Livzon Pharmaceutical Group Inc.
2010 Semi-Annual Report
August 2010Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Important Notice
The Board of Directors (BOD), Board of Supervisors (BOS), directors,
supervisors and 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.
The financial statements have not been audited by the certified public
accountants.
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 statements in this semi-annual report.
This Annual Report is published in Chinses and English vsrsions.In the
event of inconsiatency, the Chinese vsrsion shall prevail.Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Content
Section 1 Brief Introduction of the Company……………………………… 3
Section 2 Financial highlights………………………………………………4
Section 3 Change of share capitals and particulars of shareholders………… 6
Section 4 Particulars of Directors, supervisors, senior executives……………9
Section 5 Report of Board of Directors…………………………………… 10
Section 6 Major events……………………………………………………16
Section 7 Financial Report…………………………………………… 28
Section 8 Catalog of files for reference…………………………………… 140Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Section 1 Brief Introduction of the Company
Chinese name 丽珠医药集团股份有限公司
Chinese abbreviation 丽珠集团
English name LIVZON PHARMACEUTICAL GROUP INC.
English abbreviation LIVZON GROUP
Legal representative Zhu Baoguo
Secretary of BOD
Name Li Rucai
Contact address Livzon Building, No. 132, Guihua North Road, Gongbei, Zhuhai,
Guangdong Province
Telephone (0756)8135888
Fax (0756)8886002
Email lirucai2008@livzon.com.cn
Representative of stock affairs
Name Wang Shuguang
Contact address Livzon Building, No. 132, Guihua North Road, Gongbei, Zhuhai,
Guangdong Province
Telephone (0756)8135888
Fax (0756)8886002
Email wangshuguang2008@livzon.com.cn
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 of office address 519020
Website http://www.livzon.com.cn
Email zhlivzon@pub.zhuhai.gd.cn
Papers for information disclosure Securities Times, China Securities Journal and Hongkong Wen Hui
Daily (English version)
Website appointed by China Securities Regulatory
Commission for publishing the annual report
http://www.cninfo.com.cn
Location for filing the report Secretary’ Office of BOD of Livzon Group
Briefing of company stocks
Stock type Stock exchange for listi
ng of the Company
Stock abbreviation Stock code
A share Shenzhen Stock Excha
nge Livzon Group 000513
B share Shenzhen Stock Excha
nge Livzon B 200513
Other relevant information
First registration date of the Company January 26, 1985
Registration change date of the Company April 20, 2010
Registration place of the Company Zhuhai Administration of Industry and Commerce
Business license No. 440400400032571
Tax Registration No. 440401617488309
Organization code 61748830－9
Public accountants firm engaged by the Company
Name of domestic public accountants firm Reanda Certified Public Accountants Co., Ltd
Office address of domestic public accountant firm No. 215, Xingye Road, Zhuhai, Guangdong ProvinceLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Section 2 Financial Highlights
I. Main financial data in the report period (Unit: RMB Yuan)
(I) Deducted non-recurring profit and loss items:
Unit: RMB Yuan
End of the current
period
End of the previous
year
Increase or decrease
compared with the end of
previous year (%)
Total assets 3,374,129,858.05 3,124,376,784.70 7.99%
Owners’ equity attributable to the
shareholders of listed companies 2,342,705,029.81 2,149,084,836.03 9.01%
Share capitals 295,721,852.00 295,721,852.00 -
Net asset per share attributable to the
shareholders of listed companies (RMB Yuan
per share) 7.92 7.27
8.94%
Report period
(January to June)
Same period of
previous year
Increase or decrease
compared with the same
period of previous year (%)
Total operating income 1,322,769,589.74 1,209,706,856.23 9.35%
Operating profit 289,341,700.18 300,948,052.24 -3.86%
Total profit 298,403,772.65 302,421,566.16 -1.33%
Net profit attributable to the shareholders of
listed companies 241,480,232.98 247,854,875.55 -2.57%
Net profit attributable to the shareholders of
listed companies after deduction of nonrecurring
profit and loss
235,593,419.38 190,467,010.58 23.69%
Basic profit per share (RMB Yuan per share) 0.82 0.83 -1.20%
Diluted profit per share (RMB Yuan per share) 0.82 0.83 -1.20%
Weighted average yield rate of net assets 10.68% 13.35%
Down 2.67 percentage point
s
Net cash flows from operating activities 301,935,753.13 220,017,536.82 37.23%
Net cash flows per share from operating
activities (RMB Yuan per share) 1.02 0.74 37.84%
Item
January to
June 2010 Remarks
Profit and loss in disposal of non-current assets, including the
written-off part of already withdrawn depreciation reserves 1,815,102.44
They are mainly the profits on
disposal of fixed assets.
Governmental allowance accrued to the current profit and loss 7,225,572.95
They are mainly the special funds,
etc for scientific and research
projects that are allotted by the
provincial and municipal
governments.
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
-1,457,055.32
They are mainly the profit and
loss in the changes of fair values
of tradable financial assets.
Other net non-operating income and payment except the above 21,397.08Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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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).
(II) Yield Rate of Net Assets and Profit per Share
Note: this statement is prepared in accordance with the No. 9 Preparation Rule about Information Disclosure of
Companies Making Public Offering of Securities – Calculation and Disclosure of Yield Rate of Net Assets and
Profit per Share (revised edition in 2010).
(III) Difference between Domestic and OverseasAccounting Standards
In accordance with the relevant regulations of the Notice on the Relevant Issues about the
Auditing of the Companies that Issue the Domestically Listed B-shares for Overseas Investors
issued by China Securities Regulatory Commission (Zheng Jian Hui Ji Zi [2007] No. 30), the
company did not perform the semi-annual overseas auditing in 2010.
items
Other profit and loss items that comply with the definition for nonoperating
profit and loss
Subtotal 7,605,017.15
Minus: effect of income tax 1,225,654.73
Minus: non-recurring profit and loss attributable to the minority
of shareholders 492,548.82
Total of non-recurring profit and loss 5,886,813.60
Profit in the report period Weighed average yield rate of
net assets
Profit per share (RMB Yuan)
Basic profit per
share
Profit per share after
dilution
Net profit attributable to the ordinary
shareholders 10.68% 0.82 0.82
Net profit attributable to the ordinary
shareholders after deduction of nonrecurring
profit and loss
10.42% 0.80 0.80Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Section 3 Change of Share Capitals and Particulars of Shareholders
I. Particulars of Share Capital Changes (By June 30, 2010)
II. Particulars of shareholding of top ten shareholders and top ten tradable
shareholders without trading restriction (By June 30, 2010)
Beginning balance Increase (+) or decrease (-) Closing balance
Quantity
Percenta
ge
Newly
issued
shares
Bon
us
shar
es
Shares
transferre
d from
public
reserve
fund
Others Subtot
al Quantity Percentage
I. Shares with trading
restriction 6,059,428 2.05% - - - - - 6,059,428 2.05%
1.Shares held by the state - - - - - - - - -
2.Shares held by stateowned
legal person 6,059,428 2.05% - - - - - 6,059,428 2.05%
3.Shares held by other
domestic shareholders - - - - - - - - -
Including: shares held by
domestic legal persons - - - - - - - - -
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 289,662,424 97.95% - - - - - 289,662,424 97.95%
1.Renminbi ordinary
shares 177,669,070 60.08% - - - - - 177,669,070 60.08%
2.Domestically-listed
Shares for Overseas
Investors
111,993,354 37.87% - - - - - 111,993,354 37.87%
3.Overseas-listed shares
for overseas investors - - - - - - - - -
4.Others - - - - - - - - -
III. Total of shares 295,721,852 100% - - - - - 295,721,852 100%
Total quantity of shareholders The shareholder quantity amounted to 18,832 (including:
9,096 B-share holders).
Shares held by top ten shareholders
Shareholder name Shareholder natu Shareholdi Total quantit Total amount o Shares forLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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re
ng
percentag
e (%)
y of shares
f shares with
trading
restriction
the
mortgage
or freezing
Joincare pharmaceutical
Group Industry Co., Ltd
Domestic nonstate-
owned
legal person
26.21% 77,510,167
Tiancheng Industry Co., Ltd Foreign legal
person 15.06% 44,537,733
First Shanghai Securities Co.,
Ltd
Foreign legal
person 3.79% 11,204,820
Bank of Communications –
Penghua China 50 Open
Securities Investment Fund
Others 2.12% 6,282,195
Agricultural Bank of China-
Greatwall Anxin Return
Mixed Securities Investment
Fund
Others 2.09% 6,190,720
Guangzhou Begol Trading
Corporation
State-owned
legal person 2.05% 6,059,428 6,059,428 6,059,428
Shenzhen Haibin
Pharmaceutical Co., Ltd
Domestic nonstate-
owned
legal person
1.99% 5,892,943
National Social Securities
Fund 104 Portfolio Others 1.86% 5,498,995
Bank of Communications -
Great Wall Jiufu Core
Growth Stock-type Securities
Investment Fund (LOF)
Others 1.63% 4,831,520
Industrial and Commercial
Bank of China - Efunds
Finely-selected Value Stock
Securities Investment Fund
Others 1.45% 4,279,961
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 77,510,167 RMB common share
Tiancheng Industry Co., Ltd 44,537,733
Domestically-listed
shares for overseas
investors
First Shanghai Securities Co., Ltd 11,204,820
Domestically-listed
shares for overseas
investors
Bank of Communications – Penghua China 50
Open Securities Investment Fund 6,282,195 RMB common share
Agricultural Bank of China- Greatwall Anxin Return
Mixed Securities Investment Fund 6,190,720 RMB common share
Shenzhen Haibin Pharmaceutical Co., Ltd 5,892,943 RMB common share
National Social Securities Fund 104 Portfolio 5,498,995 RMB common share
Bank of Communications - Great Wall Jiufu Core
Growth Stock-type Securities Investment Fund
(LOF)
4,831,520
RMB common share
Industrial and Commercial Bank of China - Efunds
Finely-selected Value Stock Securities Investment
Fund
4,279,961
RMB common share
Shenzhen Shengjibaili Advertisement Co., Ltd 4,000,000 RMB common share
Remarks about the association relationship or conformity action of above shareholders:
①On 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 CorLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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III Shareholding quantity and trading restriction conditions of the top ten shareholders
holding shares with trading restriction (by June 30, 2010)
Note: in the process of equity reform of the company, Joincare paid the payable consideration shares of equity reform on behalf of
Begol; when the trading restriction period expires, Begol will repay such consideration shares to Joincare or their trading restriction
cannot be released without the approval of Joincare.
IV. During the report period, there are no changes of the controlling shareholders and actual
controllers of the Company.
poration 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 to Joincare; ②Tiancheng Industry Co., Ltd and Shenzhen Haibin Pharmaceutical Co., Ltd are the
subcompanies directly or indirectly held 100% by Joincare; ③Bank of Communications - Penghua China 50
Open-end Securities Investment Fund and National Social Securities Fund 104 Portfolio belong to Penghua
Fund Management Co., Ltd; ④Agricultural Bank of China- Greatwall Anxin Return Mixed Securities Investment
Fund and Bank of Communications - Great Wall Jiufu Core Growth Stock-type Securities Investment Fund
(LOF) belong to Great Wall Fund Management Co., Ltd. The Company does not know whether there are
relations between the other top 10 shareholders or top 10 circulation shareholders or whether they belong to
the concreted actors stated in the Management Measures about Takeover 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
Guangzhou Begol Trading
Corporation
6,059,428 - -
Please see the
note.Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Section 4 Particulars of Directors, Supervisors and Senior Executives
I. Shareholding and change 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, the senior executive Mr. Xu Faguo quit his position as vice president for
personal reasons; the supervisor Mr. Yang Chu quit his position as staff representative supervisor
for personal reasons.
On January 21, 2010, the second meeting of the 5th staff representative meeting elected Mr. Wang
Maolin as the staff representative supervisor of the sixth Board of Supervisors, and his term will
last to the expiry date of the sixth Board of Supervisors.
Name Position
Share-holding
quantity at
the beginning
of year
Increase of
shares in
current
period
Decrease
of shares
in current
period
Shareholding
quantit
y at the
end of
period
Including:
quantity of
shares with
trading
restriction
Quantity of
stock options
the end of
period
Reasons
for changes
Xu Faguo Vice
president 205 - - 205 - - -Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Section 5 Report of 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 1.3227696 billion
Yuan, up RMB 113.0627 million Yuan over the beginning of report period with the increase rate
of 9.35%. The main causes include: (1) The market demand is very large; (2) the sales volume of
raw material medicine products, especially the cephalosporins raw material medicine has greatly
increased; (3) for the preparation products, except the antivirus granules and digestive tract
products, the sales volumes of other key products have increased at the different levels.
During the report period, the operating profit of the Company amounts to RMB 289.3417 million
Yuan, down RMB 11.6064 million Yuan with the decrease rate of 3.86%; the net profit attributable
to the owners of parent company amounts to RMB 241.4802 million Yuan, down RMB 6.3747
million Yuan with the decrease rate of 2.57%. The decrease of operating profits and net profits is
mainly because of the increase of net profits contributed to by the main business of the company
as well as the profits in changes of fair values caused by the securities investment and effects of
investment profits.
During the report period, three expenses total RMB 385.1588 million Yuan, up RMB 2.6372
million Yuan with the increase rate of 0.69%, including: 1. the sales expense increased by RMB
24.5198 million Yuan (with the increase rate of 9.41%) and the main cause is that the increase of
sales performances has caused the increase of relevant expenses; 2. the management expense
decreased by RMB 11.9889 million Yuan (with the decrease rate of 10.78%) and the main cause is
the decrease of compensation expenses and loss of engineering suspension; 3. the financial
expense decreased by RMB 9.8937 million Yuan (with the decrease rate of 92.78%) and the main
cause is the decrease of the interests payment of bank loans.
During the report period, the net amount of cash flow from the operating activities was RMB
301.9358 million Yuan, up RMB 81.9182 million Yuan, and the main cause is that the received
accounts became larger along with the growth of sales volume. During the report period, the net
amount of cash flow from the investment activities was RMB -187.1224 million Yuan, down
RMB 262.2554 million Yuan. The main cause is the increase of payments for relocation projectsLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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of Livzon Pharmaceutical Factory and the purchase payments of equipments. During the report period,
the net amount of cash flow from the financing activities was RMB 16.7985 million Yuan, up
RMB 385.6379 million Yuan, and the main cause is that the cash paid for repayment of debts
during the report period has decreased.
(II) Discussion and analysis of operation status
In the first half of 2010, with the promotion of new medical reform, the implementation of basic
medicine system, expansion of medical insurance and rigid demand of medicine market, etc will
have the deep effects on the pharmaceutical industry. Facing the changeable external environments,
the company has positively taken the counter-measures, seriously performed the management
work, and carried out a series of measures including the adjustment of marketing strategies,
strengthening of quality control management, deepening of scientific and research management,
etc, so the company has kept a good development tendency. In the second half of year, the
company will still consolidate the management strength in all aspects, including: 1) marketing
management. The company must effectively grasp the opportunities brought by the new medical
reform, timely adjust the marketing strategies, strengthen the marketing implementation capacity,
and make the detailed plans about the management of large regions and provincial regions. The
detailed tasks include: 1) strengthen the trainings about management capacity of managers from
large regions and provincial regions, enhance the trainings about marketing strategies and
professional knowledge about products, and consolidate the coordination work between the
market and sales; 2) scientific and research development. The scientific and research departments
will seriously implement the schedule arrangements of all projects under way, and especially step
up the development of vaccines and Dankang medicines projects. At the same time, the company
will carry out the application of key types for approval; 3) production and quality management.
All production enterprises will uphold the principle that the quality is the life of enterprise, strictly
control the quality, improve the operation efficiency in the condition of ensuring the product
quality, perform the coordination work between the production and marketing, and ensure the
product supply to the market.
II. Main 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 injections, Kanglineng(Cefodizime Sodium for Injection),Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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Lifukang (voriconazole), Lizhuwei, Qianliean Suppository, Urofollitropin for Injection (follicle
stimulating), Weisanlian, Jindele, Liaolilong, Gemifloxacin, Ilaprazole, fluvoxamine, Perospirone,
leuprorelin and other medical preparations as well as Ceftriaxone, Cefodizime Sodium for
Injection, Cefuroxime, Mevastatin, mycophenlate mofetil, Pravachol, vancomycin, etc. and some
other raw-material drugs, which involve the chemical drugs, biochemical drugs, micro-ecological
preparations, Chinese patent drugs, chemical raw materials, diagnostic reagents and so on, totaling
hundreds of kinds of products in various medical fields.
(I) During the report period, the main business income is classified according to the profession
status:
Unit: RMB 10 thousand Yuan
(II) Products that account for over 10% (including 10%) of total operating income during the
report period,
Unit: RMB 10 thousand Yuan
Profession Operating
income
Operating
cost
Operating profit
margin
Increase or
decrease of
operating
income
compared with
the previous
year (%)
Increase or
decrease of
operating cost
compared with
the previous
year (%)
Increase or decrease of
operating profit margin
compared with the previous year
(%)
Che
mical
medi
cine
prepa
ration
s
Digestive tract
12,345.54 1,805.88 85.37% -16.16% -18.91%
Up 0.49 percentage points
Cardiac and cerebral
blood vessel
4,504.34 1,245.93 72.34% 1.07% -0.89%
Up 0.55 percentage points
Antimicrobial drugs
15,725.33 6,053.45 61.51% 4.44% -1.64%
Up 2.38 percentage points
Gonadotropic hormone
9,890.02 3,468.53 64.93% 11.33% 2.87%
Up 2.88 percentage points
Blood and hemopoietic
system drugs
1,242.88 766.03 38.37% 18.08% 37.12%
Down 8.55 percentage points
Others
4,346.59 1,532.52 64.74% 19.42% -0.78%
Up 7.17 percentage points
Raw material medicines
48,833.47 38,445.22 21.27% 47.12% 40.68%
Up 3.60 percentage points
Chinese traditional drug
preparation
23,620.53 4,970.26 78.96% -22.99% -42.80%
Up 7.29 percentage points
Diagnostic reagents and
equipments
9,505.30 4,417.22 53.53% 17.92% 11.83%
Up 2.53 percentage points
Imported drugs
249.17 51.57 79.30% 110.02% 62.48%
Up 6.05 percentage pointsLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
13
(III) During the report period, the income of the company’s main business is distributed as follows
according to the regions
Unit: RMB 10 thousand Yuan
(IV) Profit composition, main business structure and profitability changes of the company during
the report period:
Unit: RMB 10 thousand Yuan
Product Operating
income
Operating
cost
Operating
profit margin
Increase or
decrease of
operating
income
compared
with the
previous
year (%)
Increase or
decrease of
operating
cost
compared
with the
previous year
(%)
Increase or decrease of
operating profit margin
compared with the
previous year (%)
Shenqifuzheng
injection 14,777.68 1,312.37 91.12% 18.37% -11.69% Up 3.02 percentage points
Region Main business income Increase or decrease of business income compared with the
same period of previous year (%)
Northeast China
9,747.57 22.13%
North China 27,506.87
46.16%
Central China 12,154.11
2.14%
East China 27,564.91
16.30%
South China 23,406.33
-4.79%
Southwest China 12,555.30
-26.91%
Northwest China 4,876.21
-9.98%
Export 12,451.69
20.16%
Item January to June 2
010 January to June 2009 Change rate (%)
Operating incomes 132,276.96 120,970.69 9.35%
Operating costs 63,576.41 55,815.89 13.90%
Sales expenses 28,520.01 26,068.03 9.41%
Management expenses 9,918.92 11,117.81 -10.78%
Financial expenses 76.95 1,066.32 -92.78%
Profits in changes of fair values -215.14 13,361.10 -101.61%
Investment gains -38.50 -7,430.12 99.48%
Operating profits 28,934.17 30,094.81 -3.86%
Total profits 29,840.38 30,242.16 -1.33%
Net profits attributable to the owners of parent company 24,148.02 24,785.49 -2.57%
Net profits attributable to the owners of parent company
after the deduction of non-recurring profit and loss 23,559.34 19,046.70 23.69%
Remarks: 1. The operating incomes increase by 9.35%, and the main cause is that the sales volume of products such as
cephalosporins raw material medicine, auxiliary reproductive medicines and auxiliary medicines for anti-cancer have increased;
2.The operating costs increase by 13.90%, and the main cause is the effects of sales structure and gross profit margin changes of
product types; 3. The sales expenses increase by 9.41%, and the main cause is that the relevant expenses have increased with the
expansion of sales scale; 4. the management expenses decrease 10.78%, and the main cause is the decrease of compensation
expenses and loss of engineering suspension;5. The financial expense decrease by 92.78% and the main cause is the decrease of
the interests payment of bank loans; 6. The profits in changes of fair values decrease by 101.61% and the investment gains increLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
14
During the report period, there are no major changes about main business structure and
profitability of the company.
III. Particulars of Investment during the report period
(I)During the report period, the company didn’t raise any funds through securities market.
(II) The major investment projects that have not raised the capitals
1. The 21st meeting of the 6th Board of Directors of the company examined and passed the
Proposal on Establishing Zhuhai Livzon Dankang Biotechnology Co., Ltd jointly with Joincare
pharmaceutical Group Industry Co., Ltd (hereinafter called as “Joincare Group”), and agreed
that, the company and Joincare Group jointly invested in cash to establish Zhuhai Livzon
Dankang Biotechnology Co., Ltd(hereinafter called as “Dankang Company”); the registered
capital of Dankang Company is RMB 100 million Yuan, including RMB 51 million Yuan from
Livzon Group, accounting for 51% of the registered capital and RMB 49 million Yuan from
Joincare Group, accounting for 49% of the registered capital. On July 2, 2010, Dankang Company
obtained the business license.
2. Introduction about the progress of relocation projects of Livzon Pharmaceutical Factory: in the
first half of 2010, the company has launched the engineering construction of hormone freeze-dried
line and small-capacity and freeze-dried line of non-Green non-first class chemical medicines and
bid invitation about public utilities as well as the preparation work before the entry into the sites.
In terms of the construction, 80% of civil works and steel structures of above plants have been
completed, and the purification engineering has been launched in the second 10 days of May; at
present, the company completed most of the process partition and ceiling work; for the public
utility systems such as the steam, fire control, air-conditioning and pipelines, etc, the bidinvitation
and contract-signing work has been completed and the preparations before the
commencement are under way or even some constructors have entered the sites. We expect that
the trial production may be made in the first 10 days of this October and the GMP application may
be submitted in the last 10 days of this November; in the last 10 days of January 2011, the
company may obtain the GMP certificate and begin the formal production.
3. During the report period, the meeting of president office of the Company resolved that, the company and
ase by 99.48%, and the main cause is the decrease of securities investment of the company; 7. The operating profits, total profits
and net profits attributable to the owners of parent company decrease by 3.86%,1.33% and 2.57% respectively, and the main
cause is that the gains from securities investment have decreased; 8. The net profits attributable to the owners of parent company
after the deduction of non-recurring profit and loss increase by 23.69%, and the main cause is the increase of net profits
contributed to by the main business of the company.Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
15
Guangzhou Yinheyangguang Pharmaceutical Group Industry Co., Ltd jointly contributed to establish Livzon
Group Vaccine Engineering Co., Ltd (it is the temporary name, and the actual name is subject to the business
license, hereinafter called as “Vaccine Company”); the company contributed RMB 53 million Yuan, accounting
for 81.54% of the registered capital and Guangzhou Yinheyangguang Pharmaceutical Group Industry Co., Ltd
contributed RMB 12 million Yuan, accounting for 18.46％. At present, the registration formalities of Vaccine
Company are being handled.
IV. Determination method and acquisition mode of faire values when the fair value mode is
employed for calculation
The assets that are calculated in fair values during the report period:
Unit: RMB 1 thousand Yuan
1. The 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 and 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).
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
Depreciatio
n amount
withdrawn
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 48,888.58 -2,151.44 0 0 46,303.09
Including: 1. derivative financial
assets 0
0 0
0 0
2. Saleable financial
assets 12,906.09
0 7,982.08 0 10,472.11
Subtotal of financial assets 61,794.67 -2,151.44 7,982.08 0 56,775.20
Financial liabilities - - - - -
Total 61,794.67 -2,151.44 7,982.08 0 56,775.20Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
16
Section 6 Major Events
I. Company Governance
During the report period, the Company will continuously perfect the legal person governance
structure as per the relevant requirements of relevant laws and regulation such as the Company
Law of the People’s Republic of China, Securities Law of the People’s Republic of China and
regulatory documents regarding the company governance issued by China Securities Regulatory
Commission, strive to strengthen the establishment of modern enterprise systems, and improve the
governance level of company.
During the report period, in order to further improve the management work of the company about
information disclosure, in accordance with the Notice about Carrying out the Special Activities to
Inspect the Information Disclosure of Listed Companies (Guang Dong Zheng Jian [2010] No. 30)
issued by Guangdong Securities Regulatory Commission under China Securities Regulatory
Commission on February 9, 2010, the company made the self-inspection seriously, and published
the Self-Inspection Analysis Report of Livzon Pharmaceutical Group Inc. about Special Activities
of the Information Disclosure on April 22, 2010; at the same time, based on the self-inspection
results, the company formulated the Management System of Inside Information, Submission and
Use Management System of External Information, Internal Reporting System of Key Information
and the Management Rules of Share-Holding Status and Changes of Directors, Supervisors and
Senior Executives; the establishment of above systems has further perfected the relevant systems
about information disclosure, and improved the quality of information disclosure.
