Huadong Medicine Co., Ltd.
2021 Annual Report
April 2022
To the shareholders
Dear shareholders,
Time flies. Nearly three years have passed since I served as the Chairman of the Board of HuadongMedicine Co., Ltd, during which I have witnessed the historic changes in the pharmaceutical industryof China. Like most domestic pharmaceutical companies, we are confronted with unprecedenteddifficulties and dramatic challenges in this ever-changing era. The continued implementation of VBPprogram and the negotiation on medical insurance put an end to the benefits of generic medicines,moreover，the resurgence of COVID-19 and the instable external environment placed moreuncertainties within local pharmaceutical industry. Bearing in mind the major mission of generatingbusiness growth, the management team of the Company struggled onward amid the pains that comewith changes, reform and transformation. It cannot be denied that the Company’s financial statementsover the past three years was not as outstanding as that in the previous time. However, all employeesin the Company weathered the test of time and flagging market, achieving innovation-driven resultsthat transcend financial statements by focusing on the transformation and innovation.
From 2019 to 2021, while reconsidered its positioning and value, the Company recruited more talents,developed product pipelines faster, made greater progress in R&D capability building and achievedmore improvements in comprehensive strength than ever before, introducing tremendous changes inand outside the Company. In the past three years, we implemented in nearly 20 BD transactions withleading international pharmaceutical companies to create a global collaboration network and developdiversified and differentiated innovative product pipeline in pharmaceutical and aesthetic medicinefields, speeding up the progress of internationalization. We wasted no time in R&D, and constantlyimproved our independent R&D system. At present, the Company has established an open andscience-based international R&D ecosystem with Zhongmei Huadong new drug R&D center as thecore platform and focused on endocrinology, oncology and immunology disease areas. Now theCompany has nearly 40 innovative drugs and biosimilars under development, and proactively createda world-class ADC R&D platform, laying a solid foundation for the development of pharmaceuticalindustry in the future. It achieved rapid progress in core products development. For instance, we werethe first in China to submit the application of domestic Liraglutide injection, which are now underCDE review; the clinical trial of ADC product - Mirvetuximab moved forward in a quick manner;and TGFR system moved to the special review procedure as China’s innovative medical device. Inaddition, we facilitated the development of innovative business despite pressure and created theunique example of the cold-chain, so as to foster a new business model. Implementing thedevelopment strategy of domestic and international circulation, we constantly enriched the productlines of aesthetic medicine and expanded overseas business in this field. At present, we own 35 high-end global aesthetic medicine products featuring minimally invasive and non-invasive approaches,and recorded rapid growth in sales revenue. Moreover, the registration of domestic aesthetic medicineproducts was promoted orderly, and the blockbuster product Ellansé launched in domestic marketsuccessfully. At the same time, we also proactively explored the new “blue ocean” of industrialmicrobiology and new business layout, initiated and reserved more than 100 products, drawing a
second growth curve. Relaying on our endeavors in core business over the past three years, we arenow marching forward on an innovative path with the characteristics of Huadong Medicine, graduallyforming a new development pattern that is driven by innovation, focusing on global market, and hasmultiple and diversified business lines. With initial results, we have got attention and appraisal fromthe industry and market.
We owe these progresses to the deep-rooted concept of innovation and value. All employees in theCompany straightly faced the weaknesses, vigorously discovered new value and valorously overcameuncertainties and difficulties. Our working philosophy and thought have been changed tremendously,laying a solid foundation for innovation-driven transformation.
In the next three years, we will continue to uphold the “scientific-based, patient-centered” philosophy,implement high quality development strategy with R&D, innovation and international developmentat the core, and aim at creating differentiated development features, striving to become a leadinginternational medicine enterprise driven by scientific research and innovation, and ultimatelyrealizing the established long-range vision and strategy of Huadong Medicine.
Innovation and R&D remain the theme of the Company’s future roadmap. Therefore, the Companywill invest more in clinical value-oriented R&D of innovative drugs in endocrinology, oncology andimmunology by adopting a model featuring independent development, license-in and collaborationdevelopment. We will implement a “three-step” R&D strategy. To be specific, we have taken the firststep over the past three years in establishing and improving an initial R&D pipeline throughintroduction, building a R&D management team and creating primary R&D competence. By 2025,we will take the second step, integrating introduced products and projects into the Company’s specialR&D ecosystem by learning and absorbing the advantages of them, strengthening independent R&Dcapability and improving the building of technical platforms. From 2025 to 2030, we will accomplishthe third step, achieving internal innovation on the basis of the first two steps, and establish a R&Dmanagement system focusing on introduction and independent development, thus serving to realizethe long-term strategy and key objectives.
Aesthetic medicine is one of the core strategic sectors of the Company’s mega health industry.Upholding the operation philosophy of “facilitating global operation and layout with domestic andinternational circulation progressing smoothly”, the Company will continue to strengthen the layoutof product pipelines and boost the registration and launch process of domestic and internationalproducts. With the technological iteration and innovation in the past decade and more, industrialmicrobiology is developing at a rapid pace. Seeing the promising future of industrial microbiology,the Company endeavors to create an industrialized, large-scale and international industrial cluster andintegrate into global industrial chain of industrial microbial drugs R&D. In the future, we willtransform our strategy from introduction to global operation based on products and market, andultimately achieve coordinated development among multiply business sectors, creating a healthindustry ecosystem with Huadong Medicine characteristics.
We will adopt a forward-looking to tackle with today’s difficulties. The year 2022 remains a year ofuncertainties. Against the backdrop of rapid global changes unseen in a century and complex
international political and economic landscape, the innovative drug industry in China ushered in anew phase oriented to clinical value. We have set defined goals and clear strategies, and obtainedprecious experience, but we still face various challenges and risks that come from industry policies,market competition, pandemic and other factors on the way forward as we are in the early stage ofinnovation and reform.
As long as we press ahead with perseverance, a bright future will beckon and emerge. The year 2022is also a year of possibilities. We will reap rewards by proactive planning. Having faith in the long-term prospects of China’s medical industry, we will seize the opportunity and strive for our best inthe path of transformation, continue to establish R&D system with a global view, adhere to theestablished strategy and plan and focus on refined management and product planning, in a bid toachieve growth against changing environment and a more brilliant future.
Over the past three years, we worked extremely hard and forged ahead. We wish to express sincereappreciation to all employees for their hard work, and all shareholders for their understanding andincomparable trust. To extend our sincere gratitude, the Company has distributed nearly RMB4.6billion dividends to shareholders in 18 times since listing.
With great ambition in mind, we will never pause our pursuit of a better future. We hope to have thelasting company of investors who looking for long-term value, constantly challenge and changeourselves, and overcome fluctuation and downward cycle, thereby embracing the refreshing andbright future created by Huadong Medicine.
Lv Liang
On Behalf Of Huadong Medicine
April, 2022
Section I. Important Declaration, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and seniormanagement of Huadong Medicine Co., Ltd. (hereinafter referred to as the “Company”) herebyguarantee that the information presented in this annual report is authentic, accurate andcomplete and free of any false records, misleading statements or material omissions, and shallundertake individual and joint legal liabilities.
Lv Liang, the Company’s legal representative and the officer in charge of accounting, andQiu Renbo, head of accounting department (accounting supervisor) hereby declare andguarantee that the financial statements in this annual report are authentic, accurate andcomplete.
All directors have attended the Board of Directors meeting to review this annual report.
The future plans, development strategies and other forward-looking statements in thisannual report shall not be considered as substantial commitment of the Company to investor，Investors and related parties should be fully aware of the risks, and understand the differencesbetween plans, forecasts and commitments.
The risks the Company faces in operation including industry policy and market operationrisk, new drug R&D risk, exchange rate fluctuation risk and goodwill impairment risk. Fordetails, please refer to “v. Potential risks and responses” under “XI. Prospect of the Company’sfuture development” in “Section III. Management Discussion and Analysis”. Therefore,investors are kindly reminded to pay attention to possible investment risks
The dividend distribution scheme approved at this meeting of the Board of Directors is asfollows: on the basis of 1,749,809,548 ordinary shares of the total share capital of the Company,RMB2.90 (before tax) of cash dividends per ten ordinary shares will be distributed to allshareholders; no bonus share will be issued; and no capital reserve will be converted to increasethe capital stock. In case the Company’s total share capital changes before the dividenddistribution scheme is put in place, the proportion of distribution per share will be adjustedwith the shares base unchanged. The aforesaid dividend distribution scheme is subject to theapproval at the Annual General Meeting.
According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listed companieshave both Chinese and other language version of public notice, they should ensure the contentof both versions are the same. In the case of discrepancy, the original version in Chinese shallprevail.
Contents
To the shareholders ...... 2
Section I. Important Declaration, Contents and Definitions ....................................................................................................................5
Contents ...... 6
Definitions ...... 8
Section II. Company Profile and Key Financial Indicators ................................................................................................................... 11
Section III Management Discussion and Analysis ...... 16
Section IV. Corporate Governance ........................................................................................................................................................ 76
Section V. Environment and Social Responsibility .............................................................................................................................. 103
Section VI. Important Matters ............................................................................................................................................................. 119
Section VII. Share Change and Shareholders ...................................................................................................................................... 151
Section VIII. Information on Preferred Shares .................................................................................................................................... 159
Section IX. Information on Bonds ....................................................................................................................................................... 160
Section X. Financial Report ................................................................................................................................................................. 161
Contents of Reference File
I. Financial statements signed and stamped by the legal representative, the person in charge ofaccounting work and the head of accounting institution (accounting manager).II. Original audit report stamped by public accountants, and signed and stamped by certified publicaccountant.III. The original of all Company’s documents publicly disclosed in the press designated by CSRCduring the reporting period and the original of announcements.
Definitions
| Term | refers to | Definition |
| CSRC | refers to | China Securities Regulatory Commission |
| SSE | refers to | Shenzhen Stock Exchange |
| Huadong Medicine/the Company/our Company | refers to | Huadong Medicine Co., Ltd. |
| CGE | refers to | China Grand Enterprises, Inc. |
| Huadong Medicine Group | refers to | Hangzhou Huadong Medicine Group Co., Ltd. |
| Zhongmei Huadong | refers to | Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. |
| Jiangdong Company | refers to | Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. |
| Jiuyang Bio | refers to | Jiangsu Jiuyang Biopharm Co., Ltd. |
| Xi’an Bohua | refers to | Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. |
| Jiuyuan Gene | refers to | Hangzhou Jiuyuan Gene Engineering Co., Ltd. |
| Doer Biologics | refers to | Zhejiang Doer Biologics Co., Ltd. |
| Huadong Ningbo Company | refers to | Huadong Ningbo Medicine Co., Ltd. |
| Chongqing Peg-Bio | refers to | Chongqing Peg-Bio Biopharm Co., Ltd. |
| Qyuns Therapeutics | refers to | Qyuns Therapeutics Co., Ltd. |
| Nuoling Bio | refers to | Nuoling Biomedical technology (Beijing) Co., Ltd. |
| Grand Chanrong | refers to | Shanghai Grand Industrial and Financial Investment Management Co., Ltd. |
| Fuguang Chengdu | refers to | Fuguang Chengdu Equity Investment Management Co., Ltd. |
| Hangzhou Gaotou | refers to | Hangzhou Hi-Tech Venture Capital Management Co., Ltd. |
| Grand Huachuang | refers to | Beijing Grand Huachuang Investment Co., Ltd. |
| Hangzhou Heda | refers to | Hangzhou Heda Industrial Fund Investment Co., Ltd. |
| Pharmaceutical Industry Fund/Fuguang Hongxin | refers to | Hangzhou Fuguang Hongxin Equity Investment Partnership (Limited Partnership) |
| Huachang Hi-Tech | refers to | Anhui Huachang Hi-Tech Pharmaceutical Co., Ltd. |
| Meiqi Health | refers to | Hubei Meiqi Health Technology Co., Ltd. |
| Takeda | refers to | Takeda Pharmaceuticals Company Ltd. |
| Sinclair | refers to | Sinclair Pharma Limited |
| vTv | refers to | vTv Therapeutics LLC |
| R2 | refers to | R2 Technologies,Inc. |
| MediBeacon | refers to | MediBeacon Inc. |
| ImmunoGen | refers to | ImmunoGen, Inc. |
Provention Bio
| Provention Bio | refers to | Provention Bio, Inc. |
| RAPT | refers to | RAPT Therapeutics,Inc. |
| Kylane | refers to | Kylane Laboratoires SA |
| High Tech | refers to | High Technology Products, S.L.U. |
| Exscientia | refers to | Exscientia Ltd. |
| Heidelberg Pharma | refers to | Heidelberg Pharma AG |
| Kiniksa | refers to | Kiniksa Pharmaceuticals (UK), Ltd. |
| KiOmed | refers to | KiOmed Pharma SA |
| Daewon | refers to | Daewon Pharmaceutical Co., Ltd. |
| AKSO | refers to | AKSO Biopharmaceutical, Inc. |
| Ashvattha | refers to | Ashvattha Therapeutic, Inc. |
| SCOHIA | refers to | SCOHIA PHARMA, Inc. |
| GMP | refers to | Good Manufacturing Practice |
| cGMP | refers to | Current Good Manufacture Practices |
| GSP | refers to | Good Supply Practice |
| BE | refers to | Bioequivalence |
| CDE | refers to | Center for Drug Evaluation (of National Medical Products Administration) |
| MAH | refers to | Marketing Authorization Holder |
| FDA | refers to | (U.S.) Food and Drug Administration |
| NMPA | refers to | National Medical Products Administration |
| NHSA | refers to | National Healthcare Security Administration |
| NDA | refers to | New Drug Application |
| ANDA | refers to | Abbreviated New Drug Application (or Generic Drug Application) |
| ICH | refers to | International Council for Harmonisation (of Technical Requirements for Pharmaceuticals for Human Use) |
| IND | refers to | Investigational New Drug |
| PK/PD | refers to | pharmacokinetics/pharmacodynamics |
| CMC | refers to | Chemistry, Manufacturing and Control |
| CMO | refers to | Contract Manufacturing Organization |
| CDMO | refers to | Contract Development and Manufacturing Organization |
| QA | refers to | Quality Assurance (department) |
| ADC | refers to | Antibody-Drug Conjugates |
| BD | refers to | Business Development |
| EHS | refers to | Environment, Health, Safety |
MRCT
| MRCT | refers to | International Multi-center Clinical Trial |
| OTC | refers to | Over The Counter |
| Prescription Drugs | refers to | Drugs that require medical prescriptions issued by physicians to be bought and used |
| Catalogue of Drugs for Insurance（2021） | refers to | Catalogue of Drugs for Basic National Medical Insurance/Employment Injury Insurance/Birth Insurance（2021） |
| Reporting Period | refers to | From January 1, 2021 to December 31, 2021 |
Section II. Company Profile and Key Financial Indicators
I. Company information
| Stock name (abbreviation) | Huadong Medicine | Stock code | 000963 |
| Stock listed on | Shenzhen Stock Exchange | ||
| Company name in Chinese | 华东医药股份有限公司 | ||
| Company name in Chinese (abbreviation) | 华东医药 | ||
| Company name in English (if any) | Huadong Medicine Co., Ltd. | ||
| Company name in English (abbreviation, if any) | Huadong Medicine | ||
| Legal representative | Lv Liang | ||
| Registered address | Floor 7, 9 and 10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou | ||
| Zip code of the registered address | 310006 | ||
| Changes of registered address | From the date of listing to July 2012, the registered address was “No. 439 Zhongshanbei Road, Xiacheng District, Hangzhou”. From July 2012, the registered address was changed to “F9 and 10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou”. From July 2019, the registered address was changed to “F7, 9 and 10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou”. | ||
| Office address | No.866 Moganshan Road, Hangzhou | ||
| Zip code of the office address | 310011 | ||
| Official website | www.eastchinapharm.com | ||
| Email address | hz000963@126.com | ||
II. Contact persons and contact information
| Secretary of the Board of Directors | Securities affairs representative | |
| Name | Chen Bo | / |
| Contact address | 866 Moganshan Road, Hangzhou | / |
| Tel. | 0571-89903300 | / |
| Fax | 0571-89903300 | / |
III. Channels of disclosure and location of preparation
| Website of the Shenzhen Stock Exchange for publishing the annual | http://www.szse.cn |
report
| report | |
| Media and website for publishing the annual report | China Securities Journal, Securities Times, Shanghai Securities News and http://www.cninfo.com.cn |
| Location of preparation of the Company’s annual report | Office of the Company’s Board of Directors |
IV. Registration changes
| Organization code | 91330000143083157E |
| Changes of the Company’s main business since its listing (if any) | None |
| Previous changes of controlling shareholder (if any) | None |
V. Other informationCertified public accountants
| Name | Pan-China Certified Public Accounts (Special General Partnership) |
| Office address | F18, Huarun Building B, 1366 Qianjiang Road, Hangzhou, Zhejiang Province |
| Signing accountants | Wang Fukang and Du Jinyu |
Sponsors for continuous supervision and guidance during the reporting period
□ Applicable √ N/A
Financial consultant for continuous supervision and guidance during the reporting period
□ Applicable √ N/A
VI. Key accounting data and financial indicatorsWhether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
□Yes √No
| 2021 | 2020 | Percentage increase/decrease from last year to this year | 2019 | |
| Operating revenue (yuan) | 34,563,301,233.67 | 33,683,058,759.75 | 2.61% | 35,445,698,216.15 |
| Net profit attributable to shareholders of listed companies (yuan) | 2,301,631,347.64 | 2,819,861,203.63 | -18.38% | 2,813,118,702.11 |
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses (yuan) | 2,188,946,362.34 | 2,429,761,433.56 | -9.91% | 2,574,437,417.52 |
| Net cash flow from operating | 3,169,757,867.95 | 3,411,447,747.56 | -7.08% | 2,001,698,170.67 |
activities (yuan)
| activities (yuan) | ||||
| Basic earnings per share (yuan/share) | 1.3154 | 1.6115 | -18.37% | 1.6077 |
| Diluted earnings per share (yuan/share) | 1.3154 | 1.6115 | -18.37% | 1.6077 |
| Weighted average return on equity (ROE) | 14.75% | 20.95% | -6.20% | 25.29% |
| End of 2021 | End of 2020 | Percentage increase/decrease from last year to this year | End of 2019 | |
| Total assets (yuan) | 26,996,403,366.69 | 24,201,348,154.75 | 11.55% | 21,463,974,146.63 |
| Net assets attributable to shareholders of listed companies (yuan) | 16,579,374,323.08 | 14,619,821,308.60 | 13.40% | 12,309,477,308.00 |
The Company’s net profit before or after deducting non-recurring gains and losses, whichever is lower, in the last three fiscal yearsare all negative, and the audit report of last year shows doubt about the Company’s ability to continue as a going concern.
□Yes √No
The company's net profit before and after deducting non-recurring gains/losses in the last three fiscal years is negative.
□Yes √No
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences in net profit and net assets disclosed in financial statements under international and Chineseaccounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under international andChinese accounting standards.
2. Differences in net profit and net assets disclosed in financial statements under overseas and Chineseaccounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under overseas and Chineseaccounting standards.
VIII. Key financial indicators by quarter
Unit: RMB yuan
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenue | 8,896,632,277.36 | 8,282,805,625.25 | 8,748,039,460.66 | 8,635,823,870.40 |
| Net profit attributable to shareholders of listed companies | 758,380,756.56 | 541,965,568.29 | 595,038,254.49 | 406,246,768.30 |
Net profit attributable toshareholders of listed companiesafter deducting non-recurringgains/losses
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses | 695,792,411.78 | 498,188,475.40 | 568,039,187.19 | 426,926,287.97 |
| Net cash flow from operating activities | 302,314,164.48 | 1,436,198,207.63 | 367,404,454.61 | 1,063,841,041.23 |
Whether the above financial indicators or their totals are significantly different from relevant financial indicators in previousquarterly and semiannual reports by the Company
□ Yes √ No
IX. Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
Unit: RMB yuan
| Item | 2021 | 2020 | 2019 | Note |
| Gains/losses on disposal of non-current assets (including the written-off part of the accrued assets impairment reserve) | -2,354,117.13 | 319,656,661.95 | 109,574,836.97 | |
| Tax refund and reduction with ultra vires examination and approval or without official approval documents | 10,101,524.84 | 8,424,351.97 | 4,407,536.93 | |
| Government grants included in current gains/losses (excluding those closely related to daily business operation and distributed constantly in accordance with certain standard quota or quantity in line with national policies and regulations) | 173,543,413.54 | 190,906,656.31 | 112,527,883.18 | |
| Gains/losses caused by fair value changes for holding financial assets held for trading and financial liabilities held for trading, and investment income for handling financial assets held for trading, financial liabilities held for trading and AFS securities, excluding hedging business related to operating activities | 521,193.82 | |||
| Reversal of reserve for receivables subject to independent impairment test | 4,803,651.87 | 3,845,312.41 | 1,896,979.79 | |
| Other non-operating revenue or expenditure expect above-mentioned items | -25,651,193.11 | -20,500,748.15 | 77,976,120.18 | |
| -32,065,178.00 | -4,899,999.00 |
Other profit and loss items satisfying thedefinition of non-recurring gain/loss
| Other profit and loss items satisfying the definition of non-recurring gain/loss | ||||
| Minus: Amount affected by income tax | 20,249,495.43 | 92,420,221.30 | 47,542,186.99 | |
| Amount affected by rights and interests of minority stakeholders (after tax) | -4,035,184.90 | 14,912,244.12 | 20,159,885.47 | |
| Total | 112,684,985.30 | 390,099,770.07 | 238,681,284.59 | -- |
Details of other items of gains/losses meet the definition of non-recurring gains/losses:
√ Applicable □ N/A
[Note]: Employment resettlement fees totaled RMB32,065,178.00 for dismissed employees of Huadong Ningbo Medicine Co., Ltd,drawn from due liquidation.
Explanation for recognizing an item listed as a non-recurring gain/loss in the “Interpretative Announcement No. 1 on InformationDisclosure Criteria for Public Companies – Non-Recurring Profit/Loss” as a recurring gain/loss
□Applicable √ N/A
Explanation for recognizing an item listed as a non-recurring gain/loss in the “Interpretative Announcement No. 1 on InformationDisclosure Criteria for Public Companies – Non-Recurring Profit/Loss” as a recurring gain/loss
Section III Management Discussion and Analysis
I. The industry profile during the reporting periodIn 2021, China’s medical industry experienced profound reform and accelerating reshuffle, withindustry policies rolling out intensively and innovative results springing up. Cost control of medicalinsurance remained the main focus of industry policies. In 2021, China continued to promote the VBPProgram of drugs and medical consumables, expanding both the scope and depth. VBP Program ofgeneric drugs and high-value consumables became more popular. It is predicted that the coverage ofvariety and region will be further expanded. In terms of local level, VBP Program by cross-regionalliances were accelerated with diversified varieties. Inter-provincial alliances have become anotherbackbone of VBP Program.The reform of health insurance payment models was in the fast track. NHSA is promoting acompounded medical insurance payment model with category-based payment as the core, andpiloting diagnosis related group, or DRG payment and Diagnosis & Intervention Packet, or DIP. InNovember 2021, NHSA issued the Three-Year Plan of Reform of DGR/DIP Payment Model,requiring that by the end of 2025, DRG/DIP payment model should cover all eligible medicalinstitutions providing inpatient services, realizing substantially the full coverage of diseases andmedical insurance funds.
From the perspective of long-term developments of the industry, population aging increased theneeds for necessary medicine market to expand, and trading up in new categories promoted thedevelopment of consumer medical market, releasing more growth opportunities of the industry.Driven by a series of policies, the medical industry is undergoing profound changes, and is gainingspeed in innovative transformation. The growth logic and prospects of pharmaceutical companies arealso experiencing great changes. More and more traditional pharmaceutical companies defined theirtransformation direction towards innovative drugs, and kept increasing the investment in R&D, so asto achieve high-quality development.
2022 is the year of deepening reform during the period of 14th Five-Year Plan. The developmentplan for the pharmaceutical industry will be promulgated and implemented. The innovation iterationcycle of the pharmaceutical industry will be faster, and the challenges and pressures confronted bypharmaceutical companies will also be greater. Facing the opportunities and challenges arising fromdeepening reform, accelerating technology upgrade, continuous emergence of professionals andincreasing capital support, Chinese pharmaceutical companies are like sailing against the current.
Only through upgrade and innovation can they brave the wind and waves.II. Main businesses of the Company during the reporting periodHuadong Medicine Co., Ltd, headquartered in Hangzhou, Zhejiang province, was established in1993. It was listed on the Shenzhen Stock Exchange in December 1999 (stock code: 000963). Withmore than two decades endeavors, the Company has expanded its business covering the wholeindustrial chain of pharmaceutical industry. While centering on pharmaceutical industry, it also setsfoot in pharmaceutical commerce and aesthetic medicine and has developed into a largecomprehensive pharmaceutical listed company integrating pharmaceutical R&D, production anddistribution.In terms of pharmaceutical industry, the Company deeply rooted in the R&D, production andsales of specialty medications, chronic disease medications, and medications for special purposes,established a well-established pharmaceutical manufacturing and quality research system, formedcore product pipelines focusing on chronic kidney diseases, transplantation immunity, endocrinology,digestive system and other areas, and has a number of first-line clinical drugs with market advantagesin China. At the same time, through independent development, introduction, project cooperation andother approaches, it focused on R&D layout of innovative drugs and generic drugs with high-techbarrier in three core sectors including oncology, endocrinology, and autoimmunity. The Companyconstantly carried out international registration, certification and consistency evaluation, andachieved continuous results. It has formed a pharmaceutical industry system aimed at global market,and maintained R&D and product cooperation with a number of international innovative R&Denterprises.The Company’s pharmaceutical commerce mainly focuses on four business sectors includingtraditional Chinese medicine and western medicine, medical devices, ginseng and antler, and healthindustry, covering medicine wholesale, medicine retail, third party medical logistics characterized bycold chain, medical e-commerce, value-added service in hospitals and distinctive comprehensivehealth industry. In doing so, it went further in product agency and mark expansion, providingcomprehensive solutions for customers.Adhering to the strategy of facilitating global operation and layout with domestic andinternational circulations progressing smoothly, the Company owns more than 30 minimally invasiveand non-invasive products of aesthetic medicine through a global view and forward-looking plan,among which 20 products are on the market inside and outside the country, and 10 are internationalinnovative products under research. The product portfolio covers mainstream non-surgical aesthetic
medicine sectors such as facial fillers, thread lift, skin management, body shaping, hair removal, andcosmetic gynecology, forming an integrated product cluster with the number and scope of productsat the forefront of the industry. Sinclair, a wholly-owned subsidiary of the Company, acts as the globaloperation platform of aesthetic medicine. Headquartered in the UK, it also has manufacturing basesin the Netherlands, France, the United States, Switzerland and Bulgaria. Sinclair promotes and salesproducts such as sustained-release microspheres for injection, hyaluronic acid (HA), and face threadlift products worldwide, and researches and expands energy based aesthetic devices through itswholly-owned subsidiaries High Tech and Viora in the global market. The Company also whollyowns Sinclair (Shanghai) Co., Ltd., a subsidiary for the operation and sales in domestic market, aswell as owns the shares in R2 and Kylane, overseas technical R&D companies located in the Americaand Switzerland, respectively.III. Analysis on core competitivenessi. An open innovative drug R&D system and constant improvement of innovation capacityThe Company highly values innovation and R&D and maintains a high proportion of R&Dinvestment. The average annual R&D investment in pharmaceutical industry in the past three yearsaccounted for more than 10% of the operation revenue of pharmaceutical industry. Upholding the“scientific research-based, patient-centered” philosophy, it strives to create clinical value, medicineeconomics value and commerce value. After years of development, it has established a relativelycomplete independent innovation system for drug R&D covering drug discovery, pharmaceuticalresearch, pre-clinical research, clinical research and industrialization, and established a global newdrug R&D center.The Company’s innovation and R&D focuses on three core treatment areas, includingendocrinology, oncology and autoimmunity. By ways of cooperative drug development and equityinvestment, it carried out in-depth strategic cooperation with leading pharmaceutical companies bothin and outside China, and created a global pharmaceutical R&D ecosystem through introduction,integration and innovation. In particular, in terms of ADC field, the Company further expandeddifferential layout. It invested in Qyuns Therapeutics, an antibody R&D and production company,and Nuoling Bio, a company specialized in ADC linker and conjugate techniques, incubated ZhejiangHuida Biotech Co., Ltd. (Huida Biotech) which owns the whole product line of ADC payloads, andcontrolled Doer Biologics, a multi-antibody platform R&D company. It carried out equity investmentand product cooperation with Heidelberg Pharma, a global emerging technology company in the ADCfield, to form a unique ADC global R&D ecosystem, gradually build a differentiating ADC
independent R&D platform, and strengthen and improve antineoplastic product innovation chain andADC ecological chain. In the next three years, it plans to develop at least 10 ADC innovative productsand actively promote the registration work and clinical studies.Through independent R&D, cooperation, license-in and other measures, the Companycontinuously developed and formed differentiating innovative product pipelines covering thelifecycle of R&D. As at the releasing of this report, the Company has nearly 40 innovative drugs andbiosimilars under research, among which 5 are in the phase III of clinical trial and 3 are in phase II,covering endocrinology, oncology and autoimmunity and other areas, so as to effectively guaranteethe positive momentum of the clinical and launch progress of innovative product, thereby providingnew drivers for medium-and long-term development.
ii. Comprehensive capabilities to develop international businessThe company actively promoted the internationalization process. By acquiring 100% equity ofSinclair, High Tech and Viora, the Company realized the global layout of the aesthetic medicine field.Though strategic and equity cooperation with a number of American companies, including R2,MediBeacon, ImmunoGen, Provention Bio and Kiniksa, a Swiss company Kylane, a Germancompany Heidelberg Pharma, etc., it supplemented and enriched the rights of commercialdevelopment of innovative drugs and high-end aesthetic medicine products both at home and abroad.It cooperated with Daewon, a South Korean company, to realize the company's first overseascommercialization license-out of innovative product. It accelerated the international registration ofproducts. All online chemical APIs were obtained the market certification of FDA, EU and other
authorities. Daptomycin for Injection, Acarbose Tablets and Pantoprazole Sodium for Injection wereall approved by FDA, and some high-end industrial microorganism ingredients were empoweredstrong competitiveness in the international market. It also actively developed international logisticsand procurement suppliers to make its procurement capability keep in line with the internationalstandard. It pushed CMO/CDMO business go global, and has been integrated into the globalinnovative drugs R&D industrial chain.iii. Diversified product pipelines for specialty diseases and chronic diseases, andcomprehensive competitive advantage of diabetes treatmentOver the years, the Company has been deeply engaged in specialty medications, chronic diseasemedications, and medications for special purposes and built a favor brand effect and strong marketbase in the treatment of chronic kidney diseases, transplantation and immunity, endocrinology,digestive system and so on. The market share of these products continuously takes the lead indomestic market. Focusing on the targets of mainstream clinical treatment of diabetes, the Companyhas formed a comprehensive layout of product pipelines of innovative drugs and differentiatinggeneric drug. At present, it has more than 20 commercialized products and products underdevelopment. In organ transplantation, it realized the full coverage of clinical first-lineimmunosuppressive agents and developed multi-tiered follow-up products. It developed first-in-classdrugs in all three core treatment fields, including endocrinology, oncology and autoimmunity. As forantineoplastic ADC drugs, it has established the layout of multiple global innovative drug and a R&Decosystem, forming differentiating advantages. At present, a total of 26 core products on the marketwere listed in the Catalog of Medicines Covered by National Basic Medical Insurance, Work-RelatedInjury Insurance and Maternity Insurance (2021).
iv. A leading domestic pharmaceutical care professional team and extensive marketnetwork
In terms of pharmaceutical industry, the Company owns a professional Pharmaceutical Care (PC)and market development team consisting of 6000 employees. Centering on clinical value andacademic promotion, it promoted a marketing model integrating comprehensive hospitals, medicalinstitutions in primary level, retail, the third terminal and the Internet, so as to gradually increase thecoverage through multiple channels, thus obtaining good competitive advantages.
Having developed in Zhejiang province for many years, the Company’s pharmaceuticalcommerce owns complete business activities and diversified products, and enjoys comprehensivecompetitive advantages in market access and network coverage. It constantly improves its four corecapabilities including logistics, information, finance and operation, offering high-end value-addedservices such as policy affairs. In addition, it has established cooperative ties with 90% of mainstreampharmaceutical enterprises at home and abroad, and realized the full coverage of public medicalinstitutions, major private health care and retail pharmacies in Zhejiang province. Its market sharetakes the lead in Zhejiang province, and industry ranking stands at the forefront for many years in arow. In recent years, the Company has witnessed rapid development of its innovative businesses suchas product agency and market expansion, characteristic comprehensive health industry, third-partypharmaceutical logistics featured by cold chain, and pharmaceutical e-commerce. It has built a soundservice system and professional ability of cold chain logistics distribution, which takes the lead inChina.
v. High-end international aesthetic medicine product pipelines covering main minimallyinvasive and non-invasive non-surgeriesThe Company’s strategic plan in aesthetic medicine started in 2018, when it acquired Sinclair, aBritain-based company. As Sinclair acquired High Tech and Viora that are specialized in energybased aesthetic devices in 2021 and 2022, respectively, the Company achieved the full coverage ofnon-surgical aesthetic medicine injection products and energy based devices in medium and high-endmarket. It owns the global rights in a number of patented products in the fields of facial filler, bodyshaping, thread lift, energy based device, etc., and has an international operation and BD team ofaesthetic medicine. Focusing on the global high-end aesthetic medicine market, the Company hasformed an international aesthetic medicine business network covering R&D, manufacturing andmarketing, and built a global aesthetic medicine marketing network by further integrating R&Dresources and capabilities, and relying on four global R&D centers, including Sinclair (UK), HighTech (Spain), R2 (USA) and Kylane (Switzerland), as well as Sinclair's five global production basesin the Netherlands, France, the United States, Switzerland and Bulgaria, At present, the Company’sproducts were sold in more than 80 countries and regions around the world. The Company owns 35high-end minimally invasive and non-invasive products of aesthetic medicine, among which 21 areon the market inside and outside China, and 14 are international innovative products under research.The product portfolio covers mainstream non-surgical aesthetic medicine sectors such as facial fillers,thread lift, skin management, body shaping, hair removal, and cosmetic gynecology, forming anintegrated product cluster with the number and scope of products at the forefront of the industry.vi. Rooted in the strong R&D and industry base and systematically explored the new bluesea of industrial microbiology
The Company has been engaged in the field of industrial microorganisms for more than 40 yearswith a profound industrial foundation. It has successfully developed and manufactured a variety ofmicrobial drugs and built a system of key technology of microbial products R&D and production.The scale and technology of existing microorganism fermented products are at the forefront of theindustry. It established two microorganism R&D base: Zhongmei Huadong and Huida Biotech, fiveindustrial bases including Hangzhou Xiangfu Qiao, Qiantang New Area, Jiuyang Bio, Meiqi Healthand Huachang Hi-Tech, the largest ferment singleton workshop in Zhejiang province as well as theleading microbial drugs production capability. Its R&D capability covering the whole stage ofmicrobial engineering, such as bacteria construction, metabolic control, separation and purification,enzyme catalysis and synthesis and modification. It has formed a complete manufacturing systemcovering microbiology R&D, pilot test, commercial production, engineering and utility systemguarantee. At present, the Company has a total of 45 R&D projects of industrial microbiology,
including 7 special functional chemicals projects, 23 API and high-end medicine intermediateprojects, 12 mega health and aesthetic medicine ingredients projects and 3 biomaterials projects.Among them, 5 out of special functional chemicals projects are series projects divided in more than50 sub-projects, and 2 out of API and high-end medicine intermediate projects are series projectsdivided in more than 10 sub-projects. The total number of all projects exceeded 100. The Companyestablished an industrial microbiology department that has organized structure and operatesindependently. The department is equipped with a first-class industrial microbiology technical teamincluding 363 researchers, among which 15 hold Ph.D. degrees, and 21% of the researchers havemaster’s degrees or doctor’s degrees. Up to now, it has 23 authorized patents and 59 patents are underreview.vii. Prudent and pragmatic business style and stable shareholder returnsThe Company pays attention to management innovation and strives to meet the demand arisingfrom market competition by improving management quality. High-quality products, excellentcommercialization ability, compliance and efficient marketing services, differentiating marketpositioning, innovative R&D layout, outstanding talent planning are the engine for the Company’slong-term stable development. Over the 21 years since it was listed, the Company distributesdividends for 18 times with a total amount of RMB4,577 million, far exceeding the RMB250 millionraised in IPO, and was able to bring sustained and stable investment returns to shareholders.
