Livzon Pharmaceutical Group Inc.
2011 Semi-Annual Report
August 2011
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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.
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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………………………………………………………17
Section 7 Financial Report……………………………………………………29
Section 8 Catalog of files for reference………………………………………141
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 http://www.cninfo.com.cn
Commission for publishing the annual report
Location for filing the report Secretary’ Office of BOD of Livzon Group
Briefing of company stocks
Stock type Stock exchange for listing Stock abbreviation Stock code
of the Company
Shenzhen
A share Livzon Group 000513
Stock Exchange
Shenzhen
B share Livzon B 200513
Stock Exchange
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 Province
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Section 2 Financial Highlights
I. Main financial data in the report period (Unit: RMB Yuan)
Increase or decrease
End of the current End of the previous
compared with the end of
period year
previous year (%)
Total assets 4,175,630,303.43 3,661,991,627.95 14.03%
Owners’ equity attributable to the shareholders of
2,706,180,087.19 2,517,438,110.24 7.50%
listed companies
Share capitals 295,721,852.00 295,721,852.00 0.00%
Net asset per share attributable to the
shareholders of listed companies (RMB Yuan per 9.15 8.51 7.52%
share)
Increase or decrease
Report period Same period of
compared with the same
(January to June) previous year
period of previous year (%)
Total operating income 1,471,437,500.63 1,322,769,589.74 11.24%
Operating profit 261,244,259.11 289,341,700.18 -9.71%
Total profit 283,241,156.20 298,403,772.65 -5.08%
Net profit attributable to the shareholders of
220,861,695.59 241,480,232.98 -8.54%
listed companies
Net profit attributable to the shareholders of
listed companies after deduction of non-recurring 201,827,805.96 235,593,419.38 -14.33%
profit and loss
Basic profit per share (RMB Yuan per share) 0.75 0.82 -8.54%
Diluted profit per share (RMB Yuan per share) 0.75 0.82 -8.54%
Weighted average yield rate of net assets 8.42% 10.68% Down 2.26 percentage points
Weighed average yield rate of net assets after
deduction of non-recurring profit and loss 7.70% 10.42% Down 2.72 percentage points
Net cash flows from operating activities 292,654,480.77 301,935,753.13 -3.07%
Net cash flows per share from operating
0.99 1.02
activities (RMB Yuan per share) -2.94%
(I) Deducted non-recurring profit and loss items:
Unit: RMB Yuan
January to
Item June 2011 Remarks
Profit and loss in disposal of non-current assets, including the
written-off part of already withdrawn depreciation reserves 420,947.86
Please see the notes to the financial
statement for all types of
Governmental allowance accrued to the current profit and loss 20,110,733.72
governmental allowances received
by the company.
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
858,831.10
tradable financial liabilities as well as the investment returns in
disposal of tradable financial assets, tradable financial liabilities and
saleable financial assets
Other net non-operating income and payment except the above
items 1,465,215.51
Other profit and loss items that comply with the definition for
non-operating profit and loss
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Subtotal 22,855,728.19
Minus: effect of income tax 3,349,687.44
Minus: non-recurring profit and loss attributable to the minority of
shareholders 472,151.12
Total of non-recurring profit and loss 19,033,889.63
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
Profit per share (RMB Yuan)
Weighed average yield rate Basic profit per Profit per share after
Profit in the report period
of net assets
share dilution
Net profit attributable to the ordinary
shareholders 8.42% 0.75 0.75
Net profit attributable to the ordinary
shareholders after deduction of 7.70% 0.68 0.68
non-recurring profit and loss
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 Overseas Accounting 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 annual overseas auditing.
