Livzon Pharmaceutical Group Inc.
2009 Semi-Annual Report
August 2009Important notice
The Board of Directors (BOD), Board of Supervisors (BOS), directors, supervisors,
senior executives hereby guarantee that the data in the present report contain no false
representation, misleading statements and serious omissions, and shall be severally
and jointly liable for the authenticity, accuracy and completeness of the content.
This semi-annual financial report has not been audited by any Certified Public
Accountants Firms.
Mr. Zhu Baoguo, Chairman of the company, Mr. An Ning, the principal in charge of
accounting, and Ms. Si Yanxia, the principal of the Accounting Department hereby
declare: We guarantee the authenticity and completeness of the Financial Report in
this report.
This Annual Report is published in Chinses and English vsrsions.In the event of
inconsiatency, the Chinese vsrsion shall prevail.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
1
Content
Section 1 Brief Introduction of the Company………………………………… 2
Section 2 Financial highlights…………………………………………………… 3
Section 3 Change of share capital and particulars of shareholders……… 5
Section 4 Directors, supervisors, senior executives and employees …… 8
Section 5 Report of Board of Directors ……………………………………… 9
Section 6 Major events ……………………………………………………………14
Section 7 Financial Report ……………………………………………………27
Section 8 Catalog of files for reference ……………………………………1472009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
2
Section 1 Brief Introduction of the Company
1. Chinese name:丽珠医药集团股份有限公司
English name: LIVZON PHARMACEUTICAL GROUP INC.
Chinese abbreviation: 丽珠集团
English abbreviation: LIVZON GROUP
2. Legal representative: Zhu Baoguo
President: Zhu Baoguo
3. Secretary of BOD: Li Rucai
Telephone :( 0756)8135888 Fax :( 0756)8886002
Email：lirucai2008@livzon.com.cn
Representative of stock affairs: Wang Shuguang
Telephone: (0756）8135839 Fax :( 0756)8886002
Email：wangshuguang2008@livzon.com.cn
Contact address ： Livzon Building, No. 132, Guihua North Road, Gongbei, Zhuhai,
Guangdong Province
4. Registered address: No. 132, Guihua North Road, Gongbei, Zhuhai, Guangdong Province
Office address: Livzon Building, No. 132, Guihua North Road, Gongbei, Zhuhai,
Guangdong Province
Post code: 519020
Website: http://www.livzon.com.cn
Email: zhlivzon@pub.zhuhai.gd.cn
5. Papers for information disclosure:
Securities Times, China Securities Journal and Hongkong Wen Hui Daily (English version)
The website appointed by China Security Regulatory Commission for publishing the
annual report: http://www.cninfo.com.cn
Location for filing the report: Secretary’ Office of BOD of Livzon Group
6. Stock exchange for listing of the Company: Shenzhen Stock Exchange
Share name and code: Livzon Group (000513) Livzon B (200513)
7. Other relevant information:
First registration date of the Company: January 26, 1985
Registration change date of the Company: September 13, 2002
Registration place of Company: Zhuhai Industrial & Commercial Administration Bureau
Business licence No.: Qi He Yue Zhu Zong Zi Di No. 001111
Tax registration No.: 44041617488309
Organization code: 61748830-9
8. Domestic public accountant firm engaged by the Company: Reanda Certified Public
Accountants Co., Ltd
Office address: No. 215, Xingye Road, Zhuhai2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
3
Section 2 Financial Highlights
I. Main financial data in the report period
(Unit：RMB Yuan)
Note: By June 30, 2009, the company has accumulatively repurchased the quantity of 7,423,800 B-shares; in
calculating the above main financial index data, we have deducted the quantity of repurchased shares.
1. Items of deducted non-recurring profit and loss:
(Unit：RMB Yuan)
Note: this statement is prepared in accordance with the regulation of No. 1 Explanatory Announcement about
Information Disclosure of Companies Making Public Offering of Securities – Non-recurring Profit and Loss(2008)
(Zheng Jian Hui Gong Gao (2008) No. 43), and the data in the same period of previous year have been
correspondingly adjusted.
End of the current
period
End of the previous
period
Increase or decrease
compared with the end of
previous year (%)
Total of assets 2,871,724,768.24 2,923,813,250.23 -1.78%
Owners’ equities (or Shareholders’
equities )
1,953,366,272.65 1,778,535,879.41 9.83%
Net asset per share 6.54 5.86 11.60%
Report period
(Junuary to June)
Same period of
previous year
Increase or decrease
compared with the same
period of previous year (%)
Operating profit 300,948,052.24 92,564,696.28 225.12%
Total profit 302,421,566.16 92,423,588.02 227.21%
Net profit 247,854,875.55 61,095,693.23 305.68%
Net profit after deduction of nonrecurring
profit and loss 190,467,010.58 139,663,200.69
36.38%
Basic profit per share 0.83 0.20 315.00%
Diluted profit per share 0.83 0.20 315.00%
Yield rate of net assets 12.69% 3.38% Up 9.31 percentage points
Net cash flow from operating
activities
220,017,536.82 119,612,734.40 83.94%
Net cash flow per share from
operating activities 0.74 0.39
89.74%
Item January to
June 2009
January to
June 2008
Profit and loss in disposal of non-current assets, including the writen-off part of
already withdrawn depreciation reserves -692,791.29 2,221,936.05
Governmental allowance accrued to the current profit and loss 1,484,297.32 2,203,318.82
Except the effective hedge business related to the normal operation business of the
company, the profit and loss in the changes of fair values caused by the holding of
tradable financial assets and tradable financial liabilities as well as the investment
returns in disposal of tradable financial assets, tradable financial liabilities and
saleable financial assets
60,382,073.54 -99,287,741.79
Other net non-operating income and payment except the above items 682,007.89 -2,071,091.12
Other profit and loss items that comply with the definition for non-operating profit
and loss 1,318,292.61
Subtotal 61,855,587.46 -95,615,285.43
Minus: effect of income tax 4,373,963.33 -17,210,751.38
Minus: the non-recurring profit and loss attributable to the minority of shareholders 93,759.16 162,973.41
Total of non-recurring profit and loss 57,387,864.97 -78,567,507.462009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
4
2. Net asset yield rate and profit per share
Note: the above table is prepared in accordance with the No. 9 Rule about Information Disclosure
of Companies Making Public Offering of Securities – Calculation and Disclosure of Net Asset Yield
Rate and Profit Per Share.
Profit in the report period Net asset yield rate Profit per share
Fully
diluted
Weighed
average
Basic profit per
share
Deluted profit
per share
Net profit attributable to the
ordinary shareholders of
Company
12.69% 13.35% 0.83 0.83
Net profit attributable to the
ordinary shareholders of
Company after deduction of
non-recurring profit and loss
9.75% 10.26% 0.63 0.632009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
5
Section 3 Change of Share Capital and Particulars of Shareholders
I. Particulars of Share Capital Changes (By June 30, 2009)
Beginning balance Increase(＋) or decrease(－) Closing balance
Quantity
Percent
age
Newly
issued
share
s
Bon
us
sha
res
Shar
es
trans
ferre
d
from
publi
c
reser
ve
fund Others Subtotal Quantity
Percenta
ge
I. Shares with
trading restriction 25,304,382 8.27% 25,304,382 8.27%
1.State-owned
shares
2.Shares held by
nation-owned legal
person
6,059,428 1.98% 6,059,428 1.98%
3.Shares held by
other domestic
shareholders
19,244,954 6.29% 19,244,954 6.29%
Including: shares
held by domestic
legal persons
19,244,954 6.29% 19,244,954 6.29%
Shares held by
domestic natural
persons
4. Shares held by
foreign investors
Including: shares
held by overseas
legal persons
Shares held by
overseas natural
persons
II. Shares without
trading restriction 278,440,480 90.98% -5,133,180 -5,133,180 273,307,300 89.31%
1.Renminbi ordinary
shares
158,424,116 51.77% 158,424,116 51.77%
2.Domestically-listed
Shares for Overseas
Investors
120,016,364 39.22% -5,133,180 -5,133,180 114,883,184 37.54%
3.Overseas-listed
shares for overseas
investors
4.Others
III. Treasury shares
(B shares)
2,290,620 0.75% 5,133,180 5,133,180 7,423,800 2.43%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
6
Note: by June 30, 2009, the company has accumulatively repurchased the quantity of 7,423,800 B-shares, which
have not been cancelled but is included in the treasury shares of the company. When the repurchase plan is
completely implemented, the company will cancel all the repurchased shares in accordance with relevant regulations.
II. Particulars of shareholding of top ten shareholders and top ten tradable
shareholders without trading restriction (By June 30, 2009)
IV. Total of shares 306,035,482 100% 306,035,482 100%
Total quantity of shareholders The shareholder quantity amounted to 28,921
(including：11,472 B-share holders)
Shares held by top ten shareholders
Shareholder name
Shareholder
nature
Shareholdin
g
percentage(
%)
Total
quantity of
shares
Total amount
of shares
with trading
restriction
Shares
for the
mortgage
or
freezing
Joincare pharmaceutical Group
Industry Co., Ltd
Domestic Nonstate-
owned
Legal Person
25.33% 77,510,167 19,244,954
Tiancheng Industry Co., Ltd Foreign investor 14.55% 44,537,733
First Shanghai Securities Co., Ltd Foreign investor 3.44% 10,529,331
Guangzhou Begol Trading
Corporation
State-owned
Legal Person
1.98% 6,059,428 6,059,428 6,059,428
Shenzhen Haibin Pharmaceutical
Co., Ltd
Domestic Nonstate-
owned
Legal Person
1.93% 5,892,943
National Social Security Fund 104
Portfolio
Others 1.90% 5,801,200
Bank of Communications-
Greatwall Forever Rich Core
Growth Stock-type Securities
Investment Fund (LOF)
Others 1.73% 5,294,073
Bank of China - Huaxia Huibao
Securities Investment Fund
Others 1.65% 5,034,873
Shenzhen Shengjibaili
Advertisement Co., Ltd
Domestic Nonstate-
owned
Legal Person
1.63% 5,000,000
Bank of Communications -
Penghua China 50 Open-end
Security Investment Fund
Others 1.40% 4,269,454
Shareholding particulars of top ten shareholders without trading restriction
Shareholder name Quantity of shares without
trading restriction
Share type
Joincare Pharmaceutical Group Industry Co., Ltd
58,265,213
RMB Common
share
Tiancheng Industry Co., Ltd
44,537,733
Domestically-listed
shares for
overseas investors
First Shanghai Securities Co., Ltd
10,529,331
Domestically-listed
shares for
overseas investors
Shenzhen Haibin Pharmaceutical Co., Ltd 5,892,943
RMB Common
share
National Social Security Fund 104 Portfolio 5,801,200 RMB Common sh2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
7
III Shareholding quantity and trading restrictions of the top ten shareholders
holding shares with trading restriction (by June 30, 2009)
are
Bank of Communications- Greatwall Forever Rich Core
Growth Stock-type Securities Investment Fund (LOF)
5,294,073
RMB Common
share
Bank of China - Huaxia Huibao Securities Investment
Fund
5,034,873
RMB Common
share
Shenzhen Shengjibaili Advertisement Co., Ltd 5,000,000
RMB Common
share
Bank of Communications - Penghua China 50 Openend
Security Investment Fund
4,269,454
RMB Common
share
Agricultural Bank of China – Greatwall Anxin Huibao
Compound Securities Investment Fund
4,062,091
RMB Common
share
Remarks about the association relationship or conformity action of above shareholders:
① Both Tiancheng Industry Co., Ltd and Shenzhen Haibin Pharmaceutical Co., Ltd are the subcompanies that
are 100% directly or indirectly held or controlled by Joincare Pharmaceutical Group Industry Co., Ltd
(hereinafter referred to as “Joincare”); ②On February 2, 2004, Joincare, Guangzhou Begol Trading Corporation
and Zhuhai Lishi Investment Co., Ltd signed the Agreement on Equity Transfer, Custody and Mortgage.
Joincare and Guangzhou Begol Trading Corporation signed the Agreement on Equity Transfer and Custody, in
which Guangzhou Begol Trading Corporation directly transferred, custodized and mortgaged 6,059,428
domestic legal person shares of the Company (accounting for 1.98% of total shares) to Joincare; ③Bank of
Communications – Penghua China 50 Open Securities Investment Fund and National Social Security Fund 104
Portfolio belong to the funds managed by Penghua Fund Management Co., Ltd; ④Bank of Communications-
Greatwall Forever Rich Core Growth Stock-type Securities Investment Fund (LOF) and Agricultural Bank of Ch
ina – Greatwall Anxin Huibao Compound Securities Investment Fund belong to the funds managed by Greatwall
Fund Management Co., Ltd; ⑤ The Company does not know whether there are relations between the above top
10 shareholders and top 10 shareholders without trading restriction and whether they belong to the concreted
actors stated in the Management Measures of Purchase of Listed Companies.
No.
Shareholder
name with
the trading
restriction
Quantity of
shares with
trading
restriction
Trading
time
Increased
quantity of
new
tradable
shares
Trading restriction
1
Joincare
Pharmaceuti
cal Group
Industry Co.,
Ltd
49,848,502
2007.12.2
1 15,301,774 Within 12 months from the
implementation date of reform
plan, the shares will not be
traded; after the expiry, the
non-tradable shares may be
traded through the listing in
the Exchange, but their
percentage accounting for
total shares will not exceed
5% within 12 months and
10% within 24 months.
2008.12.2
2 30,603,548
2009.12.1
0
49,848,502
2
Guangzhou
Begol
Trading
Corporation
6,059,428 - -
In the process of equity
reform of the company,
Joincare Pharmaceutical
Group Industry Co., Ltd paid
the payable consideration
shares of equity reform on
behalf of Guangzhou Begol
Trading Corporation; Begol
will repay such consideration2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
8
IV. During the report period, there are no changes of the controlling
shareholders and actual controllers of the Company.
Section 4 Particulars of Directors, Supervisors and Senior Executives
I. Shareholding particulars of directors, supervisors and senior executives
during the report period
II. New Engagement or Disengagement of directors, supervisors and senior
executives during the report period
During the report period, Ms Gu yueyue resignated from her position as the director for personal
reasons; Mr. Hua Yizheng resignated from his position as the independent director for the expiry of
his term lasting successively 6 years.
On July 3, 2009, the 2009 first temporary shareholders’ meeting examined and approved that Mr.
Tao Desheng was elected as the director and Mr. Yang Bin as the independent director.
shares to Joincare; otherwise,
their trading restriction cannot
be released without the
approval of Joincare.
Name Position
Shares held
at beginning
of year
Increase
of share
quantity in
the
current
period
Decrease
of share
quantity
in the
current
period
Share
s held
at the
end of
period
Including:
quantity of
shares with
trading
restriction
Quantity of
share
options at
the end of
period
Reasons
for
changes
Wang
Wuping
Vice
president
330 - - 330 - - -
Xu Faguo
Vice
president
205 - - 205 - - -2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
9
Section 5 Report of the Board of Directors
I. Operation Overview of the Company
1. Operation results and brief analysis of financial status
During the report period, the sales volume of the Company amount to RMB 1.2097069 billion Yuan,
up RMB 100.76 million Yuan with the increase rate of 9.09%. The main cause is the continuous
and steady increase of sales volume of medicines especially the prescription medicines due to the
strengthening of sales reform: the Chinese traditional drug preparation products increased by RMB
84.0943 million Yuan; the Antimicrobial drugs increased by RMB 26.961 million Yuan; the products
for Gonadotropic hormone increased by RMB 21.2412 million Yuan; The products for Digestive
tract products increased by 14.5728 million Yuan; the reagent products increased by RMB 12.106
million Yuan.
During the report period, the company has made the operating profit of RMB 300.9481 million Yuan,
up RMB 208.3834 million Yuan from the same period of previous year with the increase rate of
225.12%; the company achieved a net profit of RMB 263.4629 million Yuan with the increase rate
of 276.32%; the main cause of the increase of both the operating profit and net profit is, besides the
returns from the changes of fair values caused by the securities investment and the effect of
investment returns, the huge increase of net profit contributed by the main businesses of company.
During the report period, three expenses total RMB 382.5216 million Yuan, up RMB 109.1205
million Yuan from RMB 273.4011 million Yuan at the same period of previous year with the increase
rate of 39.91%, including: (1) the sales expense increased by RMB 82.9626 million Yuan (up
46.68%) and the cause is the increase of relevant expenses due to the increase of sales
performance; (2) the management expense increased by RMB 20.5994 million Yuan (up
22.74%)and the main cause is both the increase of scientific research and development expense
and the increase of loss due to the shutdown of raw material medicine enterprises at the beginning
of year; (3) the financial expense increased by RMB 5.5584 million Yuan(up 108.89%) and the main
cause is the decrease of gains from the foreign exchanges.
During the report period, the net amount of cash flow from the operating activities was RMB
220.0175 million Yuan, up RMB 100.4048 million Yuan, and the main cause is that the received
accounts became larger along with the increase of sales volume. During the report period, the net
amount of cash flow from the investment activities was RMB 75.133 million Yuan, up RMB 59.8551
million Yuan. The main cause is the decrease of cashes used for asset purchase. During the report
period, the net amount of cash flow from the raising activities was RMB -368.8394 million Yuan,
down RMB 417.9281 million Yuan, and the main cause is that during the report period the loans
from banks decreased due to the repayment of such loans.
2. Discussion and analysis of operation status
During the first half of 2009, under the tendency in which the global financial crisis has continuously
affected the domestic economy, the company has actively met the challenges, grasped the
opportunities and performed the management work in all aspects based on the gradual influence of2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
10
marketing reform effects. (1) Marketing management. In terms of the prescription medicines, the
provincial company should seriously read the challenges and opportunities brought by the new
medical reform policies, prepare the counter-measures in all aspects, further implement all the
marketing reform measures formulated by the group, strengthen the assessment management of
all levels, emphasize the construction of medical manager team, grasped the terminal management,
enhanced the marketing of key products and ensure the completion of the tasks in the second half
of 2009. In terms of OTC and the third terminal, we should grasp the market opportunities brought
by the medical reform policies, change the thinking, consolidate and steadily push the marketing
reform progress, establish the more effective marketing mode, and enhance the sales of all
products. The marketingg department will give the necessary assistance to the first line, strengthen
the academic promotion of key and latest products, and provide the best market support and
academic services to the enhancement of sales performance; (2) Scientific research and
development. The scientific research department should seriously implement the schedule of all
existing projects, and step up the development and application of key products for approval. At the
same time, we should actively expand the research network about both domestic and overseas
information, seek for the new product research projects and add the new and competitive product
reserves to the development of the whole group in the future ； (3) Production management. All
production enterprises should regard the quality as the life. While ensuring the completion of
production tasks, we should pay much attention to the production safety and environmental
protection. The raw medicine enterprises will continue to strengthen the improvement of production
processes, enhance the quality and reduce the costs. We especially emphasize to achieve the
leading position in the industry and set the industry standards; besides, we will try to technically
break through the advantageous species by the means of introducing the talents, continuously
improve the technical and process levels, and achieve the long-term competition by the virtue of
leading process and first-class quality.
II. Business scope and operation status
The company specializes in the development, production and marketing of medicine products. The
main products are Bismuth Potassium Citrate granules and capsules, antivirus granules,
Shenqifuzheng injection, Xueshuantong Injection, Cefodizime Sodium for Injection (cefodizime),
Voriconazole for Injection (Voriconazole), Valaciclovir Hydrochloride Tablets, Qianliean Suppository,
Urofollitropin for Injection (FSH), gastric triad, Ranitidine Bismuth Citrate Tablets, Naolilong,
Jimishaxing, Ilaprazole, fluvoxamine and Perospirone and other medicinal preparations, as well as
Ceftriaxone, cefodizime, Cefuroxime, Mevastatin, Mycophenolate Mofetil, Pravachol,
Phenylalanine, Vancomycin and some other raw-material drugs, which involve hundreds of
products in various medicinal fields such as chemical drugs, biochemical drugs, micro-ecological
preparations, Chinese patent drugs, chemical raw materials, diagnostic reagents, and so on.
1. In the report period, the main business income is classified according to the
profession status:
Unit: RMB 10 thousand Yuan2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
11
Including: the total amount of associated transactions in which the Company sold products or provided the labors to
controlling shareholders and its subcompanies reached RMB 74300 Yuan.
2. In the report period, the product particulars about the operating incomes accounting
for over 10% (including 10%) of total income of the company are listed as follows:
Unit: RMB 10 thousand Yuan
3. In the report period, the income of the company’s main businesses is classified
according to the regions:
Unit: RMB 10 thousand Yuan
Profession
Business
income
Business
cost
Operatin
g profit
margin
Increase or
decrease of
business
income
compared
with the
previous
year (%)
Increase or
decrease of
business
cost
compared
with the
previous
year (%)
Increase or decrease of
operating profit margin
compared with the
previous year (%)
Che
mic
al
prep
arati
ons
Digestive tract 14,725.74 2,227.07 84.88% 10.98% 0.97% Up 1.50 percentage points
Cardiac and cerebral
blood vessel
4,456.52 1,257.12 71.79% 16.93% 16.36% Up 0.14 percentage points
Antimicrobial drugs 15,056.29 6,154.12 59.13% 21.81% 2.88% Up 7.52 percentage points
Gonadotropic
hormone
8,883.30 3,371.63 62.05% 31.43% 35.47%
Down 1.13 percentage
points
Blood and
hemopoietic system
drugs
1,052.58 558.67 46.92% 34.29% 21.03% Up 5.81 percentage points
Others 3,639.80 1,544.54 57.57% 15.84% 22.45%
Down 2.29 percentage
points
Raw material drugs 33,193.38 27,327.44 17.67% -15.35% -26.67%
Up 12.72 percentage
points
Chinese traditional drug
preparation
30,672.22 8,689.45 71.67% 37.77% 23.01% Up 3.40 percentage points
Diagnostic reagents and
equipments
8,060.98 3,949.91 51.00% 17.67% 21.28%
Down 1.46 percentage
points
Imported drugs 118.64 31.74 73.25% 43.35% 49.86%
Down 1.16 percentage
points
Product
Business
income
Business
cost
Operating
profit
margin
Increase or
decrease of
business
income
compared
with the
previous
year (%)
Increase or
decrease of
business
cost
compared
with the
previous
year (%)
Increase or
decrease of
operating profit
margin compared
with the previous
year (%)
Antivirus granules
13,066.5
2
5,660.30 56.68% 41.25% 36.86%
Up 1.39
percentage points
Shenqifuzheng
injection
12,484.4
2
1,486.14 88.10% 36.76% -9.14%
Up 6.01
percentage points
Region Main business income
Increase or decrease of operating income
compared with the same period of previous
year
Northeast China 7,981.36 68.52%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
12
4. The profit composition, main business structure, profitability change of main
businesses of the Company during the report period:
Unit: RMB Yuan
During the report period, the main business structure and profitability of the Company have not
changed greatly.
III. Particulars of investment in the report period
1. In the report period, the company didn’t raise funds through security market.
2. Key investment projects by using the non-raised capital
(1) The 43rd meeting of Investment & Decision-Making Committee of Livzon Group examined and
passed the Proposal On Constructing the Premilinary Processing Factory of Radix Codonopsis
North China 18,820.14 -15.42%
Central China 11,899.04 51.22%
East China 23,701.52 29.30%
South China 24,584.60 5.96%
Southwest China 17,178.52 37.76%
Northwest China 5,416.79 49.27%
Export 10,362.65 31.43%
Item January to June 2009 January to June 2008 Change range
(%)
Operating income 1,209,706,856.23 1,108,946,822.48 9.09%
Operating cost 558,158,942.77 628,760,344.61 -11.23%
Sales expenses 260,680,296.95 177,717,653.36 46.68%
Management expense 111,178,133.75 90,578,685.72 22.74%
Financial expense 10,663,200.60 5,104,800.09 108.89%
Profit from fair value change 133,611,037.40 -153,972,612.48 186.78%
Investment profit -74,301,232.43 56,575,358.73 -231.33%
Operating profit 300,948,052.24 92,564,696.28 225.12%
Total profit 302,421,566.16 92,423,588.02 227.21%
Net profit attributable to the owners of
parent company
247,854,875.55 61,095,693.23 305.68%
Net profit attributable to the owners of
parent company after deduction of
non-recurring profit and loss
190,467,010.58 139,663,200.69 36.38%
Remarks: 1. the operating income increases by 9.09%, and the main cause is that the reform of marketing
system in the Company protmotes the growth of the marketing scale of preparations medicines; 2. the sales
cost decreases by 11.23% and the main cause is that the costs of raw material medicines decrease; 3. the
sales expense increases by 46.68% and the main cause is that the sales expense increases with the
enlargement of marketing scale; 4. the management expense increases by 22.74%, and the main causes is the
investment in the scientific research and loss of factory shutdown; 5. the financial expense increases by
108.89% and the main cause is that the profit from the foreign exchange during the report period decreases; 6.
the profit from fair value change increases by 186.78% and the investment profit decreases by 231.33%, and
the main causes are that the company sells some of tradabble financial assets and the profit from fair value
changes is transferred to the investment profit. 7. the operating profit, total profit and net profit attributable to the
owners of parent company increase by 225.12%, 227.21% and 305.68% respectively, and the main cause is
that the profit from securities investment has greatly increased; 8. the net profit attributable to the owners of
parent company after deduction of non-recurring profit and loss increases by 36.38%, and the main cause is
that the sales income of medicines in the company increases.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
13
Drugs and approved that the subcompany Limin Pharmaceutical Co., Ltd under Livzon Group
would establish a joint venture with Longxi Tongyuan Pharmaceutical Co., Ltd to construct the
premilinary processing factory of Radix Codonopsis drugs. The plans are: the joint venture is
registered in Longxi County, and the registered capital is RMB 4 million Yuan, including: Limin
Pharmaceutical Co., Ltd under Livzon Group contributes RMB 3.6 million Yuan, accounting for 90%
of total capital; Longxi Tongyuan Pharmaceutical Co., Ltd contributes RMB 0.4 million Yuan,
accounting for 10% of total capital.
(2) The 44th meeting of Investment & Decision-Making Committee of Livzon Group examined and
passed the Proposal On Establishing Jiaozuo Livzon Syntpharm Co., Ltd and approved that Livzon
Syntpharm Co., Ltd in Zhuhai Bonded Area (hereinafter called as “Syntpharm Company”) and
Hongkong Antao Development Limited would jointly contribute to establish Jiaozuo Livzon
Syntpharm Co., Ltd in Jiaozuo. The registered capital is RMB 70 million Yuan, including: Syntpharm
Company contributes RMB 52.5 million Yuan, accounting for 75% of total capital; Longxi Tongyuan
Pharmaceutical Co., Ltd contributes RMB 17.5 million Yuan, accounting for 25% of total capital.
After the new company is established, Syntpharm Company will transfer the production of
Ceftriaxone sodium and Cefuroxime sodium to the new company.
The resolutions passed at the above meetings of the Investment & Decision-Making Committee
have been reported for the Board of Directors for file, and the preparation work for construction of
new company is under way.
(3) One of the key production enterprises of company - Livzon Pharmaceutical Factory under
Livzon Group cannot enlarge its construction scale and improve its production capacity due to the
limitation of premises. To meet the gradually growing sales scale and the capacity demand of
strategic development in the future, the company formulated the relocation project plan of Livzon
Pharmaceutical Factory (Livzon Industrial Park Project): the 2004 shareholders’ meeting examined
and passed the proposal on investing in the expansion Phase I of Livzon Pharmaceutical Factory –
the construction project of separate packaging production lines of powder injection, freeze-dried
powder injection and water injection (for more details, please see the announcement of resolutions
passed at 2004 shareholders’ meeting of the company: 2005-17); the 2006 shareholders’ meeting
examined and passed the proposal on investing in the new construction of current solid
preparations (tablet agent, capsule agent, granular agent, suppository, ointment and soft capsule
agent), oral drinking biological products, production line of sterile preparations, box production,
medicine packing materials (box, manual and label) and health products (for more details, please
see the announcement of resolutions passed at 2006 shareholders’ meeting of the company: 2007-
16) .
After completing the preparation work at the earlier stage, by now, the company has completed the
construction of a production plant with the area of 36000 square meters, and launched the design
work of production line plant. The construction design for the phase I of production plant (the
freeze-dried powder injection plant, water injection plant and non-cefa- powder injection plant of of
hormone and non-hormone) and accessory premises such as the wastewater treatment, boiler
room and power plant, etc) is scheduled to be completed by the end of 2009; the construction will
be completed in 2010, and they will be put into production at the end of 2010.The designs of other
production lines are scheduled to be completed at the end of 2010.
IV. Determination and Implementation methods of fair value in taking the fair value modes
for measuring2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
14
The assets that are calculated in fair values during the report period:
Unit: RMB Yuan
1. Financial assets that are calculated in the fair values and whose changes are accrued to the
current profit and loss, including the tradable financial assets and tradable financial liabilities: the
fair values to get them will be the initial confirmation amount. The relevant transaction expenses will
be accrued to the current profit and loss at the time of occurrence. The cash dividends or bond
interests in the payments that have been declared to be distributed will be separately confirmed as
the receivable items. The interests or cash dividends obtained during the holding period will be
confirmed as the investment gains. On the preparation date of financial statement, the changes of
fair values will be accrued to the current profit and loss.
2. Saleable financial assets: the sum of fair values and relevant expenses to get them will be
deemed as the initial confirmation amount. The cash dividends or bond interests in the payments
that have been declared to be distributed will be separately confirmed as the receivable items. The
interests and cash dividends generated during the holding period will be accrued to the interest
gains. At the end of the period, the saleable financial assets will be calculated in the fair values and
the changes of fair values will be accrued to the capital reserves (other capital reserves).
Section 6 Major Events
I. Company Governance
The Company will continuously perfect the legal person governance structure as per the relevant
requirements concerning company governance in the Company Law, Securities Law and other
regulation documents issued by China Securities Regulatory Commission, strive to strengthen the
Item
Amount at
the beginning
of period
Profit and loss
in the
changes of
fair values in
the current
period
Accumulative
changes of fair
values that are
accrued to the
equities
Deprecia
tion
amount
withdraw
n in the
current
period
Amount at
the end of
period
Financial assets
Including; 1. financial
assets or financial
liabilities that are
calculated in the fair
values and whose
changes are accrued to
the current profit and loss
121,777,817.15 27,992,763.11 - -
62,172,102.