IV. Analysis on main businesses
1. General information
The year 2021 was a year fraught with challenges from volatile global economic situation, andthe resurging COVID-19 pandemic. The reform of national medical insurance went deeper, the VBPprogram became the mainstream, and market competition was intensified. The year 2021 alsopresented many opportunities. The 14th Five-Year plan was kicked off, bring the development ofpharmaceutical industry into a new phase. For the Company, its sixth “Three-Year Plan” wasaccomplished in 2021, and its innovative transformation and reform came to a crucial time. Theimpact caused by policy changes in domestic medical industry and market competition was ongoing,and the Company’s operation was also faced by many difficulties and uncertainties. During thereporting period, confronted by complex internal and external environment, the Company fullyimplemented the principle of annual work meeting and struggled forward by innovation. It wascommitted to promoting the strategic decision of innovation-driven transformation, took solid steps
to implement all operation and management measures, and constantly deepened the reform oforganizational structure. Besides, it continued to strengthened cooperation on overseas projects,accelerated the international industrial layout, proactively explored new business operation model,and expanded to new market sectors. Thanks to the joint efforts of all employees, the Companyovercame multiple difficulties and challenges and achieved steady progresses in the overall operation.The business objectives of the year were accomplished, and new breakthroughs were made in all keywork.In 2021, the Company’s operating revenue reached RMB34,563 million, a year-on-year increaseof 2.61%. Net profit attributable to the shareholders of the Company stood at RMB2,302 million,down by 18.38% year on year, and net profit attributable to shareholders of the Company afterdeducting non-recurring profits and losses stood at RMB2,189 million, down by 9.91% year on year.If calculated according to the same statistic scope (excluding Huadong Ningbo, a controlledsubsidiary entered liquidation), the operating revenue of the Company in 2021 increased by 3.10%year on year, and net profit attributable to shareholders of the Company after deducting non-recurringprofits and losses decreased by 7.64% year on year. During the reporting period, net cash flows fromoperating activities registered RMB3.17 billion, matching with operating revenue and net profit level.CFO/NI stood at 1.36, an increase from 1.17 in the previous reporting period.In the fourth quarter of 2021, its operating revenue registered RMB8,636 million, up by 5.54%year on year, and the net profit attributable to shareholders of the Company after deducting non-recurring profits and losses registered RMB427 million, up by 7.04% year on year (quarter-on-quarterindicator in the year has been positive growth).As at the end of 2021, the Company’s total assets stood at RMB26,996 million, and the net assetsattributable to shareholders of the Company stood at RMB16,579 million. The ratio of liabilities toassets was 37.25% and return on equity (ROE) was 14.75%.
i. Pharmaceutical industryDuring the reporting period, since some products lost bid in VBP program or slashed prices innegation, Zhongmei Huadong, the Company’s core subsidiary in pharmaceutical industry, recordedoperating revenue of RMB10,109 million, a year-on-year decrease of 8.43%, and the net profit ofRMB2,092 million, a year-on-year decrease of 10.32%. Its ROE stood at 28.63%, remaining above25% for 15 consecutive years.Although the Company’s annual operating indicator of pharmaceutical industry sufferedtemporary decline, the overall operation maintained good momentum despite challenges and shocks.While the sales of main products kept growing, the Company improved the layout of innovativeproduct pipeline through independent R&D and introduction, and took a strategic way to plan and
integrate industrial microbiology sector, drawing the second growth curve of the Company’spharmaceutical manufacturing sector. It seized the market opportunity, made efforts to provideoverseas CDMO services, and actively expanded retail and online market, showing strong resilienceand potential of its pharmaceutical manufacturing business.
1. Building a new pattern of organizational structure to fuel the Company’s strategicdevelopment
In 2021, the Company set up Mega Health Business Department, Strategic MarketingDepartment, Operation Management Department, Industrial Microbiology Business Department andMedical Device Business Department, constantly improving the structural layout. It further adjustedthe structure of production system to achieve integrated management, made the allocation ofproduction resources more smoothly, and steadily enhanced the average labor efficiency per capita.Furthermore, it continued to deepen the reform of the organizational structure of R&D system andrestructured CMC Center, further improved the Company's generic drug R&D capacity and CMCstrength. Through talent review and introduction, innovative drug R&D Center gradually establisheda professional team versed in the whole process of innovative drug R&D to promote the developmentof the Company’s innovation cause on all fronts. It also gradually built a R&D system with innovativedrug R&D center, CMC R&D center and scientific research project management center at the core,further improving the efficiency of R&D project.
2. Building R&D ecosystem with Huadong Medicine characteristics to boost theinternationalization of innovation-driven development
During the sixth “Three-Year Plan”, the Company intensified efforts to build innovationplatform and integrate resources, and invested in, controlled and incubated many biotechnologycompanies with cutting-edge technologies, including Chongqing Peg-Bio, a company owningpolypeptide technology platform, Qyuns Therapeutics, a company focusing on the antibodytechnology platform against immune diseases, Nuoling Bio, who owns ADC conjugate techniques,Doer Biologics, who owns multi-antibody technology platform, and Ashvattha, an Americancompany specialized in HD technology platform. Gradually, it established an open and science-basedR&D ecosystem with Zhongmei Huadong as the core actor and main focus on endocrinology,oncology and autoimmunity. In doing so, it built a R&D and operation model emphasizing sharingand win-win results, significantly enhancing its capabilities in technical platform, product pipelines,R&D team and other aspects and facilitating the implementation of its innovation-driventransformation strategy.
The Company vigorously expanded the scope and coverage of the products, introduced a numberof innovative biologic drugs, and kept in line with advanced technologies and productivity at home
and abroad. By cooperating with leading companies, such as Provention Bio (US), AKSO (US),Kiniksa (US), SCOHIA (Japan), Takeda (Japan), Heidelberg PharmaIt (Germany), and ShenogenPharma Group (China), it acquired the relevant rights of products. It authorized Daewon the exclusiverights to develop, produce and commercialize TTP273, a product in phase II of clinical test. Thismove marked the Company’s first license-out of ongoing product, and was also a milestone in theCompany’s integration into global pharmaceutical R&D innovation. The Company will continue touphold the “scientific research-based, patient-centered” philosophy, and persist in promoting thedevelopment of innovative drug industry.
3. Exploring the new blue ocean of industrial microbiology to take a forward-lookinglayout of new business sectorIn 2021, the Company formulated the strategic plan of industrial microbial sector based on a keytechnology system of microbial product R&D and production it built through more than 40 years’endeavors, as well as a strong technology foundation and leading industrial edges in this field. As theleading R&D Company in domestic industrial microbiology, Huida Biotech, the Company’scontrolled subsidiary, focuses on the development of microbial products with high technical barriersand high added value. Based on synthetic biology and multi-scale microbial metabolic regulationtechnology, it built system platforms of microorganism construction, metabolite expression andpurification and modification, and developed first-class R&D pipelines covering payloads of ADCs,modified nucleosides for mRNA drugs, pharmaceuticals of marine biological origin, health andpersonal care and other fields. At the same time, it realized the commercialized development ofpayloads and modified nucleosides, becoming one of the main manufacturers of modified nucleosidesfor mRNA drugs in the world. It is also the core technology base and R&D innovation platformfacilitating the Company’s industrial microbiology development. Since its establishment in 2020,Huida Biotech has shown the momentum of rapid growth. It has established business relations witha number of well-known domestic and foreign pharmaceutical enterprises, and over 90% of itsbusinesses are operated in overseas market. It has scored results in both technological innovation andbusiness expansion, laying a solid foundation for the sustainable development of its business.In November 2021, Zhongmei Huadong, together with Huida Biotech and Hubei Angel BiologyGroup Co., Ltd (“Angel Bio”) jointly invested RMB250 million to establish a joint venture - HubeiMeiqi Health Technology Co., Ltd. which is under construction in 2022 and is expected to be put intooperation in 2023. Serving as the Company’s first industrialization platform for industrialmicrobiology other than the pharmaceutical field, Meiqi Health integrated the R&D, production andsales of comprehensive health products. This move represents a milestone of the company's horizontallayout in the field of industrial microbiology.
In December 2021, Zhongmei Huadong and Goho Asset Management Co., Ltd, the manager ofAnhui Huachang Hi-Tech Pharmaceutical Co., Ltd. signed the Agreement on RestructuringInvestment with conditions, agreed that Zhongmei Huadong will acquire 100% of Huachang Hi-Tech’s equity after bankruptcy restructuring. Huachang Hi-Tech will become anotherindustrialization platform of the Company in the field of industrial microbiology, which focuses onthe industrialization of nucleoside pharmaceuticals, semi-synthetic antiparasitic drug of microbialorigin and other drugs.
On the basis of international development, the Company will closely follow the trend of globalindustrial microbiology and new synthetic biology technology, and strive to become the industryleader in the field of industrial microbiology by creating an “industrialized, large-scale andinternational” industrial microbiology industrial cluster.
In 2021, the Company’s total revenue of industrial microbiology reached RMB418 million,increased by 69.2% year on year. It established the Industrial Microbiology Business Department thathas complete organizational structure and operates independently. The department was equipped witha first-class industrial microbiology technical team including 363 researchers, and 21% of them havemaster’s degrees or doctor’s degrees, among which 15 hold Ph.D. degrees. Up to now, it has 23authorized patents and 59 patents are under review.
4. Innovating production and operation model and promoting international registrationprogress
During the reporting period, the Company continued to innovate operation model, promoted anagile production and operation system, and built an open production and manufacturing system. Allemployees of the Company followed the principle of refined production and full-cost management intheir daily work. It coordinated and integrated various resources including production, procurement,energy, warehousing, engineering and human resource, and focused on and explored technicalinnovation, so as to effectively reduce the production cost and enhance production efficiency andeconomic benefits.
It followed the guideline of “compliance, implementation, and speed up” to improve qualitysystem, vigorously strengthened the management of quality compliance and GMP implementation inline with international quality management standard, and promoted international registration progress.In 2021, a total of 6 generic drugs passed consistency evaluation, and 4 varieties of preparations ofchemical generic drugs obtained approval letters. Pantoprazole sodium for injection (40mg) anddaptomycin for injection (500mg) were approved by FDA and obtained the certification for theAmerican market.
5. Strengthening the development of primary-level, outside-hospital and OTC market, and
constantly improving marketing capability
During the reporting period, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. activelyresponded to the operation and market pressure brought by the reform of the domestic medicalindustry, closely followed the policy guidance of the national and provincial health commission toimplement various work, and timely adjusted market strategy and marketing team structure. Itstabilized the team performance, put intensified efforts in marketing, and vigorously expanded themarket. Committed to the strategic policy of “paying equal attention to primary-level market andbigger cities”, it continued to extend its marketing channels deep into the public. It strengthened thedevelopment of primary-level, outside-hospital and OTC retail market, focused more on the buildingof outside-hospital team and the coverage of drug stores, intensified patients education and productsclinical pharmaceutical care. During the reporting period, the sales of Corbrin products kept growing,sales of Acarbose remained stable, the sales income of Kashuangping (Pioglitazone Hydrochlorideand Metformin Hydrochloride) and cardiovascular drugs grew rapidly, and immune productscontinued to take the lead of the targeted market.In 2021, positive results were achieved in centralized procurement and medical insurance assess.Pantoprazole Sodium for Injectionand Decitabine for Injection (Xiangke) won the bids in the fourthand fifth national VBP program, respectively. Corbrin Tablets won the bid of Chinese patent medicineVBP program organized by inter-provincial alliance of 19 provinces with Hubei province taking thelead. The bidding prices meet expectations, and it is expected that a sales increase will ensue.Metformin Hydrochloride and Empagliflozin Tablets (I), a drug for diabetes approved to market inJune 2021, was listed in the Catalog of Medicines Covered by National Basic Medical Insurance(2021) in the negotiation of medical insurance payment standard, for the first time. As a compounddrug, it is also a key product in the Company’s differentiating layout based on the needs of patients.
6. Making steady progress in key construction projects and expanding the Company’sbusiness network
During the reporting period, the phase II production base of Jiangdong Company, after 4 yearsof construction, went in to operation after Corbrin Capsule and Corbrin Tablets was grantedproduction certification license, fulfilling its strategic goal of product transfer. The domestic andinternational registrations of other APIs are also proceeding with plan. Jiangdong Company owns thedomestic first-class drug production equipment, and is expected to become the Company’s mainproduction base of ingredients and preparations.
During the reporting period, the construction of the Company’s Life Science Industrial Parkbased in Gongshu District, Hangzhou, Zhejiang province was carried out as planned. The mainearthwork construction was completed, and the main building structure is predicted to be roofed in
December, 2022. The industrial park includes pharmaceutical industry incubation district, aestheticmedicine business district, health center and other supporting commercial projects, and will becomea future-oriented high-tech life science industrial park that ensures energy conservation and emissionreduction, facilitates innovative development, integrates the industry into the city, and keeps in linewith international standards.
7. Taking solid steps to promote internal management and consolidating the foundation ofinnovation-driven developmentIn 2021, the Company launched high potentials training project, management trainee project,R&D personal review project, R&D core PM special training project, sailing plan project and othertraining projects, gradually improving tiered employee training system based on different fields. Tobe specific, it established special training systems for employees in different tiers, urged that targetedemployee development projects should be created in marketing, production, R&D, technology andother fields, and adjusted training method according to business changes, making training systemmore forward-looking and flexible. At the same time, it established and improved a collectivizemanagement model, in which the parent company sets standards, defines orientation and nurturescore employees, and all subsidiaries control the cost, refine project and focus on efficiency.It continued to strengthened EHS risk control and emergency management, organized EHScomprehensive examination on a regular basis and carried out special emergency drills in variousways to improve emergency response capacity. What’s more, it increased technical input, and activelyestablished the dual system of tiered risk control and potential risk investigation, ensuring that risksare controllable. At the same time, it introduced Automated External Defibrillator (AED) to enhancethe Company’s capability in handling emergency activities. It actively conducted tired EHS education,and improved training coverage and efficiency through online platform. The investment in safety(facilities, equipment and fire emergency) in the whole year totaled RMB16.238 million, increasedby 5.8% year on year, and the investment in occupational health totaled RMB12.804 million,increased by 15.5% year on year.ii. Pharmaceutical commerceIn 2021, the Company actively innovated business and service model of pharmaceuticalcommerce, recorded sales income of RMB23,115 million, increased by 5.94% year on year. In theface of multiple influences of intensiveVBP Program, local medical alliance centralized procurementat a lowered price, the implementation of DRGs, and high market demand driven by the stubbornCOVID-19 pandemic, the Company strived to change itself in four aspects, consolidated traditionalbusinesses, stabilized its cooperation with hospitals, made the plan of outside-hospital market, andexpanded e-commerce. Rooted deeply in Zhejiang market to develop its traditional businesses, it
placed equal emphasis on introducing new products and meeting customers’ satisfaction, increasedmarket share by improving production companies in upstream and providing better services for endusers in downstream. By focusing on innovative business including agency, e-commerce and high-end third party logistics, it cultivated new profit growth points, built brand reputation in cold chain,and reshaping its core business competitiveness. As a result, its performance in all sectors returned topre-COVID level, and maintained the position in the industry as the best pharmaceutical serviceprovider in Zhejiang province and the forefront ranking in domestic market.
1. Building a provincial market expansion network and cultivating new profit modelThe Company transformed its operation philosophy from pursuing sales volume to pursuingoperation efficiency, and adhered to improving its value through profitability. Leveraging on theadvantage of “platform + product + Internet”, it expanded the service scope of pharmaceuticalcommerce, built market development network in Zhejiang province, and refined traditional businessthrough various channels such as public institutions, private institutions and retail. Centering oninnovative drug introduction, it constantly enriched product lines. It also adjusted procurementstrategy in time, optimized product structure, and increased the share of products with high net profit.It integrated procurement and sales, strengthened the expansion of key products, introduced newproducts through coordination and cooperation, and optimized in-hospital product structuredynamically. Through professional project management, it provided customers with the whole-process supply chain services and market access solutions. In addition, it continued to strengthen thestrategic cooperation and special cooperation with a number of international pharmaceuticalcompanies such as Pfizer, AstraZeneca, Roche, Eli Lilly, Sanofi, Novartis and MSD, to extent thelayout of their chronic disease drugs in the primary-level of Zhejiang province. In addition, it alsoenhanced the contract cooperation regarding new launched drugs with domestic emerging innovativedrug companies. It cooperated with customers to improve hospital access rate, and put into placecooperation projects at a rapid pace, winning the general recognition of customers. Over the year, thenumber of cooperation projects with new added suppliers exceeded 40, and the number of newcontract products exceeded 200, generating sales income of RMB1.8 billion.The Company created a new retailing model by reaching into outside hospital market. Its self-management retail focuses on opening drug stores in and near hospitals as well as DTP pharmacies,upgrading community pharmacies, and improving the function of introducing more varieties andproviding safe prescription drugs. Based on the channels and network of traditional business, itincreased productivity to expanded market coverage and share, so as to maintain high growth rate.Relaying on the network of subsidiaries within Zhejiang, it expanded the sales of medical devices,ginseng and antler, and other high margin products across the province. It promoted centralized and
unified management, optimized organizational structure, and improved operation efficiency. Inaddition, it strengthened the establishment of tiered talent teams, emphasized on both internal talenttraining and talent introduction of innovative sectors, cultivated versatile talents through highpotentials planning, job dispatching and field training, and accelerated job rotation of young officialsand experienced officials. By applying differentiating quantitative assessment in a comprehensivemanner, it optimized information-based management methods, and put human resources into gooduse, so as to raise the average labor efficiency per capita.
2. Promoting business innovation and building a technical service platform ofpharmaceutical commerceFocusing on specialty diseases drugs and special medical devices, the Company started itsbusiness innovation with regional agent and expanded to national agent, built an academic promotionteam and increased the profitability of agent products. It was committed to innovation-driventransformation, developed rehabilitation and nursing services as the main task, established academicplatforms specialized in rehabilitation, repairing and nursing by cooperating with colleges andmedical associations, so as to build academic science-led mega health industry with HuadongMedicine characteristics. The Company explored creative products based on the homology ofmedicine and food to increase the added value of products. Aiming at serving customers, it improvedinformation technology capability and developed e-commerce business. Targeting on B2B and B2Ccustomers, the Company revised and upgraded “Huadong Medicine Online Business Website”, create“Huadong Pharmacy” flagship store and improve online sales, providing a platform for developingmarket outside hospitals. The website was thus elected in the List of Key E-Commerce Platforms inZhejiang Province of 2021-2022. It strengthened “Internet plus” medical service model, and workedwith offline medical institutions to provide online services and undertook prescription drugs onlinesales business. It integrated pharmaceutical industry and pharmaceutical commerce to build Internethospital, to put more efforts in products R&D and update, connected with more Internet hospitals onprescription outflow routes, and undertook prescriptions dispensing that were paid by online medicalinsurance. It built an independent B2B platform – multi-tiered digital pharmaceutical wholesaleplatform covering the whole channels, which was operated and managed based on big data. It paidattention to the key process of operation and management, constantly optimized the system andimproved operation performance, thereby realizing the connection of the whole channels ofpharmaceutical wholesale business and digital customer management.
3. Building an advanced and efficient supply chain distribution system and forming alogistics network covering the whole Zhejiang province
During the reporting period, the Jinhua pharmaceutical logistics center, invested by the
Company with a total amount of nearly RMB200 million, was put into operation. This professionaland modern logistics center initiated more than two years ago and covering an area of more than60,000 square meters, has an annual throughput of more than 10 million pieces and is one of theCompany’s core logistics bases of the centralized and unified logistics distribution system in Zhejiangprovince. Jinhua logistics center undertakes the Company’s logistics distribution business in Jinhua,Quzhou, Lishui, Taizhou, Shaoxing and other areas, and its delivery scope covers as far as township(district)-level health centers and pharmacies, so as to remove the obstacles on the “last mile” ofpharmaceutical distribution, significantly improving the distribution support to surrounding areas. Aprovincial logistics service system relaying on the coordination of the Company’s supply chaincompanies located in Hangzhou, Jinhua, and Wenzhou was thus established. In doing so, theCompany realized the full coverage of pharmaceutical logistics distribution throughout the province,and played an important role in improving the capability of ensuring medical supplies guaranteecapacity of Zhejiang province.As a national pilot institution of service standardization, the Company strived to promote high-quality development of digital and intelligent pharmaceutical supply chain, expanded the scale ofthird-party logistics service, improved the provincial logistics system featured by cold chain, andincreased the market share of high-end cold chain, so as to consolidate the brand advantage of theNo.1 pharmaceutical cold chain in Zhejiang. Huadong Pharmaceutical Supply Chain ManagementCo., Ltd. (“Huadong Supply Chain”), a wholly-owned subsidiary of the Company, focuses onprofessional drug distribution characterized by cold chain logistics and high-end vaccine delivery.Through actively exploring the scientific and technological innovation of cold chain logistics, it wonthe third prize of Science and Technology Progress Award of Zhejiang Province, obtained 2 patentsfor utility model and 2 software copyrights. In addition to daily delivery tasks of the Company, it alsorecorded rapid growth in third-party logistics service business every year. It owns the qualification ofvaccine distribution and was the first in Zhejiang province to pass the special unannounced inspectionof vaccine by Zhejiang Medical Products Administration, thus becoming one of the vaccine hubs inZhejiang province. In 2021, it obtained the first express business license of pharmaceutical cold chaincompany in Zhejiang province, gaining more incentives to Internet distribution business to individualcustomers. It became the exclusive COVID-19 vaccine distribution partner of Zhejiang ProvincialCenter for Disease Control and Prevention, and realized the integration of vaccine warehousing anddistribution across the province, effectively completing the annual Covid-19 vaccine distribution taskin the province.
iii. Aesthetic medicineAesthetic medicine is a core strategic sector of the Company’s comprehensive health industry.
With global vision and forward-looking layout, it constantly strengthened international industryexpansion with Sinclair, a wholly-owned subsidiary of the Company based in Britain, as the globalaesthetic medicine operating center, and promoted R&D and innovation through five R&D centersacross the world. It also improved product layout through diversified business model integratingexternal cooperation and equity investment. As a result, its commercial network has covered mainaesthetic medicine market in the world and the products were sold to more than 80 countries andregions. At present, overseas employees account for 84% of the total employees in the Company’saesthetic medicine sector. It owns 35 high-end minimally invasive and non-invasive aestheticmedicine products, among which 21 are on the market inside and outside the country, and 14 areinternational innovative products under research. The product portfolio covers mainstream non-surgical aesthetic medicine sectors such as facial fillers, thread lift, skin management, body shaping,hair removal, and cosmetic gynecology, forming an integrated product cluster with the number andscope of products at the forefront of the industry. Several products with great potential are expectedto be sold in domestic and international markets since 2022, which will bring new growth engine forthe Company’s international aesthetic medicine business.The year 2021 also marked the Company’s breakthrough in developing global strategic layoutof aesthetic medicine business, and in accelerating domestic registration and launch process of itsown aesthetic medicine products. During the reporting period, by acquiring 100% equity of HighTech, a Spanish company specialized in energy based aesthetic devices, Sinclair extended the productpipeline to energy based aesthetic devices. In February 2022, Sinclair acquired 100% equity of Viora,an international company focusing on energy based aesthetic devices, forming effective synergy withthe Company’s existing pipeline of the products. This acquisition not only realized the full coverageof energy based aesthetic device varieties, but will also create an independent business segment ofSinclair EBD. High Tech will also relay on the channels and resources of Viora to expand the USmarket. Based on this acquisition, the Company also puts forward a product idea of “providingprofessional care for women through leading aesthetic medicine technology, and creating ‘V WomenTech’”.
During the reporting period, Sinclair also signed an agreement with KiOmed, a Belgian company,to obtain the exclusive license of four ongoing innovative KiOmedine
?CM-Chitosan products inglobal skin aesthetic medicine market (excluding the U.S.). By carrying out technology storage andproduct layout with forward-looking, it actively expanded its business into upstream field of newbiological materials, so as to gain the first-mover advantage, enhancing its competitiveness in novelaesthetic medicine materials.
In 2021, although the overseas pandemic situation still dealt a blow to the Company’s
international aesthetic medicine business, recovery growth was achieved in Europe, the America andother major markets as they gradually eased their control measures. Among them, Europe, LatinAmerica and Asia-pacific markets were performed better than expectation, showing a rapid growth,and promoted the overall revenue to maintain fast growth. Sinclair (including the newly acquiredSpanish company High Tech) recorded an annual operating revenue of about RMB665 million (orGBP76.07 million), increased by 108.51% year on year. Sinclair’s own revenue was increased by
79.24%, with EBITDA reached GBP6.66 million (on consolidated basis), the best performance in itshistory (net profit loss in its statement were mainly caused by non-operating factors such asacquisition expenses, financial expenses and amortization of assets). The income of its core productsEllansé
?in the global market was increased by 99%. Two fillers newly launched in European market,MaiLi
? novel high-end HA and Lanluma
?
poly-L-lactic acid collagen stimulants, also contributed tothe rapid growth of overseas revenue. After acquisition, High Tech maintained fast growth incryolipolysis, laser and radio frequency products, and has the faith to achieve sustained growth andoverall profitability of the international aesthetic medicine business in 2022.As the operation body of the Company’s domestic aesthetic medicine business, Sinclair(Shanghai) Co., Ltd. completed the building of the whole group within a year since the establishment.It now has nearly 200 employees, increased from only 10 at the very beginning. It also formulatedsales, market and brand strategies, and developed systems and institutions concerning supply chain,quality, information, human resources, finance, legal affairs, etc., within a short period of time.Adhering to the development strategy of “put beauty-seeker at first”, it strictly selected cooperativeinstitutions in the Chinese market, and actively carried out and strengthens the training andcertification of doctors, striving to provide safer services with better quality for those seeking beauty.As at the end of 2021, the number of contracted cooperative hospitals reached 280, and the numberof doctors received training and certification exceeded 500. In 2021, the operating revenue recordedRMB185 million, and it achieved profits in the first year of operation, overfulfilled annual operatingtargets, laying a solid foundation for the goal of rapid development in 2022.The domestic aesthetic medicine industry was constantly reformed and innovated, with rapidproduct upgrade and intensified customers division. In this context, Ellansé
?, the first importedregenerative aesthetic medicine products in China that obtained type III medical equipmentcertification by NMPA, drew great attention from domestic aesthetic medicine industry since it wenton the Chinese market in August 2021. Relaying on the advantages including instant filling, long-term maintenance and natural metabolism, it meets the higher demand of customers of pursuingbeauty, and is well recognized by experts and welcomed by professional physicians and the beauty-seekers. It has become the first choice of many well-known domestic aesthetics institutions, set up
the new standard of domestic industry, and touted as the leader in regenerative aesthetic medicineproducts for injection. With the increase of market coverage and the improvement of brand promotion,the market penetration rate of Ellansé
?is expected to be further enhanced, which will drive theconstantly growth of the Company’s aesthetic medicine business.During the reporting period, the Company continued to promote the clinical work andregistration of core aesthetic medicine products at home and abroad. The cooling treatment beautydevice Glacial Spa
?(F0, the life-beauty version of a frozen freckle-removing medical device)introduced from an American company R2, has obtained license to launch it to Korean and Taiwan(China) markets. Born in Silicon Valley, Glacial Spa
?
(F0) was invented by a technical team led byRox Anderson, M.D., the founder of modern laser medicine, and director of Wellman Center forPhotomedicine at Massachusetts General Hospital (an affiliated teaching hospital of Harvard MedicalSchool located in Boston). It is the latest treatment of brightening skin of R2, and also a "rising star"of cryo-technology skin care. Cooltech Define, a cryoadipolysis device, and Perfectha
?, a biphaseHA filler containing lidocaine, have obtained CE certification of EU. Cooltech Define and Primelase,a laser hair removal device, have obtained TGA certification of Australia, and are about to initiatesample inspection for the registration in China. Laser hair removal device Elysion has obtained TGAcertification of Australia. Thread lift product Silhouette Instalift
?passed the record of Human GeneticResources Administration of China in Ministry of Science and Technology of China in February 2021,and is currently undergoing the subject enrollment of clinical trial. Maili Extreme, a high-end HAproduct, received registration inspection report in December 2021. Glacial Rx (F1), a frozen freckle-removing device, was classified as the Type II medical device by Zhejiang Medical ProductsAdministration in July 2021 and is currently undergoing the registration preparation in China. In theother part of the Asia-Pacific region, Glacial Rx (F1) has obtained market license of Korea andSingapore and has submitted the market application of Indonesia and Malaysia. In addition, theCompany is actively selecting suitable products to accelerate its application for the franchise inHainan Boao Lecheng Pilot Zone of International Medical Tourism.As the country place stricter supervision on the aesthetic medicine industry, the Company willcontinue to uphold the operation philosophy of “putting beauty-seekers first and serving them withprofessional and rigorous medical technology” and make contributions to promoting the standardizedand health development of the market. Benefiting from the standardized development of the industry,Sinclair (Shanghai) will continue to lead the development of domestic regenerative aesthetic medicineproduct amid the new regulatory and marketing environment, and will have more space to release itspotentials.
The Company’s aesthetic medicine products that went to market or under R&D
iv. Major BD projects of the Company
1. Innovative drugs
(1) In February 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary signed an
exclusive clinical development and commercialization agreement with an American companyProvention Bio, Inc., and obtained the rights of exclusive clinical development and commercializationin the Greater China of two clinical indications (treat SLE and prevent or reduce the immunogenicityof gene therapy) of bispecific antibody PRV-3279, a product under research of Provention Bio.
(2) In April 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary, and FuguangHongxin jointly invested RMB35 million to hold the equity in Nuoling Bio, a company focusing onhigh molecule-drug conjugates R&D platform, allowing the former to enjoy the priority of the rightof assignee of Nuoling Bio’s ongoing products before 2026 as agreed.
(3) In April 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary, acquired 75%of the shares of Doer Biologics in RMB487.50 million, to become its controlling shareholder. DoerBiologics is a Chinese company focusing on the R&D platform of innovative biologic drugs and ownsindependent intellectual property rights.
(4) In June 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary, introducedSCO-094, a product in Phase I clinical trial of SCOHIA PHARMA, Inc., a Japanese company. Theproduct is a global innovative dual agonist targeting at GLP-1R and GIPR, for treating diseases suchas type 2 diabetes, obesity and NASH.
(5) In September 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary, grantedthe exclusive rights of development, production and commercialization in South Korea of TTP273,an oral, small molecule, GLP-1 receptor agonist (for the treatment of type 2 diabetes) that isinnovative in the world, to Daewon Pharmaceutical Co., Ltd., a South Korean company, marking thefirst license-out of innovative products of the Company.
(6) In October 2021, the Company entered into a strategic cooperation with TakedaPharmaceuticals Company Ltd. (“Takeda”) on the rights of commercialization in China, of Nesina
?
(Alogliptin Benzoate Tablets), a DDP-4 inhibitor that has went into the Chinese market. This movefurther enriched the Company’s anti-diabetes product portfolio, and formed a synergistic effect withthe Company’s existing key products in the field, consolidating and enhancing the Company’s marketcompetitiveness and industry leading position in domestic anti-diabetes drugs. The alliance betweenthe two big companies also demonstrated the industry’s recognition of the Company’s commercialcapability in the field.
(7) In October 2021, Zhongmei Huadong and Huadong Medicine Investment Holding (HongKong) Limited, the Company’s wholly-owned subsidiaries, entered into an equity investmentagreement and an exclusive product license agreement with Ashvattha Therapeutic, Inc. an Americancompany, obtaining the exclusive license of eight products under research in 20 Asian countries andregions, including China, Singapore and Malaysia. One of the product OP-101 is undergoing phase
II clinical trial in America for the treatment of hyperinflammation in hospitalized adults with severeCOVID-19.
2. Aesthetic medicine
(1) In February 2021, Sinclair, the Company’s wholly-owned subsidiary in Britain, acquired100% equity of High Technology Products, S.L.U., a Spanish energy based aesthetic devicescompany, with equity consideration of EUR65 million and milestone payment that does not exceedEUR20 million, expanding the Company’s aesthetic medicine product pipeline into energy basedaesthetic devices and opening a new era of “minimally invasive and non-invasive” aesthetic medicine.
(2) In September 2021, Sinclair cooperated with KiOmed Pharma SA, a Belgian company, toobtain the exclusive license of four innovative KiOmedine
?CM-Chitosan aesthetic medicineproducts under development and all chitosan-related aesthetic medicine products developedsubsequently, in global skin aesthetic medicine market (excluding the U.S.), including the rights ofusing KiOmed’s intellectual property for development, production and commercialization,representing another important global strategic layout of the Company in non-surgical aestheticmedicine.
3. Industrial Microbiology
(1) In November 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary, and its’scontrolled subsidiary Huida Biotech, signed a joint venture agreement with Hubei Angel BiologyGroup Co., Ltd. to jointly establish Hubei Meiqi Health Technology Co., Ltd., promoting the R&D,production and sales of health and nutritional ingredients and personal care functional ingredients.
(2) In December 2021, Zhongmei Huadong, the Company’s wholly-owned subsidiary, acquired100% equity of Huachang Hi-Tech after it claimed bankruptcy and restructuring, and investedRMB108 million as capital increase to repay and clear the expenses for bankruptcy proceedings, thedebts incurred for the common good of creditors and claims in bankruptcy as per Reconstructing Planof Huachang Hi-Tech. Huachang Hi-Tech will become another industrialization platform of theCompany in the field of industrial microbiology, which focuses on the industrialization of nucleosidepharmaceuticals, semi-synthetic antiparasitic drug of microbial origin and other drugs.
For detailed BD transaction of the Company in the first quarter of 2022, please refer to the FirstQuarterly Report 2022 of Huadong Medicine Co., Ltd. which was released on the same day as thisreport.
v. Awards
During the reporting period, as the Company’s comprehensive competitive strength, efficientoperation and governance, and value creation ability were recognized by the market, it won a number
of awards and honors:
Ranked 314th in Fortune China Top 500 Companies, the tenth consecutive year for being listed.Listed in Top 100 of Chinese Pharmaceutical Companies in 2020 of Menet, maintaining itsranking as Top 10.
Top 500 Chinese Private Enterprises in 2021 and Top 100 Chinese Pharmaceutical Businessesin 2020, All-China Federation of Industry and Commerce
Top 100 Chinese Large Enterprises for Innovation in 2021 and Top 500 Chinese Enterprises inService Industry in 2021, China Enterprise Confederation
Top 10 Chinese Biomedical Enterprises of Business Development, Pharmcube
“Evergreen Award” of Annual Pharmaceutical R&D Enterprise in 2021, Jiemian.com
“GoldenWis” Award of Outstanding Performance in Chinese Pharmaceutical and BiologicalIndustry Segments, JRJ. Com
In terms of investor relations management:
The Best Board of Directors, the Best Investor Relations, and the Best Secretary of the Board,the 12th Tianma Award-Investor Relations of Chinese Companies Listed on the Main Board
Investor Relations Management Award of the Year 2020 and Secretary of the Board Award ofthe Year 2020, Jinniu Award
The Most Valuable Company in Investor Relations, the Most Favored Listed Company byInsurance Funds and Annual Elite Secretary of the Board TOP200, Jinglun Award
In terms of ESG management:
Top 100 A Share Companies in ESG, Securities Times
Outstanding Social Responsibility Award, Quanjing Net
2. Income and cost
(1) Composition of operating revenue
Unit: RMB yuan
| 2021 | 2020 | Year-on-year percentage increase/decrease | |||
| Amount | Proportion in operating revenue | Amount | Proportion in operating revenue | ||
| Total operating revenue | 34,563,301,233.67 | 100% | 33,683,058,759.75 | 100% | 2.61% |
| By sector | |||||
| Business | 24,203,730,039.28 | 70.03% | 23,010,850,986.99 | 66.26% | 5.18% |
| Manufacturing | 10,519,190,765.06 | 30.43% | 11,398,357,479.02 | 32.82% | -7.71% |
| Aesthetic medicine[Note1] | 1,002,027,972.65 | 2.90% | 448,777,191.66 [Note2] | 1.33% | 123.28% |
| Including: International aesthetic medicine | 665,510,309.09 | 1.93% | 319,167,474.26 | 0.95% | 108.51% |
| Domestic aesthetic medicine | 366,560,098.82 | 1.06% | 129,609,717.40 | 0.38% | 182.82% |
| Offset (inter-sectoral offset) | -971,513,302.13 | -1,045,317,180.52 | |||
| By product | |||||
| By region | |||||
| Domestic sales | 33,883,474,489.91 | 98.03% | 33,321,963,372.21 | 98.93% | 1.69% |
| Overseas sales | 679,826,743.76 | 1.97% | 361,095,387.54 | 1.07% | 88.27% |
| By sales model | |||||
[Note1] The domestic aesthetic medicine business includes the income from the self-operated products of Sinclair (Shanghai), theincome from the aesthetic medicine products of the Company’s pharmaceutical commercial agency and the income from the OTCweight-loss products of the Company, and excluding the income from the aesthetic medicine products of the holding subsidiary,Huadong Ningbo Company. The data scope in 2021 is the same as that in 2020.[Note 2] The revenue of the Company’s aesthetic medicine business (including Huadong Ningbo Company) was amounted to RMB943million.
