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German Exhibition Health (000813): Reply To Semi Annual Inquiry Letter

2019/9/24 13:19:00 0

Germany Exhibition Health Tianshan Textile Textile Stocks The Latest Announcement

Securities code: 000813 securities abbreviation: Germany exhibition health Bulletin No.: 2019-048

Limited by Share Ltd announcements on reply to Shenzhen stock exchange semi annual report 2019

Shenzhen securities Exchange Company management department:

The German exhibition great health Limited by Share Ltd (hereinafter referred to as "the company" and "Germany exhibition health") have seriously organized the verification and implementation of the problems found in the semi annual inquiry letter [2019] twelfth of the company's semi annual inquiries, and the following are the following:

First, your company's main subsidiary, Beijing Jialin pharmaceutical Limited by Share Ltd (hereinafter referred to as "Jialin pharmaceutical") is a major asset reorganization company incorporated in 2016. Jialin pharmaceutical company achieved net profit of 663 million 752 thousand and 400 yuan, 795 million 856 thousand and 600 yuan and 933 million 110 thousand and 600 yuan respectively in 2016, 2017 and 2018 respectively. The completion rate of performance commitment was 102.12%, 102.10% and 99.61% respectively. The net profit after 2016 to 2018 was 2 billion 392 million 719 thousand and 600 yuan, and the cumulative performance commitment rate was 101.12%. According to your company's semi annual report in 2018 and 2019, the operating income of Jialin pharmaceutical in the first half of 2018 and 2019 was 1 billion 661 million yuan and 922 million yuan respectively, with net profit of 442 million yuan and 257 million yuan respectively, and the operating income and net profit of reporting period decreased by 44.50% and 41.78% respectively. Your company said that the company's business model has not changed significantly during the reporting period. The flagship product "ah le" is the first domestic product to pass the atorvastatin calcium consistency evaluation, and the sales volume of "4+7", which is concentrated in the quantity purchase, has increased significantly, and the market share is among the best.

Your company:

1. According to the changes in the customer group, financial situation, operation situation, the internal and external environment of the industry, and the related situation of the same industry, the specific reasons and rationality of the dramatic decline in performance after the period of performance promise expires;

Reply:

1) the company's operating income in the first half of 2019 decreased by 44.50% compared with the first half of 2018, and its net profit decreased by 41.78%, mainly due to a sharp decline in the sales price of the company's main products. Arrow products

The main sales indicators are as follows:

project	First half of 2019	First half of 2018	Increase or decrease
Operating income (10000 yuan)	Eighty-nine thousand four hundred and forty-seven point nine four	One hundred and sixty-three thousand nine hundred and eighty-nine point five six	-45.46%
Sales volume (10000 boxes)	Nine thousand one hundred and sixty point one three	Nine thousand six hundred and ninety-two point eight six	-5.50%
Average selling price (yuan / box)	Nine point seven six	Sixteen point nine two	-42.28%
Operating cost (10000 yuan)	Eleven thousand two hundred and eighty-eight point two zero	Eleven thousand nine hundred and thirty-five point two four	-5.42%
Average unit cost (yuan / box)	One point two three	One point two three	A kind of
Gross profit margin	87.38%	92.72%	-5.34%

Note: the sales volume of 20mg products has been converted according to 10mg*1.7.

In the first half of 2019, sales of arrow products dropped by 5.50% compared with the first half of 2018. Since the fifth meeting of the Central Committee for comprehensive deepening reform in November 14, 2018, the central government has passed the "National Organization for drug centralized procurement pilot scheme". It has chosen 11 pilot cities such as Beijing, Tianjin, Shanghai, Chongqing and Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu and Chengdu to carry out quantity purchase pilot work. The purpose is to explore and perfect the mechanism of drug procurement and market oriented drug price formation mechanism, reduce the burden of drug fees, regulate the order of drug circulation industry, and improve the safety of drug use for the masses. After the policy was released, whether the centralized procurement policy was extended to other provinces and cities was uncertain. The state health insurance bureau encouraged other provinces to follow up the centralized procurement policy. Therefore, some dealers reduce purchasing intention in the first half of 2019, so as to reduce their own business risks. The company's sales volume declined in the first half of 2019.

In the first half of 2019, the average selling price of arrow products was 9.76 yuan / box, down from the first half of 2018.