During the report period, the shareholders’ meeting, Board of Directors and Board of Supervisors
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 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 comply with the
requirements of normative documents concerning the governance of listed companies issued by
China Securities Regulatory Commission.
II. Profit Distribution and Plans
(I). Implementation of 2009 profit distribution plan
On March 26, 2010, the 2009 Shareholders’ Meeting of the Company examined and passed theLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
17
2009 Profit Distribution Plan as follows: Taking the total quantity of 295,721,852 shares at the
end of report period as the base, the company will distribute the bonus of RMB 1.5 Yuan
(including the tax) to all shareholders for every 10 shares. In this year, the Company will not
transfer the capital reserves to the share capitals.
On May 18, 2010, the Company issued the bonus distribution announcement and determined that,
the registration date of A-share equity is May 21, 2010; the last transaction date of B-shares is
May 21, 2010; the registration date of B-share equity is May 26, 2010. On May 21 and May 26,
2010, the company completed the distribution of dividends of A-shares and B-shares. The 2009
profit distribution plan has been completely implemented.
(II)Semi-annual profit distribution plan in 2009
At the middle of 2010, the Company will not distribute the profits 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 during the report period
Unit: RMB Yuan
Note: in above securities investment, the investment amount of H-share of H-share market of Hongkong has been converted to
RMB amount at the exchange rate issued on June 30, 2010.
V Shareholding particulars of other listed companies
No. Security Type Security
Code
Security
abbreviation
Initial investment
amount (RMB
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
period
1 Stock 00135 Kunlun Energy 7,010,786.21 1,500,000 13,007,334.90 28.09% -407,698.85
2 Stock 00152 Shenzhen
International 10,062,599.12 17,000,000 7,192,855.55 15.53% -1,266,632.22
3 Stock 00883
China National
Offshore Oil
Corporation
2,858,608.29 560,000 6,536,643.79 14.12% 667,346.87
4 Stock 02007 Phoenix Island 20,798,512.35 2,450,000 4,467,073.00 9.65% -1,737,822.40
5 Stock 00438 Rainbow group 6,236,164.01 4,560,000 4,216,784.30 9.11% 919,210.27
6 Stock 01880 Baili Company 2,338,332.19 428,000 4,166,953.39 9.00% 804,822.70
7 Stock 00390
China Railway
Engineering Group
Co.
1,599,293.74 314,000 1,380,609.52 2.98% -275,202.16
8 Stock 01688 Alibaba 927,895.61 78,000 1,060,163.22 2.29% -165,436.81
9 Stock 01186
China Railway
Construction
Corporation
1,074,878.51 114,000 980,601.26 2.12% -8,992.27
10 Stock 00968 Little sheep 594,064.68 212,000 865,550.46 1.87% 83,367.37
Other securities investment at the end of this period 2,757,476.44 - 2,428,522.43 5.24% -220,247.26
Profit and loss of sold security investment during the report
period - - - - 0.00
Total 56,258,611.15 - 46,303,091.82 100% -1,607,284.76Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
18
Unit: RMB Yuan
Note: in June 2010, the company participated in the share-rationing plan of Bank of Communications (1.5 shares were rationed to
every 10 shares, and the share-rationing price was RMB 4.5 per share); a total of 180,022 A-shares of Bank of Communications
were rationed, and the company paid a total amount of RMB 810,099 Yuan (including the expenses).
VI Shareholding particulars of non-listed financial enterprises
Unit: RMB Yuan
VII. During the report period, the company has made no purchase and sales of key assets.
VIII. Associated transaction events during the report period
(I) Routine operating associated transactions
1. Sales of Commodities
Unit: RMB Yuan
Securities
code
Securities
abbreviatio
n
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 ownership
interests during the report
period
601328
Bank of
Communicati
ons
2,450,179.00 0.0025% 8,294,833.72 - -3,736,667.78
000963
Huadong
Medicine Co.,
Ltd
39,851.86 0.0211% 2,177,272.55 - 492,587.42
Total 2,490,030.86 10,472,106.27 -3,244,080.36
Company name Initial
investment
capital
Holding
quantity
Percentag
e of total
shares of
this
Company
Book
value at
the end
of this
period
Profit
and
loss
during
the
report
period
Change of
owners’
interests
during the
report period
Accounting
calculation
subject
Source
Zhuhai City
Commercial Bank 20,000,000 20,000,000 1.5065%
Long-term equit
y investment
Share
participation
Guangdong
Development Bank
Co., Ltd
105,000 49,844 0.0004% 105,000
Accounting
calculation
subject
Share
participation
Total 20,105,000 20,049,844 105,000
Long-term equit
y investment -
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage of
Similar
Transaction
Amount (%)
Amount
Percentage of Similar
Transaction Amount (%)
Guangdong Blue Treasure Pharmaceutica - - 12,301,965.80 1.03%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
19
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
The purchase 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.
l Co. Ltd
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 968.11 - 2,492.85 -
Shenzhen Taitai Pharmaceutical
Company Limited 16,683.76 - 71,794.87 0.01%
Total 17,651.87 - 12,376,253.52 1.04%
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage of
Similar
Transaction
Amount (%)
Amount
Percentage of Similar
Transaction Amount
(%)
Guangdong Blue Treasure Pharmaceutical
Co. Ltd 3,413.33 - 7,432.36 -
Shenzhen Haibin Pharmaceutical Co., Ltd 3,365,226.50 0.51% 1,876,068.34 0.40%
Shenzhen Taitai Pharmaceutical Company
Limited 153,384.00 0.02% 0.00 -
Joincare pharmaceutical Group Industry
Co., Ltd 14,974.36 - 329,641.03 0.07%
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 133,243,850.27 20.08% 58,206,837.63 12.42%
Total 136,780,848.46 20.61% 60,419,979.36 12.89%
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage of
Similar
Transaction
Amount (%)
Amount
Percentage of Similar
Transaction Amount
(%)
Guangdong Blue Treasure Pharmaceutical Co.
Ltd 3,401,805.22 53.16% 3,052,462.56 56.27%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
20
4. Leasing of Assets
Unit: RMB Yuan
The leasing prices to the associated companies will be calculated at the fair prices.
The above-mentioned associated transaction came from the normal supply demand of the
company. It is predicated that this associated transaction will continue during the production
operations from now on. The associated transaction follows the principle of equity, justice and no
damage to the company’s benefits. Because the associated transaction amount accounts for the
small percentage of total sales revenue or purchasing amount, it makes no effect on financial status
and operation results of the company in the current period and in the future. And it also makes no
effect on the independence of the company. The company also will not depend on the associated
persons due to this associated transaction.
(II) Associated transactions in joint investments
The 21st meeting of the 6th Board of Directors of the company resolved that, the company and Joincare
Pharmaceutical Group Industry Co., Ltd jointly contributed in currency to establish Zhuhai Livzon Dankang
Biotechnology Co., Ltd(hereinafter called as “Dankang Company”); the registered capital of
Dankang Company is RMB 100 million Yuan, including RMB 51 million Yuan from Livzon
Group, accounting for 51% of the registered capital and RMB 49 million Yuan from Joincare
Group, accounting for 49% of the registered capital. By June 30, 2010, the company and Joincare Group
have made a contribution of RMB 10.2 million Yuan and RMB 9.8 million Yuan respectively in proportion; the
balances will be fully paid in 2 years from the establishment date of Dankang Company. On July 2, 2010,
Dankang Company obtained the business license.
(III) Transfer of associated claims and debts
Unit: RMB Yuan
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage of
Similar
Transaction
Amount (%)
Amount
Percentage of
Similar
Transaction
Amount (%)
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 51,714.00 6.85% 52,104.00 7.63%
Health Pharmaceutical (China) Co., Ltd 49,974.00 6.61% 49,974.00 7.32%
Total 101,688.00 13.46% 102,078.00 14.95%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
21
Including: during the report period, the capital amount that the listed companies provided to the
controlling shareholders and their subcompanies was RMB 30.7 thousand Yuan and the balance
was RMB 180.2 thousand Yuan.
The statistical scope of this table is different from that of the capital use of associated parties in the following paragraph; this table
is only about relevant amounts under the subjects of “Other accounts receivable” and “Other accounts payable”, but does not
include the amounts under the subjects of “Accounts receivable” and “Accounts payable”.
IX Capital use and external guaranty of associated party
In accordance with the requirements of the Notice of Improving Disclosure Work of 2010 Semi-
Annual Report of Listed Companies (Shen Zheng Shang [2010] No. 211) 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:
(I) Particulars about capital use of associated parties and independent opinions
By June 30, 2010, the balance of capitals used by the controlling shareholder and other associated
parties amount to RMB 1,275,451.74 Yuan. The subcompany of controlling shareholder Jiaozuo
Joincare Pharmaceutical Group Industry Co., Ltd uses a capital of RMB 180,168.35 Yuan
(meanwhile, the Company should pay 62,791,602.73 Yuan to Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd); the subcompany of controlling shareholder Zhuhai Joincare
Pharmaceutical Group Industry Co., Ltd uses a capital of RMB 54.67 Yuan; the joint company
Guangdong Blue Treasure Pharmaceutical Co. Ltd uses a capital of RMB 1,095,228.72 Yuan
(meanwhile, the Company should pay 747,000.00 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 2010 accumulatively reaches RMB 4,041,143.31 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.,
Associated party
Provision of funds to associated party Funds that the associated party paid to
listed company
Amount Balance Amount Balance
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 14.72 14.72
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 1,095,228.72 1,095,228.72
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd 30,647.70 180,168.35
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd 210,631.02 433,322.27
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 747,000.00
Joincare pharmaceutical Group
Industry Co., Ltd -2,656.56 5,683.43
Total 1,125,891.14 1,275,411.79 207,974.46 1,186,005.70Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
22
Ltd, Shenzhen Taitai Pharmaceutical Company Limited and Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd from January to June 2010 reaches RMB 186,972.74 Yuan.
Based on the above facts, the independent directors of the Company think that, the capital use of
controlling shareholders and other associated parties did not substantially break any regulations in
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 issued by
China Securities Regulatory Commission and will never damage the interests of medium and
small shareholders.
(II) Particulars about external guaranty and independent opinions:
1. Particulars about external guaranty (not including the guaranty provided to the controlled
subcompanies):
By June 30, 2010, 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
Practical
guarantee
amount
The final
balance
Guaranty type Period
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area 2008.1.8 4,100 0 0
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 1,900 0 0
Joint and
several
liability
guaranty
2008.1.8-2011.1.8 (Zhuhai Branch of
Bank of China)
Zhuhai Livzon Reagents Co., Ltd 2010.1.1 1,500 0 0
Joint and
several
liability
guaranty
2010.1.1-2013.1.1 (Zhuhai Branch of
Bank of China)
Zhuhai Livzon Reagents Co., Ltd 2009.7.15 679
（USD100） 0 0
Joint and
several
liability
guaranty
2009.7.15-2012.7.15
(Zhuhai Branch of Standard
Chartered Bank)
Zhuhai Livzon Medicine Trade Co.,
Ltd 2008.1.8 400 0 0
Joint and
several
liability
guaranty
2008.1.8-2011.1.8 (Zhuhai Branch of
Bank of China)
Zhuhai Livzon Medicine Trade Co.,
Ltd 2009.7.20 1,000 0 0
Joint and
several
liability
guaranty
2009.7.20-2012.7.20 (Zhuhai Branch
of Bank of Communications)
Livzon Pharmaceutical Factory under
Livzon Group 2009.11.27 6,000 0 0
Joint and
several
liability
guaranty
2009.11.27-2012.11.27
(Zhuhai Branch of Agricultural Bank
of China)
Livzon Pharmaceutical Factory under
Livzon Group 2009.8.21 5,000 1,758.7 4（HKD2
016）
1,358.18（USD2
1,758.74（HK
D2016）
Joint and
several
liability
guaranty
2009.8.21-2012.8.21
(Zhuhai Branch of Bank of
Communications)Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
23
During the report period, the Company has provided no guaranty to any companies except the
controlling subcompanies; the actual guaranty amount provided to the subcompanies is RMB
133.1016 million Yuan. By June 30, 2010, the balance is RMB 88.2079 million Yuan, accounting
for 3.77% of the net asset of the Company at the middle of 2010.
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%; there are no cases about overdue guaranty.
The relevant approval procedures about above guaranties have been performed, and such
guaranties have been passed by the 19th meeting of the 6th Board of Directors and the 2010 first
temporary shareholders’ meeting of the company.
Therefore, based on the above facts, the independent directors of the Company think that, the
guaranty behaviors of the Company fully comply with the relevant laws and regulations and will
not influence the sustainable operation capacity of the Company nor damage the interests of
medium and small shareholders, so the guaranty behaviors meet the demands of company
operation.
XI Key Contracts and Their Implementation
(I) 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
00） Livzon Pharmaceutical Factory under
Livzon Group
1,358.18（USD
200）
1,358.1 8（USD
200）
Livzon Pharmaceutical Factory under
Livzon Group 2009.9.10 6,000 1,358.18（USD2
00）
1,358.1 8（USD
200）
Joint and
several
liability
guaranty
2009.9.10-2012.9.10
(Zhuhai Branch of Shenzhen
Development Bank)
Livzon Pharmaceutical Factory under
Livzon Group 2009.11.27 6000 2,791.65
(HKD3200) 0
Joint and
several
liability
guaranty
2009.6.19-2012.6.19
(Zhuhai Branch of Xiamen
International Bank)
Livzon Pharmaceutical Factory under
Livzon Group 2009.06.19 16,000 2,835.27
（HKD3250）
2,835.27
（HKD3250）
Joint and
several
liability
guaranty
2010.6.12-2018.6.03 (Zhuhai Branch
of Bank of China)
Livzon Pharmaceutical Factory under
Livzon Group
1,697.73（USD2
50） 0
Joint and
several
liability
guaranty
2010.5.13-2013.5.13 (Shenzhen
Branch of Nanyang Commercial Bank)
Livzon Pharmaceutical Factory under
Livzon Group 2009.10.15 12,000 1,510.42 1,510.42
Joint and
several
liability
guaranty
2010.6.12-2018.6.03(Zhuhai Branch of
Bank of China)
Livzon Pharmaceutical Factory under
Livzon Group 2010.05.13 6,791
（USD1,000） 0 0
Joint and
several
liability
guaranty
2010.5.13-2013.5.13（Nanyang
commercial bank, shenzhen branch）
Total guaranty amount to its controlling subcompanies in the report
period 13,310.17
Total balance of guaranty amount to its controlling subcompanies in the
report period 8,820.79Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
24
extend to the report period.
(II). The Company has no key events about entrusting other for the cash management that exist or
extend to the report period.
XII. Commitment
(I). Commitments made 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 for the purpose of production, processing and
distribution. The transfer fee will be USD 2.50 million, and by December 31, 2008, the company has fully paid
it. The company agrees to give Yiyang the commission of 10% of sales amount during the first three years when
this product begins to be sold, 8% of sales amount during the next five years, and 6% of sales amount from the
remaining time to July 22, 2014 (the expiry date of agreement). Since 2009, the company has started the sales
and paid the commissions in accordance with the 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 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 to LG Company during 30 days after each quarter. Since 2008, the company has started the
sales and paid the royalty in accordance with the agreement.
Within the first five years from the validity date of the agreement, the company will pay a royalty of 10% of net
sales volume about injection products to LG Company within 30 days after each quarter. The company will pay
a royalty of 6% of net sales volume 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).
(II) Commitments of shareholders holding over 5% of total shares of the company
The controlling shareholder Joincare of the Company makes the following commitments in the
previous year: 1. When 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. 2. 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 firstLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
25
reduction, then 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, Joincare has not decreased the shares of the company.
XII Repurchase
After the cancellation of some of repurchased domestically listed shares for overseas investors (B
shares) (for more details, see the company announcement No. 2009-50) on December 4, 2009, in
accordance with relevant regulations, the company made the application to relevant authorities for
the change of industrial and commercial registration about capital decrease. On April 23, 2010, the
company obtained the enterprise legal person business license with changed registered capitals
issued by Zhuhai Administration of Industry and Commerce, so all affairs about repurchase of
domestically listed shares for overseas investors (B shares) have completely handled.
XIII. The 2010 semi-annual financial report of the company has not been audited.
XIV. During the report period, the Company, Directors, Supervisors, senior executives,
controlling shareholders and actual controllers of the Company have not been audited by
China Securities Regulatory Commission, or received any administrative penalty and
criticism from China Securities Regulatory Commission, or received any public reprimand
from the Stock Exchange.
XV. Activities that the Company receives the investigation, communication and interview, etc.
during the report period
Reception date Reception
place
Reception
mode
Objects Discussion topics and provided
materials
January 13, 2010 Headquarter Local
investigation Greatwall Securities Co., Ltd Operation status of the Company
January 14, 2010 Headquarter Local
investigation
ABN AMRO TEDA Fund Management
Co., Ltd Operation status of the Company
March 2, 2010 Headquarter Local
investigation Guodu Securities Co., Ltd Operation status of the Company
March 2, 2010 Headquarter Local
investigation
Shenzhen Yingtai Investment
Management Co., Ltd Operation status of the Company
March 11, 2010 Headquarter Local
investigation
Minsheng Royal Fund Management Co.,
Ltd Operation status of the Company
March 11, 2010 Headquarter Local
investigation China Merchants Fund Investment Bank Operation status of the Company
March 11, 2010 Headquarter Local
investigation Pingan Dahua Fund Management Co., Ltd Operation status of the Company
March 11, 2010 Headquarter Local
investigation Baoying Fund Management Co., Ltd Operation status of the Company
March 11, 2010 Headquarter Local
investigation Citic Securities Co., Ltd Operation status of the Company
March 11, 2010 Headquarter Local investig Invesco Great Wall Fund Management Co Operation status of the CompanyLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
26
XVI. Indexes of temporary announcement disclosure during the report period
ation mpany Limited
March 18, 2010 Headquarter Local
investigation Northeast Securities Co., Ltd Operation status of the Company
March 18, 2010 Headquarter Local
investigation China Galaxy Securities Co., Ltd Operation status of the Company
March 18, 2010 Headquarter Local
investigation AIG-Huatai Fund Management Co., Ltd Operation status of the Company
March 18, 2010 Headquarter Local
investigation Hamon Asset Management Co., Ltd Operation status of the Company
March 18, 2010 Headquarter Local
investigation BNP Paribas Securities (Asia) Limited Operation status of the Company
March 18, 2010 Headquarter Local
investigation GE Asset Management Operation status of the Company
April 12, 2010 Headquarter Local
investigation Greatwall Fund Management Co., Ltd Operation status of the Company
April 27, 2010 Headquarter Local
investigation Shanghai Securities Co., Ltd. Operation status of the Company
April 27, 2010 Headquarter Local
investigation Guangfa Securities Co., Ltd Operation status of the Company
May 11, 2010 Headquarter Local
investigation Greatwall Securities Co., Ltd Operation status of the Company
May 11, 2010 Headquarter Local
investigation
Equity investment department of
Taikang Asset Management Co., Ltd. Operation status of the Company
June 4, 2010 Headquarter Local
investigation BNP Paribas Securities (Asia) Limited Operation status of the Company
June 11, 2010 Headquarter Local
investigation Guolian Securities Co., Ltd. Operation status of the Company
June 11, 2010 Headquarter Local
investigation
Shanghai Broadvision Investment
Management Co., Ltd. Operation status of the Company
June 11, 2010 Headquarter Local
investigation
China International Capital Corporation
Limited Operation status of the Company
June 11, 2010 Headquarter Local
investigation New China Asset Management Co., Ltd. Operation status of the Company
June 11, 2010 Headquarter Local
investigation
Morgan Stanley Huaxin Fund
Management Company Limited Operation status of the Company
June 11, 2010 Headquarter Local
investigation Yingpeng Investment Co., Ltd Operation status of the Company
June 28, 2010 Headquarter Local
investigation Donghai Securities Co., Ltd Operation status of the Company
June 29, 2010 Headquarter Local
investigation Penghua Fund Management Co., Ltd Operation status of the Company
June 29, 2010 Headquarter Local
investigation
China Jianyin Investment Securities
Company Ltd Operation status of the Company
No.
