S h a n g h a i P h (A joint stock company incorporated in the People's Republic of China with limited liability) a rm (Stock Code of H Share: 02607) (Stock Code of A Share: 601607) a c e u t i c a l s H o l d i n g C www.pharm-sh.com.cn o . , L t d . ANNUAL REPORT 2013 A n n u a l R e p o r t 2 0 1 3 * * For identification purpose only Important Notice (I) The board of directors and the board of supervisors of the Company and the directors, supervisors and senior management warrant that this annual report is true, accurate and complete and contains no false information, misleading statement or material omission and assume joint and several responsibilities therefor. (II) All directors of the Company attended the meeting of the board of directors aimed at approving the 2013 annual report and convened on 28 March 2014. (III) PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers issued standard unqualified auditor’s reports for the financial reports prepared by the Group based on the Chinese Accounting Standards for Business Enterprises and Hong Kong Financial Reporting Standards respectively. (IV) Mr. Lou Dingbo, the person in charge of the Company, Mr. Cho Man, the principal in charge of accounting and Mr. Shen Bo, Head of the Accounting Department (Chief Financial Officer), hereby declare that they warrant the truthfulness, accuracy and completeness of the financial statements contained in this annual report. (V) The plan for profit distribution or conversion of capital reserve fund into share capital for the Reporting Period considered by the board of directors: Shanghai Pharmaceuticals intends to distribute to all shareholders a cash dividend of RMB2.60 (tax inclusive) for every 10 Shares on the basis of the total share capital of 2,688,910,538 Shares as at the end of 2013, which is subject to the approval by the annual general meeting of the Company for 2013. (VI) Risk statements regarding the forward – looking statements: the forward-looking statements, such as future plans, contained in this annual report do not constitute any substantive commitment by the Company to the investors. Investors are advised to be aware of the investment risks involved. (VII) Is there any appropriation of funds by the controlling shareholders and their connected parties that is unrelated to operation? No (VIII) Is there any instance of providing external guarantee that is in breach of the established decision making procedure? No Contents 0 Important Notice 1 Contents 2 Chapter 1 Definitions and Warnings of Significant Risks 5 Chapter 2 Basic Corporate Information 8 Chapter 3 Summary of Accounting Data and Financial Indicators 12 Chapter 4 Report of the Board of Directors 45 Chapter 5 Significant Events 56 Chapter 6 Changes in Share Capital and Information about Shareholders 70 Chapter 7 Directors, Supervisors, Senior Management and Employees 92 Chapter 8 Corporate Governance 108 Chapter 9 Internal Control 109 Chapter 10 Financial Report (attached) 110 Chapter 11 Catalogue of Documents Available for Inspection Definitions and Warnings of Significant Risks I. DefInItIons In this report, unless the context otherwise requires, the following terms shall have the following meanings: Definitions of Common Terms “Group”, “Company” or Shanghai Pharmaceuticals Holding Co., Ltd. (上海醫藥集團股份 “Shanghai Pharmaceuticals” 有限公司), or Shanghai Pharmaceuticals and its subsidiaries, where applicable “Articles of Association” or “Articles” the articles of association of Shanghai Pharmaceuticals (as amended from time to time) “Reporting Period” the 12-month period from 1 January 2013 to 31 December 2013 “YOY” year-on-year “Shares” shares of Shanghai Pharmaceuticals with a nominal value of RMB1.00 each, comprising both A Shares and H Shares “A Shares” domestic shares of the Company, with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange and traded in RMB “H Shares” overseas shares of the Company, with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars “RMB” or “Renminbi” Renminbi, the lawful currency of the PRC “HK$” or “HK dollars” or Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong dollars” “PRC” or “China” the