94
Including: 1. derivative
financial assets - - - - -
2. Saleable financial
assets 6,674,800.96 - 5,316,914.4 -
11,991,715.3
6
Subtotal of financial
assets
27,992,763.11 5,316,914.4 -
Financial liabilities - - - - -
Total
128,452,618.11
27,992,763.11 5,316,914.40 - 74,163,818.
302009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
15
modern enterprise system construction and improve the governance level of the Company.
In the report period, in accordance with the requirements of the Notice about Site Inspection
Results ([2008] No. 62) issued by the Guangdong Securities Regulatory Commission，the company
made the deep self-inspection and correction about company governance, further perfected the
corporate governance structure, establised the special commissions of Board of Directors
concerning the strategy, auditing, nomination, compensation and assessment, etc, and formulated
the working rules for each special commission. Regarding the above correction details, the
company published the Report of Livzon Pharmaceutical Group Inc. about the Correction of
Relevant Problems Put forward by Guangdong Securities Regulatory Commission in the Site
Inspection in 2008 in the Securities Times, China Securities Journal and the Juchao website
http://www.cninfo.com.cn on January 15, 2009.
During the report period, the shareholders’ meeting, Board of Directors and Board of Supervisors
shall operate strictly and efficiently subject to relevant rules to ensure that all shareholders of the
Company shall fulfill their legal rights and protect the interests of investors and the Company. The
directors shall perform their open undertaking and sincerely and diligently perform their duties. The
supervisors shall independently and effectively supervise and inspect the directors, senior
executives and financial status. The actual conditions of company management shall comply with
the requirements of normative documents concerning the governance of listed companies issued
by China Securities Regulatory Commission.
II. Profit Distribution and Plans
1. Implementation of 2008 profit distribution plan
On March 11, 2009, the 2008 Shareholders’ Meeting of the Company examined and passed the
2008 Profit Distribution Plan as follows: the company will distribute the bonus of RMB 1.00 Yuan
(including the taxes) to all ordinary shareholders for every 10 shares; the remaining undistributed
profit will be accrued to the next year.
On June 22, 2009, the Company issued the bonus distribution announcement and determined that
the registration date of A-share equities is June 29, 2009 and the distribution date of cash bonus
is June 30, 2009; the last transaction date of B-shares is June 29, 2009 and the registration date of
equities is July 2, 2009.
By now, the 2008 annual profit distribution of the company has been completed
2. Semi-annual profit distribution plan in 2009
At the middle of 2009, the Company will not distribute the profit nor transfer the reserves to the
share capitals.
III. Lawsuits and arbitrations
There were no major lawsuits and arbitrations about the Company during the report period.
IV Security investment
No.
Secur
ity
Type
Secur
ity
Code
Security
abbreviation
Initial
investment
amount
(Yuan)
Holding
quantity
(Share)
Book Values at
the end of period
Percentage of
total investment
in this security at
the end of period
(%)
Profit and loss
during the report
period2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
16
Note: the particulars about above securities investments cover those in the H-share market of Hongkong. The
investment amount of H-share has been converted to the RMB amount at the exchange rate issued on June 30,
2009.
V. Shareholding particulars of other listed companies
Unit: RMB Yuan
VI. Shareholding particulars of non-listed financial enterprises
1 Stock 00135
CNPC(HONG
KONG)
16,529,888.60 3,500,000 19,746,272.00 31.76% 12,774,770.55
2 Stock 01088
China Shenhua
Energy
Company
Limited
4,528,044.52 418,000 10,520,090.87 16.92% 4,477,889.79
3
Stock 02007
Phoenix Island 21,016,417.65
2,450,000
7,796,692.09 12.54% 3,693,882.15
4
Stock 00152
Shenzhen
International
10,168,024.62
17,000,00
0
7,792,725.20 12.53% 2,980,987.32
5
Stock 00883
China National
Offshore Oil
Corporation
2,888,557.84 560,000 4,744,041.85 7.63% 1,170,192.24
6 Stock 01880 Baili Company 2,362,830.82 428,000 2,573,150.81 4.14% 1,304,950.54
7
Stock 00438
Rainbow Group 6,301,500.08
4,560,000
2,009,888.40 3.23% 784,007.64
8
Stock 00390
China Railway
Engineering
Group Co.
1,616,049.49 314,000 1,724,466.62 2.77% 238,094.27
9
Stock 01186
China Railway
Construction
Corporation
Limited
1,086,139.97 114,000 1,201,913.26 1.93% 42,215.80
10
Stock 01688
Alibaba
937,617.14
78,000 944,753.33 1.52% 561,184.42
Other securities investment at the
end of this period 3,385,083.56
-
3,118,108.51
5.03%
689,472.79
Profit and loss of sold security
investment during the report period
- - - - 31,664,426.02
Total
70,820,154.2
9
-
62,172,102.94
100% 60,382,073.53
Security
code
Security
abbreviati
on
Initial
investment
capital
Percentage
of total
shares of
this
Company
Book value at
the end of this
period
Profit and loss
during the
report period
Change of owners’
equities during the
report period
601328
Bank of
Communic
ations
1,640,080.0
0
0.00262% 10,813,351.50 -
5,124,640.50
000963
Huadong
Medicine
Co., Ltd
39,851.86 0.02112% 1,178,363.86 -
192,273.90
Total 11,991,715.36 5,316,914.402009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
17
Unit: (RMB) Yuan
VII. During the report period, the company has no purchase and sales events of
key assets.
VIII. Associated transaction events during the report period
1. Routine recurring associated transactions
(1) Sales of Commodities
Unit: RMB Yuan
The selling prices of products to the associated companies will be calculated at the
market prices of similar products.
(2) Purchase of Commodities
Unit: RMB Yuan
Company name Initial
investment
capital
Holding
quantity
Percentage
of total
shares of
this
Company
Book value
at the end
of this
period
Profit
and
loss
during
the
report
period
Change of
owners’
equities
during the
report
period
Accounting
calculation subject
Source
Zhuhai City
Commercial
Bank
20,000,000 20,000,000 2.0252% - - -
Long-term equity
investment
Share
particip
ation
Guangdong
Development
Bank Co., Ltd
105,000 49,844 0.0004% 105,000 - -
Long-term equity
investment
Share
particip
ation
Total 20,105,000 20,049,844 - 105,000 - - - -
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage
of
Transaction
Amount (%)
Amount
Percentage
of
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 12,301,965.80 1.03% 1,766,321.06 0.16%
Tongyikangshimei Chain (Shenzhen)
Co., Ltd - - 10,759.76 -
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 2,492.85 - 821.09 -
Shenzhen Taitai Pharmaceutical Co.,
Ltd 71,794.87 0.01% 0.00 0.00
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd - - 32,179.49 -
Total 12,376,253.52 1.04% 1,810,081.40 0.16%
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage
of
Transaction
Amount (%)
Amount
Percentage
of
Transaction
Amount (%)2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
18
The purchasing prices of products from the associated companies will be calculated at
the market prices of similar products.
(3) Provisions of labors (water, electricity and power)
Unit: RMB Yuan
The prices for water, electricity and power supplied to Guangdong Blue Treasure
Pharmaceutical Co. Ltd. will be calculated at the fair prices.
(4）Leasing of assets
Unit: RMB Yuan
The leasing prices to the associated companies will be calculated at the fair prices.
(5) Payment for renting
Unit: RMB Yuan
The above-mentioned associated transactions are caused by the supply & demand requirements of the company to
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 7,432.36 - 5,488.66 -
Shenzhen Haibin Pharmaceutical
Co., Ltd 1,876,068.34 0.40%
761,230.77
0.15%
Joincare Pharmaceutical Group
Industry Co., Ltd 329,641.03 0.07%
27,692.31
0.01%
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd 58,206,837.63 12.42% 111,704,914.63 22.67%
Total 60,419,979.36 12.89% 112,499,326.37 22.83%
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage of
Transaction
Amount (%)
Amount
Percentage
of
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 3,052,462.56 56.27% 5,365,088.34 62.32%
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage of
Transaction
Amount (%)
Amount
Percentage
of
Transaction
Amount (%)
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 52,104.00 7.63% 54,447.55 7.93%
Health Pharmaceutical (China) Co.,
Ltd 49,974.00 7.32% 8,329.00 1.21%
Total 102,078.00 14.95% 62,776.55 9.14%
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage of
Transaction
Amount (%)
Amount
Percentag
e of
Transactio
n Amount
(%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. - - 53,137.20 1.59%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
19
run its routine operation business. It is forecast that this associated transactions will continue during the production
operations in the future. The associated transactions follow the principle of equity, justice and openness without
damaging the benefits of this Company. Because associated transaction amount accounts for a small proportion of
total sales revenue or purchase amount, it makes no effect on financial status and operating result. And it also
makes no effect on the independence of the Company. The company will not depend on the associated parties
because of this associated transaction.
2. Transfer of associated claims and debts
Unit: RMB 10 thousand Yuan
Including: during the report period, the capital amount that the listed companies provided to the controlling
shareholders and their subcompanies was RMB 9000 Yuan and the balance was RMB 569,000 Yuan.
IX. Capital use and external guaranty of associated party
In accordance with the requirements of the Notice of the Improvement of Disclosure Work about
2009 Semi-Annual Report of Listed Companies (Shen Zheng Shang [2009] No. 54) issued by
Shenzhen Stock Exchange, the independent directors of Company issued the special explanations
about the capital use and external guaranty of associated parties and gave their independent
opinions:
According to the Guide Opinions of Establishment of Independent Director System in Listed
Companies issued by China Securities Regulatory Commission and the Articles of Association, as
the independent director, with the attitude of “Down to Earth”, we will comply with the other laws
and regulations such as the Notice of Relevant Problems about the Standardization of Fund
Transfer Between the Listed Companies and Associated Parties and the External Guaranty of
Listed Companies and the Notice of the Standardization of External Guaranty Behaviors of Listed
Companies in checking the capital use and external guaranty of associated parties in the first half of
2009. Now, we would like to make an explanation as follows:
1. Particulars about capital use of associated parties and independent opinions
By June 30, 2009, the capital use of controlling shareholders and other associated parties is
descried as follows:
The balance of capitals used by the controlling shareholder and other associated parties amount to
RMB 6,302,999.89 Yuan. The subcompany Jiaozuo Joincare Pharmaceutical Group Industry Co.,
Ltd uses a capital of RMB 8,629.00 Yuan (meanwhile, the Company should pay 13,135,716.93
Associated party
Funds that the listed company paid to
associated parties
Funds that the associated parties paid to
listed company
Amount Balance Amount Balance
Guangdong Blue Treasure
Pharmaceutical Co. Ltd.
65.00 65.00
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd
0.86 0.86
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd
0.04 56.04
Joincare Pharmaceutical Group
Industry Co., Ltd
-0.27 1.10
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd
22.27
Total 121.91 23.372009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
20
Yuan to Jiaozuo Joincare Pharmaceutical Group Industry Co., Ltd). The associated company
Guangdong Blue Treasure Pharmaceutical Co. Ltd. uses a capital of RMB 5,649,980.64 Yuan
(meanwhile, the Company should pay 7,432.36 Yuan to Guangdong Blue Treasure Pharmaceutical
Co. Ltd).The amount of capitals used by the controlling shareholder and other associated parties in
January to June 2009 accumulatively reaches RMB 18,116,544.11 Yuan. The accumulated amount
of capitals used by the subcompanies of controlling shareholder such as Jiaozuo Joincare
Pharmaceutical Group Industry Co., Ltd, Health Pharmaceutical (China) Co., Ltd, Zhuhai Joincare
Pharmaceutical Group Industry Co., Ltd and Shenzhen Taitai Pharmaceutical Co., Ltd from January
to June 2009 reaches RMB 265,032.40 Yuan.
Based on the above facts, the independent directors of the Company think that, the controlling
shareholders and other associated parties of the Company did not substantially break any
regulations regarding the capital use in the above Notice issued by China Securities Regulatory
Commission and will never damage the interests of medium and small shareholders.
2. Particulars about external guaranty and independent opinions
(1) Particulars about external guaranty (not including the guaranty provided to the
controlled subcompanies):
By June 30, 2009, the Company has provided no guaranty to any companies other than the
controlled subcompanies.
(2) During the report period, the guaranties provided by the company to the controlled
subcompanies are listed as follows:
Unit: RMB 10 thousand Yuan
Name of Guarantee Occurrence
Date
(Signing
date of
agreement)
Balance
at the
end of
period
Guarantee
Amount
Guaranty type Period
Limin Pharmaceutical Co., Ltd
under Livzon Group
2007.8.3 0
686
(USD100）
Joint and
several liability
guaranty
2007.8.3-2009.8.3(Shenzhen
Branch of Citi Bank)
Livzon Syntpharm Co., Ltd in
Zhuhai Bonded Area
2008.1.8 0 3,500
Joint and
several liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Lida Pharmaceutical Co., Ltd in
Zhuhai Bonded Area
2008.1.8 0 600
Joint and
several liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Zhuhai Livzon Reagent Co., Ltd 2008.1.8 0 1500
Joint and
several liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Zhuhai Livzon Medicine Trade
Co., Ltd
2008.1.8 0 400
Joint and
several liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Zhuhai Livzon Medicine Trade
Co., Ltd
2008.4.29 0 1200
Joint and
several liability
guaranty
2008.4.29-2011.4.29(Zhuhai
Branch of Bank of
Communications)
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group
2008.11.25 120 120
Joint and
several liability
guaranty
2008.11.25-2009.11.25
(Fuzhou State-owned Assets
Operation and Investment
Company)2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
21
During the report period, the Company has provided no guaranty to any companies except the
controlled subcompanies; the actual guaranty amount provided to the subcompanies is RMB
360.06 million Yuan. By June 30, 2009, the balance is RMB 47.04 million Yuan, accounting for
2.41% of the net asset of the Company at the middle of 2009.
Except the above guaranty, the Company has not provided any guaranty to any shareholders,
actual controllers or associated parties, or directly or indirectly provides the guaranty to any
guarantees whose assets/liabilities ratio exceeds 70%; the single guaranty amount has not
exceeded 10% of the latest audited net asset of the Company; the total guaranty amount has not
exceeded 50% of the latest audited net asset of the Company. The guaranty amount of the
Company within the successive 12 months has not exceeded 30% of the latest audited total asset
of the Company.
Therefore, the independent directors of the Company think that, the guaranty behaviors of the
Company comply with the relevant laws and regulations and will not influence the sustainable
operation capacity of the Company, which effectively ensures the legal rights of all shareholders.
X. Key Contracts and Their Implementation
1. The Company has no key events about custody, contracting and leasing of the assets from other
companies or custodizing, contracting and leasing the assets to other companies that exist or
extend to the report period.
2. The Company has no key events about entrusting other for the cash management that exist or
extend to the report period.
XI. Commitments
1. Matters committed by the Company:
(1) This company signed the patent license agreement with Korea Yiyang Medicine Company. This
agreement approves our company’s exclusive and irrevocable right to use the patent PPI(proton
pump inhibitor) compound and Yiyang patent in China including Hong Kong and Macao in order to
production, processing and distribution. The transfer fee will be USD 2.50 million, and by December
31, 2007, it has fully paid it. The company agrees to deduct a percentage for Yiyang according to
10% of sales amount during the first three years when this product begins to be sold. And deduct a
percentage according to 8% of sales amount during the next five years. And deduct a percentage
according to 6% of sales amount from the remaining time to July 22, 2014 (the expiry date of
agreement).
(2) In 2005, the company signed the approval and supply agreement with Korea LG life science Ltd.
(hereinafter referred to as LG Company), and it grants Gemifloxacin Mesylate with the relevant
Livzon Pharmaceutical Factory
under Livzon Group
2007.10.31 0 12,000
Joint and
several liability
guaranty
2007.10.31-2010.10.31
(Shanghai Branch of Rabobank
Nederland)
Livzon Pharmaceutical Factory
under Livzon Group
2009.06.19 4,584 16,000
Joint and
several liability
guaranty
2009.06.19-2011.06.18
(Zhuhai Branch of Xiamen
International Bank)
Total guaranty amount to its controlled subcompanies in the
report period 36,006
Total balance of guaranty amount to its controlled
subcompanies in the report period 4,7042009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
22
certificates about intellectual properties and specifies that the permission fees of the
methanesulfonic acid spasmolytic and pellet will be USD1, 000,000 respectively (It has been fully
paid by December 31, 2006). This agreement specifies as follows:
Within the first five years from the validity date of the agreement, the company’s net sales volume
of Jimishaxing pellet will amount to 1.5 million bags (3 pellets in each bag) and LG Company will
refund USD 500,000 after the taxation at one time within two months after the company has
submitted the net sales volume certificate. At the same time, during the validity period of the
agreement (by the end of 2015), the company should pay a royalty of 1.5% of net sales volume
after the taxation to LG Company during 30 days after each quarter. The company has begun the
selling activities since 2008 and paid the royalty to LG Company in accordance with the
agreements.
Within the first five years from the validity date of the agreement, the company will pay a royalty of
10% of net sales volume after the taxation about injection products to LG Company within 30 days
after each quarter. The company will pay a royalty of 6% of net sales volume after the taxation
about injection products to LG Company within 30 days after each quarter from the sixth business
year to the expiry date of agreement (by the end of 2019).
2. Commitment of shareholders holding over 5% of total shares of the Company:
(1) In the repurchase some of domestically listed shares for overseas investors (B shares) by the
Company, the fully-owned subcompany Tiancheng Industry Co., Ltd under the controlling
shareholder Joincare pharmaceutical Group Industry Co., Ltd makes the following commitments:
Within six months from the announcement date of resolutions about the repurchase some of
domestically listed shares for overseas investors (B shares) by Livzon Group to the completion
date of repurchase, it will not sell the B-shares of Livzon Group held by it. This commitment is
irrevocable.
(2) While handling the release formalities of trading restriction in 2008, the controlling shareholder
Joincare made the following commitments:
If Joincare transfers its tradable shares of Livzon Group whose trading restriction has been
released, it will strictly comply with the relevant regulations of the Guiding Opinions on the Listed
Companies’ Transfer of Original Shares Released from Trading Restrictions ([2008] No. 15
announcement) issued by China Securities Regulatory Commission.
If Joincare plans to reduce its tradable shares of Livzon Group whose trading restriction has been
released through the competing price trading system in the stock exchange in the future and the
reduced quantity of shares amounts to over 5% within 6 months from the first reduction, Joincare
will disclose the reminder announcement about the selling affairs via Livzon Group in 2 trading days
before the first reduction.
During the report period, the Company, Joincare and Tiancheng Industry Co., Ltd have seriously
performed their own commitments and had no breach behaviors.
XII. Repurchase
1. Brief introduction about repurchase
On June 20, 2008, in the 2008 first temporary shareholders’ meeting, the company examined and
passed the Proposal on Repurchasing Some of Domestically Listed Shares for Overseas Investors
(B Shares) of Livzon Pharmaceutical Group Inc and relevant proposals and agreed that: on the
condition that the repurchase price will not exceed HKD 16.00/share and the total amount of2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
23
repurchase capitals will not exceed HKD 160 million, the company plans to repurchase some of
domestically listed shares for overseas investors (B shares) (for more details, please see the
company announcement No. 2008-23 and 2008-31).
On September 27, 2008, the company obtained the relevant replies of the Ministry of Commerce
about principally approving the company to repurchase some of B-shares and reduce its capital.
On November 28, 2008, the company obtained the relevant replies of Zhuhai Center Branch of the
State Administration of Foreign Exchange about approving the company to purchase the foreign
exchange of no more than HKD 160 million for the purpose of repurchasing some of the
domestically listed shares for overseas investors of the company.
2. Repurchase implementation
On December 5, 2008, the company first implemented the plan to repurchase B-shares; by July 31,
2009, the company has accumulatively repurchased the quantity of 7,423,800 B-shares,
accounting for 2.4258% of total share capitals of the company; the highest repurchase price is HKD
13.00 per share and the lowest repurchase price is HKD 8.38 per share; the total amount is about
HKD 71.7629 million (including the taxes).
3. Adjustment of repurchase price
In accordance with relevant regulations of the Report about Repurchasing Some of Domestically
Listed Shares for Overseas Investors (B Shares) of Livzon Pharmaceutical Group Inc, after
completing the 2008 annual profit distribution and from the Ex-dividend date (June 30, 2009), the
repurchase price of domestically listed shares for overseas investors (B shares) will be adjusted to
be no more than HKD 15.89 per share.
XIII. The 2009 semi-annual financial report of the Company has not been audited.
XIV. During the report period, the Company, directors, supervisors, senior
executives, shareholders and actual controllers have not been audited by China
Securities Regulatory Commission, nor received any administrative penalty and
criticism from China Securities Regulatory Commission, nor got any public
reprimand from the Stock Exchange.
XV. Activities in which the Company received the investigation, communication
and interview, etc.
Reception
date
Reception
place
Reception
mode
Objects Discussion topics and
provided materials
January 8,
2009
Headquarters
Local
investigation
United Securities Co., Ltd Operation status of the
Company
Headquarters
Local
investigation
China Jianyin Investment
Securities Company Ltd
Operation status of the
Company
Headquarters
Local
investigation
Baoying Fund Management Co.,
Ltd
Operation status of the
Company
Headquarters
Local
investigation
CCB Principal Asset
Management Co., Ltd
Operation status of the
Company
Headquarters Local Great Wall Fund Management Operation status of the2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
24
XVI. Indexes of interim announcement disclosure during the report period
investigation Co., Ltd Company
January 16,
2009
Headquarters
Local
investigation
ICBC Credit Suisse Asset
Management Co. Ltd
Operation status of the
Company
February 27,
2009
Headquarters
Local
investigation
China Post & Capital Fund
Management Co.,Ltd
Operation status of the
Company
Headquarters
Local
investigation
Citic Securities Co., Ltd Operation status of the
Company
Headquarters
Local
investigation
Fullgoal Fund Management Co.,
Ltd
Operation status of the
Company
March 19,
2009
Headquarters
Local
investigation
Orient Fund Management
Co.,Ltd
Operation status of the
Company
Headquarters
Local
investigation
China Galaxy Securities Co., Ltd. Operation status of the
Company
Headquarters
Local
investigation
Industrial Securities Co., Ltd Operation status of the
Company
Headquarters
Local
investigation
Shenzhen Huaqiang Investment
& Guaranty Co., Ltd
Operation status of the
Company
Headquarters
Local
investigation
Invesco Great Wall Fund
Management Company Limited
Operation status of the
Company
Headquarters
Local
investigation
China Reinsurance Management
Co., Ltd
Operation status of the
Company
April 2, 2009
Headquarters
Local
investigation
Investment Bank Headquarters
of China Merchants Fund
Management Co., Ltd
Operation status of the
Company
No. Announcement name Newspaper name Disclosu
re date
1 Reminder announcement about development in
repurchasing some B-shares
Securities Times and
China Securities Journal
2009.01.06
2 Announcement of resolutions passed at the 5th
meeting of the 6th Board of Directors
Securities Times and
China Securities Journal
2009.01.15
3 Working rules of the Strategy Commission of Board of
Directors
Juchao website 2009.01.15
4 Report about the correction of relevant problems put
forward by Guangdong Securities Regulatory
Commission in the site inspection in 2008
Securities Times and
China Securities Journal
2009.01.15
5 Circular on the annual performance of 2008 The same as above 2009.01.17
6 Announcement about change of auditing agency
name
The same as above 2009.01.21
7 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.02.03
8 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.02.07
9 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.02.262009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
25
10 Announcement of resolutions passed at the 6th
meeting of the 6th Board of Directors
The same as above 2009.02.28
11 Announcement about providing the financing guaranty
to the controlled subcompanies
The same as above 2009.02.28
12 Annual report working system of independent
directors
The same as above 2009.02.28
13 Annual report working procedures of the Auditing
Commission of Board of directors
Securities Times and
China Securities Journal
2009.02.28
14 Independent opinions of independent directors about
the Company providing the guaranty to the controlled
subcompanies
Juchao website 2009.02.28
15 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.03.03
16 Announcement of resolutions passed at the 7th
meeting of the 6th Board of Directors
The same as above 2009.04.02
17 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.04.02
18 Special explanation about the capital use of
controlling shareholders and other associated parties
Securities Times and
China Securities Journal
2009.04.18
19 Independent opinions of independent directors about
the routine associated transactions
The same as above 2009.04.18
20 Announcement about the routine associated
transactions
The same as above 2009.04.18
21 Report of independent financial advisor about
associated transactions
The same as above 2009.04.18
22 The 2009 first quarterly report The same as above 2009.04.18
23 Announcement of resolutions passed at the 9th
meeting of the 6th Board of Directors
The same as above 2009.04.18
24 Special explanation and independent opinions of
independent directors about the capital use of
controlling shareholders and associated parties as
well as external guaranty
The same as above 2009.04.18
25 2008 annual report The same as above 2009.04.18
26 Announcement of resolutions passed at the 4th
meeting of the 6th Board of Supervisors
The same as above 2009.04.18
27 Independent opinions of independent directors
concerning the self-appraisal of internal control in the
company
The same as above 2009.04.18
28 Report about the self-appraisal of internal control The same as above 2009.04.18
29 Notice about convening the 2008 annual
shareholders’ meeting
The same as above 2009.04.18
30 Announcement of resolutions passed at the 8th
meeting of the 6th Board of Directors
The same as above 2009.04.182009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
26
31 2008 annual auditing report The same as above 2009.04.18
32 Summary of 2008 annual report The same as above 2009.04.18
33 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.05.05
34 2008 annual work report of independent directors The same as above 2009.05.12
35 Legal opinions about 2008 annual shareholders’
meeting
The same as above 2009.05.12
36 Announcement of the resolutions passed at the 2008
annual shareholders’ meeting
The same as above 2009.05.12
37 Reminder announcement about development in
repurchasing some B-shares
The same as above 2009.06.02
38 Announcement about providing the guaranty to the
controlled subcompanies
The same as above 2009.06.12
39 Independent opinions of independent directors about
the Company providing the guaranty to the controlled
subcompanies
The same as above 2009.06.12
40 Announcement of resolutions passed at the 10th
meeting of the 6th Board of Directors
The same as above 2009.06.12
41 Announcement about directors’ resignation The same as above 2009.06.13
42 Rules and procedure of the Board of Directors (June
2009)
Juchao website 2009.06.18
43 Announcement of resolutions passed at the 11th
meeting of the 6th Board of Directors
Securities Times and
China Securities Journal
2009.06.18
44 Declaration of the nominees for independent directors The same as above 2009.06.18
45 Articles of association (June 2009) Juchao website 2009.06.18
46 Working Rule of the President (June 2009) Juchao website 2009.06.18
47 Management system about external investment (June
2009)
Juchao website 2009.06.18
48 Announcement about convening the 2009 first
temporary shareholders’ meeting
Securities Times and
China Securities Journal
2009.06.18
49 Announcement about implementing the dividend
distribution
The same as above 2009.06.22
All above information has been carried by the Juchao website（http://www.cninfo.com.cn/）for information
disclosure.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
27
Section 7 Financial Report
(This report has not been audited)2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
28
Consolidated Balance Sheet
Kuai He Statement No.01
Prepared by: Livzon Pharmaceutical Group Inc. June 30, 2009 Unit: RMB Yuan
Assets Notes
Balance at the
end of period
Balance at the
beginning of
period
Liabilities and
Shareholders' Equities
Notes
Balance at the
end of period
Balance at the
beginning of
period
Current assets: Current liabilities:
Currency capital VII.1 490,059,937.90 540,183,900.36 Short-term loan VII.20 252,043,929.00 520,714,775.00
Tradable financial
assets
VII.2 62,172,102.94 121,777,817.15 Tradable financial
liabilities
Note receivable VII.3 178,270,619.98 200,743,296.63 Notes payable
Accounts receivable VII.4 479,769,176.58 343,386,691.32 Accounts payable VII.21 156,077,375.94 159,486,983.56
Advance money VII.5 33,888,308.84 34,582,521.10 Deposit receivable VII.22 7,749,019.67 12,802,764.02
Interests receivable Payroll payable VII.23 37,739,828.72 33,458,734.45
Dividend receivable Tax payable VII.24 46,148,119.13 77,142,056.03
Other receivables VII.6 24,442,507.70 23,100,296.48 Interests payable
Inventory VII.7 323,227,366.80 346,075,150.03 Dividend payable VII.25 5,062,422.21 2,531,984.01
Non-current assets due
within one year Other accounts payable
VII.26 217,004,918.75 150,836,568.52
Other current assets
Non-current liabilities due
within one year