Announcement name Newspaper name Disclosure
date
1 Announcement of resolutions passed at the second temporary shareholders’
meeting in 2009
Securities Times and China
Securities Journal 2010.01.04
2 Articles of association (December 2009) The same as above 2010.01.04
3 Legal opinion about witnessing the second temporary shareholders’ meeting
in 2009
The same as above 2010.01.04
4 Circular about the annual performance of 2009 The same as above 2010.01.15
5 Announcement of the change of staff representative supervisor The same as above 2010.01.23
6 Independent opinions of independent directors about internal control selfappraisal
of the company in 2009
The same as above 2010.02.27
7
Special explanation and independent opinions of independent directors about
capital use and external guaranty of controlling shareholders and other
associated parties
The same as above
2010.02.27
8 Announcement about routine associated transactions in 2010 The same as above 2010.02.27Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
27
9 Independent opinions of independent directors about routine associated
transactions in 2010
The same as above 2010.02.27
10 The 2009 Annual Report The same as above 2010.02.27
11 Report about internal control self-appraisal in 2009 The same as above 2010.02.27
12 Special explanation about the capital use of controlling shareholders and
other associated parties
The same as above 2010.02.27
13 Opinions of Board of Supervisors about the report of internal control selfappraisal
of the company in 2009
The same as above 2010.02.27
14 Summary of 2009 annual report The same as above 2010.02.27
15 Announcement about the resolution passed at the 8th meeting of the 6th Board
of Supervisors
The same as above 2010.02.27
16 Notice about convening the 2009 annual shareholders’ meeting The same as above 2010.02.27
17 Announcement about the resolution passed at the 18th meeting of the 6th
Board of Directors
The same as above 2010.02.27
18 The 2009 annual auditing report The same as above 2010.02.27
19 Management system of inside information The same as above 2010.03.16
20 Announcement about the resolution passed at the 19th meeting of the 6th
Board of Directors
The same as above 2010.03.16
21 Notice about Convening the First Temporary Shareholders’ Meeting in 2010 The same as above 2010.03.16
22 Independent opinions of independent directors about providing the financing
guaranty to the controlled subcompanies
The same as above 2010.03.16
23 Announcement about providing the financing guaranty to controlled
subcompanies
The same as above 2010.03.16
24 Management Rules of Share-Holding Status and Changes of Directors,
Supervisors and Senior Executive
Juchao website 2010.03.16
25 Legal opinions about the 2009 annual shareholders’ meeting Securities Times and China
Securities Journal 2010.03.27
26 Announcement about the resolution passed at the 2009 annual shareholders’
meeting
The same as above 2010.03.27
27 Announcement about the resolution passed at the 2010 first temporary
shareholders’ meeting
The same as above 2010.04.10
28 Legal opinions about the 2010 first temporary shareholders’ meeting The same as above 2010.04.10
29 The 2010 first quarterly report The same as above 2010.04.22
30 Internal Reporting System of Key Information Juchao website 2010.04.22
31 Submission and Use Management System of External Information Juchao website 2010.04.22
32 Self-Inspection Analysis Report about Special Activities of the Information
Disclosure
Securities Times and China
Securities Journal 2010.04.22
33 Full text of the 2010 first quarterly report The same as above 2010.04.22
34 Announcement about the resolution passed at the 20th meeting of the 6th
Board of Directors
The same as above 2010.04.22
35 Reminder announcement about the completion of repurchasing some Bshares
The same as above 2010.04.24
36 Announcement about implementing the dividend distribution in 2009 The same as above 2010.05.18
37 Announcement about associated transaction of Contributing to Establish
Dankang Biotechnology Co., Ltd jointly with Joincare Group
The same as above 2010.06.01
38
Independent opinions of independent directors about the company
Contributing to Establish Dankang Biotechnology Co., Ltd jointly with
Joincare Group
The same as above
2010.06.01
39 Announcement about the resolution passed at the 21st meeting of the 6th
Board of Directors
The same as above 2010.06.01
All above information is disclosed in Juchao website (http://www.cninfo.com.cn/).Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
28
Section 7 Financial Report
(This report has not been audited.)Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
29
Kuai Qi Sta tement No. 0 3
P repare d by: Livzon Pharma ceutic al Gro up Inc. U nit: R MB Yua n
Ite m Not e Amo unt in thi s pe rio d Am oun t i n sa me peri od of prev iou s ye ar
I. Cash flows from operating activities
Cash received from sales of goods or rendering of services 4 83,377,830.24 423,490,710.12
Tax refunding
Cash received related to other operating activities 1 9,050,518.26 25,384,854.49
Subtotal of cash inflow from the operating activities 5 02,428,348.50 448,875,564.61
Cash paid for purchase of goods or receiving of services 2 20,135,607.83 216,593,042.70
Cash paid to and on behalf of employees 4 0,344,502.42 37,069,927.86
Tax payments 4 8,016,813.96 46,963,718.57
Other cashes paid to operating activities 1 64,119,350.53 105,420,744.58
Subtotal of cash outflow from operating activities 4 72,616,274.74 406,047,433.71
Net cash flow from operating activities 2 9,812,073.76 42,828,130.90
II. Cash flow from investment activities:
Cash received from disposal of investments 109,167,422.79
CNaetshc raescheirveecde ifvreodmf irnovmesdtmisepnots areltuorfnsfixed assets, intangible assets and 1 50,229.47 95,406,007.89
other long-term assets 1,500.00
Net cash received in disposal of the subcompanies and other operating units
Cash received related to other investment activities
Subtotal of cash inflow from the investment activities 1 50,229.47 204,574,930.68
Cash paid to acquire and construct fixed assets, intangible assets and
other long-term assets 1 8,621,078.94 2,873,156.13
Cash paid to acquire investments 8 10,099.00
Net cash paid to acquire the subcompanies and other operating units 1 0,200,000.00
Cash paid related to other investment activities 3,500.00
Subtotal of cash outflow from investment activities 2 9,631,177.94 2,876,656.13
Net amount of cash flow received from the investment activities -29,480,948.47 201,698,274.55
III. Cash flow from financing activities:
Cash received from investors
L oans f rom su bcompan ies 1 49,273,100.57 75,126,838.97
C ash fr om loa ns 1 27,396,650.00 162,039,675.00
Cash received related to other financing activities 1 ,187,447.18
Subtotal of cash inflow from the financing activities 2 77,857,197.75 237,166,513.97
Repayments of loans 1 09,836,600.00 466,296,795.00
Cash paid for distribution of dividends, profits and repayment of
interests 4 7,825,998.43 40,147,699.78
L oans p aid to subcom panies
Cash payments related to other financing activities 1 ,345,000.00 47,479,144.95
Sub-total of cash outflow from the financing activities 1 59,007,598.43 553,923,639.73
Net cash flow from financing activities 1 18,849,599.32 - 316,757,125.76
IV. Effect of foreign exchange fluctuation on cash and cash
equivalents -118,503.68 55,314.67
V. Net increase of cash and cash equivalents 1 19,062,220.93 - 72,175,405.64
Plus: Balance of cash and cash equivalents at the beginning of the
period 4 18,389,049.61 465,301,653.09
VI Balance of cash and cash equivalents at the end of the period 5 37,451,270.54 393,126,247.45
Cash Flow Statement
January to June 2010
Legal representative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
30
Kuai He Statement No. 02
P repare d by: Livzon Pharma ceutic al Gro up Inc. Un it: RM B Yuan
Ite m No te Amo unt in thi s pe rio d Am ount in sa me p eri od o f p rev ious ye ar
I. Total operating income V. 37 1,322,769,589.74 1,209,706,856.23
Including: operating income V. 37 1,322,769,589.74 1,209,706,856.23
II. Total operating cost 1,030,891,476.80 9 68,068,608.96
Including: operating cost V. 37 635,764,128.75 5 58,158,942.77
Operating tax and surtax V. 38 3,027,629.54 2,987,677.47
Sales expense 285,200,131.05 2 60,680,296.95
Management expense 99,189,243.03 1 11,178,133.75
Financial expense V. 39 769,520.60 10,663,200.60
Loss from asset depreciation V. 40 6,940,823.83 24,400,357.42
Plus: returns from the changes of fair values (the loss is listed
beginning with “-”). V. 41 - 2,151,436.68 1 33,611,037.40
Investment returns (the loss is listed beginning with “-”). V. 42 - 384,976.08 - 74,301,232.43
I ncludi ng: th e inves tment return s from the as sociat ed ent erpris e s a n d j o i n- t2 ,0e0n7t,e9r1p0.r0i4ses - 1,072,268.57
III. Operating profit (the loss is listed beginning with “-”) 289,341,700.18 3 00,948,052.24
Plus : non-operating income V. 43 10,547,638.43 2,684,454.70
Minus: non-operating payments V. 44 1,485,565.96 1,210,940.78
Including: loss in the disposal of non-current assets 498,732.12 7 91,268.55
IV. Total profit (the loss is listed beginning with “-”) 298,403,772.65 3 02,421,566.16
Minus: income tax expense V. 45 40,603,599.80 38,958,684.81
V. Net profit (the loss is listed beginning with “-”) 257,800,172.85 2 63,462,881.35
Net profit attributable to the owners of parent company 241,480,232.98 2 47,854,875.55
Profit and loss of the minority of shareholders 16,319,939.87 15,608,005.80
VI. Profit per share:
(I) Basic profit per share 0 .82 0.83
(II) Diluted profit per share 0 .82 0.83
VII. Other comprehensive profit V. 46 - 3,501,761.40 4,315,830.84
V III . T otal am ount of co mpre hen sive pr ofi t 254,298,411.45 2 67,778,712.19
S ubtota l of c omprehe nsive profit s attr ibutabl e to t he own ers of p a r e n t c o2m3p7a,9n7y8,471.58 2 52,170,706.39
S ubtota l of c omprehe nsive profit s attr ibutabl e to t he min ority o f s h a r e h o l1d6e,3r1s9,939.87 15,608,005.80
Consolidate Profit Statement
January to June 2010
Legal representative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
31
Kuai He Statement No. 03
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
Item Note Amount in this period Amount in same period of previous year
I. Cash flows from operating activities
Cash received from sales of goods or rendering of services 1,353,947,866.59 1,092,693,591.75
Tax refunding 3,693,777.53 4,755,635.33
Cash received related to other operating activities V. 47 36,710,341.97 12,279,802.66
Subtotal of cash inflow from the operating activities 1,394,351,986.09 1,109,729,029.74
Cash paid for purchase of goods or receiving of services 473,282,374.99 324,677,976.27
Cash paid to and on behalf of employees 127,975,843.40 115,727,516.32
Tax payments 187,495,967.26 199,408,837.04
Other cashes paid to operating activities V. 48 303,662,047.31 249,897,163.29
Subtotal of cash outflow from operating activities 1,092,416,232.96 889,711,492.92
Net cash flow from operating activities 301,935,753.13 220,017,536.82
II. Cash flow from investment activities:
Cash received from disposal of investments 119,019,666.02
Cash received from investment returns 691,866.86 948,424.63
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 2,715,506.00 374,129.78
Net cash received in disposal of the subcompanies and other operating units
Cash received related to other investment activities
SCuabshtoptaali doft coaashcq iunifrleowan fdrocmo ntshteru icnvt efisxtmedenast saecttsi,viintiteasngible assets 3,407,372.86 120,342,220.43
and other long-term assets 189,719,682.37 45,205,746.87
Cash paid to acquire investments 810,099.00
Net cash paid to acquire the subcompanies and other operating units
Cash paid related to other investment activities 3,500.00
Subtotal of cash outflow from investment activities 190,529,781.37 45,209,246.87
Net amount of cash flow received from the investment
activities -187,122,408.51 75,132,973.56
III. Cash flow from financing activities:
Cash received from investors 9,800,000.00 400,000.00
Cash from loans 230,434,284.17 230,459,029.00
Cash received related to other financing activities V. 49 1,186,821.82
Subtotal of cash inflow from the financing activities 241,421,105.99 230,859,029.00
Repayments of loans 173,711,714.81 509,281,639.64
Cash paid for distribution of dividends, profits and repayment of
interests 49,565,891.72 42,937,652.21
Including: the dividends and profits paid to the minority of
shareholders by the subcompanies
Cash payments related to other financing activities V. 50 1,345,000.00 47,479,144.95
Sub-total of cash outflow from the financing activities 224,622,606.53 599,698,436.80
Net cash flow from financing activities 16,798,499.46 -368,839,407.80
IV. Effect of foreign exchange fluctuation on cash and cash
equivalents
-849,978.38 264,934.96
V. Net increase of cash and cash equivalents 130,761,865.70 -73,423,962.46
Plus: Balance of cash and cash equivalents at the beginning of the
period 558,262,596.74 540,183,900.36
VI Balance of cash and cash equivalents at the end of the
period
689,024,462.44 466,759,937.90
Consolidated Cash Flow Statement
January to June 2010
Legal representative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
32
K uai He Statement N o. 0 4
P repare d by: Livzon Pharma ceutic al Gro up Inc. Unit: RMB Yua n
Share capital Capital reserve Minus: treasury sharesSurplus Reserve Undistributed P rofit C o n v e r si o n
di f f e r e nc e o f
I. Balance at the end of previous year 295,721,852.00 35 0,94 6,1 75.6 4 0.00 401,456,345.99 1,11 4,71 0,4 05.9 4 -13 ,749 ,943 .54 76 ,373 ,70 7.00 2,225,458,543.03
Plus: changes of accounting policies
Correction of errors in the early stage
II. Balance at the beginning of this year 295,721,852.00 35 0,94 6,1 75.6 4 0.00 401,456,345.99 1,11 4,71 0,4 05.9 4 -13 ,749 ,943 .54 76 ,373 ,70 7.00 2,225,458,543.03
III. Increase or decrease of change amount 0.00 -2,75 7,4 68.3 0 0.00 0.00 19 7,12 1,9 55.1 8 -744 ,293 .10 26 ,119 ,93 9.87 219,740,133.65
( I)Net profit 24 1,48 0,2 32.9 8 16 ,319 ,93 9.87 257,800,172.85
( II) Ot her co mprehen sive g ains -2,75 7,4 68.3 0 -744 ,293 .10 -3,501,761.40
S u b to t a l of ( I ) a n d ( II ) -2,75 7,4 68.3 0 24 1,48 0,2 32.9 8 -744 ,293 .10 16 ,319 ,93 9.87 254,298,411.45
(III) Increase and decrease of capitals by the owners 0.00 0.0 0 0.00 9 ,800 ,00 0.00 9,800,000.00
1.Capital investment by owners 9 ,800 ,00 0.00 9,800,000.00
2. Repurchase of treasury shares in the year 0.00
3．
(I V ) P ro f i t di s t r i b ut i o n 0.00 -4 4,35 8,2 77.8 0 0.00 -44,358,277.80
1． Wit hdrawa l of surplus reserve
2. W ithdrawal of general risk reserve
3． Distribut ion to shareholders -4 4,35 8,2 77.8 0 -44,358,277.80
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 . O t he r s 0.00
V. B a l an c e a t t h e e nd o f th i s y ea r 295,721,852.00 34 8,18 8,7 07.3 4 0.00 401,456,345.99 1,31 1,83 2,3 61.1 2 -14 ,494 ,236 .64 102 ,493 ,64 6.87 2,445,198,676.68
Cons olid ated Chan ge S tate ment of S hare hold ers’ Equi ties
January to Jun e 2010
项 目
Ja nua ry to J une 201 0
Eq uit ies att rib utab le to shar eho lder s o f p aren t c omp any
Equities of the Minority of TShotaarle ohfo Sldhearrseholders’ Equities
Legal epresentative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
33
K u a i H e S t a t e m e n t N o . 0 4
P r e p a r e d b y : L i v z o n P h a r m a c e u t i c a l G r o u p I n c . U n i t : R M B Y u a n
Sh a re ca p it a l C a pit a l r es er v e M in u s: t re a s ur y s ha r es S ur plu s R e s er v e U nd ist rib ut ed P ro fit C o n v ers io n d iff er en ce o f
fo re ig n c ur re nc y
I. B a la nc e a t t he e nd of pre vi ous ye ar 3 0 6 , 0 3 5 , 4 8 2 . 0 0 4 3 7 ,3 1 4 ,8 3 4 .4 4 1 5 , 7 9 8 , 0 6 7 . 5 2 3 5 3 , 2 9 8 , 5 2 1 . 0 2 7 1 1 ,1 5 1 , 1 4 9 . 3 8 -1 3 ,4 6 6 ,0 3 9 .9 1 5 5 ,9 8 8 ,3 9 9 .1 0 1 , 8 3 4 , 5 2 4 , 2 7 8 . 5 1
P lu s: c h an ge s o f a c c oun ti ng p oli ci e s
C orre ct ion of e rrors i n t he e a rl y st a ge
I I. B al an c e at th e b eg in n in g o f thi s y ea r 3 0 6 , 0 3 5 , 4 8 2 . 0 0 4 3 7 ,3 1 4 ,8 3 4 .4 4 1 5 , 7 9 8 , 0 6 7 . 5 2 3 5 3 , 2 9 8 , 5 2 1 . 0 2 7 1 1 ,1 5 1 ,1 4 9 .3 8 -1 3 ,4 6 6 ,0 3 9 .9 1 5 5 ,9 8 8 ,3 9 9 .1 0 1 , 8 3 4 , 5 2 4 , 2 7 8 . 5 1
III. Inc rea s e or de c rea s e of ch a nge a m ount -1 0 , 3 1 3 , 6 3 0 . 0 0 - 8 6 ,3 6 8 ,6 5 8 .8 0 - 1 5 , 7 9 8 , 0 6 7 . 5 2 4 8 , 1 5 7 , 8 2 4 . 9 7 4 0 3 ,5 5 9 ,2 5 6 .5 6 -2 8 3 ,9 0 3 .6 3 2 0 ,3 8 5 ,3 0 7 .9 0 3 9 0 , 9 3 4 , 2 6 4 . 5 2
( I ) N e t p r o f i t 4 8 1 ,5 7 8 ,2 4 9 .7 3 3 2 ,2 1 5 ,9 9 3 .4 5 5 1 3 , 7 9 4 , 2 4 3 . 1 8
( I I ) O t h e r c o m p r e h e n s i v e g a i n s 5 ,2 9 6 ,5 9 3 .6 7 -2 8 3 ,9 0 3 .6 3 5 , 0 1 2 , 6 9 0 . 0 4
S u b t o t a l o f ( I ) a n d ( I I ) 5 ,2 9 6 ,5 9 3 .6 7 4 8 1 ,5 7 8 ,2 4 9 .7 3 -2 8 3 ,9 0 3 .6 3 3 2 ,2 1 5 ,9 9 3 .4 5 5 1 8 , 8 0 6 , 9 3 3 . 2 2
(II I) I nc r e as e a n d de c r ea se of ca pi tal s b y th e ow ne r s -1 0 , 3 1 3 , 6 3 0 . 0 0 - 9 1 ,6 6 5 ,2 5 2 .4 7 - 1 5 , 7 9 8 , 0 6 7 . 5 2 4 0 0 ,0 0 0 .0 0 - 8 5 , 7 8 0 , 8 1 4 . 9 5
1 .Ca p ita l in ve stm e nt by o w ne rs -1 0 , 3 1 3 , 6 3 0 . 0 0 - 9 1 ,6 6 5 ,2 5 2 .4 7 - 1 0 1 , 9 7 8 , 8 8 2 . 4 7 4 0 0 ,0 0 0 .0 0 4 0 0 , 0 0 0 . 0 0
2 . R ep urc ha se of t rea s ury sh a re s in th e yea r 8 6 , 1 8 0 , 8 1 4 . 9 5 - 8 6 , 1 8 0 , 8 1 4 . 9 5
3．
( I V ) P r o f i t d i s t r i b u t i o n 4 8 , 1 5 7 , 8 2 4 . 9 7 - 7 8 ,0 1 8 ,9 9 3 .1 7 - 1 2 ,2 3 0 ,6 8 5 .5 5 - 4 2 , 0 9 1 , 8 5 3 . 7 5
1． W it hd r a w a l o f su rp lu s r e se r v e 4 8 , 1 5 7 , 8 2 4 . 9 7 - 4 8 ,1 5 7 ,8 2 4 .9 7
2. W i thd r a w a l of ge n e r a l r isk re s e r ve
3． D istr ib ut ion to sha r e h o lde r s - 2 9 ,8 6 1 ,1 6 8 .2 0 - 1 2 ,2 3 0 ,6 8 5 .5 5 - 4 2 , 0 9 1 , 8 5 3 . 7 5
4． O th e rs
(V ) I nte r n al s e ttl e m e nt a nd tr an s fer o f ow n e r s’ e q ui tie s
1 . Tra nsfe r of c a pit a l re se rve t o sh are c a pi ta l
2 . Tra nsfe r of su rplu s re se rve t o sh are c a pi ta l
3 . S urplu s re se rve m a ke s u p for t he los s
4． O t he r s
I V . O t h e r s -
V . B a l a n c e a t t h e e n d o f t h i s y e a r 2 9 5 , 7 2 1 , 8 5 2 . 0 0 3 5 0 ,9 4 6 ,1 7 5 .6 4 0 . 0 0 4 0 1 , 4 5 6 , 3 4 5 . 9 9 1 ,1 1 4 ,7 1 0 ,4 0 5 .9 4 -1 3 ,7 4 9 ,9 4 3 .5 4 7 6 ,3 7 3 ,7 0 7 .0 0 2 , 2 2 5 , 4 5 8 , 5 4 3 . 0 3
I t e m
2 0 0 9
E q u i t i e s a t t r i b u t a b l e t o s h a r e h o l d e r s o f p a r e n t c o m p a n y
E qu itie s o f th e M ino r ity o f TSho taarle ohfo Sldhearrseh o lde rs ’ E qu itie s
C o n s o l i d a t e d C h a n g e S t a t e m e n t o f S h a r e h o l d e r s ’ E q u i t i e s
J an u a ry t o J u n e 2 0 1 0
Legal epresentative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
34
Kuai Qi Statement No. 01
P repare d by: Livzon Pharma ceutic al Gro up Inc. Unit: RMB Yu an
Ass ets No te
Balance at the end
of period
Balance at the
beginning of Lia bil itie s a nd shar eho lder s' equ itNioetse
Balance at the end
of period
Balance at the
beginning of
Current assets: Current liabilities:
Currency capital 5 69,436,760.43 4 49,132,586.01 Short-term loans 1 13,515,100.00 9 6,633,600.00
Tradable financial assets Tradable financial liability
Notes receivable 6 9,863,390.07 6 1,779,674.18 Notes payable
Accounts receivable VI. 1 1 61,405,339.58 1 68,883,426.67 Accounts payable 1 69,304,576.93 1 33,489,640.22
Advance money 1 6,378,564.72 6 ,569,662.89 Advance accounts 2 ,547,339.06 3 ,460,327.41
Interests receivable Payroll payable 1 6,397,627.92 1 9,934,903.75
Dividend receivable Tax payable 1 1,190,512.49 1 3,162,107.64
Other receivables VI. 2 3 50,859,391.96 4 41,262,083.31 Interests payable
Inventory 7 0,217,794.19 6 0,082,198.13 Dividend payable 2 0,174.46 2 0,174.01
Non-current assets due within one
year Other accounts payable 6 93,123,095.88 6 91,985,512.47
Other current assets
Non-current liabilities due within
one year
Total of current assets 1 ,238,161,240.95 1 ,187,709,631.19 Other current liabilities
Non-current assets: Total of current liabilities 1 ,006,098,426.74 9 58,686,265.50
Saleable financial assets 1 0,472,106.27 1 2,906,087.63 Non-current liabilities
Investment held to the maturity date Long-term loan 9 0,000,000.00 9 0,000,000.00
Long-term accounts receivable Bonds payable
Long-term equity investment VI. 3 1 ,078,187,429.04 1 ,069,461,516.10 Long-term accounts payable
Real estate for Investment Special accounts payable
Fixed assets 9 0,951,063.64 9 6,595,498.73 Deferred profit 1 0,166,524.45 9 ,094,359.50
Engineering under construction Anticipation liability
Engineering goods Liabilities with the deferred income
taxes
1 ,197,304.78 1 ,683,916.84
Liquidation of fixed assets Other non-current liabilities
Production biology assets Subtotal of non-current liabilities 1 01,363,829.23 1 00,778,276.34
O il and gas a ssets Total of liabilities 1 ,107,462,255.97 1 ,059,464,541.84
Intangible assets 3 5,724,790.60 3 3,783,407.53 Sh arehol ders’ equitie s:
Development expenses 7 ,727,997.86 5 ,647,989.99 Sh are ca pital 2 95,721,852.00 2 95,721,852.00
Goodwill Capital reserve 3 38,999,510.66 3 41,756,978.96
Long-term deferred and prepaid
expenses
Minus: treasury share
Assets with deferred income taxes 1 1,217,775.19 1 7,880,772.42 Su rplus reserve 2 50,810,202.23 2 50,810,202.23
Other non-current assets Un distri buted p rofit 4 79,448,582.69 4 76,231,328.56
Subtotal of non-current assets 1 ,234,281,162.60 1 ,236,275,272.40 Subtotal of shareholders’ equities 1 ,364,980,147.58 1 ,364,520,361.75
T ota l of a sse ts 2 ,472,442,403.55 2 ,423,984,903.59 Total of liabilities and
shareholders’ equities
2 ,472,442,403.55 2 ,423,984,903.59
Balance Sheet
June 30, 2010
Legal representative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
35
Kuai Qi Statement No. 02
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
Item Note Amount in this period Amount in same period of previous year
I. Operating income VI. 4 4 81,964,296.84 4 66,504,272.91
Minus: operating cost VI. 4 2 30,333,698.66 2 50,344,474.80
Operating tax and surtax VI. 5 7 5,000.00 6 1,500.00
Sales expense 1 58,641,758.26 1 46,258,350.47
Management expense 4 0,170,611.01 4 5,915,371.47
Financial expense 1 84,650.88 1 1,753,023.23
Loss from asset depreciation 1 ,316,441.24 5 ,587,538.88
Plus: returns from the changes of fair values (the loss is listed
beginning with “-”).