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Section 3 Change of Share Capitals and Particulars of Shareholders
I. Particulars of Share Capital Changes (By June 30, 2011)
Beginning balance Increase (+) or decrease (-) Closing balance
Shares
transferr
Newly Bon
ed from Subto
issued us Others Quantity Percentage
public tal
Percent share sha
reserve
Quantity age s res
fund
I. Shares with
6,059,428 2.05% - - - - - 6,059,428 2.05%
trading restriction
1.Shares held by the
- - - - - - - - -
state
2.Shares held by
state-owned legal 6,059,428 2.05% - - - - - 6,059,428 2.05%
person
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
289,662,424 97.95% - - - - - 289,662,424 97.95%
trading restriction
1.Renminbi ordinary
177,669,070 60.08% - - - - - 177,669,070 60.08%
shares
2.Domestically-listed
Shares for Overseas 111,993,354 37.87% - - - - - 111,993,354 37.87%
Investors
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
3.Overseas-listed
shares for overseas - - - - - - - - -
investors
4.Others - - - - - - - - -
III. Total of shares 295,721,852 100% - - - - - 295,721,852 100%
II. Particulars of shareholding of top ten shareholders and top ten tradable
shareholders without trading restriction (By June 30, 2011)
Total quantity of shareholders The shareholder quantity amounted to 26,883 (including: 8,083
B-share holders).
Shares held by top ten shareholders
Shareholdin Total quantity
Shares for the
Shareholder g Total quantity of shares with
Shareholder name mortgage or
nature percentage of shares trading
freezing
(%) restriction
Domestic
Joincare pharmaceutical
non-state-owned 26.21% 77,510,167
Group Industry Co., Ltd
legal person
Foreign legal
Tiancheng Industry Co., Ltd 15.48% 45,769,070
person
First Shanghai Securities Foreign legal
3.67% 10,840,342
Co., Ltd person
Foreign legal
GAOLING FUND,L.P. 3.47% 10,258,112
person
Dacheng Value Growth
Others 3.12% 9,226,210
Securities Investment Fund
Agricultural Bank of China-
Greatwall Anxin Return
Others 2.11% 6,250,020
Mixed Securities Investment
Fund
Guangzhou Begol Trading State-owned
2.05% 6,059,428 6,059,428 6,059,428
Corporation legal person
Domestic
Shenzhen Haibin
non-state-owned 1.99% 5,892,943
Pharmaceutical Co., Ltd
legal person
Bank of Communications -
Great Wall Jiufu Core
Others 1.63% 4,829,286
Growth Stock-type Securities
Investment Fund (LOF)
Agricultural Bank of China –
Others 1.57% 4,655,352
LOF
Shareholding particulars of top ten shareholders without trading restriction
Quantity of shares without
Shareholder name Share type
trading restriction
Joincare pharmaceutical Group Industry Co., Ltd 77,510,167 RMB common share
Domestically-listed
Tiancheng Industry Co., Ltd 45,769,070 shares for overseas
investors
Domestically-listed
First Shanghai Securities Co., Ltd 10,840,342 shares for overseas
investors
GAOLING FUND,L.P. 10,258,112 Domestically-listed
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
shares for overseas
investors
Dacheng Value Growth Securities Investment Fund 9,226,210 RMB common share
Agricultural Bank of China- Greatwall Anxin Return Mixed RMB common share
6,250,020
Securities Investment Fund
Shenzhen Haibin Pharmaceutical Co., Ltd 5,892,943 RMB common share
Bank of Communications - Great Wall Jiufu Core Growth RMB common share
4,829,286
Stock-type Securities Investment Fund (LOF)
Agricultural Bank of China – LOF 4,655,352 RMB common share
Bank of China – Efunds Medical Health Industry
3,478,476 RMB common share
Stock-type Securities Investment Fund
Description of relationship or concerted action of above shareholders
①On January 2, 2004, Joincare, Begol and Zhuhai Lishi Investment Co., Ltd signed the Agreement on Equity
Transfer, Custody and Mortgage. Joincare and Guangzhou Begol Trading Corporation signed the Agreement on
Equity Transfer and Custody and the Agreement on Equity Mortgage, in which Guangzhou Begol Trading
Corporation directly transferred, custodized and mortgaged 6,059,428 domestic legal person shares of our company
to Joincare;②Tiancheng Industry Co., Ltd and Shenzhen Haibin Pharmaceutical Co., Ltd are the subcompanies
directly or indirectly held 100% by Joincare; ③Agricultural 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
persons acting in concert stated in the Management Measures about Takeover of Listed Companies.
