YiChang HEC ChangJiang Pharmaceutical : DISCLOSEABLE TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS, CONTINUING CONNECTED TRANSACTIONS AND CONNECTED TRANSACTIONS

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

YiChang HEC ChangJiang Pharmaceutical Co., Ltd.

֝׹؇ජΈڗϪᖹٰุ΅Ϟࠢʮ̡

(A joint stock company incorporated in the People's Republic of China with limited liability)

(Stock Code: 01558)

ANNOUNCEMENT

DISCLOSEABLE TRANSACTIONS AND

CONTINUING CONNECTED TRANSACTIONS PROVIDED BY THE GROUP'S

CONNECTED PERSONS TO THE GROUP

• 1. PURCHASE TRANSACTIONS

• 2. ENTRUSTED TRANSACTIONS

AND

CONTINUING CONNECTED TRANSACTIONS PROVIDED BY THE GROUP'S

CONNECTED PERSONS TO THE GROUP

1. CONSTRUCTION TRANSACTIONS

2. LEASE TRANSACTIONS

AND

CONTINUING CONNECTED TRANSACTIONS PROVIDED BY THE GROUP TO

THE GROUP'S CONNECTED PERSONS

3. SALES TRANSACTIONS

4. ENTRUSTED PRODUCTION/PROCESSING TRANSACTIONS

AND

CONNECTED TRANSACTION PROVIDED BY THE GROUP'S

CONNECTED PERSON TO THE GROUP

CLARITHROMYCIN AND AZITHROMYCIN PURCHASE TRANSACTION

AND

CONNECTED TRANSACTION PROVIDED BY THE GROUP TO

THE GROUP'S CONNECTED PERSON

ENTRUSTED PRODUCTION TRANSACTION

DISCLOSEABLE TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS PROVIDED BY THE GROUP'S CONNECTED PERSONS TO THE GROUP

Purchase Transactions

1. API Purchase Contract (I), API Purchase Contract (II) and API Purchase Contract (III)

On 19 March 2021, the Group entered into the API Purchase Contracts with the Group's connected persons for the purchase of certain active pharmaceutical ingredients (''APIs'').

(1) The principal terms of the API Purchase Contract (I) are as follows: Date : 19 March 2021

Parties

• : Dongguan Yangzhikang, a subsidiary of the Company; anddirectwholly-owned

  Ruyuan HEC Pharmaceutical

  Term : From 19 March 2021 to 31 December 2021

  Nature of transaction : Dongguan Yangzhikang agreed to purchase active pharmaceutical ingredients, such as Alogliptin Benzoate, Moxifloxacin Hydrochloride and Aripiprazole, from Ruyuan HEC Pharmaceutical.

  Payment method

• : Dongguan Yangzhikang will make the corresponding payment to Ruyuan HEC Pharmaceutical within one month after receiving the APIs and passing the acceptance tests and receipt of the invoice from Ruyuan HEC Pharmaceutical.

• (2) The principal terms of the API Purchase Contract (II) are as follows:

  On 19 March 2021, Dongguan Yangzhikang and Yichang HEC Biochemical Manufacturing entered into the API Purchase Contract (II), pursuant to which, Dongguan Yangzhikang shall purchase APIs such as Clarithromycin from Yichang HEC Biochemical Manufacturing. The principal terms of the API Purchase Contract (II), such as the term and payment method, are the same as the API Purchase Contract (I).

• (3) The principal terms of the API Purchase Contract (III) are as follows:

  On 19 March 2021, the Company entered into the API Purchase Contract (III) with Ruyuan HEC Pharmaceutical, pursuant to which, the Company agreed to purchase APIs such as Alogliptin Benzoate, Escitalopram Oxalate, Aripiprazole, Linagliptin, Sitagliptin phosphate monohydrate and Rivaroxaban from Ruyuan HEC Pharmaceutical. The principal terms (such as term and payment method) of the API Purchase Contract (III) are the same as those under the API Purchase Contract (I) and the API Purchase Contract (II).

Pricing policy

In selecting the API suppliers, the Company will obtain quotations from the Group's connected persons and at least two suppliers who are independent third parties. As the Company is also engaged in manufacturing of pharmaceutical products, it is well familiar with the market price of relevant APIs required for the production. The prices and terms offered by the Group's connected persons will be fair and reasonable and comparable to those offered by such independent third parties suppliers. The Directors are of the view that by requiring the Group's connected persons to offer prices and terms similar to those offered by two other independent third parties suppliers under the API Purchase Contract (I), the API Purchase Contract (II) and the API Purchase Contract (III), it can ensure that such prices and terms will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its Shareholders as a whole.

Annual caps and determination basis

The Company estimates that the annual caps for the year ending 31 December 2021 under the API Purchase Contract (I), the API Purchase Contract (II) and the API Purchase Contract (III) are RMB5,000,500, RMB19,200,000 and RMB5,099,100 respectively. In considering the annual caps for the API Purchase Contract (I), the API Purchase Contract (II) and the API Purchase Contract (III), the Directors have taken into account a number of factors, including but not limited to (1) the historical transaction amounts; (2) the estimated market demand for the year ending 31 December 2021; and (3) the Group's business development strategies.

Historical transaction amounts

The historical transaction amounts for the purchase of APIs from the Group's connected person(s) of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts for
APIs purchase transactions	0	1,729.24	6,154.42
Reasons for the transaction

Historically, the Group purchased certain APIs from the Group's connected persons for the production of drugs. The Group's connected persons are one of the largest suppliers in the relevant API market. As such, the Group believes that the quality of the APIs provided by the Group's connected persons is no less favourable than those offered by other third party suppliers. And it is commercially desirable for us to continue to purchase APIs from the Group's connected persons due to the facts that (i) theirlocations are adjacent to the Group, which is more convenient for the transportation of APIs; and (ii) the price and terms offered by them are fair and reasonable and no less favourable than those offered by independent third parties suppliers.

2. Packaging Materials Purchase Contract

On 19 March 2021, the Company entered into the Packaging Materials Purchase Contract in relation to the purchase of printed packaging materials from Shaoguan HEC Packaging. The principal terms of the Packaging Materials Purchase Contract are as follows:

Date : 19 March 2021

Parties

: the Company; and

Shaoguan HEC Packaging

Term	:	From 19 March 2021 to 31 December 2021
Nature of transaction	:	The Company agreed to purchase printed	packaging
materials from Shaoguan HEC Packaging.
Payment method	:
Pricing policy

The Company will pay Shaoguan HEC Packaging on a monthly basis and within 30 days upon receipt of the invoice from Shaoguan HEC Packaging.

When selecting suppliers of packaging materials, the Company will obtain quotations from the Group's connected persons and at least two independent third parties suppliers. The prices and terms offered by the Group's connected persons will be fair and reasonable and comparable to those offered by such independent third parties suppliers. The Directors are of the view that by requiring the Group's connected persons to offer prices and terms similar to those offered by two other independent third parties suppliers under the Packaging Materials Purchase Contract, it can ensure that such prices and terms will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its Shareholders as a whole.

Annual caps and determination basis

The Company estimates that the annual caps under the Packaging Materials Purchase Contract for the year ending 31 December 2021 is RMB16,150,000. In considering the annual cap for the Packaging Materials Purchase Contract, the Directors have taken into account a number of factors, including but not limited to (1) the historical transaction amounts; (2) the estimated demand for the year ending 31 December 2021; and (3) expected increase in transaction amounts in the future due to the Group's business development.

Historical transaction amounts

The historical transaction amounts for the purchase of printed packaging materials from the Group's connected person(s) of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts for printed
packaging materials purchase
transactions	18,955.16	18,955.16	18,916.22
Reasons for the transaction

Historically, the Company purchased packaging materials from the Group's connected persons for packaging our drugs, and therefore they are familiar with our requirements for such materials. In addition, with better understanding of the Company's business and communication in a more efficient and effective manner, the Group's connected persons are able to complete the Company's purchase orders more efficiently.