9 7,808,992.64
Investment returns (the loss is listed beginning with “-”). VI. 6 - 1,323,857.59 2 2,801,144.39
Including: the investment returns from the associated enterp r i s e s a n d j o i n t e n t e r p r i s e s - 1,474,087.06 - 2,853,035.96
II. Operating profit (the loss is listed beginning with “-”) 4 9,918,279.20 1 27,194,151.09
Plus : non-operating income 7 ,012,509.26 8 34,001.47
Minus: non-operating payments 8 37,939.92 9 8,010.14
Including: loss in the disposal of non-current assets 4 ,434.98 9 4,409.94
III. Total profit (the loss is listed beginning with “-”) 5 6,092,848.54 1 27,930,142.42
Minus: income tax expense 8 ,517,316.61 5 ,393,172.29
IV. Net profit (the loss is listed beginning with “-”) 4 7,575,531.93 122,536,970.13
V. Profit per share:
(I) Basic profit per share
(II) Diluted profit per share
VI. Other comprehensive profit - 2,757,468.30 4 ,519,377.24
VII. Total amount of comprehensive profit 4 4,818,063.63 127,056,347.37
Profit Statement
January to June 2010
Legal representative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
36
Kuai Qi Sta tement No. 0 3
P repare d by: Livzon Pharma ceutic al Gro up Inc. U nit: R MB Yua n
Ite m Not e Amo unt in thi s pe rio d Am oun t i n sa me peri od of prev iou s ye ar
I. Cash flows from operating activities
Cash received from sales of goods or rendering of services 4 83,377,830.24 423,490,710.12
Tax refunding
Cash received related to other operating activities 1 9,050,518.26 25,384,854.49
Subtotal of cash inflow from the operating activities 5 02,428,348.50 448,875,564.61
Cash paid for purchase of goods or receiving of services 2 20,135,607.83 216,593,042.70
Cash paid to and on behalf of employees 4 0,344,502.42 37,069,927.86
Tax payments 4 8,016,813.96 46,963,718.57
Other cashes paid to operating activities 1 64,119,350.53 105,420,744.58
Subtotal of cash outflow from operating activities 4 72,616,274.74 406,047,433.71
Net cash flow from operating activities 2 9,812,073.76 42,828,130.90
II. Cash flow from investment activities:
Cash received from disposal of investments 109,167,422.79
CNaetshc raescheirveecde ifvreodmf irnovmesdtmisepnots areltuorfnsfixed assets, intangible assets and 1 50,229.47 95,406,007.89
other long-term assets 1,500.00
Net cash received in disposal of the subcompanies and other operating units
Cash received related to other investment activities
Subtotal of cash inflow from the investment activities 1 50,229.47 204,574,930.68
Cash paid to acquire and construct fixed assets, intangible assets and
other long-term assets 1 8,621,078.94 2,873,156.13
Cash paid to acquire investments 8 10,099.00
Net cash paid to acquire the subcompanies and other operating units 1 0,200,000.00
Cash paid related to other investment activities 3,500.00
Subtotal of cash outflow from investment activities 2 9,631,177.94 2,876,656.13
Net amount of cash flow received from the investment activities -29,480,948.47 201,698,274.55
III. Cash flow from financing activities:
Cash received from investors
L oans f rom su bcompan ies 1 49,273,100.57 75,126,838.97
C ash fr om loa ns 1 27,396,650.00 162,039,675.00
Cash received related to other financing activities 1 ,187,447.18
Subtotal of cash inflow from the financing activities 2 77,857,197.75 237,166,513.97
Repayments of loans 1 09,836,600.00 466,296,795.00
Cash paid for distribution of dividends, profits and repayment of
interests 4 7,825,998.43 40,147,699.78
L oans p aid to subcom panies
Cash payments related to other financing activities 1 ,345,000.00 47,479,144.95
Sub-total of cash outflow from the financing activities 1 59,007,598.43 553,923,639.73
Net cash flow from financing activities 1 18,849,599.32 - 316,757,125.76
IV. Effect of foreign exchange fluctuation on cash and cash
equivalents -118,503.68 55,314.67
V. Net increase of cash and cash equivalents 1 19,062,220.93 - 72,175,405.64
Plus: Balance of cash and cash equivalents at the beginning of the
period 4 18,389,049.61 465,301,653.09
VI Balance of cash and cash equivalents at the end of the period 5 37,451,270.54 393,126,247.45
Cash Flow Statement
January to June 2010
Legal representative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
37
K ua i Q i S t a te m en t No . 0 4
Pr e pa r e d b y: Li v z on Ph a rm a c eu t ic a l G r ou p I n c . U ni t : R M B Y ua n
Share capital Capital reserve
M inus: treasury
shares Surplus Reserve Undistributed Profit T otal of Sha reh old ers’
Equ iti es
I. Balance at the end of previous year 295,721,852 .00 341 ,75 6,97 8.96 0 .00 250 ,81 0,20 2.2 3 4 76,2 31,328.56 1,364,520,361.75
Plus: changes of accounting policies
Correction of errors in the early stage
II. Balance at the beginning of this year 295,721,852 .00 341 ,75 6,97 8.96 0 .00 250 ,81 0,20 2.2 3 4 76,2 31,328.56 1,364,520,361.75
III. Increase or decrease of change amount(the loss is listed
beginning with “-”)
0 .00 -2 ,75 7,46 8.30 0 .00 0.0 0 3,2 17,254.13 459,785.83
( I)Net profit in thi s year 47,5 75,531.93 47,575,531.93
( II) Ot her co mprehen sive g ains -2 ,75 7,46 8.30 -2,757,468.30
S u b t ot a l o f ( I ) a nd ( I I ) -2 ,75 7,46 8.30 47,5 75,531.93 44,818,063.63
(III) Increase and decrease of capitals by the shareholders 0 .00 0.00
1.Capital investment by shareholders in this period 0.00
2. Repurchase of treasury shares in the year 0.00
3． Others
(I V ) P ro f i t di s t r i b ut i o n 0.0 0 -44,3 58,277.80 -44,358,277.80
1 . Withdrawal of surplus reserve
2 . Distribution to sh areholders -44,3 58,277.80 -44,358,277.80
3 . Others
(V) Internal settlement and transfer of shareholders’ 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
I V. Bal ance at the en d o f th is year 295,721,852 .00 338 ,99 9,51 0.66 0 .00 250 ,81 0,20 2.2 3 4 79,4 48,582.69 1,364,980,147.58
Change Statement of Shareholders’ Equities
January to June 2010
Ite m N ote
Jan uar y to Ju ne 2 010
Legal epresentative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
38
K ua i Q i S t a te m en t No . 0 4
Pr e pa r e d b y: Li v z on Ph a rm a c eu t ic a l G r ou p I n c . U ni t : R M B Y ua n
Share capital Capital reserve Minus: treasury
shares
Surplus Reserve Undistributed Profit T otal of Sha reh old ers’
Equ iti es
I. Balance at the end of previous year 3 06,035,482 .00 4 28 ,12 5,63 7.76 1 5,798 ,067 .52 2 33 ,65 3,77 1.2 4 3 51,6 84,617.86 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 3 06,035,482 .00 4 28 ,12 5,63 7.76 1 5,798 ,067 .52 2 33 ,65 3,77 1.2 4 3 51,6 84,617.86 1 ,303,701,441.34
III. Increase or decrease of change amount(the loss is listed
beginning with “-”) - 10,313,630 .00 - 86 ,36 8,65 8.80 - 15,798 ,067 .52 1 7 ,15 6,43 0.9 9 1 24,5 46,710.70 6 0,818,920.41
( I)Net profit in thi s year 1 71,5 64,309.89 1 71,564,309.89
( II) Ot her co mprehen sive g ains 5 ,29 6,59 3.67 5 ,296,593.67
S u b t ot a l o f ( I ) a nd ( I I ) 5 ,29 6,59 3.67 1 71,5 64,309.89 1 76,860,903.56
(III) Increase and decrease of capitals by the shareholders - 10,313,630 .00 - 91 ,66 5,25 2.47 - 15,798 ,067 .52 - 86,180,814.95
1.Capital investment by shareholders in this period - 10,313,630 .00 - 91 ,66 5,25 2.47 - 101,978 ,882 .47 -
2. Repurchase of treasury shares in the year 8 6,180 ,814 .95 - 86,180,814.95
3． Others
(I V ) P ro f i t di s t r i b ut i o n 1 7 ,15 6,43 0.9 9 - 47,0 17,599.19 - 29,861,168.20
1 . Withdrawal of surplus reserve 1 7 ,15 6,43 0.9 9 - 17,1 56,430.99
2 . Distribution to sh areholders - 29,8 61,168.20 - 29,861,168.20
3 . Others
(V) Internal settlement and transfer of shareholders’ 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
I V. Bal ance at the en d o f th is year 2 95,721,852 .00 3 41 ,75 6,97 8.96 - 2 50 ,81 0,20 2.2 3 4 76,2 31,328.56 1 ,364,520,361.75
Item N ote
20 09
Chan ge S tate ment of S hare hold ers’ Equi ties
January to June 2010
Legal epresentative:Zhu Baoguo Principal of the Financial Department:An Ning Principal of the Accounting Department::Si YanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
39
Livzon Pharmaceutical Group Inc.
Notes to Financial Statement
June 30, 2010
(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 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)Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
40
Co., Ltd signed the Equity Transfer Agreement with China Everbright Medicine Co., Ltd and transferred all its
equity (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, 2010, 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 45.3129% 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.
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. By December 2, 2009 (the expiry date of implementing the repurchase), the company has
accumulatively repurchased 10,313,630 B-shares. On December 4, 2009, the company handled the cancellation
affairs about repurchased shares with Shenzhen Branch of China Securities Depository & Clearing Corporation
Limited; the total share capital of company decreased by 10,313,630 shares, and the registered capital of
company is reduced from RMB 306,035,482 Yuan to RMB 295,721,852 Yuan. On April 20, 2010, the company
handled the registration formalities of industrial and commercial changes, and was issued the business license for
enterprise legal person with the registration No. of 440400400032571.
2 Industry
The company is in the pharmacy industry.Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
41
3 Business scope
The approved business scope of the company: the company mainly produces and sells the raw materials for
Chinese and western medicines, medicine intermediate, Chinese medicine materials, tablet of Chinese medicines,
medical instruments, sanitation materials, healthcare products, medical cosmetics, Chinese and western finished
medicines, bio-chemical reagents, and also handles the chemical industry, food, real estate, tourism and
information business, raw materials for medicines etc; also involves the import and export businesses of its
products and relevant technologies; wholesale of the Chinese finished medicines, chemical material medicines
and their preparations, antibiotic material medicines and their preparations, biological products (except the
preventive biological products), bio-chemical medicines. (The products administrated with quota license or
special regulations shall be subject to the relevant national rules; the projects that need the administrative
approvals cannot be dealt with unless such approvals are given).
4 Change of main business
During the report period, the company has not changed its main business.
II. MainAccounting Policies,Accounting Evaluation and Early Error of the Company
(I) Preparation Basis of Financial Statement
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, 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 and the No. 9 Preparation Rule about Information Disclosure of
Companies Making Public Offering of Securities – Calculation and Disclosure of Yield Rate of Net Assets and
Profit per Share (revised edition in 2010), this financial statement is prepared under the following important
accounting and valuation policies.
(II) Declaration of Compliance with the EnterpriseAccounting Standards
The financial statement prepared by the company meets the requirements of the enterprise accounting standards,Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
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and exactly and completely reflects the financial status, operation result and cash flow, etc of the company.
(III)Accounting Period
The company employs the period of the calendar days from the January 1 to December 31 each year as the
accounting year.
(IV) Currency Used in Book-keeping
The Company takes the RMB as the currency in book-keeping.
(V) Accounting Processing Method of Merger of enterprises which are under the same control and are not
under the same control
(1) Merger of enterprises which are under the same control
For the merger of enterprises which are under the same control, the assets and liabilities that are obtained by the
merging party in the such merger will be measured at the book values of merged party on the merging date. The
difference between the book values of net assets and book values of paid merger considerations (or total amount
of book values of issued shares) will be supplemented by the capital reserve; in case the capital reserve is not
enough, the remaining gains will be adjusted.
(2) Merger of enterprises which are not under the same control
For the merger of 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 on the purchase date. In case the enterprise merger is gradually realized in many
transactions, the merger cost will be the sum of each individual transaction cost. All direct expenses related to the
enterprise merger will be accrued to the enterprise merger cost. The purchase date is the date when the company
actually obtains the control right of purchased party.
In case the enterprise merger cost of purchasing party is more than the fair values of identifiable net assets of
such enterprises, the difference will be confirmed as the goodwill; in case the enterprise merger cost of
purchasing party is less than the fair values of identifiable net assets of such enterprises, after the repeated
checks still find the same fact, the difference will be accrued to the current profit and loss.
(VI) Preparation Method of Consolidated Financial Statements
(1) Determination of consolidation scope
The consolidated financial statements will be subject to the No. 33 Enterprise Accounting Standards –
Consolidated Financial Statement that was issued in February 2006. The combination scope of the consolidated
financial statement will be determined on the basis of the control; this financial statement consolidates theLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
43
financial statements of this company, subcompanies and special objectives that are directly or indirectly
controlled by the company. The control means that the company has the right to determine the financial and
operation policies of invested units, and may obtain the benefits from the operation activities of this enterprise.
In case there are evidences indicating that the parent company cannot control the invested units, such units will
not be included in the consolidated statement scope.
(2) Disposal of purchasing or selling the shares of subcompanies.
The company confirms the date when the risks and rewards related to the purchase or sales of company shares
actually transfer as the purchase date and selling date. For the subcompanies that are obtained or sold in the
merger of enterprises which are not under the same control, the operation results and cash flow after the
purchase date and before the selling date have been duly included in the consolidated profit statement and
consolidated cash flow statement; for the subcompanies that are obtained in the merger of enterprises which are
under the same control, the operation results and cash flow from the beginning of current merger period to the
merger date have been included in the consolidated profit statement and consolidated cash flow statement, and
are separately listed; the comparison data of consolidated financial statements have also been adjusted.
For the long-term equity investment that is formed by purchasing the minority of company equities, in preparing
the consolidated financial statements, the difference between the long-term equity investment for purchasing the
minority of equities and amounts of net assets of company in the subcompanies that are continuously calculated
at the newly added share-holding percentage from the purchase date (or merger date) will be adjusted as the
owners’ equities (capital reserve); if the capital reserve is not enough, the remaining gains will be adjusted.
(3) In case the accounting policies and accounting periods of subcompanies differ from those of parent company,
the financial statements of subcompanies will be adjusted.
In case the accounting policies of subcompanies differ from those of the company, in preparing the consolidated
financial statements, the company has made the appropriate adjustments about the financial statements of
subcompanies in accordance with the accounting policies of this company; for the subcompanies that are
obtained in the merger of enterprises which are not under the same control, the company has made the
appropriate adjustments about the financial statements of subcompanies based on their identifiable assets,
liabilities and fair values of contingent securities on the purchasing date.
(4) Consolidation methods
In preparing the consolidated financial statements, all key accounts and transactions between the company and
subcompanies, subcompanies and subcompanies will be offset.
The net assets of merged subcompanies that are attributable to the minority of shareholder equities will be
separately listed in the shareholder equities of consolidated financial statements. If the loss that is borne by the
minority of shareholders exceeds their equities in the subcompanies and such minority of shareholders areLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
44
obliged to and capable of making the compensations, the equities of such minority of shareholders will be offset;
otherwise, the remaining loss will be borne by the company.
(VII) Determination Standard for Cash and 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.
(VIII) Calculation Method of Foreign Currency Business
For the foreign currency transactions, the company employs the spot exchange rate (it normally means the
intermediate price of foreign exchange rates issued by People’s Bank of China, the same as below) on the
current transaction day and convert them to RMB for book keeping.
On the preparation date of balance sheet, the foreign currency monetary items will be converted to RMB for
book-keeping in accordance with the spot exchange rate. The difference of spot exchange rates between the
preparation date of the balance sheet and the initial confirmation on the previous date of the balance sheet will be
accrued to the current profits and losses. The foreign currency non-monetary items 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. The foreign currency non-monetary items calculated at the fair values will
be converted at the spot exchange rate on the transaction day, and the difference between the amount of currency
used in book-keeping after the conversion and the amount of original currency used in book-keeping will be
deemed as the change of fair values and be accrued to the current profits and losses.
(IX) Conversion of Financial Statement in Foreign Currency
1. 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 owners’ equity items, all items except the “undistributed profit” item will be
converted at the spot exchange rate on the occurrence date.
2. The income and expense items in the profit statement will be converted at 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 owners’ equity item in the balance sheet.
3. The cash flow statement will be converted at the spot exchange rate on the occurrence date. The effect amount
of exchange rate change on the cash will be the adjustment item, and be separately listed in the cash flow
statement.
(X) Confirmation and Calculation of Financial Instruments
1. Classification. The financial instruments may be classified to five categories based on the investment purposeLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
45
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 maturity 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 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 The investments that are held to the maturity 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 effective interest rate method during the holding period will be accrued to the
investment gains.
③ Accounts receivable: the prices in the contracts and agreements with the purchasers will be the initial bookkeeping
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 reservesLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
46
(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.
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 short-term 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 cash flow values in the
future and the book values.
(1) Accounts receivable
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; 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 means the accounts receivable with the age of over 3 years; other minor
accounts receivable mean all other accounts receivable except the above two items.
On the preparation date of balance sheet, the company will make the depreciation test about the individual
accounts receivable with huge amounts. For the accounts receivable whose individual amount is not large but
there are enough evidences proving that they have been depreciated, the depreciation loss will be confirmed andLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
47
withdrawn based on the difference between the expected cash flow values in the future and the book values. For
the individual accounts receivable that have been depreciated after the single test, classify them along with the
individual accounts receivable with small amounts 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 in the balances on the preparation date of balance sheet. Please see the following details:
On the basis of the actual loss rate of accounts receivable 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 accounts receivable package:
For the fund transfer between the companies within the consolidation scope, no bad debt reserve will be
withdrawn.
Confirmation standard of bad debts: 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 them to the Board of Directors for the approval of writing
off such bad debts.
(2)The investments that are held to the maturity dates
For the investments that are held to the maturity 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 cash flow values in the future and the book values.
If the depreciation reserves are withdrawn for the investments that are held to the maturity dates, and enough
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%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
48
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 cash flow values in the future and the book values.
In case the saleable financial assets have been depreciated, the accumulated losses 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.
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 be reversed and accrued to the owners’ equities.
(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 andLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
49
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.
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.
(XI) 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 long-term 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 profit and loss. In case theLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
50
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 longterm
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 of 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-termLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
51
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 values 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 equityLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
52
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.
(XII) 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 the 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.
(XIII) FixedAsset 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 paymentLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
53
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 noncurrency
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 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:
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%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
54
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 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.
(XIV) 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
Transportation
equipments
5 18%-19% 5%-10%
Electronic equipment
and others
5 18%-19% 5%-10%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
55
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 be
reversed.
(XV) Loan expense
1. 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 noncurrency
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.
2. During the capitalization period, the capitalized amounts of interests (including the amortization of
discounting or premium) during each accounting period will be determined in accordance with the following
provisions:
(1) For the special loans that are borrowed to construct or produce the assets complying with the capitalization
conditions, the company will determine capitalized amounts by deducting the interest incomes generated from
the depositing of unused loan capitals in the banks or the investment returns from temporary investments from
the interest expenses occurring in the current period of special loans.
(2) For the general loans that are used to construct or produce the assets complying with the capitalization
conditions, 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 theLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
56
capitalization rate of general loans. The capitalization rate will be determined based on the weighed average
interest rate of general loans. The capitalization period means the period from the starting time to ending time of
the loan expense capitalization, and the period in which the loan expense capitalization is suspended will not be
included.
3. 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 amounts in each accounting period in accordance with the
effective interest rate method.
4. During the capitalization period, the company will capitalize the difference between foreign exchanges about
the principals and interests of special foreign currency loans, and accrue it to the asset costs complying with the
capitalization conditions.
5. The capitalization of loan expenses for the assets complying with capitalization conditions that have been
constructed or produced and are ready for use or sales will be stopped. The loan expenses occurring after the
assets complying with capitalization conditions are ready for use or sales will be confirmed as the expenses
based on the actual amounts and be accrued to the current profit and loss.
(XVI) Calculation Method of IntangibleAssets
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 profitLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
57
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 noncurrency
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.
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.
(XVII) 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,Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
58
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 new 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.
(XVIII) Amortization Method of Long-termAmortization 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.
(XIX) 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,Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
59
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 signs 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 the 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 equity for the minority of shareholders; but the testsLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
60
of the depreciation about relevant asset groups will include the goodwill attributable to the equity 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 periods.
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 amount 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.
(XX) 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:Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
61
(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:
(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 parts 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.
(XXI) Repurchase of company shares
If, after obtaining the approval in accordance with the legal procedures, the company reduces the share capitals
by repurchasing the company shares, the share capitals will be reduced based on the total book values of
cancelled shares; the owners’ equities will be adjusted based on the differences between the prices (including
the transaction expenses) paid to repurchase the shares and book values of shares; the remaining amount
exceeding the total book values will be offset against the capital reserve (share premium), surplus reserve and
undistributed profit in sequence; if the prices are less than the total book values, the amounts less than total
book values will be compensated by adding the capital reserve (share premium).
Before the shares repurchased by the company are cancelled or transferred, they will be managed as the
inventory shares; all payments to repurchase the shares will be transferred to the costs of inventory shares.
In transferring the inventory shares, if the incomes from such transfers exceed the costs of inventory shares, the
remaining incomes will be added to the capital reserves (share premiums); if the incomes from such transfers
are less than the costs of inventory shares, the part less than such costs will be offset against the capital reserves
(share premiums), surplus reserve and undistributed profit in sequence.Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
62
(XXII) 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 in the total labor capacity.
(3) The percentage of the occurring costs in 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.
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 fromLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
63
the company by others and effective 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.
(XXIII) Governmental allowance
1. Confirmation principle: only the governmental allowance meeting the following conditions will be confirmed:
(1) The enterprises can meet the relevant conditions required by the governmental allowance;
(2) The enterprises can receive the governmental allowance.
2. Calculation: If the governmental allowances are the monetary assets, they will be calculated at the received or
receivable amounts. If the governmental allowances are the non-monetary assets, they will be calculated at the
fair values; if the fair values are not reliably given, they will be calculated at the nominal amounts.
3. Accounting processing: the governmental allowances related to assets will be confirmed as the deferred gains,
be averagely distributed in the usage life of relevant assets, and be accrued to the current profit and loss. The
governmental allowances calculated in the nominal amounts will be directly accrued to the current profit and
loss.
The governmental allowances related to gains will be separately processed in the following cases:
(1) The governmental allowances that are used to compensate the relevant expenses and losses of enterprises in
the future periods will be confirmed as the deferred gains, and be accrued to the current profit and loss in the
confirmed periods of relevant expenses.
(2) The governmental allowances that are used to compensate the relevant expenses and losses of enterprises
that have occurred will be accrued to the current profit and loss.
(XXIV) Confirmation about deferred income tax assets and liabilities
Based on the differences between the book values of assets and liabilities and taxation basis (for the items that
have not been confirmed as the assets and liabilities, if their taxation basis may be determined in accordance with
the taxation provisions, the difference between such taxation basis and their book values will be applied), the
deferred income tax assets or deferred income tax liabilities will be confirmed at the applicable tax rate during
the expected periods of returning such assets or settling such liabilities.
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. On the
preparation date of balance sheet, if enough evidences prove that the taxable income amounts that may beLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
64
probably obtained in the future periods may be used to deduct the deductible temporary differences, they will be
confirmed as the deferred income tax assets that have not been confirmed in the previous accounting periods.
On the preparation date of balance sheet, the company will recheck the book values of deferred income tax
assets. If the taxable income amounts cannot be obtained in the future periods to be used to deduct the benefits
of deferred income tax assets, the company will reduce the book values of deferred income tax assets. If there is
great possibility to obtain enough taxable income amounts, the reduced amounts may be reversed.
(XXV) Accounting Processing Method of Income Tax
The accounting processing of income tax in the company employs the balance sheet liability method.
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;
② The 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 the 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;Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
65
(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.
(XXVI) 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.
III. Taxes
The applicable tax items and tax rate of the company are listed as follows:
Tax Item Taxation 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%
Enterprise income tax Payable income tax amount NoteLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
66
Note: the enterprise income tax rates will be subject to the following regulations:
Company Name Actual Tax
Rate
Note
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, Fuzhou Fuxing Pharmaceutical
Co., Ltd under Livzon Group, Gutian Fuxing
Pharmaceutical Co., Ltd, Shanxi Datong Livzon
Qiyuan Medicine Co., Ltd, Longxi Livzon
Shenyuan Medicine Co., Ltd, Jiaozuo Livzon
Syntpharm Co., Ltd and Zhuhai Livzon Dankang
Biotechnology Co., Ltd
25%
Livzon Pharmaceutical Group Inc., Limin
Pharmaceutical Co., Ltd under Livzon Group,
Livzon Pharmaceutical Factory under Livzon
Group, Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area, Shanghai Livzon Pharmaceutical C
15% In 2008, they are granted as the hi-tech enterprises and
the validity period is 3 years.Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
67
IV. Enterprise Merger and Consolidated Financial Statements
(I) Subcompanies that are obtained by the establishment or investment, etc
o., Ltd, Lida Pharmaceutical Co., Ltd in Zhuhai
Bonded Area
Other subcompanies 22% 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 22% in 2010.
Subcompany Name Subcompany type
Registered
place
Business nature
Registered capital
Operation scope
Antao Development Limited Wholly-owned subcompany Hongkong HKD 0.5 million
Livzon (Hongkong) Co., Ltd Wholly-owned subcompany Hongkong HKD 61 million
Zhuhai Modern Chinese Medicine Hitech
Co., Ltd
Wholly-owned subcompany Zhuhai City
Service industry
RMB 6 million Yuan Research and development of Chinese
medicines and Chinese medicine
technologies and equipments;
technical service and consultancy
Livzon Pharmaceutical Factory under Livzon
Group
Wholly-owned subcompany Zhuhai City
Pharmaceutical
production
RMB 442.10930913
millionYuan
Production and sales of Chinese and
western medicines, medical
instruments and sanitation materials
Livzon Medicine Marketing Co., Ltd under
Livzon Group
Wholly-owned subcompany Zhuhai City
Commodity sales
RMB20 millionYuan Sales of products from the company
and all medical subcompanies
Zhuhai Livzon Medicine Trade Co., Ltd Wholly-owned subcompany Zhuhai City
Commodity sales
RMB 60 million Yuan 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, sanLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
68
itation materials, sanitation products,
healthcare foodstuffs, invigorant,
biological products, bio-chemical
preparations, medical cosmetics and
medical instruments
Shanghai Livzon Pharmaceutical Co., Ltd Wholly-owned subcompany Shanghai
Municipality Pharmaceutical
production
RMB 87.33 million Yuan Production and sales of water
injection, capsules, power, tablets,
lyophilized preparation, bio-chemical
and peptide material medicines
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area
Wholly-owned subcompany Zhuhai City
Pharmaceutical
production
RMB 102.28 million Yuan Production and sales of chemical
material medicine, medical
preparations, medical intermediates
and chemical products
Zhuhai Livzon Reagent Co., Ltd Controlling subcompany Zhuhai City
Pharmaceutical
production
RMB 46.45 million Yuan Production and sales of bio-chemical,
immune and chemical reagents,
biological products, sanitation
products and medical analyzer
equipments
Lida Pharmaceutical Co., Ltd in Zhuhai
Bonded Area
Wholly-owned subcompany Zhuhai City
Pharmaceutical
production
RMB 26 million Yuan Production, processing and sales of
chemical material medicines, medical
preparations, medical intermediates,
chemical products; warehousing.