42.28%, the decline in product sales prices has led to a sharp decline in corporate revenues and net profits. Since March 2019, the formal implementation of the "4+7 drug centralized procurement" policy is the direct cause of the decline in the company's product sales price. In the first half of 2019, the proportion of regional sales in the implementation of centralized procurement policy was shown in the following table:

project	Centralized purchasing	Proportion	Non centralized procurement	Proportion
project	region	Proportion	region	Proportion
Sales volume (10000 boxes)	Four thousand nine hundred and eighty-eight point five nine	54.46%	Four thousand one hundred and seventy-one point five four	45.54%
Sales revenue (10000 yuan)	Sixteen thousand nine hundred and fifty-nine point one four	18.96%	Seventy-two thousand four hundred and eighty-eight point eight zero	81.04%
Average selling unit price (yuan / box)	Three point four zero	A kind of	Seventeen point three eight	-

Note 1:20mg the quantity of products sold has been converted to 10mg*1.7. Note 2: the sales volume and income in the "centralized procurement area" in the above table refers to the "centralized purchase of 4+7 drugs".

In the 11 cities, the sales volume and revenue after the price of 3.40 yuan / box (10mg) is actually implemented. In the first half of 2019, the sales volume of arrow products in the area of centralized drug procurement was 54.46%, and the sales volume accounted for 18.96%.

19.56%.

2) the changing situation of the company's industry. The pharmaceutical industry of the company has been greatly influenced by the national policy since 2017. It has gone through the policy of "two votes", the consistency evaluation of generic drugs and the "centralized purchasing of 4+7 drugs" implemented in 2019. In 2018, the company achieved a smooth transition of the "two votes" policy and took the lead in Atorvastatin Calcium Tablets's consistency evaluation. The policy of "centralized purchase of 4+7 drugs" has been implemented since March 2019, and the company strictly implements the "4+7 set" of the state.

The purpose of the policy is to lower the price of drugs so that the people can eat high-quality and inexpensive medicines. In the "4+7 drug centralized procurement", the company's exclusive bid is the product of atorvastatin. In September 1, 2019, the Shanghai sunshine medical network announced the "drug procurement document in the alliance area", and carried out drug procurement in the cross regional alliance outside the 4+7 pilot city, marking that drug procurement has entered a new era. The gathering will expand in 25 regions, including Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Jiangsu, Zhejiang and other 25 successful products involving the first batch of pilot projects. At the same time, a number of new regulations will be introduced. The collection will be declared in September 24, 2019 and the results will be made public.

3) company customer situation in the first half of 2019, the number of customer groups and customers has not changed significantly. Of the top ten customers ranked by the sales volume in the reporting period, 6 of them belong to the pilot cities carrying out the quantity purchase. The implementation of the bid price with the quantity purchase is the main reason leading to the decrease in the company's reporting period. The top ten customers in the reporting period are:

Unit: 10000 boxes

	Customer name	Sales volume for 1-6 months 2019
One	Client one	Seven hundred and twelve point six eight
Two	Customer two	Five hundred and forty-four point one four
Three	Customer three	Three hundred and twenty point zero eight
Four	Customer four	Three hundred and two point one two
Five	Customer five	Two hundred and fifty-nine point one eight
Six	Customer six	Two hundred and fifty-two point four six
Seven	Customer seven	Two hundred and thirty-three point eight three
Eight	Customer eight	Two hundred point five one

Note: the sales volume of 20mg products has been converted according to 10mg*1.7. 4) in the same industry, the company adopts the strategy of product centralization, which accounts for more than 95% of the company's revenue. In the "4+7 drug centralized procurement", the company is the exclusive bidder company of atorvastatin calcium products. Compared with other companies in the same industry, there is a big difference in the degree of policy impact and product variety concentration, so it is not comparable with other companies in the same industry.

(2) indicate whether the performance achieved during the performance commitment period is true and accurate, and whether there is a case of intertemporal recognition of income and carry over cost. Reply:

The performance achieved in the company's commitment period is the result of continuous strengthening of the brand market influence and increasing the market share of the company. The company's performance is real and accurate, and there is no case of intertemporal recognition of revenue and carry over cost. The company's sales comparison between 2016 and the first half of 2019 is as follows:

Sales of the company's main products from 2016 to June 2019 showed a steady upward trend, and there was no significant fluctuation. The company's product sales are mainly affected by market environment factors, and there is no artificial adjustment. The direct reason for the decline in operating income and net profit of the company in 2019 is the decline in the selling price of products.