3. Supplemental Chemical Materials and Hardware Materials Purchase Agreement

On 19 March 2021, the Company and Yichang HEC Biochemical Manufacturing entered into the Supplemental Chemical Materials and Hardware Materials Purchase Agreement of the 2018-2020 Framework Packaging and Chemical Materials Purchase Agreement dated 22 December 2017 on the extension of the terms under the 2018-2020 Framework Packaging and Chemical Materials Purchase Agreement. The principal terms of the Supplemental Chemical Materials and Hardware Materials Purchase Agreement are as follows:

Date	: 19 March 2021
Parties	: the Company; and
Yichang HEC Biochemical Manufacturing
Term	: From 19 March 2021 to 31 December 2021
Nature of transaction	: The Company agreed to purchase chemical materials and
hardware materials from Yichang HEC Biochemical
Manufacturing
Payment method

: The Company will pay Yichang HEC Biochemical

Manufacturing on a monthly basis and within 30 days upon receipt of the invoice from Yichang HEC Biochemical

Manufacturing.

Pricing policy

When selecting suppliers of chemical materials and hardware materials, the Company will obtain quotations from the Group's connected persons and at least two independent third parties suppliers. The prices and terms offered by the Group's connected persons will be fair and reasonable and comparable to those offered by such independent third parties suppliers. The Directors are of the view that by requiring the Group's connected persons to offer prices and terms similar to those offered by two other independent third parties suppliers under the Supplemental Chemical Materials and Hardware Materials Purchase Agreement, it can ensure that such prices and terms will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its Shareholders as a whole.

Annual caps and determination basis

The Company estimates that the annual caps for the year ending 31 December 2021 under the Supplemental Chemical Materials and Hardware Materials Purchase Agreement is RMB8,000,000. In considering the annual caps for the Supplemental Chemical Materials and Hardware Materials Purchase Agreement, the Directors have taken into account a number of factors, including but not limited to (1) the historical transaction amounts; (2) the estimated production for the year ending 31 December 2021; and (3) the Group's business development.

Historical transaction amounts

The historical transaction amounts for the purchase of chemical materials and hardware materials from the Group's connected person(s) of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts for
chemical materials and hardware
materials purchase transactions	6,628.16	5,012.16	5,443.84
Reasons for the transaction

Historically, the Company purchased chemical materials and hardware materials from Yichang HEC Biochemical Manufacturing for drugs packaging and production, and therefore they are familiar with our requirements for such materials. In addition, with better understanding of the Company's business and communication in a more efficient and effective manner, Yichang HEC Biochemical Manufacturing is able to complete the Company's purchase orders more efficiently.

4. Steam Supply Supplemental Agreement (I), Steam Supply Supplemental Agreement (II) and 2021 Steam Supply Contract

(1) On 19 March 2021, the Company and Yichang HEC Power Plant entered into the

Steam Supply Supplemental Agreement (I) to 2018-2020 Framework Energy Procurement Agreement dated 22 December 2017 on extension of terms under 2018-2020 Framework Energy Purchase Agreement. The principal terms of the Steam Supply Supplemental Agreement (I) are as follows:

Date : 19 March 2021

Parties : the Company; and

Yichang HEC Power Plant

Term : From 19 March 2021 to 31 December 2021

Nature of transaction : The Company agreed to purchase steam from Yichang HEC Power Plant

Payment method

:The payment for steam is payable on a monthly basis. The Company shall pay a monthly fee to Yichang HEC Power Plant in accordance with the settlement amount agreed in the Steam Supply Supplemental Agreement (I) (including the monthly measured steam volume and heat loss steam volume as shown on the steam meter or the agreed amount under the Steam Supply Supplemental Agreement (I))

• (2) On 19 March 2021, the Company and Yichang HEC Biochemical Manufacturing entered into the Steam Supply Supplemental Agreement (II) to 2018-2020 Framework Energy Procurement Agreement dated 22 December 2017 on extension of terms under 2018-2020 Framework Energy Purchase Agreement. The terms (such as term and payment method) of the Steam Supply Supplemental Agreement (II) are the same as those under the Steam Supply Supplemental Agreement (I).

• (3) On 19 March 2021, Yichang HEC Pharmaceutical Manufacturing (a subsidiary of the Company) and Yichang HEC Power Plant entered into the 2021 Steam Supply

  Contract. The principal terms of the 2021 Steam Supply Contract are as follows:

Date	: 19 March 2021
Parties	: Yichang HEC Pharmaceutical Manufacturing; and
Yichang HEC Power Plant
Term	: From 19 March 2021 to 31 December 2021
Nature of transaction	: Yichang HEC Pharmaceutical Manufacturing agreed to
purchase steam from Yichang HEC Power Plant

The payment for steam is payable on a monthly basis. Yichang HEC Pharmaceutical Manufacturing shall pay a monthly fee to Yichang HEC Power Plant in accordance with the settlement amount agreed in the 2021 Steam Supply Contract (including the monthly measured steam volume and heat loss steam volume as shown on the steam meter or the agreed amount under the 2021 Steam Supply Contract)

Pricing policy

The price of steam to be charged under the Steam Supply Supplemental Agreement (I), the Steam Supply Supplemental Agreement (II) and the 2021 Steam Supply Contract is determined with reference to the approval of the price of steam in the direct supply area of Yichang HEC Power Plant by the Yichang Municipal Price Bureau. The price of steam charged under the Steam Supply Supplemental Agreement (I), the Steam Supply Supplemental Agreement (II) and the 2021 Steam Supply Contract is determined with reference to the heat supply price from the same type of enterprise in the heat supply price list issued by Yichang Municipal Price Bureau.

Annual caps and basis of annual caps

The Company estimates that the annual caps under the Steam Supply Supplemental Agreement (I), the Steam Supply Supplemental Agreement (II) and the 2021 Steam Supply Contract for the year ending 31 December 2021 are RMB9,000,000, RMB9,000,000 and RMB4,200,000 respectively. In considering the annual caps for the Steam Supply Supplemental Agreement (I), the Steam Supply Supplemental Agreement (II) and the 2021 Steam Supply Contract, the Directors have taken into account a number of factors, including but not limited to (1) the historical transaction amounts; (2) the Group's estimated production for the year ending 31 December 2021; and (3) the Group's business development.

Historical transaction amounts

The historical transaction amounts for the purchase of steam from the Group's connected person(s) of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts for steam
purchase transactions	6,330.96	10,188.50	10,000.84

Reasons for the transaction

Historically, the Group purchased steam from the Group's connected persons for the daily production of pharmaceutical preparations. The Group does not own any boilers for steam production. As the power plant of the Group's connected persons is close to the production facilities of the Group, it is commercially desirable to continue to purchase steam from them.

5. Power Supply Supplemental Agreement and 2021 Power Supply Contract

(1) On 19 March 2021, the Company and Yichang HEC Power Plant entered into the

Power Supply Supplemental Agreement to the 2018-2020 Framework Energy Procurement Agreement dated 22 December 2017 on extension of the terms under 2018-2020 Framework Energy Purchase Agreement. The principal terms of the Power Supply Supplemental Agreement are as follows:

Date : 19 March 2021

Parties : the Company; and

Yichang HEC Power Plant

Term : From 19 March 2021 to 31 December 2021

Nature of transaction : The Company agreed to purchase electricity from Yichang HEC Power Plant

Payment method

:The electricity fee is charged on a monthly basis and the Company shall pay the relevant amount before the end of the month after receiving the invoice from Yichang HEC Power Plant

(2) On 19 March 2021, Yichang HEC Pharmaceutical Manufacturing and Yichang

HEC Power Plant entered into the 2021 Power Supply Contract. The principal terms of the 2021 Power Supply Contract are as follows:

Date	:	19 March 2021
Parties	:	Yichang HEC Pharmaceutical
subsidiary of the Company); and
Yichang HEC Power Plant
Term	:
Nature of transaction	:

From 19 March 2021 to 31 December 2021

Manufacturing (a

Yichang HEC Pharmaceutical Manufacturing agreed to purchase electricity from Yichang HEC Power PlantThe electricity fee is payable on a monthly basis, which shall be paid by Yichang HEC Pharmaceutical Manufacturing before the end of the month upon receipt of the invoice issued by Yichang HEC Power Plant

Pricing policy

The electricity fees charged under the Power Supply Supplemental Agreement and the 2021 Power Supply Contract are determined with reference to the on-grid tariff of Hubei Provincial Price Bureau (E Jia Huan Zi [2017] No. 92) (鄂價環資[2017]92號文) and the approval of Yichang Municipal Price Bureau (Yi Dong Dian [2011] No. 1) (宜 東電[2011]1號文), and is subject to an agreed pricing throughout the year.