III. Shareholding quantity and trading restrictions of the top ten shareholders holding
shares with trading restriction (by June 30, 2011)
Shareholder name with Quantity of shares Increased
No. Trading time Trading restriction
the trading restriction with trading quantity of new
Guangzhou Begol t i ti t d bl h
1 6,059,428 - - Please see the note.
Trading Corporation
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.
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Section 4 Particulars of Directors, Supervisors, Senior Executives and Staffs
I. Shareholding and change particulars of directors, supervisors and senior
executives during the report period,
During the report period, the directors, supervisors and senior executives of the
Company do not hold any shares of Company, and there is no changes about their
shareholding.
II. New Engagement or Disengagement of directors, supervisors and senior
executives during the report period
During the report period, the terms of the 6th Board of Directors and 6th Board of
Directors have expired. The 2011 first temporary shareholders’ meeting held by the company on
June 30 2011 resolved that, the company elected Mr. Zhu Baoguo, Ms. Liu Guangxia, Mr. An Ning,
Mr. Qiu Qingfeng, Mr. Zhong Shan, Mr. Tao Desheng, Mr. Wang Junyang, Mr. Luo Xiaosong and Mr.
Yang Bin as the members of the 7th Board of Directors, and Mr. Cao Pingwei, Mr. Pang Datong, and
Mr. Wang Maolin, a staff representative supervisors elected by the 3rd member meeting of 5th
company trade union as the members of the 7th Board of Directors.
On June 30, 2011, the first meeting of the 7th Board of Directors examined and
determined to elect Mr. Zhu Baoguo as the Chairman of the 7th Board of Directors, and
Ms Liu Guangxia as the vice Chairman of the 7th Board of Directors. At the same time,
this meeting examined and passed the relevant proposals about engaging the senior
executives of company, and the former senior executives will continue to be completely
engaged, and there were no new engagements or disengagements.
On June 30, 2011, the first meeting of the 7th Board of Supervisors examined and
determined to elect Mr. Cao Pingwei as the Supervisor General of the 7th Board of
Supervisors.
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Section 5 Report of Board of Directors
I. Operation Overview of the Company
(I). Operation results and brief analysis of financial status
During the first half of 2011, the sales volume of the Company amount to RMB 1.
4714375 billion Yuan, up RMB 148.6679 million Yuan over the beginning of report period
with the increase rate of 11.24%. The main cause is that the key preparation-type
products (mainly including the Chinese traditional drug preparation, Gonadotropic
hormone and Antimicrobial preparations) have greatly increased.
During the first half of 2011, the operating profit of the Company amounts to RMB
261.2443 million Yuan, down RMB 28.0974 million Yuan with the decrease rate of 9.71%;
the net profit attributable to the owners of parent company amounts to RMB 220.8617
million Yuan, down RMB 20.6185 million Yuan with the decrease rate of 8.54%. The
decrease of operating profits and net profits is mainly because of the huge increase of
sales expense and management expense.
During the first half of 2011, the sales expense of the Company amounts to RMB
383.9094 million Yuan, up RMB 98.7093 million Yuan with the increase rate of 34.61%.
the main cause is that, due to the structural change of sales during the report period, the
relevant expense caused by the sales increase of prescription medicines has increased;
the management expense of the Company amounts to RMB 129.5673 million Yuan, up
RMB 30.3781 million Yuan with the decrease rate of 30.63%. the main causes include:
(1) during the report period, the company has strengthened the development, so the
development expense increased greatly; (2) the loss due to closedown has increased;
the financial expense decreased by 783.44%. The main causes include: (1) the cash
flow status of company is good, and (2) the interest rate of deposits in banks has
increased.
During the first half of 2011, the net amount of cash flow from the operating activities
was RMB 292.6545 million Yuan, down RMB 9.2813 million Yuan, and the main causes
include: (1) the enterprise income tax expense paid by the company has increased, and
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
(2) the business expense caused by the sales business expansion has increased; the
net amount of cash flow from the investment activities was RMB -107.2140 million Yuan,
up RMB 79.9084 million Yuan. The main cause is that the cash paid for purchasing and
constructing the fixed assets, intangible assets and other long-term assets decreased by
RMB 81.18 million Yuan (mainly due to the decrease of investment in the relocation
projects of new factories); the net amount of cash flow from the financing activities was
RMB 230.5342 million Yuan, up RMB 213.7357 million Yuan, and the main cause is that
the company successfully issued the short-term financing debts of RMB 400 million
Yuan during the report period, and the cash from financing activities has increased.