Shanxi Datong Livzon Qiyuan Medicine Co.,
Ltd
Subcompany under
controlling subcompany
Hunyuan
County
Plantation industry
RMB 4 million Yuan Plantation and processing of
astragalus membranaceus; purchase
and sales of Chinese medicines
(except those that are restricted by the
nation)
Longxi Livzon Shenyuan Medicine Co., Ltd Subcompany under
controlling subcompany
Longxi County
Plantation industry
RMB 4 million Yuan Purchase, plantation, processing and
storage of Chinese medicines allowed by
the nation
Zhuhai Livzon Advertising Co., Ltd Wholly-owned subcompany Zhuhai City
Service industry
RMB 1 million Yuan Design, production, agency and
publication of various advertisements
at home and abroad
Zhuhai Livzon – Bai A Meng Biological Controlling subcompany Zhuhai City
Pharmaceutical
production
RMB 12 million Yuan Production and sales of HydroxyapatitLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
69
Subcompanies that are obtained by the establishment or investment, etc (continued)
Materials Co., Ltd e 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
Wholly-owned subcompany Zhuhai City
Service industry
RMB 1 million Yuan Technical research and development
of information and products related to
medicines and health-care products;
technical consultancy and service
Jiaozuo Livzon Syntpharm Co., Ltd Wholly-owned subcompany Jiaozuo City
Pharmaceutical
production
RMB70 millionYuan Production and sales of medical
intermediates, chemical products (the
above products do not include the
dangerous chemical products and
chemical products used for drugsmaking)
(for the above items that
involve the special approval, the
license or relevant approval
documents must be obtained before
performing the production and
operation)
Zhuhai Livzon Dankang Biotechnology Co.,
Ltd*
Controlling subcompany Zhuhai City Service industry RMB 100 million Yuan Technical research and development of biological
medicine products and antibody medicines
Subcompany Name
Actual investment
amount at the end of
period
Other item balances that
become the net investment
to subcompanies
Shareholding
percentage %
Voting percentage %
Antao Development Limited HKD 0.5 million 1,197,613,35.92 100% 100%
Livzon (Hongkong)Co., Ltd HKD61 million 19,639,866.43 100% 100%
Zhuhai Modern Chinese Medicine Hitech
Co., Ltd
RMB 6 million Yuan
0.00 100% 100%
Livzon Pharmaceutical Factory under
Livzon Group
RMB 423.25 million Yuan
0.00 100% 100%
Livzon Medicine Marketing Co., Ltd under
Livzon Group
RMB 20 million Yuan
0.00 100% 100%
Zhuhai Livzon Medicine Trade Co., Ltd RMB 60 million Yuan 0.00 100% 100%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
70
Subcompanies that are obtained by the establishment or investment, etc (continued)
Shanghai Livzon PharmaceuticalCo., Ltd RMB 87.33 million Yuan 0.00 100% 100%
Livzon Syntpharm Co., Ltd in Zhuhai
BondedArea
RMB 102.28 million Yuan
0.00 100% 100%
Zhuhai Livzon Reagent Co., Ltd RMB 23.69 million Yuan 0.00 51% 51%
Lida Pharmaceutical Co., Ltd in Zhuhai
BondedArea
RMB 26 million Yuan
0.00 100% 100%
Shanxi Datong Livzon Qiyuan Medicine Co.,
Ltd
RMB 3.7 million Yuan
0.00 81.48% 81.48%
Longxi Livzon Shenyuan Medicine Co., Ltd RMB 3.6 million Yuan 0.00 79.28% 79.28%
Zhuhai Livzon Advertising Co., Ltd RMB 1 million Yuan 0.00 100% 100%
Zhuhai Livzon – Bai A Meng Biological
Materials Co., Ltd
RMB 9.84 million Yuan
0.00 82% 82%
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd
RMB 1 million Yuan
0.00 100% 100%
Jiaozuo Livzon Syntpharm Co., Ltd
RMB 52.5 million Yuan
HKD 19.8685 million 0.00 100% 100%
Zhuhai Livzon Dankang Biotechnology Co.,
Ltd*
RMB10.20 million
0.00 51% 51%
Subcompany name
Whether they
are included in
the
consolidated
statements?
Equities of the
minority of
shareholders
Amounts that are
used for offsetting
against the equities
of the minority of
shareholders
Balance after deducting the loss in the
current period borne by the minority
of shareholders of subcompanies from
the owners’ equities of parent
company which exceeds the amount
attributable to them in the owners’
equities of company at the beginning
of period
Antao Development Limited Yes 0.00 0.00 0.00
Livzon (Hongkong)Co., Ltd Yes 0.00 0.00 0.00
Zhuhai Modern Chinese Medicine
Hi-tech Co., Ltd Yes 0.00 0.00 0.00
Livzon Pharmaceutical Factory under Yes 0.00 0.00 0.00Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
71
*The 21st meeting of the 6th Board of Directors of the company resolved that, on June 8, 2010, the company and
Joincare Pharmaceutical Group Industry Co., Ltd jointly contributed in currency to establish Zhuhai Livzon
Livzon Group
Subcompany name
Whether they
are included in
the
consolidated
statements?
Equities of the
minority of
shareholders
Amounts that are
used for offsetting
against the equities
of the minority of
shareholders
Balance after deducting the loss in the
current period borne by the minority
of shareholders of subcompanies from
the owners’ equities of parent
company which exceeds the amount
attributable to them in the owners’
equities of company at the beginning
of period
Livzon Medicine Marketing Co., Ltd
under Livzon Group Yes 0.00 0.00 0.00
Zhuhai Livzon Medicine Trade Co., Ltd Yes 0.00 0.00 0.00
Shanghai Livzon PharmaceuticalCo., Ltd Yes 0.00 0.00 0.00
Livzon Syntpharm Co., Ltd in Zhuhai
BondedArea Yes 0.00 0.00 0.00
Zhuhai Livzon Reagent Co., Ltd Yes 44,922,379.66 0.00 0.00
Lida Pharmaceutical Co., Ltd in Zhuhai
BondedArea Yes 0.00 0.00 0.00
Shanxi Datong Livzon Qiyuan Medicine
Co., Ltd Yes 256,032.88 0.00 0.00
Longxi Livzon Shenyuan Medicine Co.,
Ltd Yes 388,052.15 0.00 0.00
Zhuhai Livzon Advertising Co., Ltd Yes 0.00 0.00 0.00
Zhuhai Livzon – Bai A Meng Biological
Materials Co., Ltd Yes 1,111,467.95 0.00 0.00
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd Yes 0.00 0.00 0.00
Jiaozuo Livzon Syntpharm Co., Ltd Yes 0.00 0.00 0.00
Zhuhai Livzon Dankang Biotechnology
Co., Ltd* Yes 9,800,000.00 0.00 0.00Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
72
Dankang Biotechnology Co., Ltd, accounting for 51% and 49% of the registered capital of RMB 100 million
Yuan respectively. By June 30, 2010, the paid-up capitals amounted to RMB 20 million Yuan, and such
contribution has been verified by the Li An Dan Yan Zi [2010] No. B-1030 capital verification report issued by
Reanda Certified Public Accountants.
(II) Subcompanies that are obtained by the merger of enterprises which are not under the same control
Subcompanies that are obtained by the merger of enterprises which are not under the same control
(continued)
Full name of subcompany
Subcompany
type
Registered
place
Business
nature
Registered
capital
Operation scope
Sichuan Guangda Pharmaceutical Co.,
Ltd
Wholly-owned
subcompany
Pengzhou City
Pharmaceutical
production
RMB 95 million Yu
an
Research, development, production and sales
of Chinese and western medicines and finished
medicines
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group
Controlling
subcompany
Qingyuan City Pharmaceutical
production
RMB 134.93 million
Yuan
Export and production of its products
and relevant technologies
Limin Pharmaceutical Co., Ltd under
Livzon Group
Controlling
subcompany
Shaoguan City
Pharmaceutical
production
RMB 61.56 million
Yuan
Production and sales of various medical
preparations, medical materials, various
foodstuff additives, feedstuff additives and
nutrition health-care products
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group
Wholly-owned
subcompany
Fuzhou City
Pharmaceutical
production
USD 33.7 million 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)
Gutian Fuxing Pharmaceutical Co.,
Ltd
Wholly-owned
subcompany
Gutian County
Pharmaceutical
production
RMB 26.7 million
Yuan
Manufacturing and sales of material medicines
(Kanamycin sulfate, Tetracycline
Hydrochloride and Chlortetraccline
Hydrochloride)
Subcompany name
Actual investment
amount at the end of
period
Other item balances that
become the net investment
to subcompanies
Shareholding
percentage %
Voting percentage %
Sichuan Guangda Pharmaceutical Co.,
Ltd
RMB 95 million Yuan
0.00
100% 100%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
73
Subcompanies that are obtained by the merger of enterprises which are not under the same control
(continued)
(III) Subcompanies that are obtained by the merger of enterprises which are under the same control:
None.
(IV) Subcompanies that are newly included in the consolidated scopes
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group
RMB 124.32 million Yuan
0.00
92.14% 92.14%
Limin Pharmaceutical Co., Ltd under
Livzon Group
RMB 56.18 million Yuan
0.00
88.09% 88.09%
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group
USD 33.7 million Yuan
0.00
100% 100%
Gutian Fuxing PharmaceuticalCo., Ltd RMB 26.7 million Yuan 0.00 100% 100%
Subcompany name
Whether they
are included in
the
consolidated
statements?
Equities of the
minority of
shareholders
Amounts that are
used for offsetting
against the equities
of the minority of
shareholders
Balance after deducting the loss in the
current period borne by the minority
of shareholders of subcompanies from
the owners’ equities of parent
company which exceeds the amount
attributable to them in the owners’
equities of company at the beginning
of period
Sichuan Guangda Pharmaceutical Co.,
Ltd Yes
0.00
0.00 0.00
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group Yes 10,903,624.20 0.00 0.00
Limin Pharmaceutical Co., Ltd under
Livzon Group Yes 35,112,090.03 0.00 0.00
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group Yes 0.00 0.00 0.00
Gutian Fuxing PharmaceuticalCo., Ltd Yes 0.00 0.00 0.00
Name Net assets at the end of period Net profits in the current period
Zhuhai Livzon Dankang Biotechnology
Co., Ltd 20,000,000.00 0.00Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
74
V. Notes to Main Items in the Consolidated Financials Statements
1. Currency Capital
Item
2010.6.30 2009.12.31
Original
Currency
Exchange
rate
Book-keeping
Currency
Original Currency Exchange rate
Book-keeping
Currency
Cash at stock 102,120.08 81,708.17
Including:
RMB 87,467.38 66,035.85
Hongkong
Dollar 0.00 0.87239 0.00 1,070.00 0.88048 942.11
USD 330.00 6.7909 2,241.00 330.00 6.8282 2,253.31
Singapore
Dollar 2,567.00 4.8351 12,411.70 2,567.00 4.8605 12,476.90
Item
2010.6.30 2009.12.31
Original
Currency
Exchange
rate
Book-keeping
Currency
Original Currency Exchange rate
Book-keeping
Currency
Deposits in
banks 678,264,184.21 550,468,537.68
Including:
RMB 638,038,472.71 478,965,332.90
Hongkong
Dollar 31,764,851.11 0.87239 27,711,338.46 60,915,704.04 0.88048 53,635,059.09
USD 1,794,259.30 6.7909 12,184,635.58 2,493,423.32 6.8282 17,025,593.12
Japanese Yuan 1,579,183.00 0.076686 121,101.23 98,627.00 0.073782 7,276.90
Euro 25,225.03 8.2710 208,636.23 85,257.44 9.7971 835,275.67
Other Currency
Capital 40,500,674.09 37,981,713.34
Including:
RMB 13,764,288.96 11,543,911.45
Hongkong
Dollar 30,647,285.19 0.87239 26,736,385.13 30,026,578.56 0.88048 26,437,801.89Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
75
Other currency capitals at the end of this period include: the investment amount of RMB 26,771,578.15 Yuan
and deposits for L/C of RMB 13,729,095.94 Yuan.
RMB 20.20 million Yuan of deposits in banks has been mortgaged for the short-term loans and the use of RMB
9,642,515.94 Yuan of deposits for L/C among other currency capitals is restricted, and both of them will be
deducted from the cash and cash equivalents of cash flow statement.
In the balances at the end of period, there are no items which have the use restriction, are deposited in overseas
banks and have the return risks due to the mortgage, pledgement or freezing, etc.
2. Tradable financial assets
In the balances at the end of period, there are no tradable financial assets with the discounting restriction.
3. Receivable Bills
(1) Classification of receivable bills
(2) The main cause of the decrease of 57.43% over the beginning of period is that the sales incomes in the mode
of settlement by bills dropped.
(3) At the end of period, the company has no receivable bills that have been mortgaged.
(4) By June 30, 2010, the bills that have been endorsed but have not been due are listed as follows:
(5) At the end of period, the company has no bills that have been transferred to the accounts receivable due to
the failure of drawers to perform their obligations.
4. Accounts Receivable
(1) Composition of Accounts Receivable
Total 718,866,978.38 588,531,959.19
Item
2010.6.30 2009.12.31
Cost
Changes of Fair
Values
Fair Values
Cost
Changes of Fair
Values
Fair Values
Stock 56,108,611.16 -10,324,744.10 45,783,867.06 56,628,927.38 -8,354,189.43 48,274,737.95
Fund 150,000.00 369,224.76 519,224.76 150,000.00 463,842.56 613,842.56
Total 56,258,611.16 -9,955,519.34 46,303,091.82 56,778,927.38 -7,890,346.87 48,888,580.51
Item 2010.6.30 2009.12.31
Bank Acceptance Drafts 172,287,447.02 404,747,523.90
Bill Type Due Time Amount
Bank Acceptance Drafts 2010-12-31 169,659,394.15Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
76
(2) At the end of this period, for the accounts receivable totaling RMB 1,711,300.95 Yuan whose amounts are
large, or whose amounts are not large but whose depreciation tests have been separately made, the reserves for
them are fully withdrawn: the reserve for 1-2 years amounts to RMB 11,658.31 Yuan, the reserve for 2-3 years
amounts to RMB 265,521.00 Yuan and the reserve for 3-5 years amounts to RMB 1,434,121.64 Yuan.
(3) Age analysis
Item
2010.6.30 2009.12.31
Amount Percenta
ge
Reserves for Ba
d Debts
Net Value Amount Percenta
ge
Reserves 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. 4,688,891.92 0.99% 4,268,086.30 420,805.62 5,051,926.46 1.27% 4,355,479.66 696,446.80
Other Minor
Amounts 467,271,520.03 99.01% 24,021,054.75 443,250,465.28 392,397,399.82 98.73% 20,450,520.06 371,946,879.76
Total 471,960,411.95 100% 28,289,141.05 443,671,270.90 397,449,326.28 100% 24,805,999.72 372,643,326.56
Age
2010.6.30 2009.12.31
Amount Percentage Reserves for Bad
Debts
Net Value Amount Percent
age
Reserves for Ba
d Debts
Net Value
Within 1
year 453,706,773.50 96.14% 22,685,338.68 431,021,434.82 378,600,444.56 95.26% 18,930,022.24 359,670,422.32
1-2 years 11,432,920.30 2.42% 696,934.03 10,735,986.27 10,877,643.08 2.74% 703,418.58 10,174,224.50
2-3 years 2,131,826.23 0.45% 638,782.04 1,493,044.19 2,919,312.18 0.73% 817,079.24 2,102,232.94Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
77
(4) From January to June, 2010, the accounts receivable with the non-associated parties that have been actually
written off amount to RMB 766,484.90 Yuan and are listed as follows:
(5) By June 30, 2010, there are no debts with the shareholder units holding over 5% (including 5%) voting
rights.
(6) The total amount of top 5 accounts receivable is RMB 67,127,694.07 Yuan, accounting for 14.22% of the
receivable balance.
Over 3
years 4,688,891.92 0.99% 4,268,086.30 420,805.62 5,051,926.46 1.27% 4,355,479.66 696,446.80
Total 471,960,411.95 100% 28,289,141.05 443,671,270.90 397,449,326.28 100% 24,805,999.72 372,643,326.56
Name of Debtor Writing-off
Amount
Nature Cause Whether the
debtor is the
associated party
Shandong Xinweili Pharmaceutical
Company 329,960.00 Loan
The age is very long and it
cannot be received. No.
Jinan Ousai Medical Technology
Development Co., Ltd
99,762.00
Loan
The age is very long and it
cannot be received. No.
Jinan Hongrun Biotechnology Co., Ltd.
67,128.00
Loan
The age is very long and it
cannot be received. No.
Jiangxi Huiren Group Medicine Research
and Sales Co., Ltd 44,281.16 Loan
The age is very long and it
cannot be received. No.
Changchun Yongxin Dirui Pharmaceutical
Co., Ltd 30,390.00 Loan
The age is very long and it
cannot be received. No.
Zhejiang Wenzhou Medical Commercial
Group Co., Ltd 20,344.00 Loan
The age is very long and it
cannot be received. No.
Total 591,865.16
Age
2010.6.30 2009.12.31
Amount Percentage Amount PercentageLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
78
5. PrepaidAccounts
(1) Age analysis
(2) At the end of period, the increase of prepaid accounts by 82.59% over the beginning of period is because of
the increase of prepaid accounts for goods.
(3) The prepaid accounts with the age of over 1 year are mainly the prepaid accounts for goods and
engineering accounts that have not been settled.
(4) The top 5 prepaid accounts total RMB 98,684,837.62 Yuan, accounting for 81.29% of prepaid account
balance.
(5) By June 30, 2010, 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
Within 1 year 67,127,694.07 14.22% 52,570,979.10 13.23%
Age 2010.6.30 Percentage 2009.12.31 Percentage
Within 1 year 118,048,097.15 97.24% 58,822,561.63 88.47%
1-2 years 2,513,760.00 2.06% 2,432,414.90 3.66%
2-3 years 831,831.10 0.69% 187,148.99 0.28%
Over 3 years 4,770.00 0.01% 5,046,000.00 7.59%
Total 121,398,458.25 100.00% 66,488,125.52 100.00%
Item
2010.6.30 2009.12.31
Amount Percenta
ge
Reserves for Bad
Accounts
Net Value Amount Percenta
ge
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 3,479,069.63 8.92% 3,001,295.89 477,773.74 4,793,390.64 19.03% 3,138,897.55 1,654,493.09Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
79
(2) At the end of this period, for the other accounts receivable totaling RMB 178,155.04 Yuan whose amounts
are large, or whose amounts are not large but whose depreciation tests have been separately made, the reserves
for them are fully withdrawn: the reserve within 1 year amounts to RMB 5,250.00 Yuan; the reserve for 2-3
years amounts to RMB 3,470.00 Yuan and the reserve for 3-5 years amounts to RMB 169,435.04 Yuan.
(3) Age analysis
(4) From January to June, 2010, the other accounts receivable with the non-associated parties that have been
actually written off amount to RMB 12,580.72 Yuan.
(5) By June 30, 2010, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
risk of this
combination is
very great after the
combination
subject to the
credit risk
characteristics:
Other minor
accounts 35,545,166.78 91.08% 1,867,629.35 33,677,537.43 20,396,198.53 80.97% 1,111,304.58 19,284,893.95
Total 39,024,236.41 100.00% 4,868,925.24 34,155,311.17 25,189,589.17 100.00% 4,250,202.13 20,939,387.04
Age
2010.6.30 2009.12.31
Amount Percenta
ge
Reserves for Bad
Accounts
Net Value Amount Percentage Reserves for Bad
Accounts
Net Value
Within 1
year 34,334,894.80 87.98% 1,721,732.25 32,613,162.55 18,241,702.32 72.42% 912,085.08 17,329,617.24
1-2 years 706,666.45 1.81% 42,399.99 664,266.46 1,715,903.29 6.81% 102,954.20 1,612,949.09
2-3 years 503,605.53 1.29% 103,497.11 400,108.42 438,592.92 1.74% 96,265.30 342,327.62
Over 3
years 3,479,069.63 8.92% 3,001,295.89 477,773.74 4,793,390.64 19.03% 3,138,897.55 1,654,493.09
Total 39,024,236.41 100.00% 4,868,925.24 34,155,311.17 25,189,589.17 100.00% 4,250,202.13 20,939,387.04Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
80
(6) The top 5 other accounts receivable total RMB 5,521,979.62 Yuan, accounting for 14.15% of other accounts
receivable balance and are listed as follows:
7. Inventory
(1) Inventory classification
Debtor Name Debt Amount Nature or Content Debt Time
Percentage in
Total Amount
Xu Leyi 1,444,210.00 Loans for equipment
Within 1
year
3.70%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 1,095,228.72 Power expenses
Within 1
year
2.80%
Zhang Yuhua 1,033,496.00 Loans for equipment
Within 1
year
2.65%
Ding Gongcai 1,010,000.00 Loans for projects
Within 1
year
2.59%
Lin Wei 939,044.90 Loans for projects
Within 1
year
2.41%
Total 5,521,979.62 14.15%
Item
2010.6.30 2009.12.31
Amount Depreciation
Reserve
Net Value Amount Depreciation
Reserve
Net Value
Raw materials 110,866,826.46 879,645.22 109,987,181.24 75,050,140.55 955,214.00 74,094,926.55
Packages 17,758,969.05 93,906.45 17,665,062.60 15,611,392.55 50,043.57 15,561,348.98
Products 111,115,305.73 670,884.31 110,444,421.42 75,815,676.73 493,257.73 75,322,419.00
Inventory
commodities 214,560,886.94 3,107,618.70 211,453,268.24 183,170,828.42 10,128,351.33 173,042,477.09
Entrusted
materials for
processing 1,632,695.73 0.00 1,632,695.73 969,615.57 0.00 969,615.57
Low-value
consumables 692,791.10 0.00 692,791.10 280,385.85 0.00 280,385.85Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
81
At the end of period, the increase of inventory balance by 30.11% over the beginning of period is because of the
production expansion in this period.
(2) Depreciation reserve for inventory
Delivered
commodities
0.00 0.00 0.00 51,886.69 0.00 51,886.69
Self-made
semi-finished
products 0.00 0.00 0.00 0.00 0.00 0.00
Total 456,627,475.01 4,752,054.68 451,875,420.33 350,949,926.36 11,626,866.63 339,323,059.73
Inventory type 2009.12.31
Withdrawal in
this period
Decrease in this period
2010.6.30
Reversion
in this
period
Writing-off in
this period
Raw materials 955,214.00 228,682.41 0.00 304,251.19 879,645.22
Packages 50,043.57 43,862.88 0.00 0.00 93,906.45
Products 493,257.73 177,626.58 0.00 0.00 670,884.31
Inventory
commodities 10,128,351.33 1,615,262.79 0.00 8,635,995.42 3,107,618.70
Entrusted materials for
processing 0.00 0.00 0.00 0.00 0.00
Low-value
consumables 0.00 0.00 0.00 0.00 0.00
Delivered
commodities 0.00 0.00 0.00 0.00 0.00
Self-made semifinished
products 0.00 0.00 0.00 0.00 0.00
Total 11,626,866.63 2,065,434.66 0.00 8,940,246.61 4,752,054.68Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
82
The depreciation reserve for inventory will be withdrawn based on the difference between the inventory book
values and their net realizable values on June 30, 2010. The net realizable values mean the values after
deduction of the costs, sales expenses and relevant taxes from the evaluated selling prices of inventories in the
daily activities at the time of completion.
8. Saleable FinancialAssets
(1) Classification
a) At the end of period, the main cause of the decrease of 18.86% over the beginning of period is the changes in
fair values.
9. Investments to the associated enterprises
Item 2010.6.30 2009.12.31
Saleable equity instruments 10,472,106.27 12,906,087.63
Including: stocks 10,472,106.27 12,906,087.63
Name of Invested Units
Enterprise
type
Registered
place
Legal
representative
Business
nature
Registered
capital
Share-holding
percentage of
this
enterprise(%)
Percentage
of voting
rights of
this
enterprise
in the
invested
units(%)
Guangdong Blue Treasure
PharmaceuticalCo. Ltd.
Limited
liability
(joint
venture)
Qingyuan
City
An Ning Production
and sales of
material
medicines
USD 7.53
million
35.91% 35.91%
Livzon Medical Electronic
Equipment (Factory) Co., Ltd
Limited
liability
Zhuhai City Xu Xiaoxian It has been
closed.
RMB 3.62
million Yuan
28% 28%
Fujian Gutian Huamin Antibiotic
Medicine Co., Ltd
Limited
liability
Gutian
County
—— It has been
closed.
RMB 10
million Yuan
24% 24%
Tongyikangshimei Chain (Shenzhen)
Co., Ltd
Limited
liability
Shenzhen
Huang Qianli Commodity
sales
RMB 100
million Yuan
35% 35%
TotalLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
83
Continued:
10. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
(2) Long-term equity investment calculated by cost method
Name of Invested Units Total assets at
the end of
period
Total liabilities
at the end of
period
Total net assets
at the end of
period
Total operating
income in this
year
Net profits in
this year
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 81,982,040.73 1,664,126.80 80,317,913.93 145,122.73 -2,641,497.40
Livzon Medical Electronic Equipment
(Factory) Co., Ltd —— —— —— —— ——
Fujian Gutian Huamin Antibiotic
Medicine Co., Ltd —— —— —— —— ——
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 30,208,728.11 5,258,799.28 24,949,928.83 5,283,552.76 -2,732,442.29
Total 112,190,768.84 6,922,926.08 105,267,842.76 5,428,675.49 -5,373,939.69
Item
2010.6.30 2009.12.31
Book Balance
Depreciation
Reserve
Book Values Book Balance
Depreciation
Reserve
Book Values
Calculation by
Cost Method 27,455,000.00 20,500,000.00 6,955,000.00 27,455,000.00 20,500,000.00 6,955,000.00
Calculation by
Equity
Method 43,054,077.16 3,600,000.00 39,454,077.16 45,061,987.20 3,600,000.00 41,461,987.20
Total 70,509,077.16 24,100,000.00 46,409,077.16 72,516,987.20 24,100,000.00 48,416,987.20
Name of Invested Units Initial Amount 2009.12.31 Increase
in this
period
Decrease in
this period
2010.6.30 Sharehold
ing
percentag
e
Cash
dividendLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
84
(3) Long-term equity investment calculated by the equity method
(4) Depreciation reserve for long-term equity investment
Zhuhai Branch of Guangdong
Development Bank 105,000.00 105,000.00 0.00 0.00 105,000.00
0.00049%
0.00
Beijing Medical Goods Joint
Operation Company 100,000.00 100,000.00 0.00 0.00 100,000.00
0.821%
0.00
Doumen Sanzhou Industry City Co.,
Ltd 500,000.00 500,000.00 0.00 0.00 500,000.00
1.6%
0.00
Zhuhai City Commercial Bank 20,000,000.00 20,000,000.00 0.00 0.00 20,000,000.00 1.5065% 0.00
Ruiheng Pharmaceutical Technology
Investment Co., Ltd 6,250,000.00 6,250,000.00 0.00 0.00 6,250,000.00
5.681%
0.00
Shanghai Haixin Pharmaceutical Co.,
Ltd 500,000.00 500,000.00 0.00 0.00 500,000.00 4.55% 0.00
Total 27,455,000.00 27,455,000.00 0.00 0.00 27,455,000.00 0.00
Name of Invested Units Investment cost 2009.12.31 Increase in this
period
Decrease in
this period
2010.6.30 Shareholdin
g
percentage
Cash dividend
Livzon Medical Electronic Equipment
(Factory) Co., Ltd 1,200,000.00 1,200,000.00 0.00 0.00 1,200,000.00 20% 0.00
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 11,227,540.45 31,407,945.89 0.00 686,343.82 30,721,602.07 35.91% 0.00
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 35,000,000.00 10,054,041.31 0.00 1,321,566.22 8,732,475.09 35% 0.00
Fujian Gutian Huamin Antibiotic
Medicine Co., Ltd 2,400,000.00 2,400,000.00 0.00 0.00 2,400,000.00 24% 0.00
Total 49,827,540.45 45,061,987.20 0.00 2,007,910.04 43,054,077.16 0.00
Investment Projects 2009.12.31
Withdraw
al in this
period
Transfer in this
period
2010.6.30
Withdrawal
CauseLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
85
11. FixedAssets and Accumulated Depreciation
(1) Particulars
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
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.
