5% 22% E E 60,109,000 Distribution of pharmaceutical products For the purpose of impairment testing, goodwill has been allocated to individual CGUs. The recoverable amount of these CGUs has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by management covering a 5-year period, and discount rate of 12% per annum as at 31 December 2016 (2015: 8% 12% per annum). These CGUs cash flows beyond the 5-year period are extrapolated using a steady growth rate of 4% 27.5% as at 31 December 2016 (2015: 5% 22%). The growth rates are based on the relevant industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Except for Company E mentioned below, management believes that any reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of individual CGUs to exceed respective recoverable amount of CGUs. In the opinion of the directors, no material additional impairment loss of goodwill is identified at the end of the reporting period. During the year ended 31 December 2016, no impairment loss was recognised (2015: Impairment loss of HK$60,109,000 on Company E) as the directors of the Company considered the carrying amount exceeded the recoverable amount of these CGUs. 164 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 20. 商譽藥品生產 11% 12% 11% 12% 7% 20% 4% 14% 藥品零售 U 11% 11% 8% 10% 20. GOODWILL (continued) Manufacturing of pharmaceutical products For the purpose of impairment testing, goodwill has been allocated to individual CGUs. The recoverable amount of these CGUs has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by management covering a 5-year period, and discount rate of 11% 12% per annum as at 31 December 2016 (2015: 11% 12% per annum). These CGUs cash flows beyond the 5-year period are extrapolated using a steady growth rate of 7% 20% as at 31 December 2016 (2015: 4% 14%). The growth rates are based on the relevant industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Management believes that any reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of individual CGUs to exceed respective recoverable amount of CGUs. In the opinion of the directors, no material additional impairment loss of goodwill is identified at the end of the reporting period. Retailing of pharmaceutical products For the purpose of impairment testing, goodwill has been allocated to individual CGU. The recoverable amount of Company U has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by management covering a 5-year period, and discount rate of 11% as at 31 December 2016 (2015: 11%) per annum. This CGU s cash flows beyond the 5-year period are extrapolated using a steady growth rate of 8% as at 31 December 2016 (2015: 10%). The growth rates are based on the relevant industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. Management believes that any reasonably possible change in any of these assumptions would not cause the carrying amount of that CGU to exceed its respective recoverable amount of CGU. In the opinion of the directors, no material additional impairment loss of goodwill is identified at the end of the reporting period. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 165

For the year ended 31 December 2016 21. 無形資產 21. INTANGIBLE ASSETS 專利及牌照 Patents and licences 非專利技術 Non-patent technology 商標 Trademarks 遞延開發成本 Deferred development costs 客戶關係 Customer relationships 其他 Others 總計 Total 成本 COST At 1 January 2015 108,317 205,954 1,510,660 391,813 1,603,313 255,632 4,075,689 Additions 37,734 6,202 6,114 217,950 152,139 16 420,155 Disposals (6,740) (30,346) (4,683) (41,769) 38 Reclassified as held for sale (Note 38) (1,429) (2,521) (116,153) (120,103) 36 Acquisition of subsidiaries (Note 36) 65,660 103,996 21,350 515,752 706,758 37 Disposal of subsidiaries (Note 37) (45,154) (45,154) Exchange realignment (9,093) (16,011) (86,653) (27,756) (118,870) (14,739) (273,122) At 31 December 2015 201,189 290,880 1,384,967 487,204 2,121,988 236,226 4,722,454 Additions 5,576 148 88,835 26,714 121,273 Disposals (5,235) (30,679) (35,914) 36 Acquisition of subsidiaries (Note 36) 106,733 158,052 264,785 Exchange realignment (12,594) (22,494) (83,809) (31,625) (143,445) (11,961) (305,928) At 31 December 2016 188,595 273,962 1,408,039 544,414 2,131,360 220,300 4,766,670 攤銷 AMORTISATION At 1 January 2015 48,045 116,062 69,598 127,684 233,909 98,854 694,152 Provided during the year 20,633 51,123 57 21,145 91,385 14,015 198,358 Eliminated on disposals (1,348) (3,484) (3,417) (8,249) 38 Reclassified as held for sale (Note 38) (226) (2,475) (628) (3,329) 37 Eliminated on disposal of subsidiaries (Note 37) (7,264) (7,264) Exchange realignment (3,515) (8,752) (3,773) (8,314) (17,320) (6,220) (47,894) At 31 December 2015 64,937 154,610 58,618 139,887 304,490 103,232 825,774 Provided during the year 16,020 34,823 389 28,902 107,372 14,254 201,760 Eliminated on disposals (5) (16,506) (16,511) Exchange realignment (3,966) (14,865) (3,123) (8,893) (19,041) (7,080) (56,968) At 31 December 2016 76,991 174,568 55,884 159,896 392,816 93,900 954,055 減值 IMPAIRMENT At 1 January 2015 1,686 1,377 3,063 Exchange realignment (98) (80) (178) At 31 December 2015 1,588 1,297 2,885 Provided during the year 3,231 3,231 Exchange realignment (93) (78) (171) At 31 December 2016 4,726 1,219 5,945 賬面值 CARRYING VALUES At 31 December 2016 106,878 98,175 1,352,155 384,518 1,738,544 126,400 3,806,670 At 31 December 2015 134,664 134,973 1,326,349 347,317 1,817,498 132,994 3,893,795 Others mainly represent franchise rights. 166 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 21. 無形資產 1,338,136,000 1,319,292,000 20 O 21. INTANGIBLE ASSETS (continued) The above intangible assets, other than three (2015: two) trademarks with a total carrying value of HK$1,338,136,000 as at 31 December 2016 (2015: HK$1,319,292,000) (which are allocated to the CGU of Company O in note 20), have definite useful lives. Such intangible assets are amortised on a straight-line basis over the following periods: 5 10 5 10 5 20 5 20 5 10 Patents and licences Non-patent technology Trademarks Deferred development costs Customer relationships Others 5 10 years 5 10 years 5 20 years Not exceeding 5 years 20 years 5 10 years 1,338,136,000 1,319,292,000 3,231,000 As stated above, the trademarks with a total carrying value of HK$1,338,136,000 as at 31 December 2016 (2015: HK$1,319,292,000), are renewable continuously every ten years at minimal costs. The directors of the Company are of the opinion that the Group would renew the trademarks continuously and has the ability to do so. Various studies including product life cycle studies, market, competitive and environmental trends, and brand extension opportunities have been performed by management of the Group, which supports that the trademarks have no foreseeable limit to the period over which the trademarked products are expected to generate net cash flows for the Group. As a result, the trademarks are considered by the management of the Group as having an indefinite useful life because they are expected to contribute to net cash inflows indefinitely. The trademarks will not be amortised until the useful life is determined to be finite. Instead they will be tested for impairment annually and whenever there is an indication that they may be impaired. During the year ended 31 December 2016, impairment loss of HK$3,231,000 (2015: nil) was recognised in profit or loss for patents and licences since the relevant assets have expired as at year end. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 167

For the year ended 31 December 2016 22. 於附屬公司的投資 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES At the end of each reporting period, a majority of these subsidiaries operate in the PRC and Hong Kong. The principal activities of these subsidiaries are summarised as follows: 主要業務主要營業地點附屬公司數目 Principal activities Principal place of business Number of subsidiaries 2016 2015 Manufacturing segment PRC 130 129 Distribution segment PRC, Hong Kong 113 114 Retail segment PRC, Hong Kong 54 51 Others PRC, Hong Kong 15 15 The Company has equity interest in the following principal subsidiaries: 附屬公司名稱 Name of subsidiary 成立地點及日期 Place and date of establishment 營運地點 Place of operation 悉數支付註冊資本 Fully paid registered capital 本集團應佔股權 Equity interest attributable to the Group 於十二月三十一日 At 31 December 主要業務 Principal activities 2016 2015 4, 5 6c China Resources Pharmaceutical Holdings PRC Limited Company ( CR Pharmaceutical 22 March 2007 Holdings ) (notes 4, 5 and 6c) PRC 10,000,000,000 RMB10,000,000,000 100% 100% Investment holding 6b China Resources Pharmaceutical Investment PRC Company Limited ( CR Pharmaceutical 4 July 2003 Investment ) (note 6b) PRC 500,000,000 RMB500,000,000 100% 100% Investment holding 1, 4 6d CR Sanjiu Pharmaceutical (notes 1, 4 and 6d) PRC 21 April 1999 PRC 978,900,000 RMB978,900,000 63.60% 63.59% Manufacturing and sales of pharmaceuticals products 6b CR Donge (note 6b) PRC 9 December 2004 PRC 422,771,675 RMB422,771,675 56.62% 56.62% Investment holding 168 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 22. 於附屬公司的投資 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued) 附屬公司名稱 Name of subsidiary 成立地點及日期 Place and date of establishment 營運地點 Place of operation 悉數支付註冊資本 Fully paid registered capital 本集團應佔股權 Equity interest attributable to the Group 於十二月三十一日 At 31 December 主要業務 Principal activities 2016 2015 1,2 6d) Dong-E-E-Jiao (notes 1, 2 and 6d) PRC 4 June 1994 PRC 654,021,537 RMB654,021,537 17.76% 13.10% Manufacturing and sales of pharmaceutical products 6a) Beijing Pharmaceutical Co., Ltd. ( Beijing Pharmaceutical ) (note 6a) PRC 28 March 1987 PRC 2,320,000,000 RMB2,320,000,000 100% 100% Investment holding 1,3 6d CR Double-Crane (notes 1, 3 and 6d) PRC 16 May 1997 PRC 724,470,631 RMB724,470,631 59.99% 59.99% Manufacturing and sales of pharmaceutical products 6b (note 6b) PRC PRC 27 December 2000 1,191,703,356 RMB1,191,703,356 100% 100% Trading of pharmaceuticals products 6b (note 6b) PRC 17 July 2016 PRC 60,000,000 RMB60,000,000 63.60% 63.59% Sales of pharmaceutical products 6b (note 6b) PRC 27 January 1992 PRC 500,000,000 RMB500,000,000 63.60% 63.59% Manufacturing of pharmaceutical products 6b China Resources Shangdong Pharmaceutical Co., Ltd. ( CR Shandong ) (note 6b) PRC 28 February 2000 PRC 200,000,000 RMB200,000,000 100% 100% Sales of pharmaceutical products 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 169

