Yunnan Baiyao Group
Co., Ltd.
Annual Report 2023
March 2024
Section I Important Notes, Contents, and DefinitionsThe Board of Directors (the “Board”), the Supervisory Committee and the directors,supervisors and senior management of the Company confirm the truthfulness, accuracy andcompleteness of the contents of this Annual Report and there are no misrepresentations,misleading statements or material omissions from this Annual Report, and they accept jointand several responsibilities for the truthfulness, accuracy and completeness of the contentsherein.Mr. Dong Ming, the person in charge of the Company, Mr. Ma Jia, the accounting officer,and Ms. Xu Jing, the head of accounting center (accounting supervisor), hereby declare thatthey warrant the truthfulness, accuracy, and completeness of the financial statements in thisAnnual Report.
All directors of the Company attended the Board meeting in respect of considering andapproving this Annual Report.
The Company kindly requests investors to read through this Annual Report and payspecial attention to “XI. Outlook of the Company” in the “Section III Management Discussionand Analysis.” This part does not constitute our substantial commitments to investors.Investors are advised to pay attention to investment risks.
The profit distribution plan considered and approved by the Board of Directors is asfollows: Based on the total share capital of the Company of 1,796,862,549 shares as at the endof 2023 less 12,599,946 shares repurchased by the special securities account for sharerepurchase, i.e., on the basis of 1,784,262,603 shares, a cash dividend of RMB 20.77 (taxinclusive) for every 10 shares will be paid to all shareholders, 0 bonus shares (tax inclusive) willbe distributed, and 0 shares will be issued to all shareholders for every 10 shares by way ofconversion of capital reserve.
This report has been prepared in Chinese and translated into English. Should there be anydiscrepancies or misunderstandings between the two versions, the Chinese version shall prevail.
Contents
Section I Important Notes, Contents, and Definitions ...... 1
Section II Company Profile and Key Financial Indicators ...... 6
Section III Management Discussion and Analysis ...... 11
Section IV Corporate Governance ...... 59
Section V Environmental and Social Responsibilities ...... 92
Section VI Significant Events ...... 101Section VII Changes in Shareholdings and Particulars about Shareholders .. 128Section VIII Preference Shares ...... 138
Section IX Bonds ...... 139
Section X Financial Statements ...... 140
Documents Available for Inspection
(I) Financial statements affixed with the signatures and stamps of the person incharge of the Company, the accounting officer, and the general manager of accountingcenter;
(II) Originals of the audit report containing the stamps of the external accountingfirm and the signatures and stamps of the registered accountants;
(III) Originals of all the Company’s documents and announcements publiclydisclosed on the Securities Times, Shanghai Securities News, China Securities Journal,and http://www.cninfo.com.cn during the reporting period;
(IV) Other related materials.
Definitions
| Term | Definitions |
| CSRC | China Securities Regulatory Commission |
| SZSE | Shenzhen Stock Exchange |
| Hong Kong Stock Exchange | The Stock Exchange of Hong Kong Limited |
| SASAC of Yunnan Province | State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government |
| CSRC Yunnan Bureau | Yunnan Bureau of China Securities Regulatory Commission |
| The Company / Yunnan Baiyao | Yunnan Baiyao Group Co., Ltd. |
| New Huadu | New Huadu Industrial Group Co., Ltd. |
| Yunnan Investment Group | Yunnan Provincial Investment Holdings Group Co., Ltd. |
| Yunnan State-owned Equity Operation Management Company | Yunnan State-owned Equity Operation Management Co., Ltd. |
| Yunnan Hehe | Yunnan Hehe (Group) Co., Ltd. |
| Jiangsu Yuyue | Jiangsu Yuyue Science & Technology Development Co., Ltd. |
| Baiyao Holdings | Yunnan Baiyao Holdings Co., Ltd. |
| YNBY International / Ban Loong Holdings | YNBY International Limited (Formerly Ban Loong Holdings Limited) |
| Shanghai Pharma | Shanghai Pharmaceuticals Holding Co., Ltd. |
| Mixed ownership reform | Baiyao Holdings, former controlling shareholder of Yunnan Baiyao, introduced strategic investors New Huadu and Jiangsu Yuyue by capital increase |
| Merger and overall listing | A transaction that Yunan Baiyao merged with Baiyao Holdings by issuing shares to all shareholders of Baiyao Holdings, including SASAC of Yunnan Province, New Huadu and Jiangsu Yuyue |
| Incentive Plan | 2020 Stock Option Incentive Plan |
| General tender offer | A mandatory general cash offer was made for all issued shares held by all shareholders of Ban Loong Holdings, except the offeror and its acting-in-concert parties |
| Yunnan Pharma | Yunnan Pharmaceutical Co., Ltd. |
| Teayield | Yunnan Baiyao Teayield Co., Ltd. |
| CEO | Chief Executive Officer |
| IP | Intellectual Property, ie value contentization |
| D to C | Direct to Customer, ie the marketing model that directly faces consumers |
| ESG | Environmental, Social and Governance |
| Term | Definitions |
| AI | Artificial Intelligence |
| VBP | Volume-based procurement |
| OTC | Over-the-counter drug |
| DTP pharmacies | The pharmacies that provide more valuable professional services directly to patients |
| Reporting period | The period from January 1, 2023 to December 31, 2023 |
| RMB, RMB’0,000, RMB’00,000,000 | Expressed in the Chinese currency of Renminbi, expressed in tens of thousands of Renminbi, expressed in hundreds of millions of Renminbi |
Section II Company Profile and Key Financial IndicatorsI. Company Profile
| Stock abbreviation | Yunnan Baiyao | Stock Code | 000538 |
| Stock abbreviation before change (if any) | None | ||
| Stock Exchange | Shenzhen Stock Exchange | ||
| Company name in Chinese | 云南白药集团股份有限公司 | ||
| Company abbreviation in Chinese | 云南白药 | ||
| Company name in English (if any) | YUNNAN BAIYAO GROUP CO., LTD. | ||
| Company abbreviation in English (if any) | YUNNAN BAIYAO | ||
| Legal representative of the Company | Dong Ming | ||
| Registered address | No. 3686 Yunnan Baiyao Street, Chenggong District, Kunming City, Yunnan Province | ||
| Postal code of the registered address | 650500 | ||
| Historical changes in the Company’s registered address | No. 51 Xiba Road, Kunming City, Yunnan Province, National High-tech Industrial Development Zone, Kunming City, Yunnan Province (registered address of the Group); No. 222 Second Ring West Road, Kunming City, Yunnan Province (registered address of the parent company of the Group); No. 3686 Yunnan Baiyao Street, Chenggong District, Kunming City, Yunnan Province | ||
| Office address | No. 3686 Yunnan Baiyao Street, Chenggong District, Kunming City, Yunnan Province | ||
| Postal code of the office address | 650500 | ||
| Company website | www.yunnanbaiyao.com.cn | ||
| Email address | 000538@ynby.cn | ||
II. Contact Person and Contact Information
| Secretary of the Board of Directors | Representative of Securities Affairs | |
| Name | Qian Yinghui | Li Mengjue |
| Contact address | No. 3686 Yunnan Baiyao Street, Chenggong District, Kunming City, Yunnan Province | No. 3686 Yunnan Baiyao Street, Chenggong District, Kunming City, Yunnan Province |
| Tel | 0871-66226106 | 0871-66226106 |
| Fax | 0871-66203531 | 0871-66203531 |
| 000538dm@ynby.cn | 000538@ynby.cn |
III. Information Disclosure and Location
| Website of the stock exchange where the Company discloses its Annual Report | http://www.cninfo.com.cn |
| Name and website of the media where the Company discloses its Annual Report | Securities Times, Shanghai Securities News, China Securities Journal |
| Location where the Company prepares and places its Annual Report | Company Archives Room |
IV. Changes in Registration
| Unified Social Credit Code | 9153000021652214XX |
| Changes in the principal businesses of the Company since it was listed (if any) | None |
| Changes in the Company’s controlling shareholders (if any) | 1997: Yunnan Pharmaceutical Corporation 1999: Yunnan Pharmaceutical Group Co., Ltd. 2003: Yunnan Yunyao Co., Ltd. 2010: Yunnan Baiyao Holdings Co., Ltd. (“Baiyao Holdings”) In 2017, Baiyao Holdings was the controlling shareholder but the Company had no de facto controller. In 2019, after the cancellation of the Company’s shares held by Baiyao Holdings, the Company had no controlling shareholders and no de facto controller. |
V. Other Information
The accounting firm engaged by the Company
The sponsor engaged by the Company to perform continuous supervision duties during the reporting period
□ Applicable ? Not applicable
The financial advisor engaged by the Company to perform continuous supervision duties during the reporting period
□ Applicable ? Not applicable
VI. Key Accounting Data and Financial Indicators
Whether the Company needs retroactive adjustment or restatement of accounting data in prior years or not
□Yes ? No
| 2023 | 2022 | Increase/decrease compared to the previous year | 2021 | |
| Operating revenue (RMB) | 39,111,292,156.00 | 36,488,372,649.73 | 7.19% | 36,373,919,016.03 |
| Net profit attributable to shareholders of the listed company (RMB) | 4,093,782,074.02 | 3,001,125,887.45 | 36.41% | 2,804,916,715.84 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring profits and losses (RMB) | 3,763,605,361.07 | 3,232,024,514.64 | 16.45% | 3,339,920,238.78 |
| Net cash flows from operating activities (RMB) | 3,502,742,348.02 | 3,209,410,032.57 | 9.14% | 5,223,278,282.50 |
| Basic earnings per share (RMB/share) | 2.29 | 1.90 | 20.53% | 2.21 |
| Diluted earnings per share (RMB/share) | 2.29 | 1.90 | 20.53% | 2.18 |
| Weighted average ROE | 10.51% | 7.87% | 2.64% | 7.58% |
Name of the accounting firm
| Name of the accounting firm | Mazars Certified Public Accountants (SGP) |
| Office address of the accounting firm | 17-18/F, Changjiang Industrial Building, No. 166, Zhongbei Road, Shuiguohu Subdistrict, Wuchang District, Wuhan |
| Name of signing accountants | Yang Manhui, Yang Fan |
| End of 2023 | End of 2022 | Increase/decrease compared to the end of the previous year | End of 2021 | |
| Total assets (RMB) | 53,784,293,183.93 | 53,320,943,868.74 | 0.87% | 52,335,429,198.95 |
| Net assets attributable to shareholders of the listed company (RMB) | 39,879,122,031.51 | 38,503,673,731.86 | 3.57% | 38,227,432,067.86 |
The lower of the Company’s net profits before and after deducting non-recurring profits and losses in the latest three accountingyears are all negative, and the Company’s audit report for the previous year shows uncertainties in the Company’s ability to continueas a going concern
□Yes ? No
The lower of the Company’s net profits before and after deducting non-recurring profits and losses is negative
□Yes ? No
Total share capital of the Company as at the trading day prior to the disclosure:
| Total share capital of the Company as at the trading day prior to the disclosure (shares) | 1,796,862,549.00 |
Fully diluted earnings per share calculated based on the latest share capital:
| Preferred share dividend paid | 0.00 |
| Perpetual bond interest paid (RMB) | 0.00 |
| Fully diluted earnings per share calculated based on the latest share capital (RMB/share) | 2.2783 |
VII. Differences in Accounting Data under Chinese Accounting Standards (CAS) and OverseasAccounting Standards
1. Differences in the net profits and net assets in financial statements disclosed respectively underInternational Financial Reporting Standards (IFRS) and CAS
□Applicable ?Not applicable
During the reporting period, there was no difference in net profits and net assets in financial statements disclosed respectivelyunder IFRS and CAS.
2. Differences in the net profit and net assets in financial statements disclosed respectively under overseasaccounting standards and CAS
□Applicable ?Not applicable
During the reporting period, there was no difference in the net profit and assets in financial statements disclosed respectively underoverseas accounting standards and CAS.
VIII. Key Financial Indicators by Quarter
Unit: RMB
Note: The Company reported operating revenue of RMB 9.423 billion in the fourth quarter of 2023. The gross margin was 23.77%,up 2.76 percentage points from the fourth quarter of 2022. In the fourth quarter of 2023, promotional activities and employee benefitspayable were more concentrated than in the previous three quarters, and Yunnan Baiyao experienced a decline in investment incomefrom Shanghai Pharmaceuticals Holding Co., Ltd (“Shanghai Pharma”) and a decline in gains from changes in the fair value of financialassets held for trading after the completion of the disposal of secondary market securities investments.Whether there is any significant difference between any of the above-mentioned financial indicator or their total number and thosedisclosed in the Company’s any quarterly statements or interim statements
□ Yes ?No
IX. Non-recurring Profits and Losses and their Amounts
?Applicable □Not applicable
Unit: RMB
| Item | Amount in 2023 | Amount in 2022 | Amount in 2021 | Remarks |
| Profits and losses from disposal of non-current assets (including the write-offs for the accrued impairment of assets) | 110,477,911.97 | -62,684,387.81 | 621,711,864.34 | |
| Government subsidies included in the current profits and losses (excluding the government subsidies closely related to regular businesses of the Company in line with national policies and received by a determined standard, with a continuous impact on the Company’s profits and losses) | 75,375,220.16 | 99,898,358.75 | 178,356,401.29 | |
| Profits and losses from changes in fair value of financial assets and liabilities held for trading by non-financial enterprises, and from disposal of such financial assets and liabilities, except for effective hedging operations related to regular businesses of the Company | 199,779,795.08 | -403,800,800.93 | -1,346,093,999.30 | |
| Profits and losses arising from entrusted investment or asset management | 3,146,335.87 | |||
| Profits and losses arising from contingencies unrelated to regular businesses of the Company | 4,190,474.35 | 606,039.83 | ||
| Non-operating revenue and expenses other than the above | -1,919,286.26 | 3,035,335.64 | -3,394,986.29 | |
| Other profits and losses satisfying the definition of non-recurring profits and losses | 41,588,740.24 | 80,566,869.79 | 1,200,931.04 | |
| Less: Amount affected by the income tax | 69,955,013.92 | -48,913,488.78 | -13,530,812.00 | |
| Amount affected by minority interests (after tax) | 28,316,990.19 | 1,017,965.76 | 920,585.85 | |
| Total | 330,176,712.95 | -230,898,627.19 | -535,003,522.94 | -- |
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenue | 10,512,750,996.14 | 9,796,621,853.93 | 9,379,159,224.37 | 9,422,760,081.56 |
| Net profit attributable to shareholders of the listed company | 1,517,988,356.56 | 1,310,023,258.74 | 1,295,465,799.15 | -29,695,340.43 |
| Net profit attributable to shareholders of the listed company after deducting non-recurring profits and losses | 1,402,680,418.31 | 1,334,375,367.59 | 1,116,150,641.76 | -89,601,066.59 |
| Net cash flows from operating activities | 733,744,202.46 | 1,518,207,167.64 | 337,635,107.01 | 913,155,870.91 |
Other profits and losses satisfying the definition of non-recurring profits and losses:
?Applicable □Not applicableOther non-recurring profits and losses that meet the definition of non-recurring profits and losses mainlyinclude other non-recurring profits and losses such as interest on fixed deposits and value added tax credit.Note for the definition of non-recurring profits and losses set out in the No.1 Explanatory Announcement on InformationDisclosure for Companies Offering Their Securities to the Public - Non-recurring Profits and Losses, as recurring profits and losses
□Applicable ?Not applicable
The Company does not define any non-recurring profits and losses set out in the No.1 ExplanatoryAnnouncement on Information Disclosure for Companies Offering Their Securities to the Public - Non-recurringProfits and Losses as recurring profits and losses.
Section III Management Discussion and AnalysisI. Industry Landscape of the Company during the Reporting Period(I) Industry landscape and development trendsIn 2023, amidst profound industry transformations and ongoing healthcare system reforms, the healthcaresector encountered a dynamic landscape of challenges and opportunities. On the industrial demand side, demandgrowth in the industry has been ascertained by population aging and a resurgence in consumer spending. Moreover,the evolving concept of national health management and the changing consumer demands pose new requirementsfor reshaping the industry’s product categories. With the implementation of industry policies, including the newmedical insurance mechanism, volume-based procurement (VBP), and drug purchase outside with a prescription,the out-of-hospital over-the-counter (OTC) market witnessed remarkable expansion, underscoring its substantialgrowth potential. The trends of chaining and centralization in offline retail pharmacies further heightened, while thedirect-to-patient (DTP) pharmacy channel experienced more favorable conditions. The online channel embarked ona period of rapid development, with a trend to explore the innovation strategies of “patient-centered” omni-channeloperation. On the industrial supply side, the healthcare industry epitomized the characteristic of supply creatingdemand, with innovation serving as the perpetual driving force for the pharmaceutical sector. Only products thattruly align with consumer value demands can help businesses navigate through cycles and achieve sustainabledevelopment in the market.
The contribution of TCM to the national health service and the importance of TCM in promoting theimplementation of the “Healthy China” strategy have become increasingly prominent. China should inherit theessence of TCM while pursuing innovation. The General Office of the State Council has issued the ImplementationPlan for Major Projects for the Revitalization and Development of Traditional Chinese Medicine, which sets forthgoals for the revitalization and development of TCM, covering areas such as the TCM service system,comprehensive service capacity, scientific and technological innovation capacity, talent pool development, TCMquality, and international presence. The plan also provides specific requirements to promote the revitalization anddevelopment of TCM. The National Medical Products Administration (NMPA) has issued the Special Provisionson the Administration of Registration of Traditional Chinese Medicines, which emphasize the dialectical approachneeded to balance the inheritance and innovation of TCM, accelerate the establishment of an evidence-based systemfor TCM evaluation, define multiple indicators for assessing the therapeutic efficacy of TCM, and further drive thedevelopment of innovative TCM. The introduction of the “three-combination” evidence-based system for TCMevaluation (ie a TCM registration and approval evidence-based system that integrates TCM theory, human useexperience, and clinical trials) has further clarified the guiding principles for the innovative R&D and approval ofTCM. The system presents new opportunities for R&D of new TCM and re-exploration of well-known classicprescriptions, and improve the approval and marketing processes of TCM, providing the sector with additionalavenues for growth. With the full implementation of VBP of TCM products, the management and marketing ofthese products have entered a new phase. Market leadership will be taken by high-quality, large-scale TCMenterprises that have established a comprehensive supply chain. In terms of market trends, the increasing influence
of the “Silver Economy” in China has led to golden opportunities in the field of “musculoskeletal care, healthcareand chronic disease management.” Meanwhile, with the emergence of the “new Chinese healthcare” and otherconcepts, the consumer demand for TCM products and nourishing products has been expanding, and the retailmarket has witnessed continuous improvement.Within the Big Health industry, aging population and stronger awareness of health management spurredmedical demands, and the consumer demands and patterns tend to be more diversified. In terms of consumer demand,the consumers have gradually shifted to “rational consumption.” Products with characteristics such as satisfyingmulti-level personalized needs, having more scientific ingredient formulations and segmented efficacy claims, andpossessing strong social attributes become priorities of consumers. As for the product mix, consumer expectationshave also evolved, with stricter requirements on cost-effectiveness while pursuing quality. As costs soar, manyconsumer products have entered a phase of balancing price reduction with quantity increase. Consumerclassification is becoming increasingly evident. In terms of channel, driven by the “near-field” and “digitalization”trends of consumer goods channels, e-commerce channels experienced sustained growth, with content e-commerceand instant retail expanding rapidly. Against the backdrop of shrinking traditional large channels, the transformationand upgrading of traditional channels represented by smaller grocery stores accelerated the reshaping of offlinebusiness formats. Thanks to meeting diverse consumer demands such as immediate, urgent, and emerging needs,the online-to-offline (O2O) model has rapidly developed, bringing sales increments to most product categories.Within segments, the oral care market has witnessed channel fragmentation, intensifying competition andnecessitating further exploration of oral cleansing and care needs. Personal care brands have gained market share,while national brands have made significant breakthroughs, presenting both opportunities and challenges forChinese enterprises. The health industry is entering an era of “discerning” expenditure. To stay ahead in this fiercelycompetitive landscape, companies must adopt refined management and operations in channel and retail terminals,acquire precise insights into consumer characteristics and demands, and enhance the cost competitiveness of thesupply side.(II) Industry positionThe CPC Central Committee and the State Council attach great importance to the development of TCM,positioning the inheritance and innovation of TCM as an important aspect of the socialist cause with Chinesecharacteristics in the new era. The report to the 20th CPC National Congress has explicitly stated that we should“promote the inheritance and innovation of TCM.” The Outline of 14th Five-Year Plan for Economic and SocialDevelopment and Long-Range Objectives through the Year 2035 of China put forth measures to promote theinheritance and innovation of TCM, providing robust support and impetus for TCM’s inheritance and innovation inthe new era.At the end of 2023, the Company celebrated its thirtieth anniversary of listing. Over the past three decadessince its listing, Yunnan Baiyao has maintained continuous growth, with operating revenue growing from RMB 58million in 1993 to RMB 39.111 billion in 2023, representing an increase of 673 times; the net profit attributable tothe parent company growing from RMB 13 million in 1993 to RMB 4.094 billion in 2023, representing an increaseof 314 times. While continuously improving its intrinsic quality, the Company has always adhered to its corporatesocial responsibility, continued to enhance its dividend distribution capacity, increased the level of dividend
distribution, and distributed the dividends to its shareholders for 30 consecutive years. As of 2022, the cumulativecash dividends exceeded RMB 20.7 billion. Through stable operation and continuous dividend distribution, theCompany has shared the achievements of corporate development with all stakeholders, created lucrative valuereturns for long-term value investors, and further promoted the high-quality development of the enterprise.Yunnan Baiyao has consistently focused on integrating TCM into modern life, explored the endogenouspotential of traditional medical products, responded to the needs of modern life with product innovation and infusedtraditional brands and TCM products with renewed vitality. In the pharmaceutical products domain, the Company’sroots lie in Yunnan Baiyao Powder with a century-long legacy. Through persistent exploration and innovation,Yunnan Baiyao has progressively developed a series of core pharmaceutical products encompassing diverse formslike aerosol, plaster, tincture, and woundplast. In terms of personal care products, the Company has successfullycombined core ingredients of Yunnan Baiyao with oral care items and created a group of oral care products, notablyexemplified by Yunnan Baiyao toothpaste. This achievement stands as a prominent case for TCM enterprisesventuring into cross-border innovation and reshaping consumer preferences. Leveraging its successful developmentstrategies in pharmaceutical and health product sectors, the Company has expanded its business footprint intovarious domains, including natural medicine, TCM decoction pieces, special medicines, medical devices, personalcare products, and healthcare food. This move enables the Company’s evolution from a TCM manufacturingenterprise to a modern, Big Health-oriented entity.The Company has 567 drug approval numbers and 316 varieties, covering 222 varieties of Chinese patentmedicines, including 43 exclusive varieties. The Company not only vigorously promotes the secondary developmentof TCM varieties, but also enhances the innovation of new TCM products through R&D investment and scientificand technological strength. In the secondary development of TCM products, the Company focuses on the R&D ofGongxuening Capsule for hemostasis and anti-inflammation, and Qixuekang Oral Liquid for improving Qideficiency and blood stasis. To enrich the new TCMs, we have assigned superior R&D resources to incubate keyR&D projects for three new TCMs under Category 1.1, including the Panax notoginseng Tablet for treatment ofheart-pulse stasis syndrome related symptoms, the Fuqi Guben Ointment, the first new TCM approved for clinicalsyndrome for warming kidney and consolidating foundation, and Xianghuo Spray for patients during the recoveryperiod of COVID-19 or with wind-cold related syndrome. In addition, we have carried out the development ofChinese herbal preparations for two classic prescriptions (PZ-018, PZ-019).In 2023, Yunnan Baiyao continued to maintain its market leading position in several business areas. TheCompany’s core product, Yunnan Baiyao (Powder) occupied a 14.5% retail market share of systemic Chinese patentmedicines for orthopedic injuries in the musculoskeletal system, ranking No.1 in the market. Yunnan BaiyaoAerosol occupied a 91.0% retail market share of the topical Chinese patent medicine aerosol for pains inmusculoskeletal joints and muscle, ranking No.1 in the market. Yunnan Baiyao Woundplast occupied a 66.5% retailmarket share of woundplasts (medicated) for external hemostasis, ranking No.1 in the market (source: CHISSystem). Yunnan Baiyao Toothpaste gained a market share of 24.60% in the domestic market in 2023, maintainingits No.1 position in market share (source: Nielsen Retail Research Data (YTD2312)). In the pharmaceuticaldistribution segment, Yunnan Pharmaceutical Co., Ltd (“Yunnan Pharma”) maintained a regional dominant marketposition in the public hospitals at or above the county level in Yunnan Province.
II. Principal Businesses of the Company during the Reporting Period(I) Product and businessThe Company has four business groups, namely Pharmaceutical Business Group, Health Products BusinessGroup, Traditional Chinese Medicine (TCM) Resources Business Group and Yunnan Pharmaceutical Co., Ltd(pharmaceutical distribution). These business groups serve as the foundation for the Company’s production andoperations.Pharmaceutical Business Group focuses on the products of Yunnan Baiyao series, (for example, YunnanBaiyao Aerosol, Yunnan Baiyao Plaster, Yunnan Baiyao Woundplast, etc), which are mainly used for hemostasis,pain relief, swelling reduction, and blood stasis elimination. The BG extends its offerings to include other brandedTCMs with natural characteristics, covering areas such as tonifying Qi and blood, treating colds and flu,cardiovascular health, gynecology, pediatrics, and more. The BG is also actively involved in the development ofPanax notoginseng botanical supplements, aiming to identify new avenues for growth.Health Products Business Group, with its core focus on the toothpaste category, relies on its robust brandinfrastructure encompassing people, products, and consumer scenarios. Embracing a user-centric approach, the BGactively explores new consumer scenarios and introduces innovative product categories, particularly in the realmsof oral care and Yangyuanqing anti-hair loss solutions.TCM Resources Business Group capitalizes on Yunnan Province’s unique medicinal plant resources. Whileensuring the high-quality, efficient, and cost-effective supply of TCM raw materials across the Group, the BG strivesto develop both B-end (including Panax notoginseng series, branded medicinal materials, raw material extracts)and C-end (including TCM decoction pieces and healthcare food) products. Moreover, the BG continues to advancethe digitalization, platform-based operation, and integrated management of TCM resource cultivation, whileexploring growth potential.Yunnan Pharma remains steadfast in pursuit of maintaining its leading market share among pharmaceuticaldistribution companies in Yunnan Province. It has achieved full coverage in all 16 prefectures and cities of YunnanProvince, with its channels radiating across major retail chain pharmacies. It also assists governments and medicalinstitutions in building better management and service systems, providing high-quality and modern pharmaceuticalsupply chain service solutions for upstream and downstream customers.
(II) Business model
1. Transformation from a traditional manufacturing enterprise to a provider of comprehensive solutionsDriven by innovative biotechnology, artificial intelligence, and big data computing capabilities, the globalhealthcare industry is undergoing a transformation from evidence-based medicine to precision medicine, which hasdriven the global pharmaceutical industry’s transition from large-scale industrial production to personalizedapproaches and from chemical drugs to biologics and therapies. The market demand has also shifted from a singular“product” to “comprehensive solutions.” In this context, Yunnan Baiyao is gradually transitioning from a traditionalmanufacturing enterprise to a “globally leading provider of comprehensive solutions.” We are embarking on a pathof platformization and digitalization upgrade. The Company remains focused on our principal businesses whileactively expanding the potential of key sectors such as pharmaceuticals, health products, TCM resources, andcommercial logistics. This ensures the steady growth of the Company. Looking ahead in the medium to long term,
we are committed to our established strategic tracks. By leveraging a “dual-wheel drive” strategy of internal growthand external expansion, and introducing innovative products and establishing a commercial platform that facilitatesthe entry of innovative medicines into the Chinese market, we set to position Yunnan Baiyao as a globally leadingprovider of comprehensive healthcare solutions, with the capability to represent China’s health industry ininternational competition.
2. Transformation from a regional enterprise to an international enterprise with cross-regional presenceYunnan Baiyao has planned the establishment of regional strategic functional centers in regions such asKunming, Beijing, and Shanghai. Among these, Kunming is the Group’s headquarters, the production facility, andthe hub for TCM R&D. It still serves as the focal point from which the Company expands its influence outward.Once completed, Kunming R&D Center will concentrate on TCMs and natural drugs research, capitalizing on theabundant local flora and fauna. This will complement the Company’s traditional R&D strengths in natural plantextraction and further enhance its independent R&D capabilities. Shanghai Center establishes an open andinnovative incubation industrial science park. Beijing Center utilizes the platform of the Peking University - YunnanBaiyao International Medical Research Center (PKU-YBIMRC) to strengthen collaboration between enterprises,universities and research institutes. In addition, Beijing Center closely focuses on world cutting-edge technologyresearches, and explores new mechanisms for enterprise-university cooperation, with an aim to attract world-classscientists, accelerate transformation of academic and scientific research achievements, and create a competitivemedical brand.The Company is creating an industrial platform that leverages resource-rich highland regions with favorablepolicies. This involves cross-regional expansion to effectively harness resources and develop core competitiveadvantages.
3. Transformation from traditional endogenous growth to a model “driven by dual wheels”The R&D and innovation model of global pharmaceutical companies has shifted from the traditionalendogenous R&D to a new model characterized by patent collaborations and M&As. Against the backdrop ofpayment system reforms such as China’s drug VBP and medical insurance fee control, Chinese pharmaceuticalcompanies can no longer rely solely on domestic market-oriented business models and expansion strategies to meettheir long-term development needs as they engage in the process of internationalization. On one hand, YunnanBaiyao continues to cultivate and explore the potential of its existing business sectors, thus accumulating momentumfor its significant leapfrog advancements. Also, the Company strives to achieve commercial collaboration,technological exchange, and data sharing across business sectors, and work together to create a moat for YunnanBaiyao. On the other hand, the Company will continue to promote the introduction of innovative products at homeand abroad through various business models such as M&As, patent authorization, and joint venture construction.Yunnan Baiyao is laying the foundation for its transformation into “a comprehensive solution provider” byconstructing market-competitive products and services and focusing on developing comprehensive servicecapabilities around the medical sector.
4. Transformation from training internal talents to “training internal talents + introducing externaltalents”
The Company believes in the pivotal role of talent in driving its development. It has established acomprehensive training system and various avenues for employee growth, fostering both specialized knowledgeand comprehensive skills, with the mutual development of talents and the Company as the objective. The Companywill leverage its advantageous resources to actively recruit high-caliber specialists across various domains such asstrategic investment, medical academia, drug R&D, and user operations. This aims to bolster independent R&Dcapabilities and global resource integration expertise, drive technological innovation in pharmaceuticals,particularly in the realm of biopharmaceuticals, and integrate emerging information technologies, for achieving aleapfrog development, and creating a comprehensive pharmaceutical solution that integrates multiple product forms.The Company is further strengthening its financial strategies to provide robust support for Yunnan Baiyao’sstrategic objectives. It will also enhance operational capabilities in such areas as revamping the management ofworking capital along the entire value chain and improving the effectiveness of enterprise investment andacquisition value management. By nurturing internal talents, welcoming external experts, and fully utilizing itsorganizational environment for talent development and market resources, the Company strives to build a high-quality talent pool aligned with its future growth requirements.
5. Transformation from a traditional manufacturing enterprise to a smart enterprise based on digitaloperations
The Company is committed to building a digital driving force and actively seeking for transformation to digitaloperations with customers as the center, so as to bring new value propositions to customers, and improve theirexperience. Leveraging cutting-edge digital technologies such as cloud computing, big data, artificial intelligence,5G, and the Internet of Things, the Company drives innovation and development. The Company also seeks fortransformation from a function-oriented process to a process that connects customer scenarios to drive theCompany’s management change and organizational development. Also, the Company will establish a unified “database” and governance strategy, and build an intelligent decision-making system “based on facts.” In terms of talentmanagement, Yunnan Baiyao has built the ONE-BY digital talent lifecycle management platform and formulated adigital transformation strategy for human resources. By adopting scenario-based, automated, group-oriented, role-based, and data-driven approaches, the Company has gradually digitized its human resources practices.Pharmaceutical BG has leveraged IP-driven activities and projects to create a synergy between online and offlinechannels, enabling targeted marketing based on user value. Health Products BG has achieved significantadvancements in its toothpaste factory, implementing intelligent manufacturing and digital twinning with Industry
4.0 principles. TCM Resources BG has developed a digital Panax notoginseng industry platform, facilitatingprofound connections between users and participants in the Panax notoginseng industry. This platform enablesautomated production and fosters an industry ecosystem, ensuring that products and services can reach users moreefficiently. Yunnan Pharma continues to expand its pharmaceutical distribution capabilities by establishing anintelligent drug logistics system that covers the entire province. Yunnan Baiyao Group Medicine E-commerce Co.,Ltd has established an AI-based big data platform to support intelligent development, promoting the full-cycleupgrade of digital health from “medical + pharmaceutical + insurance” to “service + product + payment.”
III. Analysis on Core Competitiveness(I) Brand strengthYunnan Baiyao is a well-established Chinese heritage brand with a history of over 120 years. The Companyplaces the Yunnan Baiyao brand at its core, evolving from a pharmaceutical brand to cover a diverse range of sub-brands, including personal healthcare products, crude drugs, and Big Health products. We have built a diverseportfolio of brands and continuously expanded our reach to target audiences, enhancing our brand value over thelong term. With the continuous enhancement of brand market value, brands have emerged as the focal point in theglobal economic arena. Throughout its more than a century of evolution, Yunnan Baiyao has consistently pursuedinnovation and transformation. Looking ahead, the Company is poised to increase investments in technologicalinnovation and expedite the optimization and transformation of its product development processes, solidifying theCompany’s presence on the global stage. This highlighted the sustained market acknowledgment of YunnanBaiyao’s brand value during the reporting period. In July 2023, Brand Finance, a British brand evaluation agency,released the Healthcare 2023 - The Annual Report on Ranking of the Most Valuable and Strongest Pharma, MedicalDevices and Healthcare Services Brands by Value. Yunnan Baiyao was included in the shortlist of the global top25 most valuable pharmaceutical brands for the third time. In November 2023, Interbrand, a global brand strategyconsulting and design firm, released its 2023 Best Chinese Brands Ranking. Yunnan Baiyao was ranked 35
thamongChinese brands and secured the No.1 position in the pharmaceutical industry.(II) Talent team advantagesThe Company has formed a professional management team with a market awareness across various businesssectors. In the fierce industry competition, the Company has always maintained a sharp business acumen of marketchanges and profound insight into industry trends. We persistently delve into the essence and core values of ourcentury-old brand, fostering innovation and incubating high-quality product portfolios to address the iterativeupgrades in consumer demand. This drives the integration of TCM into modern life and achieves a long-term,sustainable, stable and sound development of the Company. Therefore, the Company has long been among theforefront in TCM industry in terms of operating revenue, net profit, market value, and other indicators.The Company has leveraged the benefits of market-oriented institutional mechanisms to attract a diverse arrayof top-tier talents. During the reporting period, Mr. Zhao Yingming was appointed as the Company’s ChiefCommercial Officer and Senior Vice President. The Company’s talent team building has brought fresh blood intoits management improvement, new business incubation, business expansion, digital construction, and other fields,boosting its overall capacity to expand into new business ventures. Following its official launch, PKU-YBIMRC,an R&D platform representing a groundbreaking industry-university collaboration, has attracted renowned scientistsfrom around the world. With this, the Company significantly enhanced its existing capabilities in TCM researchand established leading-edge R&D capabilities for modern pharmaceutical products across various domains.At the beginning of 2024, the Board of Directors elected Mr. Zhang Wenxue as the Chairman of the TenthBoard of Directors. The Company embarked on a steady implementation of organizational transformation with thecore principle of “strengthening the front-end, empowering the middle-end, and optimizing the back-end.” Thisaims to shift the management and control model from financial control to strategic control, while building a morefocused, streamlined, and efficient organizational structure. With such measures, the Company will enhance internal
connectivity and collaboration, and provide a robust foundation for the Company to focus on principal businesses,integrate advantageous resources, and reinforce vertical control and empowered management.At present, the Company is trying to capitalize on emerging development opportunities with joint efforts of allits employees, with an aim to advance its stability, long-term prospects, and sustainability, enabling the Companyto reach a new stage of development.(III) Innovation capabilities and product portfolio strengthsInnovation is the fundamental path for enterprises to achieve high-quality development. The core essence ofenterprise innovation lies in creating value. High-quality products serve as the driving force for value creation andsustainable development within an enterprise. They also serve as the medium through which users perceive thevalue of the enterprise. Yunnan Baiyao’s enduring vitality over the span of two centuries can be attributed to itscommitment to continuous business and product innovation, addressing the ever-evolving consumer demands. TheCompany’s innovation strategy revolves around three key areas: customer-centric innovation, social innovationthrough collaborations, and digital innovation driven by advanced technologies like artificial intelligence, big data,and cloud computing. The Company is committed to integrating TCM into modern life. As such, the Company hasevolved from a single hemostatic product manufacturer into a company with broad and diversified Yunnan Baiyaoproducts encompassing various sectors within the Big Health industry. Among them, aerosol, plaster, capsule,toothpaste, woundplast, and Baoqi Panax notoginseng products rank among the top in the segmented market share,creating classic cases of TCM innovation such as “Yunnan Baiyao Woundplast” and “Yunnan Baiyao Toothpaste”and their use in daily scenarios.The Company’s commitment to continuously enhancing its R&D capabilities and driving digitaltransformation has constantly boosted its innovation capacity. To support its R&D team, the Company hasestablished more than 10 national and provincial-level research platforms. It has also forged partnerships withvarious research institutions and universities to establish dedicated R&D centers focusing on the pharmaceuticalfield. These collaborations facilitate talent acquisition, scientific research, and knowledge exchange. By promotingclose collaboration between basic research and clinical practices, the Company truly translates research findingsinto practical outcomes, encourages interdisciplinary integration, and fosters innovation. Furthermore, with aforward-thinking perspective, the Company drives its transformation into “digital and intelligent innovation” byleveraging advanced technologies such as artificial intelligence, big data and cloud computing, and continuouslyenhances operational efficiency in both management and R&D. As a model for cross-border presence of TCMenterprises, the Company has successfully expanded its business presence in pharmaceutical products and healthproducts, and holds a leading position in various market segments.In the new era, the Company’s vitality lies in its product innovation capability. The coordinated developmentand mutual empowerment of pharmaceutical and consumer businesses can effectively mitigate market and policyrisks across different economic cycles, achieving stable and sustainable overall business operations for the Company.(IV) Full industry chain advantageYunnan Baiyao relies heavily on the biological resources in Yunnan Province and has always adhered to along-term approach when establishing its presence in strategic areas, especially focusing on strategic TCM varietieslike Paris polyphylla and Panax notoginseng. Over two decades of dedicated research on Paris polyphylla, a
strategic medicinal material for the Company, the Company has successfully addressed the challenges associatedwith its cultivation. The Company has transformed this once-wild and endangered plant into a cultivatable medicinalmaterial suitable for industrialization. Additionally, the Company has embraced digital infrastructure andinformation-oriented approaches in the Panax notoginseng industry chain, driving the digital transformation acrossthe entire supply chain. Through digital solutions, Yunnan Baiyao ensures stable quality and full traceability ofPanax notoginseng raw materials, effectively mitigating the quality fluctuations often associated with traditionalagricultural products due to extensive processing. This progress allows the Company to gradually establish a fairpricing mechanism and standardized industrial operations, thereby leading and advancing the development andupgrading of the Panax notoginseng industry. The Company is extending the experience gained from establishingthe “Digital Sanqi Industrial Platform” to other TCM supply chains. It is gradually building a long-term, stable, andhigh-quality traceable supply chain system for authentic Yunnan medicinal herbs such as Panax notoginseng, Parispolyphylla, Carthamus tinctorius, and Poria cocos.
Driven by its long-term and continuous investment in key strategic varieties of TCM materials, the Companyhas achieved a complete and closed-loop industry chain from seed selection and cultivation to production andprocessing. This has established a robust supply system for strategic medicinal materials, effectively ensuring thequality stability of TCM raw materials and controlling the price fluctuations of strategic TCM raw materials. Suchsystem has laid the groundwork for the long-term and sustainable development of Yunnan Baiyao.
(V) Channel advantages
In terms of pharmaceuticals, the Company has built a marketing network covering medical institutions andretail pharmacies across various provinces, regions, counties, and towns in China. In the advantageous OTCchannels, we have nationwide coverage, serving 5,000 top-tier chains and reaching over 400,000 retail stores.Especially in areas with well-developed chain pharmacies such as East China, Hunan Province, Hubei Province,and Yunnan Province, the Company has achieved the high coverage, the penetration rate, and strong market controlcapabilities, and implemented the special marketing cooperation under the principle of “One Province, One Strategy”or even “One Chain Store, One Strategy”. The Company also has conducted extensive cooperation with major e-commerce platforms such as Alibaba, JD.com, and Douyin, for expansion of online OTC sales channels, andachieved efficient reach to modern consumers by virtue of customized digital marketing.
Regarding health products, Yunnan Baiyao has established a comprehensive nationwide sales team dedicatedto Big Health products, covering all terminals. As of 2023, Yunnan Baiyao Toothpaste had maintained the largesttoothpaste market share in omni-channels, encompassing hypermarkets, supermarkets, mini-stores, conveniencestores, grocery stores and cosmetics store (source: Nielsen Retail Research Data YTD2312), with a high brandpenetration in the oral product category. Through ongoing optimization of its full chain channels, the Company hasnot only strengthened its position in traditional offline channels but also experienced significant growth in emergingbusiness models such as on-demand retail, community group purchases, and interest-based e-commerce. Thisdemonstrates the Company’s willingness to experiment and adapt, taking measured steps forward and learning fromany mistakes along the way, all of which enhance its ability to quickly respond to evolving business trends. Suchchannel advantages have driven significantly enhancement to Yunnan Baiyao’s market competitiveness, laying thefoundation for the Company to continuously commercialize new products.
IV. Analysis on Principal Businesses
1. Overview
(1)
Overview of business dataIn 2023, despite the challenges posed by significant external environmental changes, the Company achieved atotal operating revenue of RMB 39.111 billion, representing a net increase of RMB 2.623 billion from RMB 36.488billion in the same period last year, with a growth rate of 7.19%. Industrial revenue grew at a rate of 7.58%. TheCompany also achieved a net profit attributable to the parent company of RMB 4.094 billion, an increase of RMB
1.093 billion from RMB 3.001 billion in the same period last year, with a growth rate of 36.41%. The weightedaverage return on equity was 10.51%, an increase of 2.64 percentage points compared to the previous year. Thebasic earnings per share were RMB 2.29 per share. At the end of the reporting period, the Company’s total assetsamounted to RMB 53.784 billion, representing a 0.87% year-on-year growth. The cash and bank balance recordedRMB 14.218 billion, while the balance of financial assets held for trading decreased significantly by 93.82%compared to the beginning of the year, amounting to RMB 149 million. The net assets attributable to theshareholders of the listed company amounted to RMB 39.879 billion, representing a 3.57% year-on-year increase.(2)
The four BGs focus on their principal businesses, driving quality and efficiency, and achieving steadyand high-quality growth
1) Pharmaceutical Business Group
During the reporting period, Pharmaceutical Business Group achieved principal business revenue of RMB
6.481 billion, representing an 8.16% year-on-year growth. The core products of the Baiyao series maintained astrong growth momentum, with a gross profit margin of 70.6%. Among them, the sales revenue of Yunnan BaiyaoAerosol contributed over RMB 1.7 billion, with a 15.27% year-on-year growth. The sales revenue of Yunnan BaiyaoWoundplast, Yunnan Baiyao Plaster, Yunnan Baiyao (Powder), and Yunnan Baiyao Capsule exceeded RMB 100million. Specifically, the sales revenue of Yunnan Baiyao Plaster surpassed RMB 900 million, while the salesrevenue of Yunnan Baiyao Capsule exceeded RMB 600 million, and the sales revenue of Yunnan Baiyao (Powder)and Yunnan Baiyao Woundplast exceeded RMB 300 million. Other branded TCM products showed impressivegrowth. The sales revenue of Pudilan Anti-inflammatory Tablet and Huoxiang Zhengqi Oral Liquid both surpassedRMB 100 million, with year-on-year growth of nearly 16% and 124% respectively. The sales revenue ofGongxuening Capsule, used for gynecological inflammation, saw a 47% year-on-year increase. Botanicalsupplements also achieved significant growth, with the sales revenue of Qixuekang Oral Liquid reaching RMB 231million, representing a 15% year-on-year growth.The pharmaceutical business is Yunnan Baiyao’s core operation and a cornerstone of its vision to become a“comprehensive solution provider in the Big Health sector.” With an aging population, growing healthconsciousness, rising demand for sports-related products, and the rapid expansion of retail pharmacies, particularlyin the chain OTC segment, Yunnan Baiyao is well-positioned to leverage its brand resources, including 567 drugapproval numbers and 316 varieties (including 222 Chinese patent medicines, of which 43 are exclusive), as wellas its OTC channel advantages, encompassing 5,000 leading service chain stores and nationwide coverage of over400,000 stores. These have presented significant opportunities for Yunnan Baiyao’s branded TCM retail business.
During the reporting period, Pharmaceutical Business Group actively promoted self-reform, upholdinginheritance and innovation. In terms of academic construction, the BG joined hands with professional organizationssuch as the National Trauma Center, Bai Qiu’en Foundation, and PKU-YBIMRC to carry out a number of clinicaltrials around Baiyao’s core and growth varieties, exploring product characteristics, assessing efficacy and safety,extending the lifecycle of mature varieties, and unlocking the market potential of growth varieties. The BG hadestablished an integrated ecosystem for Yunnan Baiyao that combined research and marketing to a high degree, andenhanced its core competitiveness. Marketing efforts involved large-scale operations, pilot promotions, andincreased collaboration with drugstore chains, aiming for industry and chain growth with concentrated resourceinput. Organizational improvements included talent development initiatives like the “Xuanjia Action,” enhancedmanagement efficiency, continuously increased product quality and stability, and achieved significantbreakthroughs in operational capacity. Product initiatives focused on core series of Yunnan Baiyao, shifting from a“scattered approach” to a “targeted strategy,” concentrating resources on flagship products and national keyaccounts, and making breakthroughs in targeted products. In the field of branded TCM, an independent team wasestablished to operate Yunnan Baiyao branded TCM series products, aiming for seizing the opportunities in thebranded TCM market, and achieving sustained sales growth. In the Panax notoginseng market, a drug intelligentmanufacturing center characterized by cost control, high-quality, traceable and consistent Panax notoginseng rawmaterials was established to enable rapid market penetration in the Panax notoginseng sector.Moving forward, Pharmaceutical Business Group will focus on “leading in the field of orthopedics, expandingits reach to households with a diverse range of medicines, and becoming a prominent player in the Panax notoginsengindustry.” The BG will continue to strengthen and solidify its leading position in the OTC market for musculoskeletaldisorders while actively driving growth for other branded TCM products. Furthermore, the BG will strive to establishan operational system throughout the entire Panax notoginseng industry chain and cultivate competitive advantages invarious therapeutic areas. To achieve these objectives, Pharmaceutical Business Group will focus on two key strategies.Firstly, it will enhance academic research and deepen partnerships with National Trauma Center, AcceleratedRehabilitation Alliance, PKU-YBIMRC, and medical institutions at all levels, conducting in-depth research andsecondary development on existing products, exploring potential products and creating new growth opportunities.Secondly, the BG will collaborate with upstream raw material supply and manufacturing departments to achievecoordinated development across production, quality control, and marketing. All these will enable intelligentmanufacturing, cost reduction and enhanced efficiency, thus providing a strong impetus for future growth.
2) Health Products Business Group
During the reporting period, Health Products Business Group tapped into the potential of the existing customers,and maintained a steady growth in the principal business income, realizing an operating income of RMB 6.422billion, up 6.50% year-on-year. In the field of oral care, Yunnan Baiyao Toothpaste occupied a domestic share of
24.60% (source: Nielsen Retail Research Data, YTD2312), maintaining its No.1 position in terms of market share.During the “Double 11” period in 2023, Health Products Business Group secured the first place in several lists: Theofficial flagship store of Yunnan Baiyao Toothpaste at Tmall achieved a breakthrough, realizing sales performanceper store of over RMB 100 million for the first time, becoming the first flagship store to achieve the sales of overRMB 100 million for a single toothpaste product. It also won the first place on the list of popular toothpastes and
the first place on the list of popular branded toothbrushes at Douyin. In the hair care and anti-hair loss segment,Yangyuanqing achieved an impressive growth throughout the year, recording a sales income of RMB 300 million,with an increase of 36% year on year. During the “Double 11” period, the online sales of Yangyuanqing achievedoutstanding performance: ranking No.1 among domestic anti-hair loss shampoo brands at the Tmall platform,recording total sales of over RMB 100 million at Douyin in 2023. The flagship product of Yangyuanqing, the oilcontrol and anti-hair loss kit, topped the list of popular anti-hair loss shampoo products at Douyin Mall, and rankedfirst in the list of best sellers for nourishing and anti-hair loss shampoo at the Pinduoduo platform.During the reporting period, Health Products Business Group adhered to the core guiding principle of“stabilizing the basic segments, expanding the incremental segments, and embracing the innovative segments.” Weremained focused on oral health and personal care products, continuously driving high-quality development of thebusiness. By leveraging “both online and offline channels” and enhancing brand exposure across multipledimensions, we strengthened our existing segments and expanded the incremental segments. In the online realm,we collaborated with comprehensive e-commerce platforms like Tmall, JD.com, and Pinduoduo during major onlineshopping promotions such as “618, Double 11, Double 12.” Through impactful and ongoing marketing efforts, weactively increased our online market share by engaging live broadcasts on content e-commerce platforms likeDouyin. Additionally, we enhanced brand exposure through partnerships with Li Jian’s online concert, YunnanBaiyao Oral Health & “Divas Hit the Road - Silk Road Season” travel variety show IP content marketing, andcollaborations with Yangyuanqing & “Fengshen Performing Arts Training Camp” variety show. In terms of offlinerealm, we unified the image of terminal activities through various promotional campaigns such as “Scientific OralCare Season” and “Flying Loong Welcomes the New Year, Healthy and Happy Year” during Chinese New Year.During the reporting period, the offline promotional activities totaled more than 14,700 sessions, with activities andmaterials covering a total of 1,465 cities (provinces, cities and counties). Furthermore, we optimized our productmix, implemented iterative technological innovation, and drove category upgrades, resulting in the filing andpackaging upgrade of 153 toothpaste products during the reporting period.
The strategic development goal of Health Products Business Group is to become a comprehensive solutionprovider for oral health, scalp care, and body care. This will be achieved by establishing a supply chain platform foreffective care products, developing a refined commercial big data platform, and leading the industry in technologicalinnovation while committing to sustainable development. Health Products Business Group will continue to exploregrowth opportunities in new channels, cater to consumption stratification by expanding into emerging channels,drive product upgrades through iterative technological innovation, and leverage the e-commerce interest conversionas an opportunity to contribute to the Company’s long-term sales revenue and profit growth.
3) TCM Resources Business Group
During the reporting period, TCM Resources Business Group took customer value demands as its starting pointand focus. It aimed to create a sustainable platform for TCM resources by upgrading its operations. While ensuringhigh-quality and efficient supply of internal resources, the BG had achieved external sales revenue of RMB 1.71billion, representing a year-on-year growth of approximately 22%. Notably, the external sales revenue of Panaxnotoginseng medicinal materials had experienced a significant increase of 81% compared to the previous year. Onthe other hand, the BG ensured the stability of supply and prices for strategic varieties. Despite the general increase
in the price of TCM materials and a 17.3% year-on-year increase in the Kangmei TCM materials’ price index(source: http://cnkmprice.kmzyw.com.cn/), the BG effectively suppressed the rise in the price of the Company’sfeeding herbs, with the Company’s feeding herbs price increase significantly lower than the average level of theindustry’s price of TCM materials increase. The TCM Resources Business Group concentrated on Yunnan’s localherbs and Baiyao’s advantageous varieties, and pioneered in the Panax notoginseng sector. In the natural plantextracts business, we achieved refined operation from procurement to production and sales, contributing to a furtherincrease in the market share of eucalyptus oil, and the sales of Capsaicin quadrupling, becoming a new growthdriver for the business.
To ensure high-quality and efficient completion of business orders, TCM Resources Business Groupestablished a linkage between procurement and production. Early deployment was made based on the annualdemand of each business entity, and operating inventory and reserve inventory for strategic varieties wereestablished. Through initiatives such as precise planting in the Paris polyphylla seedling factory and the “One HeartProgram,” we achieved high-quality, efficient, and low-cost supply. Supply chain upgrades, “agile planning,”intelligent optimization strategies, and other measures ensured quick and accurate delivery. Leveraging theadvantages of the digitized industrial platform, high-quality inventory, and brand value in the field of Panaxnotoginseng, we provided strong support to relevant business entities in systematically creating a new pattern ofPanax notoginseng terminal products.With a focus on consolidation, cultivation, and innovation, TCM Resources Business Group will rely on the richresources of authentic raw materials and herbs in Yunnan Province and regional advantageous resources to build asustainable and leading platform in the TCM resources industry. While ensuring the Company’s supply, centering on theneeds of users and focusing on the excavation, cultivation, development, and utilization of Yunnan’s industry resourcesof TCM materials, we will gradually build a long-term stable, high-quality traceable supply chain system for Yunnan’sauthentic raw materials and herbs, create long-term value for the Company and its external customers. In the brandedmedicinal materials segment, we will leverage the success of the Panax notoginseng industry platform to develop otheradvantageous medicinal materials in Yunnan, creating a branded medicinal materials ecosystem through innovativeplanting models, improved processing capacity, access to R&D resources, and tailored user solutions. In the natural plantextracts segment, we will enhance the operation of eucalyptus oil and promote the healthy and sustainable developmentof the flavor and fragrance industry. By deploying production technology innovation, expanding product categories, andgaining in-depth insights into customer demand, we will transform from a raw material provider to a comprehensivesolution provider in the food plant extract industry, particularly with Capsaicin products. The pharmaceutical servicesegment will, focusing on the extended services of decoction pieces products such as Internet medical treatment, TCMdecoctions, and solution restoration, create a closed loop of the business of TCM decoction pieces, and providecomprehensive TCM solutions for medical institutions, so as to continuously increase market share, and form a significantscale advantage of decoction pieces.
4) Yunnan Pharmaceutical Co., Ltd (pharmaceutical distribution)
During the reporting period, against the background of slowdown in the growth rate of the pharmaceuticaldistribution industry and intensified competition in the market, Yunnan Pharma realized principal business revenueof RMB 24.49 billion, representing a growth of 5.63% compared with the previous year. As the Group’s
pharmaceutical commercial distribution segment, Yunnan Pharma effectively improved its overall operationalefficiency throughout the year, with an increase in the integrated order fulfillment rate of 7.4%, a significant increasein order response speed of 22%, and an increase in the speed of commodity delivery of 19%.Yunnan Pharma was deeply committed to the Yunnan pharmaceutical distribution market, relying on end-to-end process construction to provide refined services for upstream and downstream customers. In terms of theconstruction of the customer service system, we further strengthened the ability of multi-warehouse synergy andlaunched “same-day delivery, next-day delivery, two-day delivery, and agreed delivery” offerings to effectivelyimprove the quality and efficiency of service. With regard to the integrated construction of the pharmaceuticaldistribution supply chain operation, through the project co-construction, we explored the value points of thepharmaceutical distribution supply chain, strengthened the upstream and downstream synergy, and graduallypromoted the improvement of the quality and efficiency of the whole supply chain operation. To properly cope withthe risk of accounts receivable, Yunnan Pharma will adopt various approaches and take the initiative to adjust thestrategy, and comprehensively enhance the collection efforts.
Focusing on the Yunnan pharmaceutical distribution market, Yunnan Pharma will continuously improve itscore competitiveness, optimize the new regional circulation, and ensure the leading position in the regionaldistribution market. Insisting on stabilizing the scale, strengthening the service, improving the quality andcontrolling the risk, we will build a modern pharmaceutical supply chain distribution service platform and providethe most valuable distribution service solutions for upstream and downstream customers. We will integrate channelresources, enhance channel value, optimize business structure, explore value-added services and promote businessmodel innovation. We will also strengthen budget management, risk control and cost awareness, enhanceorganizational vitality, and improve operational quality and efficiency to effectively support Yunnan Baiyao’s high-quality, sustainable and sound development.
(3)
Actively exploring and incubating new business units (BUs)
Based on the established development strategy, the Company upgraded its organizational capabilities andimproved management effectiveness to align with actual business needs, resulting in the creation of an agile andefficient organizational structure. During the reporting period, the Company reorganized the emerging businesssegments, covering the Tonic Healthcare Products BU, Skin Beauty BU, Medical Devices BU and Teayield BU.Tonic Healthcare Products BU aims to capture the interest of consumers who prefer nourishment through oral pasteand enter the field of tonic healthcare products by integrating and leveraging the advantages of TCM products suchas Panax otoginseng. Skin Beauty BU strives to make a breakthrough in functional skincare products and introducea unique beauty brand that embodies Baiyao’s characteristics, using natural herbs and highlighting gentle, non-irritating, moisturizing, and caring product attributes. Medical Devices BU will concentrate on a specializedfunctional track focused on orthopedic and injury care. Teayield BU adheres to two core concepts: “Applyingpharmaceutical principles to produce healthy teas” and “Enriching and nurturing the body and mind with healthyteas.” With these concepts in mind, Teayield BU is committed to deepening the tea industry, exploring andinnovating tea derivatives. The exploration and incubation within these new BUs focus on developing a novelbusiness model of “comprehensive solutions,” which is based on precise customization supported by a big dataservice backend, and create new avenues of growth for the Company.
(4)
Increasing investment in R&D and innovation, and consolidating R&D strategic objectives withscientific and efficient R&D management system
1) Continuously increasing R&D investment and optimizing R&D management systemThe Company continued to increase its investment in R&D, maintaining the intensity of its R&D investment.Furthermore, the Company continued to strengthen the construction of R&D capabilities and set up a R&DManagement Committee to coordinate and manage the overall R&D system, with the R&D ideas of inheriting theessence of Yunnan TCM, empowering the upgrading of health products, carefully deploying innovative medicines,and implementing AI-assisted drug design. These comprehensively promoted the scientific and integratedmanagement of R&D projects, continuously strengthened the evaluation, supervision and management of R&Dprojects, and built a set of scientific, efficient and pragmatic R&D management systems.
2) Building cross-regional R&D centers with the Central Research Institute as the coreIn terms of R&D, the Central Research Institute plays a crucial role in coordination and integration. It effectivelyintegrates and coordinates cross-regional R&D resources, relying on its four major R&D centers to ensure smoothprogress in R&D. Among them, the Kunming Center utilizes the Yunnan Institute of Materia Medica as its researchplatform. It leverages its advantages in TCM research and focuses on studying the resources, pharmacology, andtoxicology of natural medicines, including TCM and ethnic medicines. The Beijing Center utilizes the PKU-YBIMRCas a platform for exploring collaborative innovation models between academia and enterprises. It undertakes the researchand development of academic achievements and commercialization projects. The Shanghai Center utilizes the InnovationDrug Center, Yunhe Pharmaceutical (Tianjin) Co., Ltd, and Yunbaiyao Zhengwu Technology (Shanghai) Co., Ltd asresearch platforms. It focuses on the R&D of innovative radiopharmaceuticals (radioactive drugs) and actively builds theCompany’s product development capabilities while fostering emerging businesses. The Wuxi Center utilizes YunnanBaiyao Group Wuxi Pharmaceutical Co., Ltd as its platform for medical device R&D. It incubates medical deviceproducts that meet market demands, possess advanced technology, and undergo professional validation. The Wuxi Centerspecifically focuses on five major product categories: devices for TCM diagnosis and treatment of chronic diseases andpain, plaster series, eye health series, personal care and disinfection, as well as customized products for sports care.
3) Scientifically planning the short-, medium- and long-term R&D projects guided by the Group’s strategy
Based on national policies, economic conditions and Yunnan Baiyao’s distinctive characteristics, the Companyadopts a market-driven approach and strategically plans short-, medium-, and long-term R&D projects. Thisinvolves comprehensively upgrading sci-tech empowerment, reinforcing evidence-based medicine, and conductingclinical trials to support drug development.
Short termMedium term
Medium termLong term
Long term
To actively deploy secondary innovativedevelopment of marketed varieties andquicker development of medical devices
| To actively deploy secondary innovative development of marketed varieties and quicker development of medical devices | To vigorously promote development of innovative TCM and achieve breakthroughs in Baiyao transdermal preparation | To commercialize innovative drug R&D results and improve sustainability |
In the short term, we will dedicate our efforts to the secondary innovative development of existingproducts and expedite the development of drugs and medical devices, providing robust support for theCompany’s business growth. During the reporting period, milestone advancements were achieved in the“secondary development of Gongxuening Capsule, a prominent TCM variety,” which was successfullydeclared as a major scientific and technological special project in Yunnan Province. The “ClinicalObservation and Research on Gongxuening Capsule in the Treatment of Uterine Bleeding” has had 1,791subjects enrolled, and clinical trial reports can be expected by the end of 2024. Three sub-projects focusingon the clinical research of Yunnan Baiyao Capsule for bone healing, wound healing, and the mechanism ofbone healing, were progressing smoothly in cooperation with the domestic Grade A tertiary hospitals. Thestudy on Qixuekang Oral Liquid, aimed at improving various symptoms related to Qi deficiency and bloodstasis in patients, was completed, and the clinical trial assessing its efficacy in improving heart and vascularhealth enrolled 70% of the subjects. Initial statistical analysis of the test results indicated preliminaryindications of the product’s positive effect on vascular health. A clinical trial report is expected to begenerated by the end of 2024. Regarding the research project on replacing aerosol projectiles for the classicdrug of Yunnan Baiyao Aerosol, the initial phase of the projectile screening study has been completed, anda proposed projectile has been preliminarily identified. Further in-depth investigations will be conducted onthe proposed projectile. Furthermore, vigorous promotion was made in the secondary development projectof Shulie’an Capsule. The multi-center, open, randomized, placebo-controlled clinical pre-trial for thetreatment of patients with type III chronic prostatitis has been actively carried out, and variouspharmacodynamic studies are steadily advancing.
Short-term project progress and planning
| Project name | Project progress during the reporting period | Next step |
| Secondary development of Gongxuening Capsule | A total of 1,791 subjects were enrolled for the Clinical Observation and Research on Gongxuening Capsule in the Treatment of Uterine Bleeding. | A clinical trial report is expected to be generated by the end of 2024 |
| Secondary development of Qixuekang Oral Liquid | The study on Qixuekang Oral Liquid, aimed at improving various symptoms related to Qi deficiency and blood stasis in patients, was completed. The clinical trial assessing its efficacy in improving heart and vascular health enrolled 70% of the subjects. Initial statistical analysis of the test results indicated preliminary indications of the product’s positive effect on vascular health. | A clinical trial report is expected to be generated by the end of 2024 |
| Secondary development of Yunnan Baiyao Capsule | The clinical research on Yunnan Baiyao Capsule for bone healing is underway The clinical research on Yunnan Baiyao Capsule for wound healing is underway The research on the mechanism for Yunnan Baiyao Capsule to promote bone healing is underway | The clinical evidence of evidence-based medicine for Yunnan Baiyao Capsule in dentistry and gastroenterology will be collected to explore the safety and efficacy of Yunnan Baiyao for use in the full range of specialties |
| The research on the replacement of projectiles for Yunnan Baiyao Aerosol | The first phase of the projectile screening study has been completed and the proposed projectile has been preliminarily identified | An in-depth study will be carried out on the proposed projectile |
| Secondary development of Shulie’an Capsule | The multi-center, open, randomized, placebo-controlled clinical pre-trial for the treatment of patients with type III chronic prostatitis has been actively carried out, and various pharmacodynamic studies are steadily advancing. | The Company will determine the participating research centers, complete institutional project establishment, ethical review, and start clinical trial enrollment |
In the medium term, we will actively promote the development of innovative TCMs, while enhancing our effortsin the field of Yunnan Baiyao’s transdermal preparations, with an aim to create star products of Yunnan Baiyao’stransdermal preparations, and deploy a comprehensive plan focusing on the country’s important needs in the field oftrauma. During the reporting period: Panax notoginseng Tablet, an innovative drug in TCM Category 1.1 for theprevention and treatment of symptoms such as chest tightness and heart pain caused by stagnation of the heart veinsin middle-aged and elderly people, was undergoing clinical Phase II research. With a cumulative enrollment of 237subjects and 211 discharges, a clinical summary report is expected in 2025. This project is the second new drug ofTCM evidence category that Yunnan Baiyao owns independent intellectual property rights and has been approved.For the Fuqi Guben Ointment, the new Chinese medicine approved for clinical syndrome for warming kidney andconsolidating foundation, the Phase II clinical trial has been completed, a clinical summary report has been obtained,the Phase II clinical trial program has passed acceptance, and the clinical trial design and preparation for the Phase IIIclinical trial is underway. For the development of two Chinese medicinal preparations with classic prescriptions (PZ-018 and PZ-019), the research on the pilot process and the quality standards of intermediate and finished products hasbeen completed, and the preparation and testing of three batches of pilot samples, the transfer of the relevant GMPdocuments for the production transition batch, and the preparation and testing of three batches of the productiontransition batch have been accomplished. It is planned to submit the registration application for Category 3.1 newTCMs by the end of 2024. For the preparation approval project of Yunnan medical institutions for Xianghuo Spray forpatients during the recovery period of COVID-19 or those with wind-cold related syndrome, the kick-off meeting forclinical studies in the recovery period of COVID-19 has been completed and subjects are being enrolled. In terms oftransdermal preparations under R&D, significant progress has been made in the development of three plasters; theYunnan Baiyao Gel Plaster, a new and improved TCM, is undergoing a small-scale pilot study; pilot studies andsample testing have been completed for the 2 generic plasters to determine the quality standards of the finished products,while stability studies, package compatibility studies and safety evaluations have been carried out. One of them hasbeen notified of the acceptance of the clinical trial application.
Medium-term project progress and planning
| Project name | Project progress during the reporting period | Next step |
| Panax notoginseng Tablet (PSQ project) | It is undergoing clinical Phase II research, with a cumulative enrollment of 237 subjects and 211 discharges | A clinical summary report is expected in 2025 |
| Fuqi Guben Ointment | The Phase II clinical trial has been completed, clinical summary report has been obtained, the Phase II clinical trial program has passed acceptance | The clinical trial design and preparation for the Phase III clinical trial is underway |
| Development of two Chinese medicinal preparations with classic prescriptions (PZ-018 and PZ-019) | The research on the pilot process and the quality standards of intermediate and finished products has been completed, and the preparation and testing of three batches of pilot samples, the transfer of the relevant GMP documents for the production transition batch, and the preparation and testing of three batches of the production transition batch have been accomplished | It is planned to apply for marketing approval (registration application for Category 3.1 new TCMs) in 2024 |
| The preparation approval project of Yunnan medical institutions for Xianghuo Spray | To carry out pharmaceutical studies that need to be supplemented in the approval documents, and carry out clinical studies in the recovery period of COVID-19 as required. The kick-off meeting has been completed and subjects are being enrolled | Clinical studies in the recovery period of COVID-19 |
| Development of three plasters | Pilot studies and sample testing have been completed for the 2 generic plasters to determine the quality standards of the finished products, while stability studies, package compatibility studies and safety evaluations have been carried out. One of them has been notified of the acceptance of the clinical trial application | For the gel plaster project, it is planned to carry out pilot and quality studies in the next step, and declare clinical trials |
In the long term, we will focus on the transformation of innovative drug R&D results. On one hand, we willfocus on the advantages of exclusive varieties of TCM, as well as the needs of the community, science andtechnology empowerment, to create high-demand TCM products. On the other hand, with the development ofradiopharmaceuticals as the center, we will deploy a number of innovative drug development, to enhance themomentum of sustainable development for Yunnan Baiyao. The radiopharmaceuticals pipeline was fully deployedand milestones were achieved during the reporting period. For the INR101 project, an innovativeradiopharmaceutical for prostate cancer diagnosis, the precursor pilot study and GMP production, labeling processconfirmation, quality study, analytical method validation and stability study have been completed, and in February2024, we received the Notice of Acceptance of Clinical Trial for INR01 Injection for in-country production of drugregistration from the National Medical Products Administration (NMPA). For the INR102 project, an innovativeradiopharmaceutical for prostate cancer treatment, the evaluation of drug efficacy, tissue distribution studies inmodel animals, the small-scale pilot study for the precursor non-GMP production and the process of radioactiveformulation have been completed. The pharmacological studies have been initiated. For the INR202 and INR203projects, nanobody candidate molecule screening studies have been initiated. Moreover, Yunhe Pharmaceutical(Tianjin) Co., Ltd obtained the approval for the Environmental Impact Assessment Report of the Tianjin Project forthe R&D Center of Radiopharmaceuticals (newly established for use and sale of radiopharmaceuticals) in earlyJanuary 2024. The Company has officially initiated the project construction, which will effectively support thedevelopment of the Company’s innovative pipeline for radiopharmaceuticals. Building upon the researchachievements of experts in radiopharmaceuticals from Peking University, the Company has engaged in in-depthcommunication and established strategic partnerships with relevant departments, enterprises, and hospitals in theradiopharmaceutical industry cluster. This further enhances the Company’s positioning in the upstream, midstream,and downstream segments of the radiopharmaceutical industry chain.
Radiopharmaceutical project progress and planning
| Project name | Project progress during the reporting period |
| INR101 Project | The precursor pilot study and GMP production, labeling process confirmation, quality study, analytical method validation and stability study have been completed, and in February 2024, we received the Notice of Acceptance of Clinical Trial for INR01 Injection for in-country production of drug registration from the National Medical Products Administration (NMPA). |
| INR102 Project | The evaluation of drug efficacy, tissue distribution studies in model animals, the small-scale pilot study for the precursor non-GMP production and the process of radioactive formulation have been completed. The pharmacological studies have been initiated. |
| INR202 Project and INR203 Project | Nanobody candidate molecule screening studies have been initiated. |
(5)
Fully integrating digital intelligence into the Company’s operations, enabling end-to-end processmanagement and innovative R&D, and enhancing the Company’s quality and efficiency
1) Launching digital change from top-level design, with the Digital Intelligence Center promoting theCompany’s digital transformation
During the reporting period, the Company published the White Paper on Digitalization of Yunnan Baiyao,which provides clear guidance for the future digitalization efforts, including three major strategic projects, twomajor protection projects, and the establishment of a unified cultural system. This included actively pursuing digitalinnovation in strategic principal businesses, strengthening the foundation, and building digital capabilities, covering
integrated business and finance systems, data governance, and company security system development. We remainattentive to future industry digitalization platforms and continue to develop Yunnan Baiyao’s digital workforce andartificial intelligence capabilities.In August 2023, the Company officially launched the Digital Intelligence Center (formerly the SmartTechnology Business Unit). Aligned with the Company’s strategic development direction, this Center focuses onfurther enhancing the Company’s digitalization and intelligence. It seizes opportunities in the digital economy bothinternally and externally, constructing technological application scenarios and industrial ecosystems throughintelligent digital operations and in-depth digital applications. This facilitates the creation of comprehensive digitalsolutions, enhancing enterprise efficiency and fostering business innovation.
2) Promoting the integration of digital technology with physical business to help the Company improvequality and efficiencyDuring the reporting period, with the purpose of improving corporate efficiency, the Company acceleratedits digital intelligence transformation, extending from the top-level design to the daily operations of variousindustrial sectors, R&D modules, functional departments, integrating digital technology with real business,and thus enabling the continuous transformation and upgrading of the industry, and enhancing itscompetitiveness.The Company established a master data system in the field of data governance by integrating the data of theits functional departments and business units. For the data lake platform system, we have realized the entry ofimportant data of the Company into the lake and initiated the construction of applications in various fields, thuslaying a good foundation for enhancing the Company’s industry-finance integration, data decision-makingeffectiveness and accuracy. Meanwhile, with regard to the Company’s financial and business analysis system,the criteria of more than 100 assessment indicators had been unified, with the closed loop of the Company’sbudget. In 2023, we launched the Accounting RPA Robot, and realized the automation of several standardbusiness processes and dramatically improved efficiency, completing the accounting tasks which required 2person-days for completion in 1.5 hours, with an automation rate of 93.7%. The Treasury Invoicing RPA Robotdramatically improved invoicing efficiency and customer satisfaction in the retail e-commerce business, with acapacity of 3,500 invoices per day and an automation rate of 95.3%. In terms of talent management digitization,the Company built the ONE-BY digital talent full-lifecycle management platform, formulated HR digitaltransformation strategy, and gradually achieved HR digitization through scenario-based, automation, grouping,role-defined and data-driven operations.With regard to the construction of full digitalization of the production chain, the Company iteratively appliedthe successful experience of the digital Panax notoginseng industry platform to the digital TCM industry platform.In November 2023, the Lijiang Digital TCM Industry Platform jointly built by the People’s Government of YulongCounty, Lijiang City and Yunnan Baiyao was officially put into operation. The platform will build a long-termstable, high-quality and traceable supply system of Yunnan TCM materials such as Panax notoginseng, Parispolyphylla, Carthamus tinctorius, Poria cocos, Angelica sinensis, and Saussurea lappa, upgrade the ecologicalresource system of TCM materials, and promote Yunnan Baiyao’s branded TCM materials project to enter a newstage.
3) Actively exploring application scenarios of AI in TCM industry
During the reporting period, the Company actively explored and experimented with artificial intelligence, andactively utilized artificial intelligence within the Company to create a digitally intelligent service experience foremployees. In October 2023, based on an AI model, the Company launched its first digital employee, Baixiaoqi, toimprove the office efficiency and access to internal information of the employees. In the future, the Company willalso actively develop the ability of AI digital employees to serve consumers to enable the users of Yunnan Baiyaoproducts to experience the technological services powered by digitalization and intelligence, and realize the “user-centered” concept. On February 27, 2024, the Company signed a strategic cooperation agreement with HuaweiCloud Computing Technologies Co., Ltd, under which the two parties will work together on the R&D and innovativeapplication of artificial intelligence technologies in the TCM industry, to create a large model of the TCM industryand carry out ecological cooperation. Leveraging the Company’s rich industry data and industry chain resourcesaccumulated in the field of TCM, the two sides will jointly explore the data mining and reconstruction of variouslinks in the TCM industry chain, to give the TCM materials industry strong momentum and vitality source forsustainable development and innovation.
(6) Vigorously advancing holistic quality control, implementing targeted quality technology endeavors,and fortifying a robust quality-centric culture
During the reporting period, the Company intensively advanced total quality management, continually refiningits essence and extending its reach. Guided by the principle of “strict quality control, expert services, and customerapproval,” the Company integrated quality across all production and operational stages. Persisting in innovationand universal involvement, the Company bolstered its quality management system, cultivated a robust qualityculture, and executed diverse quality initiatives. These endeavors led to elevated quality efficiency and therealization of substantial quality value.
During the reporting period, the Company reinforced its commitment to supporting and enhancing Company-wide production and operations, solidifying its technical prowess by conducting specialized quality and technicalinitiatives across its four business units. Pharmaceutical Business Group engaged in the national drug standardenhancement project, formulating two TCM varieties as part of quality upgrade efforts, providing technical backingfor medicine quality improvements. Meanwhile, with the rubber ointment quality improvement initiative, it pushedfor extensive development and application of whole-process control technology, achieving meticulous control andsystematic quality upgrades in rubber ointments, yielding products with consistent performance, eco-friendliness,and reduced allergenic potential. Health Products Business Group proactively advanced process quality controlmeasures, pioneering the use of Process Analytical Technologies (PAT) within the toothpaste industry to shrinkquality control cycles and promptly mitigate defective or rework instances via real-time, on-site, and near-linemonitoring, coupled with mid-process controls. Within the branded medicinal materials project, TCM ResourcesBusiness Group utilized product imaging to digitize lifecycle data, from sourcing to production, storage, sales, andbeyond, standardizing acceptance procedures and creating an acceptance manual to ensure proactive quality control,enhance efficiency, and enable full product traceability. Yunnan Pharma expedited and streamlined product recallmanagement through the development of a digital recall/recovery platform, enabling swift and precise transmissionof recall details and effectively supporting licensors and clients in executing drug recalls.
To deepen quality risk awareness and strengthen quality management prowess among all personnel, theCompany consistently reinforced quality culture. During the reporting period, it introduced the Quality CultureFramework of Yunnan Baiyao for the first time, embedding a tri-dimensional quality ethos, ie quality control, expertservices, and customer approval, while upholding its “Quality First, Customer Foremost” policy, emphasizingsuperior products, services, and a commitment to safeguarding life and health with premium offerings. Throughoutthe period, the Company conducted quality culture training and promotion campaigns to solidify qualitymanagement foundations. The four business groups achieved synergy in co-building, sharing, integrating, andcommunicating quality culture across the upstream and downstream supply chain through proactive organization ofquality culture publicity and training programs, covering drug quality, quality grades of key varieties of Chinesematerial medicines, and comprehensive quality risk control in warehousing and logistics processes.
2. Revenue and cost
(1) Operating revenue structure
Unit: RMB
| 2023 | 2022 | Year-on-year increase/decrease | |||
| Amount | Proportion in operating revenue | Amount | Proportion in operating revenue | ||
| Total operating revenue | 39,111,292,156.00 | 100% | 36,488,372,649.73 | 100% | 7.19% |
| By industries | |||||
| Income from industrial sales | 13,740,557,061.12 | 35.13% | 12,772,673,480.04 | 35.00% | 7.58% |
| Income from commercial sales | 25,295,257,277.35 | 64.68% | 23,645,421,616.92 | 64.80% | 6.98% |
| Technical service | 10,743,024.62 | 0.03% | 6,634,420.10 | 0.02% | 61.93% |
| Hospitality industry | 14,426,628.18 | 0.04% | 13,241,078.81 | 0.04% | 8.95% |
| Income from plantation sales | 1,436,078.20 | 0.00% | 1,591,729.90 | 0.00% | -9.78% |
| Income from other businesses | 48,872,086.53 | 0.12% | 48,810,323.96 | 0.13% | 0.13% |
| By products | |||||
| Industrial products (Self-made) | 13,740,557,061.12 | 35.13% | 12,772,673,480.04 | 35.00% | 7.58% |
| Wholesale and retail | 25,295,257,277.35 | 64.68% | 23,645,421,616.92 | 64.80% | 6.98% |
| Agricultural products | 1,436,078.20 | 0.00% | 1,591,729.90 | 0.00% | -9.78% |
| Other services | 25,169,652.80 | 0.06% | 19,875,498.91 | 0.05% | 26.64% |
| Others | 48,872,086.53 | 0.12% | 48,810,323.96 | 0.13% | 0.13% |
| By regions | |||||
| Domestic | 38,477,107,385.74 | 98.38% | 36,069,070,384.37 | 98.85% | 6.68% |
| Overseas | 634,184,770.26 | 1.62% | 419,302,265.36 | 1.15% | 51.25% |
| By sales model | |||||
| Industrial model | 13,740,557,061.12 | 35.13% | 12,772,673,480.04 | 35.00% | 7.58% |
| Commercial model | 25,295,257,277.35 | 64.68% | 23,645,421,616.92 | 64.80% | 6.98% |
| Others | 75,477,817.53 | 0.19% | 70,277,552.77 | 0.19% | 7.40% |
(2) The industries, products, or regions that account for more than 10% of the Company’s operatingrevenue or operating profit?Applicable □Not applicable
Unit: RMB
| Operating revenue | Operating cost | Gross margin | Increase/decrease of operating revenue compared with the same period of the previous year | Increase/decrease of operating cost compared with the same period of the previous year | Increase/decrease of gross margin compared with the same period of the previous year | |
| By industries | ||||||
| Income from industrial sales | 13,740,557,061.12 | 4,913,752,718.23 | 64.24% | 7.58% | 5.30% | 0.77% |
| Income from commercial sales | 25,295,257,277.35 | 23,769,165,686.54 | 6.03% | 6.98% | 7.20% | -0.19% |
| By products | ||||||
| Industrial products (Self-made) | 13,740,557,061.12 | 4,913,752,718.23 | 64.24% | 7.58% | 5.30% | 0.77% |
| Wholesale and retail | 25,295,257,277.35 | 23,769,165,686.54 | 6.03% | 6.98% | 7.20% | -0.19% |
| By regions | ||||||
| Domestic | 38,477,107,385.74 | 28,153,694,975.15 | 26.83% | 6.68% | 6.33% | 0.24% |
| By sales model | ||||||
| Industrial model | 13,740,557,061.12 | 4,913,752,718.23 | 64.24% | 7.58% | 5.30% | 0.77% |
| Commercial model | 25,295,257,277.35 | 23,769,165,686.54 | 6.03% | 6.98% | 7.20% | -0.19% |
When the statistical caliber of the Company’s principal business data is adjusted in the reporting period, the Company’s principalbusiness data should be subject to the one after the statistical caliber at the end of the reporting period is adjusted in the latest year
□Applicable ?Not applicable
(3) Whether the Company’s revenue from in-kind sales is greater than its revenue from labor services
?Yes □ No
| Industry Classification | Item | Unit | 2023 | 2022 | Year-on-year increase/decrease |
| Revenue from industrial sales | Sales | RMB | 13,740,557,061.12 | 12,772,673,480.04 | 7.58% |
| Revenue from commercial sales | Sales | RMB | 25,295,257,277.35 | 23,645,421,616.92 | 6.98% |
Explanations on reasons for year-on-year changes of above 30% in the relevant data
□Applicable ?Not applicable
(4) Fulfillment of significant sales contracts and significant purchase contracts entered into by theCompany as of the reporting period
□Applicable ?Not applicable
(5) Operating cost structure
Industry classification
Unit: RMB
| Industry Classification | Item | 2023 | 2022 | Year-on-year increase/decrease | ||
| Amount | Percentage in operating cost | Amount | Percentage in operating cost | |||
| Industrial sales | Direct Materials | 4,225,537,847.00 | 14.70% | 3,961,550,491.26 | 14.74% | 6.66% |
| Industrial sales | Direct salary | 133,775,797.05 | 0.47% | 148,549,942.78 | 0.55% | -9.95% |
| Industrial sales | Other direct expenses | 7,079,064.15 | 0.02% | 8,924,648.61 | 0.03% | -20.68% |
| Industrial sales | Manufacturing costs | 547,360,010.03 | 1.90% | 547,468,513.40 | 2.04% | -0.02% |
| Commercial sales | Purchase cost | 23,769,165,686.54 | 82.69% | 22,172,833,447.57 | 82.48% | 7.20% |
| Technical services | Technology development | 7,388,761.76 | 0.03% | 2,380,051.71 | 0.01% | 210.45% |
| Planting | Planting cost | 848,028.41 | 0.00% | 7,431,315.90 | 0.03% | -88.59% |
| Others | Others | 53,362,445.35 | 0.19% | 34,346,894.23 | 0.13% | 55.36% |
Notes: None.
(6) Whether there was any change in the scope of consolidation during the reporting period
?Yes □NoFor details, please refer to Section 10 - IX Changes in the Consolidation Scope.