Annual caps and basis of annual caps

The Company estimates that the annual caps for the year ending 31 December 2021 under the Power Supply Supplemental Agreement and the 2021 Power Supply Contract are RMB30,300,000 and RMB3,200,000 respectively. In considering the annual caps of the Power Supply Supplemental Agreement and the 2021 Power Supply Contract, the Directors have taken into account a number of factors, including but not limited to (1) the historical transaction amounts; (2) the Group's estimated production for the year ending 31 December 2021; and (3) the Group's business development.

Historical transaction amounts

The historical transaction amounts for the purchase of electricity from connected person(s) of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts for
electricity purchase transactions	8,471.33	9,739.55	12,395.47
Reasons for the transaction

Historically, the Group purchased electricity from the Group's connected persons for the daily production of pharmaceutical preparations. The Group does not own any power plant to generate electricity. It is commercially desirable to continue to purchase electricity from the Group's connected persons as the power plant is close to the Company's production facilities.

6. Industrial Products Sale and Purchase Contract (I) and Industrial Products Sale and Purchase Contract (II)

On 19 March 2021, the Group entered into certain Industrial Products Sale and Purchase Contracts with the Group's connected persons.

(1) The principal terms of the Industrial Products Sale and Purchase Contract (I) are as follows:

Date : 19 March 2021

Parties

• : Yichang HEC Pharmaceutical Manufacturing subsidiary of the Company); and

  (a

  Yidu Changjiang Machine and Equipment

  Term : From 19 March 2021 to 31 December 2021

  Nature of transaction : Yichang HEC Pharmaceutical Manufacturing agreed to purchase of tank field and workshop renovation equipment from Yidu Changjiang Machine and Equipment

  Payment method

• : Yichang HEC Pharmaceutical Manufacturing will settle the payment to Yidu Changjiang Machine and Equipment upon receipt of the tank field and for workshop equipment and invoice to be issued by Yidu Changjiang Machine and Equipment and after examination and acceptance thereof.

(2) The principal terms of the Industrial Products Sale and Purchase Contract (II) are as follows:

On 19 March 2021, the Company entered into the Industrial Products Sale and Purchase Contract (II) with Yidu Changjiang Machine and Equipment. Accordingly, the Company agreed to purchase workshop renovation equipment from Yidu Changjiang Machine and Equipment. The Industrial Products Sale and Purchase Contract (II) (such as term and payment method) are the same as those under the Industrial Products Sale and Purchase Contract (I).

Pricing policy

The price, charged by Yidu Changjiang Machine and Equipment to the Group for the purchase of equipment, adopts a ''cost-plus'' mechanism in which a range of 10%-15% of the profit is charged.

Annual caps and basis of annual caps

The Company estimates that the annual caps for the year ending 31 December 2021 under the Industrial Products Sale and Purchase Contract (I) and the Industrial Products Sale and Purchase Contract (II) are RMB11,000,000 and RMB7,000,000 respectively. In considering the annual caps of the Industrial Products Sale and Purchase Contract (I) and the Industrial Products Sale and Purchase Contract (II), the Directors have taken into account various factors, including the business development of the Group, the depreciation rate of the workshop equipment and the estimated total number of equipment required to be purchased in 2021 as estimated by the heads of plants of the Company multiplied by the unit price of the equipment.

The historical total transaction amounts in respect of the industrial products purchase transactions by the Group from the connected persons of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical total transaction amounts
of the industrial products purchase
transactions	6,239.21	4,517.95	16,088.17
Reasons for the transaction

The Group needs to purchase equipment necessary for workshop renovation to carry out its business. Specialized in production of equipment, Yidu Changjiang Machine and Equipment is familiar with the business and operation requirements of the Group, and maintains a good long-term cooperative relationship with the Group, which can provide the Group with the necessary equipment stably. Therefore, the Board believes that the Group purchases equipment from Yidu Changjiang Machine and Equipment is beneficial to the steady development of the Group's business.

Reasons for the Purchase Transactions

The Directors (excluding the members of the Independent Board Committee who will express their view after considering the advice from the Independent Financial Adviser) consider that the Purchase Transactions are on ordinary and normal commercial terms, and the terms of the API Purchase Contracts, the Packaging Materials Purchase Contract, the Supplemental Chemical Materials and Hardware Materials Purchase Agreement, the Steam Purchase Contracts, the Electricity Purchase Contracts and the Industrial Products Sale and Purchase Contracts are fair and reasonable and in the interests of the Company and Shareholder(s) as a whole.

Entrusted Transactions

1. Entrusted Inspection Contract (I) and Entrusted Inspection Contract (II)

On 19 March 2021, the Group has entered into certain Entrusted Inspection Contracts in relation to the entrustment of the Group's connected persons for inspection services.

(1) The principal terms of the Entrusted Inspection Contract (I) are as follows: Date : 19 March 2021

Parties

: the Company; and Ruyuan HEC PharmaceuticalTerm : From 19 March 2021 to 31 December 2021

Nature of transaction : The Company agreed to engage Ruyuan HEC

Pharmaceutical to conduct a quality control inspection on the talcum powder.

Payment method

• : The Company will pay the relevant fees to Ruyuan HEC Pharmaceutical after receiving the inspection report or the test report in December of each year.

(2) The principal terms of the Entrusted Inspection Contract (II) are as follows:

On 19 March 2021, the Company entered into the Entrusted Inspection Contract (II) with HEC Generic Drugs Development and Research. Accordingly, the Company commissioned HEC Generic Drugs Development and Research to conduct testing on the compatibility of injection packaging materials, production component compatibility, drug device compatibility, closure integrity research and analysis of excessive impurities structure during the stability process. In addition to the fact that the Company is required to make relevant payments to HEC Generic Drugs Development and Research within one week after receiving the research report from HEC Generic Drugs Development and Research, the Entrusted Inspection Contract (II) is consistent with the Entrusted Inspection Contract (I).

Pricing policy

The Group's connected persons adopt a ''cost-plus'' mechanism for charging inspection fees to the Company, i.e. it charges a profit ranging from 10% to 15%.

Annual caps and basis of annual caps

The Company estimates the annual caps under the Entrusted Inspection Contract (I) and the Entrusted Inspection Contract (II) for the year ending 31 December 2021 are RMB2,300,000 and RMB1,500,000, respectively. In considering the annual caps under the Entrusted Inspection Contract (I) and the Entrusted Inspection Contract (II), the Directors have taken into account a number of factors, including (1) the Group's production for the year ending 31 December 2021; (2) the Group's business development strategies; and (3) fair and reasonable market prices and normal commercial terms, which are not higher than the fees charged by third parties for similar services.

Reasons for the transaction

The Group conducts entrusted inspection business due to the needs of business. Engaged in the inspection, Ruyuan HEC Pharmaceutical and HEC Generic Drugs Development and Research are familiar with the Group's business and operational needs, and maintain good cooperation relationship with the Group, which can provide the necessary inspection services for the business development of the Group, the Board therefore is of the view that the entering into of the Entrusted Inspection Contracts between the Group and the Group's connected persons is beneficial to the steady development of the Group's business.