For the year ended 31 December 2016 22. 於附屬公司的投資 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued) 附屬公司名稱 Name of subsidiary 成立地點及日期 Place and date of establishment 營運地點 Place of operation 悉數支付註冊資本 Fully paid registered capital 本集團應佔股權 Equity interest attributable to the Group 於十二月三十一日 At 31 December 主要業務 Principal activities 2016 2015 (6b) (note 6b) PRC 7 March 2011 PRC 150,000,000 RMB150,000,000 100% 100% Sales of pharmaceutical products (6b) China Resources Henan Pharmaceutical Co., Ltd. (note 6b) PRC 25 May 2009 PRC 245,146,800 RMB245,146,800 100% 100% Sales of pharmaceutical products (6b) (note 6b) PRC 13 September 2000 PRC 82,608,700 RMB82,608,700 59.99% 59.99% Manufacturing of pharmaceutical products (6b) (note 6b) PRC 21 July 1998 PRC 59,326,800 RMB59,326,800 59.99% 59.99% Sale of pharmaceutical products (6b) (note 6b) PRC 16 April 1995 PRC 30,000,000 RMB30,000,000 100% 100% Sales of pharmaceutical products (6b) (note 6b) PRC 23 June 2011 PRC 330,000,000 RMB330,000,000 100% 100% Sales of pharmaceutical products (6b) (note 6b) PRC 1 January 1980 PRC 200,000,000 RMB200,000,000 100% 100% Sales of pharmaceutical products 170 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 22. 於附屬公司的投資 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued) 附屬公司名稱 Name of subsidiary 成立地點及日期 Place and date of establishment 營運地點 Place of operation 悉數支付註冊資本 Fully paid registered capital 本集團應佔股權 Equity interest attributable to the Group 於十二月三十一日 At 31 December 主要業務 Principal activities 2016 2015 (6b) (note 6b) PRC 3 November 2000 PRC 16,000,000 RMB16,000,000 55.65% 55.65% Sales of pharmaceutical products (6b) (note 6b) PRC 10 March 2003 PRC 200,000,000 RMB200,000,000 70% 70% Sales of pharmaceutical products (6b) (formerly known as (note 6b) PRC 21 October 1999 PRC 352,000,000 RMB352,000,000 60% 60% Sales of pharmaceutical products (6b) (note 6b) PRC 1 December 2011 PRC 50,000,000 RMB50,000,000 51% 51% Sales of pharmaceutical products (6b) CR Guangdong Pharmaceutical Co., Ltd. ( CR Guangdong Pharmaceutical ) (note 6a) PRC PRC 25 December 1993 405,755,000 RMB405,755,000 70% 70% Sales of pharmaceutical products (6b) (note 6b) PRC 20 January 1999 PRC 50,000,000 RMB50,000,000 70% 70% Sales of pharmaceutical products (6b) (note 6b) PRC 10 January 2013 PRC 100,000,000 RMB100,000,000 51% 51% Sales of pharmaceutical products 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 171

For the year ended 31 December 2016 22. 於附屬公司的投資 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued) 附屬公司名稱 Name of subsidiary 成立地點及日期 Place and date of establishment 營運地點 Place of operation 悉數支付註冊資本 Fully paid registered capital 本集團應佔股權 Equity interest attributable to the Group 於十二月三十一日 At 31 December 主要業務 Principal activities 2016 2015 (6b) (note 6b) PRC 26 March 2007 PRC 10,000,000 RMB10,000,000 100% 100% Sales of pharmaceutical products (6b) (note 6b) PRC 6 September 2010 PRC 200,000,000 RMB200,000,000 100% 100% Sales of pharmaceutical products (6b) (note 6b) PRC 7 April 1995 PRC 2,800,000 RMB2,800,000 100% 100% Sales of pharmaceutical products (6b) (note 6b) PRC 10 August 1999 PRC 51,000,000 RMB51,000,000 60% 60% Sales of pharmaceutical products (6b) Kunming Shenghuo Pharmaceutical Group Co., Ltd. ( Kunming Shenghuo ) (note 6b) PRC 13 October 1995 PRC 88,067,000 RMB88,067,000 100% N/A Manufacturing of pharmaceutical products 172 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 22. 於附屬公司的投資 1. 2. 56.62% 23.14% 50% 4.66% 13.10% 17.76% 3. 10.87% 49.12% 59.99% 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued) Notes: 1. CR Sanjiu Pharmaceutical and Dong-E-E-Jiao are listed on the Shenzhen Stock Exchange and CR Double-Crane is listed on the Shanghai Stock Exchange. 2. As at 31 December 2015, Dong-E-E-Jiao is considered as a subsidiary of the Group as CR Donge, a 56.62% subsidiary of the Company, holds a 23.14% equity interest in Dong-E-E-Jiao as the single largest shareholder. The Group is able to exercise control since over 50% of the board of directors are nominated by the Group. During the year ended 31 December 2016, the Group acquired additional equity interest of 4.66% in Dong-E-E-Jiao and the Group s equity interest in Dong-E-E-Jiao was increased from 13.10% to 17.76% accordingly. 3. During the year ended 31 December 2015, the Group acquired additional equity interest of 10.87% in CR Double-Crane and the Group s equity interest in CR Double-Crane was increased from 49.12% to 59.99% accordingly. 4. 31 5. 5,385,000,000 5,385,000,000 10,000,000,000 6. 4. CR Pharmaceutical Holdings issued unsecured non-listed bonds and unsecured corporate bonds and CR Sanjiu Pharmaceutical issued an unsecured corporate bonds which are listed on the Shenzhen Stock Exchange as at 31 December 2015 and 2016, respectively. Details are set out in note 31. 5. As at 31 December 2015, the registered capital of CR Pharmaceutical Holdings is RMB5,385,000,000. As at 31 December 2016, the registered capital was increased from RMB5,385,000,000 to RMB10,000,000,000. 6. For those subsidiaries established in the PRC, their kind of legal entity is as follows: (a) (a) sino-foreign equity joint venture (b) (b) limited liability company (c) (c) wholly foreign owned enterprise (d) (d) joint-stock limited company 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 173

For the year ended 31 December 2016 22. 於附屬公司的投資 (BVI) 8,400,000,000 9,390,612,000 6,400,000,000 7,639,232,000 499,412,000 558,307,000 499,000,000 595,621,000 22. PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued) Except for Beijing Pharmaceutical Investment and Management (BVI) Limited, CR Pharmaceutical Holdings, China Resources Pharmaceutical Trading Limited, CR Care and China Resources Pien Tze Huang Pharmaceutical Company Limited, which are held directly by the Company, all other subsidiaries are held indirectly by the Company. The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length. As at 31 December 2016, none of the subsidiaries had issued any debt securities except for CR Pharmaceutical Holdings Ltd. which has issued RMB8,400,000,000 (equivalent to HK$9,390,612,000) (2015: RMB6,400,000,000 (equivalent to HK$7,639,232,000)) of bonds and CR Sanjiu Pharmaceutical which has issued RMB499,412,000 (equivalent to HK$558,307,000) (2015: RMB499,000,000 (equivalent to HK$595,621,000)) of bonds, in which the Group has no interest. 174 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 23. 於聯營公司的權益 23. INTERESTS IN ASSOCIATES 2016 2015 港幣千元 Unlisted shares, at cost 1,658,228 173,571 Share of post-acquisition profits, net of dividends received and other comprehensive income 290,514 267,654 1,948,742 441,225 Particulars of the Group s principal associates at years ended 31 December 2016 and 2015 are set out below. 聯營公司名稱 Name of associate 註冊及營業地點 Place of registration and operations 註冊資本 Registered capital 附屬公司所持股權 Equity interest held by the subsidiary 於十二月三十一日 At 31 December 本集團應佔股權 Attributable equity interest to the Group 於十二月三十一日 At 31 December 2016 2015 2016 2015 主要業務 Principal activities Hefei Tianmai Biotechnology Development Co. Ltd. PRC 800,004,600 RMB800,004,600 20.00% 20.00% Research and development, production and sales of pharmaceutical products PRC 9,680,000 RMB9,680,000 49.89% 49.89% 31.73% 31.73% Manufacturing of pharmaceutical products PRC 20,000,000 RMB20,000,000 49.00% 29.40% Sales of pharmaceutical products PRC 30,000,000 RMB30,000,000 49.00% 49.00% 29.40% 29.40% Sales of pharmaceutical products The Directors consider that the aforesaid principal associates are not material to the Group s total assets and therefore no detail and separate financial information has been disclosed. The associates are accounted for using the equity method in these consolidated financial statements. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 175

For the year ended 31 December 2016 24. 可供出售投資 24. AVAILABLE-FOR-SALE INVESTMENTS 2016 2015 港幣千元 Available-for-sale investments comprise: Unlisted investments Equity investments 164,937 188,138 Others (Note) 3,648,846 6,310,350 3,813,783 6,498,488 Less: Accumulated impairment losses (41,431) (39,838) Total 3,772,352 6,458,650 Analysed for reporting purposes as: Current assets 3,648,846 6,310,350 Non-current assets 123,506 148,300 3,772,352 6,458,650 3,648,846,000 6,310,350,000 Note: Others include structured deposits entered by the Group with the banks and the financial institutions amounted to HK$3,648,846,000 as at 31 December 2016 (2015: HK$6,310,350,000). These structured deposits do not have any underlying derivative elements and stated at fair values which, in management s opinion, are approximate to their costs at the end of each reporting period. The Group s unlisted equity investments represent investments in unlisted equity securities issued by private entities established in the PRC during the years ended 2016 and 2015. To the best knowledge of the management of the Company, these unlisted private entities are principally engaged in pharmaceutical products research and development, distribution and related operations. They are measured at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair values cannot be measured reliably. 176 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 25. 其他非流動資產 25. OTHER NON-CURRENT ASSETS 2016 2015 港幣千元 Deposits for property, plant and equipment 266,141 503,114 Deposits for prepaid lease payments 57,450 505,955 Deposits for intangible assets 6,540 53,865 Others 7,049 9,300 337,180 1,072,234 26. 存貨 26. INVENTORIES 2016 2015 港幣千元 Raw materials 2,569,699 1,244,898 Packaging materials 42,296 23,880 Work in progress 608,390 572,686 Finished goods 15,638,736 13,410,519 18,859,121 15,251,983 27. 貿易及其他應收款項 27. TRADE AND OTHER RECEIVABLES 2016 2015 港幣千元 Trade receivables 42,394,252 36,229,443 Less: Allowance for doubtful debts (387,838) (376,487) 42,006,414 35,852,956 Bills receivable 6,105,764 5,464,751 Prepayments 1,823,037 2,166,663 Other receivables 4,565,769 4,154,963 37 Receivables for disposal of subsidiaries (Note 37) 19,020 Less: Allowance for other receivables (163,588) (144,104) 54,337,396 47,514,249 30 120 240 30 18030 180 The Group generally allows credit periods ranging from 30 to 120 days to its trade customers, which may be extended to 240 days for selected customers depending on their trade volume and settlement terms. The bills receivable have maturity period ranging from 30 to 180 days as at 31 December 2016 (2015: 30 to 180 days). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 177