People’s Republic of China; unless the context otherwise requires, references to the PRC or China herein do not include Hong Kong, Macau or Taiwan “Hong Kong” or “HK” the Hong Kong Special Administrative Region “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited 2 Shanghai Pharmaceuticals Holding Co., Ltd. Definitions and Warnings of Significant Risks “Hong Kong Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended, supplemented or otherwise modified from time to time) “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Hong Kong Listing Rules (as amended, supplemented or otherwise modified from time to time) “Corporate Governance Code” the Corporate Governance Code as set out in Appendix 14 of the Hong Kong Listing Rules (as amended, supplemented or otherwise modified from time to time) “NSSF” the National Council for Social Security Fund of the PRC (中華人民共和國全國社會保障基金理事會), serving as a strategic reserve fund accumulated by the central government to support future social security expenditures “SFO” the Securities and Futures Ordinance, Chapter 571, Laws of Hong Kong (as amended) “Controlling Shareholders” unless otherwise stated, has the meaning ascribed to it under the Hong Kong Listing Rules, including SIIC, Shanghai Shangshi and Shanghai Pharmaceutical (Group) “Shanghai SASAC” Shanghai State-owned Assets Supervision and Administration Commission (上海市國有資產監督管理委員會) “SIIC” Shanghai Industrial Investment (Holdings) Co., Ltd. (上海實業 （集團）有限公司) “Shanghai Shangshi” Shanghai Shangshi (Group) Co., Ltd. (上海上實（集團）有限公司) “Shanghai Pharmaceutical (Group)” Shanghai Pharmaceutical (Group) Co., Ltd. (上海醫藥（集團） 有限公司) “Shanghai Guosheng” Shanghai Guosheng Group Co., Ltd. (上海國盛（集團）有限公司) “Shanghai Shengrui” Shanghai Shengrui Investment Co., Ltd. (上海盛睿投資有限 公司) “Shenergy Group” Shenergy (Group) Co., Ltd. (申能（集團）有限公司) Annual Report 2013 3 Definitions and Warnings of Significant Risks II. WarnIngs of sIgnIfIcant rIsks For the detailed description of the potential risks involved, please refer to the potential risk factors discussed in the section headed “Board of Directors’ Discussion and Analysis on the Outlook and Prospects of the Company” set out in the Report of the Board of Directors, Chapter 4 of this annual report. 4 Shanghai Pharmaceuticals Holding Co., Ltd. Basic Corporate Information I. Corporate InformatIon Name of the Company in Chinese 上海醫藥集團股份有限公司 Chinese abbreviation of the name of the Company 上海醫藥 Name of the Company in English Shanghai Pharmaceuticals Holding Co., Ltd. Legal representative of the Company Mr. Lou Dingbo Authorised representatives of the Company Mr. Lou Dingbo, Ms. Han Min II. ContaCt person and ContaCt detaIls Secretary of the board of directors, Joint Company Secretary Name Han Min Shanghai Pharmaceutical Building, No. 200 Taicang Contact address Road, Shanghai Telephone +8621-63730908 Facsimile +8621-63289333 E-mail [email protected] III. BasIC InformatIon Registered address of the Company No. 92 Zhangjiang Road, Pudong New Area, Shanghai Postal code of the registered address of the Company 201203 Office address of the Company Shanghai Pharmaceutical Building, No. 200 Taicang Road, Shanghai Postal code of the office address of the Company 200020 Principal place of business in Hong Kong 8th Floor, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong Website of the Company http://www.sphchina.com E-mail [email protected] A Share Registrar China Securities Depository and Clearing Corporation Limited, Shanghai Branch 36/F, China Insurance Building, No. 166 Lujiazui East Road, Pudong New Area, Shanghai, the PRC H Share Registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Annual Report 2013 5 Basic Corporate Information IV. InformatIon dIsClosure and plaCe where InformatIon Is aVaIlaBle for InspeCtIon Newspapers designated by the Company Shanghai Securities News, Securities Times for disclosure of information (A Shares) Designated website for publishing announcements http://www.sse.com.cn about A Shares (including annual reports) Designated website for publishing announcements http://www.hkexnews.hk about H Shares (including annual reports) Place where the Company’s annual report