2. Supplemental Entrusted Sewage Treatment Agreement

On 19 March 2021, the Company and Yichang HEC Biochemical Manufacturing entered into the Supplemental Entrusted Sewage Treatment Agreement in relation to 2017 Entrusted Sewage Treatment Agreement dated 24 February 2017 on extension of the terms under the 2017 Entrusted Sewage Treatment Agreement. The principal terms of the Supplemental Entrusted Sewage Treatment Agreement are as follows:

Date	: 19 March 2021
Parties	: the Company; and
Yichang HEC Biochemical Manufacturing
Term	: From 19 March 2021 to 31 December 2021
Nature of transaction	: The Company agreed to engage Yichang HEC Biochemical
Manufacturing for the treatment of sewage generated during
the Company's production process.

Payment method

:Settlement at the end of each month and payment of the relevant fees to Yichang HEC Biochemical ManufacturingPricing Policy

Yichang HEC Biochemical Manufacturing adopts a ''cost-plus'' mechanism for charging entrusted sewage treatment fees (such as staff costs, electricity charges, equipment, site, sewage treatment related raw materials, etc.), i.e. it charges a profit ranging from 10% to 15%.

Annual cap and basis of annual cap

The Company estimates that the annual cap under the Supplemental Entrusted Sewage Treatment Agreement for the year ending 31 December 2021 is RMB3,600,000. In considering the annual caps under the Supplemental Entrusted Sewage Treatment Agreement, the Directors have taken into account a number of factors, including (1) the historical transaction amounts; (2) the Group's demand for the year ending 31 December 2021; and (3) the Group's business development strategies.

Historical transaction amounts

The historical transaction amounts for sewage treatment services from the Group's connected person(s) of the Group for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts for the
transactions of entrusted sewage
treatment services	2,578.84	3,692.78	4,778.76
Reasons for the transaction

The Group previously engaged the Group's connected persons to provide liquid waste processing services in relation to its API production facility of Yidu Base Area No. 2. The liquid waste processing facilities of the Group's connected persons has been put into operation since 2006. As the Group's API manufacturing facilities are located close to the Group's connected persons' liquid waste processing facilities, it is commercially desirable to continue to engage the Group's connected persons to provide such service.

3. Entrusted Processing Framework Agreement (I) and Entrusted Processing Framework Agreement (II)

On 19 March 2021, the Group entered into certain Entrusted Processing Framework Agreements in relation to the engagement of the Group's connected persons for the provision of pharmaceutical processing services.

(1) The principal terms of the Entrusted Processing Framework Agreement (I) are as follows:

Date : 19 March 2021

Parties : the Company; and

Sunshine Lake Pharma

Term : From 19 March 2021 to 31 December 2021

Nature of transaction : The Company agreed to engage Sunshine Lake Pharma to process certain pharmaceutical products, including Clarithromycin Tablets, Levofloxacin Tablets, Moxifloxacin Hydrochloride Tablets, Olmesartan Tablets, Alogliptin Benzoate Tablets, Duloxetine Hydrochloride Enteric-coated Capsules, Aripiprazole Tablet, Febuxostat Tablets, Tadalafil Tablets, Ticagrelor Tablets, Olanzapine Tablets, Rosuvastatin Calcium Tablets, Linagliptin Tablets, Sitagliptin Tablets and Entacapone Tablets

Payment method

:The Company will pay the relevant amount within 30 days after it receives the processed pharmaceutical products and pass the inspection. The holder of the certificates of registration of pharmaceutical products for some of the Group's products is Dongguan Yangzhikang, and such products are intended to be sold through Dongguan Yangzhikang, therefore Dongguan Yangzhikang will pay part of the relevant processing service fees to Sunshine Lake Pharma. Sunshine Lake Pharma shall issue invoices to Dongguan Yangzhikang

(2) The principal terms of the Entrusted Processing Framework Agreement (II) are as follows:

On 19 March 2021, the Company entered into the Entrusted Processing Framework Agreement (II) with Ruyuan HEC Pharmaceutical. Accordingly, the Company agreed to engage Ruyuan HEC Pharmaceutical to process the Rongliflozin API. The principal terms of the Entrusted Processing Framework Agreement (II) (such as the term and payment method) are the same as those under the Entrusted Processing Framework Agreement (I).

Pricing Policy

A ''cost-plus'' mechanism is adopted for the price of the processing fee payable by Group to the Group's connected persons. In addition to the necessary costs and expenses incurred for the processing services, the Group's connected persons charges the Group an additional fee within approximately 10% of the processing fee.

Annual caps and basis of annual caps

The Company estimates that the annual caps under the Entrusted Processing Framework Agreement (I) and the Entrusted Processing Framework Agreement (II) for the year ending 31 December 2021 are RMB105,280,000 and RMB25,050,700, respectively. In considering the annual caps under the Entrusted Processing Framework Agreement (I) and the Entrusted Processing Framework Agreement (II), the Directors have taken into account a number of factors, including (1) increasing demand due to successful bidding under centralized volume-based drug procurement; and (2) the Group's business development strategies.

The historical transaction amounts in respect of the Entrusted Processing Transactions paid by the Group to the Group's connected persons for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts of the
Entrusted Processing Transactions	0	0	71,222.92
Reasons for the transaction

As the approval holder of the drugs subject to entrusted processing is the Group's connected persons, which is not qualified for manufacturing of drugs under the Good Manufacturing Practice (GMP) mentioned above. The Group's connected persons have passed the GMP certification in a number of countries for many times and thus have the conditions and capacities for manufacturing the abovementioned generic drugs. As such, the Group's connected persons were entrusted to manufacture the drugs under the Entrusted Processing Framework Agreements.

Reasons for the Entrusted Transactions

The Directors (excluding the members of the Independent Board Committee who will express their view after considering the advice from the Independent Financial Adviser) consider that the Entrusted Transactions are on ordinary and normal commercial terms, and the terms of the Entrusted Inspection Contracts, the Supplemental Entrusted Sewage Treatment Agreement and the Entrusted Processing Framework Agreements are fair and reasonable and in the interests of the Company and Shareholder(s) as a whole.

Continuing Connected Transactions Provided by the Group's Connected Persons to the Group

1. Construction Transaction

On 19 March 2021, the Company entered into the Construction Contract with Yidu Construction. The principal terms of the Construction Contract are as follows:

Date	: 19 March 2021
Parties	: the Company; and
Yidu Construction
Term	: From 19 March 2021 to 31 December 2021
Nature of transaction	: The Company agreed to engage Yidu Construction to carry
out the civil works of minor maintenance projects
Contract period	: From 19 March 2021 to 31 December 2021
Payment method	: Upon completion of the project, the project will be settled
upon completion based on the construction drawings and the
actual situation of the project.
Pricing policy

The price charged by Yidu Construction to the Company adopts a ''cost-plus'' mechanism, i.e. it charges a profit ranging from 5% to 10%.

Annual caps and basis of annual caps

The Company estimates that the annual cap under the Construction Contract for the year ending 31 December 2021 is RMB17,050,000. In considering the annual caps under the Construction Contract, the Directors have taken into account a number of factors, including the needs to expand and optimise ancillary office areas and living areas as the Group's drugs are continuously approved for marketing, the estimated cost of facilities, experience of Yidu Construction, terms of service and expected quality of service.

Reasons for the transaction

As the Group's pharmaceutical products are continuously approved for marketing, corresponding facilities for production, office and living are required to be in place and optimised, so as to launch our products in a timely manner to create more benefits for the Company. In addition, Yidu Construction has extensive experience in the construction of pharmaceutical enterprises, and has undertaken a number of projects of Group which received positive feedback. Besides, Yidu Construction meets the bidding requirements for Construction Contract in terms of enterprise qualification, technical strength, project performance and financial indicators.

The Directors, including the independent non-executive Directors, are of the view that the terms of the Construction Contract are fair and reasonable, and the transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Company and on normal or more favourable commercial terms with the Construction Contract in the interests of the Company and the Shareholder(s) as a whole.