VII.27 400,000.00 10,400,000.00
Total of current
assets
1,591,830,020.74 1,609,849,673.07
Other current liabilities
Non-current assets:
Total of current
liabilities
722,225,613.42 967,373,865.59
Saleable financial
assets
VII.8 11,991,715.36 6,674,800.96
Non-current liabilities
Investment held to the
maturity date Long-term loan
VII.28 100,700,000.00 100,700,000.00
Long-term accounts
receivable Bonds payable
Long-term equity
investment
VII.9 44,056,270.57 45,128,539.14 Long-term accounts
payable
Real estate for
Investment
Special accounts
payable
Fixed assets VII.10 873,294,820.51 922,704,199.55 Deferred profit VII.29 20,278,986.38 19,300,344.26
Engineering under con VII.11 58,339,762.82 38,117,555.88 Anticipation liabilities2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
29
struction
Engineering goods
VII.12 3,281,842.98 2,528,232.88 Liabilities with the
deferred income taxes
VII.30 3,157,490.89 1,914,761.87
Liquidation of fixed
assets
Other non-current
liabilities
Production biology
assets
Subtotal of non-current
liabilities
124,136,477.27 121,915,106.13
Oil and gas assets Total of liabilities 846,362,090.69 1,089,288,971.72
Intangible assets VII.13 148,900,609.31 154,395,927.44 Shareholders' equities :
Development expenses VII.14 5,308,380.18 4,010,294.70 Share capital VII.31 306,035,482.00 306,035,482.00
Goodwill VII.15 103,040,497.85 103,040,497.85 Capital reserve VII.32 441,834,211.68 437,314,834.44
Long-term deferred and
prepaid expenses
VII.16 5,298,595.71 5,642,572.45
Minus: treasury share
VII.33 63,277,212.47 15,798,067.52
Assets with deferred
income taxes
VII.17 26,382,252.21 31,720,956.31
Surplus reserve
VII.34 353,298,521.02 353,298,521.02
Other non-current
assets Undistributed profit
VII.35 929,144,856.73 711,151,149.38
Subtotal of noncurrent
assets
1,279,894,747.50 1,313,963,577.16 Conversion difference in
foreign currency
statement
-13,669,586.31 -13,466,039.91
Subtotal of equities
attributable to the
shareholders of parent
company
1,953,366,272.65 1,778,535,879.41
Equities of the minority
of shareholders
VII.36 71,996,404.90 55,988,399.10
Subtotal of
shareholders’ equities
2,025,362,677.55 1,834,524,278.51
Total of assets 2,871,724,768.24 2,923,813,250.23
Total of liabilities and
shareholders’ equities
2,871,724,768.24 2,923,813,250.232009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
30
Consolidated Profit Statement
Kuai He Statement No.02
Prepared by: Livzon Pharmaceutical Group Inc. January to June 2009 Unit: RMB Yuan
Item Notes
Amount in this
period
Amount in the
same period of
previous year
1. Total operating income VII.37 1,209,706,856.23 1,108,946,822.48
Minus: operating cost VII.37 558,158,942.77 628,760,344.61
Operating taxes and additional charge VII.38 2,987,677.47 2,291,423.21
Sales expense VII.39 260,680,296.95 177,717,653.36
Management expense 111,178,133.75 90,578,685.72
Financial expenses VII.40 10,663,200.60 5,104,800.09
Loss for asset depreciation VII.41 24,400,357.42 14,531,965.46
Plus: profits from the fair value changes (The loss is listed beginning with “-
“)
VII.42
133,611,037.40 -153,972,612.48
Investment gains (The loss is listed beginning with “-“) VII.43 -74,301,232.43 56,575,358.73
Including: the investment gains from the associated enterprises and joint
ventures -1,072,268.57 -1,886,830.91
II. Operating profit (The loss is listed beginning with “-“) 300,948,052.24 92,564,696.28
Plus: non-operating income VII.44 2,684,454.70 2,680,893.09
Minus: non-operating expense VII.45 1,210,940.78 2,822,001.35
Including: loss in disposal of non-current assets 791,268.55 493,831.32
III. Total profit (The loss is listed beginning with “-“) 302,421,566.16 92,423,588.02
Minus: income tax expense VII.46 38,958,684.81 22,412,735.42
IV. Net profit (the net loss is listed beginning with “-”) 263,462,881.35 70,010,852.60
Net profit attributable to the owners of parent company 247,854,875.55 61,095,693.23
Profit and loss of the minority of shareholders 15,608,005.80 8,915,159.37
V. Profit per share:
(I) Basic profit per share 0.83 0.20
(II) Diluted profit per share 0.83 0.20
VI.Other comprehensive returns VII.48 4,315,830.84 -45,805,293.612009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
31
Consolidated Cash Flow Statement
Kuai He Statement No.03
Prepared by: Livzon Pharmaceutical Group Inc. January to June 2009 Unit: RMB Yuan
VII.Total of comprehensive returns 267,778,712.19 24,205,558.99
Total of comprehensive returns that are attributable to the owners of parent
company 252,170,706.39 15,290,399.62
Total of comprehensive returns that are attributable to the minority of
shareholders 15,608,005.80 8,915,159.37
Item Notes Amount in this period
Amount in the
same period of
previous year
I. Cash flows from operating activities
Cash received from sales of goods or rendering of services 1,092,693,591.75 860,428,882.12
Tax refunding 4,755,635.33 2,706,591.48
Cash received related to other operating activities VII.49 12,279,802.66 15,531,351.17
Subtotal of cash inflow from the operating activities 1,109,729,029.74 878,666,824.77
Cash paid for purchase of goods or receiving of services 324,677,976.27 318,731,967.14
Cash paid to and on behalf of employees 115,727,516.32 116,535,155.64
Tax payments 199,408,837.04 149,936,529.42
Other cashes paid to operating activities VII.50 249,897,163.29 173,850,438.17
Subtotal of cash outflow from operating activities 889,711,492.92 759,054,090.37
Net cash flow from operating activities 220,017,536.82 119,612,734.40
II. Cash flow from investment activities:
Cash received from disposal of investments 119,019,666.02 117,263,455.46
Cash received from investment returns 948,424.63 3,590,212.67
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets
374,129.78 1,579,001.11
Net cash amount received from the disposal of subcompanies and other
business units
Cash received related to other investment activities
Subtotal of cash inflow from the investment activities 120,342,220.43 122,432,669.24
Cash paid to acquire and construct fixed assets, intangible assets and
other long-term assets
45,205,746.87 38,330,671.55
Cash paid to acquire investments 18,031,225.86
Net cash amount paid to acquire the subcompanies and other operating
units
50,792,945.00
Cash paid related to other investment activities 3,500.00
Subtotal of cash outflow from investment activities 45,209,246.87 107,154,842.41
Net amount of cash flow received from the investment activities 75,132,973.56 15,277,826.83
III. Cash flow from financing activities:
Cash received by investors 400,000.00
Cash received from loans 230,459,029.00 699,833,447.00
Cash received related to other financing activities VII.51 4,047,036.65
Subtotal of cash inflow from the financing activities 230,859,029.00 703,880,483.65
Repayments of loans 509,281,639.64 474,061,570.00
Cash paid for distribution of dividends, profits and repayment of interests 42,937,652.21 180,730,220.74
Including: the dividends and profits paid to the minority of shareholders
by the subcompanies
8,205,707.77
Cash payments related to other financing activities VII.52 47,479,144.95
Sub-total of cash outflow from the financing activities 599,698,436.80 654,791,790.74
Net cash flow from financing activities -368,839,407.80 49,088,692.912009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
32
IV. Effect of foreign exchange fluctuation on cash and cash
equivalents
264,934.96 -2,233,407.13
V. Net increase amount of cash and cash equivalents -73,423,962.46 181,745,847.01
Plus: Balance of cash and cash equivalents at the beginning of the
period
540,183,900.36 281,225,232.89
VI Balance of cash and cash equivalents at the end of the period 466,759,937.90 462,971,079.902009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
32
Consolidated Change Statement of Shareholders’ Equities
Kuai He Statement No.04
Prepared by: Livzon Pharmaceutical Group Inc. January to June 2009 Unit: RMB Yuan
Item
January to June 2009
Equities attributable to shareholders of parent company
Equities of the
Minority of
Shareholders
Total of
Shareholders’
Share capital Equities
Capital
reserve
Minus:
treasury
shares
Surplus
Reserve
Undistributed
Profit
Conversion
Difference of
Foreign Currency
Statement
I. Balance at the end of previous year
306,035,482.0
0
437,314,834.4
4
15,798,067.5
2
353,298,521.02 711,151,149.38 -13,466,039.91 55,988,399.10 1,834,524,278.51
Plus: changes of accounting policies
Correction of errors in the early stage
II. Balance at the beginning of this year
306,035,482.0
0
437,314,834.4
4
15,798,067.5
2
353,298,521.02 711,151,149.38 -13,466,039.91 55,988,399.10 1,834,524,278.51
III. Increase or decrease of change amount
in this year
4,519,377.24 47,479,144.9
5
217,993,707.35 16,008,005.80 191,041,945.44
(I)Net profit 247,854,875.55 15,608,005.80 263,462,881.35
(II)Profit and loss directly accrued to owners’
equities
4,519,377.24 4,519,377.24
1. Net amount of fair value changes of saleable
financial assets
5,316,914.40 5,316,914.40
2. Effect of changes of other owners' equities in
the invested units in accordance with the Equity
Law
3. Income tax effect related to the items
accrued to owners’ equities
-797,537.16
4. Others
Subtotal of above (I) and (II) 4,519,377.24 247,854,875.55 15,608,005.80 267,982,258.59
(III) Increase and decrease of capitals by the
owners
47,479,144.9
5
400,000.00 -47,079,144.95
1.Capital investment by shareholders 400,000.00 400,000.00
2. Repurchase of treasury shares in the year
47,479,144.9
5
-47,479,144.952009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
32
3. Others
(IV)Profit distribution -29,861,168.20 -29,861,168.20
1. Withdrawal of surplus reserve
2. Withdrawal of general risk reserve
3. Distribution to the owners (or shareholders) -29,861,168.20 -29,861,168.20
4. Others
(V) Internal settlement and transfer of
owners’ equities
1. Transfer of capital reserve to share capital
2. Transfer of surplus reserve to share capital
3. Surplus reserve makes up for the loss
4. Others
IV. Others -203,546.40 -203,546.40
V. Balance at the end of this year
306,035,482.0
0
441,834,211.6
8
63,277,212.4
7
353,298,521.02 929,144,856.73 -13,669,586.31 71,996,404.90 2,025,362,677.552009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
34
Consolidated Change Statement of Shareholders’ Equities
Kuai He Statement No.04
Prepared by: Livzon Pharmaceutical Group Inc. 2008 Unit: RMB Yuan
Item
2008
Equities attributable to shareholders of parent company
Equities of
the Minority
of
Shareholders
Total of
Shareholders’
Share capital Equities
Capital
reserve
Minus:
treasury
shares
Surplus
Reserve
Undistributed
Profit
Conversion
Difference of
Foreign Currency
Statement
I. Balance at the end of previous year 306,035,482.0
0
478,651,639.9
9
348,091,204.6
5
817,303,043.0
9
-
7,417,250.28 48,260,934.71
1,990,925,054.16
Plus: changes of accounting policies
Correction of errors in the early stage
II. Balance at the beginning of this year
306,035,482.0
0
478,651,639.9
9
348,091,204.6
5
817,303,043.0
9
-
7,417,250.28 48,260,934.71 1,990,925,054.16
III. Increase or decrease of change amount
in this year
-
41,336,805.55
15,798,067.5
2 5,207,316.37
-
106,151,893.7
1
7,728,445.86
-150,351,004.55
(I)Net profit
52,073,163.66
20,834,153.63
72,907,317.29
(II)Profit and loss directly accrued to owners’
equities
-
41,336,805.55
-41,336,805.55
1. Net amount of fair value changes of saleable
financial assets
-
50,606,993.90
-50,606,993.90
2. Effect of changes of other owners' equities in
the invested units in accordance with the Equity
Law
3. Effect of income taxes related to the items
accrued to shareholders’ equities 9,259,111.50
9,259,111.50
4. Others
11,076.85
11,076.85
Subtotal of above (I) and (II)
-
41,336,805.55 52,073,163.66 20,834,153.63
31,570,511.742009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
35
(III) Increase and decrease of capitals by the
owners
15,798,067.5
2
-15,798,067.52
1.Capital investment by shareholders
2. Repurchase of treasury shares in the year
15,798,067.5
2
-15,798,067.52
3. Others
(IV)Profit distribution 5,207,316.37
-
158,225,057.3
7
-
13,105,707.77
-166,123,448.77
1. Withdrawal of surplus reserve
5,207,316.37
-
5,207,316.37
-
13,105,707.77
-13,105,707.77
2. Withdrawal of general risk reserve
3. Distribution to the owners (or shareholders)
-
153,017,741.0
0
-153,017,741.00
4. Others
(V) Internal settlement and transfer of
owners’ equities
1. Transfer of capital reserve to share capital
2. Transfer of surplus reserve to share capital
3. Surplus reserve makes up for the loss
4. Others
IV. Others
-
6,048,789.63
-
981.47
-6,049,771.10
V. Balance at the end of this year 306,035,482.0
0
437,314,834.4
4
15,798,067.5
2
353,298,521.0
2
711,151,149.3
8
-13,466,039.91
55,988,399.10
1,834,524,278.512009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
36
Balance Sheet
Kuai Qi Statement No.01
Prepared by: Livzon Pharmaceutical Group Inc. June 30, 2009 Unit: RMB Yuan
Assets Note
s
Balance at the end
of period
Balance at the
beginning of
period
Liabilities and
Shareholders' Equities Notes Balance at the end
of period
Balance at the
beginning of
period
Current assets: Current liabilities:
Currency capital 393,126,247.45 465,301,653.09 Short-term loan 182,377,063.00 476,299,225.00
Tradable financial
assets 80,393,200.00 Tradable financial
liabilities
Note receivable 47,626,713.03 29,231,539.08 Notes payable
Accounts
receivable
VIII.1
192,684,353.30 144,321,719.40 Accounts payable 155,519,912.21 114,072,354.87
Advance money 8,749,418.27 8,826,526.19 Deposit receivable 2,118,393.25 2,872,035.13
Interests receivable Payroll payable 25,578,585.00 16,598,171.56
Dividend receivable 717,057.69 Tax payable 7,451,204.72 15,704,237.77
Other receivables
VIII.2 532,488,828.39 597,968,454.42 Interests payable
Inventory 60,701,492.66 59,282,216.75 Dividend payable 2,550,612.21 20,174.01
Non-current assets
due within one year Other accounts payable 464,901,231.98 412,814,666.41
Other current
assets
Non-current liabilities
due within one year 10,000,000.00
Total of current
assets 1,235,377,053.10 1,386,042,366.62 Other current liabilities
Non-current assets:
Total of current
liabilities 840,497,002.37 1,048,380,864.75
Saleable financial
assets 11,991,715.36 6,674,800.96 Non-current liabilities
Investment held to
the maturity date Long-term loan 100,000,000.00 100,000,000.00
Long-term accounts
receivable Bonds payable
Long-term equity
investment
VIII.3 895,233,456.38 898,086,492.34 Long-term accounts
payable
Real estate for
Investment
Special accounts
payable
Fixed assets 101,576,286.66 106,219,049.50 Deferred profit 8,162,660.57 10,266,816.45
Engineering under
construction Anticipation liabilities
Engineering goods
Liabilities with the
deferred income taxes 1,546,761.00 749,223.84
Liquidation of fixed
assets
Other non-current
liabilities
Production biology
assets
Subtotal of non-current
liabilities 109,709,421.57 111,016,040.29
Oil and gas assets Total of liabilities 950,206,423.94 1,159,396,905.04
Intangible assets 36,704,216.46 39,152,640.11 Shareholders' equities :
Intangible assets 36,704,216.46 39,152,640.11 Shareholders' equities :
Goodwill Capital reserve 432,645,015.00 428,125,637.76
Long-term deferred
and prepaid
expenses Minus: treasury share
63,277,212.47 15,798,067.52
Assets with
deferred income
taxes
19,068,964.46 24,462,136.75
Surplus reserve
233,653,771.24 233,653,771.24
Other non-current
assets Undistributed profit 444,360,419.79 351,684,617.86
Subtotal of noncurrent
assets 1,068,246,846.40 1,077,055,979.76 Subtotal of
shareholders’ equities 1,353,417,475.56 1,303,701,441.34
Total of assets 2,303,623,899.50 2,463,098,346.38 Total of liabilities and
shareholders’ equities 2,303,623,899.50 2,463,098,346.382009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
37
Profit Statement
Kuai Qi Statement No.02
Prepared by: Livzon Pharmaceutical Group Inc. January to June 2009 Unit: RMB Yuan
Item Note
s
Amount in this
period
Amount in the
same period of
previous year
1. Total operating income
VIII.
4 466,504,272.91 366,901,028.96
Minus: operating cost
VIII.
4
250,344,474.80
195,479,288.60
Operating taxes and additional charge
VIII.
5
61,500.00 75,000.00
Sales expense 146,258,350.47 81,086,763.40
Management expense
45,915,371.47
36,132,933.69
Financial expenses
11,753,023.23
2,817,625.51
Loss for asset depreciation
5,587,538.88
3,093,608.48
Plus: profits from the fair value changes (The loss is listed
beginning with “-“)
97,808,992.64 -109,151,598.10
Investment gains (The loss is listed beginning with “-“)
VIII.
6 22,801,144.39 144,391,744.17
Including: the investment gains from the associated
enterprises and joint ventures
-2,853,035.96 -2,008,234.48
II. Operating profit (The loss is listed beginning with
“-“) 127,194,151.09 83,455,955.35
Plus: non-operating income 834,001.47
21,484.02
Minus: non-operating expense 98,010.14 1,839,461.36
Including: loss in disposal of non-current assets
94,409.94
179,544.88
III. Total profit (The loss is listed beginning with “-“) 127,930,142.42 81,637,978.01
Minus: income tax expense
5,393,172.29
-
2,182,798.30
IV. Net profit (the net loss is listed beginning with “-”) 122,536,970.13 83,820,776.31
V. Profit per share:
(I) Basic profit per share
(II) Diluted profit per share
VI.Other comprehensive returns 4,519,377.24 -
38,692,911.19
VII.Total of comprehensive returns 127,056,347.37 45,127,865.122009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
38
Cash Flow Statement
Kuai Qi Statement No.03
Prepared by: Livzon Pharmaceutical Group Inc. January to June 2009 Unit: RMB Yuan
Item Note
s
Amount in this
period
Amount in the same
period of previous
year
I. Cash flows from operating activities
Cash received from sales of goods or rendering of
services 423,490,710.12
351,330,036.05
Tax refunding
Cash received related to other operating activities 25,384,854.49
4,785,534.78
Subtotal of cash inflow from the operating activities 448,875,564.61
356,115,570.83
Cash paid for purchase of goods or receiving of
services 216,593,042.70
186,996,007.81
Cash paid to and on behalf of employees 37,069,927.86 33,996,156.88
Tax payments 46,963,718.57 58,815,153.74
Other cashes paid to operating activities 105,420,744.58
68,762,908.82
Subtotal of cash outflow from operating activities 406,047,433.71
348,570,227.25
Net cash flow from operating activities 42,828,130.90 7,545,343.58
II. Cash flow from investment activities:
Cash received from disposal of investments 109,167,422.79
97,425,176.01
Cash received from investment returns 95,406,007.89 2,021,088.00
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 1,500.00
1,291,842.44
Net cash amount received from the disposal of
subcompanies and other business units
Cash received related to other investment activities 92,201,523.18
Subtotal of cash inflow from the investment activities 204,574,930.68
192,939,629.63
Cash paid to acquire and construct fixed assets,
intangible assets and other long-term assets
2,873,156.13 7,120,473.39
Cash paid to acquire investments 15,160,322.80
Net cash amount paid to acquire the subcompanies
and other operating units
50,830,000.00
Cash paid related to other investment activities 3,500.00
Subtotal of cash outflow from investment activities 2,876,656.13 73,110,796.19
Net amount of cash flow received from the
investment activities 201,698,274.55
119,828,833.44
III. Cash flow from financing activities:
Cash received by investors
Loans obtained from subcompanies 75,126,838.97
Cash received from loans 162,039,675.00
630,668,277.00
Cash received related to other financing activities 4,047,036.65
Subtotal of cash inflow from the financing activities 237,166,513.97
634,715,313.65
Repayments of loans 466,296,795.00
379,596,400.00
Cash paid for distribution of dividends, profits and
repayment of interests
40,147,699.78 170,837,221.30
Loans paid to subcompanies 38,079,917.432009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
39
Cash payments related to other financing activities 47,479,144.95
Sub-total of cash outflow from the financing activities 553,923,639.73
588,513,538.73
Net cash flow from financing activities
-
316,757,125.76
46,201,774.92
IV. Effect of foreign exchange fluctuation on cash
and cash equivalents
55,314.67 -639,039.72
V. Net increase amount of cash and cash
equivalents
-
72,175,405.64
172,936,912.22
Plus: Balance of cash and cash equivalents at the
beginning of the period 465,301,653.09
214,055,704.00
VI Balance of cash and cash equivalents at the end
of the period 393,126,247.45
386,992,616.222009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
40
Change Statement of Shareholders’ Equities
Kuai Qi Statement No.04
Prepared by: Livzon Pharmaceutical Group Inc. January to June 2009 Unit: RMB Yuan
Item
N
ot
es
January to June 2009
Paid-up capital Capital reserve Treasury
shares (Minus) Surplus Reserve Undistributed
Profit
Total of
Shareholders’
Equities
I. Balance at the end of previous year 306,035,482.00 428,125,637.76 15,798,067.52 233,653,771.24 351,684,617.86 1,303,701,441.34
Plus: changes of accounting policies
Correction of errors in the early stage
II. Balance at the beginning of this year 306,035,482.00 428,125,637.76 15,798,067.52 233,653,771.24 351,684,617.86 1,303,701,441.34
III. Increase or decrease of change amount in this year 4,519,377.24 47,479,144.95 92,675,801.93 49,716,034.22
(I)Net profit 122,536,970.13 122,536,970.13
(II)Profit and loss directly accrued to owners’ equities 4,519,377.24 4,519,377.24
1. Net amount of fair value changes of saleable financial assets 5,316,914.40 5,316,914.40
2. Effect of changes of other owners' equities in the invested units
in accordance with the Equity Law
3. Effect of income taxes related to the items accrued to
shareholders’ equities -797,537.16 -797,537.16
4. Others
Subtotal of above (I) and (II) 4,519,377.24 122,536,970.13 127,056,347.37
(III) Increase and decrease of capitals by the owners 47,479,144.95 -47,479,144.95
1.Capital investment by shareholders
2. Repurchase of treasury shares in the year 47,479,144.95 -47,479,144.95
3. Amount of share payment that is accrued to shareholders’
equities
(IV)Profit distribution -29,861,168.20 -29,861,168.20
1. Withdrawal of surplus reserve
2. Distribution to the shareholders -29,861,168.20 -29,861,168.20
3. Others
(V) Internal settlement and transfer of owners’ equities
1. Transfer of capital reserve to share capital
2. Transfer of surplus reserve to share capital
3. Surplus reserve makes up for the loss
4. Others
IV. Balance at the end of this year 306,035,482.00 432,645,015.00 63,277,212.47 233,653,771.24 444,360,419.79 1,353,417,475.562009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
41
Change Statement of Shareholders’ Equities
Kuai Qi Statement No.04
Prepared by: Livzon Pharmaceutical Group Inc. 2008 Unit: RMB Yuan
Item Note
s
2008
Paid-up capital Capital reserve Treasury shares
(Minus) Surplus Reserve Undistributed
Profit
Total of
Shareholders’
Equities
I. Balance at the end of previous year 306,035,482.00 469,476,289.38 233,455,360.76 502,916,664.58 1,511,883,796.72
Plus: changes of accounting policies
Correction of errors in the early stage
II. Balance at the beginning of this year 306,035,482.00 469,476,289.38 233,455,360.76 502,916,664.58 1,511,883,796.72
III. Increase or decrease of change amount in this year -41,350,651.62 15,798,067.52 198,410.48 -151,232,046.72 -208,182,355.38
(I)Net profit 1,984,104.76 1,984,104.76
(II)Profit and loss directly accrued to owners’ equities -41,350,651.62 -41,350,651.62
1. Net amount of fair value changes of saleable financial assets -50,606,993.90 -50,606,993.90
2. Effect of changes of other owners' equities in the invested
units in accordance with the Equity Law
3. Effect of income taxes related to the items accrued to
shareholders’ equities
9,259,111.50 9,259,111.50
4. Others -2,769.22 -2,769.22
Subtotal of above (I) and (II) -41,350,651.62 1,984,104.76 -39,366,546.86
(III) Increase and decrease of capitals by the owners 15,798,067.52 -15,798,067.52
1.Capital investment by shareholders
2. Amount of share payment that is accrued to shareholders’
equities
15,798,067.52 -15,798,067.52
3. Others
(IV)Profit distribution 198,410.48 -153,216,151.48 -153,017,741.00
1. Withdrawal of surplus reserve 198,410.48 -198,410.48
2. Distribution to the shareholders -153,017,741.00 -153,017,741.00
3. Others
(V) Internal settlement and transfer of owners’ equities
1. Transfer of capital reserve to share capital
2. Transfer of surplus reserve to share capital
3. Surplus reserve makes up for the loss
4. Others
IV. Balance at the end of this year 306,035,482.00 428,125,637.76 15,798,067.52 233,653,771.24 351,684,617.86 1,303,701,441.342009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
42
Livzon Pharmaceutical Group Inc.
Notes to Consolidated Financial Statement
June 30, 2009
(The amount is expressed in RMB unless otherwise specified)
I. Company Profile
1 History
In March 1992, approved by Zhu Ti Gai Wei ［ 1992 ］ No. 29 document issued by Zhuhai
Economic System Reform Commission and ［1992］No. 45 document issued by the joint
examination team under Guangdong Enterprise Shareholding System Pilot Reform and
Guangdong Economic System Reform Commission, the company is a limited company
raising funds from targeted sources that has been sponsored by Macau Nanyue (Group) Co.,
Ltd, Zhuhai Credit Cooperative, Guangdong Medicine Group Co., Ltd, Zhuhai Medicine
Company, Guangdong Medicines & Health Products IMP.& EXP. CORP, Zhuhai branch of
Bank of China, Zhuhai Guihua Staff Mutual Help Association, contributed with the net assets
of the original joint venture Co., Ltd as the shares, and raised other funds from the domestic
legal persons and internal staffs.
In 1993, approved by Yue Zheng Jian Fa Zi［1993］No. 001 document issued by Guangdong
Securities Regulatory Commission, Shen Ren Yin Fu Zi ［1993］No. 239 document issued by
Shenzhen Special Economic Zone branch of the People’s Bank of China and Zheng Jian Fa
Shen Zi ［1993］No. 19 document issued by China Securities Regulatory Commission, the
company was listed in Shenzhen Stock Exchange.
In 1998, the sponsoring shareholders of company including Zhuhai Credit Cooperative,
Guangdong Pharmaceutical Industry Company, Zhuhai Guihua Staff Mutual Help Association
and Zhuhai branch of Bank of China signed the Equity Transfer Agreement with China
Everbright Bank (Group) Co., Ltd and transferred all their equities to China Everbright Bank
(Group) Co., Ltd ,the foreign-owned sponsor Macau Nanyue (Group) Co., Ltd signed the
Equity Transfer Agreement with China Everbright Medicine Co., Ltd and transferred all its2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
43
equities (18,893,448 shares) to China Everbright Medicine Co., Ltd. After the transfer, China
Everbright Bank (Group) Co., Ltd held 38,917,518 domestic legal person shares of the
company. On April 12, 2002, China Everbright Bank (Group) Co., Ltd and Xi’an Topsun Group
Co., Ltd signed the Equity Custody Agreement and China Everbright Bank (Group) Co., Ltd
put all its domestic legal person shares (38,917,518 shares) under the custody of Xi’an
Topsun Group Co., Ltd. On December 21, 2004, Xi’an Topsun Group Co., Ltd received the
38,917,518 legal person shares of the company from China Everbright Bank (Group) Co., Ltd.
By December 31, 2004, China Everbright Bank (Group) Co., Ltd did not hold any of the
company shares, and Xi’an Topsun Group Co., Ltd directly held 38,917,518 shares of the
company, accounting for 12.72 ％ of total shares. On February 4, 2005, Joincare
Pharmaceutical Group Industry Co., Ltd (hereinafter referred to as Joincare) and Xi’an Topsun
Group Co., Ltd signed the Equity Transfer Agreement and Equity Mortgage Agreement. Xi’an
Topsun Group Co., Ltd directly transferred and mortgaged 38,917,518 domestic legal person
shares of our company to Joincare (accounting for 12.72％ of total shares) and handled the
formalities for equity transfer on August 3, 2006.
By June 30, 2009, Joincare Group and its holding subcompanies has owned 134,000,271
shares of the company through the agreement transfer and direct purchase from the
secondary markets, accounting for 44.8744% of total shares and becoming the largest
shareholder, so it has owned the actual control right of the company. The formalities for
transferring the equities of 6,059,428 legal person shares held in the name of Guangzhou
Begol Trading Corporation to Joincare Group have not been handled.
On June 18, 1998, the company was registered with the State Administration of Industry and
Commerce for the second time and obtained the Qi He Yue Zhu Zong Fu Zi No. 001111
enterprise legal person business license.
2 Industry
The company is in the pharmacy industry.
3 Business scope
The approved business scope of the company: the company mainly deals with the medicines2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
44
(Chinese and western finished medicines, raw materials for medicines, medicine intermediate,
Chinese medicine materials, tablet of Chinese medicines, healthcare and invigorative
products, healthcare foodstuff, healthcare drinking, cosmetics, sanitation materials, biological
products, bio-chemical reagents, medical instruments, etc) and also handles the chemical
industry, food, real estate, tourism and information, etc.
4 Change of main business
During the report period, the company has not changed its main business.
II. Preparation Basis for Financial Statements
Based on the continuous operation assumption of company and the actual transactions and
items, in accordance with the Enterprise Accounting Standards- Basic Standards(No. 33
decree of the Ministry of Finance) and the Notice of the Ministry of Finance on Printing and
Issuing 38 Standards including the No. 1 Enterprise Accounting Standard – Inventory (Cai
Kuai [2006] No. 3) issued by the Ministry of Finance in February 15, 2006, and the Notice of
the Ministry of Finance about Printing and Issuing the Enterprise Accounting Standard –
Application Guidelines (Cai Kuai [2006] No. 18) issued by the Ministry of Finance in October
30, 2006, No. 7 Questions and Answers about the Standardization of Information Disclosure
of Companies Making Public Offering of Securities – Comparison about Preparation and
Disclosure of Accounting Information in the Transition Period of New and Old Accounting
Standards, the No. 1 Enterprise Accounting Standard, the No. 2 Enterprise Accounting
Standard, the No. 3 Enterprise Accounting Standard, and the No. 1 Explanatory
Announcement about Information Disclosure of Companies Making Public Offering of
Securities issued by China Securities Regulatory Commission, this financial statement is
prepared under the following important accounting and valuation policies.
III. Declaration of Compliance with the Enterprise Accounting Standards
The financial statement prepared by the company meets the requirements of the enterprise
accounting standards, and exactly and completely reflects the financial status, operation
result and cash flow, etc of the company.
IV. Main Accounting Policies and Preparation Methods of Accounting Evaluation and
Consolidated Financial Statement of the Company2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
45
(I) Accounting Year
The company employs the period of the calendar days from the January 1 to December 31
each year as the accounting year.
(II) Currency Used in Book-keeping
The Company takes the RMB as the currency in book-keeping.
(III) Calculation Natures and Statement Items with the Changes of Calculation
Natures in the Report Period
In calculating the accounting factors, the company takes the historical cost method; in case
the determined accounting factor amount can be obtained or reliably calculated, the
replacement cost, net realizable value, current value and fair value of the individual
accounting factor may be employed.
By using the historical cost calculation method, the assets will be calculated on the basis of
the cash paid to purchase them or the cash equivalents or the fair value of the considerations
paid to purchase such assets. The liabilities will be calculated on the basis of the actually
received amount or asset amount for performing the current obligations, or the contract
amount for performing the current obligations, or the paid cash amount or cash equivalent
amount to repay the debts in the daily activities
There are no changes about calculation natures of statement items during the report period.
