Basis of Pricing. The terms of the Transactions shall be determined with reference to the then prevailing market prices of similar transactions entered into between the Independent Third Parties and the Group or GPHL and its subsidiaries, and shall be on normal commercial terms or terms no less favourable to the the Group than terms available to/or from independent third parties at the then time. The then prevailing market prices under the specific contracts entered into between the Group and GPHL and its subsidiaries regarding the various types of Transactions described in section 3 of this announcement will be determined based on the prices of the similar transactions obtained by the Group from the Independent Third Parties in China (or provided to the Independent Third Parties) on an arm’s length basis and on normal commercial terms in the ordinary course of business of the Group. In addition to the basis of pricing stipulated under the New CCT Agreement as set out above, the Group will consider the following principles (“Pricing Principles”) in order of priority in determining whether or not to enter into the actual transactions under the New CCT Agreement: (1) the final confirmed prices through the bidding and tendering process conducted in accordance with the applicable laws, rules and regulations (if any) (“Regulatory Bidding Prices”); (2) the final confirmed prices through the bidding and tendering process conducted by the Group at which at least three independent bidders will be invited (“Corporate Bidding Prices”) if the Regulatory Bidding Prices are not available or applicable; (3) the market prices which are offered to or by the Independent Third Parties in the ordinary and usual course of business if none of the Regulatory Bidding Prices and the Corporate Bidding Prices are available or applicable; and (4) the agreed prices calculated based on the actual or reasonable cost incurred in the similar transactions (and, in the case of the similar transactions with respect to provision of products or rendering of services, licensing of trademarks and leasing of assets by the Group to GPHL and its subsidiaries, plus a reasonable profit margin), if none of the prices set out in (1) to (3) above are available or applicable. However, the Company would like to draw the attention of the shareholders of the Company to that: (i) based on the rules and regulations applicable as at the date of this announcement (such as The Opinion of Establishment and Implementation of National Essential Medicine System*《關於建立國家基本藥物制度的實施意見》, The Administrative Measures for the National Essential Medicines List* 《國家基本藥物目錄管理辦法》, The National Essential Medicines List* 《國家基本藥物目錄》and The Administrative Measures for Supervision and Administration of the Centralised Procurement for Pharmaceutical Products*《藥品集中採購監督管理辦法》), the bidding and tendering process referred to in the Pricing Principles set out in (1) above will be conducted by the relevant provinces and is applicable to the Purchase Transactions but not the other transactions contemplated under the New CCT Agreement; (ii) in the case of the Transactions other than the Purchase Transactions to be conducted with GPHL and its subsidiaries, a reasonable profit margin will be added on the top of the Corporate Bidding Prices as the final prices; and (iii) in case of asset leasing transactions (including Leasing Asset From GPHL and Leasing Asset to GPHL), the prices for leasing certain equipment to or from GPHL will be determined after arm’s length negotiations between the parties with reference to the appraised value of the leased equipment and the prices for leasing certain properties to or from GPHL will be determined with reference to the market prices, being the relevant prices charged by independent third parties on normal commercial terms for comparable properties at the same or nearby locations. The reasonable profit margin mentioned above is determined by reference to the nature of the similar transactions, historical prices, current market prices and market price changes in the remaining period, as well as the supply and demand level of the similar transactions in the market at the material times and the order size of GPHL and its subsidiaries. For example, in respect of the Sales Transactions, it is determined with reference to (i) the profit margin of the Group when selling comparable quantities of similar products to GPHL and its subsidiaries in previous transactions; (ii) the profit margin of the Group when selling comparable quantities of similar products to the Independent Third Parties, and (iii) the profit margin of the Group when selling comparable quantities of similar products to the Independent Third Parties in previous transactions, so as to determine whether the profit margin charged is in line with the industry conditions. It is expected that the profit margin of the Sales Transactions related to traditional Chinese medicine, raw materials, auxiliary materials, packaging materials and equipment will not exceed 10%. Since the Group is under no obligation to enter into any actual transaction under the New CCT Agreement unless it is satisfied with the terms of the relevant proposed transactions after considering the Pricing Principles, the Directors believe that such mechanism and procedures can ensure that the transactions contemplated under the New CCT Agreement to be conducted on normal commercial terms (including the prices) and not prejudicial to the interests of the Company and the minority shareholders of the Company.
