09:49     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 with limited liability established in the          
    People's Republic of China)                                               
    (Stock Code: 0874)                                                        
                                                                              
                                                                              
    CONTINUING CONNECTED TRANSACTIONS                                         
                                                                              
                                                                              
    The Directors announce that on 27 April  2005, the Company and GPHL       
    entered into the Agreement which governs the Trading Transactions         
    (being the Purchase Transactions and the Sale Transactions) for the       
    three financial years ending 31 December 2007.                            
                                                                              
    The Trading Transactions constitute non-exempt continuing connected       
    transactions for the Company under Chapter 14A of the Listing Rules.      
    The Trading Transactions are subject to disclosure requirements and       
    Independent Shareholders' approval by way of poll in a general meeting    
    of the Company. GPHL and its associates will abstain from voting at       
    the general meeting of the Company in relation to the Agreement and       
    the Trading Transactions.                                                 
                                                                              
    The Independent Board Committee will be formed to consider the terms      
    of the Agreement and the Trading Transactions. An independent             
    financial adviser will be appointed to advise the Independent Board       
    Committee and the Independent Shareholders on the terms of the            
    Agreement and the Trading Transactions. A circular containing, inter      
    alia, details of the Agreement and the Trading Transactions, and the      
    recommendation of the Independent Board Committee as well as the          
    advice of the independent financial adviser in relation thereto will      
    be despatched to the Shareholders as soon as possible.                    
                                                                              
    THE AGREEMENT                                                             
                                                                              
    The Directors announce that on 27 April  2005, the Company and GPHL,      
    for the purpose of revising the respective maximum aggregate values of    
    the Sale Transactions and the Purchase Transactions per year as set       
    out in the Existing Agreement (while there is no change to other major    
    terms of the Trading Transactions), entered into the Agreement,           
    pursuant to which the parties have agreed that during each of the         
    three financial years ending 31 December 2007,                            
                                                                              
    (1) the maximum aggregate value of the Sale Transactions shall be HK      
    $360,000,000 (equivalent to approximately RMB382,000,000); and            
                                                                              
    (2) the maximum aggregate value of the Purchase Transactions shall be     
    HK$741,000,000 (equivalent to approximately RMB785,000,000).              
                                                                              
    The Agreement, once approved by the Independent Shareholders, will        
    replace the Existing Agreement.                                           
                                                                              
    It was also set out in the Agreement that the Company and GPHL have       
    agreed that:                                                              
                                                                              
    a. each Trading Transaction will be conducted (i) in the ordinary and     
    usual course of the business of the Group; (ii) on an individual and      
    arm's length basis; and (iii) either on normal commercial terms or, if    
    there are no sufficient comparable transactions to judge whether they     
    are on normal commercial terms, on terms to the Group no less             
    favourable than terms available to or from (as appropriate)               
    Independent Third Parties;                                                
                                                                              
    b. the Trading Transactions will be reviewed by the independent non       
    -executive Directors and the auditors of the Company annually, and        
    their respective relevant reports, together with information on the       
    Trading Transactions, will be set out in the Company's next annual        
    report following the occurrence of the relevant Trading Transactions;     
    and                                                                       
                                                                              
    c. GPHL will provide its relevant records to the Company's auditors       
    during their course of review of the Trading Transactions.                
                                                                              
    REASONS FOR THE AGREEMENT                                                 
                                                                              
    The Group is principally engaged in (i) manufacture and sales of          
    Chinese patent medicine; (ii) wholesale, retail, import and export of     
    Western and Chinese pharmaceutical products and various medical           
    apparatus; and (iii) research and development of natural medicine and