(2) The operating revenue or profit accounts for more than 10% of the total by industry, product, region orsales model
√ Applicable □ N/A
Unit: RMB yuan
| Operating revenue | Operating cost | Gross profit rate | Year-on-year percentage increase/decrease in operating revenue | Year-on-year percentage increase/decrease in operating cost | Year-on-year percentage increase/decrease in gross profit rate | |
| By sector | ||||||
| Business | 24,203,730,039.28 | 22,451,262,640.00 | 7.24% | 5.18% | 5.50% | -0.28% |
| Manufacturing | 10,519,190,765.06 | 2,233,384,937.73 | 78.77% | -7.71% | 1.37% | -1.90% |
| By product | ||||||
| By region | ||||||
| Domestic sales | 33,883,474,489.91 | 23,721,443,647.68 | 29.99% | 1.69% | 5.79% | -2.72% |
| Overseas sales | 679,826,743.76 | 235,927,081.30 | 65.30% | 88.27% | 85.51% | 0.52% |
| By sales model | ||||||
If the statistical specifications of the Company’s main business data have been adjusted during the reporting period, the Company’smain business data of the most recent year should be adjusted according to the specifications at the end of the reporting period.
□ Applicable √ N/A
(3) Whether the Company’s income from in-kind sales is greater than that from labor services
√ Yes □ No
(4) Performance of major sales contracts and major procurement contracts signed by the Company as at thereporting period
□ Applicable √ N/A
(5) Composition of operating cost
□ Applicable √ N/A
Unit: RMB yuan
| Sector | Item | 2021 | 2020 | Year-on-year percentage increase/decrease | ||
| Amount | Proportion in operating cost | Amount | Proportion in operating cost | |||
| Business | Operating cost | 22,451,262,640.00 | 90.10% | 21,279,818,471.97 | 90.22% | 5.50% |
| Manufacturing | Operating cost | 2,233,384,937.73 | 8.96% | 2,203,096,679.98 | 9.34% | 1.37% |
| International aesthetic medicine | Operating cost | 234,272,299.70 | 0.94% | 104,350,496.25 | 0.44% | 124.51% |
| Offset (inter-sectoral offset) | Operating cost | -961,549,148.45 | -1,036,783,957.47 | |||
(6) Whether the scope of consolidation has changed during the reporting period
√ Yes □ No
For details, please refer to “VIII. Change of consolidation scope” in “Section X. Financial Report”.
(7) Significant changes or adjustments to the Company’s business, products or services during the reportingperiod
□ Applicable √ N/A
(8) Major customers and major suppliers
The Company’s major customers
| Total sales amount of the top five customers (yuan) | 6,621,074,103.66 |
| Proportion of the total sales amount of the top five customers in the total annual sales amount | 19.16% |
| Proportion of related parties’ sales amount of the top five customers’ sales amount in the total annual sales amount | 0.00% |
Information of the Company’s top five customers
| No. | Customer name | Sales amount (yuan) | Proportion in the total annual sales amount |
| 1 | Customer a1 | 2,864,964,134.63 | 8.29% |
| 2 | Customer a2 | 1,155,703,314.04 | 3.34% |
| 3 | Customer a3 | 965,022,865.70 | 2.79% |
| 4 | Customer a4 | 870,068,940.06 | 2.52% |
| 5 | Customer a5 | 765,314,849.23 | 2.21% |
| Total | -- | 6,621,074,103.66 | 19.16% |
Other information of major customers
□ Applicable √ N/A
Information of the Company’s major suppliers
| Total purchase amount of the top five suppliers (yuan) | 2,896,604,848.61 |
| Proportion of the total purchase amount of the top five suppliers in the total annual purchase amount | 12.09% |
| Proportion of related parties’ purchase amount of the top five customers’ purchase amount in the total annual purchase amount | 0.00% |
Information of the Company’s top five suppliers
| No. | Supplier name | Purchase amount (yuan) | Proportion in the total annual purchase amount |
| 1 | Supplier b1 | 773,982,594.17 | 3.23% |
| 2 | Supplier b2 | 757,701,231.02 | 3.16% |
| 3 | Supplier b3 | 567,845,383.99 | 2.37% |
| 4 | Supplier b4 | 400,190,983.58 | 1.67% |
| 5 | Supplier b5 | 396,884,655.85 | 1.66% |
| Total | -- | 2,896,604,848.61 | 12.09% |
Other information of major suppliers
□ Applicable √ N/A
3. Expenses
Unit: RMB yuan
| 2021 | 2020 | Year-on-year percentage increase/decrease | Note on changes | |
| Sales expenses | 5,424,051,895.28 | 5,970,614,819.26 | -9.15% | No significant changes |
| Administrative expenses | 1,166,941,288.41 | 998,746,330.35 | 16.84% | No significant changes |
| Financial expenses | 22,075,055.28 | 34,200,637.61 | -35.45% | Mainly due to the increase of interest income and the decrease of exchange loss |
| R&D expenses | 979,644,017.93 | 926,725,468.93 | 5.71% | No significant changes |
4. R&D investment
√Applicable □ N/A
(1) Overall situation of R&D
Adhering to the corporate the “scientific research-based, patient-centered” philosophy, theCompany constantly increased the investment in R&D and enriched the layout of innovative drugR&D pipeline, At present, the Company has a R&D team of 1,285 employees, and 36.58% of themhave master’s degrees or doctor’s degrees. In 2021, it recruited more than 100 R&D personnel to jointhe team. As at the release of the report, there were a total of 70 pharmaceutical projects under research,including nearly 40 innovative drugs and biosimilars, among which 5 products are in phase III clinicaltrial and 3 are in phase II. During the reporting period, the Company invested RMB1,253 million inpharmaceutical industry R&D, including RMB963 million in direct R&D, which was increased by
4.87% compared with that of 2020 (RMB918 million). The main R&D work is as follows.
1) Committed to the new drug R&D model integrating independent R&D, cooperative andcommissioned development and license-in, stayed current with the latest drug mechanism of actionand targets, as well as clinical application research progress in the world, accelerated the layout ofinnovative drugs and the introduction of innovative drug projects at home and abroad, and initiatedseveral innovative drug projects with potential.
2) Aimed at clinical value, pharmacoeconomic value and commercial value, and developed a
number of innovative products in autoimmunity, endocrinology and anti-tumor.
3) Focused on varieties of clinical superiority and specialty drugs, and accelerated the R&Dlayout of generic drugs with high-tech barriers and modified new drugs.
4) Constantly improved the process and quality of APIs and preparations, reduced costs andactively expanded the dosage forms of on-market drugs to strengthen market competitiveness.
5) Strengthened the comprehensive dynamic evaluation of the varieties under research, andspeeded up the R&D progress of key ongoing varieties through getting projects’ priorities straightand allocating R&D resources rationally.
6) Established polypeptide differentiating innovation technical platform, immune diseaseantibody technical platform, cytotoxins of microbial fermentation technical platform, and innovativelinker and conjugate technical platform to build R&D ecosystem featured by win-win cooperation.
(2) Innovative drugs development plan
The Company established a strategic plan of innovative drug development for the next five years.Centering on the current treatment areas, it clarified the direction and quantity of innovative projectsinitiated each year during this period, put forward that at least 15 innovative projects (includinginnovative drugs, modified new drugs and innovative medical devices) shall be initiated and reservedeach year during this period. During the reporting period, the Company spared no efforts in promotingthe progress of clinical trial of innovative drugs under research and key biosimilars, striving to getapproved and go to the market as soon as possible. In addition, by drawing wisdom from internationaladvanced practice, the Company explored the establishment of a leading innovative drugs R&Dsystem. It transformed the R&D strategy from “relaying on license-in” to “integrating independentR&D and license-in”, and from “emphasizing on fast follow” to “identifying differentiatingadvantages and innovating at the source”, so as to constantly adjust and optimize the Company’soverall R&D system structure. Moreover, through introducing high-end R&D talents, it established ascientific research team covering the lifecycle of innovative drug R&D, so as to improve all functionalmodules of innovative project R&D, fully ensuring that the strategic planning objectives of innovativeprojects could be achieved.
(3) Progress of clinical trials of key innovative drugs, innovative medical device andbiosimilars
During the reporting period, the Company achieved several R&D processes in innovative drugs,innovative medical device and biosimilars. The main progress is as follows:
Endocrinology field
TTP273: the first oral GLP-1 receptor agonist small molecule innovative drug in the world, beingdeveloped in Phase II clinical trials in mainland and Taiwan of China.
HDM1003 (SCO-094): In June 2021, the Company signed an agreement with SCOHIAPHARMA, Inc., a Japanese company, to jointly develop SCO-094, a dual agonist targeting at GLP-1R and GIPR for the treatment of diseases such as type 2 diabetes, obesity and NASH. The productis undergoing phase I clinical trials in the UK and the Company has submitted Pre-IND applicationin China and received a reply.
Liraglutide Injection: a GLP-1 receptor agonist. The application of market license of its diabetesindication has been processed in September 2021.
Ranibizumab Injection: The product has been approved for clinical trial in April 2021, and iscurrently undergoing phase III clinical trial.
Oncology field
HDM2002 (Mirvetuximab): Jointly developed by the Company and ImmunoGen, Inc. anAmerican company, the product is a first-in-class ADC used for the treatment of FRα-high platinum-resistant ovarian cancer. In November 2021, ImmunoGen announced that its pivotal single-armclinical trial (SORAYA trial) met its primary endpoint. The first application for clinical trial in Chinawas approved by NMPA in March 2021, including a multi-regional phase III clinical trial and a phaseI study to evaluate the safety, tolerability, and pharmacokinetics in Chinese adult patients. A pivotalsingle-arm clinical trial in China was also approved by NMPA in August 2021. In December 2021,the phase I clinical trial PK study and MRCT phase III all announced that the first subject was enrolledand administrated.
Mefatinib Tablet: a product for the treatment of advanced non-small cell lung cancer. The overallsubjects enrollment in phase III clinical trial has been completed and phase III clinical trials isexpected to be ended in 2022 for the following market license application.
Autoimmunity field
HDM3002 (PRV-3279): In February 2021, the Company introduced American companyProvention Bio, Inc.’s PRV-3279 that was under research. It is used for treating SLE and preventingor reducing the immunogenicity of gene therapy. The Company has submitted pre-IND applicationand received response.
HDM5001 (OP-101): The Company cooperated with Ashvattha Therapeutic, Inc., an Americancompany it holds shares in, to jointly develop OP-101, which is used for the treatment ofhyperinflammation in hospitalized adults with severe COVID-19. The product is undergoing phaseII clinical trial in America.
HDM3001 (QX001S): Jointly developed by the Company and Qyuns Therapeutics, QX001S isa biosimilar of innovator drug ustekinumab (Stelara?) used for the treatment of moderate and severplaque psoriasis of adults. It has been in phase III clinical trials since May 2021.
Innovative Medical DeviceHD-NP-102 (MB102 and TGFR): Jointly developed by the Company and the Americancompany MediBeacon, Inc., the product is designed to measure kidney function through TransdermalGlomerular Filtration Rate Measurement System (TGFR). It was approved by NMPA to enter thespecial review procedure for innovative medical devices in November 2021. The novel fluorescenttracer agent used with the system, or MB-102 injection (Relmapirazin), is classified as Type I newdrug. The application of phase III MRCT was approved by NMPA in May 2021 and the trail isexpected to be carries in both China and the U.S. in 2022.
For the R&D process of innovative drugs and biosimilars of the Company in the first quarter of2022, please refer to the First Quarterly Report 2022 of Huadong Medicine Co., Ltd., which wasreleased on the same day as this report.
R&D pipelines of main innovative drugs and biosimilars as at the release of this report
(4) R&D progress of main generic drugs
During the reporting period, the Company seriously sorted out and evaluated the current varietiesof genetic drugs, and further defined the focus and priority of the ongoing process. As at the releaseof the report, the progress of key varieties is as follows:
| No. | Treatment field | Item | Strengths | Latest progress |
| 1 | Endocrinology | Metformin Hydrochloride and Empagliflozin Tablets (I) | 500/5mg | Approved by NMPA in June |
| 2021 | ||||
| 2 | Endocrinology | Canagliflozin Tablets | 0.1g, 0.3g | Supplementary materials were submitted and is expected to be approved in 2022 |
| 3 | Endocrinology | Sitagliptin Phosphate and Metformin Hydrochloride Tablets | 50/850mg | Completed Zhejiang Provincial local Specification review and is expected to be approved in 2022 |
| 4 | Endocrinology | Pioglitazone Hydrochloride and Metformin Hydrochloride Tablets | 15/850mg | Completed BE trial and application is expected to be submitted in 2022 |
| 5 | Immunity | Tacrolimus Ointment | 0.03%, 0.1% | application has been submitted and has been processed in April 2022 |
| 6 | Immunity | Tacrolimus Granules | 1mg | Is undergoing BE trial |
| 7 | Oncology | Letrozole Tablets | 2.5mg | Approved by NMPA in May 2021 |
| 8 | Oncology | Sorafenib Tosylate Tablets | 0.2g | Supplementary materials were submitted and is expected to be approved in 2022 |
| 9 | Oncology | Olaparib Tablets | 150mg | Completed BE trial filing and is about to start BE trial |
| 10 | Oncology | Ibrutinib Capsules | 140mg | Pilot Scale study stage |
| 11 | Anti-infection | Micafungin Sodium for Injection | 50mg | Approved by NMPA in June 2021 |
| 12 | Digestion | Omeprazole and Sodium Bicarbonate Capsules | 20/1100mg | Approved by NMPA in June 2021 |
| 13 | Cardiovascular diseases | Macitentan Tablets | 10mg | Supplementary materials were submitted and is expected to be approved in 2022 |
(5) Progress of international registration
During the reporting period, the company actively carried out international registration, and themain progress is as follows:
| No. | Treatment field | Item | Strengths | Note |
| 1 | Digestion | Pantoprazole Sodium for Injection | 40 mg | Approved by FDA in August 2021 |
| 2 | Anti-infection | Daptomycin for Injection | 500 mg | Approved by FDA in November 2021 |
| 3 | Anti-infection | Caspofungin Acetate for Injection | 50 mg, 70 mg | Submitted ANDA in September 2021 and December 2021, respectively |
(6) Progress of consistency evaluation
During the reporting period, the Company carried out the consistency evaluation of generic drugsmoothly, and the supplementary applications for consistency evaluation of the following varietieswere approved by NMPA:
| No. | Treatment field | Item | Strengths | Note |
| 1 | Immunity | Ciclosporin Soft Capsules | 10mg | Supplementary application for consistency evaluation was approved in March 2021 |
| 2 | Oncology | Decitabine for Injection | 50mg | Supplementary application for consistency evaluation was approved in June 2021 |
| 3 | Endocrinology | Pioglitazone Hydrochloride Tablets | 15mg, 30mg | Supplementary application for consistency evaluation was approved in August 2021 |
| 4 | Digestion | Pantoprazole Sodium for Injection | 80mg | Supplementary application for consistency evaluation was approved in September 2021 |
| 5 | Anti-infection | Ornidazole Tablets | 0.5g | Supplementary application for consistency evaluation was approved in September 2021 |
| 6 | Anti-infection | Daptomycin for Injection | 0.5g | Supplementary application for consistency evaluation was approved in November 2021 |
(7) Progress of Patents
In recent years, the Company attached great importance to the protection of intellectual propertyand the commercialization and application of achievements, and the number of patent applicationsand authorization were steadily increased. Over the years the Company applied for more than 620patents at home and abroad, including over 280 authorized invention patents. Zhongmei Huadong,the Company’s wholly-controlled subsidiary, is a national intellectual property demonstrationenterprise. In November 2014, it passed the external audit of Zhongzhi (Beijing) Certification Co.,Ltd., becoming one of the first 147 companies that passed the standards implementation certification.During the reporting period, the Company successfully passed the reexamination review onsupervising the standard implementation of corporates’ intellectual property.
During the reporting period, the Company’s patent application and maintenance proceeded
smoothly. Zhongmei Huadong, a wholly-owned subsidiary of the Company, applied and submitted atotal of 61 patents, among which 57 were invention patents, 12 were authorized in China.
(8) Progress of aesthetic medicine products R&D and registrationDuring the reporting period, the progress of aesthetic medicine products R&D and registrationof the Company is as follows:
| No. | Product Name | Type | Purpose | Progress during the reporting period |
| 1 | Ellansé? | Injection filler | Repairing medium and severe nasolabial wrinkles | Obtained Type III medical device certification by NMPA in April 2021 |
| 2 | Glacial Spa? | Energy based device | Skin lightening and brightening | Market application in South Korea and Taiwan (China) was approved |
| 3 | Glacial Rx（F1） | Energy based device | Removing benign pigmented skin lesions ect. | Classified as the Type II medical device by Zhejiang Medical Products Administration in July 2021, and is currently undergoing the registration preparation in China. It obtained market license of Korea and Singapore, and has submitted the market application of Indonesia and Malaysia. |
| 4 | Cooltech Define | Energy based device | Fat reduction and body shaping | Obtained CE and TGA certification and is about to initiate sample inspection for the registration in China. |
| 5 | Perfectha? Biphase HA | Injection filler | Facial filler | Obtained CE certification |
| 6 | Primelase | Energy based device | Hair removal | Obtained TGA certification and is about to initiate sample inspection for the registration in China. |
| 7 | Elysion | Energy based device | Hair removal | Obtained TGA certification |
| 8 | Silhouette Instalift? | Thread lift | Mid-face lifting | Passed the record of Human Genetic Resources Administration of China in Ministry of Science and Technology of the People's Republic of China in February 2021, and is currently undergoing the subject enrollment of clinical trial. |
| 9 | Maili Extreme HA | Injection filler | Facial filler | Received registration inspection report in December 2021. |
R&D personnel of the Company
| 2021 | 2020 | Percentage change | |
| Number of R&D personnel (person) | 1,285 | 1,207 | 6.46% |
| Proportion of R&D personnel | 12.92% | 12.79% | 0.13% |
| R&D personnel structure by education | —— | —— | —— |
| Bachelor | 632 | 604 | 4.64% |
| Master and above | 470 | 380 | 23.68% |
| R&D personnel structure by age | —— | —— | —— |
| ＜30 | 458 | 444 | 3.15% |
| 30-40 | 628 | 629 | -0.16% |
| >40 | 199 | 134 | 48.51% |
R&D investment of the Company
| 2021 | 2020 | Percentage change | |
| R&D investment amount (yuan) [Note] | 962,881,963.61 | 918,180,946.98 | 4.87% |
| Proportion of R&D investment in operating revenue | 9.52% | 8.06% | 1.46% |
| Capitalized R&D investment amount (yuan) | 0.00 | 0.00 | 0.00% |
| Proportion of capitalized R&D investment in R&D investment | 0.00% | 0.00% | 0.00% |
Note：(1) The above R&D investment is from the R&D expenses of the Company’s main industrial controlled subsidiary, which ismainly used for clinical research of products under research, the upgrade of existing product process, expenses for commissionedtechnological development, consistency evaluation and international registration certification. In terms of finances, R&D investmentis listed in expense, and is recognized in the current period without subsequent annual amortization, which will not have a significantimpact on the Company’s future operating results.In 2021, the Company’s total R&D investment in the pharmaceutical industry was RMB1,253 million, accounting for 12.40% of therevenue of pharmaceutical industry; of which, RMB963 million was used directly for R&D, an increase of 4.87% from 2020 (RMB918million), and RMB291 million was used for the introduction of external new drug technologies and rights.
(2) The proportion of the number of R&D personnel means the proportion of the number of people in the Company’s subsidiariesmainly engaging in pharmaceutical R&D and manufacturing; the proportion of R&D investment in operating revenue means theproportion of the direct R&D investment of Company’s pharmaceutical industry in the operating revenue of the Company’spharmaceutical industry.
(3) The above-mentioned R&D personnel for 2021 are: The total of R&D personnel of the Company’s R&D system and R&D personnelof the production system.
Reasons and impacts of major changes in the composition of R&D personnel
□ Applicable √ N/A
Reasons for the year-on-year significant change in the proportion of total R&D investment in operating revenue
□ Applicable √ N/A
Reasons for the significant change in the capitalization rate of R&D investment and its rationality
□ Applicable √ N/A
5. Cash flows
Unit: RMB yuan
| Item | 2021 | 2020 | Year-on-year change |
| Cash inflows from operating activities | 38,296,617,059.25 | 37,110,493,946.97 | 3.20% |
| Cash outflows for operating activities | 35,126,859,191.30 | 33,699,046,199.41 | 4.24% |
| Net cash flow from operating activities | 3,169,757,867.95 | 3,411,447,747.56 | -7.08% |
| Cash inflows from investing activities | 251,785,859.22 | 385,678,726.69 | -34.72% |
| Cash outflows for investing activities | 2,238,468,503.37 | 2,124,316,150.63 | 5.37% |
| Net cash flow from investing activities | -1,986,682,644.15 | -1,738,637,423.94 | -14.27% |
| Cash inflows from financing activities | 2,264,348,880.01 | 2,211,047,477.21 | 2.41% |
| Cash outflows for financing activities | 3,031,802,182.50 | 2,936,777,488.44 | 3.24% |
| Net cash flow from financing activities | -767,453,302.49 | -725,730,011.23 | -5.75% |
| Net increase in cash and cash equivalents | 422,733,564.91 | 925,635,526.76 | -54.33% |
Main influencing factors of significant changes in relevant data year on year
√ Applicable □ N/A
The cash inflows from investing activities in the current period are RMB250 million, a decrease of 34.72 % compared with that in thesame period last year (RMB390 million), mainly due to the transfer of distribution rights in the Western European market of relatedproducts of Sinclair, a wholly-owned subsidiary of the Company in Britain, during the current reporting period.
Reasons for the significant difference between the Company’s net cash flow from operating activities and the current year’s net profitduring the reporting period
□ Applicable √N/A
V. Analysis of non-main business
√ Applicable □ N/A
Unit: RMB yuan
| Amount | Proportion in total profit | Note on reasons | Sustainable or not | |
| Investment gains | -96,311,975.25 | -3.41% | ||
| Asset impairment losses | -16,908,408.55 | -0.60% | ||
| Non-operating income | 2,682,255.28 | 0.09% | No | |
| Non-operating expenses | 30,860,834.95 | 1.09% | No | |
| Other gains | 174,690,581.52 | 6.18% | Mainly due to the confirmation of government grants in the current period | No |
| Gains on asset disposal | -31,626.51 | 0.00% |
VI. Assets and liabilities
1. Major changes in asset composition
Unit: RMB yuan
| End of 2021 | Beginning of 2021 | Change of proportion | Note on major changes | |||||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||||
| Monetary funds | 4,032,424,555.22 | 14.94% | 3,198,080,997.82 | 13.21% | 1.73% | Mainly due to the increase of inflow of operating net cash during the current period and the increase of balance of monetary capital at the end of the period. | ||
| Accounts receivable | 6,430,482,175.97 | 23.82% | 6,137,675,568.82 | 25.36% | -1.54% | Mainly due to the increase of the total assets during the current period and the decrease of the proportion of accounts receivable. | ||
| Inventories | 3,974,549,648.96 | 14.72% | 4,067,635,254.80 | 16.81% | -2.09% | Mainly due to the increase of total assets during the current period and the decrease of the proportion of inventory. | ||
| Real estate properties for investment | 14,569,533.94 | 0.05% | 17,792,735.95 | 0.07% | -0.02% | |||
| Long-term equity | 984,927,398.68 | 3.65% | 850,072,053.02 | 3.51% | 0.14% | |||
| investments | ||||||
| Fixed assets | 3,077,227,759.84 | 11.40% | 2,420,366,582.92 | 10.00% | 1.40% | Mainly due to the transfer of construction work in process to fixed assets |
| Constructions in progress | 1,582,125,201.25 | 5.86% | 2,240,201,926.65 | 9.26% | -3.40% | Mainly due to the transfer of construction work in process to fixed assets |
| Right-of-use assets | 153,724,197.81 | 0.57% | 191,718,186.92 | 0.58% | -0.01% | |
| Short-term borrowing | 1,237,843,228.13 | 4.59% | 1,416,932,884.87 | 5.85% | -1.26% | |
| Contract liabilities | 118,341,141.48 | 0.44% | 94,384,629.77 | 0.39% | 0.05% | |
| Long-term borrowing | 139,178,905.04 | 0.52% | 151,611,367.86 | 0.63% | -0.11% | |
| Lease liabilities | 80,889,403.39 | 0.30% | 112,194,637.40 | 0.53% | -0.23% | |
| Other non-current assets | 911,062,879.83 | 3.37% | 712,069,194.08 | 2.94% | 0.43% |
Foreign assets account for a relatively high proportion
□ Applicable √N/A
2. Assets and liabilities measured at fair value
√Applicable □ N/A
Unit: RMB yuan
| Item | Amount at the beginning of the period | Gains and losses from changes in fair value | Accumulated fair value changes recognized in equity | Depreciation reserves withdrawn during the period | Amount of buying in during the period | Amount of selling out during the period | Other changes | Amount at the end of the period |
| Financial assets | ||||||||
| Other equity instrument investments | 225,453,120.05 | 20,549,224.62 | 8,727,227.92 | 125,695,722.50 | 92,381,381.75 | 21,500,840.74 | 257,815,844.68 | |
| Total | 225,453,120.05 | 20,549,224.62 | 8,727,227.92 | 125,695,722.50 | 92,381,381.75 | 21,500,840.74 | 257,815,844.68 | |
| Financial | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
liabilities
Other changesNote: Huadong Medicine Investment Holding (Hong Kong) Limited, a subsidiary of the Company, purchased 218,102 Series C-2preferred shares of RAPT Therapeutics, Inc. in a total of USD3 million in 2018. RAPT Therapeutics, Inc. listed on NASDAQ exchangeon October 30, 2019 (stock code: RAPT). To date, Huadong Medicine Investment Holding (Hong Kong) Limited holds 60,500 sharesin RAPT after it reduced its stake, accounting for 0.204% of the total shares of RAPT Therapeutics, Inc.Whether there are significant changes in the main asset measurement attribute of the Company during the Report Period.
□ Yes √ No
3. Limitation of asset rights at the end of the reporting period
Unit: RMB yuan
| Item | End of the period | Reason for limitation |
| Cash in bank | 422,257,330.57 | Certificate of deposit |
Other monetary funds
| Other monetary funds | 30,026,586.48 | Cash deposit |
| Bills receivable | 874,373.29 | Bill pledge |
| Total | 453,158,290.34 |
VII. Investment
1. Overview
√ Applicable □ N/A
| Investment amount in the reporting period (yuan) | Investment amount in the same period of last year (yuan) | Percentage change |
| 1,793,453,494.62 | 2,195,588,789.55 | -18.32% |
2. Significant equity investments acquired during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
| Name of invested company | Main business | Way of investment | Investment amount | Shareholding ratio | Capital source | Partner | Term of investment | Product type | Progress as of the balance sheet date | Projected income | Profit or loss of investment in the current period | Involved in litigation or not | Disclosure date (if any) | Disclosure index (if any) |
| Hangzh | Equity | Newly | 98,000, | 49.00% | Own | Fuguang | Long | Equity | The | 0.0 | - | No | January | cninfo |
| ou Fuguang Hongxin Equity Investment Partnership (Limited Partnership) | investment; Venture investment | established | 000.00 | funds | Chengdu Equity Investment Management Co., Ltd., Hangzhou Hi-Tech Venture Capital Management Co., Ltd., Hangzhou Heda Industrial Fund Investment Co., Ltd., Shanghai Grand Industrial and Financial Investment Management Co., Ltd. | term | Pharmaceutical Industry Fund has completed the first phase of fund raising, the industrial and commercial registration of the fund has been completed. The fund has completed the filing with Asset Management Association of China on April 2, 2021. | 0 | 2,458,621.86 | 8, 2021 | (http://www.cninfo.com.cn) | |||
| Zhejiang Doer Biologics Co., Ltd. | Pharmaceutical R&D | Acquisition | 487,500,000.00 | 75.00% | Own funds | / | Long term | Equity | Equity Investment was completed | 0.00 | -42,247,286.36 | No | April 28, 2021 | cninfo (http://www.cninfo.com.cn) |
| High Technology Product | Non-invasive energy | Acquisition | 596,511,747.89 | 100.00% | Own funds /externa | / | Long term | Equity | Equity settlement was | 0.00 | 26,866,182.85 | No | April 30, 2021 | cninfo (http://www.cninfo.c |
| s, S.L.U. | based aesthetic devices, integrating R&D, production and sales | l financing | completed | om.cn) | ||||||||||
| Total | -- | -- | 1,182,011,747.89 | -- | -- | -- | -- | -- | -- | 0.00 | -17,839,725.37 | -- | -- | -- |
3. Significant non-equity investments in progress during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
| Project name | Way of investment | Investment in fixed assets or not | Industry involved in the investment project | Investment amount during the reporting period | Cumulative actual investment amount by the end of the reporting period | Capital source | Project progress | Projected income | Cumulative income realized by the end of the reporting period | Reasons for not meeting the planned schedule and projected income | Disclosure date (if any) | Disclosure index (if any) |
| Huadong Medicine Biomedical Science and Technology Park Project Phase II | Self-built project | Yes | Pharmaceutical manufacturing | 37,233,865.88 | 1,753,565,772.68 | Own funds | 98.00% | 0.00 | 0.00 | N/A | March 9, 2017 | cninfo (http://www.cninfo.com.cn) |
| Huadong Medicine Life | Self-built project | Yes | Pharmaceutical R&D | 79,707,624.77 | 80,843,787.97 | Own funds | 20.00% | 0.00 | 0.00 | N/A | April 21, 2021 | cninfo (http://www.cninf |
| Science Industrial Park (Xiangfu south plot) project | o.com.cn) | |||||||||||
| Total | -- | -- | -- | 387,907,668.09 | 1,716,331,906.80 | -- | -- | / | / | -- | -- | -- |
4. Investment in financial assets
(1) Securities Investment
√ Applicable □ N/A
Unit: RMB yuan
| Type of stock | Stock code | Stock abbreviation | Initial investment cost | Accounting measurement model | Book value at the beginning of the period | Gain/loss from fair value changes in the current period | Accumulative fair value changes included in equity | Purchase amount in the current period | Selling amount in the current period | Gain/loss during the reporting period | Book value at the end of the period | Accounting item | Capital source |
| Domestic and overseas stock | RAPT | RAPT | 20,207,400.00 | Fair value measurement | 23,582,877.56 | 2,228,824.61 | 8,856,357.36 | 0.00 | 11,349,950.55 | 14,461,751.62 | Other equity instrument investment | Own funds | |
| Total | 20,207,400.00 | -- | 23,582,877.56 | 2,228,824.61 | 8,856,357.36 | 0.00 | 11,349,950.55 | 0.00 | 14,461,751.62 | -- | -- | ||
| Date of announcement of the Board of Directors on securities investment approval | N/A | ||||||||||||
| Date of announcement of the Board of Shareholders on securities investment approval (if any) | N/A |
(2) Derivatives investment
□ Applicable √ N/A
No such case during the reporting period.
5. Use of raised funds
□ Applicable √ N/A
No such case during the reporting period.VIII. Major assets and equity sales
1. Major assets sales
□ Applicable √ N/A
No such case during the reporting period.
2. Major equity sales
□ Applicable √ N/A
IX. Analysis of wholly-partially owned and shareholding companies
√ Applicable □ N/A
Main subsidiaries and the shareholding companies that have an impact on the Company’s net profit of more than 10%
Unit: RMB yuan
| Company name | Company type | Main business | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Subsidiary | Production and management of Traditional Chinese and Western raw medicines and preparations, | 872,308,130 | 11,335,945,934.96 | 8,149,184,791.88 | 10,109,229,375.51 | 2,398,280,862.46 | 2,091,718,531.92 |
| and health care products | ||||||||
| Huadong Medicine Wenzhou Co., Ltd. | Subsidiary | Wholesale of TCM materials, TCM decoction pieces, chemical preparations, etc. | 61,300,000 | 1,261,588,194.25 | 272,616,982.13 | 2,751,905,977.50 | 56,291,104.42 | 41,509,566.74 |
| Huadong Medicine Supply Chain Management (Hangzhou) Co., Ltd. | Subsidiary | Warehousing and storage services | 50,729,863 | 351,774,456.99 | 149,575,767.22 | 182,772,941.57 | 31,218,716.14 | 20,186,268.79 |
| Sinclair Pharma Limited | Sub-subsidiary | R&D, production and sales of aesthetic medicine products | 219,962,963.92 | 1,718,716,643.29 | 322,699,871.17 | 665,510,309.09 | -116,989,531.06 | -133,857,951.86 |
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ N/A
| Company name | Methods of acquisition and disposal of subsidiaries during the reporting period | Impact on the overall production, operation and performance |
| Zhejiang Doer Biologics Co., Ltd. | Acquisition | Multi-antibody technical platform |
| High Technology Products, S.L.U. | Acquisition | International BD of the Company’s energy based aesthetic devices |
| Hubei Meiqi Health Technology Co., Ltd. | Newly established | Industrial microbiology comprehensive health business operation platform |
| Chengdu Haili Internet Hospital Co., Ltd. | Newly established | International hospital operation platform |
X. Structured entities controlled by the Company
□ Applicable √ N/A
XI. Prospect of the Company’s future development
i. Prospect of macro economy and pharmaceutical industry
In 2021, the world entered a period of turbulence and reform amid resurgent global pandemicand rapid global changes unseen in a century. The international landscape experienced profound andcomplex evolution, and major powers in the world engaged in sever competition over internationalrules-setting and regional hotspot issues. Geopolitical maneuvering was intensified, regional hotspotissues were increased, and international governance were in trouble. Human society is in an era withendless challenges and increasing risks. In the face of unprecedented challenges, all countries areexploring a way out. Peace and development remain the themes of our times. World multi-polarization, economic globalization, IT application and cultural diversity keeps developing. Sincethe outbreak of COVID-19, countries have attached greater importance to the strategic position of thepharmaceutical industry, and international competition in talent, technology and other areas hasbecome increasingly fierce. At the same time, economic globalization is battling against headwinds,and industrial chain and supply chain are being reshaped at a faster pace, posing challenges to theexport of China’s traditional products and the extension to higher value chain.In 2021, China’s economy as a whole was going steadily the track of recovery. Its economicperformance and pandemic response both led the world, and major indicators meet the annual targets.China’s pharmaceutical industry also faced increasing changes. External environment, policy changes,technological innovation and other factors continued to, on the one hand, exert an important influenceon pharmaceutical companies, and on the other hand, led the industry to an era of innovation.According to IQVIA’s latest data and prediction, global expense on drugs amounted to aboutUSD1.4 trillion in 2021. It is predicted that global drug market will grow at 3%-6% CAGR from 2022to 2026, with total drug expense in 2026 reaching nearly USD1.8 trillion (including that of COVID-19 vaccine). Among it, the CAGR for drug expense of emerging markets will stand at 5%-8%, slightlyhigher than that of developed markets of 2%-5%. In terms of treatment field, oncology, immunity,diabetes and neurology will be the key areas of drug expense in the next five years. With theupgrading innovation environment and strong policy incentives, China’s pharmaceutical industry isgaining speed in innovation, leading the development of emerging markets. In 2021, China’spharmaceutical industry persisted in innovation despite resurgence COVID-19. More and moreinnovative drugs were covered by the catalog of medical insurance, and innovation achievements arebenefiting more patients.
According to IQVIA, China spent USD169 billion on drugs in 2021, up more than USD100billion from USD68 billion in 2011. In the next five years, driven by the increase of the number andconsumption of innovative drugs, China’s drug expense will grow at 3.8% CAGR, or USD35 billion,and is expected to reach USD205 billion in 2026.
ii. Industry development tend
1. Domestic pharmaceutical industry
Population aging is a major national condition goes throughout China’s social and economicdevelopment. Data from the seventh national census showed that the number of people aged 60 andabove has reached 264 million, accounting for 18.7% of the total population and increased 10 millioncompared with that in the end of 2019, which indicates an obvious trend of population aging. Thissituation leads to a strong rigid demand for drugs, as well as an increasing demand for medical careand chronic disease drugs. With the increase of per capita disposable income, accelerating populationaging, rising medical insurance income and higher participation in the basic medical insurance system,China’s pharmaceutical industry will maintain long-term development.