For the year ended 31 December 2016 27. 貿易及其他應收款項 27. TRADE AND OTHER RECEIVABLES (continued) The aging analysis of the Group s trade receivables, net of allowance, based on invoice date at the years ended 31 December 2016 and 2015 are as follows: 2016 2015 港幣千元 0 30 0 30 days 18,282,964 17,404,182 31 60 31 60 days 7,166,347 5,560,305 61 90 61 90 days 4,172,059 3,172,467 91 180 91 180 days 7,928,247 6,216,369 181 365 181 365 days 4,009,438 3,332,159 1 Over 1 year 447,359 167,474 42,006,414 35,852,956 The aging analysis of the Group s bills receivable based on issue date at the years ended 31 December 2016 and 2015 is as follows: 2016 2015 港幣千元 0 30 0 30 days 2,595,739 2,267,331 31 60 31 60 days 932,319 806,180 61 90 61 90 days 985,526 1,019,972 91 180 91 180 days 1,592,180 1,371,268 6,105,764 5,464,751 4,454,390,000 3,552,394,000 Before accepting any new customer, management of the Group estimates the potential customer s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed twice a year. Trade receivables that are neither past due nor impaired have no default payment record. Included in the Group s trade receivables are debtors with a carrying amount of HK$4,454,390,000 as at 31 December 2016 (2015: HK$3,552,394,000) which are past due at the end of the reporting periods but are regarded as not impaired as there has not been a significant change in the credit standing of the debtors. The Group does not hold any collateral over these receivables. 178 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 27. 貿易及其他應收款項已逾期但無減值的貿易應收款項賬齡 27. TRADE AND OTHER RECEIVABLES (continued) Aging of trade receivables that are past due but not impaired 2016 2015 港幣千元 1 Less than 1 year 4,008,091 3,384,920 1 Over 1 year 446,299 167,474 4,454,390 3,552,394 呆賬撥備變動 In determining the recoverability of a receivable, the Group considers whether there has been adverse change in the credit standing of the debtors from the date credit was initially granted. The concentration of credit risk is limited as the Group s customer base comprises of a large number of customers. The directors of the Company believe that there is no further credit provision required in excess of the allowance for doubtful debts already provided for in the consolidated financial statements. Movement in the allowance for doubtful debts 2016 2015 港幣千元貿易應收款項 Trade receivables At the beginning of the year 376,487 370,982 Amount written off during the year (35,777) (23,130) Impairment losses recognised 93,096 125,005 Impairment losses reversed (12,919) (70,163) Exchange realignment (33,049) (26,207) At the end of the year 387,838 376,487 其他應收款項 Other receivables At the beginning of the year 144,104 204,269 Amount written off during the year (6,268) (44,679) Impairment losses recognised 58,346 27,435 Impairment losses reversed (23,451) (31,518) Exchange realignment (9,143) (11,403) At the end of the year 163,588 144,104 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 179

For the year ended 31 December 2016 27. 貿易及其他應收款項呆賬撥備變動 551,426,000 520,591,000 2,164,944,000 1,998,159,000 30 420,910,000 322,195,000 29 28. 已抵押銀行存款銀行結餘及現金 27. TRADE AND OTHER RECEIVABLES (continued) Movement in the allowance for doubtful debts (continued) Included in the allowance for doubtful debts are individually impaired receivables due from certain debtors with an aggregate amount of HK$551,426,000 as at 31 December 2016 (2015: HK$520,591,000) which have either been placed under liquidation or are in financial difficulties. The Group does not hold any collateral over these receivables. As at 31 December 2016, the Group has pledged trade and bills receivables of HK$2,164,944,000 (2015: HK$1,998,159,000) to secure certain bank borrowings (Note 30) and pledged bills receivable of HK$420,910,000 (2015: HK$322,195,000) to secure the bills payable (Note 29). 28. PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH 2016 2015 港幣千元 Pledged bank deposits for bills payable 2,662,684 2,227,907 Guarantee deposits and other restricted deposits with maturity less than three months 12,055 13,376 Total pledged bank deposits 2,674,739 2,241,283 0.35% 0.35% 0.35% 0.42% 0.35% 0.42% Bank balances of the Group carry interest at market rates ranging from nil to 0.35% (2015: 0.35%) per annum as at 31 December 2016. Pledged bank deposits of the Group represent deposits pledged to banks to secure banking facilities including bills payable and carry interest at market rates ranging from 0.35% to 0.42% (2015: 0.35% to 0.42%) per annum as at 31 December 2016. 180 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 29. 貿易及其他應付款項 29. TRADE AND OTHER PAYABLES 2016 2015 港幣千元 Trade payables 25,710,228 22,990,426 Bills payable 14,117,035 10,421,985 Receipts in advance 954,780 1,171,250 Accrued salaries 1,166,943 993,211 Interest payables 273,559 257,623 Other taxes payable 614,150 469,335 Other accrued expenses 2,981 2,214 Other payables 6,184,467 4,753,314 Dividend payables to non-controlling shareholders 89,434 578,608 36 Payables for acquisition of subsidiaries (Note 36) 626,776 315,124 Payables for acquisition of associates 1,220,608 50,960,961 41,953,090 30 120 30 180 2,164,944,000 2,223,683,000 420,910,000 322,195,00027 2,662,684,000 2,227,907,000 28 The average credit period on purchases of goods ranging from 30 to 120 days. The bills payable have maturity period ranging from 30 to 180 days. As at 31 December 2016, the Group s bills payable of HK$2,164,944,000 (2015: HK$2,223,683,000) were secured by the Group s bills receivable (Note 27) with carrying amount of HK$420,910,000 (2015: HK$322,195,000) and pledged bank deposits (Note 28) of HK$2,662,684,000 (2015: HK$2,227,907,000). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 181

For the year ended 31 December 2016 29. 貿易及其他應付款項 29. TRADE AND OTHER PAYABLES (continued) Aging analysis of the Group s trade payables based on invoice date at the end of each reporting period is as follows: 2016 2015 港幣千元 0 30 0 30 days 18,055,343 15,616,403 31 60 31 60 days 3,015,210 2,533,050 61 90 61 90 days 1,587,367 1,281,868 90 Over 90 days 3,052,308 3,559,105 25,710,228 22,990,426 Aging analysis of the Group s bills payable based on issue date at the end of each reporting period is as follows: 2016 2015 港幣千元 0 30 0 30 days 12,111,257 6,481,880 31 60 31 60 days 462,193 720,584 61 90 61 90 days 439,468 702,922 90 Over 90 days 1,104,117 2,516,599 14,117,035 10,421,985 182 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 30. 銀行借款 30. BANK BORROWINGS 2016 2015 港幣千元 Bank loans Secured 1,346,880 1,844,792 Unsecured 14,415,633 27,138,693 15,762,513 28,983,485 Fixed rate borrowings 4,671,778 2,159,132 Floating rate borrowings 11,090,735 26,824,353 15,762,513 28,983,485 Carrying amount repayable (based on scheduled repayment terms): Within one year 13,737,020 21,335,485 More than one year, but not more than two years 1,066,751 883,729 More than two years, but not more than five years 958,742 6,764,271 15,762,513 28,983,485 Less: Amount due shown under current liabilities: Due within one year (12,844,470) (21,335,485) Due within one year and contain a repayment on demand clause (892,550) Due after one year but contain a repayment on demand clause (3,000,000) (13,737,020) (24,335,485) Amount due after one year shown under non-current liabilities 2,025,493 4,648,000 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 183