2. Lease Transactions

On 19 March 2021, the Company entered into the Property Lease Contract with HEC Medicine Development and Research. The principal terms of the Property Lease Contract are as follows:

Date	: 19 March 2021
Parties	: the Company; and
HEC Medicine Development and Research
Term	: From 19 March 2021 to 31 December 2021
Nature of transaction	: The Company agreed to lease a property at No. 368 Zhen An
Zhong Road, Chang'an County, Dongguan from HEC
Medicine Development and Research

Payment method

:The Company is required to pay a monthly rental of RMB202,175.10 to HEC Medicine Development and Research

Pricing policy

The rental charged by HEC Medicine Development and Research to the Company is determined after arm's length negotiations by reference to the current rent for the same type of property in the vicinity at the time of entering into the Property Lease Contract.

Annual cap and basis of annual cap

The Company estimates that the annual cap under the Property Lease Contract for the year ending 31 December 2021 is RMB2,426,101.20. In considering the annual cap under the Property Lease Contract, the Directors have taken into account a number of factors, including the estimated annual transaction amount by reference to the expiry date of the Property Lease Contract and the potential increase in rent for properties of similar size in the neighbourhood.

The historical transaction amounts in respect of the Lease Transactions paid by the Group to the Group's connected persons for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts of the
Lease Transactions	0	0	2,225.78
Reasons for the transaction

The Directors believe that leasing the premises will provide better working environment for our employees and enhance the competitiveness of the Group.

The Directors (including the independent non-executive Directors) are of the view that the Property Lease Contract (including the annual cap) is entered into in the ordinary and usual course of business of the Group, and the terms are fair and reasonable and the transactions contemplated thereunder are on normal commercial terms or favourable to the Company and the Property Lease Contract is in the interests of the Company and Shareholder(s) as a whole.

Continuing Connected Transactions Provided by Group to the Group's Connected Persons

3.

Sales Transactions

On 19 March 2021, the Company entered into certain sales contracts in relation to the sale of APIs and pharmaceutical products to Sunshine Lake Pharma.

(1) The principal terms of the API Sales Contract are as follows:

Date

• : 19 March 2021

  Parties

• : the Company; and

  Sunshine Lake Pharma

  Term

• : From 19 March 2021 to 31 December 2021

  Nature of transaction

• : The Company agreed to sell APIs of Olmesartan Medoxomil, Moxifloxacin Hydrochloride, Esomeprazole Magnesium, Entacapone, Febuxostat, Duloxetine Hydrochloride, Olanzapine and Levofloxacin to Sunshine Lake Pharma

Payment method

:Sunshine Lake Pharma will pay the corresponding amount to the Company within one month upon receipt of the goods and receipt of the invoice after passing the acceptance inspection

(2)The principal terms of the Pharmaceutical Sales Contract are as follows:

Date	: 19 March 2021
Parties	: the Company; and
Sunshine Lake Pharma
Term	: From 19 March 2021 to 31 December 2021
Nature of transaction
Payment method

the Company

• : After engaging

  toMorphothiadine Mesylate, Sunshineproduce the Lake Pharmaagreed to purchase the finished products of Morphothiadine Mesylate from the Company.

• : Sunshine Lake Pharma will pay the corresponding amount to the Company within one month upon receipt of the goods and receipt of the invoice from the Company after passing the acceptance inspection.

Pricing policy

As the Group also sells pharmaceutical products and APIs to independent third parties, the fees to be charged shall not be lower than the price charged to any independent third parties. In addition, Morphothiadine Mesylate is a class I innovative drug which has currently no reference price in the market. The price charged by the Company to Sunshine Lake Pharma adopts a ''cost-plus'' mechanism, i.e. it charges 30% of the profit.

Annual caps and basis of annual caps

The Company estimates that the annual caps under API Sales Contract and Pharmaceutical Sales Contract for the year ending 31 December 2021 are RMB30,000,000 and RMB4,580,000, respectively. In considering the annual caps under API Sales Contract and Pharmaceutical Sales Contract, the Directors have taken into account a number of factors, including (1) the historical transaction amounts; (2) the Group's demand for the year ending 31 December 2021; and (3) the Group's business development strategies.

The historical transaction amounts of the API Sales Transactions provided by Group to the Group's connected persons for each of the three years ended 31 December 2018, 2019 and 2020 are set out below:

For the year	For the year	For the year
ended	ended	ended
31 December	31 December	31 December
2018	2019	2020
RMB'000	RMB'000	RMB'000
Historical transaction amounts of the
API Sale Transactions	2,205.84	2,372.43	4,242.92
Reasons for the transaction

The principal activities of the Group include the sale of API. As part of its ordinary and usual course of business, the Group sells certain APIs and pharmaceutical products to Sunshine Lake Pharma at prices and terms consistent with the prevailing market prices and conditions of the relevant products.

The Directors (including the independent non-executive Directors) are of the view that the terms of the API Sales Contract and Pharmaceutical Sales Contract and the transactions contemplated thereunder are on normal commercial terms and in the ordinary and usual course of business of the Group, and the annual caps are on normal commercial terms and fair and reasonable and in the interests of the Company and Shareholders as a whole.

4. Entrusted Production/Processing Transactions

On 19 March 2021, the Group and the Group's connected persons entered into certain Entrusted Processing Framework Agreement (III) and Entrusted Processing Framework Agreements in relation to the entrustment of the Group to carry out pharmaceutical processing and production services.

(1) The principal terms of the Entrusted Processing Framework Agreement (III) are as follows:

Date : 19 March 2021

Parties : the Company; and

Sunshine Lake Pharma

Term : From 19 March 2021 to 31 December 2021

Nature of transaction : Sunshine Lake Pharma agreed to engage the Company to process Yiqibuvir Tablets, Dong An Tai (東安泰), Dong An En (東安恩) and Dong Tong Shen (東通神)

Payment method

:Settlement on an annual basis

(2) The principal terms of the Entrusted Production Service Framework Agreement (I) are as follows:

Date : 19 March 2021

Parties

• : Yichang HEC Pharmaceutical subsidiary of the Company); andManufacturing

  (a

  Sunshine Lake Pharma

  Term : From 19 March 2021 to 31 December 2021

  Nature of transaction : Sunshine Lake Pharma agreed to engage Yichang HEC

  Pharmaceutical Manufacturing to evaluate and inspect the production and safety response of Phenylcarbonohydrazonoyl dicyanide, Dong An En, Dong Jian Ze (東健澤), Dong Tong Rui (東通瑞), Dong Tong Shun (東通順), Dong Tong Run (東通潤), Rongliflozin RG04 and other new pharmaceutical intermediates

  Payment method

• : Sunshine Lake Pharma shall pay Yichang HEC Pharmaceutical Manufacturing for the production services and purchase fee of products from such batch at fair market price. Details of the payment terms will be set out in a separate purchase order.

(3) The principal terms of the Entrusted Production Service Framework Agreement (II) are as follows:

On 19 March 2021, Yichang HEC Pharmaceutical Manufacturing (a subsidiary of the Company) and HEC Generic Drugs Development and Research entered into the Entrusted Production Service Framework Agreement (II), pursuant to which, HEC Generic Drugs Development and Research engaged Yichang HEC Pharmaceutical Manufacturing to evaluate and inspect the production and safety response on Palamevir, Siponimod and other generic drugs. The Entrusted Production Service Framework Agreement (II) (such as term and payment method) is consistent with the Entrusted Production Service Framework Agreement (I).

Pricing policy

The Group adopts a ''cost-plus'' mechanism for charging a service fee to the Group's connected persons (the service fee includes raw and auxiliary materials, packaging materials, labour and manufacturing expenses provided by Party B), i.e. it charges 20% of the profit.

Annual caps and basis of annual caps

The Company estimates that the annual caps under the Entrusted Processing Framework Agreement (III), the Entrusted Production Service Framework Agreement (I) and the Entrusted Production Service Framework Agreement (II) for the year ending 31 December 2021 are RMB29,296,263.44, RMB40,000,000 and RMB5,000,000, respectively. In considering the annual caps for the Entrusted Processing Framework Agreement (III), the Entrusted Production Service Framework Agreement (I) and the Entrusted Production Service Framework Agreement (II), the Directors have taken into account a number of factors, including (1) production capacity of the Group; and (2) demand from the Counterparty.