(II) Discussion and analysis of operation status
During the first half of 2011, while facing a lot of unfavorable factors such as the price
adjustment of some medicines, the market downturn of antibiotics material medicines
and the increase of Chinese medicine material prices, the company, by continuously
strengthening the internal management, actively taking the measures such as the
adjustment of marketing strategy, push of detailed production management, and
improvement of product quality control and management, etc, has endeavored to reduce
the impact levels of all kinds of unfavorable factors, and then make the operating income
in the first half of 2011 keep in a good increasing tendency. In the second half of 2011,
the company will continue to enlarge the management level in marketing, production and
scientific research, etc, and the main strategies and measure include: (1) marketing
management. Strengthen the assessment so as to improve the marketing enforcement;
make the detailed management so as to enlarge the effective terminals; employ the
talents to improve the sales volume in the weak region in terms of sales; make the
strategic adjustment so as to step up the promotion of new medicines; 2) management
of production quality. All production enterprises under the company will continue to
emphasize the quality, and in the condition of ensuring the product quality, improve the
operation efficiency, strengthen the process improvement, and endeavor to reduce the
pressure brought by the price increase of raw materials and energies. At the same time,
endeavor to collaborate the production and sales to ensure the supply to the market. 3)
scientific research. Firstly, seriously grasp the progress of current projects, especially the
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
experiment, bench-scale test and pilot test of dankang project as well as the application
and certification of new medicines such as the vaccine project; secondly, seriously make
the application for patents and international registration, and make the preparations for
and lay the solid foundation to develop the international market in the future.
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), 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
Increase or Increase or
Operating decrease of decrease of
cost operating operating Increase or decrease of
Operating Operating income cost operating profit margin
Profession
income profit margin compared compared compared with the
with the with the previous year (%)
previous previous
year (%) year (%)
Down 0.05 percentage
Che Digestive tract 12,318.19 1,808.38 85.32% -0.22% 0.14% points
mic Cardiac and cerebral Down 0.06 percentage
blood vessel points
5,403.86 1,497.73 72.28% 19.97% 20.21%
al Up 2.37 percentage point
Antimicrobial drugs
16,711.88 6,036.01 63.88% 6.27% -0.29% s
med Up 1.90 percentage point
Gonadotropic
s
icin hormone 14,211.32 4,668.28 67.15% 41.74% 33.98%
Down 12.10 percentage
e Blood and points
hemopoietic system
prep drugs 1,459.78 1,076.31 26.27% 17.45% 40.50%
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Up 7.91 percentage point
arati s
Others
ons 4,796.88 1,348.50 71.89% 13.93% -11.09%
Down 3.20 percentage
Raw material medicines points
40,082.50 32,839.25 18.07% -17.92% -14.58%
Down 8.98 percentage
Chinese traditional drug points
preparation
37,640.75 11,300.85 69.98% 59.36% 127.37%
Down 1.43 percentage
Diagnostic reagents and points
equipments
12,501.06 5,987.52 52.10% 31.52% 35.55%
Up 1.30 percentage point
Imported drugs s
452.76 87.83 80.60% 81.71% 70.31%
(II) Products that account for over 10% (including 10%) of total operating income during
the report period,
Unit: RMB 10 thousand Yuan
Increase or Increase or
Operating decrease of decrease of
cost operating operating Increase or decrease
Operating
Operating income cost of operating profit
Product profit
income compared compared margin compared with
margin
with the with the the previous year (%)
previous previous
year (%) year (%)
Shenqifuzheng Down 11.10%
injection 23,184.82 4,633.48 80.02% 56.89% 253.06% percentage points
Note: the main cause of the huge decrease of operating profit margin of Shenqifuzheng injection is that the production
cost of products has increased due to the increase of raw material prices.