(IV) Standard for Cash Equivalent
In preparing the cash flow statement, the cash equivalents of the company include the
investments with short period (it usually expires within three months from the purchase date),
characteristics of high flow, easy conversion to the known amount of cash and little risk of
value change. The equity investment will not be deemed as the cash equivalents.
(V) Calculation Method of Foreign Currency Business
The foreign currency business will be converted to RMB for book-keeping in accordance with
the spot exchange rate on the current transaction day. On the preparation date of the balance
sheet, the balance of foreign currency items will be adjusted after the conversion to the RMB
in accordance with the spot exchange rate that day; the difference of spot exchange rates
between the preparation date of the balance sheet and the initial confirmation or the previous2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
46
date of the balance sheet will be accrued to the current profits and losses; to add or reduce
the amount of foreign currency items used in book-keeping. The non-currency items of
foreign currency calculated with the historical cost method will be converted at the spot
exchange rate on the transaction day and the amount of currency used in book-keeping will
not be changed.
(VI) Conversion of Financial Statement in Foreign Currency
The asset and liability items in the balance sheet will be converted at the spot exchange rate
on the preparation date of balance sheet. Among the equity items of shareholders, all items
except the “undistributed profit” will be converted at the spot exchange rate on the occurrence
date. The income and expense items in the profit statement will be converted at the average
exchange rate that is determined by using the reasonable methods of systems and is similar
to the spot exchange rate on the occurrence date. The conversion difference of financial
statement in foreign currency caused by the above conversion will be separately listed in the
equity item of shareholders in the balance sheet.
(VII) Confirmation and Calculation of Financial Instruments
1. Classification. The financial instruments may be classified to five categories based on the
investment purpose and economic essence:
①The financial assets or financial liabilities that are calculated in the fair values and whose
changes are accrued to the current profit and loss, including the tradable financial assets or
financial liabilities; the financial assets or financial liabilities that are designated to be
calculated in the fair values and whose changes will be accrued to the current profit and loss;
② The investments that are held to the expiry dates;
③ Loans and accounts receivable;
④ Saleable financial assets;
⑤ Other financial liabilities.
2. Initial confirmation and subsequent calculation
① The financial assets or financial liabilities that are calculated in the fair values and whose
changes are accrued to the current profit and loss: the fair values to get them will be the initial
confirmation amount and the relevant transaction expenses will be accrued to the current2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
47
profit and loss at the time of occurrence. The cash dividends or bond interests in the
payments that have been declared to be distributed will be separately confirmed as the
receivable items. The interests or cash dividends obtained during the holding period will be
confirmed as the investment gains. On the preparation date of financial statement, the
changes of fair values will be accrued to the current profit and loss.
② The investments that are held to the expiry dates: the sum of fair values and relevant
expenses to get them will be deemed as the initial confirmation amount. The cash dividends
or bond interests in the payments that have been declared to be distributed will be separately
confirmed as the receivable items. The interest incomes confirmed in accordance with the
actual interest rate method during the holding period will be accrued to the investment gains.
③ Receivable account: the prices in the contracts and agreements with the purchasers will
be the initial book-keeping amount.
④ Saleable financial assets: the sum of fair values and relevant expenses to get them will be
deemed as the initial confirmation amount. The cash dividends or bond interests in the
payments that have been declared to be distributed will be separately confirmed as the
receivable items. The interests and cash dividends generated during the holding period will
be accrued to the investment gains. At the end of the period, the saleable financial assets will
be calculated in the fair values and the changes of fair values will be accrued to the capital
reserves (other capital reserves).
⑤ Other financial liabilities: the sum of fair values and relevant expenses to get them will be
deemed as the initial book-keeping amount. The subsequent calculation will employ the
amortized cost method.
3. Determination Method about Fair Values of Main Financial Assets and Financial Liabilities
① For the active financial assets or financial liabilities in the market, the quotations will be
used for determination of their fair values.
② For the inactive financial instruments, the enterprises will employ the evaluation technology
to determine their fair values.
③ The financial assets that are initially obtained or derived or financial liabilities will take the
market transaction prices as the basis to determine their fair values.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
48
④ In case the enterprise employs the discounted cash flow method to determine the fair
values, the market return rates of other financial instruments with the essentially same
contract terms and characteristics may be used as the discounting rate. In case the shortterm
accounts receivable without indicating the interest rate and current values of accounts
payable have the very small price difference with the actual transaction prices, they will be
calculated at the actual transaction prices.
⑤ Other financial liabilities: the sum of fair values and relevant expenses to get them will be
deemed as the initial book-keeping amount. The subsequent calculation will employ the
amortized cost method.
3. Determination Method about Fair Values of Main Financial Assets and Financial Liabilities
① For the active financial assets or financial liabilities in the market, the quotations will be
used for determination of their fair values.
② For the inactive financial instruments, the enterprises will employ the evaluation technology
to determine their fair values.
③ The financial assets that are initially obtained or derived or financial liabilities will take the
market transaction prices as the basis to determine their fair values.
④ In case the enterprise employs the discounted cash flow method to determine the fair
values, the market return rates of other financial instruments with the essentially same
contract terms and characteristics may be used as the discounting rate. In case the shortterm
accounts receivable without indicating the interest rate and current values of accounts
payable have the very small price difference with the actual transaction prices, they will be
calculated at the actual transaction prices.
4. Disposal of Financial Asset Depreciation
At the end of the period, in case enough evidences prove that all financial assets except
those that are calculated in the fair values and whose changes are accrued to the current
profit and loss have been depreciated, the depreciation reserve will be withdrawn based on
the difference between the expected currency flow values in the future and the book values.
(1)Accounts receivable
At the end of the period, in case enough evidences prove that the accounts receivable have2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
49
been depreciated, the depreciation loss will be calculated and confirmed based on the
difference between the book values and the expected currency flow values in the future.
At the end of the period, the depreciation test will be made about the individual accounts
receivable with huge amounts. In case enough evidences prove that they have been
depreciated, the depreciation loss will be confirmed and withdrawn based on the difference
between the expected currency flow values in the future and the book values.
For the individual accounts receivable with small amounts at the end of the period, classify
them along with the accounts receivable that have not proved to be depreciated after the
single test to numbers of packages in line with the similar credit risk characteristics; then
determine and withdraw the depreciation loss based on the percentage of these receivable
items to the balances on the preparation date of balance sheet. This percentage reflects the
actual depreciation loss in each item, i.e., the exceeding amount of book values of each
package over their currency flow values in the future.
On the basis of the actual loss rate of receivable account package (i.e., age package) with the
same or similar credit risk characteristics in the previous year, the company will consider the
current situation to determine the percentage of withdrawing the bad debt reserve for the
following receivable account package:
For the fund transfer between the companies within the consolidation scope, no bad debt
reserve will be withdrawn.
In making the group testing, if any signs indicate that the receivability of a certain
account receivable is obviously different from other accounts receivable at the same age
Age Withdrawal
Percentage
Less than one year (including one year) 5%
One to two years (including two years) 6%
Two to three years (including three years) 20%
Three to four years (including four years) 70%
Four to five years (including five years) 90%
Over five years 100%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
50
and therefore, the withdrawal of bad debt reserve at the specified percentage will not
actually reflect its receivable amount, the individual confirmation method will be
employed for withdrawal of bad debt reserve.
Confirmation standard of bad debts: ① the debtors are bankrupt or dead and their remaining
assets or the heritage are not enough to write off the accounts receivable; ②the debtors fail
to repay the debt overdue and there are obvious signs that the accounts receivable cannot
be returned.
For the accounts that cannot finally be returned, report to the Board of Directors for the
approval of writing off such bad debts.
(2) The investments that are held to the expiry dates
For the investments that are held to the expiry dates, the depreciation test will be made
based on numbers of packages of the individual or accounts receivable with similar credit risk
characteristics. In case enough evidences prove that they have been depreciated, the
depreciation loss will be confirmed and withdrawn based on the difference between the
expected currency flow values in the future and the book values.
If the depreciation reserves are withdrawn for the investments that are held to the expiry
dates, and enough evidences prove that their values have been restored and actually it is
related to the facts after confirmation of such loss, the originally confirmed depreciation
reserve will be reversed in case it does not exceed the amortized cost on the transfer date of
such financial assets without withdrawing the depreciation reserve and will be accrued to the
current profit and loss.
(3) Saleable Financial Assets
In case the fair values of saleable financial assets have greatly dropped, or after considering
various relevant factors, this drop tendency is deemed as long-term, the depreciation reserve
will be withdrawn based on the difference between the expected currency flow values in the
future and the book values.
In case the saleable financial assets have been depreciated, the accumulated loss caused by
the drop of fair values that have been accrued to the owners’ equities will be transferred, and
then the depreciation reserve will be confirmed and withdrawn.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
51
For the saleable liability instruments whose depreciation loss has been confirmed, if their fair
values during the subsequent accounting period have gone up and it is actually related to
the facts occurring after the confirmation of original depreciation loss, the originally confirmed
depreciation reserve will be reversed and accrued to the current profit and loss. The
depreciation loss of the investments in saleable liability instruments will not be reversed
through the profit and loss.
(VIII) Inventory Calculation Method:
1. Inventory Classification
Inventory classification: the inventories of the company mainly include the raw materials,
packaging materials, products under production, products at stock, processing materials and
low-value consumable products, etc.
2. The company employs the perpetual inventory method.
3. Pricing method in purchasing and delivery: The purchased inventories shall be accrued at
the actual cost. The purchase and warehousing of various inventories in the company are
priced based on the actual cost; The delivery of stock commodities shall be calculated by the
weighted average method; whiling the low-value consumable products and packaging
materials are taken, they will be accrued to the cost at one time.
4. Confirmation standard and withdrawal method of inventory depreciation reserve
After the complete check about the inventories at the end of the period, the inventory
depreciation reserve will be withdrawn or adjusted based on the lower between the inventory
cost and discountable net value. The discountable net value will be determined after the
deduction of the possible cost, marketing expense and relevant taxes from the current
evaluation of inventories in the normal production and operation period. Normally, the
inventory depreciation reserve will be withdrawn in accordance with the individual inventory
item, but for the large quantity of low-unit-price inventories, the inventory depreciation reserve
will be withdrawn in accordance with the inventory type; for the inventories that are related to
the product series produced and sold in the same area, have the same or similar final usage
and purposes and are hard to be separately calculated from other items, their depreciation
reserves will be consolidated.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
52
On the preparation date of balance sheet, in case the impact factors of the withdrawn
inventory depreciation reserve disappear, the deducted inventory values will be restored and
reversed in the originally withdrawn inventory depreciation reserve; the transferred amount
will be accrued to the current profit and loss.
(IX) Long-term Equity Investment
1. Initial Calculation
（1） Long-term equity investment caused by the enterprise merger
① In case the long-term equity investment are made to obtain the equities of the enterprises
under the same control and the company pays the cash, transfers the non-cash assets or
bears the liabilities as the consideration for the merger, the book value share on the merging
date to obtain the owners’ equities of the merging party will be deemed as the initial
investment cost of long-term equity investment. The difference between the initial investment
cost of long-term equity investment and paid cash, transferred non-cash assets and book
values of liabilities will be supplemented by the capital reserve; in case the capital reserve is
not enough, the remaining gains will be adjusted. In case the company issues the equity
securities as the merger consideration, the book value share on the merging date to obtain
the owners’ equities of the merging party will be deemed as the initial investment cost of longterm
equity investment. If the book value amount of the issued shares is deemed as the
capital, the difference between the initial investment cost of long-term equity investment and
the book value amount of the issued shares will be supplemented by the capital reserve; in
case the capital reserve is not enough, the remaining gains will be adjusted. All direct
expenses related to the enterprise merger, including the auditing expense, evaluation
expense, legal service expense, etc will be accrued to the current profit and loss.
②In case the long-term equity investment are made to obtain the equities of the merging
enterprises which are not under the same control, the merger cost will be the paid assets,
existing liabilities and fair values of the issued equity securities on the purchasing date to
purchase the control right of such enterprises. In case the absorption merger method is
employed, the difference between the enterprise merger cost and the identifiable net asset
values of such enterprises will be confirmed as the goodwill or accrued to the current profit2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
53
and loss. In case the controlling merger is employed and the enterprise merger cost is more
than the identifiable net asset values of such enterprises in the merger, the difference
between them will be confirmed as the goodwill in the consolidated balance sheet. In case the
enterprise merger cost is less than the identifiable net asset values of such enterprises in the
merger, the difference between them will be accrued to the current profit and loss. All direct
expenses related to the enterprise merger will be accrued to the enterprise merger cost.
（2） Other types of long-term equity investment
① In case the cash investment is made to obtain the long-term equity, the actual payment
amount will be deemed as the initial investment cost. The initial investment costs also include
the direct expenses related to the long-term equity investment, taxes and other necessary
expenses.
②In case the long-term equity investment is made by issuing the equity securities, the fair
values of issued equity securities will be deemed as the initial investment cost.
③For the long-term equity investment made by the investors, the values agreed in the
investment contracts or agreements will be deemed as the initial investment cost, except that
the contracts or agreements provide that the values are not fair.
④In case the long-term equity investment is made by exchanging the non-currency assets,
and this exchange has the commercial substance and the fair values of said assets can be
reliably calculated, the fair values of the assets and relevant taxes will be deemed as the
initial investment cost; the difference between the fair values of the assets and book values
will be accrued to the current profit and loss; in case the non-currency asset exchange does
not have the above two conditions, the book values of the assets and relevant taxes will be
deemed as the initial investment cost.
⑤In case the long-term equity investment is made by the mode of liability restructure, the fair
values of the obtained equities will be deemed as the initial investment cost; the difference
between the initial investment cost and book values of liabilities will be accrued to the current
profit and loss.
2. Subsequent Calculation
(1) The cost method is employed to calculate the long-term equity investment of2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
54
subcompanies and will be adjusted in accordance with the equity method in the preparation of
the consolidated financial statements.
(2) The cost method is used to calculate the long-term equity investments in the invested
units which are not under the common control or of important impact, are not quoted in the
active market or whose fair values cannot be reliably calculated. In employing the cost
method, add or return the cost used for adjusting the long-term equity investment. The current
investment gains are only limited to the distributed amount of accumulative net profit
generated by the investment in the invested units since the investment completion. The
profits or cash dividends exceeding the above amount that are declared to be distributed by
the invested units will be deemed as the return of initial investment cost, deducting the book
values of investments.
(3) The equity method is used to calculate the long-term equity investments in the invested
units, which are under the common control or of important impact. In employing the cost
method, in line with the net profit and loss share of invested units to be distributed or borne,
confirm the profit and loss of investments and adjust the book values of long-term equity
investments. The profit and loss of current investment will be the net profit or net loss share of
invested units to be distributed or borne in the current year. In confirming the net loss of
invested units to be borne, the limit is the zero of book values of investment (except that the
investment enterprises bear the obligations for additional loss); in case the invested units
make the net profits in the future and the distribution amount of gains exceeds the
unconfirmed loss amount, the book values of investment will be restored subject to the
unconfirmed loss amount to be borne.
(4) In case the invested units employs the different accounting policies and accounting
periods from the investment enterprises, the accounting policies and accounting periods of
the investment enterprises will be employed to adjust the financial statements of invested
units and confirm the investment gains. As regards the other changes of owners’ equities
except the net profit and loss of the invested units, the investment units will adjust the book
values of long-term equity investments and accrue them to the owners’ equities.
(5) In disposing of the long-term equity investment, the difference between the book values2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
55
and actual payments will be accrued to the current profit and loss. In case the equity method
is employed to calculate the long-term equity investment and the other changes of owners’
equities except the net profit and loss of the invested units are accrued to the owners’
equities, the part that has been accrued to the owners’ equities will be proportionally
transferred to the current profit and loss.
3. Confirmation standard and withdrawal method of depreciation reserve for long-term equity
investment
In case the cost method is used to calculate the long-term equity investments which are
not quoted in the active market or whose fair values cannot be reliably calculated, the
depreciation loss will be determined based on the difference between the book values and
current values determined by the discounting of future cash flow in line with the current
market return rate of similar financial assets. For the other long-term equity investments, in
case the calculation results of receivable amounts indicate that the receivable amount of this
long-term equity investment is less than their book values, the difference will be confirmed as
the asset depreciation losses. Once the depreciation loss of long-term equity investment is
confirmed, they will not be reversed.
(X) Real Estate for Investment
The real estates for investment refer to the real estates that are held for the purpose of
earning the rent or capital increment, or for both of them, including the land use rights that
have been rented or will be transferred after the value increment, or the structures that have
been rented.
The company employs the cost mode to calculate the current real estates for investment and
withdraws the depreciation or amortization in accordance with the same depreciation or
amortization policies of fixed assets and intangible assets in the company. In case the real
estates for investment are transferred to other assets or other assets are transferred to the
real estates for investment, the book values of real estates before the transfer will be the book
values after the transfer. In case the company sells, transfers and rejects the real estates for
investment or the real estates for investment are damaged, the remaining amount after the
deduction of book values and relevant taxes from disposal incomes will be accrued to the2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
56
current profit and loss. In case the received amount is less than the book values, the
depreciation reserve will be withdrawn based on the difference between the receivable
amount of individual real estate for investment and their book values; Once the depreciation
losses are withdrawn, they will not be reversed.
(XI)Fixed Asset Pricing and Depreciation Method
1. Confirmation condition for fixed assets
The fixed assets refer to the tangible assets with the usage life of over one accounting year
that are held for commodity production, labor provision, renting or operational management
The fixed assets will be confirmed if they meet the following conditions:
(1) The economic benefits related to this fixed asset probably flow to the enterprise;
(2) The cost of this fixed asset may be reliably calculated.
2. Classification of Fixed Assets
The fixed assets may be classified into the following items: houses and structures, machine
equipments, transportation equipments, electronic equipment and others.
3. Calculation of fixed assets
The actual costs of fixed assets will be deemed as the initial calculation amount.
(1) In case the prices to purchase the fixed assets exceed the normal credit conditions and
cause the payment deferment and are characteristic of the financing nature, the costs of fixed
assets will be determined based on the current values of purchase prices.
(2) In case the fixed assets are obtained by the liability restructure to write off the liabilities of
debtors, their book values will be determined based on the fair values of this fixed asset. The
difference between the book values of restructuring liabilities and the fair values of this fixed
asset will be accrued to the current profit and loss. In case the non-currency asset exchange
is characteristic of commercial substance and the fair values of received or delivered assets
can be reliably calculated, the book values of received fixed assets in the non-currency asset
exchange will normally be determined based on the fair values of delivered assets, except
that the accurate evidences indicate that the fair values of received assets are more reliable.
In case any non-currency asset exchange does not meet the above conditions, the book
values of delivered assets and the payable taxes will be deemed as the costs of received2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
57
fixed assets. No profit and loss will be confirmed.
(3) The book values of fixed assets to be obtained by the absorption merger from the
enterprises which are under the same control will be determined based on the book values of
merging party; the book values of fixed assets to be obtained by the absorption merger from
the enterprises which are not under the same control will be determined based on their fair
values.
The rejection expenses of fixed assets will be calculated and accrued to the book values of
fixed assets based on the current values.
In case the subsequent payments related to the fixed assets make the economic benefits
generated by the inflow of this fixed asset to the enterprise exceed the original evaluations,
the exceeding part will be accrued to the book values of fixed assets. The increased amount
will not exceed the receivable amount of this fixed asset.
4. The depreciation method of fixed assets: the average life method is used to calculate the
depreciation of fixed assets in the company from the next month after such fixed assets meet
the expected usable conditions. The depreciation life, annual depreciation rate and assessed
residual value rate of various fixed assets are listed as follows:
5. Confirmation about the depreciation reserve of fixed assets: at the end of each period, the
company will judge if relevant assets have any signs of possible depreciation. If so, the
company will evaluate the receivable amount. The receivable amount will be determined
based on the larger one between the net amount after the deduction of disposal expenses
Fixed Asset category Depreciation life
(years)
Annual depreciation
rate
Assessed residual
value rate
Houses and
structures
20 4.5%-4.75% 5%-10%
Machine equipments 10 9%-9.5% 5%-10%
Transportation
equipments
5 18%-19% 5%-10%
Electronic equipment
and others
5 18%-19% 5%-10%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
58
from the fair values of this asset and the current values of expected cash flow of this asset in
the future. If the receivable amount of this asset is less than the book values, the difference
will be confirmed as the depreciation loss of assets. The depreciation reserves of fixed assets
will be withdrawn subject to the individual asset. Once the depreciation losses of assets are
confirmed, they will not be reversed in the future accounting period.
In withdrawing the depreciation for the fixed assets whose depreciation reserves have been
withdrawn, based on the book values of this fixed asset and the remaining usage life, the
depreciation rate and depreciation amount will be calculated and determined once again. The
fixed assets whose depreciation reserves have been fully withdrawn will not be withdrawn
once again.
(XII) Calculation Method of Projects under Construction
1. Classification of projects under construction
The projects under construction will be calculated based on the classification of proposed
projects.
2. Transfer time of projects under construction to fixed assets
For the projects under construction, all expenses occurring before they are ready for the use
will be the book values as the fixed assets. In case the projects under construction has been
ready for use but the final accounts for completion have not been handled, from the date
when such projects has been ready for use, the company will evaluate the values and
determine the costs based on the project budgets, prices or actual costs of projects, etc and
the depreciation amount will also be withdrawn; when the final accounts for completion are
handled, the company will adjust the originally evaluated values subject to the actual costs,
but will not adjust the withdrawn depreciation amount.
3. Depreciation of projects under construction: at the end of the period, the company will
judge if the depreciation reserves are withdrawn based on the depreciation signs of such
projects. In case the projects that have been stopped for a long time and will not be rebuilt
within three years are expected to be depreciated, the depreciation reserves for such projects
will be withdrawn for the difference amount between the receivable amount and the book
values. Once the depreciation reserves for such projects are withdrawn, they will not be2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
59
reversed.
(XIII) Pricing and Amortization Method of Intangible Assets
1. Confirmation condition of intangible assets
The intangible assets mean the identifiable non-currency assets without the actual substance
status that are owned or controlled by the enterprises. Only the intangible assets meeting the
following conditions will be confirmed:
(1) The economic benefits related to this intangible asset probably flow to the enterprise;
(2) The cost of this fixed asset may be reliably calculated.
2. Pricing of intangible assets
The intangible assets will be originally calculated based on the actual costs.
(1)In case the prices to purchase the intangible assets exceed the normal credit conditions
and cause the payment deferment and are characteristic of the financing nature, the costs of
intangible assets will be determined based on the current values of purchase prices.
(2) In case the intangible assets are obtained by the liability restructure to write off the
liabilities of debtors, their book values will be determined based on the fair values of this
intangible asset. The difference between the book values of restructuring liabilities and the
fair values of this intangible asset will be accrued to the current profit and loss. In case the
non-currency asset exchange is characteristic of commercial substance and the fair values of
received or delivered assets can be reliably calculated, the book values of received intangible
assets in the non-currency asset exchange will normally be determined based on the fair
values of delivered assets, except that the accurate evidences indicate that the fair values of
received assets are more reliable. In case any non-currency asset exchange does not meet
the above conditions, the book values of delivered assets and the payable taxes will be
deemed as the costs of received intangible assets. No profit and loss will be confirmed.
(3) The book values of intangible assets to be obtained by the absorption merger from the
enterprises which are under the same control will be determined based on the book values of
merging party; the book values of intangible assets to be obtained by the absorption merger
from the enterprises which are not under the same control will be determined based on their
fair values.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
60
3. Usage life and amortization of intangible assets
In obtaining the intangible assets, the company will analyze and judge their usage life. In case
their usage life is limited, the company will evaluate the usage years or the quantity of
calculation units such as the capacity constituting the usage life; in case it’s impossible to
evaluate the usage life when the intangible assets bring the benefits to enterprises, it will be
deemed that the usage life of such intangible assets is uncertain.
Amortization method of intangible assets: for the intangible assets with the limited usage life,
the average amortization amount in the usage life will be accrued to the profit and loss. For
the intangible assets with the uncertain usage life, no amortization will be made. At the end of
each year, the company will recheck the usage life of intangible assets with the limited usage
life and amortization method. In case the usage life and amortization method are different
from the original ones, the amortization life and method after the recheck will be employed.
4. The depreciation of intangible assets will be handled in accordance with the accounting
polices about asset depreciation. Once the depreciation losses of intangible assets are
confirmed, they will not be reversed in the future accounting period.
(XIV) Research and Development Expenses
The expenses for the research and development of projects in the company include the
expenses for the research stage and development stage.
The expense for the research stage means the expense occurring for the planned
investigations of the company about the innovative exploration in order to obtain and
understand the latest science and technical knowledge, which are the preparations made for
the further development activities; whether the already done research activities will be
transferred to the development or the development will turn to the intangible assets has a lot
of uncertainty.
The expense for the development stage means the expense occurring to apply the research
results or other knowledge to a certain plan or design and produce the new or substantially
improved materials, equipments and products, etc before the launch of commercial
production and use. Compared with the research stage, the development stage comes on the
basic condition that the research stage work is completed and has greatly turned to a new2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
61
product or technology.
The expense in the research stage of projects in the company will be accrued to the current
profit and loss in the time of occurrence; the expense in the development stage will be
confirmed as the intangible assets if the following conditions are met:
1. The completion of this intangible asset will make it have the feasibility to be able to be used
or sold.
2. Complete this intangible asset for the purpose of use and selling.
3. The means by which the intangible assets bring the economic benefits.
4. Have enough technical and financial resources and other supports to complete the
development of this intangible asset and be able to use and sell this intangible asset.
5. The expense attributable to the development stage of this intangible asset can be reliably
calculated.
(XV) Amortization Method of Long-term Amortization Expenses
The overhaul payment of fixed assets in the company will be averagely amortized during the
overhaul interval; other long-term amortization expenses will be averagely amortized during
the benefiting period.
(XVI) Asset Depreciation
1. Definition of asset depreciation
The asset depreciation means that the receivable amount of assets is less than their book
values. On the preparation date of balance sheet, the company will judge if relevant assets
have any signs of possible depreciation. If so, the company will evaluate the receivable
amount. In case the receivable amount of assets is less than their book values, such book
values will be deducted to the receivable amount and the deducted amount is confirmed as
the depreciation loss of assets and accrued to the current profit and loss; at the same time,
the relevant depreciation reserves of assets will be withdrawn. Once the depreciation losses
of assets are confirmed, they will not be reversed in the future accounting period. After the
confirmation of depreciation losses of assets, the depreciation or amortization expenses of
assets will be adjusted in the future period so that in the remaining usage life of this asset, the
company will systemically amortize the adjusted book values of assets. The following signs2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
62
indicate that the assets are possibly depreciated:
(1) The market prices of assets drop greatly and the drop extent is clearly higher than the
expected drop for the time passage or normal use.
(2) The economic, technical or legal environments and markets where the company is
operating are greatly changing in the current period or in the near future, which will exercise
the unfavorable impacts on the company.
(3) The interest rate or other investment return rate in the market have been enhanced in the
current period, which will influence on the calculation of the discounting rate of cash flow
values in the future and lead to the great decrease of receivable amount of assets.
(4) The evidences indicate that the assets have been too old or the substances have been
damaged.
(5) The assets have been or will be left unused, stopped to be used or planned to be disposed
in advance.
(6) The evidences from the internal reports in the company indicate that the economic
performance of assets have been or will be less than the expected performance. For example,
the net cash flow or operating profits (or losses) created by the assets are greatly less (more)
than the expected amounts. etc.
(7) Other signs that indicate the assets may possibly be depreciated.
2.Determination of depreciation loss of assets
(1) At the end of the period, the company will inspect the long-term equity investment, fixed
assets, projects under construction, intangible assets and goodwill, etc to judge if there are
any signs of possible depreciation. For the goodwill caused by the enterprise merger and the
intangible assets with the uncertain usage life, whether there are signs of possible
depreciation, the depreciation tests will be made each year.
(2) If the assets have any signs of possible depreciation, the company will evaluate the
receivable amount. The receivable amount will be determined based on the larger one
between the net amount after the deduction of disposal expenses from the fair values of this
asset and the current values of expected cash flow of this asset in the future. If the receivable
amount of this asset is less than the book values, such book values will be deducted to the2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
63
receivable amount and the deducted amount is confirmed as the depreciation loss of assets
and accrued to the current profit and loss. The depreciation tests of goodwill and its relevant
asset groups (or asset group combination, the same below) will be made. The goodwill
reflected in the consolidated financial statement will not include the goodwill of subcompany
attributable to the equities for the minority of shareholders; but the tests of the depreciation
about relevant asset groups will include the goodwill attributable to the equities for the
minority of shareholders; the company will adjust the book values of asset groups and
compare the adjusted book values of asset groups with their receivable amounts to
determine if the asset groups (including the goodwill) are depreciated. If so, the company will
deduct the equity share of the minority of shareholders from the above losses to determine
the depreciation losses of goodwill attributable to the parent company. Once the depreciation
losses of assets such as the long-term equity investment, the real estates for investment
calculated by the cost mode, fixed assets, intangible assets and goodwill are confirmed, they
will not be reversed in the future accounting period.
3. Calculation method of asset group
(1) Generally, the company will evaluate the receivable amount subject to the individual asset.
In case the receivable amount of individual asset cannot be evaluated, the receivable amount
of asset groups will be determined based on the asset groups containing this asset. The
determination of asset groups will be based on whether the main cash inflow generated by
the asset groups are independent from other assets or cash inflow of asset groups; at the
same time, it’s necessary to consider the production and operation management mode of the
company and the policy-deciding mode about the continuous use or disposal of assets, etc.
Once the asset groups are determined, they will not be changed in each accounting period.
(2) The receivable amount of asset groups will be determined based on the larger one
between the net amount after the deduction of disposal expenses from the fair values of this
asset group and the current values of expected cash flow in the future..
(3) If the receivable amount of the asset group or asset group combination is less than the
book values, the relevant depreciation loss will be confirmed. The depreciation loss amount2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
64
will at first write off the book values of goodwill that are amortized to the asset groups or asset
group combinations, then based on the percentage of book values of various other assets
except the goodwill in the asset groups or asset group combination, write off the book values
of various other assets in the above proportion.
(XVII) Capitalization of loan expenses
1. Confirmation principle of capitalization of loan expenses
In case the loan expenses occurring in the company may directly be attributable to the
construction and productions of assets complying with the capitalization conditions , they will
be capitalized and accrued to the relevant capital costs; other loan expenses will be
confirmed as the expenses based on the actual amount in the time of occurrence and
accrued to the current profit and loss. The assets complying with the capitalization conditions
mean the assets such as fixed assets, real estates for investment and inventory, etc that need
a long time of construction and production activities before being ready for use or for sales.