Reasons for the transaction

The Group's connected persons entrusted the Company to carry out the production of drugs, which is beneficial for the Company to efficiently utilize the production lines and avoid idle factory buildings, equipment and loss of personnel, so as to generate more revenue for the Group. At the same time, it will be beneficial for the Company to develop new business, satisfy the Company's future development needs, enhance the Company's competitiveness and create more value for the Company.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Entrusted Processing Framework Agreement (III), the Entrusted Production Service Framework Agreement (I) and the Entrusted Production Service Framework Agreement (II) are fair and reasonable, and the transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Group, and on normal commercial terms or more favourable to the Company, and the Entrusted Processing Framework Agreement (III), the Entrusted Production Service Framework Agreement (I) and the Entrusted Production Service Framework Agreement (II) are in the interests of the Company and Shareholder(s) as a whole.

Connected Transaction Provided by the Group's Connected Persons to the Group

1. Clarithromycin and Azithromycin Purchase Transaction

On 19 March 2021, the Company entered into the API Purchase Contract (IV) in relation to the purchase of pharmaceutical products from Yichang HEC Biochemical Manufacturing. The principal terms of the API Purchase Contract (IV) are as follows:

Date	: 19 March 2021
Parties	: the Company; and
Yichang HEC Biochemical Manufacturing
Nature of transaction	: The Company agreed to purchase APIs (Clarithromycin and
Azithromycin) from Yichang HEC Biochemical
Manufacturing

Consideration : RMB3,000,000

Payment method

• : Yichang HEC Biochemical Manufacturing is required to deliver the APIs to the Company within 30 days after entering into the API Purchase Contract (IV). The Company will pay the relevant amount upon receipt of the APIs and receipt of the invoice from Yichang HEC Biochemical Manufacturing after passing the acceptance inspection.

  Basis of

  Consideration

• : Antibiotics-type APIs are subject to volatile market prices, with reference to the fair price of the market transactions, which is determined after arm's length negotiations between parties to ensure that such price is equal to the market price.

Reasons for the transaction

In accordance with the market requirements for Clarithromycin tablets and Azithromycin tablets, the Company purchased APIs as needed to ensure the normal engagement of the Company's production and commercial activities. Yichang HEC Biochemical Manufacturing is familiar with the business needs of the Company, which helps to save administrative expenses, and provides APIs (Clarithromycin and Azithromycin) with guaranteed quality and facilitates the tracking management of drugs. It is beneficial to win the trust of the Company's products from the market and has a positive impact on the market promotion.

The Directors (including the independent non-executive Directors) are of the view that the terms of the API Purchase Contract (IV) are fair and reasonable and the transactions contemplated thereunder are entered into in the ordinary and usual course of business of the Company, and on normal commercial terms or better to the Company and the API Purchase Contract (IV) is in the interests of the Company and Shareholder(s) as a whole.

Connected Transaction Provided by the Group to the Group's Connected Persons

2. Entrusted Production Transaction

On 19 March 2021, HEC Generic Drugs Development and Research entered into the Entrusted Production Contract in relation to the entrustment of the Company for the provision of pharmaceutical manufacturing services. The principal terms of the Entrusted Production Contract are as follows:

Date : 19 March 2021

Parties : the Company; and

HEC Generic Drugs Development and Research

Nature of transaction : The Company has been engaged by HEC Generic Drugs

Development and Research to manufacture insulin degludec and insulin degludec/liraglutide injection under GMP conditions, and the Company will provide a warehouse for the storage of drugs and related raw materials, auxiliary materials and other goods for a term until HEC Generic Drugs Development and Research has completed clinical trials.

Consideration : RMB6,069,203

Payment method

• : After receiving the injection samples and passing the inspection and acceptance, HEC Generic Drugs Development and Research shall pay 40% of the total amount (RMB2,427,681) to the Company

  HEC Generic Drugs Development and Research shall pay the remaining 60% of the total amount (RMB3,641,522) to the Company upon completion of the packaging of the relevant drugs.

  Basis of consideration

• : The Company provides entrusted production to HEC Generic Drugs Development and Research with the ''cost-plus'' (such as staff costs, electricity bill, equipment, venues and relevant raw materials) mechanism, i.e. it charges a profit of 10%- 15%.

Reasons for the transaction

The Group's connected person entrusted the Company to carry out the production of drugs, which is beneficial for the Group to efficiently utilize the production lines and avoid idle factory buildings, equipment and loss of personnel, so as to generate more revenue for the Group. At the same time, it will be beneficial for the Company to develop new business, satisfy the Company's future development needs, enhance the

Company's competitiveness and create more value for the Company.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Entrusted Production Contract are fair and reasonable and the transactions contemplated thereunder are on normal commercial terms or better to the Company and the Entrusted Production Contract is in the interests of the Company and Shareholder(s) as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As the Purchase Transactions are of similar nature, pursuant to Rule 14.22 of the Listing Rules, the transactions contemplated thereunder shall be aggregated. As the highest percentage ratio of the Purchase Transactions exceeds 5% but is less than 25%, the Purchase Transactions constitute disclosable transactions of the Company and are therefore subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

As the Entrusted Transactions are of similar nature, pursuant to Rule 14.22 of the Listing Rules, the transactions contemplated thereunder shall be aggregated. As the highest percentage ratio of the Entrusted Transactions exceeds 5% but is less than 25%, the Entrusted Transactions constitute disclosable transactions of the Company and are therefore subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, each of the Counterparties is a subsidiary of the controlling shareholder of the Company, and therefore a connected person of the Company. Accordingly, the transactions between the Group and each of the Counterparties constitute connected transactions and/or continuing connected transactions of the Company.

As the highest percentage ratio of the Purchase Transactions on an aggregate basis pursuant to Rule 14A.81 exceeds 5%, the Purchase Transactions are subject to the reporting, announcement and annual review, circular and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As the highest percentage ratio of the Entrusted Transactions on an aggregate basis pursuant to Rule 14A.81 exceeds 5%, the Entrusted Transactions are subject to the reporting, announcement and annual review, circular and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As the highest percentage ratio of the Construction Transactions and the transactions contemplated thereunder is more than 0.1% but less than 5%, the Construction Transactions are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As there were also the Lease Transactions between the Group and its connected persons in the past 12 months, pursuant to Rule 14A.81 of the Listing Rules, the transactions thereunder shall be aggregated. As the highest applicable percentage ratio of the Lease Transactions on an aggregated basis is more than 0.1% but less than 5%, the Lease Transactions are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As there were also the Sales Transactions between the Group and its connected persons in the past 12 months, pursuant to Rule 14A.81 of the Listing Rules, the transactions thereunder shall be aggregated. As the highest applicable percentage ratio of the Sale Transactions on an aggregated basis is more than 0.1% but less than 5%, the Sale Transactions are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As there were also the Entrusted Production/Processing Transactions between the Group and its connected persons in the past 12 months, pursuant to Rule 14A.81 of the Listing Rules, the transactions thereunder shall be aggregated. As the highest applicable percentage ratio of the Entrusted Production/Processing Transactions on an aggregated basis is more than 0.1% but less than 5%, the Entrusted Production/Processing Transactions are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As there were also the transactions for the purchase of APIs between the Group and its connected persons in the past 12 months, pursuant to Rule 14A.81 of the Listing Rules, the transactions under the Clarithromycin and Azithromycin Purchase Transactions shall be aggregated. As the highest applicable percentage ratio of the Clarithromycin and Azithromycin Purchase Transactions on an aggregated basis is more than 0.1% but less than 5%, the Clarithromycin and Azithromycin Purchase Transactions are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As there were also the Entrusted Production Transactions between the Group and its connected persons in the past 12 months, according to Rule 14A.81 of the Listing Rules, the transactions under the Entrusted Production Transactions shall be aggregated. As the highest applicable percentage ratio of the Entrusted Production Transactions on an aggregated basis is more than 0.1% but less than 5%, the Entrusted Production Transactions are subject to the reporting and announcement requirements but are exempt from the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Mr. Tang Xinfa, a non-executive Director, is considered to have a material interest in the transactions contemplated between the Group and the Group's connected persons by virtue of his position as a director and general manager of Shenzhen HEC Industrial (being the holding company of the Parent Company) and has abstained from voting on the board resolution approving the transactions contemplated between the Group and the Group's connected persons (including the annual caps).