(7) Significant change or adjustment of the business, product or service of the Company during the reportingperiod
□Applicable ?Not applicable
(8) Major customers and major suppliers
Major customers
Information of top 5 customers
| No. | Customer name | Sales amount (RMB) | Percentage in annual total sales amount |
| 1 | Customer A | 2,070,036,579.60 | 5.29% |
| 2 | Customer B | 1,607,151,400.95 | 4.11% |
| 3 | Customer C | 1,030,977,639.65 | 2.64% |
| 4 | Customer D | 636,238,262.68 | 1.63% |
| 5 | Customer E | 631,940,134.03 | 1.62% |
| Total | -- | 5,976,344,016.91 | 15.29% |
Other information of the major customers
□Applicable ?Not applicable
| Total sales amount of top 5 customers (RMB) | 5,976,344,016.91 |
| Percentage of total sales amount of top 5 customers in annual total sales amount | 15.29% |
| Among the sales amount of top 5 customers, percentage of the sales to the related parties in the annual sales amount | 0.00% |
Major suppliers
| Total purchase amount of top 5 suppliers (RMB) | 2,482,562,943.72 |
| Percentage of total purchase amount of top 5 suppliers in annual total purchase amount | 8.25% |
| Among the purchase amount of top 5 suppliers, percentage of the purchase from the related parties in the annual purchase amount | 0.00% |
Information of top 5 suppliers
| No. | Supplier name | Purchase amount (RMB) | Percentage in annual total purchase amount |
| 1 | Supplier A | 788,323,382.18 | 2.62% |
| 2 | Supplier B | 527,826,736.60 | 1.75% |
| 3 | Supplier C | 406,363,041.72 | 1.35% |
| 4 | Supplier D | 384,796,902.06 | 1.28% |
| 5 | Supplier E | 375,252,881.16 | 1.25% |
| Total | -- | 2,482,562,943.72 | 8.25% |
Other information of major suppliers
□Applicable ?Not applicable
3. Expenses
Unit: RMB
| 2023 | 2022 | Year-on-year increase/decrease | Explanations on significant changes | |
| Sales expenses | 4,992,157,591.11 | 4,165,563,900.91 | 19.84% | The sales volume for the current period has increased, accompanied by an increase in sales expenses. |
| Administrative expenses | 1,058,503,523.90 | 833,784,263.46 | 26.95% | The amount of employee compensation for the current period has increased by RMB 243 million compared to the previous year. |
| Financial expenses | -259,243,744.88 | -342,878,381.80 | 24.39% | The interest income for the current period has decreased by RMB 58,551,300 compared to the previous year, while the interest expenses have decreased by RMB 18,248,300. Moreover, the net foreign exchange loss has increased by RMB 58,556,400 compared to the previous year. |
| R&D expenses | 336,013,434.83 | 336,723,690.26 | -0.21% | No significant changes. |
4. R&D investment
?Applicable □Not applicable
| R&D Project name | Objective of the project | Project progress | Goals to be achieved | Expected impact on the future development of the Company |
| Fuqi Guben Ointment | To explore and validate the clinical research methodology and marketing registration pathway for the development of a new TCM for warming the kidneys and consolidating the fundamentals, which is designed to treat the symptoms of frequent nocturnal urination in middle-aged and elderly people due to kidney yang deficiency, and improve the quality of life of middle-aged and elderly people. | The Phase II clinical trial was completed, clinical summary report was obtained, the Phase II clinical trial program passed acceptance in 2023. The clinical trial design and preparation for the Phase III clinical trial is underway. | To complete Phase III clinical study on Fuqi Guben Ointment, clarify its clinical therapeutic characteristics, diagnostic criteria for treatment of disease, effective dosage for treatment, drug administration program and course of treatment, and register and market it as new TCM of Category 1.1. | This project is the first new TCM of the evidence-based class approved for clinical use in China, and this R&D project is a strong proof of the Company’s ability to develop and industrialize innovative drugs of the TCM of evidence-based class. In the future, it is expected to add a new TCM drug of evidence-based class in line with the overall healing characteristics of TCM, and enrich the Company’s TCM innovative drug product matrix. |
| Panax notoginseng Tablet (PSQ project) | To tap into the characteristics of Panax notoginseng in disease prevention and treatment, and develop Category 1 innovative TCM for the prevention and treatment of chest tightness, heart pain, palpitation and dizziness in middle-aged and elderly people due to the evidence of stasis in the heart veins, and reducing the incidence of cardiovascular events. | It is undergoing clinical Phase II research, with a cumulative enrollment of 237 subjects and 211 discharges. A clinical summary report is expected in 2025. | To comprehensively utilize the resources of the whole Panax notoginseng plant and further explore the synergistic mechanism of saponins, flavonoids, polysaccharides and other components, and market the product as innovative TCM of Category 1.1 | This product is the first innovative drug R&D project for cardiovascular diseases under the Company’s “Big Health” strategy, which is conducive to the treatment of symptoms related to cardiovascular stasis. In the future, it is expected to add a new TCM drug of evidence class in line with the overall healing characteristics of TCM, and enrich the Company’s TCM innovative drug product matrix. |
| INR102 Project | To develop innovative radiopharmaceuticals for prostate cancer treatment | The evaluation of drug efficacy and tissue distribution studies in model animals have been completed and the pharmacological studies have been initiated. The small-scale pilot study for the precursor non-GMP production and the process of radioactive formulation has been completed. | To obtain the approval for marketing from NMPA | It will drive the development of the Company’s innovative drug segment and improve the Company’s deployment in cutting-edge technology. |
| INR101 Project | To develop innovative radiopharmaceuticals for prostate cancer diagnosis | We have received the notice from NMPA for the acceptance of the clinical trial application. | To obtain the approval for marketing from NMPA | It will drive the development of the Company’s innovative drug segment and improve the Company’s deployment in cutting-edge technology. |
| R&D Project name | Objective of the project | Project progress | Goals to be achieved | Expected impact on the future development of the Company |
| Development of three plasters |
To expand the clinical choice ofplaster products It is planned todevelop 1 improved TCM (YunnanBaiyao Gel Plaster) and 2 genericplasters.
| Pilot studies and sample testing have been completed for the 2 generic plasters to determine the quality standards of the finished products, while stability studies, package compatibility studies and safety evaluations have been carried out. One of them has been notified of the acceptance of the clinical trial application. | To obtain the drug registration certificate | To expand the clinical choice of plaster products, maintain Yunnan Baiyao’s industry advantage in the field of topical preparations through formulation deployment, new product selection and dosage form improvement, and help the Company explore new growth drivers | ||
| Secondary development of large varieties of TCM | To carry out in-depth research on existing large varieties in the areas of pharmacology, non-clinical, clinical and economics to improve the efficacy and safety evaluation system of the products, expand and clarify the indications of the products and the applicable population, guide the clinical medication, and introduce new technologies for the improvement of the existing products | At present, 11 large varieties of TCM are involved in secondary development. Taking 2 projects as an example: A total of 1,791 subjects were enrolled for the Clinical Observation and Research on Gongxuening Capsule in the Treatment of Uterine Bleeding. A clinical trial report is expected to be generated by the end of 2024. The clinical trial on Qixuekang Oral Liquid assessing its efficacy in improving heart and vascular health enrolled 70% of the subjects. Initial statistical analysis of the test results indicated preliminary indications of the product’s positive effect on vascular health. A clinical trial report is expected to be generated by the end of 2024. | Taking 2 projects as an example: To further indicate the safety and efficacy of Gongxuening Capsule for gynecological hemostasis and collect extensive clinical evidence; To explore the therapeutic effects of Qixuekang Oral Liquid in cardiovascular system diseases | This will expand or refine the clinical application of the product in a disease area, guide clinical medication, tap into growth potential, and facilitate the product’s entry into guidelines, pathways and consensus. |
| Development of two Chinese medicinal preparations with classic prescriptions (PZ-018 and PZ-019) | To develop and market two classic famous prescriptions (PZ-018 and PZ-019) with clinical value and market prospect through regulated and standardized research, with the help of modern science and technology. | The research on the pilot process and the quality standards of intermediate and finished products has been completed, and the preparation and testing of three batches of pilot samples, the transfer of the relevant GMP documents for the production transition batch, and the preparation and testing of three batches of the production transition batch have been accomplished. It is planned to apply for marketing approval in 2024. | According to the registration and market approval requirements for new TCMs of Category 3.1 | This will practice the Company’s strategy of deep cultivation in the field of TCM, contribute to maintaining integrity and promoting innovation in the field of TCM, enrich the Company’s TCM product echelon, and help the Company explore new growth drivers, and enhance market competitiveness. In addition, it will accumulate technology and project management experience for the development of new TCMs for the Company, and continuously improve the core competitiveness of TCM in Yunnan Province. |
| R&D Project name | Objective of the project | Project progress | Goals to be achieved | Expected impact on the future development of the Company |
| Nutritional Formula for Special Medical Purposes | To develop 1 medical nutritional support supplement for people with limited eating, digestive and absorption disorders, and metabolic disorders (over 10 years of age) | Filing information has been submitted and notification of acceptance has been obtained. We are preparing for onsite inspection. | To complete the registration of a nutritional formula for special medical purposes and obtain the production permit; To construct a knowledge and technology system and industrial platform for R&D and registration of special medical food. | In line with the Company’s strategic objectives, this project is an effective complement to the echelon of Big Health products. It can greatly enrich the Company’s product groups, and help the Company explore new growth drivers and enhance market competitiveness. |
| The preparation approval project of Yunnan medical institutions for Xianghuo Spray | To develop a healthcare organization formulation for people recovering from COVID-19 and with wind-cold type cold related symptoms | To carry out pharmaceutical studies that need to be supplemented in the approval documents, and carry out clinical studies in the recovery period of COVID-19 as required. The initiation meeting has been completed and subjects are being enrolled. | To obtain the official approval for medical institution preparation in Yunnan Province | This will practice the Company’s strategy of deep cultivation in the field of TCM, contribute to maintaining integrity and promoting innovation in the field of TCM, and provide the Company with alternative innovative TCMs in the field of respiratory medicine. |
| Productivity Improvement Project (Technology Reform Project) | To carry out product power enhancement studies on the Company’s marketed varieties to improve the quality and qualification of the existing varieties. | The following tasks are underway: 1. Study on replacement of environmentally friendly projectile for Yunnan Baiyao Aerosol: The first phase of the projectile screening study has been completed and the proposed projectile has been preliminarily identified. An in-depth study will be carried out on the proposed projectile; 2. Study on sugar-free dosage forms of three granule preparations, including Bupleurum Hamiltonii Granule, Xiangsha Stomach Harmonizing Granule, and Ginseng and Tuckahoe Spleen and Stomach Strengthening Granule. | To complete the declaration of supplemental registration of drugs and obtain the approval of supplemental application. | 1. This will practice the Company’s strategy of focusing on the field of TCM, promote inheritance and innovation in the field of TCM development, and further stabilize and enhance our competitiveness in the target product market. 2. It will help to explore the market of sugar-free granules, provide a new direction to solve the medication limitations of diabetes and other patients with prohibited sugar medication, expand the scope of application of the product to meet the health needs of more patient populations, and enhance the quality and competitiveness of the product. |
R&D team member
| 2023 | 2022 | Change rate | |
| Number of R&D team members (persons) | 527 | 435 | 21.15% |
| Percentage of R&D team members in total head counts | 5.97% | 4.95% | 1.02% |
| Educational background structure of R&D team members | |||
| Below bachelor | 71 | 80 | -11.25% |
| Bachelor | 287 | 194 | 47.94% |
| Master | 157 | 151 | 3.97% |
| Above master | 12 | 10 | 20% |
| Age structure of R&D team members | |||
| Below 30 | 135 | 116 | 16.38% |
| 30-40 | 300 | 237 | 26.58% |
| Above 40 | 92 | 82 | 12.2% |
Note: The Company’s R&D team members refer to individuals directly involved in R&D activities, as well as managementpersonnel and direct service personnel closely related to R&D activities. During the reporting period, adjustments had been made tothe statistical scope of R&D team members to align with the statistical scope of R&D expenses. In previous years, the Company’sR&D team members were calculated based on the scope of technical personnel (including power equipment, technical quality,information management, and R&D management).
R&D investment
| 2023 | 2022 | Change rate | |
| R&D investment amount (RMB) | 344,441,461.28 | 342,748,138.38 | 0.49% |
| Percentage of R&D investment in operating revenue | 0.88% | 0.94% | -0.06% |
| Capitalized R&D investment amount (RMB) | 8,428,026.45 | 6,024,448.12 | 39.90% |
| Percentage of capitalized R&D investment in total R&D investment | 2.45% | 1.76% | 0.69% |
Reason for the significant change in the composition of R&D team and its impact
□Applicable ?Not applicable
Reason for significant change in percentage of R&D investment in operating revenue as compared with the previous year
□Applicable ?Not applicable
Reason for significant change in capitalization rate of R&D investment and its rationality
□Applicable ?Not applicable
5. Cash flow
Unit: RMB
| Item | 2023 | 2022 | Year-on-year increase/decrease |
| Subtotal of cash inflows from operating activities | 41,332,606,952.24 | 39,117,632,071.50 | 5.66% |
| Subtotal of cash outflows from operating activities | 37,829,864,604.22 | 35,908,222,038.93 | 5.35% |
| Net cash flows from operating activities | 3,502,742,348.02 | 3,209,410,032.57 | 9.14% |
| Subtotal of cash inflows from investment activities | 4,973,097,122.26 | 6,842,996,254.88 | -27.33% |
| Subtotal of cash outflows from investment activities | 4,454,516,459.62 | 13,159,079,055.92 | -66.15% |
| Net cash flows from investment activities | 518,580,662.64 | -6,316,082,801.04 | 108.21% |
| Subtotal of cash inflows from financing activities | 1,378,858,273.49 | 2,448,169,506.95 | -43.68% |
| Subtotal of cash outflows from financing activities | 4,296,900,513.08 | 5,181,473,239.42 | -17.07% |
| Net cash flow from financing activities | -2,918,042,239.59 | -2,733,303,732.47 | -6.76% |
| Net increase in cash and cash equivalents | 1,105,605,456.02 | -5,823,704,829.85 | 118.98% |
Explanation of the main factors behind the significant changes in the relevant data compared to the previous year?Applicable □Not applicable
1. Net cash flows from operating activities increased by 9.14%, with an increase of RMB 293 million. Themain reason was an increase of RMB 2.422 billion in cash receipts from sales of goods and services compared tothe same period last year, and an increase of RMB 1.117 billion in cash payments for the purchase of goods andlabor services compared to the same period last year.
2. Net cash flows from investment activities increased by 108.21%, with an increase of RMB 6.835 billion.The main reason was a decrease of RMB 2.522 billion in cash receipts from the recovery of investments comparedto the same period last year, a decrease of RMB 11.581 billion in cash payments for investments compared to thesame period last year, and an increase of RMB 3.317 billion in cash payments related to other investment activitiescompared to the same period last year.
3. Net cash flows from financing activities decreased by 6.76%, with a decrease of RMB 185 million. Themain reason was a decrease of RMB 927 million in cash receipts from borrowing compared to the same period lastyear, a decrease of RMB 814 million in cash payments for debt repayment compared to the same period last year,an increase of RMB 646 million in cash payments for the distribution of dividends, profits, or payment of interestcompared to the same period last year, and a decrease of RMB 716 million in cash payments related to otherfinancing activities compared to the same period last year.
Explanation of the significant difference between the net cash flows from operating activities of the Company and the net profitfor the year during the reporting period
□Applicable ?Not applicable
V. Analysis of Non-principal Businesses
?Applicable □Not applicable
Unit: RMB
| Amount | Percentage in total profit | Reasons | Sustainable or not | |
| Investment income | 779,010,728.82 | 16.17% | It consisted mainly of the gains on investment in Shanghai Pharma and gains on disposal of equity interests in a subsidiary, Ban Loong Xing Ye Commercial Trading (Shenzhen) Limited. | No |
| Profits and losses from changes in fair value | 123,566,330.46 | 2.56% | It consisted mainly of the change in the net value of securities and mutual fund units held by the Company. | No |
| Asset impairment | -58,127,562.23 | -1.21% | It consisted mainly of the provision for impairment of goodwill and the provision for impairment of intangible assets. | No |
| Non-operating revenue | 12,234,049.26 | 0.25% | It consisted mainly of the income unrelated to the Company’s day-to-day operating activities. | No |
| Non-operating expenses | 24,728,403.02 | 0.51% | It consisted mainly of the expenses unrelated to the Company’s day-to-day operating activities. | No |
| Credit impairment losses (loss is indicated with “-”) | -136,455,204.36 | -2.83% | It consisted mainly of the provision for bad debt related to accounts receivable in the commercial sector. | No |
| Other income | 83,315,147.32 | 1.73% | It consisted mainly of government subsidies. | No |
| Gains from disposal of assets | 10,654,438.38 | 0.22% | It consisted mainly of gains from the disposal of non-current assets and gains from the disposal of rights to use assets. | No |
VI. Analysis on Assets and Liabilities
1. Significant changes in assets composition
| Unit: RMB | ||||||
| End of 2023 | Beginning of 2023 | Increase/ decrease in proportion | Statement on significant changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Cash and bank balance | 14,218,343,076.67 | 26.44% | 13,056,113,712.47 | 24.49% | 1.95% | No significant changes. |
| Accounts receivable | 9,966,170,447.21 | 18.53% | 9,089,822,151.93 | 17.05% | 1.48% | Increase in accounts receivable from Yunnan Pharma during the period. |
| Inventories | 6,442,194,823.67 | 11.98% | 7,993,207,044.26 | 14.99% | -3.01% | Inventory management efficiency was improved and turnover was accelerated. |
| Investment property | 44,104,145.97 | 0.08% | 55,823,776.49 | 0.10% | -0.02% | No significant changes. |
| Long-term equity investments | 11,536,660,992.93 | 21.45% | 11,318,749,947.10 | 21.23% | 0.22% | No significant changes. |
| Fixed assets | 2,662,900,014.03 | 4.95% | 2,723,302,365.65 | 5.11% | -0.16% | No significant changes. |
| Construction in progress | 529,708,553.58 | 0.98% | 193,993,194.93 | 0.36% | 0.62% | Increased investment in construction in progress during the reporting period. |
The proportion of overseas assets was relatively high? Applicable ? Not applicable
| Right-of-use assets | 258,319,485.58 | 0.48% | 389,975,390.73 | 0.73% | -0.25% | Partial lease termination during the reporting period. |
| Short-term loans | 1,747,303,700.34 | 3.25% | 1,850,867,886.59 | 3.47% | -0.22% | No significant changes. |
| Contractual liabilities | 1,739,865,228.75 | 3.23% | 2,578,264,621.13 | 4.84% | -1.61% | Decrease in contractual payments received in advance at the end of the period. |
| Long-term loans | 2,100,000.00 | 0.00% | 2,100,000.00 | 0.00% | 0.00% | No significant changes. |
| Leasing liabilities | 172,347,309.72 | 0.32% | 285,783,728.73 | 0.54% | -0.22% | Partial lease termination during the reporting period. |
| Financial assets held for trading | 149,366,687.56 | 0.28% | 2,415,722,075.60 | 4.53% | -4.25% | The investment in shares of Xiaomi Group-W (HK.01810) and all fund investments were disposed of during the period. |
| Notes receivables | 227,542,572.56 | 0.42% | 789,465,084.93 | 1.48% | -1.06% | Reclassification according to the business management mode of notes receivable during the period. |
| Receivables financing | 1,590,749,810.74 | 2.96% | 834,668,231.58 | 1.57% | 1.39% | Reclassification according to the business management mode of notes receivable during the period. |
| Prepayments | 312,298,727.01 | 0.58% | 542,948,440.85 | 1.02% | -0.44% | Decrease in prepayments to suppliers during the period. |
| Other current assets | 2,862,076,217.20 | 5.32% | 474,340,107.76 | 0.89% | 4.43% | Increase in fixed deposits during the period. |
| Development expenses | 14,452,474.57 | 0.03% | 6,024,448.12 | 0.01% | 0.02% | Continued investment in the original capitalization project during the reporting period. |
| Other non-current assets | 541,475,331.17 | 1.01% | 965,218,407.14 | 1.81% | -0.80% | Decrease in time deposits with maturity dates greater than one year from the balance sheet date. |
| Receipts in advance | 486,612.12 | 0.00% | 1,569,799.63 | 0.00% | 0.00% | Decrease in rent in advance during the reporting period. |
| Payroll payable | 1,067,190,665.08 | 1.98% | 468,450,348.52 | 0.88% | 1.10% | Increase in outstanding employee compensation payable at the end of the period. |
| Taxes and duties payable | 339,670,850.02 | 0.63% | 509,286,922.32 | 0.96% | -0.33% | Decrease in unpaid income tax and VAT due at the end of the period |
| Other current liabilities | 532,943,904.40 | 0.99% | 381,185,773.19 | 0.71% | 0.28% | Increase in pending output VAT at the end of the period. |
| Deferred income | 238,811,111.04 | 0.44% | 178,621,813.00 | 0.33% | 0.11% | Increase in balance of government grants related to income. |
2. Assets and liabilities at fair value
? Applicable ? Not applicable
Unit: RMB
| Item | Opening balance | Profits or losses on changes in fair value during the reporting period | Cumulative changes in fair value included in equity | Impairment accrued during the reporting period | Purchase amount during the reporting period | Sales amount during the reporting period | Other changes | Closing balance |
Financial assets
| Financial assets |
Financial assets held for trading (derivativefinancial assets excluded)
| Financial assets held for trading (derivative financial assets excluded) | 2,415,722,075.60 | 179,678,085.07 | 75,131,442.00 | 2,514,689,915.11 | -6,475,000.00 | 149,366,687.56 |
Other equity instrument investments
| Other equity instrument investments | 71,745,000.00 | 71,745,000.00 |
Other non-current financial assets
| Other non-current financial assets | 380,786,134.24 | -56,111,754.61 | 324,674,379.63 |
Subtotal of financial assets
| Subtotal of financial assets | 2,868,253,209.84 | 123,566,330.46 | 75,131,442.00 | 2,514,689,915.11 | -6,475,000.00 | 545,786,067.19 |
Total
| Total | 2,868,253,209.84 | 123,566,330.46 | 75,131,442.00 | 2,514,689,915.11 | -6,475,000.00 | 545,786,067.19 |
Financial liabilities
| Financial liabilities | 0.00 | 0.00 |
Other variations: NoneWhether the Company had significant changes in measurement attributes of main assets during the reporting period
□ Yes ? No
3. Restrictions on asset rights as of the end of the reporting period
| Item | Closing book value (RMB) | Reason for restriction |
Cash and bank balance
| Cash and bank balance | 48,618,045.43 | Banker’s acceptance deposit, foreign exchange performance bond and banker’s letter of guarantee |
Cash and bank balance
| Cash and bank balance | 2,643,393.65 | Special funds for housing reform and housing maintenance |
Cash and bank balance
| Cash and bank balance | 500,000.00 | The matters involved in the litigation have been successfully resolved, and efforts are underway to lift the freeze and address related issues |
Assets in special account for
system reform
| Assets in special account for system reform | 627,116,169.10 | Special fund for paying the cost of employee status conversion in state-owned enterprises |
Long-term equity investments
| Long-term equity investments | 11,536,646,559.56 | The holdings shall not be transferred within 36 months since the ending date of the private placement in 2021 |
Total
| Total | 12,215,524,167.74 | -- |
VII. Investment Analysis
1. Overview
? Applicable ? Not applicable
| Investment during the reporting period (RMB) | Investment during the same period of the previous year (RMB) | Percentage of change |
4,454,516,459.62
| 4,454,516,459.62 | 13,159,079,055.92 | -66.15% |
2. Significant equity investments made during the reporting period
? Applicable ? Not applicable
3. Significant non-equity investments in progress during the reporting period
?Applicable ?Not applicable
Unit: RMB
| Project | Investment method | Investment in fixed assets or not | Involved industry in investment projects | Amount invested in the reporting period | Cumulative actual investment as of the end of reporting period | Source of funding | Progress of project | Estimated income | Cumulative income as of the end of the reporting period | Reasons for unmet progress and estimated income | Disclosure date (if any) | Disclosure index (if any) |
| Yunnan Baiyao Shanghai International Center | Self-established | Yes | Pharmaceuticals, daily chemical products | 273,545,193.38 | 567,425,102.99 | Self-raised funds | 50.89% | N/A | June 9, 2021 | http://www.cninfo.com.cn/new/disclosure/detail?stockCode=000538&announcementId=1210206330&orgId=gssz0000538&announcementTime=2021-06-09 | ||
| Yunnan Baiyao R&D Platform - Kunming Center Construction Project | Self-established | Yes | Pharmaceuticals | 66,903,374.73 | 87,196,805.90 | Self-raised funds | 11.04% | N/A | ||||
| Total | -- | -- | -- | 340,448,568.11 | 654,621,908.89 | -- | -- | 0.00 | 0.00 | -- | -- | -- |
4. Financial assets investment
(1) Securities investment
?Applicable □Not applicable
Unit: RMB
| Type of securities | Stock code | Stock abbreviation | Initial investment cost | Accounting measurement model | Opening book value | Profits or losses on changes in fair value during the reporting period | Cumulative changes in fair value included in equity | Purchase amount during the reporting period | Sales amount during the reporting period | Profits and losses during the reporting period | Closing book value | Accounting items | Source of funding |
| Domestic and overseas stocks | HK.02633 | Jacobson Pharma | 238,699,200.00 | Fair value | 164,361,680.00 | -48,365,520.00 | 14,978,562.00 | 115,996,160.00 | Other non-current financial assets | Self-raised | |||
| Domestic and overseas stocks | HK.03681 | SinoMab BioScience | 354,119,828.19 | Fair value | 81,419,271.05 | 9,535,032.83 | 18,408,819.22 | -5,330,367.76 | 72,545,484.66 | Financial assets held for trading | Self-raised | ||
| Domestic and overseas stocks | HK.02161 | JBM (Healthcare) | 25,039,800.00 | Fair value | 21,215,162.50 | -3,425,401.60 | 54,431,442.00 | -458,253.79 | 72,221,202.90 | Financial assets held for trading | Self-raised | ||
| Domestic and overseas stocks | HK.01810 | Xiaomi Corporation | 1,631,800,843.40 | Fair value | 1,078,456,867.31 | 146,146,733.66 | 1,224,603,600.97 | 157,681,844.16 | Financial assets held for trading | Self-raised | |||
| Fund | 162712 | Guangfa Juli Bonds Class A | 400,000,000.00 | Fair value | 398,257,744.66 | 9,224,385.79 | 407,482,130.45 | 10,013,185.79 | Financial assets held for trading | Self-raised | |||
| Fund | 004736 | Fullgoal Dingli Net Debt | 1,700,000,000.00 | Fair value | 289,725,481.89 | 6,196,610.89 | 295,922,092.78 | 6,807,225.83 | Financial assets held for trading | Self-raised | |||
| Fund | SJS623 | CICC Wealth Management Exclusive No. 516 | 129,850,746.27 | Fair value | 136,804,621.97 | 3,616,530.57 | 140,421,152.54 | 3,663,717.05 | Financial assets held for trading | Self-raised |
| Fund | 002925 | Guangfa Juyuan Class A | 100,999,000.00 | Fair value | 123,309,198.09 | 123,309,198.09 | 668,616.43 | Financial assets held for trading | Self-raised | ||||
| Fund | SW8334 | Le Rui Enhanced Bonds No.20 | 88,000,000.00 | Fair value | 116,958,548.41 | 116,958,548.41 | -1,208,297.97 | Financial assets held for trading | Self-raised | ||||
| Fund | SEG067 | Boshi Robust Preferred FOF2 | 25,000,000.00 | Fair value | 61,815,384.62 | 1,527,692.31 | 63,343,076.93 | 1,479,692.31 | Financial assets held for trading | Self-raised | |||
| Other securities investments held at the end of the reporting period | 50,000,000.00 | -- | 45,118,354.68 | 170,741.17 | 45,289,095.85 | 357,596.05 | -- | -- | |||||
| Total | 4,743,509,417.86 | -- | 2,517,442,315.18 | 124,626,805.62 | 0.00 | 54,431,442.00 | 2,435,737,715.24 | 188,653,520.10 | 260,762,847.56 | -- | -- | ||
| Disclosure date of the Board’s announcement on review and approval of securities investment | December 31, 2022 | ||||||||||||
Note: In 2023, Jacobson Pharma distributed a special dividend by way of distribution in specie, whereby the Company, as a shareholder of Jacobson, was distributed 509 shares of JBM (Healthcare)for every 2,000 shares of Jacobson, resulting in a total of 50.9 million shares valued at RMB 54,431,442.00 being distributed.
(2) Investments in derivatives
□Applicable ?Not applicable
The Company had no investments in derivatives during the reporting period.
5. Use of proceeds
□Applicable ?Not applicable
The Company had no use of proceeds during the reporting period.
VIII. Significant Assets and Equity Sales
1. Significant assets sales
□Applicable ?Not applicable
The Company had no significant assets sales during the reporting period.
2. Significant equity sales
□Applicable ?Not applicable
IX. Analysis on the Major Holding Companies and Joint-stock Companies?Applicable □Not applicableMajor subsidiaries and joint-stock companies with a net profit impact of over 10%
Unit: RMB
| Company name | Company type | Principal businesses | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Yunnan Pharmaceutical, Co., Ltd | Subsidiary | Wholesale and retail of pharmaceuticals | 1,000,000,000.00 | 15,200,346,760.92 | 5,878,586,996.71 | 24,490,415,618.28 | 489,491,253.02 | 412,985,984.59 |
| Yunnan Baiyao Group Health Products Co., Ltd. | Subsidiary | Production and sales of oral hygiene products | 84,500,000.00 | 8,653,605,571.01 | 6,537,279,297.85 | 6,422,334,217.30 | 2,420,484,806.39 | 2,022,491,803.68 |
| Shanghai Pharmaceuticals Holding Co., Ltd. | Joint-stock company | R&D, manufacturing, and sales of API, pharmaceutical products (including but not limited to chemical Active Pharmaceutical Ingredients (APIs), chemical preparations, TCM materials, Chinese patent medicines, TCM decoction pieces, biochemical drugs, biological products, narcotics, psychotropic drugs, and toxic drugs for medical use [Adapted to the scope of business], vaccines) of various dosage forms (including but not limited to tablets, capsules, aerosols, immune preparations, granules, plasters, pills, oral liquids, inhalants, injections, liniments, tinctures, suppositories) health products, medical devices, and related products, manufacturing and sales of pharmaceutical equipment, engineering installation and maintenance, warehousing and logistics, sea, land, and air freight forwarding business, industrial investment, asset management, provision of international economic and trade information and consulting services, self-owned house leasing, import and export business of various self-operated and agent drugs and related goods and technologies. | 3,696,414,318.00 | 211,972,533,766.80 | 80,326,092,964.93 | 260,295,088,943.53 | 7,667,234,704.32 | 5,166,570,284.26 |
Acquisition and disposal of subsidiaries during the reporting period
□Applicable ?Not applicable
See Section X “IX. Changes in Consolidation.”X. Structured Entities Controlled by the Company?Applicable □Not applicableSee Section X “X. Interest in Other Entities.”
XI. Outlook of the Company(I) Future development strategy
1. Strategic positioning
(1) Leader of China’s pharmaceutical industry
Committed to maintaining a leading position in China’s pharmaceutical industry and in the field of orthopedics,we leverage innovative methods and our competitive strength across the entire industry chain. We actively explorediversification, accelerate internationalization of our business and brands, and continuously expand the boundariesof the pharmaceutical industry. Deepening reform practices in the pharmaceutical enterprise system, we strive tobecome a model for the transformation and upgrading of traditional pharmaceutical companies.
(2) Promoter of TCM inheritance and innovation
Guarding and inheriting Yunnan Baiyao, a crown jewel of ethnic medicines, we tell the story of TCM brandsentering modern life in China. By deeply cultivating innovation and development of TCM resources, we promoteTCM to enter every household and various life scenarios through R&D and product innovation. We also focus onthe protection, development, and utilization of authentic TCM resources, accelerating the process ofindustrialization, modernization, and scientific development of TCM.
(3) Guardian of people’s healthy life
In the health sector, we drive supply-side reforms, focusing on public health demands to deliver betterhealthcare products and services. We dutifully shoulder social responsibilities in guarding life and health, enhancinghealthcare equity, accessibility, and efficacy through optimized regional distribution and sustained investments inmanufacturing and R&D. Moreover, we consistently focus on addressing major health issues that concern society,such as oncology, cardiovascular and cerebrovascular care, pain management, and maternal-child health, aimingfor groundbreaking outcomes.
2. Terminal goals of “14
thFive-Year Plan”
By 2025, Yunnan Baiyao will have optimized its business structure, substantially boosting corporate vigor andeffectively enhancing financial performance. The priorities entail: strengthening and expanding the quality influenceof “Big TCM” products along the comprehensive TCM industry chain; enhancing and refining the health andwellness offerings through a focus on efficacious products and services in personal healthcare; stabilizing andimproving the new regional distribution channels via market-specific commercial circulation.
(II) Business plan for 2024In 2024, the Company will thoroughly study and fully implement the key principles outlined in the CentralEconomic Work Conference and the Yunnan Provincial Economic Work Conference. It will also align our actionswith the Yunnan Province’s 3815 Strategy, embrace the new development concept, and strive to establish a newdevelopment pattern. We will continue to adhere to a long-term oriented development philosophy, and develop newquality productive forces. Upholding an entrepreneurial and craftsmanship spirit, we will reinforce strategicmanagement and concentrate on our principal businesses. We will construct a lean operation value managementsystem around the entire process of value creation, value enablement, value support, value supervision, and valuedistribution to accelerate the strategic transformation and organizational change. Bolstered by R&D, powered bydigital intelligence, and streamlined by operational efficiency, we will deepen transformative reforms to effectivelyelevate our development quality and efficiency, thereby striving to propel our high-quality development.In 2024, the Company will adhere to its strategies, further concentrating on its principal businesses, andsafeguarding the basic segments: Pharmaceuticals BG, Health Products BG, TCM Resources BG, and YunnanPharma. With the main work tone of synergizing “growth” and “efficiency,” we will focus on the goal of healthyand sustainable growth with efficiency and quality. In terms of scale, we will promote the core industry to realizegrowth by focusing on products related to our principal businesses and with competitive strengths. Structurally,focusing on the core products, we will promote the secondary development of key varieties, integrate all theresources of the Group, and promote the continuous optimization of the industrial structure and product mix tocreate new growth drivers. In terms of quality, we will promote internal lean operation through the competitivenessenhancement of the entire industry chain, realize cost reduction and efficiency enhancement, continuouslyconsolidate the basic segments, and achieve a new pattern of coordinated development of scale, structure and quality.The aforementioned business plan should not constitute a performance commitment to investors. Investors areadvised to pay attention to investment risks.(III) Key Measures
1. Strengthening the leadership in Party building and gathering momentum for developmentLeadership in high-quality Party building is always an important basic guarantee for Yunnan Baiyao to copewith external complexities and risk challenges and realize high-quality development of the Company. We willcontinue to study and implement General Secretary Xi Jinping’s important expositions on Party building, andpromote the development of the Company to a new stage by strengthening the Party building, gathering strength,increasing momentum, and improving the effectiveness, with the goal of “leading and ensuring the high-qualitydevelopment of Yunnan Baiyao by high-quality Party building.” We will constantly deepen the construction ofmodern enterprise system with Chinese characteristics, promote the integration of the Party’s leadership into theentire process and all aspects of corporate governance, focus on “integration and inclusion,” identify the key areasand focus points of Party building efforts, and lead reform and development to a higher level of quality throughhigh-quality Party building.
2. Enhancing strategic governance and concentrating on principal businessesThe Company upholds its mission of “to guard life and health,” consistently striving to inherit tradition whilefostering innovation. We consider the “integration of TCM into modern life” as the driving force for ourdevelopment. We continuously inject new vitality into traditional brands and the development of TCM, aligningclosely with the national strategy of “focusing on the inheritance and innovation of TCM.”Looking ahead, the Company will firmly focus on its strategic positioning as a “provider of comprehensivesolutions in the Big Health sector,” steadfastly deepening its roots in the “pharmaceutical” industry. The Companywill drive all business operations to focus on the advantageous areas of Yunnan Baiyao in the Big Health sector,continuously strengthening its leading position in the sector. Meanwhile, the Company will scientifically, prudentlyand effectively foster new business growth drivers while continuously enhancing its core competencies. TheCompany will focus on its three principal businesses: pharmaceuticals, health, and pharmaceutical distribution, andfurther fortify its dominant position in the field of TCM, strengthen and expand the quality influence of “Big TCM”products to secure its status as an industry leader. By extending advantages, it will develop a premier medicinebrand in Yunnan Province. The Company will also innovate and refine the health and wellness offerings to maintainits pioneering status in this domain, and stabilize and improve the new regional distribution channels to sustain itsleadership in regional markets. While maintaining a focus on the principal businesses, the Company will adhere toits overall strategic deployment, leverage its business characteristics and capabilities to expand the businesspresence in related fields through scientific and prudent approaches. Following the principle of “doing what we dobest”, the Company will continuously and effectively create new business growth opportunities. To ensure thehealthy and efficient development of both core and innovative businesses, the Company is actively building astrategic investment capability system and risk management system that cover the entire investment process. Thiswill drive the Company’s industrial layout and investment management to new heights, effectively promoting theCompany’s healthy development.
3. Enhancing lean efficiency to catalyze high-quality development
The Company will further reinforce budget management, risk control, and cost consciousness, drivingtransformational reforms through whole-chain quality and efficiency enhancements to attain high-quality growthand mutual benefits for all stakeholders. Comprehensive budget management serves as a pivotal tool for translatingthe corporate strategy into action and enhancing management practices. Thus, the Company will synchronizestrategic management and overall budget planning by developing a strategy-centric comprehensive budget systemto facilitate strategic and organic growth and orderly performance improvement. Cultivating a strong costconsciousness is an important means of achieving cost reduction and efficiency improvement, which itself is asustained, systemic endeavor. The Company will adopt a holistic approach to build end-to-end value chaincapabilities, aiming to reduce costs and increase efficiency across the entire value chain. Through effectivecoordination, comprehensive consideration, and step-by-step resolution, the Company will ultimately achieve theoptimal cost and strongest competitiveness throughout the entire chain. Moreover, the Company will consistentlyreinforce the regulation of its own professional behavior in various management processes, prevent and resolveoperational risks, and continuously enhance employees’ awareness of bottom lines and risks to ensure the steadyand far-reaching development of the Company.
In 2024, the Company will steadily implement organizational reforms centered around “strengthening thefront-end, consolidating the middle-end, and optimizing the back-end,” and drive the shift in management controlfrom financial control to strategic control, leading to a more focused, streamlined, and efficient organizationalstructure. The Company will enhance internal coherence and collaboration, providing stronger organizationalsupport for its focus on principal businesses, integration of advantageous resources, and reinforcement of verticaland empowerment controls. Looking ahead, the Company will continually reinforce its talent pool, emphasizing thecultivation of a proficient, specialized, and market-driven cadre and workforce. Deepening market-orientedmechanisms, the Company will continuously enhance resource allocation precision, and collective coordination,and further unleash the power of “breakthrough” and “perseverance.” This aims to ignite the passion and drive forinnovation among its cadre and staff, motivating them to work tirelessly and energetically.
4. Propelling enterprise development through sci-tech innovation
Yunnan Baiyao’s enduring vitality over its 120-year legacy stems from its unwavering commitment to tradition,ceaseless innovation, and adaptability to progress. The Company embraces the digital and intelligent transformation,and relentlessly pursues excellence through self-renewal via innovation in raw materials, product development, andtechnological advancements. The Company establishes mechanisms, creates platforms, and fosters a culture tofurther develop a scientific, efficient, and pragmatic R&D management system. Through rigorous verification andefficient management, the Company continuously strengthens the full-process management of R&D projects.
Looking ahead, Yunnan Baiyao will persist in its three pillars of scientific and technological innovation:
customer-focused innovation centered on consumer needs, collaborative “socialized innovation” facilitated bypartnerships among government, industry, academic, research, and medical sectors, and “digital and intelligentinnovation” propelled by AI, big data, and cloud computing technologies. The Company will thus construct aninnovation system aligned with national strategies, market demands, and corporate realities, thereby enhancing theCompany’s intrinsic value. On one hand, Yunnan Baiyao will skillfully play the dual cards of TCM and innovativemedicine. For TCM R&D, innovation, safety, and effectiveness should be the guiding principles. The Companywill allocate resources reasonably to promote the innovation and inheritance of TCM theories, advancing thedevelopment of innovative Chinese medicines and the secondary development of TCM. Regarding R&D ofinnovative drugs, the Company benchmarks against technological frontiers, clinical demands, and its uniqueresource capabilities to provide momentum for long-term growth. On the other hand, the Company will adeptlybalance short-term and mid-to-long-term R&D programs. In the near term, the Company will vigorously exploreYunnan Baiyao’s resource variety, hastening the conversion of products with competitive market appeal. In themedium term, the Company will develop a repertoire of scalable and replicable generic technologies. In the longterm, the Company will nurture a cohort of leading experts in their respective fields to ensure that the Company’shigh-quality development is underpinned by its sci-tech R&D and innovations.
5. Focusing on investor returns to achieve mutual benefits for all stakeholders
Yunnan Baiyao has consistently emphasized delivering steady and reasonable returns to its investors, sharingcorporate achievements with shareholders. Since its listing, the Company has distributed dividends for consecutive30 years, with a cumulative total exceeding RMB 20.7 billion. The Company will diligently implement the guidingprinciples of “activating capital markets and boosting investor confidence” outlined at the meetings of Political
Bureau of CPC Central Committee, and “further enhancing the quality and investment value of listed companies,and taking stronger, more effective measures to stabilize the market and improve confidence” proposed at theExecutive Meeting of the State Council. The Company will continue to actively respond to regulatory authorities’calls to increase corporate value and prioritize investor returns, focusing on its principal businesses, fosteringinnovation, continuously creating value for shareholders, and thus contributing to the growth of social wealth andincreased consumer spending. Moreover, the Company will strictly abide by legal statutes and corporate guidelines,ensuring transparent, accurate, comprehensive, timely, and equitable disclosure of information. By disclosinginformation related to environmental, social, and governance (ESG) issues, the Company will deepen the conceptof sustainable development and implement the new development philosophy. The Company will also accelerateits green transformation, provide investors with a more comprehensive view of its corporate value, and build anexcellent corporate value communication system, striving tirelessly to achieve long-term, high-quality mutualbenefits for all stakeholders.
XII. Surveys, Communications, Interviews and Other Activities during the Reporting Period?Applicable □Not applicable
| Time of reception | Place of reception | Model of reception | Type of guests | Guests | Discussions and information provided | Index of basic information of the survey |
February 3, 2023
| February 3, 2023 | Office building at the headquarters | Field research | Institution | 2 persons from CITIC Securities | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1215788816&orgId=gssz0000538&announcementTime=2023-02-07 |
February 9, 2023
| February 9, 2023 | Office building at the headquarters | Field research | Institution | 2 persons from Western Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1215852957&orgId=gssz0000538&announcementTime=2023-02-13 |
February 13, 2023
| February 13, 2023 | Office building at the headquarters | Field research | Institution | 7 persons from Pharmaceutical Division of Hua Chuang Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1215870293&orgId=gssz0000538&announcementTime=2023-02-15 |
February 14, 2023
| February 14, 2023 | Office building at the headquarters | Field research | Institution | 4 persons from Guoyuan Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1215881542&orgId=gssz0000538&announcementTime=2023-02-16 |
February 15, 2023
| February 15, 2023 | Office building at the headquarters | Field research | Institution | 8 persons from Guosheng Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1215889941&orgId=gssz0000538&announcementTime=2023-02-17 |
April 1, 2023
| April 1, 2023 | Office building at the headquarters | Telephone communication | Others | 140 persons from investors | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216327171&orgId=gssz0000538&announcementTime=2023-04-04 |
April 6, 2023
| April 6, 2023 | Office building at the headquarters | Field research | Institution | 3 persons from CICC, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216364465&orgId=gssz0000538&announcementTime=2023-04-10 |
April 11, 2023
| April 11, 2023 | Office building at the headquarters | Field research | Institution | 1 person from Broad Peak | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216389978&orgId=gssz0000538&announcementTime=2023-04-12 |
April 13, 2023
| April 13, 2023 | Office building at the headquarters | Field research | Institution | 1 person from Rheos Capital | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216411350&orgId=gssz0000538&announcementTime=2023-04-14 |
April 14, 2023
| April 14, 2023 | Office building at the headquarters | Field research | Institution | 60 persons from investors | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216453402&orgId=gssz0000538&announcementTime=2023-04-18 |
| April 18, 2023 | Investor Relations Interactive Platform of Quanjing.com | Online exchange through Internet platform | Others | 140 persons from investors | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216489678&orgId=gssz0000538&announcementTime=2023-04-20 |
May 18, 2023
| May 18, 2023 | Office building at the headquarters | Field research | Institution | 2 persons from Topsperity Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216861152&orgId=gssz0000538&announcementTime=2023-05-19 |
May 17, 2023
| May 17, 2023 | Office building at the headquarters | Field research | Institution | 14 persons from Industrial Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1216861154&orgId=gssz0000538&announcementTime=2023-05-19 |
June 9, 2023
| June 9, 2023 | “Baiyao Park” Building of the Company | Field research | Institution | 65 persons from the institutional investors | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1217051686&orgId=gssz0000538&announcementTime=2023-06-13 |
July 14, 2023
| July 14, 2023 | “Baiyao Park” Building of the Company | Field research | Others | 102 persons from investors | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1217318930&orgId=gssz0000538&announcementTime=2023-07-18 |
July 25, 2023
| July 25, 2023 | “Baiyao Park” Building of the Company | Field research | Institution | 20 persons from Ningbo Zhiyuan, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1217393068&orgId=gssz0000538&announcementTime=2023-07-26 |
August 31, 2023
| August 31, 2023 | Office building at the headquarters | Telephone communication | Others | 168 persons from institutional and individual investors | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1217771510&orgId=gssz0000538&announcementTime=2023-09-04 |
September 1,
2023
| September 1, 2023 | Office building at the headquarters | Field research | Institution | 5 persons from Ronnie Millennium Capital Management (Hong Kong) Limited, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1217782348&orgId=gssz0000538&announcementTime=2023-09-05 |
September 26,
2023
| September 26, 2023 | “Baiyao Park” Building of the Company | Field research | Institution | 9 persons from Fullgoal Fund, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1217968299&orgId=gssz0000538&announcementTime=2023-09-27 |
October 13, 2023
| October 13, 2023 | Office building at the headquarters | Telephone communication | Institution | 2 persons from UBS Assets Management | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218062501&orgId=gssz0000538&announcementTime=2023-10-17 |
October 31, 2023
| October 31, 2023 | Office building at the headquarters | Field research | Institution | 2 persons from JunHe | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218241015&orgId=gssz0000538&announcementTime=2023-11-02 |
November 9,
2023
| November 9, 2023 | Office building at the headquarters | Field research | Institution | 3 persons from Essence Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218324669&orgId=gssz0000538&announcementTime=2023-11-13 |
| November 13, 2023 | Office building at the headquarters | Field research | Institution | 4 persons from Topsperity Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218350021&orgId=gssz0000538&announcementTime=2023-11-15 |
November 14,2023
| November 14, 2023 | Office building at the headquarters | Field research | Institution | 3 persons from China Post Securities, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218361773&orgId=gssz0000538&announcementTime=2023-11-16 |
December 13,2023
| December 13, 2023 | Office building at the headquarters | Field research | Institution | 1 person from Hazel Investment | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218634851&orgId=gssz0000538&announcementTime=2023-12-15 |
December 25,2023
| December 25, 2023 | Office building at the headquarters | Telephone communication | Institution | 5 persons from China Merchants Fund, etc. | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218743778&orgId=gssz0000538&announcementTime=2023-12-27 |
December 26,
2023
| December 26, 2023 | Office building at the headquarters | Telephone communication | Institution | 4 persons from Tianhong Asset Management | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218749256&orgId=gssz0000538&announcementTime=2023-12-28 |
December 26,
2023
| December 26, 2023 | Office building at the headquarters | Telephone communication | Institution | 1 person from DH Fund Management | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218749350&orgId=gssz0000538&announcementTime=2023-12-28 |
December 29,
2023
| December 29, 2023 | Office building at the headquarters | Telephone communication | Institution | 1 person from Zhong Ou AMC | To understand the business situation of the Company and other related issues | http://www.szcninfo.com/new/disclosure/detail?stockCode=000538&announcementId=1218768046&orgId=gssz0000538&announcementTime=2023-12-29 |
XIII. Implementation of the “Enhancement of Quality and Returns” InitiativeWhether the Company disclosed the “Enhancement of Quality and Returns” Initiative?Yes □No
The Company disclosed the Announcement on “Enhancement of Quality and Returns” Initiative on March 9,2024 (Announcement No.: 2024-12).In 2023, the Company achieved operating revenue of RMB 39.111 billion, an increase of 7.19% year-on-year.The net profit attributable to shareholders of the listed company was RMB 4.094 billion, a growth of 36.41% year-on-year. The net profit attributable to shareholders of the listed company, excluding non-recurring profits and losses,reached RMB 3.764 billion, an increase of 16.45% year-on-year. Overall, the Company maintained a stable andprogressive performance. At the same time, the Company maintained a sound financial structure, with goodprofitability and ample cash reserves. By the end of 2023, the Company’s asset-liability ratio was 25.80%, and itscash and bank balance at the end of the period amounted to RMB 14.218 billion. The net cash flows from operatingactivities for the year was RMB 3.503 billion. The Company’s dividend plan for 2023 is to distribute RMB 20.77per 10 shares, with a total dividend amount of RMB 3.706 billion, accounting for 90.53% of the 2023 net profitattributable to the parent company.
On February 23, 2024, the Company held the general meeting, which considered and approved the cancellationof the repurchased 12,599,946 shares and the reduction of the Company’s registered capital accordingly. Throughthis share repurchase cancellation arrangement, the Company demonstrates its confidence in its development andenhances investors’ sense of achievement with concrete actions. This fully safeguards the interests of investors andstakeholders and further enhances investors’ recognition of the Company’s value. Currently, the matter is under theperiod for creditors to declare their claims, and the Company’s management will proceed with the share cancellationprocedures in accordance with the authorization granted by the general meeting.
Looking ahead, the Company will firmly focus on its strategic positioning as a “provider of comprehensivesolutions in the Big Health sector,” steadfastly deepening its roots in the “pharmaceutical” industry. The Companywill drive all business operations to focus on the advantageous areas of Yunnan Baiyao in the Big Health sector,continuously strengthening its leading position in the sector. Meanwhile, the Company will scientifically, prudentlyand effectively foster new business growth drivers while continuously enhancing its core competencies. TheCompany will focus on its three principal businesses: pharmaceuticals, health, and pharmaceutical distribution, andfurther fortify its dominant position in the field of TCM, strengthen the quality influence of “Big TCM” products tosecure its status as an industry leader. By extending advantages, it will develop a premier medicine brand in YunnanProvince. The Company will also refine the health and wellness offerings to maintain its pioneering status in thisdomain, and improve the new regional distribution channels to sustain its leadership in regional markets. Whilemaintaining a focus on the principal businesses, the Company will adhere to its overall strategic deployment,leverage its business characteristics and capabilities to expand the business presence in related fields throughscientific and prudent approaches. Following the principle of “doing what we do best”, the Company willcontinuously and effectively create new business growth opportunities. To ensure the healthy and efficientdevelopment of both core and innovative businesses, the Company is actively building a strategic investment
capability system and risk management system that cover the entire investment process. This will drive theCompany’s industrial layout and investment management to new heights, effectively promoting the Company’shealthy development.The Company will strictly remain committed to fulfilling its responsibilities and obligations as a listedcompany. Through focusing on our principal businesses, continuous innovation, and operational improvements toenhance our intrinsic value, we aim to promote the healthy and sustainable development of the Company. We willadhere to the “investor-oriented” principle, striving to safeguard investors’ rights and interests through variousmeans, enhance investment returns and bolster investors’ sense of achievement. By effectively implementing the“Enhancement of Quality and Returns” initiative, we seek to boost market confidence and contribute to the positiveand healthy development of the capital market.
Section IV Corporate Governance
I. Basic Information of Corporate GovernanceIn strict accordance with the requirements of the Company Law, the Securities Law, the Code of Governancefor Listed Companies, the Rules Governing the Listing of Shares on Shenzhen Stock Exchange, the Shenzhen StockExchange’s Self-regulatory Guidelines for Listed Companies No. 1 - Standardized Operation of Listed Companieson the Main Board, and other laws and regulations, as well as internal rules and regulations, such as the Articles ofAssociation, the Company keeps improving corporate governance and strengthening the awareness of compliantoperation, and optimizing internal control. By strengthening the learning of the relevant laws and regulations oflisted companies by all directors, supervisors, senior managements and relevant responsible personnel andcontinuously improving their ability to perform their duties, we have continuously improved our governancecapacity, management efficiency and standardized operation, and promoted the high-quality and sustainabledevelopment of the Company. The basic information of the Company’s corporate governance during the reportingperiod is as follows:
1. Shareholders and General Meetings
The Company protects the rights of shareholders in accordance with the law, paying special attention toprotecting the legitimate rights and interests of minority shareholders, and protects the rights of shareholders toknow and participate in decision-making and supervision of significant events of the Company. The Company heldthe 2022 annual general meeting on May 9, 2023, and the first extraordinary general meeting for 2023 on September19, 2023, respectively. The convening of the meetings, the convening procedures, the qualifications of theparticipants, the qualifications of the convenor, the voting procedures and the voting results of the meetingscomplied with the provisions of laws and regulations and the Articles of Association of the Company, and all themotions were voted on and approved.
2. Directors and Board of Directors
The number and composition of the Board of Directors of the Company are in compliance with therequirements of laws and regulations, the professional structure is reasonable, and the directors are fully equippedwith the necessary time and energy, knowledge reserves, professional skills and comprehensive qualities to performtheir duties. The directors abide by the relevant laws and regulations and the Articles of Association, and performtheir duties faithfully, diligently and prudently. The independent directors independently perform their dutiesaccording to laws, fully understand the Company’s operation and the contents of Board meetings, and safeguard theinterests of the Company and all shareholders, paying particular attention to the protection of the legitimate rightsand interests of minority shareholders.
The Board of Directors earnestly performs the duties prescribed by the relevant laws and regulations and theArticles of Association, and operates in strict accordance with the Rules of Procedure for the Board of Directors toensure the standardized and efficient operation of the Board and prudent and scientific decision-making. The Boardof Directors consists of four special committees on audit, strategy, nomination, remuneration and appraisal, which
are responsible to the Board of Directors and perform their duties in accordance with the Articles of Association andthe implementation rules of the special committees. During the reporting period, the tenth Board of Directors of theCompany held a total of 7 sessions, and all the motions were voted on and approved. All the sessions were convenedand held in strict accordance with the Rules of Procedure for the Board of Directors, all the directors were notifiedin advance as required, and sufficient meeting materials were provided. The meeting minutes were true, accurateand complete.
3. Supervisors and Supervisory Committee
The supervisors strictly abide by the relevant laws, regulations and norms, independently and effectivelyperform the supervision function, and urge the Board of Directors and the management to operate in a standardizedmanner and make scientific decisions, thus effectively safeguarding the interests of the Company, shareholders andemployees. During the reporting period, the tenth Supervisory Committee of the Company held a total of 4 sessions,and all the motions were voted on and approved. The Supervisory Committee obtained a full understanding of theCompany’s production and operation situation, comprehensively inspected the Company’s finance, supervised thedirectors and senior management to perform their duties in a standardized manner, reviewed the Company’s periodicreports and put forward written review opinions, and expressed clear opinions on the cancellation of some stockoptions of the 2020 stock option incentive plan.
4. Senior management and operation team
During the reporting period, the tenth Board of Directors appointed Mr. Zhao Yingming as Chief CommercialOfficer and Senior Vice President. The Company appointed senior management in strict accordance with therelevant laws and regulations and the Articles of Association, performed legal procedures and made timelydisclosure.
The operation team has clear responsibilities and strictly implements the resolutions of the general meeting ofshareholders, resolutions of the Board of Directors and other relevant resolutions. The senior management membersabide by the relevant laws and regulations and the Articles of Association, and perform their duties faithfully,diligently and prudently.
5. Revision of corporate governance related systems
During the reporting period, in accordance with the latest provisions of the Securities Law of the People’sRepublic of China, the Measures for the Administration of Independent Directors of Listed Companies, the Self-regulatory Guidelines for Listed Companies No.1 of Shenzhen Stock Exchange - Standardized Operation of ListedCompanies on the Main Board, the Guidelines on Investor Relations Management for Listed Companies, the Ruleson the Management of the Shares Held by Directors, Supervisors and Senior Management of Listed Companies andTheir Changes and other laws and regulations and normative documents, and based on the actual situations of theCompany, the Company systematically revised the Implementation Rules of the Audit Committee of the Board ofDirectors, the Implementation Rules of the Nomination Committee of the Board of Directors, and theImplementation Rules of the Remuneration and Appraisal Committee of the Board of Directors after considerationand approval by the Board of Directors, to further improve the governance structure of the Board of Directors ofthe Company. In addition, during the reporting period, the Company also revised such basic management systemsas the Investor Relation Management System, the Management Measures on Shareholdings and Changes by
Directors, Supervisors and Senior Management, the Working System for Independent Directors, the Investment andFinancial Management System, the Management Measures on Securities Investment Risks, and formulated suchbasic management systems as the Comprehensive Risk Management System, the Management System forInformation Disclosure of Debt Financing Instruments in the Inter-Bank Bond Market, and the Public WelfareDonation Management Measures.
6. Largest shareholders of equal ranking and listed company
Yunnan State-owned Equity Operation Management Co., Ltd (“Yunnan State-owned Equity OperationManagement Company”) and New Huadu Industrial Group Co., Ltd (“New Huadu”) with its acting-in-concertparties, were equally the largest shareholders of the Company, and the Company has no de facto controller and nocontrolling shareholders. The above-mentioned largest shareholders of equal ranking shall exercise their rights asshareholders in accordance with law, fulfill their obligations as shareholders, and earnestly fulfill their commitments.The largest shareholders of equal ranking are independent from the Company in terms of personnel, assets andfinance, and have independent institutions and businesses. There are no cases in which the Company’s funds havebeen appropriated by the largest shareholders of equal ranking and its subsidiaries or through other means, or theCompany has provided guarantees for the largest shareholder and its subsidiaries in violation of the law. During thereporting period, the decision-making procedures and information disclosure obligations were strictly fulfilled forthe related party transactions between the Company and the related parties in accordance with relevant regulations,and the related party transactions had commercial substance and fair pricing.
7. Information disclosure and transparency
During the reporting period, the Company and other information disclosure obligators disclosed informationin a true, accurate, complete, timely and fair manner in strict accordance with laws and regulations, self-regulatoryrules and the Articles of Association of the Company, and the disclosures were concise, clear and easy to understand.The Company’s designated information disclosure media are China Securities Journal, Shanghai Securities News,Securities Times and http://www.cninfo.com.cn, so that users can quickly and conveniently obtain information ofthe Company. Attaching importance to the management of insider information, the Company strictly controls thescope of persons with knowledge of insider information, registers the information of persons with knowledge ofinsider information truthfully, accurately and completely, and reports to the Exchange in a timely manner.
8. Internal control and regulation system
The Company has established a sound internal control system. With the form and content in line with therequirements of the Basic Standard for Internal Control of Enterprises, its supplementary guidelines, and otherrelevant laws, regulations and normative documents, the internal control self-evaluation can truly and accuratelyreflect the implementation status of the Company’s internal controls.
The Company has, according to the actual situation and management needs, established and improved internalcontrol to reasonably ensure the legal compliance of operation and management, asset safety, the truth and integrityof financial reports and related information, improve the operation efficiency and effect, promote the realization ofdevelopment strategies, and meet the objectives of internal control. The Company has established a series of internalcontrol systems for the business and matters included in the scope of internal control evaluation, which have beenimplemented in the operation and management activities, effectively preventing and controlling the Company’s
internal business risks in major aspects, and ensuring the safety and integrity of the Company’s assets and the orderlydevelopment of operation and management activities. The internal control systems are reasonable, complete andeffective, and conducive to achieving the strategic objectives of operation and development of the Company. TheCompany has introduced a third-party consulting agency to assist in the construction of a comprehensive riskmanagement system, and promoted the integration of risk management into each business management link throughrisk identification, risk assessment, clarification of risk early warning indicators, development of risk reporting andresponse mechanisms, and the construction of a corporate responsibility and assessment system. The Company willconstantly improve the internal control system and standardize the implementation of the internal control systemaccording to the changes of internal and external environment and management requirements, and based on theguidelines of comprehensive risk management. Through the operation, analysis and evaluation of the internalcontrol system, we will provide guarantee for the Company’s legal and compliant operation and asset safety,effectively prevent risks in operation and management, and promote the steady implementation of the Company’sstrategy.
9. Stakeholders and social responsibilities
The Company fully respects and safeguards the legitimate rights and interests of stakeholders, with an aim torealize the coordination and balance of the interests of society, shareholders, the Company, employees and otherparties. Yunnan Baiyao actively fulfills its social responsibilities in terms of environmental protection, disaster reliefand relief assistance, and public welfare, while maintaining the Company’s sustainable development, improving itsoperating results and protecting the interests of its shareholders. In 2023, Yunnan Baiyao was again awarded an Arating in the MSCI-ESG rating. Based on the corporate attributes of inheritance and innovation, excellent quality,technology empowerment, co-construction and sharing, social responsibility and sustainable development, theCompany will continue to optimize the governance system and governance level, constantly upgrade the industrialdeployment, adhere to the environmentally friendly development path, and create long-term sustainable value forthe society, the environment and various stakeholders.We firmly believe that good corporate governance is the cornerstone and guarantee for the sustainable andhealthy development of enterprises, and standardized operation is the basic requirement for the sustainable andhealthy development of the Company. Insisting on standardized operation in accordance with laws and regulationsand the requirements of the corporate governance system, the Company has continuously improved its governancecapacity and management effectiveness. Thanks to scientific decision-making and sound operation, we effectivelysafeguard the interests of the Company and the general investors, and achieved the Company’s high-quality andsustainable development.
Whether there were any significant differences between the Company’s actual governance status and laws, administrativeregulations and the rules issued by China Securities Regulatory Commission (“CSRC”) on listed company governance?
□ Yes ?No
There was no significant difference between the Company’s actual governance status and laws, administrative regulations and therules issued by CSRC on listed company governance.
II. Details Regarding the Company’s Separation from the Controlling Shareholder and DeFacto Controller across Assets, Personnel, Finance, Institutions, and Business Operations
Yunnan State-owned Equity Operation Management Company and New Huadu with its acting-in-concertparties, were equally the largest shareholders of the Company, and the Company has no de facto controller and nocontrolling shareholders. In strict accordance with the requirements of the Company Law, the Articles of Associationand other laws, regulations and rules, the Company and the largest shareholders of equal ranking are completelyseparated in terms of business, personnel, assets, institutions, finance and other aspects. The Company has anindependent and complete business system and the ability to operate independently in the market. The Companywill continue to ensure the separation between the Company and the aforesaid largest shareholders in terms ofpersonnel, assets, finance, institutions and business operations according to the requirements of the relevant lawsand regulations.
1. In terms of personnel: The Company operates completely independently in terms of labor, personnel andwage management system and has developed an independent management system. The directors, supervisors andsenior management of the Company are lawfully selected and employed in accordance with the Company Law, theArticles of Association and other relevant laws, regulations and provisions. All senior executives of the Companywork in the Company and receive remuneration. There is no situation in which senior executives hold dual positionsin the Company and the companies of the aforesaid largest shareholders. There is no situation in which finance staffhas cross appointments in related organizations.
2. In terms of assets: The Company has a clear division of property rights with its aforesaid largest shareholders,has the ability to operate independently in the market, and has full control over the production system, supportingfacilities, land use rights and other assets, and there is no situation where the aforesaid largest shareholders occupyor dominate the assets.
3. In terms of finance: The Company has established an independent, complete and standardized financialaccounting system and financial management system, as well as the corresponding internal control system andinternal audit system to independently make financial decisions in accordance with the requirements of theAccounting Standards for Business Enterprises.
4. In terms of institutions: The Board of Directors, Supervisory Committee and other internal organs of theCompany have sound structure, operate independently, make scientific decisions, and the internal organizations arecompletely separate from the aforesaid largest shareholders. All the institutions of the Company are set accordingto the requirements of listed companies’ norms and the Company’s actual business needs and characteristics. TheCompany and its largest shareholders of equal ranking have independent office addresses, and there is no mixedoperation and co-office. The aforesaid largest shareholders exercise their rights and undertake correspondingobligations according to law.
5. In terms of business: The Company has a completely independent business operation system, businessdeployment and the ability to operate independently for the market, with independent procurement system,production system and sales system. There is no dependence on majority shareholders to obtain profits, and there isno competition with aforesaid largest shareholders and their subsidiaries.
III. Horizontal Competition
□Applicable ?Not applicable
IV. Annual General Meeting and Extraordinary General Meeting Held during the ReportingPeriod
1. Shareholders’ meetings held during the reporting period
| Sessions | Meeting type | Proportion of attendance of the investors | Meeting date | Disclosure date | Resolutions |
| 2022 Annual General Meeting | Annual General Meeting | 62.74% | May 9, 2023 | May 10, 2023 | The following proposals had been considered and approved: 1. Proposal on the 2022 Annual Work Report of the Board of Directors; 2. Proposal on the 2022 Annual Work Report of the Supervisory Committee; 3. Proposal on the 2022 Final Financial Report; 4. Proposal on the 2022 Annual Report and its Summary; 5. Proposal on the 2022 Profit Distribution Plan; 6. Proposal on the 2023 Financial Budget Report; 7. Proposal on the Re-appointment of the Company’s 2023 Auditor (including internal control audit). |
| First Extraordinary General Meeting for 2023 | Extraordinary General Meeting | 61.36% | September 19, 2023 | September 20, 2023 | The following proposals had been considered and approved: 1. Resolution on Applying for Registration and Issuance of Ultra Short-term Financing Bonds |
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting rights
□Applicable ?Not applicable
V. Directors, Supervisors and Senior Management
1. Basic information
| Name | Gender | Age | Title | Service status | Date of commencement of service term | Date of end of service term | Number of shares held at the beginning of the period (shares) | Increase in number of shares held in the current period (shares) | Decrease in number of shares held in the current period (shares) | Other changes (shares) | Number of shares held at the end of the period (shares) | Reasons for changes in shares |
| Zhang Wenxue | Male | 61 | Secretary of the Company’s Party Committee, Chairman | Incumbent | February 23, 2024 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Chen Fashu | Male | 64 | Director | Incumbent | August 21, 2019 | November 7, 2025 | 12,527,495 | 0 | 0 | 0 | 12,527,495 | N/A |
| Dong Ming | Male | 48 | Director, CEO and President | Incumbent | March 3, 2021 | November 7, 2025 | 13,280 | 0 | 0 | 0 | 13,280 | N/A |
| Lu Hongdong | Male | 57 | Deputy Secretary of the Company’s Party Committee, Director | Incumbent | November 7, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Xie Yunshan | Male | 49 | Director | Incumbent | November 7, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Li Hongshen | Male | 45 | Director | Incumbent | November 7, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Chen Yanhui | Male | 38 | Director | Incumbent | August 21, 2019 | November 7, 2025 | 177,345 | 0 | 0 | 0 | 177,345 | N/A |
| Dai Yang | Male | 55 | Independent Director | Incumbent | August 21, 2019 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Zhang Yongliang | Male | 56 | Independent Director | Incumbent | August 21, 2019 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Liu Guo’en | Male | 67 | Independent Director | Incumbent | May 25, 2021 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| He Yong | Male | 54 | Independent Director | Incumbent | November 7, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Zhu Zhaoyun | Female | 70 | TCM Strategy Scientist | Incumbent | August 21, 2019 | November 7, 2025 | 56,000 | 0 | 0 | 0 | 56,000 | N/A |
| Qin Wanmin | Male | 60 | Chief Innovation Officer, Senior Vice President, President of Health Products BG | Incumbent | August 21, 2019 | November 7, 2025 | 504,000 | 0 | 0 | 0 | 504,000 | N/A |
| Yang Yong | Male | 60 | Chief Compliance Officer, Senior Vice President, Executive Director of Yunnan Pharma | Incumbent | August 21, 2019 | November 7, 2025 | 101,024 | 0 | 0 | 0 | 101,024 | N/A |
| Zhao Yingming | Male | 52 | Chief Commercial Officer, Senior Vice President | Incumbent | March 13, 2023 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Zhang Ning | Male | 53 | Chief Scientist | Incumbent | January 24, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Ma Jia | Male | 47 | Chief Financial Officer | Incumbent | June 1, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Li Jin | Male | 59 | Secretary of the Disciplinary Committee, Chief Quality and Process Officer | Incumbent | August 21, 2019 | November 7, 2025 | 56,000 | 0 | 0 | 0 | 56,000 | N/A |
| Qian Yinghui | Male | 40 | Secretary of Board of Directors | Incumbent | January 17, 2022 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| You Guanghui | Male | 53 | Chairman of Supervisory Committee | Incumbent | August 21, 2019 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Zhong Jie | Male | 60 | Vice Chairman of Supervisory Committee | Incumbent | August 21, 2019 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Qu Huaxi | Male | 58 | Supervisor, Chairman of Trade Union | Incumbent | August 21, 2019 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| He Yingxia | Female | 52 | Supervisor, Vice Chairman of Trade Union | Incumbent | August 21, 2019 | November 7, 2025 | 0 | 0 | 0 | 0 | 0 | N/A |
| Wang Minghui | Male | 62 | Former Chairman | Resigned | August 21, 2019 | March 5, 2023 | 1,008,000 | 0 | 0 | 0 | 1,008,000 | N/A |
| Yin Pinyao | Male | 55 | Former Chief Operation Officer, Senior Vice President, President of TCM Resources BG | Resigned | August 21, 2019 | February 7, 2024 | 336,000 | 0 | 0 | 0 | 336,000 | N/A |
| Wang Jin | Female | 54 | Former Chief Sales Officer, Senior Vice President, President of Pharmaceutical BG | Resigned | August 21, 2019 | March 13, 2023 | 504,000 | 0 | 0 | 0 | 504,000 | N/A |
| Yu Juan | Female | 52 | Former Chief Human Resources Officer | Resigned | August 21, 2019 | February 7, 2024 | 140,000 | 0 | 0 | 0 | 140,000 | N/A |
| Total | -- | -- | -- | -- | -- | -- | 15,423,144 | 0 | 0 | 0 | 15,423,144 | -- |
Whether there was any departure of directors and supervisors and dismissal of senior management during the term of office duringthe reporting period?Yes □NoOn March 7, 2023, the Company disclosed the Announcement on the Resignation of the Chairman(Announcement number: 2023-03), stating that Mr. Wang Minghui resigned from the chairman of the tenth Boardof Directors of the Company, director, member of the Strategic Committee and all the positions in the Companyand its controlling subsidiaries due to personal reasons.
On March 15, 2023, the Company disclosed the Announcement on the Resignation of Senior Management(Announcement number: 2023-06), stating that Ms. Wang Jin resigned from the Company’s Chief Sales Officer,Senior Vice President and all the positions in the Company and its controlling subsidiaries due to personal reasons.
On February 7, 2024, the Company disclosed the Announcement on the Resignation of Senior Management(Announcement number: 2024-06), stating that Mr. Yin Pinyao resigned from the Chief Operating Officer andSenior Vice President of the Company and all positions in the Company and its controlling subsidiaries due topersonal reasons; and Ms. Yu Juan resigned from the Company’s Chief Human Resources Officer and all thepositions in the Company and its controlling subsidiaries due to personal reasons.
Changes of directors, supervisors and senior management of the Company
?Applicable □Not applicable
| Name | Position held | Type | Date | Reason |
ZhangWenxue
| Zhang Wenxue | Chairman | Elected | February 23, 2024 | For improving the governance structure of the Company’s Board of Directors further, he was elected as chairman |
ZhaoYingming
| Zhao Yingming | Chief Commercial Officer and Senior Vice President | Appointed | March 13, 2023 | For improving the Company’s management structure further |
WangMinghui
| Wang Minghui | Former Chairman | Resigned | March 6, 2023 | Resigned as Chairman and Director due to personal reasons |
Wang Jin
| Wang Jin | Former Chief Sales Officer and Senior Vice President | Dismissed | March 15, 2023 | Resigned as Chief Sales Officer and Senior Vice President due to personal reasons |
Yin Pinyao
| Yin Pinyao | Former Chief Operation Officer and Senior Vice President | Dismissed | February 7, 2024 | Resigned as Chief Operation Officer and Senior Vice President due to personal reasons |
Yu Juan
| Yu Juan | Former Chief Human Resources Officer | Dismissed | February 7, 2024 | Resigned as Chief Human Resources Officer due to personal reasons |
2. Appointment
Professional background, main working experience and main duties in the Company of current directors,supervisors, and senior management of the Company
Zhang Wenxue, male, Han nationality, born in June 1963, a member of the Communist Party of China, holdingan on-the-job master’s degree, is a Senior Economist. He was a member of the Tenth Yunnan Provincial Committeeof the Communist Party of China and the 12
th
Yunnan Provincial Committee of the CPPCC. He served as DeputyGeneral Manager of Yunnan Phosphorus Chemical Industry (Group) Company, General Manager and DeputySecretary of the Party Committee of Yunnan Phosphate Group Co., Ltd, Secretary of the Party Committee and
General Manager of Yunnan Phosphate Group Co., Ltd, Director, Deputy General Manager and StandingCommittee Member of the Party Committee of Yuntianhua Group Co., Ltd, General Manager, Deputy Secretary ofthe Party Committee and Deputy Chairman of Yuntianhua Group Co., Ltd, Secretary of the Party Committee andChairman of Yuntianhua Group Co., Ltd. He is currently Secretary of the Party Committee and Chairman of YunnanBaiyao (and Chairman of Chongqing Polycomp International Corporation).Chen Fashu, male, born in October 1960, was a member of All-China Youth Federation, a member of theExecutive Committee of the Ninth All-China Federation of Industry and Commerce, a member of the Ninth andTenth Fujian Provincial Committee of the CPPCC, Chairman of the Committee of Fujian Provincial Federation ofIndustry and Commerce, Chairman of Baiyao Holdings, and Co-chairman of Yunnan Baiyao. He currently servesas Chairman of Fujian Fashu Charity Foundation, Legal Representative and Chairman of New Huadu, and Directorof Yunnan Baiyao.
Dong Ming, male, born in October 1976, is a doctoral candidate in management, holding a bachelor’s degree.He served as Vice President of the CIS Regional Department, Director of VIP System Department, General Managerof Beijing Branch, Director of Mobile System Department, and Vice President for China of Huawei TechnologiesCo., Ltd. He is currently Legal Representative, Director, CEO and President of Yunnan Baiyao.Lu Hongdong, male, born in December 1966, holds a master’s degree. He served as a lecturer, politicalcounselor and director of Administrative Teaching and Research Department of Yunnan University of Finance andEconomics; Principal Staff Member of the Cadre Examination Office and the Cadre Supervision Office of theOrganization Department of Yunnan Provincial Party Committee; Deputy Director of Enterprise Cadres Office,Deputy Director and Director of the Fifth Cadres Division, Member of the Party Committee and Deputy Secretaryof Baiyao Holdings, Director of Yunnan Baiyao. He is currently Deputy Secretary of the Party Committee andDirector of Yunnan Baiyao.Xie Yunshan, male, born in September 1975, is a member of the Communist Party of China, a doctor ofeconomics, postdoctoral, and Certified Public Accountant. He once worked at the Southwest ManagementHeadquarters of Xiangcai Securities, the First Secretariat of the General Office of the Yunnan ProvincialGovernment, the Investment Research Institute of Yunnan University of Finance and Economics, the FinanceResearch Institute of the People’s Bank of China, Zhonghe Zhengxin Accounting Firm, the Investment BankingDepartment of Hongta Securities, the Investment Banking Department of Dongguan Securities, and the InvestmentBanking Headquarters of Pacific Securities. He is currently Director of Yunnan Baiyao.Li Hongshen, male, born in August 1978, is a doctor of economics, and engineer. He served as Vice President(presiding over work) of Chuncheng Road Sub-branch, General Manager of International Business Department ofKunming Branch of China Merchants Bank, Manager Assistant, Deputy Manager and Manager of Qujing CigaretteFactory of Hongyun Honghe Tobacco (Group) Co., Ltd, Manager of Kunming Cigarette Factory of HongyunHonghe Tobacco (Group) Co., Ltd, Vice President and Deputy General Manager of Hongyun Honghe Tobacco(Group) Co., Ltd. He is currently General Manager of Yunnan Hehe, and Director of Yunnan Baiyao, KPCPharmaceuticals, Inc, Yunnan Hongta Bank Co., Ltd, and Zhongwei Capital Holdings Co., Ltd.
Chen Yanhui, male, born in April 1986, holding a bachelor’s degree, used to work in Essence Securities, andserved as Supervisor of Baiyao Holdings, and Director of Yunnan Baiyao Qingyitang Industrial Co., Ltd. He iscurrently Director of Yunnan Baiyao, Director and General Manager of New Huadu, Legal Representative andExecutive Director of New Huadu Industrial Group (Shanghai) Investment Co., Ltd, Legal Representative andChairman of Teh-Ho Canned Food Company, Legal Representative and Executive Director of Fujian New HuaduEnterprise Management Co., Ltd.
Resume of Independent Directors:
Dai Yang, male, born in January 1969, holding a bachelor’s degree, served as Deputy Principal Staff, PrincipalStaff, Deputy Director of General Affairs Department, Deputy Director of General Office (Party Office), Directorand Head of Listed Company Supervision Department of Tibet Securities Regulatory Bureau of China SecuritiesRegulatory Commission, Deputy Secretary of Party Committee, General Manager, Secretary of the PartyCommittee and Chairman of Tibet Mineral Development Co., Ltd, Vice President of Yongtai Group Co., Ltd,Chairman and Vice Chairman of Hainan Haide Industrial Co., Ltd, and Independent Director of Tibet WaterResources Limited. He is currently an Independent Director of KSEC Intelligent Technology Co., Ltd, Wondershare,and Yunnan Baiyao.
Zhang Yongliang, male, born in March 1968, holding a master of law, is a practicing lawyer. He was a memberof the fourth and fifth Review Committees of Listed Companies M&A and Reorganization of China SecuritiesRegulatory Commission. He is currently an Independent Director of Yunnan Baiyao, and a Partner of King & WoodLaw Firm. His main practice areas are corporate mergers and acquisitions, securities, debt restructuring, etc.
Liu Guo’en, male, born in October 1957, a doctor of economics, is a Special Professor of EconomicsChangjiang Scholar of Ministry of Education. He used to teach at the University of Southern California and theUniversity of North Carolina, and served as President of the Chinese Economist Society and President of the Asia-Pacific Federation of International Society for Pharmacoeconomics and Outcomes Research. He is currently aDistinguished Professor of Liberal Arts of Peking University, Dean of Global Health Development Institute ofPeking University, Member of Faculty of Chinese Academy of Medical Sciences, Chinese Convener of China-USTrack II Dialogue on Health, Chairman of Pharmacoeconomics Professional Committee of Chinese PharmaceuticalAssociation, Independent Director of MicroPort Scientific Corporation, Independent Director of SciClonePharmaceuticals (Holdings) Limited, and Independent Director of Yunnan Baiyao.
He Yong, male, born in October 1970, holding a bachelor’s degree, is a partner of ShineWing Certified PublicAccountants, Deputy Director of Chengdu Branch, Chinese Certified Public Accountant (senior member of CICPA),Chinese Certified Asset Appraiser, Leading Accounting Talent of the Ministry of Finance, and Member of the FirstListing Committee of ChiNext of Shenzhen Stock Exchange. He is currently an Independent Director of YunnanBaiyao.
Resume of Shareholder Supervisors:
You Guanghui, male, born in December 1971, holding a bachelor’s degree, is a Certified ManagementAccountant (CMA), Senior Corporate Culture Engineer, and Senior Corporate Compliance Engineer. He was ChiefAccountant of Fujian Industrial Bank Wuyishan Sub-branch, Chief Accountant and Head of the Finance Section ofNew Huadu Engineering Co., Ltd, Supervisor, Deputy Manager and Manager of the Planning and Finance
Department of Fujian Wuyishan Tourism Development Company Limited, Director and Chief Financial Officer ofFujian Wuyishan Tourism Development Company Limited, Supervisor of Kanas Xinjiang Tourism DevelopmentLimited By Share Ltd, and Chief Financial Officer of Baiyao Holdings. He is currently Chairman of the SupervisoryCommittee of Yunnan Baiyao.Zhong Jie, male, born in March 1964, holding a master’s degree, is an economist and engineer. He served asAssistant Engineer of Yunnan Textile Research Institute, Director of Infrastructure Technical Reform Departmentof Yunnan Textile Industry Bureau, Principal Staff of Technical Reform Division, Deputy Director of the SecondIndustrial Division of Yunnan Economic and Trade Commission, Chief Supervisor of the sixth SupervisoryCommittee of Yunnan State-owned Enterprise Supervisory Committee Working Office, Deputy General Manager(Temporary) of Yunnan Jiehua Group Co., Ltd, Chairman of the Supervisory Committee of Yunnan IndustrialInvestment Holding Group Company, Director of Property Rights Management Department of Yunnan SASAC,General Liaison Officer of Bankruptcy Administrator of Yunnan Coal Chemical Industry Group Co., Ltd, Chairmanof the Supervisory Committee of Baiyao Holdings. He is currently Vice Chairman of the Supervisory Committeeof Yunnan Baiyao.
Resume of Employee Supervisors:
Qu Huaxi, male, born in June 1966, holding a university degree of the provincial Party School, is a memberof the Communist Party of China and a lecturer. He served as a cadre in the Office of Menglian County PartyCommittee of Simao City, Deputy Secretary of the Party Committee of Labei Township of Menglian County ofSimao City, Principal Staff (Director) of the Comprehensive Division of the Yunnan Provincial Poverty AlleviationOffice, Deputy Researcher of the Micro-credit Division of the Yunnan Provincial Poverty Alleviation Office,Deputy Director of the Yunnan Provincial Poverty Alleviation Office’s Project Management Office, Director of theYunnan Provincial Poverty Alleviation Office’s Program and Financial Affairs Division (during which time heserved as Head of the General Team of the New Rural Workers of Wuding County of Chuxiong Prefecture, and asDeputy Secretary of the County Party Committee), Director of Non-local Poverty Alleviation and DevelopmentDivision of the Yunnan Provincial Office of Poverty Alleviation, Director of the Discipline Inspection Group andMember of the Party Group of the Yunnan Provincial Federation of Supply and Marketing Cooperatives. In August2016, he was transferred to Baiyao Holdings. He is currently Chairman of Trade Union and Supervisor of YunnanBaiyao.He Yingxia, female, born in March 1972, holding an on-the-job master’s degree, is a Party member andpolitical engineer. She was a workshop worker of Yunnan Baiyao, Deputy Sales Manager of Southwest region,Deputy Secretary of the Group Youth League Committee, Vice Chairman of the Trade Union, Director ofOrganization and Publicity Department, Deputy Secretary of the Discipline Commission, Chairman of the TradeUnion and Secretary of the first Party branch of the Group headquarters. Currently, she is a Member of the PartyCommittee of Yunnan Baiyao, Vice Chairman of the Trade Union, Supervisor, and Director of the Party and MassWork Department. She is a Member of the Seventh Women Workers Committee of the All-China Federation ofTrade Unions, Member of the Twelfth Committee of the Provincial Federation of Trade Unions, Member of theStanding Committee of the Sixth Women Workers Committee, Member of the Standing Committee of the Third-and Fourth-People’s Congresses of Chenggong District, Kunming.