The loan expenses begin to be capitalized under the following circumstances:
（1） The asset payments that have been made include the payments such as the paid
cashes, transferred non-currency assets or borne liabilities with the interests to construct or
produce the assets complying with the capitalization conditions;
（2） The loan expenses have occurred;
（3） The necessary construction or production activities to make the assets ready for use
or sales have been launched.
In case during the construction or production period the assets complying with the
capitalization conditions are abnormally suspended and the suspension period exceeds 3
months continuously, the capitalization of loan expenses will also be suspended.
The capitalization of loan expenses for the assets that have been constructed or produced
and are ready for use or sales will be stopped.
1. Capitalization period of loan expenses
In case the assets that have been constructed and produced comply with the capitalization
conditions, all expenses occurring before this asset complies with the expected use or sales
status will be accrued to the cost of this assets; all expenses occurring after this asset2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
65
complies with the expected use or sales status will be directly accrued to the current financial
expense.
2. Calculation method about capitalization amount of loan expenses
The interest expenses for special loans (after the deduction of interest income generated by
the unused loan capitals or the investment return obtained from the temporary investments)
and auxiliary expenses will be capitalized before the assets complying with the capitalization
conditions are ready for the expected use or sales.
The interest amount of general loans to be capitalized will be determined by multiplying the
weighed average amount of the asset payments by which the accumulated assets exceed
the special loans with the capitalization rate of general loans. The capitalization rate will be
determined based on the weighed average interest rate of general loans.
In case the loans have the discounts or premiums, the company will adjust the interest
amount in each period based on the amortized discount and premium amount in each
accounting period in accordance with the actual interest rate method.
(XVIII) Confirmation Principle of Expected Liabilities
1. Confirmation Principle of Expected Liabilities
The obligations related to contingent events that meet the following conditions at the same
time will be confirmed as the liabilities:
(1) This obligation is the current obligation of the company;
(2) The performance of this obligation will probably cause the economic benefits to flow out of
the company;
(3) The amount of this obligation can be reliably calculated.
In case the loss contracts and restructuring obligations of the company meet the above
conditions, they will be confirmed as the expected liabilities.
2. Determination method about optimum evaluation amount of expected liabilities
In case the necessary payments have a amount scope, the optimum evaluation amount will
be determined based on the average amount between the upper and lower limits of amounts;
in case the necessary payments do not have such a amount scope, the optimum evaluation
amount will be determined in the following method:2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
66
(1) If the contingent events involve the individual project, the optimum evaluation amount will
be determined based on the possible amount;
(2) If the contingent events involve many projects, the optimum evaluation amount will be
determined based on the possible amount and occurrence probability. In case all or part of
payments about the confirmed liquidation liabilities are expected to be compensated by the
third parties or other parties and the compensation amount are surely received, such
amounts will be separately confirmed. The confirmed compensation amounts will not exceed
the book values of confirmed liabilities.
(XIX)Confirmation Principle of Income
1. Commodity sales
The company has transferred the main risks and rewards about commodity ownership to the
purchasers; the company does not reserve any continuous management rights normally
related to the ownership nor performs any effective control about the sold commodities; the
income amounts will be reliably calculated; the relevant economic benefit will probably flow
into the enterprise; in case the relevant costs that have occurred or will occur may be reliably
calculated, the achievement of operating incomes will be confirmed.
2. Provision of labors
In case on the preparation date of balance sheet the results about labor provision transaction
can be reliably evaluated, the labor income will be confirmed by the completion percentage
method. Based on the actual situation, the completion progress of labor provision will be
determined in the following methods:
(1) Measurement about the work that has already been completed.
(2) The percentage of the provided labors to the total labor capacity.
(3) The percentage of the occurring costs to the total costs.
The company will determine the total amount of labor provision based on the prices in
contracts and agreements that have been received or will be receivable, except that such
prices are not fair. On the preparation date, the current labor incomes will be determined
based on the amount after the total labor income amount multiplied by the completion
progress deducts the accumulated labors in the past accounting periods.2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
67
In case the labor transaction results on the preparation date of balance sheet cannot be
reliably evaluated, they will be handled by the following means:
(1) In case the labor costs that have occurred can be compensated, the labor income will be
confirmed based on such labor costs and the same amounts will be settled as the labor costs.
(2) In case the labor costs that have occurred cannot be compensated, such labor costs will
be accrued to the current profit and loss and will not be confirmed as the labor costs.
3. Use right of transferred assets
In case the economic benefits related to the transaction will probably flow into the enterprise
and the income amounts can be reliably calculated, the company will determine the income
amount about use right of transferred assets by the following means:
(1) The interest income amount will be calculated and determined based on the use time of
currency capital from the company by others and actual interest rate.
(2) The income amount of use expenses will be calculated and determined subject to the
charging time and method agreed in the relevant contracts and agreements.
(XX) Accounting Processing Method of Income Tax
The accounting processing of income tax in the company employs the balance sheet liability
method. The deferred taxes will be calculated by the balance sheet liability method based on
the temporary difference.
1. Confirmation of deferred income tax assets
(1) The company will confirm the deferred income tax assets generated by the deductible
temporary difference within the limit of taxable income amount that may be obtained and
used to deduct such difference. But, at the same time, the deferred income tax assets
generated by the initial confirmation of assets or liabilities in the transactions with the
following characteristics will not be confirmed:
① This transaction is not the enterprise merger;
②The occurrence of transactions will not affect the accounting profits nor affect the taxable
income amount (or the deductible loss).
(2) In case the deductible temporary difference related to the investments in the subcompany,
affiliated companies and joint ventures by the company meet the following conditions at the2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
68
same time, they will be confirmed as the corresponding deferred income tax assets:
① The temporary difference will probably be reversed in the foreseeable future;
② The taxable income tax amount that is used to deduct the temporary difference will
probably be obtained in the future.
(3) If the company can settle the deductible loss and tax deduction in the coming years, the
company will confirm the relevant deferred income tax assets within the limit of taxable
income amount in the future that may be obtained and used to deduct such deductible loss
and tax deduction.
2. Confirmation of deferred income tax liabilities
Except the deferred income tax liabilities generated by the following cases, the company will
confirm the deferred income tax liabilities generated by the all taxable temporary difference.
(1) Initial confirmation of goodwill;
(2) Initial confirmation of assets or liabilities generated by the transactions complying with the
following characteristics at the same time:
① This transaction is not the enterprise merger;
② The occurrence of transactions will not affect the accounting profits nor affect the taxable
income amount (or the deductible loss).
(3) The taxable temporary difference related to the investments in the subcompany, affiliated
companies and joint ventures by the company meet the following conditions at the same time:
① The investment enterprises can control the reversion time of temporary difference;
② The temporary difference will not probably be reversed in the foreseeable future.
3. Calculation of income tax expenses
The company will accrue the current income taxes and deferred income taxes to the current
profit and loss as the income tax expenses and benefits, but will not include the income taxes
generated in the following cases:
① Enterprise merger;
② Transactions or items that are directly confirmed in the owners’ equities.
(XXI) Preparation Method of Consolidated Financial Statements
The consolidated financial statements will be subject to the No. 33 Enterprise Accounting2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
69
Standards – Consolidated Financial Statement. The combination scope of the consolidated
financial statement will be determined on the basis of the control; the special objectives
controlled by the parent company will also be concluded in the combination scope of the
consolidated financial statement. The consolidated financial statement will be based on the
individual financial statements and other data about the parent company and involved
subcompanies. After adjusting the long-term equity investments in the subcompanies in
accordance with the equity method and offsetting the effects of key internal transactions
between the parent company and subcompany or subcompany and subcompany on the
consolidated financial statements, consolidated profit statements, consolidated cash flow
statements, consolidated statements about equity changes of shareholders and notes to the
financial statements, the parent company will consolidate the preparation.
In case the accounting policies and accounting periods of subcompanies differ from those of
parent company, the financial statements of subcompanies will be adjusted.
(XXII) Accounting Policies, Accounting Evaluation Changes and Correction of
Accounting Errors
During this period, the company has not made any changes about accounting policies and
accounting evaluation or any correction of accounting errors.
V. Taxes
The applicable tax items and tax rate of the company are listed as follows:
Tax Item Tax Basis Tax Rate
Value-added tax
Sales income of products and
materials
17%
Sales tax Taxable sales income 5%
Urban maintenance and
construction tax
Payable circulating tax
amount
5%. 7%
Educational surtax
Payable circulating tax
amount
3%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
70
Note: the enterprise income tax rates will be subject to the following regulations:
Enterprise income tax Payable income tax amount Note
Company Name Actual
Tax
Rate
Note
Lida Pharmaceutical Co., Ltd in Zhuhai
Bonded Area
10% It is a foreign-invested production enterprise and
enjoys the preferential policies of income tax - “Two
Exemptions and Three Reduction ” from the first
profit-making year; the current period is the third
year to implement the “Three Reduction ” policy.
Sichuan Guangda Pharmaceutical Co., Ltd 15% The preferential policies about enterprise income
tax for the Grand Development of Western Regions
in accordance with the Notice of Preferential
Policies about Enterprise Income Tax in the
Transitional Period (Guo Fa [2007] No. 39) and
the Notice of the Issues on Tax Preferential
Policies for the Grand Development of Western
Regions Jointly Issued by the Ministry of Finance,
the State Administration of Taxation and the
General Administration of Customs (Cai Shui [2001]
No. 202) will continue to be implemented. The
enterprise income tax of 15% will be applied by the
year of 2010.
Livzon (Hongkong) Co., Ltd and Hongkong
Antao Development Limited
16.5% The policies about enterprise income taxes in
Hongkong area will be applied.
Xinbeijiang Pharmaceutical Co., Ltd under
Livzon Group, Liwei Branch of Zhuhai Livzon
Medicine Trade Co., Ltd, Fuzhou Fuxing
Pharmaceutical Co., Ltd under Livzon Group,
Gutian Fuxing Pharmaceutical Co., Ltd,
Shanxi Datong Livzon Qiyuan Medicine Co.,
25%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
71
VI. Particulars about subcompanies, joint venture and affiliated enterprises
(I) Subcompanies that are obtained by the merger of enterprises that are not under the
same control
1. Subcompanies that are included in the consolidated financial statements
Ltd and Longxi Livzon Shenyuan Medicine
Co., Ltd
Parent Company, Limin Pharmaceutical Co.,
Ltd under Livzon Group, Livzon
Pharmaceutical Factory under Livzon Group,
Livzon Syntpharm Co., Ltd in Zhuhai Bonded
Area and Shanghai Livzon Pharmaceutical
Co., Ltd
15% In 2008, they were granted as the hi-tech
enterprises and the validity period will last for 3
years.
Other subcompanies 20% In accordance with the Notice of Preferential
Policies about Enterprise Income Tax in the
Transitional Period (Guo Fa [2007] No. 39) issued
by the State Council, from the date of January 1st,
2008, the legal tax rate will, within 5 years after the
implementation of new laws, be gradually applied
to the enterprises that ever enjoyed the low
preferential tax rate. The enterprises enjoying the
tax rate of 15% will pay the income tax at 20% in
2009.
Company Name
Regi
stere
d
Addr
ess
Actual
Investment
Amount
Registere
d Capital
Perce
ntage
of
Votin
g
Right
s
Business Scope
Hongkong Antao Development
Limited
Hongk
ong
HKD 0.5 millio
n
HKD 0.5
million
100%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
72
Livzon (Hongkong) Co., Ltd Hongk
ong
HKD 61 millio
n
HKD 61
million
100%
Zhuhai Modern Chinese
Medicine Hi-tech Co., Ltd
Zhuha
i City
RMB 6 million
Yuan
RMB6 million
Yuan
100% Research and development of
Chinese medicines and Chinese
medicine technologies and
equipments; technical service and
consultancy
Livzon Pharmaceutical Factory
under Livzon Group
Zhuha
i City
RMB 192.42
million Yuan
RMB 177.11
million Yuan
100% Production and sales of Chinese
and western medicines, medical
instruments and sanitation materials
Livzon Medicine Marketing Co.,
Ltd under Livzon Group
Zhuha
i City
RMB 20
million Yuan
RMB 20
million Yuan
100% Sales of products from the company
and all medical subcompanies
Zhuhai Livzon Medicine Trade
Co., Ltd
Zhuha
i City
RMB 60
million Yuan
RMB 60
million Yuan
100% Import and export of Chinese and
western medicine preparations and
materials and medical intermediates,
etc. Chinese and western medicine
preparations and materials, medical
intermediates, chemical materials,
sanitation materials, sanitation
products, healthcare foodstuffs,
invigorant, biological products, biochemical
preparations, medical
cosmetics and medical instruments.
Sichuan Guangda
Pharmaceutical Co., Ltd
Peng
zhou
City
RMB 95
million Yuan
RMB 95
million Yuan
100% Research, development, production
and sales of Chinese and western
medicines and finished medicines
Shanghai Livzon
Pharmaceutical Co., Ltd
Shan
ghai
Munic
ipality
RMB 87.33
million Yuan
RMB 87.33
million Yuan
100% Production and sales of water
injection, capsules, power, tablets,
lyophilized preparation, biochemical
and peptide material
medicines
Xinbeijiang Pharmaceutical
Co., Ltd under Livzon Group
Qingy
uan
City
RMB 124.32
million Yuan
RMB 134.93
million Yuan
92.14
%
Export and production of its
products and relevant technologies
Livzon Syntpharm Co., Ltd in
Zhuhai Bonded Area
Zhuha
i City
RMB 102.28
million Yuan
RMB 102.28
million Yuan
100% Export and production of chemical
material medicine, medical
preparations, medical intermediates
and chemical products
Zhuhai Livzon Reagent Co., Lt Zhuha RMB 23.69 RMB 46.45 51% Production and sales of bio-chemica2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
73
d i City million Yuan million Yuan l, immune and chemical reagents,
biological products, sanitation
products and medical analyzer
equipments
Limin Pharmaceutical Co., Ltd
under Livzon Group
Shaog
uan
City
RMB 56.18
million Yuan
RMB 61.56
million Yuan
88.09
%
Production and sales of various
medical preparations, medical
materials, various foodstuff
additives, feedstuff additives and
nutrition health-care products
Lida Pharmaceutical Co., Ltd in
Zhuhai Bonded Area
Zhuha
i City
RMB 26
million Yuan
RMB 26
million Yuan
100% Production, processing and sales of
chemical material medicines,
medical preparations, medical
intermediates, chemical products;
warehousing.
Fuzhou Fuxing Pharmaceutical
Co., Ltd under Livzon Group
Fuzho
u City
USD 33.7 milli
on
USD 33.7
million
100% Production of material medicines
such as bacteriophage,
intermediates, preparations and
chemical materials for the purpose
of medical production (not including
the inflammable and dangerous
chemical products; if required, the
license must be obtained)
Production of material medicine
such as bacteriophage,
intermediates, preparations and
chemical materials for the purpose
of medical production (not including
the inflammable and dangerous
chemical products; if required, the
license must be obtained)
Gutian Fuxing Pharmaceutical
Co., Ltd
Gutia
n
Count
y
RMB 26.7
million Yuan
RMB 26.70
million Yuan
100% Manufacturing and sales of material
medicines (Kanamycin sulfate,
Tetracycline Hydrochloride and
Chlortetraccline Hydrochloride)
Shanxi Datong Livzon Qiyuan
Medicine Co., Ltd
Shan
xi
RMB 3.7
million Yuan
RMB 4
million Yuan
81.48
%
Plantation and processing of
astragalus membranaceus;
purchase and sales of Chinese
medicines (except those that are
restricted by the nation)2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
74
*On April 28, 2009, the 43rd meeting of Investment & Decision-Making Committee of Livzon
Longxi Livzon Shenyuan
Medicine Co., Ltd *
Gans
u
RMB 3.6
million Yuan
RMB 4
million Yuan
79.28
%
Purchase and sales, plantation,
processing and storage of Chinese
medicines that are approved by the
nation
Zhuhai Livzon Advertising Co.,
Ltd
Zhuh
ai
RMB 1
million Yuan
RMB 1
million Yuan
100% Design, production, agency and
publication of various
advertisements at home and abroad
Company Name
Regi
stere
d
Addr
ess
Actual
Investment
Amount
Registere
d Capital
Perce
ntage
of
Votin
g
Right
s
Business Scope
Zhuhai Livzon – Bai A Meng
Biological Materials Co., Ltd
Zhuha
i City
RMB 9.84
million Yuan
RMB 12
million Yuan
82% Production and sales of
Hydroxyapatite materials, plasma
spraying HA-Ti artificial tooth and
artificial hip, HA porous ceramic
grains, and porous hydroxyapatite
ceramic products.
Zhuhai Livzon Meidaxin
Technology Development Co.,
Ltd
Zhuha
i City
RMB 1
million Yuan
RMB 1
million Yuan
100% Technical research and
development of information and
products related to medicines and
health-care products; technical
consultancy and service
Shenzhen Yuanxing
Pharmaceutical Co., Ltd *2
Shenz
hen
City
RMB 60.83
million Yuan
RMB 95
million Yuan
100% Production of medical products
(subject to the business licence of
pharmaceutical production
enterprises); research and
development of material medicines,
oral preparations, injection products
and external preparations (not
including the items that are
restricted), import and export
businesses (subject to Shen Mao
Guan Deng Zheng Zi Di No. 182).2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
75
Group resolved that Limin Pharmaceutical Co., Ltd under Livzon Group invested RMB 3.6 million
Yuan to establish Longxi Livzon Shenyuan Medicine Co., Ltd, accounting for 90% of the
registered capital.
2. Subcompanies that are not included in the consolidated financial statements
MolecularTaq Limited has stopped its business for many years; this investment has been fully
withdrawn as the depreciation reserve of long-term equity investment and is not included in
the consolidation scope.
(II) Subcompanies that are obtained by the merger of enterprises which are under the
same control: None.
(III) Associated Enterprises
Company Name Registered Address
Actual Investment
Amount
Percentage of voting
rights
Business Scope
MolecularTaq Limited Hongkong HKD3 million 100% ——
Company Name
Registered
Address
Actual
Investment
Amount
Registered
Capital
Percentage
of voting
rights
Business Scope
Guangdong Blue Treasure
Pharmaceutical Co. Ltd.
Qingyuan
City
RMB 10.5386 mil
lion Yuan
RMB 59.67
million Yuan
35.91% Bio-chemical material medicines
Livzon Medical Electronic
Equipment (Factory) Co., Ltd
Zhuhai City RMB 1.2 million
Yuan
RMB 3.62 million
Yuan
28% Production and sales of medical
instruments, electronic equipments
for medical purposes, and electronic
information system for medical
purposes
Livzon Tingen Company Limited Hongkong HKD 0.5 million —— 30%
Fujian Gutian Huamin Poultry
Medicine Co., Ltd
Gutian
County
RMB 2.4 million
Yuan
RMB 10 million
Yuan
24%
Tablets and capsules (in case the
above business scope is controlled by
the special regulations issued by the
nation, such regulations will be
applicable).2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
76
(IV) Change of Consolidation Statement Scopes during the Report Period
The 43rd meeting of Investment & Decision-Making Committee of Livzon Group resolved that,
on April 28, 2009, Longxi Livzon Shenyuan Medicine Co., Ltd was established with the
registered capital of RMB 4 million Yuan; Limin Pharmaceutical Co., Ltd under Livzon Group
invested RMB 3.6 million Yuan, accounting for 90% of the registered capital.
VII. Notes of Main Items in the Consolidated Financials Statements
1. Currency Capital
Tongyikangshimei Chain
(Shenzhen) Co., Ltd
Shenzhen
RMB 28 million
Yuan
RMB100 million
Yuan
35%
Sales of general merchandises;
import of commodities; export of
commodities made in China; other
relevant accessory service. Sales of
general merchandises; import of
commodities; export of commodities
made in China; other relevant
accessory service. Sales of general
merchandises; import of commodities;
export of commodities made in China;
other relevant accessory services.
Item
2009.6.30 2008.12.31
Original
Currency
Exchange
rate
Book-keeping
Currency
Original
Currency
Exchange
rate
Book-keeping
Currency
Cash at stock 130,937.21 60,167.77
Including:
RMB 128,592.16 60,135.13
Hongkong
Dollar 2,660.20 0.88153 2,345.05 37.00 0.8819 32.64
Deposits in
banks 471,831,766.57 526,594,000.11
Including:
RMB 440,199,864.48 519,981,329.702009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
77
Other currency capitals at the end of this period include: the investment amount of RMB
17,233,527.41 Yuan and deposits for L/C of RMB 863,706.71 Yuan.
The deposits of RMB 23.3 million Yuan in banks have become the pledge for short-term loans
and are deducted from the cash and cash equivalents in the cash flow statement.
2. Tradable financial assets
The decrease by 48.95% over the beginning of this period is mainly caused by the sales of
stocks.
Hongkong
Dollar 27,651,590.84 0.88153 24,375,706.87 5,807,764.58 0.8819 5,121,867.58
USD 143,466.36 6.8319 980,147.81 109,810.79 6.8346 750,512.83
Japanese
Yuan 16,367,953.09 0.071117 1,164,039.72 10,000,000.00 0.074029 740,290.00
Euro 530,247.25 9.6408 5,112,007.69 0.00
Other
Currency
Capital 18,097,234.12 13,529,732.48
Including:
RMB 877,899.76 2,450,490.78
Hongkong
Dollar 19,533,463.82 0.88153 17,219,334.36 12,562,922.90 0.8819 11,079,241.70
Total 490,059,937.90 540,183,900.36
Item
2009.6.30 2008.12.31
Cost
Changes of Fair
Values
Fair Values
Cost
Changes of Fair
Values
Fair Values
Stock 70,670,154.29 -9,012,779.01 61,657,375.28 263,897,010.60 -142,510,835.34 121,386,175.26
Fund 150,000.00 364,727.66 514,727.66 150,000.00 241,641.89 391,641.89
Total 70,820,154.29 -8,648,051.35 62,172,102.94 264,047,010.60 -142,269,193.45 121,777,817.152009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
78
3. Receivable Bills
By June 30, 2009, the bills that have been endorsed but have not been due are listed as
follows:
4. Accounts Receivable
(1) Composition of Accounts Receivable
Item 2009.6.30 2008.12.31
Bank Acceptance Drafts 178,270,619.98 200,743,296.63
Bill Type Due Time Amount
Bank Acceptance Drafts 2009-12-31 109,895,324.47
Item
2009.6.30 2008.12.31
Amount Percent
age
Reserves for B
ad Debts
Net Value Amount Percen
tage
Reserve for
Bad Debts
Net Value
The individual
amount is large
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
The individual
amount is not
large; however,
the risk of this
combination is
very great after
the combination
subject to the
credit risk
characteristics. 5619,605.19 1.10% 4,544,523.55 1,075,081.64 5,920,613.11 1.61% 4,974,419.49 946,193.62
Other Minor
Amounts
504,673,898.
34 98.90% 25,979,803.40 478,694,094.94 362,341,053.30 98.39% 19,900,555.60 342,440,497.70
Total 510,293,503.
53 100% 30,524,326.95 479,769,176.58 368,261,666.41 100% 24,874,975.09 343,386,691.322009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
79
(2) Age analysis
(3) The increase by 38.57% over the beginning of period is mainly caused by the growth of
income.
(4) From January to June 2009, the accounts receivable with the non-associated parties that
have been actually written off amount to RMB 3,036,115.53 Yuan and are listed as follows:
Age
2009.6.30 2008.12.31
Amount Percenta
ge
Reserve for Bad
Debts
Net Value Amount Perce
ntage
Reserve for
Bad Debts
Net Value
Within 1
year 490,368,028.48 96.10% 24,518,401.42 465,849,627.06 347,774,309.36
94.43
% 17,388,715.50 330,385,593.86
1-2 years 9,998,371.42 1.96% 599,902.29 9,398,469.13 8,718,512.77 2.37% 696,435.90 8,022,076.87
2-3 years 4,307,498.44 0.84% 861,499.69 3,445,998.75 5,848,231.17 1.59% 1,815,404.20 4,032,826.97
Over 3
years 5,619,605.19 1.10% 4,544,523.55 1,075,081.64 5,920,613.11 1.61% 4,974,419.49 946,193.62
Total 510,293,503.53 100% 30,524,326.95 479,769,176.58 368,261,666.41 100% 24,874,975.09 343,386,691.32
Name of Debtor Writing-off
Amount
Nature Cause Whether the
debtor is the
associated
party
Hubei Hengkang Double-crane
Pharmaceutical Co., Ltd 526,734.82
Payment
for goods
The company has stopped its
business and the court has
checked and found out that it
owned no assets No
Beijing Medicines & Health Products
Imports & Exports Corporation 353,224.34
Payment
for goods
The company is bankrupt
and the account cannot be
received. No
Hebei Tianhe Pharmaceutical Trading
Co., Ltd 361,962.43
Payment
for goods
The age of account is very
long and it cannot be
received. No
Sichuan Medical Industrial Trade Co., 152,645.00 Payment The age of account is very No2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
80
(5) By June 30, 2009, there are no debts with the shareholder units holding over 5%
(including 5%) voting rights.
(6) The total amount of top 5 amounts receivable is RMB 51,502,982.68 Yuan, accounting
for 10.09% of the receivable balance.
(7) At the end of this period, no reserves for individual bad accounts are fully withdrawn.
(8) Other particulars:
① The accounts receivable with large individual amount mean the accounts receivable
whose individual amount accounts for over 10% (including 10%) of receivable balance at the
end of this period.
② The accounts receivable whose individual amount is not large but the risk of this
combination is very great after the combination subject to the credit risk characteristics: the
accounts receivable with the age of over 3 years whose individual amount is not large are
the accounts receivable whose individual amount is not large but the risk of this combination
is very great after the combination subject to the credit risk characteristics.
③ Other minor accounts receivable: all other accounts receivable except the above ① and
②.
Ltd for goods
long and it cannot be
received.
Chinese medicine product branch
under Huadong Medicine Co.,Ltd 111,547.27
Payment
for goods
The age of account is very
long and it cannot be
received. No
Total
1,506,113.8
6
Age
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
Within 1 year 51,502,982.68 10.09% 47,207,477.07 12.82%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
81
5. Prepaid Accounts
(1) Age analysis
(1) The prepaid accounts with the age of over 1 year are mainly the prepaid accounts for
goods and development expenses for projects that have not been settled.
(2) The top 5 prepaid accounts total RMB 14,806,382.99 Yuan, accounting for 43.69% of
prepaid account balance.
(3) By June 30, 2009, there are no debts with the shareholder units holding over 5%
(including 5%) voting rights.
6. Other Accounts receivable
(1) Composition of other accounts receivable
Age 2009.6.30 Percentage 2008.12.31 Percentage
Within 1 year 24,785,919.89 73.14% 22,824,077.85 66.00%
1-2 years 3,127,856.62 9.23% 3,438,958.59 9.94%
2-3 years 251,233.49 0.74% 2,431,703.26 7.03%
Over 3 years 5,723,298.84 16.89% 5,887,781.40 17.03%
Total 33,888,308.84 100.00% 34,582,521.10 100.00%
Item
2009.6.30 2008.12.31
Amount Perce
ntage
Reserves for
Bad
Accounts
Net Value Amount Perce
ntage
Reserves for
Bad
Accounts
Net Value
The individual
amount is
large 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
The accounts
receivable
whose individ 4,296,369.64 14.43% 3,866,499.40 429,870.24 4,609,339.38 16.07% 4,121,964.56 487,374.822009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
82
(2) Age analysis
(3) From January to June 2009, the other accounts receivable with the non-associated
parties that have been actually written off amount to RMB 578,632.94 Yuan.
(4) By June 30, 2009, there are no debts with the shareholder units holding over 5%
(including 5%) voting rights.
ual amount is
not large but
the risk of this
combination is
very great
after the
combination
subject to the
credit risk
characteristics:
Other minor
accounts 25,476,954.75 85.57% 1,464,317.29 2,4012,637.46 24,080,811.90 83.93% 1,467,890.24 22,612,921.66
Total 29,773,324.39 100% 5,330,816.69 24,442,507.70 28,690,151.28 100% 5,589,854.80 23,100,296.48
Age
2009.6.30 2008.12.31
Amount Percent
age
Reserves for Bad
Accounts
Net Value Amount Percenta
ge
Reserves for Bad
Accounts
Net Value
Within 1
year 23,464,642.96 78.81% 1,173,232.15 22,291,410.81 22,148,297.89 77.20% 1,107,414.90 21,040,882.99
1-2 years 1,310,515.43 4.40% 78,630.92 1,231,884.51 1,173,731.58 4.09% 70,423.89 1,103,307.69
2-3 years 701,796.36 2.36% 212,454.22 489,342.14 758,782.43 2.64% 290,051.45 468,730.98
Over 3
years 4,296,369.64 14.43% 3,866,499.40 429,870.24 4,609,339.38 16.07% 4,121,964.56 487,374.82
Total 29,773,324.39 100% 5,330,816.69 24,442,507.70 28,690,151.28 100% 5,589,854.80 23,100,296.482009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
83
(5) The top 5 other accounts receivable total RMB 3,673,596.51 Yuan, accounting for 12.34%
of other receivable account balance and are listed as follows:
(6) At the end of this period, the reserves for individual bad accounts are fully withdrawn: the
reserve for 2-3 years amounts to RMB 90,118.69 Yuan, the reserve for 3-5 years amounts to
RMB 1,564,942.88 Yuan.
(7) Other particulars:
① The accounts receivable with large individual amount mean the accounts receivable
whose individual amount accounts for over 10% (including 10%) of receivable balance at the
end of this period.
② The accounts receivable whose individual amount is not large but the risk of this
combination is very great after the combination subject to the credit risk characteristics: the
accounts receivable with the age of over 3 years whose individual amount is not large are
the accounts receivable whose individual amount is not large but the risk of this combination
is very great after the combination subject to the credit risk characteristics.
Debtor Name Debt Amount Nature or Content Debt Time
Percentage of
Total Amount
Fujian Gutian Huamin Poultry
Medicine Co., Ltd 869,177.03 Fund transfer
Over 3 ye
ars 2.92%
Chen Tao 780,769.91 Reserve fund
Within 1 ye
ar 2.62%
Receivable Export Rebate 728,581.93
Receivable Export
Rebate
Within 1
year 2.45%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 649,980.64 Power expense
Within 1
year 2.18%
Chen Wei 645,087.00 Reserve fund
Within 1
year 2.17%
Total 3,673,596.51 12.34%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
84
③ Other minor accounts receivable: all other accounts receivable except the above ① and
②.
