09:16     GUANGZHOU PHAR<00874> - Announcement (2)                            

    the supervisors and senior management of the Company. Thus, the           
    meeting was held in accordance with the requirements of the Company       
    Law and the Articles of Association of the Company and validly            
    constituted. After detailed discussion, the directors present             
    unanimously voted in favour of the motion for the adoption of the         
    accounting principles generally accepted in Hong Kong ("HKGAAP") in       
    the accounting treatment in relation to the medical insurance taken       
    out by the Group for its Retired and Retiring Employees.                  
                                                                              
    According to the requirement of HKGAAP and the opinion of the             
    international auditors of the Group, payment to be made by the Group      
    in relation to medical insurance for past services of its Retired and     
    Retiring Employees should be recognized as expense in 2002. Based on      
    the preliminary estimate by the Company, which is subject to the          
    review by the 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. The estimate of the    
    net present value of the payments to be made by the Group in relation     
    to the medical insurance for past services of the Retired and Retiring    
    Employees is based on; (i) the actual age and number of the Retired       
    and Retiring Employees; (ii) the parameters taken from per capita         
    salaries of in Guangzhou city in 2001; (iii) the national average life    
    span; and (iv) the expected growth rate of the gross national products    
    of the Guangzhou city after deduction of the general corporate            
    debenture rates. If such payments of medical insurance are recognized     
    as expense in the Group's financial statements for the year ended 31      
    December 2002, 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 as approximately RMB75 million may be         
    recognized as an expense. The Group disclosed matters related to the      
    Provisional Rules of Medical Insurance in its 2002 interim results        
    announcement. As the Group was still assessing the financial impact of    
    the Provisional Rules of Medical Insurance, the Group did not reflect     
    such impact on its 2002 interim accounts.                                 
                                                                              
    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.                                    
                                                                              
    This announcement is made in accordance with paragraph 2(2) of the        
    Listing Agreement and will be published simultaneously in Hong Kong       
    and Shanghai.                                                             
                                                                              
    The directors individually and jointly accept responsibility for the      
    accuracy of this announcement.                                            
                                                                              
    By Order of the Board                                                     
    He Xuhua                                                                  
    Company Secretary                                                         
    Guangzhou Pharmaceutical Company Limited                                  
                                                                              
    Guangzhou, the PRC, 23 January 2003                                       
                                                                              
    (* For the Chinese name, please refer to the press announcement today.)