6840.048601.26

Eight thousand six hundred and one point two six

Eight thousand seven hundred and twenty-seven point five nine

Eight thousand six hundred and fifty-nine point six nine

9692.869407.76

Nine thousand four hundred and seven point seven six

Nine thousand one hundred and sixty point one three

0 2000 4000 6000 8000 10000 12000
	Sales of products from 2016 to June 2019
					Sales volume (10000 boxes)

	2016 1-6	2016 7-12	2017 1-6	2017 7-12		2018 1-6	2018 7-12	2019 1-6

Nine	Customer nine	Two hundred point zero four
Ten	Customer ten	One hundred and ninety-five point zero seven
Total		Three thousand two hundred and twenty point one one

Question two, your company's monetary balance at the end of the reporting period is 439 million yuan, a sharp decrease of 69.60% compared to the 1 billion 447 million yuan balance at the beginning of the year. Monetary funds are mainly bank deposits, and interest income is reported during the reporting period.

5 million 191 thousand and 900 yuan, which is only 1.18% of the final bank balance.

(1) specify the specific reasons for the sharp reduction of monetary funds at the end of the reporting period, and whether monetary funds are restricted.

Reply:

At the beginning of the reporting period, the balance of Monetary Fund was 1 billion 447 million yuan, and the balance of monetary funds at the end of the period was 439 million yuan, which was 1 billion 6 million yuan lower than the beginning of the year. The main reason for the decrease in monetary funds is the purchase of financial products and payment of cooperation sincerity.

Unit: 100 million yuan

project	Current amount
Sales of merchandise and recovery of accounts receivable	Seventeen Point nine one
Purchase of raw materials and packaging materials	Zero point nine three
Taxes and expenses paid	One point zero eight
Paid salaries and expenses	One point zero two
To pay for sales and management expenses.	Seven point zero nine
Net cash flow from operating activities	Seven point seven nine
Net purchases of financial products	Fourteen point nine eight
Payment of cooperation sincerity	Two point five zero
Purchase of fixed assets and intangible assets	Zero point three one
Net cash flow from investment activities	-17.79
Financing activities and exchange rate changes	-0.06
Net increase in cash and cash equivalents	-10.06

There is no monetary constraint on the company.

(2) the matching of interest income with monetary fund and bank deposit scale and its reasonableness are explained in combination with the situation of money fund storage and interest rate level.

Reply:

In 2019 1-6, the specific circumstances of bank deposits are as follows:

Unit: 100 million yuan

Month	Bank balance at the end of the month	Monthly average balance	Interest income 1-6 in 2019	Calculation of annual deposit interest rate
January	Thirteen point eight nine	Nine point four two	Zero Point Zero Five	1.10%

February	Ten point three one
March	Ten point four one
April	Three point two five
May	Three point eight five
June	Four point three nine

The benchmark interest rate of the PBC is as follows:

project	PBC's benchmark interest rate%
Demand deposits	Zero point three five
Seven day notice deposit	One point three five

Data sources: the average interest rate data of the above money market are derived from the adjustment of the RMB deposit benchmark interest rate of the Monetary Policy Department of the people's Bank of China (January 1, 2019).

According to the plan of using funds, the company uses bank deposits to deposit seven days notice deposit. At present, the interest rate of the seven day notice deposit is about 1.35%, while the actual deposit rate of the company is 1.10%, which is between the 0.35% interest rate of the demand deposit rate and the 1.35% day notice deposit rate 1.35%. Therefore, the interest income of the company is matched and reasonable with the size of the bank deposit. In addition, the income generated by the company's purchase of financial products is included in the "investment income" subject, not in the "interest income" subjects.

(3) to indicate whether there is a joint or condominium account with the controlling shareholder or other related party, and whether there is the actual use of monetary funds by the other party. Reply:

After consulting the company and consulting with the controlling shareholder, the company confirmed that there was no joint ownership account with the controlling shareholder or other related parties, and there was no actual use of monetary funds by the other party.

Three, semi annual report shows that the controlling shareholder Merrill Lynch Holdings Limited holds 676825475 shares, accounting for 30.20% of the total share capital of the company. 666598670 of them have been pledged or frozen, accounting for 98.49% of their holdings.

1, explain the reasons for the pledge of the above shares, the specific use of the pledge funds, the realization of the pledge right, the financial position and solvency of the controlling shareholders and the actual controllers.

Reply:

After consulting the controlling shareholder of the company, it was confirmed that as of September 19, 2019, Merrill Lynch Holdings Limited and the co operative Beijing Kai Shi Fu Le asset management Limited by Share Ltd, the 9 private equity investment fund, held 745231311 shares, accounting for 33.25% of the company's total shares; Merrill Lynch Holdings Limited.