At the same time, as China continues to deepen the reform of national health care system,improve drug review and approval system, implement the VBP Program of medicines and medicaldevices, reform health care insurance payment model, and promote rational clinical drug use,pharmaceutical industry will face active and profound influence in its development. Since 2019,pharmaceutical manufacturing industry has slowed down its growth, and relevant enterprises sufferedfrom short-term operation pressure. Since 2021, medical reform policies were constantly improvedand extended, and the general principle of price control and reduction stayed unchanged. Dynamicadjustment mechanism of national drug reimbursement list was basically established, and volume-based centralized procurement of drugs and high-value medical consumables has become themainstream.
With the deepening reform of VBP program system, this type of drug procurement will becomethe primary model of public healthcare institutions. In the future, the more innovative procurementmeasures will be developed. For example, centralized procurement will be conducted according tounified rules for varieties with strong universality. Differentiating procurement policies will beapplied for different high-value medical consumables according to their varieties. Special centralizedprocurement policy will be applied for varieties with strong characteristics. Drugs for the treatmentof similar indication will be integrated. Price negotiation will be taken in different stage according tomarket dynamics for varieties that be influenced significantly by supply and demand. At the sametime, the category has also been expanded from chemical drugs to biological drugs, high-valuemedical consumables and so on. In this context, the profits of generic drugs were largely squeezed,and it is a crucial issue for companies, who have to follow the trend of VBP program, to overcomethe difficulties by transformation and reform.
At present, China has stepped in the second tier of pharmaceutical innovation in the world. Thenumber of innovative drugs only ranked after the United State, but with relatively large gap. In recentyears, with the rapid improvement of R&D capability of domestic pharmaceutical companies, the gap
of clinical practices compared with foreign companies was further narrowed, but some severphenomena, such as overcrowded targets, overlapped indications, and increasing homogeneity stillexist, underscoring the problems of the waste of resources and fierce competition in similar drugs. InNovember 2021, the official draft of the Guiding Principles for Clinical Research and Developmentof Anti-tumor Drugs Oriented by Clinical Value is released by CDE, in which the core value of“driven by the demand of patients and oriented by clinical value to meet the unfulfilled clinicaldemands” was recognized by all walks of society. This policy adjustment emphasizing on clinicalvalue will have a lasting impact on the development of innovative drugs and CXO industry anddirectly affect pharmaceutical companies’ R&D logistic and strategies, leading them to a virtuouscycle of R&D to increase the benefits for patients, and promoting the orderly long-term developmentof pharmaceutical innovation in China.In the long run, the transition from Me-too/Me-better to BIC, and finally to FIC, is an importantway for China to transform from a country with large pharmaceutical industry to a country withadvanced pharmaceutical industry.In January 2022, nine ministries, including the Ministry of Industry and Information Technologyand National Development and Reform Commission, released the “14th Five-Year Plan” Outline forthe Development of Pharmaceutical Industry (“the Outline”), and put forward the developmentobjectives in the next five year and the long-range objectives through next 15 years. By 2025, majoreconomic indicators will achieve medium-high growth, innovation achievements in frontier fieldswill be prominent, innovation impetus will be strengthened, modernization of industrial chain will besignificantly improved, the supply guarantee system of pharmaceutical devices will be furtherimproved, and internationalization level will be comprehensively improved. By 2035, the overallstrength of the pharmaceutical industry will improve. Innovation-driven development will take shape,the industrial structure will be upgraded, and more products will be produced with better quality tomeet people's health needs at a higher level, providing solid support for building a healthy China inall respects. A series of specific targets are also set in the Outline: In terms of economies of scale, theOutline proposes that during the 14th Five-Year Plan period, the average annual growth rate ofoperating revenue and total profits of the pharmaceutical industry should be kept above 8%, theproportion of added value in all industries should be increased to about 5%, and the concentrationdegree of leading enterprises in the industry should be further improved. In terms of R&D investment,the Outline proposed that R&D investment in the whole industry will increase by more than 10%annually during the 14th Five-Year Plan period. By 2025, sales growth volume of innovative productswill account for a higher proportion in the growth volume of industry’s operating revenue
2. Aesthetic medicine
China’s aesthetic medicine industry has grown rapidly in recent years, thanks to the increase ofper capita disposable income, the significant development of medical technology, demographicchanges, and the higher social acceptance of medical aesthetic services. According to the report ofFrost & Sullivan, a world-renowned market research agency, China’s market share of aestheticmedicine ranks second only to that of the United State. China’s aesthetic medicine market growsmuch faster than the global market. It has a huge consumption base and is the world’s fastest growingmarket with great growth potential. Frost & Sullivan predicts that the compound growth rate of globalaesthetic medicine market over the five-year period from 2018 to 2023 will be 7%, while thecompound growth rate of China’s aesthetic medicine market over the five-year period from 2019 to2024 will reach 17.3%, much higher than global average. In terms of market scale, global aestheticmedicine market was worth USD135.7 billion in 2018, and China’s aesthetic medicine market in2024 is estimated to be worth USD315.8 billion, becoming the world’s largest market in this field.The blooming China’s medical aesthetic market is not only a result of the local, social and economictransformation, but also a result of the globalization of cultural, aesthetic ideology and medicalcosmetology technology. Frost & Sullivan estimates that an RMB653.5 billion market in China willbe developed by 2030, and the CGAR of China’s aesthetic medicine market from 2020 to 2030 willbe 15.5%. At the same time, the market penetration rate of aesthetic medicine in China is far lowerthan that of the US, Brazil, South Korea and other countries, meaning that aesthetic medicine industryin China will continue to grow rapidly for a long time in the future. Measured by the times of aestheticmedical treatment per thousand people, the penetration of in China is significantly lower than that inJapan, Brazil, the US and South Korea, and is less than one-fifth of that in South Korea, and one-thirdof that in the US.The rapid growth of domestic aesthetic medicine industry also underscores the problems suchas illegal operation, false publicity, damage to the personal safety and the rights and interests ofconsumers. The chaos of the industry has been outside the supervision of authorities for a long time,and it is urgent to standardize the regulation of the industry. During the reporting period, the relevantdepartments of the state released several documents and regulations to expand the scope ofsupervision and strengthen supervision, guiding and promoting the standardized development of theaesthetic medicine industry. In June 2021, eight ministries, including NHSA, jointly released theSpecial Rectification Work Plan on Cracking Down on Illegal Aesthetic medicine Services to takerelevant actions. In 2021, State Administration for Market Regulation released the Guidelines forLaw Enforcement regarding Advertising in the Aesthetic medicine, in order to standardize andstrengthen the supervision on aesthetic medicine advertising and effectively maintain the order ofaesthetic medicine advertising market, protecting the legitimate rights and interests of consumers.
The guideline also defines the detailed requirements and regulatory responsibilities of the publicationof medical beauty advertisements, and particularly discourages the promotion that causes anxietyabout appearance. In November 2021, the Ministry of Public Security of China issued a notice onfight against the crime of illegal production and sale of medical cosmetic products, such asmanufacturing and selling fake and inferior products, and selling medical cosmetic products importedfrom illegal ways. As the supervision on aesthetic medicine industry becomes more intensified,industry supervision and policy guidance are expected to become normal, and standardized operationwill be the inevitable choice of related organizations. Under the guidance of policies, the industrywill be led to a path of healthy and orderly development, and will become more centralized, eco-concerned, transparent and standardizediii. Innovative development strategy of the Company’s business sectors
1. Development plan of pharmaceutical industry
In the future development, the Company will emphasize on meeting the clinical demands inscientific research and R&D, and pursue innovation and differencing competitiveness in new drugR&D and project launching as well as decision-making. It will focus on clinical value, clinicalpharmacoeconomic characteristics, commercial value, aim at long-term pipeline layout and placeequal importance on generic drugs upgrade and innovative drugs development. Innovative drugdevelopment will be our foundation and priority in creating core competitiveness. In other words, theCompany will closely follow up the global trend of technology development and product R&D in thecutting-edge fields such as biological drugs, gene therapy and antibody drugs, focus on the layout anddevelopment of innovative drugs with outstanding clinical value and generic drugs with high-techbarriers targeted on serious diseases and chronic diseases such as antineoplastic drugs, endocrinedrugs and autoimmune drugs, forming differentiating and advanced pipeline layout of innovativeproducts. It will transform its R&D philosophy from “emphasizing on fast follow” to “identifyingdifferentiating advantages and innovating at the source”. We will deepen global cooperation andproduct introduction on all fronts, accelerate our capabilities of learning from and integrating externaladvanced resources and technologies and make more connection with them, and establish a globalecosystem of strategic R&D cooperation with Zhongmei Huazhong at its core. We will shift fromrelaying on license in to emphasizing on independent R&D while maintaining license in, creating thedual engine of innovation and R&D to constantly enrich product pipelines and improve the medium-and long-term plan of innovative products. At the same time, we will continue to enhance ourcapability of international operation and make more efforts in the license-out of our distinctiveproducts and advanced technologies and patents.It will continue to increase R&D investment, and enrich and optimize product pipelines. In
addition, it will strive to raise the proportion of R&D investment to sales income of pharmaceuticalindustry to over 10% per year, and use R&D funds more effectively. Through independent R&D andlicense-in, it will initiate and reserve at least 15 innovative projects (including drugs and medicaldevices, ect.) every year, and ensure that each existing product line has innovative product supplementand is led by innovative products, thus forming diversified product pipelines and sound productstructure. A virtuous development trajectory with constant stream of innovative products to belaunched will be created in 2022, helping to realize the phased target that 30% of the total revenue ofpharmaceutical industry are generated by innovative business in 2025.It will introduce high-end talents at a faster pace to create a high level scientific research team,and foster a cultural environment that values innovation, encourages success, and allows failure. Itwill strengthen the establishment of internal R&D systems and technical platforms, and build asuccess-oriented and market-based performance mechanism. It will also promote the implementationof innovation-driven international strategy by creating an open-minded scientific team withprominent competence, great passion and strong responsibility that forges ahead in an innovative andenterprising spirit. It will establish dynamic evaluation mechanism of R&D projects. By setting upan external expert academic committee, the Company will improve the decision-making andmanagement of R&D and product introduction, ensuring that scientific research innovation work arescience-based, advanced and feasible.
2. Development plan of pharmaceutical commerce
Upholding the principle of focusing on services and promoting transformation throughinnovation, it will keep our business base in Zhejiang province, constantly increase brand influence,and maintain our leading industry position in Zhejiang province. It will not simply pursue theexpansion in scale, but emphasize both scale and efficiency. It will strength the establishment ofsystems and improve operating capability by refining operation and management. Besides, it willbuild a modern pharmaceutical logistic network covering the whole province, go all out to createhigh-end third party pharmaceutical logistics featured by cold chain, thus enhancing our value addedservice capability. It will vigorously develop new business model such as general agency, businesscustody and BTC pharmacies, so as to cultivate innovative business. It will consolidate in-hospitalmarket, expand outside-hospital market, and apply Internet platforms. Through new technologiessuch as big data, AI and IoT, it will innovate our services for suppliers, and extent service supplychain. Relaying on the platform and network of pharmaceutical circulation linking upstreammanufacturers and downstream users, it will upgrade and improve traditional operation model, builda pharmaceutical supply chain that keeps in line with the time, and gradually become a provider ofmodern value-added pharmaceutical services, pursuing sustainable high-quality development.
3. Development plan of aesthetic medicine
The Company will stick to the principle of “facilitating global operation and layout withdomestic and international circulations progressing smoothly” in aesthetic medicine development. Tobe specific, it will take its core subsidiary Sinclair as the main global operating platform, and build itinto a world-class aesthetic medicine enterprise, so as to create new development space, realizingglobal operation and layout. Chinese aesthetic medicine market is of great importance to the Company.It will introduce more high-tech products with great potentials into China, and relay on its strongdomestic registration and marketing competence to expand domestic market. Internationally, basedon its marketing foundation in China and the rapid growth of the industry, it will promote the approvaland commercialization of more competitive aesthetic medicine product in international markets. Indoing so, it will create a new development pattern featuring dual circulation, in which domestic andoverseas markets reinforce each other.In the future, the Company will continue to focus on global high-end aesthetic medicine market.By developing four global R&D centers in Sinclair (UK), High Tech (Spain), R2 (US) and Kylane(Switzerland), it will further integrate R&D resources and capabilities, upgrade and optimize productstructure in active, and enrich and improve industrial layout. In addition, five global production basesin the Netherlands, France, the United States, Switzerland and Bulgaria will ensure the productivityof aesthetic medicine products in the way toward internationalization, so as to better fulfill the marketdemand for future development.
iv. Operation plan of 2022
The year 2022 kicks off the Company’s seventh “Three-Year Plan”, and its innovation-driventransformation comes to a crucial time. In 2022, the Company will adhere to the developmentphilosophy of all business sectors clarified in the seventh “Three-Year Plan”, implement it in apragmatic and unswervingly manner, and strive to get its overall operation performance back togrowth trajectory.
1. Pharmaceutical manufacturing and quality
In 2022, the Company will vigorously innovate production and operation model, improvetechnology with priority given to increasing the preparation yield, constantly promote lean production,reduce costs and optimize process, and bolster production efficiency, further reducing productioncosts.
It will continue to increase investment in fixed assets in a coordinated manner and pay attentionto major projects such as the construct of Life Science Industrial Park and the industrialization ofsemaglutide API. It will strengthen the management of project schedule, cost, quality and safety, andensure the advances in technology while meeting the target of investment income.
Quality system shall be updated to keep pace with transformation. The Company will furtherconsolidate its quality management system and collectivize management capability, and reform itsmanagement in terms of compliance, risk control, and cost and benefit, ensuring the realization ofinternational development. It will continue to implement international standards in production, takeFDA standard as the goal of quality control, enhance its capability of international registration,shorten registration period, and improve the efficiency of submit for approval.
2. Pharmaceutical R&D and BD
Adhering to clinical value, the Company will improve assessment system of innovation andR&D projects, and develop a dynamic system of R&D resource allocation. It will comprehensivelyimplement the establishment of R&D security systems and institutions of innovation center, makeinnovation and R&D more professional, international and standardized, and build science-basedsound IT systems in all R&D centers in a comprehensive manner, so as to effectively protect coredata and information. It will set up a Science and Technology Expert Committee, and strengthen themanagement prior to project implementation with the help of internal and external experts, tomaximize clinical value, pharmacoeconomic value and commerce value.
Relying on its R&D capability and commercialization capability, and focusing on anti-tumor,endocrinology and immunity, the Company will strengthen the cooperation with leading enterprisesat home and abroad on all fronts such as R&D, production and commercialization. With the help ofits brand advantages and BD capability, it will realize innovative products license out andcontinuously improve the brand influence.
3. Pharmaceutical care
Sticking to the “scientific research-based, patient-centered” philosophy, it will promoteacademic transformation, upgrade training system, and enrich training content, significantlyenhancing academic promotion capabilities. It will further deepen the reform of marketingorganization, continue to push forward the layout outside hospital and in primary-level, andimplement refined marketing of products, so as to comprehensively bolster the marketing capabilityinside and outside hospital, at primary-level and online. It will further strengthen the establishmentof outside-hospital organizational structure, optimize the system of outside hospital promotion andprimary-level promotion, foster a sales team owning expertise, and explore and create academicpromotion model suitable for outside-hospital market based on Internet data. Through a goodenterprise image and brand exposure, it will actively respond to the adjustment of Catalogue of Drugsfor Basic National Medical Insurance and Catalogue of National Basic Drugs, as well as centralizeddrug procurement policies at all levels, creating a sound academic promotion ecosystem.
4. Pharmaceutical commerce
The Company will continue to develop traditional commerce distribution in Zhejiang province,and maintain the growth of sales and profitability. At the same time, it will provide a full range ofquality services to meet the demands of upstream and downstream customers, explore the marketoutside Zhejiang with innovative businesses, and reshape it core competitiveness. It will expand itsshare in national agency or regional agency business, and enhance profitability by making moreefforts in building e-commerce platform and its own brand. While consolidate traditional business,stabilize in-hospital market and plan outside-hospital market, it will constantly pursue value creationby realizing innovation-driven transformation and expanding e-commerce and new platform. It willintegrate procurement and sales, jointly promote innovation drug introduction, focus on increasingthe share of high-margin products in the hospital, and gradually adjust the product structure. In termsof pharmaceutical retail business, it will focus on designated pharmaceutical stores, hospitalassociated drugstores and chain drugstores, and expand its coverage and shares, maintaining highgrowth rate. In terms of self-operate retail business, it will focus on drugstores inside and nearbyhospitals, DTP stores, and upgrade community drugstores. It will expand the share of medical devices,ginseng antler and other high value products in all parts of the province, strive to cultivate innovativebusiness, and intensified efforts in expanding specialty product pipeline agency from Zhejiang to thewhole country. Ginseng antler under private label will be the key product of self-operate e-commerceplatform, and more efforts will be put in product R&D and upgrade. It Supply Chain Company willimprove provincial logistics system featured by cold chain, continue to expand third-party logisticsbusiness, consolidating its position as the leading pharmaceutical cols chain in Zhejiang.
5. Aesthetic medicine
Sinclair (Shanghai) will formulate a clear brand building plan, strengthen the education of beautyseekers and doctors, train more registered doctors that meet the requirements, and strive to train morethan 1000 certified doctors in 2022. It will constantly expand the number of institutions, striving tocooperate with more than 500 aesthetic medicine institutions in 2022. At the same time, it will givepriority to the feedback from beauty-seekers, and continue to pay attention to AE dynamics. On thebasis of the good start in 2021, it will continue to deepen market expansion and brand building, andestablish a sound return visit mechanism. It will establish and improve a professional registrationsystem, accelerate the domestic registration progress of foreign products under development andproducts launched in overseas markets. Sinclair will continue to enrich the product pipeline in thefield of aesthetic medicine, and at the same time firmly implement the business philosophy of doublecirculation of domestic and international development, and strengthen the communication, exchangeand learning among employees at home and abroad.
6. Industrial microbiology
The Company will stabilize quality, optimize costs, and build leading scale production capabilityof microbiology through technical advantages, operation control and scale effect. At the same time,it will accelerate product R&D speed and improve product profile, so as to gain competitiveadvantage.
7. Management work
Focusing on the Company’s overall interests, it will build an efficient management system in ascientific way, and systematically improve the Company’s operation efficiency through systembuilding. It will value details and key links, establish a sound and united work style, and identify jobresponsibilities, further enhancing management efficiency. It will underscore vision and the overallplan, and build a talent team values science, innovation, responsibility and mission. It will promoteintegrity, adhere to principle and build a clean working environment. It will further enrich corporateculture and lead the healthy development of the company.
It will introduce and train talents, strengthen a tiered talent team, build a professional,international and younger organizational team, establish a diversified and multi-level talent trainingsystem, and facilitate innovation-driven transformation by emphasizing on talents building. It willaccelerate the layout of international talents and capacity building of international talents, and fosters talent team with global thinking and overseas operation capacity, ensuring that the Company’sinternational operation goes smoothly. It will constantly improve the establishment of HR system,carry out talent review and training, and pay more attention to the development of core talents. It willestablish and improve performance and feedback mechanisms centering on organization and projects,boost its own development capability, and form the core competitiveness of the organization.
The overall work plan of financial management system in 2022 is as follows. It will adhere tolong-term development and closely follow the Company’s strategy. It will implement the guidingprinciple of economic work, and intensify efforts in system building. It will keep pushing the overallfinancial planning objectives that is collectivized, compliance, information-based and oriented tointernational market. It will focus on reducing cost and improving efficiency and operation, supportinnovation-driven transformation and compliance bottom line, and build a refined and efficientfinancial talent team, so as to constantly create financial value.
v. Potential risks and responses
1. Industry policies and market operation risks
The pharmaceutical industry is one of the most important industries related to the nationaleconomy and people's livelihood, and also significantly influenced by national policies. In recentyears, the reform of healthcare sectors has been deepened, and various policies were strengthened tobecome more standardized, normal and systematic. The national supervision of pharmaceutical
industry has a profound impact on the development of the domestic pharmaceutical industry, whichhas become even more uncertain as the COVID-19 pandemic kept resurging and pandemic responsebecame more severe. With the further promotion of the policies such as volume-based procurementand health insurance negotiation, the production costs and profitability in the pharmaceutical industryare also facing challenges, and the price of new drug products could be lowered.Responses:
The Company will pay close attention to and study the national pharmaceutical policies andindustrial development trends, increase the investment in R&D, and integrate independent R&D andlicense in. It will speed up the layout of innovative varieties centering on core treatment areas, enrichthe product pipelines, and enhance core competitiveness. At the same time, it will lower productionand operation risks through lean production management and cost reduction and efficiencyimprovement. Besides, it will make great efforts to expand the primary-level and self-funded marketto increase the market coverage. It will also focus on dominant aesthetic medicine and industrialmicrobiology sectors, improve brand competitiveness, and create new profit points.
2. New drug R&D risk
The R&D of new drugs requires high investment, takes long term and may cause high risks.Before a new product is launched, it needs to engage in a long process including nonclinical studies,clinical trials, submission and registration, and approval for launch, which will consume a lot of time.Besides, it is subject to the influence of national policies, market, supervision and approval, and soon. In addition, the R&D of new medicine has extremely high requirements of personnel quality. TheHR and R&D expenses at the early stage will lead to some pressure on the Company for the currentoperation goal, and new drugs will be examined by market demands when goes on the market, whichwill result in consequences such as the return of R&D investment lower than expectation.
Responses:
The Company will continue to increase investment in the R&D of new drugs, optimize theinnovation mechanism, constantly improve the research and evaluation and decision-making systemof new drugs in a scientific way, and strengthen relationship with well-known R&D institutions athome and abroad. Focusing on core treatment areas, it will enrich and improve product pipelinesthrough independent project initiation and license in, enhance independent R&D competence, andbuild its own R&D ecosystem. It will continue to increase the introduction of high-level scientificresearch talents, strengthen the training and incentives of internal core technical personnel, and builda scientific research team covering the whole cycle of new drug development.
3. Risk of exchange rate fluctuation
In recent years, with the continuous promotion of the Company’s internationalization,
international cooperation and communication continue to increase. The aesthetic medicine marketingnetwork covers all around the world, and the proportion of business settled by foreign currencies isincreasing. The changes in exchange rate have a profound and long-lasting impact on companies,which can not only bring good economic benefits but also cause serious economic risks. Exchangerate fluctuations will affect the prices of the Company’s export products, and will also cause exchangegains and losses to the company, directly affecting the Company’s assets, liabilities and earnings, andfurther affecting the operation capacity, debt repayment capacity, and profitabilityResponses:
The Company will pay attention to exchange rate fluctuations all the time, and adjust theoperation strategies and resolve negative impacts in a timely manner based on its own condition. Itwill foster the awareness of exchange rate risk prevention, and improve management system offoreign exchange risks. At the same time, it will strengthen the training of financial personnel in termsof professional skills and risk awareness, enhance risk avoid awareness, and avoid exchange rate risksby financial methods.
4. Goodwill impairment risk
In recent years, in order to realize the development strategy of innovation-driven transformation,the Company has carried out several investment and merger activities in the field of innovativemedicine and aesthetic medicine, thus forming goodwill. As at the end of the reporting period, theCompany conducted an impairment test on goodwill, and found no sign of impairment of goodwill.If the business condition of the acquired companies shows fluctuations, there may be a risk ofgoodwill impairment, thus adversely affecting the current business performance of the Company.
Responses:
The company will strive to comprehensively improving its coordination capability of operationplanning, management structure and financial management, constantly strengthen resource sharingand synergies with overseas subsidiaries such as Sinclair, a global aesthetic medicine operatingplatform of the Company, and continuously enhance the Company's business integration capabilitiesin overall operation and governance.XII. Registration form of receptions, including research, communication and interview,undertaken during the reporting period
√ Applicable □ N/A
| Reception Date | Reception Address | Reception Method | Type of visitor | Reception object | Main content of discussion and | Index of basic information of the research |
| information provided | ||||||
| February 18,2021 | Company conference room | Field research and communication by phone | Institution, individual | China International Capital Corporation Limited., etc. | Interpretation on Huadong Medicine’s introduction of autoimmunity innovative drugs and acquisition of overseas energy based aesthetic devices company | Please refer to “Huadong Medicine: record of investor relations activities: February 18, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| February 25,2021 | Company conference room | Field research and communication by phone | Institution, individual | Harvest Fund, Huatai Securities, etc. | Business communication | Please refer to “Huadong Medicine: record of investor relations activities: February 25, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| March 3,2021 | Company conference room | Field research and communication by phone | Institution, individual | Industrial Securities, Zheshang Securities,Huatai Securities, etc. | Business communication | Please refer to “Huadong Medicine: record of investor relations activities: March 3, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| April 21, 2021 | Company conference room | Communication by phone | Institution, individual | Industrial Securities, GF Securities, etc. | Interpretation of 2020 Annual Report of Huadong Medicine | Please refer to “Huadong Medicine: record of investor relations activities: April 21, 2021” presented on the websites of irm.cninfo.com.cn |
| and cninfo.com.cn for details. | ||||||
| April 27-28, 2021 | Company conference room | Field research and communication by phone | Institution, individual | UBS Securities, Huatai Securities, Essence Securities, etc. | Online discussion on China A-shares, interpretation of 2021 First Quarterly Report of Haudong Medicine | Please refer to “Huadong Medicine: record of investor relations activities: April 27-28, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| May 11, 2021 | Company conference room | Others | Institution, individual | Individual investors and institutional investors | Interpretation of 2020 annual and 2021 First quarter online performance | Please refer to “Huadong Medicine: record of investor relations activities: May 11, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| May 21, 2021 | Company conference room | Field research | Institution, individual | China International Capital Corporation Limited., etc. | Activities of investors’ reception day of the Company | Please refer to “Huadong Medicine: record of investor relations activities: May 21, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| June 29-July 5, 2021 | Company conference room | Field research and communication by phone | Institution | Kaiyuan Securities, Guotai Junan Securities, SWS Research, etc. | Business communication | Please refer to “Huadong Medicine: record of investor relations activities: June 29-July 5, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| August 10. 11. | Company | Communication by | Institution, | Hua | Interpretation | Please refer to |
| 13, 2021 | conference room | phone | individual | Chuang Securities, Goldman Sachs, TF Securities, etc. | of Half Year Report performance of Huadong Medicine, communication of overseas investors | “Huadong Medicine: record of investor relations activities: August 10. 11. 13, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| October 27, 2021 | Company conference room | Communication by phone | Institution | Huatai Securities, etc. | Interpretation of Third Quarter Report performance of Huadong Medicine | Please refer to “Huadong Medicine: record of investor relations activities: October 27, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| December 23,2021 | Swissotel Grand Shanghai | Field research | Institution | Huatai Securities, etc. | Special communication on aesthetic medicine business of the Company | Please refer to “Huadong Medicine: record of investor relations activities: December 23, 2021” presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
Section IV. Corporate GovernanceI. Basic situation of corporate governanceDuring the reporting period, the Company strictly complied with the requirements of the regulatory documents on corporategovernance issued by the CSRC and the Shenzhen Stock Exchange, such as “Company Law”, “Securities Law”, “GovernanceGuidelines for Listed Companies”, and “Rules for Stock Listing of Shenzhen Stock Exchange”. In order to realize its strategicdevelopment goals and safeguard the interests of all shareholders, the Company carried out comprehensive internal control andstandardized management, strengthened system construction and internal management, standardized information disclosure andimproved the corporate governance structure. There is no difference between corporate governance and the requirements of “CompanyLaw” and the relevant provisions of the CSRC.
According to the regulatory documents on the governance of listed companies issued by the CSRC, the Company has formed asystem that is legally compliant and in line with the actual operation of the Company. By the end of the reporting period, the actualcorporate governance was basically consistent with the regulatory documents on corporate governance issued by the CSRC and theShenzhen Stock Exchange, and there were no outstanding governance issues.
Whether the actual corporate governance of the Company is significantly different from the normative documents on corporategovernance issued by the CSRC
□ Yes √ No
No such case during the reporting period.II. The Company’s independence in Businesses, Management, Assets, Institutions and Financefrom Controlling Shareholders
During the reporting period, the Company continuously strengthened the corporate governance structure and implementedstandardized operation in accordance with the requirements of regulatory authorities. The Company and its controlling shareholderrealized the separation of management and independent operation in terms of personnel, assets, finance, institutions and business.
| Category | Independent or not | Note |
| Independence in business | Yes | The Company is mainly engaged in the production and operation of pharmaceutical products, and has its own independent production and sales systems. The Company’s business activities are completely independent from its controlling shareholder. Although the subsidiaries of the Company and the controlling shareholder are engaged in pharmaceutical business, they focus on different medical fields and different customer groups. Therefore, there is no competition between the Company, controlling shareholders and related parties. |
Independence inpersonnel
| Independence in personnel | Yes | The company is completely independent in the management of labor, personnel and salaries, and has an independent human resources department and a sound personnel management system. |
Independence in assets
| Independence in assets | Yes | The Company has various independent assets, such as independent production systems, auxiliary production systems and supporting facilities; independent purchasing and sales systems; independent industrial property rights, trademarks, non-patented |
| technologies and other intangible assets. | ||
| Independence in institutions | Yes | The Company has established an independent Board of Directors, management and other internal organizations, and each functional department is independent from controlling shareholders in duty and personnel. There is no superior-subordinate relation between functional departments of controlling shareholders and those of the Company, which would have an impact on the Company’s independent operations. |
| Independence in finance | Yes | The Financial Management Head Office is responsible for the financial accounting and budget management of the Company, and has established independent and sound financial, accounting and budget management systems according to relevant laws and regulations. |
Note: The Company is independent in Businesses, Management, Assets, Institutions and Finance from controlling shareholders. TheCompany does not have peer competition or related transactions caused by partial restructuring, industry characteristics, nationalpolicies or mergers and acquisitions.III. Horizontal competition
□ Applicable √ N/A
IV. Annual and extraordinary general meetings held during the reporting period
1. Shareholders’ meetings in the reporting period
| Meeting | Meeting type | Proportion of investors present | Convene date | Disclosure date | Meeting resolution |
| 2020 annual General Meeting | annual General Meeting | 59.20% | May 21, 2021 | May 21, 2021 | Announcement of Resolutions of 2020 Annual General Meeting (Announcement No.: 2021-045) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed votingrights:
□ Applicable √ N/A
V. Directors, Supervisors and Senior Managers
1. Brief Information
| Name | Title | Tenure status | Gender | Age | Commencement of term of duty | Commencement of term of duty | Shares held at the beginning of the period (shares) | Shares increased during the Period(shares) | Shares decreased during the Period(shares) | Other changes(shares) | Shares held at the end of the Period (shares) | Reasons of changes in shareholding |
| Lv Liang | Chairman | Incumbent | Male | 48 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Li Bangliang | Honorary Chairman | Incumbent | Male | 76 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Li Yuedong | Director, General Manager(CEO) | Departing | Male | 50 | June 06, 2019 | August 16, 2021 | 0 | 0 | 0 | 0 | 0 | / |
| Niu Zhanqi | Director | Incumbent | Male | 55 | June 03, 2016 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Kang Wei | Director | Incumbent | Female | 54 | December 05, 2016 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Jin Xuhu | Director | Incumbent | Male | 59 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Zhu Liang | Director | Incumbent | Male | 45 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Zhong Xiaoming | Independent Director | Incumbent | Male | 60 | January 6, 2016 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Yang Lan | Independent Director | Incumbent | Female | 53 | April 27, 2017 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Yang Jun | Independent Director | Incumbent | Female | 50 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Bai Xinhua | Supervisor | Incumbent | Female | 56 | January 20, 1998 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Liu Chengwei | Supervisor | Incumbent | Male | 49 | January 6, 2016 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Qin Yun | Supervisor | Incumbent | Female | 52 | May 19, 2006 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Hu Baozhen | Supervisor | Incumbent | Female | 49 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| He Rufen | Supervisor | Incumbent | Female | 54 | June 06, 2019 | June 05, 2022 | 33,660 | 0 | 0 | 0 | 33,660 | / |
| Xu Zhifeng | Supervisor | Incumbent | Male | 47 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Zhou Shunhua | Deputy General Manager | Incumbent | Male | 62 | June 30, 2009 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Wu Hui | Deputy General Manager | Incumbent | Male | 53 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Zhu li | Deputy General Manager | Incumbent | Male | 47 | October 12, 2020 | June 5, 2022 | 30,000 | 0 | 0 | 0 | 30,000 | / |
| Chen Bo | Board Secretary | Incumbent | Male | 50 | June 30, 2009 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Qiu Renbo | Person in Charge of Finance | Incumbent | Male | 40 | November 28, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Total | -- | -- | -- | -- | -- | -- | 63,660 | 0 | 0 | 0 | 63,660 | -- |
Whether directors and supervisors left office or senior management members were dismissed during their terms of office during thereporting period
√ Yes 口 No
The Board of Directors of the Company received the written resignation from Mr. Li Yuedong, Director of the 9th Board of Directorsand General Manager of the Company, in August 2021. Mr. Li Yuedong applied for resigning from the positions of Director of the 9thBoard of Directors and General Manager of the Company due to personal health reasons, and ceased to hold any position in theCompany and its subsidiaries after leaving office.Change of directors, supervisors and senior managers of the Company
√ Applicable □ N/A
| Name | Title | Type | Date | Reason |
| Li Yuedong | Director, General Manager(CEO) | Departing | August 16, 2021 | Personal physical reasons |
2. Positions and Incumbency
Professional background, main working experiences and main responsibilities of the Company’s incumbent directors, supervisors andsenior managers
(1) Profile of directors
Chairman –Mr. Lv Liang: born in 1974, holds a master’s degree. He has served as Project Manager of Grand Asset Management Co.,Ltd. from July 1997 to July 2001; Deputy General Manager and General Manager of Changshu Leiyunshang Pharmaceutical Co.,Ltd. from July 2001 to March 2010; Director and Deputy General Manager of the Company from April 2010 to January 2016;Director and General Manager of the Company from January 6, 2016 to June 5, 2019; and Chairman of the Board of the Companysince June 6, 2019.Director – Mr. Niu Zhanqi: born in 1967, Doctor of Pharmacy. He has served as technical researcher of Chengde TechnicalSupervision Bureau; Deputy Director of Hebei Pharmaceutical Group Research Institute; Manager of Technical DevelopmentDepartment of China Shijiazhuang Pharmaceutical Group; Manager of Medicine Department of CSPC Ouyi Pharmaceutical Co.Ltd.; Deputy General Manager of CSPC NBP Pharmaceutical Co., Ltd.; senior R&D director of CSPC; Vice President ofPharmaceutical Management Head Office and General Manager of R&D Management Department of China Grand Enterprises, Inc.from March 2013 to June 2016; CEO of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. from June 2016to November 2018; President of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. since November 2018;and Director of the Company since June 2016.Director – Ms. Kang Wei: born in 1968, holds a master’s degree. She has served as Manager of the Trade Division, Manager of theCapital Division and Manager of Financial Management of the Financial Management Department of China Grand Enterprises, Inc.;Chief Financial Officer and Deputy General Manager of Heilongjiang Grand Shopping Center; currently Chief Financial Officer ofChina Grand Enterprises, Inc.; and Director of the Company since December 2016.Director - Mr. Jin Xuhu: born in 1963, holds a bachelor’s degree. He has served as Chairman and General Manager of HangzhouHuadong Medicine Group Co., Ltd.; Party Secretary and Chairman of Hangzhou State-owned Capital Investment and Operation Co.,Ltd., Executive Director & Manager of Hangzhou Huadong Medicine Group Co., Ltd., since January 2019; and Director of theCompany since June 2019.Director - Mr. Zhu Liang: born in 1977, holds a bachelor’s degree. He has served as Director of the Labor Union of HangzhouHuadong Medicine Group Co., Ltd., Vice Chairman of the Labor Union of Hangzhou Huadong Medicine Group Co., Ltd., Chairman
of the Labor Union of Hangzhou Huadong Medicine Group Co., Ltd. and Huadong Medicine Co., Ltd.; Supervisor of the Companyfrom April 2017 to June 2019; and Director of the Company since June 2019.Independent Director - Mr. Zhong Xiaoming: born in 1962, holds a master’s degree. He has been Deputy Director of the New DrugsOffice, professor, postgraduate student and doctoral supervisor of Zhejiang Chinese Medical University since 1985; chief scientist ofZhejiang University since 2013; and Independent Director of the Company since January 2016.Independent Director - Ms. Yang Lan: born in 1969, holds a master’s degree. She has served in Guiyang Audit Bureau, Zhuhai LixinCertified Public Accountants, Shanghai Lixin Changjiang Certified Public Accountants Zhuhai Branch, and Guangdong LixinChangjiang Certified Public Accountants. Senior Manager of Pan-China Certified Public Accountants Guangdong Branch;Investment Director of Guangzhou Securities Innovation Investment Co., Ltd.; Deputy Director of Guangdong Pujin XinghuaCertified Tax Agent Co., Ltd.; Deputy Director of Guangdong Lixin Jiazhou Certified Public Accountants; and Independent Directorof the Company since April 27, 2017.Independent Director - Ms. Yang Jun: born in 1972, holds a bachelor’s degree, Canadian citizenship. She has served as ChiefFinancial Officer of Freedom Foundation of Ontario, Canada; Chief Knowledge Officer and lecturer partner of ShanghaiEasyFinance Management Consulting Co., Ltd.; Chief Financial Officer of Dookbook Culture Co., Ltd.; founding partner and chiefconsultant of Shanghai Yuecheng Information Technology Co., Ltd. since June 2018; and Independent Director of the Companysince June 2019.