is Office of the board of directors available for inspection V. stoCk InformatIon of the Company Stock Information of the Company Stock exchange on Type of stock Stock abbreviation Stock code which shares are listed A Shares Shanghai Stock Exchange 上海醫藥 601607 Hong Kong Stock H Shares SH PHARMA 02607 Exchange VI. Changes In regIstratIon of the Company durIng the reportIng perIod (I) Basic Information There was no change in registration of the Company during the Reporting Period. (II) Enquiry Index Relating to Initial Registration of the Company Details of the initial registration of the Company are available in the Basic Corporate Information section of the 2011 annual report. (III) Changes in Major Operations since the Company was Listed There was no change in major operations (primarily pharmaceutical manufacturing business, pharmaceutical distribution business and pharmaceutical retail business) since the Company was listed. 6 Shanghai Pharmaceuticals Holding Co., Ltd. Basic Corporate Information (IV) Changes in Controlling Shareholders since the Company was Listed In March 1994, Shanghai No. 4 Pharmaceutical Co., Ltd., the predecessor of the Company, was listed on the Shanghai Stock Exchange, with Shanghai Pharmaceutical (Group) Corporation (now known as Shanghai Pharmaceutical (Group)) as the controlling shareholder. In September 1998, Shanghai No. 4 Pharmaceutical Co., Ltd. was restructured as Shanghai Pharmaceutical Joint Stock Company, with the controlling shareholder remaining unchanged. In March 2010, Shanghai Pharmaceutical Joint Stock Company completed a substantial asset restructuring and was renamed Shanghai Pharmaceuticals Holding Co., Ltd., with Shanghai Pharmaceutical (Group) as the controlling shareholder. Note: The use of the term “controlling shareholder” above is based on the definition for A Shares. VII. other releVant InformatIon Name PricewaterhouseCoopers Zhong Tian LLP Name of accounting firm 11/F, PricewaterhouseCoopers Center, No. Office address engaged by the Company 202 Hu Bin Road, Shanghai, the PRC (domestic) Name of signing Qian Jin accountant Liu Wei PricewaterhouseCoopers, Certified Public Name Accountants, Hong Kong Accounting firm engaged 22nd Floor, Prince’s Building, Central, Hong Office address by the Company (overseas) Kong Name of signing Not applicable accountant Not applicable Annual Report 2013 7 Summary of Accounting Data and Financial Indicators I. Major accountIng Data anD fInancIal InDIcators of the coMpany for the recent three years up to the enD of the reportIng perIoD prepareD unDer the chInese accountIng stanDarDs for BusIness enterprIses (I) Major Accounting Data Unit: RMB Change compared to the corresponding Major accounting data 2013 2012 period last year (%) 2011 Operating revenue 78,222,817,357.35 68,078,117,819.19 14.90 54,899,872,504.11 Net profit attributable to equity holders of the Company 2,242,925,141.06 2,052,871,698.55 9.26 2,042,238,482.84 Net profit after deduction of non-recurring profit or loss attributable to equity holders of the Company 2,067,125,810.03 1,794,965,958.94 15.16 1,424,034,687.07 Net cash flows from operating activities 973,449,693.95 1,150,774,970.90 -15.41 1,772,438,011.82 Change compared to the end of the corresponding period End of 2013 End of 2012 last year (%) End of 2011 Net assets attributable to equity holders of the Company 25,953,812,431.68 24,639,299,336.20 5.34 23,078,472,247.95 Total assets 56,311,521,570.36 51,069,037,985.13 10.27 47,667,822,923.30 (II) Major Financial Indicators Change compared to the corresponding Major financial indicators 2013 2012 period last year (%) 2011 Basic earnings per share (RMB per share) 0.8341 0.7635 9.26 0.8437 Diluted earnings per share (RMB per share) 0.8341 0.7635 9.26 0.8437 Basic earnings per share after deduction of non-recurring profit or loss (RMB per share) 0.7688 0.6675 15.16 0.5883 Weighted average return on net assets (%) 8.87 8.62 increase of 0.25 11.82 percentage point Weighted average return on net assets 8.17 7.53 increase of 0.64 8.04 after deduction of non-recurring percentage point profit or loss (%) 8 Shanghai Pharmaceuticals Holding Co., Ltd.