The total number of shares held by the company is 735004506 shares, accounting for 32.79% of the total share capital of the company, accounting for 98.63% of the shares held by Merrill Lynch holding company. Details of pledge and pledge are as follows:

Serial number	Title of pledgee	Number of pledge shares (10000 shares)	Expiration date of pledge	Pledge financing purposes
One	Huafu Securities Co., Ltd.	Fifty-five thousand four hundred and nine point eight seven	November 3, 2019	The purpose of the project is to repay 1 billion 800 million yuan of the loan of Xingye fortune, and to participate in the issuance of 453 million yuan, and the rest for production and operation funds.
Two	Societe Generale Asset Management Limited	Six thousand eight hundred and forty point five eight	February 18, 2020	Bona film investment was invested 50 million yuan, the Bank of Jinzhou returned 80 million yuan, and the rest was supplementary production and operation capital.
Three	Shen Wan Hongyuan Securities Co., Ltd.	Eleven thousand two hundred and forty-nine point nine nine	October 10, 2019	It is used to invest 78 million 750 thousand yuan in the Bank of Kashi and 100 million yuan in the capital raising financial management company.

The operation and financial situation of Merrill Lynch Holdings Limited in June 30, 2019 are as follows:

Unit: 10000 yuan

Management situation		Financial situation
Total operating income	Ninety-two thousand eight hundred and seventy-six point nine two	total assets	Nine hundred and twenty-one thousand two hundred and thirty-seven point six two
Total operating cost	Twelve thousand six hundred and two point three eight	Total liabilities	Five hundred and twenty-four thousand nine hundred and ten point three three
Total profit	Seven thousand nine hundred and eighty-seven point zero one	Net assets	Three hundred and ninety-six thousand three hundred and twenty-seven point two nine
Net profit	Two thousand eight hundred and seventeen point four nine

Note: the above financial data are not audited.

By the end of 6 2019, the total assets of Merrill Lynch Holdings Limited were 9 billion 213 million yuan, liabilities were 5 billion 249 million yuan, asset liability ratio was 57%, total operating income in 2019 was 928 million yuan, and total profit was 79 million yuan. Merrill Lynch Holdings Limited is operating well, with a reasonable level of assets and liabilities and a good solvency.

(2) it is clear whether there is a risk of stock holding and closing positions in controlling shareholders and actual controllers, which may lead to changes in controlling shareholders and actual controllers.

Reply:

After consulting the controlling shareholder of the company, it was confirmed that the closing price of the company's stock in September 19, 2019 was 8.08 yuan.

It is far from the closing price of stock pledge of controlling shareholders, so there is no risk of stock pledge closing. And there is a big difference between the controlling shareholders and the second largest shareholders of the company. There is no possibility of a change in the controlling shareholder and the actual controller.

Due to the high share pledge of controlling shareholders, in order to reduce the proportion of pledge, the controlling shareholders plan to take corresponding measures to reduce the risk of pledge. In January 2019, Merrill Lynch holdings held the same letter of issue on the Shenzhen stock exchange in January 2019. Merrill Lynch will offer a 900 million yuan refund-raising debt before the end of October, and raise funds to repay debts through various channels, so as to further reduce the rate of pledge.

Question four: during the reporting period, your company signed a framework agreement on equity purchase and comprehensive strategic cooperation with Han Zhong Business Management Group Co., Ltd. (hereinafter referred to as Han Zhong Group) and hemp Investment Group Limited (hereinafter referred to as "hemp investment") and paid 250 million yuan in cooperation sincerity. After that, your company has established joint ventures with the Han nationality group, hemp investment and other related parties, including Deyi Pharmaceutical Co., Ltd., Beijing, USA and so on. In September 7, 2019, your company announced the announcement that the parties signed further the cooperation agreement, and invested 150 million yuan of the 250 million yuan cooperation sincerity in the early payment as your company's contribution to the Deyi Pharmaceutical Co., Ltd. and the American Swiss food and Beverage Co. Ltd., and the remaining 100 million yuan as the sincerity fund for carrying out this cooperation agreement. The 781 million 584 thousand and 100 restricted shares held by Merrill Lynch, Shanghai Yue Ye, Zhang Hao, Tibet Jintong, Shenzhen Mount Everest, Quan Wei, Shenzhen central Europe, Cao Lesheng and so on will be expired in October 2019 and December, accounting for 34.87% of the total share capital of the company.

(1) specify the specific time, mode of storage, and consideration procedure for the 250 million yuan cooperation sincerity fund payment.

Reply:

In March 8, 2019 and March 11, 2019, the company paid 70 million yuan and 30 million yuan to the Han Zhong group respectively. On 9 April 2019, the company paid a total of 150 million yuan to the condominium account jointly established by the company and Han Zhong Group, and accumulated a total of 250 million yuan in the sincerity fund, of which 100 million yuan was deposited in the Han public group account and the remaining 150 million yuan was deposited in the co management account. In March 7, 2019, the general manager's office of the company considered and passed the shareholding with Han Zhong Business Management Group Co., Ltd. and hemp Investment Group Co., Ltd.