Resume of Senior Management:
Zhu Zhaoyun, female, born in March 1954, is a Senior Engineer and Academician of the Chinese Academyof Engineering. She served as Secretary of the Party Committee and Director of Yunnan Institute of Materia Medica,Party Committee Member, R&D Director, Director of TCM R&D of Yunnan Baiyao. She is currently Member ofthe Party Committee and TCM Strategy Scientist of Yunnan Baiyao.
Qin Wanmin, male, born in December 1964, is a master of medicine. He served as Marketing Manager andDeputy General Manager of Yunnan Baiyao Medicine E-commerce Co., Ltd, Assistant to President of YunnanBaiyao, Deputy General Manager and General Manager of Health Products BG of Yunnan Baiyao. He is currentlyMember of the Party Committee, Chief Innovation Officer and Senior Vice President of Yunnan Baiyao.
Yang Yong, male, born in December 1964, holding a master’s degree, served as Deputy General Manager ofYunnan Pharma, Director and Deputy General Manager of Yunnan Baiyao, General Manager and President ofYunnan Pharma. He is currently Member of the Party Committee, Chief Compliance Officer and Senior VicePresident of Yunnan Baiyao, and Executive Director of Yunnan Pharma.
Zhao Yingming, Male, born in November 1972, is a CPC member, holding a doctoral degree. He served inWangfujing Department Store Group, Maoye Group, and JD.com as Assistant President of Wangfujing Department StoreGroup, General Manager of Maoye Commercial, Vice President of JD.com, and President of Retail Fashion & HomeBusiness Group of JD.com. He is currently Chief Commercial Officer and Senior Vice President of Yunnan Baiyao GroupCo., Ltd, an independent director of Zhejiang Red Dragonfly Shoes Co., Ltd, and an independent director of Aimer.
Zhang Ning, male, born in November 1970, is a professor at Peking University and a doctor of biochemistry,cell and molecular biology at School of Medicine, Johns Hopkins University. He served as Deputy Director ofPeking University Health Science Center, Director of Research Department of Peking University, Vice President ofTianjin Medical University, Professor of Affiliated Cancer Hospital of Tianjin Medical University, Deputy Directorof Tianjin Cancer Research Institute, and Deputy Director of Department of Chemical Biology of School ofChemistry of Peking University. He is currently Deputy Director of Peking University-Yunnan Baiyao InternationalMedical Research Center, Deputy Director of Peking University International Cancer Institute, Executive DeputyDirector of the Center for Translational Tumor Research at Peking University First Hospital, Deputy Director ofPeking University International Research Institute for Big Data in Health, and Chief Scientist of Yunnan Baiyao.
Ma Jia, male, born in March 1977, is a master and Party member. He served as Director of FinancialManagement Department of Beijing Panasonic Lighting Co., Ltd, Financial Director of CIS Regional subsidiary ofHuawei Technologies, IFS Transformation Project Manager (China), Chief Financial Officer of ShandongRepresentative Office, Chief Financial Officer of China Operator BG, Chief Financial Officer of ChinaRegion/Member of China Region Administrative Management Team, responsible for operation management, riskcontrol, sales and financing, taxation, subsidiaries and other financial business of Huawei China (excluding HongKong, Macao and Taiwan) ICT, as well as financial organization construction. He is currently Chief FinancialOfficer of Yunnan Baiyao.
Li Jin, male, born in August 1965, a master of business administration, licensed pharmacist, and senior engineer.He served as Deputy Chief Engineer and Director of Technology Department of Yunnan Baiyao, general manager ofYunnan Baiyao Tianzihong Pharmaceutical Co., Ltd, and Technical Quality Director of Yunnan Baiyao. He is currently
Secretary of Discipline Inspection Committee and Chief Quality and Process Officer of Yunnan Baiyao.
Qian Yinghui, male, born in September 1983, is a master of law in international trade law and commerciallaw from Durham University in the UK, and a bachelor of law from China Youth University of Political Studies.He served as Project Manager of the Strategy Committee Office of Yunnan Baiyao and Project Director of theStrategy Development Center of Yunnan Baiyao, and obtained the Qualification Certificate of Board Secretary inMay 2021. He is currently Secretary of the Board of Directors of Yunnan Baiyao.Engagement in shareholding companies?Applicable □Not applicable
| Name of person | Name of shareholding company | Position held in shareholding company | Date of commencement of service term | Date of end of service term | Whether to receive remuneration and allowances from the shareholding company |
Chen Fashu
| Chen Fashu | New Huadu Industrial Group Co., Ltd. | Legal Representative, Chairman | November 16, 2019 | Yes |
Chen Yanhui
| Chen Yanhui | New Huadu Industrial Group Co., Ltd. | Director and President | November 16, 2019 | Yes |
Li Hongshen
| Li Hongshen | Yunnan Hehe (Group) Co., Ltd. | Deputy Secretary of the Company’s Party Committee, General Manager | May 25, 2022 | Yes |
Position at other entities?Applicable □Not applicable
| Name of person | Name of other entity | Position held in other entity | Date of commencement of service term | Date of end of service term | Whether to receive remuneration and allowances from the other entity |
Zhang Wenxue
| Zhang Wenxue | Chongqing Polycomp International Corporation | Chairman | November 27, 2020 | No |
Chen Fashu
| Chen Fashu | New Huadu Group (HK) Investment Limited | Director | August 1, 2006 | No |
Chen Fashu
| Chen Fashu | Shanghai Pharmaceuticals Holding Co., Ltd. | Director | June 29, 2023 | No |
Chen Fashu
| Chen Fashu | Fujian New Huadu Property Development Co., Ltd. | Legal Representative, Chairman | June 27, 2003 | No |
Chen Fashu
| Chen Fashu | Xiamen New Huadu Investment Management Consulting Co., Ltd. | Legal Representative, Executive Director and General Manager | November 4, 1997 | No |
Chen Fashu
| Chen Fashu | Fuzhou Haiyue Hotel Property Management Co., Ltd. | Supervisor | September 27, 2018 | No |
Chen Yanhui
| Chen Yanhui | New Huadu Industrial Group (Shanghai) Investment Co., Ltd. | Legal Representative and Executive Director | October 1, 2018 | Yes |
Penalties to the current directors, supervisors and senior management of the Company and those leaving office during the reporting
| Chen Yanhui | Teh-Ho Canned Food Company | Legal Representative and Chairman | September 9, 2016 | No |
Chen Yanhui
| Chen Yanhui | Kunming Teh-Ho Canned Food Factory of Teh-Ho Canned Food Company | Person in Charge | October 21, 2016 | No |
Chen Yanhui
| Chen Yanhui | Fujian New Huadu Enterprise Management Co., Ltd. | Legal Representative and Executive Director | April 19, 2022 | No |
Chen Yanhui
| Chen Yanhui | Baoting Banshan Bandao Rainforest Property Co., Ltd. | Legal Representative and Executive Director | September 16, 2019 | No |
Chen Yanhui
| Chen Yanhui | Fujian New Huadu Property Development Co., Ltd. | Supervisor | August 17, 2016 | No |
Chen Yanhui
| Chen Yanhui | Qujing Dexuan Agriculture and Animal Husbandry Technology Co., Ltd. | Supervisor | May 7, 2020 | No |
Chen Yanhui
| Chen Yanhui | Xuanwei Brothers Food Technology Co., Ltd. | Supervisor | June 1, 2020 | No |
Dong Ming
| Dong Ming | Shanghai Pharmaceuticals Holding Co., Ltd. | Director | June 29, 2023 | No |
Li Hongshen
| Li Hongshen | Yunnan Hongta Bank Co., Ltd | Director | October 20, 2022 | No |
Li Hongshen
| Li Hongshen | Zhongwei Capital Holdings Co., Ltd. | Director | June 28, 2023 | No |
Li Hongshen
| Li Hongshen | KPC Pharmaceuticals, Inc. | Director | February 2, 2024 | December 08, 2024 | No |
Xie Yunshan
| Xie Yunshan | Yunnan Yunqin Service Group Co., Ltd. | External Director | March 1, 2022 | February 28, 2023 | Yes |
Xie Yunshan
| Xie Yunshan | Yunnan Aviation Industry Investment Group Co., Ltd. | External Director | July 1, 2022 | February 28, 2023 | Yes |
Dai Yang
| Dai Yang | KSEC Intelligent Technology Co., Ltd | Independent Director | March 22, 2021 | March 21, 2024 | Yes |
Dai Yang
| Dai Yang | Wondershare | Independent Director | May 7, 2021 | May 16, 2025 | Yes |
Liu Guo’en
| Liu Guo’en | Peking University | Professor | January 1, 2006 | Yes |
ZhangYongliang
| Zhang Yongliang | Beijing King & Wood Mallesons | Partner | October 20, 1997 | Yes |
He Yong
| He Yong | ShineWing Certified Public Accountants (SGP) | Partner | July 1, 2009 | Yes |
He Yong
| He Yong | Chengdu Branch of ShineWing Certified Public Accountants (SGP) | Deputy Chief Accountant | August 4, 2022 | Yes |
Zhao Yingming
| Zhao Yingming | Zhejiang Red Dragonfly Shoes Co., Ltd. | Independent director | September 13, 2022 | September 12, 2025 | Yes |
Zhao Yingming
| Zhao Yingming | Aimer Co., Ltd. | Independent director | May 22, 2023 | May 21, 2026 | Yes |
Zhang Ning
| Zhang Ning | Peking University | Professor | October 9, 2017 | Yes |
Zhang Ning
| Zhang Ning | Affiliated Cancer Hospital of Tianjin Medical University | Part-time Professor | October 9, 2017 | Yes |
Ma Jia
| Ma Jia | Shanghai Pharmaceuticals Holding Co., Ltd. | Supervisor | June 29, 2023 |
period by securities regulatory agencies in the latest three years
□Applicable ?Not applicable
3. Remuneration of Directors, Supervisors and Senior Management
Decision-making procedures, determination basis and actual payment of remuneration for directors, supervisors, and seniormanagement
| Decision-making procedures of remuneration of directors, supervisors, and senior management | The Remuneration Management Committee shall submit the proposal to the board of directors for consideration and approval prior to implementation. |
| Basis for determination of the remuneration of directors, supervisors, and senior management | Remuneration shall be determined based on operating conditions, industry standard, responsibilities assumed, and other relevant factors. |
| Actual payment of remuneration of directors, supervisors, and senior management | Allowances for directors and supervisors will be paid on a monthly basis, while those for senior management will be paid based on established assessment standards. |
| Composition of remuneration of directors, supervisors, and senior management | The remuneration actually received by directors, supervisors, and senior management of the company in 2023 includes a basic salary, performance bonus, allowances, and other cash income. |
Remuneration for directors, supervisors, and senior management during the reporting period
Unit: RMB0’000
| Name | Gender | Age | Title | Service status | Total pre-tax remunerations received from the Company | Whether remuneration was received from related parties of the Company |
| Chen Fashu | Male | 64 | Director | Incumbent | 0.00 | Yes |
| Dong Ming | Male | 48 | Director, CEO, and President | Incumbent | 425.10 | No |
| Lu Hongdong | Male | 57 | Deputy Secretary of the Company’s Party Committee and Director | Incumbent | 116.79 | No |
| Xie Yunshan | Male | 49 | Director | Incumbent | 100.69 | No |
| Li Hongshen | Male | 45 | Director | Incumbent | 0 | Yes |
| Chen Yanhui | Male | 38 | Director | Incumbent | 113.09 | Yes |
| Dai Yang | Male | 55 | Independent Director | Incumbent | 25.71 | No |
| Zhang Yongliang | Male | 56 | Independent Director | Incumbent | 25.60 | No |
| Liu Guo’en | Male | 67 | Independent Director | Incumbent | 25.71 | No |
| He Yong | Male | 54 | Independent Director | Incumbent | 25.71 | No |
| Zhu Zhaoyun | Female | 70 | TCM Strategic Scientist | Incumbent | 170.70 | No |
| Qin Wanmin | Male | 60 | Chief Innovation Officer, Senior Vice President, and President of the Health Products Business Group | Incumbent | 363.68 | No |
| Zhao Yingming | Male | 52 | Chief Commercial Officer & Senior Vice President | Incumbent | 363.68 | No |
| Yang Yong | Male | 60 | Chief Compliance Officer, Senior Vice President, and Executive Director of Yunnan Pharma | Incumbent | 275.84 | No |
| Zhang Ning | Male | 53 | Chief Scientist | Incumbent | 360.69 | No |
| Ma Jia | Male | 47 | Chief Financial Officer | Incumbent | 183.68 | No |
| Li Jin | Male | 59 | Secretary of the Discipline Inspection | Incumbent | 123.68 | No |
| Committee, and Chief Quality and Process Officer | ||||||
| Qian Yinghui | Male | 40 | Secretary of the Board of Directors | Incumbent | 110.66 | No |
| You Guanghui | Male | 53 | Chairman of the Supervisory Committee | Incumbent | 105.95 | No |
| Zhong Jie | Male | 60 | Deputy Chairman of the Supervisory Committee | Incumbent | 105.95 | No |
| Qu Huaxi | Male | 58 | Supervisor and Chairman of the Trade Union | Incumbent | 105.95 | No |
| He Yingxia | Female | 52 | Supervisor and Deputy Chairman of the Trade Union | Incumbent | 56.20 | No |
| Wang Minghui | Male | 62 | Former Chairman | Resigned | 45.89 | No |
| Yin Pinyao | Male | 55 | Former Chief Operation Officer, Senior Vice President, and President of the TCM Resources Business Group | Resigned | 403.67 | No |
| Wang Jin | Female | 54 | Former Chief Sales Officer, Senior Vice President, and President of Pharmaceutical Business Group | Resigned | 90.92 | No |
| Yu Juan | Female | 52 | Former Chief Human Resources Officer | Resigned | 183.91 | No |
| Total | -- | -- | -- | -- | 3,909.45 | -- |
Notes: 1. On March 7, 2023, the Company disclosed the Announcement on the Resignation of the Chairman(Announcement No.: 2023-03), stating that Mr. Wang Minghui has resigned from his position as Chairman of theTenth Board of Directors, as well as from his roles as a director and a member of the Strategic Committee of theBoard of Directors, and from all his positions in the Company and its holding subsidiaries for personal reasons.On March 15, 2023, the Company disclosed the Announcement on the Resignation of Senior Management(Announcement No.: 2023-06), stating that Ms. Wang Jin has resigned from her position as the Company’s ChiefSales Officer and Senior Vice President, as well as all her positions in the Company and its holding subsidiaries forpersonal reasons.On February 7, 2024, the Company disclosed the Announcement on the Resignation of Senior Management(Announcement No.: 2024-06), stating that Mr. Yin Pinyao has resigned from his position as the Company’s ChiefOperating Officer and Senior Vice President, as well as all his positions in the Company and its holding subsidiariesfor personal reasons; Ms. Yu Juan has resigned from her position as the Chief Human Resources Officer of theCompany and all her positions in the Company and its holding subsidiaries for personal reasons.
The disclosed remuneration in this form represents the remuneration received by the aforementioned personnelduring their service in 2023.
2. On February 23, 2024, the Company disclosed the Announcement on Resolutions of the Second Session ofthe Tenth Board of Directors for 2024 (Announcement No.: 2024-09), stating that the tenth Board of Directors ofthe Company had elected Mr. Zhang Wenxue as Chairman of the Company, and he did not receive any pre-taxremuneration from the Company as a director, supervisor or senior management during the year 2023.
Explanation on other matters
□Applicable ?Not applicable
VI. Duty Performance of Directors during the Reporting Period
1. Board meetings held during the reporting period
| Sessions | Meeting date | Disclosure date | Resolutions |
The first session of theTenth Board ofDirectors for 2023
| The first session of the Tenth Board of Directors for 2023 | March 13, 2023 | March 15, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1216123120&announcementTime=2023-03-15%2011:46 |
The second session ofthe Tenth Board ofDirectors for 2023
| The second session of the Tenth Board of Directors for 2023 | March 29, 2023 | March 31, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1216280786&announcementTime=2023-03-31 |
The third session of theTenth Board ofDirectors for 2023
| The third session of the Tenth Board of Directors for 2023 | April 25, 2023 | April 27, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1216610744&announcementTime=2023-04-27 |
The fourth session ofthe Tenth Board ofDirectors for 2023
| The fourth session of the Tenth Board of Directors for 2023 | July 5, 2023 | July 7, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1217227167&announcementTime=2023-07-07 |
The fifth session of theTenth Board ofDirectors for 2023
| The fifth session of the Tenth Board of Directors for 2023 | August 28, 2023 | August 30, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1217699939&announcementTime=2023-08-30 |
The sixth session of theTenth Board ofDirectors for 2023
| The sixth session of the Tenth Board of Directors for 2023 | October 27, 2023 | October 31, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1218200816&announcementTime=2023-10-31 |
The seventh session ofthe Tenth Board ofDirectors for 2023
| The seventh session of the Tenth Board of Directors for 2023 | December 27, 2023 | December 29, 2023 | http://www.cninfo.com.cn/new/disclosure/detail?plate=szse&orgId=gssz0000538&stockCode=000538&announcementId=1218750587&announcementTime=2023-12-29 |
2. Attendance of directors at the Board meetings and general meetings
Attendance of directors at the Board meetings and general meetingsName ofdirectors
| Name of directors | Number of attendances required for the reporting period | Number of on-site attendances to Board meetings | Number of attendances to Board meetings through communication | Number of Board meetings attended by directors appointed as the proxy | Number of absences from Board meetings | Non-attendance in person for two consecutive times or not | Number of attendances to general meetings |
Chen Fashu
| Chen Fashu | 7 | 1 | 6 | 0 | 0 | No | 1 |
Dong Ming
| Dong Ming | 7 | 2 | 5 | 0 | 0 | No | 2 |
Lu Hongdong
| Lu Hongdong | 7 | 2 | 5 | 0 | 0 | No | 2 |
Xie Yunshan
| Xie Yunshan | 7 | 2 | 5 | 0 | 0 | No | 2 |
Li Hongshen
| Li Hongshen | 7 | 2 | 5 | 0 | 0 | No | 2 |
Chen Yanhui
| Chen Yanhui | 7 | 2 | 5 | 0 | 0 | No | 1 |
Dai Yang
| Dai Yang | 7 | 2 | 5 | 0 | 0 | No | 2 |
ZhangYongliang
| Zhang Yongliang | 7 | 1 | 6 | 0 | 0 | No | 2 |
Liu Guo’en
| Liu Guo’en | 7 | 0 | 7 | 0 | 0 | No | 2 |
He Yong
| He Yong | 7 | 1 | 6 | 0 | 0 | No | 2 |
Explanation on two consecutive absences from Board meetings: None.
3. Objections raised by directors to relevant matters of the Company
Did directors object to relevant matters of the Company?
□ Yes ?No
During the reporting period, no directors objected to relevant matters of the Company.
4. Other circumstances in the performance of duties by directors
Was advice to the Company from directors adopted??Yes □ NoExplanation on whether advice to the Company from directors was adopted or notDuring the reporting period, in strict accordance with the Company Law, the Securities Law, the GovernanceGuidelines for Listed Companies, the Several Provisions on Strengthening the Protection of the Rights and interestsof Shareholders of Public Shares and other laws, regulations and normative documents, as well as the Articles ofAssociation, the Rules of Procedure for the Board of Directors and other relevant requirements, all the members ofthe Tenth Board of Directors of the Company, honoring the principles of integrity, faithfulness and diligence, andabiding by the code of conduct for the performance of duties as a director, attended the Board meetings and thegeneral meetings in earnest, actively understanding the operation of the Company and fully expressing our opinions,and carefully, independently and objectively considering 40 motions, including the revision of the Company’scorporate governance documents, organizational structure, related party transactions, misappropriation of funds,and the appointment of senior management personnel. They carefully understood the contents for considerationduring the Board meetings and expressed corresponding opinions and suggestions, which have played a positiverole in promoting the Board of Directors to make strategic decisions that are more in line with the development ofthe Company and more scientific and reasonable, and have effectively safeguarded the legitimate rights and interestsof the Company and all the shareholders, in particular the minority shareholders.
VII. Performance of Special Committees under the Board of Directors during the Reporting Period
| Name of Committee | Members | Number of Meetings | Date of convention | Agenda of meeting | Important opinions and recommendations proposed | Other circumstances in the performance of duties | Particulars of objections (if any) |
| Strategy Committee | Chen Fashu, Lu Hongdong, Li Hongshen, Dong Ming, Liu Guo’en | 3 | March 20, 2023 | (I) The first meeting of Strategy Committee of the Tenth Board of Directors for 2023 1. Proposal on the 2023 Organizational Structure Plan of Yunnan Baiyao. 2. Proposal on Delegation of Power by the Board of Directors to the Group Office Meeting 3. Proposal Number of bonus shares for every 10 shares (share) on Public Welfare Donation Management Measures of Yunnan Baiyao Result: 5 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Strategy Committee | Chen Fashu, Lu Hongdong, Li Hongshen, Dong Ming, Liu Guo’en | 3 | July 31, 2023 | (II) The second meeting of Strategy Committee of the Tenth Board of Directors for 2023 1. Proposal on Revising the Investment and Financial Management System of the Company 2. Proposal on Applying for Registration and Issuance of Ultra Short-term Financing Bonds Result: 5 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Strategy Committee | Chen Fashu, Lu Hongdong, Li Hongshen, Dong Ming, Liu Guo’en | 3 | December 18, 2023 | (III) The third meeting of Strategy Committee of the Tenth Board of Directors for 2023 1. Proposal on the Use of Self-owned Idle Funds for Investment and Financial Management in 2024 Result: 5 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Nomination Committee | Dai Yang, Zhang Yongliang, Chen Yanhui | 1 | February 28, 2023 | (I) The first meeting of Nomination Committee of the Tenth Board of Directors for 2023 1. Proposal on Appointment of Senior Management Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Remuneration and Appraisal Committee | Zhang Yongliang, Dai Yang, Chen Fashu | 6 | February 14, 2023 | (I) The first meeting of Remuneration and Appraisal Committee of the Tenth Board of Directors for 2023 1. Proposal on Adjustment of the Remuneration for the Secretary of the Board of Directors Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Remuneration and Appraisal Committee | Zhang Yongliang, Dai Yang, Chen Fashu | 6 | February 23, 2023 | (II) The second meeting of Remuneration and Appraisal Committee of the Tenth Board of Directors for 2023 1. Proposal on Adjustment of the Remuneration for TCM Strategy Scientist Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Remuneration and Appraisal Committee | Zhang Yongliang, Dai Yang, Chen Fashu | 6 | February 28, 2023 | (III) The third meeting of Remuneration and Appraisal Committee of the Tenth Board of Directors for 2023 1. Proposal on Adjustment of the Remuneration for Chief Commercial Officer and Senior Vice President Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Remuneration and Appraisal Committee | Zhang Yongliang, Dai Yang, Chen Fashu | 6 | March 23, 2023 | (IV) The fourth meeting of Remuneration and Appraisal Committee of the Tenth Board of Directors for 2023 1. Proposals on the Implementation of the Measures for the Remuneration and Appraisal of Core Personnel such as Directors, Supervisors and Senior Management in 2022 Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Remuneration and Appraisal Committee | Zhang Yongliang, Dai Yang, Chen Fashu | 6 | May 31, 2023 | (V) The fifth meeting of Remuneration and Appraisal Committee of the Tenth Board of Directors for 2023 1. Proposal on the Implementation of Short-term Incentive Distribution for Directors, Supervisors and Senior Management in 2022 Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Remuneration and Appraisal Committee | Zhang Yongliang, Dai Yang, Chen Fashu | 6 | July 17, 2023 | (VI) The sixth meeting of Remuneration and Appraisal Committee of the Tenth Board of Directors for 2023 1. Proposal on Cancelling the Third Exercisable Period of the Initially Granted Part of the 2020 Stock Option Incentive Plan and the Second Exercisable Period of Its Reserved Granted Part Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | March 13, 2023 | (I) The first meeting of Audit Committee of the Tenth Board of Directors for 2023 1. Preliminary Audit Opinion on the 2022 Annual Report Issued by the Certified Public Accountant Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | March 16, 2023 | (II) The second meeting of Audit Committee of the Tenth Board of Directors for 2023 1. 2022 Summary Report on Internal Audit and 2023 Internal Audit Plan Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | March 27, 2023 | (III) The third meeting of Audit Committee of the Tenth Board of Directors for 2023 1. 2022 Annual Report and its summary 2. Annual Final Account Report for 2022 3. Proposal on the special audit report of the accounting firm on the summary of the non-operational funds occupied by the related parties and the transactions of other related funds 4. 2022 Profit Distribution Plan 5. Proposal on Estimation of the Daily Related Party Transactions in 2023 6. Report on the Company’s Financial Budget for 2023 7. Proposal on Provision for Asset Impairment in 2022 8. Proposal on Change of Accounting Policies 9. Self-evaluation Report on the Company’s Internal Control for 2022 10. Proposal on paying the audit fees (including internal control audit) of Mazars Certified Public Accountants LLP in 2022 11. Proposal on Renewing the Engagement with the Company’s Audit Organization (Including Internal Control Audit) for 2023 12. Proposal on Revising the Implementation Rules of the Audit Committee of the Board of Directors Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | April 24, 2023 | (IV) The fourth meeting of Audit Committee of the Tenth Board of Directors for 2023 1. Proposal on the Report of the First Quarter in 2023 Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | August 25, 2023 | (V) The fifth meeting of Audit Committee of the Tenth Board of Directors for 2023 1. Proposal on Interim Report for 2023 and its summary Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | October 25, 2023 | (VI) The sixth meeting of Audit Committee of the Tenth Board of Directors for 2023 1. Proposal on the Report of the Third Quarter in 2023 Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
| Audit Committee | He Yong, Xie Yunshan, Zhang Yongliang | 7 | November 22, 2023 | (VII) The seventh meeting of Audit Committee of the Tenth Board of Directors for 2023 1. Proposal on 2023 Annual Report Audit Plan Result: 3 voted in favor, 0 voted against, 0 abstained | None | None | None |
VIII. Work of the Supervisory CommitteeWhether the Supervisory Committee identified any risks to the Company in its supervisory activities during the reporting period
□Yes ?No
The Supervisory Committee had no objections to the supervisory matters during the reporting period.
IX. Employees of the Company
1. Number of employees, professional composition, and education
| Number of in-service employees of the parent company at the end of the reporting period (person) | 3,961 |
| Number of in-service employees of major subsidiaries at the end of the reporting period (person) | 4,873 |
| Total number of in-service employees at the end of the reporting period (person) | 8,834 |
| Total number of salaried employees in the current period (person) | 8,834 |
| Number of retired pensioners whose expenses shall be borne by the parent company and its main subsidiaries (person) | 1,872 |
| Professional Composition | |
| Category of Professional Composition | Number of Professional Composition (Person) |
| Production staff | 1,676 |
| Sales staff | 5,099 |
| Technical staff | 1,265 |
| Including: R&D staff | 527 |
| Financial staff | 308 |
| Administrative staff | 486 |
| Total | 8,834 |
| Education | |
| Category of Education | Number (person) |
| Doctor | 35 |
| Master | 532 |
| Undergraduate | 3,804 |
| College | 2,877 |
| Technical secondary school and below | 1,586 |
| Total | 8,834 |
2. Remuneration policy
In accordance with the Social Insurance Law of the People’s Republic of China, Yunnan Baiyao haspurchased pension, medical, unemployment, work-related injury, maternity, and other insurance foremployees, as well as has provided housing provident fund and enterprise annuity to ensure that employeesenjoy the rights stipulated by law. In addition, the Company has purchased commercial insurance to avoid
the risk of accidental injury and protect the health of employees. In 2023, the Company improved itscompensation system, focusing on value creation, promoting labor efficiency, optimizing the personnelstructure, as well as enhancing capacity. The Company assessed the reasonableness and effectiveness ofhuman resource investment by analyzing the operation and allocation efficiency of human resources toenhance the value-creating ability of its employees. The Company also established a positive incentiveculture, implemented an over-sharing mechanism for improving quality and efficiency, taken performanceresults as a part of the remuneration system, encouraged the complement of special tasks with projectrewards, and rewarded quality and efficiency based on the incremental part of revenue and profitcontribution.
3. Training program
Yunnan Baiyao adheres to the concept of “People-first, Talent-integrated,” and establishes andimproves the talent training system through scientific talent strategy planning. By offering employeesdiverse avenues for development and comprehensive training support, the Company fosters the personalgrowth of its workforce, enabling them to continuously enhance their skills and capabilities. This ensures amutually beneficial relationship between the enterprise and its employees. To further empower theorganization, its business operations, and its personnel, the Company has formulated and implementedspecial training programs for management and professional talents, and has conducted a dynamic talentinventory based on competency models and talent assessment, focusing on the identification and training ofkey talents to ensure that their competency enhancement matches the Company’s future needs. Byimplementing effective cadre management mechanisms and talent pool management tools, we cultivatehigh-quality management talents who align with the Company’s future development needs.
During the reporting period, the Company achieved end-to-end digitization of the training program byembracing digital transformation, and bestowed digital “wings” upon the entire process of “businessstrategy-talent planning-training program-talent growth” with digital capabilities. With the continuousenhancement of the “Blossoming Flowers” talent training system, the Company delivered tailor-madetraining programs that catered to the needs and development requirements of different employees, such asPanax Notoginseng Flower Training Program for Project Manager, Paris Polyphylla Flower TrainingProgram for Middle-level Management, New Apprenticeship Project, and National Senior Workshop.
4. Labor outsourcing
□Applicable ?Not applicable
X. Profit Distribution and Conversion of Capital Reserve into Share Capital of theCompany
Profit distribution policies during the reporting period, especially the formulation, implementation, or adjustment of thecash dividend policies
?Applicable □Not applicableThe Company’s ongoing commitment revolves around creating value and ensuring reasonable returnsfor investors. The Company extensively gathers and incorporates shareholders’ perspectives regarding profitdistribution. It follows sustainable, stable, compliant, and transparent distribution policies that prioritize the
protection of minority shareholders’ legitimate rights and interests. The standards and ratios for dividenddistribution are clearly defined. The profit distribution plan of the Company is submitted to the shareholders’general meeting for consideration, and the decision-making and implementation of profit distributioncomply with the relevant provisions of the Articles of Association and the requirements of the resolutions ofthe shareholders’ general meeting.
The Company’s annual equity distribution plan for 2022 was as follows: Based on the total share capitalof the Company of 1,796,862,549 shares as at the end of 2022 less 12,599,946 shares repurchased by thespecial securities account for share repurchase, i.e., on the basis of 1,784,262,603 shares, a cash dividend ofRMB 15.2 (tax inclusive) for every 10 shares would be paid to all shareholders, 0 bonus shares (tax inclusive)would be distributed, and no share capital would be converted from capital reserve. In accordance with thedistribution proportion of this plan, the total amount of distribution was finally determined based on thenumber of shares entitled to profit distribution on the equity registration date when the distribution plan wasimplemented in the future. The remaining undistributed profits were reserved for distribution in subsequentyears.On May 19, 2023, the Company completed the implementation of equity distribution for 2022, with atotal cash dividend of RMB 2,712,079,156.56 distributed.
| Special Description of Cash Dividend Policy | |
| Whether it complies with the provisions of the Articles of Association or the requirements of resolutions of shareholders’ general meetings: | Yes |
| Whether the standards and ratios for dividend distribution are clearly defined: | Yes |
| Whether relevant decision-making procedures and mechanisms are complete: | Yes |
| Whether the independent directors perform their duties and play their due role: | Yes |
| If the Company does not pay cash dividends, it shall disclose the specific reasons and the next steps to be taken to enhance the return of investors: | No |
| Whether minority shareholders have sufficient opportunities to express their opinions and demands, and whether their legitimate rights and interests are fully protected: | Yes |
| Whether the conditions and procedures for adjusting or changing the cash dividend policies are compliant and transparent: | Yes |
The Company made profits during the reporting period and the profit available for distribution to shareholders of the parentcompany was positive, but no cash dividend distribution plan was proposed
□Applicable ?Not applicable
Distribution of profits and capital reserve converted into share capital during the reporting period
?Applicable □Not applicable
| Number of bonus shares for every 10 shares (share) | 0 |
| Number of dividends for every 10 shares (RMB) (tax included) | 20.77 |
| Number of shares transferred for every 10 shares (share) | 0 |
| Base of Share capital of the distribution plan (share) | 1,784,262,603.00 |
| Cash dividend amount (RMB) (tax included) | 3,705,913,426.43 |
| Cash dividend amount in other ways (such as repurchase of shares) (RMB) | 0.00 |
| Total cash dividend (including other methods) (RMB) | 3,705,913,426.43 |
| Distributable profits (RMB) | 3,750,505,582.48 |
| Proportion of total cash dividends (including other methods) to total profit distribution | 100% |
| This Cash Dividend | |
| If the Company is in the mature phase and there is no significant capital expenditure arrangement, the cash dividend shall account for at least 80% of the profit distribution when profit distribution is made. | |
| Details of Plan on Profit Distribution and Conversion of Capital Reserve into Share Capital | |
| The profit distribution plan of the Company considered and approved by the Board of Directors is as follows: Based on the total share capital of the Company of 1,796,862,549 shares as at the end of 2023 less 12,599,946 shares repurchased by the special securities account for share repurchase, i.e., on the basis of 1,784,262,603 shares, a cash dividend of RMB 20.77 (tax inclusive) for every 10 shares will be paid to all shareholders, 0 bonus shares (tax inclusive) will be distributed, and 0 shares will be issued to all shareholders for every 10 shares by way of conversion of capital reserve. | |
XI. Implementation of the Company’s Equity Incentive Plan, Employee Stock Ownership Plan(ESOP), or Other Employee Incentive Measures
?Applicable □Not applicable
1. Equity incentive
(1) On June 8, 2021, the Company held the fifth session of the Ninth Board of Directors for 2021, at which theProposal on Fulfillment of Exercise Conditions for First Exercisable Period of Stock Options Initially Grantedunder the 2020 Stock Option Incentive Plan had been considered and approved. Those 670 incentive participantsinitially granted with stock options under the 2020 Stock Option Incentive Plan could exercise a total of 6,746,400exercisable stock options in the first exercisable period by using the independent exercise method.
(2) On May 5, 2022, the Proposal on the Adjustment of the Number and Exercise Price of Stock Options InitiallyGranted under the 2020 Stock Option Incentive Plan had been considered and approved at the seventh session of theninth Board of Directors in 2022. As the Company’s 2021 Annual Equity Distribution Plan had been implemented, acash dividend of RMB 16.00 (including tax) for every 10 shares would be paid to all shareholders on the basis of1,796,221,975 shares. According to the Company’s 2020 Stock Option Incentive Plan (Draft), the number ofunexercised options initially granted under the Company’s 2020 Stock Option Incentive Plan was adjusted from11,257,220 to 15,760,108 and the exercise price was adjusted from RMB 74.05/share to RMB 51.75/share.
(3) On August 8, 2022, the Proposal on Cancellation of Certain Stock Options Granted under the 2020 StockOption Incentive Plan had been considered and approved at the ninth session of the Ninth Board of Directors for2022, canceling 947,054 stock options initially granted that had not been exercised upon expiration of the firstexercisable period. As the Company’s return on equity in 2021 was less than 10.5%, the exercise conditions for thesecond exercisable period had not been satisfied; therefore 7,086,240 stock options initially granted correspondingto the second exercisable period and 840,000 stock options under reserved grant corresponding to the firstexercisable period could not be exercised and would thus be canceled by the Company accordingly. Aftercancellation, the number of stock options initially granted under the Company’s 2020 Stock Option IncentivePlan was adjusted from 15,119,534 to 6,772,080, the number of options under reserved grant was adjusted from
1,680,000 to 840,000, and the number of incentive participants was adjusted from 671 to 653.
(4) On September 7, 2022, the Shenzhen Branch of China Securities Depository and Clearing Corporationreviewed and confirmed that the cancellation conducted by the Company had been completed. According to therelevant provisions of the Measures for the Administration of Equity Incentives of Listed Companies and the 2020Stock Option Incentive Plan (Draft), the Company canceled certain stock options under the 2020 Stock OptionIncentive Plan. In particular:
1) Upon expiration of the first exercisable period of the stock options initially granted under the 2020 StockOption Incentive Plan, 6,252,954 stock options had been exercised and 947,054 stock options had not been exercised;947,054 stock options initially granted that had not been exercised upon were canceled.
2) As the Company’s 2021 performance indicators failed to fully meet the performance assessmentrequirements set forth in the 2020 Stock Option Incentive Plan, 7,086,240 stock options initially grantedcorresponding to the second exercisable period and 840,000 stock options under reserved grant corresponding tothe first exercisable period (1,200,000 stock options were under reserved grant, which were adjusted to 1,680,000after equity distribution in 2021, and thus 840,000 stock options were not exercised corresponding to the firstexercisable period) could not be exercised and would thus be canceled by the Company accordingly.
3) For the stock options initially granted under the 2020 Stock Option Incentive Plan, 17 incentive participantsresigned and 1 incentive participant passed away due to other reasons than performing duties, being no longereligible for exercising the stock options. Those 314,160 stock options granted but not exercised by theaforementioned incentive participants could not be exercised and would thus be canceled by the Companyaccordingly. On September 7, 2022, the Shenzhen Branch of China Securities Depository and Clearing Corporationreviewed and confirmed that the Company had completed the cancellation of 9,187,454 stock options mentionedabove.
(5) On August 28, 2023, the Proposal on Cancelling the Third Exercisable Period of the Initially Granted Partof the 2020 Stock Option Incentive Plan and the Second Exercisable Period of Its Reserved Granted Part had beenconsidered and approved at the fifth session of the Tenth Board of Directors for 2023 and the third session of theTenth Supervisory Committee for 2023. As the Company’s 2022 performance indicators failed to fully meet theperformance assessment requirements set forth in the 2020 Stock Option Incentive Plan of Yunnan Baiyao Group,4,837,200 stock options initially granted corresponding to the third exercisable period would not be exercised for itwas adjusted to 6,772,080 stock options and 840,000 stock options under reserved grant corresponding to the secondexercisable period after the equity distribution adjustment for 2021 (A total of 1,200,000 stock options underreserved grant, for it was adjusted to 1,680,000 stock options after the equity distribution adjustment for 2021. Outof these, 840,000 stock options corresponding to the first exercisable period have been cancelled, and the remaining840,000 stock options correspond to the second exercisable period). All of these stock options could not be exercisedand would thus be canceled by the Company (the actual cancellation will be based on the records of the ShenzhenBranch of China Securities Depository and Clearing Corporation).
(6) On September 7, 2023, following the review and confirmation by the Shenzhen Branch of China SecuritiesDepository and Clearing Corporation, the Company had completed the cancellation of the aforementioned7,612,080 stock options. After the cancellation of all the aforementioned stock options, the Company’s 2020 Stock
Option Incentive Plan had been completely terminated.Equity incentives obtained by directors and senior management of the Company
□Applicable ?Not applicable
Evaluation mechanism and incentives for senior managementThe Company has formulated an objective, fair, motivation-oriented, economic, and legitimate performanceappraisal system for senior management in accordance with the relevant national labor policies and in light of theactual operation of the industry and the Company. The senior management of the Company shall be appointed bythe Board of Directors uniformly, and the Remuneration and Appraisal Committee under the Board is responsiblefor evaluating the working capability and performance of the senior management of the Company, formulating ascientific and reasonable remuneration incentive mechanism based on the industry landscape and the actualoperation of the Company, and submitting it to the Board for approval. The remuneration of senior managementincludes basic salary, performance rewards, incentive funds, etc. The performance of senior management isappraised based on the completion rate of overall operation indicators to encourage them to complete the stageoperation objectives. During the reporting period, to improve and perfect the incentive and restraint mechanism ofthe Company, enhance the sense of responsibility and mission of directors, supervisors, senior management, middlemanagement, business backbones, and key technical backbones to achieve the sustainable and healthy developmentof the Company, and ensure the realization of strategic objectives, the Company complied with relevant nationallaws, adhered to the concept of creating and sharing value and launched a stock option incentive plan whichintegrated the interests of the Company, shareholders and key employees to promote the sustainable and healthydevelopment of the Company, thereby creating greater value and rewarding investors.
2. Implementation of the ESOP
?Applicable □Not applicableAll active ESOPs during the reporting period
| Scope of employees | Number of employees | Number of shares held (share) | Status of change | Proportion in the total share capital of listed company | Source of funding to implement the Plan |
1. Directors (excluding
independent directors),supervisors, and seniormanagement of theCompany; 2.Employees of theCompany and itsholding subsidiaries. Allparticipants are requiredto be employed by theCompany (including itsholding subsidiaries)and sign a laborcontract/ servicecontract with theCompany.
| 1. Directors (excluding independent directors), supervisors, and senior management of the Company; 2. Employees of the Company and its holding subsidiaries. All participants are required to be employed by the Company (including its holding subsidiaries) and sign a labor contract/ service contract with the Company. | 1,312 | 23,379,996 | 1. The sensitive period in the ESOP will be revised in accordance with the latest regulations. 2. The number of members in the ESOP Management Committee will be increased, and corresponding elections will be conducted to fill the vacancies. | 1.30% | Employee’s statutory compensation, self-raised funds, funds raised through financing under the Plan, incentive funds set aside by the Company, and funds obtained by any other means permitted by laws and regulations. |
Shareholdings of the directors, supervisors, and senior management in ESOPs during the reporting period
| Name | Position | Number of shares held at the beginning of the reporting period (share) | Number of shares held at the end of the reporting period (share) | Proportion to the total share capital of listed company |
Dong Ming
| Dong Ming | Director, CEO, President | 303,666 | 0 | 0 |
Lu Hongdong
| Lu Hongdong | Director | 26,028 | 0 | 0 |
Zhu Zhaoyun
| Zhu Zhaoyun | TCM Strategy Scientist | 86,762 | 0 | 0 |
Qin Wanmin
| Qin Wanmin | Chief Innovation Officer, Senior Vice President | 303,666 | 0 | 0 |
Yang Yong
| Yang Yong | Chief Compliance Officer, Senior Vice President | 303,666 | 0 | 0 |
Li Jin
| Li Jin | Chief Quality and Process Officer | 86,762 | 0 | 0 |
Qian Yinghui
| Qian Yinghui | Secretary of the Board of Directors | 21,690 | 0 | 0 |
You Guanghui
| You Guanghui | Chairman of the Supervisory Committee | 43,381 | 0 | 0 |
Zhong Jie
| Zhong Jie | Deputy Chairman of the Supervisory Committee | 43,381 | 0 | 0 |
Qu Huaxi
| Qu Huaxi | Chairman of the Trade Union, Employee Supervisor | 26,028 | 0 | 0 |
He Yingxia
| He Yingxia | Vice Chairman of the Trade Union, Employee Supervisor | 21,690 | 0 | 0 |
Wang Minghui
| Wang Minghui | Former Chairman | 520,570 | 0 | 0 |
Yin Pinyao
| Yin Pinyao | Former Chief Operating Officer and Senior Vice President | 303,666 | 0 | 0 |
Wang Jin
| Wang Jin | Former Chief Sales Officer and Senior Vice President | 303,666 | 0 | 0 |
Yu Juan
| Yu Juan | Former Chief Human Resources Officer | 173,523 | 0 | 0 |
Changes in asset management institutions during the reporting period
□Applicable ?Not applicable
Changes in equity caused by shares disposal by holders during the reporting period
□Applicable ?Not applicable
Exercise of the shareholders’ rights during the reporting period: Not applicableOther relevant circumstances and statements of the ESOP during the reporting period
□Applicable ?Not applicable
Changes in the membership of the management committee of the ESOP
□Applicable ?Not applicable
The financial impact of the ESOP on the listed company during the reporting period and related accounting treatment
□Applicable ?Not applicable
Termination of the ESOP during the reporting period?Applicable □Not applicableOn July 5, 2023, the Company convened the fourth session of the Tenth Board of Directors for 2023, atwhich the Proposal on the Early Termination of the ESOP was considered and approved. The lock-up periodof the Company’s 2021 ESOP expired on June 30, 2022. As of May 26, 2023, all 23,379,996 shares of theCompany held under this ESOP had been reduced, and assets under the ESOP currently were all cash and bankbalance. The Proposal on the Early Termination of the ESOP had been considered and approved at this Boardmeeting, agreeing to this early termination. Thereafter, the ESOP would be liquidated by its managementcommittee and the proceeds would be distributed in proportion to the shares held by the participants. The above
information can be found in the Announcement on the Resolution of the Fourth Session of the Tenth Board ofDirectors of Yunnan Baiyao Group Co., Ltd for 2023 (Announcement No.: 2023-26) and the Announcementon the Early Termination of the 2021 ESOP of Yunnan Baiyao Group Co., Ltd (Announcement No.: 2023-27),both disclosed by the Company at http://www.cninfo.com.cn on July 7, 2023.
3. Other employee incentive measures
□Applicable ?Not applicable
XII. Establishment and Implementation of Internal Control System during the ReportingPeriod
1. Establishment and implementation of internal control
The Company has established a scientifically designed and effective internal control system in accordancewith the Company Law, the Basic Rules for Enterprise Internal Control, and related laws and regulations, andhas continuously improved the internal control system and working mechanism by reference to the industrycharacteristics and the practice of the Company. During the reporting period, the Company promotedcomprehensive risk management of key business entities and key risk areas to improve its overall risk defensecapability.The form and content of the Company’s internal control evaluation can truly and accurately reflect thecurrent implementation of the Company’s internal control work, without any false records, misleadingstatements, or material omissions. The internal control system has been fully established for businesses andmatters included in the scope of internal control evaluation and has been fully implemented in the operationand management activities, which can effectively prevent and control the internal operation risks of theCompany in major aspects, and ensure the legal and compliant operation of the Company and the safety andintegrity of assets, achieving the expected objectives of internal control and safeguarding the interests of theCompany and all shareholders.
2. Details of significant internal control defects discovered during the reporting period
□Yes ?No
XIII. Management Control of Subsidiaries during the Reporting Period
None.
XIV. Internal Control Evaluation Report or Internal Control Audit Report
1. Internal control evaluation report
| Full-Text Disclosure Date of Internal Control Evaluation Report | March 30, 2024 |
Full-Text Disclosure Index of Internal Control Evaluation Report
| Full-Text Disclosure Index of Internal Control Evaluation Report | http://www.cninfo.com.cn/new/index |
Total assets of units included in the evaluation scope as a percentage of total assets of theCompany’s consolidated financial statements
| Total assets of units included in the evaluation scope as a percentage of total assets of the Company’s consolidated financial statements | 98.98% |
Operating income of units included in the scope of evaluation as a percentage of operatingincome of the Company’s consolidated financial statements
| Operating income of units included in the scope of evaluation as a percentage of operating income of the Company’s consolidated financial statements | 99.99% |
Defect Identification Criteria
Defect Identification CriteriaCategory
| Category | Financial Report | Non-Financial Report |
| Qualitative Criteria | 1. Major defects: Frauds among directors, supervisors, and senior managers of the Company are discovered; Significant internal control deficiencies identified and reported to management are not corrected after a reasonable time; Control environment is ineffective; The oversight of internal controls by Audit Committee and internal audit bodies is ineffective; There are defects affecting earnings trends; Material misstatements detected by external audit are not first detected by the Company; The Company corrects published financial statements. 2. Important defects: Accounting policies fail to be selected and applied by GAAP; Controls or compensatory measures for non-conventional or special transaction accounting treatment fail to be established or implemented. 3. General defects: Defects other than major defects and important defects are classified as general defects. | 1. Major defects: Those defects that have been formally disclosed and have a negative impact on the Company’s periodic reporting disclosure; and have violated national laws and regulations, causing heavy losses to the Company. 2. Important defects: Those defects that are punished by national government authorities but have not had a negative impact on the Company’s periodic report disclosures. 3. General defects: Those defects are punished by provincial (including provincial) and below government departments but do not have a negative impact on the disclosure of the Company’s periodic reports. |
Quantitative Criteria
| Quantitative Criteria | Internal control defects with financial misstatement amount less than 3% of total profit shall be identified as general defects; Internal control defects with an absolute amount greater than or equal to 3% but less than 5% of total profit shall be identified as important defects; Internal control defects with an absolute amount greater than or equal to 5% of total profit shall be identified as major defects. | By reference to the identification criteria for internal control defects in financial reports, internal control defects that may cause direct property losses with an absolute amount less than 3% of total profits are identified as general defects; Internal control defects with an absolute amount greater than or equal to 3% but less than 5% of total profit shall be identified as important defects; Internal control defects with an absolute amount greater than or equal to 5% of total profit shall be identified as major defects. |
Number of Major Defects inFinancial Reports (Item)
| Number of Major Defects in Financial Reports (Item) | 0 |
Number of Major Defects in Non-Financial Reports (Item)
| Number of Major Defects in Non-Financial Reports (Item) | 0 |
Number of Important Defects inFinancial Reports (Item)
| Number of Important Defects in Financial Reports (Item) | 0 |
Number of Important Defects inNon-Financial Reports (Item)
| Number of Important Defects in Non-Financial Reports (Item) | 0 |
2. Internal control audit report
?Applicable □Not applicable
Considerations about Internal Control Audit ReportWe believe that Yunnan Baiyao has maintained effective internal control over financial reports in all material respects as ofDecember 31, 2023, in accordance with the Basic Rules for Enterprise Internal Control and relevant regulations.
We believe that Yunnan Baiyao has maintained effective internal control over financial reports in all material respects as ofDecember 31, 2023, in accordance with the Basic Rules for Enterprise Internal Control and relevant regulations.Disclosure of Internal Control Audit Report
| Disclosure of Internal Control Audit Report | Disclosed |
Full-Text Disclosure Date of Internal Control Audit Report
| Full-Text Disclosure Date of Internal Control Audit Report | March 30, 2024 |
Full-Text Disclosure Index of Internal Control Audit Report
| Full-Text Disclosure Index of Internal Control Audit Report | http://www.cninfo.com.cn/new/index |
Opinion Type of Internal Control Audit Report
| Opinion Type of Internal Control Audit Report | Unqualified opinion |
Whether There are Major Defects in Non-Financial Reports
| Whether There are Major Defects in Non-Financial Reports | No |
Does the accounting firm issue internal control audit reports with qualified opinion?
□Yes ?No
Whether the internal control audit report issued by the accounting firm is consistent with the self-evaluation report of the Boardof Directors??Yes □No
XV. Rectification of Self-inspection Issues in Special Actions for Governance of Listed CompaniesNot applicable
Section V Environmental and Social Responsibilities
I. Significant Environmental IssuesWhether the listed company and its subsidiaries are the key pollutant discharge unit announced by the environmental protectiondepartments?Yes□No
Environmental protection related policies and industry standardsThe Company has strictly complied with laws and regulations such as the Law of the People’s Republic ofChina on Environmental Protection, the Law of the People’s Republic of China on Air Pollution Prevention andControl, the Law of the People’s Republic of China on Water Pollution Prevention and Control, the Law of thePeople’s Republic of China on Solid Waste Pollution Prevention and Control, and the Law of the People’s Republicof China on Environmental Noise Pollution Prevention and Control, and internally formulated and implementedenvironmental management policies such as the Environmental Protection Management System, EnvironmentalProtection Responsibility System, Environmental Protection Approval Management System, and Hazardous WasteManagement System.
Administrative permits for environmental protectionYunnan Baiyao applied for the pollution discharge permit at June 30, 2022, which will be valid until June 29,2027
Environmental Impact Assessment (EIA) Approvals for Yunnan Baiyao Group Traditional Chinese MedicineResources Co., Ltd: YHXZH (2008) No.55, YHSH (2009) No.261; Approval for Acceptance of CompletedEnvironmental Protection Projects: Phase I YH Acceptance (2013) No. 1, Phase II YH Acceptance (2015) No. 30,and YH Acceptance (2014) No. 16
Industry emission standards and specific situations of pollutant emissions involved in production and operation activities
| Name of Company or Subsidiary | Types of Main Pollutants and Characteristic Pollutants | Names of Main Pollutants and Characteristic Pollutants | Emission Method | Number of Discharge Outlets | Distribution of Discharge Outlets | Emission Concentration/Intensity | Pollutant Emission Standards Implemented | Total Emissions | Approved Total Emissions | Emissions Exceeding Standards |
| Yunnan Baiyao Group Co., Ltd. | Particulate matter | Particulate matter | Organized emissions | 7 | 1.Main discharge outlet for boiler exhaust gas 2. Main discharge outlet for alcohol extraction exhaust gas | 4t/h boiler (with an average particulate matter concentration of 5.9mg/m?); 10t/h boiler (with an average particulate matter concentration of 5.3mg/m?); 15t/h boiler (with an average particulate matter concentration of 5.3mg/m?); Alcohol extraction exhaust gas discharge outlet 1 (with an average particulate matter concentration of 4.3mg/m?); Alcohol extraction exhaust gas discharge outlet 2 (with an average particulate matter concentration of 4.1mg/m?); Alcohol extraction exhaust gas discharge outlet 3 (with an average particulate matter concentration of 4.7mg/m?); Alcohol extraction exhaust gas discharge outlet 4 (with an average particulate matter concentration of 3.85mg/m?). | Standards for the Emission of Air Pollutants in the Pharmaceutical Industry GB37823-2019; Standards for the Emission of Air Pollutants from Boilers GB13271-2014 | Subject to simplified management, with no total emission indicator available | None | None |
| Yunnan Baiyao Group Co., Ltd. | Exhaust gas | SO2 | Organized emissions | 3 | Main discharge outlet for boiler exhaust gas | 4t/h boiler (with an average SO2 concentration of 0mg/m?); 10t/h boiler (with an average SO2 concentration of 0mg/m?); 15t/h boiler (with an average SO2 concentration of 0mg/m?). | Standards for the Emission of Air Pollutants in the Pharmaceutical Industry GB37823-2019; Standards for the Emission of Air Pollutants from Boilers GB13271-2014 | Subject to simplified management, with no total emission indicator available | None | None |
| Yunnan Baiyao Group Co., Ltd. | Exhaust gas | NOX | Organized emissions | 3 | Main discharge outlet for boiler exhaust gas | 4t/h boiler (with an average NOX concentration of 73.8mg/m?); 10t/h boiler (with an average NOX concentration of 94.8mg/m?); 15t/h boiler (with an average NOX concentration of 90.5mg/m?); | Standards for the Emission of Air Pollutants in the Pharmaceutical Industry GB37823-2019; Standards for the Emission of Air Pollutants from Boilers GB13271-2014 | Subject to simplified management, with 3.182 tons of NOX emissions in 2023 | 11.0667 tons of approved total emissions | None |
| Yunnan Baiyao Group Co., Ltd. | Exhaust gas | Non-methane total hydrocarbons | Organized emissions | 4 | Alcohol extraction exhaust gas discharge outlet | Alcohol extraction exhaust gas discharge outlet 1 (with an average concentration of non-methane total hydrocarbons of 19.75mg/m?); Alcohol extraction exhaust gas discharge outlet 2 (with an average concentration of non-methane total hydrocarbons of 18.6mg/m?); Alcohol extraction exhaust gas discharge outlet 3 (with an average concentration of non-methane total hydrocarbons of 15.9mg/m?); Alcohol extraction exhaust gas discharge outlet 4 (with an average concentration of non-methane total hydrocarbons of 15.3mg/m?); | Standards for the Emission of Air Pollutants in the Pharmaceutical Industry GB37823-2019 | Subject to simplified management, with no total emission indicator available | None | None |
| Yunnan Baiyao Group Co., Ltd. | Wastewater | COD, ammonia nitrogen | Drainage outlet | 2 | 1. Main drainage outlet 2. Rainwater drainage outlet | Average concentration at main drainage outlet: COD 40.20mg/L, Ammonia nitrogen: 2.37mg/L; Average concentration at rainwater drainage outlet: COD 19.6mg/L | Wastewater Quality Standard for Discharge to Municipal Sewers GB/T 31962-2015; Integrated Wastewater Discharge Standards GB8978-1996 | Subject to simplified management, with no total emission indicator available | None | None |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Combustion exhaust emissions outlet | Non-methane total hydrocarbons | Organized emissions | 1 | Pre-treatment roof | 3.83mg/m? | Non-methane total hydrocarbons ＜ 100mg/Nm? | / | / | None |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Dust removal discharge outlet for crushing | Particulate matter | Unorganized emissions | 5 | Pre-treated crushing | ＜ 20mg/m? | Particulate matter ＜ 30mg/Nm? | / | / | None |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Factory boundary | Hydrogen sulfide; ammonia; odor concentration; non-methane total hydrocarbons | Unorganized emissions | 5 | Factory area | Hydrogen sulfide: 0.006mg/m? Ammonia: 0.2mg/m? Odor concentration: 15 mg/m? Non-methane total hydrocarbons: 1.4mg/m? | Hydrogen sulfide ＜ 0.06mg/Nm? Ammonia ＜ 1.5mg/Nm? Odor concentration 20 dimensionless Non-methane total hydrocarbons ＜ 4.0mg/Nm? | / | / | None |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Boiler discharge outlet | Sulfur dioxide; nitrogen oxide; particulate matter; Lingeman blackness | Organized emissions | 3 | Boiler room | / | Sulfur dioxide ＜ 50mg/Nm? Nitrogen oxides ＜ 200mg/Nm? Particles ＜ 20mg/Nm? | / | Nitrogen oxide: 32.18t/a | None |
| Lingeman blackness level 1 | ||||||||||
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Total nitrogen | / | 1 | Sewage station drainage outlet | / | 70mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Chroma | / | 1 | Sewage station drainage outlet | 30-60 | 64 | / | / | / |
| Yunnan Baiyao Group TCM Resources Co.,Ltd. | Main drainage outlet | Total dissolved solids | / | 1 | Sewage station discharge outlet | 1500-1800mg/L | 2000mg/L | / | / | / |
| Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd. | Main drainage outlet | Flows | / | 1 | Sewage station drainage outlet | / | mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Ammonia nitrogen | / | 1 | Sewage station drainage outlet | 0.30mg/L | 45mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Acute toxicity | / | 1 | Sewage station drainage outlet | 0.04mg/L | mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Animal and vegetable oils | / | 1 | Sewage station drainage outlet | 0.06 | 100mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | PH value | / | 1 | Sewage station drainage outlet | 7.8 | 6.5-9.5 | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Total organic carbon | / | 1 | Sewage station drainage outlet | 12.4mg/L | mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Total cyanide | / | 1 | Sewage station drainage outlet | 0.004mg/L | 0.5mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Chemical oxygen demand | / | 1 | Sewage station drainage outlet | 50-80mg/L | 500mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Suspended solids | / | 1 | Sewage station drainage outlet | 18mg/L | 400mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Five-day biochemical oxygen demand | / | 1 | Sewage station drainage outlet | 13mg/L | 350mg/L | / | / | / |
| Yunnan Baiyao Group TCM Resources Co., Ltd. | Main drainage outlet | Total phosphorus | / | 1 | Sewage station drainage outlet | 4.4mg/L | 8mg/L | / | / | / |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Exhaust gas | Particulate matter | Bag for dust removal | 4 | Direct emissions | / | GB16297-1996 | / | / | / |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Exhaust gas | Nitrogen oxide | Chimney | 1 | Direct emissions | 48mg/m3 | GB16297-1996, GB13271-2014 | 0.247t | / | None |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Wastewater | COD | Main drainage outlet | 1 | Discharged into a municipal sewage pipe network | 45mg/L | GB14554-93, GB16297-1996, GB21908-2008 | 0.151t | / | None |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Wastewater | BOD5 | Main drainage outlet | 1 | Discharged into a municipal sewage pipe network | 12.7mg/L | GB14554-93, GB16297-1996, GB21908-2008 | 0.043t | / | None |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Wastewater | Ammonia nitrogen | Main drainage outlet | 1 | Discharged into a municipal sewage pipe network | 0.91mg/L | GB14554-93, GB16297-1996, GB21908-2008 | 0.007t | / | None |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Wastewater | Total nitrogen | Main drainage outlet | 1 | Discharged into a municipal sewage pipe network | 7.12mg/L | GB14554-93 GB16297-1996, GB21908-2008 | 0.113t | / | None |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | Wastewater | Total phosphorus | Main drainage outlet | 1 | Discharged into a municipal sewage pipe network | 0.12mg/L | GB14554-93 GB16297-1996, GB21908-2008 | 0.002t | / | None |
| Yunnan Baiyao Group Wenshan Qihua Co., Ltd. | Exhaust gas | Sulfur dioxide; particle matter; nitrogen oxides | Organized emissions | 2 | Boiler main exhaust gas outlet | Boiler 2 (with a sulfur dioxide concentration of ＜ 3mg/m?, an average particulate matter concentration of 2.1mg/m?, an average nitrogen oxide concentration of 46.5mg/m?) has a smoke density of ≤ 1; Boiler 3 (with a sulfur dioxide concentration of ＜ 3mg/m?, an average particulate matter concentration of 2.1mg/m?, an average nitrogen oxide concentration of 49.75mg/m?) has a smoke density of ≤ 1. | Sulfur dioxide: ≤50mg/m?; particulate matter≤20mg/m?; nitrogen oxide≤200mg/m?; smoke density of ≤ 1 | Subject to simplified management, with no total emission indicator available | None | None |
| Yunnan Baiyao Group Wenshan Qihua Co., Ltd. | Wastewater | COD; BOD5, suspended solids; ammonia nitrogen | Organized emissions | 1 | Main sewage discharge outlet in the factory area | With an average COD concentration of 33.5mg/L, An average BOD5 concentration of 12.1mg/L, an average suspended solids concentration of 7mg/L, an average ammonia nitrogen concentration of 0.67mg/L | COD≤500mg/L; BOD5≤300mg/L; suspended solids≤400mg/L; ammonia nitrogen≤45mg/L | Subject to simplified management, with no total emission indicator available | None | None |
Treatment of pollutantsThe Company strictly follows the requirements of environmental impact assessment (EIA) in construction ofpollution prevention and control facilities, and has obtained complete related environmental protection approvals.In 2023, the Company and its subsidiaries actively carried out third-party environmental testing, showing theemissions of various pollutants such as wastewater, waste gas, solid waste, and noise, were in strict line with thestandards, with no excessive emissions.
Yunnan Baiyao Group Wenshan Qihua Co., Ltd:
I. This Company adopts a physical-biological contact oxidation process for sewage treatment (3,000m?/day),a closed treatment process, which can efficiently treat organic compounds in high-concentration wastewater fromTCM pharmaceuticals and mainly has the following characteristics:
1. The acid-base regulation tank, pre-acidification tank, anoxic tank, aerobic tank, and sludgeconcentration tank, etc, all have a closed design. Volatile gases (odor, hydrogen sulfide, ammonia, etc) arecollected through pipelines and then transported to photocatalytic oxidation deodorization equipment, fordecomposing and purifying harmful gases to reduce air pollution.
2. The methane gas produced during the anaerobic reaction stage is transported, through the biogasrecovery system, to the boiler for combustion, which not only protects the environment, but also provides energyfor the Company and saves costs.
II. The 40t/h boiler burns clean energy natural gas, and the data of the produced flue gas emission are connectedto an environmental protection platform through online monitoring devices, achieving real-time online monitoringof main indicators to meet emission standards.
III. For the auxiliary material crushing and other work sections in the production OU, bags for dust removal are used.The collected drugs, environmentally friendly and cost-effective, can be reused for production and extraction.
The wastewater and exhaust gas facilities are operating normally, and the discharges of various pollutantfactors (wastewater, exhaust gas, noise) meet the standards.
Environmental self-monitoring plan
Yunnan Baiyao itself prepared an environmental self-monitoring plan in 2023 and filed it with theenvironmental protection department. In 2023, it carried out self-monitoring work in strict accordance with this plan,with all indicators of pollutants meeting the required emission standards.
In August 2017, Yunnan Baiyao Group Wenshan Qihua Co., Ltd completed the preparation of the EIA reportfor the Relocation and Expansion Project Phase I. On August 27, 2017, it received the Approval WHSH [2017] No.53 from the Wenshan Branch of the Wenshan Prefecture Ecological Environment Bureau. In January 2021, itcompleted the environmental protection acceptance report for the construction project and obtained the pollutantdischarge permit No. 91532600709893942X002R on August 3, 2021.
Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd strictly followed the requirements of the permit anddischarged nitrogen oxides were monitored once a month and 12 times a year; particulate matter, sulfur dioxide,and smoke density monitored once a year; particulate matter, non-methane total hydrocarbons, odor concentration,ammonia, H2S, etc. monitored every six months and twice a year; pH, SS, BOD, COD, T-N, T-P, NH3-N, etc,monitored once a quarter and four times a year; and LAeq monitored once a quarter and four times a year.
Emergency plans for sudden environmental eventsThe Company has prepared relevant plans and submitted them to competent department of the ChenggongBranch of Kunming Ecological Environment Bureau for record keeping. In 2023, we conducted practical drills incollaboration with the Chenggong Branch of Kunming Ecological Environment Bureau.
As required by the approval of the EIA report for the Relocation and Expansion Project Phase I of YunnanBaiyao Group Wenshan Qihua Co., Ltd, the emergency plan for sudden environmental events was prepared onDecember 25, 2020, and filed with the Wenshan Branch of the Wenshan Prefecture Ecological Environment Bureauon January 5, 2021, No. 532601-2021-002-L. Emergency drills were conducted annually according to the relevantcontent.Investment in environmental governance and protection and payment of environmental protection taxesThe Company pays environmental protection taxes on a quarterly basis in a timely manner based on its ownemissions.
Measures taken to reduce carbon emissions and their effects during the reporting period
?Applicable Not applicable
In 2023, under China’s “carbon peak and carbon neutrality” strategy, as a key unit under close regulationin terms of energy consumption, the Company further optimized its online energy monitoring system platform,completed the annual energy-saving goals and the action implementation plan for energy efficiencyimprovement, and ensured the achievement of energy-saving goals through the implementation of the energy-saving target responsibility system, the sound energy management system, the energy-saving technologytransformation and application, energy-saving publicity and training, and other means.
Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd was gradually phasing out outdated and high energyconsuming equipment, striving to achieve energy conservation and emission reduction.
Administrative punishments for environmental issues during the reporting period
None.
Other environmental information that should be disclosed
In accordance to the requirements as set out in the pollutant discharge permits, the Company has completedthe preparation of its environmental self-monitoring plan and filed it with competent ecological environmentbureau. The Company tests the pollutant discharge factors monthly/quarterly/annually.
Other environmental protection related information
None
II. Social Responsibility
Please refer to the 2023 Annual Corporate Social Responsibility and ESG (Environmental, Social, andGovernance) Report disclosed by the Company on the same day at www.cninfo.com.cn.
III. Consolidated and Expanded Achievements in Poverty Alleviation and Rural Revitalization
Yunnan Baiyao Group has always conscientiously implemented the relevant requirements from the PartyCentral Committee and The State Council. By leveraging its inherent strengths, the Company has dedicated itself
to a targeted approach towards multiple objectives and tasks. With well-defined work concepts, the Company hasdeveloped precise plans and fine-tuned work strategies, and consistently extended support to Weixi County.Eventually, the Company successfully accomplished its phase-specific tasks. In 2023, the Company’s solidachievements in rural revitalization were recognized by various sectors of society. It received the “Best PracticeCase among Listed Companies in Rural Revitalization” award and was also acknowledged for its efforts in povertyalleviation and rural revitalization in Weixi County, earning the title of “China’s National Excellent Case in RuralRevitalization.”Yunnan Baiyao has always been committed to leveraging its corporate advantages. Relying on Yunnan’sdistinctive geographical advantages, the Company has been unwavering in its support for poverty alleviation andrural revitalization in areas like Weixi County and Fugong County in Yunnan. Through initiatives such as industrycultivation, physician training, medical donations, and educational assistance, the Company has achieved significantoutcomes. Its continuous 8-year efforts in linked poverty alleviation in Weixi County and 16-year training ofgrassroots rural doctors in Fugong County have garnered increasing attention and recognition from all sectors ofsociety.In 2023, Yunnan Baiyao kept placing orders for medicinal materials from poverty-stricken counties andestablishing a long-term benefit linkage mechanism for the development of the TCM industry. The Companyentered into a strategic partnership with Weixi Weihong Agricultural Resources Development Co., Ltd, designatingthe enterprise for the acquisition and initial processing of TCM through a unified order-based procurement approach.During this period, the Company also provided technical support in various aspects, including conducting technicalguidance on TCM cultivation and training on drug traceability. The village task force regularly carried out dynamicearly warning monitoring and assistance work at the assistance sites to prevent them from falling back into povertyagain, with “a monthly calculation, analysis and assessment” of the income of farmers there and a thoroughinvestigation of farmers facing poverty-returning risks before including them in early warning monitoring accordingto the process. Also, targeted investigations and verifications were carried out for households with substandardincome, and assistance plans were formulated on a per-household and per-person basis. Support policies were re-fined, and income-increasing measures were precisely implemented for each household.
Yunnan Baiyao remains committed to its mission of “To Guard Life and Health.” It consistently and effectivelycontributes to the course of rural revitalization, bringing health and well-being to people of all ethnic groups in borderareas.