(2) Profile of supervisors
The Chairman of Board of Supervisors - Ms. Bai Xinhua: born in 1966, holds a master’s degree. She has served as Assistant Auditorof Beijing Municipal Bureau of Audit; Accounting Manager of the Financial Management Head Office and Audit Manager of theSupervision and Audit Department of China Grand Enterprises, Inc.; now Deputy General Manager of the Financial ManagementHead Office of China Grand Enterprises, Inc.; Supervisor of the Company since 2003;Supervisor - Ms. Qin Yun: born in 1970, holds a bachelor’s degree. She has served as attending physician in the Internal MedicineDepartment of Beijing Shougang Hospital; medical representative in the Beijing Office of Tianjin Takeda Pharmaceuticals Co., Ltd.,senior medical representative in the Beijing Office of Lilly Asia; and head of product department in the sales branch of ChinaNational Pharmaceutical Foreign Trade Corporation. She worked for China Grand Enterprises, Inc. in 2002 and has served as ProjectManager of Pharmaceutical Business Division, Business Director of Operation Department of Pharmaceutical Management HeadOffice; now Business Director of Bidding and Procurement Management Center of China Grand Enterprises, Inc.; and Supervisor ofthe Company since 2006;Supervisor – Mr. Liu Chengwei: born in 1973, holds a master’s degree. He has served as Financial Services Manager and ChiefFinancial Officer of GE Medical Systems China; Financial Manager of ECG monitoring of GE Healthcare Asia. In 2001, he joinedChina Grand Enterprises, Inc., where he served as Director of Supervision and Audit, Deputy General Manager of the Investment andOperation Head Office, Deputy General Manager and General Manager of the Pharmaceutical Business Division, and head of thepreparatory group of CGE Life & Health Insurance Company. He served as Deputy General Manager of Grandpharma (China) Co.,Ltd. from August 2016 to September 2018; Assistant President of China Grand Enterprises, Inc. since September 2018; Director ofthe Company from 2003 to January 2016; and Supervisor of the Company since January 2016.Supervisor - Ms. Hu Baozhen: born in 1973, holds a bachelor’s degree. She served as Chief Financial Officer and dispatched full-timesupervisor of Hangzhou State-owned Assets Supervision and Administration Commission from March 2009 to March 2019; Head ofthe Risk Control and Legal Department of Hangzhou State-owned Capital Investment and Operation Co., Ltd. since April 2019;Supervisor of the Company from June 2012 to April 2014; Supervisor of the Company since June 2019.Employee Supervisor – Ms. He Rufen: born in 1968, holds a bachelor’s degree, senior certified public accountant. Assistant Managerof the Financial Department of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. from July 1990 to March 1998; Manager ofthe Financial Department of the Company from April 1998 to December 1998; officer in charge of financial affairs of the Companyfrom January 1999 to June 2010; Deputy General Manager of Business of the Company since July 2010; Employee Supervisor of theCompany since June 2019.
Employee Supervisor - Mr. Xu Zhifeng: born in 1975, holds a bachelor’s degree, economist. Commissioner of the BusinessAdministration Office and Director Assistant of the General Manager Office of Hangzhou Zhongmei Huadong Pharmaceutical Co.,Ltd. from August 1997 to July 2011; Manager of the Risk Management and Audit Department of the Company from August 2011 toJanuary 2018; Director of the Risk Management and Audit Department of the Company since February 2018; Employee Supervisorof the Company since June 2019.
(3) Profile of senior managers
Deputy General Manager - Mr. Zhou Shunhua: born in 1960, holds a master’s degree, economist. He worked in the Company inDecember 1978, and has served as Publicity Officer, Manager of the Operation Department, Director of Shanghai Office, andShanghai Regional Manager of the Company; Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.;Deputy General Manager of the Company since 2009.Deputy General Manager - Mr. Wu Hui: born in April 1969, holds a master’s degree, professor-level senior engineer. He worked inthe Company in July 1991, and has served as technician, workshop director and chief engineer of Hangzhou Zhongmei HuadongPharmaceutical Co., Ltd.; Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since 2015; DeputyGeneral Manager of the Company since June 2019.Deputy General Manager – Ms. Zhu Li: born in 1975, has obtained a master’s degree, and serves as an accountant. She has served asthe accountant, deputy general manager, general manager, deputy director, and director of the Procurement and ManagementDepartment for Chinese and Western Medicine in the Chinese patent medicine branch of Huadong Pharmaceutical DistributionCompany since August 1997. From September 2019 to September 2020, she served as the Deputy General Manager of HuadongPharmaceutical Distribution Company (responsible for the overall work), and from October 2020, she serves as the Deputy GeneralManager (responsible for the commercial matters) of the Company and concurrently as the General Manager of HuadongPharmaceutical Distribution Company.。Secretary of the Board of Directors - Mr. Chen Bo: born in 1972, holds a master’s degree, economist. He joined the Company in2002, and has served as investment commissioner and Deputy Manager of the Financing Department; Secretary of the Board ofDirectors since June 2009.Officer in Charge of Financial Affairs - Mr. Qiu Renbo: born in 1982, holds a master’s degree. He has served as commissioner of theFinancial Management Head Office and Chief of the Finance Section of the Manufacturing Branch of the Company from August2004 to July 2010; Manager of the Financial Department of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. from August2010 to April 2015; Chief Financial Officer of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since May 2015; Officer inCharge of Financial Affairs of the Company since December 2019.Positions in shareholders’ entities
√ Applicable □ N/A
| Name | Shareholders’ entity | Position in shareholders’ entities | Commencement of the term | Termination of the term | Compensation and allowance from the shareholders’ entity |
| Niu Zhanqi | China Grand Enterprises, Inc. | President of the Pharmaceutical Management Head Office of China Grand Enterprises, Inc. | Yes | ||
| Kang Wei | China Grand Enterprises, Inc. | CFO of China Grand Enterprises, Inc. | Yes | ||
| Bai Xinhua | China Grand Enterprises, Inc. | Deputy General Manager of the Financial Management | Yes |
| Head Office of China Grand Enterprises, Inc. | |||||
| Liu Chengwei | China Grand Enterprises, Inc. | Assistant President of China Grand Enterprises, Inc. | Yes | ||
| Qin Yun | China Grand Enterprises, Inc. | Business Director of the Pharmaceutical Management Head Office China Grand Enterprises, Inc. | Yes | ||
| Jin Xuhu | Hangzhou Huadong Medicine Group Co., Ltd. | Executive Director and Manager of Hangzhou Huadong Medicine Group Co., Ltd. | No |
Position in other entities
√ Applicable □ N/A
| Name | Name of other entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the shareholders’ entity |
| Niu Zhanqi | Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Kang Wei | Western Securities Co., Ltd. | Supervisor | Yes | ||
| Kang Wei | Leiyunshang Pharmaceutical Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Bai Xinhua | Grand Industrial Holding Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Qin Yun | Yunnan Leiyunshang Lixiang Pharmaceutical Co., Ltd. | Director | No | ||
| Liu Chengwei | Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Jin Xuhu | Hangzhou State-owned Capital Investment and Operation Co., Ltd. | Chairman | Yes | ||
| Jin Xuhu | Hangzhou Oxygen Plant Group Co., Ltd. | Executive | No |
Director
Incumbent and off-office directors, supervisors and senior management personnel during the reporting period that have been imposedadministrative penalties by the SCRC during the last three years.
□ Applicable √ N/A
3. Remuneration of directors, supervisors and senior managers
The decision-making procedure, determination basis and actual remuneration for directors, supervisors and senior managersThe remuneration plan of independent directors on the ninth Board of Directors of the Company was preliminarily approved bythe Board of Directors. The final decision would be made by the general meeting of shareholders.In 2021, the annual allowance for the independent directors of the Company was 80,000 yuan (before tax), paid in a lump sum atthe end of the year. The directors and supervisor appointed by shareholders will receive allowance of 30,000yuan (before tax), paid ina lump sum at the end of the year. Other directors, supervisors and senior managers of the Company will receive benefits in accordancewith the Company’s current Salary System and Performance Appraisal Schemes.
Remuneration of directors, supervisors and senior managers of the Company during the reporting period
Unit: RMB ten thousand yuan
| Name | Title | Gender | Age | Holding of positions | Total pretax remuneration received from the Company | Receive remuneration from related parties of the Company or not |
| Lv Liang | Chairman of the Board | Male | 48 | Incumbent | 240 | No |
| Li Yuedong | Director, General Manager | Male | 50 | Departing | 126 | No |
| Niu Zhanqi | Director | Male | 55 | Incumbent | 3 | Yes |
| Kang Wei | Director | Female | 54 | Incumbent | 3 | Yes |
| Jin Xuhu | Director | Male | 59 | Incumbent | 3 | Yes |
| Zhu Liang | Director | Male | 45 | Incumbent | 65 | No |
| Zhong Xiaoming | Independent Director | Male | 60 | Incumbent | 8 | No |
| Yang Lan | Independent Director | Female | 53 | Incumbent | 8 | No |
| Yang Jun | Independent Director | Female | 50 | Incumbent | 8 | No |
| Bai Xinhua | Supervisor | Female | 56 | Incumbent | 3 | Yes |
| Qin Yun | Supervisor | Female | 52 | Incumbent | 3 | Yes |
| Liu Chengwei | Supervisor | Male | 49 | Incumbent | 3 | Yes |
| Hu Baozhen | Supervisor | Female | 49 | Incumbent | 3 | Yes |
| He Rufen | Supervisor | Female | 54 | Incumbent | 100 | No |
| Xu Zhifeng | Supervisor | Male | 47 | Incumbent | 65 | No |
| Zhou Shunhua | Deputy General Manager | Male | 62 | Incumbent | 130 | No |
| Wu Hui | Deputy General Manager | Male | 53 | Incumbent | 120 | No |
| Zhu Li | Deputy General Manager | Male | 47 | Incumbent | 120 | No |
| Chen Bo | Secretary of the Board of Directors | Male | 50 | Incumbent | 120 | No |
| Qiu Renbo | Officer in Charge of Financial Affairs | Male | 40 | Incumbent | 120 | No |
| Total | -- | -- | -- | -- | 1251 | -- |
VI. Performance of duties of directors during the reporting period
1. Board meetings during the reporting period
| Sessions | Convene date | Disclosure date | Meeting resolution |
| The interim session of the 9th Board meeting | January 7, 2021 | January 7, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-001) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The interim session of the 9th Board meeting | February 10, 2021 | February 17, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-007) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The interim session of the 9th Board meeting | February 17, 2021 | February 18, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-009) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The interim session of the 9th Board meeting | March 12, 2021 | March 15, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-013) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The interim session of the 9th Board meeting | April 19, 2021 | April 19, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-019) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 10th session of the 9th Board meeting | April 19, 2021 | April 21, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-021) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 11th session of the 9th Board meeting | April 26, 2021 | April 28, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-033) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The interim session of the 9th Board meeting | April 29, 2021 | April 29, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of |
| Directors (announcement No.: 2021-037) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) | |||
| The interim session of the 9th Board meeting | May 31, 2021 | June 1, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-049) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 12th session of the 9th Board meeting | July 14, 2021 | July 15, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-057) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 13th session of the 9th Board meeting | August 9, 2021 | August 9, 2021 | The Half Year Report 2021 of Huadong Medicine Co., Ltd |
| The 14th session of the 9th Board meeting | October 26, 2021 | October 27, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-075) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The interim session of the 9th Board meeting | December 20, 2021 | December 20, 2021 | Announcement of the Resolutions of the 9th interim meeting of the Board of Directors (announcement No.: 2021-086) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
2. Attendance of directors at Board meetings and general meetings
| Attendance of directors at Board meetings and general meetings | |||||||
| Name of directors | Number of Board meetings to be attended during the reporting period | Number of Board meetings attended on site | Number of Board meetings attended virtually | Number of Board meetings attended by proxy | Times of absent from Board meetings | Whether or not attend Board meetings in person for two consecutive times | Times of attendance of general meeting |
| Lv Liang | 13 | 13 | 0 | 0 | 0 | No | 1 |
| Li Yuedong | 11 | 11 | 0 | 0 | 0 | No | 1 |
| Niu Zhanqi | 13 | 1 | 12 | 0 | 0 | No | 1 |
| Kang Wei | 13 | 1 | 12 | 0 | 0 | No | 1 |
| Jin Xuhu | 13 | 1 | 12 | 0 | 0 | No | 1 |
| Zhu Liang | 13 | 13 | 0 | 0 | 0 | No | 1 |
| Zhong Xiaoming | 13 | 1 | 12 | 0 | 0 | No | 1 |
| Yang Lan | 13 | 1 | 12 | 0 | 0 | No | 1 |
| Yang Jun | 13 | 0 | 13 | 0 | 0 | No | 1 |
3. Objections from directors on relevant issues of the Company
Whether the directors have raised any objection to relevant issues of the Company
□ Yes √ No
No such case during the reporting period.
4. Other details about the performance of duties by directors
Whether the directors’ suggestions were adopted or not
√ Yes □ No
Note on the adoption or non-adoption of the directors’ suggestionsDuring the reporting period, in strict accordance with the relevant laws and regulations,normative documents, the Articles of Association, Rules of Procedure of the Board of Directors, andother relevant provisions, all directors of the Company preformed duties and exercise their functionsand power earnestly, strictly implemented the resolution of the general meeting of shareholders, andactively carries out all works of the Board of Directors. They also conscientiously reviewed andapproved various proposals of the Board of Directors, exercised right to vote according to law,actively participated in corporate governance and decision-making activities, and constantly
standardized corporate governance. With a responsible attitude towards the Company and allshareholders, the independent directors performed their duties and obligations diligently andfaithfully, and carefully deliberated various proposals of the Board of Directors. In addition, theyexpressed objective opinions on relevant matters under deliberation based on independent position,actively promoted the standardized operation of the Board of Directors and improved corporategovernance, safeguarding the interests of the Company and all investors. All suggestions above havebeen adopted by the Company.VII. Performance of special committees under the Board of Directors during the reportingperiod
| Committee name | Members | Number of meetings | Convene day | Meeting content | Important comments and suggestions | Other performance of duties | Details of objection (if any) |
| Audit Committee of the 9th Board of Directors | Yang Lan (Chairman of Committee), Zhong Xiaoming, Jin Xuhu | 6 | March 23, 2021 | 1. Publish review opinion on 2020 Annual Financial Report of Huadong Medicine (unaudited); 2. Review the 2021 work plan of Internal Audit Department. | 1. It believes that the Company’s 2021 annual financial statements (unaudited) reflect the Company’s financial position as at December 31, 2020 and the operating results and cash flows of the year 2020, and agrees to carry out the financial audit of the year 2020 on the basis of the financial statements; 2. Agree to the 2021 annual | No | No |
| audit plan. | ||||
| April 19, 2021 | 1. Review the work report of the Internal Audit Department for the first quarter of 2021; 2. Communicated and discussed with Pan-China Certified Public Accounts about the major issues concerned in the audit of the Company’s 2020 annual report, and issued review opinions on the 2020 Annual Financial Report of Huadong Medicine (audited); 3. Deliberated on the 2020 Corporate Social Responsibility Report; 4. Reviewed the Motion on Reappointing Pan-China Certified Public Accounts as the Audit | 1. The Company’s internal audit work was carried out in an orderly manner according to the plan, and no major problems were found; 2.No dispute with the contents of the Company’s annual financial report and annual audit accountant, that (1) the basis, ground, principle and methods of the preparation of financial statements comply with new Accounting Standard for Business Enterprises, Accounting System for Business Enterprises, relevant laws and regulations and the company’s internal | No | No |
| Institution for the Company’s 2021 Annual Financial Report and Internal Control Report. | management system; (2) The content and format of the financial statements comply with the relevant provisions of China Securities Regulatory Commission, Shenzhen Stock Exchange and Accounting Standards for Business Enterprises, and fairly reflect the Company’s financial position as at December 31, 2020, and operating results and cash flow in 2020; 3. Reviewed and approved the 2020 Corporate Social Responsibility Report; 4. Reviewed and approved the Motion on Reappointing Pan-China Certified Public |
| Accounts as the Audit Institution for the Company’s 2021 Annual Financial Report and Internal Control Report. | ||||
| April 26, 2021 | Deliberated the Company’s Report for the First Quarter of 2021. | The Audit Committee carried out its work in strict accordance with the Company Law, CSRC regulatory rules, Articles of Association and Rules of Procedure of the Audit Committee, and approved the proposal with diligence and responsibility. | No | No |
| August 9, 2021 | 1. Deliberated the Company’s 2021 Semi-Annual Report; 2. Review the Second Quarter of 2021 work report of the Internal Audit Department. | 1. The Audit Committee carried out its work in strict accordance with the Company Law, CSRC regulatory rules, Articles of Association and Rules of Procedure of the Audit Committee, and approved the | No | No |
| proposal with diligence and responsibility; 2. The internal audit was carried out in accordance with the plan and no major problems were found. | ||||
| October 26, 2021 | 1. Review the Company’s Third Quarter 2021 Report; 2. Review the work report of Internal Audit Department for the third quarter of 2021. | 1. The Audit Committee carried out its work in strict accordance with the Company Law, CSRC regulatory rules, Articles of Association and Rules of Procedure of the Audit Committee, and approved the proposal with diligence and responsibility; 2. The internal audit was carried out in accordance with the plan and no major problems were found. | No | No |
| December 9, 2021 | 1. Communicated and discussed the major issues concerned in | 1. Discussed the major issues concerned by accountants and put | No | No |
| the pre-audit of the company’s annual report; 2. Review the 2022 work plan of the Internal Audit Department. | forward suggestions; 2. Agreed to the annual audit plan for 2022 | ||||||
| Nomination Committee of the 9th Board of Directors | Zhong Xiaoming (Chairman of Committee), Kang Wei, Yang Lan | 1 | October 26, 2021 | Published the review opinions on the Appointment of Chairman and General Manager | The Nomination Committee verified and deliberated the matters under review, agree to the nomination of the Chairman and General Manager, and submit the proposal to the Board of Directors for deliberation. | No | No |
| Remuneration and Approval Committee of the 9th Board of Directors | Yang Jun (Chairman of Committee), Lv Liang, Zhong Xiaoming | 1 | April 19, 2021 | Review the 2021 Annual Compensation Assessment Plan for Senior Executives of the Company | Remuneration and Approval Committee verified and deliberated the matters under review, and unanimously agreed on the relevant proposals. | No | No |
VIII. Performance of duties by the Board of SupervisorsWhether the Board of Supervisors found any risks of the Company in the supervision activities during the reporting period
□ Yes √ No
No such case during the reporting period.
IX. Employees of the Company
1. Number of employees, profession composition and education level
| Number of incumbent employees in the parent company (person) | 915 |
| Number of incumbent employees in major subsidiaries (person) | 11,512 |
| Total number of incumbent employees (person) | 12,427 |
| Total number of employees receiving salaries in the current period (person) | 12,389 |
| Number of retired employees requiring the parent Company and its subsidiaries to bear costs (person) | 18 |
| Professional structure | |
| Category | Number (person) |
| Category | 1,207 |
| Production staff | 6,608 |
| Sales staff | 2,196 |
| Technical staff | 219 |
| Financial staff | 1,599 |
| Administrative staff | 598 |
| Total | 12,427 |
| Educational background | |
| Category | Number (person) |
| Master’s degree or above | 845 |
| Bachelor’s degree | 5,010 |
| Junior college (professional training) | 5,663 |
| Other | 909 |
| Total | 12,427 |
Note: (1) Sales staff include those engaged in academic promotion, retail promotion, pharmaceutical service,marketing, aesthetic medicine business development, etc.
(2) Technical staff include those directly engaged in R&D and other R&D support personnel
2. Staff remuneration policy
Based on strategic development planning and talent strategy, the Company builds a market-oriented differentiating remuneration system, establishes a flexible and diversified incentive
mechanism, and makes its talent teem younger, professional and international. It upgrades andoptimizes employee structure, encourages employees to stick to innovation and value creation, andenables employees themselves and as a whole to achieve sustainable development and strategic goals.
3. Training program
In order to meet the requirements of the sustainable development and international strategies ofthe Company, speed up the talent transformation, further improve the cultivation and developmentsystem for various talents, the Company’s Learning and Development Department formulated therelevant training program for 2022 following collecting the extensive training demands of theCompany’s middle and senior management and employees. The Department divided various talentcultivation projects into professional talent training programs and management talent trainingprograms with the guiding concept of “cost control, project refinement, effectiveness-oriented, andresource sharing”. At the same time, it will constantly carry out the establishment of training system.In terms for professional talent training programs, considering that the Company is on the crucialperiod of strategic transformation and scientific research and innovation, the training of scientificpersonnel is of great urgency. The Company will place higher requirements on this new kind oftraining to better meet the demands of business department, and give priority to R&D personnelreview and IDP training, as well as R&D project manager training program. As for other matureprofessional talent training programs, including the business strengthen and leadership improvementprograms related to production, quality, marking and other sectors, it will aim at the 2025development strategic plan, strictly control costs, refine projects, and ensure that the costs andexpenses of all programs only reduce, and not increase.As for management talent training programs, the Company will carry out internal cultivationsuch as management case study, on-duty development and cultivation, and rotation and assignment,combined with certain advanced management concepts of external industries, so as to guide theofficials to innovate their management and concept, and assist in the establishment of reserve teamsfor middle-and high-level officials. The programs will mainly include enterpriser reserve trainingprogram, high potentials training program and management trainee training program.In the system building, in order to better connect all project resources of various companies, theCompany will consider the system building and the implementation of various cultivation programsfrom the perspective of the entire joint-stock company, continuously improve internal trainer andtutor teams and various courses, make overall planning for the demands of the subsidiaries, andprovide branches and subsidiaries with courses and teaching resources to create the sharing culture
and promote the establishment of collectivized and learning-oriented organizations. At the same time,online course resources will be open to all employee platforms of branches and subsidiaries.
4. Labor outsourcing
□ Applicable √ N/A
X. The Company’s profit distribution and increase of capital stock by capital reserveconversion
Formulation, implementation or adjustment of the profit distribution policy, especially the cash dividend policy, during the reportingperiod
□ Applicable √ N/A
During the reporting period, the Company made profits and the profit available to shareholders of the parent company was positive,but no cash dividend plan for common shares was proposed
□ Applicable √ N/A
Profit distribution and capital stock increase by capital reserve conversion during the current reporting period
√ Applicable □ N/A
| Number of bonus shares every 10 shares (share) | 0 |
| Dividends paid every 10 shares (tax included) | 2.90 |
| Number of shares added for every 10 shares by capital reserve conversion | 0 |
| Capital stock base of the distribution plan (share) | 1,749,809,548 |
| Cash dividends (yuan) (tax included) | 507,444,768.92 |
| Cash dividends by other means (such as share repurchase) (yuan) | 0.00 |
| Total cash dividends (yuan) | 507,444,768.92 |
| Distributable profit (yuan) | 5,340,988,582.88 |
| Proportion of total cash dividends (including those by other means) in the total profit distributed | 100% |
| Current cash dividends | |
| If the Company is in a mature stage of development and has no significant capital expenditure arrangement, the proportion of cash dividends in the current profit distribution should be at least 80%. | |
| Details of the profit distribution plan or the plan for capital stock increase by capital reserve conversion | |
| On the basis of 1,749,809,548 ordinary shares of the total share capital of the Company on December 31, 2021, RMB2.90 (before tax) of cash dividends per ten ordinary shares will be distributed to all shareholders; no bonus share will be issued; and no capital reserve will be converted to increase the capital stock. A Total of RMB507,444,768.92 (before tax) cash bonus will be distributed, and the remaining undistributed profit will be distributed in future years. In case the Company’s total share capital changes before the profit distribution scheme is put in place, the proportion of distribution per share will be adjusted with the shares base unchanged. | |
The aforesaid profit distribution scheme is subject to the approval at the annual General Meeting.
XI. Implementation of the Company’s equity incentive plan, employee stock ownership plan orother employee incentive measures
□ Applicable √N/A
There is no equity incentive plan, employee stock ownership plan or other employee incentive measures and the implementationsituation during the reporting period.XII. The establishment and implementation of internal control during the reporting period
1. The establishment and implementation of internal control
In accordance with the Basic Norms for Enterprise Internal Control, Self-Regulatory Guidelinesfor Listed Companies on the Shenzhen Stock Exchange No.1 - Standardized Operation of ListedCompanies on the Main Board, and other relevant laws, regulations and normative documents, theCompany constantly promoted the establishment of internal control, improved internal controlinstitutions, and normalized the implementation of internal control institutions. It strengthened thesupervision and inspection of internal control, improve the corporate governance structure, and ensurethat the Company’s operation and management level was constantly improved. During the reportingperiod, the Company’s internal control system design is sound and reasonable. It maintained effectiveinternal control in all major aspects in accordance with the requirements of internal control standardsystem and relevant regulations, and there is no major omission. Please refer to the Self-EvaluationReport on Internal Control published on http://www.cninfo.com.cn/ on April 28, 2022.
2. Details of major internal control deficiencies found during the reporting period
□ Yes √ No
XIII. The Company’s management control over subsidiaries during the reporting period
In strict accordance with relevant laws and regulations of CSRC and SZSE, and the provisionsof the Articles of Association, the Company provided guidance on the standardized operation of thesubsidiaries in terms of organizational setup, personnel adjustment, internal control and financialsystem and other aspects, and timely tracked various major issues of the subsidiaries to exercisemanagement control over the subsidiaries.