(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
Increase or decrease of business income compared
Region Main business income
with the same period of previous year (%)
Northeast China 13,390.02 37.37%
North China 24,768.84 -9.95%
Central China 14,832.71 22.04%
East China 29,965.94 8.71%
South China 25,959.98 10.91%
Southwest China 17,232.34 37.25%
Northwest China 7,323.60 50.19%
Export 13,618.06 9.37%
(IV) Profit composition, main business structure and profitability changes of the company
during the report period:
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Unit: RMB 10 thousand Yuan
January to Jun Change rate
Item January to June 2010
e 2011 (%)
Operating incomes 147,143.75 132,276.96 11.24%
Operating costs 67,709.34 63,576.41 6.50%
Sales expenses 38,390.94 28,520.01 34.61%
Management expenses 12,956.73 9,918.92 30.63%
Financial expenses -525.91 76.95 -783.44%
Operating profits 26,124.43 28,934.17 -9.71%
Total profits 28,324.12 29,840.38 -5.08%
Net profits attributable to the owners of parent
22,086.17 24,148.02
company -8.54%
Net profits attributable to the owners of parent
company after the deduction of non-recurring profit 20,182.78 23,559.34
and loss -14.33%
Remarks: 1. The operating incomes increase by 11.24%, and the main cause is that the sales volume of
preparation-type products (the Chinese traditional drug preparation, Gonadotropic hormone and Antimicrobial
preparations) have increased; 2.The operating costs increase by 6.50% and the increase rate is less than that of
operating incomes, and the main cause is the effects of sales structure and gross profit margin changes of product
types; 3. The sales expenses increase by 34.61%, and the main cause is that the sales percentage of
preparation-type products has been improved, which led to the increase of sales expense; 4. the management
expenses increase by 30.63%, and the main cause is the increase of development expenses and loss of
engineering suspension; 5. The financial expense decrease by 783.44%, and the main cause is the increase of the
interests payment of bank loans; 6. The operating profits, total profits and net profits attributable to the owners of
parent company decrease by 9.71%, 5.08% and 8.54% respectively, and the main cause is that the sales expense
and management expense have increased; 8. The net profits attributable to the owners of parent company after the
deduction of non-recurring profit and loss decrease by 14.33%, and the main cause is the increase of net profits
contributed to by the main business of the company.
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 28th meeting of the 6th Board of Directors of the company examined and passed
the Proposal on Investing and Constructing Ningxia Livzon Pharmaceutical Industry
Park, and agreed that, the company invested no more than RMB 300 million Yuan in the
first phase to invest and construct “Livzon Group (Ningxia) Pharmaceutical Industry
Park” in Pingluo County, Shizuishan City, Ningxia, and establish “Ningxia Xinbeijiang
Pharmaceutical Co., Ltd under Livzon Group” (the establishment is still under way) and
“Ningxia Fuxing Pharmaceutical Co., Ltd under Livzon Group (the establishment is still
under way) to meet the demands for capacity expansion and development & production
of new products of Ningxia Fuxing Pharmaceutical Co., Ltd and Ningxia Xinbeijiang
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Pharmaceutical Co., Ltd under Livzon Group; the company signed relevant agreements
with Luoping County Government, and appropriated 600 mu of lands as the construction
base of “Livzon Group (Ningxia) Pharmaceutical Industry Park”.
At present, the above projects are still in the prepration stage, and the preliminary
planning design and project application are still under way, and no construction has
been commenced.
2. Introduction about the progress of relocation projects of Livzon Pharmaceutical
Factory: during the report period, the company has completed the construction of
hormone freeze-dried plant in this project, obtained the GMP certificate in June 2011,
and the factory has been put into production. Besides, three injection plants are still
under the construction of auxiliary utilities, and according to the forecast, they will be put
into production in May 2012. The construction of 7 production plants including solid
preparations and cephalosporins injection are at the preliminary design stage. The
design plan of solid preparations has been determined, and the structure construction
may be launched in this October.