Section VI Significant Events
I. Performance of Commitments
1. Commitments of the Company’s De Facto Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and Other Related EntitiesFulfilled during the Reporting Period or Ongoing at the Period-End?Applicable □Not applicable
| Commitments | Commitment Party | Commitment Type | Contents | Commitment Time | Commitment Period | Performance Status |
| Commitments made in the acquisition report or equity change report | Yunnan Provincial Investment Holdings Group Co., Ltd (“Yunnan Investment Group”) | Commitments regarding horizontal competition | 1. Our company is not engaged in any business or activity that is the same as, similar to, or resembling, and constitutes or may constitute directly or indirectly a competition in any aspect with, the listed company’s any existing business, nor will we actively provide, in any way, any assistance in finance, business, management, etc or any trade secrets such as technical information, business operations, sales channels, to any enterprises, agencies or other economic organizations that compete with the listed company in any of its existing business. 2. As of the date of issuance of this commitment letter, our company will legally take necessary and possible measures to avoid, and urge any other enterprises under our actual control to avoid, any businesses or activities that may in any way substantially or potentially constitute a horizontal competition or a conflict of interest, with the principal businesses of the listed company. If, in the future, a material conflict of interest arising from substantial or potential horizontal competition between our company and any enterprises under our control and the listed company, our company and such enterprises under our actual control will give up that business opportunity that may result in a material horizontal competition and thus lead to a substantial conflict of interest or take appropriate measures permitted by other laws and regulations to eliminate the potential impact of material horizontal competition. 3. Our company will not, by virtue of any information learned or known from the listed company, assist our company itself or any third party in engaging in any business activities that may in any way substantially or potentially constitute a horizontal competition with the principal businesses of the listed company. | December 10, 2021 | Remain effective during the period of holding indirect stake in Yunnan Baiyao | In progress |
| Commitments made in the acquisition report or equity change report | Yunnan Investment Group | Commitments to maintain the independence of the listed company | To protect the legitimate rights and interest of any and all of the shareholders of the listed company, our company undertakes to warrant: 1. The personnel independence of the listed company, that is: (1) The general manager, deputy general manager, chief financial officer, secretary of the Board of Directors, and other senior management personnel of the listed company will work full-time and receive compensation in the listed company, with holding no positions other than directors or supervisors or receiving no compensation in any other enterprises under the control of our company, for continuously maintaining the independence of personnel of the listed company; (2) The listed company has a complete and independent labor, personnel, and salary management system, which is fully independent from our company and any other enterprises under our control; (3) The directors, supervisors, and senior management personnel of the listed company are elected or appointed in accordance with legal procedures, and our company will not interfere with the personnel appointment and removal decisions already made by the Board of Directors and the general meeting of the listed company. 2. The asset independence of the listed company, that is: (1) The listed company has independent and complete assets, all of which are under the control of the listed company and are independently owned and operated by the listed company; (2) Our company and any other enterprises under our control do not and will not in any way occupy the funds, assets, and other resources of the listed company in violation of laws and regulations; (3) Our company and any other enterprises under our control will not use the assets of the listed company as guarantee for our and their debts in violation of regulations. 3. The financial independence of the listed company, that is: (1) The listed company continues to maintain its independent financial department and independent financial accounting system; (2) The listed company opens an independent bank account and does not share a bank account with our company or any other enterprises under our control; (3) The listed company is able to make independent financial decisions, without our company’s illegal interference with its asset utilization scheduling; (4) The independence of the listed company’s financial personnel who will not work part-time or receive remuneration in any other enterprises under our control; (5) The listed company legally pays taxes independently. 4. The institutional independence of the listed company, that is: (1) The listed company continues to maintain a sound corporate governance structure and has an independent and complete organizational structure; (2) The general meeting, Board of Directors, independent directors, Supervisory Committee, general manager, etc of the listed company independently exercise their powers in accordance with laws, regulations, and the listed company’s articles of association; (3) The listed company has an independent and complete organizational structure, without institutional confusion with any other enterprises under our control. 5. The business independence of the listed company, that is: (1) The listed company has the assets, personnel, qualifications, and capabilities to independently carry out business activities, and also has the capabilities to independently and continuously operate in the market; (2) The listed company has minimized related party transactions between our company and any other enterprises under our control and the listed company as much as possible, and fairly carry out necessary and inevitable related party transactions at fair prices in accordance with market-oriented principles, with transaction procedures and information disclosure obligations fulfilled in accordance with relevant laws, regulations, and normative documents. 6. The listed company maintains independence from our company and any other enterprises under our control in any other aspects. | December 10, 2021 | Remain effective during the period of holding indirect stake in Yunnan Baiyao | In progress |
| Commitments made in the acquisition report or equity change report | Yunnan Investment Group | Commitments regarding related party transactions | 1. After the completion of this equity transfer, our company will consciously safeguard the interest of the listed company and any and all of its shareholders, and minimize and avoid related party transactions with the listed company. We will not, by virtue of our indirect stake in the listed company, seek for improper benefits or harm any interest of the listed company and any and all of its shareholders in related party transactions. 2. Our company does not and will not, by virtue of our indirect stake in the listed company and its own controlling influence, seek from the listed company for better commercial terms for business cooperation than that given to the third parties in the market for itself or for any other enterprises under our control. 3. Our company does not and will not, by virtue of our indirect stake in the listed company and its own controlling influence, seek for privileges for itself or any other enterprises under our control to enter into transactions with the listed company. 4. After completing this equity transfer, our company will strictly adhere to the provisions of the Company Law of the People’s Republic of China, the Articles of Association of Yunnan Baiyao Group, the Rules of Procedure for the General Meetings, and the Decision System for Related Party Transactions of the Listed Company when engaging in inevitable related party transactions with the listed company. We are committed to conducting these transactions in a transparent, fair, and equitable manner. This involves adhering to commercial principles such as “fairness, impartiality, and voluntariness.” We will enter into fair and reasonable transaction contracts with the listed company, ensuring that pricing policies are developed based on market fairness, impartiality, and openness. This approach guarantees the fairness of transaction prices. 5. After the completion of this equity transfer, our company and any other enterprises under our control will not illegally occupy the funds and assets of the listed company, and under no circumstances will the listed company be required to provide any form of guarantees to our company or any other enterprises under our control. | December 10, 2021 | Remain effective during the period of holding indirect stake in Yunnan Baiyao | In progress |
| Commitments made in the acquisition report or equity change report | State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government (“SASAC of Yunnan Province”), New Huadu | Commitments regarding horizontal competition | In the future, when the time is ripe, SASAC of Yunnan Province and New Huadu shall urge Baiyao Holdings to gradually inject the high-quality assets related to Yunnan Baiyao’s existing business and future development areas into Yunnan Baiyao Group. Both SASAC of Yunnan Province and New Huadu will also strictly comply with the regulations to avoid horizontal competition. | March 23, 2017 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| Commitments made in the acquisition report or equity change report | New Huadu | Commitments regarding related party transactions | 1. New Huadu and any other enterprises under our control will try the best to avoid related party transactions with Yunnan Baiyao. For inevitable related party transactions or those occurring for reasonable reasons, New Huadu will undertake to conduct such transactions on an equal and voluntary basis in the principles of fairness, impartiality, and compensation for equal value, with the transaction prices to be determined based on the reasonable prices recognized in the market. 2. New Huadu and any other enterprises under our control will strictly comply with the avoidance provisions on related party transactions set out in Yunnan Baiyao’s articles of association and in other relevant regulations. All related party transactions involved will be carried out in accordance with the decision-making procedures for related party transactions for Yunnan Baiyao, and legal procedures will be followed to ensure not to harm any legitimate rights and interest of Yunnan Baiyao and any other shareholders through related party transactions. 3. If New Huadu and any other enterprises under our control violate any of the above statements and commitments, leading to any damages to any rights and interest of Yunnan Baiyao, New Huadu agrees to bear any and all of the corresponding compensation liabilities for such damages so caused to Yunnan Baiyao. | March 23, 2017 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| Commitments made during asset restructuring | Yunnan State-owned Equity Operation Management Company, New Huadu and its acting-in-concert parties, Jiangsu Yuyue Science & Technology Development Co., Ltd (“Jiangsu Yuyue”) | Commitments regarding related party transactions | 1. Yunnan State-owned Equity Operation Management Company has undertaken the previous commitments of SASAC of Yunnan Province: After the completion of this significant asset restructuring, SASAC of Yunnan Province will try its best to avoid related party transactions with the listed company. For inevitable related party transactions or those occurring for reasonable reasons, SASAC of Yunnan Province will undertake to conduct such transactions on an equal and voluntary basis in the principles of fairness, impartiality, and compensation for equal value, with the transaction prices to be determined based on the reasonable prices recognized in the market. SASAC of Yunnan Province will strictly comply with the provisions of relevant laws, regulations, normative documents, and the articles of association of the listed company, perform the decision-making procedures and information disclosure obligations for related party transactions, and warrant not to harm any legitimate rights and interest of the listed company and any other shareholders through related party transactions. This commitment letter shall come into effect and be irrevocable as of the date of official signature by SASAC of Yunnan Province. SASAC of Yunnan Province warrants the effective fulfillment of these commitments, and the listed company has the right to supervise its fulfillment of this commitment letter. If SASAC of Yunnan Province fails to effectively fulfill this commitment letter, leading to any actual losses to the listed company, SASAC of Yunnan Province will compensate for any and all of such direct or indirect losses so caused to the listed company. 2. New Huadu and its acting-in-concert parties undertake that: after the completion of this merger and overall listing, our company/I and any enterprises under our/my control will try the best to avoid related party transactions with the listed company. For inevitable related party transactions or those occurring for reasonable reasons, our company/I undertake (s) to conduct such transactions on an equal and voluntary basis in the principles of fairness, impartiality, and compensation for equal value, with the transaction prices to be determined based on the reasonable prices recognized in the market. Our company/I and any other enterprises under our/my control will strictly comply with the provisions of relevant laws, regulations, normative documents, and the articles of association of the listed company, perform the decision-making procedures and information disclosure obligations for related party transactions, and warrant not to harm any legitimate rights and interest of the listed company and any other shareholders through related party transactions. This commitment letter shall come into effect and be irrevocable as of the date of official signature by our company/me. Our company/I warrant(s) the effective fulfillment of these commitments, and the listed company has the right to supervise the fulfillment of this commitment letter. If our company/I fail(s) to effectively fulfill this commitment letter, leading to any actual losses to the listed company, our | October 31, 2018 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| company/I will compensate for any and all of such direct or indirect losses so caused to the listed company. 3. Jiangsu Yuyue undertakes that: after the completion of this merger and overall listing, our company and any enterprises under our control will try the best to avoid related party transactions with the listed company. For inevitable related party transactions or those occurring for reasonable reasons, our company undertakes to conduct such transactions on an equal and voluntary basis in the principles of fairness, impartiality, and compensation for equal value, with the transaction prices to be determined based on the reasonable prices recognized in the market. Our company and any enterprises under our control will strictly comply with the provisions of relevant laws, regulations, normative documents, and the articles of association of the listed company, perform the decision-making procedures and information disclosure obligations for related party transactions, and warrant not to harm any legitimate rights and interest of the listed company and any other shareholders through related party transactions. This commitment letter shall come into effect and be irrevocable as of the date of official signature by our company. Our company warrants the effective fulfillment of these commitments, and the listed company has the right to supervise the fulfillment of this commitment letter. If our company fails to effectively fulfill this commitment letter, leading to any actual losses to the listed company, our company will compensate for any and all of such direct or indirect losses so caused to the listed company. | ||||||
| Commitments made during asset restructuring | Yunnan State-owned Equity Operation Management Company, New Huadu, Jiangsu Yuyue | Commitments to maintain the independence of the listed company | After the completion of this merger and overall listing, our company/institution will maintain independence from the listed company in terms of personnel, assets, business, institutions, and finance in accordance with relevant laws, regulations, and normative documents. We will not, by virtue of the identity as a related party of the listed company, engage in the acts that affect the independence of the listed company’s personnel, assets, business, institutions, and finances, or harm any rights and interest of the listed company and any other shareholders. Instead, we will effectively ensure the independence of the listed company in terms of personnel, assets, business, institutions, finance, etc. This commitment letter shall come into effect and be irrevocable as of the date of official signature by our company/institution. Our company/institution warrants the effective fulfillment of these commitments, and the listed company has the right to supervise the fulfillment of this commitment letter. If our company/institution fails to effectively fulfill this commitment letter, leading to any actual losses to the listed company, our company/institution will compensate for any and all of such direct or indirect losses so caused to the listed company. | October 31, 2018 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| Commitments made during asset restructuring | Jiangsu Yuyue | Commitments regarding lock-up shares | The shares of the listed company subscribed by our company through this transaction shall not be transferred during the period from the end of the issuance of these shares to June 26, 2023 (inclusive). After the expiration of the aforementioned lockup period, the transfer and trading of such shares shall be handled in accordance with the then effective laws and regulations, as well as the regulations and rules of the CSRC and Shenzhen Stock Exchange (“SZSE”). After the completion of this transaction, our company will also arrange a lockup period as described above for our any increased stake in the listed company after it issues bonus shares or convert public reserve funds into share capital. | October 31, 2018 | June 26, 2023 | Completed |
| Commitments made during asset restructuring | Baiyao Holdings, Yunnan State-owned Equity Operation Management Company, New Huadu, Jiangsu Yuyue | Commitments regarding real estate business | If Yunnan Baiyao and its subsidiaries within the scope of its consolidated financial statements, and, Baiyao Holdings and its subsidiaries within the scope of its consolidated financial statements engaged in any illegal activities in the domestic real estate development business during the reporting period, such as undisclosed land vacancy, speculation of land, property hoarding, and price gouging, which have caused any losses to Yunnan Baiyao and investors, our company/institution will bear any and all of corresponding compensation liabilities for such losses as required by relevant laws, regulations and securities regulatory authorities. | December 11, 2018 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| Commitments made during asset restructuring | Directors and senior management of the listed company | Commitments regarding real estate business | If Yunnan Baiyao and its subsidiaries within the scope of its consolidated financial statements, and, Baiyao Holdings and its subsidiaries within the scope of its consolidated financial statements engaged in any illegal activities in the domestic real estate development business during the reporting period, such as undisclosed land vacancy, speculation of land, property hoarding, and price gouging, which have caused any losses to Yunnan Baiyao and investors, I will bear any and all of the corresponding compensation liabilities for such losses as required by relevant laws, regulations and securities regulatory authorities. | December 11, 2018 | Remain effective | In progress |
| Commitments made during asset restructuring | Baiyao Holdings, Yunnan State-owned Equity Operation Management Company, New Huadu, Jiangsu Yuyue | Commitments regarding compensatory measures after dilution of immediate returns | 1. Our company/institution will not interfere with any operation and management activities of the listed company beyond authority, nor will it encroach on any interest of the listed company. 2. After the date of issuance of this commitment letter, if the securities regulatory authorities make other regulatory requirements regarding compensatory measures and related commitments, and the above commitments fail to meet such new regulatory regulations of the securities regulatory authorities, our company/institution will undertake to issue supplementary commitments in accordance with their then latest relevant regulations. 3. Our company/institution undertakes to effectively fulfill the relevant compensatory measures formulated by the listed company and the relevant commitments made by our company/institution. If our company/institution violates these commitments and causes any losses to the listed company or investors, our company/institution is willing to legally bear any and all of the corresponding compensation liabilities for such losses. | December 11, 2018 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| Commitments made during asset restructuring | Directors, supervisors, and senior management of the listed company | Commitments regarding compensatory measures after dilution of immediate returns | 1. I undertake not to transfer benefits to any other units or individuals without compensations or under unfair conditions, nor to harm any interest of the listed company in any other way. 2. I undertake to restrain my official consumption. 3. I undertake not to use the assets of the listed company to engage in investment or consumption activities unrelated to my duties. 4. I undertake that the compensation system to be formulated by the Board of Directors or Remuneration Committee in the future will be linked to the implementation of compensatory measures taken by the listed company. 5. I undertake that the exercise conditions of the listed company’s equity incentives to be announced in the future will be linked to the implementation of the compensatory measures taken by the listed company. 6. I undertake to effectively fulfill the relevant compensatory measures formulated by the listed company and any commitments made by myself regarding compensatory measures. If I violate or refuse to fulfill any of the above commitments, leading to any losses to the listed company or any and all of its shareholders, I’m willing to legally bear any and all of the corresponding compensation liabilities. This commitment letter shall come into effect as of the date of my signature and shall constitute a binding legal document on me upon its effectiveness. If I violate this commitment letter, I’m willing | December 11, 2018 | Remain effective | In progress |
| to bear any and all of the corresponding legal liabilities. | ||||||
| Commitments made during asset restructuring | Yunnan State-owned Equity Operation Management Company, New Huadu | Commitments regarding horizontal competition | 1. Yunnan State-owned Equity Operation Management Company has undertaken the previous commitments of SASAC of Yunnan Province: In order to avoid horizontal competition with the listed company and safeguard the legitimate rights and interest of the listed company and other shareholders, Yunnan State-owned Equity Operation Management Company solemnly makes the following statements and commitments: After the completion of this transaction, Yunnan State-owned Equity Operation Management Company will not directly engage in any businesses that are the same as or similar to, and constitute a competition with, the principal businesses of the listed company. 2. New Huadu undertakes that: As of the issuance date of this commitment letter, our company and any enterprises under our control have not invested in any company, enterprise or other operating entity engaged in any business the same as, or similar to, the principal businesses of the listed company or co-operating or co-engaged, with others, in business the same as, or similar to, the principal businesses of the listed company. After the completion of this transaction, our company and any enterprises under our control will not directly or indirectly engage in any form (including but not limited to investment, M&A, affiliation, joint ventures, cooperation, partnership, contracting or leasing operations, and equity participation) in businesses that are the same as or similar to, and constitute a competition with, the principal businesses of the listed company, nor will we directly or indirectly own any absolute or relative control over any other companies, enterprises or operating entities that engage in businesses that are the same as or similar to, and constitute a competition with the principal businesses of the listed company. During the commitment period mentioned above, if the listed company actually further expands its existing principal businesses, and our company and any enterprises under our control have not yet engaged in production or operation of such new businesses, our company and any enterprises under our control will not engage in such new businesses that compete with the principal businesses of the listed company unless the listed company notifies us in writing that it would no longer engage in such new businesses. During the aforementioned commitment period, if our company and any enterprises under our control obtain from any third party any business opportunity that competes or may compete with the principal businesses of the listed company, we shall immediately notify the listed company. If the listed company provides a positive response that it is willing to take advantage of that business opportunity within the reasonable period specified in the notice, our company and any enterprises under our control will abandon that business opportunity. If our company and any enterprises under our control violate any of the above statements and commitments, leading to any damages to any rights and interest of the listed company, our company agrees to bear any and all of the corresponding compensation liabilities for such damages so caused to the listed company. | October 31, 2018 | Remain effective during the period of holding the shares of Yunnan Baiyao (directly and indirectly) | In progress |
| Commitments made during asset restructuring | Directors, supervisors, and senior management of the listed company | Commitments regarding the authenticity, accuracy, and completeness of the information provided | Our company/I has/have provided necessary, authentic, accurate, complete, and effective documents, materials, or oral statements and explanations for this transaction at this stage, without any concealments, false records, or significant omissions. The provided copy materials or photocopies are consistent and aligned with the original materials or originals. The signatures and seals on the provided documents and materials are authentic, with necessary legal procedures for such signatures and seals having been fulfilled, and legal authorizations having been obtained. All statements and explanations of facts are consistent with the facts that occurred. According to the progress of this transaction, our company/I will provide relevant information and documents in a timely manner in accordance with relevant laws, regulations, rules, and relevant provisions of the CSRC and the stock exchange, and ensure that the information and documents to be constantly provided still meet the requirements of authenticity, accuracy, completeness, and effectiveness. Our company/I undertake (s) and warrant (s) the information provided or disclosed in this transaction is authentic, accurate, complete, and effective, without false records, misleading statements, or material omissions, and is/am willing to bear any and all of the corresponding individual and joint legal liabilities for that. | June 10, 2021 | Remain effective | In progress |
| Commitments made during asset restructuring | Yunnan State-owned Equity Operation Management Company | Commitments regarding the authenticity, accuracy, and completeness of the information provided | As of the date of the issuance of this commitment, our company has provided necessary, authentic, accurate, complete, and effective documents, materials, or oral statements and explanations for this transaction at this stage, without any concealments, false records, or significant omissions. The provided copy materials or photocopies are consistent and aligned with the original materials or originals. The signatures and seals on the provided documents and materials are authentic, with necessary legal procedures for such signatures and seals having been fulfilled, and legal authorizations having been obtained. All statements and explanations of facts are consistent with the facts that occurred. According to the progress of this transaction, our company will provide relevant information and documents in a timely manner in accordance with relevant laws, regulations, rules, and relevant provisions of the CSRC and the stock exchange, and ensure that the information and documents to be constantly provided still meet the requirements of authenticity, accuracy, completeness, and effectiveness. Our company undertakes and warrants the information provided or disclosed in this transaction is authentic, accurate, complete, and effective, without false records, misleading statements, or material omissions, and is willing to bear any and all of the corresponding individual and joint legal liabilities for that. | June 10, 2021 | Remain effective | In progress |
| Commitments made during asset restructuring | New Huadu and its acting-in-concert parties | Commitments regarding the authenticity, accuracy, and completeness of the information provided | Our company and our acting-in-concert parties have provided necessary, authentic, accurate, complete, and effective documents, materials, or oral statements and explanations for this transaction at this stage, without any concealments, false records, or significant omissions. The provided copy materials or photocopies are consistent and aligned with the original materials or originals. The signatures and seals on the provided documents and materials are authentic, with necessary legal procedures for such signatures and seals having been fulfilled, and legal authorizations having been obtained. All statements and explanations of facts are consistent with the facts that occurred. According to the progress of this transaction, our company and our acting-in-concert parties will provide relevant information and documents in a timely manner in accordance with relevant laws, regulations, rules, and relevant provisions of the CSRC and the stock exchange, and ensure that the information and documents to be constantly provided still meet the requirements of authenticity, accuracy, completeness, and effectiveness. Our company and our acting-in-concert parties undertake and warrant the information provided or disclosed in this significant asset restructuring is authentic, accurate, complete, and effective, without false records, misleading statements, or material omissions, and are willing to bear any and all of the corresponding individual and joint legal liabilities for that. | June 10, 2021 | Remain effective | In progress |
| Commitments made during asset restructuring | Directors, supervisors, and senior management of the listed company | Commitments regarding compensatory measures after diluting immediate returns by this restructuring | 1. I undertake not to transfer benefits to any other units or individuals without compensations or under unfair conditions, nor to harm any interest of the listed company in any other way. 2. I undertake to restrain my official consumption behavior. 3. I undertake not to use the assets of the listed company to engage in investment or consumption activities unrelated to my duties. 4. I undertake that the compensation system to be formulated by the Board of Directors or Remuneration Committee in the future will be linked to the implementation of compensatory measures taken by the listed company. 5. If the listed company subsequently introduces equity incentive policies, I undertake that the exercise conditions of the listed company’s equity incentives to be announced in the future will be linked to the implementation of the compensatory measures taken by the listed company. 6. If, during the period after the date of issuance of this commitment letter and before the completion of this transaction by the listed company, the CSRC makes other regulatory requirements regarding compensatory measures and related commitments, and the above commitments fail to meet such new regulatory regulations of the CSRC, I undertake to issue supplementary commitments in accordance with the then latest CSRC regulations. 7. If I violate any of the above commitments, leading to any losses to the listed company or investors, I’m willing to legally bear any and all of the corresponding compensation liabilities for such losses so caused to the listed company or investors. | June 10, 2021 | Remain effective | In progress |
| Commitments made during asset restructuring | Yunnan State-owned Equity Operation Management Company | Commitments regarding compensatory measures after diluting immediate returns by this restructuring | 1. Our company will not interfere with any operation and management activities of the listed company beyond authority, nor will it encroach on any interest of the listed company. 2. If, during the period after the date of issuance of this commitment letter and before the completion of this transaction by the listed company, the CSRC makes other regulatory requirements regarding compensatory measures and related commitments, and the above commitments fail to meet such new regulatory regulations of the CSRC, our company undertakes to issue supplementary commitments in accordance with the then latest CSRC regulations. 3. Our company will effectively fulfill this commitment letter. If our company violates any of these commitments and causes any losses to the listed company or investors, our company is willing to legally bear any and all of the corresponding compensation liabilities for such losses so caused to the listed company or investors. | June 10, 2021 | Before the major assets purchases and related-party transactions are completed | In progress |
| Commitments made during asset restructuring | New Huadu and its acting-in-concert parties | Commitments regarding compensatory measures after diluting immediate returns by this restructuring | 1. Our company and our acting-in-concert parties will not interfere with any operation and management activities of the listed company beyond authority, nor will they encroach on any interest of the listed company. 2. If, during the period after the date of issuance of this commitment letter and before the completion of this transaction by the listed company, the CSRC makes other regulatory requirements regarding compensatory measures and related commitments, and the above commitments fail to meet such new regulatory regulations of the CSRC, our company and our acting-in-concert parties undertake to issue supplementary commitments in accordance with the then latest CSRC regulations. 3. Our company and our acting-in-concert parties will effectively fulfill this commitment letter. If our company violates any of these commitments and causes any losses to the listed company or investors, our company and our acting-in-concert parties are willing to legally bear any and all of the corresponding compensation liabilities for such losses so caused to the listed company or investors. | June 10, 2021 | Before the major assets purchases and related-party transactions are completed | In progress |
| Commitments made during asset restructuring | Yunnan State-owned Equity Operation Management Company | Commitments to maintain the independence of the listed company, reduce and regulate related party transactions, and avoid horizontal competition | 1.On October 31, 2018, SASAC of Yunnan Province, as a shareholder of the listed company, issued the Commitment Letter of SASAC of Yunnan Province on Maintaining the Independence of the Listed Company, Commitment Letter of SASAC of Yunnan Province on Reducing and Regulating Related Party Transactions, and Commitment Letter of SASAC of Yunnan Province on Avoiding Horizontal Competition. On April 7, 2020, our company issued the Commitment Letter of Yunnan State-owned Equity Operation Management Company on Its Undertaking of the Relevant Commitments Made in the Process of Yunnan Baiyao’s Merger Transaction by SASAC of Yunnan Province (hereinafter referred to as the “Commitment Letter on Undertaking”), committing to fully undertake, as of the date of completion of this equity transfer (calculated from the date of registration of the underlying equity in the name of our company), the responsibilities and obligations specified in the commitment documents previously made by SASAC of Yunnan Province and continuously effective at the time of this equity transfer as set out in the following list. The list includes the foregoing three commitment letters issued by SASAC of Yunnan Province. 2. As of the date of signing this commitment letter, our company has always strictly fulfilled the commitments to maintain the independence of the listed company, reduce and regulate related party transactions, and avoid horizontal competition in accordance with the requirements of the Commitment Letter on Undertaking, and has not violated any of the commitments made. After the completion of this transaction, our company will continue to strictly fulfill the Commitment Letter on Undertaking to safeguard the interest of the listed company and any and all of its shareholders. | June 10, 2021 | Remain effective | In progress |
| Commitments made during asset restructuring | New Huadu and its acting-in-concert parties | Commitments to maintain the independence of the listed company, reduce and regulate related party transactions, and avoid horizontal competition | 1. As of the date of signing this commitment letter, our company has always strictly fulfilled the Commitment Letter on Maintaining the Independence of the Listed Company, Commitment Letter on Reducing and Regulating Related Party Transactions, and Commitment Letter on Avoiding Horizontal Competition all issued on October 31, 2018. Our company’s acting-in-concert parties have always strictly fulfilled the Commitment Letter on Reducing and Regulating Related Party Transactions issued on October 31, 2018, and have not violated any of the commitments made. After the completion of this transaction, our company and our acting-in-concert parties will continue to strictly fulfill this commitment letter to safeguard the interest of the listed company and any and all of its shareholders. 2. After the completion of this transaction, our company’s acting-in-concert parties will maintain independence from the listed company in terms of personnel, assets, business, institutions, and finance in accordance with relevant laws, regulations, and normative documents, and will not, by virtue of the identity as a shareholder and a related party of the listed company, engage in the acts that affect the independence of the listed company’s personnel, assets, business, institutions, and finances, or harm any rights and interest of the listed company and other shareholders. Instead, they will effectively ensure the independence of the listed company in terms of personnel, assets, business, institutions, finance, etc. 3. As of the date of signing this commitment letter, our company’s acting-in-concert parties and any other companies or enterprises under their control have not engaged in any business that constitute a horizontal competition with the principal businesses of the listed company and any other companies or enterprises under its control. In order to avoid horizontal competition with the listed company and safeguard the legitimate rights and interest of the listed company and other shareholders, after the completion of this transaction, our company’s acting-in-concert parties and any other companies or enterprises under their control will not directly engage in businesses that are the same as, or similar to, | June 10, 2021 | Remain effective | In progress |
| and constitute a competition with, the principal businesses of the listed company. 4. This commitment letter shall come into effect and be irrevocable as of the date of official signature by our company and our acting-in-concert parties. Our company and our acting-in-concert parties warrant the effective fulfillment of these commitments, and the listed company has the right to supervise their fulfillment of this commitment letter. If our company and our acting-in-concert parties fail to effectively fulfill this commitment letter, leading to any actual losses to the listed company, our company and our acting-in-concert parties will compensate for any and all of such direct or indirect losses so caused to the listed company. | ||||||
| Commitments made during asset restructuring | Listed company | Commitments to reduce and regulate related party transactions | During the period when our company is a related party of Shanghai Pharma, our company and any other companies or enterprises under our control will try the best to avoid and reduce related party transactions with Shanghai Pharma and its subsidiaries. For inevitable related party transactions or those occurring for reasonable reasons, the company undertakes to conduct such transactions on an equal and voluntary basis in the principles of fairness, impartiality, and compensation for equal value, with the transaction prices to be determined based on the reasonable prices recognized in the market. Our company will strictly comply with the provisions of relevant laws, regulations, normative documents, and the Articles of Association of Shanghai Pharma, perform the decision-making procedures and information disclosure obligations for related party transactions, and warrant not to harm any legitimate rights and interest of Shanghai Pharma and any other shareholders through related party transactions. This commitment letter shall come into effect and be irrevocable as of the date of official signature by our company. Our company warrants the effective fulfillment of these commitments, and Shanghai Pharma has the right to supervise the fulfillment of this commitment letter. If our company fails to effectively fulfill this commitment letter, leading to any actual losses to Shanghai Pharma, our company will compensate for any and all of such direct or indirect losses so caused to Shanghai Pharma. | June 10, 2021 | Remain effective | In progress |
| Commitments made during asset restructuring | Listed company | Commitments regarding lock-up shares | Shanghai Pharma’s shares subscribed by our company through this transaction shall not be transferred within 36 months from the end of the issuance of these shares. After the expiration of the aforementioned lockup period, the transfer and trading of such shares shall be handled in accordance with the then effective laws and regulations, as well as the regulations and rules of the CSRC, SZSE, and SHSE. After the completion of this transaction, our company will also arrange a lockup period as described above for our any increased stake in Shanghai Pharma after it issues bonus shares or convert public reserve funds into share capital. | May 11, 2021 | Thirty-six months from the end of the issuance of new shares by Shanghai Pharma | In progress |
| Whether the commitments are fulfilled as scheduled | Yes | |||||
2. Explanation of the Company that the assets or projects have met the original profit forecast and the reasons for that if there is a profit forecast for theCompany’s assets or projects and the reporting period is still in the profit forecast period
□Applicable ?Not applicable
II. Occupation of the Company’s Capital by the Controlling Shareholder or any of ItsRelated Parties for Non-Operating Purposes
□Applicable ?Not applicable
During the reporting period, there was no occupation of the Company’s capital by the controlling shareholderor any of its related parties for non-operating purposes.III. Non-compliant Provision of External Guarantees
□Applicable ?Not applicable
There was no non-compliant provision of external guarantees during the reporting period.
IV. Explanation of the Board on the “Modified Audit Report” for the Latest Period
□Applicable ?Not applicable
V. Explanations Given by the Board of Directors, the Supervisory Committee andIndependent Director (if any) Regarding the Auditor’s “Modified Audit Report” on theFinancial Statements of the Reporting Period
□Applicable ?Not applicable
VI. Explanation on Changes in Accounting Policies and Accounting Estimates or Rectificationon Significant Accounting Errors as Compared with the Financial Report for the Previous Year
?Applicable □Not applicableThere was no change in the accounting policies and accounting estimates or rectification on significantaccounting errors during the reporting period.
VII. Explanation on the Change in Consolidation Scope as Compared with the Financial Reportfor the Previous Year
?Applicable □Not applicableFor details, please refer to Section 10 - IX. Changes in the Consolidation Scope.
VIII. Appointment and Removal of Accounting Firm
Currently engaged accounting firm
| Name of domestic accounting firm | Mazars Certified Public Accountants (SGP) |
Remuneration of the domestic accounting firm (Unit:
RMB’0,000)
| Remuneration of the domestic accounting firm (Unit: RMB’0,000) | 229.80 |
Number of consecutive years of audit services of thedomestic accounting firm
| Number of consecutive years of audit services of the domestic accounting firm | 8 |
Names of certified public accountants of the domesticaccounting firm
| Names of certified public accountants of the domestic accounting firm | Yang Manhui, Yang Fan |
Number of consecutive years of audit services ofcertified public accountants of the domesticaccounting firm
| Number of consecutive years of audit services of certified public accountants of the domestic accounting firm | 1 |
Whether to change the accounting firm in the current period?
□Yes ?No
Engagement of internal control audit accounting firms, financial advisors or sponsors
?Applicable □Not applicable
Thanks to its strong comprehensive strength, Mazars Certified Public Accountants (SGP) has ranked first in thecomprehensive industry ranking of Yunnan Institute of Certified Public Accountants and the bidding ranking of YunnanSASAC for many years, and fully possesses the experience and ability to provide audit services for listed companies. Inorder to ensure the smooth progress of the Company's auditing work, the Company engaged the services of Mazars CertifiedPublic Accountants (SGP) for the Company’s auditing for the year 2023 (including internal control audit).IX. Delisting after Disclosure of Annual Report
□Applicable ?Not applicable
X. Bankruptcy and Reorganization
□Applicable ?Not applicable
There was no bankruptcy or restructuring related events during the reporting period.
XI. Significant lawsuits and arbitration
?Applicable □Not applicable
| Basic Information of Litigation (Arbitration) | Amount Involved (RMB’0,000) | Any Estimated Liability Caused or Not | Litigation (Arbitration) Progress | Litigation (Arbitration) Trial Results and Impacts | Enforcement of Litigation (Arbitration) Judgments | Disclosure date | Disclosure Index |
| Chuxiong Linxin Mushroom Developing Co., Ltd. vs Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd, one of the Company’s subsidiaries, (Contract Dispute) | 4,236.57 | No | Yunnan Provincial Higher People’s Court has disallowed the request for a retrial by both Chuxiong Linxin Mushroom Developing Co., Ltd and Yunnan Baiyao Group Chinese Medicine Resources Co., Ltd. | If payments of both parties payable to each other can be offset against each other, in accordance with the content of the civil judgments, Chuxiong Linxin Mushroom Developing Co., Ltd shall also need to pay Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd an outstanding payment loss of RMB 2,876,484.81, together with an interest calculated from the offsetting date based on the above outstanding payment loss and Loan Prime Rate (LPR) published by the National Interbank Funding Center. Meanwhile, Chuxiong Linxin Mushroom Developing Co., Ltd shall also need to compensate Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd for the prepaid litigation fee of RMB 34,332.00. | The claims were transmitted by means of communication, written reports and other forms through the liaison channel of the Kunming Intermediate Court of the rule of law business environment. The enforcement for debt offsetting was completed on October 24, 2023. The enforcement is completed and the case is closed. | March 31, 2023 | Annual Report for 2022 and Interim Report for 2023 For details, please refer to http://www.cninfo.com.cn |
| Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd (one of the Company’s subsidiaries) vs Chuxiong Linxin Mushroom Developing Co., Ltd. (Contract Dispute) | 4,545.90 | No | The Supreme People’s Court’s Court has disallowed the request for a retrial by Chuxiong Linxin Mushroom Developing Co., Ltd | Same as above | The claims were transmitted by means of communication, written reports and other forms through the liaison channel of the Kunming Intermediate Court of the rule of law business environment. The enforcement for debt offsetting was completed on October 24, 2023, with RMB 34.8934 million offset, and RMB 3.686 million subject to further enforcement after discovery of property clues in the future. | March 31, 2023 | Annual Report for 2022 and Interim Report for 2023 For details, please refer to http://www.cninfo.com.cn |
| Summary of events not meeting the disclosure standards for being included in significant litigation (arbitration) | 90,527.11 | No | Some cases have been filed to be tried; some are being under trials to be adjudicated; some have been adjudicated; some have been closed. | Summary of litigation events has no significant impact on the Company | Some judgments have come into effect and have been enforced or are being enforced | / |
Note: The above contract disputes, such as Chuxiong Linxin Mushroom Developing Co., Ltd. vs Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd, one of the Company’ssubsidiaries, (Contract Dispute) and Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd (one of the Company’s subsidiaries) vs Chuxiong Linxin Mushroom Developing Co., Ltd.(Contract Dispute), did not reach the disclosure standards for significant litigation (arbitration). However, to maintain the continuity of information disclosure, they were disclosed separately in the tableabove.
XII. Punishments and Rectifications
□Applicable ?Not applicable
There was no punishment or rectification involving the Company during the reporting period.
XIII. Credit Quality of the Company as well as its Controlling Shareholder and De FactoController
□Applicable ?Not applicable
XIV. Significant Related Party Transactions
1. Related party transactions related to daily operations
□Applicable ?Not applicable
There were no related party transactions related to daily operations during the reporting period.
2. Related party transactions arising from acquisition or sale of assets or equity
□Applicable ?Not applicable
There were no related party transactions arising from acquisition or sale of assets or equity during thereporting period.
3. Related party transactions regarding joint investments in third parties
□Applicable ?Not applicable
There were no related party transactions regarding joint investments in third parties during the reportingperiod.
4. Amounts due to and from related parties
□Applicable ?Not applicable
There were no amounts due to and from related parties during the reporting period.
5. Transactions with related finance companies
□Applicable ?Not applicable
There were no deposit, loan, credit or other financial business occurring between the Company and itsrelated finance companies/related parties.
6. Transactions with related parties by finance company controlled by the Company
□Applicable ?Not applicable
There were no deposit, loan, credit or other financial business occurred between any finance companies
under the control of the Company and related parties.
7. Other significant related party transactions
?Applicable □Not applicableThe Company has made reasonable estimates on various other related party transactions, includingpurchases and sales of goods, related to its daily operations, based on the needs of its daily operations in2023. It is expected that the aggregate total amount of daily related party transactions between theCompany and Shanghai Pharma, Tibet Jiushi Zhihe Marketing Co., Ltd and Yuyue Medical in 2023 willbe RMB 1,911,000,000, accounting for 4.96% of the Company’s audited net assets of RMB38,508,245,600,000 as at the end of 2022, which do not need to be reported to the shareholders’ meetingfor consideration.The matter had been considered and approved at the second session of the Tenth Board of Directorsof the Company for 2023, details of which were set out in the Announcement on the Estimation of DailyRelated Party Transactions for 2023 (Announcement No. 2023-11) and the Announcement onResolutions of the Second Session of the Tenth Board of Directors of the Company for 2023(Announcement No. 2023-07).Enquiries on the online disclosure of interim announcement of significant related party transactions
| Name of interim announcement | Date of disclosure of interim announcement | Website on which interim announcement is disclosed |
Announcement on the Estimation of DailyRelated Party Transactions for 2023
| Announcement on the Estimation of Daily Related Party Transactions for 2023 | March 31, 2023 | http://www.cninfo.com.cn |
Announcement on Resolutions of the SecondSession of the Tenth Board of Directors
| Announcement on Resolutions of the Second Session of the Tenth Board of Directors | March 31, 2023 | http://www.cninfo.com.cn |
There were no other significant related party transactions during the reporting period.XV. Major Contracts and Their Performance
1. Entrustment, contracting and leases
(1) Entrustment
□Applicable ?Not applicable
There were no entrustment events of the Company during the reporting period.
(2) Contracting
□Applicable ?Not applicable
There were no contracting events of the Company during the reporting period.
(3) Leases
□Applicable ?Not applicable
There were no leases of the Company during the reporting period.
2. Major guarantees
?Applicable?Not applicable
Unit: RMB’0,000
Guarantees provided by the Company and its subsidiaries (excluding the guarantees to subsidiaries)Guaranteedparty
| Guaranteed party | Disclosure date of related announcement of guarantee quota | Guarantee quota | Actual occurrence date | Actual guarantee amount | Guarantee type | Collateral (if any) | Counter guarantee (if any) | Guarantee period | Fulfilled or not | Guarantee for a related party or not |
YunnanYunchengHospitalManagementCo., Ltd.
| Yunnan Yuncheng Hospital Management Co., Ltd. | November 24, 2017 | 150,000 | Joint and several liability guarantee | 12 years | No | No |
Total approved limit forguarantees for others duringthe reporting period (A1)
| Total approved limit for guarantees for others during the reporting period (A1) | Total amount of guarantees for others incurred during the reporting period (A2) |
Total approved limit forguarantees for others at theend of the reporting period(A3)
| Total approved limit for guarantees for others at the end of the reporting period (A3) | 150,000 | Total actual balance of guarantees for others at the end of the reporting period (A4) | 150,000 |
Total amount of guarantees by the Company (i.e., sum of the above 3 items)
Total amount of guarantees by the Company (i.e., sum of the above 3 items)Total approved limit forguarantees at the end of thereporting period (A3+B3+C3)
| Total approved limit for guarantees at the end of the reporting period (A3+B3+C3) | 150,000 | Total actual balance of guarantees at the end of the reporting period (A4+B4+C4) | 150,000 |
The proportion of actual total guarantee amount (i.e.A4+B4+C4) to the Company’s net assets
| The proportion of actual total guarantee amount (i.e. A4+B4+C4) to the Company’s net assets | 3.76% |
Including:
Including:
Balance of guarantees for shareholders, de factocontrollers and related parties (D)
| Balance of guarantees for shareholders, de facto controllers and related parties (D) | 0 |
Balance of debt guarantees directly or indirectly providedto the parties with the gearing ratio exceeding 70% (E)
| Balance of debt guarantees directly or indirectly provided to the parties with the gearing ratio exceeding 70% (E) | 0 |
Total amount of guarantees exceeding 50% of net assets(F)
| Total amount of guarantees exceeding 50% of net assets (F) | 0 |
Total amount of the above three types of guarantees (D+E+ F)
| Total amount of the above three types of guarantees (D+ E+ F) | 0 |
Description of the circumstances, if any, under which theguarantee liability arose during the reporting period orthere is evidence of a likelihood of joint and severalliquidation liability for the outstanding guaranteecontracts during the reporting period
| Description of the circumstances, if any, under which the guarantee liability arose during the reporting period or there is evidence of a likelihood of joint and several liquidation liability for the outstanding guarantee contracts during the reporting period | None |
Explanation on provision of guarantee to external partiesin violation of prescribed procedures, if any
| Explanation on provision of guarantee to external parties in violation of prescribed procedures, if any | None |
Explanations on the specific situation of guarantees provided by composite methods:
None.
3. Cash entrusted for wealth management
(1) Entrusted wealth management
?Applicable □Not applicableOverview of entrusted wealth management during the reporting period
Unit: RMB’0,000
| Type | Source of funding | Amount | Undue amount | Unrecovered overdue amount | Provision for impairment on unrecovered overdue amount |
Bank financialproducts
| Bank financial products | Self-owned capital | 13,194 | 10,624 | 0 | 0 |
Total
| Total | 13,194 | 10,624 | 0 | 0 |
Details of high-risk entrusted wealth management products with a significant amount per single item or of lowsafety and poor liquidity
□Applicable ?Not applicable
Cases under which it is expected that the principal of entrusted financing cannot be recovered, or there may beother circumstances that may result in impairment
□Applicable ?Not applicable
(2) Entrusted loan
□Applicable ?Not applicable
The Company did not have any entrusted loan during the reporting period.
4. Other Significant Contracts
□Applicable
?Not applicable
There were no other significant contracts of the Company during the reporting period.XVI. Explanations to Other Significant Events
?Applicable □ Not applicable(I) System update
1. On March 29, 2023, the Company held the second session of the Tenth Board of Director for 2023,considering and approving the Proposal on Formulating the Public Welfare Donation Management Measures ofYunnan Baiyao, the Proposal on Revising the Implementation Rules of the Nomination Committee of the Board ofDirectors of Yunnan Baiyao, the Proposal on Revising the Implementation Rules of the Remuneration andEvaluation Committee of the Board of Directors of Yunnan Baiyao, the Proposal on Revising the ImplementationRules of the Audit Committee of the Board of Directors of Yunnan Baiyao, the Proposal on Revising the Measuresfor Management of Securities Investment Risks of Yunnan Baiyao, and the Proposal on Formulating the ExternalInvestment Management System of Yunnan Baiyao. For details, please refer to the Announcement on Resolutions ofthe Second Session of the Tenth Board of Directors of the Company for 2023 (Announcement No. 2023-07)disclosed by the Company on March 31, 2023 at http://www.cninfo.com.cn, the Measures for Management ofSecurities Investment Risks of Yunnan Baiyao Group Co., Ltd, the Public Welfare Donation Management Measuresof Yunnan Baiyao Group Co., Ltd, the External Investment Management System of Yunnan Baiyao Group Co., Ltd,the Implementation Rules of the Remuneration and Evaluation Committee of the Board of Directors of Yunnan
Baiyao Group Co., Ltd, the Implementation Rules of the Audit Committee of the Board of Directors of YunnanBaiyao Group Co., Ltd, and the Implementation Rules of the Nomination Committee of the Board of Directors ofYunnan Baiyao Group Co., Ltd.
2. On August 28, 2023, the Company held the fifth session of the Tenth Board of Director for 2023, consideringand approving the Proposal on Revision of the Investor Relations Management System, the Proposal on Revision ofthe Measures for the Management of Changes in Shareholdings of Senior Management, the Proposal onFormulation of the Management System for Information Disclosure of Debt Financing Instruments in the Inter-bank Bond Market, the Proposal on Formulation of a Comprehensive Risk Management System, and the Proposalon Revision of the Management System for Investment and Wealth Management. For details, please refer to theAnnouncement on Resolutions of the Fifth Session of the Tenth Board of Directors of the Company for 2023(Announcement No. 2023-33) disclosed by the Company on August 30, 2023 at http://www.cninfo.com.cn, theInvestor Relations Management System of Yunnan Baiyao Group Co., Ltd, the Management System forShareholdings of Directors, Supervisors and Senior Management of Yunnan Baiyao Group Co., Ltd and ChangesTherein, the Management System for Information Disclosure of Debt Financing Instruments in the Inter-bank BondMarket of Yunnan Baiyao Group Co., Ltd, the Comprehensive Risk Management System of Yunnan Baiyao GroupCo., Ltd, and the Management System for Investment and Wealth Management of Yunnan Baiyao Group Co., Ltd.
3. On December 27, 2023, the Company held the seventh session of the Tenth Board of Director for 2023,considering and approving the Proposal on Revising the Working System of Independent Directors. For details,please refer to the Announcement on Resolutions of the Seventh Session of the Tenth Board of Directors of theCompany for 2023 (Announcement No. 2023-45) disclosed by the Company on December 29, 2023 athttp://www.cninfo.com.cn, and the Working System of Independent Directors.
(II) Employee Stock Ownership Plan and Equity Incentive
1. On May 30, 2023, the Company disclosed the Announcement on Completion of Shareholding Reductionunder the 2021 Annual Employee Stock Ownership Plan (Announcement No. 2023-22). On May 29, 2023, theCompany received a notice from the ESOP Management Committee, which stated the completion of a fullreduction in shareholding in the Company under the 2021 Annual ESOP. During December 13, 2022 to May 26,2023, upon the expiration of the lock-up period of this ESOP, a full reduction in shareholding in the Companyinvolving 23,379,996 shares of the Company under this ESOP was completed by means of centralized biddingand block trading in the secondary market. Such shares accounted for 1.30% of the Company’s current total sharecapital, among which, the transferees of block trading were not related or acting-in-concert parties of shareholdersholding more than 5% of the Company’s shares. As for this ESOP, its income distribution, liquidation, termination,and other related matters would be subsequently completed as per relevant regulations. More details can be foundat http://www.cninfo.com.cn.
2. On July 5, 2023, the Company held the fourth session of the Tenth Board of Directors for 2023, consideringand approving the Proposal on Early Termination of the 2021 Employee Stock Ownership Plan. The lock-up periodfor this ESOP implemented by the Company expired on June 30, 2022. As of May 26, 2023, all of the 23,379,996shares of the Company held under this ESOP were reduced, and the assets thereunder are now all cash and bankbalance. The Board of Directors has considered and agreed to terminate this ESOP in advance. Upon termination
thereof, the Employee Stock Ownership Plan Management Committee will conduct liquidation with regard to thisESOP and make related distribution in accordance with the shares held by the holders. For details, please refer tothe Announcement on Resolutions of the Fourth Session of the Tenth Board of Directors of the Company for 2023(Announcement No. 2023-26) and the Announcement on Early Termination of 2021 Employee Stock OwnershipPlan (Announcement No. 2023-27) disclosed by the Company on July 7, 2023 at http://www.cninfo.com.cn.
3. On August 28, 2023, the Proposal on Cancelling the Third Exercisable Period of the Initially Granted Partof the 2020 Stock Option Incentive Plan and the Second Exercisable Period of Its Reserved Granted Part had beenconsidered and approved at the fifth session of the Tenth Board of Directors for 2023 and the third session of theTenth Supervisory Committee for 2023. As the Company’s 2022 performance indicators failed to fully meet theperformance assessment requirements set forth in the 2020 Stock Option Incentive Plan of Yunnan Baiyao Group,4,837,200 stock options initially granted corresponding to the third exercisable period would not be exercised for itwas adjusted to 6,772,080 stock options and 840,000 stock options under reserved grant corresponding to the secondexercisable period after the equity distribution adjustment for 2021 (A total of 1,200,000 stock options underreserved grant, for it was adjusted to 1,680,000 stock options after the equity distribution adjustment for 2021. Outof these, 840,000 stock options corresponding to the first exercisable period have been cancelled, and the remaining840,000 stock options correspond to the second exercisable period). All of these stock options could not be exercisedand would thus be canceled by the Company (the actual cancellation will be based on the records of the ShenzhenBranch of China Securities Depository and Clearing Corporation).On September 7, 2023, the Company completed the cancellation of the aforesaid 7,612,080 stock options afterreview and confirmation by the Shenzhen Branch of China Securities Depository and Clearing Corporation. Uponcompletion of the cancellation of all of the above stock options, the Company’s 2020 Stock Option Incentive Planwas terminated in its entirety. For details, please refer to the Announcement on Resolutions of the Fifth Session ofthe Tenth Board of Directors of the Company in 2023 (Announcement No. 2023-33), the Announcement onResolutions of the Third Session of the Tenth Supervisory Committee of the Company for 2023 (Announcement No.2023-34), the Proposal on Cancelling the Third Exercisable Period of the Initially Granted Part of the 2020 StockOption Incentive Plan and the Second Exercisable Period of Its Reserved Granted Part (Announcement No. 2023-
36) disclosed by the Company on August 30, 2023, and the Announcement on the Completion of Cancellation ofthe Third Exercisable Period of the Initially Granted Part of the 2020 Stock Option Incentive Plan and the SecondExercisable Period of Its Reserved Granted Part (Announcement No. 2023-39) disclosed on September 9, 2023 athttp://www.cninfo.com.cn.
(III) Changes in Shareholding of Jiangsu Yuyue
1. On June 21, 2023, the Company disclosed the Informative Announcement on the Circulation of CertainShares Subject to Trading Moratorium (Announcement No. 2023-24). The Company’s shareholder Jiangsu Yuyuehad applied for release of the trading moratorium on its shares. There would be totally 99,916,513 such sharescirculating in the markets on June 27, 2023 for this time, accounting for 5.56% of the Company’s total share capital.More details can be found at http://www.cninfo.com.cn.
2. On June 22, 2023, the Company disclosed the Announcement on Pre-disclosure of Shareholding Reductionby Shareholders Holding 5% or More Shares (Announcement No. 2023-25). On June 20, 2023, the Company
received from its shareholder Jiangsu Yuyue the Notification Letter Regarding Proposed Reduction in Shareholdingin Yunnan Baiyao Group, stating that it planned to reduce no more than 35,937,250 shares of the Company(accounting for no more than 2% of the Company’s total share capital) from its 99,916,513 shares in the Company(accounting for 5.56% of the Company’s total share capital) via bidding from July 17, 2023 to January 13, 2024. If,during the implementation of this shareholding reduction plan, the Company distributes cash dividends, bonusshares, converts capital reserves into share capital, or occurs any other ex-rights or ex-dividend events, JiangsuYuyue would make corresponding adjustments to this shareholding reduction in the number and equity ratio. Moredetails can be found at http://www.cninfo.com.cn.
3. On July 28, 2023, the Company disclosed the Indicative Announcement on Changes in the Equity ofShareholders Holding 5% or More of the Shares (Announcement No.: 2023-31). On July 27, 2023, the Companyreceived the Short-form Equity Change Report of Yunnan Baiyao Group Co., Ltd and the Notification LetterRegarding the Reduction of Shareholdings of Shareholders Holding More Than 5% of Shares to Less Than 5% ofShares issued by Jiangsu Yuyue, a shareholder, and was informed of the transfer of 10,073,400 shares of theCompany held by Jiangsu Yuyue between July 17, 2023 and July 26, 2023 via bidding. After this equity change,the shareholding of Jiangsu Yuyue decreased from 5.56% to 4.999999%, and it was no longer a shareholder holdingmore than 5% of the Company’s shares. This equity change was a shareholding reduction, did not involve tenderoffer, and did not result in a change of control of the Company. For details, please refer to http://www.cninfo.com.cn.
4. As of January 13, 2024, the above shareholding reduction plan expired and Jiangsu Yuyue completed thisshareholding reduction plan. During the period from July 17, 2023 to January 13, 2024, Jiangsu Yuyue cumulativelyreduced, via centralized bidding transactions, its holdings of 35,936,638 outstanding shares of the Company notsubject to trading moratorium, accounting for 1.99997% of the total share capital of the Company. The reductionwas consistent with the previously disclosed reduction plan and the amount of the reduction was within the scopeof the reduction plan. During the period from August 14, 2023 to September 26, 2023, Jiangsu Yuyue alsocumulatively reduced, via block trading, its holdings of 35,668,100 outstanding shares of the Company not subjectto trading moratorium, accounting for 1.98502% of the total share capital of the Company.
(IV) Changes in Equity Structure of State-owned Equity Operation and Management Company
On November 4, 2023, the Company disclosed the Announcement on Yunnan State-owned Equity Operationand Management Co, Ltd’s Continuing to Introduce Capital Contribution by China Life Asset ManagementCompany Limited for Capital Increase (Announcement No. 2023-43). The Company received the NotificationLetter of Yunnan State-owned Equity Operation and Management Co, Ltd on Introducing Capital Contribution byChina Life Asset Management Company Limited for Capital Increase issued by State-owned Equity Operation andManagement Co, Ltd, and was informed that China Life Asset Management Company Limited (“China Life”) hadincreased its capital contribution and expanded its shares in Yunnan State-owned Equity Operation and ManagementCo, Ltd, and the formalities with regard to these relevant industrial and commercial changes had been completedrecently. China Life increased its capital contribution by RMB 11 billion in cash, with a capital increase ratio of
17.77%. Yunnan Investment Group held 75.21% of the shares and China Life held 24.79% of the shares before thiscapital increase; after the capital increase, Yunnan Investment Group held 57.44% of the shares and China Life held
42.56% of the shares. The de facto controller of State-owned Equity Operation and Management Co, Ltd after this
capital increase was the State-owned Assets Supervision and Administration Commission of the Yunnan ProvincialPeople’s Government, which remained unchanged. For details, please refer to http://www.cninfo.com.cn.(V) Application for Registration and Issuance of Ultra Short-term Financing BondsThe fifth session of the Tenth Board of Directors for 2023 held on August 28, 2023 and the first extraordinarygeneral meeting for 2023 held on September 19, 2023 considered and approved the Proposal on Applying forRegistration and Issuance of Ultra Short-term Financing Bonds, approving the Company to apply to the ChinaAssociation of Interbank Market Dealers (“Dealers Association”) for the registration and issuance of ultra short-term financing bonds of RMB 3 billion (The amount is subject to the registration notice issued by the DealersAssociation). For details, please refer to the Announcement on Resolutions of the Seventh Session of the Tenth Boardof Directors of the Company for 2023 (Announcement No. 2023-33), and the Announcement on Application forRegistration and Issuance of Ultra Short-term Financing Bonds (Announcement No.2023-37 ) disclosed by theCompany on August 30, 2023 and the Announcement on Resolutions of the First Extraordinary General Meetingfor 2023 (Announcement No. 2023-40) disclosed on September 20, 2023 at http://www.cninfo.com.cn.
On February 26, 2024, the Company received a Notice of Acceptance of Registration (Zhong Shi Xie Zhu[2024] SCP63) from the Dealers Association, which stated Dealers Association’s agreement to accept theregistration of the Company’s ultra-short-term financing bonds and indicated the Company registered an amount ofRMB 3 billion in the ultra-short-term financing bonds, which bonds will be valid for 2 years from the date of thenotice, and underwritten by the Industrial and Commercial Bank of China Limited. The Company may issue theseultra-short-term financing bonds in tranches during the registered validity period, and upon completion of theissuance, the issuance results will be disclosed through the channels recognized by the Dealers Association. Fordetails, please refer to the Announcement on Approval on Registration of Issuance of Ultra-short-term FinancingBonds (Announcement No. 2024-11) disclosed by the Company on February 28, 2024 at http://www.cninfo.com.cn.
On March 20, 2024, the issuance of the Company’s First Tranche of Ultra Short-Term Financing Bonds for2024 valued RMB 1 billion (Sci-Tech Innovation Notes/Rural Revitalization) was completed and the proceeds werereceived in full. For details, please refer to the Announcement on Results of Issuance of the First Tranche of Ultra-short-term Financing Bonds (Sci-Tech Innovation Notes/Rural Revitalization) (Announcement No. 2024-14)disclosed by the Company on March 21, 2024 at http://www.cninfo.com.cn.XVII. Significant Events of the Company’s Subsidiaries
?Applicable □ Not applicable
Related events of YNBY International (Formerly Ban Loong Holdings)
1. Achieving resumption guidelines and resuming trading
(1) Suspension of trading
At the request of Ban Loong Holdings, trading of its shares was suspended on Hong Kong Stock Exchange asof 9:00 am on June 21, 2022 and would continue to be suspended. Ban Loong Holdings will issue furtherannouncements to inform its shareholders and potential investors of any significant developments related to theaforementioned event as and when appropriate.
(2) Resumption guidance
On July 26, 2022, Ban Loong Holdings received the following resumption guidance from Hong Kong StockExchange, requiring Ban Loong Holdings to: (1) publish all undisclosed financial results required under the ListingRules and address any audit modifications; (2) demonstrate its compliance with Rule 13.24 of the Listing Rules; (3)conduct an appropriate independent forensic investigation, announce the findings and take appropriate remedialactions; (4) demonstrate that there is no reasonable regulatory concern about its management integrity and/or theintegrity of any persons with substantial influence over its management and operations, which may pose a risk toinvestors and damage market confidence; (5) conduct an independent internal control review and demonstrate thatit has in place adequate internal controls and procedures to meet its obligations under the Listing Rules; and (6)announce all material information for its shareholders and investors to appraise its position.Hong Kong Stock Exchange also required Ban Loong Holdings to correct the wrongs that led to thesuspended trading of its shares and fully comply with the Listing Rules to the satisfaction of Hong Kong StockExchange before it was allowed to resume trading of its securities. Hong Kong Stock Exchange may revise orsupplement the resumption guidance against any changes of Ban Loong Holdings.On October 12, 2023, Ban Loong Holdings disclosed an announcement, stating that it had submitted aresumption proposal to Hong Kong Stock Exchange on September 27, 2023 to seek resumption of trading in theshares. The resumption proposal set out, among other things, the actions taken and proposed to be taken by BanLoong Holdings in relation to the fulfillment of the resumption guidelines.
On October 25, 2023, Ban Loong Holdings disclosed an announcement, stating that, as disclosed in itsannouncement dated July 26, 2022, the conditions for resumption of trading include, among other things, therequirement for it to (1) conduct an appropriate independent forensic investigation, make public the results of theinvestigation and take appropriate remedial measures; and (2) conduct an independent internal control examinationto certify that it has put in place appropriate internal controls and procedures to fulfill its obligations under theListing Rules. The announcement set out the key findings of the forensic investigation and internal controlexamination.
On December 20, 2023, Ban Loong Holdings disclosed an announcement, stating that it was still awaiting aresponse from the Hong Kong Stock Exchange in relation to the resumption proposal, and that it would issue aseparate announcement in due course in relation to any material developments on the resumption status.
(3) Achievement of the resumption guidelines and resumption of trading
On January 30, 2024, and as of the date of announcement, Ban Loong Holdings met the requirements underthe resumption guidelines. Trading in its shares had been suspended on the Hong Kong Stock Exchange with effectfrom 9:00 a.m. on June 21, 2022 at its own request. As the resumption guidelines have been fully met to thesatisfaction of the Hong Kong Stock Exchange, Ban Loong Holdings has applied to the Hong Kong Stock Exchangefor the resumption of trading in the shares with effect from 9:00 a.m. on January 31, 2024.
2. Framework Agreement of Continuing Connected Transactions and Extraordinary General Meeting
On December 13, 2022, the Company entered into the Framework Agreement of Continuing ConnectedTransactions (hereinafter referred to as the “Framework Agreement”) with Ban Loong Holdings, stating that theCompany agreed to purchase from Ban Loong Holdings product registration and promotion services, global supply
chain integration services, and specialized support services; Ban Loong Holdings agreed to cooperate with theCompany to sell and distribute to overseas markets certain products produced and branded by the Company, whilethe Company agreed to cooperate with Ban Loong Holdings to sell and distribute to China health products and foodspurchased, procured, manufactured, and/or branded by Ban Loong Holdings. The Framework Agreement wouldonly take effect after adoption of the necessary resolutions for approving the execution of the Framework Agreementand the transactions to be promoted thereunder at the Extraordinary General Meeting.
Ban Loong Holdings convened an Extraordinary General Meeting on May 15, 2023, which adopted theordinary resolutions for approving, confirming, and endorsing the Framework Agreement, as well as the proposedannual transaction upper limits set out in the proposed transactions thereunder and circulars related to suchtransactions from the effective date to the third anniversary of the effective date. The Extraordinary General Meetingalso authorized any one or more directors of Ban Loong Holdings to act on behalf of Ban Loong Holdings to signall relevant documents and agreements, and to do all relevant actions and matters, if they deem it necessary,expedient or appropriate in their discretion to implement (or make effective) the Framework Agreement and allmatters in connection therewith.
3. Extension of maturity date of convertible bonds
On December 5, 2022, the Company and Ban Loong Holdings entered into the Supplemental Agreement to theConvertible Bond Subscription Agreement, which extended the maturity date of the Convertible Bonds fromOctober 31, 2022 to October 30, 2024 (the “Extension”), with all the other terms and conditions agreed in theprevious transaction documents remaining unchanged. Meanwhile, based on the Trust Contract, the Company, asthe principal, has issued instructions to Shanghai Trust, the trustee, requesting it to extend the term of the convertiblebonds held by it to the date of September 30, 2023 in accordance with the Trust Contract. After such point of time,the Company may take other appropriate means to continue to hold the said convertible bonds for the fulfillment ofthe Supplemental Agreement to the Convertible Bond Subscription Agreement. On December 29, 2022, theCompany again issued a Waiver Letter (II) to Ban Loong Holdings, granting it a waiver period of four months afterthe original expiration date. At the same time, the Company, as principal of the trust, also sent relevant instructionsto the trustee to accommodate the exemption period arrangement. Apart from that, all the other terms and conditionsof the waiver letter remain unchanged. In order to support the arrangement of the aforesaid Waiver Letter (II), theCompany entered into the Letter of Consent to Extend the Final Closing Date of the Supplemental Agreement to theConvertible Bond Subscription Agreement with Ban Loong Holdings on the same day. The parties agreed to change,by this written consent letter, the definition of “Final Closing Date” in Section 1 of the Supplemental Agreement tothe Convertible Bond Subscription Agreement, which would be changed to February 28, 2023. On January 12, 2023,because the relevant regulatory authorities in Hong Kong did not make any further inquiries regarding the contentsof the circular of Ban Loong Holdings, Ban Loong Holdings issued a circular and the notice of an extraordinarygeneral meeting on the same day. On February 1, 2023, Ban Loong Holdings held an extraordinary general meeting,which considered and approved all necessary proposals relating to the extension of the maturity date of theconvertible bonds. As at the disclosure date of this announcement, Ban Loong Holdings has obtained all necessaryconsents and approvals for the maturity extension of the convertible bonds, and the Supplemental Agreement to theSubscription Agreement for the Convertible Bonds entered into between the Company and Ban Loong Holdings has
come into effect, extending the maturity date of the convertible bonds from October 31, 2022 to October 30, 2024.
4. Change of company name and securities abbreviation
On October 11, 2023, Ban Loong Holdings disclosed an announcement, stating that the Board of Directors ofBan Loong Holdings was pleased to announce that further to the approval of the proposed change of name of thecompany by shareholders by way of poll at the extraordinary general meeting held on September 5, 2023, theCertificate of Registration of Change of Name of the Company and the Second Name Certificate were issued by theRegistrar of Companies in Bermuda on September 18, 2023 respectively, certifying that the first name of thecompany was changed from “Ban Loong Holdings Limited” to “YNBY International Limited” and that “云白国际有限公司” was adopted as the second Chinese name of the company. On October 5, 2023, the Registrar ofCompanies of Hong Kong issued a Certificate of Registration of Change of Name of a Registered non-Hong KongCompany confirming the registration in Hong Kong of the new English and Chinese names of the company, “YNBYInternational Limited” and “云白国际有限公司” respectively under Part 16 of the Companies Ordinance (Chapter622 of Laws of Hong Kong).With effect from 9:00 a.m. on October 16, 2023, the English stock short name for trading in the shares of thecompany on the Hong Kong Stock Exchange was changed from “BAN LOONG HOLD” to “YNBY INTL” and theChinese stock short name was changed from “万隆控股集团” to “云白国际.” The Company’s stock code on theHong Kong Stock Exchange will remain unchanged at “0030.”
5. Announcement of 2023 Results
On April 28, 2023, Ban Loong Holdings disclosed an announcement stating that HLB Hodgson Impey ChengLimited (“HLB”) has resigned as the auditor of Ban Loong Holdings with effect from April 25, 2023. The Board,with the recommendation of the Audit Committee, resolved to appoint Zhonghui Anda CPA Limited (“ZhonghuiAnda”) as the auditor of the Company with effect from 28 April 2023 to fill the casual vacancy following theresignation of HLB as auditor of the Company, and to hold office until the conclusion of the next annual generalmeeting of the Company.
On January 15, 2024, YNBY International published the 2021 Annual Report, the 2022 Interim Report, the2022 Annual Report and the 2023 Interim Report. The 2021 Annual Report (from April 1, 2020 to March 31, 2021)and the 2022 Annual Report (from April 1, 2021 to March 31, 2022) were audited by Zhonghui Anda, and the typeof audit comment in the audit report issued was “Disclaimer of Opinion.” Matters that resulted in the audit commentof “Disclaimer of Opinion” were businesses that occurred prior to the tender offer of the Company in January 2022,for which the Company had made appropriate treatment at the point of acquisition. In addition, after the acquisition,the Company actively took over YNBY International in an orderly manner in accordance with the requirements oflisted companies. Thanks to the efforts of all parties of the Company, the requirements under the ResumptionGuidelines were fulfilled on January 30, 2024, and the Resumption Guidelines were fully complied with to thesatisfaction of the HKEX. The trading in YNBY International was resumed on January 31, 2024 with effect from9:00 a.m. onwards.
On March 22, 2024, YNBY International disclosed its final results for the nine months ended December 31,2023. Zhonghui Anda, the independent auditor of YNBY International, issued the independent auditor’s report. Inthe opinion of Zhonghui Anda, except for the possible effects of the matters described in the Basis for Qualified
Opinion section of this report, the consolidated financial statements give a true and fair view of the consolidatedfinancial position of YNBY International as at December 31, 2023, and of its consolidated financial performanceand its consolidated cash flows for the nine months then ended in accordance with Hong Kong Financial ReportingStandards issued by the Hong Kong Institute of Certified Public Accountants, and have been properly prepared inaccordance with the disclosure requirements of the Companies Ordinance of Hong Kong. Qualified Opinion: (1)Revenues and cost of sales reversed during the year ended December 31, 2023; (2) Trade and other payable; and (3)Insufficient accounting records of Wan Long Shenzhen.
Section VII Changes in Shareholdings and Particulars about ShareholdersI. Changes in Shareholdings
1. Changes in shareholdings
Unit: Share
| Before this change | Increase/decrease (+, -) | After this change | |||||||
| Quantity | Proportion | New shares | Bonus shares | Capital reserve converted into share capital | Others | Subtotal | Quantity | Proportion | |
I. Shares subject to tradingmoratorium
| I. Shares subject to trading moratorium | 112,267,871 | 6.25% | 0 | 0 | 0 | -100,700,513 | -100,700,513 | 11,567,358 | 0.64% |
1. State-owned shares
| 1. State-owned shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
2. Shares held by state-owned
legal persons
| 2. Shares held by state-owned legal persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
3. Shares held by
other domestic shareholders
| 3. Shares held by other domestic shareholders | 112,267,871 | 6.25% | 0 | 0 | 0 | -100,700,513 | -100,700,513 | 11,567,358 | 0.64% |
Of which: shares held bydomestic legal persons
| Of which: shares held by domestic legal persons | 99,916,513 | 5.56% | 0 | 0 | 0 | -99,916,513 | -99,916,513 | 0 | 0.00% |
Shares held by domesticnatural persons
| Shares held by domestic natural persons | 12,351,358 | 0.69% | 0 | 0 | 0 | -784,000 | -783,998 | 11,567,358 | 0.64% |
4. Foreign-invested shares
| 4. Foreign-invested shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
Of which: shares held byoverseas legal persons
| Of which: shares held by overseas legal persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
Shares held by overseasnatural persons
| Shares held by overseas natural persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
II. Shares not subject to tradingmoratorium
| II. Shares not subject to trading moratorium | 1,684,594,678 | 93.75% | 0 | 0 | 0 | 100,700,513 | 100,700,513 | 1,785,295,191 | 99.36% |
1. RMB-denominated ordinary
share
| 1. RMB-denominated ordinary share | 1,684,594,678 | 93.75% | 0 | 0 | 0 | 100,700,513 | 100,700,513 | 1,785,295,191 | 99.36% |
2. Domestic-listed foreign-
invested shares
| 2. Domestic-listed foreign-invested shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
3. Overseas-listed foreign-
invested shares
| 3. Overseas-listed foreign-invested shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
III. Total number of shares
| III. Total number of shares | 1,796,862,549 | 100.00% | 0 | 0 | 0 | 0 | 0 | 1,796,862,549 | 100.00% |
Reasons for changes in shareholdings
□ Applicable ? Not applicable
Approval of changes in shareholdings
□ Applicable ? Not applicable
Transfers for changes in shareholdings
□ Applicable ? Not applicable
The impact of changes in shareholdings on financial indicators such as basic and diluted earnings per share, net assets per share attributable to the Company’s ordinary shareholders for the latest yearand period
□ Applicable ? Not applicable
Other disclosures deemed necessary by the Company or required by securities regulators
□ Applicable ? Not applicable
2. Changes in shares subject to trading moratorium
? Applicable □ Not applicable
Unit: Share
| Name of shareholder | Number of shares subject to trading moratorium at the beginning of the reporting period | Increase in shares subject to trading moratorium during the reporting period | Number of shares released from trading moratorium during the reporting period | Number of shares subject to trading moratorium at the end of the reporting period | Reason for moratorium | Date of shares released from trading moratorium |
Jiangsu Yuyue
Science &TechnologyDevelopment Co.,
Ltd.
| Jiangsu Yuyue Science & Technology Development Co., Ltd. | 99,916,513 | 0 | 99,916,513 | 0 | Shares subject to trading moratorium after private placement | The committed lock-up period for the stock unlocking is until June 27, 2023. After the expiration date, the unlocking process will be Implemented in accordance with regulatory requirements |
| Chen Fashu | 9,395,621 | 0 | 0 | 9,395,621 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Chen Yanhui
| Chen Yanhui | 133,009 | 0 | 0 | 133,009 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Dong Ming
| Dong Ming | 9,960 | 0 | 0 | 9,960 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Qin Wanmin
| Qin Wanmin | 378,000 | 0 | 0 | 378,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Yang Yong
| Yang Yong | 75,768 | 0 | 0 | 75,768 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Li Jin
| Li Jin | 42,000 | 0 | 0 | 42,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Zhu Zhaoyun
| Zhu Zhaoyun | 42,000 | 0 | 0 | 42,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Wang Minghui
| Wang Minghui | 756,000 | 0 | 0 | 756,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Yin Pinyao
| Yin Pinyao | 252,000 | 0 | 0 | 252,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Yu Juan
| Yu Juan | 105,000 | 0 | 0 | 105,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Wang Jin
| Wang Jin | 378,000 | 0 | 0 | 378,000 | Locked-up shares held by senior management | Implemented in accordance with regulatory requirements |
Yang Changhong
| Yang Changhong | 504,000 | 0 | 504,000 | 0 | Locked-up shares held by senior management | May 5, 2023 |
Wu Wei
| Wu Wei | 280,000 | 0 | 280,000 | 0 | Locked-up shares held by senior management | May 5, 2023 |
Total
| Total | 112,267,869 | 0 | 100,700,513 | 11,567,358 | -- | -- |
II. Issuance and Listing of Securities
1. Issuance of securities (preferred shares excluded) during the reporting period
□ Applicable ? Not applicable
2. Changes in the Company’s total number of shares, structure of shareholders and structure of assets andliabilities
□ Applicable ? Not applicable
3. Existing staff shares
□ Applicable ? Not applicable
III. Particulars about shareholders and de facto controller
1. Number of shareholders of the Company and their shareholdings
Unit: Share
| Total number of ordinary shareholders at the end of the reporting period | 199,821 | The total number of ordinary shareholders at the end of the preceding month prior to the disclosure date of the annual report | 197,414 | Total number of preferred shareholders with resumed voting rights at the end of the reporting period (if any) (see Note 8) | 0 | The total number of preferred shareholders with resumed voting rights at the end of the preceding month prior to the disclosure date of the annual report (if any) (see Note 8) | 0 |
Shareholdings of shareholders holding more than 5% of the shares or the top 10 shareholders (excluding share lending via securities financing)
Shareholdings of shareholders holding more than 5% of the shares or the top 10 shareholders (excluding share lending via securities financing)Name ofshareholder
| Name of shareholder | Nature of shareholder | Shareholding ratio | Number of shares held at the end of the reporting period | Change during the reporting period | Number of shares subject to trading moratorium | Number of shares not subject to trading moratorium | Pledged, marked or frozen | |
| Status | Quantity | |||||||
Yunnan State-owned EquityOperationManagement Co.,Ltd.
| Yunnan State-owned Equity Operation Management Co., Ltd. | State-owned legal person | 25.02% | 449,624,311 | 0 | 0 | 449,624,311 | Pledged | 190,743,840 |
New HuaduIndustrial GroupCo., Ltd.
| New Huadu Industrial Group Co., Ltd. | Domestic non-state-owned legal person | 24.25% | 435,742,244 | 0 | 0 | 435,742,244 | Pledged | 290,514,000 |
Yunnan Hehe(Group) Co., Ltd.
| Yunnan Hehe (Group) Co., Ltd. | State-owned legal person | 8.14% | 146,185,851 | 0 | 0 | 146,185,851 | Not applicable | 0 |
Hong KongSecurities ClearingCompany Limited
| Hong Kong Securities Clearing Company Limited | Overseas legal person | 3.72% | 66,861,065 | -12,825,164 | 0 | 66,861,065 | Not applicable | 0 |
China SecuritiesFinance Corp.
| China Securities Finance Corp. | Domestic non-state-owned legal person | 2.08% | 37,373,108 | 0 | 0 | 37,373,108 | Not applicable | 0 |
Jiangsu YuyueScience &TechnologyDevelopment Co.,Ltd.
| Jiangsu Yuyue Science & Technology Development Co., Ltd. | Domestic non-state-owned legal person | 1.58% | 28,311,775 | -71,604,738 | 0 | 28,311,775 | Pledged | 7,587,825 |
Central HuijinInvestment Ltd.
| Central Huijin Investment Ltd. | State-owned legal person | 0.92% | 16,617,440 | 0 | 0 | 16,617,440 | Not applicable | 0 |
| UBS Asset Management (Singapore) Ltd. -UBS Lux Investment SICAV | Overseas legal person | 0.91% | 16,268,628 | -2,403,500 | 0 | 16,268,628 | Not applicable | 0 |
Chen Fashu
| Chen Fashu | Domestic natural person | 0.70% | 12,527,495 | 0 | 9,395,621 | 3,131,874 | Not applicable | 0 |
National SocialSecurity Fund 110
| National Social Security Fund 110 | Others | 0.66% | 11,796,858 | 769,700 | 0 | 11,796,858 | Not applicable | 0 |
Strategic investors or general legal persons whobecome the top 10 shareholders due to rights issue (ifany)
| Strategic investors or general legal persons who become the top 10 shareholders due to rights issue (if any) | Not applicable |
Related or acting-in-concert parties among theshareholders above
| Related or acting-in-concert parties among the shareholders above | Chen Fashu is the de facto controller of New Huadu Industrial Group Co., Ltd. It is unclear whether there are any related relationships among other shareholders or whether there is any concerted action as defined by the Administrative Measures for Information Disclosure of Changes in Shareholdings of Shareholders of Listed Companies. |
Above shareholders involved in entrusting/beingentrusted with voting rights and giving up votingrights
| Above shareholders involved in entrusting/being entrusted with voting rights and giving up voting rights | Not applicable |
Special account for share repurchases (if any) amongthe top 10 shareholders
| Special account for share repurchases (if any) among the top 10 shareholders | As of the end of the reporting period, Yunnan Baiyao Group’s holdings in the special securities account for stock repurchase amounted to 12,599,946 shares, representing a 0.70% ownership stake. |
Shareholdings of the top 10 shareholders not subject to trading moratorium
Shareholdings of the top 10 shareholders not subject to trading moratoriumName of shareholder
| Name of shareholder | Number of shares not subject to trading moratorium held at the end of the reporting period | Type of shares | |
| Type | Quantity | ||
Yunnan State-owned Equity Operation ManagementCo., Ltd.
| Yunnan State-owned Equity Operation Management Co., Ltd. | 449,624,311 | RMB-denominated ordinary share | 449,624,311 |
New Huadu Industrial Group Co., Ltd.
| New Huadu Industrial Group Co., Ltd. | 435,742,244 | RMB-denominated ordinary share | 435,742,244 |
Yunnan Hehe (Group) Co., Ltd.
| Yunnan Hehe (Group) Co., Ltd. | 146,185,851 | RMB-denominated ordinary share | 146,185,851 |
Hong Kong Securities Clearing Company Limited
| Hong Kong Securities Clearing Company Limited | 66,861,065 | RMB-denominated ordinary share | 66,861,065 |
China Securities Finance Corp.
| China Securities Finance Corp. | 37,373,108 | RMB-denominated ordinary share | 37,373,108 |
Jiangsu Yuyue Science & Technology DevelopmentCo., Ltd.
| Jiangsu Yuyue Science & Technology Development Co., Ltd. | 28,311,775 | RMB-denominated ordinary share | 28,311,775 |
Central Huijin Investment Ltd.
| Central Huijin Investment Ltd. | 16,617,440 | RMB-denominated ordinary share | 16,617,440 |
| UBS Asset Management (Singapore) Ltd. - UBS Lux Investment SICAV | 16,268,628 | RMB-denominated ordinary share | 16,268,628 |
National Social Security Fund 110
| National Social Security Fund 110 | 11,796,858 | RMB-denominated ordinary share | 11,796,858 |
China Construction Bank Corporation－EFund CSI300 Health Care Index ETF
| China Construction Bank Corporation －EFund CSI300 Health Care Index ETF | 11,299,766 | RMB-denominated ordinary share | 11,299,766 |
Related or acting-in-concert parties among the top 10circulating shareholders not subject to tradingmoratorium, and between the top 10 circulatingshareholders not subject to trading moratorium and thetop 10 shareholders
| Related or acting-in-concert parties among the top 10 circulating shareholders not subject to trading moratorium, and between the top 10 circulating shareholders not subject to trading moratorium and the top 10 shareholders | It is unclear whether there are any related relationships among the above-mentioned shareholders or whether there is any concerted action as defined by the Administrative Measures for Information Disclosure of Changes in Shareholdings of Shareholders of Listed Companies. |
Top 10 ordinary shareholdersinvolved in securities margin trading (if any)
| Top 10 ordinary shareholders involved in securities margin trading (if any) | Not applicable |
Participation of the top 10 shareholders in share lending via securities financing
□ Applicable ? Not applicable
Changes in the top 10 shareholders compared to the previous period
□ Applicable ? Not applicable
Whether the top 10 ordinary shareholders and the top 10 ordinary shareholders not subject to trading moratorium of the Company conducted any agreed repurchase transactions during the reportingperiod
□ Yes ? No
The top 10 ordinary shareholders and the top 10 ordinary shareholders not subject to trading moratorium of the Company did not conduct any agreed repurchase transactions during the reporting period.
2. Particulars about the Company’s controlling shareholders
Nature of controlling shareholder: No controlling entityType of controlling shareholder: Does not existDescription of no controlling shareholders of the CompanyOn July 3, 2019, the Company purchased 668,430,196 new shares from Baiyao Holdings, its controllingshareholder, and issued these shares in the public market, of which 321,160,222 shares were issued to theSASAC of Yunnan Province, 275,901,036 shares to New Huadu, and 71,368,938 shares to Jiangsu Yuyue.Meanwhile, the shares held by Baiyao Holdings in the listed company were cancelled. After this issuance, theSASAC of Yunnan Province, New Huadu, and its acting-in-concert parties both hold 25.14% of the Company’sshares, resulting in no shareholders having control over the Company actually or via shareholdings and theCompany becoming an enterprise with no de facto controllers and controlling shareholders.Changes in controlling shareholders during the reporting period
□ Applicable ? Not applicable
There was no change in the controlling shareholders of the Company during the reporting period.
3. The Company’s de facto controllers and their respective acting-in-concert partiesNature of de facto controllers: No de facto controllersType of de facto controllers: Does not exist.Description of no de facto controllers of the Company.On July 3, 2019, the Company purchased 668,430,196 new shares from Baiyao Holdings, its controllingshareholder, and issued these shares in the public market, of which 321,160,222 shares were issued to theSASAC of Yunnan Province, 275,901,036 shares to New Huadu, and 71,368,938 shares to Jiangsu Yuyue.Meanwhile, the shares held by Baiyao Holdings in the listed company were cancelled. After this issuance, theSASAC of Yunnan Province, New Huadu, and its acting-in-concert parties both hold 25.14% of the Company’sshares, resulting in no shareholders having control over the Company actually or via shareholdings and theCompany becoming an enterprise with no de facto controllers and controlling shareholders.Whether the Company has any shareholders at the ultimate control level with a shareholding of more than 10%
□Yes ?No
□Shareholders at the ultimate control level with a shareholding of more than 5% ? Shareholders at the ultimatecontrol level with a shareholding of less than 5%
The Company has no de facto controllers.
Change of de facto controllers during the reporting period
□ Applicable ? Not applicable
There was no change in the de facto controllers of the Company during the reporting period.
Diagram of property rights and control relationship between the Company and the de facto controller
The de facto controllers of the Company control over the Company via trust or other asset management methods
□ Applicable ? Not applicable
4. The cumulative number of pledged shares held by the controlling shareholder or the largest shareholderof the Company and their acting-in-concert parties accounts for up to 80% of the total number of shares heldby them in the Company
□ Applicable ? Not applicable
5. Other legal-person shareholders holding more than 10% of the shares
? Applicable □ Not applicable
| Name of corporate shareholder | Legal representative/Head of the organization | Date of establishment | Registered capital | Main business operations or management activities |
| Yunnan State-owned Equity Operation Management Co., Ltd. | Wang Hongxin | June 21, 2019 | RMB 20,977,469,085.95 | Holding and managing state-owned equity; Equity (including listed company equity) investment, operation, and transfer; Fundraising; Research and consulting services on the structural layout of state-owned capital and industrial development (Business activities that require approval according to the law may be conducted only after obtaining approval from the relevant departments.) |
| New Huadu Industrial Group Co., Ltd. | Chen Fashu | May 4, 1996 | RMB 139,800,000.00 | Wholesale and retail of pre-packaged and bulk food products; Investment, management, and consulting services in the retail industry, interior and exterior decoration, hotel industry, mining industry, hydropower engineering, road and bridge engineering projects, real estate industry, and industrial sector (Business activities that require approval according to the law may be conducted only after obtaining approval from the relevant departments.) |
6. Restricted reduction of shares held by controlling shareholders, de facto controllers, restructuring parties,and other committed entities
□ Applicable ? Not applicable
IV. Detailed implementation of share repurchase during the reporting period
Implementation of share repurchase
□ Applicable ? Not applicable
Implementation of reduction in repurchased shares via centralized bidding
□ Applicable ? Not applicable
Section VIII Preference Shares
□ Applicable ? Not applicable
There were no preference shares in the Company during the reporting period.
Section IX Bonds
□ Applicable ? Not applicable
Section X Financial StatementsI. Audit Report
Body Text of Audit Report
ZHS Zi (2024) No. 1600081To All shareholders of Yunnan Baiyao Group Co., Ltd,
I. Audit OpinionsWe have audited the financial statements of Yunnan Baiyao Group Co., Ltd (“Yunnan Baiyao”), whichcomprise the consolidated and balance sheets of the Company as of December 31, 2023, as well as the consolidatedand income statements of the Company, the consolidated and cash flow statements of the Company, the consolidatedand statements of changes in shareholders’ equity of the Company for 2023 and notes to the financial statements.In our opinion, the attached financial statements have been prepared in accordance with the provisions of theAccounting Standards for Business Enterprises in all major aspects, and present fairly the consolidated financialposition of Yunnan Baiyao as of December 31, 2023, and the results of its operations and cash flows in 2023.
II. Basis for the Audit OpinionWe conduct our audit in accordance with the PRC Standards on Auditing for Certified Public Accountants.Our responsibilities under these standards are further described in the section on “the Certified Public Accountants’Responsibilities for the Audit of the Financial Statements” of our audit report. We are independent of YunnanBaiyao in accordance with the PRC Code of Ethics for Certified Public Accountants and have fulfilled our otherethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.
III. Key Audit MattersKey audit matters are those, in our professional judgment, of most significance in our audit of the financialstatements of the current period. The treatment of these matters is based on an audit of the financial statements as awhole and audit opinions therefrom, and we do not express an opinion on these matters separately. We haveidentified the following matters as the key audit matters stated in our audit report.
| Type of Audit Opinion | Unqualified opinion |
Signature Date of Audit Report
| Signature Date of Audit Report | March 28, 2024 |
Name of Audit Body
| Name of Audit Body | Mazars Certified Public Accountants (SGP) |
Document No. of Audit Report
| Document No. of Audit Report | ZHS Zi (2024) No. 1600081 |
Name of Certified Public Accountant
| Name of Certified Public Accountant | Yang Manhui, Yang Fan |
(I) Revenue recognition
| Key Audit Matters | How to treat this matter in the audit? |
Please refer to Note VI.48 in the financialstatements.Yunnan Baiyao’s annual operatingincome in 2023 was RMB 39.111 billion,of which the main business income wasRMB 39.062 billion, accounting for
99.87% of the total operating income.
Due to the amount of revenue from themain business being significant and a keyperformance indicator, and thus there wasan inherent risk that the Managementtends to manipulate the timing of revenuerecognition to meet specific objectives orexpectations, we identified revenuerecognition as a key audit matter.
| Please refer to Note VI.48 in the financial statements. Yunnan Baiyao’s annual operating income in 2023 was RMB 39.111 billion, of which the main business income was RMB 39.062 billion, accounting for 99.87% of the total operating income. Due to the amount of revenue from the main business being significant and a key performance indicator, and thus there was an inherent risk that the Management tends to manipulate the timing of revenue recognition to meet specific objectives or expectations, we identified revenue recognition as a key audit matter. | Our audit procedures for revenue recognition from the principal businesses mainly include: (1) To understand key internal controls relevant to revenue recognition, evaluate the effectiveness of their design and implementation, and test the operational effectiveness of relevant internal controls; (2) To examine the Company’s major sales contracts, identify key contract terms and performance obligations related to revenue recognition, and evaluate whether the Company’s revenue recognition policies comply with the requirements of the Accounting Standards for Business Enterprises and are consistently applied; (3) To obtain the sales list of the Company for the current year, and analyze procedures for operating income, including analyzing the annual and monthly income of major products, changes in major customers and sales prices, changes in the gross profit margin of major products, and judging the rationality of changes in revenue and gross profit margin of the current year; (4) To sample and inspect supporting documents such as annual sales agreements, sales contracts, delivery orders, invoices, customer receipt orders, and corresponding accounting records to verify whether the recognized amount of revenue is correct; (5) To conduct confirmation procedure for sales volume, accounts receivable, or contract liabilities of major customers, understand the background of important customers, and pay attention to whether there are related party transactions; (6) To select a sample for income transactions recorded before and after the balance sheet date, check shipping invoices and other supporting documents, and check subsequent settlements and returns to evaluate whether revenue is recorded in the appropriate accounting period. |
(II) Provision for bad debts of accounts receivable
| Key Audit Matter | How to deal with this matter in the audit? |
Please refer to Note VI.4 in the financialstatements.As of December 31, 2023, Yunnan Baiyaohad a balance of accounts receivable ofRMB 10.8 billion, and a balance of baddebt reserve of RMB 834 million, all ofwhich were high book value over RMB
9.966 billion. Due to the high book value of
accounts receivable, the provision for baddebts of accounts receivable involvessignificant accounting estimates andjudgments, and the recoverability ofaccounts receivable had a significant impacton the financial statements, we identifiedthe provision for bad debts of accountsreceivable as a key audit matter.
| Please refer to Note VI.4 in the financial statements. As of December 31, 2023, Yunnan Baiyao had a balance of accounts receivable of RMB 10.8 billion, and a balance of bad debt reserve of RMB 834 million, all of which were high book value over RMB 9.966 billion. Due to the high book value of accounts receivable, the provision for bad debts of accounts receivable involves significant accounting estimates and judgments, and the recoverability of accounts receivable had a significant impact on the financial statements, we identified the provision for bad debts of accounts receivable as a key audit matter. | Our audit procedures for the provision for bad debts of accounts receivable mainly include: (1) To understand, evaluate, and test the effectiveness of the design and operation of the Company’s internal control key control points related to accounts receivable management; (2) To analyze and confirm the rationality of accounting estimation of bad debt provision of accounts receivable, including the basis for determining the combination of accounts receivable and expecting credit loss rate, and judge of impairment test of accounts receivable assessed individually; (3) To analyze and calculate the ratio between the bad debt provision amount and the accounts receivable balance on the balance sheet date of the Company, compare the provision for bad debts in the previous period with the actual amount incurred, and analyze whether the bad debt provision of the accounts receivable is sufficient; (4) To conduct confirmation procedures for accounts receivable, and affirm the authenticity and accuracy of accounts receivable on the balance sheet date through post-period inspection and other procedures. |
IV. Other InformationThe management of Yunnan Baiyao is responsible for the other information, which includes the informationcovered in the annual report, but does not include the financial statements and our audit report.
Our audit opinion on the financial statements does not cover the other information and we do not express anyform of verification conclusion thereon.
Given our audit of financial statements, our responsibility is to review other information, and in such process,to judge whether other information is significantly inconsistent with the financial statements or what we learned inthe audit process, or that information seems to be significantly misstated.Where we identify that there is a material misstatement of other information, based on the work we have performed,we will report that fact, but have nothing to report in this regard.
V. The Management and the Governance’s Responsibilities for the Financial StatementsThe management of Yunnan Baiyao is responsible for the preparation of financial statements according toAccounting Standards for Business Enterprises in a fair view, and for designing, implementing, and maintainingnecessary internal control to be absent from material misstatement in the financial statements, whether due to fraudor error.In preparing the financial statements, the management is responsible for assessing Yunnan Baiyao’s ability tocontinue as a going concern, disclosing matters related to going concern (as applicable), and applying the going-concern assumption, unless the management intends to liquidate Yunnan Baiyao or cease operations or has norealistic alternative but to do so.The governance team is responsible for overseeing the financial reporting of Yunnan Baiyao.VI. Responsibilities of Certified Public Accountants for the Audit of Financial StatementsOur purpose is to obtain reasonable assurance about whether the financial statements as a whole are free frommaterial misstatement due to fraud or error, and to issue an audit report that includes an audit opinion. Ourreasonable assurance is of high level, but is not a guarantee that an audit conducted in accordance with auditingstandards will always detect a material misstatement. Misstatements can result from fraud or error and are generallyconsidered material if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users made based on these financial statements.We exercise professional judgment and maintain professional skepticism in performing the audit in accordancewith auditing standards. At the same time, we also conduct the following work:
(I) To identify and assess the risks of material misstatement of the financial statements due to fraud or error,design and implement audit procedures to address these risks, and obtain sufficient and appropriate audit evidenceas the basis for expressing audit opinions. The risk of failing to detect a material misstatement due to fraud is higherthan the risk of failing to detect a material misstatement due to an error, as fraud may involve collusion, forgery,intentional omissions, misrepresentation, or overriding internal controls.(II) To understand the internal control related to audit to design appropriate audit procedures.(III) To evaluate the appropriateness of accounting policies adopted and the reasonableness of accountingestimates and related disclosures made by the management.(IV) A conclusion is made on the appropriateness of the going-concern assumption adopted by theManagement. At the same time, based on the audit evidence obtained, a conclusion is reached on whether there ismaterial uncertainty as to the matters or circumstances that may give rise to significant doubt about Yunnan Baiyao’sability to continue as a going concern. Where we conclude that a material uncertainty exists, auditing standardsrequire us to draw the attention of statement users to the related disclosures therein; where the disclosures areinadequate, no unqualified opinion shall be issued. Our conclusion is based on the information available as of thedate of the audit report. However, future events or circumstances may cause Yunnan Baiyao to be unable to continueas a going concern.(V) To evaluate the overall presentation, structure, and content of the financial statements and whether thefinancial statements present fairly the underlying transactions and events.
(VI) To obtain sufficient and appropriate audit evidence on the financial information of entities or businessactivities in Yunnan Baiyao to express opinions on the financial statements. We are responsible for the direction,supervision, and execution of the Group audits. We take full responsibility for the audit opinion.We communicate with the governance team on matters such as planned audit scope, timing, and significantaudit findings, including communicating internal control deficiencies of concern identified in our audit.We also provide a statement to the governance team that we have complied with the ethical requirementsrelated to independence, and communicate with the governance team all relationships and other matters that mayreasonably be perceived to affect our independence, as well as related precautions (if applicable).We determine the matters that are most significant to the audit of the current financial statements in the matterscommunicated to the governance team and therefore such matters constitute key audit matters. We disclose thesematters in our audit report except where public disclosure of the matters is prohibited by law or regulation, or inrare instances, we determine that a matter shall not be disclosed in the audit report if it is reasonably expected thatthe negative consequences of disclosure of the matter in the report will outweigh the benefits to the public interest.
| Mazars Certified Public Accountants (SGP) | Chinese Certified Public Accountants: |
| (Project Partner): | |
| Yang Manhui | |
| Chinese Certified Public Accountants: | |
| Yang Fan | |
| Wuhan, China | March 28, 2024 |
II. Financial Statement
The units in the Notes to the Financial Statements are presented in RMB.
1. Consolidated balance sheet
Prepared by Yunnan Baiyao Group Co., Ltd.