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Basis of Pricing. The terms of the Transactions shall will be determined with reference to the then prevailing market prices at the material time when the Purchase Transactions, Sales Transactions, Provisions, Labour Services or Entrusted Processing, Use of similar transactions Trademarks Under Licence, Asset Leasing From GPHL or Asset Leasing to GPH are entered into between the Independent Third Parties Company and the Group its subsidiaries (or GPHL and its subsidiaries, ) on the one hand and shall the Independent Third Parties on the other hand (“Similar Transactions”) and will be determined on normal commercial terms or terms no not less favourable terms than those available to the Group from the Group than terms available to/Independent Third Parties (or from independent third parties at to the then timeIndependent Third Parties). The then prevailing market prices under the specific contracts entered into between the Group and GPHL and its subsidiaries regarding the various types of Transactions connected transactions described in section 3 of this announcement will be determined based on at the prices of the similar transactions obtained Similar Transactions conduct on arm’s length basis obtain by the Group from the Independent Third Parties in China (or provided provide to the Independent Third Parties) on an arm’s length basis and on normal commercial terms and in the ordinary course of business of the Group. In addition to the above basis of pricing stipulated under the New CCT Agreement as set out aboveAgreement, the Group will consider the following principles (“Pricing Principles”) in order of priority in before determining whether or not to enter into the actual transactions under the New CCT Agreement:
(1a) the final confirmed prices through the bidding and tendering process conducted in accordance with the applicable laws, rules and regulations (if any) (“Regulatory Bidding Prices”);
(2b) the final confirmed prices through the bidding and tendering process conducted by the Group at which at least three independent bidders will be invited (“Corporate Bidding Prices”) if the Regulatory Bidding Prices are not available or applicable;
(3c) the market prices which are offered to or by the Independent Third Parties in the ordinary and usual course of business if none of the Regulatory Bidding Prices and the Corporate Bidding Prices are available or applicable; and
(4d) the agreed prices calculated based on the actual or reasonable cost incurred in the similar transactions thereof (and, in the case of the similar transactions with respect to provision of products or rendering of services, licensing of trademarks and leasing of assets Similar Transactions by the Group to GPHL and its subsidiaries, plus a reasonable profit margin), which is determined by reference to the nature of the Similar transactions, past prices, current market prices and market price changes in the remaining period if none of the prices set out in (1a) to (3c) above are available or applicable. The Pricing Principles basically apply to the Transactions. However, the Company would like to draw the attention of the shareholders of the Company to that: :
(i) based on the rules and regulations applicable as at the date of this announcement Announcement Date (such as The Opinion of Establishment and Implementation of National Essential Medicine System*《關於建立國家基本藥物制度的實施意見System* 《關於建立國家基本藥物制度的實施意見》, The Administrative Measures for the National Essential Medicines List* 《國家基本藥物目錄管理辦法》, The National Essential Medicines List* 《國家基本藥物目錄》and List*《國家基本藥物目錄》and The Administrative Measures for Supervision and Administration of the Centralised Procurement for Pharmaceutical Products*《藥品集中採購監督管理辦法》)) , the bidding and tendering process referred to in the Pricing Principles Principle set out in (1a) above will be conducted by the relevant provinces and Pricing Principle (a) is applicable to the Purchase Transactions but not the other transactions contemplated under the New CCT Agreement; and
(ii) in the case of the Transactions (other than then the Purchase Transactions to be conducted Transactions) with GPHL and its subsidiaries, a reasonable profit margin will be added on the top of the Corporate Bidding Prices as the final prices; and (iii) in case of asset leasing transactions (including Leasing Asset From GPHL and Leasing Asset to GPHL), the prices for leasing certain equipment to or from GPHL will be determined after arm’s length negotiations between the parties with reference to the appraised value of the leased equipment and the prices for leasing certain properties to or from GPHL will be determined with reference to the market prices, being the relevant prices charged by independent third parties on normal commercial terms for comparable properties at the same or nearby locations. The reasonable profit margin mentioned above is determined by reference to the nature of the similar transactions, historical prices, current market prices and market price changes in the remaining period, as well as the supply and demand level of the similar transactions in the market at the material times and the order size of GPHL and its subsidiaries. For example, in respect of the Sales Transactions, it is determined with reference to (i) the profit margin of the Group when selling comparable quantities of similar products to GPHL and its subsidiaries in previous transactions; (ii) the profit margin of the Group when selling comparable quantities of similar products to the Independent Third Parties, and (iii) the profit margin of the Group when selling comparable quantities of similar products to the Independent Third Parties in previous transactions, so as to determine whether the profit margin charged is in line with the industry conditions. It is expected that the profit margin of the Sales Transactions related to traditional Chinese medicine, raw materials, auxiliary materials, packaging materials and equipment will not exceed 10%. Since the Group is under no obligation to enter into any actual transaction under the New CCT Agreement unless it is satisfied with the terms of the relevant proposed transactions after considering the Pricing Principles, the Directors believe that such mechanism and procedures can ensure that the transactions contemplated under by the New CCT Agreement to will be conducted on normal commercial terms (including the prices) and not prejudicial to the interests of the Company and the minority shareholders of the Company.
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