Internal Control Level

In addition to the annual review by the auditors and independent non-executive Directors as required under Chapter 14A of the Listing Rules, the Company has implemented or will implement the following internal control measures:

(1) The finance department will check and monitor the aggregate transaction amounts of the

Purchase Transactions, the Entrusted Transactions, the Construction Transactions, the Lease Transactions, the Sales Transactions and the Entrusted Production Transactions, respectively, and confirm that the transaction amounts will not exceed the annual capsfor the continuing connected transactions under the Purchase Transactions, the Entrusted Transactions, the Construction Transactions, the Lease Transactions, the Sales Transactions and the Entrusted Production Transactions, respectively. In the event that the total transaction amount reaches 80% of the annual cap or is expected to exceed the annual cap in the next two months, the personnel of the finance department shall notify the Board immediately to determine the appropriate action to be taken;

(2) The Board will also from time to time inspect the Group's policies, provisions and implementation status with respect to the continuing connected transactions, including the investigation of the audit entity's processes for identifying connected persons and its processes for handling the continuing connected transactions ; and

(3) The audit committee of the Company shall review the contemplated transactions at least twice a year to confirm whether the relevant transactions are on fair and reasonable terms and in the interest of the Company and the Shareholder(s) as a whole.

The Board is of the view that the above methods and procedures can ensure that the pricing and other contractual terms for the continuing connected transaction(s) by the Group are on normal commercial terms, fair and reasonable and in the interests of the Company and Shareholder(s) as a whole, and that the continuing connected transaction(s) is conducted as agreed under the API Purchase Contracts, the Steam Purchase Contracts, the Electricity Purchase Contracts, the Industrial Products Sale and Purchase Contracts, the Entrusted Inspection Contracts, the Entrusted Processing Contracts, the Construction Contracts, the Property Lease Contract, the Sales Contracts and the Entrusted Production/Processing Contracts respectively and in compliance with the requirements under Chapter 14A of the Listing Rules.

INFORMATION OF THE PARTIES

The Company

The Company is a pharmaceutical manufacturing company focusing on the development, manufacturing and sales of pharmaceutical products in the therapeutic areas of anti-virus, endocrine and metabolic diseases as well as cardiovascular diseases. The ultimate beneficial owner of the Company is Mr. Zhang Yushuai.

Sunshine Lake Pharma

Sunshine Lake Pharma is a company incorporated in the PRC and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is primarily engaged in the development, manufacturing and sales of pharmaceutical products. The ultimate beneficial owner of Sunshine Lake Pharma is Mr. Zhang Yushuai.

Dongguan Yangzhikang

Dongguan Yangzhikang is a company incorporated in the PRC in 2018, and is a direct wholly-owned subsidiary of the Company. It is engaged in research and development, production and sales of pharmaceutical products. The ultimate beneficial owner of Dongguan Yangzhikang is Mr. Zhang Yushuai.

Yichang HEC Pharmaceutical Manufacturing

Yichang HEC Pharmaceutical Manufacturing is a company incorporated in the PRC in 2018 and is a direct wholly-owned subsidiary of the Company. It is engaged in the production and sales of domestic and overseas APIs. The ultimate beneficial owner of Yichang HEC Pharmaceutical Manufacturing is Mr. Zhang Yushuai.

Ruyuan HEC Pharmaceutical

Ruyuan HEC Pharmaceutical is a company incorporated in the PRC in 2010 and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is engaged in the pharmaceutical manufacturing industry. The ultimate beneficial owner of Ruyuan HEC Pharmaceutical is Mr. Zhang Yushuai.

Shaoguan HEC Packaging

Shaoguan HEC Packaging is a company incorporated in the PRC in 2020 and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is engaged in production and sales of four major product series, namely color box, board book binding, aluminum coated film, transfer film/paper and related laser products. The ultimate beneficial owner of Shaoguan HEC Packaging is Mr. Zhang Yushuai.

Yichang HEC Power Plant

Yichang HEC Power Plant is a company incorporated in the PRC in 2006, and is a direct non-wholly owned subsidiary of Shenzhen HEC Industrial. It is engaged in thermal power generation, production and sales of steam. The ultimate beneficial owner of Yichang HEC Power Plant is Mr. Zhang Yushuai.

Yidu Changjiang Machine and Equipment

Yidu Changjiang Machine and Equipment is a company incorporated in the PRC in 2004, and is a direct non-wholly owned subsidiary of Shenzhen HEC Industrial (with shareholding of 62.65%). It is a comprehensive enterprise providing rivet welding and mechanical processing. The ultimate beneficial owner of Yidu Changjiang Machine and Equipment is Mr. Zhang Yushuai.

Yidu Construction

Yidu Construction is a company incorporated in the PRC in 2004 and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is principally engaged in the construction business. The ultimate beneficial owner of Yidu Construction is Mr. Zhang Yushuai.

Yichang HEC Biochemical Manufacturing

Yichang HEC Biochemical Manufacturing is a company incorporated in the PRC on 29 November 2018 and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is engaged in biochemical pharmaceutical manufacturing. The ultimate beneficial owner of Yichang HEC Biochemical Manufacturing is Mr. Zhang Yushuai.

HEC MEDICINE DEVELOPMENT AND RESEARCH

HEC Medicine Development and Research is a company incorporated in the PRC on 23 August 2002, and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is engaged in research and development of drugs. The ultimate beneficial owner of HEC Medicine Development and Research is Mr. Zhang Yushuai.

HEC GENERIC DRUGS DEVELOPMENT AND RESEARCH

HEC Generic Drugs Development and Research is a company incorporated in the PRC on 21 March 2019, and is an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial. It is engaged in research and development of drugs. The ultimate beneficial owner of HEC Generic Drugs Development and Research is Mr. Zhang Yushuai.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee (comprising Mr. Tang Jianxin, Mr. Zhao Dayao, Ms. Xiang Ling and Mr. Li Xuechen, all being independent non-executive Directors) has been formed to advise the Independent Shareholder(s) on the Purchase Transactions (including the annual caps) and the Entrusted Transactions (including the annual caps). Gram Capital has been appointed by the Company to make recommendations to the Independent Board Committee and the Independent Shareholder(s) in respect of the Purchase Transactions and its annual caps and the Entrusted Transactions and its annual caps.

GENERAL MEETING

The general meeting will be convened to, among other things, consider and, if thought fit, approve the Purchase Transactions (including the annual caps) and the Entrusted Transactions (including the annual caps).

The Parent Company is required to abstain from voting on the resolutions to be proposed at the general meeting to approve the Purchase Transactions (including the annual caps) and the Entrusted Transactions (including the annual caps).

A circular containing, among other things, (i) further details of the Purchase Transactions (including the annual caps) and the Entrusted Transactions (including the annual caps); (ii) the recommendation of the Independent Board Committee in respect of the Purchase Transactions (including the annual caps) and the Entrusted Transactions (including the annual caps); (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholder(s) in respect of the Purchase Transactions (including the annual caps) and the Entrusted Transactions (including the annual caps); and (iv) other information as required by the Listing Rules, is expected to be despatched to the Shareholders on or before 8 April 2021.