December 31, 2023
Unit: RMB
| Item | December 31, 2023 | January 1, 2023 |
| Current assets: | ||
| Cash and bank balance | 14,218,343,076.67 | 13,056,113,712.47 |
| Provision of settlement fund | ||
| Placements with banks and other financial institutions | ||
| Financial assets held for trading | 149,366,687.56 | 2,415,722,075.60 |
| Derivative financial assets | ||
| Notes receivable | 227,542,572.56 | 789,465,084.93 |
| Accounts receivable | 9,966,170,447.21 | 9,089,822,151.93 |
| Accounts receivable financing | 1,590,749,810.74 | 834,668,231.58 |
| Prepayment | 312,298,727.01 | 542,948,440.85 |
| Premium receivable | ||
| Reinsurance premium receivable | ||
| Reserves for reinsurance contract receivable | ||
| Other receivables | 104,050,709.53 | 118,948,994.06 |
| Including: Interest receivable | ||
| Dividends receivable | 4,531,100.00 | |
| Financial assets held under resale agreements | ||
| Inventory | 6,442,194,823.67 | 7,993,207,044.26 |
| Contractual assets | ||
| Held-for-sales assets | ||
| Non-current assets due within one year | 442,772,777.78 | 361,774,444.44 |
| Other current assets | 2,862,076,217.20 | 474,340,107.76 |
| Total current assets | 36,315,565,849.93 | 35,677,010,287.88 |
| Non-current assets: | ||
| Loans and advances to customers | ||
| Debt investments | ||
| Other debt investment | ||
| Long-term receivables |
| Long-term equity investments | 11,536,660,992.93 | 11,318,749,947.10 |
| Investment in other equity instruments | 71,745,000.00 | 71,745,000.00 |
| Other non-current financial assets | 324,674,379.63 | 380,786,134.24 |
| Investment properties | 44,104,145.97 | 55,823,776.49 |
| Fixed assets | 2,662,900,014.03 | 2,723,302,365.65 |
| Construction in progress | 529,708,553.58 | 193,993,194.93 |
| Productive biological assets | 988,424.85 | 1,160,324.85 |
| Oil and gas assets | ||
| Right-of-use assets | 258,319,485.58 | 389,975,390.73 |
| Intangible assets | 583,372,000.59 | 590,985,824.30 |
| Development expenses | 14,452,474.57 | 6,024,448.12 |
| Goodwill | 104,121,771.67 | 129,882,094.89 |
| Long-term deferred expenses | 105,335,550.31 | 103,039,892.76 |
| Deferred income tax assets | 690,869,209.12 | 713,246,779.66 |
| Other non-current assets | 541,475,331.17 | 965,218,407.14 |
| Total non-current assets | 17,468,727,334.00 | 17,643,933,580.86 |
| Total assets | 53,784,293,183.93 | 53,320,943,868.74 |
| Current liabilities: | ||
| Short-term loans | 1,747,303,700.34 | 1,850,867,886.59 |
| Borrowings from the central bank | ||
| Placements from banks and other financial institutions | ||
| Financial liabilities held for trading | ||
| Derivative financial liabilities | ||
| Notes payable | 1,850,863,313.78 | 1,991,907,836.96 |
| Accounts payable | 4,359,632,642.20 | 4,639,261,396.45 |
| Receipts in advance | 486,612.12 | 1,569,799.63 |
| Contractual liabilities | 1,739,865,228.75 | 2,578,264,621.13 |
| Financial assets sold under repurchase agreements | ||
| Deposits from customers and interbank | ||
| Customer brokerage deposits | ||
| Acting underwriting of securities | ||
| Payroll payable | 1,067,190,665.08 | 468,450,348.52 |
| Taxes and duties payable | 339,670,850.02 | 509,286,922.32 |
| Other payables | 1,025,085,879.54 | 1,043,693,209.78 |
| Including: Interest payable | ||
| Dividends payable | 86,490,742.04 | 89,413,484.03 |
| Fees and commissions payable |
| Reinsurance amounts payable | ||
| Held-for-sales liabilities | ||
| Non-current liabilities due within one year | 74,736,102.58 | 93,870,902.64 |
| Other current liabilities | 532,943,904.40 | 381,185,773.19 |
| Total current liabilities | 12,737,778,898.81 | 13,558,358,697.21 |
| Non-current liabilities: | ||
| Reserves for insurance contract | ||
| Long-term loans | 2,100,000.00 | 2,100,000.00 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 172,347,309.72 | 285,783,728.73 |
| Long-term payables | 631,735,908.04 | 646,074,143.55 |
| Long-term payroll payable | 4,090,687.99 | 4,280,453.08 |
| Estimated liabilities | ||
| Deferred income | 238,811,111.04 | 178,621,813.00 |
| Deferred income tax liabilities | 74,772,071.70 | 98,079,237.09 |
| Other non-current liabilities | 17,296,814.41 | 20,648,534.29 |
| Total non-current liabilities | 1,141,153,902.90 | 1,235,587,909.74 |
| Total liabilities | 13,878,932,801.71 | 14,793,946,606.95 |
| Owners’ equity | ||
| Share capital | 1,796,862,549.00 | 1,796,862,549.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 18,246,619,742.09 | 18,231,423,838.72 |
| Less: Treasury stock | 707,428,892.15 | 707,428,892.15 |
| Other comprehensive income | -89,538,172.13 | -68,087,650.95 |
| Special reserves | ||
| Surplus reserves | 2,530,458,968.58 | 2,530,458,968.58 |
| Provision for general risk | ||
| Undistributed profit | 18,102,147,836.12 | 16,720,444,918.66 |
| Total owners’ equity attributable to parent company | 39,879,122,031.51 | 38,503,673,731.86 |
| Minority interests | 26,238,350.71 | 23,323,529.93 |
| Total owners’ equity | 39,905,360,382.22 | 38,526,997,261.79 |
| Total liabilities and owners’ equity | 53,784,293,183.93 | 53,320,943,868.74 |
Legal representative: Dong Ming Accounting officer: Ma Jia Head of accounting center: Xu Jing
2. Balance sheet of parent company
Unit: RMB
| Item | December 31, 2023 | January 1, 2023 |
| Current assets: | ||
| Cash and bank balance | 11,558,478,370.89 | 10,750,790,137.56 |
| Financial assets held for trading | 72,221,202.90 | 2,271,661,364.13 |
| Derivative financial assets | ||
| Notes receivable | 6,112,294.09 | 15,053,289.26 |
| Accounts receivable | 1,330,908,560.96 | 977,848,724.80 |
| Accounts receivable financing | 602,881,796.61 | 764,707,862.56 |
| Prepayment | 1,600,931,041.18 | 2,653,025,880.52 |
| Other receivables | 4,127,088,902.76 | 3,123,928,450.54 |
| Including: Interest receivable | ||
| Dividends receivable | 4,531,100.00 | |
| Inventory | 1,462,389,548.82 | 1,714,985,144.48 |
| Contractual assets | ||
| Held-for-sales assets | ||
| Non-current assets due within one year | 442,772,777.78 | 161,580,000.00 |
| Other current assets | 3,156,374,029.15 | 860,182,734.75 |
| Total current assets | 24,360,158,525.14 | 23,293,763,588.60 |
| Non-current assets: | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 13,882,263,332.22 | 13,555,259,244.01 |
| Investment in other equity instruments | ||
| Other non-current financial assets | 324,174,379.63 | 382,286,134.24 |
| Investment properties | 319,279,203.56 | 329,163,194.06 |
| Fixed assets | 1,406,905,437.93 | 1,466,536,097.93 |
| Construction in progress | 127,864,253.80 | 42,777,046.60 |
| Productive biological assets | ||
| Oil and gas assets | ||
| Right-of-use assets | 259,635,687.65 | 278,370,935.35 |
| Intangible assets | 283,913,499.08 | 279,813,388.40 |
| Development expenses | 14,452,474.57 | 6,024,448.12 |
| Goodwill | ||
| Long-term deferred expenses | 19,333,368.56 | 26,383,681.39 |
| Deferred income tax assets | 374,888,819.41 | 393,672,386.71 |
| Other non-current assets | 467,069,694.11 | 878,933,974.44 |
| Total non-current assets | 17,479,780,150.52 | 17,639,220,531.25 |
| Total assets | 41,839,938,675.66 | 40,932,984,119.85 |
| Current liabilities: | ||
| Short-term loans | 19,002,863.01 | |
| Financial liabilities held for trading | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | 3,247,231,002.57 | 3,490,312,525.91 |
| Receipts in advance | 368,860.80 | 78,896.18 |
| Contractual liabilities | 1,316,384,668.74 | 1,854,572,406.22 |
| Payroll payable | 742,388,264.48 | 260,587,798.86 |
| Taxes and duties payable | 53,940,771.05 | 136,524,520.02 |
| Other payables | 9,513,887,394.94 | 6,874,487,463.94 |
| Including: Interest payable | ||
| Dividends payable | 86,490,742.04 | 86,490,742.04 |
| Held-for-sales liabilities | ||
| Non-current liabilities due within one year | 17,766,112.27 | 19,355,990.16 |
| Other current liabilities | 86,664,716.45 | 168,111,106.82 |
| Total current liabilities | 14,997,634,654.31 | 12,804,030,708.11 |
| Non-current liabilities: | ||
| Long-term loans | 1,100,000.00 | 1,100,000.00 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 247,778,172.74 | 262,346,944.44 |
| Long-term payables | 631,735,908.04 | 646,074,143.55 |
| Long-term payroll payable | ||
| Estimated liabilities | ||
| Deferred income | 147,405,764.87 | 90,960,005.58 |
| Deferred income tax liabilities | 48,751,418.36 | 58,991,118.22 |
| Other non-current liabilities | 1,931,554.36 | 1,931,554.36 |
| Total non-current liabilities | 1,078,702,818.37 | 1,061,403,766.15 |
| Total liabilities | 16,076,337,472.68 | 13,865,434,474.26 |
| Owners’ equity: | ||
| Share capital | 1,796,862,549.00 | 1,796,862,549.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 18,449,011,067.03 | 18,430,166,434.80 |
| Less: Treasury stock | 707,428,892.15 | 707,428,892.15 |
| Other comprehensive income | -54,646,721.46 | -32,221,472.36 |
| Special reserves | ||
| Surplus reserves | 2,529,297,618.08 | 2,529,297,618.08 |
| Undisturbed profits | 3,750,505,582.48 | 5,050,873,408.22 |
| Total owners’ equity | 25,763,601,202.98 | 27,067,549,645.59 |
| Total liabilities and owners’ equity | 41,839,938,675.66 | 40,932,984,119.85 |
3. Consolidated income statement
Unit: RMB
| Item | 2023 | 2022 |
| I. Total operating revenue | 39,111,292,156.00 | 36,488,372,649.73 |
| Including: Operating revenue | 39,111,292,156.00 | 36,488,372,649.73 |
| Interest income | ||
| Premiums earned | ||
| Fee and commission income | ||
| II. Total operating cost | 35,082,749,923.97 | 32,087,168,220.45 |
| Including: Operating cost | 28,744,517,640.29 | 26,883,485,305.46 |
| Interest expenses | ||
| Fee and commission expenses | ||
| Surrender value | ||
| Net payments for insurance claims | ||
| Net provision for insurance liability | ||
| Bond insurance expenses | ||
| Reinsurance expenses | ||
| Taxes and surcharges | 210,801,478.72 | 210,489,442.16 |
| Selling expenses | 4,992,157,591.11 | 4,165,563,900.91 |
| Administrative expenses | 1,058,503,523.90 | 833,784,263.46 |
| R&D expenses | 336,013,434.83 | 336,723,690.26 |
| Financial expenses | -259,243,744.88 | -342,878,381.80 |
| Including: Interest expenses | 49,601,252.93 | 67,849,588.22 |
| Interest income | 315,758,812.17 | 374,310,143.23 |
| Plus: other income | 83,315,147.32 | 104,727,718.20 |
| Investment income (loss is indicated with “-”) | 779,010,728.82 | 868,198,390.16 |
| Including: Income from investment in associates and joint ventures | 628,531,524.35 | 732,233,328.71 |
| Investment income from derecognition of financial assets at amortized cost | ||
| Exchange gains (loss is indicated with “-”) | ||
| Net exposure hedging income (loss is indicated with “-”) |
| Income from change in fair value (loss is indicated with “-”) | 123,566,330.46 | -619,902,948.31 |
| Credit impairment losses (loss is indicated with “-”) | -136,455,204.36 | -724,554,552.72 |
| Asset impairment losses (loss is indicated with “-”) | -58,127,562.23 | -664,338,618.92 |
| Gains from asset disposal (loss is indicated with “-”) | 10,654,438.38 | 5,944,768.41 |
| III. Operating profit (loss is indicated with “-”) | 4,830,506,110.42 | 3,371,279,186.10 |
| Plus: Non-operating revenue | 12,234,049.26 | 13,589,178.75 |
| Less: Non-operating expenses | 24,728,403.02 | 7,865,941.15 |
| IV. Total profit (total loss is indicated with “-”) | 4,818,011,756.66 | 3,377,002,423.70 |
| Less: Income tax expenses | 695,450,660.17 | 536,592,729.51 |
| V. Net profit (net loss is indicated with “-”) | 4,122,561,096.49 | 2,840,409,694.19 |
| (I) Classification by operation continuity | ||
| 1. Net profit from continuing operations (net loss is indicated with “-”) | 4,122,561,096.49 | 2,840,409,694.19 |
| 2. Net profit from discontinued operations (net loss is indicated with “-”) | ||
| (II) Classification by ownership | ||
| 1. Net profits attributable to the shareholders of the parent company (net loss to be listed with “-”) | 4,093,782,074.02 | 3,001,125,887.45 |
| 2. Minority interests (net loss to be listed with “-”) | 28,779,022.47 | -160,716,193.26 |
| VI. Other comprehensive income, net of tax | -21,847,821.78 | -81,412,436.29 |
| Other comprehensive income attributable to owners of parent company, net of tax | -21,450,521.18 | -70,601,453.60 |
| (I) Other comprehensive income that cannot be reclassified into profits or losses | -8,280,710.37 | 8,731,257.88 |
| 1. Changes arising from re-measurement of the defined benefit plan | ||
| 2. Other comprehensive income that cannot be reclassified into profits or losses under the equity method | -8,280,710.37 | 8,731,257.88 |
| 3. Changes in fair value of other equity instrument investments | ||
| 4. Changes in fair value of the enterprise’s credit risk | ||
| 5. Others | ||
| (II) Other comprehensive income that will be reclassified into profits or losses | -13,169,810.81 | -79,332,711.48 |
| 1. Other comprehensive income that can be reclassified into profits or losses under the equity method | -14,144,538.73 | -42,553,962.75 |
| 2. Changes in fair value of other debt investments | ||
| 3. Amount of the financial asset reclassified into other comprehensive income | ||
| 4. Provision for credit impairment of other debt investments | ||
| 5. Cash flow hedging reserves | ||
| 6. Exchange differences from translation of statements denominated in foreign currencies | 974,727.92 | -34,536,280.30 |
| 7. Others | -2,242,468.43 | |
| Other comprehensive income attributable to minority interests, net of tax | -397,300.60 | -10,810,982.69 |
| VII. Total comprehensive income | 4,100,713,274.71 | 2,758,997,257.90 |
| Total comprehensive income attributable to owners of parent company | 4,072,331,552.84 | 2,930,524,433.85 |
| Total comprehensive income attributable to minority interests | 28,381,721.87 | -171,527,175.95 |
| VIII. Earnings per share | ||
| (I) Basic earnings per share | 2.29 | 1.9 |
| (II) Diluted earnings per share | 2.29 | 1.9 |
Net profit realized by the combined party in business combination under common control before the business combination in thecurrent period was RMB 0.00, and net profit realized by the combined party in the previous period was RMB 0.Legal representative: Dong Ming Accounting officer: Ma Jia Head of accounting center: Xu Jing
4. Income statement of parent company
Unit: RMB
| Item | 2023 | 2022 |
| I. Operating revenue | 6,881,456,920.60 | 6,440,461,426.23 |
| Less: Operating cost | 3,165,134,772.87 | 2,980,435,577.07 |
| Taxes and surcharges | 83,265,593.34 | 83,793,052.47 |
| Selling expenses | 2,294,245,758.98 | 1,986,803,504.78 |
| Administrative expenses | 660,823,121.05 | 420,434,297.52 |
| R&D expenses | 250,038,194.42 | 259,720,011.08 |
| Financial expenses | -288,843,660.25 | -351,061,240.29 |
| Including: Interest expenses | 2,525,713.85 | 3,114,486.90 |
| Interest income | 289,024,747.89 | 345,551,878.59 |
| Plus: Other income | 27,816,279.64 | 48,895,921.37 |
| Investment income (loss is indicated with “-”) | 741,892,987.96 | 1,495,121,958.34 |
| Including: Income from investment in associates and joint ventures | 628,517,050.64 | 732,711,091.10 |
| Derecognized financial assets measured by amortized cost (loss is indicated with “-”) | ||
| Net exposure hedging income (loss is indicated with “-”) | ||
| Income from changes in fair value (loss is indicated with “-”) | 107,345,538.18 | -593,004,615.91 |
| Credit impairment losses (loss is indicated with “-”) | -2,956,484.71 | -2,152,245.84 |
| Asset impairment losses (loss is indicated with “-”) | -26,559,432.53 | -71,317,107.54 |
| Gains from asset disposal (loss is indicated with “-”) | -157,621.90 | 2,985,699.84 |
| II. Operating profit (loss is indicated with “-”) | 1,564,174,406.83 | 1,940,865,833.86 |
| Plus: Non-operating revenue | 5,136,425.36 | 1,165,403.30 |
| Less: Non-operating expenses | 11,785,458.74 | 4,689,343.77 |
| III. Total profit (total loss is indicated with “-”) | 1,557,525,373.45 | 1,937,341,893.39 |
| Less: Income tax expenses | 145,814,042.63 | 44,007,170.98 |
| IV. Net profit (net loss is indicated with “-”) | 1,411,711,330.82 | 1,893,334,722.41 |
| (I) Net profit from continuing operations (net loss is | 1,411,711,330.82 | 1,893,334,722.41 |
| indicated with “-”) | ||
| (II) Net profit from discontinued operations (net loss is indicated with “-”) | ||
| V. Other comprehensive income, net of tax | -22,425,249.10 | -33,822,704.87 |
| (I) Other comprehensive income that cannot be reclassified into profits or losses | -8,280,710.37 | 8,731,257.88 |
| 1. Changes arising from re-measurement of the defined benefit plan | ||
| 2. Other comprehensive income that cannot be reclassified into profits or losses under the equity method | -8,280,710.37 | 8,731,257.88 |
| 3. Changes in fair value of other equity instrument investments | ||
| 4. Changes in fair value of the enterprise’s credit risk | ||
| 5. Others | ||
| (II) Other comprehensive income that will be reclassified into profits or losses | -14,144,538.73 | -42,553,962.75 |
| 1. Other comprehensive income that can be reclassified into profits or losses under the equity method | -14,144,538.73 | -42,553,962.75 |
| 2. Changes in fair value of other debt investments | ||
| 3. Amount of the financial asset reclassified into other comprehensive income | ||
| 4. Provision for credit impairment of other debt investments | ||
| 5. Cash flow hedging reserves | ||
| 6. Exchange differences from translation of statements denominated in foreign currencies | ||
| 7. Others | ||
| VI. Total comprehensive income | 1,389,286,081.72 | 1,859,512,017.54 |
| VII. Earnings per share | ||
| (I) Basic earnings per share | ||
| (II) Diluted earnings per share |
5. Consolidated cash flow statement
Unit: RMB
| Item | 2023 | 2022 |
| I. Cash flows from operating activities: | ||
| Cash received from sales of goods or rendering of services | 40,638,627,018.49 | 38,216,566,841.97 |
| Net increase in customer deposits and placements from financial institutions | ||
| Net increase in borrowings from central bank | ||
| Net increase in placements from other financial institutions | ||
| Cash received from premiums of original insurance contracts | ||
| Net cash received from reinsurance business | ||
| Net increase in deposits of the insured and investment | ||
| Cash received from interest, fees and commissions |
| Net increase in placements from banks and other financial institutions | ||
| Net increase in repurchase business funds | ||
| Net cash received from acting trading of securities | ||
| Receipts from tax refunds | 4,858,426.21 | 159,371,374.98 |
| Other cash receipts related to operating activities | 689,121,507.54 | 741,693,854.55 |
| Subtotal of cash inflows from operating activities | 41,332,606,952.24 | 39,117,632,071.50 |
| Cash paid for goods purchased and services received | 29,797,492,545.65 | 28,680,616,058.63 |
| Net increase in loans and advances to customers | ||
| Net increase in deposits with central bank and other financial institutions | ||
| Cash paid for claim settlements on original insurance contract | ||
| Net increase in placements to banks and other financial institutions | ||
| Cash paid for interest, fees and commissions | ||
| Cash paid for policy dividends | ||
| Cash paid to and on behalf of employees | 2,585,937,678.63 | 2,281,828,435.31 |
| Payments of all types of taxes | 2,465,312,635.54 | 2,262,131,942.27 |
| Other cash paid relating to operating activities | 2,981,121,744.40 | 2,683,645,602.72 |
| Subtotal of cash outflows from operating activities | 37,829,864,604.22 | 35,908,222,038.93 |
| Net cash flows from operating activities | 3,502,742,348.02 | 3,209,410,032.57 |
| II. Cash flows from investment activities: | ||
| Cash received from disposal of investments | 2,558,487,934.50 | 5,080,545,532.47 |
| Cash received from returns on investments | 436,150,493.91 | 567,196,644.37 |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 282,170.75 | 4,079,069.83 |
| Net cash received from disposal of subsidiaries and other business units | 20,403,838.21 | |
| Other cash received relating to investment activities | 1,978,176,523.10 | 1,170,771,170.00 |
| Subtotal of cash inflows from investment activities | 4,973,097,122.26 | 6,842,996,254.88 |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | 575,507,137.90 | 446,732,820.54 |
| Cash paid for acquisition of investments | 73,700,000.00 | 11,654,869,186.44 |
| Net increase in pledged loans | ||
| Net cash paid for acquisition of subsidiaries and other business units | 569,283,888.24 | |
| Other cash paid relating to investment activities | 3,805,309,321.72 | 488,193,160.70 |
| Subtotal of cash outflows from investment activities | 4,454,516,459.62 | 13,159,079,055.92 |
| Net cash flows from investment activities | 518,580,662.64 | -6,316,082,801.04 |
| III. Cash flows from financing activities: | ||
| Cash received from absorption of investments | 2,670,000.00 | 144,736,386.38 |
| Including: Cash received from subsidiaries’ absorbing minority shareholder investment | 2,670,000.00 | 86,453,260.82 |
| Cash received from borrowings | 1,376,188,273.49 | 2,303,433,120.57 |
| Other cash received relating to financing activities | ||
| Subtotal of cash inflows from financing activities | 1,378,858,273.49 | 2,448,169,506.95 |
| Cash payments for settlement of debts | 1,424,233,267.77 | 2,238,287,969.20 |
| Cash payments for distribution of dividends and profits or repayment of interest | 2,767,483,369.05 | 2,121,590,675.38 |
| Including: Dividends and profits paid to minority shareholders by subsidiaries | 19,857,165.96 | 7,179,781.75 |
| Other cash payments relating to financing activities | 105,183,876.26 | 821,594,594.84 |
| Subtotal of cash outflows from financing activities | 4,296,900,513.08 | 5,181,473,239.42 |
| Net cash flow from financing activities | -2,918,042,239.59 | -2,733,303,732.47 |
| IV. Effect of foreign exchange rate changes on cash and cash equivalents | 2,324,684.95 | 16,271,671.09 |
| V. Net increase in cash and cash equivalents | 1,105,605,456.02 | -5,823,704,829.85 |
| Plus: Opening balance of cash and cash equivalents | 13,046,160,012.47 | 18,869,864,842.32 |
| VI. Closing balance of cash and cash equivalents | 14,151,765,468.49 | 13,046,160,012.47 |
6. Cash flow statement of parent company
Unit: RMB
| Item | 2023 | 2022 |
| I. Cash flows from operating activities: | ||
| Cash received from sales of goods or rendering of services | 5,929,733,284.63 | 5,971,394,259.14 |
| Receipts from tax refunds | 102,588.12 | |
| Other cash receipts related to operating activities | 5,099,663,267.49 | 7,591,371,481.08 |
| Subtotal of cash inflows from operating activities | 11,029,396,552.12 | 13,562,868,328.34 |
| Cash paid for goods purchased and services received | 1,876,454,451.95 | 2,371,484,892.90 |
| Cash paid to and on behalf of employees | 1,191,675,173.28 | 1,193,892,284.72 |
| Payments of all types of taxes | 858,867,113.63 | 910,654,949.88 |
| Other cash paid relating to operating activities | 4,152,898,161.48 | 3,983,548,611.15 |
| Subtotal of cash outflows from operating activities | 8,079,894,900.34 | 8,459,580,738.65 |
| Net cash flows from operating activities | 2,949,501,651.78 | 5,103,287,589.69 |
| II. Cash flows from investment activities: | ||
| Cash received from disposal of investments | 2,427,269,469.67 | 3,765,525,425.37 |
| Cash received from returns on investments | 424,094,233.80 | 551,710,773.52 |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 1,863,158.34 | |
| Net cash received from disposal of subsidiaries and other business units | 40,000,000.00 | |
| Other cash received relating to investment activities | 1,772,731,569.97 | |
| Subtotal of cash inflows from investment activities | 4,624,095,273.44 | 4,359,099,357.23 |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | 174,741,908.64 | 171,724,018.14 |
| Cash paid for acquisition of investments | 108,100,000.00 | 11,028,424,186.44 |
| Net cash paid for acquisition of subsidiaries and other business units | ||
| Other cash paid relating to investment activities | 3,804,472,300.00 | 450,000,000.00 |
| Subtotal of cash outflows from investment activities | 4,087,314,208.64 | 11,650,148,204.58 |
| Net cash flows from investment activities | 536,781,064.80 | -7,291,048,847.35 |
| III. Cash flows from financing activities: | ||
| Cash received from absorption of investments | 58,283,125.56 | |
| Cash received from borrowings | 19,000,000.00 | |
| Other cash received relating to financing activities | ||
| Subtotal of cash inflows from financing activities | 19,000,000.00 | 58,283,125.56 |
| Cash payments for settlement of debts | ||
| Cash payments for distribution of dividends and profits or repayment of interest | 2,712,079,156.56 | 2,052,825,115.20 |
| Other cash payments relating to financing activities | 2,220,005.75 | 709,957,733.50 |
| Subtotal of cash outflows from financing activities | 2,714,299,162.31 | 2,762,782,848.70 |
| Net cash flow from financing activities | -2,695,299,162.31 | -2,704,499,723.14 |
| IV. Effect of foreign exchange rate changes on cash and cash equivalents | -473,889.11 | 113,384.75 |
| V. Net increase in cash and cash equivalents | 790,509,665.16 | -4,892,147,596.05 |
| Plus: Opening balance of cash and cash equivalents | 10,750,790,137.56 | 15,642,937,733.61 |
| VI. Closing balance of cash and cash equivalents | 11,541,299,802.72 | 10,750,790,137.56 |
7. Consolidated statement of changes in owners’ equity
Amount for the current period
Unit: RMB
| Item | 2023 | ||||||||||||||
| Owner’s equity attributable to parent company | Minority interests | Total owners’ equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Provision for general risk | Undisturbed profits | Others | Subtotal | |||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| I. Closing balance of the previous year | 1,796,862,549.00 | 18,231,423,838.72 | 707,428,892.15 | -68,087,650.95 | 2,530,458,968.58 | 16,720,444,918.66 | 38,503,673,731.86 | 23,323,529.93 | 38,526,997,261.79 | ||||||
| Plus: Changes in accounting policies | |||||||||||||||
| Correction of errors in the prior period | |||||||||||||||
| Others | |||||||||||||||
| II. Opening balance of the current period | 1,796,862,549.00 | 18,231,423,838.72 | 707,428,892.15 | -68,087,650.95 | 2,530,458,968.58 | 16,720,444,918.66 | 38,503,673,731.86 | 23,323,529.93 | 38,526,997,261.79 | ||||||
| III. Increase/decrease for the period (decrease is indicated with “-”) | 15,195,903.37 | -21,450,521.18 | 1,381,702,917.46 | 1,375,448,299.65 | 2,914,820.78 | 1,378,363,120.43 | |||||||||
| (I) Total comprehensive income | -21,450,521.18 | 4,093,782,074.02 | 4,072,331,552.84 | 28,381,721.87 | 4,100,713,274.71 | ||||||||||
| (II) Contribution and withdrawal of capital by owners | -3,648,728.86 | -3,648,728.86 | -8,532,477.14 | -12,181,206.00 | |||||||||||
| 1．Ordinary shares invested by owners | -2,230,000.00 | -2,230,000.00 | |||||||||||||
| 2．Capital invested by holders of other equity instruments | |||||||||||||||
| 3．Amount of share payment credited to owners’ equity | |||||||||||||||
| 4．Others | -3,648,728.86 | -3,648,728.86 | -6,302,477.14 | -9,951,206.00 | |||||||||||
| (III) Profit distribution | -2,712,079,156.56 | -2,712,079,156.56 | -16,934,423.95 | -2,729,013,580.51 | |||||||||||
| 1．Withdrawal of surplus reserves | |||||||||||||||
| 2．Withdrawal of general risk provision | |||||||||||||||
| 3．Distribution to owners (or shareholders) | -2,712,079,156.56 | -2,712,079,156.56 | -16,934,423.95 | -2,729,013,580.51 | |||||||||||
| 4．Others | |||||||||||||||
| (IV) Internal carry-over of owner’s equity | |||||||||||||||
| 1．Transfer of capital reserves to capital (or share capital) | |||||||||||||||
| 2．Transfer of surplus reserves to capital (or share capital) | |||||||||||||||
| 3．Covering loss with surplus reserves | |||||||||||||||
| 4．Change of defined benefit plan carried forward to retained earnings | |||||||||||||||
| 5．Other comprehensive income carried forward to retained earnings | |||||||||||||||
| 6．Others | |||||||||||||||
| (V) Special reserves | |||||||||||||||
| 1．Provision for the period | |||||||||||||||
| 2．Utilization for the period | |||||||||||||||
| (VI) Others | 18,844,632.23 | 18,844,632.23 | 18,844,632.23 |
| IV. Closing balance for the period | 1,796,862,549.00 | 18,246,619,742.09 | 707,428,892.15 | -89,538,172.13 | 2,530,458,968.58 | 18,102,147,836.12 | 39,879,122,031.51 | 26,238,350.71 | 39,905,360,382.22 |
Amount for the previous year
Unit: RMB
| Item | 2022 | ||||||||||||||
| Owner’s equity attributable to parent company | Minority interests | Total owners’ equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Provision for general risk | Undisturbed profits | Others | Subtotal | |||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| I. Closing balance of the previous year | 1,282,715,242.00 | 18,126,393,630.22 | 2,513,802.65 | 2,530,458,968.58 | 16,285,350,424.41 | 38,227,432,067.86 | 207,710,297.10 | 38,435,142,364.96 | |||||||
| Plus: Changes in accounting policies | |||||||||||||||
| Correction of errors in the prior period | |||||||||||||||
| Others | |||||||||||||||
| II. Opening balance of the current period | 1,282,715,242.00 | 18,126,393,630.22 | 2,513,802.65 | 2,530,458,968.58 | 16,285,350,424.41 | 38,227,432,067.86 | 207,710,297.10 | 38,435,142,364.96 | |||||||
| III. Increase/decrease for the period (decrease is indicated with “-”) | 514,147,307.00 | 105,030,208.50 | 707,428,892.15 | -70,601,453.60 | 435,094,494.25 | 276,241,664.00 | -184,386,767.17 | 91,854,896.83 | |||||||
| (I) Total comprehensive income | -70,601,453.60 | 3,001,125,887.45 | 2,930,524,433.85 | -171,527,175.95 | 2,758,997,257.90 | ||||||||||
| (II) Contribution and withdrawal of capital by owners | 514,147,307.00 | 131,299,489.88 | 707,428,892.15 | -61,982,095.27 | 17,527,623.88 | -44,454,471.39 | |||||||||
| 1. Ordinary shares invested by owners | 17,527,623.88 | 17,527,623.88 | |||||||||||||
| 2. Capital invested by holders of other equity instruments | |||||||||||||||
| 3. Amount of share | 514,147,307.00 | 54,468,696.05 | 707,428,892.15 | -138,812,889.10 | -138,812,889.10 | ||||||||||
| payment credited to owners’ equity | |||||||||||||||
| 4. Others | 76,830,793.83 | 76,830,793.83 | 76,830,793.83 | ||||||||||||
| (III) Profit distribution | -2,566,031,393.20 | -2,566,031,393.20 | -8,896,212.33 | -2,574,927,605.53 | |||||||||||
| 1. Withdrawal of surplus reserves | |||||||||||||||
| 2. Withdrawal of general risk provision | |||||||||||||||
| 3. Distribution to owners (or shareholders) | -2,566,031,393.20 | -2,566,031,393.20 | -8,896,212.33 | -2,574,927,605.53 | |||||||||||
| 4. Others | |||||||||||||||
| (IV) Internal carry-over of owner’s equity | |||||||||||||||
| 1. Transfer of capital reserves to capital (or share capital) | |||||||||||||||
| 2. Transfer of surplus reserves to capital (or share capital) | |||||||||||||||
| 3. Covering loss with surplus reserves | |||||||||||||||
| 4. Change of defined benefit plan carried forward to retained earnings | |||||||||||||||
| 5. Other comprehensive income carried forward to retained earnings | |||||||||||||||
| 6. Others | |||||||||||||||
| (V) Special reserves | |||||||||||||||
| 1. Provision for the period | |||||||||||||||
| 2. Utilization for |
| the period | |||||||||||||||
| (VI) Others | -26,269,281.38 | -26,269,281.38 | -21,491,002.77 | -47,760,284.15 | |||||||||||
| IV. Closing balance for the period | 1,796,862,549.00 | 18,231,423,838.72 | 707,428,892.15 | -68,087,650.95 | 2,530,458,968.58 | 16,720,444,918.66 | 38,503,673,731.86 | 23,323,529.93 | 38,526,997,261.79 |
8. Statement of changes in owners’ equity of parent company
Amount for the current period
Unit: RMB
| Item | 2023 | |||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Undisturbed profits | Others | Total owners’ equity | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| I. Closing balance of the previous year | 1,796,862,549.00 | 18,430,166,434.80 | 707,428,892.15 | -32,221,472.36 | 2,529,297,618.08 | 5,050,873,408.22 | 27,067,549,645.59 | |||||
| Plus: Changes in accounting policies | ||||||||||||
| Correction of errors in the prior period | ||||||||||||
| Others | ||||||||||||
| II. Opening balance of the current period | 1,796,862,549.00 | 18,430,166,434.80 | 707,428,892.15 | -32,221,472.36 | 2,529,297,618.08 | 5,050,873,408.22 | 27,067,549,645.59 | |||||
| III. Increase/decrease for the period (decrease is indicated with “-”) | 18,844,632.23 | -22,425,249.10 | -1,300,367,825.74 | -1,303,948,442.61 | ||||||||
| (I) Total comprehensive income | -22,425,249.10 | 1,411,711,330.82 | 1,389,286,081.72 | |||||||||
| (II) Contribution and withdrawal of capital by owners | ||||||||||||
| 1. Ordinary shares invested by owners | ||||||||||||
| 2. Capital invested by holders of other equity instruments | ||||||||||||
| 3. Amount of share payment credited to owners’ equity | ||||||||||||
| 4. Others | ||||||||||||
| (III) Profit distribution | -2,712,079,156.56 | -2,712,079,156.56 | ||||||||||
| 1. Withdrawal of surplus reserves | ||||||||||||
| 2. Distribution to owners (or shareholders) | -2,712,079,156.56 | -2,712,079,156.56 | ||||||||||
| 3. Others | ||||||||||||
| (IV) Internal carry-over of owner’s equity | ||||||||||||
| 1. Transfer of capital reserves to capital (or share capital) | ||||||||||||
| 2. Transfer of surplus reserves to capital (or share capital) | ||||||||||||
| 3. Covering loss with surplus reserves | ||||||||||||
| 4. Change of defined benefit plan carried forward to retained earnings | ||||||||||||
| 5. Other comprehensive income carried forward to retained earnings | ||||||||||||
| 6. Others | ||||||||||||
| (V) Special reserves | ||||||||||||
| 1. Provision for the period |
Amount for the previous year
Unit: RMB
| 2. Utilization for the period | ||||||||||||
| (VI) Others | 18,844,632.23 | 18,844,632.23 | ||||||||||
| IV. Closing balance for the period | 1,796,862,549.00 | 18,449,011,067.03 | 707,428,892.15 | -54,646,721.46 | 2,529,297,618.08 | 3,750,505,582.48 | 25,763,601,202.98 |
Item
| Item | 2022 | |||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury stock | Other comprehensive income | Special reserves | Surplus reserves | Undisturbed profits | Others | Total owners’ equity | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| I. Closing balance of the previous year | 1,282,715,242.00 | 18,401,967,020.13 | 1,601,232.51 | 2,529,297,618.08 | 5,723,570,079.01 | 27,939,151,191.73 | ||||||
| Plus: Changes in accounting policies | ||||||||||||
| Correction of errors in the prior period | ||||||||||||
| Others | ||||||||||||
| II. Opening balance of the current period | 1,282,715,242.00 | 18,401,967,020.13 | 1,601,232.51 | 2,529,297,618.08 | 5,723,570,079.01 | 27,939,151,191.73 | ||||||
| III. Increase/decrease for the period (decrease is indicated with “-”) | 514,147,307.00 | 28,199,414.67 | 707,428,892.15 | -33,822,704.87 | -672,696,670.79 | -871,601,546.14 | ||||||
| (I) Total comprehensive income | -33,822,704.87 | 1,893,334,722.41 | 1,859,512,017.54 | |||||||||
| (II) Contribution and withdrawal of capital by owners | 514,147,307.00 | 54,468,696.05 | 707,428,892.15 | -138,812,889.10 | ||||||||
| 1. Ordinary shares invested by owners | ||||||||||||
| 2. Capital invested by holders of other equity instruments | ||||||||||||
| 3. Amount of share payment credited to | 514,147,307.00 | 54,468,696.05 | 707,428,892.15 | -138,812,889.10 | ||||||||
| owners’ equity | ||||||||||||
| 4. Others | ||||||||||||
| (III) Profit distribution | -2,566,031,393.20 | -2,566,031,393.20 | ||||||||||
| 1. Withdrawal of surplus reserves | ||||||||||||
| 2. Distribution to owners (or shareholders) | -2,566,031,393.20 | -2,566,031,393.20 | ||||||||||
| 3. Others | ||||||||||||
| (IV) Internal carry-over of owner’s equity | ||||||||||||
| 1. Transfer of capital reserves to capital (or share capital) | ||||||||||||
| 2. Transfer of surplus reserves to capital (or share capital) | ||||||||||||
| 3. Covering loss with surplus reserves | ||||||||||||
| 4. Change of defined benefit plan carried forward to retained earnings | ||||||||||||
| 5. Other comprehensive income carried forward to retained earnings | ||||||||||||
| 6. Others | ||||||||||||
| (V) Special reserves | ||||||||||||
| 1. Provision for the period | ||||||||||||
| 2. Utilization for the period | ||||||||||||
| (VI) Others | -26,269,281.38 | -26,269,281.38 | ||||||||||
| IV. Closing balance for the period | 1,796,862,549.00 | 18,430,166,434.80 | 707,428,892.15 | -32,221,472.36 | 2,529,297,618.08 | 5,050,873,408.22 | 27,067,549,645.59 |
III. Basic Information of the Company
1. Place of registration, form of organization and address of headquarters of the CompanyThe registered address of Yunnan Baiyao Group Co., Ltd is No.3686 Yunnan Baiyao Street, ChenggongDistrict, Kunming, Yunnan Province. The Company is established as a joint-stock limited company with its headoffice located at No.3686 Yunnan Baiyao Street, Chenggong District, Kunming, Yunnan Province.
2. History of the Company
The Company was formerly known as Yunnan Baiyao Factory, which was established in June 1971. On May3, 1993, Yunnan Provincial System Reform Committee approved the establishment of Yunnan Baiyao IndustrialCo., Ltd in the Document Yun Ti Gai [1993] No.48. The Company’s sponsors were Yunnan Baiyao Factory,Yunnan Fudian Trust and Investment Company and Lianjiang International Trade Co., Ltd. On June 18, 1993,the Economic System Reform Commission and the Planning Commission of Yunnan Province jointly issued theDocument Yun Ti Gai [1993] No.74 to approve the Company’s public offering of RMB 20 million of individualshares (in the par value of the shares). On June 24, 1993, the Administration of State-owned Assets of YunnanProvince issued the Document Yun Guo Zi Zi (1993) No.37 to confirm the appraisal results of Yunnan BaiyaoFactory and decided to set up RMB 40 million of national capital stock, amounting to 40 million shares. YunnanBaiyao Industrial Co., Ltd was approved by CSRC under the Document Zheng Jian Fa Shen Zi (1993) No.55 toissue 20 million RMB-denominated ordinary shares to the public. Yunnan Baiyao issued 20 million shares to thepublic in November 1993, of which 18 million shares were issued to the public individuals and 2 million sharesto the Company’s internal employees.
On November 30, 1993, the Company was registered as a joint-stock limited company with theAdministration for Industry and Commerce of Yunnan Province, and on December 15, 1993, the public sharesissued by the Company were listed on the Shenzhen Stock Exchange, with a total share capital of 80 millionshares and a stock code of “000538.”
In accordance with the resolutions passed at the third Extraordinary General Meeting of the fifth Board ofDirectors of the Company in 2008 on August 11, 2008, and at the first Extraordinary General Meeting of theCompany in 2008 on August 27, 2008, and the approval by the CSRC on the Document (2008) No.1411 Reply onApproving the Private Issuance of Shares of Yunnan Baiyao Group Co., Ltd, the Company issued 50,000,000 newshares to Ping An Life Insurance Company of China Limited in a private offering, raising funds of RMB1,393,500,000.00 (including issuance expenses), all of which were subscribed in cash. The share capital of theCompany increased from 484,051,138 shares to 534,051,138 shares after the implementation of the aboveprivate offerings.
In accordance with the 2009 Annual Equity Distribution Plan approved at the General Meeting of the Companyin May 2010, 3 shares were issued to all shareholders from the capital reserve as a bonus for every 10 shares held.The Company’s share capital amounted to 534,051,138 shares prior to the distribution, and the total share capitalincreased to 694,266,479 shares after the distribution.
The 2013 Annual General Meeting was held on May 8, 2014, and in accordance with the resolution of themeeting and the amended articles of association, the shareholders of the Company increased the registered capitalby RMB 347,133,239.00. The newly registered capital would be increased by the distribution of 5 bonus shares for
every 10 shares to all shareholders based on the Company’s existing total share capital of 694,266,479 shares. Afterthe change, the share capital of the Company increased from 694,266,479 shares to 1,041,399,718 shares.
The Company underwent a merger and overall listing with Baiyao Holdings by issuing shares to threeshareholders of Baiyao Holdings: SASAC of Yunnan Province, New Huadu and Jiangsu Yuyue. This merger andoverall listing were successfully completed on June 1, 2019, with the Company as the existing entity. As a result,the Company acquired all the assets, liabilities, businesses, contracts, and other rights and obligations of BaiyaoHoldings. Following the completion of the transaction, the 432,426,597 shares of the listed company previouslyheld by Baiyao Holdings were canceled. The merger and overall listing brought in a newly registered capital ofRMB 236,003,599.00, and the Company’s total share capital amounted to RMB 1,277,403,317.00 after this change.A total of 236,003,599 newly issued shares subject to trading moratorium were issued, with a listing date of July 3,2019, and the shares were listed on the Shenzhen Stock Exchange. Upon completion of this transaction, SASAC ofYunnan Province and New Huadu with its acting-in-concert parties, were equally the largest shareholder of theCompany, and neither of them obtained control over the Company.On May 22, 2020, SASAC of Yunnan Province transferred its 321,160,222 shares of the Company to YunnanState-owned Equity Operation Management Company at nil consideration. Upon completion of this transfer,Yunnan State-owned Equity Operation Management Company and New Huadu with its acting-in-concert parties,were equally the largest shareholder of the Company, and there was no change in the Company’s situation of nothaving a de facto controller or controlling shareholder.On December 8, 2021, SASAC of Yunnan Province transferred 100% of its shares of Yunnan State-ownedEquity Operation Management Company into Yunnan Investment Group. After the equity transfer, YunnanInvestment Group held 321,160,222 shares of the Company through the Yunnan State-owned Equity OperationManagement Company, accounting for 25.04% of the total share capital of the Company. Yunnan State-ownedEquity Operation Management Company and New Huadu with its acting-in-concert parties, were equally the largestshareholder of the Company, and there was no change in the Company’s situation of not having a de facto controlleror controlling shareholder.On April 20, 2022, the Company’s 2021 Annual Equity Distribution Plan had been considered and approvedat the Company’s 2021 Annual General Meeting, and the details of 2021 Annual Equity Distribution Plan were asfollows: Based on the total share capital on the equity registration date when the distribution plan was implementedin the future, a cash dividend of RMB 16.00 (including tax) for every 10 shares and 4.00 bonus shares (includingtax) for every 10 shares would be distributed to all shareholders, and there would be no conversion of share capitalfrom the capital reserve. On April 21, 2020, the fourth session of the Ninth Board of Directors of the Company for2020 and the third session of the Ninth Supervisory Committee of the Company for 2020 respectively consideredand approved the Proposal on Granting Stock Options (Initially Granted Part) to Incentive Participants of the 2020Equity Incentive Plan. As of December 31, 2022, the Company had completed distributing dividends of513,206,278 shares and stock exercises of 941,029 shares, increasing its share capital to 1,796,862,549 shares.
3. Business nature and principal businesses of the Company
The business nature and operating activities of the Company and its subsidiaries (collectively referred to asthe “Group”) mainly include: R&D, manufacturing, and sales of chemical APIs, chemical preparations, Chinese
patent medicines, TCM materials, biological products, medical devices, healthcare food, food, beverages, speciallabor protection products, non-household textile products, daily chemical products, cosmetics, outdoor products;Sales of rubber pastes, plasters, disinfectant products, electronic and digital products; Information technology,science and technology and economic and technological consulting services; Import and export of goods; Propertyoperation and management (carrying out business activities with qualification certificates), wholesale and retail ofdrugs, logistics and distribution, etc (For items that require approval according to law, business activities of theseprojects can only be carried out after approval by relevant departments).
4. These financial statements were approved for reporting by a resolution of the Board of Directors of theCompany dated March 28, 2024.As of December 31, 2023, there were 107 subsidiaries and structured entities included in the scope of theGroup’s consolidated financial statements. For details, please refer to Note IX “Interest in Other Entities.” TheGroup had 21 new entities included in its consolidated financial statements compared to the end of the previous
year, while 11 entities were excluded. For details, please refer to Note VIII “Changes in Consolidation Scope.”
IV. Basis for Preparation of Financial Statements
1. Basis for preparation
The financial statements of the Group are prepared on the basis of going concern assumptions, based on actualtransactions and events that occur and in accordance with the Accounting Standards for Business Enterprises - BasicStandards issued by the Ministry of Finance (issued by Decree No. 33 of the Ministry of Finance, revised by DecreeNo. 76 of the Ministry of Finance), 41 specific accounting standards, Guidelines for the Application of AccountingStandards for Business Enterprises, interpretations of Accounting Standards for Business Enterprises and otherrelevant provisions promulgated and revised on and after February 15, 2006 (collectively “Accounting Standardsfor Business Enterprises” or “ASBEs”), as well the disclosure provisions of the Rules No.15 for Governing theDisclosure of Information by Companies Issuing Public Securities - General Provisions for Financial Reporting(Revised in 2014) issued by CSRC.
In accordance with the relevant provisions of the Accounting Standards for Business Enterprises, the Group’saccounting is based on the accrual basis. Except for certain financial instruments, these financial statements areprepared at historical cost. In case of asset impairment, provision for impairment would be made according to therelevant regulations.
2. Going concern basis
The Company and the Group evaluated their abilities to continue as a going concern for the 12 months fromthe end of the reporting period and there are no material matters affecting their abilities to continue as a goingconcern.
V．Significant Accounting Policies and Accounting Estimates
Notes on specific accounting policies and accounting estimates:
Based on the actual production and operation characteristics and in accordance with the provisions of relevantaccounting standards for enterprises, the Group has formulated a number of specific accounting policies and
accounting estimates for transactions and matters such as revenue recognition and R&D expenses. For details, seethe descriptions under Section 37 “Revenue” under this Note V. For the descriptions of significant accountingjudgments and estimates made by the management, please refer to Section 43 “Significant Accounting Judgmentsand Accounting Estimates” under this Note V.
1. Statement of compliance with the ASBEs
The financial statements prepared by the Company are in compliance with the requirements of the AccountingStandards for Business Enterprises (ASBEs), and have reflected truly and completely such relevant information asthe financial positions of the Company and the Group as of December 31, 2023 as well as the business results andcash flows of the Company and the Group for 2023. In addition, all significant aspects of the financial statementsof the Company and the Group also comply with the disclosure requirements about the financial statements andtheir notes in the Rules No.15 for Governing the Disclosure of Information by Companies Issuing Public Securities- General Provisions for Financial Reporting as amended by the CSRC in 2023.
2. Accounting period
The Group’s accounting periods are divided into annual and interim periods. An interim period refers to areporting period less than a full accounting year. The accounting year of the Group is the calendar year that startsfrom January 1 and ends on December 31.
3. Operating cycle
The normal operating cycle refers to the period from purchasing the assets for processing to realizing the cashor cash equivalents. The operating cycle of the Group consists of 12 months which is the standard of theclassification for the liquidity of the assets and liabilities.
4. Reporting currency
RMB is the currency used in the major economic environment where the Company and its domesticsubsidiaries operate. The reporting currency of the Company and its domestic subsidiaries is RMB. The Company’sforeign subsidiaries select HKD as their reporting currencies based on the currency of the primary economicenvironment in which they operate. The currency used by the Group in preparing the financial statements is RMB.
5. Determination method and selection basis of materiality standards
?Applicable□Not applicable
| Item | Materiality standards |
| Significant accounts receivable, bad debt provisions to be recovered or reversed | The single provision amount accounts for more than 10% of the total amount of bad debt provision for various types of receivables and the amount is greater than RMB 5 million. |
| Actual write-off of significant receivables | The value of a single item is greater than RMB 5 million |
| Significant construction in progress | Projects with budgets exceeding RMB 50 million or deemed to be of significance. |
| Significant advance receipts | The amount of a single advance receipt with an age of more than 1 year is greater than RMB 5 million |
| Significant contract liabilities | A single contractual liability with an age of more than 1 year accounts for more than 10% of the total contractual liabilities and the amount is greater than RMB 100 million |
6. Accounting treatment for business combination under common control and not under common controlA business combination refers to the transaction or matter in which one reporting subject formed due to thecombination of two or above separate entities. A business combination can be classified as the combination undercommon control and not under common control.
(1) Business combination under common control
A business combination under common control is a business combination in which all of the combining entitiesare ultimately controlled by the same party or parties both before and after the combination, and that control is nottransitory. For a business combination under common control, the party that obtains the control of the other partieson the combination date is the acquirer, and other parties involving in the business combination are the acquirees.The combination date is the date on which the acquirer effectively obtains the control of the acquirees.
Assets and liabilities that are obtained by the acquirer in a business combination shall be measured at theirbook value at the combination date as recorded by the acquirees. The difference between the book value of the netassets obtained and the book value of the consideration paid by the acquirer for the combination (or the aggregatepar value of the issued shares) shall be adjusted to share premium under capital reserve (or capital premium). If theshare premium under capital reserve (or capital premium) is not sufficient to absorb the difference, any excess shallbe adjusted against retained earnings.
Expenses that are directly attributable to the business combination by the acquirer are charged to the currentprofits and losses in which they are incurred.
(2) Business combination not under common control
| Significant accounts payable aged over one year or overdue | The amount of a single account payable is greater than RMB 5 million |
| Significant other payables aged over one year or overdue | The amount of a single item is greater than RMB 5 million |
| Significant dividends payable outstanding for over one year | The amount of a single item is greater than RMB 100 million |
| Receipts and payments of significant cash related to investment activities | The amount of a single item is greater than RMB 100 million |
| Significant offshore operating entity | The net assets of the economic entity exceed RMB 100 million |
| Significant structured entity | The net assets of the structured entity exceed RMB 2 million |
| Significant non-wholly-owned subsidiaries | The net assets of the subsidiary exceed RMB 100 million |
| Significant capitalized R&D projects | The year-end balance of a single project exceeds RMB 50 million |
| Significant outsourced project under research | The amount of a single project accounts for more than 20% of the total R&D investment |
| Significant investment activities | A single investment activity accounts for more than 10% of the total cash inflow or outflow related to the investment activities and the amount is greater than RMB 1 billion |
| Significant joint ventures or associates | The book value of long-term equity investment in a single investee account for more than 5% of the Group’s net assets and the amount is greater than RMB 1 billion, or the investment profit and loss under the long-term equity investment equity method accounts for more than 10% of the Group’s consolidated net profit |
| Significant subsidiaries | The net assets of the subsidiary account for more than 10% of the Group’s net assets, or the net profits of subsidiary account for more than 10% of the Group’s consolidated profits, and the subsidiaries with significant strategic position |
A business combination not under common control is a business combination in which all of the combiningentities are not ultimately controlled by the same party or parties both before and after the combination. For abusiness combination not under common control, the party that obtains the control of the other parties on theacquisition date is the acquirer; other parties involving in the business combination are the acquirees. The acquisitiondate is the date on which the acquirer effectively obtains control of the acquirees.For a business combination not under common control, the cost of business combination is the fair value ofassets paid, liabilities incurred or undertaken, and equity securities issued by the acquirer for obtaining the controlof the acquirees at the acquisition date. Expenses that are attributable to the business combination such as audit fees,legal services fees, consultancy fees and other administration expenses incurred by the Company as acquirer areexpensed in the current profits and losses in which they are incurred. Transaction fees of equity securities or debtsecurities issued by the acquirer as consideration for a business combination are included in the initially recognizedamount of equity securities or debt securities. Contingent consideration involved is recorded as the combination costat its fair value on the acquisition date. Should any new or further evidence in relation to the circumstances existingon the acquisition date arise within 12 months after the acquisition date, making it necessary to adjust the contingentconsideration, the goodwill arising from the business combination shall be adjusted accordingly. The cost ofcombination incurred and identifiable net assets obtained by the acquirer in a business combination are measured atfair value on the acquisition date. Where the cost of the combination exceeds the acquirer’s interest in the fair valueof the acquiree’s identifiable net assets on the acquisition date, the difference is recognized as goodwill; Where thecost of combination is lower than the acquirer’s interest in the fair value of the acquiree’s identifiable net assets onthe acquisition date, the difference is recognized in current profits and losses after a review of measurement for thefair value of identifiable assets, liabilities and contingent liabilities of the acquiree and the combination cost.In relation to the deductible temporary difference acquired from the acquiree, which was not recognized asdeferred tax assets due to non-fulfillment of the recognition criteria at the date of the acquisition, if new or furtherinformation that is obtained within 12 months after the acquisition date indicates that related conditions at theacquisition date already existed, and that the realization of the economic benefits brought by the deductibletemporary difference of the acquiree on the acquisition date can be expected, the relevant deferred tax assets shallbe recognized and goodwill shall be deducted accordingly. When the amount of goodwill is less than the deferredtax assets that shall be recognized, the difference shall be recognized in the current profits and losses. Except for theabove circumstances, deferred tax assets in relation to business combination are recognized in the current profitsand losses.For a business combination involving entities not under common control that is achieved in stages, theCompany shall determine whether the business combination shall be treated as “a bundle of transactions” inaccordance with the determination standards as contained in the Circular on the Publishment of Interpretation No.5on Accounting Standards for Business Enterprises Issued by the Ministry of Finance (Finance and Taxation [2012]No. 19) and Section 51 of Accounting Standards for Business Enterprises No.33 - Consolidated FinancialStatements (See Item (2) of Section 6 “Preparation of the consolidated financial statements” under this Note V).Where the business combination is treated as “a bundle of transactions,” the business combination shall be accountedfor in accordance with the previous paragraphs and Section 22 “Long-term equity investments” of this Note V;
where the business combination does not fall within “a bundle of transactions,” the business combination in theCompany’s and the consolidated financial statements shall be accounted for as follows:
In the Company’s financial statements, the initial cost of the investment shall be the sum of the book value ofequity investment held in the acquiree prior to the acquisition date and the amount of additional investment made tothe acquiree at the acquisition date. Other comprehensive income relating to the equity interest held in the acquireeprior to the acquisition date shall be, upon disposal of the investment, accounted for in accordance with the samebasis as that the acquiree adopts in directly disposing of relevant assets or liabilities.In the consolidated financial statements, the equity interest held in the acquiree prior to the acquisition date isre-measured according to its fair value at the acquisition date; the difference between the fair value and the bookvalue is recognized as investment income for the current period. Other comprehensive income relating to the equityinterest held in the acquiree prior to the acquisition date shall be accounted for in accordance with the same basis asthat the acquiree adopts in directly disposing of relevant assets or liabilities.
7. Judgement criteria of control and preparation of consolidated financial statements
(1) Criteria for the recognition of scope of consolidated financial statements
The scope of consolidation shall be determined based on the concept of control. Control means that the Grouphas power over the investee, enjoys variable returns through its participation in the investee’s related activities, andhas the ability to use its power over the investee to influence the amount of its returns. The consolidated financialstatements comprise the financial statements of the Company and all of its subsidiaries, which are defined as thoseentities controlled by the Group.
Once any change in the facts and circumstances arises which leads to a change in the elements involved in thedefinition of control, the Group will conduct an assessment.
(2) Preparation of consolidated financial statements
Subsidiaries are consolidated from the date on which the Group obtains their net assets and actual control overtheir operating decisions, and are deconsolidated from the date when such control ceases. For subsidiaries beingdisposed of, the business results and cash flows prior to the date of disposal are duly included in the consolidatedincome statement and consolidated cash flow statement; for subsidiaries disposed of during the period, the openingbalances of the consolidated balance sheet would not be restated. For subsidiaries acquired from a businesscombination not under common control, their operating results and cash flows subsequent to the acquisition dateare included in the consolidated income statement and consolidated cash flow statement, and the opening balancesand comparative figures in the consolidated financial statements would not be restated. For subsidiaries acquiredfrom a business combination under common control and acquirees from a merger by absorption, their operatingresults and cash flows from the date of commencement of the period in which the combination occurred to the dateof combination are included in the consolidated income statement and consolidated cash flow statement, and thecomparative figures in the consolidated financial statements would be restated.
In preparing the consolidated financial statements, where the accounting policies or the accounting periods areinconsistent between the Company and subsidiaries, the financial statements of subsidiaries are adjusted inaccordance with the accounting policies and accounting period of the Company. For subsidiaries acquired from a
business combination involving enterprises not under common control, the financial statements of the subsidiariesare adjusted based on the fair value of the identifiable net assets at the acquisition date.All significant intra-group balances, transactions and unrealized profits are offset in preparing the consolidatedfinancial statements.The portion of a subsidiary’s equity and the portion of a subsidiary’s net profits and losses for the period notattributable to the Company are recognized as minority interests and profits and losses attributable to minorityinterests respectively, which are presented under shareholders’ equity and net profit separately, in the consolidatedfinancial statement. A subsidiary’s net current profits and losses attributable to minority interests is recognized as“share of profits and losses of minority interests” under net profit in the consolidated income statement. When theamount of a subsidiary’s loss attributable to the minority shareholders exceeds the minority shareholders’ share ofthe opening balance of shareholders’ equity of the subsidiary, the excess is deducted from the minority interests.
In event of loss of control over a former subsidiary due to disposal of certain equity investments or other reasons,any retained equity is re-measured at its fair value on the date when the control is lost. The surplus of the aggregateconsiderations received upon disposal of equity plus the fair value of any retained equity less the share of net assetsin the former subsidiary calculated cumulatively from the acquisition date based on the original shareholdingpercentage is included in the investment income for the period when the control is lost. Other comprehensive incomerelated to the equity investment in the former subsidiary shall be accounted for on the same basis at the time of lossof control as the subsidiary directly disposed of the related asset or liability. Then, the remaining equity shall bemeasured subsequently in accordance with the Accounting Standards for Business Enterprises No. 2 - Long-termEquity Investments or Accounting Standards for Business Enterprises No. 22 - The Recognition and Measurementof Financial Instruments and other regulations. For details, please see Section 22 “Long-term equity investments”or Section 11 “Financial instruments” under this Note V.For disposal of the Group’s equity investments in a subsidiary in phases through multiple transactions untilloss of control, it is determined based on whether such transactions should be regarded as a bundle of transactions.If the terms, conditions and economic effects of all transactions are conducted for the purpose of disposing of theequity investments in a subsidiary and meet the following one or more criteria, it is usually shown that such multipletransactions are deemed as a bundle of transactions for accounting treatment: ① These transactions were enteredinto at the same time or upon the consideration of the effects therebetween; ② These transactions can only generateone complete business result when conducted all together; ③ The occurrence of one transaction depends on theoccurrence of at least one other transaction; and ④ One transaction alone is not economical, but is economicalwhen considered with other transactions. When the transactions do not constitute a bundle of transactions, eachtransaction thereof shall be accounted in accordance with principles applicable to the “disposal of part of long-termequity investments in a subsidiary that does not result in the loss of control” (please see Item (2) ④ of Section 22“Long-term equity investments” under this Note V for details) and “loss of control over a former subsidiary due todisposal of certain equity investments or other reasons” (please see the preceding paragraph for details). If suchtransactions fall under a bundle of transactions, those transactions are accounted for as one deal under which thesubsidiary is disposed of and control is lost. However, before the control over the subsidiary is lost, the surplus
between consideration received for each disposal and the value of corresponding share of net assets in the subsidiaryentitled by the investment underlying the disposal shall be recognized as other comprehensive income in theconsolidated financial statements, and, when control is lost, converted into investment income or loss for the periodin which control is lost.
8. Classification of joint venture arrangements and accounting treatment method for joint operationsJoint venture arrangement means an arrangement under the common control of two or more parties. The Groupclassifies the joint venture arrangement into joint operations and joint ventures based on the rights and obligationsit enjoys and assumes in the joint venture arrangement. Joint operation means a joint venture arrangement in whichthe Group owns the assets and assumes the liabilities associated with the arrangement. Joint venture means a jointventure arrangement in which the Group only has rights to the net assets of the arrangement.The Group’s investments in joint ventures are accounted for using the equity method and are treated inaccordance with the accounting policies described in Item (2) ② “Long-term equity investments accounted forusing the equity method” in Section 22 “Long-term equity investments” under this Note V.
For the joint operations, the Group, as a joint venture party, recognizes the assets and liabilities separately heldby the Group, as well as the assets and liabilities jointly held by the Group in accordance with the Group’s share;recognizes the income arising from the disposal of the Group’s share of joint operation output; recognizes the incomefrom the sale of outputs from joint operations based on the Group’s share; and recognizes the expenses incurred bythe Group alone and the expenses incurred based on the Group’s share in the joint operation.
When the Group, as a joint venture party, invests in or sells assets to the joint venture (which do not constitutea business, the same below), or purchases assets from the joint operation, the Group recognizes only those portionsof the profits and losses arising from the transaction that are attributable to other participants in the joint operation,prior to the sale of such assets to a third party. In the event that such assets incur asset impairment losses inaccordance with the provisions of Accounting Standard for Enterprises No. 8 - Asset Impairment, the Group willfully recognize such losses if the assets are invested or sold by the Group to the joint operation; In the case of assetspurchased by the Group from the joint operation, the Group will recognize such losses on the basis of its share ofcommitment.
9. Determination standards for cash and cash equivalents
Cash and cash equivalents of the Group include the cash on hand, deposits that can be used for payment at anytime, the investments that are held for a short period of time (generally maturing within three months from the dateof purchase) which are highly liquid, easily convertible to known amounts of cash, and having minimal risk ofchanges in value.
10. Foreign currency business and foreign currency statement translation
The method for determining the conversion exchange rate in foreign currency transactions
Upon initial recognition, the foreign currency transactions of the Group are converted into the amount ofreporting currency according to the spot exchange rate of the trading day (usually referring to the median price ofthe foreign exchange rate of the day published by the People’s Bank of China, the same below).
(1) Translation of foreign currency monetary items and foreign currency non-monetary items
On the balance sheet date, if the foreign currency monetary items are translated at the spot rate of the balancesheet date, the resulting exchange difference, except for ① Exchange differences arising from special loansin foreign currencies related to the acquisition and construction of assets eligible for capitalization, which shall betreated in accordance with the principle of capitalization of borrowing costs; ② Exchange differences of hedginginstruments used to operate effective hedging of net investment abroad (this difference is included in othercomprehensive income and is not recognized as current profits and losses until the net investment is disposed of)and ③ foreign currency monetary items classified as measured at fair value through other comprehensive income,shall be recorded into current profits and losses, provided that exchange differences resulting from changes in otherbook balances other than amortized costs (including impairment) shall be recorded in other comprehensive income.The non-monetary foreign currency items measured at historical cost shall be measured at the amount ofreporting currency that is translated into based on the spot rate on the transaction date. For non-monetary foreigncurrency items measured at fair value, the exchange rate prevailing at the date when the fair value is determined isused for translation, and the difference between the translated amount of the reporting currency and the originalamount of the reporting currency shall be treated as the change in fair value (including change of exchange rate) andrecorded in current profits and losses or recognized as other comprehensive income.
(2) Translation of foreign currency financial statement
Foreign currency financial statements of overseas operations are translated into RMB statements in thefollowing ways: The items of assets and liabilities in the balance sheet were translated at the spot exchange rate onthe balance sheet date. The shareholders’ equity items are translated at the spot rate at the time of occurrence exceptfor the “undistributed profit” items. The income and expense items in the income statement are converted using theaverage exchange rate of the current period on the date of occurrence of the transaction. The undistributed profit atthe beginning of the year is the undistributed profit at the end of the year after the conversion of the previous year;The undistributed profit at the end of the period is calculated and shown on the basis of each item of profitdistribution after translation; The difference between the total amount of asset items and liability items andshareholders’ equity items after translation is treated as the difference in the translation of foreign currencystatements and recognized as other comprehensive income. Upon disposal of an overseas operation and loss ofcontrol, the conversion difference of the foreign currency statement related to the overseas operation, as shownunder the shareholders’ equity item in the balance sheet, shall be transferred to the profits and losses of the disposalof the current period in full or in proportion to the disposal of the overseas operation.
Foreign currency cash flow and cash flow of overseas subsidiaries shall be translated at the spot exchange ratein the period when the cash flow is generated. The effect of exchange rate changes on cash is presented separatelyin the cash flow statement as an adjustment item.
The figures for the beginning of the year and the actual figures for the previous year are presented in accordancewith the amounts of the financial statements of the previous year after translation.
Upon the disposal of all the owners’ equity of the Group’s overseas operations or the loss of control overoverseas operations due to the disposal of part of the equity investment or other reasons, the translation differenceof the foreign currency statement related to the owners’ equity of the overseas operations attributable to the parent
company, as shown under the shareholders’ equity item in the balance sheet, shall be fully transferred to the profitsand losses of the disposal period.
When part of the equity investment is disposed of or the proportion of overseas operating interest is reducedfor other reasons but the control of overseas operations is not lost, the difference in the translation of foreign currencystatements related to the disposal part of the overseas operation will be attributed to the minority shareholders’equity and will not be transferred to the current profits and losses. Upon disposal of part of the equity of the overseasoperation as an associate or joint venture, the translation difference of the foreign currency statement related to theoverseas operation shall be transferred to the profits and losses of the disposal period in proportion to the disposalof the overseas operation.If there are foreign currency monetary items that substantially constitute net investments in overseas operations,the exchange difference resulting from changes in exchange rates shall be recognized as other comprehensiveincome in the consolidated financial statements as “translation difference in foreign currency statements;” Upondisposal of the overseas operations, it shall be included in the profits and losses of the disposal period.
11. Financial instruments
When the Group becomes a party to a financial instrument contract, it shall recognize a financial asset orfinancial liability.
(1) Classification, recognition and measurement of financial assets
The Group has classified the financial assets as financial assets at amortized cost; financial assets at fair valuethrough other comprehensive income and financial assets at fair value through profits and losses based on thebusiness model for managing financial assets and the contractual cash flow characteristics of the financial assets.
Financial assets are measured at fair value on initial recognition. For financial assets at fair value throughprofits and losses, the related transaction costs are recognized directly in profits and losses; and for other categoriesof financial assets, the related transaction costs are recognized in initial recognition amounts. For the accountsreceivable or notes receivable arising from the sale of products or the provision of services that do not contain ortake into account a significant financing component, the amount of consideration to which the Group is expected tobe entitled shall be taken as the initial recognition amount.
① Financial assets at amortized cost
The Group’s business model of managing financial assets at amortized cost is aimed at the collection ofcontractual cash flows, and the contractual cash flow characteristics of such financial assets are consistent with thebasic borrowing arrangement, that is, the cash flows generated on a specific date are only payments of principal andinterest based on the outstanding principal amount. For such financial assets, the effective interest rate method isused for subsequent measurement at amortized cost, and any profits or losses arising from amortization orimpairment is included in the current profits and losses.
② Financial assets at fair value through other comprehensive income
The Group’s business model of managing such financial assets is aimed at the collection and disposal ofcontractual cash flows, and the contractual cash flow characteristics of such financial assets are consistent with the
basic borrowing arrangement. The Group measures such financial assets at fair value and their changes arerecognized in other comprehensive income, but impairment losses or gains, exchange profits and losses and interestincome calculated under the effective interest rate method are recognized in current profits and losses.
In addition, the Group has designated certain non-trading equity instrument investments as financial assets atfair value through other comprehensive income. The Group recognizes the relevant dividend income of suchfinancial assets in current profits and losses and the fair value changes in other comprehensive income. Upon thederecognition of the financial assets, the accumulated profits and losses previously recognized in othercomprehensive income are transferred from other comprehensive income to retained earnings and are not recognizedin the current profits and losses.
③ Financial assets at fair value through profits and losses
The Group’s financial assets other than those at amortized cost and those at fair value through othercomprehensive income as described above are classified as financial assets at fair value through profits and losses.In addition, at the time of initial recognition, in order to eliminate or significantly reduce accounting misalignments,the Group designated certain financial assets as financial assets at fair value through profits and losses. Suchfinancial assets are subsequently measured at fair value, with changes in fair value recognized in the current profitsand losses.
(2) Classification, recognition and measurement of financial liabilities
Financial liabilities are classified as financial liabilities at fair value through profits and losses and otherfinancial liabilities at the time of initial recognition. For financial liabilities at fair value through profits and losses,the related transaction costs are recognized directly in profits or losses, and for other financial liabilities, the relatedtransaction costs are recognized in their initial recognition amounts.
① Financial liabilities at fair value through profits and losses
The financial liabilities at fair value through profits and losses include financial liabilities held for trading(including derivatives that are financial liabilities) and those designated as financial liabilities at fair value throughprofits and losses at the initial recognition.
Financial liabilities held for trading (including derivatives that are financial liabilities) are subsequentlymeasured at fair value, with changes in fair value recognized in current profits and losses, except for those relatedto hedge accounting.
For those designated as financial liabilities at fair value through profits and losses, the change in fair value ofsuch liabilities caused by changes in the Group’s own credit risk is included in other comprehensive income, andthe cumulative change in its fair value caused by changes in its own credit risk included in other comprehensiveincome is transferred to retained earnings when such liabilities are derecognized. Other changes in fair value areincluded in current profits and losses. If the treatment of the effect of the change in the credit risk of the financialliabilities in the manner described above would cause or widen the accounting mismatch in profits and losses, theGroup would recognize the full profits or losses of the financial liabilities (including the amount affected by thechange in the credit risk of the enterprise) in the current profits and losses.
② Other financial liabilities
Financial liabilities other than those resulting from the transfer of financial assets that does not meet theconditions for derecognition or continues to be involved in the transfer of financial assets, and other financialliabilities excluding financial guarantee contracts are classified as financial liabilities at amortized cost, which aresubsequently measured at amortized cost, and the profits and losses resulting from the derecognition or amortizationare included in current profits and losses.
(3) Recognition basis and measurement method for transfer of financial assets
A financial asset is derecognized if it meets any of the following conditions: ① The contractual right to receivethe cash flow of the financial asset is terminated; ② The financial asset has been transferred, and substantially allthe risks and returns of ownership of the financial asset have been transferred to the transferee; ③ The financialasset has been transferred, substantially all the risks and returns of ownership of the financial asset have neither beentransferred nor retained, but the control over the financial asset has been relinquished.
If neither substantially all the risks and returns of ownership of a financial asset are transferred nor retained,and the control over the financial asset is not relinquished, the underlying financial asset shall be recognized to theextent of its continuing involvement in the transferred financial asset, and the related liability shall be recognizedaccordingly. The extent of continued involvement in the transferred financial asset is the level of risk to which theenterprise is exposed as a result of changes in the value of that financial asset.
If the overall transfer of financial assets meets the conditions for derecognition, the difference between thebook value of the transferred financial assets and the consideration received as a result of the transfer and thecumulative change in the fair value originally included in other comprehensive income is included in the currentprofits and losses.
If the partial transfer of financial assets meets the conditions for derecognition, the book value of the transferredfinancial assets shall be apportioned between the portion derecognized and the portion not for derecognitionaccording to their relative fair value. The difference between the sum of the consideration received as a result of thetransfer and the cumulative changes in fair value originally included in other comprehensive income that should beapportioned to the portion derecognized and the above-mentioned book value apportioned are recognized in currentprofits and losses.
If the Group sells the financial assets by recourse or makes endorsement transfer of the financial assets it holds,it is necessary to determine whether virtually all risks and returns in the ownership of the financial asset have beentransferred. If the Group has transferred substantially all the risks and returns related to the ownership of a financialasset to the transferee, the Group shall derecognize the financial asset. If substantially all the risks and returns relatedto the ownership of a financial asset are retained, the financial assets shall not be derecognized. If substantially allthe risks and returns related to the ownership of the financial asset are neither transferred nor retained, whether theenterprise retains control of the asset shall be determined and accounting treatment shall be made in accordance withthe principles described in the preceding paragraphs.
(4) Derecognition of financial liabilities
A financial liability (or a portion thereof) is derecognized when the present obligation is discharged. If anagreement is entered into between the Group (the borrower) and the lender to replace the original financial liabilityby assuming a new financial liability, and the contractual terms of the new financial liability are materially differentfrom those of the original financial liability, the original financial liability is derecognized and the new financialliability is recognized at the same time. If the Group materially modifies the contractual terms of the originalfinancial liability (or part thereof), it shall derecognize the original financial liability and recognize a new financialliability in accordance with the modified terms.If a financial liability is derecognized in whole or in part, the difference between the book value of thederecognized portion and the consideration paid (including non-cash assets transferred or liabilities assumed) isrecognized in current profits and losses.
(5) Offsetting of financial assets and financial liabilities
When the Group has the legal rights to offset the financial assets and financial liabilities whose amounts havebeen recognized, the legal rights are currently exercisable, and the Group plans to settle with net amount or realizethe financial asset and repay the financial liability simultaneously, the financial assets and financial liabilities canbe presented in the balance sheet with the net amount after they are mutually offset. Apart from this, financial assetsand financial liabilities shall be presented separately in the balance sheet and not be offset against each other.
(6) Methods for determining the fair value of financial assets and financial liabilities
Fair value is the price that a market participant would receive to sell an asset or pay to transfer a liability in anorderly transaction occurring on the measurement date. Regarding the financial instruments for which there is anactive market, the Group uses quoted prices in an active market to determine their fair values. A quoted price in anactive market is a price that is readily available on a regular basis from an exchange, broker, trade association,pricing service agency, etc., and represents the price of a market transaction that actually takes place in a fair trade.If there is no active market for the financial instrument, the Group uses valuation techniques to determine its fairvalue. The valuation techniques include reference to prices used in recent market transactions by the parties who arefamiliar with the situation and willing to deal, reference to the current fair value of other substantially identicalfinancial instruments, the discounted cash flow method, and option pricing models. In the valuation, the Group willadopt the valuation techniques applicable in the current situation and supported by sufficiently available data andother information, select the input values that are consistent with the characteristics of the asset or liabilityconsidered by market participants in the transaction of the relevant asset or liability, and give priority to the relevantobservable input values when possible. The non-observable input values will be used only when the relevantobservable input values are unavailable or not practicable to obtain.
(7) Equity instruments
Equity instruments are contracts that demonstrate ownership of the remaining interest in the Group’s assetsafter deducting all liabilities. The Group’s issuance (including refinancing), repurchase, sale or cancellation of equityinstruments is treated as changes in equity, and the transaction expenses related to equity transactions are deductedfrom equity. The Group does not recognize the changes in fair value of equity instruments.
Dividends (including “interest” on instruments classified as equity instruments) distributed during the existence
of the Group’s equity instruments are treated as profit distributions.
(8) Impairment of financial assets
The financial assets for which the Group needs to recognize impairment losses are financial assets at amortizedcost, debt instruments at fair value through other comprehensive income, lease receivables, which mainly includenotes receivable, accounts receivable, receivables financing, other receivables, debt investments, other debtinvestments, long-term receivables, etc. In addition, for contractual assets and certain financial guarantee contracts,impairment provisions are made and credit impairment losses are recognized in accordance with the accountingpolicies described in this section.
① Recognition of provision for impairment losses
On the basis of expected credit losses, the Group makes an impairment provision and recognizes creditimpairment losses for each of the above items in accordance with its applicable expected credit losses measurementmethod (general method or simplified method).
Credit losses represent the difference between all contractual cash flows receivable under the contract and allcash flows expected to be received by the Group, discounted at the original effective interest rate, i.e., the presentvalue of all cash shortfalls. Financial assets purchased or originated by the Group that are credit impaired shall bediscounted at the credit-adjusted effective interest rate of the financial assets.
The general method of measurement of expected credit losses means that the Group assesses at each balancesheet date whether the credit risk of financial assets (including contractual assets and other applicable items, thesame below) has increased significantly since the initial recognition. If the credit risk has increased significantlysince the initial recognition, the Group measures the loss provision at an amount equivalent to the expected creditlosses over the entire duration; If credit risk does not increase significantly since the initial recognition, the Groupmeasures the loss provision at an amount equivalent to expected credit losses over the next 12 months. The Groupwill consider all the reasonable and evidence-based information, including forward-looking information, whenassessing expected credit losses.
For financial instruments with low credit risk on the balance sheet date, the Group assumes that their credit riskhas not increased significantly since initial recognition, and measures the provision for losses based on expectedcredit losses over the next 12 months.
② Criteria for determining whether credit risk has increased significantly since the initial recognition
If the probability of default of a financial asset during the estimated duration determined on the balance sheetdate is significantly higher than the probability of default during the estimated duration determined at the time ofinitial recognition, it indicates that the credit risk of the financial asset has significantly increased. Except inexceptional circumstances, the Group uses the change in default risk occurring over the next 12 months as areasonable estimate of the change in default risk occurring over the duration to determine whether credit risk hasincreased significantly since the initial recognition.
③ The portfolio-based approach to assessing expected credit risk
The Group assesses credit risk individually for financial assets with significantly different credit risks, such asreceivables that are in dispute with other parties or involved in litigation or arbitration; or where there are clearindications that the debtor is likely to be unable to meet its repayment obligations.
Apart from financial assets that are individually assessed for credit risk, the Group classifies financial assetsinto different groups based on common risk characteristics and assesses credit risk on a portfolio basis.
④ Accounting treatment of impairment of financial assets
At the end of the period, the Group will calculate the estimated credit losses of various financial assets, and ifthe estimated credit losses are greater than the book value of its current impairment provision, the difference isrecognized as an impairment loss; If it is less than the book value of the current impairment provision, the differenceis recognized as an impairment gain.
⑤ Determination of credit losses of various financial assets
a. Notes receivable
The Group measures the loss provision for notes receivable at the amount equivalent to expected credit lossesin the entire duration. Based on the credit risk characteristics of notes receivable, they are divided into differentportfolios:
b. Accounts receivable and contractual assets
For the accounts receivable and contractual assets that do not have a significant financing component, theGroup measures the loss provision at the amount equivalent to expected credit losses in the entire duration.
For the accounts receivable, contractual assets and lease receivables that have a significant financingcomponent, the Group chooses to always measure the loss provision at an amount equivalent to expected creditlosses over the duration.
Apart from the accounts receivable for single assessment of credit risk, they are divided into different portfoliosbased on their credit risk characteristics:
| Item | Basis for determining the portfolio |
Related party within the consolidation scope
| Related party within the consolidation scope | This portfolio represents amounts receivable of the Company within the scope of consolidation. |
Account age portfolio
| Account age portfolio | The portfolio takes the age of receivables as the credit risk characteristics. |
Method for calculating aging years based on credit risk characteristics portfolio: The Group calculates theaging years of accounts receivable based on the principle of First Occurrence, First Recovery.
| Item | Basis for determining the portfolio |
Banker’s acceptance bill
| Banker’s acceptance bill | Banks with less credit risk in relation to acceptors |
Commercial acceptance bill
| Commercial acceptance bill | Divided according to the acceptor’s credit risk |
Recognition criteria for provision of bad debts of a single account receivable: The Group conducts separateimpairment tests on accounts receivable with significantly different credit risk characteristics, such as significantlydeteriorating credit status of the debtor, low possibility of future repayment, and credit impairment that has occurred.c. Accounts receivable financingNotes and accounts receivable measured at fair value through other comprehensive income are presented asaccounts receivable financing if their maturities are within one year (including one year) from the initial recognitiondate. The Group measures the loss provision at the amount equivalent to expected credit losses in the entire duration.
Apart from the accounts receivable financing for single assessment of credit risk, they are divided into differentportfolios based on their credit risk characteristics:
| Item | Basis for determining the portfolio |
Related party within the consolidationscope
| Related party within the consolidation scope | This portfolio represents amounts receivable of the Company within the scope of consolidation. |
Account age portfolio
| Account age portfolio | The portfolio takes the age of receivables as the credit risk characteristics. |
Method for calculating aging years based on credit risk characteristics portfolio: The Group calculates theaging years of accounts receivable based on the principle of First Occurrence, First Recovery.
Recognition criteria for provision of bad debts of a single account receivable: The Group conducts separateimpairment tests on accounts receivable with significantly different credit risk characteristics, such as significantlydeteriorating credit status of the debtor, low possibility of future repayment, and credit impairment that has occurred.
d. Other receivables
Based on whether the credit risk of other receivables has increased significantly since initial recognition, theGroup measures the loss provision at the amount equivalent to expected credit losses in the next 12 months or theentire duration. Apart from the other receivable for single assessment of credit risk, they are divided into differentportfolios based on their credit risk characteristics:
| Item | Basis for determining the portfolio |
Related party within the consolidationscope
| Related party within the consolidation scope | This portfolio represents amounts receivable of the Company within the scope of consolidation. |
Account age portfolio
| Account age portfolio | The portfolio takes the age of receivables as the credit risk characteristics. |
Method for calculating aging years based on credit risk characteristics portfolio: The Group calculates theaging years of accounts receivable based on the principle of First Occurrence, First Recovery.
Recognition criteria for provision of bad debts of a single account receivable: The Group conducts separateimpairment tests on accounts receivable with significantly different credit risk characteristics, such as significantlydeteriorating credit status of the debtor, low possibility of future repayment, and credit impairment that has occurred.
12. Notes receivable
Please refer to “11. Financial instruments.”