Fujian Gutian Huamin Antibiotic
Medicine Co., Ltd 2,400,000.00 0.00 0.00 2,400,000.00
Closed
Total 24,100,000.00 0.00 0.00 24,100,000.00
Item
2009.12.31 Increase in this period
Decrease in this
period
2010.6.30
Original values of
fixed assets
Houses and buildings 789,938,986.44 2,617,997.06 1,807,341.91 790,749,641.59
Machine equipments 863,067,485.73 18,565,696.65 6,539,017.95 875,094,164.43
Transportation
equipments 26,575,356.84 271,258.00 19,038.83 26,827,576.01
Electronic equipments
and others
140,414,525.63 5,803,453.73 953,464.83 145,264,514.53
Total 1,819,996,354.64 27,258,405.44 9,318,863.52 1,837,935,896.56
Accumulated
depreciation:
Houses and buildings 337,925,677.26 17,368,409.80 1,418,763.57 353,875,323.49
Machine equipments 473,680,331.59 29,012,700.08 5,104,293.60 497,588,738.07
Transportation
equipments 15,731,367.40 970,273.31 18,088.83 16,683,551.88Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
86
(2) The projects under construction in this period that have been transferred to the fixed assets amount to RMB
18,068,444.51 Yuan.
(3) The fixed assets that are temporarily unused are listed as follows:
(4) The fixed assets that are proposed to be disposed of are listed as follows:
Electronic equipments
and others 104,216,384.49 5,770,682.03 712,948.20 109,274,118.32
Total 931,553,760.74 53,122,065.22 7,254,094.20 977,421,731.76
Net value of fixed
assets: 888,442,593.90 860,514,164.80
Depreciation reserve
for fixed assets
Houses and buildings 24,768,735.49 0.00 0.00 24,768,735.49
Machine equipments 41,863,273.00 91,066.21 76,462.56 41,877,876.65
Transportation
equipments 116,203.04 0.00 950.00 115,253.04
Electronic equipments
and others
776,118.32 0.00 6,723.75 769,394.57
Total 67,524,329.85 91,066.21 84,136.31 67,531,259.75
Net values of fixed
assets: 820,918,264.05 792,982,905.05
Item
Original Book
Values
Accumulated
Depreciation
Depreciation
Reserve
Net Amount
Estimated Time to put it
into use
Houses and
buildings 22,889,304.30 6,965,278.23 2,777,473.23
13,146,552.84
2010
Machine
equipments 36,020,592.42 22,331,152.83 9,021,831.28
4,667,608.31
2010
Office equipments
and others 574,496.66 529,186.78 239.18
45,070.70
2010
Total 59,484,393.38 29,825,617.84 11,799,543.69 17,859,231.85Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
87
(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:
12. Projects under Construction
(1) Projects under Construction
Item
Original Book
Values
Accumulated
Depreciation
Depreciation
Reserve
Net Amount
Estimated Time to be
disposed of
Houses and
buildings 4,235,939.47 2,747,319.94 0.00
1,488,619.53
September to December
2010
Machine
equipments 1,147,750.87 772,224.58 75,905.99
299,620.30
September to December
2010
Office equipments
and others 816,194.45 692,972.48 4,807.80
118,414.17
September to December
2010
Total 6,199,884.79 4,212,517.00 80,713.79 1,906,654.00 -
Item
Original Book Values
Accumulated
Depreciation
Depreciation Reserve Net Amount
Houses and buildings 4,682,737.33 2,300,790.55 26,479.77 2,355,467.01
Item Original Book
Values
Accumulated
Depreciation
Depreciati
on Reserve
Net Amount
Cause
Houses and
buildings 83,388,514.17 11,337,878.76 0.00
72,050,635.41
They are the newly built projects
and the handling of certificates is
still under way.
工程名称
2010.6.30 2009.12.31
Book-keeping
Amount
Depreciation
Reserve
Net Value
Book-keeping
Amount
Depreciation
Reserve
Net Value
Newly built
plants 175,841,991.43 0.00 175,841,991.43 81,421,653.78 0.00 81,421,653.78Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
88
(2) Particulars
Equipment
installation 22,121,440.10 0.00 22,121,440.10 2,741,355.70 0.00 2,741,355.70
Technical
improveme
nt 14,146,475.68 0.00 14,146,475.68 10,159,510.43 0.00 10,159,510.43
Plant
improveme
nt 11,899,925.05 0.00 11,899,925.05 5,649,482.91 0.00 5,649,482.91
Others 4,579,891.62 0.00 4,579,891.62 3,867,742.54 0.00 3,867,742.54
Total 228,589,723.88 0.00 228,589,723.88 103,839,745.36 0.00 103,839,745.36
Project
Name
Budget Amount 2009.12.31
Increase in this
period
Fixed Assets
Transferred in
this Period
Other
Decrease
2010.6.30 Capital Source
Percentage
of Project
Investment
to Budget
Newly
built
plants
411,459,000.00 81,421,653.78 105,124,429.93 10,704,092.28 0.00 175,841,991.43
Loans and
available
capitals owned
by the company 45.34%
Equipmen
t
installatio
n 27,050,000.00 2,741,355.70 23,401,567.83 4,021,483.43 0.00 22,121,440.10
Available
capitals owned
by the company
96.65%
Technical
improvem
ent 54,046,097.00 10,159,510.43 4,379,979.36 331,424.11 61,590.00 14,146,475.68
Available
capitals owned
by the company 26.90%
Plant
improvem
ent 55,190,134.84 5,649,482.91 9,261,886.83 3,011,444.69 0.00 11,899,925.05
Available
capitals owned
by the company
27.02%
Others
77,020,214.88 3,867,742.54 712,149.08 0.00 0.00 4,579,891.62
Available
capitals owned 5.95%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
89
(3) At the end of period, the increase of projects under construction by 120.14% over the beginning of period is
mainly because of the investment in the “relocation profit of new factory”.
(4) By June 30, 2010, the capitalization amounts of interests for the projects under construction are listed as
follows:
The capitalization of projects under construction will apply the interest rates for special loans of banks.
13. Project Goods
14. IntangibleAssets and AccumulatedAmortization
by the company
Total 624,765,446.72 103,839,745.36 142,880,013.03 18,068,444.51 61,590.00 228,589,723.88
Project Name 2009.12.31
Increase in this
period
Fixed Assets
Transferred in this
Period
Other Decrease 2010.6.30
Newly built
plants 7,737,045.90 1,672,122.98 0.00 0.00 9,409,168.88
Goods name 2010.6.30 2009.12.31
Special materials 3,525,900.00 469,223.27
Special equipments 13,558,842.28 2,891,065.19
Total 17,084,742.28 3,360,288.46
Item
2009.12.31
Increase in this
period
Decrease in this
period
2010.6.30
① Original price
Use rights of lands 156,246,944.89 0.00 0.00 156,246,944.89
Special techniques 85,337,778.89 6,492,000.00 0.00 91,829,778.89
Software 7,402,016.90 103,119.66 0.00 7,505,136.56
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 249,010,740.68 6,595,119.66 0.00 255,605,860.34
②Accumulated
amortization
Use rights of lands 40,137,494.30 1,481,446.80 0.00 41,618,941.10Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
90
The intangible assets are obtained in the way of purchase.
15. Development payment
Special techniques 54,790,007.88 4,057,080.97 0.00 58,847,088.85
Software 5,438,865.29 726,563.15 0.00 6,165,428.44
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 100,390,367.47 6,265,090.92 0.00 106,655,458.39
Item
2009.12.31
Increase in this
period
Decrease in this
period
2010.6.30
③Depreciation reserve for
intangible assets
Use rights of lands 981,826.94 0.00 0.00 981,826.94
Special techniques 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 115,127,623.65 0.00 1,481,446.80 113,646,176.85
Special techniques 29,167,771.12 6,492,000.00 4,057,080.97 31,602,690.15
Software 1,963,151.61 103,119.66 726,563.15 1,339,708.12
Trademark rights 0.00 0.00 0.00 0.00
Total 146,258,546.38 6,595,119.66 6,265,090.92 146,588,575.12
Item
2009.12.31
Increase in this
period
Decrease in this period
2010.6.30
Accrued to the
current profit and
loss
Confirmed as
intangible assets
Capitalization
payment 7,369,974.29
2,080,007.87
0.00 0.00 9,449,982.16Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
91
16 Goodwill
The book balances of goodwill are listed as follows:
Expense payment 0.00 17,936,750.09 17,936,750.09 0.00 0.00
Total 7,369,974.29 20,016,757.96 17,936,750.09 0.00 9,449,982.16
Item
2010.6.30 2009.12.31
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 2009.12.31
Increase in this
period
Decrease in this
period
2010.6.30 Formation Source
Livzon Pharmaceutical Factory under
Livzon Group 47,912,269.66 0.00 0.00 47,912,269.66
Cost-book value
differentials
Sichuan Guangda Pharmaceutical Co.,
Ltd 13,863,330.24 0.00 0.00 13,863,330.24
Cost-book value
differentials
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group 46,926,155.25 0.00 0.00 46,926,155.25
Cost-book value
differentials
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 7,271,307.03 0.00 0.00 7,271,307.03
Cost-book value
differentials
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd 287,756.12 0.00 0.00 287,756.12
Cost-book value
differentials
Name of Invested Units 2009.12.31
Increase in this
period
Decrease in this
period
2010.6.30 Formation Source
Shanghai Livzon Pharmaceutical Co.,
Ltd 2,045,990.12 0.00 0.00 2,045,990.12
Cost-book value
differentials
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area 3,414,752.58 0.00 0.00 3,414,752.58
Cost-book value
differentials
Lida Pharmaceutical Co., Ltd in Zhuhai
Bonded Area 78,000.00 0.00 0.00 78,000.00
Cost-book value
differentialsLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
92
The goodwill depreciations are listed as follows:
17 Long-termAmortization Expense
Total 121,799,561.00 0.00 0.00 121,799,561.00
Name of Invested Units 2009.12.31
Increase in this
period
Decrease in
this period
2010.6.30
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
2009.12.31 Increase in this
period
Transfer in
this period
Amortization in
this Period
2010.6.30 Accumulated
Amortization
Remaining
Amortization
Period
Overhaul expense of
fixed assets 4,576,299.10 2,841,824.29 64,999.04 0.00 440,841.34 2,465,981.99 2,110,317.11 6-72 months
Decoration expense of
offices 2,280,131.61 92,159.04 1,919,513.61 0.00 71,415.55 1,940,257.10 339,874.51 12-35 months
Decoration expense of
plants 1,144,337.66 539,605.50 0.00 0.00 122,582.77 417,022.73 727,314.93 12-98 months
Publicly amortized
expense of public
utilities 978,608.31 151,073.50 0.00 0.00 26,279.37 124,794.13 853,814.18 50-57 months
Resin 3,990,833.45 1,092,417.01 745,084.97 0.00 422,575.15 1,414,926.83 2,575,906.62 48-54 months
Others 2,090,480.18 744,133.95 348,335.58 0.00 190,572.54 901,896.99 1,188,583.19 3-54 months
Total 15,060,690.31 5,461,213.29 3,077,933.20 1,274,266.72 7,264,879.77 7,795,810.54Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
93
18 Deferred Income Tax Asset
19 Asset Depreciation Reserve
Type 2010.6.30 2009.12.31
Withdrawal of the deductible temporary difference caused
by the asset depreciation reserve
17,893,038.46 18,463,998.23
The deductible temporary difference caused by the longterm
equity investment out of the scope of consolidation
statement 3,268,417.70 3,047,304.64
The deductible temporary difference caused by the
amortization of intangible assets
514,392.24 542,037.72
The deductible temporary difference caused by the operating
expense
0.00 17,021.89
The deductible temporary difference caused by the
withdrawal expense
1,830,242.24 2,070,262.43
The deductible temporary difference caused by the
deductible loss
0.00 6,887,792.83
The deductible temporary difference caused by the deferred
gains
183,300.00 214,800.00
Total 23,689,390.64 31,243,217.74
Item 2009.12.31
Increase in this
period
Decrease in this period
2010.6.30
Reversion Writing-off
Reserves for Bad
Accounts 29,056,201.85 4,875,389.17 -9,873.45 783,398.18 33,158,066.29
Depreciation Reserve for
inventory 11,626,866.63 2,065,434.66 0.00 8,940,246.61 4,752,054.68
Depreciation reserve for
long-term equity
investment 24,100,000.00 0.00 0.00 0.00 24,100,000.00
Depreciation Reserve for
fixed assets 67,524,329.85 91,066.21 0.00 84,136.31 67,531,259.75Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
94
The writing-off of the reserves for bad accounts means the writing-off of the bad accounts; the writing-off of
depreciation reserve of fixed assets and depreciation reserve for inventory means the rejection or disposal
transfer.
20 Assets whose ownership rights are restricted
The reasons for the mortgage of asset ownership rights are listed as follows:
(1) The subcompany Livzon Syntpharm Co., Ltd in Zhuhai Bonded Area mortgaged the certificate of time
deposit of RMB 6,200,000.00 Yuan to Zhuhai Branch of Agricultural Bank of China for a loan of HKD
6,200,000.00, and the mortgage period is from June 13, 2010 to December 13, 2010.
(2) The subcomopany Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area mortgaged the certificate of time
deposit of RMB 14,000,000.00 Yuan to Zhuhai Branch of Agricultural Bank of China for a loan of HKD
14,000,000.00, and the mortgage period is from June 13, 2010 to December 13, 2010.
(3) Fuzhou Fuxing Pharmaceutical Co., Ltd under Livzon Group mortgaged the houses and buildings located at
industrial central zone, Jiangyin Township with original book value of RMB 84,795,367.21 Yuan, accumulated
Depreciation Reserve for
projects under
construction 0.00 0.00 0.00 0.00 0.00
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 153,428,288.31 7,031,890.04 -9,873.45 9,807,781.10 150,662,270.70
Item 2009.12.31 Increase in this period Decrease in this period 2010.6.30
Assets used for
pledgement
Deposits in banks 18,980,000.00 20,200,000.00 18,980,000.00 20,200,000.00
Assets used for
mortgage:
Houses and buildings 72,491,935.75 10,823,988.03 2,559,855.79 80,756,067.99
Use rights of lands 7,575,114.80 0.00 82,587.20 7,492,527.60
Total 99,047,050.55 31,023,988.03 21,622,442.99 108,448,595.59Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
95
depreciation of RMB 14,863,287.25 Yuan, net value of RMB 69,932,079.96 Yuan to Fuqing Branch of Bank of
China for a loan of RMB 30,000,000.00 Yuan, and the mortgage period is from November 20, 2009 to
November 20, 2010.
(4) Livzon Pharmaceutical Factory under Livzon Group mortgaged the houses and buildings located at Guihua
North Road, Gongbei, Zhuhai, with original book value of RMB 43,684,137.23 Yuan, accumulated depreciation
of RMB 29,573,004.46 Yuan, depreciation of fixed assets of RMB 3,287,144.74 Yuan and net value of RMB
10,823,988.03 Yuan to Zhuhai Branch of Bank of China for a loan of RMB 15,104,172.92 Yuan, and the
mortgage period is from October 15, 2009 to December 31, 2015.
21 Short-time Loan
(1) Types of short-term loans
(2) By June 30, 2010, there are no due short-term loans that have not been repaid.
(3) Guaranty loan:
The Company provides the guaranty to Livzon Pharmaceutical Factory under Livzon Group for two loans of
HKD 20.16 million and USD 2 million from Zhuhai Branch of Bank of Communications, a loan of USD 2
million from Zhuhai Branch of Shenzhen Development Bank and a loan of HKD 32.50 million from Zhuhai
Branch of Xiamen International Bank.
(4) Please see the article 20 of V in the notes to the financial statement for more details about the mortgage.
(5) Other loans are the loans for import bill advance.
22 Accounts payable
Type 2010.6.30 2009.12.31
Credit loan 130,962,900.00 96,633,600.00
Guaranty loan 73,103,657.40 73,238,636.80
Mortgage loan 30,000,000.00 30,000,000.00
Pledgement loan 17,622,278.00 17,785,696.00
Other loans 7,128,065.10 954,309.23
Total 258,816,900.50 218,612,242.03
Item 2010.6.30 2009.12.31
Accounts payable 191,712,313.71 182,395,197.95Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
96
(1) By June 30,2010, 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 9,223,626.62 Yuan, accounting for 4.81%
of the balance at the end of period.
(3) Please see the note VII for the details about the payments of associated parties.
23. Advance accounts
(1) By June 30,2010, 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 696,881.91 Yuan, accounting for 6.76%
of the balance at the end of period.
24．Rewards paid to the staffs
Item 2010.6.30 2009.12.31
Advance accounts 10,309,255.97 16,482,054.51
Item 2009.12.31 Increase in this
period
Payment in this
period
2010.6.30
Salary, bonus and allowance 37,758,295.03 95,132,431.98 105,252,758.01 27,637,969.00
Welfare expense for staffs 0.00 6,420,351.40 6,420,351.40 0.00
Social insurance fees 229,959.99 11,656,644.38 11,670,112.96 216,491.41
Including: medical insurance
fees 64,311.00 3,378,755.51 3,383,755.51 59,311.00
Endowment Insurance 124,257.99 7,301,855.73 7,310,324.31 115,789.41
Unemployment insurance fees 25,415.00 513,534.09 513,534.09 25,415.00
Occupational Injury Insurance 10,213.00 271,680.30 271,680.30 10,213.00
Childbirth insurance 5,763.00 190,818.75 190,818.75 5,763.00
Reserves for houses 537,553.32 3,848,000.08 3,847,002.08 538,551.32
Trade union expense and staff
education expense 290,622.44 296,693.58 314,043.99 273,272.03
Compensation for the
cancellation of work
relationship 0.00 747,136.00 747,136.00 0.00
Equity stimulation bonus 6,721,067.38 0.00 0.00 6,721,067.38
Others 675,846.53 673,847.22 980,297.22 369,396.53Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
97
At the end of period, there are no cases about failure to pay the rewards of staffs.
25. Payable Taxes
The main reason for the decrease of payable taxes by 53.69% over the beginning of period is that, to expand the
production scale, the company improved the purchase quantity hugely and then the payable value-added taxes
decreased.
26 Payable dividends
Total 46,213,344.69 118,775,104.64 129,231,701.66 35,756,747.67
Tax 2010.6.30 2009.12.31
Value-added tax 5,756,122.71 41,093,977.74
Operating tax 3,763.20 5,988.65
City construction tax 880,328.44 426,219.84
Enterprise income tax 23,793,996.06 33,134,498.69
Real estate tax 1,163,069.31 7,130.40
Utilization tax of lands 1,309,335.15 0.00
Personal income tax 1,863,264.58 2,397,650.21
Stamp tax 532,030.60 119,385.73
Education surtax 427,820.86 247,789.34
Embankment protection
cost 134,253.04
78,064.99
Others 58,826.72 59,007.90
Total 35,922,810.67 77,569,713.49
Investor name 2010.6.30 2009.12.31 Cause for Debts
Dividends for common shares 20,174.46 20,174.01 Not paid
Qingyuan Xinbeijiang
Enterprise (Group) Company 1,200,710.00 1,200,710.00 Not paid
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 paidLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
98
27 Other accounts payable
(1) At the end of period, the advance withdrawn expenses from the balance amounts to RMB 144,479,008.11
Yuan, accounting for 56.28% of the balance and are listed as follows:
(2) The other accounts payable with the age of over 1 year amount to RMB 5,070,342.59 Yuan, accounting for
1.98% of the balance at the end of period.
Total 2,531,984.46 2,531,984.01
Item 2010.6.30 2009.12.31
Other accounts payable 256,718,371.58 233,002,793.34
Item 2010.6.30 2009.12.31 期末结存原因
Interests 396,475.90 0.00 未支付
Water and electricity
expense 444,883.27 503,707.01
未支付
Business promotion
expense 125,972,152.97 125,468,878.19
未支付
Leasing expense 161,193.21 79,460.21 未支付
Advertisement expense 1,507,173.33 0.00 未支付
Meeting expense 6,386,149.56 8,229,838.86 未支付
Auditing and information
disclosure expenses 952,847.77 1,048,896.03
未支付
Risk fund for medicine
research 300,000.00 422,021.30
未支付
Operating expense of
branches 4,012,883.60 3,766,385.04
未支付
Drainage expense 275,284.00 271,238.00 未支付
Others 4,069,964.50 4,265,121.26 未支付
Total 144,479,008.11 144,055,545.90Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
99
(3) By June 30, 2010, the company has paid RMB 5,683.43 Yuan to the shareholder unit Joincare
Pharmaceutical Group Industry Co., Ltd which holds over 5% (including 5%) voting rights.
(4) Please see the note XII for more details about the payments of associated parties.
28. Non-current Liabilities Due within 1 Year
29. Long-term Loans
(1) Types of Long-term Loans
(2) List of loan units
Borrowing Unit 2010.6.30 2009.12.31 Interest
Rate
Loan Period Condition
Fujian Huaqiao Trust &
Investment Company 400,000.00 400,000.00
Interestfree
Not specified Credit
Type 2010.6.30 2009.12.31
Credit loans 90,700,000.00 90,700,000.00
Mortgage and
guaranty loans 15,104,172.92 0.00
Total 105,804,172.92 90,700,000.00
Loan Unit
2010.6.30
Annual
Interest Rate
Loan Period
Loan
Conditions
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 Credit
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 Credit
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 CreditLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
100
*The borrower is the subcompany Livzon Pharmaceutical Factory under Livzon Group; please see the article
20 of note V to the financial statements for more details about the mortgage; this company also provides the
guaranty to this loan.
(3) By June 30, 2010, there are no due long-term loans which have not been repaid.