For the year ended 31 December 2016 30. 銀行借款 30. BANK BORROWINGS (continued) Certain of the Group s bank borrowings were secured by: 2016 2015 港幣千元 Prepaid lease payments 43,459 Buildings 19,507 Trade and bills receivables 2,164,944 1,998,159 2,164,944 2,061,125 3.12% 2.51% 3.94% 4.54% 32,688,000 52,280,000 31. 應付債券 3,000,000,000 1 1100 4.48% 9,000,000 100 1,400,000,000 1 4.94% 4,200,000 The average effective interest rate of the Group s floating rate bank borrowings was 3.12% (2015: 2.51%) per annum, and fixed rate borrowings was 3.94% (2015: 4.54%) per annum as at 31 December 2016. Included in the carrying amount of the Group s bank borrowings was transaction cost of HK$32,688,000 as at 31 December 2016 (2015: HK$52,280,000) which is amortised over the relevant loan period. 31. BONDS PAYABLE On 8 August 2012, a subsidiary of the Company, CR Pharmaceutical Holdings, issued unsecured non-listed bonds in an aggregate amount of RMB3,000,000,000 ( Bonds 1 ). Bonds 1 were priced at par at RMB100 each, carry interest of a fixed rate of 4.48% per annum, will mature on 8 August 2017 and the interest is payable annually on 8 August. The issue fee of this bond amounted to RMB9,000,000. On 22 March 2013, CR Pharmaceutical Holdings, further issued unsecured non-listed Bonds 1 in an aggregate amount of RMB1,400,000,000 at par at RMB100 each, carry interest of a fixed rate of 4.94% per annum which will mature on 22 March 2018 and the interest is payable annually on 22 March. The issue fee of this bond amounted to RMB4,200,000. 184 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 31. 應付債券 500,000,000 2 2 100 4.60% 2 2,000,000 100 2,000,000,000 3 4.20% 210,000 100 1,500,000,000 4 2.59% 2,250,000 100 1,000,000,000 5 2.65% 1,500,000 100 2,000,000,000 6 2.90% 3,000,000 1 4,400,000,000 4,918,892,000 4,400,000,000 5,251,972,000 1 31. BONDS PAYABLE (continued) On 9 May 2013, another subsidiary of the Company, CR Sanjiu Pharmaceutical issued unsecured corporate bonds ( Bonds 2 ) in an aggregate amount of RMB500,000,000 which are listed on the Shenzhen Stock Exchange. Bonds 2 were priced at par at RMB100 each, carry interest of a fixed coupon rate of 4.60% per annum. The issuer can elect to increase a basis point on the fixed coupon rate (the revised coupon rate ) or maintain the existing coupon rate at the end of the third year that the bondholders would then have an option to request for redemption of the bonds. The Bonds 2 will mature on 9 May 2018 as no early redemption exercised and the interest is payable annually on 9 May. The issue fee of this bond amounted to RMB2,000,000. On 9 July 2015, CR Pharmaceutical Holdings issued unsecured non-listed bonds ( Bonds 3 ) in an aggregate amount of RMB2,000,000,000 at par at RMB100 each, carry interest of a fixed rate of 4.20% per annum which will mature on 8 July 2020 and the interest is payable annually on 8 July. The issue fee of this bond amounted to RMB210,000. On 2 March 2016, CR Pharmaceutical Holdings issued unsecured nonlisted bonds ( Bonds 4 ) in an aggregate amount of RMB1,500,000,000 at par at RMB100 each, carried interest of a fixed rate of 2.59% per annum which has matured on 28 November 2016. The issue fee of this bond amounted to RMB2,250,000. On 23 March 2016, CR Pharmaceutical Holdings issued unsecured nonlisted bonds ( Bonds 5 ) in an aggregate amount of RMB1,000,000,000 at par at RMB100 each, carried interest of a fixed rate of 2.65% per annum which has matured on 19 December 2016. The issue fee of this bond amounted to RMB1,500,000. On 25 April 2016, CR Pharmaceutical Holdings issued unsecured nonlisted bonds ( Bonds 6 ) in an aggregate amount of RMB2,000,000,000 at par at RMB100 each, carry interest of a fixed rate of 2.90% per annum which will mature on 20 January 2017. The issue fee of this bond amounted to RMB3,000,000. The fair value of the Bonds 1 is amounting to RMB4,400,000,000 (equivalent to HK$4,918,892,000) as at 31 December 2016 (2015: RMB4,400,000,000 (equivalent to HK$5,251,972,000)). The carrying amount of Bonds 1 approximates its fair value. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 185

For the year ended 31 December 2016 31. 應付債券 2 499,412,000 558,307,000 499,000,000 595,621,000 2 3 2,000,000,000 2,235,860,000 2,000,000,000 2,387,260,000 3 6 2,000,000,000 2,235,860,000 6 29 31. BONDS PAYABLE (continued) The fair value of the Bonds 2 is amounting to RMB499,412,000 (equivalent to HK$558,307,000) as at 31 December 2016 (2015: RMB499,000,000 (equivalent to HK$595,621,000)). The fair value is determined using the market price of the Bonds 2 as at 31 December 2016 and 2015. The fair value of the Bonds 3 at 31 December 2016 and 31 December 2015 is amounting to RMB2,000,000,000 (equivalent to HK$2,235,860,000) and RMB2,000,000,000 (equivalent to HK$2,387,260,000). The carrying amount of Bonds 3 approximates its fair value. The fair value of the Bonds 6 at 31 December 2016 is amounting to RMB2,000,000,000 (equivalent to HK$2,235,860,000). The carrying amount of Bonds 6 approximates its fair value. The interest payables of the bonds are included in other payables in note 29. The movement of these bonds during the years ended 31 December 2016 and 2015 is set out below: 2016 2015 港幣千元 Carrying amount as at the beginning of the year 8,234,853 8,111,130 Proceeds received from issued bonds 5,263,007 2,491,369 Repayment (2,923,625) (1,868,160) Exchange realignment (625,316) (499,486) Carrying amount as at the end of the year 9,948,919 8,234,853 Amount represented as: Within one year 5,589,650 In the first year to second years 2,123,409 3,580,890 In the second to fifth years 2,235,860 4,653,963 9,948,919 8,234,853 186 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 32. 遞延稅項遞延稅項資產 32. DEFERRED TAXATION The followings are the major deferred tax balances recognised and movements thereon the Relevant Periods: Deferred tax assets 資產減值 Impairment of assets 稅項虧損 Tax losses 撥備及應計費用 Provision and accruals 其他 Others 總計 Total At 1 January 2015 110,885 139,970 155,087 107,503 513,445 Credited (charged) during the year 8,986 (95,334) 54,766 (15,661) (47,243) 38 Reclassified as held for sale (Note 38) (12,767) (12,767) Exchange realignment (6,153) (8,564) (9,967) (6,233) (30,917) At 31 December 2015 113,718 36,072 199,886 72,842 422,518 Credited (charged) during the year 21,032 4,054 32,137 (6,098) 51,125 36 Acquisition of subsidiaries (Note 36) 398 398 37 Disposal of subsidiaries (Note 37) (2,196) (2,196) Exchange realignment (7,212) (2,288) (12,677) (1,363) (23,540) At 31 December 2016 127,538 37,838 219,346 63,583 448,305 遞延稅項負債 Deferred tax liabilities 重估投資物業 Revaluation of investment properties 收購附屬公司產生的公允價值調整 Fair value adjustment arising from acquisition of subsidiaries 附屬公司的未分派盈利 Undistributed earnings of subsidiaries 其他 Others 總計 Total At 1 January 2015 158,794 647,567 9,189 815,550 Credited (charged) during the year 17,333 (102,686) 19,584 (65,769) 36 Acquisition of subsidiaries (Note 36) 154,187 154,187 Exchange realignment (3,271) (37,808) (536) (41,615) At 31 December 2015 172,856 661,260 28,237 862,353 Credited (charged) during the year 111,978 (217,630) 203,406 (21,200) 76,554 36 Acquisition of subsidiaries (Note 36) 50,972 50,972 Exchange realignment (10,958) (38,675) (1,799) (51,432) At 31 December 2016 273,876 455,927 203,406 5,238 938,447 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 187

For the year ended 31 December 2016 32. 遞延稅項遞延稅項負債 2,661,315,000 2,200,000,000 151,352,000 144,288,000 2,509,963,000 2,055,712,000 198,190,000 203,831,000 32. DEFERRED TAXATION (continued) Deferred tax liabilities (continued) The Group had unused tax loss of HK$2,661,315,000 as at 31 December 2016 (2015: HK$2,200,000,000). A deferred tax asset has been recognised in respect of HK$151,352,000 of such loss for the Group as at 31 December 2016 (2015: HK$144,288,000). No deferred tax asset has been recognised in respect of the remaining tax loss of HK$2,509,963,000 due to the unpredictable profit stream as at 31 December 2016 (2015: HK$2,055,712,000). Included in unused tax loss is loss of HK$198,190,000 as at 31 December 2016 (2015: HK$203,831,000) that may be carried forward indefinitely. Other tax losses will be expired in the following years: 2016 2015 港幣千元 2016 58,112 2017 312,532 264,280 2018 618,481 544,045 2019 446,719 434,783 2020 499,723 550,661 2021 434,318 2,311,773 1,851,881 3,665,000,000 As at 31 December 2016, deferred tax liability has been provided in respect of HK$3,665,000,000 (2015: nil) undistributed earnings of the Group s PRC subsidiaries. Deferred tax has not been provided in respect of the remaining temporary differences attributable to the undistributed earnings as the Group is in a position to control the quantum and timing of the distribution thereof, deferred tax is only provided to the extent that such earnings are estimated to be distributable in the foreseeable future. Deferred tax in respect of the undistributed earnings of the Group s associates in the PRC have not been provided as the amount involved is not significant. 188 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 32. 遞延稅項遞延稅項負債 7,014,775,000 (12,807,455,000 ) 1,272,433,000 1,227,239,000 33. 其他非流動負債 32. DEFERRED TAXATION (continued) Deferred tax liabilities (continued) The aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was HK$7,014,775,000 as at 31 December 2016 (2015: HK$12,807,455,000). The Group has deductible temporary difference of HK$1,272,433,000 as at 31 December 2016 (2015: HK$1,227,239,000) in relation to impairment recognised on property, plant and equipment, trade and other receivables and inventories. No deferred tax asset has been recognised in relation to such deductible temporary differences as it is not probable that taxable profit will be available against which the deductible temporary differences can be utilised. 33. OTHER NON-CURRENT LIABILITIES 2016 2015 港幣千元 Government grants 697,136 728,974 Provision for restructuring of business 578,651 554,577 Others 100,027 50,481 1,375,814 1,334,032 135,002,000 176,234,000 117,478,000 100,058,000 During the year ended 31 December 2016, the Group received new government grants from the government authorities amounting to HK$135,002,000 (2015: HK$176,234,000) to subsidise the construction of certain research and development centres and purchases of property, plant and equipment of the Group. The Group has complied with the conditions attached to the grants as at the end of the reporting periods and will transfer the grants to profit or loss over the useful lives of the related assets. The Group recognised these government grants to profit or loss amounting to HK$117,478,000 during the year ended 31 December 2016 (2015: HK$100,058,000). 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 189

