09:15     GUANGZHOU PHAR<00874> - Announcement (1)                            

    The Stock Exchange of Hong Kong Limited takes no responsibility for       
    the contents of this announcement, makes no representation as to its      
    accuracy or completeness and expressly disclaims any liability            
    whatsoever for any loss howsoever arising from or in reliance upon the    
    whole or any part of the contents of this announcement.                   
                                                                              
    Guangzhou Pharmaceutical Company Limited                                  
    (a joint stock company established in the People's Republic of China      
    with limited liability)                                                   
    ANNOUNCEMENT                                                              
    IN RELATION TO (1) MEDICAL INSURANCE FOR ALL RETIRED AND                  
    RETIRING EMPLOYEES OF THE GROUP AS REQUIRED BY                            
    PROVISIONAL RULES OF MEDICAL INSURANCE AND                                
    (2) ACCOUNTING TREATMENT OF INSURANCE PREMIUM PAYMENTS                    
                                                                              
    SUMMARY                                                                   
                                                                              
    As required by the Provisional Rules of Medical Insurance promulgated     
    by the Guangzhou People's Municipal Government effective on 1 December    
    2001, the Group shall be responsible for taking out medical insurance     
    for its Retired and Retiring Employees and pay for the relevant           
    insurance premium.                                                        
                                                                              
    At the board meeting of the Company held on 23 January 2003, the          
    directors voted in favour of the motion for the adoption of HKGAAP in     
    the accounting treatment in relation to the medical insurance taken       
    out by the Group for its Retired and Retiring Employees.                  
                                                                              
    Based on the preliminary estimate by the Company, which is subject to     
    the review by the international auditors of the Group, the net present    
    value of the aggregate payments for medical insurance in 2002 and the     
    next nine years is approximately RMB75 million, representing about 3.2    
    % of the Group's net tangible asset as at 31 December 2001. Therefore,    
    if such payments of medical insurance are recognized as expense in the    
    Group's financial statements for the year ended 31 December 2002, the     
    financial results of the Group shown in the accounts prepared in          
    accordance with HKGAAP for the year ended 31 December 2002 would be       
    adversely affected. Since the total present value for the aforesaid       
    medical insurance is still under consideration, the best estimated        
    amount thereof will be disclosed in the 2002 annual report.               
                                                                              
    In view of the impact on the financial results of the Group,              
    shareholders and potential investors are advised to exercise caution      
    when dealing in shares of the Company.                                    
                                                                              
    As required by circular no. 17 - Provisional Rules of Basic Medical       
    Insurance for Employees in Guangzhou City (*) (the "Provisional Rules of  
    Medical Insurance") promulgated by the Guangzhou People's Municipal       
    Government effective on 1 December 2001, Guangzhou Pharmaceutical Company 
    Limited (the "Company" and its subsidiaries (together the "Group") shall  
    be responsible for taking out medical insurance for all its Retired and   
    Retiring Employees. Pursuant to the requirements of the Provisional Rules 
    of Medical Insurance, the enterprises may pay in one lump sum or on a     
    yearly or monthly basis over 10 years for the insurance premium for their 
    retired employees and the employees to be retired in next ten years (the  
    "Retired and Retiring Employees"). In view of the circumstances of the    
    Group, the Group will comply with the relevant requirements but intends to
    make such payments on a monthly basis for their Retired and Retiring      
    employees (except those 233 Retired and Retiring Employees of certain     
    subsidiaries of the Group, representing about 3.16% of the total number of
    about 7,373 Retired and Retiring Employees of the Group, for whom the     
    insurance premium has been paid by the Group in one lump sum as such      
    subsidiaries consider that it is better for them to make one lump sum     
    payment). According to *  (the Supplemental Advice Relating to Payment of 
    the Transitional Basic Medical Insurance Premium and Related Questions)   
    issued by the relevant government authorities, no approval of the payment 
    by the Group on a monthly basis for the medical insurance of their Retired
    and Retiring Employees is required.                                       
                                                                              
    The board of directors (the "Board") of the Company held the 2nd term     
    of the 21st meeting at the Conference Room on the 2nd floor of the        
    Company on 23 January 2003 to consider the accounting treatment           
    regarding the payment to be made by the Group in relation to medical      
    insurance as required by the Provisional Rules of Medical Insurance.      
    There were 9 directors eligible to attend the meeting, out of which 6     
    attended the meeting. Mr. Liu Jinxiang and Mr. Feng Zansheng              
    respectively appointed Mr. Cai Zhixiang, the Chairman of the Board, as    
    their proxy to vote at the meeting. Mr. Zhang Bohua appointed Mr. Li      
    Yimin, the Vice Chairman of the Board, as his proxy to vote at the        
    meeting. The meeting was chaired by Mr. Cai Zhixiang and attended by