7. Inventory
Depreciation reserve for inventory will be withdrawn based on the difference between the
inventory book values and their net realizable values on June 30, 2009. The net realizable
values means the values after deduction of the costs, sales expenses and relevant taxes
from the evaluated selling prices in the daily activities at the time of completion.
8. Saleable Financial Assets
(1) Classification
Item
2009.6.30 2008.12.31
Amount Depreciation
Reserve
Net Value Amount Depreciation
Reserve
Net Value
Raw
materials 78,983,899.06 1,298,699.55 77,685,199.51 92,322,606.12 2,560,564.13 89,762,041.99
Packages 14,118,835.09 354,410.61 13,764,424.48 16,585,698.92 326,158.17 16,259,540.75
Products 71,341,136.44 663,438.63 70677697.81 66,872,945.94 2,085,416.87 64,787,529.07
Inventory
commodities 167,224,070.44 7,731,632.21 159,492,438.23 187,885,556.46 13,991,790.49 173,893,765.97
Entrusted
materials for
processing 697,327.48 0.00 697,327.48 834,271.18 0.00 834,271.18
Low-value
consumables 204,665.66 0.00 204,665.66 494,039.81 0.00 494,039.81
Delivered
commodities
705,613.63 0.00 705,613.63 43,961.26 0.00 43,961.26
Total 333,275,547.80 10,048,181.00 323,227,366.80 365,039,079.69 18,963,929.66 346,075,150.032009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
85
(2) At the end of period, the main cause of the increase by 79.66% over the beginning of
period is the changes in fair values.
9. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
(2) Long-term equity investment calculated by cost method
Item 2009.6.30 2008.12.31
Saleable equity instruments 11,991,715.36 6,674,800.96
Including: stocks 11,991,715.36 6,674,800.96
Item
2009.6.30 2008.12.31
Book Balance
Depreciation
Reserve
Book Values Book Balance
Depreciation
Reserve
Book Values
Calculation
by Cost
Method
30,759,300.
00
23,704,300.
00
7,055,000.0
0
30,759,300.
00
23,704,300.
00
7,055,000.0
0
Calculation
by Equity
Method
41,135,320.
57
4,134,050.0
0
37,001,270.
57
42,207,589.
14
4,134,050.0
0
38,073,539.
14
Total 71,894,620.
57
27,838,350.
00
44,056,270.
57
72,966,889.
14
27,838,350.
00
45,128,539.
14
Name of Invested Units Initial Amount 2008.12.31 Increase
in the
current
period
Decrease in
the current
period
2009.6.30
Zhuhai Branch of Guangdong
Development Bank 105,000.00 105,000.00 0.00 0.00 105,000.00
Beijing Medical Goods Joint Operatio 100,000.00 100,000.00 0.00 0.00 100,000.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
86
(3) Long-term equity investment calculated by the equity method
(4) Depreciation reserve for long-term equity investment
n Company
Doumen Sanzhou Industry City Co.,
Ltd 500,000.00 500,000.00 0.00 0.00 500,000.00
Zhuhai City Commercial Bank 20,000,000.00 20,000,000.00 0.00 0.00 20,000,000.00
Ruiheng Pharmaceutical Technology
Investment Co., Ltd 6,250,000.00 6,250,000.00 0.00 0.00 6,250,000.00
Shanghai Haixin Pharmaceutical Co.,
Ltd 500,000.00 500,000.00 0.00 0.00 500,000.00
Zhuhai Lixin Health-care Foodstuff
Co., Ltd 100,000.00 100,000.00 0.00 0.00 100,000.00
MolecularTaq Limited 3,204,300.00 3,204,300.00 0.00 0.00 3,204,300.00
Total 30,759,300.00 30,759,300.00 0.00 0.00 30,759,300.00
Name of Invested Units Investment Cost 2008.12.31 Increase in the
current period
Decrease in
the current
period
2009.6.30 Cash
Dividends
Livzon Medical Electronic Equipment
(Factory) Co., Ltd 1,200,000.00 1,200,000.00 0.00 0.00 1,200,000.00 0.00
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 11,227,540.45 28,819,257.51 2,289,558.08 0.00 31,108,815.59 0.00
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 28,000,000.00 9,254,281.63 0.00
3,361,826.6
5 5,892,454.98 0.00
Livzon Tingen Company Limited 534,050.00 534,050.00 0.00 0.00 534,050.00 0.00
Fujian Gutian Huamin Poultry Medicine
Co., Ltd 2,400,000.00 2,400,000.00 0.00 0.00 2,400,000.00 0.00
Total 43,361,590.45 42,207,589.14 2,289,558.08
3,361,826.6
5 41,135,320.57 0.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
87
10. Fixed Assets and Accumulated Depreciation
(1) Particulars
Investment Projects 2008.12.31
Withdraw
al in the
Current
Period
Transfer
in the
Current
Period
2009.6.30
Withdrawal
Cause
Doumen Sanzhou Industry City Co.,
Ltd
500,000.00
0.00 0.00
500,000.00
The net
assets are
less than zero.
Zhuhai City Commercial Bank 20,000,000.00 0.00 0.00 20,000,000.00 Loss
MolecularTaq Limited 3,204,300.00 0.00 0.00 3,204,300.00 Closed
Livzon Medical Electronic
Equipment (Factory) Co., Ltd
1,200,000.00
0.00 0.00
1,200,000.00
The net
assets are
less than zero.
Livzon Tingen Company Limited 534,050.00 0.00 0.00 534,050.00 Loss
Fujian Gutian Huamin Poultry
Medicine Co., Ltd
2,400,000.00
0.00 0.00
2,400,000.00 Loss
Total 27,838,350.00 0.00 0.00 27,838,350.00
Item
2008.12.31
Increase in the
current period
Decrease in the
current period
2009.6.30
Original values of
fixed assets
Houses and
buildings 777,999,778.80 1,945,026.99 0.00 779,944,805.79
Machine equipments 845,467,983.70 12,702,585.85 2,284,766.63 855,885,802.92
Transportation
equipments 24,216,927.66 2,055,751.22 313,000.00 25,959,678.88
Electronic
equipments and oth 145,741,642.88 5,146,741.70 8,680,025.5 142,208,359.082009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
88
(2) The projects under construction that have been transferred to the fixed assets amount to
ers
Total 1,793,426,333.04 21,850,105.76 11,277,792.13 1,803,998,646.67
Accumulated
depreciation:
Houses and
buildings 300,667,480.26 18,458,079.25 0.00 319,125,559.51
Machine equipments 417,447,244.23 31,706,375.09 980,056.30 448,173,563.02
Transportation
equipments 14,736,715.59 847,293.50 243,836.84 15,340,172.25
Electronic
equipments and
others 103,203,665.71 7,078,683.65 6,139,982.80 104,142,366.56
Total 836,055,105.79 58,090,431.49 7,363,875.94 886,781,661.34
Net value of fixed
assets: 957,371,227.25 917,216,985.33
Depreciation reserve
for fixed assets
Houses and
buildings 13,567,551.90 205,146.96 0.00 13,772,698.86
Machine equipments 18,915,934.79 11,223,059.94 658,933.65 29,480,061.08
Transportation
equipments 117,088.04 0.00 885.00
116,203.04
Electronic
equipments and
others 2,066,452.97 12,963.75 1,526,214.88 553,201.84
Total 34,667,027.70 11,441,170.65 2,186,033.53 43,922,164.82
Net values of fixed
assets: 922,704,199.55 873,294,820.512009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
89
RMB 13,159,270.00 Yuan.
(3) The fixed assets that are temporarily unused are listed as follows:
(4) The company has no fixed assets that are proposed to be disposed.
(5) The company has not leased any fixed assets in the mode of financing lease.
(6) The fixed assets that have been rented out are listed as follows:
(7) Particulars about fixed assets whose property certificates have not been handled
11. Projects under Construction
(1) Projects under Construction
Item
Original Book
Values
Accumulated
Depreciation
Depreciation
Reserve
Net Amount
Estimated Time to put it
into use
Houses and
buildings 5,718,700.47 2,727,060.03 342,862.13 2,648,778.31
Uncertain
Machine
equipments 33,419,974.15 20,577,144.05 9,924,609.07 2,918,221.03
Uncertain
Office
equipments and
others 775,330.21 731,442.24 909.18 42,978.79
Uncertain
Total 39,914,004.83 24,035,646.32 10,268,380.38 5,609,978.13
Item Original Book
Values
Accumulated
Depreciation
Depreciation
Reserve
Net Amount
Houses and
buildings 4,682,737.33 2,217,244.63 26,479.77 2,439,012.93
Item
Original Book
Values
Accumulated
Depreciation
Depreciati
on
Reserve
Net Amount Cause
Houses and
buildings 71,220,631.40 6,500,625.77 0.00
64,720,005.6
3
They are the newly built
projects and the handling of
certificates is still under way.
Project 2009.6.30 2008.12.312009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
90
(2) Particulars
Name
Book-keeping
Amount
Depreciation
Reserve
Net Value
Book-keeping
Amount
Depreciation
Reserve
Net Value
Newly built
plants 41,474,220.55 0.00 41,474,220.55 24,083,097.44 0.00 24,083,097.44
Technical
improvemen
t 7,691,409.41 0.00 7,691,409.41 5,463,236.89 0.00 5,463,236.89
Plant
improvemen
t 32,020,784.85 27,365,074.82 4,655,710.03 34,233,898.88 27,365,074.82 6,868,824.06
Others 4,518,422.83 0.00 4,518,422.83 1,702,397.49 0.00 1,702,397.49
Total 85,704,837.64 27,365,074.82 58,339,762.82 65,482,630.70 27,365,074.82 38,117,555.88
Project
Name
Budget
Amount
2008.12.31
Increase in
the Current
Period
Fixed Assets
Transferred
in the
Current
Period
Other
Decrease
2009.6.30
Capital
Source
Percentage
of Project
Investment
to Budget
Newly
built
plants
129,978,000.
00
24,083,097.4
4
21,908,737.
89
4,517,614.7
8 0.00 41,474,220.55
Loans and
available
capitals owned
by the company 35.38%
Technica
l
improve
ment
51,022,400.0
0 5,463,236.89
5,575,423.4
8
3,057,534.6
0 289,716.36
7,691,409.4
1
Available
capitals
owned by the
company 21.63%
Plant
improve
ment
38,300,386.4
7
34,233,898.8
8
3,184,262.1
9
5,397,376.2
2 0.00
32,020,784.
85
Available
capitals
owned by the
company 97.70%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
91
(3) By June 30, 2009, the capitalization amounts of interests for the products under
construction are listed as follows:
The capitalization rate of interests for projects under construction will apply the interest rates
for special loans of banks.
(4) Depreciation Reserve for Projects under Construction
12. Projects Goods
13. Intangible Asset and Accumulated Amortization
Others
5,493,442.15 1,702,397.49
3,002,769.7
4 186,744.40 0.00
4,518,422.8
3
Available
capitals
owned by the
company 85.65%
Total 224,794,228.
62
65,482,630.7
0
33,671,193.
30
13,159,270.
00 289,716.36 85,704,837.64
Project Name 2008.12.31
Increase in the
current period
Fixed Assets
Transferred in the
Current Period
Other
Decrease
2009.6.30
Newly built
plants 5,016,602.85 1,088,153.80 0.00 0.00 6,104,756.65
Project Name 2008.12.31
Increase in the
current period
Transfer in the
Current Period
2009.6.30
Plant improvement 27,365,074.82 0.00 0.00 27,365,074.82
Goods name 2009.6.30 2008.12.31
Special materials 74,273.28 74,273.28
Special equipments 3,207,569.70 2,453,959.60
Total 3,281,842.98 2,528,232.88
Item
2008.12.31
Increase in the
current period
Decrease in the
current period
2009.6.302009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
92
The intangible assets are obtained in the way of purchase.
① Original price
Use rights of lands 154,946,944.89 0.00 0.00 154,946,944.89
Know-how 84,769,552.00 0.00 0.00 84,769,552.00
Software 6,450,222.03 651,606.84 0.00 7,101,828.87
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 246,190,718.92 651,606.84 0.00 246,842,325.76
②Accumulated
amortization
Use rights of lands 37,200,600.74 1,468,446.78 0.00 38,669,047.52
Know-how 48,633,454.82 3,772,345.61 0.00 52,405,800.43
Software 3,574,909.09 906,132.58 0.00 4,481,041.67
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 89,432,964.65 6,146,924.97 0.00 95,579,889.62
③Depreciation reserve
for intangible assets
Use rights of lands 981,826.94 0.00 0.00 981,826.94
Know-how 1,379,999.89 0.00 0.00 1,379,999.89
Software 0.00 0.00 0.00 0.00
Trademark rights 0.00 0.00 0.00 0.00
Total 2,361,826.83 0.00 0.00 2,361,826.83
④ Total of book values of
intangible assets
Use rights of lands 116,764,517.21 0.00 1,468,446.78 115,296,070.43
Know-how 34,756,097.29 0.00 3,772,345.61 30,983,751.68
Software 2,875,312.94 651,606.84 906,132.58 2,620,787.20
Trademark rights 0.00 0.00 0.00 0.00
Total 154,395,927.44 651,606.84 6,146,924.97 148,900,609.312009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
93
14. Development payment
15. Goodwill
The book balances of goodwill are listed as follows:
Item
2008.12.31
Increase in the
current period
Reversion in the c
urrent period 2009.6.30
Capitalization
payment
4,010,294.70
1,298,085.48
0.00 5,308,380.18
Expense payment
0.00
17,146,321.07
17,146,321.0
7 0.00
Total
4,010,294.70
18,444,406.55
17,146,321.0
7 5,308,380.18
Item
2009.6.30 2008.12.31
Book balance
Depreciation
Reserve
Book Values Book balance
Depreciation
Reserve
Book Values
Good
will 121,799,561.00 18,759,063.15 103,040,497.85 121,799,561.00 18,759,063.15 103,040,497.85
Name of Invested Units 2008.12.31
Increase in
the current
period
Decrease
in the
current
period
2009.6.30 Formation Source
Livzon Pharmaceutical Factory
under Livzon Group 12,051,099.
78 0.00 0.00 12,051,099.78
Merger of enterprises
which are not under
the same control
Sichuan Guangda
Pharmaceutical Co., Ltd 13,863,330.
24 0.00 0.00 13,863,330.24
Merger of enterprises
which are not under
the same control2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
94
The goodwill depreciations are listed as follows:
Fuzhou Fuxing
Pharmaceutical Co., Ltd under
Livzon Group
46,926,155.
25 0.00 0.00 46,926,155.25
Merger of enterprises
which are not under
the same control
Xinbeijiang Pharmaceutical
Co., Ltd under Livzon Group 7,271,307.0
3 0.00 0.00 7,271,307.03
Merger of enterprises
which are not under
the same control
Zhuhai Livzon Meidaxin
Technology Development Co.,
Ltd 287,756.12 0.00 0.00 287,756.12
Merger of enterprises
which are not under
the same control
Shanghai Livzon
Pharmaceutical Co., Ltd 2,045,990.1
2 0.00 0.00 2,045,990.12
Merger of enterprises
which are not under
the same control
Livzon Syntpharm Co., Ltd in
Zhuhai Bonded Area 3,414,752.5
8 0.00 0.00 3,414,752.58
Merger of enterprises
which are not under
the same control
Lida Pharmaceutical Co., Ltd
in Zhuhai Bonded Area
78,000.00 0.00 0.00 78,000.00
Merger of enterprises
which are not under
the same control
Shenzhen Yuanxing
Pharmaceutical Co., Ltd 35,861,169.
88 0.00 0.00 35,861,169.88
Merger of enterprises
which are not under
the same control
Total 121,799,561.
00 0.00 0.00
121,799,561.0
0
Name of Invested Units 2008.12.31
Increase in the
current period
Decrease in
the current
period
2009.6.302009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
95
16. Long-term Amortization Expense
17. Deferred Income Tax Asset
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group 11,200,000.00 0.00 0.00 11,200,000.00
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 7,271,307.03 0.00 0.00 7,271,307.03
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd 287,756.12 0.00 0.00 287,756.12
Total 18,759,063.15 0.00 0.00 18,759,063.15
Project Name Original
Amount
2008.12.31 Increase in the
current period
Transfer
in the
Current
Period
Amortization
in the Current
Period
2009.6.30 Accumulated
Amortization
Remaining
Amortization
Period
Overhaul expense
of fixed assets 3,433,598.77 2,421,710.05 51,700.00 0.00 330,053.42 2,143,356.63 1,290,242.14 1-90 months
Decoration
expense of offices 315,618.00 227,996.93 0.00 0.00 41,458.04 186,538.89 129,079.11 17-45 months
Decoration
expense of plants 1,144,337.66 683,290.35 78,987.00 0.00 110,677.70 651,599.65 492,738.01 27-55 months
Publicly amortized
expense of public
utilities 978,608.31 355,230.05 0.00 0.00 222,668.35 132,561.70 846,046.61 68-75 months
Resin 3,085,432.12 1,132,809.92 781,590.87 0.00 465,705.75 1,448,695.04 1,636,737.08 6-32 months
Others 1,519,188.79 821,535.15 255,299.15 0.00 340,990.50 735,843.80 783,344.99 1-30 months
Total 10,476,783.65 5,642,572.45 1,167,577.02 0.00 1,511,553.76 5,298,595.71 5,178,187.94
Type 2009.6.30 2008.12.31
Withdrawal of the deductible temporary difference 12,591,164.47 13,361,945.292009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
96
18. Asset Depreciation Reserve
caused by the asset depreciation reserve
The deductible temporary difference caused by the
long-term equity investment out of the scope of
consolidation statement 2,451,917.06 2,023,961.67
The deductible temporary difference caused by the
amortization of intangible assets
407,682.08
456,934.70
The deductible temporary difference caused by the
operating expense
39,717.74
62,413.59
The deductible temporary difference caused by the
withdrawal expense
2,482,976.29
1,144,352.16
The deductible temporary difference caused by the
deductible loss
8,408,794.57
0.00
The deductible temporary difference caused by the
changes in the fair values of tradable financial assets
0.00
14,671,348.9
Total 26,382,252.21 31,720,956.31
Item 2008.12.31
Increase in the
current period
Decrease in the current period
2009.6.30
Reversion Resale
Reserves for Bad
Accounts 30,464,829.89 8,947,738.22 -57,324.00 3,614,748.47 35,855,143.64
Depreciation Reserve
for inventory 18,963,929.66 4,011,448.56 0.00 12,927,197.22 10,048,181.00
Depreciation reserve for
long-term equity
investment 27,838,350.00 0.00 0.00 0.00 27,838,350.00
Depreciation Reserve
for fixed assets 34,667,027.70 11,441,170.65 0.00 2,186,033.53 43,922,164.82
Depreciation Reserve
for projects under
construction 27,365,074.82 0.00 0.00 0.00 27,365,074.822009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
97
The resale of the reserves for bad accounts means the writing-off of the bad accounts; the
resale of depreciation reserve of fixed assets and depreciation reserve for inventory means
the rejection or disposal transfer.
19. Assets whose ownership rights are restricted
The causes of assets ownership’s pledge:
① The subcompany Livzon Pharmaceutical Factory under Livzon Group pledges the deposit
of RMB 4,800,000.00 Yuan to Zhuhai Branch of Bank of Communications for the loan of RMB
4,820,400.00 Yuan and the pledge period is from June 9, 2009 to June 9, 2010.
② The subcompany Livzon Syntpharm Co., Ltd in Zhuhai Bonded Area pledges the fixed
certificate of deposit of RMB 5,700,000.00 Yuan to Zhuhai Branch of Xiamen International
Bank for the loan of RMB 5,465,486.00 Yuan and the pledge period is from June 18, 2009 to
June 18, 2010.
③ The subcompany Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area pledges the fixed
certificate of deposit of RMB 12,800,000.00 Yuan to Zhuhai Branch of Xiamen International
Bank for the loan of RMB 12,341,420.00 Yuan and the pledge period is from June 18, 2009 to
Depreciation Reserve
for intangible assets 2,361,826.83 0.00 0.00 0.00 2,361,826.83
Depreciation Reserve
for goodwill 18,759,063.15 0.00 0.00 0.00 18,759,063.15
Total 160,420,102.05 24,400,357.43 -57,324.00 18,727,979.22 166,149,804.26
Item 2008.12.31
Increase in the
current period
Decrease in the
current period
2009.6.30
Assets used for
pledge:
Deposits in banks 0.00 23,300,000.00 0.00 23,300,000.00
Assets used for
mortgage:
Houses and
buildings 30,003,444.99 0.00 30,003,444.99 0.00
Total 30,003,444.99 23,300,000.00 30,003,444.99 23,300,000.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
98
June 18, 2010.
20. Short-time Loan
a) Types of short-term loans
(2)By June 30, 2008, there are no due short-term loans that have not been repaid.
(3)Guaranty loan:
① The Company provides the guaranty to the subcompany Fuzhou Fuxing Pharmaceutical
Co., Ltd under Livzon Group for an interest-free loan of RMB 1.2 million Yuan from Fuzhou
State-owned Assets Operation and Investment Company.
② The company provides the guaranty to the subcompany Livzon Pharmaceutical Factory
under Livzon Group for the loan of HKD52 million Yuan from Xiamen International Bank.
(3)Please see the article 19 of VII in the notes to the financial statement for more details
about the pledge.
(4)Other loans come from the discounted amount of bank acceptance bills.
21. Accounts payable
(1) By June 30,2009 there are no debts with the shareholder units holding over 5% (including
5%) voting rights.
(2) The accounts payable with the age of over 1 year amount to RMB 8,970,224.88 Yuan,
accounting for 5.75% of the balance at the end of period.
(3) Please see the note IX for the details about the payments of associated parties.
Type 2009.6.30 2008.12.31
Credit loan 152,377,063.00 316,299,225.00
Guaranty loan 47,039,560.00 144,415,550.00
Mortgage loan 0.00 60,000,000.00
Pledge loan 22,627,306.00 0.00
Other loans 30,000,000.00 0.00
Total 252,043,929.00 520,714,775.00
Item 2009.6.30 2008.12.31
Accounts payable 156,077,375.94 159,486,983.562009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
99
22. Advance accounts
(1)By June 30,2009 there are no debts with the shareholder units holding over 5% (including
5%) voting rights.
(2)The advance accounts with the age of over 1 year amount to RMB 339,330.06 Yuan,
accounting for 4.38% of the balance at the end of period.
(3)At the end of this period, the main cause of the decrease by 39.47% over the beginning of
period is that the advance accounts at the beginning of period are settled during the current
period.
(4)Please see the note IX for the details about the accounts received in advance of
associated parties.
23. Rewards paid to the staffs
Item 2009.6.30 2008.12.31
Advance accounts 7,749,019.67 12,802,764.02
Item 2008.12.31 Increase in the
current period
Payment in the
current period
2009.6.30
Salary, bonus and
allowance 30,757,457.26 86,254,035.36 82,103,838.72 34,907,653.90
Welfare expense for staffs 0.00 6,540,115.65 6,540,115.65 0.00
Social insurance fees 211,449.00 15,965,610.23 15,963,425.90 213,633.33
Including: medical
insurance fees 64,311.00 5,526,778.56 5,526,778.56 64,311.00
Endowment Insurance 105,747.00 8,862,666.55 8,860,482.22 107,931.33
Unemployment insurance
fees 25,415.00 853,189.94 853,189.94 25,415.00
Occupational Injury
Insurance 10,213.00 416,283.87 416,283.87 10,213.00
Childbirth insurance 5,763.00 306,691.31 306,691.31 5,763.00
Reserves for houses 532,976.32 4,833,242.69 4,816,487.36 549,731.65
Trade union expense and
staff education expense 1,291,092.30
609,551.20
504,702.21 1,395,941.292009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
100
At the end of period, there are no cases about failure to pay the rewards of staffs.
24. Payable Taxes
25. Payable dividends
Compensation for the
cancellation of work
relationship 0.00
929,104.66
929,104.66 0.00
Others 665,759.57 667,249.98 660,141.00 672,868.55
Total 33,458,734.45 115,798,909.77 111,517,815.50 37,739,828.72
Tax 2009.6.30 2008.12.31
Value-added tax 24,882,596.79 36,245,402.00
Operating tax 7,896.04 7,856.79
City construction tax 590,307.15 209,875.00
Enterprise income tax 17,101,365.92 35,343,748.61
Real estate tax 493,816.26 1,544,826.77
Utilization tax of lands 695,455.84 1,636,704.71
Personal income tax 1,718,211.07 1,611,952.89
Stamp tax 151,421.14 244,715.63
Education surtax 292,767.58 140,968.02
Embankment protection
cost
167,574.28 111,444.33
Others 46,707.06 44,561.28
Total 46,148,119.13 77,142,056.03
Investor name 2009.6.30 2008.12.31 欠款原因
Dividends for common shares 2,550,612.21 20,174.01 Not paid
Qingyuan Xinbeijiang Enterprise
(Group) Company 1,200,710.00 1,200,710.00 Not paid2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
101
26. Other accounts payable
(1) At the end of period, the advance withdrawn expenses from the balance amounts to RMB
144,557,262.82 Yuan, accounting for 66.61% of the balance and are listed as follows:
Other legal person shares and
personal shares in the
subcompanies 1,051,300.00 1,051,300.00 Not paid
Internal staff share of
subcompanies 259,800.00 259,800.00 Not paid
Total 5,062,422.21 2,531,984.01
Item 2009.6.30 2008.12.31
Other accounts payable 217,004,918.75 150,836,568.52
Item 2009.6.30 2008.12.31 Cause of Settlement at
the end of period
Interest 92,392.91 2,952,700.47 Not paid
Water and electricity
expense 541,217.63 380,699.25
Not paid
Scientific research
expense 300,000.00 9,990.00
Not paid
Business promotion
expense 118,909,896.08 76,315,513.52
Not paid
Leasing expense 386,352.00 580,932.80 Not paid
Advertisement
expense 6,475,847.70 3,554,590.70
Not paid
Meeting expense 2,556,022.42 3,044,913.82 Not paid
Auditing expense 1,550,792.34 1,510,410.47 Not paid
Risk fund for medicine
research 300,000.00 300,000.00
Not paid2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
102
(2)The other accounts payable with the age of over 1 year amount to RMB 14,574,454.75
Yuan, accounting for 6.72% of the balance at the end of period. The main cause is that the
deposit for goods amounts to RMB 6,008,504.00 Yuan.
(3)By June 30, 2009, the company should pay RMB 10,996.55 Yuan to the shareholder unit
Joincare Pharmaceutical Group Industry Co., Ltd which holds over 5% (including 5%) voting
rights.
(4)Please see the note IX for more details about the payments of associated parties.
27. Non-current Liabilities Due within 1 Year
28. Long-tern Loans
(1)Types of Long-term Loans
Operating expense of
branches 6,495,927.86 2,387,446.08
Not paid
Drainage expense 1,028,788.32 691,358.90 Not paid
Others 5,920,025.56 3,296,439.87 Not paid
Total 144,557,262.82 95,024,995.88
Borrowing Unit 2009.6.30 2008.12.31 Interest
Rate
Loan Period Condition
Fujian Huaqiaao Trust &
Investment Company
400,000.00 400,000.00
Interestfree
Not specified Credit
Zhuhai Branch of Bank of
China Limited 0.00 10,000,000.00
5.427% 2006-6-30 to 2009-6-
29
Credit
Total 400,000.00 10,400,000.00
Type 2009.6.30 2008.12.312009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
103
(2)List of loan units
Credit loans 100,700,000.00 100,700,000.00
Total 100,700,000.00 100,700,000.00
Loan Unit
2009.6.30 Annual
Interest
Rate
Loan Period
Loan
Cond
itions
Principal Payable
Interests
Total
Loans from banks:
Zhuhai Branch of
Agricultural Bank of
China 20,000,000.00 0.00 20,000,000.00 4.860% 2009-3-30 to 2012-3-30
Credi
t
Zhuhai Branch of
Agricultural Bank of
China 20,000,000.00 0.00 20,000,000.00 4.860% 2008-11-24 to 2011-11-24
Credi
t
Zhuhai Branch of
Agricultural Bank of
China 20,000,000.00 0.00 20,000,000.00 4.860% 2008-11-24 to 2011-11-24
Credi
t
Zhuhai Branch of Bank of
Communications 20,000,000.00 0.00 20,000,000.00 4.860% 2008-7-3 to 2010-7-2
Credi
t
Zhuhai Branch of Bank of
Communications 20,000,000.00 0.00 20,000,000.00 4.860% 2008-9-24 to 2010-9-24
Credi
t
Subtotal 100,000,000.00 0.00 100,000,000.00
Loans from non-bank
financial institutions:
Fuzhou Finance Bureau 700,000.00 0.00 700,000.00
Interest-fr
ee
Not specified Credi
t
Subtotal 700,000.00 0.00 700,000.00
Total 100,700,000.00 0.00 100,700,000.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
104
(3)By June 30, 2009, there are no due long-term loans which have not been repaid.