For the year ended 31 December 2016 33. 其他非流動負債 33. OTHER NON-CURRENT LIABILITIES (continued) The movement of the provision for restructuring of business during the years is set out below: 2016 2015 港幣千元 Carrying amount as at the beginning of the year 554,577 668,251 Additions 139,420 Utilisation during the year (79,045) (76,070) Exchange realignment (36,301) (37,604) Carrying amount as at the end of the year 578,651 554,577 34. 股本 The provision for restructuring of business represents funds set aside for the retirement of employees in restructuring of Beijing Pharmaceutical starting from 25 September 2004. 34. SHARE CAPITAL 股份數目股本 Number of shares Share capital 2016 2015 2016 2015 港幣千元已發行及繳足 : Issued and fully paid: At beginning of year 4,629,424,461 4,629,424,461 12,473,920 12,473,920 1 Issue of new shares (Note 1) 1,543,141,500 14,042,588 Transaction costs attributable to issue of new shares (293,877) 2 Issue of new shares upon exercise of over-allotment option (Note 2) 111,940,500 1,018,658 At end of year 6,284,506,461 4,629,424,461 27,241,289 12,473,920 1. 1,543,141,500 77,158,000 1,465,983,500 9.10 14,042,588,000 2. 9.10 111,940,500 1,018,658,000 Notes: 1: In connection with the initial public offering of the Company on the Main Board of the Stock Exchange, 1,543,141,500 new ordinary shares (including 77,158,000 new ordinary shares issued for Hong Kong Public Offer and 1,465,983,500 new ordinary shares issued for international placing) were issued at a price of HK$9.10 per new share for a total cash consideration, before expenses, of HK$14,042,588,000. Dealings in the shares of the Company on the Stock Exchange commenced on 28 October 2016. 2: On 21 November 2016, the Group partially exercise of over-allotment option in the initial public offering of the Company on the Main Board of the Stock Exchange, resulted in the issuance of 111,940,500 new shares at a price of HK$9.10 per new share for a total cash consideration, before expenses, of HK$1,018,658,000. 190 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS Details of non-wholly owned subsidiaries that have material non-controlling interests The table below shows details of non-wholly-owned subsidiaries of the Group that have material non-controlling interests: Name of subsidiaries 註冊成立及主要營業地點 Place of incorporation and principal place of business 非控股權益所持擁有權及投票權比例 Proportion of ownership interests and voting rights held by non-controlling interests 分配予非控股權益的溢利 Profit allocated to non-controlling interests 累計非控股權益 Accumulated non-controlling interests 2016 2015 2016 2015 2016 2015 港幣千元港幣千元 % % Dong-E-E-Jiao PRC 82.24 86.90 1,784,745 1,774,671 7,715,440 7,357,780 CR Double-Crane PRC 40.01 40.01 363,456 334,089 3,384,465 3,306,980 CR Sanjiu Pharmaceutical PRC 36.40 36.41 521,496 598,204 3,624,555 3,412,956 PRC 40.00 40.00 38,280 26,705 378,426 346,474 CR Guangdong Pharmaceutical PRC 30.00 30.00 163,863 157,481 388,485 376,250 PRC 30.00 30.00 43,259 42,869 113,288 157,073 Others 231,580 298,139 1,076,850 2,385,817 Total 3,146,679 3,232,158 16,681,509 17,343,330 Summarised financial information in respect of each of the Group s subsidiaries that has material non-controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 191

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) Dong-E-E-Jiao 2016 2015 港幣千元 Current assets 8,477,076 7,678,646 Non-current assets 2,645,841 2,597,334 Current liabilities (1,666,319) (1,736,743) Non-current liabilities (81,493) (84,737) Non-controlling interests (30,144) (82,586) Equity attributable to owners of Dong-E-E-Jiao 9,344,961 8,371,914 2016 2015 港幣千元 Revenue 7,387,574 6,787,229 Expenses (5,218,081) (4,747,430) Profit for the year 2,169,493 2,039,799 Profit attributable to owners of Dong-E-E-Jiao 2,166,375 2,023,874 Profit attributable to the non-controlling interests 3,118 15,925 Profit for the year 2,169,493 2,039,799 192 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) Dong-E-E-Jiao (continued) 2016 2015 港幣千元 Other comprehensive income attributable to owners of Dong-E-E-Jiao 26,781 7,370 Other comprehensive income attributable to the non-controlling interests Other comprehensive income for the year 26,781 7,370 Total comprehensive income attributable to owners of Dong-E-E-Jiao 2,193,156 2,031,244 Total comprehensive income attributable to the non-controlling interests 3,118 15,925 Total comprehensive income for the year 2,196,274 2,047,169 Dividends paid to non-controlling interests 503,196 18,091 Net cash inflow from operating activities 730,406 1,217,555 Net cash outflow from investing activities (385,358) (1,744,165) Net cash outflow from financing activities (630,500) (583,575) Exchange difference 182 169 Net cash outflow (285,270) (1,110,016) 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 193

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) CR Double-Crane 2016 2015 港幣千元 Current assets 4,813,576 4,487,267 Non-current assets 4,399,900 4,779,011 Current liabilities (1,134,943) (1,318,065) Non-current liabilities (209,978) (268,507) Non-controlling interests (393,830) (390,613) Equity attributable to owners of CR Double-Crane 7,474,725 7,289,093 2016 2015 港幣千元 Revenue 6,425,899 6,399,563 Expenses (5,561,386) (5,571,568) Profit for the year 864,513 827,995 Profit attributable to owners of CR Double-Crane 835,234 823,315 Profit attributable to the non-controlling interests 29,279 4,680 Profit for the year 864,513 827,995 194 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) CR Double-Crane (continued) 2016 2015 港幣千元 Other comprehensive (expense) income attributable to owners of CR Double-Crane (736) 1,287 Other comprehensive income attributable to the non-controlling interests Other comprehensive (expense) income for the year (736) 1,287 Total comprehensive income attributable to owners of CR Double-Crane 834,498 824,602 Total comprehensive income attributable to the non-controlling interests 29,279 4,680 Total comprehensive income for the year 863,777 829,282 Dividends paid to non-controlling interests 62,717 Net cash inflow from operating activities 901,936 873,485 Net cash inflow (outflow) from investing activities 190,969 (884,430) Net cash outflow from financing activities (262,764) (727,204) Exchange difference 58 184 Net cash inflow (outflow) 830,199 (737,965) CR Sanjiu Pharmaceutical 2016 2015 港幣千元 Current assets 5,681,834 6,222,776 Non-current assets 9,468,071 8,123,772 Current liabilities (4,233,630) (3,940,680) Non-current liabilities (1,166,410) (1,245,784) Non-controlling interests (118,875) (122,299) Equity attributable to owners of CR Sanjiu Pharmaceutical 9,630,990 9,037,785 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 195

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) CR Sanjiu Pharmaceutical (continued) 2016 2015 港幣千元 Revenue 10,503,674 9,839,212 Expenses (9,091,259) (8,251,651) Profit for the year 1,412,415 1,587,561 Profit attributable to owners of CR Sanjiu Pharmaceutical 1,400,815 1,555,837 Profit attributable to the non-controlling interests 11,600 31,724 Profit for the year 1,412,415 1,587,561 Other comprehensive (expense) income attributable to owners of CR Sanjiu Pharmaceutical (448) 273 Other comprehensive expense attributable to the non-controlling interests Other comprehensive (expense) income for the year (448) 273 Total comprehensive income attributable to owners of CR Sanjiu Pharmaceutical 1,400,367 1,556,110 Total comprehensive income attributable to the non-controlling interests 11,600 31,724 Total comprehensive income for the year 1,411,967 1,587,834 Dividends paid to non-controlling interests 62,519 Net cash inflow from operating activities 1,677,241 1,569,053 Net cash outflow from investing activities (1,480,894) (983,671) Net cash outflow from financing activities (262,216) (800,216) Exchange difference 2,336 1,753 Net cash outflow (63,533) (213,081) 196 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) 2016 2015 港幣千元 Current assets 3,411,865 2,889,732 Non-current assets 545,963 617,431 Current liabilities (3,067,536) (2,664,968) Non-current liabilities (8,939) (9,752) Non-controlling interests (43,143) (22,495) Equity attributable to owners of 838,210 809,948 2016 2015 港幣千元 Revenue 8,336,882 8,064,158 Expenses (8,248,677) (7,996,339) Profit and total comprehensive income for the year 88,205 67,819 Profit and total comprehensive income attributable to owners of 83,208 68,524 Profit (loss) and total comprehensive income (expense) attributable to the non-controlling interests 4,997 (705) Profit and total comprehensive income for the year 88,205 67,819 Dividends paid to non-controlling interests Net cash inflow from operating activities 78,931 510,945 Net cash inflow (outflow) from investing activities 2,875 (83,818) Net cash outflow from financing activities (82,443) (445,877) Net cash outflow (637) (18,750) 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 197

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) CR Guangdong Pharmaceutical 2016 2015 港幣千元 Current assets 9,557,837 7,548,676 Non-current assets 458,487 217,925 Current liabilities (8,745,420) (6,512,435) Non-current liabilities (105,732) Non-controlling interests (55,619) Equity attributable to owners of CR Guangdong Pharmaceutical 1,109,553 1,254,166 2016 2015 港幣千元 Revenue 24,793,663 19,248,096 Expenses (24,266,797) (18,723,159) Profit and total comprehensive income for the year 526,866 524,937 Profit and total comprehensive income attributable to owners of CR Guangdong Pharmaceutical 518,575 524,937 Profit and total comprehensive income attributable to the non-controlling interests 8,291 Profit and total comprehensive income for the year 526,866 524,937 Dividends paid to non-controlling interests 186,691 95,663 Net cash inflow from operating activities 1,359,710 1,097,613 Net cash outflow from investing activities (366,250) (150,638) Net cash outflow from financing activities (1,040,236) (1,045,432) Net cash outflow (46,776) (98,457) 198 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 35. 非控股權益擁有重大非控股權益的非全資附屬公司詳情 35. NON-CONTROLLING INTERESTS (continued) Details of non-wholly owned subsidiaries that have material non-controlling interests (continued) 2016 2015 港幣千元 Current assets 3,701,612 3,046,079 Non-current assets 41,623 41,459 Current liabilities (3,363,938) (2,561,595) Non-current liabilities (1,669) (2,367) Equity attributable to owners of 377,628 523,576 2016 2015 港幣千元 Revenue 6,225,848 5,871,741 Expenses (6,081,651) (5,728,843) Profit and total comprehensive income for the year 144,197 142,898 Dividends paid to non-controlling interests 59,171 Net cash (outflow) inflow from operating activities (274,222) 57,167 Net cash outflow from investing activities (6,007) (15,276) Net cash inflow (outflow) from financing activities 327,097 (62,403) Net cash inflow (outflow) 46,868 (20,512) 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 199