13. Accounts receivable
Please refer to “11. Financial instruments.”
14. Accounts receivable financing
Notes and accounts receivable at fair value through other comprehensive income are presented as accountsreceivable financing if their maturities are within one year (including one year) from the initial recognition date.The Notes and accounts receivable with the maturity of more than 1 year since the initial recognition date arepresented as other debt investments. For the relevant accounting policies, please refer to “11. Financial instruments”under this Note.
15. Other receivables
For the method of determining expected credit losses on other receivables and the accounting treatment, pleaserefer to “11. Financial instruments.”
16. Inventories
(1) Categories of inventories
Inventories mainly include raw materials, packaging and low-value consumable goods, products in process,goods in stock, consumable biological assets, development costs, development products, etc.
(2) Pricing of inventories
Inventories are initially measured at actual cost. The cost of inventories includes procurement cost, processingcost and other costs. Inventories are measured by the weighted average method upon delivery.
(3) Determination of net realizable value of inventories and method of making provision forinventory impairment
The net realizable value of inventories refers to the estimated selling price deducted by estimated costs untilthey are made into finished goods, estimated selling expense and relevant taxes in daily activities. The determinationof the net realizable value of inventories is based on conclusive evidence obtained, taking into account the purposefor which the inventories are held and the effect of events after the balance sheet date.
Inventories are measured at the lower of cost or net realizable value at the balance sheet date, and provisionfor their impairment shall be made when the net realizable value is below the cost of inventories. Provision forinventory impairment is made on the basis of the difference whereby the cost of one single inventory item exceedsits net realizable value. For inventories with large quantities and low unit prices, provision for inventory impairmentshall be made according to inventory categories. Inventories that are related to product series produced and sold inthe same region and have the same or similar end use or purpose, and are difficult to be documented separately fromother items that shall be combined for making provision for inventory impairment.
After provision for inventory impairment is made, if the factors that once resulted in the impairment disappear,leading to the net realizable value of inventories higher than their book value, the provision of inventory impairmentshall be reversed to the extent of provision previously made, and the reversed amount shall be recognized in currentprofits and losses.
(4) The inventory system shall be the perpetual inventory system.
(5) Amortization of low-value consumables and packaging materials
The low-value consumables and packaging materials are amortized using a one-off amortization method.
17. Long-term equity investments
Long-term equity investments in this section refers to any equity investment by which the Group has control,common control or significant influence over the investee. Long-term equity investments by which the Group doesnot have control, common control or significant influence over the investee are accounted for as financial assets atfair value through profits or losses. If they are non-trading, the Group may elect to designate them as financial assetsat fair value through other comprehensive income at the time of initial recognition. For the accounting policies,please refer to “11. Financial instruments” under Note V.Common control is the Group’s contractually agreed sharing of control over an arrangement, and the activitiesunder which must be decided by unanimous agreement from parties who share the control. Significant influence isthe power of the Group to participate in the decision-making for financial and operating policies of an investee, butnot to control or common control the formulation of such policies together with other parties.
(1) Determination of investment cost
For long-term equity investments acquired relating to business combination under common control, the initialinvestment cost is determined on the date of consolidation according to the percentage of shareholders/owners’equity from the combined party as a part of the book value of total shareholders/owners’ equity set forth in theconsolidated financial statements of the ultimate controlling party. The difference between the said initialinvestment cost and the sum of cash being paid, non-cash assets being transferred and book value of liabilities beingassumed shall be adjusted against the capital reserve; or, in case of insufficient capital reserve to cover the difference,against the retained earnings accordingly. In case that the consideration of the business combination is satisfied byissuing equity securities, the initial investment cost of the long-term equity investments is determined on the dateof consolidation according to the percentage of shareholders’ equity from the combined party as a part of the bookvalue of total shareholders’ equity set forth in the consolidated financial statements of the ultimate controlling party.With the sum of par values of shares being issued as the share capital, the difference between the said initialinvestment cost and the sum of par values of shares being issued shall be adjusted against the capital reserve; or, incase of insufficient capital reserve to cover the difference, against the retained earnings accordingly. Where abusiness combination under common control is achieved by acquiring the equity of a combined party under commoncontrol in phases through multiple transactions, following policies shall apply depending on whether thosetransactions are “a bundle of transactions”: if so, the Company shall account for all transactions together as the onedeal to obtain the control; if not, the initial investment cost of the long-term equity investments shall be determinedon the date of consolidation according to the percentage of shareholders/owners’ equity from the combined party asa part of the book value of total shareholders’ equity set forth in the consolidated financial statements of the ultimatecontrolling party, while the difference between the initial investment cost and the sum of book value of long-termequity investments before the consolidation and that of consideration newly paid to acquire additional equities onthe date of consolidation shall be adjusted against the capital reserve, or, in case of insufficient capital reserve tocover the difference, against retained earnings accordingly. Accounting treatment is currently not required for other
comprehensive income that has been recognized due to the adoption of equity method in accounting or theclassification as financial assets at fair value through other comprehensive income in respect of equity investmentsheld before the date of consolidation.For the long-term equity investments acquired relating to business combination not under common control, theinitial investment cost is the cost of combination on the date of acquisition which equals to the aggregate fair valueof assets transferred, liabilities incurred or assumed and equity securities issued by the acquirer. Where a businesscombination not under common control is achieved by acquiring the equity of a combined party under commoncontrol in phases through multiple transactions, following policies shall apply depending on whether thosetransactions are “a bundle of transactions”: if so, the Group shall account for all transactions together as the onedeal to obtain the control; if not, the initial investment cost of the long-term equity investments that is re-accountedfor using the cost method shall be the sum of book value of long-term equity investments previously held by theacquirer in the acquiree and new investment cost. Accounting treatment is currently not required for othercomprehensive income in respect of equity investments that have been accounted for using the equity method.The intermediary expenses on items such as audit, legal service and valuation advisory for businesscombination and other related administrative expenses incurred by the combining party or acquirer are recognizedin current profits and losses upon their occurrence.
Long-term equity investments other than those formed by business combination is initially measured at costwhich varies depending on the different ways of acquiring the long-term equity investments and is determined byconsidering the amount of actual cash paid by the Group, the fair value of the equity securities issued by the Group,the conventional value stipulated in the investment contract or agreement, the fair value or original book value ofthe assets surrendered in the non-Cash and bank balance swap transaction, the fair value of the long-term equityinvestments itself, and etc. The expenses, taxes and other necessary expenses directly related to the acquisition ofthe long-term equity investments are also included in the investment cost.For additional long-term equity investments that entitles the Company with significant influence or common controlbut not control over the investee, its cost of investment is the sum of fair value of equity investments that have beenheld plus new cost of investment pursuant to the Accounting Standards for Business Enterprises No. 22 -Recognition and Measurement of Financial Instrument.
(2) Subsequent measurement and recognition method of profits and losses
A long-term equity investment with common control (excluding that constituting a joint venture) over orsignificant influence on the investee is accounted for by using the equity method, and a long-term equity investmentwith control over the investee is accounted for in the Company’s financial statements by using the cost method.
① Long-term equity investment accounted for with cost method
When a long-term equity investment is accounted for with cost method, its price is measured at initialinvestment cost, and when the long-term equity investment is added or disposed, its cost is adjusted accordingly.The cash dividend or profit declared by the investee, except for the cash dividend or profit declared but not yetgranted that is included in the price or consideration actually paid upon the acquisition of the investment, shall berecognized as investment income for the period.
② Long-term equity investment accounted for with equity method
When a long-term equity investment is accounted for with equity method and its initial investment cost ishigher than the proportion of fair value of the investee’s identifiable net assets attributable to the investor becauseof the investment, its initial cost shall not be adjusted; if lower, the difference shall be recognized in the currentprofits and losses, and its cost shall be adjusted accordingly.When a long-term equity investment is accounted for with equity method, the investment income and othercomprehensive income arising therefrom are recognized in accordance with the proportion of net profits and lossesand other comprehensive income of the investee attributable to the investor, and the book value of long-term equityinvestments is adjusted accordingly; if any profit or cash dividend is declared by the investee, the book value oflong-term equity investments shall be reduced according to the part of profit or dividends attributable to the investor;if there is any other changes in shareholders’ equity other than net profits and losses, other comprehensive incomeand profit distribution, such change shall be adjusted against the book value of long-term equity investments andrecognized in the capital reserve. The Group recognizes its share of the investee’s net profits and losses based onfair value of the investee’s identifiable assets at the time of acquisition, after making appropriate adjustments to netprofits thereto. In case of any inconsistency between the accounting policies and accounting periods adopted by theinvestee and by the Group, the financial statements of the investee shall be adjusted in accordance with theaccounting policies and accounting periods of the Group, and the gain on investment and other comprehensiveincome shall be recognized accordingly. In respect of the transactions between the Group and its associates and jointventures in which the assets invested or disposed of are not part of the business, the share of unrealized profits andlosses arising from inter-group transactions shall be offset by the portion attributable to the Group, and the profitsand losses on investment shall be recognized accordingly. However, any unrealized loss arising from inter-grouptransactions between the Group and an investee is not offset to the extent that the loss is impairment loss of theassets transferred. Where the Group invests to its joint ventures or associates an asset forming part of a business,giving rise to the acquisition of a long-term equity investment by the investor without obtaining control, the initialinvestment cost of the additional long-term equity investments shall be recognized at fair value of the businessinvested. The difference between initial investment cost and book value of the business invested will be fullyincluded in current profits and losses. Where the Group disposes of an asset forming part of a business to itsassociates or joint ventures, the difference between the consideration received and the book value of the businessshall be fully included in current profits and losses. Where the Group acquires from its associates or joint venturesan asset forming part of a business, the profits or losses related to the transaction shall be accounted for andrecognized in accordance with the Accounting Standards for Business Enterprises No. 20 - Business Combination.The Group’s share of net loss of the investee shall be recognized to the extent that the book value of the long-term equity investment and any long-term equity that substantially forms part of the investor’s net investment in theinvestee are written down to zero. If the Group has to assume additional obligations to the loss of the investee, theestimated liabilities shall be recognized for the estimated obligation assumed and charged to investment loss for theperiod. Where the investee makes profits in subsequent periods, the Group shall re-recognize its share of the profitsafter setting off against the share of unrecognized losses.
③ Acquisition of minority interests
When preparing the consolidated financial statements, the Company adjusts the capital reserve and, if thecapital reserve is insufficient, adjusts the retained earnings based on the difference between the additional long-termequity investments arising on acquisition of minority interests and the Company’s share in the net assets of thesubsidiary accrued from the acquisition date (or consolidation date) in proportion to the additional shareholdings.
④ Disposal of long-term equity investments
In the consolidated financial statements, if the parent company disposes part of the long-term equity investmentin the subsidiary without losing its control, the difference between the disposal price and the Company’s share inthe net assets of the subsidiary attributable to the disposal of the long-term equity investment is recognized in theshareholders’ equity; if the parent company disposes part of the long-term equity investment in the subsidiaryresulting in the loss of its control over the subsidiary, the accounting treatment shall be in accordance with thepolicies as set out in Item (2) of Section 6 “Accounting treatment for business combination under common controland not under common control” under this Note V.
In other cases, upon the disposal of a long-term equity investment, the difference between the book value ofthe investment and the price received is recognized in the current profits and losses.
For a long-term equity investment that is accounted for using the equity method where the remaining equityafter disposal continues to be accounted for using the equity method, the portion of other comprehensive incomepreviously included in shareholder’s equity shall be treated in accordance with the same basis as the investee directlydisposes of relevant asset or liability on pro rata basis at the time of disposal. The owners’ equity recognized for thechange in owners’ equity of the investee other than net profits and losses, other comprehensive income and profitdistribution, shall be transferred to current profits and losses on pro rata basis.
For a long-term equity investment accounted for using the cost method where the remaining equity afterdisposal continues to be accounted for using cost method, other comprehensive income recognized using the equitymethod or in accordance with the standard for recognition and measurement of financial instruments prior to theacquisition of control over the investee shall be treated in accordance with the same basis as the investee directlydisposes of relevant asset or liability, and transferred to current profits and losses on pro rata basis. The change inowners’ equity recognized in net assets of the investee by using the equity method other than net profits and losses,other comprehensive income and profit distribution shall be transferred to current profits and losses on pro rata basis.
In preparing separate financial statements, if control is lost over the investee upon partial disposal of equityinvestment, the remaining equity with common control or an ability to impose a significant influence over theinvestee after disposal shall be accounted for using the equity method, and shall be adjusted as if it has beenaccounted for using the equity method since it was acquired. The remaining equity without common control or anability to impose a significant influence over the investee after disposal shall be accounted for based on the standardfor recognition and measurement of financial instruments, and the difference between its fair value and book valueon the date of loss of control shall be included in current profits and losses. In respect of other comprehensive incomerecognized using the equity method or in accordance with the standard for recognition and measurement of financial
instruments prior to the acquisition of control over the investee, it shall be accounted for in accordance with thesame basis as the investee directly disposes of relevant asset or liability when the control is lost. The change inowners’ equity recognized in net assets of the investee by using the equity method other than net profits and losses,other comprehensive income and profit distribution shall be transferred to current profits and losses at the time whenthe control over investee is lost. Where the remaining equity after disposal is accounted for using the equity method,other comprehensive income and other owners’ equity shall be carried forward on pro rata basis. Where theremaining equity after disposal is accounted for in accordance with the standard for recognition and measurementof financial instruments, other comprehensive income and other owners’ equity shall be fully carried forward.
If the common control or significant influence of the Group over the investee is lost upon partial disposal ofequity investment, the remaining equity after disposal shall be accounted for in accordance with the standard forrecognition and measurement of financial instruments. The difference between its fair value and book value on thedate of loss of common control or significant influence shall be included in current profits and losses. For othercomprehensive income recognized previously for the equity investment using equity method, it shall be accountedfor in accordance with the same basis as the investee directly disposes of relevant asset or liability at the time whenthe equity method is ceased to be used. The owners’ equity recognized arising from the change in owners’ equity ofthe investee other than net profits and losses, other comprehensive income and profit distribution shall be transferredto current profits and losses at the time when the equity method is ceased to be used.
Where the Group disposes of its equity investment in a subsidiary in a series of transactions until the control islost, and such transactions form “a bundle of transactions,” each transaction shall be accounted for as a disposal ofequity investment of the subsidiary resulting in a loss of control. The difference between the consideration for eachtransaction and the book value of the long-term equity investment attributable to the equity interests disposed priorto loss of control shall be initially recognized as other comprehensive income, and upon loss of control, transferredto current profits and losses when the loss of control takes place.
18. Investment properties
Investment properties are real estate held for rental income or capital appreciation, or both, including land userights that have been leased, land use rights that are held and intended to be transferred after appreciation, andbuildings that have been leased. In addition, vacant buildings held by the Group for operating leases are reported asinvestment properties if the Board of Directors (or similar organization) makes a written resolution that they will beused for operating leases and the intention to hold them will not change in the near future.
Investment properties shall be initially measured at cost. The subsequent expenses related to investmentproperties shall be recognized as cost of the investment properties only if it is probable that economic benefitsassociated with the assets will flow to the Group and the cost of the assets can be measured reliably. Othersubsequent expenses shall be recognized in the current profits and losses when incurred.
The Group uses the cost model for subsequent measurement of investment properties and depreciates oramortizes them according to the policies consistent with that for buildings or land use rights.
For the method of impairment test and provision for impairment loss of investment properties, please refer toSection 25 “Impairment of long-term assets” under Note V.
When the purpose of an investment property changes to self-use, from the date of the change, the investmentproperty shall be reclassified as a fixed asset or intangible asset. When the purpose of a self-use property changesto earning rental income or capital appreciation, from the date of the change, the fixed asset or intangible asset shallbe reclassified as an investment property. Upon reclassification, for investment properties measured using the costmodel, the carrying value before reclassification is recognized as the carrying value after reclassification. Forinvestment properties measured using the fair value model, the fair value on the date of reclassification is recognizedas the carrying value after reclassification.An investment property is derecognized upon disposal or when it is permanently withdrawn from use and no futureeconomic benefits are expected from its disposal. The net proceeds from sale, transfer, retirement or damage of aninvestment property after its book value and related taxes and expenses are recognized in the current profits and losses.
19. Fixed assets
(1) Recognition criteria
Fixed assets refer to the tangible assets held by the Company for producing goods, rendering services, rentingor operation and administration purposes with useful life of over one accounting year. The fixed assets arerecognized only when the economic interests related thereto are likely to flow into the Group and its cost can bemeasured reliably. The fixed assets are initially measured at cost with consideration of the impact of estimateddisposal costs.
(2) Depreciation method
| Category | Depreciation method | Depreciation life (year) | Rate of residual value (%) | Annual depreciation rate (%) |
Building for
production
| Building for production | Straight-line method | 39 | 5 | 2.44 |
Machine andequipment for
production
| Machine and equipment for production | Straight-line method | 10 | 5 | 9.5 |
Transportation
equipment
| Transportation equipment | Straight-line method | 10 | 5 | 9.5 |
Electronic deviceand management
tools
| Electronic device and management tools | Straight-line method | 5 | 5 | 19 |
Machine andequipment for non-production purpose
| Machine and equipment for non-production purpose | Straight-line method | 10 | 5 | 9.5 |
Building for non-production purpose
| Building for non-production purpose | Straight-line method | 45 | 5 | 2.11 |
Others
| Others | Straight-line method | 5 | 5 | 19 |
The depreciation of fixed assets is calculated using the straight-line method over their estimated useful lives,starting from the month following the attainment of the intended usable state. The estimated useful lives, expectedresidual values, and annual depreciation rates for various types of fixed assets are as follows:
The expected residual value refers to the anticipated condition of the fixed asset at the end of its estimateduseful life. It represents the estimated amount that the Group would receive from the disposal of the asset, net ofany expected disposal costs incurred.
(3) Impairment test method and provision for impairment of fixed assets
The impairment testing method and provision for impairment of fixed assets can be found in Item 25 of NoteV “Impairment of Long-term Assets.”
(4) Other Information
Subsequent expenditures related to fixed assets that are expected to generate economic benefits and can bereliably measured are capitalized as part of the fixed asset's cost, and the carrying value of the replaced portion isderecognized. Other subsequent expenditures are recognized in the current period's income statement uponoccurrence.
When a fixed asset is classified as held for disposal or is expected to no longer generate economic benefitsthrough use or disposal, it is derecognized. Proceeds from the sale, transfer, scrapping, or destruction of fixed assets,net of their carrying value and related taxes, are recognized in the current period’s income statement.
The Group reviews the useful lives, estimated residual values, and depreciation methods of fixed assets at leastannually. Changes in these estimates are treated as changes in accounting estimates.
20. Construction in progress
The cost of construction in progress is measured according to the actual expense for the construction in progress,including all the necessary expenses incurred in the process of construction, borrowing costs to be capitalized beforethe project is ready for its intended use and other related costs.
The construction in progress is transferred to fixed assets after it is ready for its intended use.
For the method of impairment test and provision for impairment loss of construction in progress, please referto Section 30 “Impairment of long-term assets” under Note V.
21. Borrowing costs
Borrowing costs include interest on borrowings, amortization of discounts or premiums, ancillary costs, andexchange differences arising from foreign currency borrowings. Where the borrowing costs can be directlyattributable to the acquisition and construction or production activities of assets eligible for capitalization, it shallbe capitalized on the basis that the expense for the asset has already been incurred, the borrowing costs have beenincurred and the acquisition and construction or production activities necessary to prepare the asset for its intendeduse or for sale have already commenced; after the acquired or produced asset eligible for capitalization is availablefor its intended use or for sale, the capitalization shall be stopped. Other borrowing costs shall be recognized asexpenses at the time when they are incurred.
The actual interest cost incurred in the period of specific-purpose borrowing net of any interest income fromthe borrowed funds not used and deposited in bank or any investment income from the temporary investment ofthose funds shall be capitalized; the amount of interest of general-purpose borrowings to be capitalized is determinedby multiplying the weighted average of the amounts of cumulative expenses on the asset over and above the amountsof specific-purpose borrowings by the capitalization rate of the corresponding general-purpose borrowings.Capitalization rate is calculated and determined based on the weighted average rate of general-purpose borrowings.
During the capitalization period, exchange differences related to specific-purpose borrowings denominated inforeign currencies are fully capitalized; exchange differences related to general-purpose borrowings denominatedin foreign currencies are recognized in the current profits and losses.
Assets eligible for capitalization refer to the fixed assets, investment properties, inventories and other assetsthat require a substantially long period of time of acquisition and construction or production activities for intendeduse or for sale.
Where the acquisition and construction or production activities of an asset eligible for capitalization isinterrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowingcosts shall be suspended until the acquisition and construction or production of the asset is resumed.
22. Biological assets
(1) Consumptive biological assets
Consumptive biological assets are the biological assets held for sale or harvested for agricultural products inthe future, including growing field crops, vegetables, timber stands and livestock stored for sale. Consumptivebiological assets shall be initially measured at cost. The cost of a consumptive biological asset that is cultivated,constructed, propagated or farmed by the Company is the necessary expense incurred before the asset isharvested/closed/sold/sold or placed in storage that is directly attributable to the asset, including borrowing coststhat are eligible for capitalization. Subsequent expenses such as management and feeding costs incurred afterharvesting/closing/storage of consumptive biological assets are included in current profits and losses.
Consumptive biological assets are carried forward at book value using the weighted average method whenharvested or sold.
On the balance sheet date, consumptive biological assets are measured at the lower of cost or net realizablevalue, and the provision for impairment of consumptive biological assets shall be calculated and recognized basedon the methods consistent with those for the recognition of the provision for inventory impairment. Where theimpairment factors disappear, the amount written down shall be restored and reversed from the original provisionfor depreciation, with the amount reversed recognized in the current profits and losses.
(2) Productive biological assets
Productive biological assets refer to the biological assets held for the purpose of producing agricultural products,providing services or leasing, including economic forests, firewood forests, production animals and draft animals.Productive biological assets shall be initially measured at cost. The cost of a self-created or propagated productivebiological asset is the necessary expense incurred before the asset achieves the intended purpose of production andoperation that can be directly attributable to the asset, including borrowing costs that meet the capitalization conditions.
The Group reviews the useful life and estimated net residual value of a productive biological asset and thedepreciation method applied at least at each year-end. Any change shall be accounted for as a change in accountingestimate.
The difference between the disposal proceeds from the sale, liquidation, death or destruction of productivebiological assets less their book value and related taxes and charges is included in the current profits and losses.
The Group determines whether a productive biological asset has any signs of impairment on each balance sheetdate. If the asset shows signs of impairment, the recoverable amount is estimated. The recoverable amount isestimated on a single asset basis. If it is difficult to estimate the recoverable amount of a single asset, the recoverableamount of the asset group to which the asset belongs shall be determined. If the recoverable amount of an asset islower than its book value, the provision for asset impairment shall be made according to the difference and recordedin the current profits and losses.Once the above asset impairment loss is recognized, it shall not be reversed in subsequent accounting periods.If a productive biological asset changes its use and becomes a consumptive biological asset, the cost of thechange of use is determined at the book value at the time of the change of use. If the productive biological assetchanges its use and becomes a public welfare biological asset, whether there is any impairment is determined inaccordance with the provisions of Accounting Standard for Business Enterprises No. 8 - Asset Impairment. Whenan impairment occurs, an impairment provision shall be first made and then determined on the basis of the bookvalue after such provision is made.
23. Oil and gas assets
Not applicable
24. Intangible assets
(1) Useful life and its basis for determination, estimate, amortization method or review procedure
An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled bythe Group.
An intangible asset shall be initially measured at cost. The expenses incurred on an intangible asset shall berecognized as cost of the intangible asset only if it is probable that economic benefits associated with the asset willflow to the Group and the cost of the asset can be measured reliably. Other expenses shall be recognized in thecurrent profits and losses when incurred.
Land use right acquired shall normally be recognized as an intangible asset. For self-constructed buildings (e.g.plants), the expenses on the land use right and cost of the buildings shall be separately accounted for as an intangibleasset and fixed asset. For buildings and structures purchased, the purchase consideration shall be allocated amongthe land use right and the buildings on a reasonable basis. In case there is difficulty in making a reasonable allocation,the consideration shall be recognized in full as a fixed asset.
An intangible asset with a definite useful life is amortized on average and by stages using the straight-linemethod by deducting the estimated net residual value and accrued provision for impairment loss from the originalvalue over the estimated useful life from the time when it is available for use. An intangible asset with an indefiniteuseful life is not amortized.
During the end of the period, the Company shall check the useful life and the amortization method of intangibleassets with limited useful life and carry out accounting estimate change in case that a change happens. In addition,the Company shall check the useful life of intangible assets with indefinite useful life. If there are evidences showingthat the intangible assets can bring economic benefit for the Company within the foreseeable period, the Company
shall estimate the useful life and carry out amortization according to the amortization policy for intangible assetswith finite useful life.The Group’s intangible assets include land use rights, software, franchise rights, patent technology, non-patenttechnology, and trademarks. The amortization periods and conditions for the main intangible assets are as follows:
① Land use rights are amortized over the remaining useful life specified in the land use right certificate, withan average annual amortization period of 30-50 years. When the purchase price of land and buildings cannotbe reasonably allocated between land use rights and buildings, the entire amount is treated as fixed assets.
② Software, patent technology, and non-patent technology are amortized over the estimated useful life of 10years, with an average annual amortization period.
③ Franchise rights are amortized over the estimated useful life of 30 years, with an average annualamortization period.
(2) Scope of R&D expenses and related accounting treatment
The scope of our Company’s R&D expenses is primarily determined based on the Company’s R&D projects.It includes R&D personnel salaries, direct input costs, depreciation and amortization expenses, design and testingexpenses, outsourced R&D expenses, and other expenses.The Group classifies the expense on an internal R&D project into expense at the research phase and expenseat the development phase.
Expense at the research phase is recognized in the current profits and losses when incurred.
Expense at the development phase is recognized as an intangible asset if all of the following conditions aresatisfied at the same time, and otherwise, it is recognized in the current profits and losses:
① It is technically feasible to complete the intangible asset so that it will be available for use or sale;
② It is intended to complete and to use or sell the intangible asset;
③ It can be demonstrated how the intangible asset will generate economic benefits, including demonstrating
that there is an existing market for products produced by the intangible asset or for the intangible asset itself,
and that it can be proven to be useful if the intangible asset is to be used internally;
④ There are adequate technical, financial and other resources to complete the development and
the ability to use or sell the intangible assets;
⑤ The expense attributable to the intangible asset at its development phase can be reliably measured.
All the expenses on R&D which cannot be distinguished between the research phase and development phaseare recognized in the profits and losses when incurred.
The specific criteria for dividing internal research and development projects into research phase anddevelopment phase are as follows: Once the corresponding project meets the aforementioned conditions and isapproved through a review process, it enters the development phase and begins capitalization.
(3) The impairment testing method and provision for impairment of intangible assetsFor the impairment testing method and provision for impairment of intangible assets, please refer to Item 25of Note V “Impairment of long-term assets.”
25. Impairment of long-term assets
For non-current non-financial assets such as fixed assets, construction in progress, right of use assets, intangibleassets with limited useful life, investment real estate measured at cost and long-term equity investments insubsidiaries, joint ventures and associates, the Group determines whether there are signs of impairment on thebalance sheet date. If the asset shows signs of impairment, the recoverable amount is estimated, and impairment testis conducted. Goodwill, intangible assets with indefinite useful lives and intangible assets that have not yet readyfor use are tested annually for impairment regardless of whether there is an indication of impairment.If the impairment test results show that the recoverable amount of an asset is lower than its carrying value, theimpairment provision shall be made and the impairment loss shall be recorded according to the difference. Therecoverable amount is the higher between the net value of the fair value of the asset less the disposal expense andthe present value of the estimated future cash flow of the asset. The fair value of the asset is determined based onthe sales agreement price in fair transactions. Where there is no sales agreement but there is an active market for theasset, the fair value shall be determined according to the buyer’s bid for the asset.Where there is neither sales agreement nor active market for the asset, the fair value of the asset is estimatedbased on the best information available. Disposal costs include legal costs associated with the disposal of the asset,related taxes, removal costs and direct costs incurred to bring the asset to marketable status. The present value ofthe expected future cash flow of the asset shall be determined according to the discounted amount of the expectedfuture cash flow generated by the asset in the process of continuous use and final disposal, which is convertedaccording to the appropriate discount rate. The asset impairment provision is calculated and recognized on a singleasset basis. If it is difficult to estimate the recoverable amount of a single asset, the recoverable amount of the assetgroup to which the asset belongs shall be determined. An asset group is the smallest portfolio of assets that canindependently generate cash inflows.For the goodwill presented separately in the financial statements, when tested for impairment, the book valueof goodwill will be apportioned to the asset group or combination of asset groups expected to benefit from thesynergies of the business combination. Where the test results indicate that the recoverable amount of an asset groupor combination of asset groups containing the apportioned goodwill is less than its book value, the correspondingimpairment loss is recognized. The impairment loss amount is first set off against the book value of the goodwillapportioned to the asset group or combination of asset groups and then set off against the book value of other assetsbased on the proportion of the book value of each asset other than goodwill in the asset group or combination ofasset groups.Once the above asset impairment loss is recognized, it shall not be reversed in subsequent accounting periodsfor the part whose value is restored.
26. Long-term deferred expenses
Long-term unamortized expenses are the expenses that have been incurred but shall be borne in the reportingperiod and subsequent periods for a period of assessment of more than one year. The Group’s long-term deferredexpenses mainly consist of building renovations and project improvements. These long-term deferred expenses areamortized using the straight-line method over the estimated period of benefit.
27. Contractual liabilities
The contractual liabilities refer to the obligation of the Group to transfer goods to customers for considerationreceived or receivable. If the customer has paid the contractual consideration or the Group has obtained anunconditional right of collection prior to the transfer of goods by the Group to the customer, the Group presents theamount received or receivable as a contractual liability on the date when the actual payment is made by the customeror the payment due date, whichever is earlier. Contractual assets and contractual liabilities under the same contractare presented on a net basis, and contractual assets and contractual liabilities under different contracts are not offset.
28. Employee compensation
(1) Accounting treatment for short-term employee compensation
The employee compensation of the Group includes short-term compensation, post-employment benefits,termination benefits and other long-term employee benefits. Where:
Short-term compensation mainly includes wages, bonuses, allowances and subsidies, employee welfareexpenses, medical insurance premiums, maternity insurance premiums, work-related injury insurance premiums,housing provident funds, union funds and employee education funds, non-monetary benefits, etc. The Grouprecognizes short-term employee compensation actually incurred during the accounting period in which employeesprovide services to the Group as a liability and includes it in current profits and losses or related asset cost. Non-monetary benefits are measured at fair value.
(2) Accounting treatment for post-employment benefits
Post-employment benefits mainly include basic pension insurance, unemployment insurance and annuity. Thepost-employment benefits plan includes the establishment of a defined contribution plan and the establishment of adefined benefit plan. If a defined contribution plan is adopted, the corresponding amount due is included in therelevant asset cost or current profits and losses at the time of occurrence.
If the employment relationship with the employee is terminated before the expiration of the employee’semployment contract, or a compensation proposal is made to encourage the employee to voluntarily accept thereduction, the employee compensation liabilities arising from termination benefits shall be recognized and includedin current profits and losses when the Group cannot unilaterally withdraw the termination benefits provided as aresult of the termination plan or the reduction proposal, or the Group recognizes the costs associated with thereorganization involving the payment of termination benefits, whichever is earlier. However, if the terminationbenefits cannot be fully paid within 12 months after the end of the annual reporting period, they shall be treated asother long-term employee compensations.
(3) Accounting treatment for termination benefits
Internal employee retirement plans are treated in the same way as the termination benefits mentioned above.The Group will recognize the salary of internal retirees and social insurance premiums to be paid during the periodfrom the date the employee ceases to provide service to the normal retirement date in the current profits and losses(termination benefits) when the conditions for recognition of the estimated liabilities are met.
(4) Accounting treatment for other long-term employee benefits
Other long-term employee benefits provided by the Group to employees that meet the defined contributionplan are accounted for in accordance with the defined contribution plan. Other benefits shall be accounted for inaccordance with the defined benefit plan.
29. Estimated liabilities
An obligation relating to a contingency is recognized as an estimated liability when the following conditionsare met: (1) The obligation is a current obligation undertaken by the Group; (2) The performance of the obligationis likely to result in the outflow of economic benefits; (3) The amount of the obligation can be measured reliably.
On the balance sheet date, estimated liabilities are measured according to the best estimate of expenses requiredto meet the relevant current obligations, taking into account factors such as risks, uncertainties and the time valueof money associated with contingencies.
If all or part of the expenses required to pay off the estimated liabilities are expected to be compensated by athird party, the compensation amount shall be recognized separately as an asset when it is basically determined thatit can be received, and the recognized compensation amount shall not exceed the book value of the estimatedliabilities.
(1) Loss-making contract
A loss-making contract is a contract in which the cost of fulfilling the contractual obligation inevitably exceedsthe expected economic benefit. If the contract to be executed becomes a loss-making contract and the obligationsarising from the loss-making contract meet the conditions for recognition of the above-mentioned estimatedliabilities, the portion of the estimated loss of the contract exceeding the recognized impairment loss (if any) of theunderlying asset of the contract is recognized as an estimated liability.
(2) Reorganization obligation
For a detailed, formal reorganization plan that has been announced to the public, the estimated liability amountis determined on the basis of direct expenses related to the reorganization, subject to meeting the conditions forrecognition of the estimated liabilities described above.
30. Share-based payments
(1) Accounting treatment for share-based payment
Share-based payments are transactions in which equity instruments are granted or liabilities are assumed onthe basis of equity instruments in exchange for services rendered by employees or other parties. The share-basedpayments are divided into equity-settled share-based payment and cash-settled share-based payment.
① Equity-settled share-based payments
Equity-settled share-based payments in exchange for services rendered by employees shall be measured at daysthe fair value of the equity instruments granted to employees. For the equity-settled share-based payment that canonly be vested after services during a waiting period are provided, or required performance conditions are met, theamount of such fair value is calculated on a straight-line basis, based on the best estimate of the number of equityinstruments that can be vested during the waiting period, and is included in the relevant costs or expenses, or ifavailable immediately after grant, included in the relevant costs or expenses on the grant date, increasing capitalreserves accordingly.On each balance sheet date during the waiting period, the Group makes the best estimate based on the latestfollow-up information such as changes in the number of employees that satisfy vesting conditions, and revises thenumber of equity instruments expected to be vested. The impact of the above estimates is included in the relevantcosts or expenses for the period, and capital reserves are adjusted accordingly.The equity-settled share-based payments in exchange for services rendered by other parties shall be measuredat the fair value of the services on the acquisition date if the fair value of services rendered by other parties can bereliably measured. However, if the fair value of services rendered by other parties cannot be reliably measured, butthe fair value of the equity instruments can be reliably measured, the equity-settled share-based payments shall bemeasured at the fair value of the equity instruments on the acquisition date of the services, and included in therelevant costs or expenses, increasing shareholders’ equity correspondingly.When the fair value of equity instruments granted cannot be reliably measured, the intrinsic value of the equityinstruments is used to measure their value on the grant date, subsequent balance sheet dates, and settlement dates.Changes in the intrinsic value are recognized in the current period’s income statement.
② Cash-settled share-based payments
A cash-settled share-based payment shall be measured in accordance with the fair value of liability determinedbased on the shares or other equity instruments undertaken by the Group. If the cash-settled share-based paymentcan be vested immediately after granting, it shall be included in the relevant costs or expenses on the grant date,increasing the liabilities correspondingly. For the cash-settled share-based payment that can only be vested afterservices during a waiting period are provided or required performance conditions are met, on each balance sheetdate during the waiting period, the services obtained during the current period are included in the cost or expense atthe fair value of the liabilities assumed by the Group based on the best estimate of the situation of vesting, increasingthe corresponding liabilities correspondingly.
The Group shall, on each balance sheet date and each account date prior to the settlement of the relevantliabilities, re-measure the fair values of the liabilities and include the changes in the current profits and losses.
(2) Accounting treatment for modification and termination of share-based payment plan
When the Group makes a modification to the share-based payment plan, if the modification increases the fairvalue of the equity instrument granted, the increase in services obtained is recognized in accordance with the increasein the fair value of the equity instrument. The increase in the fair value of equity instruments refers to the difference
between fair values of the equity instruments before and after the modification on the date of modification. If amodification reduces the total fair value of share-based payments or is otherwise unfavorable to the employees, theacquired services continue to be accounted for as if the change never occurs, unless the Group cancels some or allof the equity instruments granted.If a grant of equity instruments is canceled during the waiting period, the Group treats the cancellation of thegranted equity instruments as accelerated exercise of right and includes the amount to be recognized over theremaining waiting period in the current profits and losses immediately, and recognizes the capital reserve at thesame time. If employees or other parties can choose to meet the non-vesting conditions but have not met theconditions within the waiting period, the Group treats it as cancellation of equity instruments granted.
(3) Accounting treatment for share-based payment transactions involving the shareholders or de factocontrollers of the Group and Company
Transactions involving share payments between the shareholders or de facto controllers of the Group andCompany are accounted for in the Group’s consolidated financial statements in accordance with the followingprovisions if either one of the settlement enterprises and receiving enterprises is within the Group, while the otherone is outside the Group:
① If the settlement enterprise settles by its own equity instruments, the share-based payment transaction shallbe treated as the equity-settled share-based payment; otherwise, they shall be treated as the cash-settled share-basedpayment.
If the settlement enterprise is an investor of the enterprise receiving the services, it shall be recognized as along-term equity investment in the enterprise receiving the services according to the fair value of the equityinstrument on the grant date or the fair value of the liability assumed, and the capital reserve (other capital reserve)or liability shall be recognized at the same time.
② If the enterprise receiving the services has no settlement obligation or the equity instrument granted to itsemployees is its own equity instrument, the share-based payment transaction shall be treated as the equity-settledshare-based payment. If the enterprise receiving the services has settlement obligation and the equity instrumentgranted to its employees is not its own equity instrument, the share-based payment transaction shall be treated asthe cash-settled share-based payment.
For the share-based payment transaction occurring among the enterprises within the Group, where theenterprise receiving the services and the settlement enterprise are not the same enterprise, the recognition andmeasurement of the share-based payment transaction in the individual financial statements of the enterprisereceiving the services and the settlement enterprise shall be processed in accordance with the above principles.
31. Revenue
Revenue is the total inflow of economic benefits arising from the Group’s ordinary activities that would resultin an increase in shareholders’ equity and are unrelated to capital contributions by shareholders. When the contractbetween the Group and the customer meets the following conditions, revenue is recognized when the customerobtains control of the relevant goods (including services, the same below) : The parties to the contract have approved
the contract and undertake to perform their obligations; The contract specifies the rights and obligations of theparties to the contract in relation to the goods transferred or the provision of services; The contract has clear paymentterms related to the transferred goods; The contract is commercial in nature, i.e. the performance of the contract willchange the risk, timing or amount of the Group’s future cash flows; The consideration to which the Group is entitledas a result of the transfer of goods to customers is likely to be recovered. Gaining control of the relevant goodsmeans being able to dominate the use of that goods and derive almost all of the economic benefits from it.On the commencement date of the contract, the Group identifies the individual performance obligation existingin the contract and allocates the transaction price to each individual performance obligation in proportion to theindividual selling price of the goods promised by each individual performance obligation. Factors such as variableconsideration, significant financing elements in the contract, non-cash consideration, and consideration payable tocustomers are considered in determining the transaction price.For each individual performance obligation in the contract, the Group will recognize the transaction priceallocated to the individual performance obligation in accordance with the performance progress during the relevantperformance period as revenue if one of the following conditions is met: The customer acquires and consumes theeconomic benefits arising from the Group’s performance at the same time as the Group fulfills its obligations; Thecustomer can control the goods under construction in the course of the Group’s performance; The goods producedin the course of the Group’s performance have irreplaceable uses and the Group is entitled to receive paymentthroughout the contract period for the cumulative part of the performance completed to date. The performanceprogress is determined by the input or output method, depending on the nature of the goods transferred. When theperformance progress cannot be reasonably determined, and the costs incurred by the Group are expected to becompensated, revenue is recognized at the amount of the costs incurred until the progress of performance can bereasonably determined.
If one of the above conditions is not met, the Group recognizes revenue at the point at which the customerobtains control of the relevant goods at the transaction price apportioned to the individual performance obligation.In determining whether a customer has acquired control of the goods, the Group considers the following indications:
The enterprise has the current right of collection in respect of the goods, that is, the customer has the current paymentobligation in respect of the goods; The enterprise has transferred the legal ownership of the goods to the customer,that is, the customer has the legal ownership of the goods; The enterprise has physically transferred the goods to thecustomer, that is, the customer has physically possessed the goods; The enterprise has transferred the main risks andreturns in the ownership of the goods to the customer, that is, the customer has obtained the main risks and returnsin the ownership of the goods; The customer has accepted the goods; Other indications that the customer has takencontrol of the goods.
Revenue recognition principles for specific scenarios are as follows:
(1) Domestic sales
Revenue is recognized when control is transferred to the customer upon delivering the products to thecustomer’s specified location and obtaining customer acknowledgement through a signed confirmation, as stipulatedin the sales contract or order.
Revenue is recognized when control is transferred to the customer upon delivering the products to thecustomer’s specified location and completing the customer's inspection based on relevant standards, as stipulated inthe sales contract or order.Revenue is recognized when the hotel rooms or catering services have been provided, and the right to collectservice fees is obtained.
(2) International sales
Revenue is recognized when control is transferred to the customer upon the products being dispatched andcustoms clearance procedures being completed, as stipulated in the sales contract or order.
32. Contract cost
Incremental cost incurred by the Group to acquire contract that is expected to be recovered is taken as thecontract acquisition cost and recognized as an asset. However, if the amortization period of the asset does not exceedone year, it is included in the current profits and losses when it occurs.
The cost incurred for the performance of the contract is recognized as an asset if it does not fall within thescope of Accounting Standard for Business Enterprises No. 14 - Revenue (Revised in 2017) and meets the followingconditions: ① The cost is directly related to a current or anticipated contract, including direct labor, direct materials,manufacturing expenses (or similar expenses), cost expressly borne by the customer, and other costs incurred solelyas a result of the contract; ② This cost increases the Group’s future resources to meet its performance obligations;
③ This cost is expected to be recovered.
Assets related to contract costs are amortized on the same basis as for the recognition of the commodity revenueassociated with the assets and are recognized in current profits and losses.
When the carrying amount of an asset related to contract costs exceeds the difference between the followingtwo amounts, an impairment provision is recognized for the excess amount, and an asset impairment loss isrecognized: (1) The expected remaining consideration to be obtained from transferring the goods related to that asset.
(2) The estimated costs necessary to complete the transfer of the related goods. If there is a change in the factorsthat led to impairment in previous periods, resulting in the difference between (1) minus (2) exceeding the carryingamount of the asset, the previously recognized impairment provision is reversed and recognized in the currentperiod’s income statement. However, the carrying amount of the asset after the reversal should not exceed thecarrying amount of the asset on the date of the reversal, assuming no impairment provision had been recognized.
33. Government subsidy
Government subsidy refers to the Cash and bank balance and non-Cash and bank balance that the Group obtainsfrom the government free of charge, excluding the capital invested by the government as an investor with thecorresponding owners’ equity. Government subsidies are divided into asset-related government subsidies andincome-related government subsidies. The Group defines government subsidies obtained for the acquisition orotherwise formation of long-term assets as asset-related government subsidies. Other government subsidies aredefined as income-related government subsidies. If the government document does not specify the recipients of thesubsidies, the subsidies divided into asset-related government subsidies and income-related government subsidies
in the following way: (1) If the government documents specify the specific project for which the subsidy is targeted,the division shall be made according to the relative proportion of the disbursement amount forming assets and thedisbursement amount included in the expenses in the budget of the specific project, and the division proportion shallbe reviewed on each balance sheet date and changed if necessary; (2) Where the government document only has ageneral description of the purpose and no specific project is specified, it shall be regarded as an income-relatedgovernment subsidy. For a government subsidy in the form of transfer of Cash and bank balance, the subsidy ismeasured at the amount received or receivable. For a government subsidy in the form of transfer of non-Cash andbank balance, it is measured at fair value; if the fair value cannot be reliably determinable, the subsidy is measuredat nominal amount. Government subsidies measured at nominal amounts are directly included in current profits andlosses.The Group usually recognizes and measures government subsidies in accordance with the amount actuallyreceived when they are actually received. However, government subsidies are recognized at the amount receivableif there is evidence that the Group can meet the relevant conditions specified in the financial support policy at theend of the period and the Group is expected to receive the financial support funds. Government subsidies measuredat the amounts receivable shall also meet the following conditions: (1) The amount of the receivable subsidies hasbeen confirmed by the competent government department in writing, or can be reasonably calculated according tothe relevant provisions of the officially issued measures for the management of financial funds, and there is nosignificant uncertainty in the estimated amount; (2) It is based on the financial support projects and financial fundmanagement measures officially issued by the local financial department and actively disclosed in accordance withthe provisions of the Regulations on the Disclosure of Government Information, and the management measuresshould be inclusive (that is, any enterprise that meets the prescribed conditions can apply), rather than specificallyformulated for specific enterprises; (3) The relevant grant approval has clearly promised the disbursement period,and the disbursement of the amount is guaranteed by the corresponding financial budget, so it can be reasonablyguaranteed that it can be received within the specified period; (4) Other relevant conditions that should be met basedon the specific circumstances of the Group and the grant in question (if any).Asset-related government subsidies are recognized as deferred revenues and included in the current profits andlosses over the useful life of the related assets in accordance with a reasonable and systematic method. Income-related government subsidies that compensate the future costs, expenses or losses are recorded as deferred incomeand recognized in current profits and losses in the period in which the related costs, expenses or losses are recognized;Income-related government subsidies that compensate the incurred expenses or losses are included directly in thecurrent profits and losses.For government subsidies that contain both parts related to assets and parts related to income, accountingtreatments shall be made separately for different parts. If it is difficult to distinguish, it shall be classified as theincome-related government subsidy.
Government subsidies related to ordinary activities are recorded in other income in accordance the substanceof economic operations. Government subsidies unrelated to daily activities are included in non-operating revenueand expense.
When confirmed government subsidies need to be returned and there is a related balance of deferred income,the related deferred income balance is offset. Any excess amount is recognized in the current period’s incomestatement or adjusted against the carrying value of the asset (for government subsidies that were initially offsetagainst the carrying value of the asset); in other cases, it is recognized directly in the current profits and losses.
34. Deferred income tax assets/deferred income tax liabilities
(1) Current income tax
The current income tax liabilities (or assets) generated in the current period and previous periods are measuredon the balance sheet date in accordance with the expected payable (or refunded) income tax amount calculatedaccording to the tax law. The taxable income amount on which the current income tax expense is calculated is basedon the corresponding adjustment of the pre-tax accounting profit of the reporting period in accordance with therelevant provisions of the tax law.
(2) Deferred income tax assets and deferred income tax liabilities
The deferred income tax assets and deferred income tax liabilities can be determined with the balance sheetliability method, based on the difference between the book value of certain assets and liabilities and the tax basis,as well as the temporary difference between the tax basis and the book value of the items not recognized as assetsand liabilities but whose tax basis can be determined according to the tax law.
For taxable temporary differences relating to the initial recognition of goodwill and the initial recognition ofassets or liabilities arising from transactions that are neither a business combination nor affect accounting profit andtaxable income (or deductible losses) at the time of occurrence, the relevant deferred tax liabilities are not recognized(except for individual transactions in which the initial recognition of assets and liabilities results in equal amountsof taxable temporary differences and deductible temporary differences).
In addition, for taxable temporary differences related to investments in subsidiaries, associates and jointventures, deferred tax liabilities are not recognized if the Group is able to control the timing of the reversal of thetemporary difference and it is likely that the temporary difference will not be reversed in the foreseeable future.
Subject to the above exceptions, the Group recognizes all other deferred tax liabilities arising from taxabletemporary differences.
For deductible temporary differences relating to the initial recognition of assets or liabilities arising fromtransactions that are neither a business combination nor affect accounting profit and taxable income (or deductiblelosses) at the time of occurrence, the relevant deferred tax assets are not recognized (except for individualtransactions in which the initial recognition of assets and liabilities results in equal amounts of taxable temporarydifferences and deductible temporary differences). For deductible temporary differences associated withinvestments in subsidiaries, associates and joint ventures, the relevant deferred tax asset is not recognized if it is notlikely that the temporary differences will reverse in the foreseeable future and it is not likely that taxable incomewill be available against which the deductible temporary differences can be utilized in the future. Subject to theabove exceptions, the Group recognizes other deferred income tax assets arising from deductible temporarydifferences to the extent that it is probable that taxable income will be available against which deductible temporarydifferences can be utilized.
For the deductible losses and tax credits that can be carried forward to future years, the Group recognizes thecorresponding deferred tax assets to the extent that it is probable that future taxable income will be available againstwhich the deductible losses and tax credits can be utilized.On the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at thetax rates that are expected to apply in the period in which the asset is recovered or the liability is settled accordingto the tax law.On the balance sheet date, the Group reviews the book value of deferred income tax assets. If no sufficienttaxable income is probably obtained in the future to offset the benefits of deferred income tax assets, the book valueof the deferred income tax assets shall be written down. When it is probable to obtain sufficient taxable incometaxes, such write-down amount shall be reversed.
(3) Income tax expense
Income tax expenses include current income tax expenses and deferred income tax expenses.
Except for current income tax and deferred income tax related to transactions and events recognized as othercomprehensive income or directly included in shareholders’ equity, and the book value of deferred income taxadjusted goodwill resulting from business combination, the remaining current income tax and deferred income taxexpenses or gains are included in current profits and losses.
(4) Offsetting of income tax
If the Group has the legal right to settle on a net basis, and intends to settle on a net basis or acquire assets andsettle liabilities simultaneously, the current income tax assets and current income tax liabilities are presented on anet basis after offsetting.
If the Group has a legally enforceable right to settle current income tax assets and liabilities on a net basis，and the deferred income tax assets and liabilities are related to the income taxes levied by the same taxation authorityon either the same taxable entity or different taxable entities, which intend either to settle current income tax assetsand liabilities on a net basis or to realize the assets and settle the liabilities simultaneously, in each future period inwhich significant amounts of deferred income tax assets and liabilities are expected to be reversed, the deferredincome tax assets and liabilities can be offset and presented on a net basis.
35. Leases
Leasing refers to the contract in which the Group transfers or acquires the right to control the use ofidentified assets for a specified period in exchange for consideration. On the commencement date of a contract,the Group assesses whether the contract is, or contains, a lease.
(1) Accounting treatment as the lessee
The Group’s lease assets are mainly housing and buildings.
① Initial measurement
On the date of commencement of the lease term, the Group recognizes the right to use the lease asset duringthe lease term as a right of use asset and recognizes the present value of the outstanding lease payments as a leaseliability, except for short-term leases and low value asset leases. When calculating the present value of lease
payments, the interest rate implicit in the lease is used as the discount rate. If the interest rate implicit in the leasecannot be determined, the lessor’s incremental borrowing rate is used as the discount rate.
② Subsequent measurement
The Group shall depreciate the right of use assets in accordance with the relevant depreciation provisions ofAccounting Standard for Business Enterprises No. 4 - Fixed Assets (see Section 19 “Fixed assets” under NoteV for details). If the ownership of the leased asset can be reasonably determined at the end of the lease term, theGroup shall depreciate the leased asset during the remaining useful life. Where it is unable to reasonably determinethe ownership of the leased asset at the end of the lease term, the Group shall make depreciation provision over thelease term or the remaining useful life of the leased asset, whichever is shorter.
The Group calculates the interest expense on lease liabilities for each period of the lease term at a fixed periodicrate, which is included in the current profits and losses, or the relevant asset costs. Variable lease payments that arenot included in the measurement of the lease liability are recognized in current profits and losses, or the relevantasset costs when they are actually incurred.
After the commencement date of the lease term, when there is a change in the substantive fixed payment amount,a change in the amount expected to be payable for the guaranteed residual value, a change in the index or rate usedto determine the lease payment amount, or a change in the evaluation result or actual exercise of the purchase option,renewal option or termination option, the Group remeasures the lease liability at the present value of the changedlease payment amount and adjusts the carrying value of the right-of-use asset accordingly. If the book value of theright-of-use asset has been reduced to zero but the lease liability is subject to further reduction, the Group recognizesthe remaining amount in current profits and losses.
③ Short-term leases and leases of low-value assets
For short-term leases (leases with a lease term of not more than 12 months since the commencement date ofthe lease) and low-value asset leases (the value of a single lease asset, which is a brand-new asset, is lower thaneither RMB 40,000 or USD 5,000), the Group adopts a simplified approach whereby the right of use assets and leaseliabilities are not recognized and the lease payments are recognized in the relevant asset cost or current profits andlosses in accordance with the straight-line method or other systematic and reasonable methods during the variousperiods of the lease term.
(2) Accounting treatment as the lessor
On the inception date of the lease, the Group classifies the lease as a finance lease and an operating lease basedon the substance of transaction. A finance lease is a lease that transfers substantially all the risks and returnsassociated with ownership of the leased asset. An operating lease is a lease other than a finance lease.
① Operating lease
Lease receipts under operating leases are recognized as rental income on a straight-line basis over the respectiveperiods of the lease term. Variable lease payments acquired in connection with operating leases that are not includedin the lease receipts are recognized in current profits and losses when they are actually incurred.
② Finance lease
The Group recognizes finance lease receivables and derecognizes finance lease assets on the commencementdate of the lease term. Finance lease receivables are initially measured at the net lease investment (the sum of theunsecured balance and the unreceived lease proceeds on the commencement date of the lease term at the presentvalue discounted with the intrinsic interest rate of the lease), and interest income is recognized during the lease termat a fixed periodic interest rate. Variable lease payments obtained by the Group which are not included in the netlease investment measurement are recognized in current profits and losses when they are actually incurred.
36. Other significant accounting policies and accounting estimates
(1) Share repurchase
Consideration and transaction costs paid in share repurchases reduce shareholders’ equity and no profits orlosses is recognized when shares of the Company are repurchased, transferred or cancelled.
For the transfer of treasury shares, the difference between the amount actually received and the book value oftreasury shares shall be included in the capital reserve. If the capital reserve is insufficient for deduction, the surplusreserve and undistributed profits shall be deducted. For the cancellation of treasury shares, the share capital shall bereduced according to the par value of the shares and the number of shares cancelled, and the difference between thebook balance and the par value of treasury shares shall be charged to the capital reserve. If the capital reserve isinsufficient for deduction, the surplus reserve and undistributed profits shall be deducted.
37. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
□Applicable? Not applicable
(2) Changes in significant accounting estimates
□Applicable? Not applicable
(3) First-time implementation of the new accounting standard in 2023 to adjust relevant items in the
financial statements at the beginning of the year of first-time implementation
□Applicable?Not applicable
38. Significant accounting judgment and estimate
As operating activities have inherent uncertainties, the Group needs to make judgments, estimates andassumptions upon report items that cannot be accurately calculated in applying the above accounting policies. Thesejudgments, estimates and assumptions are made based on historical experiences of the management of the Group,taking other related factors into consideration. These judgments and estimates may affect the presented amounts ofincomes, expenses, assets and liabilities and, as well as the disclosure of contingent liabilities on the balance sheetdate. However, the uncertainty in these estimates may result in actual results that differ from the current estimatesof the Group's management, resulting in material adjustments to the book value of assets or liabilities affected in thefuture.
The Group reviews the above judgments, estimates and assumptions periodically based on going concern. Ifthe changes of accounting estimates only affect the current period, the influence amount is recognized in the currentperiod. If the changes of accounting estimates affect both of the current year and the future period, the influence
amount is recognized in the current period and the future period.As at the balance sheet date, the significant areas in which the Group is required to make judgments, estimatesand assumptions regarding the amounts of items in the financial statements are as follows:
(1) Revenue recognition
As set out in Section 39 “Revenue” under Note V, the Group’s revenue recognition involves significantaccounting judgments and estimates such as: identifying customer contracts; estimating the recoverability of theconsideration to which the Group is entitled as a result of the transfer of goods to the customer; identifying theperformance obligations in the contract; estimating the variable consideration present in the contract and the amountof accumulated recognized revenue that is highly unlikely to be materially reversed when the related uncertainty iseliminated; whether there is any significant financing component to the contract; estimating the individual sellingprice of the individual performance obligations in the contract; determining whether the performance obligation isto be performed within a certain period of time or at a certain point; determining the implementation progress, etc.The Group mainly relies on past experience and work to make judgments, and these significant judgments andchanges in estimates may have an impact on the operating revenue, operating costs, and profits and losses of theperiod for the current or subsequent periods, and may constitute a material impact.
(2) Leases
① Identification of leases
When identifying whether a contract is a lease or contains a lease, the Group needs to assess whether thereexists an identified asset and the customer controls the use of the asset for a certain period of time. In this assessment,consideration needs to be given to the nature of the asset, substantial replacement rights, and whether the customeris entitled to receive virtually all of the economic benefits arising from the use of the asset during that period andable to direct the use of the asset.
② Classification of leases
When acting as a lessor, the Group classifies leases into operating leases and finance leases. When making theclassification, the management needs to make an analysis and judgment as to whether all the risks and rewardsassociated with ownership of the leased asset have been substantially transferred to the lessee.
③ Lease liabilities
When the Group is the lessee, the lease liabilities shall be initially measured at the present value of theoutstanding lease payment on the commencement date of the lease term. When measuring the present value of leasepayments, the Group estimates the discount rate used and the lease term of a lease contract with a renewal ortermination option. When assessing the lease term, the Group takes into account all relevant facts and circumstancesrelating to the economic benefits arising from the exercise of the option by the Group, including expected changesin facts and circumstances between the commencement date of the lease term and the exercise date of the option.Different judgments and estimates may affect the recognition of lease liabilities and right-of-use assets and willaffect the profits or losses in subsequent periods.
(3) Impairment of financial assets
The Group uses the expected credit loss model to evaluate the impairment of financial instruments, and theapplication of the expected credit loss model requires significant judgments and estimates that take into account allreasonable and evidence-based information, including forward-looking information. When making such judgmentsand estimates, the Group extrapolates the expected changes in the debtors' credit risk based on historical data andfactors such as changes in economic policies, macroeconomic indicators, industry risks, external market conditions,technological environment and customer conditions.
(4) Provision for inventory impairment
According to the inventory accounting policy, the Group makes provision for inventory impairment based oneither the cost or the realizable net value of the old and unsalable inventory, whichever is lower, if the cost is higherthan the realizable net value. The impairment of inventory to net realizable value is based on assessing themarketability of the inventory and its net realizable value. Assessment of inventory impairment requires themanagement to make judgments and estimates on the basis of obtaining solid evidence and considering factors suchas the purpose of holding inventory and the impact of events after the balance sheet date. The difference betweenactual results and the original estimate will affect the book value of inventory and the withdrawal or reversal of theprovision for inventory impairment during the period in which the estimate is changed.
(5) Fair value of financial instruments
For financial instruments without active market, the Group will determine their fair values through variousvaluation methods. These valuation methods include discounted cash flow model analysis. In the valuation, theGroup needs to estimate future cash flows, credit risk, market volatility and correlation, and select an appropriatediscount rate. These assumptions are subject to uncertainty, and changes in them can have an impact on the fairvalue of financial instruments. Where equity instrument investments or contracts are publicly quoted, the Groupdoes not use cost as the best estimate of their fair value.
(6) Provision for impairment of long-term assets
On the balance sheet date, the Group makes a judgment on whether there is any sign of possible impairment ofnon-current assets other than financial assets. Intangible assets with uncertain useful life shall be subject toimpairment tests when there are signs of impairment in addition to annual impairment tests. Non-current assets otherthan financial assets shall be subject to impairment tests when there are signs indicating that their book value isuncollectible.
Impairment occurs when the book value of an asset or asset group is greater than the recoverable amount, thatis, the net amount of fair value minus disposal expenses and the present value of expected future cash flow,whichever is higher.
The net amount of fair value minus disposal expenses shall be determined by reference to the sale agreementprice or observable market price of similar assets in an arm’s length transaction, less the incremental cost directlyattributable to the disposal of the asset.
When estimating the present value of future cash flows, it is necessary to make significant judgments about theoutput of the asset (or group of assets), the selling price, the associated operating costs, and the discount rate usedin calculating the present value. When estimating the recoverable amounts, the Group uses all the relevant
information available, including projections of production volumes, selling prices and related operating costs basedon reasonable and supportable assumptions.The Group tests goodwill for impairment at least annually. This requires an estimate of the present value of thefuture cash flows of the asset group or combination of asset groups to which goodwill has been allocated. Whenestimating the present value of the future cash flow, the Group needs to estimate the expected future cash flowgenerated by the asset group or combination of asset groups, and determine the present value of the future cash flowat an appropriate discount rate.
(7) Depreciation and amortization
The Group depreciates and amortizes the investment real estate, fixed assets and intangible assets on a straight-line basis over their useful lives, taking into account their residual value. The Group periodically reviews the usefullife to determine the amount of depreciation and amortisation expenses to be included in each reporting period. Theuseful life is determined by the Group based on previous experience with similar assets as well as expectedtechnological updates. If there is any material change in previous estimates, an adjustment will be made todepreciation and amortization expense in future periods.
(8) Deferred income tax assets
To the extent that there is likely sufficient taxable profit to offset the loss, the Group recognises deferred taxassets on all unutilised tax losses. This requires the management of the Group to use massive judgments to estimatethe time and amount of taxable profit in the future and then to determine the value of deferred tax assets incombination with tax planning strategies.
(9) Income tax
In the normal business activities of the Group, there are certain uncertainties in the final tax treatment andcalculation of some transactions. Whether some items can be deducted before tax requires the approval of the taxauthority. Where the final tax outcome of these matters is different from the estimated amounts, the differences willimpact the current income tax and deferred income tax in the period in which such determination is made.
(10) Estimated liabilities
Based on the terms of the contract, current knowledge and historical experience, the Group estimates and makescorresponding provisions for product quality assurance, expected contract losses, liquidated damages for latedelivery, etc. Where such contingencies have created a current obligation and the fulfilment of such currentobligations is likely to result in an outflow of economic benefits from the Group, the Group recognises thecontingency as an estimated liability based on the best estimate of the expense required to fulfil the relevant currentobligation. The recognition and measurement of the estimated liabilities relies heavily on the judgment of themanagement. When making this judgment, the Group needs to assess factors such as risks, uncertainties and thetime value of money associated with such contingencies.
Among other things, the Group will estimate liabilities for after-sales quality maintenance commitmentsprovided to customers in relation to the sale, repair and modification of the products sold. The Group’s recentmaintenance experience data has been taken into account when estimating liabilities, but recent maintenanceexperience may not reflect future maintenance situation. Any increase or decrease in this provision may affect profits
or losses in future years.
(11) Measurement at fair value
Certain assets and liabilities of the Group are measured at fair value in the financial statements. Whenestimating the fair value of an asset or liability, the Group uses available observable market data. If theinputs of level 1 are not available, the Group uses appropriate valuation techniques and relevant models forvaluation.
39. Others
None.
VI. Taxation
1. Main tax types and tax rates
| Tax type | Taxation basis | Tax rate |
Value-added tax
| Value-added tax | Value added from sales of goods or rendering of services | 13%, 9%, 6%, 5%, 3% |
Consumption tax
| Consumption tax | Quantity-based collection and price-based collection | Price-based collection: 20%, 15%; Quantity-based collection: RMB 0.5 per 0.5kg |
Urban maintenance andconstruction tax
| Urban maintenance and construction tax | Amount of turnover tax payables | 7%, 5%, 1% |
Enterprise income tax
| Enterprise income tax | Taxable income | 15%, 16.5%, 20%, 25% |
Education surcharge
| Education surcharge | Amount of turnover tax payables | 3% |
Local education surcharge
| Local education surcharge | Amount of turnover tax payables | 2% |
If there are taxable entities with different corporate income tax rates, disclose the description of the situation
| Taxpayer | Income tax rate |
| Yunnan Baiyao Group Co., Ltd. | 15% |
| Yunnan Baiyao Group Medicine E-commerce Co., Ltd. | 15% |
| Yunnan Institute of Materia Medica | 15% |
| Yunbaiyao Zhengwu Technology (Shanghai) Co., Ltd. | 15% |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | 15% |
| Yunnan Baiyao Group Health Products Co., Ltd. | 15% |
| Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd. | 15% |
| Yunnan Baiyao Group Lijiang Pharmaceutical Co., Ltd. | 15% |
| Yunnan Baiyao Group Wenshan Qihua Co., Ltd. | 15% |
| Yunnan Baiyao Group Wuding Pharmaceutical Co., Ltd. | 15% |
| Yunnan Pharmaceutical Co., Ltd. | 15% |
| Yunnan Pharmaceutical Yuxi Sales Co., Ltd. | 15% |
| Yunnan Pharmaceutical Xingda Co., Ltd. | 15% |
| Yunnan Pharmaceutical Baoshan Drug Development Co., Ltd. | 15% |
| Yunnan Pharmaceutical Technology Co., Ltd. | 15% |
| Yunnan Pharmaceutical Sanfa Co., Ltd. | 15% |
| Yunnan Pharmaceutical Dehong Development Co., Ltd. | 15% |
| Yunnan Pharmaceutical Xihui Co., Ltd. | 15% |
| Yunnan Pharmaceutical Qujing Co., Ltd. | 15% |
| Yunnan Baiyao Pharmacy Co., Ltd. | 15% |
| Yunnan Pharmaceutical Wanhe Co., Ltd. | 15% |
| Yunnan Pharmaceutical Tianma Co., Ltd. | 15% |
| YNBY International Limited | 16.50% |
| Beijing Rui’er Testing Technology Co., Ltd. | 20% |
| Yunnan Pharmaceutical Jiayuan Co., Ltd. | 20% |
| Yunnan Pharmaceutical Xiongyi Co., Ltd. | 20% |
| Yunnan Pharmaceutical Tianfu Dahua Co., Ltd. | 20% |
| Yunnan Pharmaceutical Lincang Sales Co., Ltd. | 20% |
| Yunnan Pharmaceutical Diqing Development Co., Ltd. | 20% |
| Yunnan Pharmaceutical Pu’er Co., Ltd. | 20% |
| Yunnan Pharmaceutical Dali Development Co., Ltd. | 20% |
| Lijiang Yunquan Biological Development Co., Ltd. | 20% |
| Yunnan Baiyao Tiancui Business Management Co., Ltd. | 20% |
| Beijing Yunzhi Health Management Co., Ltd. | 20% |
| Shanghai Wenshu Health Management Co., Ltd. | 20% |
| Yunnan Baiyao Yunzhen International Trade Co., Ltd. | 20% |
| Kunming Yunzhen Medical Technology Co., Ltd. | 20% |
| Shanghai Yunyao Oral Medical Technology Co., Ltd. | 20% |
| Yunnan Fengqing Tea Plant Co., Ltd. | 20% |
| Tianjin Yunshuda Comprehensive Clinic Co., Ltd. | 20% |
| Yunnan Tianzheng Testing Co., Ltd. | 20% |
2. Preferential tax treatment
(1) Yunnan Baiyao Group Co., Ltd, Yunnan Baiyao Group Medicine E-commerce Co., Ltd, YunnanPharmaceutical Co., Ltd, Yunnan Pharmaceutical Technology Co., Ltd, Yunnan Pharmaceutical Yuxi SalesCo., Ltd, Yunnan Pharmaceutical Sanfa Co., Ltd, Yunnan Pharmaceutical Xingda Co., Ltd, YunnanPharmaceutical Wanhe Co., Ltd, Yunnan Pharmaceutical Baoshan Drug Development Co., Ltd, YunnanBaiyao Group Health Products Co., Ltd, Yunnan Baiyao Group Lijiang Pharmaceutical Co., Ltd, YunnanBaiyao Group Wenshan Qihua Co., Ltd, Yunnan Baiyao Pharmacy Co., Ltd, Yunnan Baiyao Group WudingPharmaceutical Co., Ltd, Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd, Yunnan PharmaceuticalTianma Co., Ltd, Yunnan Pharmaceutical Hongde Development Co., Ltd, Yunnan Pharmaceutical Qujing Co.,Ltd and Yunnan Pharmaceutical Xihui Co., Ltd enjoy the preferential tax treatment for the Western
Development and pay the enterprise income tax at the tax rate of 15%.
(2) Yunnan Institute of Materia Medica, Yunbaiyao Zhengwu Technology (Shanghai) Co., Ltd andYunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd enjoy the preferential tax treatmentfor high-tech enterprises and pay the enterprise income tax at the tax rate of 15%.
(3) For Yunnan Baiyao Group Sanqi Industry Co., Ltd, Yunnan Baiyao Group Tai’an BiotechnologyIndustry Co., Ltd and Yunnan Yunyao Flavor and Fragrance Co., Ltd, the primary processing of agriculturalproducts is exempt from enterprise income tax, and the income other than that is taxed at 25%.For Lijiang Yunquan Biological Development Co., Ltd, the primary processing of agricultural products isexempt from enterprise income tax, and the income other than that shall be subject to enterprise income taxfor small and micro enterprises.
(4) According to the Announcement of the General Administration of Taxation of the Ministry of Financeon the Further Implementation of the Preferential Income Tax Policy for Small and Micro Enterprises (Financeand Taxation [2022] No. 13), “the part of the annual taxable income of small and micro profit enterprisesexceeding RMB 1 million but not exceeding RMB 3 million shall be included in the taxable income at areduced rate of 25%, and the enterprise income tax shall be paid at a tax rate of 20%. The period ofimplementation of this announcement is from January 1, 2022 to December 31, 2024,” the Announcement ofthe General Administration of Taxation of the Ministry of Finance on Preferential Income Tax Policies forSmall and Micro Enterprises and Individual Industrial and Commercial Households (Finance and Taxation[2023] No. 6), “the part of the annual taxable income of small and micro profit enterprises that does not exceedRMB 1 million shall be included in the taxable income at a reduced rate of 25%, and the enterprise income taxshall be paid at a tax rate of 20%. The period of enforcement of this Announcement is from January 1, 2023 toDecember 31, 2024,” and the Announcement of the General Administration of Taxation of the Ministry ofFinance on Tax Policies for Further Supporting the Development of Small and Micro Enterprises andIndividual Industrial and Commercial Enterprises (Finance and Taxation [2023] No. 12), “For small, low-profit enterprises, the taxable income amount shall be calculated at a reduced rate of 25%, and the enterpriseincome tax shall be paid at a tax rate of 20%. The policy shall be continued until December 31, 2027.” Eighteencompanies, including Yunnan Fengqing Tea Plant Co., Ltd, and Beijing Rui’er Testing Technology Co., Ltdpay enterprise income tax at a tax rate of 20% according to this policy.
3. Others
None.
VII. Notes to Items in Consolidated Financial Statements
1. Cash and bank balance
Unit: RMB
| Item | Closing balance | Opening balance |
Cash on hand
| Cash on hand | 258,600.92 | 224,637.14 |
Bank deposit
| Bank deposit | 14,132,709,154.14 | 13,006,283,524.34 |
Other cash and bank balance
| Other cash and bank balance | 85,375,321.61 | 49,605,550.99 |
Total
| Total | 14,218,343,076.67 | 13,056,113,712.47 |
Including: Total amount of moneydeposited overseas
| Including: Total amount of money deposited overseas | 190,267,321.90 | 177,953,497.45 |
Other explanations: None.
2. Financial assets held for trading
Unit: RMB
| Item | Closing balance | Opening balance |
Financial assets at fair value throughprofits or losses
| Financial assets at fair value through profits or losses | 149,366,687.56 | 2,415,722,075.60 |
Including:
| Including: |
Investments in debt instruments
| Investments in debt instruments |
Investments in equity instruments
| Investments in equity instruments | 144,766,687.56 | 2,357,680,635.18 |
Others
| Others | 4,600,000.00 | 58,041,440.42 |
Total
| Total | 149,366,687.56 | 2,415,722,075.60 |
Other explanations: None.
3. Notes receivable
(1) Notes receivable by type
Unit: RMB
| Item | Closing balance | Opening balance |
Banker’s acceptance bill
| Banker’s acceptance bill | 227,542,572.56 | 789,465,084.93 |
Total
| Total | 227,542,572.56 | 789,465,084.93 |
(2) Disclosure by provision for bad debts
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Provision for bad debts | Book value | Book balance | Provision for bad debts | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
Bills receivable with provision for bad debts byportfolio
| Bills receivable with provision for bad debts by portfolio | 227,542,572.56 | 100.00% | 227,542,572.56 | 789,465,084.93 | 100.00% | 789,465,084.93 |
Including:
| Including: |
Banker’s acceptance bill
| Banker’s acceptance bill | 227,542,572.56 | 100.00% | 227,542,572.56 | 789,465,084.93 | 100.00% | 789,465,084.93 |
Total
| Total | 227,542,572.56 | 100.00% | 227,542,572.56 | 789,465,084.93 | 100.00% | 789,465,084.93 |
Provision for bad debts by portfolio:
Unit: RMB
| Item | Closing balance | ||
| Book balance | Provision for bad debts | Provision proportion | |
Banker’s acceptance bill
| Banker’s acceptance bill | 227,542,572.56 |
Total
| Total | 227,542,572.56 |
If provision was made for bad debts of notes receivable in accordance with the general expected credit loss model:
□ Applicable
? Not applicable
(3) Provision for bad debts accrued, recovered or reversed during the reporting period: None.
(4) Notes receivable pledged by the Company at the end of the reporting period: None.
(5) Notes receivable endorsed or discounted by the Company, which were not yet due on the balancesheet date as at the end of the reporting period
Unit: RMB
| Item | Amount derecognized at the end of the period | Amount not derecognized at the end of the period |
Banker’s acceptance bill
| Banker’s acceptance bill | 7,122,953.97 |
Total
| Total | 7,122,953.97 |
(6) Actual write-off of notes receivable for the period: None.
4. Accounts receivable
(1) Disclosure by aging
Unit: RMB
| Aging | Closing balance | Opening balance |
Within 1 year (inclusive of 1 year)
| Within 1 year (inclusive of 1 year) | 9,849,981,025.64 | 9,171,153,870.19 |
1 to 2 years
| 1 to 2 years | 830,787,332.12 | 515,648,957.18 |
2 to 3 years
| 2 to 3 years | 86,210,266.13 | 21,889,679.33 |
Above 3 years
| Above 3 years | 33,448,661.91 | 36,176,763.82 |
Total
| Total | 10,800,427,285.80 | 9,744,869,270.52 |
(2) Disclosure by provision for bad debts
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Provision for bad debts | Book value | Book balance | Provision for bad debts | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
Accounts receivablewith provision for baddebts on individualbasis
| Accounts receivable with provision for bad debts on individual basis | 7,404,800.00 | 0.07% | 7,404,800.00 | 100.00% | 7,404,800.00 | 0.08% | 7,404,800.00 | 100.00% |
Including:
| Including: |
Accounts receivablewith provision for baddebts on individualbasis
| Accounts receivable with provision for bad debts on individual basis | 7,404,800.00 | 0.07% | 7,404,800.00 | 100.00% | 7,404,800.00 | 0.08% | 7,404,800.00 | 100.00% |
Accounts receivablewith provision for baddebts on portfolio basis
| Accounts receivable with provision for bad debts on portfolio basis | 10,793,022,485.80 | 99.93% | 826,852,038.59 | 7.66% | 9,966,170,447.21 | 9,737,464,470.52 | 99.92% | 647,642,318.59 | 6.65% | 9,089,822,151.93 |
Including:
| Including: |
Aging portfolio
| Aging portfolio | 10,793,022,485.80 | 99.93% | 826,852,038.59 | 9,966,170,447.21 | 9,737,464,470.52 | 99.92% | 647,642,318.59 | 6.65% | 9,089,822,151.93 |
Total
| Total | 10,800,427,285.80 | 100.00% | 834,256,838.59 | 7.72% | 9,966,170,447.21 | 9,744,869,270.52 | 100.00% | 655,047,118.59 | 6.72% | 9,089,822,151.93 |
Provision for bad debts made on an individual basis:
Unit: RMB
| Name | Opening balance | Closing balance | ||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | Provision proportion | Reason for provision | |
Ningbo QingbingBiotechnologyCo., Ltd
| Ningbo Qingbing Biotechnology Co., Ltd | 7,404,800.00 | 7,404,800.00 | 7,404,800.00 | 7,404,800.00 | 100.00% | Little chance of recovery |
Total
| Total | 7,404,800.00 | 7,404,800.00 | 7,404,800.00 | 7,404,800.00 |
Provision for bad debts made on a portfolio basis:
Unit: RMB
| Name | Closing balance | ||
| Book balance | Provision for bad debts | Provision proportion | |
Aging portfolio
| Aging portfolio | 10,793,022,485.80 | 826,852,038.59 | 7.66% |
Total
| Total | 10,793,022,485.80 | 826,852,038.59 |
Explanation on the basis for determining the portfolio: None.If provision was made for bad debts of accounts receivable in accordance with the general expected credit loss model:
□ Applicable
?
Not applicable
(3) Provision for bad debts accrued, recovered or reversed during the reporting periodProvision for bad debts for the period:
Unit: RMB
| Category | Opening balance | Changes in this period | Closing balance | |||
| Provision | Recovery or reversal | Write-off | Others | |||
Single accountreceivable withprovision for bad debts
| Single account receivable with provision for bad debts | 7,404,800.00 | 7,404,800.00 |
Aging portfolio
| Aging portfolio | 647,642,318.59 | 179,435,027.97 | 225,307.97 | 826,852,038.59 |
Total
| Total | 655,047,118.59 | 179,435,027.97 | 225,307.97 | 834,256,838.59 |
Provision for bad debts during the reporting period: None.
(4) Actual write-off of accounts receivable for the period:
Unit: RMB
| Item | Amount of write-off |
Actual write-off of accounts receivable
| Actual write-off of accounts receivable | 225,307.97 |
Significant write-off of accounts receivable: None.Explanation on write-off of accounts receivable: None.
(5) Top five customers in closing balance of accounts receivable and contractual assets summarizedby debtor
Unit: RMB
| Entity name | Closing balance of accounts receivable | Closing balance of contractual assets | Closing balance of accounts receivable and contractual assets | Percentage of total of closing balance of accounts receivable and contractual assets | Closing balance of provision for bad debts of account receivable and provision for impairment of contractual assets |
Customer A
| Customer A | 708,200,548.76 | 0.00 | 708,200,548.76 | 6.56% | 93,710,938.28 |
Customer B
| Customer B | 524,026,774.26 | 0.00 | 524,026,774.26 | 4.85% | 26,201,338.71 |
Customer C
| Customer C | 468,933,274.24 | 0.00 | 468,933,274.24 | 4.34% | 23,446,663.71 |
Customer D
| Customer D | 429,426,908.33 | 0.00 | 429,426,908.33 | 3.98% | 43,573,681.69 |
Customer E
| Customer E | 405,341,546.93 | 0.00 | 405,341,546.93 | 3.75% | 72,237,381.49 |
Total
| Total | 2,535,929,052.52 | 0.00 | 2,535,929,052.52 | 23.48% | 259,170,003.88 |
5. Accounts receivable financing
(1) Accounts receivable financing by type
Unit: RMB
| Item | Closing balance | Opening balance |
Bank acceptance bill
| Bank acceptance bill | 1,081,485,346.18 | 834,668,231.58 |
Domestic Letter of Credit in China
| Domestic Letter of Credit in China | 509,264,464.56 |
Total
| Total | 1,590,749,810.74 | 834,668,231.58 |
(2) Financing of receivable pledged by the Company at the end of the reporting period: None.
(3) Financing of receivable endorsed or discounted by the Company, which was not yet due on thebalance sheet date as at the end of the reporting period:
Unit: RMB
| Item | Amount derecognized at the end of the period | Amount not derecognized at the end of the period |
Banker’s acceptance bill
| Banker’s acceptance bill | 4,546,781,651.31 |
Domestic letter of credit in China
| Domestic letter of credit in China | 114,000,000.00 |
Total
| Total | 4,660,781,651.31 |
(4) Financing of receivable pledged by the Company at the end of the period: None.
(5) Increase/decrease in the financing of accounts receivable and in their fair values during theirfinancing period: None.
(6) Other explanations: None.
6. Other receivables
Unit: RMB
| Item | Closing balance | Opening balance |
Dividends receivable
| Dividends receivable | 4,531,100.00 |
Other receivables
| Other receivables | 99,519,609.53 | 118,948,994.06 |
Total
| Total | 104,050,709.53 | 118,948,994.06 |
(1) Dividends receivable
1) Dividends receivable by type
Unit: RMB
| Project (or investee) | Closing balance | Opening balance |
Jacobson Pharama Corporation
| Jacobson Pharama Corporation | 4,531,100.00 |
Total
| Total | 4,531,100.00 |
2) Major dividends receivable aged over one year: None.
3) Disclosure by provision for bad debts
□Applicable
?Not applicable
4) Withdrawal, recovery and reversal of provision for bad debts during the period: None.
5) Actual write-off of dividend receivable during the period: None.
(2) Other receivables
1) Other receivables by nature
Unit: RMB
| Nature of payment | Book balance at the end of the reporting period | Book balance at the beginning of the reporting period |
Deposits and guarantees
| Deposits and guarantees | 292,908,411.96 | 341,475,970.72 |
Petty cash
| Petty cash | 12,098,577.52 | 40,949,868.07 |
Borrowings
| Borrowings | 6,777,211.78 | 9,889,172.38 |
Others
| Others | 286,715,486.83 | 584,078,713.91 |
Total
| Total | 598,499,688.09 | 976,393,725.08 |
2) Disclosure by aging
Unit: RMB
| Aging | Closing balance | Opening balance |
Within 1 year (inclusive of 1 year)
| Within 1 year (inclusive of 1 year) | 76,994,145.16 | 246,320,241.73 |
1 to 2 years
| 1 to 2 years | 24,492,402.85 | 280,922,568.80 |
2 to 3 years
| 2 to 3 years | 101,816,008.74 | 239,820,193.82 |
Above 3 years
| Above 3 years | 395,197,131.34 | 209,330,720.73 |
Total
| Total | 598,499,688.09 | 976,393,725.08 |
3) Disclosure by provision for bad debts
? Applicable □ Not applicable
Provision was made for bad debts in accordance with the general expected credit loss model:
Unit: RMB
| Provision for bad debts | Phase I | Phase II | Phase III | Total |
| Expected credit losses for the next 12 months | Lifetime ECL (not credit-impaired) | Lifetime ECL (credit-impaired) |
Balance as of January 1, 2023
| Balance as of January 1, 2023 | 271,949,622.49 | 585,495,108.53 | 857,444,731.02 |
Balance as of January 1, 2023 inthe current period
| Balance as of January 1, 2023 in the current period |
Current provision
| Current provision | 896,174.86 | 896,174.86 |
Current reversal
| Current reversal | 43,875,998.47 | 43,875,998.47 |
Current write-off
| Current write-off | 13,600.00 | 13,600.00 |
Other changes
| Other changes | -315,471,228.85 | -315,471,228.85 |
Balance as of December 31, 2023
| Balance as of December 31, 2023 | 228,060,024.02 | 270,920,054.54 | 498,980,078.56 |
Division base for each phase and proportion of provision for bad debtsChanges in book balance with significant changes in loss reserves in the current period
□ Applicable
?
