Diana Huang - Investor Relations Manager Zhilin Li - President, Chief Executive Officer, and Interim Chief Financial Officer Sam Hsing - Corporate Vice President

Ladies and gentlemen, thank you for standing by, and welcome to the Fiscal Year 2012 China Pharma Holdings Incorporation’s Earnings Conference Call. At this time, all participants are in the listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Friday, March 15, 2013. I would now like to hand the conference over to your host today, Ms. Diana Huang, Investor Relations Manager. Thank you. Please go ahead.

Thank you, operator. Good morning ladies and gentlemen, and good evening to those of you joining us from China. Welcome to China Pharma Holdings’ full year 2012 earnings conference call. I am Diana Huang, the company’s Investor Relations Manager. Speaking on the call today are China Pharma’s President and the CEO and Interim CFO, Ms. Zhilin Li and the Corporate Vice President, Mr. Sam Hsing. In addition, I will provide translation during the Q&A session of this call. The company’s earnings press release issued earlier this morning is available on our website at www.chinapharmaholding.com. I would like to remind our listeners that on this call management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today due to such risks as market and customer acceptance and demand for our products, our ability to market our product, the impact of competitive products and pricing, the ability to develop and launch new products on a timely basis, the regulatory environment including government regulation in the PRC. Our ability to obtain the regulatory approvals become most relied on products, fluctuation in operating results including spending for research and development and sales and marketing activities and other risks detailed from time to time in our filings with the SEC. In addition any projections as to the company’s future performance represents management estimations as of the date March the 15, 2013, China Pharma assumes no obligation to update those projections in the future as market conditions change. Now, it is my pleasure to turn the call over to China Pharma’s CEO and Interim CFO, Ms. Li to make her opening remarks in Chinese which will be translated by Sam. Afterwards Sam will continue translating Ms. Li’s detailed discussion of the company’s full year 2012 financial results.

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Thank you, Diana and good morning everyone. I would like to thank each of you for joining us today for your continued support of the China Pharma. The healthcare reform has produced encouraging results in improving the standards of the healthcare service for people in China. The changes produced by the reform, however, have created a pricing pressure on nearly all pharmaceutical products across the industry, and we expect this environment to continue for some time to come. The economics and the pharmaceutical challenges and uncertainties, rising cost and price cutting have negatively impact our business in 2012, which leads to the overall climb in sales of our products for the mandatory requirements of new GMP requirements by creating of our dry powder injectable line and liquid injectable lines must be completed by the end of the 2013. We have adjusted our general sales and the credit policies to a conservative spends since the beginning of the 2012 in order to issue the capital requirement for new GMP upgrading requirements or mix and control and improve the growing accounts receivable. We have completed the planning design and our environment campaign in patient evaluation and commenced the construction related to certain required facility and equipment. We expect the launch of the Candesartan in the 2013 to bring positive streams to our performance. I will now read the rest of Ms. Li’s prepared remarks in English. The economic and pharmaceutical challenges and uncertainties have negatively impacted our business in 2012, which leads to the overall decline in sales of our products. For the year ended December 31, 2012, we have certain drop in financial performance. Revenue decreased by 33% to $54.5 million as compared to $81.2 million in the year ended December 31, 2011. This decrease was primarily from our CNS Cerebral…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of Jason Wang from (indiscernible) Investment. Please ask your question now.

(Foreign Language)

Yes.

So, Ms. Li, we are interested in your business and we heard from last teleconference that you try to reduce your receivables as one of the most important work for this year. So, actually we read this year’s 10-K report, it seems that receivable is not improved too much, especially the receivables over 360 days to 770 days receivables even much higher than in the year 2011. We want to know what’s going on and we did some research it seems that your product is not sold in most of the coastal developed areas in China, instead your products are mainly sold in province like Sichuan, Anhui, and Hubei which are relatively under developed markets, where the receivables are difficult to collect. Can you explain what’s the reason, why you choose these markets your main markets? Thank you.