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 10 thousand Yuan
Depreciati
Accumulative
Profit and loss in on amount
Amount at the changes of fair Amount at
the changes of withdrawn
Item beginning of values that are the end of
fair values in the in the
period accrued to the period
current period current
equities
period
Financial assets
Including; 1. financial assets
or financial liabilities that are
calculated in the fair values
and whose changes are
57,865.79 43.87 - - 56,611.07
accrued to the current profit
and loss
Including: derivative financial - - - -
assets -
2. Saleable financial - -
-3,847.90
assets 10,572.89 9,868.29
Subtotal of financial assets 68,438.68 43.87 -3,847.90 - 66,479.36
Financial liabilities - - - - -
Total 68,438.68 43.87 -3,847.90 - 66,479.36
1. The financial assets that are calculated in the fair values and whose changes are accrued to the
15
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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. 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).
16
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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, 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 2010 profit distribution plan
On February 26, 2011, the 2010 Shareholders’ Meeting of the Company examined and
passed the 2010 Profit Distribution Plan as follows: Taking the total quantity of
295,721,852 shares at the end of 2010 as the base, the company will distribute the
bonus of RMB 1.00 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 20, 2011, the Company issued the bonus distribution announcement and
determined that, the registration date of A-share equity is May 25, 2011; the last
transaction date of B-shares is May 25, 2011; the registration date of B-share equity is
May 30, 2011. On May 26 and May 30, the company completed the distribution of
dividends of A-shares and B-shares. The 2010 profit distribution plan has been
completely implemented.
17
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
(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
Percentage
of total
Initial
Holding Book Values at investment Profit and loss
Security Security Security investment
No. quantity the end of in this during the
Type Code abbreviation amount
(Share) period security at report period
(RMB Yuan)
the end of
period (%)
1 Stock 00135 Kunlun Energy 6,683,146.33 1,500,000 16,690,613.40 29.48% 1,665,734.40
Shenzhen
2 Stock 00152
International 9,592,336.77 17,000,000 8,623,899.40 15.23% -286,592.13
China National
3 Stock 00883 Offshore Oil
Corporation 2,725,014.99 560,000 8,457,242.75 14.94% -26,080.69
4 Stock 02007 Phoenix Island 19,826,521.22 2,450,000 6,968,143.98 12.31% 1,142,780.52
5 Stock 01880 Baili Company 2,229,053.31 428,000 5,837,307.10 10.31% 1,173,821.16
6 Stock 00438 Rainbow group 5,944,725.08 5,016,000 3,629,123.15 6.41% -2,025,533.03
7 Stock 00968 Little sheep 566,301.85 212,000.00 1,098,370.43 1.94% 247,673.21
China Railway
8 Stock Engineering
00390 Group Co. 1,524,552.85 314,000.00 953,119.68 1.68% -517,757.36
9 Stock 01688 Alibaba 884,531.63 78,000.00 804,342.86 1.42% -86,677.57
China Railway
10 Stock Construction
01186 Corporation 1,024,645.47 114,000.00 617,178.47 1.09% -268,297.80
Other securities investment at the end of this
period
2,635,619.45 - 2,931,732.91 5.18% -160,239.61
Profit and loss of sold security investment
- - - - -
during the report period
Total
53,636,448.95 - 56,611,074.13 100.00% 858,831.10
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, 2011.
V Shareholding particulars of other listed companies
Unit: RMB Yuan
Securities Securities Initial Percentage of Book value at Change of
Profit and
code abbreviation investment total shares of the end of this owners’ Accounting
loss during
capital this Company period equity calculation Source
the report
during the subject
period
report
18
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
period
Bank of Share
Long-term equ
601328 Communicati 2,450,179.00 0.00% 7,646,152.88 0.00 82,810.32 participati
ity investment
ons on
Huadong Share
Long-term equ
000963 Medicine 39,851.86 0.02% 2,222,136.93 0.00 -787,407.40 participati
ity investment
Co., Ltd on
Total 2,490,030.86 - 9,868,289.81 0.00 -704,597.08 - -
VI Shareholding particulars of non-listed financial enterprises
Unit: RMB Yuan
Company name Initial Holding Percenta Book Profit
Change of
investment quantity ge of value at and
owners’
capital total the end loss Accounting
equity Sourc
shares of of this during calculation
during the e
this period the subject
report
Company report
period
period
Shar
Long-term eq e
China Resources Bank of
uity investme partici
Zhuhai Co., Ltd
nt patio
20,000,000 20,000,000 1.5065% n
Shar
177,348 Long-term eq e
Guangdong Development
177,348.84 68,854 0.0004% uity investme partici
Bank Co., Ltd .84
nt patio
n
177,348
Total - -
20,177,348.84 - - .84
Note: with the approva of China Banking Regulatory Commission and Zhuhai Administration of Industry and
Commerce, on April 11, 2011, the former “Zhuhai City Commercial Bank” was formally renamed as “China Resources
Bank of Zhuhai Co., Ltd”.