Not applicable
4) Provision for bad debts accrued, recovered or reversed during the current period
Provision for bad debts during the reporting period:
Unit: RMB
| Category | Opening balance | Changes in this period | Closing balance | |||
| Provision | Recovery or reversal | Resell or write off | Others | |||
Other accounts receivablewith provision for baddebts by credit riskcharacteristics portfolio
| Other accounts receivable with provision for bad debts by credit risk characteristics portfolio | 857,444,731.02 | 896,174.86 | 43,875,998.474 | 13,600.00 | -315,471,228.85 | 498,980,078.564 |
Total
| Total | 857,444,731.02 | 896,174.86 | 43,875,998.474 | 13,600.00 | -315,471,228.85 | 498,980,078.564 |
Recovery or reversal of provision for bad debts with significant amount during the reporting period: None.
5) Actual write-off of other receivables for the period: None.
Unit: RMB
| Item | Amount of write-off |
| The actual write-off of other receivables | 13,600.00 |
Write-off of important other receivables: None.Explanation on write-off of other receivables: None.
6) Top five customers in closing balance of other receivables summarized by debtor
Unit: RMB
| Entity name | Nature of payment | Closing balance | Aging | Percentage of total of closing balance of other receivables | Closing balance of provision for bad debt |
Entity A
| Entity A | Security deposit | 100,000,000.00 | Above 3 years | 16.71% | 100,000,000.00 |
Entity B
| Entity B | Security deposit | 30,000,000.00 | Above 3 years | 5.01% | 30,000,000.00 |
Entity C
| Entity C | Security deposit | 18,000,000.00 | Above 3 years | 3.01% | 18,000,000.00 |
Entity D
| Entity D | Security deposit | 12,000,000.00 | 2 to 3 years | 2.01% | 12,000,000.00 |
Entity E
| Entity E | Security deposit | 10,000,000.00 | Above 3 years | 1.67% | 3,000,000.00 |
Total
| Total | 170,000,000.00 | 28.41% | 163,000,000.00 |
7) Presentation under Other Receivables due to centralized fund management: None.
7. Prepayments
(1) Prepayments by aging
Unit: RMB
| Aging | Closing balance | Opening balance | ||
| Amount | Proportion | Amount | Proportion | |
Within 1 year
| Within 1 year | 274,935,247.83 | 88.04% | 498,263,637.61 | 91.77% |
1 to 2 years
| 1 to 2 years | 31,179,366.00 | 9.98% | 31,396,687.61 | 5.78% |
2 to 3 years
| 2 to 3 years | 2,366,049.64 | 0.76% | 7,040,632.08 | 1.30% |
Above 3 years
| Above 3 years | 3,818,063.54 | 1.22% | 6,247,483.55 | 1.15% |
Total
| Total | 312,298,727.01 | 542,948,440.85 |
Explanation on why prepayments with aging of more than 1 year and an important amount not settled in time: None.
(2) Top five suppliers in closing balance of prepayment summarized by payee
Unit: RMB
| Series No. | Company name | Book balance | Percentage of prepayments (%) |
| 1 | Supplier A | 27,214,953.30 | 8.71% |
| 2 | Supplier B | 18,367,480.94 | 5.88% |
| 3 | Supplier C | 17,162,093.00 | 5.50% |
| 4 | Supplier D | 14,433,174.20 | 4.62% |
| 5 | Supplier E | 11,832,597.42 | 3.79% |
Total
| Total | 89,010,298.86 | 28.50% |
Other explanations: None.
8. Inventories
Did the Company need to comply with the disclosure requirements of the real estate industry: No.
(1) Categories of inventories
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Provision for decline in value of inventories or provision for impairment of contract fulfillment costs | Book value | Book balance | Provision for inventory impairment or provision for impairment of contract performance costs | Book value | |
| Raw materials | 1,850,907,681.12 | 71,368,550.13 | 1,779,539,130.99 | 2,392,701,254.76 | 118,815,553.26 | 2,273,885,701.50 |
| Work in process | 192,411,841.66 | 192,411,841.66 | 142,723,757.34 | 142,723,757.34 | ||
| Finished goods | 4,444,660,840.07 | 67,539,262.09 | 4,377,121,577.98 | 5,520,098,866.23 | 55,694,955.01 | 5,464,403,911.22 |
| Consumptive biological assets | 28,031,085.47 | 28,031,085.47 | 36,074,617.71 | 36,074,617.71 | ||
| Contract performance costs | 13,070,656.42 | 13,070,656.42 | ||||
| Materials outsourced for processing | 185,148.88 | 185,148.88 | 447,210.05 | 447,210.05 | ||
| Packaging materials and low value consumables | 67,439,762.34 | 2,533,723.65 | 64,906,038.69 | 64,864,577.24 | 2,263,387.22 | 62,601,190.02 |
| Total | 6,583,636,359.54 | 141,441,535.87 | 6,442,194,823.67 | 8,169,980,939.75 | 176,773,895.49 | 7,993,207,044.26 |
(2) Provision for inventory impairment or provision for impairment of contract performance costs
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | ||
| Provision | Others | Reversal or reselling | Others | |||
| Raw materials | 118,815,553.26 | -11,983,273.53 | 35,463,729.60 | 71,368,550.13 | ||
| Stocks | 55,694,955.01 | 22,954,138.44 | 11,109,831.36 | 67,539,262.09 | ||
| Packaging materials and low value consumables | 2,263,387.22 | 519,660.31 | 249,323.88 | 2,533,723.65 | ||
| Total | 176,773,895.49 | 11,490,525.22 | 46,822,884.84 | 141,441,535.87 | ||
(3) Explanation on closing balance of inventories involving capitalized amount of borrowing costs: None.
(4) Explanation on the current amortization amount of contract performance costs: None.
9. Non-current assets due within one year
Unit: RMB
| Item | Closing balance | Opening balance |
| Certificate of deposit and interest | 442,772,777.78 | 361,774,444.44 |
| Total | 442,772,777.78 | 361,774,444.44 |
(1) Debt investments due within one year
□ Applicable ? Not applicable
(2) Other debt investments due within one year
□ Applicable ? Not applicable
10. Other current assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Time deposits and other wealth management products | 2,219,049,423.96 | 11,209,672.18 |
| Input tax to be deducted and certified | 397,271,600.13 | 309,513,536.94 |
| Cost of returned goods receivable | 147,880,091.79 | 136,588,595.19 |
| Prepaid taxes and fees | 90,685,070.74 | 13,248,495.90 |
| Others | 7,190,030.58 | 3,779,807.55 |
| Total | 2,862,076,217.20 | 474,340,107.76 |
Other explanations: None.
11. Other equity instrument investments
Unit: RMB
| Item name | Closing balance | Opening balance | Gains included in other comprehensive income during the period | Loss included in other comprehensive income during the period | Accumulated gains included in other comprehensive income at the end of the period | Accumulated loss included in other comprehensive income at the end of the period | Dividend income recognized in the current period | Reason for designating measurement at fair value through other comprehensive income |
| ImmuneSensor Therapeutics Inc. | 71,745,000.00 | 71,745,000.00 | The investment is strategic and is a non-trading equity instrument investment | |||||
| Total | 71,745,000.00 | 71,745,000.00 |
Derecognition during the period: None.Itemized disclosure of investment in non-trading equity instruments for the period: None.
12. Long-term equity investments
Unit: RMB
| Investee | Opening balance (book value) | Opening balance of the impairment provision | Increase and decrease in the current period | Closing balance (book value) | Closing balance of impairment provision | |||||||
| Additional investment | Decreased investment | Profits and losses on investments confirmed under the equity method | Adjustment of other comprehensive income | Change in other equities | Cash dividends or profit declared to be issued | Provision for impairment | Others | |||||
| I. Joint ventures | ||||||||||||
| II. Associates | ||||||||||||
| Shanghai Pharmaceuticals Holding Co., Ltd. | 11,318,607,693.92 | 627,651,828.07 | -22,425,249.10 | 18,844,632.23 | 406,032,345.56 | 11,536,646,559.56 | ||||||
| Yunnan Baiyao Chinese Herbal Medicine Technology Co., Ltd. | ||||||||||||
| Lijiang Changgengming Trading Co., Ltd. | 142,253.18 | -142,253.18 | ||||||||||
| Ban Loong Jacobson JBM Pharma Limited | 55,318.80 | -38,630.37 | -2,255.06 | 14,433.37 | ||||||||
| Subtotal | 11,318,749,947.10 | 55,318.80 | 627,470,944.52 | -22,425,249.10 | 18,844,632.23 | 406,032,345.56 | -2,255.06 | 11,536,660,992.93 | ||||
| Total | 11,318,749,947.10 | 55,318.80 | 627,470,944.52 | -22,425,249.10 | 18,844,632.23 | 406,032,345.56 | -2,255.06 | 11,536,660,992.93 |
The recoverable amount is determined based on fair value less the disposal expense.
□ Applicable ? Not applicable
The recoverable amount is determined based on the present value of estimated future cash flows.
□ Applicable ? Not applicable
Reasons for significant differences between the foregoing information and information used for impairment testing in previous years or external information: None.Reasons for significant differences between the information used in the Company's impairment tests in previous years and the actual situation in the corresponding year: None.Other explanations: None.
13. Other non-current financial assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Financial assets at fair value through profits or losses | 324,674,379.63 | 380,786,134.24 |
| Total | 324,674,379.63 | 380,786,134.24 |
Other explanations: None.
14. Investment properties
(1) Adoption of the cost measurement model for investment properties
?Applicable □Not applicable
Unit: RMB
| Item | Buildings and structures | Land use rights | Construction in progress | Total |
| I. Original book value | ||||
| 1. Opening balance | 52,663,738.12 | 38,294,126.24 | 90,957,864.36 | |
| 2. Increase in the current period | 19,837,775.99 | 7,801,587.20 | 27,639,363.19 | |
| (1) Outsourcing | ||||
| (2) Transfer from inventory\fixed assets\ construction in progress | 19,837,775.99 | 7,801,587.20 | 27,639,363.19 | |
| (3) Increase in business combination | ||||
| 3. Decrease in the current period | 17,534,546.83 | 13,910,913.51 | 31,445,460.34 | |
| (1) Disposal | ||||
| (2) Other transfer out | 17,534,546.83 | 13,910,913.51 | 31,445,460.34 | |
| 4. Closing balance | 54,966,967.28 | 32,184,799.93 | 87,151,767.21 | |
| II. Accumulated depreciation and accumulated amortization | ||||
| 1. Opening balance | 31,783,351.89 | 3,350,735.98 | 35,134,087.87 | |
| 2. Increase in the current period | 14,128,329.86 | 2,722,016.86 | 16,850,346.72 | |
| (1) Provision or amortization | 661,466.76 | 609,580.32 | 1,271,047.08 | |
| (2) Others | 13,466,863.10 | 2,112,436.54 | 15,579,299.64 | |
| 3. Decrease in the current period | 10,157,667.79 | 1,217,204.91 | 11,374,872.70 | |
| (1) Disposal | ||||
| (2) Other transfer out | 10,157,667.79 | 1,217,204.91 | 11,374,872.70 | |
| 4. Closing balance | 35,754,013.96 | 4,855,547.93 | 40,609,561.89 | |
| III. Provision for impairment |
| 1. Opening balance | ||||
| 2. Increase in the current period | 2,438,059.35 | 2,438,059.35 | ||
| (1) Provision | ||||
| (2) Other | 2,438,059.35 | 2,438,059.35 | ||
| 3. Decrease in the current period | ||||
| (1) Disposal | ||||
| (2) Other transfer out | ||||
| 4. Closing balance | 2,438,059.35 | 2,438,059.35 | ||
| IV. Book value | ||||
| 1. Closing book value | 16,774,893.97 | 27,329,252.00 | 44,104,145.97 | |
| 2. Opening book value | 20,880,386.23 | 34,943,390.26 | 55,823,776.49 |
The recoverable amount is determined based on fair value less the disposal expense.
□Applicable ?Not applicable
The recoverable amount is determined based on the present value of estimated future cash flows.
□Applicable ?Not applicable
Reasons for significant differences between the foregoing information and information used for impairment testing in previousyears or external information: None.
Reasons for significant differences between the information used in the Company's impairment tests in previous years and theactual situation in the corresponding year: None.
Other explanations: None.
(2) Adoption of the fair value measurement model for investment properties
□Applicable ?Not applicable
(3) Conversion to investment properties and adoption of fair value measurement: None.
(4) Investment properties for which the title certificate has not been obtained: None.
15. Fixed assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Fixed assets | 2,662,805,209.03 | 2,721,970,469.98 |
| Liquidation of fixed assets | 94,805.00 | 1,331,895.67 |
| Total | 2,662,900,014.03 | 2,723,302,365.65 |
(1) Fixed assets
Unit: RMB
| Item | Houses and buildings | Machinery and equipment | Transportation vehicles | Electronic equipment | Others | Total |
| I. Original book value: |
| 1. Opening balance | 2,480,173,132.48 | 1,533,268,006.94 | 60,443,544.48 | 176,201,281.24 | 2,140,485.56 | 4,252,226,450.70 |
| 2. Increase in the current period | 99,117,695.62 | 78,291,644.49 | 10,708,750.69 | 3,361,027.13 | 28,580.67 | 191,507,698.60 |
| (1) Purchase | 36,172,352.82 | 10,708,750.69 | 28,580.67 | 46,909,684.18 | ||
| (2) Transfer from construction in progress | 81,583,148.79 | 42,119,291.67 | 3,361,027.13 | 127,063,467.59 | ||
| (3) Increase in business combination | ||||||
| (4) Others | 17,534,546.83 | 17,534,546.83 | ||||
| 3. Decrease in the current period | 29,698,036.70 | 7,989,056.66 | 5,255,451.68 | 21,434,572.13 | 911,472.37 | 65,288,589.54 |
| (1) Disposal or scrapping | 9,860,260.71 | 7,989,056.66 | 5,255,451.68 | 21,434,572.13 | 911,472.37 | 45,450,813.55 |
| (2) Other transfer-out | 19,837,775.99 | 19,837,775.99 | ||||
| 4. Closing balance | 2,549,592,791.40 | 1,603,570,594.77 | 65,896,843.49 | 158,127,736.24 | 1,257,593.86 | 4,378,445,559.76 |
| II. Accumulated depreciation | ||||||
| 1. Opening balance | 503,358,238.26 | 843,895,176.28 | 36,330,631.77 | 78,536,215.59 | 1,564,749.64 | 1,463,685,011.54 |
| 2. Increase in the current period | 71,733,418.97 | 115,085,045.96 | 2,982,076.44 | 27,206,500.15 | 163,942.43 | 217,170,983.95 |
| (1) Provision | 61,575,751.18 | 115,085,045.96 | 2,982,076.44 | 27,206,500.15 | 163,942.43 | 207,013,316.16 |
| (2) Others | 10,157,667.79 | 10,157,667.79 | ||||
| 3. Decrease in the current period | 16,971,659.88 | 5,830,013.93 | 4,574,933.73 | 4,159,590.10 | 692,293.86 | 32,228,491.50 |
| (1) Disposal or scrapping | 3,504,796.78 | 5,830,013.93 | 4,574,933.73 | 4,159,590.10 | 692,293.86 | 18,761,628.40 |
| (2) Other transfer-out | 13,466,863.10 | 13,466,863.10 | ||||
| 4. Closing balance | 558,119,997.35 | 953,150,208.31 | 34,737,774.48 | 101,583,125.64 | 1,036,398.21 | 1,648,627,503.99 |
| III. Provision for impairment | ||||||
| 1. Opening balance | 63,002,508.17 | 3,558,224.02 | 10,236.99 | 66,570,969.18 | ||
| 2. Increase in the current period | 12,773.34 | 4,157,005.70 | 4,169,779.04 | |||
| (1) Provision | 12,773.34 | 4,157,005.70 | 4,169,779.04 | |||
| (2) Others | ||||||
| 3. Decrease in the current period | 2,438,059.35 | 1,289,842.13 | 3,727,901.48 | |||
| (1) Disposal or scrapping | 1,289,842.13 | 1,289,842.13 | ||||
| (2) Other transfer-out | 2,438,059.35 | 2,438,059.35 | ||||
| 4. Closing balance | 60,577,222.16 | 2,268,381.89 | 4,167,242.69 | 67,012,846.74 | ||
| IV. Book value | ||||||
| 1. Closing book value | 1,930,895,571.89 | 648,152,004.57 | 31,159,069.01 | 52,377,367.91 | 221,195.65 | 2,662,805,209.03 |
| 2. Opening book value | 1,913,812,386.05 | 685,814,606.64 | 24,112,912.71 | 97,654,828.66 | 575,735.92 | 2,721,970,469.98 |
(2) Temporarily idle fixed assets
Unit: RMB
| Item | Original book value | Accumulated depreciation | Impairment provision | Book value | Remarks |
| Electronic equipment | 7,112,776.58 | 2,588,427.63 | 4,167,242.69 | 357,106.26 | |
| Machinery and equipment | 7,013,818.18 | 4,657,313.45 | 0.00 | 2,356,504.73 |
(3) Fixed assets leased through operating lease: None.
(4) Fixed assets for which the title certificate has not been obtained
Unit: RMB
Other explanations: None.
(5) Impairment test of fixed assets
□Applicable ?Not applicable
(6) Liquidation of fixed assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Machinery and equipment | 94,206.37 | 1,223,963.94 |
| Electronic equipment | 107,058.13 | |
| Transportation vehicles | 598.63 | 873.60 |
| Total | 94,805.00 | 1,331,895.67 |
Other explanations:
16. Construction in progress
Unit: RMB
| Item | Closing balance | Opening balance |
| Construction in progress | 529,708,553.58 | 193,993,194.93 |
| Total | 529,708,553.58 | 193,993,194.93 |
(1) Construction in progress
| Item | Book value | Reasons for not obtaining the title certificate |
| No.51 Xiba Road (general workshop) | 3,906,752.88 | It was unable to apply for the certificate due to the loss of relevant documents |
| Yunjian Assets | 2,178,828.56 | It was acquired by judicial auction, with land title but no real estate property certificate. |
| Overall relocation project of Wenshan Qihua | 33,578,434.11 | Some title certificates have been obtained, and the rest is under application. |
| Drug Division of Dali Pharmaceutical Economic Development Zone | 27,136,680.35 | Under application |
| Buildings in planting base of Yunquan | 1,373,159.38 | The land is a leased land |
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Project of Yunnan Baiyao International Center (Shanghai) | 389,398,864.33 | 389,398,864.33 | 115,853,670.95 | 115,853,670.95 | ||
| Yunnan Baiyao R&D platform - Kunming center construction project | 82,578,321.10 | 82,578,321.10 | 15,674,946.37 | 15,674,946.37 | ||
| Optimization project of new factory of Yunnan Baiyao toothpaste | 23,403,647.03 | 23,403,647.03 | ||||
| Granules Production Increase and Expansion Project of Pharmaceutical Business Group of Yunnan Baiyao Group | 16,649,408.02 | 16,649,408.02 | ||||
| Government-Enterprise Cooperation Project of Yunnan Baiyao Group in Lijiang Ecological Science and Technology Industrial Park (Phase I) | 5,655,808.43 | 5,655,808.43 | ||||
| Chinese Medicine Pharmaceutical Service Kunming Center Project of Yunnan Baiyao Group | 2,667,581.02 | 2,667,581.02 | ||||
| Yunnan Baiyao Wenshan Sanqi smart technology park project | 1,081,007.34 | 1,081,007.34 | 3,986,332.63 | 3,986,332.63 | ||
| Production base construction project of Yunnan Baiyao Group Shanghai Technology Co., Ltd. | 1,024,787.20 | 1,024,787.20 | ||||
| Yunnan Baiyao Shanghai project office decoration project | 396,852.43 | 396,852.43 | 5,513,196.92 | 5,513,196.92 | ||
| Upgrading project of the old workshop in the economic development zone | 9,585,081.75 | 9,585,081.75 | ||||
| Health Industry Project (Phase I) of Yunnan Baiyao Group | 593,826.74 | 593,826.74 | 6,979,457.53 | 6,979,457.53 | ||
| Yunnan Baiyao Taian project phase III | 2,271,149.08 | 2,271,149.08 | ||||
| Cosmetic medicine supporting commercial and office projects of Yunnan Baiyao in Beijing SOHO | 2,218,701.36 | 2,218,701.36 | ||||
| PKU-YBIMRC renovation project | 1,890,969.29 | 1,890,969.29 | ||||
| Others | 6,258,449.94 | 6,258,449.94 | 30,019,689.05 | 30,019,689.05 | ||
| Total | 529,708,553.58 | 529,708,553.58 | 193,993,194.93 | 193,993,194.93 | ||
(2) Changes in important projects of construction in progress for the period
Unit: RMB
| Item name | Budget amount | Opening balance | Increase in the current period | Transfer to fixed assets in the current period | Other decrease in the current period | Closing balance | Proportion of total project investment in budget | Engineering progress | Accumulated amount of interest capitalized | Including: Amount of interest capitalized for the period | Capitalization rate of interest for the period | Source of funds |
ShanghaiInternational Centerof Yunnan Baiyao
| Shanghai International Center of Yunnan Baiyao | 1,389,170,500.00 | 115,853,670.95 | 273,545,193.38 | 389,398,864.33 | 40.85% | 50.89% | Other |
Yunnan BaiyaoR&D platform -Kunming centerconstruction project
| Yunnan Baiyao R&D platform - Kunming center construction project | 921,670,000.00 | 15,674,946.37 | 66,903,374.73 | 82,578,321.10 | 8.96% | 11.04% | Other |
Optimization projectof new factory ofYunnan Baiyaotoothpaste
| Optimization project of new factory of Yunnan Baiyao toothpaste | 38,000,000.00 | 1,677,435.34 | 22,042,140.89 | 315,929.20 | 23,403,647.03 | 76.75% | 90% | Other |
Government-EnterpriseCooperation Projectof Yunnan BaiyaoGroup in LijiangEcological Scienceand TechnologyIndustrial Park(Phase I)
| Government-Enterprise Cooperation Project of Yunnan Baiyao Group in Lijiang Ecological Science and Technology Industrial Park (Phase I) | 17,860,000.00 | 7,156,693.39 | 1,500,884.96 | 5,655,808.43 | 40.07% | 40% | Other |
Chinese MedicinePharmaceuticalService KunmingCenter Project ofYunnan BaiyaoGroup
| Chinese Medicine Pharmaceutical Service Kunming Center Project of Yunnan Baiyao Group | 68,096,000.00 | 2,667,581.02 | 2,667,581.02 | 8.17% | 40% | Other |
Health IndustryProject (Phase I) ofYunnan BaiyaoGroup
| Health Industry Project (Phase I) of Yunnan Baiyao Group | 1,158,174,400.00 | 6,979,457.53 | 54,270,650.85 | 55,686,770.01 | 4,969,511.63 | 593,826.74 | 90.00% | 99% | Other |
Total
| Total | 3,592,970,900.00 | 140,185,510.19 | 426,585,634.26 | 57,503,584.17 | 4,969,511.63 | 504,298,048.65 |
(3) Provision for impairment of construction in progress for the period: None.
(4) Impairment test of construction in progress
□ Applicable ? Not applicable
(5) Project materials: None.
17. Productive biological assets
(1) Adoption of the cost measurement model for productive biological assets? Applicable □ Not applicable
Unit: RMB
| Item | Planting | Stockbreeding | Forestry | Aquaculture | Total |
| Tea tree | |||||
| I. Original book value | |||||
| 1. Opening balance | 2,578,500.00 | 2,578,500.00 | |||
| 2. Increase in the current period | |||||
| (1) Outsourcing | |||||
| (2) Self-cultivation | |||||
| 3. Decrease in the current period | |||||
| (1) Disposal | |||||
| (2) Others | |||||
| 4. Closing balance | 2,578,500.00 | 2,578,500.00 | |||
| II. Accumulated depreciation | |||||
| 1. Opening balance | 1,418,175.15 | 1,418,175.15 | |||
| 2. Increase in the current period | 171,900.00 | 171,900.00 | |||
| (1) Provision | 171,900.00 | 171,900.00 | |||
| 3. Decrease in the current period | |||||
| (1) Disposal | |||||
| (2) Others | |||||
| 4. Closing balance | 1,590,075.15 | 1,590,075.15 | |||
| III. Provision for impairment | |||||
| 1. Opening balance | |||||
| 2. Increase in the current period | |||||
| (1) Provision |
| 3. Decrease in the current period | |||||
| (1) Disposal | |||||
| (2) Others | |||||
| 4. Closing balance | |||||
| IV. Book value | |||||
| 1. Closing book value | 988,424.85 | 988,424.85 | |||
| 2. Opening book value | 1,160,324.85 | 1,160,324.85 |
(2) Impairment test of productive biological assets measured at cost
□ Applicable
? Not applicable
(3) Adoption of the fair value measurement model for productive biological assets
□ Applicable
? Not applicable
18. Right-of-use assets
(1) Right-of-use assets
Unit: RMB
| Item | Houses and buildings | Total |
| I. Original book value | ||
| 1. Opening balance | 580,165,392.75 | 580,165,392.75 |
| 2. Increase in the current period | 60,930,940.63 | 60,930,940.63 |
| (1) Lease | 60,930,940.63 | 60,930,940.63 |
| (2) Others | ||
| 3. Decrease in the current period | 135,436,027.40 | 135,436,027.40 |
| (1) Disposal | 135,436,027.40 | 135,436,027.40 |
| (2) Others | ||
| 4. Closing balance | 505,660,305.98 | 505,660,305.98 |
| II. Accumulated depreciation | ||
| 1. Opening balance | 190,190,002.02 | 190,190,002.02 |
| 2. Increase in the current period | 100,305,178.75 | 100,305,178.75 |
| (1) Provision | 100,305,178.75 | 100,305,178.75 |
| (2) Others | ||
| 3. Decrease in the current period | 43,154,360.37 | 43,154,360.37 |
| (1) Disposal | 43,154,360.37 | 43,154,360.37 |
| (2) Others | ||
| 4. Closing balance | 247,340,820.40 | 247,340,820.40 |
| III. Provision for impairment | ||
| 1. Opening balance | ||
| 2. Increase in the current period | ||
| (1) Provision | ||
| 3. Decrease in the current period | ||
| (1) Disposal |
| 4. Closing balance | ||
| IV. Book value | ||
| 1. Closing book value | 258,319,485.58 | 258,319,485.58 |
| 2. Opening book value | 389,975,390.73 | 389,975,390.73 |
(2) Impairment test of right-of-use assets:
□ Applicable ? Not applicable
Other explanations: None.
19. Intangible assets
(1) Intangible assets
Unit: RMB
| Item | Land use rights | Patent Right | Non-patent technology | Software | Trademark | Franchise rights | Total |
| I. Original book value | |||||||
| 1. Opening balance | 683,358,811.53 | 35,290,624.52 | 2,150,381.86 | 44,659,022.05 | 20,000.00 | 151,853,515.32 | 917,332,355.28 |
| 2. Increase in the current period | 13,910,913.51 | 30,805,130.71 | 2,228,167.25 | 46,944,211.47 | |||
| (1) Purchase | 4,557,800.53 | 2,228,167.25 | 6,785,967.78 | ||||
| (2) Transfer from construction in progress | 26,247,330.18 | 26,247,330.18 | |||||
| (3) Increase in business combination | |||||||
| (4) Others | 13,910,913.51 | 13,910,913.51 | |||||
| 3. Decrease in the current period | 7,801,587.20 | 797,947.92 | 8,599,535.12 | ||||
| (1) Disposal | 797,947.92 | 797,947.92 | |||||
| (2) Other transfer-out | 7,801,587.20 | 7,801,587.20 | |||||
| 4. Closing balance | 689,468,137.84 | 34,492,676.60 | 2,150,381.86 | 75,464,152.76 | 20,000.00 | 154,081,682.57 | 955,677,031.63 |
| II. Accumulated amortization | |||||||
| 1. Opening balance | 144,827,547.65 | 24,852,586.94 | 2,150,381.86 | 11,566,287.48 | 925.55 | 16,855,816.42 | 200,253,545.90 |
| 2. Increase in the current period | 15,005,804.96 | 2,802,967.77 | 13,538,803.31 | 2,222.22 | 808,399.92 | 32,158,198.18 |
| (1) Provision | 13,788,600.05 | 2,802,967.77 | 13,538,803.31 | 2,222.22 | 808,399.92 | 30,940,993.27 | |
| (2) Others | 1,217,204.91 | 1,217,204.91 | |||||
| 3. Decrease in the current period | 2,108,684.95 | 797,947.92 | 2,906,632.87 | ||||
| (1) Disposal | 797,947.92 | 797,947.92 | |||||
| (2) Other transfer-out | 2,108,684.95 | 2,108,684.95 | |||||
| 4. Closing balance | 157,724,667.66 | 26,857,606.79 | 2,150,381.86 | 25,105,090.79 | 3,147.77 | 17,664,216.34 | 229,505,111.21 |
| III. Provision for impairment | |||||||
| 1. Opening balance | 6,382,453.60 | 119,710,531.48 | 126,092,985.08 | ||||
| 2. Increase in the current period | 16,706,934.75 | 16,706,934.75 | |||||
| (1) Provision | 16,706,934.75 | 16,706,934.75 | |||||
| 3. Decrease in the current period | |||||||
| (1) Disposal | |||||||
| 4. Closing balance | 6,382,453.60 | 136,417,466.23 | 142,799,919.83 | ||||
| IV. Book value | |||||||
| 1. Closing book value | 525,361,016.58 | 7,635,069.81 | 50,359,061.97 | 16,852.23 | 583,372,000.59 | ||
| 2. Opening book value | 532,148,810.28 | 10,438,037.58 | 33,092,734.57 | 19,074.45 | 15,287,167.42 | 590,985,824.30 |
(2) Land use rights for which the title certificate has not been obtained: None.
(3) Impairment test of intangible assets
?Applicable □Not applicableThe recoverable amount is recognized by the fair value, net of the disposal expenses
□Applicable ?Not applicable
The recoverable amount is recognized by the present value of expected future cash flows?Applicable □Not applicable
Unit: RMB
| Item | Book value | Recoverable amount | Impairment amount | Expected years | Key parameters for the expected years | Key parameters for the stable years | Basis for determining the key parameters for the stable years |
Franchise ofLincangManor
| Franchise of Lincang Manor | 16,706,934.75 | 0.00 | 16,706,934.75 | 21 | Cost growth rate being 0.56% -0.87%, discount rate being 12.19% | The remaining benefit period is 21 years, and predictions are made for the remaining benefit period |
Total
| Total | 16,706,934.75 | 0.00 | 16,706,934.75 |
20. Goodwill
(1) Original book value of goodwill
Unit: RMB
| Name of the investee or items forming goodwill | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | ||
| Formed by business combination | Disposal | |||||
| YNBY International Limited (Formerly Ban Loong Holdings Limited) | 645,635,327.81 | 645,635,327.81 | ||||
| Yunnan Baiyao Group Medical Technology Hefei Co., Ltd. | 26,904,931.64 | 26,904,931.64 | ||||
| Shanghai Hanshi Health Consulting Co., Ltd. | 23,247,992.08 | 23,247,992.08 | ||||
| Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd. | 12,843,661.62 | 12,843,661.62 | ||||
| Lijiang Yunquan Biological Development Co., Ltd. | 721,770.39 | 721,770.39 | ||||
| Total | 709,353,683.54 | 709,353,683.54 | ||||
(2) Provision for impairment of goodwill
Unit: RMB
| Name of the investee or items forming goodwill | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Provision | Disposal | |||
| Shanghai Hanshi Health Consulting Co., Ltd. | 16,089,461.58 | 16,089,461.58 | ||
| YNBY International Limited (Formerly Ban Loong Holdings Limited) | 561,515,748.26 | 561,515,748.26 | ||
| Yunnan Baiyao Group Medical Technology Hefei Co., Ltd. | 17,234,070.00 | 9,670,861.64 | 26,904,931.64 | |
| Lijiang Yunquan Biological Development Co., Ltd. | 721,770.39 | 721,770.39 | ||
| Total | 579,471,588.65 | 25,760,323.22 | 605,231,911.87 |
(3) Related information on asset group or combination of asset groups containing goodwill
| Name | Composition and basis of the asset group or portfolio to which it belongs | Business segments and basis | Whether consistent with the previous years |
| YNBY International Limited (Formerly Ban Loong Holdings Limited) | The asset group consists of “notes and accounts receivable, prepayments, inventories, other receivables, other current assets, fixed assets, right-to-use assets, accounts payable, contractual liabilities, other payables and goodwill,” which is the smallest portfolio of assets or the smallest portfolio of asset groups that can generate major cash inflows independently | The management’s approach to managing and monitoring business activities | Yes |
| Yunnan Baiyao Group Medical Technology Hefei Co., Ltd. | The asset group consists of “fixed assets, intangible assets, right-of-use assets, long-term deferred expenses and goodwill,” which is the smallest portfolio of assets or the smallest portfolio of asset groups that can generate major cash inflows independently | The management’s approach to managing and monitoring business activities | Yes |
| Shanghai Hanshi Health Consulting Co., Ltd. | The asset group consists of “fixed assets, construction in progress (equipment), right-of-use assets, long-term deferred expenses and goodwill,” which is the smallest portfolio of assets or the smallest portfolio of asset groups that can generate major cash inflows independently | The management’s approach to managing and monitoring business activities | Yes |
| Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd. | The asset group consists of “fixed assets, intangible assets and goodwill,” which is the smallest portfolio of assets or the smallest portfolio of asset groups that can generate major cash inflows independently | The management’s approach to managing and monitoring business activities | Yes |
(4) Determination of recoverable amount
The recoverable amount is determined based on fair value less the disposal expense.
□Applicable ?Not applicable
The recoverable amount is determined based on the present value of estimated future cash flows.?Applicable □Not applicable
Unit: RMB
| Item | Book value | Recoverable amount | Impairment amount | Forecast period (years) | Key parameters for the forecast period | Key parameters for the stable period | Basis for determining the key parameters for the stable period |
| YNBY International Limited (Formerly Ban Loong Holdings Limited) | 1,175,006,194.96 | 455,828,700.00 | 561,515,748.26 | 2024-2028 (followed by the stable period) | Growth rate 10.58% to 11.53%, profit margin 2.77% to 3.25%, pre-tax discount rate 9.10% | Growth rate 0.00%, profit margin 2.77%, discount rate 9.10% | The income growth rate for the stable period is 0%, the profit margin and discount rate are for the last year of the forecast period, and the discount rate is a pre-tax discount rate that reflects the risks specific to the relevant asset group or portfolio of asset groups. |
| Yunnan Baiyao Group Medical Technology Hefei Co., Ltd. | 52,868,433.83 | 14,000,000.00 | 26,904,931.64 | 2024-2028 (followed by the stable period) | Growth rate 0.34% to 0.40%, profit margin 6.30% to 6.75%, pre-tax discount rate 13.75% | Growth rate 0.00%, profit margin 6.75%, discount rate 13.75% | The income growth rate for the stable period is 0%, the profit margin and discount rate are for the last year of the forecast period, and the discount rate is a pre-tax discount rate that reflects the risks specific to the relevant asset group or portfolio of asset groups. |
| Shanghai Hanshi Health Consulting Co., Ltd. | 40,089,461.58 | 24,000,000.00 | 16,089,461.58 | 2024-2028 (followed by the stable period) | Growth rate 20%, profit margin -33.44% to 10.49%, pre-tax discount rate 13.69% | Growth rate 0%, profit margin 10.49%, discount rate 13.69% | The income growth rate for the stable period is 0%, the profit margin and discount rate are for the last year of the forecast period, and the discount rate is a pre-tax discount rate that reflects the risks specific to the relevant asset group or portfolio of asset groups. |
| Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd. | 32,644,949.63 | 55,000,000.00 | 0 | 2024-2028 (followed by the stable period) | Growth rate 0%, profit margin 4.13% to 4.23%, pre-tax discount rate 14.11% | Growth rate 0%, profit margin 4.13%, discount rate 14.11% | The income growth rate for the stable period is 0%, the profit margin and discount rate are for the last year of the forecast period, and the discount rate is a pre-tax discount |
| rate that reflects the risks specific to the relevant asset group or portfolio of asset groups. | |||||||
| Total | 1,300,609,040.00 | 548,828,700.00 | 604,510,141.48 |
Reasons for significant differences between the foregoing information and information used for impairment testingin previous years or external information: Not applicableReasons for significant differences between the information used in the Company’s impairment tests in previousyears and the actual situation in the corresponding year: Not applicable
(5) Fulfillment of undertakings and goodwill impairment
Performance commitments existed at the time goodwill was formed and the reporting period, or the previous periodof the reporting period was within the performance commitment period
□ Applicable ? Not applicable
Other explanations: None.
21. Long-term deferred expenses
Unit: RMB
| Item | Opening balance | Increase in the current period | Amortization in the current period | Other decrease | Closing balance |
| Building decoration and project renovation | 90,442,503.49 | 33,160,372.79 | 27,178,754.57 | 96,424,121.71 | |
| Nanping Street renovation project of Yunnan Baiyao | 9,497,542.66 | 964,501.89 | 3,962,925.04 | 6,499,119.51 | |
| External preparation demonstration hall renovation project | 1,434,420.64 | 0.00 | 1,434,420.64 | 0.00 | |
| Others | 1,665,425.97 | 1,664,442.75 | 917,559.63 | 2,412,309.09 | |
| Total | 103,039,892.76 | 35,789,317.43 | 33,493,659.88 | 0.00 | 105,335,550.31 |
Other explanations: None.
22. Deferred income tax assets/deferred income tax liabilities
(1) Deferred tax assets before offset
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Deductible temporary differences | Deferred income tax assets | Deductible temporary differences | Deferred income tax assets | |
| Provision for asset impairment and provision for credit impairment | 149,391,736.51 | 29,733,789.86 | 183,093,535.46 | 35,612,233.01 |
| Unrealised profits of intra-group transactions | 355,719,960.08 | 56,616,299.10 | 433,164,555.99 | 68,246,952.21 |
| Deductible losses | 85,261,634.28 | 12,772,083.95 | 98,294,872.23 | 16,407,198.08 |
| Provision for credit impairment | 1,031,702,042.48 | 155,456,724.98 | 858,738,207.86 | 130,874,447.83 |
| Deferred income | 174,855,238.93 | 26,308,248.51 | 112,673,439.27 | 16,991,015.89 |
| Contractual liabilities | 927,324,390.56 | 139,098,658.58 | 744,264,425.60 | 111,639,663.83 |
| Payroll payable and long-term employee benefits payable | 442,302,070.56 | 66,345,310.57 | 213,880,961.43 | 32,082,144.21 |
| Expenses beyond overall planning for employee status conversion expenses of state-owned enterprises and social security expenses of retirees | 488,564,678.84 | 73,284,701.83 | 523,242,481.81 | 78,486,372.27 |
| Lease liabilities | 247,083,412.30 | 33,532,096.13 | 377,446,471.13 | 78,492,672.52 |
| Changes in fair value | 31,774,859.47 | 4,766,228.92 | 511,601,593.57 | 76,740,239.04 |
| Other payables | 390,202,998.08 | 58,530,449.71 | 439,458,968.57 | 65,918,845.29 |
| Others | 56,028,058.38 | 8,404,208.76 | 1,709,349.66 | 254,929.90 |
| Estimated income from returned goods | 172,763,638.76 | 26,020,408.22 | 9,912,179.43 | 1,500,065.58 |
| Total | 4,552,974,719.23 | 690,869,209.12 | 4,507,481,042.01 | 713,246,779.66 |
(2) Deferred tax liabilities before offset
Unit: RMB
| Item | Closing balance | Opening balance | ||
| Taxable temporary differences | Deferred income tax liabilities | Taxable temporary differences | Deferred income tax liabilities | |
| Changes in fair value | 111,313,586.41 | 16,988,794.59 | ||
| Right-of-use assets | 258,319,485.58 | 34,427,707.34 | 359,106,274.04 | 74,402,624.87 |
| Fixed assets subject to one-time pre-tax deduction | 26,760,390.32 | 4,014,058.55 | 25,258,729.32 | 3,788,809.41 |
| Appreciation of asset valuation | 5,464,293.67 | 1,366,073.41 | 7,642,418.23 | 1,148,270.17 |
| Investment income from business combination not under common control achieved in stages | 2,282,373.90 | 570,593.48 | 2,282,373.90 | 570,593.48 |
| Others | 65,373,768.09 | 9,806,065.22 | 7,867,630.46 | 1,180,144.57 |
| Cost of returned goods receivable | 163,264,685.39 | 24,587,573.70 | ||
| Total | 521,464,996.95 | 74,772,071.70 | 513,471,012.36 | 98,079,237.09 |
(3) Deferred income tax assets or liabilities after offset, net
Unit: RMB
| Item | Offsetting amount of deferred income tax assets and deferred income tax liabilities at the end of the reporting period | Closing balance of deferred income tax assets or liabilities after offset | Offsetting amount of deferred income tax assets and deferred income tax liabilities at the beginning of the reporting period | Opening balance of deferred income tax assets or liabilities after offset |
| Deferred income tax assets | 690,869,209.12 | 713,246,779.66 | ||
| Deferred income tax liabilities | 74,772,071.70 | 98,079,237.09 |
(4) Details of unrecognized deferred income tax assets
Unit: RMB
| Item | Closing balance | Opening balance |
| Deductible losses | 697,042,370.78 | 443,245,994.93 |
| Provision for asset impairment and provision for credit impairment | 505,835,499.95 | 840,097,956.04 |
| Deferred income | 63,955,872.11 | 65,948,373.73 |
| Others | 10,735,715.83 | 9,339,644.36 |
| Total | 1,277,569,458.67 | 1,358,631,969.06 |
(5) Deductible losses for which deferred income tax assets were unrecognized will expire in the followingyears
Unit: RMB
| Year | Closing balance | Opening balance | Remarks |
| 2023 | 9,639,436.11 | ||
| 2024 | 18,092,739.35 | 4,973,973.57 | |
| 2025 | 20,152,321.40 | 15,423,790.17 | |
| 2026 | 136,477,740.18 | 125,859,640.03 | |
| 2027 | 202,345,894.66 | 209,472,670.65 | |
| 2028 | 299,773,438.15 | 6,005,279.37 | |
| 2029 | 1,476,119.82 | 12,571,801.89 | |
| 2030 | 4,028,298.39 | 7,604,046.31 | |
| 2031 | 12,861,719.12 | 19,011,681.19 | |
| 2032 | 1,599,912.28 | 32,683,675.64 | |
| 2033 | 234,187.43 | ||
| Total | 697,042,370.78 | 443,245,994.93 |
Other explanations: None.
23. Other non-current assets
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Time deposit and interest | 913,499,670.63 | 913,499,670.63 | 1,044,622,324.57 | 1,044,622,324.57 | ||
| Advance payment for the purchase of fixed assets | 3,485,598.75 | 3,485,598.75 | 24,712,674.27 | 24,712,674.27 | ||
| Cost of returned goods receivable | 15,394,540.30 | 15,394,540.30 | 17,595,832.83 | 17,595,832.83 | ||
| Stocks of special materials | 42,000,723.80 | 42,000,723.80 | 30,000,000.00 | 30,000,000.00 | ||
| Value-added tax credit refund | 9,867,575.47 | 9,867,575.47 | 9,867,575.47 | 9,867,575.47 | ||
| Less: the part due within 1 year | -442,772,777.78 | -442,772,777.78 | -161,580,000.00 | -161,580,000.00 | ||
| Total | 541,475,331.17 | 541,475,331.17 | 965,218,407.14 | 965,218,407.14 | ||
Other explanations: None.
24. Assets with Restricted Ownership or Use Rights:
Unit: RMB
| Item | At the end of the period | At the beginning of the period | ||||||
| Book balance | Book value | Type of restriction | Restriction | Book balance | Book value | Type of restriction | Restriction | |
| Cash and bank balance | 2,643,393.65 | 2,643,393.65 | Special use | Special fund for paying the cost of employee status conversion in state-owned enterprises, housing reform and housing maintenance costs | ||||
| Cash and bank balance | 500,000.00 | 500,000.00 | Property preservation | The lawsuit has been won, and we are promoting the lifting of the freeze and other related matters. | ||||
| Cash and bank balance | 48,618,045.43 | 48,618,045.43 | Security deposit | Security deposit | 9,953,700.00 | 9,953,700.00 | Security deposit | Security deposit |
| Various assets of the restructured special account | 627,116,169.10 | 627,116,169.10 | Special use | Special fund for paying the cost of employee status conversion in state-owned enterprises | 641,477,826.99 | 641,477,826.99 | Special use | Special fund for paying the cost of employee status conversion in state-owned enterprises |
| Long-term equity investments | 11,536,646,559.56 | 11,536,646,559.56 | Restricted | The holdings shall not be transferred within 36 months since the ending date of the private placement in 2021 | 11,318,607,693.92 | 11,318,607,693.92 | Restricted | The holdings shall not be transferred within 36 months since the ending date of the private placement in 2021 |
| Total | 12,215,524,167.74 | 12,215,524,167.74 | 11,970,039,220.91 | 11,970,039,220.91 | ||||
Other explanations: None.
25. Short-term loans
(1) Classification of short-term loans
Unit: RMB
| Item | Closing balance | Opening balance |
| Loan in credit | 1,014,634,728.09 | 890,531,958.04 |
| Discounted internal bills | 732,668,972.25 | 960,335,928.55 |
| Total | 1,747,303,700.34 | 1,850,867,886.59 |
Explanation on classification of short-term loans: None.
(2) Overdue and outstanding short-term loans: None.
26. Notes payable
Unit: RMB
| Type | Closing balance | Opening balance |
| Commercial acceptance bill | 100,000.00 | |
| Banker’s acceptance bill | 1,850,863,313.78 | 1,991,807,836.96 |
| Total | 1,850,863,313.78 | 1,991,907,836.96 |
Total notes payable due and unpaid at the end of the period were RMB 0.
27. Accounts payable
(1) Accounts payable
Unit: RMB
| Item | Closing balance | Opening balance |
| Payment for goods | 4,326,110,424.11 | 4,598,356,773.61 |
| Payment for engineering equipment | 33,522,218.09 | 40,782,479.02 |
| Labor expenses and others | 122,143.82 | |
| Total | 4,359,632,642.20 | 4,639,261,396.45 |
(2) Major accounts payable aged over one year:
Unit: RMB
| Item | Closing balance | Reasons for outstanding or carry-forward |
| Kunming Derun Jindi Trading Co., Ltd. | 7,235,339.76 | The payment conditions have not been met |
| Total | 7,235,339.76 |
28. Other payables
Unit: RMB
| Item | Closing balance | Opening balance |
| Dividend payable | 86,490,742.04 | 89,413,484.03 |
| Other payables | 938,595,137.50 | 954,279,725.75 |
| Total | 1,025,085,879.54 | 1,043,693,209.78 |
(1) Dividends payable
Unit: RMB
| Item | Closing balance | Opening balance |
| State-owned Assets Supervision and Administration Commission of the People’s Government of Yunnan Province, New Huadu Industrial Group Co., Ltd. | 86,490,742.04 | 86,490,742.04 |
| Kunming Nuo’an Enterprise Management Co., Ltd. | 2,922,741.99 | |
| Total | 86,490,742.04 | 89,413,484.03 |
(2) Other payables
1) Other payables by nature of payment
Unit: RMB
| Item | Closing balance | Opening balance |
| Market maintenance fee | 459,313,752.19 | 449,675,991.26 |
| Deposits and guarantees | 266,970,613.85 | 305,330,173.64 |
| Other current accounts | 81,677,453.94 | 31,366,513.19 |
| Hospital management fee payable | 70,325,588.08 | 85,937,574.20 |
| Collection and payment | 20,013,555.07 | 14,954,473.71 |
| Loans and interests | 60,956,390.23 | |
| Others | 40,294,174.37 | 6,058,609.52 |
| Total | 938,595,137.50 | 954,279,725.75 |
2) Other important payables aged over 1 year or overdue: None.
29. Receipts in advance
(1) Receipts in advance
Unit: RMB
| Item | Closing balance | Opening balance |
| Receipts in advance - lease | 486,612.12 | 1,569,799.63 |
| Total | 486,612.12 | 1,569,799.63 |
(2) Major receipts in advance aged over one year: None.
30. Contractual liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Receipts in advance - goods contract | 1,737,952,687.45 | 2,575,823,948.53 |
| Others | 1,912,541.30 | 2,440,672.60 |
| Total | 1,739,865,228.75 | 2,578,264,621.13 |
Significant contractual liabilities with aging more than 1 year: None.
31. Payroll payable
(1) Payroll payable
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| I. Short-term compensation | 440,330,260.27 | 2,939,567,358.61 | 2,359,647,788.43 | 1,020,249,830.45 |
| II. Welfare after demission - defined contribution plan | 27,839,224.27 | 211,857,267.29 | 192,811,926.46 | 46,884,565.10 |
| III. Dismissal welfare | 280,863.98 | 9,564,670.27 | 9,789,264.72 | 56,269.53 |
| Total | 468,450,348.52 | 3,160,989,296.17 | 2,562,248,979.61 | 1,067,190,665.08 |
(2) Short-term compensation
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| 1. Salary, bonus, allowance, and subsidy | 163,058,986.84 | 2,083,922,628.73 | 1,712,403,323.99 | 534,578,291.58 |
| 2. Staff welfare | 12,216,670.96 | 229,998,404.91 | 226,106,664.10 | 16,108,411.77 |
| 3. Social insurance contribution | 829,224.27 | 88,280,369.51 | 88,822,248.85 | 287,344.93 |
| Of which: Medical insurance premiums | 809,268.95 | 80,096,124.97 | 80,653,254.82 | 252,139.10 |
| Industrial injury insurance premiums | 7,217.66 | 5,486,413.52 | 5,484,743.93 | 8,887.25 |
| Maternity insurance premiums | 12,737.66 | 2,697,831.02 | 2,684,250.10 | 26,318.58 |
| 4. Housing provident fund | 215,632.66 | 105,774,649.56 | 105,583,334.56 | 406,947.66 |
| 5. Union dues and staff training fees | 27,188,273.65 | 34,722,534.78 | 31,338,662.73 | 30,572,145.70 |
| 6. Short-term paid absence | 23,383.99 | 23,383.99 | ||
| 7. Short-term profit-sharing plan | 236,797,817.90 | 283,810,831.02 | 82,496,090.38 | 438,112,558.54 |
| 8. Other short-term compensation | 270.00 | 113,057,940.10 | 112,874,079.83 | 184,130.27 |
| Total | 440,330,260.27 | 2,939,567,358.61 | 2,359,647,788.43 | 1,020,249,830.45 |
(3) Defined contribution plans
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| 1. Basic endowment insurance | 466,997.59 | 158,013,057.69 | 157,959,365.51 | 520,689.77 |
| 2. Unemployment insurance premiums | 15,428.02 | 5,791,900.67 | 5,786,447.64 | 20,881.05 |
| 3. Corporate pension payment | 27,356,798.66 | 48,052,308.93 | 29,066,113.31 | 46,342,994.28 |
| Total | 27,839,224.27 | 211,857,267.29 | 192,811,926.46 | 46,884,565.10 |
Other explanations: None.
32. Tax payables
Unit: RMB
| Item | Closing balance | Opening balance |
| Value added tax | 74,507,524.44 | 105,116,961.78 |
| Consumption tax | 9,690.71 | 274,825.30 |
| Enterprise Income Tax | 215,055,624.82 | 366,975,428.61 |
| Individual income tax | 13,584,778.64 | 16,268,091.05 |
| Urban maintenance and construction tax | 5,944,928.97 | 6,874,277.78 |
| Property tax | 11,470,392.03 | 152,423.60 |
| Land use tax | 5,324,861.58 | 25,004.80 |
| Stamp duty | 5,765,684.18 | 4,476,145.74 |
| Education surcharge | 2,628,898.41 | 3,110,941.91 |
| Local education surcharge | 1,752,038.22 | 2,049,949.71 |
| Environmental protection tax | 10,222.02 | 18,065.25 |
| Water conservancy fund | 4,724.15 | 11,439.47 |
| Collected and remitted taxes and fees | 3,611,481.85 | 3,933,367.32 |
| Total | 339,670,850.02 | 509,286,922.32 |
Other explanations: None.
33. Non-current liabilities due within one year
Unit: RMB
| Item | Closing balance | Opening balance |
| Lease liabilities due within one year | 74,736,102.58 | 93,870,902.64 |
| Total | 74,736,102.58 | 93,870,902.64 |
Other explanations: None.
34. Other current liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Returns payable | 157,398,378.74 | 145,436,712.72 |
| Transfer to output tax | 373,745,525.66 | 233,949,060.47 |
| Special financial support funds of “transferring loan to subsidy” for the use of intelligent voice cluster development base in the R&D project of intelligent medical devices based on medical big data | 1,800,000.00 | 1,800,000.00 |
| Total | 532,943,904.40 | 381,185,773.19 |
Changes in short-term bonds payable: None.
35. Long-term loans
Long-term loans by type
Unit: RMB
| Item | Closing balance | Opening balance |
| Loan in credit | 2,100,000.00 | 2,100,000.00 |
| Total | 2,100,000.00 | 2,100,000.00 |
Explanation on classification of long-term loans: None.Other explanations, including the range of interest rate: None.
36. Lease liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Buildings and structures | 247,083,412.30 | 379,654,631.37 |
| Less: Non-current liabilities reclassified to liabilities due within one year | -74,736,102.58 | -93,870,902.64 |
| Total | 172,347,309.72 | 285,783,728.73 |
Other explanations: None.
37. Long-term payables
Unit: RMB
| Item | Closing balance | Opening balance |
| Long-term payables | 626,897,323.88 | 641,235,559.39 |
| Special payables | 4,838,584.16 | 4,838,584.16 |
| Total | 631,735,908.04 | 646,074,143.55 |
(1) Long-term payables by nature of payment
Unit: RMB
| Item | Closing balance | Opening balance |
| Expenses beyond overall planning for employee status conversion expenses of state-owned enterprises and social security expenses of retirees | 626,897,323.88 | 641,235,559.39 |
Other explanations: None.
(2) Special payables
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | Reasons |
| Preliminary funds for major technological transformation projects | 888,468.00 | 888,468.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Fulintang chain operating funds | 500,000.00 | 500,000.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Funds for Kunming medicine distribution center | 500,000.00 | 500,000.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Yunnan Sanqi brand registration project | 164,272.00 | 164,272.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Group company management information system project | 250,978.00 | 250,978.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Group company technology center construction expenses | 231,265.00 | 231,265.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Nefuramide oxalate project funding | 85,426.00 | 85,426.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Yunnan Natural Medicine Engineering Center project | 998,506.00 | 998,506.00 | Transfer from Baiyao Holdings due to merger by absorption | ||
| New drug research project for treatment of back pulp injury | 472,062.56 | 472,062.56 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Material purchase project research expense | 489,575.00 | 489,575.00 | Transfer from Baiyao Holdings due to merger by absorption |
| R&D of new drugs for treating cardiovascular and cerebrovascular diseases (TCM) | 258,031.60 | 258,031.60 | Transfer from Baiyao Holdings due to merger by absorption | ||
| Total | 4,838,584.16 | 4,838,584.16 |
Other explanations: None.
38. Long-term payroll payable
(1) Details of long-term payroll payable
Unit: RMB
| Item | Closing balance | Opening balance |
| II. Termination benefits | 409,232.99 | 598,998.08 |
| III. Other long-term benefits | 3,681,455.00 | 3,681,455.00 |
| Total | 4,090,687.99 | 4,280,453.08 |
(2) Change of defined benefit plan: None.
39. Estimated liabilities: None.
40. Deferred income
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | Reasons |
| Government subsidies | |||||
| Including: Government subsidies related to income | 20,353,660.72 | 67,596,671.93 | 7,026,939.27 | 80,923,393.38 | |
| Government subsidies related to assets | 158,268,152.28 | 16,418,070.75 | 16,798,505.37 | 157,887,717.66 | |
| Total | 178,621,813.00 | 84,014,742.68 | 23,825,444.64 | 238,811,111.04 |
Other explanations: None.
41. Other non-current liabilities
Unit: RMB
| Item | Closing balance | Opening balance |
| Receipts of real estate sale under staff housing reform | 1,931,554.36 | 1,931,554.36 |
| Returns payable | 15,365,260.05 | 18,716,979.93 |
| Total | 17,296,814.41 | 20,648,534.29 |
Other explanations: None.
42. Share capital
Unit: RMB
| Opening balance | Increase or decrease (＋,－) | Closing balance | |||||
| Issuance of new shares | Share dividend | Capitalization of capital reserve into share capital | Others | Subtotal | |||
| Total number of shares | 1,796,862,549.00 | 1,796,862,549.00 | |||||
Other explanations: None.
43. Capital reserves
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Capital premium (equity premium) | 18,178,665,010.12 | 3,648,728.86 | 18,175,016,281.26 | |
| Other capital reserves | 52,758,828.60 | 18,844,632.23 | 71,603,460.83 | |
| Total | 18,231,423,838.72 | 18,844,632.23 | 3,648,728.86 | 18,246,619,742.09 |
Other explanations, including changes and reasons thereof as at the end of the reporting period:
(1) Reasons for increase during the period:
1) In the current year, other changes in equity in associates and passive dilution of shares due to the exerciseof rights to issue new shares were recognized, and an increase of RMB 18,844,632.23 in capital surplus - othercapital surplus was recognized in accordance with the proportion of shares held.
(2) Reasons for decrease during the period:
1) During the year, the Company purchased a 30% minority interest in a subsidiary, Yunnan Baiyao GroupMedical Technology Hefei Co., Ltd and recognized a decrease of RMB 3,648,728.86 in capital surplus - othercapital surplus at the consolidated level based on the difference between the purchase price paid and the amountof equity interest.
44. Treasury stock
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Share repurchase for equity incentives | 707,428,892.15 | 707,428,892.15 | ||
| Total | 707,428,892.15 | 707,428,892.15 |
Other explanations, including changes and reasons thereof as at the end of the reporting period: None.
45. Other comprehensive income
Unit: RMB
| Item | Opening balance | Amount for the current period | Closing balance | |||||
| Amount before income tax in the current period | Less: Amount previously included in other comprehensive income but transferred to profits and losses in the current period | Less: Amount previously included in other comprehensive income but transferred to retained earnings in the current period | Less: income tax expenses | That attributable to the Company after tax | That attributable to minority interests after tax | |||
| I. Other comprehensive incomes that will not be reclassified into profits or losses | 8,731,257.88 | -8,280,710.37 | -8,280,710.37 | 450,547.51 | ||||
| Including: Other comprehensive income that cannot be transferred to profits or losses under equity method | 8,731,257.88 | -8,280,710.37 | -8,280,710.37 | 450,547.51 | ||||
| II. Other comprehensive incomes to be reclassified into profits and losses | -76,818,908.83 | -13,169,810.81 | -13,169,810.81 | -397,300.60 | -89,988,719.64 | |||
| Including: Other comprehensive income that can be transferred to profits or losses under equity method | -42,284,342.91 | -14,144,538.73 | -14,144,538.73 | -56,428,881.64 | ||||
| Exchange differences from translation of financial statements denominated in foreign currencies | -34,534,565.92 | 974,727.92 | 974,727.92 | -397,300.60 | -33,559,838.00 | |||
| Total other comprehensive income | -68,087,650.95 | -21,450,521.18 | -21,450,521.18 | -397,300.60 | -89,538,172.13 |
Other explanations, including adjustments to the effective portion of the cash flow hedge profits or losses transferred to the amount initially recognized for the hedged item: None.
46. Surplus Reserves
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance |
| Statutory surplus reserves | 2,530,458,968.58 | 2,530,458,968.58 | ||
| Total | 2,530,458,968.58 | 2,530,458,968.58 |
Explanations on surplus reserves, including changes and reasons thereof for the period: None.
47. Undistributed profit
Unit: RMB
| Item | Current period | Previous period |
| Undistributed profit at the end of the previous period before adjustment | 16,720,444,918.66 | 16,285,350,424.41 |
| Undistributed profit at the beginning of the period after adjustment | 16,720,444,918.66 | 16,285,350,424.41 |
| Plus: Net profits attributable to equity owners the Company’s owners in the current period | 4,093,782,074.02 | 3,001,125,887.45 |
| Minus: Ordinary share dividends payable | 2,712,079,156.56 | 2,566,031,393.20 |
| Undistributed profit at the end of the period | 18,102,147,836.12 | 16,720,444,918.66 |
Details on adjustment of undistributed profits at the beginning of the period:
1) Due to retrospective adjustments in accordance with Accounting Standards for Business Enterprises and relevant new provisions,the undistributed profits at the beginning of the period were affected by RMB 0.
2) Due to changes in accounting policies, the undistributed profits at the beginning of the period were affected by RMB 0.
3) Due to correction of material accounting errors, the undistributed profits at the beginning of the period were affected by RMB 0.
4) Due to changes in the consolidation scope under common control, the undistributed profits at the beginning of the period wereaffected by RMB 0.
5) Due to other adjustments, the undistributed profits at the beginning of the period were affected by RMB 0.
48. Operating revenue and operating cost
Unit: RMB
| Item | Amount for the current period | Amount for the previous period | ||
| Revenue | Cost | Revenue | Cost | |
| Principal businesses | 39,062,420,069.47 | 28,704,978,123.36 | 36,439,562,325.77 | 26,860,675,164.12 |
| Other businesses | 48,872,086.53 | 39,539,516.93 | 48,810,323.96 | 22,810,141.34 |
| Total | 39,111,292,156.00 | 28,744,517,640.29 | 36,488,372,649.73 | 26,883,485,305.46 |
Whether the lower of the audited net profit before and after deduction of non-recurring gains or losses is negative
□ Yes ?No
Breakdown information of operating revenue and operating cost:
Unit: RMB
| Type of contract | Drug sales | Health and daily chemical | TCM resources | |||
| Operating revenue | Operating cost | Operating revenue | Operating cost | Operating revenue | Operating cost | |
| Business type | 6,684,519,641.40 | 2,383,515,724.30 | 6,503,861,736.75 | 2,086,408,849.77 | 1,633,112,219.00 | 1,446,815,933.46 |
| Including: | ||||||
| Industrial sales income | 6,684,519,641.40 | 2,383,515,724.30 | 6,503,861,736.75 | 2,086,408,849.77 | 483,690,767.27 | 411,715,375.62 |
| Commercial sales income | 1,147,985,373.53 | 1,034,252,529.43 | ||||
| Technical services | ||||||
| Hotel catering industry | ||||||
| Planting sales income | 1,436,078.20 | 848,028.41 | ||||
| Other | ||||||
| By operating areas | 6,684,519,641.40 | 2,383,515,724.30 | 6,503,861,736.75 | 2,086,408,849.77 | 1,633,112,219.00 | 1,446,815,933.46 |
| Including: | ||||||
| In Yunnan province | 1,023,670,435.93 | 143,865,938.13 | 343,446,449.59 | 222,007,997.07 | 697,568,277.52 | 603,846,136.30 |
| Outside Yunnan province (excluding overseas) | 5,626,042,110.70 | 2,226,272,256.89 | 6,159,007,075.54 | 1,863,912,964.87 | 663,781,849.03 | 580,838,464.89 |
| Overseas | 34,807,094.77 | 13,377,529.28 | 1,408,211.62 | 487,887.83 | 271,762,092.45 | 262,131,332.27 |
| Total | 6,684,519,641.40 | 2,383,515,724.30 | 6,503,861,736.75 | 2,086,408,849.77 | 1,633,112,219.00 | 1,446,815,933.46 |
| Type of contract | Drug circulation | Others | Total | |||
| Operating revenue | Operating cost | Operating revenue | Operating cost | Operating revenue | Operating cost | |
| Business type | 23,559,399,059.10 | 22,203,298,707.09 | 730,399,499.75 | 624,478,425.67 | 39,111,292,156.00 | 28,744,517,640.29 |
| Including: | ||||||
| Industrial sales income | 68,484,915.70 | 32,112,768.54 | 13,740,557,061.12 | 4,913,752,718.23 | ||
| Commercial sales income | 23,559,399,059.10 | 22,203,298,707.09 | 587,872,844.72 | 531,614,450.02 | 25,295,257,277.35 | 23,769,165,686.54 |
| Technical services | 10,743,024.62 | 7,388,761.76 | 10,743,024.62 | 7,388,761.76 | ||
| HHotel and catering | 14,426,628.18 | 13,822,928.42 | 14,426,628.18 | 13,822,928.42 | ||
| Planting sales income | 1,436,078.20 | 848,028.41 | ||||
| Other | 48,872,086.53 | 39,539,516.93 | 48,872,086.53 | 39,539,516.93 | ||
| By operating areas | 23,559,399,059.10 | 22,203,298,707.09 | 730,399,499.75 | 624,478,425.67 | 39,111,292,156.00 | 28,744,517,640.29 |
| Including: | ||||||
| In Yunnan province | 23,487,863,019.51 | 22,124,468,960.75 | 275,117,974.26 | 256,766,618.40 | 25,827,666,156.81 | 23,350,955,650.65 |
| Outside Yunnan province (excluding overseas) | 71,536,039.59 | 78,829,746.34 | 129,074,154.07 | 52,885,891.51 | 12,649,441,228.93 | 4,802,739,324.50 |
| Overseas | 326,207,371.42 | 314,825,915.76 | 634,184,770.26 | 590,822,665.14 | ||
| Total | 23,559,399,059.10 | 22,203,298,707.09 | 730,399,499.75 | 624,478,425.67 | 39,111,292,156.00 | 28,744,517,640.29 |
Information related to performance obligations: The Company and its subsidiaries are mainly engaged in sale of drugs, medicinal materials, health and daily chemical products, etc. and recognize therealization of revenue upon delivery of products to customers and confirmation by customers that they have obtained control over the products. No contracts are for the purpose of significant financing.But, some contracts may include some discount and concession clauses. Usually, no contracts contain expected refunds to customers or other similar obligations assumed by the Company.Information about variable consideration in the contract: None.Other explanations: None.
49. Taxes and surcharges
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Consumption tax | 1,334,001.60 | 854,138.47 |
| Urban maintenance and construction tax | 87,286,116.05 | 84,697,210.82 |
| Education surcharge | 38,006,819.35 | 37,323,173.77 |
| Property tax | 20,854,291.61 | 24,008,483.52 |
| Land use tax | 11,015,525.09 | 11,316,849.02 |
| Vehicle and vessel use tax | 82,456.83 | 178,747.19 |
| Stamp duty | 26,724,523.32 | 24,429,646.95 |
| Land value-added tax | 2,563,445.92 | |
| Local education surcharge | 25,358,176.63 | 24,927,946.73 |
| Others | 139,568.24 | 189,799.77 |
| Total | 210,801,478.72 | 210,489,442.16 |
Other explanations: None.
50. Administrative expenses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Employee compensation | 699,216,701.82 | 456,376,184.90 |
| Depreciation and amortization | 119,934,021.71 | 117,326,492.90 |
| Agency service fee | 52,485,577.72 | 77,396,074.12 |
| Office expenses | 22,359,108.91 | 30,820,796.23 |
| Technical service fee | 31,860,830.97 | 21,061,758.60 |
| Business entertainment fee | 15,994,289.45 | 16,462,082.25 |
| Travel expenses | 20,122,003.15 | 10,754,258.51 |
| Utilities and property management fee | 5,926,154.60 | 8,704,893.66 |
| Security and cleaning fee | 6,322,427.76 | 6,244,773.62 |
| Advertising and promotion expenses | 3,570,476.33 | 4,335,561.43 |
| Afforestation and pollution discharge fee | 4,477,164.69 | 4,179,829.13 |
| Lease cost | 6,457,746.85 | 3,666,584.08 |
| Share payment expenses | 0.00 | -7,505,567.02 |
| Other | 69,777,019.94 | 83,960,541.05 |
| Total | 1,058,503,523.90 | 833,784,263.46 |
Other explanations: None.
51. Selling expenses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Employee compensation | 1,831,501,877.46 | 1,434,593,352.34 |
| Market maintenance and promotion expenses | 1,861,437,876.57 | 1,426,225,492.30 |
| Advertising expenses | 661,244,437.69 | 608,977,960.14 |
| Information technology service fee | 53,262,914.17 | 113,030,603.00 |
| Travel expenses | 109,139,900.74 | 91,116,431.47 |
| Hospital management fee | 76,739,145.81 | 79,327,385.62 |
| Depreciation and amortization | 72,950,345.58 | 73,415,253.68 |
| Planning service fee | 68,134,522.07 | 62,926,565.58 |
| Office expenses | 62,544,576.41 | 55,484,596.00 |
| Manufacturing expenses | 19,174,909.92 | 37,238,976.99 |
| Warehousing expenses | 12,101,737.90 | 32,133,896.26 |
| Material consumption | 28,242,998.85 | 23,136,193.24 |
| Transportation and handling fees | 33,389,355.68 | 21,892,197.34 |
| Promotion fee | 21,239,165.85 | 20,076,357.00 |
| Service fee | 13,445,297.11 | 10,179,229.86 |
| Lease fee | 7,395,782.20 | 9,794,581.18 |
| Sample fee | 8,188,682.02 | 9,584,584.03 |
| Others | 52,024,065.08 | 56,430,244.88 |
| Total | 4,992,157,591.11 | 4,165,563,900.91 |
Other explanations: None.
52. R&D expenses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Employee compensation | 155,787,826.65 | 112,076,284.66 |
| Materials consumption and inspection fee | 32,779,955.16 | 73,207,131.01 |
| Depreciation and amortisation | 18,203,654.61 | 54,292,927.85 |
| Test out-sourcing expenses | 38,162,026.18 | 28,857,450.09 |
| Commissioned R&D cost | 59,308,976.45 | 19,390,700.49 |
| New product design fee | 4,086,610.07 | 6,075,819.03 |
| Others | 27,684,385.71 | 42,823,377.13 |
| Total | 336,013,434.83 | 336,723,690.26 |
Other explanations: None
53. Financial expenses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Interest expenses | 49,601,252.93 | 67,849,588.22 |
| Less: interest income | -315,758,812.17 | -374,310,143.23 |
| Net loss on foreign exchange | -2,073,485.41 | -60,629,900.19 |
| Bank charges | 6,759,007.86 | 21,845,875.93 |
| Others | 2,228,291.91 | 2,366,197.47 |
| Total | -259,243,744.88 | -342,878,381.80 |
Other explanations:
54. Other income
Unit: RMB
| Other sources of income | Amount for the current period | Amount for the previous period |
| Government subsidies directly included in current profit and loss during the period | 51,549,775.52 | 78,679,223.60 |
| Amortization of government subsidies related to assets | 16,798,505.37 | 14,059,549.50 |
| Amortization of government subsidies | 7,026,939.27 | 7,159,585.65 |
| related to income | ||
| Return of individual income tax service charge | 4,121,718.75 | 3,950,966.78 |
| Others | 3,818,208.41 | 878,392.67 |
| Total | 83,315,147.32 | 104,727,718.20 |
55. Gains on changes in fair value
Unit: RMB
| Sources of gains on changes in fair value | Amount for the current period | Amount for the previous period |
| Financial assets held for trading | 179,678,085.07 | -667,561,834.94 |
| Other non-current financial assets | -56,111,754.61 | 47,224,578.50 |
| Change in fair value of bank wealth management products outstanding | 434,308.13 | |
| Total | 123,566,330.46 | -619,902,948.31 |
Other explanations: None.
56. Investment income
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Gain on long-term equity investments subject to accounting with equity method | 628,531,524.35 | 732,233,328.71 |
| Investment income from disposal of long-term equity investment | 110,398,541.09 | -73,495,210.33 |
| Investment income on financial assets held for trading during holding period | 7,606,635.89 | 7,577,722.83 |
| Investment income from disposal of financial assets held for trading | -7,010,382.50 | 204,640,032.15 |
| Investment income earned during the holding period of other non-current financial assets | 75,617,211.23 | 10,253,018.90 |
| Others | -36,132,801.24 | -13,010,502.10 |
| Total | 779,010,728.82 | 868,198,390.16 |
Other explanations: None.
57. Credit impairment losses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Bad debt losses on accounts receivable | -179,435,027.97 | -186,806,590.38 |
| Bad debt losses on other receivables | 42,979,823.61 | -537,747,962.34 |
| Total | -136,455,204.36 | -724,554,552.72 |
Other explanations: None.
58. Asset impairment losses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| I. Inventory impairment losses and contract performance cost impairment losses | -11,490,525.22 | -65,630,502.65 |
| II. Impairment loss of fixed assets | -4,169,779.04 | -19,958,298.01 |
| III. Impairment loss of intangible assets | -16,706,934.75 | |
| IV. Goodwill impairment loss | -25,760,323.22 | -578,749,818.26 |
| Total | -58,127,562.23 | -664,338,618.92 |
Other explanations: None.
59. Gains on disposal of assets
Unit: RMB
| Source of gains on disposal of assets | Amount for the current period | Amount for the previous period |
| Profit from disposal of non-current assets | -105,279.84 | 2,133,959.03 |
| Profit from disposal of right-of-use assets | 10,759,718.22 | 3,810,809.38 |
| Total | 10,654,438.38 | 5,944,768.41 |
60. Non-operating revenue
Unit: RMB
| Item | Amount for the current period | Amount for the previous period | Amount of non-recurring profits or losses included in the current period |
| Profits from destruction and scrapping of non-current assets | 171,572.75 | 48,404.12 | 171,572.75 |
| Including: fixed assets | 171,572.75 | 48,404.12 | 171,572.75 |
| Others | 12,062,476.51 | 13,540,774.63 | 12,062,476.51 |
| Total | 12,234,049.26 | 13,589,178.75 | 12,234,049.26 |
Other explanations: None.
61. Non-operating expenses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period | Amount of non-recurring profits or losses included in the current period |
| Donation | 3,439,155.47 | 4,382,049.94 | 3,439,155.47 |
| Losses from destruction and scrapping of non-current assets | 10,746,640.25 | 1,550,976.51 | 10,746,640.25 |
| Including: fixed assets | 10,746,640.25 | 1,545,176.45 | 10,746,640.25 |
| Others | 10,542,607.30 | 1,932,914.70 | 10,542,607.30 |
| Total | 24,728,403.02 | 7,865,941.15 | 24,728,403.02 |
Other explanations: None.
62. Income tax expense
(1) Table of income tax expenses
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Current income tax expenses | 696,380,255.02 | 701,797,672.02 |
| Deferred income tax expenses | -929,594.85 | -165,204,942.51 |
| Total | 695,450,660.17 | 536,592,729.51 |
(2) Adjustment process of accounting profit and income tax expense
Unit: RMB
| Item | Amount for the current period |
| Total profit | 4,818,011,756.66 |
| Income tax expense calculated at statutory/applicable tax rate | 722,701,763.50 |
| Effect of different tax rates applied to subsidiaries | 33,488,195.50 |
| Effect of adjusting income tax for prior periods | 9,319,135.48 |
| Effect of non-taxable income | -119,956,874.62 |
| Effect of non-deductible costs, expenses and losses | 35,249,500.23 |
| Effect of deductible losses on the use of deferred tax assets not recognized in prior periods | -14,480,104.50 |
| Effect of deductible temporary differences or deductible losses on deferred income tax assets not recognized in the current period | 68,303,837.20 |
| Extra tax deductions for R&D costs | -41,760,357.09 |
| Others | 2,585,564.47 |
| Income tax expenses | 695,450,660.17 |
Other explanations: None.
63. Other comprehensive income
For details, please refer to Note 45 “Other comprehensive income.”
64. Cash flow statement
(1) Cash relating to operating activities
Cash received relating to other operating activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Interest income | 343,668,676.54 | 373,821,901.39 |
| Deposits and guarantees | 137,533,597.44 | 146,882,290.06 |
| Government subsidy | 134,140,444.78 | 95,383,223.60 |
| Current account and petty cash | 23,924,789.88 | 94,214,478.71 |
| Others | 49,853,998.90 | 31,391,960.79 |
| Total | 689,121,507.54 | 741,693,854.55 |
Explanations on cash received relating to other operating activities: None.Cash payments relating to other operating activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Expenses of cost nature | 2,788,122,677.99 | 2,508,477,763.35 |
| Deposits and guarantees | 121,204,248.66 | 88,797,398.36 |
| Current account and petty cash | 41,963,044.67 | 17,136,959.72 |
| Others | 29,831,773.08 | 69,233,481.29 |
| Total | 2,981,121,744.40 | 2,683,645,602.72 |
Explanations on cash payments relating to other operating activities: None.
(2) Cash relating to investment activities
Cash received relating to other investment activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Principal and interest of time deposits and other financial products redeemed | 1,978,176,523.10 | 1,170,771,170.00 |
| Total | 1,978,176,523.10 | 1,170,771,170.00 |
Important cash received relating to investment activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Principal and proceeds of stocks and funds, etc. | 2,858,040,561.69 | 4,319,636,258.97 |
| Principal and interest of time deposits and other wealth management products | 1,978,176,523.10 | 1,170,771,170.00 |
| Principal and interest of other bank wealth management products | 136,597,866.72 | 1,328,105,917.87 |
| Total | 4,972,814,951.51 | 6,818,513,346.84 |
Explanations on cash received relating to other investing activities: None.Cash payments relating to other investment activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Time deposits and other bank wealth management products | 3,805,272,300.00 | 478,644,953.13 |
| Net cash outflow from disposal of subsidiary | 37,021.72 | |
| Equity investment consulting fee | 9,548,207.57 | |
| Total | 3,805,309,321.72 | 488,193,160.70 |
Important cash paid relating to investment activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Time deposits and other bank wealth management products | 3,805,272,300.00 | 478,644,953.13 |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 575,507,137.90 | 446,732,820.54 |
| Other bank wealth management products | 68,700,000.00 | 654,500,000.00 |
| Payments for subscription of equity of Shanghai Pharma | 10,909,623,186.44 | |
| Net cash paid for acquisition of subsidiaries and other business units | 569,283,888.24 | |
| Total | 4,449,479,437.90 | 13,058,784,848.35 |
Explanations on cash payments relating to other investing activities: None.
(3) Cash received relating to financing activities
Cash received relating to other financing activities: None.Cash paid relating to other financing activities
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Repurchase of treasury stock | 707,428,892.15 | |
| Payment of lease costs | 91,230,648.56 | 91,337,801.12 |
| Handling fee for financing activities | 953,227.70 | 16,927,901.57 |
| Dividend Margin | 1,000,000.00 | |
| Payments for acquisition of minority equity in Hefei Company | 8,100,000.00 | |
| Payment for minority equity upon cancellation and liquidation of subsidiary | 4,900,000.00 | 4,900,000.00 |
| Total | 105,183,876.26 | 821,594,594.84 |
Explanations on cash payments relating to other financing activities:
Change of liabilities resulting from financing activities
?Applicable □Not applicable
Unit: RMB
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | ||
| Cash change | Non-cash change | Cash change | Non-cash change | |||
| Short-term borrowings | 1,850,867,886.59 | 1,376,188,273.49 | 38,610,693.19 | 1,459,780,314.30 | 58,582,838.63 | 1,747,303,700.34 |
| Dividend payable | 89,413,484.03 | 2,729,013,580.53 | 2,731,936,322.52 | 86,490,742.04 | ||
| Lease liabilities (Lease liabilities due within one year) | 379,654,631.37 | 68,242,372.11 | 91,230,648.56 | 109,582,942.62 | 247,083,412.30 | |
| Long-term borrowings | 2,100,000.00 | 2,100,000.00 | ||||
| Total | 2,322,036,001.99 | 1,376,188,273.49 | 2,835,866,645.83 | 4,282,947,285.38 | 168,165,781.25 | 2,082,977,854.68 |
(4) Explanation on presentation of cash flow in net amount: None.
(5) Significant activities and financial effects that do not involve current cash receipts anddisbursements but affect the enterprise’s financial position or may affect the enterprise’s cashflows in the future
65. Supplementary information of cash flow statement
(1) Supplementary information of cash flow statement
Unit: RMB
| Supplementary information | Amount for the current period | Amount for the previous period |
| 1. Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 4,122,561,096.49 | 2,840,409,694.19 |
| Plus: Impairment provision for assets | 194,582,766.59 | 1,388,893,171.64 |
| Depreciation of fixed assets, depreciation of oil and gas assets, depreciation of productive biological assets | 208,456,263.24 | 316,627,661.86 |
| Depreciation of right-of-use assets | 100,305,178.75 | 109,141,890.48 |
| Amortization of intangible assets | 30,940,993.27 | 27,839,854.11 |
| Amortization of long-term deferred expenses | 33,493,659.88 | 27,820,395.79 |
| Loss on disposal of fixed assets, intangible assets and other long-term assets (gain is indicated with “-”) | 79,370.88 | -5,944,768.41 |
| Losses on scrapping of fixed assets (gain is indicated with “-”) | 10,575,067.50 | 1,496,772.33 |
| Losses on changes in fair value (gain is indicated with “-”) | -123,566,330.46 | 619,902,948.31 |
| Financial expenses (income is indicated with “-”) | 49,601,252.93 | 67,849,588.22 |
| Investment losses (gain is indicated with “-”) | -779,010,728.82 | -868,198,390.16 |
| Decrease of deferred income tax assets (increase is indicated with “-”) | 22,377,570.54 | -198,706,335.80 |
| Increase of deferred income tax liabilities (decrease is indicated with “-”) | -23,307,165.39 | 34,413,109.36 |
| Decrease in inventories (increase is indicated with “-”) | 1,539,521,695.37 | 338,741,897.07 |
| Decrease in operating receivable items (increase is indicated with “-”) | -2,088,116,474.45 | -2,054,964,892.96 |
| Increase in operating payable items (decrease is indicated with “-”) | 198,990,559.88 | 1,166,791,741.20 |
| Others | 5,257,571.82 | -602,704,304.66 |
| Net cash flows from operating activities | 3,502,742,348.02 | 3,209,410,032.57 |
| 2. Major investment and financing activities irrelevant to cash income and expense: | ||
| Conversion of debts into capital | ||
| Convertible corporate bonds due within one year | ||
| Fixed assets acquired under finance leases |
(2) Net cash paid for acquisitions of subsidiaries for the period: None.
(3) Net cash received from disposal of subsidiaries for the period: None.
(4) Composition of cash and cash equivalents
Unit: RMB
| Item | Closing balance | Opening balance |
| I. Cash | 14,151,765,468.49 | 13,046,160,012.47 |
| Including: Cash on hand | 258,600.92 | 224,637.14 |
| Bank deposit available for payment at any time | 14,114,677,091.39 | 13,006,283,524.34 |
| Other cash and bank balance available for payment at any time | 36,829,776.18 | 39,651,850.99 |
| II. Cash and cash equivalents at the end of the reporting period | 14,151,765,468.49 | 13,046,160,012.47 |
(5) Presentation of items with restricted use but still belonging to cash and cash equivalents: None.
(6) Cash and bank balance which are not cash and cash equivalents:
Unit: RMB
| Item | Amount in the reporting period | Amount in the previous period | Reasons for not belonging to cash and cash equivalents |
| Guarantee deposit, banker’s acceptance bill deposit, performance deposit, etc | 48,618,045.43 | 9,953,700.00 | Cannot be withdrawn at any time |
| Cost specially used for housing reform and maintenance | 2,643,393.65 | Cannot be withdrawn at any time | |
| Cost for property preservation | 500,000.00 | Cannot be withdrawn at any time | |
| Cost specially used for identity conversion for employees in state-owned enterprises | 14,816,169.10 | Cannot be withdrawn at any time | |
| Total | 66,577,608.18 | 9,953,700.00 |
(7) Explanations on other significant activities: None.