DEFINITIONS

''API Purchase Contracts''

API Purchase Contract (I), API Purchase Contract (II) and API Purchase Contract (III)

''Board''

board of Directors of the Company

''Company''

YiChang HEC ChangJiang Pharmaceutical Co., Ltd. (宜昌東 陽光長江藥業股份有限公司), a company established in the PRC on 11 May 2015 as a joint stock company with limited liability

''Director(s)''

''Construction Transaction''

transactions contemplated under the Construction Contract the director(s) of the Company

''Dongguan Yangzhikang''

Dongguan Yangzhikang Pharmaceutical Co., Ltd. (東莞市陽 之康醫藥有限責任公司), a company incorporated in the PRC, being a direct wholly-owned subsidiary of the Company

''Electricity Purchase

Contracts''

Power Supply Supplemental Agreement and 2021 Power Supply Contract

''Entrusted Inspection

Contracts''

Entrusted Inspection Contract (I) and Entrusted Inspection Contract (II)

''Entrusted Processing

Framework Agreements''

Entrusted Processing Framework Agreement (I) and Entrusted Processing Framework Agreement (II)

''Entrusted Production/

Processing Contracts''

Entrusted Processing Framework Agreement (III), Entrusted Production Service Framework Agreement (I) and Entrusted Production Service Framework Agreement (II)

''Entrusted Production/

Processing Transactions''

transactions Contractsunder the Entrusted Production/Processing

''Entrusted Production

Transactions''

''Entrusted Transactions''

transactions under the Entrusted Production Contracttransactions under the Entrusted Inspection Contracts, the Supplemental Entrusted Sewage Treatment Agreement and the Entrusted Processing Contracts

''Group''

the Company and its subsidiaries

''Group's connected persons''	Ruyuan HEC Pharmaceutical Co., Ltd., Yichang HEC
or ''Counterparty(ies)''	Biochemical Manufacturing Co. Ltd., Shaoguan HEC
Packaging and Printing Co., Ltd., Yichang HEC Power
Plant Co., Ltd., Yidu Changjiang Machine and Equipment
Co., Ltd., Yichang HEC Biochemical Manufacturing Co.
Ltd., Dongguan HEC Medicine Development and Research
Co., Ltd. and Dongguan HEC Generic Drugs Development
and Research Co. Ltd.
''HEC Generic Drugs	Dongguan HEC Generic Drugs Development and Research
Development and	Co. Ltd. (東莞市東陽光仿製藥研發有限公司), a company
Research''	incorporated in the PRC, being a subsidiary of Shenzhen
HEC Industrial
''HEC Medicine Development	Dongguan HEC Medicine Development and Research Co.,
and Research''	Ltd. (東莞東陽光藥物研發有限公司), a company incorporated
in the PRC, being a subsidiary of Shenzhen HEC Industrial
''Hong Kong''	Hong Kong Special Administrative Region of the PRC
''Independent Board	the independent board committee (comprising Mr. Tang
Committee''	Jianxin, Mr. Zhao Dayao, Ms. Xiang Ling and Mr. Li
Xuechen, all being independent non-executive Directors)
established by the Company to advise the Independent
Shareholder(s) in respect of the Purchase Transactions
(including the annual caps) and the Entrusted Transactions
(including the annual caps)
''Independent Financial	Gram Capital Limited, a licensed corporation to carry out
Adviser'', ''Gram Capital''	Type 6 (advising on corporate finance) regulated activity
under the Securities and Futures Ordinance (Chapter 571 of
the Laws of Hong Kong), being the independent financial
adviser appointed by the Company to advise the
Independent Board Committee and the Independent
Shareholder(s) in respect of the Purchase Transactions
(including the annual caps) and the Entrusted Transactions
(including the annual caps)
''Independent	shareholder(s) other than the Parent Company, who are not
Shareholder(s)''	involved in or interested in the Purchase Transactions
(including the annual caps) and the Entrusted Transactions
(including the annual caps)
''Industrial Products Sale and	Industrial Products Sale and Purchase Contract (I) and
Purchase Contracts''	Industrial Products Sale and Purchase Contract (II)
''Lease Transactions''	transactions under the Property Lease Contract
''Listing Rules''	the Listing Rules of the Stock Exchange

''Parent Company''

Guangdong HEC Technology Holding Co., Ltd. (廣東東陽 光科技控股股份有限公司), a company incorporated in the PRC with limited liability and the immediate controlling shareholder of the Company holding approximately 53.89% equity interest in the Company as at the date of this announcement

''PRC''

the People's Republic of China, for the purpose of this announcement, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

''Purchase Transactions''

transactions under the API Purchase Contracts, the Packaging Materials Purchase Contract, the Supplemental Chemical Materials and Hardware Materials Purchase Agreement, the Steam Purchase Contracts, the Electricity Purchase Contracts and the Industrial Products Sale and Purchase Contracts

''RMB''

Renminbi, the lawful currency of the PRC

''Ruyuan HEC

Pharmaceutical''

Ruyuan HEC Pharmaceutical Co., Ltd. (乳源東陽光藥業有 限公司), an indirect non-wholly owned subsidiary of Shenzhen HEC Industrial

''Sales Contracts''

API Sales Contract and Pharmaceutical Sales Contract

''Sales Transactions''

transactions under the API Pharmaceutical Sales ContractSalesContractandthe

''Shaoguan HEC Packaging''

Shaoguan HEC Packaging and Printing Co., Ltd. (韶關東陽 光包裝印刷有限公司), a company incorporated in the PRC, being a subsidiary of Shenzhen HEC Industrial

''Shareholder(s)''

holders of ordinary shares of the Company

''Shenzhen HEC Industrial''

Shenzhen HEC Industrial Development Co., Ltd. (深圳市東 陽光實業發展有限公司), a company incorporated in the PRC and directly and indirectly holds approximately 43.43% equity interest in the Parent Company as at the date of this announcement, of which approximately 27.97% is directly held

''Steam Purchase Contracts''

Steam Supply Supplemental Agreement (I), Steam Supply Supplemental Agreement (II) and 2021 Steam Supply Contract

''Stock Exchange''

The Stock Exchange of Hong Kong Limited

''Sunshine Lake Pharma''	Sunshine Lake Pharma Co., Ltd., a company incorporated in
the PRC on 29 December 2003 (廣東東陽光藥業有限公司)
and a direct subsidiary of Yichang HEC Research Co., Ltd.
(宜昌東陽光藥研發有限公司) and an indirect non-wholly
owned subsidiary of Shenzhen HEC Industrial
''Yichang HEC Biochemical	Yichang HEC Biochemical Manufacturing Co. Ltd. (宜昌東
Manufacturing''	陽光生化製藥有限公司), a company incorporated in the
PRC, being a subsidiary of Shenzhen HEC Industrial
''Yichang HEC	Yichang HEC Pharmaceutical Manufacturing Co., Ltd. (宜
Pharmaceutical	昌東陽光製藥有限公司), a company incorporated in the
Manufacturing''	PRC, being a direct wholly-owned subsidiary of the
Company
''Yichang HEC Power Plant''	Yichang HEC Power Plant Co., Ltd., a company
incorporated in the PRC, being a subsidiary of Shenzhen
HEC Industrial
''Yidu Changjiang Machine	Yidu Changjiang Machine and Equipment Co., Ltd. (宜都長
and Equipment''	江機械設備有限公司), a company incorporated in the PRC,
being a subsidiary of Shenzhen HEC Industrial
''Yidu Construction''	Yidu Shanchengshuidu Project Construction Co., Ltd. (宜都
山城水都建築工程有限公司), a company incorporated in
the PRC, being a subsidiary of Shenzhen HEC Industrial

''%'' percentage

In this announcement, unless the context requires otherwise, the terms ''associate(s)'', ''connected person(s)'', ''connected transaction(s)'' and ''subsidiary(ies)'' shall have the meanings ascribed to them under the Listing Rules (as modified by the Stock Exchange from time to time).

On behalf of the Board

YiChang HEC ChangJiang Pharmaceutical Co., Ltd.

Tang Xinfa

Chairman

Hubei, the PRC

19 March 2021

As of the date of this announcement, the Board consists of Mr. JIANG Juncai, Mr. WANG Danjin, Mr. CHEN Yangui and Mr. LI Shuang as executive Directors; Mr. TANG Xinfa and Mr. Eddy HUANG as non-executive Directors; and Mr. TANG Jianxin, Mr. ZHAO Dayao, Ms. XIANG Ling and Mr. LI Xuechen as independent non-executive Directors.