In accordance with the relevant stipulations of the framework agreement, the company has paid the above sincerity money to Han Zhong Group and its condominium accounts in strict accordance with the company payment approval process according to the relevant agreement of the framework agreement. In September 6, 2019, the company signed the "cooperation agreement" with Han Zhong Group, hemp investment and Han Yi biology. According to the relevant agreement of the cooperation agreement, the company has recovered the 149 million yuan sincerity fund of the co management account between the company and the Han nationality group, of which 49 million yuan has been invested in the registered capital of Deyi pharmaceuticals, and the remaining fund company will complete the investment to the company in a timely manner on the basis of the assessment of the intangible assets of the company.

(2) in line with the relevant qualifications, technical strength and financial strength of the industrial hemp cultivation, processing and marketing, it is necessary to explain whether your company has made substantial progress in developing industrial cannabis related businesses; if so, please elaborate on the progress and carry out the information disclosure in time; if not, fully disclose the risk situations such as uncertainties, and disclose the authenticity, accuracy and completeness of the company's information disclosure according to the early disclosure and the company's stock price movements.

At present, the company's industrial hemp related business is steadily advancing. The company has completed the capital injection of 49 million yuan of capital of Deyi pharmaceutical, and the registered capital has been paid in place. The US is evaluating the intangible assets. After the assessment is completed, the company will complete the investment to the company in a timely manner. The main products and R & D pipeline direction of the two companies has been basically determined, and some personnel have been adjusted and recruited. Some of the projects have been developed in terms of cannabinoid molecule modification, API preparation, dosage form development and so on. However, there are risks of uncertainty in the above work due to factors such as changes in national policies, macro environment, market competition, and technology development. Investors are invited to pay attention to investment risks.

(3) to explain the controlling shareholder, shareholding of more than 5% shareholders, Dong Jiangao's holding of restricted shares and the reduction of shares in the next three months.

Reply:

After consulting the controlling shareholder of the company and holding more than 5% shareholders, it is confirmed that the controlling shareholder Merrill Lynch will apply for the settlement limit according to the deadline of the deadline. Merrill Lynch Holdings has no reduction plan for the time being. In the future, if there is a need for capital reduction, it will disclose the reduction plan according to the provisions, mainly reducing the shares by way of agreement transfer.

22 million 801 thousand and 900 shares of company issued by Xinjiang Financial Investment Co. Ltd. will be released on December 2019. Xinjiang Financial Investment Co., Ltd. and concerted action Katie investment, Katie mining will be based on the "shareholders of listed companies, a number of provisions on the high shareholding of Dong Jian", "Shenzhen Stock Exchange listed company shareholders and directors, supervisors, senior management personnel to implement the rules for the reduction of shares".

And other relevant laws and regulations, in the next three months, according to their liquidity and changes in the capital market, plans to give priority to through the block trading and agreement transfer and other ways to reduce shares. Shanghai Yue Ye holds 414 million 138 thousand and 100 shares of the company, accounting for 18.48% of the total shares of the company, of which the restricted shares are 2 billion 192 million 462 thousand and 200 shares, accounting for 9.79% of the total shares of the company, and will be lifted in October 2019. 194 million 675 thousand and 900 shares of the tradable shares are sold, accounting for 8.79% of the total number of healthy shares of the German exhibition. As a shareholder of the company, Yue Ye, Shanghai, attaches great importance to the long-term stable development of the company. It will give full consideration to the stable development of the listed companies, the fund's own interests and the actual situation, and take the strategic investors as the main object of reduction, with the agreement transfer as the main way to reduce the stock holdings. The reduction of stocks will strictly abide by the relevant provisions of relevant laws, regulations and normative documents, such as the People's Republic of China company law, the People's Republic of China securities law, the provisions of the shareholders of listed companies, the high shareholdings of directors and supervisors, and the implementing rules for the reduction of shares of shareholders and directors, supervisors and senior managers of Shenzhen stock exchanges.

None of the directors of the company has stock holdings. In the next three months, there will be uncertainty about whether the controlling shareholder or shareholder holding more than 5% shareholders will reduce, reduce the way, quantity and price. The company will fulfill the obligation of information disclosure in accordance with relevant regulations.

Notice hereby.

Germany exhibition great health Limited by Share Ltd

Board of directors September 23, 2019