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
January to June 2011 January to June 2010
Percentage of
Name of Associated Parties Similar Percentage of Similar
Amount Amount
Transaction Transaction Amount (%)
Amount (%)
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 7,083.49 0.00% 968.11 0.00%
19
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Shenzhen Taitai Pharmaceutical
Company Limited - - 16,683.76 0.00%
Total 7,083.49 0.00% 17,651.87 0.00%
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
January to June 2011 January to June 2010
Percentage of
Percentage of
Name of Associated Parties Similar
Amount Amount Similar Transaction
Transaction
Amount (%)
Amount (%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 184,089.42 0.04% 3,413.33 0.00%
Shenzhen Haibin Pharmaceutical Co.,
Ltd 7,351,495.73 1.49% 3,365,226.50 0.51%
Shenzhen Taitai Pharmaceutical
Company Limited 0 0.00% 153,384.00 0.02%
Joincare pharmaceutical Group
Industry Co., Ltd 53,914.53 0.01% 14,974.36 0.00%
Jiaozuo Joincare Pharmaceutical 133,243,850.2
Group Industry Co., Ltd 52,180,106.84 10.61% 7 20.08%
136,780,848.4
Total 59,769,606.52 12.15%
6 20.61%
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
January to June 2011 January to June 2010
Percentage of
Percentage of
Name of Associated Parties Similar
Amount Amount Similar Transaction
Transaction
Amount (%)
Amount (%)
Guangdong Blue Treasure 5,003,733.6 3,401,805.2
Pharmaceutical Co. Ltd 3 66.47% 2 53.16%
The prices for water, electricity and power supplied to Guangdong Blue Treasure
Pharmaceutical Co. Ltd. will be calculated at the fair prices.
4. Leasing of Assets
Unit: RMB Yuan
20
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
January to June 2011 January to June 2010
Percentage of Percentage
Name of Associated Parties Similar of Similar
Amount Amount
Transaction Transaction
Amount (%) Amount (%)
Zhuhai Joincare Pharmaceutical
6.85%
Group Industry Co., Ltd 54,146.88 3.58% 51,714.00
Health Pharmaceutical (China) Co.,
6.61%
Ltd 49,974.00 3.31% 49,974.00
Total 104,120.88 6.89% 101,688.00 13.46%
The leasing prices to the associated companies will be calculated at the fair prices.