During the reporting period, the Company exerted effective supervision on its subsidiaries.Huadong Ningbo Medicine Co., Ltd. (“Huadong Ningbo Company”), the Company’s controlled
subsidiary, reached the expiration of the operation term (December 31, 2021). After the deliberationand approval by the Board of Directors of the Company, the Company decided not to extend itsoperation period, and liquidate and cancel it according to the law. In accordance with relevantregulations of the Company Law of the People's Republic of China and Accounting Standard forBusiness Enterprises, and confirmed by Pan-China Certified Public Accountants (special generalpartnership), the Company’s audit services and internal control audit services institution, HuadongNingbo Company will no longer be included in the consolidated financial statements of the Companysince December 31, 2021. As at the date of disclosure of the Company’s 2021 annual report, HuadongNingbo Company is still in the liquidation phase under the court. The Company will continue toparticipate in and cooperate with the subsequent liquidation work of Huadong Ningbo Company.XIV Self-evaluation report on internal control or Audit report on internal control
1. Self-evaluation report on internal control
| Disclosure date of the full text of self-evaluation report on internal control | April 28, 2022 | |
| Disclosure index of the full text of self-evaluation report on internal control | www.cninfo.com.cn | |
| Proportion of assets evaluated in total assets | 95.00% | |
| Proportion of revenue evaluated in total revenue per consolidated financial statement | 90.00% | |
| Recognition standard of deficiencies | ||
| Category | Category | Category |
| Qualitative criteria | The Company stipulates that internal control deficiencies involving the following fields shall be identified as at least “important deficiencies”: anti-fraud procedure and control; internal control over unconventional or unsystematic transactions; internal control over the selection and application of accounting policies in relation to GAAP; internal control over the end-of-period financial reporting process. The Company stipulates that internal control deficiencies involving the | The Company stipulates that internal control deficiencies involving the following fields shall be considered as “material deficiencies”: serious violation of laws and regulations; in addition to policy reasons, the Company has been losing money for years, and its continuous operation has been challenged; lack of system control or systematic failure in important business; M&A and restructuring failure; the operation of newly expanded subordinate units is |
| following fields shall be identified as at least “important deficiencies”, and has strong indications of “material deficiencies”: restatement of previously published financial statements to reflect correction of misstatements resulting from error or fraud; the auditor found material misstatement in the Company’s financial statements for the current period that was not initially detected by the Company’s internal control over financial reporting. The Audit Committee’s failed to supervise the Company’s external financial reports and internal control over financial reports; Compliance supervision function is invalid, and the violation of laws and regulations may have a significant impact on the reliability of financial reports; finding any level of malpractice involving senior management; Management failed to correct important defects in a reasonable period of time after reporting to management. | unsustainable; lack of internal control construction and disorderly management in subsidiaries; middle and senior managers have left their posts, or serious staff turnover in key positions; frequent exposure of negative news in the media; internal control evaluation results, especially major or significant deficiencies have not been corrected. The Company stipulates that internal control deficiencies involving the following fields shall be considered as “important deficiencies”: there were a few negative news in the major media at provincial level and above; the general defects identified last year have not been rectified and there is no reasonable explanation; middle management or operating personnel are not competent enough. | |
| Quantitative criteria | Potential misstatement of total profit; potential misstatement of total assets | Impact on total assets; significant negative impact |
| Number of material deficiencies in financial reporting | 0 | |
| Number of material deficiencies in non-financial reporting | 0 | |
| Number of important deficiencies in financial reporting | 0 | |
| Number of important deficiencies in non-financial reporting | 0 | |
2. Audit report on internal control
√ Applicable □ N/A
| Comments of Internal Control Audit Report | |
| On December 31, 2021, Huadong Medicine has maintained effective internal control over financial reporting in all major respects in accordance with the “Basic Norms for Enterprise Internal Control” and relevant regulations. | |
| Disclosure of internal control audit report | Disclosure |
| Disclosure date of the full audit report on internal control | April 28, 2022 |
| Disclosure index of the full audit report on internal control | cninfo (www.cninfo.com.cn) |
| Type of opinions in the internal control audit report | Unmodified unqualified opinions |
| Whether there are material deficiencies in non-financial reporting | None |
Whether the accounting firm has issued the auditor’s report on internal control with non-standard opinions
□ Yes √ No
Whether the auditor’s report on internal control issued by the accounting firm is consistent with the self-evaluation report of theBoard of Directors
√ Yes □ No
XV.Rectification of Self-Detected Problems through the Special Campaign to ImproveGovernance of Listed CompaniesN/A
Section V. Environment and Social Responsibility
I. Major environmental issuesWhether the Company and its subsidiaries are the key pollutant discharging units announced by the environmental protectionauthorities
√ Yes □ No
| Name of the company or subsidiary | Name of major pollutants | Discharge type | Number of discharge outlets | Distribution of discharge outlets | Concentration of discharge | Discharge standard of pollutants | Total discharge | Approved total discharge | Excessive discharge |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant:: PH value | Intermittent discharge | 1 | Front gate, 866 Moganshan Road | 7.65 | 6-9 | / | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant:: COD | Intermittent discharge | 1 | Front gate, 866 Moganshan Road | 54.35mg/l | 500mg/l | 9.003tons | 33.3tons/year | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant: ammonia nitrogen | Intermittent discharge | 1 | Front gate, 866 Moganshan Road | 0.96mg/l | 35mg/l | 0.074tons | 2.38tons/year | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Solid pollutant: hazardous solid waste | Legal disposal by entrusted qualified units | / | In the factory at 866 Moganshan Road | / | / | 2243.14tons | / | None |
| Hangzhou Zhongmei Huadong | Solid pollutant: general | Legal disposal by entrusted | / | In the factory at 866 | / | / | 1701.6tons | / | None |
| Pharmaceutical Co., Ltd. | solid waste | qualified units | Moganshan Road | ||||||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant: nitrogen oxide | Organized emission | 2 | Roof of the boiler room in Building No. 25 | 22.75 mg/ m3 | 60mg/ m3 | 1.909tons | 17.7tons/year | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant: sulfur dioxide | Organized emission | 2 | Roof of the boiler room in Building No. 25 | 3 mg/ m3 | 50mg/ m3 | 0.245tons | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant: dust and fume | Organized emission | 2 | Roof of the boiler room in Building No. 25 | 4.65mg/ m3 | 20mg/ m3 | 0.34tons | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Water pollutant: PH value | Intermittent discharge | 1 | Along National Highway 310, Liuye River, Huayin City | 8.1 | 6-9 | / | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Water pollutant: COD | Intermittent discharge | 1 | Along National Highway 310, Liuye River, Huayin City | 11.41mg/l | 50mg/l | 0.188tons | 3tons | None |
| Huadong Medicine (Xi’an) Bohua Pharmace | Water pollutant: ammonia nitrogen | Intermittent discharge | 1 | Along National Highway 310, Liuye | 0.23mg/l | 8mg/l | 0.004tons | 0.48tons | None |
| utical Co., Ltd. | River, Huayin City | ||||||||
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Water pollutant: total nitrogen | Intermittent discharge | 1 | Along National Highway 310, Liuye River, Huayin City | 6.04mg/l | 15mg/l | 0.103tons | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Solid pollutant: hazardous waste | Compliant disposal by entrusted qualified units | 3 | In the company | / | / | 218.41tons | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Air pollutant: volatile organic compound | Organized emission | 1 | Raw medicine No.1 workshop | 20.8mg/ m3 | 60mg/ m3 | / | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Air pollutant: hydrogen chloride | Organized emission | 1 | Raw medicine No.1 workshop | 3.55mg/ m3 | 30mg/ m3 | / | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Air pollutant: particulate matter | Organized emission | 1 | Raw medicine No.1 workshop | 1.03mg/ m3 | 20mg/ m3 | / | / | None |
| Huadong Medicine (Xi’an) | Air pollutant: sulfuric | Organized emission | 1 | Raw medicine No.2 | / | 45mg/ m3 | / | / | None |
| Bohua Pharmaceutical Co., Ltd. | acid mist | workshop | |||||||
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Air pollutant: hydrogen chloride | Organized emission | 1 | Raw medicine No.2 workshop | / | 30mg/ m3 | / | / | None |
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | Air pollutant: particulate matter | Organized emission | 1 | Raw medicine No.2 workshop | 2.8mg/ m3 | 20mg/ m3 | / | / | None |
| Jiangsu Joyang Laboratories Co., Ltd. | Water pollutant: PH value | Intermittent discharge | 1 | Haidubei Road | 8.29 | 6-9 | / | / | None |
| Jiangsu Joyang Laboratories Co., Ltd. | Water pollutant: COD | Intermittent discharge | 1 | Haidubei Road | 221mg/l | 500mg/l | 8.394tons | 51.4173tons/year | None |
| Jiangsu Joyang Laboratories Co., Ltd. | Water pollutant: ammonia nitrogen | Intermittent discharge | 1 | Haidubei Road | 3.65mg/l | 35mg/l | 0.139tons | 3.6819tons/year | None |
| Jiangsu Joyang Laboratories Co., Ltd. | Water pollutant: SS | Intermittent discharge | 1 | Haidubei Road | 98mg/l | 120mg/l | 3.722tons | 24.968tons/year | None |
| Jiangsu Joyang Laboratories Co., | Solid pollutant: hazardous solid | Legal disposal by entrusted qualified | / | In the factory at Haidubei Road | / | / | 1516.985tons | 3148.7tons/year | None |
| Ltd. | waste | units | |||||||
| Jiangsu Joyang Laboratories Co., Ltd. | Air pollutant: particulate matter | Organized emission | 5 | Dosing section of workshop 101, fermentation section of workshop 101, dosing section of workshop 104 (shared by 107 and 108), fermentation section of workshop 104 (shared by 107 and 108), and drying section of workshop 104 (shared by 107 and 108) | 2.4mg/m3 | 10mg/m3 | 0.473tons/year | 0.797tons/year | None |
| Jiangsu Joyang Laboratories Co., Ltd. | Air pollutant: ethyl acetate | Organized emission | 3 | Extraction of workshop 101, Extraction of workshop 104, and workshop 303 | 0.029mg/m3 | 50mg/m3 | 0.0008tons/year | 1.074tons/year | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant: pH | East factory intermittent emission, west factory continuous emission | 2 | West side of the south gate of east factory, southeast corner of west factory | 8.39 | 6-9 | / | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant: COD | East factory intermittent emission, west factory continuous emission | 2 | West side of the south gate of east factory, southeast corner of west factory | 235 mg/l | 500mg/l | 141.455tons | 25.897tons | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant: ammonia nitrogen | East factory intermittent emission, west factory continuous emission | 2 | West side of the south gate of east factory, southeast corner of west factory | 7.08 mg/l | 35mg/l | 12.5tons | 2.59tons | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant: total phosphorus | East factory intermittent emission, west factory continuous emission | 2 | West side of the south gate of east factory, southeast corner of west factory | 2.74 mg/l | 8mg/l | / | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant: sulfur dioxide | Continuous emission | 1 | East factory RTO waste gas outlet | / | 100mg/m3 | 0.38tons | / | The project involved was not in production, no emission |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant: nitrogen oxide | Continuous emission | 1 | East factory RTO waste gas outlet | / | 200mg/m3 | 7.545tons | / | The project involved was not in production, no emission |
| Hangzhou Zhongmei Huadong Pharmaceuti | Air pollutant: non-methane | Continuous emission | 6 | West factory quality inspection | / | 60mg/m3 | 5.14tons | 0.40404tons | None |
| cal Co., Ltd. | hydrocarbon | building, east factory quality inspection building, Daptomycin refining building, Acarbose refining building, tank area, RTO waste gas outlet |
Construction and operation of pollution prevention and control facilities
1. Construction and operation of pollution prevention and control facilities of Hangzhou Zhongmei Huadong Pharmaceutical Co.,Ltd.:
(1) Waste water
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
Waste water treatmentsystem of the old sewage
station
| Waste water treatment system of the old sewage station | Facultative + fluidized bed | Original 600 tons/day; 800 tons/day after technical transformation | November 1993; technical transformation in 2007 | Normal |
Waste water treatmentsystem of the new sewage
station
| Waste water treatment system of the new sewage station | Anaerobic (IC tower)+ facultative +CASS+ air flotation | 2,200 tons/day | December 2001; technical transformation in 2014 (IC and air flotation added) | Normal |
(2) Waste gas
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
| DA010（35#-1） | Level 2 water spray + surface cooler + activated carbon adsorption and desorption | 15000 | 2017 | Normal |
| DA011（35#-2） | Level 2 water spray | 22000 | 2013 | Normal |
| DA012（40#-2） | Activated carbon + horizontal spray | 6000 | 2019 | Dismantled |
| DA013（32#-1） | Level 2 alkaline water spray | 22000 | 2013 | Dismantled |
| DA014（36#-1) | Level 2 clean water spray + surface cooler + low-temperature plasma + level 1 water spray | 27000 | 2017 | Normal |
DA015（40#-1）
| DA015（40#-1） | Level 2 clean water spray | 24200 | / | Dismantled |
| DA016（18#-1） | Level 2 alkaline water spray + all-in-one machine（photocatalytic oxidation + plasma + activated carbon）+ inorganic nano catalytic deodorization device + level 1 water spray | 16000 | 2019 | Normal |
DA017（19#-1）
| DA017（19#-1） | Burner | / | 2018 | Dismantled |
| DA018（19#-2） | Burner | / | 2018 | Dismantled |
| DA019（3#-1） | Level 1 water spray + photoxide | 20000+52000 | 2019 | Normal |
DA020（36#-2）
| DA020（36#-2） | Level 2 water spray + condensation + photocatalytic oxidation + activated carbon + inorganic nano catalysis + water spray | 10000 | 2019 | Normal |
| DA021（16#-1） | Level 1 water spray + level 1 alkali spray | 12000 | 2012 | Shutdown |
| DA022（16#-2） | Level 1 water spray + level 1 plant oil and water spray | 30000 | 2014 | Shutdown |
| DA023（27#-1） | Condensation + level 1 alkali spray+ all-in-one machine + level 1 alkali spray | 15000 | 2009 | Shutdown |
DA024（33#-1）
| DA024（33#-1） | Level 2 alkaline water spray + condensation water tank +common 1evel 1 alkaline water spray | 48000 | 2019 | Dismantled |
| DA025（32#-2） | Bag dust removal + high efficiency filtration | / | 2017 | Dismantled |
DA026（34#-1）
| DA026（34#-1） | Level 2 alkaline water spray | 54000 | 2008 | Dismantled |
| DA027（7#-1） | Level 2 alkaline water spray | 26000 | 2015 | Normal |
| DA028（6#-1） | Level 1 clean water spray | 12200 | 2016 | Normal |
DA029（18#-2）
| DA029（18#-2） | Level 2 alkaline water spray + photocatalytic oxidation + Activated carbon + Level 1 alkaline water spray | 16000 | 2018 | Normal |
| DA030（18#-3） | Level 1 clean water spray + Level 1 alkaline water spray | 5000 | 2017 | Normal |
DA031（25#-2）
| DA031（25#-2） | Low nitrogen combustion + high altitude emission | 8000 | 2009 (The low nitrogen transformation completed in December 2019.) | Normal |
| DA032（25#-1） | Low nitrogen combustion + high altitude emission | 8000 | 2009 (The low nitrogen transformation completed in | Normal |
December 2019.)DA033（1#-1）
| DA033（1#-1） | Oil fume purifier | / | / | Normal |
| DA034（27#-2） | Level 2 water spray + activated carbon adsorption and desorption | 15000 | 2011 | Shutdown |
| DA035（27#-3） | Photocatalytic oxidation + Level 1 alkaline water spray | 22300 | 2016 | Shutdown |
| DA036（8#-1） | Level 1 water spray | 25000 | 2017 | Normal |
| DA037（13#-1） | Level 2 water spray +surface cooler+ activated carbon adsorption and desorption | 25000 | 2017 | Normal |
| DA038（28#-1） | Level 1 water spray + photocatalytic oxidation | 22000 | 2011 | Shutdown |
| DA039（28#-2） | Level 2 water spray + common photocatalytic oxidation | 48000 | 2011 | Shutdown |
| DA040（29#-1） | Level 1 water spray + Level 1 alkaline water spray | 22000 | 2011 | Shutdown |
DA041（33#-2）
| DA041（33#-2） | Level 1 water spray | 18600 | 2012 | Dismantled |
| DA042（10#-1） | Level 1 clean water spray | 20000 | 2016 | Normal |
| DA043（15#-1） | Level 1 alkaline water spray + photocatalytic oxidation | 25000 | 2018 | Normal |
| DA044（43#-1） | Level 1 alkaline water spray + level 1 water spray | 45000 | 2014 | Normal |
| DA045（46#-1） | Level 1 clean water spray | 3000 | 2015 | Normal |
DA046（46#-2）
| DA046（46#-2） | Level 1 clean water spray | 25000 | 2015 | Normal |
| DA047（46#-3） | Level 1 clean water spray | 30000 | 2015 | Normal |
| DA048（23#-1） | Level 2 water spray | 7000 | 2019 | Normal |
(3) Solid waste
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
| Hazardous waste warehouse | Standardized storage | 160 tons | March 2012 | Standardized storage; legal disposal by qualified units |
| Standardized storage | 240 tons | March 2010 |
General solid waste yard
| General solid waste yard | Standardized storage | 7 tons | March 2010 | Standardized storage; legal disposal by qualified units |
| Standardized storage | 30 tons | June 2004 |
2. Construction and operation of pollution prevention and control facilities of Huadong Medicine (Xi’an) Bohua Pharmaceutical Co.,Ltd.:
(1) Waste water
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
Waste water treatmentsystem of the sewage station
| Waste water treatment system of the sewage station | Ozone oxidation + facultative + aerobic + MBR | 250 tons/day | July 2012 | Normal |
(2) Waste gas
| Name of pollution prevention and control facilities | Treatment process | Time of operation | Status of operation |
| Waste gas treatment unit of raw medicine No. 1 workshop | Alkali spray + dry filter (filter cotton) +UV photolysis + activated carbon adsorption | October 2020 | Normal |
Waste gas treatment unit of raw medicine No. 2 workshop
| Waste gas treatment unit of raw medicine No. 2 workshop | Level 2 alkaline water spray + dry filter +UV photolysis + activated carbon | November 2019 | Normal |
(3) Solid waste
| Name of pollution prevention and control facilities | Treatment process | Storage capacity | Time of operation | Status of operation |
| Hazardous waste warehouse | Standardized storage | 60 tons | January 2012 | Standardize storage; legal disposal by entrusted qualified units |
3. Construction and operation of pollution prevention and control facilities of Jiangsu Joyang Laboratories Co., Ltd.:
(1) Waste water
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
| Waste water treatment system of the sewage station | Air floatation tank + hydrolysis acidification + IC tower + UASB pool + A/O pool + O pool + secondary sedimentation tank | 300 tons/day | December 2014 | Normal |
(2) Waste gas
| Name of pollution prevention and control facilities | Treatment process | Processing capacity CMH | Time of operation | Status of operation |
Waste gas treatment unit of the extraction
section of workshop 101
| Waste gas treatment unit of the extraction section of workshop 101 | Level 1 water spray + moisture separator + photocatalytic oxidation + level 2 activated carbon adsorption + high-altitude discharge via 25m exhaust pipe | 10,000 | 2014 | Normal |
| Waste gas treatment unit of the fermentation section of workshop 101 | Level 1 water spray + moisture separator + level 2 activated carbon adsorption + high-altitude discharge via 25m exhaust pipe | 2,000 | 2019 | Normal |
| Waste gas treatment unit of the drying section of workshop 101 | Level 1 water spray + moisture separator + level 2 activated carbon adsorption + high-altitude discharge via 25m exhaust pipe | 22,000 | 2017 | Normal |
Waste gas treatment unit of the dosingsection of workshop 101
| Waste gas treatment unit of the dosing section of workshop 101 | Cyclone separator + level 1 water spray + high-altitude discharge via 15m exhaust pipe | 5,000 | 2014 | Normal |
| Waste gas treatment unit of the fermentation section of workshop 104/107/108 | level 1 water spray + moisture separator + level 2 activated carbon adsorption +high-altitude discharge via 25m exhaust pipe | 75000 | 2021 | Normal |
Waste gas treatment unit of the extraction
section of workshop 104
| Waste gas treatment unit of the extraction section of workshop 104 | Level 1 water spray + moisture separator + photocatalytic oxidation + level 2 activated carbon adsorption + high-altitude discharge via 25m exhaust pipe | 10,000 | 2015 | Normal |
| Waste gas treatment unit of the dosing section of workshop 104/107/108 | Cyclone separator + level 1 water spray +high-altitude discharge via 15m exhaust pipe | 5000 | 2015 | Normal |
Waste gas treatment unit of the drying
section of workshop 104/107/108
| Waste gas treatment unit of the drying section of workshop 104/107/108 | Level 1 water spray + moisture separator + level 2 activated carbon adsorption | 20000 | 2015 | Normal |
| Waste gas treatment unit of pretreatment basin and domestic waste yard of workshop 103 and 303 | Level 1 water spray + moisture separator + photocatalytic oxidation + level 2 activated carbon adsorption +high-altitude discharge via 25m exhaust pipe | 40000 | 2019 | Normal |
| Waste gas treatment unit of workshop 106 | Level 1 water spray + moisture separator + photocatalytic oxidation + level 2 activated carbon adsorption + high-altitude discharge via 25m exhaust pipe | 10,000 | 2015 | Normal |
| Waste gas treatment unit of the extraction section of workshop 107 | Level 1 water spray + moisture separator +photocatalytic oxidation+ level 2 activated carbon adsorption + high-altitude | 20,000 | 2019 | Normal |
| discharge via 25m exhaust pipe | ||||
| Waste gas treatment unit of the extraction section of workshop 108 | Level 1 water spray + moisture separator + photocatalytic oxidation + level 2 activated carbon adsorption + high-altitude discharge via 25m exhaust pipe | 40,000 | 2019 | Normal |
| Waste gas treatment unit of workshop 109 | Level 1 water spray +high-altitude discharge via 25m exhaust pipe | 20000 | 2019 | Normal |
| Waste gas treatment unit of sewage station 303 | Level 1 water spray + moisture separator + photocatalytic +high-altitude discharge via 25m exhaust pipe | 15000 | 2021 | Normal |
(3) Solid waste
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
Hazardous waste warehouse
| Hazardous waste warehouse | Standardized storage | 300 tons | October 2020 | Standardized storage; legal disposal by entrusted qualified units |
| Domestic waste yard | Standardized storage | 3 tons | March 2015 | Chengdong Garbage Disposal Station |
4. Construction and operation of pollution prevention and control facilities of Hangzhou Zhongmei HuadongPharmaceutical Jiangdong Co., Ltd.
(1) Waste water
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
| Waste water treatment unit in east factory | Primary sedimentation + anaerobic EGSB+AO+ advanced treatment | 1500tons/day | May 2016 | Normal |
| Waste water treatment unit in west factory | pretreatment+ anaerobic EGSB+AO+ advanced treatment | 8500tons/day | November 2019 | Normal |
(2) Waste gas
| Name of pollution prevention and control facilities | Treatment process | Processing capacity CMH | Time of operation | Status of operation |
| Waste gas system of the dosing section in west factory | Level 1 alkali spray | 10000 | May 2016 | Normal |
Other waste gas system of the dosing
| Other waste gas system of the dosing | Level 1 alkali spray + | 20000 | May 2016 | Normal |
| section in west factory | photocatalytic oxidation + level 2 alkali spray |
Waste gas system between plate and frame
in west factory
| Waste gas system between plate and frame in west factory | Level 1 alkali spray + photocatalytic oxidation + level 2 alkali spray | 40000 | June 2017 | Normal |
| Waste gas system of east fermentation section in west factory | Level 1 alkali spray + photocatalytic oxidation + level 2 alkali spray | 45000 | May 2016 | Normal |
Waste gas system of west fermentation
section in west factory
| Waste gas system of west fermentation section in west factory | Level 1 alkali spray + photocatalytic oxidation + level 2 alkali spray | 40000 | May 2016 | Normal |
| Waste gas system of south refining section in west factory | Level 2 alkali spray | 80000 | May 2016 | Normal |
| Waste gas system of north refining section in west factory | Level 2 alkali spray | 80000 | May 2016 | Normal |
| Waste gas system of 7m interlayer in west factory | Level 1 alkali spray | 20000 | May 2016 | Normal |
| Waste gas system of 18m interlayer in west factory | Level 1 alkali spray | 20000 | May 2016 | Normal |
| Waste gas system of cooling bin in west factory | Level 1 alkali spray + level 2 alkali spray | 40000 | June 2017 | Normal |
| Waste gas system of quality inspection building in west factory | Photocatalytic oxidation + level 1 alkali spray | 20000 | May 2016 | Normal |
Waste gas system of sewage station 1# in
west factory
| Waste gas system of sewage station 1# in west factory | Level 1 alkali spray + photocatalytic oxidation + level 2 alkali spray | 30000 | May 2016 | Normal |
| Waste gas system of sewage station 2# in west factory | Level 2 alkali spray | 20000 | June 2017 | Normal |
| Waste gas treatment system of north AK fermentation in east factory | Level 1 alkali spray + photocatalytic oxidation + level 2 water spray | 90000 | September 2020 | Suspend |
Waste gas treatment system of south AKfermentation in east factory
| Waste gas treatment system of south AK fermentation in east factory | Level 1 alkali spray + photocatalytic oxidation + level 2 water spray | 90000 | September 2020 | Suspend |
Waste gas treatment system of super antifermentation in east factory
| Waste gas treatment system of super anti fermentation in east factory | Level 1 alkali spray + photocatalytic oxidation +level 2 water spray | 20000 | March 2021 | Suspend |
| Waste gas treatment system of central control laboratory in east factory | Level 1 alkali spray + photocatalytic oxidation + level 2 water spray | 8000 | October 2020 | Suspend |
| Waste gas treatment system of quality inspection building in east factory | Level 1 alkali spray + photocatalytic oxidation + level 2 | 30000 | August 2020 | Normal |
| water spray | ||||
| Waste gas treatment system of AK refined hydrochloric acid in east factory | Level 1 alkali spray + level 2 water spray | 10000 | November 2020 | Suspend |
| Waste gas treatment system of AK refined ethyl alcohol in east factory | Level 1 alkali spray + level 2 water spray | 1000 | November 2020 | Suspend |
| Waste gas treatment system of X8 precipitation filtration in east factory | Level 1 alkali spray + level 2 water spray | 6000 | March 2021 | Suspend |
| Waste gas treatment system of YT ethanol in east factory | Level 1 alkali spray + level 2 water spray | 4000 | June 2021 | Suspend |
| Waste gas treatment system of MP space ventilation in east factory | Photocatalytic oxidation | 44000 | May 2021 | Suspend |
| Waste gas treatment system of tank area in east factory | Active carbon+ alkali spray | A small amount | February 2021 | Normal |
| Waste gas treatment system of preparation 1 department in east factory | Condensation + level 2 water spray | 20000 | December 2021 | Normal |
| Waste gas treatment system of sewage station in east factory | Level 1 alkali spray + level 2 water spray | 36800 | March 2021 | Normal |
| Waste gas treatment system of RTO in east factory | Water spray +RTO+ alkali spray | 100000 | / | Suspend |
(3) Solid waste
| Name of pollution prevention and control facilities | Treatment process | Processing capacity | Time of operation | Status of operation |
| General solid waste yard in west factory | Standardized storage | 10tons | October 2016 | Standardized storage; legal disposal by entrusted qualified units |
| Standardized storage | 15tons | May 2016 | Standardized storage; legal disposal by entrusted qualified units | |
| General solid waste yard in east factory | ||||
| Standardized storage | 80tons | Not Running yet | Standardized storage; legal disposal by entrusted qualified units | |
| Standardized storage | 20tons | May 2021 | Standardized storage; legal disposal by entrusted qualified units |
Hazardous waste warehousein west factory
| Hazardous waste warehouse in west factory | Standardized storage | 10tons | May 2016 | Standardized storage; legal disposal by entrusted qualified units |
| Hazardous waste warehouse in east factory | Standardized storage | 120tons | June 2021 | Standardized storage; legal disposal by entrusted qualified units |
Environmental impact assessment of construction projects and other administrative permits for environmental protection
All construction projects of the above four subsidiaries of the Company have be declared, constructed and accepted in strictaccordance with the requirements of “three simultaneous” for environmental protection, have passed environmental impact assessment,and met the requirements of environmental impact assessment for construction projects. The Company has obtained the pollutantdischarge permit and the discharge permit of urban sewage into the drainage pipe network according to the environmental protectionrequirements. Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. complete the filling of technical transformation project of LifeScience Industrial Park (Hedong Block) on July 14, 2021 (HZMEE Gongshu Branch filling (2021) No.2). Huadong Medicine (Xi’an)Bohua Pharmaceutical Co., Ltd. received the approval by Weinan MEE about the environmental impact report of Olaparib pilot testsite renovation project on November 10, 2021 (Weinan MEE approval (2021) No.66).Emergency plan for environmental emergenciesThe company has established a comprehensive emergency response plan for environmental emergencies, standardizes theemergency handling of environmental emergencies, and minimizes the impact on human health caused by the leakage of environmentalrisk substances into the air, water or soil due to fire, explosion, leakage or other unexpected emergencies. And environmental hazards,continue to improve the company's emergency response capabilities for sudden environmental pollution incidents.The company has comprehensively established the emergency plan for environmental emergencies, standardized the emergencytreatment of environmental emergencies, minimized the harm to human health and environment caused by the leakage of environmentalrisk substances to air, water or soil due to fire, explosion, leakage or other unexpected emergencies, and continuously improved theemergency response capacity of the company for environmental pollution emergencies. The above four subsidiaries of the Companyhave compiled and established the mechanism of “Emergency Plan for Environmental Emergencies”, revised and improved it regularlyaccording to the requirements. Jiangsu Jiuyang Biopharm Co., Ltd. organized a comprehensive environmental emergency plan drill inJuly 2021.Environmental self-monitoring schemeThe above four subsidiaries of the Company have all established the mechanism of “Self-monitoring Scheme for Pollution Sources”which has been put on record in the environmental protection authorities, and all the monitoring data are reported according to theregulations.Administrative punishment caused by environmental problems during the reporting period
| Company/subsidiary name | Reasons | Violation description | Punishment | Impact on the production and operation of the listed Company | Rectification measures |
| Jiangsu Joyang Laboratories Co., Ltd | Discharged industrial waste water that did not meet the process requirements to the centralized sewage treatment facilities | The ammonia nitrogen concentration of discharge wastewater from outlet header did not meet the treatment process requirements of Sheyang Sewage Treatment Co., Ltd. | A fine of RMB100,000 | No major impact | Stopped discharging sewage immediately and returned unqualified sewage to the front channel for retreatment; sewage was sampled and tested by the environmental protection department after reaching the standard; sewage was then discharged |
| according to regulations after passed the test. | |||||
| Jiangsu Joyang Laboratories Co., Ltd | Discharged of water pollutants in a way that evaded regulation | Rainwater and sewage diversion measures did not well implemented, and part of the surface flushing water and process cooling water are discharged into the rainwater pipe network without treatment | A fine of RMB320,000 | No major impact | Carried out self-examination and self-rectification, and initiated renovation project of rainwater and sewage diversion according to the requirements of environmental regulators. |
Other environmental information that should be made publicNoneCarbon emissions reduction measures and effects during the reporting period
√ Applicable □ N/A
In 2021, Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. a wholly-ownedsubsidiary of the Company, constantly improved the efficiency of energy supply and consumptionsystem through lean project management, and reduced power consumption by more than 6.5 millionkWh, steam by more than 3,500 GJ, tap water consumption by about 130,000 tons, and carbon dioxideemissions by more than 6,700 tons.
In 2021, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., a wholly-owned subsidiaryof the Company, carried out lean project management, and reduced boiler natural gas consumptionby using boiler flue gas to heat boiler water supply, saving about 500,000 cubic meters of natural gasin the year. It also conducted the upgrade of sewage tank temperature automatic control, which cansave 1474 tons of steam annually. It conducted energy saving transformation of air pretreatmentdevice in fermentation workshop, which can reduce the consumption of chilled water and steam andreduce air loss annually.
In 2021, Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd., a subsidiary of theCompany, implemented flow restriction measures of cooling water in preparation workshops, whichcan save 1,000 tons of tap water annually. It recycled purified water secondary concentrated water,which can save 500 tons of tap water annually. It added sprinklers to save steam and water, whichcan save 100 tons of steam and 500 tons of water annually. It inspected and repaired steam traps forsteam equipment in preparation workshop, saving 100 tons of steam.
Other information related to environmental protectionNone
II. Social responsibilitiesIn 2021, the Company’s innovation-driven transformation came to a crucial moment. It facedchallenges directly, and strived forward despite difficulties, thus gaining remarkable fruits. Allmembers in Huadong Medicine innovated business management ideas, empowered the Companywith wisdom and hard work, and spared no efforts to ensure the stable improvement of the Company.In the process of strategic transformation, the company strictly performed its socialresponsibility as a corporate citizen and paid attention to the demands of stakeholders such asshareholders, employees, customers, suppliers and communities. It undertook the social responsibilityof environmental protection, energy conservation and emission reduction, promoted the efficient andstable operation of EHS system, actively engaged in public welfare, and gave back to society withpractical actions.
The Company’s fulfillment of social responsibility in 2021 can be found in the 2021 SocialResponsibility Report of Huadong Medicine.III. Performance of consolidating and expanding the achievement of poverty alleviation, andsupporting rural revitalizationActively responding to local government’s activities of “uniting townships and connectingvillages”, the Company paired up with Linqi Town, located in Chun’an County, Hangzhou city,Zhejiang, and supported and promoted its economic and social development through targeted actions.From 2017 to 2021, the Company donated a total of RMB1.5 million to this poverty alleviationproject.
Section VI. Important Matters
I. Fulfillment of commitments
1. Commitments made by interested parties such as the Company’s de facto controller, shareholders, relatedparties, acquirer(s), and the Company that are fulfilled during the reporting period or unfulfilled by the endof the reporting period
□ Applicable √ N/A
The Company does not have commitments made by interested parties such as the Company’s de facto controller, shareholders, related
parties, acquirer(s), and the Company that are fulfilled during the reporting period or unfulfilled by the end of the reporting period.
2. If there is a profit forecast for the Company’s assets or projects and the reporting period is in the profitforecast period, the Company should state the assets or projects that meet the original profit forecast and thereasons for that
□ Applicable √ N/A
II. Controlling shareholders’ and related parties’ occupation of non-operating funds of thelisted companies
□ Applicable √ N/A
No such case during the reporting period.III. External guarantees in violation of provisions
□ Applicable √ N/A
No such case during the reporting period.
IV. Explanation by the Board of Directors on the latest “modified auditor report”
□ Applicable √ N/A
V. Explanation by the Board of Directors, the Board of Supervisors and the independentdirectors (if any) on the “auditor’s nonstandard report” of the accounting firm during thecurrent reporting period
□ Applicable √ N/A
VI. Explanation of changes in accounting policies and estimation, or the correction ofsignificant accounting errors as compared with the previous financial report
□ Applicable √ N/A
The Company does not have changes in accounting policies and estimation, or the correction of significant accounting errors duringthe reporting period.VII. Changes in the scope of consolidated statements as compared to the previous financialreport
√ Applicable □ N/A
Refer to “VIII. Changes in the scope of consolidated statements” in “Section X. Financial Report” of this report for details.
VIII. Employment and dismissal of accounting firms
Accounting firm employed by the Company for now
| Name of the domestic accounting firm | Pan-China Certified Public Accountants (special general partnership) |
| Continuous number of years of audit services provided by the domestic accounting firm | 165 |
| Remuneration of the domestic accounting firm (ten thousand yuan) | 24 |
| Certified public accountants of the domestic accounting firm | Wang Fukang, Du Jinyu |
| Continuous number of years of audit services provided by certified public accountants of the domestic accounting firm | 5 |
| Name of the overseas accounting firm (if any) | None |
| Remuneration of the overseas accounting firm (ten thousand yuan) (if any) | 0 |
| Continuous number of years of audit services provided by the overseas accounting firm (if any) | None |
| Certified public accountants of the overseas accounting firm (if any) | None |
| Continuous number of years of audit services provided by certified public accountants of the overseas accounting firm (if any) | None |
Whether the accounting firm employed was replaced in the current period
□ Yes √ No
Information about the internal control audit accounting firm, financial consultant or sponsor employed by the Company
√ Applicable □ N/A
During the reporting period, the Company employed Pan-China Certified Public Accountants (special general partnership) as theaudit institution of its annual financial report and internal control audit report; the annual financial report and internal control auditreport audit fee paid is 1.65 million yuan.
IX. Delisting after annual report disclosure
□ Applicable √ N/A
X. Bankruptcy reorganization
□ Applicable √ N/A
The Company does not have related matters of bankruptcy reorganization during the reporting period.
XI. Major litigation and arbitration
√ Applicable □ N/A
| Litigation (arbitration) general information | Amount involved (in ten thousand yuan) | Whether an estimated liability is formed | Litigation (arbitration) progress | Litigation (arbitration) adjudication result and impact | Execution of litigation (arbitration) judgments | Disclosure date | Disclosure index |
| Case of individual Shareholders of Huadong Ningbo Medicine Co., Ltd. requesting dissolution of the company: In August 2021, a total of 20 individual shareholders of Huadong Ningbo Company filed a lawsuit against Huadong Ningbo Company as the defendant and Huadong Medicine as the third party to the People’s Court of Beilun District of Ningbo city for requesting the dissolution of the company. The case was accepted by the court. | 0 | No | On November 16, 2021, the People’s Court of Beilun District of Ningbo made a first-instance judgment on this case (2021) Zhe 0206 Minchu No.5792. | The first-instance judgment rejected the plaintiff's claim, and the costs of this case shall be borne by the plaintiff. The plaintiff appealed against the first verdict, and the second trial has yet to be held. | Has not yet executed | August 24, 2021 | Announcement of civil complaint received by the Company and its controlled subsidiaries(Announcement No: 2021-065) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| Summary of matters that do not meet the disclosure standards for major litigation (arbitration) (within China） | 2,557.55 | No | Some cases are under filling, some are under trials and some have come into force | The summary of the litigation matters has no significant impact on the Company |
Some of thejudgment havecome into forceand are beingexecuted;some have beenadjudicated buthave not yetcome into force;some are not
| Do not meet the disclosure standards for major litigation | / |
| adjudicated; some are in progress | |||||||
| Summary of matters that do not meet the disclosure standards for major litigation (arbitration) (overseas） | 117.6 | No | Under trials | The summary of the litigation matters has no significant impact on the Company | Under trials and are not adjudicated | Do not meet the disclosure standards for major litigation | / |
XII. Punishment and rectification
□ Applicable √ N/A
No such case during the reporting period.
XIII. Integrity of the Company and its controlling shareholder and de facto controller
√ Applicable □ N/A
There is no case of the Company, its controlling shareholders and de facto controller failed to comply with the effective judgement ofthe court, or failed to repay the due debts of a large amount during the reporting period.
XIV. Major related transactions
1. Transactions related to daily operations
√ Applicable □ N/A
| Related party | Relationship | Type of related transaction | Content of related transaction | Pricing principles for related transaction | Price of related transaction | Related transaction amount (ten thousand yuan) | Proportion in the amount of similar transactions | Approved transaction amount (ten thousand yuan) | Whether it exceeds the approved amount | Settlement method of related transaction | Available market prices of similar transactions | Date of disclosure | Disclosure index |
| Grandpharma (China) Co., Ltd. | Subsidiary of the Company’s | Drug purchase | Drug purchase | Market price determined by the | Market price | 6,273.24 | 0.26% | 7,500 | No | Cash, banker’s acce | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| controlling shareholder | Company’s related transaction decision-making process | ptance bill | |||||||||||
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 6,214.95 | 0.26% | 4,500 | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 4,559.61 | 0.19% | 6,500 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Beijing Grand Johamu Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholde | Drug purchase | Drug purchase | Market price determined by the Company’s related transact | Market price | 1,524.71 | 0.06% | 4,000 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| r | ion decision-making process | ||||||||||||
| Wuhan Grand Pharmaceutical Group Sales Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 2,426.57 | 0.10% | 2,000 | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Hangzhou Grand Biologic Pharmaceutical Inc | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 1,364.05 | 0.06% | 2,000 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Penglai Nuokang Pharmaceutical Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 2,259.25 | 0.09% | 3,000 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Yunnan Leiyunshang Lixiang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 2,046.66 | 0.09% | 2,000 | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Leiyunshang Pharmaceutical Group Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 419.15 | 0.02% | 500 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Shenyang Yaoda Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 436.27 | 0.02% | 700 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Guangdong Leiyunshang | Subsidiary of the Comp | Drug purchase | Drug purchase | Market price determined by | Market price | 356.76 | 0.01% | 350 | Yes | Cash, banker’s | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Pharmaceutical Co., Ltd. | any’s controlling shareholder | the Company’s related transaction decision-making process | acceptance bill | ||||||||||
| Xi'an Yuanda new Beilin Pharmaceutical Co., Ltd | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 215.05 | 0.01% | 300 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Changshu Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 160.36 | 0.01% | 200 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Changchun Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling share | Drug purchase | Drug purchase | Market price determined by the Company’s related | Market price | 154.61 | 0.01% | 150 | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| holder | transaction decision-making process | ||||||||||||
| Beijing Huajin Pharmaceutical Co., Ltd | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 30.88 | 0.00% | 100 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Hangzhou Huadong Medicine Group Guizhou TCM Development Co., Ltd. | Subsidiary of the Company’s second largest shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 24.82 | 0.00% | 150 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Xi'an Yuanda Detian Pharmaceutical Co., Ltd | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making | Market price | 8.97 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| process | |||||||||||||
| Grandpharma Huangshi Feiyun Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 12.04 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Anhui Leiyun Shang pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 77.75 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Grand Life Science (Wuhan) Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 205.05 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Grand Biopharmaceu | Subsidiary of the | Drug purchase | Drug purchase | Market price determi | Market price | 190.38 | 0.01% | Yes | Cash, bank | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| tical (Chongqing) Co., Ltd. | Company’s controlling shareholder | ned by the Company’s related transaction decision-making process | er’s acceptance bill | ||||||||||
| Peg-Bio Biopharm Co., Ltd. (Chongqing) | Joint venture of the Company | Drug purchase | Drug purchase | Market price determined by the Company’s related transaction decision-making process | Market price | 1.77 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Hangzhou Junlan Pharmaceutical Trading Co. Ltd. | Shareholding enterprise | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 9,638.39 | 0.28% | 14,000 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Leiyunshang Pharmaceutical Group Co. Ltd. | Subsidiary of the Company’s controlling | Drug sales | Drug sales | Market price determined by the Company’s | Market price | 267.06 | 0.01% | 450 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| shareholder | related transaction decision-making process | ||||||||||||
| Guangdong Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 207.14 | 0.01% | 400 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Yunnan Leiyunshang Lixiang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 188.97 | 0.01% | 250 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Changchun Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision | Market price | 39.34 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| -making process | |||||||||||||
| Changshu Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 8.58 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 1,152 | 0.03% | 600 | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Hangzhou Tangyangyuan Pharmaceutical Co., Ltd. | Joint venture of the Company | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 257.9 | 0.01% | 1,200 | No | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Hangzhou | Subsidiary | Drug sales | Drug sales | Market price | Market | 87.31 | 0.00% | 150 | No | Cash, | Market | April 21, | cninfo (http://www.c |
| Grand Biologic Pharmaceutical Inc. | of the Company’s controlling shareholder | determined by the Company’s related transaction decision-making process | price | banker’s acceptance bill | price | 2021 | ninfo.com.cn) | ||||||
| Grand Resources Group Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 8.27 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Hangzhou Tangyangyuan TCM Outpatient Department Co., Ltd. | Subsidiary of the Company’s joint venture Hangzhou Tangyangyuan Pharmaceutical Co., Ltd. | Drug sales | Drug sales | Market price determined by the Company’s related transaction decision-making process | Market price | 749.61 | 0.02% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Grand | Subsi | Drug | Drug | Market | Mark | 1.44 | 0.00 | Yes | Cash | Mark | Apri | cninfo |
| Holding Co., Ltd. | diary of the Company’s controlling shareholder | sales | sales | price determined by the Company’s related transaction decision-making process | et price | % | , banker’s acceptance bill | et price | l 21, 2021 | (http://www.cninfo.com.cn) | |||
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | House rental | House rental | Market price determined by the Company’s related transaction decision-making process | Market price | 6.42 | 0.00% | 5 | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Beijing Yanhuang Real Estate Co., Ltd. | Subsidiary of the Company’s controlling shareholder | House leasing | House leasing | Market price determined by the Company’s related transaction decision-making process | Market price | 133.93 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Hangzhou Huadong Medici | Joint venture of the Comp | House leasing | House leasing | Market price determined by the | Market price | 10.86 | 0.00% | 25 | No | Cash, banker’s acce | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| ne Group Co., Ltd. | any | Company’s related transaction decision-making process | ptance bill | ||||||||||
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | House leasing | House leasing | Market price determined by the Company’s related transaction decision-making process | Market price | 198.17 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Penglai Nuokang Pharmaceutical Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Agent service fee | Agent service fee | Market price determined by the Company’s related transaction decision-making process | Market price | 1,655.01 | 0.07% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Peg-Bio Biopharm Co., Ltd. (Chongqing) | Joint venture of the Company | Preparation filling Service | Preparation filling Service | Market price determined by the Company’s related transact | Market price | 170.75 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| ion decision-making process | |||||||||||||
| Hangzhou Grand Biologic Pharmaceutical Inc. | Subsidiary of the Company’s controlling shareholder | processing charge | processing charge | Market price determined by the Company’s related transaction decision-making process | Market price | 60.08 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Beijing Yuanda Chuangxin Property Management Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Property management fee | Property management fee | Market price determined by the Company’s related transaction decision-making process | Market price | 19.28 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) | |
| Beijing Haiwan Banshan Hotel Management Co., Ltd. | Subsidiary of the Company’s controlling shareholder | conference fee | conference fee | Market price determined by the Company’s related transaction decision-making process | Market price | 9.08 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | April 21, 2021 | cninfo (http://www.cninfo.com.cn) |
| Total | -- | -- | 44,311.43 | -- | 44,379 | -- | -- | -- | -- | -- |
| Details of bulk sales returns | N/A | |||||||||
| Actual performance during the reporting period where the total amount of daily related transactions is estimated by category for the current period (if any) | N/A | |||||||||
| Reasons for the large difference between the transaction price and the market reference price (if applicable) | N/A | |||||||||
2. Related transactions involving the acquisition or sale of assets and shares
□ Applicable √N/A
No such case during the reporting period.