66. Notes to statement of changes in equity
Explanation on “Others” adjusted for closing balance of the previous year and adjusted amount thereof: None.
| 3. Net changes in cash and cash equivalents: | ||
| Closing balance of cash | 14,151,765,468.49 | 13,046,160,012.47 |
| Less: Opening balance of cash | 13,046,160,012.47 | 18,869,864,842.32 |
| Plus: Closing balance of cash equivalents | ||
| Less: Opening balance of cash equivalents | ||
| Net increase in cash and cash equivalents | 1,105,605,456.02 | -5,823,704,829.85 |
67. Monetary items denominated in foreign currencies
(1) Monetary items denominated in foreign currencies
Unit: RMB
| Item | Closing balance of foreign currency | Exchange rate | Closing balance converted into RMB |
| Cash and bank balance | |||
| Including: USD | 7,291,861.95 | 7.0827 | 51,646,070.63 |
| Euro | 1,981,507.95 | 7.8592 | 15,573,067.28 |
| HKD | 121,443,397.97 | 0.90622 | 110,054,436.11 |
| Japanese yen | 20,877,251.91 | 0.05021 | 1,048,246.82 |
| South Korean won | 21,324,422.00 | 0.00551 | 117,497.57 |
| THB | 1,116,327.33 | 0.20736 | 231,481.64 |
| CAD | 948.07 | 5.3673 | 5,088.58 |
| CHF | 20,357.05 | 8.4184 | 171,373.79 |
| SGD | 99,868.99 | 5.3772 | 537,015.53 |
| Accounts receivable | |||
| Including: USD | 13,507.62 | 7.0827 | 95,670.43 |
| Euro | |||
| HKD | 16,232,528.13 | 0.90622 | 14,710,241.64 |
| Japanese yen | 11,960.00 | 0.05021 | 600.51 |
| SGD | 544.47 | 5.3772 | 2,927.72 |
| Long-term loan | |||
| Including: USD | |||
| Euro | |||
| HKD | |||
| Other current assets | |||
| Including USD | 15,000,000.00 | 7.0827 | 106,240,500.00 |
| Accounts payable | |||
| Including: HKD | 2,617,590.31 | 0.90622 | 2,372,112.69 |
| Other receivables: | |||
| Including: USD | 1,651.05 | 7.0827 | 11,693.89 |
| HKD | 11,481,477.00 | 0.90622 | 10,404,744.09 |
| THB | 136,496.49 | 0.20345 | 27,770.21 |
| CAD | 966.78 | 5.3673 | 5,189.00 |
| SGD | 9,398.01 | 5.3772 | 50,534.98 |
| Contractual liabilities | |||
| Including: HKD | 3,562,953.78 | 0.90622 | 3,228,819.97 |
| Other payables | |||
| Including: HKD | 15,450,675.29 | 0.90622 | 14,001,710.96 |
| Japanese yen | 950,020.00 | 0.05021 | 47,700.50 |
| THB | 53,319.04 | 0.20345 | 10,847.76 |
Other explanations: None.
(2) Description of overseas business entities; for material overseas business entities, disclose their majorbusiness places overseas, functional currency and the selection criterion thereof; should there be any changein the functional currency, disclose the reason for such change
□ Applicable ?Not applicable
68. Leases
(1) The Company as the lessee
? Applicable □ Not applicableVariable lease payments not included in the measurement of lease liabilities? Applicable □ Not applicable
Unit: RMB
| Item | Amount |
| Variable lease payments not included in the measurement of lease liabilities | 978,985.95 |
Simplified handling of payments of short-term leasing or leasing of low value assets? Applicable □ Not applicable
Unit: RMB
| Item | Amount |
| Simplified handling of fees of short-term leasing or leasing of low value assets | 12,874,543.10 |
After-sales leaseback transactions
(2) The Company as the lessor
Operating lease where the Company is the lessor? Applicable □ Not applicable
Unit: RMB
| Item | Receipts from lease | Including: Receipts related to variable lease payments not included in lease receipts |
| Houses and buildings | 13,621,479.81 | |
| Total | 13,621,479.81 |
Finance lease where the Company is the lessor
□ Applicable ? Not applicable
Undiscounted lease receipts for each of the next five years
□ Applicable ? Not applicable
Reconciliation of undiscounted lease receipts to net investment in leases: None.
(3) Recognition of gains and losses on sales under finance leases as a manufacturer or distributor? Applicable ? Not applicable
69. Others
None.VIII. R&D Expenditure
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Employee Benefits | 155,787,826.65 | 112,076,284.66 |
| Materials consumption and inspection fees | 33,036,222.54 | 73,207,131.01 |
| Depreciation and amortization | 18,301,737.20 | 54,307,942.01 |
| Test outsourcing fee | 38,167,290.57 | 28,857,450.09 |
| Commissioned R&D cost | 67,328,221.73 | 25,400,134.45 |
| New product design fee | 4,086,610.07 | 6,075,819.03 |
| Others | 27,733,552.52 | 42,823,377.13 |
| Total | 344,441,461.28 | 342,748,138.38 |
| Including: Expensed R&D expenditure | 336,013,434.83 | 336,723,690.26 |
| Capitalized R&D expenditure | 8,428,026.45 | 6,024,448.12 |
1. R&D projects meeting capitalization conditions
Unit: RMB
Important capitalized R&D projects: None.
Impairment provision for R&D expenditure: None.
2. Important outsourced project under study: None.
IX. Changes in the Consolidation Scope
1. Business combination not under common control
(1) Business combination not under common control in the current period: None.
(2) Merger cost and goodwill: None.
(3) Identifiable assets and liabilities of acquirees as at the acquisition date: None.
(4) Profits or losses generated from the re-measurement of equity held before the acquisition date at the fair
value
Whether there was a transaction that realized mergers step by step via multipletransactions and obtained control during the reporting period
?Yes ?No
| Item | Opening balance | Increase in the current period | Decrease in the current period | Closing balance | ||
| Internal development costs | Others | Recognized as intangible assets | Transfer to current profits or losses | |||
| P137 Project Research and Development (IND) | 6,024,448.12 | 8,428,026.45 | 0.00 | 0.00 | 0.00 | 14,452,474.57 |
| Total | 6,024,448.12 | 8,428,026.45 | 0.00 | 0.00 | 0.00 | 14,452,474.57 |
(5) Relevant information about the merger consideration that cannot be reasonably determined as at the
acquisition date or the end of the current period of merger or on the fair value of acquirees’ identifiableassets and liabilities:
None.
(6) Other explanations: None.
2. Business combination under common control
(1) Business combination under common control in the current period: None.
(2) Merger cost: None.
(3) Book value of assets and liabilities of the merged entity on the date of merger:
3. Reverse purchase
Basic information of the transaction, the basis for the transaction to constitute a reverse purchase, whether theassets and liabilities retained by the listed company constitute a business and its basis, the determination of mergercost, the amount of equity adjustment and its calculation when dealing with equity transactions:
4. Disposal of subsidiaries
Whether there were any transactions or events during the period in which control of subsidiaries was lost?Yes ?No
Unit: RMB
| Name of subsidiary | Disposal price at the time point when the control was lost | Disposal proportion at the time point when the control was lost | Disposal method at the time point when the control was lost | The time point when the control was lost | Basis for determining the time point when the control was lost | The difference between the disposal price and the share of the net assets of the subsidiary at the consolidated financial statement level corresponding to the disposal of the investment | Proportion of rest equity on the date of losing control | Carrying value of the remaining equity on the date of loss of control at the level of Consolidated Financial Statements | Fair value of the remaining equity on the date of loss of control at the level of Consolidated Financial Statements | Gains or losses on re-measurement of remaining equity at fair value | Methods and key assumptions for determining the fair value of the remaining equity at the date of loss of control at the level of Consolidated Financial Statements | Amount transferred from other comprehensive income related to equity investment in former subsidiaries to investment profit and loss or retained income |
| Wan Long Xing Ye Commercial Trading (Shenzhen) Limited | HK1.00 | 100.00% | Agreed transfer | December 12, 2023 | Loss of right for making business decision | 110,398,541.09 |
Other explanations: None.Whether there was a loss of control in the current period under a progressive disposal of investments in subsidiaries through multiple transactions?Yes?No
5. Changes in the consolidation scope due to other reasons
Describe the change in scope of consolidation for other reasons (e.g. Establishing new subsidiaries, liquidatingsubsidiaries, etc.) and its details:
(1) Cancellation of subsidiaries
1) Yunnan Pharmaceutical Hanbo Co., Ltd completed the cancellation of industrial and commercial registration inFebruary 2023.
2) Yunnan Baiyao Group Chuxiong Health Products Co., Ltd completed the cancellation of industrial andcommercial registration in June 2023.
3) Yunnan Pharmaceutical Ruiyang Shenhua Technology Co., Ltd completed the cancellation of industrial andcommercial registration in December 2023.
4) Beijing Yunyi Medical Beauty Clinic Co., Ltd completed the cancellation of business registration in July 2023.
5) Hainan Yunfan Private Equity Fund Management Co., Ltd completed the cancellation of industrial andcommercial registration in September 2023.
6) Ban Loong Fund Investment Co., Ltd was cancelled in February 2023.
7) Ban Loong Hemp Technology Inc was cancelled in March 2023.
8) Yunnan Baiyao Qingyitang Hong Kong Limited was deregistered in September 2023.
9) Yunnan Wuxi Health Technology Co., Ltd was deregistered in November 2023.
(2) Establishment of new subsidiaries
1) Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd established through investmentXingzhong Digital Intelligence TCM Service Co., Ltd, with the registered capital of RMB 20 million and theshareholding ratio of 100%. Yunnan Baiyao included Xingzhong Digital Intelligence TCM Service Co., Ltd intothe scope of consolidation in May 2023.
2) Yunnan Yunyao Co., Ltd established through investment Yunnan Yunyao Nuxiang Co., Ltd, with the registeredcapital of RMB 2 million and the shareholding ratio of 100%. Yunnan Baiyao included Yunnan Yunyao NuxiangCo., Ltd into the scope of consolidation in June 2023.
3) Yunnan Pharmaceutical Co., Ltd. invested in the establishment of Yunnan Pharmaceutical Dali Co., Ltd with aregistered capital of RMB 10.00 million and a shareholding ratio of 100%. Yunnan Baiyao has included YunnanPharmaceutical Dali Co., Ltd in its scope of consolidation from November 2023 onwards.
4) Yunnan Baiyao Group Co., Ltd invested in the establishment of Yunhe Pharmaceutical (Tianjin) Co., Ltd with aregistered capital of RMB 20.00 million and a shareholding of 100%. Yunnan Baiyao has included YunhePharmaceutical (Tianjin) Co., Ltd in its scope of consolidation from July 2023 onwards.
5) YNBY International Limited invested in the establishment of BL Healthcare (Overseas) Limited, with one shareissued; totaling HK$ 1. Yunnan Baiyao has included BL Healthcare (Overseas) Limited in its scope of consolidationfrom February 2023 onwards.
6) YNBY International Limited invested in the establishment of YNBY Health Limited, with one share issued;totaling HK$ 1. Yunnan Baiyao has included YNBY Health Limited in its scope of consolidation from February2023 onwards.
7) YNBY International Limited invested in the establishment of YNBY Beauty Limited, with one share issued;
totaling HK$ 1. Yunnan Baiyao has included YNBY Beauty Limited in its scope of consolidation from February2023 onwards.
8) YNBY International Limited invested in the establishment of YNBY Pharmaceutical Limited, with one shareissued; totaling HK$ 1. Yunnan Baiyao has included YNBY Pharmaceutical Limited in its scope of consolidationfrom February 2023 onwards.
9) YNBY International Limited invested in the establishment of Ban Loong Holdings Group Limited (called asYNBY International Limited above), with one share issued; totaling HK$ 1. Yunnan Baiyao has included BanLoong Holdings Group Limited (called as YNBY International Limited above) in its scope of consolidation fromMarch 2023 onwards.10) YNBY International Limited invested in the establishment of YNBY Limited, with one share issued; totalingHK$ 1. Yunnan Baiyao has included YNBY Limited in its scope of consolidation from March 2023 onwards.
11) YNBY International Limited invested in the establishment of YNBY Holdings Group Limited, with one shareissued; totaling HK$ 1. Yunnan Baiyao has included YNBY Holdings Group Limited in its scope of consolidationfrom March 2023 onwards.
12) YNBY International Limited invested in the establishment of YNBY Group Limited, with one share issued;totaling HK$ 1. Yunnan Baiyao has included YNBY Group Limited in its scope of consolidation from March 2023onwards.
13) YNBY International Limited invested in the establishment of YNBY Hong Kong Limited, with one share issued;totaling HK$ 1. Yunnan Baiyao has included YNBY Hong Kong Limited in its scope of consolidation from March2023 onwards.
14) BL Healthcare (Overseas) Limited invested in the establishment of YNBY Healthcare (Shenzhen) Limited, withone share issued; totaling HK$ 1. Yunnan Baiyao has included YNBY Healthcare (Shenzhen) Limited in its scopeof consolidation from April 2023 onwards.
15) BL Healthcare (Overseas) Limited invested in the establishment of YNBY Healthcare (Singapore) Pte Ltd, withone share issued; totaling SGD 1. Yunnan Baiyao has included YNBY Healthcare (Singapore) Pte Ltd in its scopeof consolidation from May 2023 onwards.
16) YNBY Holdings Group Limited invested in the establishment of YNBY Healthcare (Malaysia) SDN.BHD, withone share issued; totaling MYR 1. Yunnan Baiyao has included YNBY Healthcare (Malaysia) SDN.BHD in itsscope of consolidation from September 2023 onwards.
17) YNBY Holdings Group Limited invested in the establishment of YNBY Health Technology (Yunnan) Co., Ltd,with the registered capital of RMB 4 million. Yunnan Baiyao has included YNBY Health Technology (Yunnan)Co., Ltd in its scope of consolidation from September 2023 onwards.
18) YNBY Holdings Group Limited invested in the establishment of YNBY Healthcare (UK) Limited, with 200shares issued; totaling GBP 200. Yunnan Baiyao has included YNBY Healthcare (UK) Limited in its scope ofconsolidation from October 2023 onwards.
19) YNBY Group Limited invested in the establishment of YNBY Coffee Industry Co., Ltd, with one share issued;totaling HK$ 1. Yunnan Baiyao has included YNBY Coffee Industry Co., Ltd in its scope of consolidation fromNovember 2023 onwards.
20) YNBY International Limited invested in the establishment of YNBY Coffee Co., Ltd, with one share issued;totaling HK$ 1. Yunnan Baiyao has included YNBY Coffee Co., Ltd in its scope of consolidation from November2023 onwards.
21) YNBY International Limited invested in the establishment of YNBY Holdings Limited, with one share issued;totaling HK$ 1. Yunnan Baiyao has included YNBY Holdings Limited in its scope of consolidation from November2023 onwards.
(3) Liquidation
The structured entity Yunfan No. 1 Private Equity Investment Fund was liquidated in May 2023.
6. Others: None.
X. Interest in Other Entities
1. Interest in subsidiaries
(1) Composition of the Group
Unit: RMB
| Name of subsidiary | Registered capital | Main business location | Place of registration | Business nature | Shareholding proportion | Acquisition method | |
| Direct | Indirect | ||||||
| Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd | 16,400,000.00 | Kunming | Kunming | Pharmaceutical | 100.00% | 0.00% | Set-up or investment |
| Yunnan Baiyao Group Medicine E-commerce Co., Ltd. | 30,000,000.00 | Kunming | Kunming | Wholesale and retail of daily necessities | 100.00% | 0.00% | Set-up or investment |
| Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd. | 25,000,000.00 | Wuxi | Wuxi | Pharmaceutical | 100.00% | 0.00% | Set-up or investment |
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | 15,515,000.00 | Dali | Dali | Pharmaceutical | 100.00% | 0.00% | Set-up or investment |
| Yunnan Baiyao Group Health Products Co., Ltd. | 84,500,000.00 | Chuxiong | Chuxiong | Production and sales of health and daily chemicals | 100.00% | 0.00% | Set-up or investment |
| Yunnan Pharmaceutical Co., Ltd. | 1,000,000,000.00 | Kunming | Kunming | Pharmaceutical wholesale and retail | 100.00% | 0.00% | Set-up or investment |
| Yunnan Institute of Materia Medica | 54,080,000.00 | Kunming | Kunming | New Drug Research and Development | 100.00% | 0.00% | Business combination under common control |
| Yunnan Baiyao Holding Investment Co., Ltd. | 100,000,000.00 | Kunming | Kunming | Investment | 100.00% | 0.00% | Business combination under common control |
| Yunnan Baiyao Teayield Co., Ltd. | 20,000,000.00 | Kunming | Kunming | Tea | 100.00% | 0.00% | Business combination under common control |
| Yunnan Baiyao | 15,000,000.00 | Hainan | Danya | Import and export | 100.00% | 0.00% | Set-up or |
| Group (Hainan) Co., Ltd. | agency, technical services, etc. | investment | |||||
| Yunnan Baiyao Group Shanghai Co., Ltd. | 15,000,000.00 | Shanghai | Shanghai | Technical services | 100.00% | 0.00% | Set-up or investment |
| Yunnan Baiyao Group Medical Technology Hefei Co., Ltd. | 25,970,800.00 | Hefei | Hefei | Medical Device Production and Sales | 100% | 0.00% | Business combination not under the same control |
| Shanghai Yunzhen Medical Technology Co., Ltd. | 900,000.00 | Shanghai | Shanghai | Technical development and service | 100.00% | 0.00% | Set-up or investment |
| YNBY International Limited | 0.00 | Hong Kong | Hong Kong | Trade | 28.06% | 45.62% | Business combination not under the same control |
| Yunnan Baiyao Tiancui Business Management Co., Ltd. | 3,000,000.00 | Kunming | Kunming | Catering | 100.00% | 0.00% | Set-up or investment |
| Yunnan Baiyao Group Beijing Co., Ltd. | 50,000,000.00 | Beijing | Beijing | Technology promotion service | 100.00% | 0.00% | Set-up or investment |
| Yunhe Pharmaceutical (Tianjin) Co., Ltd | 20,000,000.00 | Tianjin City | Tianjin City | Research and experimental development | 100.00% | 0.00% | Set-up or investment |
Explanation of the inconsistency of the percentage of shares in subsidiaries with the proportion of voting rights: None.Basis for holding half or less of the voting rights but still controlling investees, and holding more than half of the voting rights butnot controlling investees: None.
Basis for controlling major structured entities consolidated into the financial statements: The structured entities included in thescope of consolidation of the Group include CICC Directional Asset Management-GF-CICC Qirui 1 and Shanghai Trust PlatinumSeries Hong Kong Market Investment Single Fund Trust. Because the Group has power over such structured entities, enjoys variablereturns by participating in related activities, and has the ability to use its power over the investee to influence its variable returns, theGroup has control over such structured entities.
Basis for determining whether the Company is an agent or an entrustor: None.
Other explanations: None.
(2) Key non-wholly owned subsidiaries
Unit: RMB
| Name of subsidiary | Percentage of shares held by minority interests | Profit and loss attributable to non-controlling interests in the current period | Dividends declared to non-controlling interests in the current period | Balance of minority shareholders’ equity at the end of the period |
| YNBY International Limited | 26.32% | 28,395,444.46 | -62,061,867.97 |
Explanation on the inconsistency of the percentage of shares held by minority shareholders in subsidiaries with the proportion ofvoting rights: None.
Other explanations: None.
(3) Main financial information of key non-wholly owned subsidiaries
Unit: RMB
| Name of subsidiary | Closing balance | Opening balance | ||||||||||
| Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | Current assets | Non-current assets | Total assets | Current liabilities | Non-current liabilities | Total liabilities | |
| YNBY International Limited | 336,579,182.52 | 17,052,211.25 | 353,631,393.77 | 112,222,845.17 | 21,056,768.96 | 133,279,614.13 | 276,242,436.69 | 4,331,182.05 | 280,573,618.74 | 138,081,828.97 | 449,975,968.80 | 588,057,797.77 |
Unit: RMB
| Name of subsidiary | Amount for the current period | Amount for the previous period | ||||||
| Operating revenue | Net Profit | Total comprehensive income | Cash flows from operating activities | Operating revenue | Net Profit | Total comprehensive income | Cash flows from operating activities | |
| YNBY International Limited | 651,184,145.52 | 122,600,946.27 | 123,857,222.10 | 27,823,483.10 | 293,310,483.90 | -596,404,068.60 | -637,272,549.41 | -98,977,783.70 |
Other explanations: None.
(4) Major restrictions on the use of assets and settlement of debts of the corporate group: None.
(5) Financial support or other support provided for structured entity included in the scope of consolidationfor the consolidated financial statements
Other explanations: None.
2. Transaction in which the share of owners’ equity in the subsidiary changes while control over
the subsidiary remains unchanged
(1) Explanations on changes in the share of owners’ equity in the subsidiary: None.
(2) Impact of the transaction on the minority shareholders’ equity and the owners’ equity attributable to theparent company: None.
3. Interest in joint arrangement or associates
(1) Important joint ventures or associates
| Name of joint venture or associate | Main business location | Place of registration | Business nature | Shareholding proportion | The accounting method for investments in joint ventures or associates | |
| Direct | Indirect | |||||
| Shanghai Pharmaceuticals Holding Co., Ltd. | Shanghai | No. 92, Zhangjiang Road, China (Shanghai) Pilot Free Trade Zone | Pharmaceuticals | 17.97% | Equity method for long-term equity investments | |
Explanation of the inconsistency of the percentage of shares in joint ventures or associates with the proportionof voting rights: None.Basis for holding 20% or less voting rights but having important influence, or holding 20% or more voting rightsbut not having important influence: None.
(2) Main financial information of important joint ventures: None.
(3) Main financial information of important associates
Unit: RMB
| Closing balance/Amount for the current period | Opening balance/Amount for the previous period | |
| Current assets | 162,433,862,348.46 | 149,512,870,619.79 |
| Non-current assets | 49,538,671,418.34 | 48,622,030,879.16 |
| Total assets | 211,972,533,766.80 | 198,134,901,498.95 |
| Current liabilities | 122,371,879,034.89 | 110,691,046,029.78 |
| Non-current liabilities | 9,274,561,766.98 | 9,441,404,411.74 |
| Total liabilities | 131,646,440,801.87 | 120,132,450,441.52 |
| Minority interests | 11,801,949,913.58 | 10,939,445,168.20 |
| Equity attributable to shareholders of the parent company | 68,524,143,051.35 | 67,063,005,889.23 |
| Share of net assets based on percentage of shareholding | 12,316,447,243.08 | 12,072,581,725.67 |
| Adjustment | ||
| - Goodwill | 935,589,606.31 | 937,045,521.30 |
| - Unrealized profit on internal transactions | -5,399,246.55 | -5,425,757.63 |
| - Others | -1,709,991,043.28 | -1,685,593,795.42 |
| Book value of equity investment in associates | 11,536,646,559.56 | 11,318,607,693.92 |
| Fair value of equity investments in associates for which publicly quoted prices exist | 11,135,936,297.08 | 11,868,125,772.68 |
| Operating revenue | 260,295,088,943.53 | 231,981,299,764.51 |
| Net profits | 5,166,570,284.26 | 6,992,014,768.55 |
| Net profits from discontinued operations | ||
| Other comprehensive income | -126,719,890.54 | -226,480,312.21 |
| Total comprehensive income | 5,039,850,393.72 | 6,765,534,456.34 |
| Dividends received from associates during the year | 406,032,345.56 | 279,563,254.32 |
Other explanations: None.
(4) Combined financial information of insignificant joint ventures and associates
Unit: RMB
| Closing balance/Amount for the current period | Opening balance/Amount for the previous period | |
| Joint ventures: | ||
| Total of the followings based on the percentage of shareholdings | ||
| Associates: | ||
| Total book value of investments | 14,433.37 | 142,253.18 |
| Total of the followings based on the percentage of shareholdings | ||
| - Net profit | -746,786.87 | -11,668,887.07 |
| - Other comprehensive income | -248,424.18 | |
| - Total comprehensive income | -746,786.87 | -11,917,311.25 |
Other explanations: None.
(5) Explanation on significant restrictions on the ability of joint ventures or associates to transfer funds to
the Company: None.
(6) Excess loss generated from joint ventures or associates: None.
(7) Unrecognised commitment related to investments in joint ventures: None.
(8) Contingent liabilities related to investments in joint ventures or associates: None.
4. Significant joint operation: None.
5. Interest in structured entities not included in the scope of consolidated financial statements:
None.
6. Others: None.
XI. Government Grants
1. Government grants recognized at the end of the reporting period based on amounts receivable
□Applicable ?Not applicable
Reasons for not receiving the estimated amount of government grants at the expected time point
□Applicable ?Not applicable
2. Liabilities involving government grants
?Applicable ?Not applicable
Unit: RMB
| Accounting item | Opening balance | Amount of new subsidies in the current period | Amount included in non-operating revenue during the period | Amount transferred to other income in the current period | Other changes in the current period | Closing balance | Related to assets/income |
| Deferred income | 20,353,660.72 | 67,596,671.93 | 7,026,939.27 | 80,923,393.38 | Related to income | ||
| Deferred income | 158,268,152.28 | 16,418,070.75 | 16,798,505.37 | 157,887,717.66 | Related to assets |
3. Government grants included in profit or loss for the current period:
?Applicable ?Not applicable
Unit: RMB
| Accounting item | Amount for the current period | Amount for the previous period |
| Other income | 75,375,220.16 | 99,898,358.75 |
Other explanations: None.
XII. Risks Associated with Financial Instruments
(I) Risks incurred by financial instruments
The Group’s financial instruments include equity investments, debt investments, loans, receivables andaccounts payable, etc., as detailed in the relevant items under Note VI. The risk management objective of the Groupis to get an appropriate balance between risk and return, minimize the negative impact of risk on business results ofthe Group, and maximize the interest of shareholders and other equity investors. Based on this risk managementobjective, the basic risk management strategy of the Group is to identify and analyze various risks faced by theGroup, establish an appropriate risk tolerance bottom line and conduct risk management, and supervise various risksin a timely and reliable manner to control risks within a limited range.
1. Market risks
Market risk of financial instruments is the risk of fluctuation in the fair value of financial instruments or futurecash flow arising from changes in market price, including exchange rate risk, interest rate risk and other price risk.
The Group uses sensitivity analysis techniques to analyze the possible impact of reasonable and possiblechanges in market risk related variables on current profits and losses or shareholders’ equity. Since any risk variablerarely changes in isolation, and the correlations that exist between variables will have a significant impact on theultimate amount of a change in a risk variable, in the following explanation, it is assumed that each variable changesindependently.
(1) Exchange rate risk
Exchange rate risk refers to the risk that the fair value or future cash flow of a financial instrument will fluctuatedue to changes in the exchange rate. Exchange rate risk arises from financial instruments denominated in foreigncurrencies other than the functional currency. The Group's principal operations are located in the PRC, the functionalcurrency is RMB, and its principal operations are settled in RMB. The principal place of business of the Group'ssubsidiary, YNBY International, is located in Hong Kong, the PRC, and its functional currency is Hong Kong dollars.The Group's exposure to foreign exchange risk relates mainly to the US dollar and Hong Kong dollar, etc. Theexchange rate risk affects both the Group's transactions and the results of its foreign operations. The balance of theGroup's foreign currency monetary items as at December 31, 2023 is as shown in 66 "Monetary items denominatedin foreign currencies” under Note VI. If the RMB had appreciated or depreciated by 3% against the US dollar andHong Kong dollar, while other factors remained unchanged, the net profit of the Company would have increased ordecreased by approximately RMB 8,108,187.87.
(2) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate becauseof changes in market interest rates. The Group’s interest rate risk arises from bank loans and bonds payable andother interest-bearing long-term debts. Financial liabilities at floating rates expose the Group to the cash flow interestrate risk, and financial liabilities at fixed rates expose the Group to the fair value interest rate risk. The Groupdetermines the relative proportion of contracts carrying fixed and floating rates according to prevailing marketconditions. As at December 31, 2023, the Group’s interest-bearing debt consisted mainly of fixed-rate borrowingcontracts denominated in RMB amounting to RMB 1,016,734,728.09 (end of last year: RMB 892,631,958.04), andthe exposure to changes in market interest rates was not material.
(3) Other price risk
The investments classified as financial assets at fair value through profits or losses held by the Group are
measured at fair value on the balance sheet date. Therefore, the Group is exposed to fluctuations in the securitiesmarket. The Group reduces the price risk of equity portfolio investments by holding multiple equity portfolios.As at December 31, 2023, if the expected price at which the Group holds the above types of investments hadincreased or decreased by 5%, while other factors remained unchanged, the Group would have increased ordecreased its net profit by approximately RMB 13,038,142.38.
2. Credit risk
As at December 31, 2023, the maximum exposure to credit risk that could cause the Group’s financial loss ismainly due to losses on the Group’s financial assets arising from the failure of the other party to perform itsobligations under the contract and financial guarantees undertaken by the Group, including:
The book value of recognized financial assets in the consolidated balance sheet. For financial instrumentsmeasured at fair value, the book value reflects its risk exposure, but not its maximum risk exposure, which willchange as fair value changes in the future;
The financial guarantee contract amount disclosed in Note XVI “Commitments and contingencies.”
To reduce credit risk, the Company’s self-produced drugs and health products are generally sold in accordancewith the principle of first payment before delivery. When selecting dealers (customers), the Company willinvestigate the scale and financial strength, market resources, operations, brands, sales networks, and sales channelsof dealers (customers). Only dealers (customers) that meet the requirements of the Company can be selected.Yunnan Pharma, a subsidiary of the Company, mainly faces the customer credit risk caused by credit sales. YunnanPharma strictly implements credit management for the whole process of credit sales. It has established a customercredit evaluation management system, and divided customers into various types according to their nature, expectedsales, operating conditions, and development potential. For each type of customer, it will set assessment credit andred line credit days according to a unified division standard, and then confirm the effective sales and the time limitto stop billing, and make credit sales forecast and evaluation before the transactions. In the process of cooperation,dynamic credit adjustment is carried out according to the actual purchase amount of customers and the change ofbusiness scale, so that the credit sales amount given matches its business strength. Because the Company only dealswith recognized and reputable third parties, and customer bases are mainly medical institutions at all levels, largepharmacy chains, distributors, community and township medical service outlets, no collateral is required. Creditrisk concentration is managed by customer type, geographic region and industry.
Because the Company’s customer base for accounts receivable is widely dispersed in different regions andindustries, there is no significant concentration of credit risk within the Company.
The Group’s working capital is held in banks with high credit ratings and therefore the credit risk of workingcapital is low.
3. Liquidity risk
Liquidity risk is the risk that a company will run short of funds to meet its obligations settled by deliveringcash or other financial assets.
It is the Company’s policy to ensure that it has sufficient cash to pay its debts as they fall due. Liquidity risk iscentrally controlled by the Company’s Financial Department. The Financial Department ensures that the Companyhas sufficient funds to service its debt with all reasonable projections by monitoring cash balances, readily realizable
marketable securities and rolling projections of cash flows for the next 12 months.The maturity analysis of financial liabilities based on undiscounted contractual cash flows of the Company isas follows:
(1) The Company’s current liabilities include short-term loans, notes payable and accounts payable, and otherpayables, which are expected to be repaid within 1 year.
(2) The maturity analysis of non-current liabilities (including the non-current liabilities due within 1 year)based on undiscounted contractual cash flows of the Company is as follows:
Unit: RMB
| Item | December 31, 2023 | Total | |||
| Within one year | 1 to 2 years | 2 to 3 years | Above 3 years | ||
| Long-term loans | 2,100,000.00 | 2,100,000.00 | |||
| Total | 2,100,000.00 | 2,100,000.00 | |||
(II) Hedging
(1) The Company carried out hedging business for risk management
?Applicable ?Not applicable
(2) The Company conducted eligible hedging business and applied hedging accounting: None.
(3) The Company carried out hedging business for risk management, which is expected to achieve riskmanagement target, but did not apply hedging accounting?Applicable ?Not applicable(III) Financial assets
(1) Classification by type of transfer
?Applicable ?Not applicable
(2) Derecognition of financial assets due to transfer
?Applicable ?Not applicable
(3) Financial assets involved in continued assets transfer
?Applicable ?Not applicableOther explanations: None.
XIII. Disclosure of Fair Value
1. Final fair value of assets and liabilities measured at fair value
Unit: RMB
| Item | Closing fair value | |||
| Level I fair value measurement | Level II fair value measurement | Level III fair value measurement | Total | |
| I. Continuous fair value measurement | -- | -- | -- | -- |
| (I) Financial assets held for trading | 144,766,687.56 | 4,600,000.00 | 149,366,687.56 | |
| (1) Investment in equity instruments | 144,766,687.56 | 144,766,687.56 | ||
| (2) Others | 4,600,000.00 | 4,600,000.00 | ||
| (II) Accounts receivable financing | 1,590,749,810.74 | 1,590,749,810.74 | ||
| (1) Notes receivable | 1,590,749,810.74 | 1,590,749,810.74 | ||
| (III) Other non-current financial assets | 115,996,160.00 | 0.00 | 208,678,219.63 | 324,674,379.63 |
| (1) Investment in equity instruments | 115,996,160.00 | 208,678,219.63 | 324,674,379.63 | |
| (III) Investment in other equity instruments | 71,745,000.00 | 71,745,000.00 | ||
2. Determination basis of the market price of the item measured using level I fair value measurementcontinuously and non-continuously
The financial assets at fair value through profits or losses held by the Company are mainly the share and fundinvestments in the secondary market, whose closing fair value is determined by the closing price of the publiclytraded market on the balance sheet date.
3. Valuation techniques and qualitative and quantitative information on important parameters adoptedfor items subject to level II continuous and noncontinuous fair value measurement
The items subject to level II continuous fair value measurement mainly include the wealth managementproducts held by the Company. The profits or losses from fluctuation during the holding period are not recognizedbecause the fair value fluctuation is small.
4. Valuation techniques and qualitative and quantitative information on important parameters adoptedfor items subject to level III continuous and noncontinuous fair value measurement
(1) Other non-current financial assets subject to level III continuous fair value measurement are the equityinvestment in non-listed companies held by the Company. The Company will obtain the annual auditor’s report ofthe investee, consider the operating environment, operating conditions and financial status of the investee enterprise,and determine the closing fair value on the basis of the closing net assets of the company. Other investments in otherequity instruments are the equity of non-listed companies held by the Company. As the investee is a start-up
biotechnology company, considering that the business environment and operating conditions of the investedenterprise, its financial position have not changed substantially at the time of the new investment, the investmentcost is used as the best estimate of fair value in the current period.
(2) The accounts receivable financing subject to level III fair value measurement are the notes receivable heldby the Company, mainly including banker’s acceptance bill. Its credit risk is negligible, its remaining term is short(less than 12 months), and its book value is close to its fair value. Therefore, the Company uses the book value asits fair value.
5. The reconciliation information between opening and closing book values and unobservable parametersensitivity analysis for the items subject to level III continuous fair value measurement:
6. For the items subject to continuous fair value measurement, if there is a conversion between all levels inthe current period, the reason for the conversion and the policy for determining the time point of theconversion: None.
7. Changes in the valuation technology and the reason for the changes in the current period: None.
8. Fair value of financial assets and financial liabilities that are not measured at fair valueThe financial assets and liabilities measured at amortized cost reported in the financial statements mainlyinclude: notes receivable, accounts receivable, other receivables, long-term borrowings, short-term borrowings,notes payable, accounts payable, other payables, long-term payables, etc.
The management of the Group believes that the book values of financial assets and liabilities reported in thefinancial statements are close to their fair values.
9. Others: None.
XIV. Related Parties and Related Party Transactions
1. Information about the parent company of the Company: None.
Ultimate controller of the Company: None.
Other explanations:
The proposal of merger and overall listing of Yunnan Baiyao Group and Baiyao Holdings by issuing shareshad been considered and approved at the first Extraordinary General Meeting of Yunnan Baiyao for 2019. On April24, 2019, CSRC issued the Approval on the Proposal of Merger and Overall Listing of Yunnan Baiyao Group Co.,Ltd and Yunnan Baiyao Holdings Co., Ltd (Zheng Jian Xu Ke [2019] No. 770). Prior to the completion of the above-mentioned merger and overall listing, the controlling shareholder of the Company was Baiyao Holdings, and therewas no de facto controller. After the completion of the transaction, SASAC of Yunnan Province and New Huaduwith its acting-in-concert parties, were equally the largest shareholder of the Company, and neither of them obtainedthe control over the listed company. SASAC of Yunnan Province, along with New Huadu and its acting-in-concertparties, had made long-term share lock-up commitments. Therefore, the listed company did not have de factocontroller before and after the transaction.
On May 22, 2020, SASAC of Yunnan Province transferred 321,160,222 shares of the Company held by it toits wholly-owned subsidiary Yunnan State-owned Equity Operation Management Company at nil consideration.
After the completion of the transfer, State-owned Equity Operation and Management Company and New Huaduwith its acting-in-concert parties, were equally the largest shareholder of the Company, and there was no change inthe Company’s situation of not having a de facto controller or controlling shareholder.On December 8, 2021, SASAC of Yunnan Province transferred 100% of the shares held by State-owned EquityOperation and Management Company to Yunnan Investment Group Co., Ltd. After the equity transfer, YunnanInvestment Group Co., Ltd would hold 321,160,222 shares of the Company through State-owned Equity Operationand Management Company, accounting for 25.04% of the total share capital of the Company. State-owned EquityOperation and Management Company and New Huadu and New Huadu with its acting-in-concert parties, wereequally the largest shareholder of the Company, and the situation that the Company has no de facto controller andno controlling shareholder remain unchanged.
2. Information about subsidiaries of the Company
For details of subsidiaries of the Company, please refer to 1 “Interest in Subsidiaries” under Note X.
3. Information about joint ventures and associates of the Company
For details of important joint ventures or associates of the Company, please refer to Note X3 (1) ImportantJoint Ventures or Associates.
Details of joint ventures or associates with related party transactions for the period and balances resulting fromrelated party transactions in the previous period are as follows:
| Name of joint ventures or associates | Relationship with the Company |
| Shanghai Pharmaceuticals Holding Co., Ltd. | Associate |
| Yunnan Baiyao Chinese Herbal Medicine Technology Co., Ltd. | Associate |
| Lijiang Changgengming Trading Co., Ltd. | Associate |
Other explanations: None.
4. Information about other related parties
| Name of other related parties | Relationship between other related parties and the Company |
| New Huadu Industrial Group Co., Ltd. | Substantial shareholder of the Company |
| Jiangsu Yuyue Science & Technology Development Co., Ltd. | Former substantial shareholder of the Company |
| Guangxi Zhongheng Chinese Herbal Medicine Industry Development Co., Ltd. | Former shareholder of the equity participation company |
| Yunnan Renjiu Technology Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Yunnan Tianma Pharmaceutical Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Yunnan Jianshui County Xingda Medicine Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Yunnan Baoshan Medicine Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Qiubei County Wanhe Pharmaceutical Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Kaiyuan Sanfa Pharmaceutical Trade Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Chuxiong Jiayuan Medicine Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Yunnan Jingxing Pharmaceutical Group Co., Ltd. | Minority shareholder that has significant influence on the subsidiary |
| Yunnan Salt Wenshan Co., Ltd. | Sub-subsidiary of the substantial shareholder |
| Yunnan Salt Lijiang Co., Ltd. | Sub-subsidiary of the substantial shareholder |
| Yunnan Salt Rixin Co., Ltd. | Sub-subsidiary of the substantial shareholder |
| MB Packaging Limited | Sub-subsidiary of the substantial shareholder |
| Yunnan Medical Investment Management Group Kunming Technology Co., Ltd. | Sub-subsidiary of the substantial shareholder |
| Yunnan Drug Technology Development Operation Co., Ltd. | Subsidiary of the substantial shareholder |
| YEIG Power Assembly Park Development Co., Ltd. | Subsidiary of the substantial shareholder |
| Tibet Jiushi Zhihe Marketing Co., Ltd. | Subsidiary of the substantial shareholder |
| Kunming Yusi Pharmaceutical Co., Ltd. | Subsidiary of the substantial shareholder |
| Kunming Guiyan New Material Technology Co., Ltd. | Subsidiary of the substantial shareholder |
| Teh-Ho Canned Food Company | Subsidiary of the substantial shareholder |
| Quanzhou New Huadu Supercenter Co., Ltd. | Subsidiary of the substantial shareholder |
| Kunming Jinkuan Trading Co., Ltd. | Company controlled by former related party |
| Shanghai Skynet Brand Management Crop., Ltd. | Equity participation company of the subsidiary of the substantial shareholder |
| Beijing Jingji Chenggong Sports Brokerage Co., Ltd. | Holding company of former minority shareholder of subsidiary |
| Hefei Juyinzhai Health Technology Co., Ltd. | Holding company of former minority shareholder of subsidiary |
| Cao Liangming | Former minority shareholder of the subsidiary |
| Zhang Sulei | Former minority shareholder of the subsidiary |
| Wenshan Yungui Agricultural Development Co., Ltd. | Former associate |
| Kunming Nuo’an Enterprise Management Co., Ltd. | Minority shareholder of the sub-subsidiary |
Other explanations: None.
5. Related party transactions
(1) Related party transactions on purchase and sales of goods and rendering and receiving of servicesInformation of commodities purchased/labor services accepted
Unit: RMB
| Related Party | Contents of related party transaction | Amount for the current period | Approved transaction limit | Whether exceeding the transaction limit | Amount for the previous period |
| Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | Purchase of goods | 615,537,706.00 | 1,031,000,000.00 | No | 447,658,185.52 |
| Jiangsu Yuyue Science & Technology Development Co., Ltd. and its subsidiaries | Purchase of medical devices, goods and drugs | 32,852,184.77 | 60,000,000.00 | No | 29,157,418.26 |
| MB Packaging Limited | Purchase of foods | 3,925,036.06 | 5,094,904.12 | ||
| Kunming Jinkuan Trading Co., Ltd. | Purchase of goods and services | 2,923,733.27 | 12,091,974.00 | ||
| Teh-Ho Canned Food Company and its subsidiaries | Purchase of goods, promotion services | 2,661,071.80 | 3,531,280.92 | ||
| Kunming Yusi Pharmaceutical Co., Ltd. | Purchase of foods | 767,124.82 | 418,767.56 |
| Quanzhou New Huadu Supercenter Co., Ltd. | Purchase service | 336,792.44 | 763,316.21 | ||
| Yunnan Medical Investment Management Group Kunming Technology Co., LTD | Purchase of foods | 232,920.36 | |||
| Shanghai Skynet Brand Management Crop., Ltd. | Purchase of goods, Dunhuang IP licensing fee, yolk cat IP licensing and derivative product design and other service fees | 164,408.23 | 1,190,270.33 | ||
| Yunnan Salt Wenshan Co., Ltd. | Purchase of industrial salt | 56,548.68 | |||
| Yunnan Salt Rixin Co., Ltd. | Purchase of raw materials | 37,433.63 | |||
| Yunnan Salt Lijiang Co., Ltd. | Purchase of salt products | 353.98 | 176.99 | ||
| Wenshan Yungui Agricultural Development Co., Ltd. | Purchase of raw materials | 51,016,777.20 | |||
| Yunnan Renjiu Technology Co., Ltd. | Purchase of drugs | 16,332,301.78 | |||
| Yunnan Drug Technology Development Operation Co., Ltd. | Purchase of goods | 3,612.01 |
Information of commodities sold/labor services provided
Unit: RMB
| Related Party | Contents of related party transaction | Amount for the current period | Amount for the previous period |
| Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | Sale of goods | 405,843,813.13 | 242,627,647.95 |
| Tibet Jiushi Zhihe Marketing Co., Ltd. | Sale of goods | 260,774,824.31 | 309,118,657.41 |
| Kunming Jinkuan Trading Co., Ltd. | Sale of goods | 28,520,999.82 | 73,879,269.79 |
| Yunnan Provincial Pharmaceutical Technology Development and Operation Co., Ltd | Sale of goods | 2,820,416.84 | 660,912.09 |
| Yunnan Baoshan Medicine Co., Ltd. | Sales of drugs | 437,891.88 | 927,743.61 |
| Lijiang Changgengming Trading Co., Ltd. | Sales of drugs | 259,161.96 | 2,392,782.79 |
| Kunming Guiyan New Material Technology Co., Ltd | Testing fee | 2,830.19 | 2,547.17 |
| Guangxi Zhongheng Chinese Herbal Medicine Industry Development Co., Ltd. | Sales of TCM materials | 44,981,077.97 |
Explanations on related party transactions on purchase and sales of goods and rendering and receiving of services: None.
(2) Trusteeship/contracting and entrusted management/outsourcing: None.
(3) Leasing between related parties
The Company as the lessor:
Unit: RMB
| Name of lessee | Types of leased assets | Lease income recognized in the current period | Lease income recognized in the previous period |
| Teh-Ho Canned Food Company | Shop | 110,730.12 |
The Company as the lessee:
Unit: RMB
| Name of lessor | Types of leased assets | Rental costs for short-term leases and leases of low-value assets that are streamlined (if applicable) | Variable lease payments that are not included in the measurement of the lease liability (if applicable) | Rent paid | Interest expense on lease liabilities assumed | Increased right-to-use assets | |||||
| Amount for the current period | Amount for the previous period | Amount for the current period | Amount for the previous period | Amount for the current period | Amount for the previous period | Amount for the current period | Amount for the previous period | Amount for the current period | Amount for the previous period | ||
| Yunnan Jianshui County Xingda Medicine Co., Ltd. | House | 1,552,123.81 | 1,552,849.75 | 15,144.50 | 74,259.07 | ||||||
| Yunnan Baoshan Medicine Co., Ltd. | House, equipment, vehicle | 2,813,785.08 | 1,402,407.08 | 17,373.95 | 8,120,850.14 | 1,402,407.08 | |||||
| Yunnan Tianma Pharmaceutical Co., Ltd. | House | 770,642.20 | 741,713.92 | 38,043.92 | 8,740.00 | ||||||
| Kaiyuan Sanfa Pharmaceutical Trade Co., Ltd. | Vehicle and equipment | 602,477.88 | 602,477.88 | 602,477.88 | 602,477.88 | ||||||
| Chuxiong Jiayuan Medicine Co., Ltd. | Equipment | 141,592.93 | 141,592.93 | 4,104.37 | 1,341.51 | 277,739.98 | |||||
| Yunnan Jingxing Pharmaceutical Group Co., Ltd. | House | 633,686.24 | 60,511.53 | 1,565,165.47 | |||||||
| YEIG Power Assembly Park Development Co., Ltd. | House | 1,364,087.62 | 1,351,218.90 | 231,019.21 | 291,325.27 | ||||||
Explanations on leasing between related parties: None.
(4) Related party guarantees: None.
(5) Borrowings with related parties
Unit: RMB
| Related Party | Borrowing amount | Commencement date | Due date | Description | |
| Borrowing | |||||
| Entity A | 21,800,000.00 | June 10, 2021 | December 12, 2023 | Repaid | |
| Entity B | 20,000,000.00 | September 10, 2021 | November 24, 2023 | Repaid | |
| Entity C | 13,000,000.00 | August 13, 2021 | November 22, 2023 | Repaid | |
| Loans | |||||
(6) Asset transfer and debt restructuring of related parties: None.
(7) Remuneration to key management personnel
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Remuneration to key management personnel | 39,094,528.46 | 35,627,687.12 |
Note: It is set out in the Article 4 of Accounting Standard for Business Enterprises No.36 - Disclosures ofRelated Parties that key management personnel refer to personnel who have the power and are responsible forplanning, directing, and controlling enterprise activities. The amount of remuneration to key management personnelin this reporting period was the total pretax remuneration received by all directors, supervisors, and seniormanagement personnel of the Company during the reporting period.
(8) Other related party transactions: None.
6. Amounts receivable from and payable to related parties
(1) Receivable
Unit: RMB
| Item name | Related Party | Closing balance | Opening balance | ||
| Book balance | Provision for bad debt | Book balance | Provision for bad debt | ||
| Accounts receivable | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 14,929,453.95 | 588,430.73 | 20,885,033.46 | 974,051.40 |
| Accounts receivable | Lijiang Changgengming Trading Co., Ltd. | 2,717,793.63 | 610,834.92 | 3,722,642.00 | 351,110.79 |
| Accounts receivable | Yunnan Jingxing Pharmaceutical Group Co., Ltd | 256,854.37 | 12,842.72 | ||
| Accounts receivable | Yunnan Drug Technology Development Operation Co., Ltd. | 16,253.88 | 812.69 | ||
| Accounts receivable | Kaiyuan Sanfa Pharmaceutical Trade Co., Ltd. | 200,214.52 | 60,064.36 | ||
| Accounts receivable | Yunnan Baoshan Medicine Co., Ltd. | 3,721.00 | 186.05 | ||
| Other receivables | Beijing Jingji Chenggong Sports Brokerage Co., Ltd. | 2,360,000.00 | 1,416,000.00 | ||
| Other receivables | Yunnan Baiyao Chinese Herbal Medicine Technology Co., Ltd | 179,791.57 | 158,771.36 | 177,922.32 | 111,723.90 |
| Other receivables | Cao Liangming | 133,368.00 | 40,010.40 | ||
| Other receivables | Hefei Juyinzhai Health Technology Co., Ltd. | 4,283.45 | 2,985.04 | ||
| Other receivables | Zhang Sulei | 1,432.00 | 429.60 | ||
| Prepayment | Jiangsu Yuyue Science & Technology Development Co., Ltd and its subsidiaries | 1,185,072.72 | 2,074,165.10 | ||
| Prepayment | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 205,957.44 | 645,917.73 | ||
| Prepayment | Qiubei County Wanhe Pharmaceutical Co., Ltd | 72,206.41 | |||
| Notes receivable | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 689,199.51 | 1,212,677.73 | ||
| Accounts receivable financing | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 8,225,916.72 | 12,229,069.00 | ||
| Accounts receivable financing | Tibet Jiushi Zhihe Marketing Co., Ltd. | 1,544,428.80 | 10,000,000.00 |
(2) Payables
Unit: RMB
| Item name | Related Party | Book balance at the end of the period | Book balance at the beginning of the period |
| Accounts payable | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 60,976,451.66 | 76,496,404.37 |
| Accounts payable | Yunnan Medical Investment Management Group Kunming Science and Technology Co., Ltd. | 907,736.56 | |
| Accounts payable | Kunming Yusi Pharmaceutical Co., Ltd. | 196,663.49 | |
| Accounts payable | Teh-Ho Canned Food Company and its subsidiaries | 44,515.35 | 1,749,569.64 |
| Accounts payable | Yunnan Salt Rixin Co., Ltd. | 42,300.00 | |
| Accounts payable | MB Packaging Limited | 28,682.85 | |
| Accounts payable | Qiubei County Wanhe Pharmaceutical Co., Ltd. | 10,779.90 | |
| Accounts payable | Chuxiong Jiayuan Medicine Co., Ltd. | 3,126.32 | 4,762.46 |
| Accounts payable | Yunnan Renjiu Technology Co., Ltd. | 0.30 | 10,471.90 |
| Accounts payable | Beijing Jingji Chenggong Sports Brokerage Co., Ltd. | 4,160.00 | |
| Accounts payable | Yunnan Drug Technology Development Operation Co., Ltd. | 3,612.01 | |
| Notes payable | Yunnan Renjiu Technology Co., Ltd. | 16,989,446.48 | |
| Notes payable | Jiangsu Yuyue Science & Technology Development Co., Ltd and its subsidiaries | 11,503,853.81 | 8,653,145.32 |
| Notes payable | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 1,745,473.86 | 2,690,480.00 |
| Other payables | Beijing Jingji Chenggong Sports Brokerage Co., Ltd. | 798,000.00 | |
| Other payables | Qiubei County Wanhe Pharmaceutical Co., Ltd. | 630,000.00 | |
| Other payables | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 70,000.00 | |
| Other payables | Chuxiong Jiayuan Medicine Co., Ltd. | 604.80 | 604.80 |
| Other payables | Kaiyuan Sanfa Pharmaceutical Trade Co., Ltd. | 12,831.86 | |
| Dividend payable | State-owned Assets Supervision and Administration Commission of the People’s Government of Yunnan Province, New Huadu Industrial Group Co., Ltd. | 86,490,742.04 | 86,490,742.04 |
| Dividend payable | Kunming Nuo’an Enterprise Management Co., Ltd. | 2,922,741.99 | |
| Contractual liabilities | Shanghai Pharmaceuticals Holding Co., Ltd and its subsidiaries | 50,412,199.36 | 48,788,541.50 |
| Contractual liabilities | Tibet Jiushi Zhihe Marketing Co., Ltd. | 2,427,757.00 | 3,061,507.53 |
| Contractual liabilities | Yunnan Baoshan Medicine Co., Ltd. | 567,217.96 | |
| Contractual liabilities | Kunming Jinkuan Commerce & Trade Co., Ltd. | 15,714,893.18 | |
| Non-current liabilities due within one year | YEIG Power Assembly Park Development Co., Ltd. | 1,185,189.56 | 1,121,472.45 |
| Non-current liabilities due within one year | Yunnan Baoshan Medicine Co., Ltd. | 2,610,019.14 | |
| Non-current liabilities due within one year | Yunnan Tianma Pharmaceutical Co., Ltd. | 761,902.21 | |
| Non-current liabilities due within one year | Yunnan Jingxing Pharmaceutical Group Co., Ltd. | 526,744.88 | |
| Lease liabilities | YEIG Power Assembly Park Development Co., Ltd. | 3,889,088.11 | 5,022,156.52 |
| Lease liabilities | Yunnan Baoshan Medicine Co., Ltd. | 2,714,419.89 |
7. Related party commitments: None.
8. Others: None.
XV. Share-based Payment
1. General information about share-based payment
□Applicable
?Not applicable
2. Equity-settled share-based payment
□Applicable
?Not applicable
3. Cash-settled share-based payment
□Applicable
?Not applicable
4. Share payments during the period
□Applicable
?Not applicable
5. Amendment and termination of share-based payment: None.
6. Others: None.
XVI. Commitment and Contingencies
1. Significant commitments: None.
2. Contingencies
(1) Significant contingencies on the balance sheet date
Provision of guarantees for Yunnan Yuncheng Hospital Management Co., Ltd.In November 2017, the Company issued the Announcement on the Investment and Establishment of PPPProject Companies by Wholly-owned Subsidiaries and the Provision of Guarantees for Them. According to theannouncement, Yunnan Provincial Health and Family Planning Commission was authorized by Yunnan ProvincialPeople’s Government to serve as the project implementation agency of the Chenggong Hospital PPP project (PhaseI project) of the First Affiliated Hospital of Kunming Medical University, and The First Affiliated Hospital ofKunming Medical University was authorized to be the representative of the government, to invest and hold shareson behalf of the government, and jointly establish Yunnan Yuncheng Hospital Management Co., Ltd (the “ProjectCompany”) with social capital. Yunnan Pharma, a wholly-owned subsidiary of the Company, and Yunnan HaopyPharmaceutical Sales Co., Ltd, a private capital, formed a consortium to bid for the project, and finally won the bid.According to the requirements of the procurement documents, Yunnan Pharma shall invest RMB 100,000 in theProject Company in cash, with an equity ratio of 10%. The consortium shall undertake joint and several guaranteeliability for the PPP project debt of the Project Company for a period of 12 years, and the maximum total guaranteeamount of the consortium should be RMB 150,000.
(2) Where the Company had no significant contingencies to disclose, explanation is also required
The Company had no significant contingencies to disclose.
3. Others
None.
XVII. Events Subsequent to the Balance Sheet Date
1. Important non-adjusting events: None.
2. Profit distribution:
| Proposed distribution of dividends per 10 shares (RMB) | 20.77 |
| Proposed distribution of bonus shares per 10 shares (quantity of shares) | 0 |
| Proposed distribution of converted shares per10 shares (quantity of shares) | 0 |
| Declared distribution of dividends per 10 shares after consideration and approval (RMB) | 20.77 |
| Declared distribution of bonus shares per 10 shares after consideration and approval (quantity of shares) | 0 |
| Declared distribution of converted shares per 10 shares after consideration and approval (quantity of shares) | 0 |
| Profit distribution plan | Based on the total share capital of the Company of 1,796,862,549 shares as at the end of 2023 less 12,599,946 shares repurchased by the special securities account for share repurchase, i.e., on the basis of 1,784,262,603 shares, a cash dividend of RMB 20.77 (tax inclusive) for every 10 shares will be paid to all shareholders, and no shares will be issued by way of conversion of capital reserve. |
3. Sales return: None.
4. Explanation on other events subsequent to the balance sheet date:
1) Change in the purpose of repurchased shares and cancellation of such sharesOn February 7, 2024, the Company held the first session of the Tenth Board of Directors and passed theProposal on Changes in the Purpose of Repurchased Shares and Cancellation of Such Shares. In this proposal, theCompany planned to change the purpose of 12,599,946 shares repurchased by the special securities account forshare repurchase from “for implementing employee stock ownership plans or equity incentive plans” to “forcancellation of such shares to reduce registered capital.”XVIII. Other Significant Events
1. Correction of previous accounting errors
(1) Retrospective restatement method: None.
(2) Prospective application method: None.
2. Debt restructuring: None.
3. Assets exchange
(1) Exchange of non-Cash and bank balance: None.
(2) Exchange of other assets: None.
4. Annuity plan
(1) In accordance with the Trial Measures for Enterprise Annuity and Trial Measures for Enterprise AnnuityFund Management of the Ministry of Labor and Social Security, as well as the Letter Yun Lao She Han [2006] No.267 of Department of Labor and Social Security of Yunnan Province, the Company was approved to establish anenterprise annuity. The investment manager of the enterprise annuity fund is Fullgoal Fund Management Co., Ltd.,and the trustee of the enterprise annuity fund is China Merchants Bank Co., Ltd. The enterprise contribution shall
be paid annually at 5-8.33% of the total salary of the employees of the Company in the previous year, and theindividual contribution of the employees shall be paid at 10% of the unit contribution. The individual contributionshall be collected and paid by the Company from the employee’s salary.
(2) According to the replies of Yunnan Provincial Department of Human Resources and Social Security (YunRen She Letter [2009] No.79) and Kunming Municipal Labor and Social Security Bureau (Kun Lao She Han [2008]No.204) on the Enterprise Annuity Implementation Plan of Yunnan Pharma, Yunnan Pharma, a subsidiary of theCompany, was approved to establish an enterprise annuity. The investment manager of the enterprise annuity fundis Ping An Annuity Insurance Company of China, Ltd, and the trustee of the enterprise annuity fund is ChinaMerchants Bank Co., Ltd. According to the plan, the enterprise contribution shall be paid annually at no more than
8.33% of the total salary of the employees of Yunnan Pharma in the previous year, and the individual contributionof the employees shall be paid at 10% of the unit contribution.
(3) According to the replies of Yunnan Provincial Department of Human Resources and Social Security (YunRen She Letter [2009] No.79) and Kunming Municipal Labor and Social Security Bureau (Kun Ren She Han [2016]No.21) on the Enterprise Annuity Implementation Plan of Yunnan Institute of Materia Medica, Yunnan Institute ofMateria Medica, a subsidiary of the Company, was approved to establish an enterprise annuity. The investmentmanager of the enterprise annuity fund is Ping An Annuity Insurance Company of China, Ltd, and the trustee of theenterprise annuity fund is China Construction Bank Corporation. According to the plan, the enterprise contributionshall be paid annually at no more than 5% of the total salary of the employees of Yunnan Institute of Materia Medicain the previous year, and the individual contribution of the employees shall be paid at 10% of the unit contribution.
(4) In accordance with the Measures on Enterprise Annuity (Decree No. 36 of Ministry of Human Resourcesand Social Security), Measures on the Management of Enterprise Annuity Fund (Decree No. 11 of Ministry ofHuman Resources and Social Security) and other relevant provisions as well as the Reply on Filing of EnterpriseAnnuity Plan of Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd issued by Wuxi Human Resources and SocialSecurity Bureau (Xi Ren She Fu [2018] No.27), Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd, a subsidiaryof the Company, was approved to establish an enterprise annuity. The investment manager of the enterprise annuityfund is Ping An Annuity Insurance Company of China, Ltd, and the trustee of the enterprise annuity fund is ChinaConstruction Bank Corporation. According to the plan, the enterprise contribution shall be paid annually at no morethan 5% of the total salary of the employees of Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd in the previousyear, and the individual contribution of the employees shall be paid at 10% of the unit contribution.
5. Discontinuation of operation: None.
6. Segment information
(1) Determination basis and accounting policy of reporting segments: None.
(2) Financial information of reporting segments: None.
(3) If the Company has no reporting segment or the total assets and total liabilities of the reporting segmentscannot be disclosed, please explain the reason: None.
(4) Other explanations: None.
7. Other significant transactions and matters that have an impact on investors’ decision-making
On April 28, 2023, YNBY International Limited (“YNBY International,” stock code: 00030, formerly knownas Ban Loong Holdings), a subsidiary of the Company, disclosed an announcement stating that HLB HodgsonImpey Cheng Limited (“HLB”) has resigned as the auditor of Ban Loong Holdings with effect from April 25, 2023.The Board, with the recommendation of the Audit Committee, resolved to appoint Zhonghui Anda CPA Limited(“Zhonghui Anda”) as the auditor of the Company with effect from 28 April 2023 to fill the casual vacancyfollowing the resignation of HLB as auditor of the Company, and to hold office until the conclusion of the nextannual general meeting of Ban Loong Holdings.On January 15, 2024, YNBY International published the 2021 Annual Report, the 2022 Interim Report, the2022 Annual Report and the 2023 Interim Report. The 2021 Annual Report (from April 1, 2020 to March 31, 2021)and the 2022 Annual Report (from April 1, 2021 to March 31, 2022) were audited by Zhonghui Anda, and the typeof audit comment in the audit report issued was “Disclaimer of Opinion.” Matters that resulted in the audit commentof “Disclaimer of Opinion” were businesses that occurred prior to the tender offer of the Company in January 2022,for which the Company had made appropriate treatment at the point of acquisition. In addition, after the acquisition,the Company actively took over YNBY International in an orderly manner in accordance with the requirements oflisted companies. Thanks to the efforts of all parties of the Company, the requirements under the ResumptionGuidelines were fulfilled on January 30, 2024, and the Resumption Guidelines were fully complied with to thesatisfaction of the HKEX. The trading in YNBY International was resumed on January 31, 2024 with effect from9:00 a.m. onwards.
On March 22, 2024, the Board of Directors of YNBY held a meeting to consider the audited results for thefinancial year ended December 31, 2023 (The period of business results was from April 1, 2023 to December 31,2023) and the publication of the relevant results announcement on the websites of The Stock Exchange of HongKong Limited and YNBY. The type of audit comment in the audit report for the fiscal year ended December 31,2023 was qualified, which was mainly due to the fact that the matters leading to disclaimer of opinion still had animpact on the financial data at the beginning of the year (the fiscal year ended March 31, 2023). The matters leadingto qualified opinion did not have a significant impact on the Group’s financial data and results of operations for2023.
8. Others: None.
XIX. Notes to Major Items of Financial Statements of the Parent Company
1. Accounts receivable
(1) Disclosure by aging
Unit: RMB
| Aging | Closing balance | Opening balance |
| Within 1 year (inclusive of 1 year) | 614,449,599.26 | 320,787,574.10 |
| 1 to 2 years | 85,846,594.74 | 22,626,539.08 |
| 2 to 3 years | 5,516,424.89 | 277,308,880.56 |
| Above 3 years | 645,998,164.53 | 375,141,861.83 |
| Total | 1,351,810,783.42 | 995,864,855.57 |
(2) Disclosure by provision for bad debts
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Provision for bad debt | Book value | Book balance | Provision for bad debt | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
| Including: | ||||||||||
| Account receivables with provision for bad debt on portfolio basis | 1,351,810,783.42 | 100.00% | 20,902,222.46 | 1.55% | 1,330,908,560.96 | 995,864,855.57 | 100.00% | 18,016,130.77 | 1.81% | 977,848,724.80 |
| Including | ||||||||||
| Receivable from external customer | 79,297,162.59 | 5.87% | 20,902,222.46 | 26.36% | 58,394,940.13 | 78,444,316.75 | 7.88% | 18,016,130.77 | 22.97% | 60,428,185.98 |
| Receivable for related party | 1,272,513,620.83 | 94.13% | 1,272,513,620.83 | 917,420,538.82 | 92.12% | 917,420,538.82 | ||||
| Total | 1,351,810,783.42 | 100.00% | 20,902,222.46 | 1.55% | 1,330,908,560.96 | 995,864,855.57 | 100.00% | 18,016,130.77 | 1.81% | 977,848,724.80 |
Provision for bad debts made on a portfolio basis:
Unit: RMB
| Name | Closing balance | ||
| Book balance | Provision for bad debts | Provision proportion | |
| Receivables from external customers | 79,297,162.59 | 20,902,222.46 | 26.36% |
| Receivables from related parties | 1,272,513,620.83 | ||
| Total | 1,351,810,783.42 | 20,902,222.46 | |
Explanation on the basis for determining the portfolio: None.If provision was made for bad debts of accounts receivable in accordance with the general expected credit loss model:
?Applicable?Not applicable
(3) Provision for bad debts accrued, recovered or reversed during the periodNone.
(4) Actual write-off of accounts receivable for the period
None.
(5) Top five customers in closing balance of accounts receivable and contractual assets summarized bydebtor
Unit: RMB
| Customer name | Closing balance of accounts receivable | Closing balance of contractual assets | Closing balance of accounts receivable and contractual assets | Percentage of total of closing balance of accounts receivable and contractual assets | Closing balance of provision for bad debts of accounts receivable and provision for impairment of contractual assets |
| Customer A | 555,396,104.81 | 555,396,104.81 | 41.09% | ||
| Customer B | 535,754,637.30 | 535,754,637.30 | 39.63% | ||
| Customer C | 131,984,872.53 | 131,984,872.53 | 9.76% | ||
| Customer D | 23,671,271.87 | 23,671,271.87 | 1.75% | ||
| Customer E | 11,030,863.59 | 11,030,863.59 | 0.82% | ||
| Total | 1,257,837,750.10 | 1,257,837,750.10 | 93.05% |
2. Other receivables
Unit: RMB
| Item | Closing balance | Opening balance |
| Dividends receivable | 4,531,100.00 | |
| Other receivables | 4,122,557,802.76 | 3,123,928,450.54 |
| Total | 4,127,088,902.76 | 3,123,928,450.54 |
(1) Interest receivable
1) Category of interest receivable: None.
2) Significant overdue interest: None.
3) Disclosure by provision for bad debts
?Applicable?Not applicable
4) Provision for bad debts accrued, recovered or reversed during the period: None.
5) Actual write-off of dividends receivable during this reporting period: None.
(2) Dividends receivable
1) Category of dividends receivable
Unit: RMB
| Item (or investee) | Closing balance | Opening balance |
| Jacobson Pharma Corporation Limited | 4,531,100.00 | |
| Total | 4,531,100.00 |
2) Significant dividends receivable aged above 1 year: None.
3) Disclosure by provision for bad debts
?Applicable?Not applicable
4) Provision for bad debts accrued, recovered or reversed during the period: None.
5) Actual write-off of dividends receivable during this reporting period
Including actual write-off of significant dividends receivable: None.Write-off explanations: None.Other explanations: None.
(3) Other receivables
1) Other receivables by nature
Unit: RMB
| Nature | Book balance at the end of the reporting period | Book balance at the beginning of the reporting period |
| Amounts from related parties within the scope of consolidation | 4,254,011,881.88 | 3,258,095,819.76 |
| Deposits and guarantees | 14,347,777.84 | 9,155,501.26 |
| Petty cash | 7,104,113.05 | 9,512,706.51 |
| Total | 4,275,463,772.77 | 3,276,764,027.53 |
2) Disclosure by aging
Unit: RMB
| Aging | Book balance at the end of the period | Opening balance at the end of the period |
| Within 1 year (inclusive of 1 year) | 1,864,972,976.56 | 1,058,335,839.27 |
| 1 to 2 years | 943,970,831.13 | 1,004,480,186.88 |
| 2 to 3 years | 677,614,286.73 | 143,283,020.32 |
| Above 3 years | 788,905,678.35 | 1,070,664,981.06 |
| 3 to 4 years | 788,905,678.35 | 1,070,664,981.06 |
| Total | 4,275,463,772.77 | 3,276,764,027.53 |
3) Disclosure by provision for bad debts
Unit: RMB
| Category | Closing balance | Opening balance | ||||||||
| Book balance | Provision for bad debts | Book value | Book balance | Provision for bad debts | Book value | |||||
| Amount | Proportion | Amount | Provision proportion | Amount | Proportion | Amount | Provision proportion | |||
| Including: | ||||||||||
| Provision for bad debts by portfolio | 4,275,463,772.77 | 100.00% | 152,905,970.01 | 35.74% | 4,122,557,802.76 | 3,276,764,027.53 | 100.00% | 152,835,576.99 | 41.17% | 3,276,764,027.53 |
| Including: | ||||||||||
| Aging portfolio | 21,451,890.89 | 0.50% | 6,931,300.47 | 32.31% | 14,520,590.42 | 18,701,031.75 | 0.57% | 6,860,884.49 | 36.69% | 18,701,031.75 |
| Related party portfolio | 4,254,011,881.88 | 99.50% | 145,974,669.54 | 3.43% | 4,108,037,212.34 | 3,258,062,995.78 | 99.43% | 145,974,692.50 | 4.48% | 3,258,062,995.78 |
| Total | 4,275,463,772.77 | 100.00% | 152,905,970.01 | 35.74% | 4,122,557,802.76 | 3,276,764,027.53 | 100.00% | 152,835,576.99 | 41.17% | 3,276,764,027.53 |
Provision was made for bad debts in accordance with the general expected credit loss model:
Unit: RMB
| Provision for bad debts | Phase I | Phase II | Phase III | Total |
| Expected credit losses for the next 12 | Lifetime ECL (not credit-impaired) | Lifetime ECL (credit-impaired) |
| months | ||||
| Balance as of January 1, 2023 | 152,835,576.99 | 152,835,576.99 | ||
| Balance as of January 1, 2023 in the current period | ||||
| Provision for the period | 70,393.02 | 70,393.02 | ||
| Balance as of December 31, 2023 | 152,905,970.01 | 152,905,970.01 |
Division base for each phase and proportion of provision for bad debts: None.
Changes in book balance with significant changes in loss reserves in the current period?Applicable?Not applicable
4) Provision for bad debts accrued, recovered or reversed during the periodProvision for bad debts for the period:
Unit: RMB
| Category | Opening balance | Change in the current period | Closing balance | |||
| Provision | Recovery or reversal | Transfer or write-off | Other changes | |||
| Aging portfolio | 6,860,884.49 | 70,415.98 | 6,931,300.47 | |||
| Related party portfolio | 145,974,692.50 | -22.96 | 145,974,669.54 | |||
| Total | 152,835,576.99 | 70,393.02 | 152,905,970.01 | |||
Provision for bad debt with important amount of recovery or reversal during the period: None.
5) Actual write-off of other receivables during this reporting period: None.
6) Top five customers in closing balance of other receivables summarized by debtor
Unit: RMB
| Entity name | Nature | Closing balance | Aging | Percentage of total of closing balance of other receivables | Closing balance of provision for bad debts |
| Entity A | Related party transactions | 1,298,160,786.82 | Within 1 year, 1 to 2 years, 2 to 3 years, above 3 years | 30.36% | |
| Entity B | Related party transactions | 829,427,236.43 | Within 1 year, 2 to 3 years | 19.40% | |
| Entity C | Related party transactions | 667,778,834.70 | Within 1 year, 1 to 2 years, 2 to 3 years | 15.62% | |
| Entity D | Related party transactions | 384,808,049.53 | Within 1 year, 1 to 2 years | 9.00% | 145,974,669.54 |
| Entity E | Related party transactions | 295,969,610.07 | Within 1 year, 1 to 2 years, 2 to 3 years | 6.92% | |
| Total | 3,476,144,517.55 | 81.30% | 145,974,669.54 |
7) Reported as other receivables due to centralized fund management: None.
3. Long-term equity investment
Unit: RMB
| Item | Closing balance | Opening balance | ||||
| Book balance | Impairment provision | Book value | Book balance | Impairment provision | Book value | |
| Investments in subsidiaries | 2,573,195,450.92 | 244,474,941.95 | 2,328,720,508.97 | 2,465,095,450.92 | 244,474,941.95 | 2,220,620,508.97 |
| Investments in associates and joint ventures | 11,553,542,823.25 | 11,553,542,823.25 | 11,334,638,735.04 | 11,334,638,735.04 | ||
| Total | 14,126,738,274.17 | 244,474,941.95 | 13,882,263,332.22 | 13,799,734,185.96 | 244,474,941.95 | 13,555,259,244.01 |
(1) Investments in subsidiaries
Unit: RMB
| Investee | Opening balance (book value) | Closing balance of impairment provision | Increase and decrease in the current period | Closing balance (book value) | Closing balance of impairment provision | |||
| Additional investment | Decreased investment | Provision for impairment | Others | |||||
| Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd | 130,894,518.14 | 130,894,518.14 | ||||||
| Yunnan Baiyao Group Medicine E-commerce Co., Ltd. | 56,059,850.00 | 56,059,850.00 | ||||||
| Yunnan Baiyao Group Wuxi Pharmaceutical Co., Ltd. | 39,627,253.25 | 39,627,253.25 | ||||||
| Yunnan Baiyao Group Dali Pharmaceutical Co., Ltd. | 16,489,200.00 | 16,489,200.00 | ||||||
| Yunnan Baiyao Group Health Products Co., Ltd. | 168,297,661.03 | 168,297,661.03 | ||||||
| Yunnan Pharmaceutical Co., Ltd | 765,533,647.30 | 765,533,647.30 | ||||||
| Yunnan Institute of Materia Medica | 101,075,329.94 | 101,075,329.94 | ||||||
| Yunnan Baiyao Holding Investment Co., Ltd. | 193,992,837.67 | 193,992,837.67 | ||||||
| Yunnan Baiyao Teayield Co., Ltd. | 3,701,960.00 | 20,000,000.00 | 3,701,960.00 | 20,000,000.00 | ||||
| Yunnan Baiyao Group (Hainan) Co., Ltd. | 457,198,438.74 | 457,198,438.74 | ||||||
| Yunnan Baiyao Group Shanghai Co., Ltd. | 11,350,000.00 | 11,350,000.00 | ||||||
| Yunnan Baiyao Group Medical Technology Hefei Co., Ltd. | 77,600,000.00 | 8,100,000.00 | 85,700,000.00 | |||||
| Shanghai Yunzhen Medical Technology Co., Ltd. | 100,572,858.37 | 100,000,000.00 | 200,572,858.37 | |||||
| YNBY International Limited (Formerly Ban Loong Holdings Limited) | 98,226,954.53 | 224,474,941.95 | 98,226,954.53 | 224,474,941.95 | ||||
| Total | 2,220,620,508.97 | 244,474,941.95 | 108,100,000.00 | 2,328,720,508.97 | 244,474,941.95 | |||
(2) Investments in associates and joint ventures
Unit: RMB
| Investee | Opening balance (book value) | Closing balance of impairment provision | Increase and decrease in the current period | Closing balance (book value) | Closing balance of impairment provision | |||||||
| Additional investment | Decreased investment | Profit and loss on investments recognized under the equity method | Adjustment of other comprehensive income | Change in other equities | Cash dividends or profit declared to be issued | Provision for impairment | Others | |||||
| I. Joint ventures | ||||||||||||
| II. Associates | ||||||||||||
| Shanghai Pharmaceuticals Holding Co., Ltd. | 11,319,745,137.87 | 627,159,060.84 | -22,425,249.10 | 18,844,632.23 | 406,032,345.56 | 11,537,291,236.28 | ||||||
| Yunnan Tianzheng Testing Co., Ltd. | 14,893,597.17 | 1,357,989.80 | 16,251,586.97 | |||||||||
| Yunnan Baiyao Chinese Herbal Medicine Technology Co., Ltd. | ||||||||||||
| Subtotal | 11,334,638,735.04 | 628,517,050.64 | -22,425,249.10 | 18,844,632.23 | 406,032,345.56 | 11,553,542,823.25 | ||||||
| Total | 11,334,638,735.04 | 628,517,050.64 | -22,425,249.10 | 18,844,632.23 | 406,032,345.56 | 11,553,542,823.25 | ||||||
The recoverable amount is determined based on fair value less the disposal expense.
□Applicable ?Not applicable
The recoverable amount is determined based on the present value of estimated future cash flows.
□Applicable ?Not applicable
Reasons for significant differences between the foregoing information and information used for impairmenttesting in previous years or external information: None.Reasons for significant differences between the information used in the Company's impairment tests inprevious years and the actual situation in the corresponding year: None.
(3) Other explanations: None.
4. Operating revenue and Operating Cost
Unit: RMB
| Item | Amount for the current period | Amount for the previous period | ||
| Income | Cost | Income | Cost | |
| Main business | 6,762,661,949.46 | 3,050,317,137.32 | 6,325,677,777.91 | 2,889,920,823.10 |
| Other business | 118,794,971.14 | 114,817,635.55 | 114,783,648.32 | 90,514,753.97 |
| Total | 6,881,456,920.60 | 3,165,134,772.87 | 6,440,461,426.23 | 2,980,435,577.07 |
Breakdown information of operating revenue and operating cost:
Unit: RMB
| Contract classification | Drug sales | TCM resources | Others | Total | ||||
| Operating revenue | Operating cost | Operating revenue | Operating cost | Operating revenue | Operating cost | Operating revenue | Operating cost | |
| Business type | 6,659,619,829.83 | 2,957,985,201.82 | 103,042,119.63 | 92,331,935.50 | 118,794,971.14 | 114,817,635.55 | 6,881,456,920.60 | 3,165,134,772.87 |
| Including: | ||||||||
| Industrial sales income | 6,659,619,829.83 | 2,957,985,201.82 | 6,659,619,829.83 | 2,957,985,201.82 | ||||
| Commercial sales income | 103,042,119.63 | 92,331,935.50 | 103,042,119.63 | 92,331,935.50 | ||||
| Others | 118,794,971.14 | 114,817,635.55 | 118,794,971.14 | 114,817,635.55 | ||||
| By operating areas | 6,659,619,829.83 | 2,957,985,201.82 | 103,042,119.63 | 92,331,935.50 | 118,794,971.14 | 114,817,635.55 | 6,881,456,920.60 | 3,165,134,772.87 |
| Including: | ||||||||
| In Yunnan province | 825,019,070.05 | 346,526,894.46 | 98,970,898.91 | 88,518,376.77 | 118,794,971.14 | 114,817,635.55 | 1,042,784,940.10 | 549,862,906.78 |
| Outside Yunnan province (excluding overseas) | 5,832,867,670.97 | 2,609,471,404.10 | 4,071,220.72 | 3,813,558.73 | 5,836,938,891.69 | 2,613,284,962.83 | ||
| Overseas | 1,733,088.81 | 1,986,903.26 | 1,733,088.81 | 1,986,903.26 | ||||
| Total | 6,659,619,829.83 | 2,957,985,201.82 | 103,042,119.63 | 92,331,935.50 | 118,794,971.14 | 114,817,635.55 | 6,881,456,920.60 | 3,165,134,772.87 |
Information about performance obligations:
Other explanations: None.Information related to the transaction price allocated to the remaining performance obligations: At the end of this reporting period,the Company recorded an amount of revenue of RMB 0.00 from its performance of obligations set out in the signed contracts to befulfilled or fully fulfilled.
Significant contractual changes or significant transaction price adjustments: None.
5. Investment income
Unit: RMB
| Item | Amount for the current period | Amount for the previous period |
| Long-term equity investment incomes accounted by the cost method | 617,000,000.00 | |
| Long-term equity investment incomes accounted by the equity method | 628,517,050.64 | 732,711,091.10 |
| Investment income generated from disposal of long-term equity investment | -81,317,400.00 | |
| Investment income on trading financial assets during holding period | 7,606,635.89 | 7,577,722.83 |
| Investment income from disposal of trading financial assets | 10,374,861.89 | 204,640,032.15 |
| Investment income from other non-current financial assets during the holding period | 70,844,082.00 | 9,931,274.97 |
| Others | 24,550,357.54 | 4,579,237.29 |
| Total | 741,892,987.96 | 1,495,121,958.34 |
6. Others: None.
XX. Supplementary Information
1. Breakdown of non-recurring profits and losses for the current period
?Applicable ?Not applicable
Unit: RMB
| Item | Amount | Description |
| Profits and losses from disposal of non-current assets | 110,477,911.97 | |
| Government subsidies included in the current profits and losses (excluding the government subsidies closely related to regular businesses of the Company in line with national policies and received by a determined standard, with a continuous impact on the Company’s profits and losses) | 75,375,220.16 | |
| Profits and losses from changes in fair value of financial assets and liabilities held for trading by non-financial enterprises, and from disposal of such financial assets and liabilities, except for effective hedging operations related to regular businesses of the Company | 199,779,795.08 | |
| Profits and losses from entrusted investment or asset management | 3,146,335.87 | |
| Non-operating revenue and expenses other than the above | -1,919,286.26 | |
| Other profits and losses satisfying the definition of non-recurring profits and losses | 41,588,740.24 | |
| Less: Amount affected by the income tax | 69,955,013.92 |
| Amount affected by minority interests (after tax) | 28,316,990.19 | |
| Total | 330,176,712.95 | -- |
Other profits and losses satisfying the definition of non-recurring profits and losses:
?Applicable ?Not applicableOther profit and loss items that meet the definition of non-recurring profit and loss mainly include other non-recurring profit andloss such as interest on time deposits and return of individual income tax fees.Note for the definition of non-recurring profits and losses set out in the No.1 Explanatory Announcement on InformationDisclosure for Companies Offering Their Securities to the Public - Non-recurring Profits and Losses, as recurring profits and losses
□Applicable ?Not applicable
2. Return on equity and earnings per share
| Profits during the reporting period | Weighted average return on equity | Earnings per share | |
| Basic earnings per share (RMB/share) | Diluted earnings per share (RMB/share) | ||
| Net profits attributable to ordinary shareholders of the Company | 10.51% | 2.29 | 2.29 |
| Net profits attributable to ordinary shareholders of the Company after deducting non-recurring profits and losses | 9.66% | 2.11 | 2.10 |
3. Differences in Accounting Data under Chinese Accounting Standards (CAS) and Overseas AccountingStandards
(1) Differences in the net profits and net assets in financial statements disclosed respectively under
International Financial Reporting Standards (IFRS) and CAS
□Applicable ?Not applicable
(2) Differences in the net profits and net assets in financial statements disclosed respectively under
overseas accounting standards and CAS
□Applicable ?Not applicable
(3) Explanations of the causes to differences in accounting data under CAS and overseas accounting
standards; if adjustment is made for data audited by an overseas audit institution, the name of the
institution shall be provided
□Applicable ?Not applicable
4. Others: None.
Yunnan Baiyao Group Co., Ltd.
Board of Directors
March 28, 2024