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一六年十二月三十一日止年度 2,758,707,000 3,211,703,000 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES For the year ended 31 December 2016 During the year ended 31 December 2016, the Group acquired twelve companies which were engaged in manufacture and sale of pharmaceutical products from independent third parties for an aggregated cash consideration of RMB2,758,707,000 (equivalent to HK$3,211,703,000). Those transactions had been accounted for using the acquisition method. These subsidiaries were acquired so as to provide human resources, economies of scale and synergy to the Group and expand in pharmaceutical industry of Chinese medicine. 實體名稱 Name of entity 收購日期 Date of acquisition 所收購權益百分比 (%) % of interest acquired March 2016 70.00% (formerly known as May 2016 70.00% (formerly known as May 2016 70.00% May 2016 70.00% May 2016 80.00% August 2016 100.00% (formerly known as Kunming Shenghuo September 2016 100.00% 自以下公司收購的業務 Business acquired from the following companies 收購日期 Date of acquisition March 2016 March 2016 January 2016 January 2016 January 2016 200 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一六年十二月三十一日止年度 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES (continued) For the year ended 31 December 2016 (continued) The information for these acquisitions was disclosed on an aggregated basis as they were individually immaterial to the Group. 昆明聖火 Kunming Shenghuo 其他 Others 於收購日期確認的金額 Total amount recognised at the date of acquisition Fair value of net identifiable assets of the subsidiaries acquired: Property, plant and equipment 73,556 156,877 230,433 Prepaid lease payments 17,413 13,515 30,928 Intangible assets 107,386 157,399 264,785 Deferred tax assets 398 398 Inventories 82,179 256,835 339,014 Trade and other receivables (Note) 369,925 1,199,317 1,569,242 Bank balances and cash 65,855 138,252 204,107 Trade and other payables (118,430) (865,810) (984,240) Taxation payable (21,950) (29,765) (51,715) Bank and other borrowings (373,936) (373,936) Other non-current liabilities (12,591) (12,591) Deferred tax liabilities (17,376) (33,596) (50,972) 558,558 606,895 1,165,453 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 201

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一六年十二月三十一日止年度 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES (continued) For the year ended 31 December 2016 (continued) 昆明聖火 Kunming Shenghuo 其他 Others 於收購日期確認的金額 Total amount recognised at the date of acquisition Consideration transferred, satisfied by cash 2,206,065 1,005,638 3,211,703 Plus: Non-controlling interests 108,792 108,792 Less: Net assets acquired (558,558) (606,895) (1,165,453) Goodwill arising on acquisition 1,647,507 507,535 2,155,042 Net cash outflow on acquisition of subsidiaries: Cash consideration (2,206,065) (1,005,638) (3,211,703) Amounts unpaid and included in other payables 257,124 369,652 626,776 Cash and cash equivalent acquired 65,855 138,252 204,107 (1,883,086) (497,734) (2,380,820) 1,569,242,000 1,569,242,000 Note: The receivables acquired in these transactions with a fair value of HK$1,569,242,000 had gross contractual amount of HK$1,569,242,000 at the relevant dates of acquisition. No amount at acquisition date of the contractual cash flows is not expected to be collected. 202 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一六年十二月三十一日止年度 108,792,000 183,320,000 5,129,355,000 158,339,635,000 6,074,979,000 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES (continued) For the year ended 31 December 2016 (continued) The non-controlling interests recognised at the dates of acquisitions were measured by reference to the proportionate share of the recognised value of the net identifiable assets of the respective subsidiaries of the acquirees at the dates of acquisitions and amounted to HK$108,792,000. Goodwill arose in the acquisitions because the cost of the combination included the benefit of expected synergies, revenue growth, future market development, the assembled workforce and the control premium of the acquirees as the acquirees are engaged in various areas relating to the manufacturing, distribution and retail in the pharmaceutical and medication industry. These benefits were not recognised separately from goodwill because they did not meet the recognition criteria for identifiable intangible assets. None of the goodwill arising on these acquisitions was expected to be deductible for tax purposes. Included in the profit for the year was HK$183,320,000 attributable to the additional business generated by the acquirees. Revenue for the year included HK$5,129,355,000 generated from the acquirees. Had the acquisition been completed on 1 January 2016, total group revenue for the year would have been HK$158,339,635,000, and profit for the year would have been HK$6,074,979,000. The pro forma information was for illustrative purposes only and was not necessarily an indication of revenue and results of operations of the Group that actually would had been achieved had the acquisition been completed on 1 January 2016, nor was it intended to be a projection of future results. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 203

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一五年十二月三十一日止年度 2,013,448,000 3,211,703,000 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES (continued) For the year ended 31 December 2015 During the year ended 31 December 2015, the Group acquired four companies which are engaged in manufacture and sale of pharmaceutical products from independent third parties for an aggregated cash consideration of RMB2,013,448,000 (equivalent to HK$3,211,703,000). Those transactions have been accounted for using the acquisition method. These subsidiaries were acquired so as to provide human resources, economies of scale and synergy to the Group and expand in pharmaceutical industry of Chinese medicine. 實體名稱 Name of entity 收購日期 Date of acquisition 所收購權益百分比 (%) % of interest acquired May 2015 100.00% August 2015 100.00% August 2015 100.00% (formerly known as November 2015 60.00% The information for these acquisitions is disclosed on an aggregated basis as they are individually immaterial to the Group. 於收購日期確認的金額 Amount recognised at the date of acquisition Fair value of net identifiable assets of the subsidiaries acquired: Property, plant and equipment 344,368 Intangible assets 706,758 Prepaid lease payments 181,428 Inventories 208,020 Trade and other receivables (Note) 303,027 Other non-current assets 9,458 Bank balances and cash 46,296 Trade and other payables (237,709) Taxation payable (60,522) Bank and other borrowings (78,894) Deferred tax liabilities (154,187) 1,268,043 204 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一五年十二月三十一日止年度 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES (continued) For the year ended 31 December 2015 (continued) 於收購日期確認的金額 Amount recognised at the date of acquisition Consideration transferred, satisfied by cash 2,502,467 Add: Non-controlling interests 370,404 Less: Net assets acquired (1,268,043) Goodwill arising on acquisition 1,604,828 Net cash outflow on acquisition of subsidiaries: Cash consideration (2,502,467) Amounts unpaid and included in other payables 315,124 Cash and cash equivalent acquired 46,296 (2,141,047) 303,027,000 303,027,000 Note: The receivables acquired in these transactions with a fair value of HK$303,027,000 had gross contractual amount of HK$303,027,000 at the relevant dates of acquisition. No amount at acquisition date of the contractual cash flows is not expected to be collected. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 205

For the year ended 31 December 2016 36. 收購附屬公司業務截至二零一五年十二月三十一日止年度 370,404,000 36,619,000 515,454,000 147,117,728,000 6,162,027,000 36. ACQUISITION OF SUBSIDIARIES/BUSINESSES (continued) For the year ended 31 December 2015 (continued) The non-controlling interests recognised at the dates of acquisitions were measured by reference to the proportionate share of the recognised value of the net identifiable assets of the respective subsidiaries of the acquirees at the dates of acquisitions and amounted to HK$370,404,000. Goodwill arose in the acquisitions because the cost of the combination included the benefit of expected synergies, revenue growth, future market development, the assembled workforce and the control premium of the acquirees as the acquirees are engaged in manufacturing, distribution and retail of pharmaceutical, healthcare and Chinese medicines products. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes. Included in the profit for the year is HK$36,619,000 attributable to the additional business generated by the acquirees. Revenue for the year includes HK$515,454,000 generated from the acquirees. Had the acquisition been completed on 1 January 2015, the Group s revenue for the year would have been HK$147,117,728,000, and profit for the year would have been HK$6,162,027,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2015, nor is it intended to be a projection of future results. 206 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 37. 出售附屬公司截至二零一六年十二月三十一日止年度 (i)360,493,000 428,335,000 28,732,000 (ii) 63,908,000 74,595,000 45,442,000 37. DISPOSAL OF SUBSIDIARIES For the year ended 31 December 2016 During the year ended 31 December 2016, the Group disposed of (i) a subsidiary to a fellow subsidiary at a consideration of RMB360,493,000 (equivalent to HK$428,335,000) and resulted in a gain on disposal of HK$28,732,000 credited to profit or loss; and (ii) the entire equity interest in a subsidiary to an independent third party at a consideration of RMB63,908,000 (equivalent to HK$74,595,000) and resulted in a gain on disposal of HK$45,442,000 credited to profit or loss. 2016 港幣千元 Net assets disposed of: Property, plant and equipment 74,880 Prepaid lease payments 3,410 Investment properties 3,036 Other non-current assets 456,437 Inventories 21,191 Deferred tax assets 2,196 Trade and other receivables 132,411 Bank balances and cash 37,979 Trade and other payables (45,912) Bank and other borrowings (25,679) Taxation payable (3,216) Amount due to a shareholder (175,579) 481,154 Non-controlling interests (52,398) Gain on disposal of subsidiaries 74,174 Consideration, satisfied by cash 502,930 Net cash inflow on disposal of subsidiaries: Cash consideration received 502,930 Cash and cash equivalents disposed of (37,979) 464,951 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 207