3. Related transactions of joint external investment
√ Applicable □ N/A
| Joint investors | Related relations | Name of investee | Main business of investee | Registered capital of investee | Total assets of investee (unit: RMB10,000) | Net assets of investee (unit: RMB10,000) | Net profits of investee (unit: RMB10,000) |
| Shanghai Yuanda Investment Management Co., Ltd., Fuguang Chengdu Equity Investment Management Co., Ltd., Hangzhou High-Tech Venture Capital | Yuanda Investment Management and Fuguang Chengdu are subsidiaries of Beijing Yuanda Huachuang Investment Co., Ltd., the controlling shareholder of China Grand | Hangzhou Fuguang Hongxin Equity Investment Partnership (L.P.) | General projects: Equity investment; venture capital investment (investment in unlisted companies only) | 200 million yuan | 7,754.14 | 7,754.14 | -245.86 |
| Management Co., Ltd., and Hangzhou Heda Industrial Fund Investment Co., Ltd. | Enterprises, Inc. (the controlling shareholder of the Company). According to the provisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange and other relevant laws and regulations, Yuanda Investment Management, Fuguang Chengdu and the Company constitute related parties. | ||||||
| Hangzhou Fuguang Hongxin Equity Investment Partnership (L.P.) | Since Fuguang Chengdu, the managing partner and fund manager of Fuguang Hongxin, and Yuanda Investment Management, one of Fuguang Hongxin’s limited partner, are subsidiaries | Nuoling Biomedical Technology (Beijing) Co., Ltd. | Retail pharmaceuticals; biological and pharmaceutical technology development, technology transfer, technical consultation and technical services; sales of biological reagents (excluding drugs), | 5.197356 million yuan | 8,170.99 | 7,845.81 | -1,582.21 |
| of Yuanda Huachuang, the controlling shareholder of China Grand Enterprises, Inc. (the controlling shareholder of the Company), and the Company is a limited partner of Fuguang Hongxin, Fuguang Hongxin and the Company constitute related parties in accordance with the provisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange and other relevant laws and regulations. | instruments and meters, type I medical equipment; conference services; exhibitions and shows; import and export of goods and technology. | |||
| Progress of major ongoing projects (if any) of the investee | 1. In order to further increase the integration of industry and finance and industrial innovation, build an incubation and introduction platform for diversified high-quality R&D and innovation projects, and quickly enrich the Company’s core product pipelines, the Company signed the Partnership Agreement of Hangzhou Fuguang Hongxin Equity Investment Partnership (L.P.) with Shanghai Yuanda Investment Management Co., Ltd., Fuguang Chengdu Equity Investment Management Co., Ltd., Hangzhou High-Tech Venture Capital Management Co., Ltd., and Hangzhou Heda Industrial Fund Investment Co., Ltd., jointly establishing “Hangzhou Fuguang Hongxin Equity Investment Partnership (L.P.)” on January 7, | |||
2021. The Pharmaceutical Industry Fund was established with a total scale of RMB200 million, ofwhich RMB98 million is contributed by the Company with its own funds and the Company is a limitedpartner of the Pharmaceutical Industry Fund. For details, please refer to No. 2021-002 Announcementon Participation in Investment in the Establishment of Pharmaceutical Industry Investment Fund andRelated Party Transactions issued by the Company on January 7, 2021.
2. As of April 6, 2021, the Pharmaceutical Industry Fund completed the initial fund raising, finished theindustrial and commercial registration procedures, and it was successfully filed with AMAC on April2, 2021. For details, please refer to No. 2021-016 Announcement on the Progress of Participation inInvestment in the Establishment of Pharmaceutical Industry Investment Fund issued by the Companyon April 6, 2021.
3. Zhongmei Huadong, a wholly-owned subsidiary of the Company, and Hangzhou Fuguang HongxinEquity Investment Partnership (L.P.) jointly contributed a total of RMB35 million to increase the capitalof Nuoling Biomedical Technology (Beijing) Co., Ltd. and subscribed for the newly increasedregistered capital of RMB520,479 of Nuoling Biomedical Technology, which corresponds to 10.4478%of its equity after the completion of the financing. Specifically, Zhongmei Huadong invested RMB15million and subscribed for Nuoling Biomedical Technology’s newly registered capital of RMB223,062,while Fuguang Hongxin invested RMB20 million and subscribed for RMB297,417. Upon completionof the transaction, Zhongmei Huadong held 4.4776% of the equity of Nuoling Biomedical Technology,while Fuguang Hongxin held 5.9702%. On April 19, 2021, all existing shareholders of NuolingBiomedical Technology signed a Capital Increase Agreement and a Shareholders Agreement withZhongmei Huadong and Fuguang Hongxin. For details, please refer to No. 2021-020 Announcement onJoint External Investment and Related Party Transactions with the Pharmaceutical Industry InvestmentFund issued by the Company on April 19, 2021.
4. In August 2021, Nuoling Bio carried out a new round of capital increase. After this action,
Zhongmei Huadong holds 4.2918% equity of Nuoling Bio, and Fuguang Hongxin holds 5.7225%.
4. Associated claim and debt transactions
□ Applicable √N/A
No such case during the reporting period.
5. Transactions with financial companies who are related parties of the Company
□ Applicable √N/A
No deposit, loan, credit or other financial business between the Company and the related financial companies
6. Transactions between the financial companies controlled by the Company and the related parties
□ Applicable √N/A
No deposit, loan, credit or other financial business between the financial companies controlled by the Company and the relatedparties.
7. Other major related transactions
□ Applicable √N/A
No such case during the reporting period.XV. Major contracts and their fulfilment
1. Entrustment, contracting and leasing
(1) Entrustment
□ Applicable √N/A
No such case during the reporting period.
(2) Contracting
□ Applicable √N/A
No such case during the reporting period.
(3) Leasing
□ Applicable √N/A
No such case during the reporting period.
2. Important guarantees
√ Applicable □ N/A
Unit: RMB ten thousand yuan
| External guarantees of the Company and its subsidiaries (excluding guarantees for subsidiaries) | ||||||||||
| guaranteed party | Disclosure date of the announcement related to the guarantee Cap | Guarantee Cap | Actual date of occurrence | Actual guaranteed amount | Type of guarantee | Collateral (if any) | Counter-guaranty (if any) | Period of guarantee | Fulfilled or not | Guarantee for a related party or not |
| / | / | / | / | / | / | / | / | / | / | / |
| Total amount of external guarantees approved during the reporting period (A1) | / | Total actual amount of external guarantees during the reporting period (A2) | / | |||||||
| Total amount of approved external guarantees at the | / | Total actual balance of external | / | |||||||
| end of the reporting period (A3) | guarantees at the end of the reporting period (A4) | |||||||||
| The Company’s guarantees for its subsidiaries | ||||||||||
| guaranteed party | Disclosure date of the announcement related to the guarantee Cap | Guarantee Cap | Actual date of occurrence | Actual guaranteed amount | Type of guarantee | Collateral (if any) | Counter-guaranty (if any) | Period of guarantee | Fulfilled or not | Guarantee for a related party or not |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2020 | 80,000 | May 22, 2020 | 58 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2020 | 80,000 | June 9, 2020 | 708 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2020 | 80,000 | October 13, 2020 | 14 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2020 | 80,000 | April 9, 2021 | 974 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 21, 2021 | 80,000 | June 25, 2021 | 25,488 | Joint liability guarantee | One year | No | No | ||
| Hangzhou | April 21, | 80,000 | Novembe | 10,000 | Joint | One year | No | No | ||
| Zhongmei Huadong Pharmaceutical Co., Ltd. | 2021 | r 30, 2021 | liability guarantee | |||||||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 21, 2021 | 80,000 | December 10, 2021 | 72 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | June 2, 2021 | 9,564 | June 1, 2021 | 9,564 | Joint liability guarantee | No | No | |||
| Huadong Ningbo Medicine Co., Ltd. | April 21, 2021 | 50,000 | One year | |||||||
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | April 21, 2021 | 5,000 | One year | |||||||
| Huadong Medicine Ningbo Sales Co., Ltd. | April 21, 2021 | 15,000 | November 26, 2021 | 3,800 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Huzhou Co., Ltd. | ||||||||||
| Huadong Medicine Shaoxing Co., Ltd. | April 21, 2021 | 18,000 | November 26, 2021 | 4,988 | Joint liability guarantee | One year | No | No |
| Huadong Medicine Supply Chain Management (Hangzhou) Co., Ltd. | April 21, 2021 | 6,000 | One year | |||||||
| Huadong Medicine Supply Chain Management (JinHua) Co., Ltd. | April 19, 2019 | 20,000 | Ten years | |||||||
| Huadong Medicine (Hangzhou) Biological Products Co., Ltd. | April 21, 2021 | 3,200 | One year | |||||||
| Jiangsu Jiuyang Biopharm Co., Ltd. | April 21, 2021 | 7,000 | One year | |||||||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | December 20, 2021 | 990 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | December 16, 2021 | 990 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | December 15, 2021 | 990 | Joint liability guara | One year | No | No |
| ntee | ||||||||||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | December 14, 2021 | 990 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | October 21, 2021 | 1,980 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | November 23, 2021 | 990 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | November 22, 2021 | 990 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | September 15, 2021 | 2,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 21, 2021 | 24,000 | September 9, 2021 | 2,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Lishui Co., Ltd. | April 21, 2021 | 15,000 | May 31, 2021 | 6,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Daishan Co., Ltd. | April 21, 2021 | 5,500 | November 29, 2021 | 370 | Joint liability guarantee | One year | No | No |
| Huadong Medicine Cunde (Zhoushan) Co., Ltd. | April 21, 2021 | 12,000 | November 26, 2021 | 1,900 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. | April 21, 2021 | 70,000 | July 27, 2021 | 1,874 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Huadong Pharmacy Chain Co., Ltd. | April 21, 2021 | 5,000 | May 31, 2021 | 2,300 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Jinhua Co., Ltd. | April 21, 2021 | 12,000 | November 26, 2021 | 1,140 | Joint liability guarantee | One year | No | No | ||
| Huadong Pharmaceutical Investment Holding (Hong Kong) Limited | July 16, 2021 | 60,569 | Three years | |||||||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | May 21, 2020 | 10,328 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | July 30, 2020 | 2,582 | Joint liability | Three years | No | No |
| guarantee | ||||||||||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | November 16, 2020 | 1,721 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | February 4, 2021 | 2,582 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,910 | March 30, 2021 | 2,582 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,910 | April 19, 2021 | 3,443 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,910 | May 26, 2021 | 3,443 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,910 | August 11, 2021 | 1,721 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,910 | September 14, 2021 | 1,721 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | March 16, 2021 | 21,516 | March 5, 2021 | 18,049 | Joint liability guarantee | Three years | No | No |
| Sinclair Pharma Limited | March 16, 2021 | 14,439 | April 8, 2021 | 14,439 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | March 16, 2021 | 14,439 | March 17, 2021 | 14,439 | Joint liability guarantee | Until December 31, 2024 | No | No | ||
| Sinclair Pharma Limited | July 16, 2021 | 35,066 | Joint liability guarantee | Three years | ||||||
| Total guarantee cap for subsidiaries approved during the reporting period (B1) | 502,294 | Total actual guarantee amount for subsidiaries during the reporting period (B2) | 142,809 | |||||||
| Total approved guarantee cap for subsidiaries at the end of the reporting period (B3) | 706,842 | Total actual guarantee balance for subsidiaries at the end of the reporting period (B4) | 158,220 | |||||||
| Subsidiaries guarantee for subsidiaries | ||||||||||
| guaranteed party | Disclosure date of the announcement related to the guarantee Cap | Guarantee Cap | Actual date of occurrence | Actual guaranteed amount | Type of guarantee | Collateral (if any) | Counter-guaranty (if any) | Period of guarantee | Fulfilled or not | Guarantee for a related party or not |
| Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. | April 21, 2021 | 20,000 | September 15, 2021 | 4,015 | Joint liability guarantee | One year | No | No | ||
| Total guarantee cap for subsidiaries approved during the reporting period (C1) | 20,000 | Total guarantee cap for subsidiaries approved during the reporting period (C1) | 4,015 | |||||||
| Total approved guarantee cap for subsidiaries at the end of the reporting period (C3) | 20,000 | Total approved guarantee cap for subsidiaries at the end of the reporting period (C3) | 4,015 |
| Total amount of the Company’s guarantees (i.e. the sum of the above-mentioned 3 kinds of guarantees) | |||
| Total guarantees cap approved during the reporting period (A1+B1+C1) | 522,294 | Total actual guarantee amount during the reporting period (A2+B2+C2) | 146,824 |
| Total approved guarantee cap at the end of the reporting period (A3+B3+C3) | 726,842 | Total actual guarantee balance at the end of the reporting period (A4+B4+C4) | 162,235 |
| Proportion of the actual guarantee amount (i.e. A4+B4+C4) in the Company’s net assets | 9.79% | ||
| Including: | |||
| Balance of guarantees for shareholders, de facto controllers and their related parties (D) | / | ||
| Amount of debt guarantees provided directly or indirectly for the entities with a liability-to asset ratio over 70% (E) | 26,290 | ||
| The total amount of guarantees exceeds 50% of the net assets (F) | / | ||
| Total guarantee amount of the above-mentioned three kinds of guarantees (D+E+F) | 26,290 | ||
| For the unexpired guarantee, a guarantee liability has occurred or there may be a joint liability for satisfaction during the reporting period (if any) | / | ||
| Note of external guarantees in violation of prescribed procedures (if any) | / | ||
3. Entrusted management of cash assets
(1) Entrusted finances
□ Applicable √ N/A
No such case during the reporting period.
(2) Entrusted loans
□ Applicable √ N/A
No such case during the reporting period.
4. Other significant contracts
□ Applicable √ N/A
No such case during the reporting period.XVI. Other major events
□ Applicable √ N/A
No such case during the reporting period.XVII. Major events of subsidiaries
□ Applicable √ N/A
Section VII. Share Change and Shareholders
I. Changes in Share Capital
1. Table of Changes in share capital
Unit: share
| Before the change | Change in the period (+/-) | After the change | |||||||
| Number of shares | Proportion | New shares | Number of shares | Proportion | New shares | Number of shares | |||
| I. Shares subject to conditional restriction | 47,745 | 0.00% | 0 | 0 | 0 | 0 | 0 | 47,745 | 0.00% |
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2. Shares held by state-owned corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Shares held by other domestic investors | 47,745 | 0.00% | 0 | 0 | 0 | 0 | 0 | 47,745 | 0.00% |
| Including: held by domestic corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| held by domestic natural persons | 47,745 | 0.00% | 0 | 0 | 0 | 0 | 0 | 47,745 | 0.00% |
| 4. Shares held by overseas investors | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Including: held by overseas corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| held by overseas natural persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| II. Shares without restriction | 1,749,761,803 | 100.00% | 0 | 0 | 0 | 0 | 0 | 1,749,761,803 | 100.00% |
| 1. RMB ordinary shares | 1,749,761,803 | 100.00% | 0 | 0 | 0 | 0 | 0 | 1,749,761,803 | 100.00% |
| 2. Domestically listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Foreign shares listed overseas | 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 | 1,749,8 | 100.00 | 0 | 0 | 0 | 0 | 0 | 1,749,8 | 100.00% |
| 09,548 | % | 09,548 |
Reasons for the changes in share capital
□ Applicable √ N/A
Approval for changes in share capital
□ Applicable √ N/A
Transfer of shares
□ Applicable √ N/A
Effects of changes in share capital on the basic earnings per share, diluted earnings per share for the most recent year and the mostrecent period, the net assets per share attributable to the Company’s shareholders of common shares and other financial indicators
□ Applicable √ N/A
Other disclosures the Company deems necessary or required by securities regulatory authorities
□ Applicable √ N/A
2. Changes in restricted shares
□ Applicable √ N/A
II. Issuance and listing of securities
1. Securities (excluding preferred shares) during the reporting period
□ Applicable √ N/A
2. Explanation on changes in share capital, the structure of shareholders and the structure of assets andliabilities
□ Applicable √ N/A
3. Existent shares held by internal staff of the Company
□ Applicable √ N/A
III. Particulars about shareholders and the de facto controller
1. Total number of shareholders and their shareholdings
Unit: share
| Total number of common shareholders at the end of the reporting period | 155,939 | Total number of common shareholders at the end of the previous month before the disclosure of the annual report | 131,993 | Total number of preference shareholders with restoration of the voting rights at the end of the reporting period (if any) (see Note 8) | 0 | Total number of preference shareholders with restoration of the voting rights at the end of the previous month before the disclosure of the annual report (if any) (see Note 8) | 0 | ||||||||
| Particulars about shareholders with a shareholding ratio over 5% or the Top 10 shareholders | |||||||||||||||
| Name of shareholder | Nature of shareholder | Share- holding ratio | Total shares held at the end of the reporting period | Changes in the reporting period | The number of common shares held with trading restrictions restricted shares held | The number of shares held without trading restriction | Pledged or frozen | ||||||||
| Status | Status | ||||||||||||||
| China Grand Enterprises, Inc. | Domestic non-state-owned corporation | 41.77% | 730,938,157 | 0 | 0 | 730,938,157 | Pledged | 238,450,000 | |||||||
| Hangzhou Huadong Medicine Group Co., Ltd. | State-owned corporation | 16.46% | 288,000,000 | 9,380,000 | 0 | 288,000,000 | |||||||||
| Hong Kong Securities Clearing Company Ltd. | Overseas corporation | 1.86% | 32,460,513 | -5,839,102 | 0 | 32,460,513 | |||||||||
| China Securities Finance Co., | Domestic non-state-owned corporation | 1.27% | 22,186,818 | 0 | 0 | 22,186,818 | |||||||||
| China Construction Bank Co., Ltd. - ICBC Credit Suisse Frontier Medical Equity Fund | Others | 0.57% | 10,000,050 | 10,000,050 | 0 | 10,000,050 | |||
| National Social Security Fund Portfolio 503 | Others | 0.46% | 7,999,959 | 1,000,186 | 0 | 7,999,959 | |||
| China Merchants Bank Co., Ltd. – Xingquan Heyuan Two-Year Mixed Fund | Others | 0.33% | 5,833,335 | 5,833,335 | 0 | 5,833,335 | |||
| Taikang Life Insurance Co., Ltd. - Equity Linked - Industry allocation | Others | 0.31% | 5,409,029 | 5,409,029 | 0 | 5,409,029 | |||
| Liu Li | domestic natural persons | 0.30% | 5,310,000 | 5,310,000 | 0 | 5,310,000 | |||
| Basic Endowment Insurance Fund Portfolio 15041 | Others | 0.27% | 4,682,950 | -2,940,618 | 0 | 4,682,950 | |||
| Strategic investors or general corporations become the top 10 shareholders due to the placement of new shares (if any) (see Note 3) | None | ||||||||
| Explanation on associated relationships or concerted actions among the above-mentioned shareholders | The Company does not know whether the above-mentioned shareholders are related parties or whether they are acting-in-concert parties with one another. | ||||||||
| Description about above-mentioned shareholders’ entrusting/being entrusted with and waiving voting rights t | None | ||||||||
| Explanation of special account for repurchase among the top 10 shareholders (if any) (see Note 10) | None | ||||||||
| Shareholding of the top 10 shareholders without trading restriction conditions | |||||||||
| Name of shareholder | Number of the trading unrestricted stocks held at the end of the Report Period | Type of stocks | |
| Type of stocks | Qty | ||
| China Grand Enterprises, Inc. | 730,938,157 | RMB ordinary stocks | 730,938,157 |
| Hangzhou Huadong Medicine Group Co., Ltd. | 288,000,000 | RMB ordinary stocks | 288,000,000 |
| Hong Kong Securities Clearing Company Ltd. | 32,460,513 | RMB ordinary stocks | 32,460,513 |
| China Securities Finance Co., | 22,186,818 | RMB ordinary stocks | 22,186,818 |
| China Construction Bank Co., Ltd. - ICBC Credit Suisse Frontier Medical Equity Fund | 10,000,050 | RMB ordinary stocks | 10,000,050 |
| National Social Security Fund Portfolio 503 | 7,999,959 | RMB ordinary stocks | 7,999,959 |
| China Merchants Bank Co., Ltd. – Xingquan Heyuan Two-Year Mixed Fund | 5,833,335 | RMB ordinary stocks | 5,833,335 |
| Taikang Life Insurance Co., Ltd. - Equity Linked - Industry allocation | 5,409,029 | RMB ordinary stocks | 5,409,029 |
| Liu Li | 5,310,000 | RMB ordinary stocks | 5,310,000 |
| Basic Endowment Insurance Fund Portfolio 15041 | 4,682,950 | RMB ordinary stocks | 4,682,950 |
| Description for affiliated relationship or concerted action among the top 10 shareholders holding tradable stocks without trading restriction conditions and between the top 10 shareholders holding tradable stocks without trading restriction conditions and | The Company does not know whether the above-mentioned shareholders are related parties or whether they are acting-in-concert parties with one another. | ||
| Description of the participation in margin trading business of the top 10 common shareholders (if any) (see Note 4) | At the end of the reporting period, Liu Li, the 9th shareholder among the top 10 ordinary shareholders of the Company, held | ||
5,310,000 shares of the company through margin account.
Whether the Company’s Top 10 common shareholders or the Top 10 common shareholders without trading restriction have carriedout any agreement to repurchase transaction during the reporting period
□ Yes √ No
No such case during the reporting period.
2. Particulars about controlling shareholder of the Company
Nature of controlling shareholder: Natural individual holdingType of controlling shareholder: Corporation
| Name of controlling shareholder | Legal representative/person in charge | Date of establishment | Organization code | Main business |
| China Grand Enterprises, Inc. | Hu Kaijun | October 27, 1993 | 91110000101690952K | Investment management |
| Shares held by the controlling shareholder in other listed companies through controlling or holding during the reporting period | The other two listed companies controlled by China Grand Enterprises, Inc. are Grand Industrial Holding Co., Ltd. and Grand Pharmaceutical Group Limited. | |||
Change of the controlling shareholder during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
3. Particulars about the Company’s de facto controller & concerted partiesNature of de facto controller: Domestic natural individual holdingType of de facto controller: Natural individual
| Name of de facto controller | Relationship with the de facto controller | Nationality | Whether the de facto controller has obtained the right of abode in another country or region |
| Hu Kaijun | Hu Kaijun | China | No |
| Main occupation and position | Chairman of the Board and General Manager of China Grand Enterprises, Inc.; Chairman of the Board and General Manager of Beijing Yuanda Huachuang Investment Co., Ltd. | ||
| Share held by the de facto controlling shareholder in domestic or overseas listed companies in the past the years | The three listed companies controlled by de facto controller are Huadong Medicine Co., Ltd., Grand Industrial Holding Co., Ltd., and China Grand Pharmaceutical and Grand Pharmaceutical Group Limited. | ||
Change of the de facto controller during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
The ownership and controlling relationship between the de facto controller of the Company and the Company is detailed as follows:
The de facto controller controls the Company through a trust or other way of assets management
□ Applicable √ N/A
4. The amount of shares pledged by the Company’s controlling shareholder or the largest shareholder andits parties acting in concert accounts for 80% of the total shares of the Company held by them
□ Applicable √ N/A
5. Other corporate shareholders with a shareholding ratio over 10%
√ Applicable □ N/A
| Name of corporate shareholders | Legal representative/person in charge | Date of establishment | Registered capital | Main business or management activities |
| Hangzhou Huadong Medicine Group Co., Ltd. | Jin Xuhu | December 21, 1992 | 60 million yuan | The production and processing of compound wine, bagged tea, and donkey-hide glue products (the branches can operate only with licenses), and the state-owned asset operation within the authorized scope of the municipal government; industrial investment; wholesale and retail: chemical raw materials and products (except dangerous chemicals and precursor chemicals), package materials, medical intermediates (except dangerous chemicals and precursor |
chemicals); other legal items that need no submission forapproval.
6. Reduction of restricted shares held by controlling shareholder, de facto controller, restructuring partiesand other commitment subjects
□ Applicable √ N/A
IV. Progress of share repurchase during the reporting periodProgress of share repurchase
□ Applicable √ N/A
Progress of reducing repurchased shares through centralized bidding
□ Applicable √ N/A
Section VIII. Information on Preferred Shares
□ Applicable √ N/A
No such case during the reporting period.
Section IX. Information on Bonds
□ Applicable √ N/A
Section X. Financial ReportI. Audit report
| Audit Opinion | Unmodified unqualified audit opinion |
| Audit Report sign-off Date | April 19, 2021 |
| Audit Institution Name | Pan-China Certified Public Accountants |
| Audit Report Number | T. J. S. (2022) No. 4078 |
| Certified Public Accounts Name | Wang Fukang, Du Jinyu |
Main body of the audit report
Audit ReportT. J. S. (2022) No. 4078
Shareholders of Huadong Medicine Co., Ltd.:
I. Audit opinionWe audited the financial statements of Huadong Medicine Co., Ltd. (hereinafter referred to as“Huadong Medicine”), including the consolidated and the parent company’s balance sheets as atDecember 31, 2021, the consolidated and the parent company’s income statements for the year 2021,the consolidated and the parent company’s cash flow statements, the consolidated and the parentcompany’s statements of changes in ownership interest, and the notes to relevant financial statements.
In our opinion, the attached financial statements are prepared in accordance with the accountingstandards for business enterprises in all material aspects and fairly reflect the consolidated and theparent company’s financial condition of Huadong Medicine as at December 31, 2021, as well as theconsolidated and the parent company’s operating results and cash flows in 2021.
II. Basis opinion
We conducted our audit in accordance with the auditing standards for certified publicaccountants of China. Our responsibilities under these standards are further elaborated in the section“CPA’s responsibility to audit the financial statements” of the auditor’s report. In accordance withthe code of professional ethics for certified public accountants in China, we are independent ofHuadong Medicine and have fulfilled other responsibilities in respect of professional ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate, providing a basis forauditor’s opinion.
III. Key audit matters
The key audit matters are those we consider most important to the audit of the financialstatements for the current period in our professional judgment. The response to these items is based
on an audit of the financial statements as a whole and the formation of auditor’s opinion. We do notcomment on these items separately.(I) Revenue recognition
1. Description
The relevant information disclosure is detailed in Notes III (XXIV) and V (II) 1 to the financialstatements.The operating revenue of Huadong Medicine mainly comes from the production and sales ofdrugs. The operating revenue of Huadong Medicine in 2021 is RMB 345.63 hundred million yuan.The medicine sales business of Huadong Medicine is a performance obligation to be performedat a certain time. The recognition of revenue from domestic sales of products of Huadong Medicineshall meet the following conditions: the products have been delivered to the buyer according to thecontract, and the amount of product sales revenue has been determined, the payment for goods hasbeen recovered or the receipt certificate has been obtained, and the relevant economic benefits arelikely to flow in, and the costs related to the products can be measured reliably. The recognition ofrevenue from overseas sales of products shall meet the following conditions: the products have beendeclared at the customs according to the contract, the bill of lading has been obtained, the amount ofproduct sales revenue has been determined, the payment for goods has been recovered or the receiptcertificate has been obtained, and the relevant economic benefits are likely to flow in, and the costsrelated to the products can be measured reliably.As the operating revenue is one of the key performance indicators of Huadong Medicine, theremay be inherent risks for the management of Huadong Medicine (hereinafter referred to as the“Management”) to achieve specific goals or expectations through inappropriate revenue recognition.Therefore, we identified revenue recognition as a key audit matter.
2. Audit response
For revenue recognition, the audit procedures we implemented mainly include:
(1) Understanding the key internal controls related to revenue recognition, evaluating the designof these controls, determining whether they are implemented, and testing the operating effectivenessof relevant internal controls;
(2) Reviewing the sales contract, understanding the main contract terms or conditions, andevaluating whether the revenue recognition method is appropriate;
(3) Analyzing the operating revenue and gross profit rate by month, product, region, etc.,identifying whether there are significant or abnormal fluctuations, and ascertaining the reasons forthe fluctuations;
(4) For domestic sales revenue, checking the supporting documents related to revenuerecognition by sampling, including sales contracts, orders, sales invoices, outbound delivery orders,shipping orders, shipping documents and payment receipts. For overseas revenue, obtaining e-portinformation and checking with the accounting records, and checking the sales contracts, exportdeclaration forms, bills of lading, sales invoices and other supporting documents by sampling;
(5) In combination with accounts receivable confirmation, confirming the current sales withmajor customers by sampling;
(6) Carrying out a cut-off test for the operating revenue recognized before and after the balancesheet date, and evaluating whether the operating revenue is recognized within an appropriate period;and
(7)The medicine sales business of Huadong Medicine is a performance obligation to be
performed at a certain time.
(8) Checking whether the information relating to operating revenue has been properly presentedin the financial statements.
(II) Impairment of accounts receivable
1. Description
The relevant information disclosure is detailed in Notes III (X) and V (I) 2 to the financialstatements.
As of December 31, 2021, the book balance of accounts receivable of Huadong Medicine wasRMB 67.98 hundred million yuan, the bad debt reserve was 3.67 hundred million yuan, and the bookvalue was 64.31 hundred million yuan.
Based on the credit risk characteristics of various accounts receivable and the individual accountreceivable or the combination of accounts receivable, the Management measured its loss reserveaccording to the expected credit loss equivalent to the entire duration. For the accounts receivablewith expected credit loss measured based on an individual item, the Management comprehensivelyconsidered the reasonable and reliable information about the past items, current conditions and futureeconomic conditions, estimated the expected cash flow, and determined the bad debt reserve thatshould be accrued. For the accounts receivable with expected credit loss measured based on thecombined items, the Management divided the accounts receivable based on age, made adjustmentsaccording to historical credit loss and prospective estimates, compiled a comparison table of accountsreceivable ages and expected credit loss rates, and determined the bad debt reserve that should beaccrued.
Due to the significant amount of accounts receivable and significant management judgmentinvolved in the impairment of accounts receivable, we determined the impairment of accountsreceivable as a key audit matter.
2. Audit response
For the impairment of accounts receivable, the audit procedures we implemented mainly include:
(1) Understanding the key internal controls related to the impairment of accounts receivable,evaluating the design of these controls, determining whether they are implemented, and testing theoperating effectiveness of relevant internal controls;
(2) Reviewing the follow-up actual write-off or reversal of accounts receivable for which thebad debt reserve has been accrued in previous years, evaluating the accuracy of the Management’spast forecasts;
(3) Reviewing the relevant considerations and objective evidence of the Management’s creditrisk assessment of accounts receivable, and evaluating whether the Management has properlyidentified the credit risk characteristics of various accounts receivable;
(4) For the accounts receivable with expected credit loss measured based on an individual item,obtaining and checking the Management’s forecast of the expected cash flow received, evaluating therationality of the key assumptions used in the forecast and the accuracy of data, and checking withthe external evidence obtained;
(5) For the accounts receivable with expected credit loss measured based on the combined items,evaluating the rationality of the Management’s division of combinations according to the credit riskcharacteristics; evaluating the rationality of the comparison table of accounts receivable ages andexpected credit loss rates determined by the Management based on historical credit loss experienceand prospective estimates; testing the accuracy and completeness of the Management’s data
(including the age of accounts receivable, historical loss rate, migration rate, etc.) and whether thecalculation of bad debt reserve is accurate;
(6) Checking the subsequent collection of accounts receivable, and evaluating the reasonabilityof the Management’s accrual of bad debt reserve for accounts receivable; and
(7) Checking whether the information relating to the impairment of accounts receivable has beenproperly presented in the financial statements.
(III) Goodwill impairment
1. Description
The relevant information disclosure is detailed in Notes III (V), III (XIX) and V (I) 15 to thefinancial statements.
As of December 31, 2021, the original book value of goodwill of Huadong Medicine was 21.44hundred million yuan, the impairment reserve was 0.05 hundred million yuan, and the book valuewas 21.39 hundred million yuan.
When there is any sign of impairment in the asset group or asset portfolio related to goodwill,and at the end of each year, the Management shall conduct a goodwill impairment test. TheManagement conducted the goodwill impairment test in combination with the relevant asset group orasset portfolio, and the recoverable amount of the relevant asset group or asset portfolio wasdetermined by the present value of the expected future cash flow. The key assumptions used in theimpairment test include: revenue growth rate in the detailed forecast period, growth rate in theperpetual forecast period, gross profit rate, related expenses and discount rate.
Due to the significant amount of goodwill and the significant management judgment involvedin the goodwill impairment test, we determined the goodwill impairment as a key audit matter.
2. Audit response
For the goodwill impairment, the audit procedures we implemented mainly include:
(1) Reviewing the Management’s forecast of the present value of future cash flows in previousyears and actual operating results, and evaluating the accuracy of the Management’s past forecasts;
(2) Understanding and evaluating the competence, professional quality and objectivity ofexternal valuation experts employed by the Management;
(3) Evaluating the rationality and consistency of the Management’s methods in the impairmenttest;
(4) Evaluating the rationality of the key assumptions adopted by the Management in theimpairment test, and verifying whether the relevant assumptions are consistent with the overalleconomic environment, industry conditions, operating conditions, historical experience, operatingplans, approved budgets, meeting minutes, and other assumptions used by the Management in relationto the financial statements;
(5) Testing the accuracy, completeness and relevance of the data used by the Management in theimpairment test, and rechecking the internal consistency of the relevant information in the impairmenttest;
(6) Testing whether the Management’s calculation of the present value of expected future cashflows is accurate;
(7) Based on the methods and assumptions used by the Management, estimating the presentvalue range of future cash flows and evaluating whether it differs significantly from the rangeestimated by the Management; and
(8) Checking whether the information relating to the goodwill impairment has been properly
presented in the financial statements.
IV. Other informationThe Management is responsible for other information, including information covered in theannual report, but not the financial statements and the auditor’s report.The auditor’s opinion on the financial statements does not cover other information, and we donot publish any form of corroborating conclusions on other information.In conjunction with our audit of the financial statements, it is our responsibility to read otherinformation and, in doing so, consider whether other information is materially inconsistent with thefinancial statements or what we learned during the audit or appears to be materially misrepresented.Based on the work we have performed, if we determine that other information is materiallymisrepresented, we should report that fact. In this connection, we have nothing to report.
V. Responsibility of the Management and Governance for the Financial StatementsThe Management is responsible for preparing the financial statements in accordance with theaccounting standards for business enterprises to achieve fair presentation and for designing,implementing and maintaining the necessary internal controls so that the financial statements are freefrom material misstatement due to fraud or error.In preparing the financial statements, the Management is responsible for assessing HuadongMedicine’s competence for continuing operations, disclosing matters relating to continuingoperations (if applicable) and applying the going concern assumption, unless liquidation andtermination are planned or there is no other realistic alternative.Those charged with governance of Huadong Medicine is responsible for overseeing theCompany’s financial reporting process.
VI. Responsibility of Certified Public Accountants on the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement due to fraud or error, and to issue an auditor’s report thatincludes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee thatan audit performed in accordance with the audit standards will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are considered material when it isreasonably expected that misstatements, individually or collectively, may affect the economicdecisions made by users based on the financial statements.As part of the audit in accordance with the audit standards, we exercise professional judgmentand maintain professional skepticism throughout the process. We also:
(I) Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than the risk of not detecting one resulting fromerror, as fraud may involve collusion, forgery, omissions, misrepresentations, or the override ofinternal control.(II) Understand the internal control associated with the audit to design appropriate auditprocedures.
(III) Evaluate the appropriateness of accounting policies used and the rationality of accounting
estimates and related disclosures made by the Management.
(IV) Conclude on the appropriateness of using the going concern assumption by the Management,and conclude, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on Huadong Medicine’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw the attentionof users to relevant disclosures in the financial statements in our auditor’s report; if such disclosuresare inadequate, we should offer qualified opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However, future events or conditions may causeHuadong Medicine to cease to continue as a going concern.(V) Evaluate the overall presentation, structure and content of the financial statements, includingwhether the financial statements represent the underlying transactions and events in a manner thatachieves fair presentation.(VI) Obtain sufficient and appropriate audit evidence on the financial information of entities orbusiness activities of Huadong Medicine to express auditor’s opinions on the financial statements.We are responsible for the guidance, supervision and implementation of group audits and take fullresponsibility for the auditor’s opinions.We communicate with those charged with governance regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significantdeficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied withthe professional ethical requirements associated with our independence, and communicate to thosecharged with governance all relationships and other matters that may reasonably be deemed to affectour independence, as well as relevant precautions (if applicable).
From the matters communicated to those charged with governance, we determine which mattersare most important to the current financial statement audit and thus constitute key audit matters. Wedescribe these matters in our auditor’s report, unless laws and regulations prohibit their publicdisclosure or, in rare cases, if it is reasonably expected that the negative consequences ofcommunicating a matter in the auditor’s report outweigh the benefits in the public interest, wedetermine that the matter should not be communicated in the auditor’s report.
| Pan-China Certified Public Accountants (special general partnership) | Chinese Certified Public Accountant: Wang Fukang (Project partner) |
| Hangzhou, China April 26, 2022 | Chinese Certified Public Accountant: Du Jinyu |
II. Financial statementsThe unit of statements in the financial notes is: RMB yuan.
1. Consolidated balance sheet
Prepared by: Huadong Medicine Co., Ltd.