29. Deferred Gains
Item
Total Allowance
Amount
2008.12.31
Increase in
the current
period
Resale in the
Current
Period
2009.6.30
L－Phenylalanine project 3,884,702.80 300,000.00 0.00 300,000.00 0.00
Non-PVE bag improvement
project 4,840,000.00 4,727,315.00 0.00 0.00 4,727,315.00
Famciclovir Sustained Release
Capsules 0302 project 1,100,000.00 130,383.34 0.00 35,245.25 95,138.09
Enzymatic technology innovation
project 1,042,631.00 944,812.90 0.00 0.00 944,812.90
Shenchang Drop Pills (Bidinvitation
project expense of
provincial science and technology
department) 4,300,000.00 2,133,993.30 0.00 22,071.76 2,111,921.54
Item
Total Allowance
Amount
2008.12.31
Increase in
the current
period
Resale in the
Current
Period
2009.6.30
5- 4-aminosalicylic acid (0001
project) 1,200,000.00 537,938.10 0.00 0.00 537,938.10
Salvianolic acid B 300,000.00 150,000.00 0.00 0.00 150,000.00
Bifidoboigen preparations 600,000.00 497,049.69 0.00 3,848.47 493,201.22
Research, development and
production transfer of Jimishaxing
pellets 300,000.00 274,902.13 0.00 0.00 274,902.13
Experiments and research about
the anti-Avian influenza of 600,000.00 337,613.15 0.00 13,360.16 324,252.992009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
105
30. Deferred Income Tax Liabilities
antivirus granules
Three flower powder used for
injection purpose 1,000,000.00 0.00 1,000,000.00 200,000.00 800,000.00
Aid for patent application expense 12,000.00 0.00 12,000.00 0.00 12,000.00
Special fund for self-owned brand
development 150,000.00 0.00 150,000.00 0.00 150,000.00
Award for safe production of
enterprises 3,000.00 0.00 3,000.00 0.00 3,000.00
International development capital
for SME 58,610.00 0.00 58,610.00 0.00 58,610.00
Allowance for office rooms 1,210,000.00 0.00 1,210,000.00 210,000.00 1,000,000.00
Process improvement of
ValaciclovirHydrochloride 200,000.00 171,806.50 0.00 0.00 171,806.50
Industry research of potassium
citrate sustained release pellets 920,000.00 540,337.86 0.00 0.00 540,337.86
Depth development of Mesylate
Jimishaxing series (pellet) 80,000.00 80,000.00 0.00 0.00 80,000.00
IY81149 anti-gastrointestinal ulcer
medicine 4,800,000.00 4,467,979.48 0.00 153,240.24 4,314,739.24
Demonstration project of
managing the high-concentration
organic wastewater 4,000,000.00 3,155,195.00 0.00 197,202.00 2,957,993.00
Others 950,000.00 851,017.81 0.00 320,000.00 531,017.81
Total
31,550,943.8
0
19,300,344.2
6 2,433,610.00 1,454,967.88
20,278,986.3
8
Type 2009.6.30 2008.12.312009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
106
At the end of this period, the main cause of the increase by 64.90% over the beginning of
period is the rebounce of fair values of saleable financial assets in the current period.
31. Capital
Temporary difference of payable taxes caused by the
saleable financial assets 1,546,761.00 749,223.84
Temporary difference of payable taxes caused by the
calculation of long-term equity investment with the equity
method 1,610,729.89 1,165,538.03
Total 3,157,490.89 1,914,761.87
Increase or Decrease (+ or －) Unit: share
Item 2008.12.31 Sharerationin
g
Amount
Gift
share
amount
Shares
transferred
from public
reserve fund
Others Subtotal 2009.6.30
I. Shares with trading
restriction
① Sponsor’s shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Including:
State-owned shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Shares held by domestic
legal persons
0.00 0.00 0.00 0.00 0.00 0.00 0.00
Shares held by foreign
legal persons
0.00 0.00 0.00 0.00 0.00 0.00 0.00
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
② Raising legal person
shares
0.00 0.00 0.00 0.00 0.00 0.00 0.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
107
32. Capital Reserve
The main cause of the increase in this period is the change in fair values of saleable financial
assets.
③ Internal staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
④ Preference shares or
others
0.00 0.00 0.00 0.00 0.00 0.00 0.00
⑤Circulation share with
trading restriction 25,304,382
0.00 0.00 0.00 0.00 0.00
25,304,382
Total of non-circulation
shares 25,304,382
0.00 0.00 0.00 0.00 0.00
25,304,382
II.Shares without trading
restriction
①Domestically-listed
Renminbi ordinary
shares 158,424,116
0.00 0.00 0.00 0.00 0.00
158,424,116
Including: Management
shares 535
0.00 0.00 0.00 0.00 0.00
535
②Domestically-listed
shares for overseas
investors 122,306,984
0.00 0.00 0.00 0.00 0.00
122,306,984
Total of circulation
ordinary shares 280,731,100
0.00 0.00 0.00 0.00 0.00
280,731,100
III. Total shares 306,035,482 0.00 0.00 0.00 0.00 0.00 306,035,482
Type 2008.12.31
Increase in the
current period
Decrease in the
current period
2009.6.30
Share Premium 412,457,694.25 0.00 0.00 412,457,694.25
Other Capital
Reserve 24,857,140.19 4,519,377.24 0.00 29,376,517.43
Total 437,314,834.44 4,519,377.24 0.00 441,834,211.682009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
108
33. Inventory share
In the 2008 First Temporary Shareholders’ Meeting, the company examined and passed the
Proposal on Repurchasing Some of Domestically Listed Shares for Overseas Investors (B
Shares) of Livzon Pharmaceutical Group Inc: on the condition that the total amount of
repurchase capitals does not exceed HKD 160 million and the repurchase price does not
exceed HKD 16.00/share, the company plans to repurchase 10 million domestically listed
shares for overseas investors (B shares) (the quantity of repurchased shares will be subject
to that of actually repurchased shares at the expiry of repurchase period), and these
repurchased shares will be legally cancelled. The repurchase period is within 12 months from
the announcement date of the repurchase report.
By June 30, 2009, the company has accumulatively repurchased 7,423,800 B-shares,
accounting for 2.4258% of total share capital of the company
34. Surplus Reserve
35. Undistributed Profit
Item
2008.12.31
Repurchase in this
period
Decrease in this per
iod 2009.6.30
Domestically Listed
Shares for Overseas
Investors (B Shares) 15,798,067.52 47,479,144.95 0.00 63,277,212.47
Type 2008.12.31
Increase in the
current period
Decrease in the
current period
2009.6.30
Legal Surplus
Reserve 185,710,200.62 0.00 0.00 185,710,200.62
Other Surplus
Reserves 63,796,201.34 0.00 0.00 63,796,201.34
Reserve Fund 82,108,376.71 0.00 0.00 82,108,376.71
Enterprise
Development
Fund 21,683,742.35 0.00 0.00 21,683,742.35
Total 353,298,521.02 0.00 0.00 353,298,521.02
Item 2009.6.30 2008.12.312009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
109
36. Equities of the minority of shareholders
Undistributed profit at the
beginning of period
711,151,149.38 817,303,043.09
Plus: profit transfer in the current
period 247,854,875.55 52,073,163.66
Other transfers 0.00 0.00
Minus：Withdrawal of Legal Surplus
Reserve 0.00 5,207,316.37
Withdrawal of staff awards or
welfare funds 0.00 0.00
Withdrawal of reserve fund 0.00 0.00
Withdrawal of enterprise
development fund 0.00 0.00
Profits capitalized on return of
investment 0.00 0.00
Minus: Payable dividends for
preference shares 0.00 0.00
Withdrawal of other surplus
reserves 0.00 0.00
Payable dividends for ordinary
shares 29,861,168.20 153,017,741.00
Dividends for ordinary shares
that are transferred to capitals 0.00 0.00
Undistributed profit at the end of
period 929,144,856.73 711,151,149.38
Company name
Equities of the
minority of
shareholders on
December 31,
2008
Increase or decrease from January to June 2009
Equities of the
minority of
shareholders on
June 30, 2009
Net profits of
subcompanie
s
Sharehol
ding
percentag
e of the m
Profit and loss
of the minority
of shareholders
Extra losses
that are borne
by the parent
company for t Other changes2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
110
Other changes are about the capitals invested by the minority of shareholders.
37. Operating Income and Cost
a) Item list
In this period, the main cause of the increase of operating income and decrease of operating
cost are the decrease of the costs of raw material medicine products.
b) The main businesses are listed as follows as per the region:
inority of
sharehold
ers
he minority of
shareholders
Zhuhai Livzon Reagent Co., Ltd 25,928,874.06
14,368,251.
57 49%
7,040,443.2
7 0.00 0.00 32,969,317.33
Xinbeijiang Pharmaceutical Co.,
Ltd under Livzon Group 6,905,116.20
22,049,235.
93 7.86%
1,733,069.9
4 0.00 0.00 8,638,186.14
Limin Pharmaceutical Co., Ltd
under Livzon Group 21,764,895.65
57,427,525.
27 11.91%
6,839,618.2
6 0.00 0.00 28,604,513.91
Shanxi Datong Livzon Qiyuan
Medicine Co., Ltd 278,045.24 -68,342.20 18.52% -5,125.67 0.00 0.00 272,919.57
Longxi Livzon Shenyuan
Medicine Co., Ltd 0.00 0.00 20.72% 0.00 0.00 400,000.00 400,000.00
Zhuhai Livzon – Bai A Meng
Biological Materials Co., Ltd 1,111,467.95 0.00 18% 0.00 0.00 0.00 1,111,467.95
Total 55,988,399.10
93,776,670.
57
15,608,005.
80 0.00 400,000.00 71,996,404.90
Item
January to June 2009 January to June 2008
Operating Income Operating Cost
Gross operating
Profit
Operating Income Operating Cost
Gross operating
Profit
Main Business 1,198,594,526.67 551,116,843.50 647,477,683.17 1,085,315,855.03 610,906,566.95 474,409,288.08
Other
Business 11,112,329.56 7,042,099.27 4,070,230.29 23,630,967.45 17,853,777.66 5,777,189.79
Total 1,209,706,856.23 558,158,942.77 651,547,913.46 1,108,946,822.48 628,760,344.61 480,186,477.872009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
111
c) Incomes and costs from main businesses are listed as follows as per the business:
d) Sales volume of top 5 clients
e) Incomes and costs from other businesses are listed as follows as per the business:
Item
January to June 2009 January to June 2008
Income from
Main Business
Cost of Main
Business
Gross profit from
Main Business
Income from Main
Business
Cost of Main
Business
Gross profit from
Main Business
Guangdong
Province 1,324,422,259.28 802,956,300.63 521,465,958.65 1,248,365,191.15 852,414,043.10 395,951,148.05
Sichuan
Province 148,559,712.76 64,073,665.45 84,486,047.31 109,131,396.82 47,844,566.32 61,286,830.50
Fujian
Province 133,080,716.25 112,418,303.79 20,662,412.46 129,445,476.94 106,057,158.00 23,388,318.94
Others 45,526,988.28 32,914,825.73 12,612,162.55 41,287,891.60 25,841,561.18 15,446,330.42
Subtotal 1,651,589,676.57 1,012,363,095.60 639,226,580.97 1,528,229,956.51 1,032,157,328.60 496,072,627.91
Internal
Writing-off in
the Company 452,995,149.90 461,246,252.10 -8,251,102.20 442,914,101.48 421,250,761.65 21,663,339.83
Total 1,198,594,526.67 551,116,843.50 647,477,683.17 1,085,315,855.03 610,906,566.95 474,409,288.08
Item January to June 2009 January to June 2008
Income from Main
Business
Cost of Main Business
Income from Main
Business
Cost of Main Business
Sales of
Commodities 1,198,594,526.67 551,116,843.50 1,085,315,855.03 610,906,566.95
Total 1,198,594,526.67 551,116,843.50 1,085,315,855.03 610,906,566.95
Client Name
January to June 2009 January to June 2008
Sales Volume
Percentage of Total
Sales Volume (%)
Sales Volume
Percentage of Total
Sales Volume (%)
Total sales volume of top 5
clients 109,121,240.77 9.02% 114,768,733.20 10.35%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
112
38. Business Tax and Surtax
Please see the note V for the withdrawal standard of taxes
39. Sales Expense
In this period, the main cause of the huge increase of sales expense over the same period of
previous year is: in order to push the increase of sales, the promotion expense for business
Item
January to June 2009 January to June 2008
Incomes from Other
Businesses
Costs of Other
Businesses
Incomes from Other
Businesses
Costs of Other
Businesses
Sales of raw
materials 4,313,441.63 1,238,242.86 13,294,832.97 8,189,334.95
Processing
expense 253,722.44 155,413.01 203,214.70 96,564.38
Transfer royalty
of technologies 0.00 0.00 400,000.00 0.00
Leasing expense 682,734.51 16,070.68 686,730.17 14,761.65
Inspection
expense 30,172.26 11,775.28 62,255.92 27,585.77
Power expense 5,424,378.43 5,536,850.80 8,609,594.83 8,397,638.94
Others 407,880.29 83,746.64 374,338.86 1,127,891.97
Total 11,112,329.56 7,042,099.27 23,630,967.45 17,853,777.66
Item January to June 2009 January to June 2008
City construction tax 1,485,088.48 1,054,353.67
Education surtax 868,725.36 648,738.14
Embankment protection cost 578,982.73 544,879.90
Business Tax 19,805.90 18,211.15
Others 35,075.00 25,240.35
Total 2,987,677.47 2,291,423.21
Item January to June 2009 January to June 2008
Sales expense 260,680,296.95 177,717,653.362009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
113
also increases.
40. Financial Expense
In this period, the main cause of the increase of financial expense by 108.89% over the same
period of previous year is that the exchange loss in this period has greatly decreased.
41. Loss of asset depreciation
In this period, the main cause of the increase of loss of assets depreciation by 67.91% over
the same period of previous year is that: the fixed assets of Gutian Fuxing Pharmaceutical
Co., Ltd are temporarily unused and the depreciation reserves for fixed assets are withdrawn.
42. Gains from changes of fair values
In this period, the main cause of the huge increase of gains from changes of fair values over
the same period of previous year is that: some tradable financial assets are sold and the
Item January to June 2009 January to June 2008
Interest payment 12,290,483.65 20,098,659.33
Minus: Interest income 1,861,057.82 1,902,869.35
Profit and loss in the exchange -182,740.82 -13,926,016.18
Handling expense charged by banks 416,515.59 835,026.29
Total 10,663,200.60 5,104,800.09
Item January to June 2009 January to June 2008
Loss of bad debts 8,947,738.21 7,810,318.87
Loss of inventory depreciation 4,011,448.56 6,633,269.63
Loss of fixed assets depreciation 11,441,170.65 88,376.96
Total 24,400,357.42 14,531,965.46
Sources of gains caused by the
changes of fair values
January to June 2009 January to June 2008
Tradable financial assets 133,611,037.40 -153,972,612.48
Including: stocks 133,487,951.63 -153,753,428.99
Fund 123,085.77 -219,183.492009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
114
gains from changes of fair values is transferred to the investment gains.
43. Investment returns
In this period, the main cause of the decrease of investment returns by 231.33% over the
previous period is that the returns from the investments and transfers have greatly decreased.
Item January to June 2009 January to June 2008
1. Returns in the holding period: -123,704.18 1,255,406.16
① profits distributed by the associated or joint
companies 0.00 500,000.00
Including:Changzhou Kangli
Pharmaceutical Co., Ltd under Livzon Group 0.00 500,000.00
②Tradable financial assets 948,564.39 1,680,167.63
③Saleable financial assets 0.00 180,022.50
④Profits distributed by other equity investments 0.00 1,281,065.50
Including: Ruiheng Pharmaceutical
Technology Investment Co., Ltd
0.00 1,281,065.50
⑤ Net increase and decrease of adjusted
shareholders’ equities of invested companies at
the end of year
-1,072,268.57 -2,386,830.91
Including:Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 2,289,558.08 156,090.31
Xinbeijiang Pharmaceutical Co., Ltd -3,361,826.65 -2,542,921.22
⑥ Others 0.0 981.44
2. Returns from transfers： -74,177,528.25 55,319,952.57
Including: Sales of tradable financial assets -74,177,528.25 19,283,010.46
Sales of saleable financial assets 0.00 33,541,670.10
Returns from the equity transfer and
investments
0.00 2,495,272.01
3. Returns from entrusted investments: 0.00 0.00
Total -74,301,232.43 56,575,358.732009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
115
44. Non-operating Income
（1） List about non-operating incomes
（2） Governmental allowance
Item January to June 2009 January to June 2008
Total profit of non-current asset
disposal 98,477.26 220,495.34
Including: Profit of fixed asset
disposal 98,477.26 220,495.34
Penalty income 67,259.00 31,050.00
Waste income 236,792.98 97,192.69
Governmental allowance 1,484,297.32 2,203,318.82
Compensation incomes 592,730.00 0.00
Others 204,898.14 128,836.24
Total 2,684,454.70 2,680,893.09
Type January to
June 2009
January to
June 2008
Source unit Approval document
Demonstration project of managing the highconcentration
organic wastewater 197,202.00 197,202.00
Zhuhai
Environmental
Protection Bureau ——
Award for export increase of export
enterprises 0.00 307,762.85
People’s
Government of
Qingyuan City Qing Fu [2007] No. 86
Expense from Guangdong Fermentation
Pharmaceutical Engineering Technical and
Research Center 200,000.00 0.00
Qingyuan Finance
Bureau Yue Ke Ji[2008] No. 148
Special capital granted by Qingyuan City to
support the SME development 300,000.00 0.00
Guangdong
Science and
Technology Bureau Qing Cai Qi[2008] No. 93
Production project of L － Phenylalanine by
utilizing the gene engineering strains for ferm 200,000.00 0.00
Fuzhou Science
and Technology Bur
Min Cai (Jiao) Zhi [2009] No.
102009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
116
45. Non-operating Expense
In this period, the main cause of the decrease of non-operating expense by 57.09% over
the previous period is that the public welfare donations have greatly decreased.
46. Income Taxes
entation eau
Special research fund 0.00 1,634,000.00
Shaoguan Finance
Bureau Shao Cai G on g〔2008〕No. 5
Special allowance for energy-saving and
technical improvement projects 202,100.00 0.00
Fuzhou Finance
Bureau
Rong Cai Gong[2008] No.
1986
Special capitals of Zhuhai Science and
Technology Bureau 120,000.00 0.00
Zhuhai Science
and Technology
Bureau Yue Cai Jiao[2006] No. 235
Allowance for province-level enterprise
improvement and capital & technology
innovation projects granted by Guangdong
province in 2008 153,240.24 0.00
Zhuhai Finance
Bureau
Yue Jing Mao Chuang
Xin[2008] No. 778
Others 111,755.08 64,353.97
Total 1,484,297.32 2,203,318.82
Item January to June 2009 January to June 2008
Total of loss for disposal
of the non-current assets 791,268.55 493,831.32
Including: Loss for
disposal of fixed assets 791,268.55 493,831.32
Penalty payments 344,343.55 4,994.90
Public welfare donations 500.00 2,161,243.88
Extraordinary loss 21,861.49 54,670.40
Others 52,967.19 107,260.85
Total 1,210,940.78 2,822,001.352009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
117
In this period, the main cause of the increase of income tax by 73.82% over the same period
of previous year is that the total amounts of profits have greatly increased.
47. Net profit after deduction of Non-Recurring Profit and Loss
Item January to June 2009 January to June 2008
Current income
tax
33,174,788.85
50,995,269.38
Deferred income
tax
5,783,895.96 -28,582,533.96
Total 38,958,684.81 22,412,735.42
Item
January to June
2009
January to June
2008
Net profit 263,462,881.35 70,010,852.60
Plus: (1) Profit and loss in disposal of non-current assets, including the writen-off part of
already withdrawn depreciation reserves 692,791.29 -2,221,936.05
(2) Tax rebate and exemption due to the approval without the appropriate authority
or the formal approval documents, or the accidental tax rebate and exemption 0.00 0.00
(3) Governmental allowance accrued to the current profit and loss, except those that
are closely related to the normal operation businesses of company, comply with the
national policies, and are continuously granted based on the certain standard quota or
certain quantity -1,484,297.32 -2,203,318.82
(4) Capital occupancy expense from the non-financial enterprises that is accrued to
the current profit and loss 0.00 0.00
(5) The investment costs of enterprises to obtain the subcompanies, associated
enterprises and joint enterprises are less than the returns from the fair values of
identifiable net assets of invested units that should be available at the time of investment 0.00 0.00
(6) Profit and loss of the non-currency asset exchange 0.00 0.00
(7) Profit and loss of investment or management of entrusted assets 0.00 0.00
(8) The various withdrawn reserves for assets depreciation due to the force majeures
such as the natural calamities 0.00 0.00
(9) Profit and loss of liabilities restructuring 0.00 0.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
118
(10) Enterprise restructuring expenses, such as the payments for staffing and
integration expense, etc. 0.00 0.00
(11) Profit and loss from the amount exceeding the fair values in the transactions in
which the transaction prices are obviously unfair. 0.00 0.00
(12) The current profit and loss from the establishment date to the merger date of
subcompanies that are established by the merger of enterprises under the same control 0.00 0.00
(13) The profit and loss caused by the contingent events that are not related to the
normal operation business of the company 0.00 0.00
(14) Except the effective hedge business related to the normal operation business of
the company, the profit and loss in the changes of fair values caused by the holding of
tradable financial assets and tradable financial liabilities as well as the investment returns
in disposal of tradable financial assets, tradable financial liabilities and saleable financial
assets -60,382,073.54 99,287,741.79
(15) Reversion of depreciation reserves for accounts receivable whose depreciation
testing have been individually made 0.00 0.00
(16) Profit and loss from the externally entrusted loans 0.00 0.00
(17) Profit and loss caused by the changes of fair values of invested real estates in
the subsequent calculation by utilizing fair value mode 0.00 0.00
(18) Effect of the one-time adjustment of the current profit and loss in accordance
with the requirements of laws and regulations concerning the taxes and accounting, etc.
on the current profit and loss 0.00 0.00
(19) Custody income due to the entrusted custody 0.00 0.00
(20) Other non-operating income and payment except the above items -682,007.89 2,071,091.12
(21) Other profit and loss items that comply with the definition for non-operating profit
and loss 0.00 -1,318,292.61
Subtotal -61,855,587.46 95,615,285.43
Minus: effect of income tax of non-operating profit and loss -4,373,963.33 17,210,751.38
Minus: effect of non-operating profit and loss on the current profit and loss of the minority
of shareholders’ equities -93,759.16 -162,973.41
Net profit after deduction of Non-Recurring Profit and Loss 206,075,016.38 148,578,360.06
Minus: the net profit attributable to the minority of shareholders after deduction of nonoperating
profit and loss 15,608,005.80 8,915,159.372009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
119
48. Other Comprehensive Returns
49. Other Received Cashes Related to the Operating Activities
The net profit attributable to the shareholders of parent company after deduction of nonoperating
profit and loss 190,467,010.58 139,663,200.69
Item
January to June
2009
January to June 2008
1. Saleable financial assets 5,316,914.40 -47,186,477.06
Plus: the amounts that are gained (lost) in the current period 5,316,914.40 -45,610,981.20
Minus: the amounts that were ever accured to the other
comprehensive returns before but transferred to the profits in the
current period 0.00 1,575,495.86
2. Shares in the other comprehensive returns of invested units
based on the calculation by equity method 0.00 0.00
3. Hedging instrument of cash flow 0.00 0.00
Plus: the amounts that are gained (lost) in the current period 0.00 0.00
Minus: the amounts that were ever accured to the other
comprehensive returns before but transferred to the profits in the
current period 0.00 0.00
The adjustment amounts that were transferred to the initial
confirmation amounts of hedged items 0.00 0.00
4. Conversion difference in operating the foreign currencies in
the overseas markets -203,546.40 -7,112,382.42
5. Effect of income taxes related to the items accrued to
comprehensive returns -797,537.16 8,493,565.87
6. Others 0.00 0.00
Total 4,315,830.84 -45,805,293.61
Item January to June 2009 January to June 20082009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
120
50. Other Paid Cashes Related to the Operating Activities
Deposit 1,408,736.00 1,004,125.10
Fund transfer 3,782,674.57 3,341,825.55
Governmental allowance 2,934,021.44 4,930,310.96
Interest income 1,861,057.82 1,902,869.35
Penalty income 114,933.60 21,673.65
Deposit 163,135.60 106,000.00
Staff loan 896,376.53 1,602,774.76
Waste income 3,045.00 14,800.00
Bill deposit 0.00 1,460,168.70
Others 1,115,822.10 1,146,803.10
Total 12,279,802.66 15,531,351.17
Item January to June 2009 January to June 2008
Office expense 6,020,862.42 4,861,295.65
Traveling expense 5,558,222.84 4,186,347.81
Communication expense 5,938,330.45 4,995,487.03
Water and electricity expenses 1,614,871.80 3,293,571.78
Transportation expense 11,659,563.27 11,362,469.95
Advertising expense 2,347,122.00 8,256,794.62
Meeting expense 6,521,985.03 5,530,806.44
Lease expense 1,858,034.74 1,478,916.31
Maintenance expense 1,748,130.26 1,804,783.86
Environmental Protection Cost 553,955.90 21,589.20
Auditing expense and information
disclosure expense 1,169,971.77 1,352,623.79
Insurance 311,875.38 675,127.81
Meeting expense of Board of 40,203.90 68,646.102009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
121
51. Other Received Cashes Related to the Financing Activities
52. Other Paid Cashes Related to the Financing Activities
53. Supplementary Data of Consolidated Cash Flow Statement
Directors
Consultancy expense of
consultants 371,128.46 753,805.65
Research and development
expense 8,860,646.66 5,512,240.76
Lawsuit expense 56,202.00 313,110.82
Bid-invitation expense 1,373,458.35 1,112,214.92
Testing and inspection expenses 171,263.00 100,557.80
Handling expenses charged by
banks 416,515.59 730,528.99
Penalty payment 344,021.55 51,842.40
Reserve fund 2,860,022.06 1,353,448.49
Deposit 24,359,012.27 2,731,055.31
Fund transfer 319,860.59 1,889,018.82
Low-value consumables 0.00 36,203.69
Business promotion expense 155,165,330.46 96,400,133.59
Transfer royalty of technologies 2,145,063.85 0.00
Others 8,111,508.69 14,977,816.58
Total 249,897,163.29 173,850,438.17
Item January to June 2009 January to June 2008
Deducted personal income tax
in the dividend distribution 0.00 4,047,036.65
Item January to June 2009 January to June 2008
Repurchase of B shares 47,479,144.95 0.00
Item January to June 2009January to June 20082009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
122
54. Cash and Cash Equivalents
1.Adjust the net profit to the cash flow of operating activities:
Net profit 263,462,881.35 70,010,852.60
Plus: Reserve for asset depreciation 24,400,357.42 14,531,965.46
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 58,090,431.49 59,831,149.29
Amortization of intangible assets 6,146,924.97 6,098,302.09
Amortization of long-term amortization expense and long-term assets 1,511,553.76 1,964,722.84
Loss in disposal of fixed assets, intangible assets and other long-term
assets (the profits will be listed beginning with "-") 692,791.29 273,335.98
Loss in the rejection of fixed assets (the profits will be listed beginning
with "-") 0.00 0.00
Loss in the changes of fair values (the profits will be listed beginning
with "-") -133,611,037.40 153,972,612.48
Financial expense (the profits will be listed beginning with "-") 12,675,781.94 5,394,717.69
Investment loss (the profits will be listed beginning with "-") 74,301,232.43 -56,575,358.73
Decrease of deferred income tax assets (the increase will be listed
beginning with "-") 5,338,704.10 -6,793,124.65
Increase of deferred income tax liabilities (the decrease will be listed
beginning with "-") 445,191.86 -21,883,115.78
Decrease of inventory (the increase will be listed beginning with "-") 18,836,334.67 2,095,347.09
Decrease of receivable operating items (the increase will be listed
beginning with "-") -146,862,869.79 -135,008,330.01
Increase of receivable operating items (the decrease will be listed
beginning with "-") 34,589,258.73 25,699,658.05
Others 0.00 0.00
Net amount of cash flow from the operating activities 220,017,536.82 119,612,734.40
2.Key investment and financing activities not involving the cash income
and payment
Transfer from liabilities to share capital 0.00 0.00
Transferable company bonds due within one year 0.00 0.00
Financing leasing of fixed assets 0.00 0.00
3.Change of cash and cash equivalents:
Cash balance at the end of period 466,759,937.90 462,971,079.90
Minus: cash balance at the beginning of period 540,183,900.36 281,225,232.89
Plus: cash equivalent balance at the end of period 0.00 0.00
Minus: cash equivalent balance at the beginning of period 0.00 0.00
Net increase of cash and cash equivalent -73,423,962.46 181,745,847.01
Item 2009.6.30 2008.12.31
I. Cash 466,759,937.90 540,183,900.362009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
123
VIII. Notes to the Relevant Items in the Financial Statements of Parent
company
1. Accounts Receivable
(1) Composition of accounts receivable
Including: Cash at stock 130,937.21 60,167.77
Deposits in banks that may be used
for payment randomly 448,531,766.57 526,594,000.11
Other Currency Capitals that may
be used for payment randomly 18,097,234.12 13,529,732.48
II. Cash equivalents 0.00 0.00
Including: Bond investment due within 3
months
0.00 0.00
III. Cash and cash equivalent balances at
the end of period 466,759,937.90 540,183,900.36
Item
2009.6.30 2008.12.31
Amount Percenta
ge
Reserves for
Bad Accounts
Net Value Amount Percent
age
Reserves for
Bad
Accounts
Net Value
The individual amount
is large
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
The accounts
receivable whose
individual amount is not
large but the risk of this
combination is very
great after the combina 2,015,528.51 0.98% 1,474,200.41 541,328.10 979,802.67 0.64% 721,901.70 257,900.972009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
124
(2) Age analysis
(1) From January to June 2009, the accounts receivable with the non-associated parties that
have actually been written off amount to RMB 167,381.03 Yuan.
(2) By June 30, 2009, there are no debts with the shareholder units holding over 5%
(including 5%) voting rights.
(3) The total amount of the top 5 accounts receivable is RMB 27,467,241.88 Yuan, accounting
for 13.43% of receivable balance.
2. Other Accounts Receivable
tion subject to the
credit risk
characteristics
Other minor accounts
receivable 202,471,694.73 99.02% 10,328,669.53 192,143,025.20 151,925,643.58 99.36% 7,861,825.15 144,063,818.43
Total
204,487,223.24 100.00% 11,802,869.94 192,684,353.30 152,905,446.25
100.00
% 8,583,726.85 144,321,719.40
Age
2009.6.30 2008.12.31
Amount Percenta
ge
Reserves for Bad
Accounts
Net Value Amount Percent
age
Reserves for Bad
Accounts
Net Value
Within 1 year 196,434,092.4
3 96.06% 9,821,704.62
186,612,387.8
1
146,653,365.2
5 95.91% 7,328,716.27
139,324,648.9
8
1-2 years 5,003,968.25 2.45% 300,238.10 4,703,730.15 3,723,905.58 2.44% 223,434.33 3,500,471.25
2-3 years 1,033,634.05 0.51% 206,726.81 826,907.24 1,548,372.75 1.01% 309,674.55 1,238,698.20
Over 3 years 2,015,528.51 0.98% 1,474,200.41 541,328.10 979,802.67 0.64% 721,901.70 257,900.97
Total 204,487,223.2
4 100.00% 11,802,869.94
192,684,353.3
0
152,905,446.2
5
100.00
% 8,583,726.85
144,321,719.4
0
Age
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
Within 1 year 27,467,241.88 13.43% 34,558,155.71 22.60%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
125
(1) Composition of other accounts receivable
(2) Other accounts receivable with the large individual amount
Item
2009.6.30 2008.12.31
Amount Percent
age
Reserves for
Bad
Accounts
Net Value Amount Percent
age
Reserves for
Bad
Accounts
Net Value
The individual amount
is large
469,337,502.6
8 87.80% 0.00
469,337,502.6
8
531,280,132.2
5 88.52% 0.00
531,280,132.2
5
The accounts
receivable whose
individual amount is not
large but the risk of this
combination is very
great after the
combination subject to
the credit risk
characteristics 1,686,081.80 0.31%
1,344,318.8
1 341,762.99 2,113,138.98 0.35%
1,674,892.6
5 438,246.33
Other minor accounts
receivable 63,498,705.64 11.89% 689,142.92 62,809,562.72 66,787,576.85 11.13% 537,501.01 66,250,075.84
Total 534,522,290.1
2 100.00%
2,033,461.7
3
532,488,828.3
9
600,180,848.0
8 100.00%
2,212,393.6
6
597,968,454.4
2
Debtor Name Debt Amount Withdrawa
l
Percentag
e
Cause
Livzon Syntpharm Co., Ltd in
Zhuhai Bonded Area 121,534,143.94 0.00
The debtor is the subcompany
controlled by the company and there are
no risks in receiving the debts..2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
126
(3) Age analysis
(4) By June 30, 2008, there are no debts with the shareholder units holding over 5%
(including 5%) voting rights.
