09:49 GUANGZHOU PHAR<00874> - Announcement (2) biological medicine. GPHL is a state-owned enterprise in the PRC. GPHL is principally engaged in the development, manufacture and trading of pharmaceutical products. GPHL is the controlling Shareholder holding approximately 60.55% of the total issued share capital of the Company. It was set out in the paragraph headed "Non-competition and right of first refusal agreement" under the section headed "Particulars of the Group" of the prospectus of the Company dated 21 October 1997 that a non-competition agreement had been entered into between the Company and GPHL, pursuant to which GPHL agreed that the GPHL Group would not engage directly or indirectly in any businesses that would compete with those of the Group. In addition, it was announced by the Company on 9 February 2004 that another non-competition agreement had been entered into between the Company and BYSCL on 6 February 2004, pursuant to which each of the Group and the BYSCL Group agreed that it would not research, develop or manufacture new products that have been researched, developed or manufactured by the other party. The Group, in its ordinary and usual course of business, sells / purchases pharmaceutical products, pharmaceutical raw materials, medical apparatus and packaging materials to/from the GPHL Group. The pharmaceutical products provided by the GPHL Group, including the BYSCL Group, which are not the same as those pharmaceutical products manufactured by the Group, are distributed by the Group through its extensive sales network. On the other hand, as the Group is able to source a variety of pharmaceutical raw materials and packaging materials from different markets, including Germany, the United States of America and Japan, it also re-sells those materials at a margin to other manufacturers of pharmaceutical products, including the GPHL Group (which includes the BYSCL Group). In addition, having taken into account the increased orders as a result of re-sale of pharmaceutical raw materials and packaging materials by the Group, the Directors consider that the Group's bargaining power with suppliers will be enhanced. Since the execution and approval of the Existing Agreement, the Trading Transactions have been carried out according to the terms of the Existing Agreement. Set out below is a summary of the Trading Transactions which took place during the three financial years ended 31 December 2004 and the three months ended 31 March 2005: Purchase Transactions Proposed annual cap Year Year Year Three months Annual cap for the three ended ended ended ended under years ending 31 December 31 December 31 December 31 March the Existing 31 December 2002 2003 2004 2005 Agreement 2007 % to cost of % to cost of % to cost of % to cost of RMB'000 sales RMB'000 sales RMB'000 sales RMB'000 sales RMB'000 RMB'000 (Note 4) (Note 4) (Note 4) (Note 4) (Note 5) The GPHL Group (excluding the BYSCL Group) (Note 1) 35,735 0.77 53,210 0.96 9,607 0.15 9,494 0.49 The BYSCL Group (Note 2) 75,155 1.62 99,978 1.79 94,843 1.50 68,859 3.55 Total 110,890 2.39 153,188 2.75 104,450 1.65 78,353 4.04 169,600 785,000 Sale Transactions Proposed annual cap Year Year Year Three months Annual cap for the three ended ended ended ended under years ending 31 December 31 December 31 December 31 March the Existing 31 December 2002 2003 2004 2005 Agreement 2007 % to % to % to % to RMB'000 turnover RMB'000 turnover RMB'000 turnover RMB'000 turnover RMB'000 RMB'000 (Note 3) (Note 3) (Note 3) (Note 3) (Note 5) The GPHL Group (excluding the BYSCL Group) (Note 1) 30,055 0.51 20,054 0.29 7 0.00 3 0.00 The BYSCL Group 49,038 0.82 85,753 1.23 84,139 1.09 37,098 1.58