30 Deferred Gains
Zhuhai Branch of Bank of
Communications 20,000,000.00 0.00 20,000,000.00 4.860% 2009-9-22 to 2011-9-22 Credit
Zhuhai Branch of Bank of
Communications 10,000,000.00 0.00 10,000,000.00 4.860% 2009-11-6 to 2011-11-6 Credit
Zhuhai Branch of Bank of
China*
3,972,246.02
0.00
3,972,246.02 5.350%
2010-06-04 to 2016-06-03
Mortgage
and
guaranty
Zhuhai Branch of Bank of
China*
11,131,926.90
0.00
11,131,926.90 5.350%
2010-06-12 to 2016-06-11
Mortgage
and
guaranty
Subtotal 105,104,172.92 0.00 105,104,172.92
Loans from non-bank
financial institutions:
Fuzhou Finance Bureau 700,000.00 0.00 700,000.00 Interest-free Not specified Credit
Subtotal 700,000.00 0.00 700,000.00
Total 105,804,172.92 0.00 105,804,172.92
Item
Total
Allowance
Amount
2009.12.31
Increase in this
period
Writing-off in
this period 2010.6.30
Non-PVC bag improvement project 4,100,000.00 3,792,949.20 0.00 97,182.90 3,695,766.30
Sterilization and kidney-quieting capsule
project 1,640,000.00 420,000.00 800,000.00 210,000.00 1,010,000.00
Famciclovir Sustained Release 4,100,000.00 58,684.35 3,000,000.00 13,606.96 3,045,077.39Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
101
Capsules 0302 project
Enzymatic technology innovation
project 1,042,631.00 944,812.90 0.00 0.00 944,812.90
Shenchang Drop Pills (Bid-invitation
project expense of provincial science
and technology department) 4,300,000.00 2,058,077.34 0.00 2,058,077.34 0.00
5- 4-aminosalicylic acid (0001
project) 1,200,000.00 537,938.10 0.00 0.00 537,938.10
Salvianolic acid B 300,000.00 140,757.40 0.00 0.00 140,757.40
Bifidoboigen preparations 600,000.00 480,646.34 0.00 12,741.19 467,905.15
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 antivirus
granules 600,000.00 73,147.58 0.00 73,147.58 0.00
Three-pollen for injection 1,800,000.00 1,600,000.00 0.00 200,000.00 1,400,000.00
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 81,277.50 459,060.36
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 1,900,000.00 861,499.00 0.00 153,240.24 708,258.76
Demonstration project of
managing the high-concentration
organic wastewater 4,000,000.00 2,760,791.00 0.00 197,202.00 2,563,589.00
Enterprise innovation fund granted
by the province in 2009 700,000.00 700,000.00 0.00 0.00 700,000.00
Development of new Xueshuantong 300,000.00 300,000.00 0.00 63,994.24 236,005.76Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
102
31. Deferred Income Tax Liabilities
32 Share Capital
preparation RX
Ilaprazole project 10,900,000.00 10,900,000.00 0.00 0.00 10,900,000.00
Lupron Deport project 100,000.00 0.00 100,000.00 100,000.00 0.00
Quick testing reagent project of
Enrofloxacin and Nitrofuran 300,000.00 0.00 300,000.00 300,000.00 0.00
Special fund for environmental protection 300,000.00 0.00 300,000.00 300,000.00 0.00
Shenqifuzheng injection 200,000.00 0.00 200,000.00 200,000.00
Project expense allotted by Qingyuan
Science and Information Bureau 300,000.00 0.00 300,000.00 300,000.00 0.00
Supporting fund for 2009 provincial
scientific rolling plan project 230,000.00 0.00 230,000.00 230,000.00 0.00
2009 Award for enterprise export expansion
by the municipal government 299,547.00 0.00 299,547.00 299,547.00 0.00
Others 1,617,281.00 961,750.00 155,531.00 427,281.00 690,000.00
Total 42,329,459.00 27,658,099.70 5,685,078.00 5,117,297.95 28,225,879.75
Type 2010.6.30 2009.12.31
Temporary difference of payable taxes caused by the saleable
financial assets 1,197,304.78 1,683,916.84
Temporary difference of payable taxes caused by the
calculation of long-term equity investment with the equity
method 1,535,439.36 1,668,895.11
Total 2,732,744.14 3,352,811.95
Increase or Decrease (+ or －) Unit: share
Item 2009.12.31 Sharerationing
Gift
share am
Shares
transferred
from public
reserve fund
Others Subtotal 2010.6.30Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
103
Amount ount
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 0.00
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 6,059,428
0.00 0.00 0.00 0.00 0.00
6,059,428
Total of non-circulation
shares 6,059,428
0.00 0.00 0.00 0.00 0.00
6,059,428
II.Shares without trading
restriction
①Domestically-listed
Renminbi ordinary shares 177,669,070
0.00 0.00 0.00 0.00 0.00
177,669,070
Including: Management
shares 535
0.00 0.00 0.00 0.00 0.00
535
②Domestically-listed
shares for overseas
investors 111,993,354
0.00 0.00 0.00 0.00 0.00
111,993,354
Total of circulation shares 289,662,424 0.00 0.00 0.00 0.00 0.00 289,662,424
III. Total shares 295,721,852 0.00 0.00 0.00 0.00 0.00 295,721,852Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
104
33 Capital Reserve
34 Surplus Reserve
35 Undistributed Profit
type 2009.12.31 Increase in this period
Decrease in this
period
2010.6.30
Share Premium 320,792,441.78 0.00 0.00 320,792,441.78
Other Capital
Reserve 30,153,733.86 0.00 2,757,468.30 27,396,265.56
Total 350,946,175.64 0.00 2,757,468.30 348,188,707.34
Type 2009.12.31 Increase in this period
Decrease in this
period
2010.6.30
Legal Surplus
Reserve 233,868,025.59 0.00 0.00 233,868,025.59
Discretionary
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 401,456,345.99 0.00 0.00 401,456,345.99
Item 2010.6.30 2009.12.31
Undistributed profit at the beginning
of period 1,114,710,405.94 711,151,149.38
Plus: profit transfer in the current
period 241,480,232.98 481,578,249.73
Other transfers 0.00 0.00
Minus：Withdrawal of Legal Surplus
Reserve 0.00 48,157,824.97Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
105
36 Equities of the minority of shareholders
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 discretionary surplus
reserves 0.00 0.00
Payable dividends for ordinary shares 44,358,277.80 29,861,168.20
Dividends for ordinary shares that are
transferred to capitals 0.00 0.00
Undistributed profit at the end of
period 1,311,832,361.12 1,114,710,405.94
Company name
Equities of the
minority of
shareholders on
December 31,
2009
Increase or decrease from January to June 2010
Equities of the
minority of
shareholders on
June 30, 2010
Net profits of
subcompanies
Shareholdi
ng
percentage
of the
minority of
shareholde
rs
Profit and loss of
the minority of
shareholders
Extra losses
that are borne
by the parent
company for
the minority of
shareholders Other changes
Zhuhai Livzon Reagent Co., Ltd 36,929,472.74 16,312,054.94 49% 7,992,906.92 0.00 0.00 44,922,379.66
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 9,256,656.34 20,953,789.63 7.86% 1,646,967.86 0.00 0.00 10,903,624.20
Limin Pharmaceutical Co., Ltd under
Livzon Group 28,418,142.10 56,204,432.64 11.91% 6,693,947.93 0.00 0.00 35,112,090.03
Shanxi Datong Livzon Qiyuan Medicine 263,314.34 -97,086.19 18.52% -7,281.46 0.00 0.00 256,032.88Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
106
Other changes are about the capitals invested by the minority of shareholders.
37 Operating Income and Cost
(1) Item list
(2) The main businesses are listed as follows as per the region:
Co., Ltd
Longxi Livzon Shenyuan Medicine Co.,
Ltd 394,653.53 -66,013.84 20.72% -6,601.38 0.00 0.00 388,052.15
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
Zhuhai Livzon Dankang Biotechnology
Co., Ltd 0.00 0.00 51% 0.00 0.00 9,800,000.00 9,800,000.00
Total 76,373,707.00 93,307,177.18 16,319,939.87 0.00 9,800,000.00 102,493,646.87
Item
January to June 2010 January to June 2009
Operating Income Operating Cost
Gross operating
Profit
Operating
Income
Operating Cost
Gross operating
Profit
Main Business 1,302,631,607.06 627,566,218.33 675,065,388.73 1,198,594,526.67 551,116,843.50 647,477,683.17
Other
Business 20,137,982.68 8,197,910.42 11,940,072.26 11,112,329.56 7,042,099.27 4,070,230.29
Total 1,322,769,589.74 635,764,128.75 687,005,460.99 1,209,706,856.23 558,158,942.77 651,547,913.46
Item
January to June 2010 January to June 2009
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 1,475,624,784.86 886,937,861.00 588,686,923.86 1,324,422,259.28 802,956,300.63 521,465,958.65
Sichuan
Province 56,793,401.75 26,834,280.38 29,959,121.37 148,559,712.76 64,073,665.45 84,486,047.31
Fujian Province 178,477,920.72 139,990,468.26 38,487,452.46 133,080,716.25 112,418,303.79 20,662,412.46
Others 62,101,334.50 44,132,832.92 17,968,501.58 45,526,988.28 32,914,825.73 12,612,162.55
Subtotal 1,772,997,441.83 1,097,895,442.56 675,101,999.27 1,651,589,676.57 1,012,363,095.60 639,226,580.97Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
107
(3) Incomes and costs from main businesses are listed as follows as per the business:
(4) Sales volume of top 5 clients
(5) Incomes and costs from other businesses are listed as follows as per other business:
Internal
Writing-off in
the Company 470,365,834.77 470,329,224.23 36,610.54 452,995,149.90 461,246,252.10 -8,251,102.20
Total 1,302,631,607.06 627,566,218.33 675,065,388.73 1,198,594,526.67 551,116,843.50 647,477,683.17
Item January to June 2010 January to June 2009
Income from Main
Business
Cost of Main Business
Income from Main
Business
Cost of Main Business
Sales of
Commodities 1,302,631,607.06 627,566,218.33 1,198,594,526.67 551,116,843.50
Total 1,302,631,607.06 627,566,218.33 1,198,594,526.67 551,116,843.50
Client Name
January to June 2010 January to June 2009
Sales Volume
Percentage of Total
Sales Volume (%)
Sales Volume
Percentage in Total
Sales Volume (%)
Total sales volume of top 5
clients 164,802,970.86 12.46% 109,121,240.77 9.02%
Item
January to June 2010 January to June 2009
Incomes from Other
Businesses
Costs of Other Businesses
Incomes from Other
Businesses
Costs of Other
Businesses
Sales of raw
materials 11,778,588.24 1,164,801.64 4,313,441.63 1,238,242.86
Processing expense 597,256.05 658,116.88 253,722.44 155,413.01
Leasing expense 755,647.57 15,103.33 682,734.51 16,070.68
Inspection expense 27,795.72 10,215.14 30,172.26 11,775.28Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
108
The main cause of the increase of incomes from other businesses by 81.22% over the same period of previous
year is that, the sales volume of raw materials by the subcompany Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area has greatly increased.
38 Business Tax and Surtax
Please see the note III for the withdrawal standard of taxes
39 Financial Expense
In this period, the main cause of the decrease of financial expense by 92.78% over the same period of previous
year is that, the foreign-currency loans with low interest rate in this period have greatly increased.
40. Loss of asset depreciation
Power expenses 6,399,010.23 6,242,164.80 5,424,378.43 5,536,850.80
Others 579,684.87 107,508.63 407,880.29 83,746.64
Total 20,137,982.68 8,197,910.42 11,112,329.56 7,042,099.27
Item January to June 2010 January to June 2009
City construction tax 21,936.55 1,485,088.48
Education surtax 1,482,633.16 868,725.36
Embankment protection cost 809,106.60 578,982.73
Business Tax 621,340.51 19,805.90
Others 92,612.72 35,075.00
Total 3,027,629.54 2,987,677.47
Item January to June 2010 January to June 2009
Interest payment 4,282,258.84 12,290,483.65
Minus: Interest income 3,454,946.99 1,861,057.82
Profit and loss in the exchange -581,401.52 -182,740.82
Formality expense charged by banks 523,610.27 416,515.59
Total 769,520.60 10,663,200.60
Item January to June 2010 January to June 2009
Loss of bad debts 4,875,389.17 8,947,738.21
Loss of inventory depreciation 2,065,434.66 4,011,448.56
Loss of fixed assets depreciation 0.00 11,441,170.65Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
109
In this period, the main cause of the decrease of loss of assets depreciation by 71.55% over the same period of
previous year is the huge withdrawal amount of depreciation reserve for fixed assets for the subcompanies
Xinbeijiang Pharmaceutical Co., Ltd under Livzon Group and Gutian Fuxing Pharmaceutical Co., Ltd.
41 Gains from changes of fair values
The main cause of huge decrease of gains caused by the changes of fair values over the same period of previous
year is that the huge decrease of fair values of tradable financial assets and drop of share prices in this period.
42 Investment returns
In this period, the main cause of the change of investment returns over the previous period is that the sales of
Total 6,940,823.83 24,400,357.42
Sources of profits caused by the changes of
fair values
January to June 2010 January to June 2009
Tradable financial assets -2,151,436.68 133,611,037.40
Including: shares -2,056,818.88 133,487,951.63
Fund -94,617.80 123,085.77
Item January to June 2010 January to June 2009
1. Returns in the holding period: -384,976.08 -123,704.18
① profits distributed by the associated or joint
companies 0.00 0.00
②Tradable financial assets 544,151.89 948,564.39
③Saleable financial assets 150,229.47 0.00
④ Net increase or decrease of adjusted shareholders’
equities of invested company at the end of year -2,007,910.04
-1,072,268.57
Including: Guangdong Blue Treasure Pharmaceutical
Co. Ltd. -686,343.82 2,289,558.08
Tongyikangshimei Chain (Shenzhen) Co., Ltd -1,321,566.22 -3,361,826.65
⑤ Others 928,552.60 0.00
2. Returns from transfers： 0.00 -74,177,528.25
Including: Sales of tradable financial assets 0.00 -74,177,528.25
Total -384,976.08 -74,301,232.43Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
110
tradable financial assets in the previous period suffered from a great loss.
43 on-operating Income
(1) List about non-operating incomes
(2) Governmental allowance
Item January to June 2010 January to June 2009
Total profit of non-current asset
disposal 2,309,399.58 98,477.26
Including: Profit of fixed asset
disposal 2,309,399.58 98,477.26
Penalty income 29,450.00 67,259.00
Waste income 196,225.23 236,792.98
Governmental allowance 7,225,572.95 1,484,297.32
Compensation income 717,246.00 592,730.00
Others 69,744.67 204,898.14
Total 10,547,638.43 2,684,454.70
Type
January to June
2010
Source unit Approval document
Special capital for two new products in
2009
150,000.00 Qingyuan Finance Bureau ——
Special fund for environmental protection 300,000.00 Qingyuan Finance Bureau Qing Cai Qi [2009] No. 130
2009 Award for enterprise export
expansion by the municipal government
299,547.00 Qingyuan Finance Bureau ——
Supporting fund for 2009 provincial
scientific rolling plan project
230,000.00 Qingyuan Finance Bureau ——
Demonstration project of
managing the high-concentration
organic wastewater
197,202.00
Zhuhai Environmental
Protection Bureau
——
Prize for expanding the domestic sales of 100,000.00 Zhuhai Finance Bureau ——Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
111
processing enterprises in the second
quarter of 2009
IY81149 anti-gastrointestinal ulcer
medicine (Ilaprazole)
153,240.24 Zhuhai Finance Bureau Yue Jing Mao Chuang Xin [2008] No. 778
Shenchang Drop Pills (Bid-invitation
project expense of provincial science and
technology department)
2,058,077.34
Guangdong Science and
Technology Department
Bid-Invitation Announcement of Key
Breakthrough Projects in the Key Fields of
Guangdong Province in 2003
Development of new
Xueshuantong preparation RX
63,994.24 Zhuhai Finance Bureau Yue Ke Gui Hua Zi [2009] No. 159
Expense for intelligent property
protection 100,000.00 Zhuhai Finance Bureau
Notice about Issuing the Fourth Batch of
Demonstrative Enterprise Names of
Guangdong Provincial Intellectual
Property Rights, Guangdong Provincial
Intellectual Property Bureau
Allowance for patent application
expense 71,750.00 Zhuhai Finance Bureau Zhu Zhi [2009] No. 6
Patent prize awarded by Zhuhai
City 100,000.00 Zhuhai Finance Bureau
Announcement of Proposed Projects for
First Patent Award in Zhuhai City
Special fund for self-owned brand
development
845,000.00 Zhuhai Finance Bureau
Notice about Relevant Problems In
Making the Application for Special Funds
of Science & Technology Revitalizing the
Trade and Development of Export Brands
in Guangdong Province In 2008
Capitals for cultivating the independent
brand and developing the overseas
marketing network
800,000.00 Zhuhai Finance Bureau
Yue Wai Jing Mao Gui Cai Zi [2009] No.
42
Type
January to June
2010
Source unit Approval document
Prize for expanding the domestic sales of
enterprises
100,000.00
Zhuhai Science, Technology,
Industry, Trade and
Information Technology Bure
Zhu Fu [2010] No. 11Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
112
44 Non-operating Expense
au
Award for famous product in Guangdong
Province
100,000.00 Zhuhai Finance Bureau Yue Cai Wai [2009] No. 163
Incomes of export allowance 80,000.00 Fuzhou Finance Bureau Rong Wai Jing Mao Mao Yi [2009] No. 83
Sterilization and kidney-quieting capsule
project
210,000.00
Guangdong Science and
Technology Department
Yue Ke Ji Zi [2007] No. 172
Non-PVC bag improvement
project
97,182.90
National Development and
Reforem Commission
Yue Ke Ji Zi [2007] No. 172
Special capitals for energy-saving in 2009
received from Shaoguan Finance Bureau
(the energy-saving improvement of fan
system and air-conditioners, etc)
160,000.00 Shaoguan Finance Bureau Shao Cai Gong [2010] No. 28
Special capital for production, study and
research –South China Agricultural
University
283,200.00
Zhuhai Science and
Technology Bureau
——
Others 726,379.23
Total 7,225,572.95
Item January to June 2010 January to June 2009
Total of loss for disposal of
the non-current assets 498,732.12 791,268.55
Including: Loss for disposal
of fixed assets 498,732.12 791,268.55
Penalty payments 85,226.27 344,343.55
Penalty for breach 38,770.94 0.00
Public welfare donations 855,565.94 500.00
Extraordinary loss 0.00 21,861.49
Others 7,270.69 52,967.19Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
113
45 Income Taxes
46 Other comprehensive gains
Total 1,485,565.96 1,210,940.78
Item January to June 2010 January to June 2009
Current income tax 33,183,228.45 33,174,788.85
Deferred income
tax
7,420,371.35 5,783,895.96
Total 40,603,599.80 38,958,684.81
Item
January to June
2010
January to June 2009
1. Profit (loss) caused by the saleable financial assets -3,244,080.36 5,316,914.40
Minus: Income tax effect of saleable financial assets -486,612.06 797,537.16
Net amount that was accrued to other comprehensive gains in the previous
periods and is transferred to the current profit and loss 0.00 0.00
Subtotal -2,757,468.30 4,519,377.24
2. Shares in the other comprehensive gains of invested units calculated by
Equity Method 0.00 0.00
Minus: Income tax effect of the shares in the other comprehensive gains of
invested units calculated by Equity Method 0.00 0.00
Net amount that was accrued to other comprehensive gains in the previous
periods and is transferred to the current profit and loss 0.00 0.00
Subtotal 0.00 0.00
3．Profit (or loss) caused by cash flow hedging instruments 0.00 0.00
Minus: Income tax effect of cash flow hedging instruments 0.00 0.00Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
114
47 Other Cashes Received Related to the OperatingActivities
48 Other Cashes Paid Related to the OperatingActivities
Net amount that was accrued to other comprehensive gains in the previous
periods and is transferred to the current profit and loss 0.00 0.00
Adjusted amount that was transferred as the initial confirmation amount of
hedged item 0.00 0.00
Subtotal 0.00 0.00
4．Conversion difference of foreign currency financial statements -744,293.10 -203,546.40
Minus: Net amount that is transferred to the current profit and loss due to
disposal of overseas operation 0.00 0.00
Subtotal -744,293.10 -203,546.40
5. Others 0.00 0.00
Minus: Effect of income tax that is accrued to the other comprehensive gains 0.00 0.00
Net amount that was accrued to other comprehensive gains in the previous
periods and is transferred to the current profit and loss 0.00 0.00
Subtotal 0.00 0.00
Total -3,501,761.40 4,315,830.84
Item January to June 2010 January to June 2009
Deposit 15,290,721.18 1,408,736.00
Fund transfer 4,960,107.39 3,782,674.57
Governmental allowance 8,293,353.00 2,934,021.44
Interest income 3,454,946.99 1,861,057.82
Penalty income 29,450.00 114,933.60
Deposit 333,136.28 163,135.60
Loans to staffs 2,511,806.14 896,376.53
Waste income 0.00 3,045.00
Others 1,836,820.99 1,115,822.10
Total 36,710,341.97 12,279,802.66Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
115
Item January to June 2010 January to June 2009
Office expense 7,279,538.92 6,020,862.42
Traveling expense 8,259,786.25 5,558,222.84
Communication expense 5,727,368.08 5,938,330.45
Water and electricity expenses 1,229,092.22 1,614,871.80
Transportation expense 9,151,716.26 11,659,563.27
Advertising expense 5,047,042.62 2,347,122.00
Meeting expense 11,883,274.97 6,521,985.03
Lease expense 2,993,730.32 1,858,034.74
Maintenance expense 4,790,211.10 1,748,130.26
Environment Protection Cost 294,182.00 553,955.90
Auditing expense and information
disclosure expense 1,313,610.81 1,169,971.77
Insurance 1,153,324.23 311,875.38
Meeting expense of Board of
Directors 94,622.04 40,203.90
Consultancy expense of consultants 590,896.31 371,128.46
Research and development expense 12,532,133.24 8,860,646.66
Lawsuit expense 546,856.22 56,202.00
Bid-invitation expense 403,597.47 1,373,458.35
Testing and inspection expenses 106,890.00 171,263.00
Formality expenses charged by banks 523,610.27 416,515.59
Penalty payment 199,922.82 344,021.55
Reserve fund 4,965,123.27 2,860,022.06
Deposit 13,854,223.74 24,359,012.27
Fund transfer 3,668,877.38 319,860.59
Business promotion expense 191,423,729.74 155,165,330.46
Transfer royalty of technologies 5,990,023.05 2,145,063.85Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
116
49 Other Cashes Received Related to the Financing activities
50 Other Cashes Paid Related to the FinancingActivities
51 Supplementary Data of Consolidated Cash Flow Statement
(1) Supplementary data of cash flow statement
Others 9,638,663.98 8,111,508.69
Total 303,662,047.31 249,897,163.29
Item January to June 2010 January to June 2009
Deducted personal income tax in
the dividend distribution 1,186,821.82 0.00
Item January to June 2010 January to June 2009
Repurchase of B shares 0.00 47,479,144.95
Formality fees of issuing the bonds 125,000.00 0.00
Mortgaged deposits 1,220,000.00 0.00
Total 1,345,000.00 47,479,144.95
Item January to June 2010 January to June 2009
1. Reconciliation of net profit to cash flow from operating activities:
Net profits
257,800,172.85 263,462,881.35
Plus: Reserve for asset depreciation 6,940,823.83 24,400,357.42
Fixed asset depreciation, consumption of oil and gas assets and production
biology asset depreciation 53,122,065.22 58,090,431.49
Amortization of intangible assets 6,265,090.92 6,146,924.97
Amortization of long-term amortization expense and long-term assets 1,274,266.72 1,511,553.76
Loss in disposal of fixed assets, intangible assets and other long-term assets
(the profits will be listed beginning with "-") -1,810,667.46 692,791.29
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 "-") 2,151,436.68 -133,611,037.40
Financial expense (the profits will be listed beginning with "-") 4,282,258.84 12,675,781.94
Investment loss (the profits will be listed beginning with "-") 384,976.08 74,301,232.43
Decrease of deferred income tax assets (the increase will be listed beginning
with "-") 7,553,827.10 5,338,704.10
Increase of deferred income tax liabilities (the decrease will be listed
beginning with "-") -133,455.75 445,191.86Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
117
(2) Cash and Cash Equivalents
Decrease of inventory (the increase will be listed beginning with "-") -114,620,432.08 18,836,334.67
Decrease of receivable operating items (the increase will be listed beginning
with "-") 102,446,025.95 -146,862,869.79
Increase of payable operating items (the decrease will be listed beginning
with "-") -23,720,635.77 34,589,258.73
Others 0.00 0.00
Net amount of cash flow from the operating activities 301,935,753.13 220,017,536.82
Item January to June 2010 January to June 2009
2.Key investment and financing activities not involving the cash income and
payment
Transfer from liabilities to share capital 0.00 0.00
Convertible 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 689,024,462.44 466,759,937.90
Minus: cash balance at the beginning of period 558,262,596.74 540,183,900.36
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 130,761,865.70 -73,423,962.46
Item 2010.6.30 2009.6.30
I. Cash 689,024,462.44 466,759,937.90
Including: Cash at stock 102,120.08 130,937.21
Deposits in banks that may be used for
payment randomly 658,064,184.21 448,531,766.57
Other Currency Capitals that may be used for
payment randomly 30,858,158.15 18,097,234.12
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 689,024,462.44 466,759,937.90Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
118
VI. Notes to the Relevant Items in the Financial Statements of Parent company
1. Accounts Receivable
(1) Composition of accounts receivable
(2) Age analysis
Item
2010.6.30 2009.12.31
Amount Percentag
e
Reserves for Bad
Accounts
Net Value Amount Percenta
ge
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
combination subject to
the credit risk
characteristics 1,672,852.39 0.98% 1,406,313.64 266,538.75 1,710,366.13 0.95% 1,317,062.28 393,303.85
Other minor accounts
receivable 169,872,882.58 99.02% 8,734,081.75 161,138,800.83 177,599,742.57 99.05% 9,109,619.75 168,490,122.82
Total 171,545,734.97 100.00% 10,140,395.39 161,405,339.58 179,310,108.70 100.00% 10,426,682.03 168,883,426.67
Age
2010.6.30 2009.12.31
Amount Percentag
e
Reserves for Bad
Accounts
Net Value Amount Percenta
ge
Reserves for Bad
Accounts
Net Value
Within 1
year 161,521,385.82 94.16% 8,076,069.29 153,445,316.53 169,068,039.99 94.29% 8,453,402.00 160,614,637.99
1-2 years 7,230,620.65 4.21% 433,837.24 6,796,783.41 7,500,876.89 4.18% 450,052.61 7,050,824.28
2-3 years 1,120,876.11 0.65% 224,175.22 896,700.89 1,030,825.69 0.58% 206,165.14 824,660.55Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
119
(1) At the end of period, there are no accounts receivable whose individual amount is large, or whose individual
amount is not large but whose depreciation testing have been individually made.
(2) From January to June 2010, the accounts receivable with the non-associated parties that have actually been
written off amount to RMB 490,985.73Yuan.