(5) The total amount of top 5 other accounts receivable is RMB 500,762,475.48 Yuan,
accounting for 93.69% of total of other accounts receivable and is listed as follows:.
Hongkong Antao Development
Limited 119,761,335.92 0.00
The debtor is the subcompany
controlled by the company and there are
no risks in receiving the debts..
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group 119,314,057.15 0.00
The debtor is the subcompany
controlled by the company and there are
no risks in receiving the debts..
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 108,727,965.67 0.00
The debtor is the subcompany
controlled by the company and there are
no risks in receiving the debts..
Total 469,337,502.68
Age
2009.6.30 2008.12.31
Amount Percent
age
Reserves for
Bad Accounts
Net Value Amount Percent
age
Reserves for
Bad Accounts
Net Value
Within 1 year 531,778,099.49 99.49% 565,150.52 531,212,948.97 596,822,385.15 99.44% 338,058.95 596,484,326.20
1-2 years 625,924.10 0.12% 37,555.45 588,368.65 827,305.24 0.14% 49,638.31 777,666.93
2-3 years 432,184.73 0.08% 86,436.95 345,747.78 418,018.71 0.07% 149,803.75 268,214.96
Over 3 years 1,686,081.80 0.31% 1,344,318.81 341,762.99 2,113,138.98 0.35% 1,674,892.65 438,246.33
Total
534,522,290.12
100.00
% 2,033,461.73 532,488,828.39 600,180,848.08
100.00
% 2,212,393.66 597,968,454.42
Debtor Name Debt Amount
Nature or Content Debt Time
Percentage of
Total Amount2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
127
(6) At the end of period, no individual reserves for bad accounts are full withdrawn.
3. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area 121,534,143.94 Fund transfer
Within 1
year
22.74%
Hongkong Antao Development
Limited 119,761,335.92 Fund transfer
Within 1
year
22.41%
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group 119,314,057.15 Fund transfer
Within 1
year
22.32%
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 108,727,965.67 Fund transfer
Within 1
year
20.34%
Lida Pharmaceutical Co., Ltd in
Zhuhai Bonded Area 31,424,972.80 Fund transfer
Within 1
year
5.88%
Total 500,762,475.48 93.69%
Item
2009.6.30 2008.12.31
Book Balance
Depreciation
Reserve
Book Values Book Balance
Depreciation
Reserve
Book Values
Calculatio
n by Cost
Method 921,399,238.31 38,971,307.03 882,427,931.28 921,399,238.31 38,971,307.03 882,427,931.28
Calculatio
n by
Equity
Method 14,005,525.10 1,200,000.00 12,805,525.10 16,858,561.06 1,200,000.00 15,658,561.06
Total 935,404,763.41 40,171,307.03 895,233,456.38 938,257,799.37 40,171,307.03 898,086,492.342009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
128
(2) Long-term equity investment calculated by cost method
Name of Invested Units Initial Amount 2008.12.31 Increase in the
current period
Decrease in
the current
period
2009.6.30
Zhuhai Branch of Guangdong
Development Bank 105,000.00
105,000.00
0.00 0.00
105,000.00
Beijing Medical Goods Joint Operation
Company 100,000.00
100,000.00
0.00 0.00
100,000.00
Doumen Sanzhou Industry City Co.,
Ltd 500,000.00
500,000.00
0.00 0.00
500,000.00
Zhuhai City Commercial Bank 20,000,000.00 20,000,000.00 0.00 0.00 20,000,000.00
Ruiheng Pharmaceutical Technology
Investment Co., Ltd 6,250,000.00
6,250,000.00 0.00 0.00 6,250,000.00
Zhuhai Livzon – Bai A Meng Biological
Materials Co., Ltd 3,934,721.95 3,934,721.95 0.00 0.00 3,934,721.95
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd 800,000.00 800,000.00 0.00 0.00 800,000.00
Name of Invested Units Initial Amount 2008.12.31 Increase in the
current period
Decrease in
the current
period
2009.6.30
Livzon Pharmaceutical Factory under
Livzon Group 122,339,752.98 122,339,752.98
0.00
0.00 122,339,752.98
Sichuan Guangda Pharmaceutical Co.,
Ltd 116,872,457.35 116,872,457.35
0.00
0.00 116,872,457.35
Shanghai Livzon Pharmaceutical Co.,
Ltd 74,229,565.00 74,229,565.00
0.00 0.00
74,229,565.00
Zhuhai Modern Chinese Medicine Hitech
Co., Ltd 4,539,975.00 4,539,975.00
0.00 0.00
4,539,975.00
Livzon (Hongkong) Co., Ltd 64,770,100.00 64,770,100.01 0.00 0.00 64,770,100.012009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
129
(3) Long-term equity investment calculated by equity method
(4) Depreciation Reserve for long-term equity investment
Hongkong Antao Development Limited 534,050.00 534,050.00 0.00 0.00 534,050.00
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 116,446,982.80 116,446,982.80
0.00 0.00
116,446,982.80
Livzon Reagent Co., Ltd under Livzon
Group 2,021,378.68 2,896,800.00
0.00 0.00
2,896,800.00
Livzon Medicine Marketing Co., Ltd
under Livzon Group 12,008,000.00 12,008,000.00
0.00
0.00 12,008,000.00
Limin Pharmaceutical Co., Ltd under
Livzon Group 32,768,622.72 32,768,622.72
0.00
0.00 32,768,622.72
Zhuhai Livzon Medicine Trade Co., Ltd 40,020,000.00 40,020,000.00 0.00 0.00 40,020,000.00
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group 150,759,738.00 241,453,210.50
0.00 0.00
241,453,210.50
Shenzhen Yuanxing Pharmaceutical
Co., Ltd 60,830,000.00 60,830,000.00
0.00
0.00 60,830,000.00
Total 829,830,344.48 921,399,238.31 0.00 0.00 921,399,238.31
Name of Invested Units Investment Cost 2008.12.31 Increase in
the current
period
Decrease in
the current
period
2009.6.30 Cash
Dividends
Livzon Medical Electronic Equipment
(Factory) Co., Ltd 1,200,000.00 1,200,000.00 0.00 0.00 1,200,000.00 0.00
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 2,462,407.50 6,404,279.43 508,790.69 0.00 6,913,070.12 0.00
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 17,500,000.00 9,254,281.63 0.00
3,361,826.
65 5,892,454.98 0.00
Total
21,162,407.50 16,858,561.06 508,790.69
3,361,826.
65 14,005,525.10 0.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
130
4. Operating Income and Operating Cost
(1) Item list
Investment Items
2008.12.31
Withdraw
al in the
Current
Period
Transfer
in the
Current
Period 2009.6.30
Withdrawal
Cause
Doumen Sanzhou Industry City
Co., Ltd
500,000.00 0.00 0.00 500,000.00
The net assets
are less than
zero.
Zhuhai City Commercial Bank
20,000,000.0
0 0.00 0.00 20,000,000.00 Loss
Livzon Medical Electronic
Equipment (Factory) Co., Ltd
1,200,000.00 0.00 0.00 1,200,000.00
The net assets
are less than
zero.
Fuzhou Fuxing Pharmaceutical
Co., Ltd under Livzon Group 11,200,000.00 0.00 0.00 11,200,000.00
The
depreciation
has occurred.
Xinbeijiang Pharmaceutical Co.,
Ltd under Livzon Group 7,271,307.03 0.00 0.00 7,271,307.03 Operation loss
Total
40,171,307.0
3 0.00 0.00 40,171,307.03
Item
January to June 2009 January to June 2008
Operating Income Operating Cost
Gross operating
Profit
Operating Income Operating Cost
Gross operating
Profit
Main Business 466,128,782.40 250,328,404.12 215,800,378.28 366,552,082.79 195,464,526.95 171,087,555.84
Other
Business 375,490.51 16,070.68 359,419.83 348,946.17 14,761.65 334,184.52
Total 466,504,272.91 250,344,474.80 216,159,798.11 366,901,028.96 195,479,288.60 171,421,740.362009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
131
(2) Incomes from main business and businesses are listed as follows as per the business
types:
(3) Sales volume of top 5 clients
5. Business Tax and surtax
Item
January to June 2009 January to June 2008
Income from Main
Business
Cost of Main
Business
Gross Profit from
Main Business
Income from Main
Business
Cost of Main
Business
Gross Profit from
Main Business
Sales of
Commodities 466,128,782.40 250,328,404.12 215,800,378.28 366,552,082.79 195,464,526.95 171,087,555.84
Client Name
January to June 2009 January to June 2008
Sales Volume
Percentage of Total
Sales Volume (%)
Sales Volume
Percentage of Total
Sales Volume (%)
Total sales volume of top 5
clients 40,852,185.30 8.76% 77,332,565.82 21.10%
Item Tax rate January to June 2009 January to June 2008
Business Tax 5% 0.00 0.00
Embankment protection
cost
0.07%
61,500.00 75,000.00
Total 61,500.00 75,000.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
132
6. Investment Returns
Item January to June 2009 January to June 2008
1. Returns during the holding period: 91,835,914.24 91,719,527.16
① Profits distributed by the associated or joint
companies 0.00 500,000.00
Including:Changzhou Kangli Pharmaceutical Co.,
Ltd under Livzon Group
0.00 500,000.00
②Tradable financial assets 0.00 60,000.00
③Bonus return of saleable financial assets 0.00 180,022.50
④Profits distributed by other equity investment 0.00 1,281,065.50
Including:Ruiheng Pharmaceutical Technology
Investment Co., Ltd 0.00 1,281,065.50
⑤ Net increase or decrease of adjusted
shareholder equities of invested companies at the
end of year -2,853,035.96 -2,508,234.48
Including: Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 508,790.69 34,686.74
Tongyikangshimei Chain (Shenzhen) Co.,
Ltd -3,361,826.65 -2,542,921.22
⑥Investment returns of subcompanies 94,688,950.20 92,206,673.64
Including:Livzon Pharmaceutical Factory under
Livzon Group
49,008,731.25 15,932,407.30
Sichuan Guangda Pharmaceutical Co.,
Ltd
37,983,419.93 36,653,558.25
Livzon Medicine Marketing Co., Ltd under
Livzon Group 4,455.32 5,150.46
Limin Pharmaceutical Co., Ltd under
Livzon Group
0.00 34,084,527.38
Zhuhai Livzon Advertising Co., Ltd 0.00 2,529.012009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
133
7. Supplementary Data of Cash Flow Statement of Parent Company
Zhuhai Livzon Medicine Trade Co., Ltd 7,692,343.70 5,528,501.24
⑦ Others 0.00 0.00
2. Transfer returns: -69,034,769.85 52,672,217.01
Including: Sales of tradable financial assets -69,034,769.85 16,613,023.57
Sales of saleable financial assets 0.00 33,541,670.10
Returns from equity transfer investment 0.00 2,517,523.34
Total 22,801,144.39 144,391,744.17
Item January to June 2009 January to June 2008
1.Adjust the net profit to the cash flow of operating activities:
Net profit 122,536,970.13 83,820,776.31
Plus: Reserve for asset depreciation 5,587,538.88 3,093,608.48
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 7,607,596.59 7,614,121.35
Amortization of intangible assets 3,100,030.49 3,154,107.33
Amortization of long-term amortization expense and long-term
assets 0.00 0.00
Loss in disposal of fixed assets, intangible assets and other longterm
assets (the profits will be listed beginning with "-") 93,664.35 179,544.88
Loss in the rejection of fixed assets (the profits will be listed
beginning with "-") 0.00 0.00
Loss in the changes of fair values (the profits will be listed
beginning with "-") -97,808,992.64 109,151,598.10
Financial expense (the profits will be listed beginning with "-") 11,248,197.18 3,216,717.65
Investment loss (the profits will be listed beginning with "-") -22,801,144.39 -144,391,744.17
Decrease of deferred income tax assets (the increase will be
listed beginning with "-") 5,393,172.29 -3,944,753.00
Increase of deferred income tax liabilities (the decrease will be
listed beginning with "-") 0.00 -16,711,056.98
Decrease of inventory (the increase will be listed beginning with "-
") -3,273,046.59 -16,942,956.29
Decrease of receivable operating items (the increase will be listed
beginning with "-") -81,665,334.73 -46,264,470.98
Increase of receivable operating items (the decrease will be listed
beginning with "-") 92,809,479.34 25,569,850.90
Others 0.00 0.00
Net amount of cash flow from the operating activities 42,828,130.90 7,545,343.58
2.Key investment and financing activities not involving the cash
income and payment
Transfer from liabilities to share capital 0.00 0.00
Transferable company bonds due within one year 0.00 0.002009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
134
IX. Relationship and Transaction of Associated Parties
1. Confirmation Standard of associated parties
The other party which is controlled, jointly controlled or substantially influenced by the
company, or controls, jointly controls or substantially influences the company, or is under the
same control, joint control or substantial influence of the same parties as the company will be
deemed as the associated party of the company.
2. Relationship of associated parties
(1) Associated party with the control relationship
Please see the note VI for the details of the subcompanies held by the company.
(2) Registered capitals and changes of associated parties with the control relationship
Financing leasing of fixed assets 0.00 0.00
3.Change of cash and cash equivalents:
Cash balance at the end of period 393,126,247.45 386,992,616.22
Minus: cash balance at the beginning of period 465,301,653.09 214,055,704.00
Plus: cash equivalent balance at the end of period 0.00 0.00
Minus: cash equivalent balance at the beginning of period 0.00 0.00
Net increase of cash and cash equivalent -72,175,405.64 172,936,912.22
Enterprise
Name
Registered
Address
Main Business
Organization
Code
Relationship
with the
Company
Economic
Nature
Legal
Representative
Joincare
Pharmaceutical
Group Industry
Co., Ltd
Shenzhen
Production and
sales of oral
liquids,
medicines and
health-care food
61887436-7
Parent
company
Company
Limited
(Listed
company)
Zhu Baoguo
Enterprise Name 2008.12.31 Increase in the
current period
Decrease in the
current period
2009.6.302009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
135
Please see the note VI for the details of the registered capitals and changes of subcompanies
held by the company.
(3) Shares and changes of associated parties with the control relationship
In the above equities held by Joincare Pharmaceutical Group Industry Co., Ltd, the formalities
for transferring the equities of 6,059,428 legal person shares held in the name of Guangzhou
Begol Trading Corporation have not been handled and the transfer formalities of other
equities have been handled
(4) Details about associated parties without any control relationship
Joincare Pharmaceutical Group
Industry Co., Ltd
1,097,874,000 0.00 0.00 1,097,874,000
Enterprise Name 2008.12.31 Percenta
ge (%)
Increase in the
current period
Decrease in
the current
period
2009.6.30 Percenta
ge(%)
Joincare Pharmaceutical Group Industry
Co., Ltd and its subcompanies 134,000,271
44.0754
% 0.00 0.00 134,000,271
44.8744
%
Enterprise Name Organization Code Relationship with the Company
Guangdong Blue Treasure Pharmaceutical
Co. Ltd 61806410-2 Associated company
Tongyikangshimei Chain (Shenzhen) Co.,
Ltd 76046936-2 Associated company
Shenzhen Haibin Pharmaceutical Co., Ltd
61885517-4
Company controlled by parent
company
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 77512952-0
Company controlled by parent
company
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 75788087-1
Company controlled by parent
company
Health Pharmaceutical (China) Co., Ltd
61749891-0
Company controlled by parent
company
Shenzhen Taitai Pharmaceutical Industry Co.,
Ltd 74121715-1
Company controlled by parent
company2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
136
3. Transactions between associated parties
（1） The pricing principle of transactions between the company and associated parties:
the transactions will be settled at the prices of similar products in the market
（2） Transaction of associated parties
① Sales of Commodities
② Provision of labors (water, electricity and power)
③ Purchase of commodities
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage of
Transaction
Amount (%)
Amount
Percentage of
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 12,301,965.80 1.03% 1,766,321.06 0.16%
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 0.00 0.00 10,759.76 0.00
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 2,492.85 0.00 821.09 0.00
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd 0.00 0.00 32,179.49 0.00
Total 12,304,458.65 1.03% 1,810,081.40 0.16%
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage of
Transaction
Amount (%)
Amount
Percentage of
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 3,052,462.56 56.27% 5,365,088.34 62.32%
Name of Associated Parties January to June 2009 January to June 20082009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
137
④ Leasing of assets
⑤ Renting of Assets
Amount
Percentage of
Transaction
Amount (%)
Amount
Percentage of
Transaction
Amount (%)
Changzhou Kangli
Pharmaceutical Co., Ltd under
Livzon Group 0.00 0.00 1,520,512.82 0.31%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 7,432.36 0.00 5,488.66 0.00
Shenzhen Haibin Pharmaceutical
Co., Ltd 1,876,068.34 0.40%
761,230.77
0.15%
Joincare Pharmaceutical Group
Industry Co., Ltd 329,641.03 0.07%
27,692.31
0.01%
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd 58,206,837.63 12.42%
111,704,914.63
22.67%
Total 60,419,979.36 12.89% 114,019,839.19 23.14%
Name of Associated Parties
January to June 2009 January to June 2008
Amount
Percentage of
Transaction Amount
(%)
Amount
Percentage of
Transaction
Amount (%)
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 52,104.00 7.63% 54,447.55 7.93%
Health Pharmaceutical (China) Co.,
Ltd 49,974.00 7.32% 8,329.00 1.21%
Total 102,078.00 14.95% 62,776.55 9.14%
Name of Associated Parties January to June 2009 January to June 20082009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
138
⑥ Receivable and payable balances with associated parties
Amount
Percentage of
Transaction Amount
(%)
Amount
Percentage of
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 0.00 0.00 53,137.20 1.59%
Enterprise Name
2009.6.30 2008.12.31
Amount Percentage Amount Percentage
Accounts receivable:
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 5,000,000.00 0.98%
0.00 0.00
Shenzhen Taitai Pharmaceutical
Industry Co., Ltd 84,000.00 0.02%
0.00 0.00
Total 5,084,000.00 1.00% 0.00 0.00
Other accounts receivable:
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 649,980.64 2.18%
0.00 0.00
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 8,629.00 0.03%
0.00 0.00
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 560,390.25 1.88%
560,000.00
1.95%
Total 1,218,999.89 4.09% 560,000.00 1.95%
Enterprise name
2009.6.30 2008.12.31
Amount Percentage Amount Percentage2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
139
X. Contingent Events
By June 30, 2009, the company has no contingent key events for disclosure.
XI. Commitments
1. This company signed the patent license agreement with Korea Yiyang Medicine Company.
This agreement approves our company’s exclusive and irrevocable right to use the patent
Accounts payable:
Shenzhen Haibin Pharmaceutical Co.,
Ltd
0.00
0.00
1,036,800.00
0.65%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd.
7,432.36
0.00
0.00
0.00
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 12,913,025.68 8.27% 22,257,840.92 13.96%
Total 12,920,458.04 8.27% 23,294,640.92 14.61%
Other Accounts payable:
Joincare Pharmaceutical Group
Industry Co., Ltd 10,996.55 0.01% 13,653.11 0.01%
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 222,691.25 0.10% 222,691.25 0.15%
Total 233,687.80 0.11% 236,344.36 0.16%
Advance accounts:
Shenzhen Haibin Pharmaceutical Co.,
Ltd 0.00
0.00 738,489.44 5.77%2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
140
PPI(proton pump inhibitor) compound and Yiyang patent in China including Hong Kong and
Macao in order to production, processing and distribution. The transfer fee will be USD 2.50
million, and by December 31, 2007, it has fully paid it. The company agrees to deduct a
percentage for Yiyang according to 10% of sales amount during the first three years when this
product begins to be sold. And deduct a percentage according to 8% of sales amount during
the next five years. And deduct a percentage according to 6% of sales amount from the
remaining time to July 22, 2014 (the expiry date of agreement).
2. In 2005, the company signed the approval and supply agreement with Korea LG life
science Ltd. (hereinafter referred to as LG Company), and it grants Gemifloxacin Mesylate
with the relevant certificates about intellectual properties and specifies that the permission
fees of the methanesulfonic acid spasmolytic and pellet will be USD1, 000,000 respectively (It
has been fully paid by December 31, 2006). This agreement specifies as follows:
Within the first five years from the validity date of the agreement, the company’s net sales
volume of Jimishaxing pellet will amount to 1.5 million bags (3 pellets in each bag) and LG
Company will refund USD 500,000 after the taxation at one time within two months after the
company has submitted the net sales volume certificate. At the same time, during the validity
period of the agreement (by the end of 2015), the company should pay a royalty of 1.5% of
net sales volume after the taxation to LG Company during 30 days after each quarter. The
company has begun the selling activities since 2008 and paid the royalty to LG Company in
accordance with the agreements.
Within the first five years from the validity date of the agreement, the company will pay a
royalty of 10% of net sales volume after the taxation about injection products to LG Company
within 30 days after each quarter. The company will pay a royalty of 6% of net sales volume
after the taxation about injection products to LG Company within 30 days after each quarter
from the sixth business year to the expiry date of agreement (by the end of 2019).2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
141
3. On April 2, 2007, the fifth Board of Supervisors of Livzon Pharmaceutical Group Inc.
passed the Proposal on Construction of Livzon Industrial Park Project and Relevant Financing
Plans and approved that, to satisfy the demands of development strategy of the Company,
the Company would invest a total of RMB 467.06 million Yuan (including RMB 334.84 million
Yuan loaned from the financial institutions and RMB 132.22 million Yuan raised by the
Company in other ways) to build the Livzon Industrial Park Project in the Shuanglin Zone,
Liangang Industrial Park, Jinwan, Zhuhai. Main construction items of the project: ①the
production lines of current solid preparations (tablet agent, capsule agent, granular agent,
suppository, ointment and soft capsule agent), oral drinking biological products and sterile
preparations produced by Livzon Pharmaceutical Factory under Livzon Group will be
relocated and constructed; ②The auxiliary projects such as box production, medicine packing
materials (box, manual and label) and health products will be constructed.
According to the plan, it will take three years(2007-2010) from the commencement in design
and construction to the engineering completion and production launch. Based on the project
construction schedule, it’s proposed that the investment percentage of construction capitals in
the three-year construction period will be 50%,30% and 20%. The flow capitals will be
invested in the first year of operation period; the yearly investment plan is shown in the
following table:
XII. Non-adjusting Events occurring after the Balance Sheet Date
By the reporting date, the company has no non-adjusting events occurring after the balance
sheet date that need to be disclosed.
Investment(RMB
10 thousand
Yuan)
2008 2009 2010 2011
Construction
investment 21,428 12,856 8,571 0.00
Flow capital
0.00 0.00 0.00 3,851
Total 21,428 12,856 8,571 3,8512009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
142
XIII. Other Key Events
1. Bank loan guaranties that the company provides to the controlled subcompanies during
the report period are listed as follows: (RMB 10 thousand Yuan)
Name of Guarantee Occurrence
Date
(Signing
date of
agreement)
Balance
at the
end of
period
Guarantee
Amount
Guaranty
type
Period
Limin Pharmaceutical Co., Ltd
under Livzon Group
2007.8.3 0 686 (USD100)
Joint and
several
liability
guaranty
2007.8.3-2009.8.3(Shenzhen
Branch of Citi Bank)
Livzon Syntpharm Co., Ltd in
Zhuhai Bonded Area
2008.1.8 0 3,500
Joint and
several
liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Lida Pharmaceutical Co., Ltd in
Zhuhai Bonded Area
2008.1.8 0 600
Joint and
several
liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Zhuhai Livzon Reagent Co., Ltd 2008.1.8 0 1500
Joint and
several
liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)
Zhuhai Livzon Medicine Trade
Co., Ltd
2008.1.8 0 400
Joint and
several
liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch
of Bank of China)2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
143
2. In the 2008 First Temporary Shareholders’ Meeting, the company examined and passed
the Proposal on Repurchasing Some of Domestically Listed Shares for Overseas Investors (B
Shares) of Livzon Pharmaceutical Group Inc: on the condition that the total amount of
repurchase capitals does not exceed HKD 160 million and the repurchase price does not
exceed HKD 16.00/share, the company plans to repurchase 10 million domestically listed
shares for overseas investors (B shares) (the quantity of repurchased shares will be subject
to that of actually repurchased shares at the expiry of repurchase period), and these
repurchased shares will be legally cancelled. The repurchase period is within 12 months from
the announcement date of the repurchase report.
On September 27, 2008, the company obtained the relevant replies of the Ministry of
Zhuhai Livzon Medicine Trade
Co., Ltd
2008.4.29 0 1200
Joint and
several
liability
guaranty
2008.4.29-2011.4.29(Zhuhai
Branch of Bank of Communications)
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group
2008.11.25 120 120
Joint and
several
liability
guaranty
2008.11.25-2009.11.25
(Fuzhou State-owned Assets
Operation and Investment
Company)
Livzon Pharmaceutical Factory
under Livzon Group
2007.10.31 0 12,000
Joint and
several
liability
guaranty
2007.10.31-2010.10.31
(Shanghai Branch of Rabobank
Nederland)
Livzon Pharmaceutical Factory
under Livzon Group
2009.06.19 4,584 16,000
Joint and
several
liability
guaranty
2009.06.19-2011.06.18
(Zhuhai Branch of Xiamen
International Bank)
Total guaranty amount to its controlled subcompanies in the
report period 4,584
Total balance of guaranty amount to its controlled
subcompanies in the report period 4,7042009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
144
Commerce about principally approving the company to repurchase some of B-shares and
reduce its capital.
On November 28, 2008, the company obtained the relevant replies of Zhuhai Center Branch
of the State Administration of Foreign Exchange about approving the company to purchase
the foreign exchange of no more than HKD 160 million Yuan in order to repurchase some of
the domestically listed shares for overseas investors of the company.
By the report date, the company has accumulatively repurchased the quantity of 7,423,800
B-shares, accounting for 2.4258% of total share capital of the company; the highest purchase
price is HKD 13.00 per share; the lowest purchase price is HKD 8.38 per share; the total
amount is about HKD 71.7629 million (including the taxes).
3. On July 9. 2009, the controlling shareholder Joincare Pharmaceutical Group Industry Co.,
Ltd convened the 32nd meeting of the 3th Board of Directors, and examined and passed the
Proposal on the Company Issuing the Exchangeable Bonds and proposed to take some of
tradable A-shares of the company without trading conditions as the pledge in order to issue
the exchangeable bonds.
XIV. Yield Rate of Net Asset and Profit Per Share
Calculation Steps:
Profit in the report period
Yield Rate of Net
Assets
Profit per share (Yuan/share)
Full
dilution
Weighed
average
Basic profit
per share
Profit per
share after
dilution
Net profit attributable to the ordinary
shareholders
247,854,875.
55 12.69% 13.35% 0.83 0.83
Net profit attributable to the ordinary
shareholders after deduction of nonrecurring
profit and loss
190,467,010.
58 9.75% 10.26% 0.63 0.632009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
145
1. Basic profit per share
2. Dilution of profit per share:
Items Calculation Steps Amount
After deduction of
non-recurring profit
and loss
Net profit attributable to the ordinary
shareholders
P
247,854,875.55 190,467,010.58
Total quantity of shares in the beginning of
period
S0
304,024,902 304,024,902
Increase of shares in the current period Si -5,413,220 -5,413,220
Length from the next month after share
increase to the end of report period (unit:
month)
Mi
0-6 0-6
Length of report period (unit: month) M0 6 6
The weighted average number of ordinary
shares which are issued to the public
S=S0＋Si×Mi÷M0
300,205,531 300,205,531
Basic profit per share P÷S 0.83 0.63
Item Calculation Steps Amount
After deduction of
non-recurring profit
and loss
Current net profit attributable to ordinary
shareholders
P
247,854,875.5
5 190,467,010.58
Dividends and interests related to the diluted
potential ordinary shares
A1
0.00 0.00
Returns or expenses caused by the dilution of
the conversion of potential ordinary shares
A2
0.00 0.00
Total quantity of shares in the beginning of
period
S0
304,024,902 304,024,902
Increase of shares in the current period Si -5,413,220 -5,413,220
Length from the next month after share increase Mi 0-6 0-62009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
146
XVI. Approval of Financial Statement
This financial statement is passed and issued by the Board of Direction on , 2009.
Company Name：Livzon Pharmaceutical Group Inc.
to the end of report period (unit: month)
Length of report period M0 6 6
The weighted average number of ordinary
shares which are issued to the public
S=S0＋Si×Mi÷M0
300,205,531 300,205,531
Weighed average number in the conversion from
diluted potential ordinary shares to ordinary
shares
X
0.00 0.00
Diluted profit per share (P＋A1±A2)÷(S＋X) 0.83 0.63
Principal of the Company: Principal of the Financial
Department:
Principal of the Accounting
Department:2009 Semi-annual Report of Livzon Pharmaceutical Group Inc.
147
Section 8 Catalog of Files for Reference
1. The 2009 semi-annual report with the signature of the Chairman.
2. Financial reports with signatures of legal representative, principal of
Financial Department and principal of Accounting Department.
3. All original files and announcement manuscripts that have been
published in the Securities Times, China Securities Journal and
Hongkong Wen Hui Daily (English version) during the report period.
Livzon Pharmaceutical Group Inc.
Chairman: Zhu Baoguo
August 12, 2009