For the year ended 31 December 2016 37. 出售附屬公司截至二零一五年十二月三十一日止年度 35,597,000 44,244,000 37. DISPOSAL OF SUBSIDIARIES (continued) For the year ended 31 December 2015 In 2015, the Group disposed of its entire equity interests in two subsidiaries to independent third parties for an aggregated consideration of RMB35,597,000 (equivalent to approximately HK$44,244,000). 2015 Net assets disposed of: Property, plant and equipment 16,047 Intangible assets 37,890 Inventories 998 Bank balances and cash 218 Trade and other receivables 11,404 Trade and other payables (30,830) Taxation payable (26) 35,701 Non-controlling interests (23,490) Gain on disposal of subsidiaries 32,033 Consideration, satisfied by cash, net 44,244 Net cash inflow on disposal of subsidiaries: Cash consideration received 44,244 Amount not received and included in other receivables (19,020) Cash and cash equivalents disposed of (218) 25,006 208 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 38. 分類為持作出售的資產 51.51% 1,142,227,000 1,422,575,000 208,000,000 258,990,000 934,227,000 1,163,585,000 100% 691,495,000 861,122,000 60%269,343,000 334,760,000 38. ASSETS CLASSIFIED AS HELD FOR SALE On 16 September 2014, Beijing Pharmaceutical entered into a sale and purchase agreement with an independent third party to dispose of 51.51% equity interest in China Resources Wandong Medical Equipment Company Limited () ( CR Wandong Pharmaceutical ), which is engaged in manufacture and sales of medical appliances, for a consideration of approximately RMB1,142,227,000 (equivalent to HK$1,422,575,000). Subsequently, Beijing Pharmaceutical entered into supplementary agreement with the purchaser and agreed to bear additional severance payment to be incurred by the purchaser for the staff laid off after the completion of the disposal and the amount of RMB208,000,000 (equivalent to HK$258,990,000) would reduce the cash consideration received. As a result, the net cash consideration received by Beijing Pharmaceutical was approximately RMB934,227,000 (equivalent to HK$1,163,585,000). On 15 February 2015, the transaction had been completed. On 16 September 2014, CR Pharmaceutical Investment entered into a sale and purchase agreement with the independent third party to dispose of 100% equity interest in Shanghai Medical Instruments Company Limited ( ) ( Shangxie Jituan ), which is engaged in sales of medical appliances, for a consideration of approximately RMB691,495,000 (equivalent to HK$861,122,000). On 2 April 2015, the transaction had been completed. On 17 December 2015, the shares of Anhui Huayuan Pharmaceutical Co., Ltd () ( Anhui Huayuan ), which is engaged in manufacture and sales of medical products, was being registered on for public sale. On 28 January 2016, Beijing Pharmaceutical entered into an equity transfer agreement with an independent third party to dispose of the Group s entire 60% equity interest in Anhui Huayuan for a consideration of approximately RMB269,343,000 (equivalent to HK$334,760,000) and on 9 February 2016, the transaction had been completed. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 209

For the year ended 31 December 2016 38. 分類為持作出售的資產 38. ASSETS CLASSIFIED AS HELD FOR SALE (continued) The subsidiary did not have any significant contribution to the results and cash flows of the Group during the years ended 31 December 2015. The major classes of assets and liabilities at the end of the reporting period are as follows: 安徽華源 Anhui Huayuan 華潤萬東醫療及上械集團 CR Wandong Pharmaceutical and Shangxie Jituan 2015 2014 17 Property, plant and equipment (Note 17) 639,370 478,146 19 Investment properties (Note 19) 96,661 18 Prepaid lease payments (Note 18) 114,888 74,598 20 Goodwill (Note 20) 15,892 5,002 21 Intangible assets (Note 21) 116,774 118,125 Other non-current assets 333,736 Interest in a joint venture 1,668 Inventories 136,550 470,292 Trade and other receivables 2,982,191 639,522 Bank balances and cash 822,964 303,371 Available-for-sale investments 97,324 Other current assets 38,339 55,227 32 Deferred tax assets (Note 32) 12,767 25,524 Assets classified as held for sale 4,977,059 2,601,872 Trade and other payables 2,974,820 714,418 Bank borrowings 1,354,770 255,049 Taxation payable 45,980 19,024 Deferred tax liabilities 115 Deferred revenue 18,753 9,966 Other non-current liabilities 5,979 34,735 Liabilities directly associated with assets classified as held for sale 4,400,302 1,033,307 Net assets classified as held for sale 576,757 1,568,565 210 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 38. 分類為持作出售的資產 38. ASSETS CLASSIFIED AS HELD FOR SALE (continued) Gain on disposal of subsidiaries classified as held for sale recognised for the year ended 31 December 2015 and 2016 are as follows: 2016 2015 港幣千元 Consideration, satisfied by cash 334,760 2,024,707 Less: Net assets classified as held for sale 576,757 1,568,565 Non-controlling interests (291,285) (384,505) Gain on disposal of subsidiaries classified as held for sale 49,288 840,647 Net cash (outflow) inflow on disposal of assets classified as held for sale: Cash consideration 334,760 2,024,707 Less: cash and cash equivalent disposed of (822,964) (303,371) (488,204) 1,721,336 39. 或然負債 (a) 11,500,000 13,786,000 7,000,000 8,355,000 (c) 39. CONTINGENT LIABILITIES (a) As at 31 December 2015, the Group had outstanding financial guarantees issued to amounting to RMB11,500,000 (equivalent to HK$13,786,000) in respect of banking facilities granted to third parties for the period from 24 July 2014 to 20 July 2016. As at 31 December 2016 and 31 December 2015, RMB nil and RMB7,000,000 (equivalent to HK$8,355,000) facilities has been utilised, respectively. As at 31 December 2016, the Group did not provide any financial guarantee. The amounts for financial guarantee contracts are the maximum amounts the Group could be required to settle under the arrangement for the full guaranteed amount as stated here and (c) below if those amounts are claimed by the counterparties to the guarantee. Based on expectations as at 31 December 2015, the Group considered that it was more likely than not that such amount will not be payable under the arrangements. However, this estimate is subject to change depending on the probability of the counterparties claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparties which are guaranteed suffer credit losses. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 211

For the year ended 31 December 2016 39. 或然負債 (b) 39. CONTINGENT LIABILITIES (continued) (b) As at 31 December 2016 and 2015, certain subsidiaries of the Group were involved in a number of litigations with third parties for which the trials are still proceeding. The directors of the Company are in the opinion that the financial impact to the Group is not significant, accordingly, no material provision has been made in the consolidated financial statements. (c) (i) (ii) (c) During the years ended 31 December 2016 and 2015, the Group (i) endorsed certain bills receivable for the settlement of trade and other payables; and (ii) discounted certain bills receivable to banks for raising of cash. In the opinion of the directors of the Company, the Group has transferred the significant risks and rewards relating to these bills receivable, and the Group s obligations to the corresponding counterparties were discharged in accordance with the commercial practice in the PRC and the risk of the default in payment of the endorsed and discounted bills receivable is low because all endorsed and discounted bills receivable are issued and guaranteed by the reputable PRC banks. As a result, the relevant assets and liabilities were not recognised on the consolidated financial statements. The maximum exposure to the Group that may result from the default of these endorsed and discounted bills receivable at the end of each reporting period are as follows: 2016 2015 港幣千元 Settlement of trade and other payables 6,435,481 9,135,645 Discounted bills for raising of cash 3,376,237 3,847,055 Outstanding endorsed and discounted bills receivable with recourse 9,811,718 12,982,700 180 The outstanding endorsed and discounted bills receivable are aged within 180 days at the end of each reporting period. The directors of the Company consider that the carrying amounts of the endorsed and discounted bills receivable approximate their fair values. 212 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 40. 經營租賃承擔作為出租人 40. OPERATING LEASE COMMITMENTS As lessor As at 31 December 2016 and 2015, the Group had contracted with lessees for the following future minimum lease payments under noncancellable operating leases which fall due as follows: 2016 2015 港幣千元 Within one year 45,579 47,541 In the second to fifth year inclusive 40,211 38,891 Over five years 65,824 66,882 151,614 153,314 1 10 作為承租人 Operating leases are negotiated for lease terms principally ranged from 1 to 10 years. As lessee As at 31 December 2016 and 2015, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: 2016 2015 港幣千元 Within one year 206,970 371,637 In the second to fifth year inclusive 614,070 624,152 After five years 186,520 255,786 1,007,560 1,251,575 1 20 1 2 Operating leases are negotiated for lease terms principally ranged from 1 to 20 years. The Group leases certain of its offices and warehouses under noncancellable operating lease arrangements. Leases for properties are negotiated for terms ranging from 1 to 2 years. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 213

For the year ended 31 December 2016 41. 承擔 41. COMMITMENTS 2016 2015 港幣千元 Contracted but not provided for in relation to the acquisition of: property, plant and equipment, intangible assets and prepaid lease payments 950,759 1,099,084 equity interests in subsidiaries/associate 1,225,190 425,965 42. 關聯方披露交易 (I) 重大關聯方交易 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (I) Significant transactions with related parties The Group entered into the following transactions with related parties during the years ended 31 December 2016 and 2015: Sales 2016 2015 港幣千元 Fellow subsidiaries 183,047 83,002 Associates of a fellow subsidiary 6,217 Associates 63 Companies held by non-controlling interests 7,235 196,562 83,002 Purchases 2016 2015 港幣千元 Fellow subsidiaries 21,744 30,494 Associate 4,850 Non-controlling interest 67,125 74,575 Companies held by non-controlling interests 9,772 22,183 103,491 127,252 214 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 42. 關聯方披露交易 (I) 重大關聯方交易 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (continued) (I) Significant transactions with related parties (continued) Interest expenses paid 2016 2015 港幣千元 Intermediate holding company 4,030 Management fee paid 2016 2015 港幣千元 Fellow subsidiaries 4,289 2,095 Non-controlling interest 7,256 11,545 2,095 Management fee received 2016 2015 港幣千元 Fellow subsidiaries 1,937 Non-controlling interest 12,085 16,287 Companies held by non-controlling interests 8,366 14,022 24,653 Service fee paid 2016 2015 港幣千元 Fellow subsidiaries 13,066 11,917 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 215

For the year ended 31 December 2016 42. 關聯方披露交易 (I) 重大關聯方交易 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (continued) (I) Significant transactions with related parties (continued) Operating lease payments 2016 2015 港幣千元 Fellow subsidiary 25,364 53,380 Non-controlling interest 310 25,674 53,380 Interest income received 2016 2015 港幣千元 Fellow subsidiary 12,116 22,652 As lessee At the years ended 31 December 2016 and 2015, the Group had commitments for future minimum lease payments with related parties under non-cancellable operating leases which fall due as follows: 2016 2015 港幣千元 Within one year 6,418 9,764 In the second to fifth year inclusive 400 8,978 6,818 18,742 1 2 The Group leases certain of its offices and warehouses under noncancellable operating lease arrangements. Leases for properties are negotiated for terms ranging from 1 to 2 years. The purchase and sales of finished goods, management fee paid and received, service fee paid and rental expenses are all at the terms agreed between the relevant parties. 216 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 42. 關聯方披露交易 (I) 重大關聯方交易 360,493,000 428,335,000 28,732,000 37 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (continued) (I) Significant transactions with related parties (continued) Gain on disposal of a subsidiary to a fellow subsidiary During the year ended 31 December 2016, the Group disposed of a subsidiary to a fellow subsidiary at a consideration of RMB360,493,000 (equivalent to HK$428,335,000) and resulted in a gain on disposal of HK$28,732,000 credited to profit or loss. Details are set out in note 37. (II) 重大關聯方結餘 (II) Significant balances with related parties The Group had the following significant balances with its related parties: Amounts due from related parties 2016 2015 港幣千元 Trade receivables 161,796 9,878 Other receivables 82,609 72,819 Prepayments 456 22,767 244,861 105,464 Trade receivables 2016 2015 港幣千元 Fellow subsidiaries 161,796 9,878 The aging analysis of the Group s trade receivables with related parties based on invoice date at the end of each reporting period are as follows: 2016 2015 港幣千元 0 30 0 30 days 145,365 6,384 31 60 31 60 days 8,932 1,141 61 90 61 90 days 3,864 308 91 180 91 180 days 3,440 134 180 Over 180 days 195 1,911 161,796 9,878 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 217