December 31, 2021
Unit: RMB yuan
| Item | December 31, 2021 | December 31, 2020 |
| Current assets: | ||
| Cash and bank balances | 4,032,424,555.22 | 3,198,080,997.82 |
| Settlement reserve | ||
| Lending to other banks and other financial institutions | ||
| Financial assets for trade | ||
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 6,430,482,175.97 | 6,137,675,568.82 |
| Accounts receivable for financing | 509,190,888.54 | 828,659,217.25 |
| Prepayments | 275,353,134.69 | 250,916,482.07 |
| Premiums receivable | ||
| Reinsurance accounts receivable | ||
| Reinsurance contract reserve receivable | ||
| Other receivables | 223,707,267.30 | 87,269,489.82 |
| Including: Interests receivable | ||
| Dividends receivable | 877,734.45 | 4,195,666.37 |
| Financial assets purchased for resale | ||
| Inventories | 3,974,549,648.96 | 4,067,635,254.80 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 40,907,922.76 | 85,654,691.58 |
| Total current assets | 15,486,615,593.44 | 14,655,891,702.16 |
| Non-current assets: | ||
| Loans and prepayments issuance | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables |
| Long-term equity investments | 984,927,398.68 | 850,072,053.02 |
| Other equity instrument investments | 257,815,844.68 | 225,453,120.05 |
| Other non-current financial assets | ||
| Real estate properties for investment | 14,569,533.94 | 17,792,735.95 |
| Fixed assets | 3,077,227,759.84 | 2,420,366,582.92 |
| Constructions in progress | 1,582,125,201.25 | 2,240,201,926.65 |
| Biological assets for production | ||
| Oil & gas assets | ||
| Right-of-use assets | 153,724,197.81 | |
| Intangible assets | 2,233,450,369.34 | 1,463,242,463.99 |
| Development expenditures | ||
| Goodwill | 2,138,808,037.01 | 1,469,617,262.10 |
| Long-term unamortized expenses | 12,425,364.03 | 8,811,339.43 |
| Deferred tax assets | 143,651,186.84 | 137,829,774.40 |
| Other non-current assets | 911,062,879.83 | 712,069,194.08 |
| Total non-current assets | 11,509,787,773.25 | 9,545,456,452.59 |
| Total assets | 26,996,403,366.69 | 24,201,348,154.75 |
| Current liabilities: | ||
| Short-term borrowing | 1,237,843,228.13 | 1,416,932,884.87 |
| Borrowing from the central bank | ||
| Borrowing from other banks and other financial institutions | ||
| Financial liabilities for trade | ||
| Derivative financial liabilities | ||
| Notes payable | 671,964,504.00 | 554,336,058.71 |
| Accounts payable | 3,847,719,574.86 | 3,947,044,331.68 |
| Receipts in Advance | 1,147,425.45 | 951,926.56 |
| Contract liabilities | 118,341,141.48 | 94,384,629.77 |
| Financial assets sold for repurchase | ||
| Absorbing deposits and due from banks | ||
| Receipts for buying and selling securities as proxy |
| Receipts for underwriting securities as proxy | ||
| Payroll payable | 168,210,088.82 | 152,106,819.91 |
| Taxes payable | 1,029,610,563.41 | 571,792,475.80 |
| Other payables | 1,935,116,784.93 | 1,817,529,820.99 |
| Including: Interests payable | ||
| Dividends payable | 2,184,219.60 | 224,219.60 |
| Handling fees and commissions payable | ||
| Reinsurance accounts payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 244,256,705.59 | 67,813,886.68 |
| Other current liabilities | 11,386,267.11 | 10,786,034.37 |
| Total current liabilities | 9,265,596,283.78 | 8,633,678,869.34 |
| Non-current liabilities: | ||
| Insurance policy reserve | ||
| Long-term borrowing | 139,178,905.04 | 151,611,367.86 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 80,889,403.39 | |
| Long-term payables | 261,903,489.09 | 26,812,354.90 |
| Long-term employee benefits payable | ||
| Provisions | 39,086,238.25 | 39,467,829.23 |
| Deferred income | 83,521,649.96 | 81,628,032.54 |
| Deferred tax liabilities | 184,908,391.50 | 88,738,187.41 |
| Other non-current liabilities | ||
| Total non-current liabilities | 789,488,077.23 | 388,257,771.94 |
| Total liabilities | 10,055,084,361.01 | 9,021,936,641.28 |
| Owners’ Equity: | ||
| Share capital | 1,749,809,548.00 | 1,749,809,548.00 |
| Other equity instruments | ||
| Including: Preferred shares |
| Perpetual bonds | ||
| Capital reserves | 2,229,868,312.11 | 2,158,080,661.07 |
| Less: Treasury shares | ||
| Other comprehensive income | -47,768,225.80 | -2,191,069.45 |
| Special reserve | ||
| Surplus reserves | 1,021,670,687.31 | 861,680,578.42 |
| General risk reserve | ||
| Retained earnings | 11,625,794,001.46 | 9,852,441,590.56 |
| Total owners’ equity attributable to owner of the Company | 16,579,374,323.08 | 14,619,821,308.60 |
| Minority interest | 361,944,682.60 | 559,590,204.87 |
| Total owners’ equity | 16,941,319,005.68 | 15,179,411,513.47 |
| Total liabilities & owners’ equity | 26,996,403,366.69 | 24,201,348,154.75 |
Legal representative: Lv LiangPerson in charge of accounting work: Lv LiangPerson in charge of the Accounting Department: Qiu Renbo
2. Balance sheet of the parent company
Unit: RMB yuan
| Item | December 31, 2021 | December 31, 2020 |
| Current assets: | ||
| Cash and bank balances | 2,280,519,812.31 | 1,889,264,142.30 |
| Financial assets for trade | ||
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 3,369,254,003.85 | 3,287,882,027.51 |
| Accounts receivable for financing | 196,523,246.00 | 214,871,707.01 |
| Prepayments | 140,828,160.14 | 121,268,106.62 |
| Other receivables | 986,757,703.19 | 798,152,353.96 |
| Including: Interests receivable | ||
| Dividends receivable | 3,363,380.00 | |
| Inventories | 1,946,036,027.82 | 1,845,977,070.46 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 20,289.53 | |
| Total current assets | 8,919,939,242.84 | 8,157,415,407.86 |
| Non-current assets: | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 5,079,071,023.37 | 4,847,172,288.65 |
| Other equity instrument investments | 10,100,870.56 | 94,312,742.49 |
| Other non-current financial assets | ||
| Real estate properties for investment | 7,659,343.90 | 8,125,576.54 |
| Fixed assets | 160,678,584.54 | 159,486,234.04 |
| Constructions in progress | 211,760.72 | 342,161.41 |
| Biological assets for production | ||
| Oil & gas assets | ||
| Right-of-use assets | 11,020,708.66 | |
| Intangible assets | 218,720,898.11 | 56,448,575.54 |
| Development expenditures | ||
| Goodwill | ||
| Long-term unamortized expenses | 321,067.34 | 645,902.07 |
| Deferred tax assets | 47,289,929.98 | 45,918,388.57 |
| Other non-current assets | 406,493,149.98 | 96,882,664.08 |
| Total non-current assets | 5,941,567,337.16 | 5,309,334,533.39 |
| Total assets | 14,861,506,580.00 | 13,466,749,941.25 |
| Current liabilities: | ||
| Short-term borrowing | 630,446,420.72 | 930,813,369.36 |
| Financial liabilities for trade | ||
| Derivative financial liabilities | ||
| Notes payable | 311,085,944.14 | 180,042,270.63 |
| Accounts payable | 2,416,471,973.20 | 2,421,476,904.57 |
| Receipts in advance | ||
| Contract liabilities | 19,690,922.48 | 32,577,236.92 |
| Payroll payable | 9,353,991.58 | 8,530,961.48 |
| Taxes payable | 176,633,138.73 | 154,676,067.87 |
| Other payables | 877,397,177.28 | 518,390,330.44 |
| Including: Interests payable | ||
| Dividends payable | 224,219.60 | 224,219.60 |
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 5,939,175.02 | |
| Other current liabilities | 2,494,822.02 | 4,273,258.99 |
| Total current liabilities | 4,449,513,565.17 | 4,250,780,400.26 |
| Non-current liabilities: | ||
| Long-term borrowing | ||
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 2,701,526.22 | |
| Long-term payables | ||
| Long-term employee benefits payable | ||
| Provision | ||
| Deferred income | 38,133,036.03 | 40,698,910.95 |
| Deferred tax liabilities | 12,511,476.38 | 10,888,106.00 |
| Other non-current liabilities | ||
| Total non-current liabilities | 53,346,038.63 | 51,587,016.95 |
| Total liabilities | 4,502,859,603.80 | 4,302,367,417.21 |
| Owners’ Equity: | ||
| Share capital | 1,749,809,548.00 | 1,749,809,548.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 2,168,451,528.01 | 2,168,451,528.01 |
| Less: Treasury shares | ||
| Other comprehensive income | -129,129.44 | 3,051,311.29 |
| Special reserve | ||
| Surplus reserves | 1,099,526,446.75 | 939,536,337.86 |
| Retained earnings | 5,340,988,582.88 | 4,303,533,798.88 |
| Total owners’ equity | 10,358,646,976.20 | 9,164,382,524.04 |
| Total liabilities & owners’ equity | 14,861,506,580.00 | 13,466,749,941.25 |
3. Consolidated income statement
Unit: RMB yuan
| Item | 2021 | 2020 |
| I. Total operating income | 34,563,301,233.67 | 33,683,058,759.75 |
| Including: Operating revenue | 34,563,301,233.67 | 33,683,058,759.75 |
| Interests received | ||
| Premiums earned | ||
| Handling fees and commissions received | ||
| II. Total operating cost | 31,727,336,299.43 | 30,666,230,281.53 |
| Including: Operating cost | 23,957,370,728.98 | 22,550,481,690.73 |
| Interests paid | ||
| Handling fees and commissions paid | ||
| Surrender value | ||
| Net payment of insurance claims | ||
| Net appropriation of policy reserve | ||
| Policy dividends paid | ||
| Reinsurance expenses | ||
| Business taxes and surcharges | 177,253,313.55 | 185,461,334.65 |
| Selling expenses | 5,424,051,895.28 | 5,970,614,819.26 |
| Administrative expenses | 1,166,941,288.41 | 998,746,330.35 |
| Research and Development(R&D) expenses | 979,644,017.93 | 926,725,468.93 |
| Financial expenses | 22,075,055.28 | 34,200,637.61 |
| Including: Interests expenses | 68,478,439.03 | 68,639,542.18 |
| Interests income | 80,402,140.26 | 60,990,405.57 |
| Add: Other income | 174,690,581.52 | 191,999,829.91 |
| Investment income (Losses are indicated by “-”) | -96,311,975.25 | -27,525,224.08 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | -53,433,345.46 | -10,825,814.85 |
| Gains on the derecognition of financial assets measured at amortized cost | ||
| Gains on exchange (Losses are indicated by “-”) | ||
| Gains on net exposure hedging (Losses are indicated by “-”) | ||
| Gains on changes in fair value (Losses are indicated by “-”) | ||
| Credit impairment losses (Losses are indicated by “-”) | -41,689,977.06 | -22,826,566.73 |
| Impairment losses of assets (Losses are indicated by “-”) | -16,908,408.55 | -4,537,552.17 |
| Gains on assets disposal (Losses are indicated by “-”) | -31,626.51 | 322,636,323.26 |
| III. Operating profit (Losses are indicated by “-”) | 2,855,713,528.39 | 3,476,575,288.41 |
| Add: Non-operating income | 2,682,255.28 | 12,497,148.79 |
| Less: Non-operating expenses | 30,860,834.95 | 35,681,896.22 |
| IV. Total profit (Total losses are indicated by “-”) | 2,827,534,948.72 | 3,453,390,540.98 |
| Less: Income tax expenses | 488,907,390.69 | 543,673,981.58 |
| V. Net profit (Net losses are indicated by “-”) | 2,338,627,558.03 | 2,909,716,559.40 |
| (I) Classification by continuous operations | ||
| 1. Net profit from continued operations (Net losses are indicated by “-”) | 2,338,627,558.03 | 2,909,716,559.40 |
| 2. Net profit from terminational operations (Net losses are indicated by |
| “-”) | ||
| (II) Classification by attribution of ownership | ||
| 1. Net profit attributable to owners of the parent company | 2,301,631,347.64 | 2,819,861,203.63 |
| 2. Profit or loss attributable to minority shareholders | 36,996,210.39 | 89,855,355.77 |
| VI. Other comprehensive income, net of income tax | -24,076,315.61 | -19,570,529.59 |
| Other comprehensive income attributable to owners of the parent company, net of tax | -24,076,315.61 | -19,570,529.59 |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | 20,549,224.62 | -7,557,508.15 |
| 1.Changes in remeasurement on the defined benefit plan | ||
| 2. Other comprehensive income that cannot be reclassified into gains/losses under equity method | ||
| 3. Changes in fair value of other equity instrument investments | 20,549,224.62 | -7,557,508.15 |
| 4. Changes in fair value of credit risk of the enterprise | ||
| 5. Others | ||
| (II) Other comprehensive income to be reclassified into gains/losses | -44,625,540.23 | -12,013,021.44 |
| 1. Other comprehensive income that can be reclassified into gains/losses under equity method | 13,371.08 | |
| 2. Changes in fair value of other debt investments | ||
| 3. Amount of financial assets reclassified into other comprehensive income | ||
| 4. Credit impairment reserve of other debt investments | ||
| 5. Cash flow hedging reserve | ||
| 6. Exchange differences arising on conversion of financial | -44,638,911.31 | -12,013,021.44 |
| statements denominated in foreign currencies | ||
| 7. Others | ||
| Net amount after tax of other comprehensive income attributable to minority shareholders | ||
| VII. Total comprehensive income | 2,314,551,242.42 | 2,890,146,029.81 |
| Total comprehensive income attributable to owners of the parent company | 2,277,555,032.03 | 2,800,290,674.04 |
| Total comprehensive income attributable to minority shareholders | 36,996,210.39 | 89,855,355.77 |
| VIII. Earnings per share (EPS): | ||
| (I) Basic EPS | 1.3154 | 1.6115 |
| (II) Diluted EPS | 1.3154 | 1.6115 |
As for enterprise merger under the same control in the current period, the net profit generated by the merged party before the mergeris 0.00 yuan, and that generated during the previous period is 0.00 yuan.
Legal representative: Lv LiangPerson in charge of accounting work: Lv LiangPerson in charge of the Accounting Department: Qiu Renbo
4. Income statement of the parent company
Unit: RMB yuan
| Item | 2021 | 2020 |
| I. Total operating income | 18,244,390,942.29 | 16,872,181,187.37 |
| Less: Total operating cost | 17,251,703,368.39 | 15,944,922,632.47 |
| Business taxes and surcharges | 21,076,198.14 | 22,247,894.47 |
| Selling expenses | 377,727,331.87 | 376,745,334.88 |
| Administrative expenses | 179,218,304.43 | 149,533,857.93 |
| Research and Development (R&D) expenses | ||
| Financial expenses | 8,473,695.73 | 16,997,550.09 |
| Including: Interests | 53,611,690.17 | 55,351,840.15 |
| expenses | ||
| Interests income | 58,998,380.29 | 42,365,020.49 |
| Add: Other income | 11,127,440.65 | 12,869,243.56 |
| Investment income (Losses are indicated by “-”) | 1,047,838,931.11 | 1,230,298,386.30 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | -3,572,410.52 | |
| Gains on the derecognition of financial assets measured at amortized cost (Losses are indicated by “-”) | ||
| Gains on net exposure hedging (Losses are indicated by “-”) | ||
| Gains from changes in fair values (Losses are indicated by “-”) | ||
| Credit impairment losses (Losses are indicated by “-”) | -37,258,383.02 | 20,604,531.85 |
| Impairment gains (losses) of assets (Losses are indicated by “-”) | -2,923,308.83 | |
| Asset disposal income (Losses are indicated by “-”) | 10,369.02 | -6,255.56 |
| II. Operating profit (Losses are indicated by “-”) | 1,424,987,092.66 | 1,625,499,823.68 |
| Add: Non-operating income | 4,529.76 | 1,052,923.08 |
| Less: Non-operating expenses | 5,472,564.05 | 8,012,091.67 |
| III. Total profit (Total losses are indicated by “-”) | 1,419,519,058.37 | 1,618,540,655.09 |
| Less: Income tax expenses | 120,747,280.50 | 105,334,546.00 |
| IV. Net profit (Net losses are indicated by “-”) | 1,298,771,777.87 | 1,513,206,109.09 |
| (I) Net profit from continuous operations (Net losses are indicated by “-”) | 1,298,771,777.87 | 1,513,206,109.09 |
| (II) Net profit from discontinued operations (Net losses are indicated by “-”) | ||
| V. Other comprehensive income, net of income tax | 65.17 | 2,203,785.23 |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | 65.17 | 2,203,785.23 |
| 1. Changes in remeasurement on the defined benefit plan | ||
| 2. Other comprehensive income that cannot be reclassified into gains/losses under equity method | ||
| 3. Changes in fair value of other equity instrument investments | 65.17 | 2,203,785.23 |
| 4. Changes in fair value of credit risk of the enterprise | ||
| 5. Others | ||
| (II) Other comprehensive income to be reclassified into gains/losses | ||
| 1. Other comprehensive income that can be reclassified into gains/losses under equity method | ||
| 2. Changes in fair value of other debt investments | ||
| 3. Amount of financial assets reclassified into other comprehensive income | ||
| 4. Credit impairment reserve of other debt investments | ||
| 5. Cash flow hedging reserve | ||
| 6. Exchange differences from translation of foreign currency financial statements | ||
| 7. Others | ||
| VI. Total comprehensive income | 1,298,771,843.04 | 1,515,409,894.32 |
| VII. Earnings per share (EPS): | ||
| (I) Basic EPS | ||
| (II) Diluted EPS |
5. Consolidated cash flow statement
Unit: RMB yuan
| Item | 2021 | 2020 |
| I. Cash flows from operating activities： | ||
| Cash received from sale of goods or rendering of services | 37,705,732,220.73 | 36,213,324,706.96 |
| Net increase in customer deposits and due from banks | ||
| Net increase in borrowing from the central bank | ||
| Net increase in borrowing from other financial institutions | ||
| Cash from the premium of the original insurance policy | ||
| Net cash from reinsurance | ||
| Net increase in deposits and investment of the insured | ||
| Cash from interests, handling fees and commissions | ||
| Net increase in borrowing from other banks and other financial institutions | ||
| Net increase in funds for repurchase | ||
| Net cash received for buying and selling securities as proxy | ||
| Receipts of tax refunds | 56,001,263.57 | 21,366,495.17 |
| Other cash receipts to operating activities | 534,883,574.95 | 875,802,744.84 |
| Sub-total of Cash inflows from operating activities | 38,296,617,059.25 | 37,110,493,946.97 |
| Cash payments for goods purchased and services received | 25,581,019,339.56 | 23,428,048,137.78 |
| Net increase in customer loans and prepayments | ||
| Net increase in deposits of central bank and due from banks |
| Cash payments for original insurance claims | ||
| Net increase in lending to other banks and other financial institutions | ||
| Cash payments for interests, handling fees and commissions | ||
| Cash payments for policy dividends | ||
| Cash payments to and on behalf of employees | 2,642,677,316.23 | 2,292,509,541.65 |
| Payments of various types of taxes | 1,595,252,332.08 | 2,186,582,342.29 |
| Other cash payments in relation to operating activities | 5,307,910,203.43 | 5,791,906,177.69 |
| Sub-total of cash outflows for operating activities | 35,126,859,191.30 | 33,699,046,199.41 |
| Net cash flow from operating activities | 3,169,757,867.95 | 3,411,447,747.56 |
| II. Cash flows from investing activities | ||
| Cash receipts from recovery of investments | 92,381,381.75 | 1.00 |
| Cash receipts from investment income | 43,721,334.71 | 900,000.00 |
| Net cash from disposal of fixed assets, intangible assets and other long-term assets | 79,161,948.94 | 373,808,641.84 |
| Net cash from disposal of subsidiaries and other business units | ||
| Other cash receipts in relation to investing activities | 36,521,193.82 | 10,970,083.85 |
| Sub-total of cash inflows from investing activities | 251,785,859.22 | 385,678,726.69 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 819,095,124.00 | 1,472,983,747.79 |
| Cash payments for investment | 246,401,722.50 | 638,463,000.00 |
| Net increase in pledge loans | ||
| Net cash paid for acquisition of subsidiaries and other business units | 791,857,512.24 | |
| Other cash payments in relation to | 381,114,144.63 | 12,869,402.84 |
| investing activities | ||
| Sub-total of cash outflows for investing activities | 2,238,468,503.37 | 2,124,316,150.63 |
| Net cash flow from investing activities | -1,986,682,644.15 | -1,738,637,423.94 |
| III. Cash flows from financing activities: | ||
| Cash receipts from capital contributions | 5,000,000.00 | |
| Including: Cash receipts from capital contributions from minority owners of subsidiaries | 5,000,000.00 | |
| Cash from borrowing | 2,110,032,213.34 | 2,194,671,377.21 |
| Other cash receipts in relation to financing activities | 149,316,666.67 | 16,376,100.00 |
| Sub-total of cash inflows from financing activities | 2,264,348,880.01 | 2,211,047,477.21 |
| Cash repayment of borrowings | 2,296,363,034.67 | 2,258,202,628.26 |
| Cash payments for distribution of dividends or profits or settlement of interet expenses | 463,028,834.38 | 655,696,970.33 |
| Including: Dividends and profits paid by subsidiaries to minority shareholders | 2,920,000.00 | 89,969,437.98 |
| Other cash payments in relation to financing activities | 272,410,313.45 | 22,877,889.85 |
| Sub-total of cash outflows from financing activities | 3,031,802,182.50 | 2,936,777,488.44 |
| Net cash flows from financing activities | -767,453,302.49 | -725,730,011.23 |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 7,111,643.60 | -21,444,785.63 |
| V. Net increase in cash and cash equivalents | 422,733,564.91 | 925,635,526.76 |
| Add: Opening balance of cash and cash equivalents | 3,157,407,073.26 | 2,231,771,546.50 |
| VI. Closing balance of cash and cash equivalents | 3,580,140,638.17 | 3,157,407,073.26 |
6. Cash flow statement of the parent company
Unit: RMB yuan
| Item | 2021 | 2020 |
| I. Cash flows from operating activities： | ||
| Cash receipts from the sale of goods and the rendering of services | 19,578,902,300.31 | 18,468,734,907.54 |
| Receipts of tax refund | 2,136,711.19 | 62.38 |
| Other cash receipts in relation to operating activities | 194,135,943.58 | 75,204,158.10 |
| Sub-total of cash inflows from operating activities | 19,775,174,955.08 | 18,543,939,128.02 |
| Cash payments for goods acquired and services received | 18,617,179,307.59 | 17,189,413,934.83 |
| Cash payments to and on behalf of employees | 251,434,357.34 | 221,958,975.19 |
| Payments of various types of taxes | 268,426,804.41 | 141,082,140.82 |
| Other cash payments in relation to operating activities | 320,447,047.23 | 305,941,397.18 |
| Sub-total of cash outflows for operating activities | 19,457,487,516.57 | 17,858,396,448.02 |
| Net cash flow from operating activities | 317,687,438.51 | 685,542,680.00 |
| II. Cash flows from investing activities | ||
| Cash receipts from recovery of investments | 81,031,431.20 | 4,277,665.48 |
| Cash receipts from investment income | 1,028,872,757.80 | 252,569,238.79 |
| Net cash receipts from disposal of fixed assets, intangible assets and other long-term assets | 423,127.11 | 51,043.55 |
| Net cash from disposal of subsidiaries and other business units | ||
| Other cash receipts in relation to investing activities | 608,901,831.03 | 1,008,662,454.55 |
| Sub-total of cash inflows from investing activities | 1,719,229,147.14 | 1,265,560,402.37 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 96,179,759.09 | 117,614,594.72 |
| Cash payments for investment | 238,516,032.77 | 45,563,072.00 |
| Net cash paid for acquisition of subsidiaries and other business units | ||
| Other cash payments in relation to investing activities | 979,989,850.00 | 883,840,800.00 |
| Sub-total of cash outflows for investing activities | 1,314,685,641.86 | 1,047,018,466.72 |
| Net cash flows from investing activities | 404,543,505.28 | 218,541,935.65 |
| III. Cash flows from financing activities: | ||
| Cash receipts from absorbing investments | ||
| Cash receipts from borrowing | 960,000,000.00 | 1,290,651,754.99 |
| Other cash receipts in relation to financing activities | 3,883,416,666.67 | 8,284,000,000.00 |
| Sub-total of cash inflows from financing activities | 4,843,416,666.67 | 9,574,651,754.99 |
| Cash repayments of borrowings | 1,389,996,025.48 | 1,415,656,441.26 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 423,529,087.27 | 555,848,349.12 |
| Other cash payments in relation to financing activities | 3,722,279,458.85 | 7,511,907,162.52 |
| Sub-total of cash outflows fromfinancing activities | 5,535,804,571.60 | 9,483,411,952.90 |
| Net cash flow from financing activities | -692,387,904.93 | 91,239,802.09 |
| IV. Effect of foreign exchange rate changes on Cahs and Cash Equivalents | ||
| V. Net increase in cash and cash equivalents | 29,843,038.86 | 995,324,417.74 |
| Add: Opening balance of cash and cash equivalents | 1,889,254,142.30 | 893,929,724.56 |
| VI. Closing balance of cash and cash equivalents | 1,919,097,181.16 | 1,889,254,142.30 |
7. Consolidated statement of changes in owners’ Equity
Amount in the current period
Unit: RMB yuan
| Item | 2021 | ||||||||||||||
| Ownership interest attributable to the parent company | Minority interest | Total ownership interest | |||||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | General risk reserve | Undistributed profit | Others | Total | |||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,158,080,661.07 | -2,191,069.45 | 861,680,578.42 | 9,852,441,590.56 | 14,619,821,308.60 | 559,590,204.87 | 15,179,411,513.47 | |||||||
| Add: changes in accounting policies | |||||||||||||||
| Error correction in the prior periods | |||||||||||||||
| Merger of enterprises under the same control | |||||||||||||||
| Others | |||||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,158,080,661.07 | -2,191,069.45 | 861,680,578.42 | 9,852,441,590.56 | 14,619,821,308.60 | 559,590,204.87 | 15,179,411,513.47 | |||||||
| III. Amount of change in the current period (Decreases are indicated by “-”) | 71,787,651.04 | -45,577,156.35 | 159,990,108.89 | 1,773,352,410.90 | 1,959,553,014.48 | -197,645,522.27 | 1,761,907,492.21 | ||||||||
| (I) Total | - | 2,301, | 2,277, | 36,996 | 2,314, | ||||||||||
| comprehensive income | 24,076,315.61 | 631,347.64 | 555,032.03 | ,210.39 | 551,242.42 | ||||||||||
| (II) Capital contributed by owners and capital decreases | 5,000,000.00 | 5,000,000.00 | |||||||||||||
| 1. Common shares invested by owners | 5,000,000.00 | 5,000,000.00 | |||||||||||||
| 2. Capital invested by holders of other equity instruments | |||||||||||||||
| 3. Amount of share-based payment included in ownership interest | |||||||||||||||
| 4. Others | |||||||||||||||
| (III) Profit distribution | 129,877,177.79 | -532,333,373.83 | -402,456,196.04 | -4,880,000.00 | -407,336,196.04 | ||||||||||
| 1. Withdrawal of surplus reserve | 129,877,177.79 | -129,877,177.79 | |||||||||||||
| 2. Withdrawal of general risk reserve | |||||||||||||||
| 3. Distribution to owners (or shareholders) | -402,456,196.04 | -402,456,196.04 | -4,880,000.00 | -407,336,196.04 | |||||||||||
| 4. Others | |||||||||||||||
| (IV) Internal conversion of | -21,500 | 28,846,278.3 | -7,345, |
| ownership interest | ,840.74 | 6 | 437.62 | ||||||||||||
| 1. Capital (or share capital) increase from capital reserve conversion | |||||||||||||||
| 2. Capital (or share capital) increase from surplus reserve conversion | |||||||||||||||
| 3. Recovery of losses by surplus reserve | |||||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | |||||||||||||||
| 5. Retained earnings from transfer of other comprehensive income | -21,500,840.74 | 318,050.59 | 21,182,790.15 | ||||||||||||
| 6. Others | 28,528,227.77 | -28,528,227.77 | |||||||||||||
| (V) Special reserve | |||||||||||||||
| 1. Withdrawal in the current period | |||||||||||||||
| 2. Use in the current period | |||||||||||||||
| (VI) Others | 71,787,651.04 | 1,266,652.74 | 11,399,874.71 | 84,454,178.49 | -234,761,732.66 | -150,307,554.17 |
| IV. Balance at the end of the current period | 1,749,809,548.00 | 2,229,868,312.11 | -47,768,225.80 | 1,021,670,687.31 | 11,625,794,001.46 | 16,579,374,323.08 | 361,944,682.60 | 16,941,319,005.68 |
Amount in the prior period
Unit: RMB yuan
| Items | 2020 | ||||||||||||||
| Ownership interest attributable to the parent company | Minority interest | Total ownership interest | |||||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | General risk reserve | Undistributed profit | Others | Total | |||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,158,080,661.07 | 22,792,488.80 | 710,359,967.51 | 7,668,434,642.62 | 12,309,477,308.00 | 557,146,931.87 | 12,866,624,239.87 | |||||||
| Add: Changes in accounting policies | |||||||||||||||
| Error correction in the prior periods | |||||||||||||||
| Merger of enterprises under the same control | |||||||||||||||
| Others | |||||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,158,080,661.07 | 22,792,488.80 | 710,359,967.51 | 7,668,434,642.62 | 12,309,477,308.00 | 557,146,931.87 | 12,866,624,239.87 | |||||||
| III. Amount of | - | 151,32 | 2,184, | 2,310, | 2,443,2 | 2,312,7 | |||||||||
| change in the current period (Decreases are indicated by “-”) | 24,983,558.25 | 0,610.91 | 006,947.94 | 344,000.60 | 73.00 | 87,273.60 | |||||||||
| (I) Total comprehensive income | -19,570,529.59 | 2,819,861,203.63 | 2,800,290,674.04 | 89,855,355.77 | 2,890,146,029.81 | ||||||||||
| (II) Capital contributed by owners and capital decreases | 4,900,000.00 | 4,900,000.00 | |||||||||||||
| 1. Common shares invested by owners | 4,900,000.00 | 4,900,000.00 | |||||||||||||
| 2. Capital invested by holders of other equity instruments | |||||||||||||||
| 3. Amount of share-based payment included in ownership interest | |||||||||||||||
| 4. Others | |||||||||||||||
| (III) Profit distribution | 151,320,610.91 | -641,267,284.35 | -489,946,673.44 | -89,969,437.98 | -579,916,111.42 | ||||||||||
| 1. Withdrawal of surplus reserve | 151,320,610.91 | -151,320,610.91 | |||||||||||||
| 2. Withdrawal of general risk reserve | |||||||||||||||
| 3. Distribution | - | - | - | - |
| to owners (or shareholders) | 489,946,673.44 | 489,946,673.44 | 89,969,437.98 | 579,916,111.42 | |||||||||||
| 4. Others | |||||||||||||||
| (IV) Internal conversion of ownership interest | -5,413,028.66 | 5,413,028.66 | |||||||||||||
| 1. Capital (or share capital) increase from capital reserve conversion | |||||||||||||||
| 2. Capital (or share capital) increase from surplus reserve conversion | |||||||||||||||
| 3. Recovery of losses by surplus reserve | |||||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | |||||||||||||||
| 5. Retained earnings from transfer of other comprehensive income | -5,413,028.66 | 5,413,028.66 | |||||||||||||
| 6. Others | |||||||||||||||
| (V) Special reserve | |||||||||||||||
| 1. Withdrawal in the current period | |||||||||||||||
| 2. Use in the current period |
| (VI) Others | -2,342,644.79 | -2,342,644.79 | |||||||||||||
| IV. Balance at the end of the current period | 1,749,809,548.00 | 2,158,080,661.07 | -2,191,069.45 | 861,680,578.42 | 9,852,441,590.56 | 14,619,821,308.60 | 559,590,204.87 | 15,179,411,513.47 |
8. Statement of changes in ownership interest of the parent company
Amount in the current period
Unit: RMB yuan
| Item | 2021 | |||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profit | Others | Total ownership interest | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,168,451,528.01 | 3,051,311.29 | 939,536,337.86 | 4,303,533,798.88 | 9,164,382,524.04 | ||||||
| Add: Changes in accounting policies | ||||||||||||
| Error correction in the prior periods | ||||||||||||
| Others | ||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,168,451,528.01 | 3,051,311.29 | 939,536,337.86 | 4,303,533,798.88 | 9,164,382,524.04 | ||||||
| III. Amount of change in the current period (Decreases are indicated by “-”) | -3,180,440.73 | 159,990,108.89 | 1,037,454,784.00 | 1,194,264,452.16 | ||||||||
| (I) Total comprehensive income | 65.17 | 1,298,771,777.87 | 1,298,771,843.04 | |||||||||
| (II) Capital contributed by owners and capital decreases | ||||||||||||
| 1. Common shares invested by owners | ||||||||||||
| 2. Capital invested by holders of other equity instruments | ||||||||||||
| 3. Amount of share-based payment included in ownership interest | ||||||||||||
| 4. Others | ||||||||||||
| (III) Profit distribution | 129,877,177.79 | -532,333,373.83 | -402,456,196.04 | |||||||||
| 1. Withdrawal of surplus reserve | 129,877,177.79 | -129,877,177.79 | ||||||||||
| 2. Distribution to owners (or shareholders) | -402,456,196.04 | -402,456,196.04 | ||||||||||
| 3. Others | ||||||||||||
| (IV) Internal conversion of ownership interest | -3,180,505.90 | 28,846,278.36 | -25,665,772.46 | |||||||||
| 1. Capital (or share capital) increase from capital reserve conversion |
| 2. Capital (or share capital) increase from surplus reserve conversion | ||||||||||||
| 3. Recovery of losses by surplus reserve | ||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | ||||||||||||
| 5. Retained earnings from transfer of other comprehensive income | -3,180,505.90 | 318,050.59 | 2,862,455.31 | |||||||||
| 6. Others | 28,528,227.77 | -28,528,227.77 | ||||||||||
| (V) Special reserve | ||||||||||||
| 1. Withdrawal in the current period | ||||||||||||
| 2. Use in the current period | ||||||||||||
| (VI) Others | 1,266,652.74 | 296,682,152.42 | 297,948,805.16 | |||||||||
| IV. Balance at the end of the current period | 1,749,809,548.00 | 2,168,451,528.01 | -129,129.44 | 1,099,526,446.75 | 5,340,988,582.88 | 10,358,646,976.20 |
Amount in the prior period
Unit: RMB yuan
| Item | 2020 | |||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasur | Other compre | Special reserve | Surplus reserve | Undistributed | Others | Total ownership | |
| Preferred shares | Perpetual bonds | Others | y shares | hensive income | profit | interest | ||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,168,451,528.01 | 847,526.06 | 788,215,726.95 | 3,431,594,974.14 | 8,138,919,303.16 | ||||||
| Add: Changes in accounting policies | ||||||||||||
| Error correction in the prior periods | ||||||||||||
| Others | ||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,168,451,528.01 | 847,526.06 | 788,215,726.95 | 3,431,594,974.14 | 8,138,919,303.16 | ||||||
| III. Amount of change in the current period (Decreases are indicated by “-”) | 2,203,785.23 | 151,320,610.91 | 871,938,824.74 | 1,025,463,220.88 | ||||||||
| (I) Total comprehensive income | 2,203,785.23 | 1,513,206,109.09 | 1,515,409,894.32 | |||||||||
| (II) Capital contributed by owners and capital decreases | ||||||||||||
| 1. Common shares invested by owners | ||||||||||||
| 2. Capital invested by holders of other |
| equity instruments | ||||||||||||
| 3. Amount of share-based payment included in ownership interest | ||||||||||||
| 4. Others | ||||||||||||
| (III) Profit distribution | 151,320,610.91 | -641,267,284.35 | -489,946,673.44 | |||||||||
| 1. Withdrawal of surplus reserve | 151,320,610.91 | -151,320,610.91 | ||||||||||
| 2. Distribution to owners (or shareholders) | -489,946,673.44 | -489,946,673.44 | ||||||||||
| 3. Others | ||||||||||||
| (IV) Internal conversion of ownership interest | ||||||||||||
| 1. Capital (or share capital) increase from capital reserve conversion | ||||||||||||
| 2. Capital (or share capital) increase from surplus reserve conversion | ||||||||||||
| 3. Recovery of losses by surplus reserve | ||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit |
| plan | ||||||||||||
| 5. Retained earnings from transfer of other comprehensive income | ||||||||||||
| 6. Others | ||||||||||||
| (V) Special reserve | ||||||||||||
| 1. Withdrawal in the current period | ||||||||||||
| 2. Use in the current period | ||||||||||||
| (VI) Others | ||||||||||||
| IV. Balance at the end of the current period | 1,749,809,548.00 | 2,168,451,528.01 | 3,051,311.29 | 939,536,337.86 | 4,303,533,798.88 | 9,164,382,524.04 |
Huadong Medicine Co., Ltd.Chairman of the Board: Lv Liang
April 28, 2022