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I just would like to translate Ms. Li’s answer to Mr. Wang’s first question. Ms. Li answers that, because the majority of our existing products are prescription products, which are mainly sold to the hospital. And it is a Chinese phenomenon that the government-backed hospitals kind of (indiscernible) their payments. And therefore, the non-cash collection cycle, a common practice to do business with the hospital in China and because we have very few OTC, over-the-counter products and over 90% are prescription products, therefore, this non-collection cycle product phenomenon seems very obvious for China Pharma. And Ms. Li continues that actually we have expense, these are, if you for quite a lot of time, but maybe you are new investor to our company, therefore she would like to explain to you again. And that’s actually in 2012, we did recognize certain improvements of the collection of accounts receivable. The cash and cash equivalents, we collected of course including the bank’s acceptance, we collected from the accounts receivable actually was bigger than the sales revenue. We recognized in this year 2012, which is improved compared to the condition in the previous years. And of course, during these adjusting periods in 2012 with respect to the accounts receivables, we did have the phenomenon as what you mentioned the long aging for accounts receivable increased. That if a problem cannot be solved in fact mainly, we are trying to solve the overall picture of accounts receivable, but we kind of addressed some other issues like the selecting of the federal customer in terms of their payable performance first.

Okay.

That’s basically what Ms. Li’s response to Mr. Wang’s first question.

(Foreign Language)

Ms. Li answered the second question, she said because in the previous years in order to have better performance in the penetrating in the markets and to expand our markets, we kind of invest lot of capital to some of the sales, because as you know, we have the long collection cycle of accounts receivables requires us to support our marketing and the sales expansion with a lot of money, but at that time in the previous year, because we do not have compulsory and large CapEx needs like what we have, the new GMP upgrading nowadays. Therefore, we acted aggressively to expand the sales markets and made a lot of purchase of the drug formula as you observed in financial statements, but since 2012, due to the compulsory requirements of the new GMP upgrading, we have to spend the capital to support the complexion and upgrading. Therefore, we adjusted our strategy to act more prudently with respect to the sales expansion in order to guarantee the CapEx needs and the payments for the milestone payments of the current patented products.

(Foreign Language)

Ms. Li added in addition, the company also acts aggressively to seek bank project financing to support the CapEx needs, because the project financing from bank is lowest cost financing measures we have on hand. And as an important and famous company in Henan Province, we have the government and the bank’s support for this kind of financing. And in addition Ms. Li mentioned, due to our extremely low stock price to seek any financing from the capital market seems unreasonable nowadays for us.

Thank you for your questions. (Operator Instructions) You have follow-up questions from Mr. Jason Wang. Please ask your question.

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Mr. Wang continued to ask the sales performance of China Pharma in different provinces in China, because so far based on his research in certain provinces like Zhejiang, Shanghai and Jiangsu which are more developed provinces and with better average general accounts payable performance. He did not observe much sales activity from Helpson, which is a subsidiary of China Pharma. And he asked Ms. Li, why China Pharma did not seek deeper penetration to those more developed markets? Then Ms. Li answered that actually China Pharma has quite our sales coverage, the majority of the provinces in China, and we did have sales in the provinces as what you mentioned. As for such as (indiscernible) provinces, the sales activity – the purchase on sales activity in this province was quite well under regulation and developed, and only drug included in their drug purchase system announced to result in that province. And we currently have two or three products included in their system and Mr. Wang continued to ask that he is planning to make a visit to China Pharma in early April and Ms. Li welcomed his visit.

Thank you. (Operator Instructions) There are no more questions from the phone line. I would like to handle the call back to the management for closing remarks.

On behalf of entire China Pharma team, we would like to thank you for your interest in the company and the participation on this call. For any of you traveling to China, we always welcome and encourage any visitors from our shareholders, potential investors, and analysts. This concludes China Pharma’s 2012 earnings call. Thanks.

Ladies and gentlemen, that concludes the conference for today. Thank you for your participation. You may disconnect the lines.