Segmental Contribution

Sales of Group’s Pharmaceutical Drugs

Underscored by the Group’s strategic initiative to focus on the sale of its proprietary drugs, contribution from the sale of pharmaceutical drugs in FY2008 grew 28.7% to RMB 649.7 million from RMB 504.8 million. The commendable growth was achieved against the backdrop of a challenging operating environment brought about by tighter PRC regulatory policies to contain rising healthcare costs and a general slowdown in the global economic climate. Contributing to the growth was exceptional demand for key products Lipusu, Okai, Elcatonin, CMNa and Nuosen which recorded sales growth of 106.6%, 37.1%, 29.9%, 23.2% and 12.2% respectively.

Export Sales of Active Ingredients

As part of the Group’s decision to reduce export sales of active ingredients due to its low margins and higher credit risks, export sales of active ingredients decreased by RMB 0.5 million to RMB 1.6 million in FY2008 from RMB 2.1 million in FY2007.

Sales of R&D Results

In line with the Group’s decision to retain economically viable research findings and divert more R&Dresources for development of its own drugs, sales of R&Dresults declined to a negative amount of RMB 0.3 million in FY2008 due to a write-back of R&Dincome resulting from the cancellation of existing contracts.

Contribution by Geographical Regions

Building on the success of its international expansion strategy which began in FY2005, the Group has established a significant market presence in the growing markets of Vietnam, Pakistan and Korea.

In FY2008, the Group further extended the success of the above strategy through entry into Singapore and Malaysia with maiden contribution from its recently acquired Xuezhikang product – marketed in South East Asia under the brand names HypoCol® and Lipascor® For FY2008, HypoCol® contributed RMB 13.2 million to the Group’s total revenue.

Moving forward, the Group will seek to further extend its international market presence and has identified various potential markets in South East Asia for its proprietary pharmaceutical products.

Significant Developments

Subsequent to FY2008, the Group received a mandate from shareholders through a Special General Meeting convened on March 6 2009 for 1) the proposed name change of the Group to Luye Pharma Group Ltd and 2) the acquisition and relocation of the Group’s facilities.

On 17th March 2009, the Company’s name was changed from Asiapharm Group Ltd. to Luye Pharma Group Ltd. to better align various segments of the Group’s

business under the Luye brand name and complement the Group’s effort to build a stronger and more recognisable brand name for its products. The change will also serve to streamline the Group’s dealings with external business partners.

In FY2008, the Group received notification from the PRC government about the rezoning of land usage and the concessionary offer for a larger plot of land within Yantai, Shandong, PRC to relocate Luye’s existing production facilities. This offer came at an opportune time as the Group’s existing facilities – which were constructed in 1999 – had reached their maximum growth potential due to space constraints and could not handle the projected increase in capacity that was necessary to meet the Group’s future development plans.

With the approval from shareholders for the acquisition, the Group will invest in total approximately RMB 293.5 million, including the purchase of a plot of new land in Yantai, Shandong for the construction its new production facilities at a concessionary price. This land parcel – which has an approximate gross area of 216.6mu – is bigger than the existing premises and will house a new facility that caters to the Group’s future growth requirements. Based on preliminary estimates, the new facility will boost the Group’s annual production capacity for Lyophilised powder for injection from 2 billion vials to 4 billion vials.

Following the relocation of production facilities to the new site in 2014, the existing premises will be converted into commercial use land and the Group may choose to either lease out or sell the premises.