(3) By June 30, 2010, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
(4) The total amount of the top 5 accounts receivable is RMB 18,046,602.95 Yuan, accounting for 10.52% of
receivable balance.
2 Other accounts receivable
(1) Composition of other accounts receivable
Over 3
years 1,672,852.39 0.98% 1,406,313.64 266,538.75 1,710,366.13 0.95% 1,317,062.28 393,303.85
Total 171,545,734.97 100.00% 10,140,395.39 161,405,339.58 179,310,108.70 100.00% 10,426,682.03 168,883,426.67
Age
2010.6.30 2009.12.31
Amount Percentage Amount Percentage
Within 1 year 18,046,602.95 10.52% 20,305,392.17 11.32%
Item
2010.6.30 2009.12.31
Amount Percentag
e
Reserves for
Bad Accounts
Net Value Amount Percentag
e
Reserves for
Bad Accounts
Net Value
The individual amount is
large 286,910,221.93 81.28% 0.00 286,910,221.93 366,326,784.22 82.67% 0.00 366,326,784.22
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 1,744,264.64 0.50% 1,261,437.61 482,827.03 1,854,078.28 0.42% 1,322,336.71 531,741.57
Other minor accounts rec 64,319,155.34 18.22% 852,812.34 63,466,343.00 74,957,670.95 16.91% 554,113.43 74,403,557.52Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
120
(2) Other accounts receivable with the large individual amount
(3) Age analysis
(1) At the end of period, there are no accounts receivable whose individual amount is large, or whose individual
amount is not large but whose depreciation testing have been individually made.
eivable
Total 352,973,641.91 100% 2,114,249.95 350,859,391.96 443,138,533.45 100.00% 1,876,450.14 441,262,083.31
Debtor Name Debt Amount Withdrawal
Percentage
Cause
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.
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 74,200,614.77 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 48,394,830.08 0.00
The debtor is the subcompany controlled by
the company and there are no risks in
receiving the debts.
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area 44,553,441.16 0.00
The debtor is the subcompany controlled by
the company and there are no risks in
receiving the debts.
Total 286,910,221.93
Age
2010.6.30 2009.12.31
Amount Percenta
ge
Reserves for Bad
Accounts
Net Value Amount Percenta
ge
Reserves for
Bad Accounts
Net Value
Within 1 year 350,239,972.93 99.23% 728,040.28 349,511,932.65 439,489,953.85 99.17% 392,573.20 439,097,380.65
1-2 years 522,205.80 0.15% 31,332.35 490,873.45 1,409,714.59 0.32% 84,582.88 1,325,131.71
2-3 years 467,198.54 0.13% 93,439.71 373,758.83 384,786.73 0.09% 76,957.35 307,829.38
Over 3 years 1,744,264.64 0.49% 1,261,437.61 482,827.03 1,854,078.28 0.42% 1,322,336.71 531,741.57
Total 352,973,641.91 100.00% 2,114,249.95 350,859,391.96 443,138,533.45 100.00% 1,876,450.14 441,262,083.31Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
121
(2) By June 30, 2010, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
(3) The total amount of the top 5 other accounts receivable is RMB 309,110,434.10 Yuan, accounting for
87.57% of other receivable balance, and is listed as follows:
3. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
Debtor Name Debt Amount Nature or Content Debt Time
Percentage in
Total Amount
Hongkong Antao Development Limited 119,761,335.92 Fund transfer
Within 1
year 33.93%
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 74,200,614.77 Fund transfer
Within 1
year 21.02%
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group 48,394,830.08 Fund transfer
Within 1
year 13.71%
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area 44,553,441.16 Fund transfer
Within 1
year 12.62%
Livzon (Hongkong) Co., Ltd 22,200,212.17 Fund transfer
Within 1
year 6.29%
Total 309,110,434.10 87.57%
Item
2010.6.30 2009.12.31
Book Balance Depreciation Reserve Book Values Book Balance Depreciation Reserve Book Values
Calculation
by Cost
Method 1,101,599,238.31 38,971,307.03 1,062,627,931.28 1,091,399,238.31 38,971,307.03 1,052,427,931.28
Calculation
by Equity
Method 16,759,497.76 1,200,000.00 15,559,497.76 18,233,584.82 1,200,000.00 17,033,584.82Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
122
(2) Long-term equity investment calculated by cost method
Total 1,118,358,736.07 40,171,307.03 1,078,187,429.04 1,109,632,823.13 40,171,307.03 1,069,461,516.10
Name of Invested Units Initial Amount 2009.12.31 Increase in this
period
Decrease in this
period
2010.6.30
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
Livzon Pharmaceutical Factory under
Livzon Group 353,169,752.98 353,169,752.98 0.00 0.00 353,169,752.98
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 Hi-tech
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 64,770,100.01
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
Zhuhai Livzon Reagent Co., Ltd 2,021,378.68 2,896,800.00 0.00 0.00 2,896,800.00
Livzon Medicine Marketing Co., Ltd under 12,008,000.00 12,008,000.00 0.00 0.00 12,008,000.00Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
123
(3) Long-term equity investment calculated by equity method
(4) Depreciation Reserve for long-term equity investment
Livzon Group
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
Zhuhai Livzon Dankang Biotechnology
Co., Ltd 10,200,000.00 0.00 10,200,000.00 0.00 10,200,000.00
Total 1,010,030,344.48 1,091,399,238.31 10,200,000.00 0.00 1,101,599,238.31
Name of Invested Units Investment Cost 2009.12.31 Increase in
this period
Decrease in
this period
2010.6.30 Cash
dividend
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 6,979,543.51 0.00 152,520.84 6,827,022.67 0.00
Tongyikangshimei Chain (Shenzhen) Co.,
Ltd 17,500,000.00 10,054,041.31 0.00 1,321,566.22 8,732,475.09 0.00
Total 21,162,407.50 18,233,584.82 0.00 1,474,087.06 16,759,497.76 0.00
Investment Projects
2009.12.31
Withdrawa
l in this
period
Transfer in
this period 2010.6.30
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 LossLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
124
4. Operating Income and Operating Cost
(1) Item lists
(2) Incomes and costs of main business are listed as follows as per the business types:
(3) Sales volume of top 5 clients
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
depreciations
have occurred.
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 7,271,307.03 0.00 0.00 7,271,307.03 Operation loss
Total 40,171,307.03 0.00 0.00 40,171,307.03
Item
January to June 2010 January to June 2009
Operating Income Operating Cost
Gross operating
Profit
Operating Income Operating Cost
Gross operating
Profit
Main
Business 481,565,169.27 230,318,595.33 251,246,573.94 466,128,782.40 250,328,404.12 215,800,378.28
Other
Business 399,127.57 15,103.33 384,024.24 375,490.51 16,070.68 359,419.83
Total 481,964,296.84 230,333,698.66 251,630,598.18 466,504,272.91 250,344,474.80 216,159,798.11
Item
January to June 2010 January to June 2009
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 481,565,169.27 230,318,595.33 251,246,573.94 466,128,782.40 250,328,404.12 215,800,378.28
Client Name January to June 2010 January to June 2009Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
125
5. Business Tax and surtax
6. Investment Return
Sales Volume
Percentage in Total
Sales Volume (%)
Sales Volume
Percentage in Total
Sales Volume (%)
Total sales volume of top 5
clients 34,718,462.24 7.20% 40,852,185.30 8.76%
Item Tax rate January to June 2010 January to June 2009
Embankment protection cost 0.07% 75,000.00 61,500.00
Total 75,000.00 61,500.00
Item January to June 2010 January to June 2009
1. Returns during the holding period: -1,323,857.59 91,835,914.24
① Profits distributed by the associated or joint
companies 0.00 0.00
②Tradable financial assets 0.00 0.00
③Bonus returns of saleable financial assets 150,229.47 0.00
④Net increase or decrease of adjusted shareholders’
equities of invested company at the end of year -1,474,087.06 -2,853,035.96
Including: Guangdong Blue Treasure Pharmaceutical Co.
Ltd. -152,520.84 508,790.69
Tongyikangshimei Chain (Shenzhen) Co., Ltd -1,321,566.22 -3,361,826.65
⑤Investment return of subcompanies 0.00 94,688,950.20
Including: Livzon Pharmaceutical Factory under Livzon
Group
0.00 49,008,731.25
Sichuan Guangda Pharmaceutical Co., Ltd 0.00 37,983,419.93
Livzon Medicine Marketing Co., Ltd under Livzon
Group
0.00
4,455.32
Zhuhai Livzon Medicine Trade Co., Ltd 0.00 7,692,343.70
2. Transfer returns: 0.00 -69,034,769.85Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
126
7. Supplementary Data of Cash Flow Statement of Parent Company
Including: Sales of tradable financial assets 0.00 -69,034,769.85
Total -1,323,857.59 22,801,144.39
Item January to June 2010 January to June 2009
1. Reconciliation of net profit to cash flow from operating activities:
Net profit 47,575,531.93 122,536,970.13
Plus: Reserve for asset depreciation 1,316,441.24 5,587,538.88
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 5,787,733.29 7,607,596.59
Amortization of intangible assets 3,711,736.59 3,100,030.49
Amortization of long-term amortization expense and long-term assets 0.00 0.00
Loss in disposal of fixed assets, intangible assets and other long-term
assets (the profits will be listed beginning with "-") 2,302,189.33 93,664.35
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 "-") 0.00 -97,808,992.64
Financial expense (the profits will be listed beginning with "-") 12,896,957.88 11,248,197.18
Investment loss (the profits will be listed beginning with "-") 1,323,857.59 -22,801,144.39
Decrease of deferred income tax assets (the increase will be listed
beginning with "-") 6,662,997.23 5,393,172.29
Increase of deferred income tax liabilities (the decrease will be listed
beginning with "-") 0.00 0.00
Item January to June 2010 January to June 2009
Decrease of inventory (the increase will be listed beginning with "-") -11,856,420.46 -3,273,046.59
Decrease of receivable operating items (the increase will be listed
beginning with "-") -71,748,508.60 -81,665,334.73
Increase of payable operating items (the decrease will be listed
beginning with "-") 31,839,557.74 92,809,479.34
Others 0.00 0.00
Net amount of cash flow from the operating activities 29,812,073.76 42,828,130.90
2.Key investment and financing activities not involving the cash income
and payment
Transfer from liabilities to share capital 0.00 0.00
Convertible 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 537,451,270.54 393,126,247.45Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
127
XII. 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 IV for the details of the subcompanies held by the company.
The finally actual controller of this company is the natural person Zhu Baoguo.
(2) Registered capitals and changes of associated parties with the control relationship
Please see the note IV 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
Minus: cash balance at the beginning of period 418,389,049.61 465,301,653.09
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 119,062,220.93 -72,175,405.64
Enterprise Name
Registere
d Place
Main Business
Organization
Code
Relationship
with the
Company
Economic
Nature
Legal
Representa
tive
Joincare
Pharmaceutical
Group Industry
Co., Ltd
Shenzhen
Production and sales
of oral liquids,
medicines and healthcare
food
61887436-7
Parent
company
Company
Limited
(Listed
company)
Zhu
Baoguo
Enterprise Name 2009.12.31 Increase in this
period
Decrease in this
period
2010.6.30
Joincare Pharmaceutical Group
Industry Co., Ltd
1,097,874,000 219,574,800 0.00 1,317,448,800
Enterprise Name 2009.12.31 Percentag Increase in this Decrease in 2010.6.30 PercentagLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
128
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
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
Sales of Commodities
e (%) period this period e (%)
Joincare Pharmaceutical Group Industry Co.,
Ltd and its subcompanies 134,000,271 45.3129% 0.00 0.00 134,000,271 45.3129%
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 Company
Limited 74121715-1 Company controlled by parent company
Name of Associated Parties January to June 2010 January to June 2009Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
129
Provision of labors (water, electricity and power)
Purchase of commodities
Amount
Percentage in
Similar Transaction
Amount (%)
Amount
Percentage in
Similar
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 0.00 0.00 12,301,965.80 1.03%
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 968.11 0.00 2,492.85 0.00
Shenzhen Taitai Pharmaceutical
Company Limited 16,683.76 0.00 0.00 0.00
Total 17,651.87 0.00 12,304,458.65 1.03%
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage in
Similar Transaction
Amount (%)
Amount
Percentage in
Similar
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 3,401,805.22 53.16% 3,052,462.56 56.27%
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage in
Similar Transaction
Amount (%)
Amount
Percentage in
Similar
Transaction
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 3,413.33 0.00 7,432.36 0.00
Shenzhen Haibin Pharmaceutical
Co., Ltd 3,365,226.50 0.51% 1,876,068.34 0.40%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
130
Leasing of assets
On June 8, 2010, the company and Joincare Pharmaceutical Group Industry Co., Ltd contributed RMB 51
million Yuan and RMB 49 million Yuan in currency to establish Zhuhai Livzon Dankang Biotechnology Co., Ltd,
accounting for 51% and 49% of the registered capital of RMB 100 million Yuan respectively. By June 30, 2010,
the paid-up capitals amounted to RMB 20 million Yuan.
Receivable and payable balances with associated parties
Shenzhen Taitai Pharmaceutical
Company Limited 153,384.00 0.02% 0.00 0.00
Joincare Pharmaceutical Group
Industry Co., Ltd 14,974.36 0.00 329,641.03 0.07%
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd 133,243,850.27 20.08% 58,206,837.63 12.42%
Total 136,780,848.46 20.62% 60,419,979.36 12.89%
Name of Associated Parties
January to June 2010 January to June 2009
Amount
Percentage in
Similar
Transaction
Amount (%)
Amount
Percentage in
Similar
Transaction
Amount (%)
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 51,714.00
6.85%
52,104.00 7.63%
Health Pharmaceutical (China) Co.,
Ltd 49,974.00
6.61%
49,974.00 7.32%
Total 101,688.00 13.46% 102,078.00 14.95%
Enterprise Name
2010.6.30 2009.12.31
Amount Percentage Amount Percentage
Accounts receivable:
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd
39.95 0.00 0.00 0.00
Other accounts receivable:Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
131
VIII. Contingent Events
By June 30, 2010, the company has no contingent key events for disclosure.
IX. 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 PPI(proton pump inhibitor) compound
and Yiyang patent in China including Hong Kong and Macao for the purpose of production, processing and
distribution. The transfer fee will be USD 2.50 million, and by December 31, 2008, the company has fully paid it.
The company agrees to give Yiyang the commission of 10% of sales amount during the first three years when
Guangdong Blue Treasure Pharmaceutical
Co. Ltd. 1,095,228.72 2.81%
0.00 0.00
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 180,168.35 0.46% 149,520.65 0.59%
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 14.72 0.00%
0.00 0.00
Total 1,275,411.79 3.27% 149,520.65 0.59%
Enterprise Name
2010.6.30 2009.12.31
Amount Percentage Amount Percentage
Accounts payable:
Shenzhen Haibin Pharmaceutical Co., Ltd 2,649,450.00 1.38% 1,795,000.00 0.98%
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 62,358,280.46 32.53% 28,773,750.00 15.78%
Total 65,007,730.46 33.91% 30,568,750.00 16.76%
Other accounts payable:
Joincare Pharmaceutical Group Industry
Co., Ltd 5,683.43 0.00 8,339.99 0.00
Guangdong Blue Treasure Pharmaceutical
Co. Ltd. 747,000.00 0.29% 747,000.00 0.32%
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 433,322.27 0.17% 222,691.25 0.10%
Total 1,186,005.70 0.46% 978,031.24 0.42%Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
132
this product begins to be sold, 8% of sales amount during the next five years, and 6% of sales amount from the
remaining time to July 22, 2014 (the expiry date of agreement). Since 2009, the company has started the sales
and paid the commissions in accordance with the 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 (they have 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 above final
pellet products 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 in 2008 and paid the royalties 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).
X 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.
XIII. Other Key Events
1. Bank loan guaranties that the company provides to the controlling subcompanies during the report period are
listed as follows: (RMB 10 thousand Yuan)Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
133
Name of Guarantee Occurrence
Date
(Signing
date of
agreement)
Balance at the
end of period
Guarantee
Amount
Guaranty type Period
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area
2008.1.8 0 4,100
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 1,900
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 1,500
Joint and
several
liability
guaranty
2008.1.8-2011.1.8(Zhuhai Branch of
Bank of China)
Zhuhai Livzon Reagent Co., Ltd 2009.6.18 0
684
（USD100）
Joint and
several
liability
guaranty
2009.7.15-2014.7.14
(Zhuhai Branch of Standard Chartered
Bank)
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
2009.7.20 0 1,000
Joint and
several
liability
guaranty
2009.7.20-2012.7.20(Zhuhai Branch of
Bank of Communications)
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
2009.11.27 0 12,000
Joint and
several
liability
guaranty
2009.11.27-2012.11.27
(Zhuhai Branch of Agricultural Bank
of China)Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
134
2. On July 1, 2010, the company and Guangzhou Yinheyangguang Pharmaceutical Group Industry Co., Ltd
jointly contributed to establish Livzon Group Vaccine Engineering Co., Ltd; the company contributed RMB 53
million Yuan, and the contribution mode includes RMB 44 million Yuan in currency capital and RMB 9 million
Yuan in the technical estimate of non-patent technology - absorption purified inactivated Japanese encephalitis
virus vaccine, accounting for 81.54％ of total registered capital; Guangzhou Yinheyangguang Pharmaceutical
Group Industry Co., Ltd contributed RMB 12 million Yuan, accounting for 18.46 ％ ; the contribution mode
includes the RMB 12 million Yuan in the technical estimate of non-patent technology - absorption purified
inactivated Japanese encephalitis virus vaccine. Such contribution has been verified by the Li An Dan Yan Zi
[2010] No. B-1033 capital verification report issued by Reanda Certified Public Accountants
3. On July 14, 2010, the 22nd meeting of the 6th Board of Directors examined and approved that, the company
would issue the debt financing instrument with the balance not exceeding RMB 800 million Yuan to the bonds
market among Chinese banks; the company proposes to apply for the registration of short-term financing bonds
with total amount of RMB 800 million Yuan; the registration period is 2 years and the bonds will be issued in
three times. Agricultural Bank Of China Ltd will be the main underwrite. The first issuance time is scheduled
Livzon Pharmaceutical Factory under
Livzon Group
2009.8.21
1,758.74（HK
D2016）
5,000
Joint and
several
liability
guaranty
2009.7.20-2012.7.20
(Zhuhai Branch of Bank of
Communications)
Livzon Pharmaceutical Factory under
Livzon Group
1,358.18（USD
200）
Livzon Pharmaceutical Factory under
Livzon Group
2009.9.10
1,358.18（USD
200）
6,000
Joint and
several
liability
guaranty
2009.9.10-2012.9.10
(Zhuhai Branch of Shenzhen
Development Bank)
Livzon Pharmaceutical Factory under
Livzon Group
2009.06.19
2,835.27
（HKD3250）
16,000
Joint and
several
liability
guaranty
2009.06.19-2012.06.18
(Zhuhai Branch of Xiamen
International Bank)
Livzon Pharmaceutical Factory under
Livzon Group
2009.09.16 1,510.42 12,000
Joint and
several
liability
guaranty
2010.06.04-2018.06.03(Zhuhai Branch
of Bank of China)
Total guaranty amount to its controlling
subcompanies in the report period 13,310.16
Total balance of guaranty amount to its controlling
subcompanies in the report period 8,820.79Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
135
in October 2010, and the issuance amount is RMB 400 million Yuan; the period is 365 days.
4. Assets and Liabilities calculated at the fair values
Unit: RMB 1000 Yuan
5. Foreign currency financial assets and foreign currency financial liabilities
Unit price: RMB 1000 Yuan
Item Amount at
the
beginning
of period
Profit and
loss in the
changes of
fair values
in this
period
Accumulated
changes of fair
values that are
accrued to the
equities
Withdrawn
depreciation in
this period
Amount at
the end of
period
Financial assets
1. Financial assets that are calculated in the fair
values and whose changes are accrued to the
current profit and loss (not including the
derivative financial assets) 48,888.58 -2,585.49 0.00 0.00 46,303.09
2. Derivative financial assets 0.00 0.00 0.00 0.00 0.00
3. Saleable financial assets 12,906.09 0.00 -3,244.08 0.00 10,472.11
Subtotal of financial assets 61,794.67 -2,585.49 -3,244.08 0.00 55,965.10
Real estate for investment 0.00 0.00 0.00 0.00 0.00
Production biology asset 0.00 0.00 0.00 0.00 0.00
Others 0.00 0.00 0.00 0.00 0.00
Total 61,794.67 -2,585.49 -3,244.08 0.00 55,965.10
Financial liabilities 0.00 0.00 0.00 0.00 0.00
Item Amount at
the
beginning
of period
Profit and
loss in the
changes of
fair values
in this
period
Accumulated
changes of fair
values that are
accrued to the
equities
Withdrawn
depreciation in
this period
Amount at
the end of
period
Financial assets
1. Financial assets that are calculated in the fair 48,274.74 -2,490.87 0.00 0.00 45,783.87Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
136
XII. Supplementary Data
1. Non-Recurring Profit and Loss
In accordance the 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) issued
on October 31, 2008, the non-recurring profit and loss items of the company are listed as follows:
values and whose changes are accrued to the
current profit and loss (not including the
derivative financial assets)
2. Derivative financial assets 0.00 0.00 0.00 0.00 0.00
3. Loans and accounts receivable 28,499.25 0.00 0.00 35.02 32,466.24
4. Saleable financial assets 0.00 0.00 0.00 0.00 0.00
5. Investments that are held to the maturity
dates 0.00 0.00 0.00 0.00 0.00
Subtotal of financial assets 76,773.99 -2,490.87 0.00 35.02 78,250.11
Financial liabilities 159,676.60 0.00 0.00 0.00 169,437.91
Item January to June 2010 January to June 2009
Profit and loss in disposal of non-current assets, including the written-off part
of already withdrawn depreciation reserves 1,815,102.44 -692,791.29
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
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 7,225,572.95 1,484,297.32
Capital occupancy expense from the non-financial enterprises that is accrued
to the current profit and loss 0.00 0.00
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
Profit and loss of non-currency assets exchange 0.00 0.00
Profit and loss of investment or management of entrusted assets 0.00 0.00Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
137
The various withdrawn reserves for assets depreciation due to the force
majeures such as the natural calamities 0.00 0.00
Profit and loss of liabilities restructuring 0.00 0.00
Enterprise restructuring expenses, such as the payments for staffing and
integration expense, etc. 0.00 0.00
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
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
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
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
-
1,457,055.32 60,382,073.54
Reversion of depreciation reserves for accounts receivable whose
depreciation testing have been individually made. 0.00 0.00
Profit and loss from the externally entrusted loans 0.00 0.00
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
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
Custody income due to the entrusted custody 0.00 0.00
Other net non-operating income and payment except the above items 21,397.08 682,007.89
Other profit and loss items that comply with the definition for non-operating
profit and loss 0.00 0.00
Subtotal 7,605,017.15 61,855,587.46
Minus: effect of income tax 1,225,654.73 4,373,963.33
Effect of the minority of shareholders’ equities 492,548.82 93,759.16Livzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
138
2. Yield Rate of Net Assets and Profit Per Share
Calculation Steps:
1. Basic profit per share
2. Dilution of profit per share:
Total 5,886,813.60 57,387,864.97
Profit in the report period
Weighted average yield rate
of net asset
Profit per share (Yuan/share)
Basic profit per share
Profit per share after
dilution
Net profit attributable to the
ordinary shareholders 10.68% 0.82 0.82
Net profit attributable to the ordinary
shareholders after deduction of nonrecurring
profit and loss 10.42% 0.80 0.80
Items Calculation Steps Amount
After deduction of
non-recurring profit
and loss
Current net profit attributable to the ordinary
shareholders
P
241,480,232.98 235,593,419.38
Total quantity of shares in the beginning of period S0 295,721,852 295,721,852
Increase of shares in the current period Si 0 0
Length from the next month after share increase to
the end of report period (unit: month)
Mi
0 0
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
295,721,852 295,721,852
Basic profit per share P÷S 0.82 0.80
Item Calculation Steps Amount After deduction ofLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
139
XIII. Approval of Financial Statement
This financial statement is passed and issued by the Board of Direction on August 18 , 2010
Company Name：Livzon Pharmaceutical Group Inc.
non-recurring profit
and loss
Current net profit attributable to ordinary
shareholders
P
241,480,232.98 235,593,419.38
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 295,721,852 295,721,852
Increase of shares in the current period Si 0 0
Length from the next month after share increase to
the end of report period (unit: month)
Mi
0 0
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
295,721,852 295,721,852
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) 0.82 0.80
Principal of the Company: Principal of the Financial
Department:
Principal of the Accounting
Department:
Zhubaoguo Anning SiyanxiaLivzon Pharmaceutical Group Inc. Full text of 2010 Semin-annual Report
140
Section 8: Catalog of Files for Reference
1 The 2010 semi-annual reports with the signature of Chairman.
2 The financial reports with signatures of legal representative, principal of Financial
Department and principal of Accounting Department.
3. All original files and announcement manuscript that have been published in Securities
Times, China Securities Journal and Hongkong Wen Hui Daily (English version) during
the report period.
Livzon Pharmaceutical Group Inc.
Chairman: Zhu Baoguo
August 20, 2010