For the year ended 31 December 2016 42. 關聯方披露交易 (II) 重大關聯方結餘 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (continued) (II) Significant balances with related parties (continued) Deposits placed with a fellow subsidiary 2016 2015 港幣千元 Fellow subsidiary 3,069,836 1,785,670 Other receivables 2016 2015 港幣千元 Fellow subsidiaries 63,335 50,856 Immediate holding company 17,933 17,944 Associates 1,132 3,108 Non-controlling interest 168 911 Companies held by non-controlling interests 41 82,609 72,819 The amounts are unsecured, interest-free and repayable on demand. Prepayments 2016 2015 港幣千元 Fellow subsidiaries 456 22,767 Amounts due to related parties 2016 2015 港幣千元 Trade payables 23,274 23,740 Other payables 148,399 373,021 Loans from fellow subsidiaries 482,125 171,673 878,886 218 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 42. 關聯方披露交易 (II) 重大關聯方結餘 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (continued) (II) Significant balances with related parties (continued) Trade payables 2016 2015 港幣千元 Fellow subsidiaries 3,485 1,014 Associates 569 Non-controlling interest 16,062 16,798 Companies held by non-controlling interests 3,727 5,359 23,274 23,740 The aging analysis of the Group s trade payables with related parties based on invoice date at the end of each reporting period is as follows: 2016 2015 港幣千元 0 90 0 90 days 22,653 23,740 91 365 91 365 days 621 23,274 23,740 Other payables 2016 2015 港幣千元 Fellow subsidiaries 148,399 373,021 The amounts are unsecured, interest-free and repayable on demand. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 219

For the year ended 31 December 2016 42. 關聯方披露交易 (II) 重大關聯方結餘 42. RELATED PARTY DISCLOSURES/CONNECTED PARTY TRANSACTIONS (continued) (II) Significant balances with related parties (continued) Loans from fellow subsidiaries 2016 2015 港幣千元 Fellow subsidiaries 482,125 (III) 與其他中國政府控制實體的交易結餘 (IV) The amounts in prior year were unsecured, interest-free and repayable on demand. During the year ended 31 December 2016, the amounts were fully repaid. (III) Transactions/balances with other PRC government controlled entities In addition, the Group has entered into various transactions, including deposits placement, borrowings and other general banking facilities, with certain banks and financial institutions which are government-related entities in its ordinary course of business. In view of the natures of those banking transactions, the directors of the Company are of the opinion that separate disclosure would not be meaningful. (IV) The remuneration of directors of the Company and other members of key management was as follows: Compensation of key management personnel 2016 2015 港幣千元 Salaries, allowances and bonuses 23,577 18,466 Retirement benefit schemes contributions 427 503 Total compensation paid to key management personnel 24,004 18,969 The remuneration of key management personnel is determined by the management of the Company having regarding to the performance of individuals and market trends. 220 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 43. 本公司的財務狀況報表及本公司的儲備 43. STATEMENTS OF FINANCIAL POSITION OF THE COMPANY AND RESERVES OF THE COMPANY 2016 2015 港幣千元非流動資產 NON-CURRENT ASSETS Property, plant and equipment 1,928 969 Investments in subsidiaries 14,039,457 8,657,582 14,041,385 8,658,551 流動資產 CURRENT ASSETS Other receivables 2,234 1,979 Amounts due from related parties 9,934,466 12,294,617 Bank balances and cash 6,048,196 2,370,759 15,984,896 14,667,355 流動負債 CURRENT LIABILITIES Other payables 457,632 18,358 Amounts due to related parties 174 323 Bank borrowings due within one year 892,550 8,656,468 1,350,356 8,675,149 流動資產淨值 Net current assets 14,634,540 5,992,206 總資產減流動負債 Total assets less current liabilities 28,675,925 14,650,757 非流動負債 NON-CURRENT LIABILITIES Bank borrowings due after one year 1,092,021 3,543,040 資產淨值 NET ASSETS 27,583,904 11,107,717 資金及儲備 CAPITAL AND RESERVES Share capital 27,241,289 12,473,920 Reserves (note) 342,615 (1,366,203) 股東權益 SHAREHOLDERS EQUITY 27,583,904 11,107,717 The Company s statement of financial position was approved and authorised for issue by the Board of Directors on 17 March 2017 and are signed on its behalf by: 王春城先生 WANG CHUNCHENG 李國輝先生 LI GUOHUI DIRECTOR DIRECTOR 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 221

For the year ended 31 December 2016 43. 本公司的財務狀況報表及本公司的儲備 43. STATEMENTS OF FINANCIAL POSITION OF THE COMPANY AND RESERVES OF THE COMPANY (continued) Note: 匯兌儲備 Translation reserve ( 累計虧損 ) 保留溢利 (Accumulated losses) retained profit 總計 Total At 1 January 2015 (30,315) (336,061) (366,376) Loss for the year (718,080) (718,080) Exchange differences arising on translation (281,747) (281,747) Total loss and comprehensive expense for the year (281,747) (718,080) (999,827) At 31 December 2015 (312,062) (1,054,141) (1,366,203) Profit for the year 1,939,567 1,939,567 Exchange differences arising on translation (230,749) (230,749) Total (loss) profit and comprehensive (expense) income for the year (230,749) 1,939,567 1,708,818 At 31 December 2016 (542,811) 885,426 342,615 222 2016 年年報 Annual Report 2016

For the year ended 31 December 2016 44. 退休福利計劃中國 638,290,000 602,733,000 香港 5% 1,500 748,000 726,000 44. RETIREMENT BENEFIT SCHEMES PRC The employees of the Group in the PRC are members of state-managed retirement benefit schemes operated by the local government in the PRC. The Group is required to contribute a specified percentage of the payroll costs to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the specified contributions. Total cost charged to profit or loss of HK$638,290,000 during the year ended 31 December 2016 (2015: HK$602,733,000) represents contributions paid to the state-managed retirement benefit schemes by the Group in respect of the current year. Hong Kong The Group participates in both a defined contribution scheme which is registered under a Mandatory Provident Fund Scheme (the MPF Scheme ) established under the Hong Kong Mandatory Provident Fund Schemes Ordinance in December 2000. The assets of the schemes are held separately from those of the Group, in funds under the control of trustees. For members of the MPF Scheme, the Group contributes 5% of relevant payroll costs or at monthly maximum cap of HK$1,500 each person to the scheme, which contribution is matched by the employees. The total cost charged to profit or loss of HK$748,000 during the year ended 31 December 2016 (2015: HK$726,000), represents contributions paid to the MPF scheme by the Group in respect of the current year. At 31 December 2016 and 2015, the amount of forfeited contributions available to reduce contributions payable in the future years is insignificant. 華潤醫藥集團有限公司 China Resources Pharmaceutical Group Limited 223

For the year ended 31 December 2016 45. 報告期後事項 45. EVENTS AFTER THE REPORTING PERIOD Subsequent to the reporting period, the Group has the following transactions: (a) 2,200,000 0.34% 28.14% 17.76% 18.10% (a) In January 2017, CR Pharmaceutical Investment, a wholly-owned subsidiary of the Company acquired approximately 2.2 million listed shares of Dong-E-E-Jiao, a company listed on the Shenzhen Stock Exchange, which represented an additional equity interest of 0.34% in Dong-E-E-Jiao (the Share Acquisition ). Upon the Completion of the Share Acquisition, the Group indirectly held 28.14% equity interest in Dong-E-E-Jiao and the Group s effective equity interest in Dong-E-E-Jiao was increased from 17.76% to 18.10% accordingly. (b) 150 2017 SCP40 (b) On 23 February 2017, CR Pharmaceutical Holdings received a notice of acceptance of registration (Zhong Shi Xie Zhu 2017 No. SCP40) (the Notice ) issued by the National Association of Financial Market Institutional Investors in relation to the proposed issuance of unsecured non-listed bonds of up to RMB15 billion in the PRC. The Notice shall be effective for a period of two years from the issue date of the Notice, during which CR Pharmaceutical Holdings may issue the unsecured non-listed bonds in tranches. If the proposed issuance of the unsecured non-listed bonds proceeds, it is expected that the proceeds raised therefrom will mainly be used for the repayment of existing debt of the Group and replenishment of working capital. (c) (d) 233,597,000 264,205,000 51% 850,000,000 950,241,000 425,000,000 480,688,000 (c) Pursuant to an equity transfer agreement dated 20 January 2017, CR Shandong, a wholly-owned subsidiary of the Company, acquired 51% equity interest of Shandong Rongda Pharmaceutical Company Limited () at a consideration of approximately RMB233,597,000 (equivalent to HK$264,205,000). As at the date of issuance of these consolidated financial statements, the transaction has been completed. (d) Pursuant to an acquisition agreement dated 27 December 2016, CR Saike, a non-wholly owned subsidiary of the Company, acquired 100% equity interest of Hainan Zhong Hua Lian He Pharmaceutical Company Limited ( ) at a consideration of RMB 850,000,000 (equivalent to HK$950,241,000). On 10 January 2017, CR Saike has paid the first installment of RMB 425,000,000 (equivalent to HK$480,688,000) in accordance with the acquisition agreement. As at the date of issuance of these consolidated financial statements, the transaction was not completed. 224 2016 年年報 Annual Report 2016

China Resources Pharmaceutical Group Limited 41/F, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong (Incorporated in Hong Kong with Limited Liability) www.crpharm.com