5. Payments for renting
Unit: RMB Yuan
January to June 2011 January to June 2010
Percentage of Percentage
Name of Associated Parties Similar of Similar
Amount Amount
Transaction Transaction
Amount (%) Amount (%)
Joincare pharmaceutical Group
-
Industry Co., Ltd 453,287.80 100% -
Total 453,287.80 100% - -
The prices of renting the assets from 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) Transfer of associated claims and debts
Unit: RMB Yuan
21
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Provision of funds to Funds that the associated
associated party party paid to listed company
Associated party
Amount Balance Amount Balance
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 3,373,648.85 7,531,606.09 - -
Jiaozuo Joincare Pharmaceutical
Group Industry Co., Ltd -44,741.25 0.00
Total 3,373,648.85 7,531,606.09 -44,741.25 0.00
Including: during the report period, the capital amount that the listed companies provided
to the controlling shareholders and their subcompanies was RMB 0 Yuan and the
balance was RMB 0 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 (without the report issued
by the accountants form)
In accordance with the requirements of the Notice of Improving Disclosure Work of 2011
Semi-Annual Report of Listed Companies (Shen Zheng Shang [2011] No. 193) 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, 2011, the balance of capitals used by the controlling shareholder and other
associated parties amount to RMB 7,531,606.09 Yuan. The joint company Guangdong
Blue Treasure Pharmaceutical Co. Ltd uses a capital of RMB 7,531,606.09 Yuan
(meanwhile, the Company should pay 215,384.62 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 2011 accumulatively reaches RMB
5,857,176.53 Yuan. The accumulated amount of capitals used by the controlling
shareholder Joincare pharmaceutical Group Industry Co., Ltd and its subcompanies
Health Pharmaceutical (China) Co., Ltd and Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd from January to June 2011 reaches RMB 565,696.36 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
22
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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, 2011, 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 Occurrence Balance at the Guarantee Guaranty type Period
Guarantee Date end of period Amount
Actual guarantee
(Signing
amount
date of
agreement)
Livzon 0
Joint and
Syntpharm
several
Co., Ltd in 2008.1.8 0 4,100
liability
Zhuhai Bonded 2008.1.8-2011.1.8(Zhuhai
guaranty
Area Branch of Bank of China)
Lida 0
Joint and
Pharmaceutical
several
Co., Ltd in 2008.1.8 0 1,900
liability
Zhuhai Bonded 2008.1.8-2011.1.8(Zhuhai
guaranty
Area Branch of Bank of China)
0 Joint and
Zhuhai Livzon
several
Reagent Co., 2010.3.28 0 2,000
liability 2011.3.28-2014.3.28(Zhuhai
Ltd
guaranty Branch of Bank of China)
Joint and
Zhuhai Livzon 2009.7.15-2012.7.15
662 several
Reagent Co., 2009.7.15 0 0 (Zhuhai Branch of Standard
（USD100） liability
Ltd Chartered Bank)
guaranty
0 Joint and
Zhuhai Livzon
several
Medicine Trade 2008.1.8 0 400
liability 2008.1.8-2011.1.8(Zhuhai
Co., Ltd
guaranty Branch of Bank of China)
0 Joint and
Zhuhai Livzon
several 2009.7.20-2012.7.20(Zhuhai
Medicine Trade 2009.7.20 0 1,000
liability Branch of Bank of
Co., Ltd
guaranty Communications)
Livzon Joint and
Pharmaceutical several 2009.11.27-2012.11.27
2009.11.27 0 0 6,000
Factory under liability (Zhuhai Branch of
Livzon Group guaranty Agricultural Bank of China)
Livzon Joint and 2009.9.10-2012.9.10
Pharmaceutical several (Zhuhai Branch of
2009.9.10 0 0 6,000
Factory under liability Shenzhen Development
Livzon Group guaranty Bank)
23
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Livzon Joint and
2011.5.17-2014.5.17
Pharmaceutical several
2011.05.13 0 0 16,000 (Zhuhai Branch of Xiamen
Factory under liability
International Bank)
Livzon Group guaranty
Livzon Joint and
2009.8.21-2012.8.21
Pharmaceutical several
2009.8.21 0 0 5,000 (Zhuhai Branch of Bank of
Factory under liability
Communications)
Livzon Group guaranty
Livzon Joint and
2010.12.14-2018.12.14
Pharmaceutical several
2010.12.23 50 50 32,000 (Zhuhai Branch of Bank of
Factory under liability
Communications)
Livzon Group guaranty
Livzon Joint and
Pharmaceutical several 2010.6.12-2018.6.03
2009.10.15 0 4,559.61 12,000
Factory under liability (Zhuhai Branch of Bank of
Livzon Group guaranty China)
Livzon 8,316 Joint and
Pharmaceutical 2,494.86 2,494.86 several 2010.5.13-2013.5.13
2010.05.13 （HKD
Factory under （HKD3,000） （HKD3,000） liability (Shenzhen Branch of
Livzon Group 10,000） guaranty Nanyang Commercial Bank)
Livzon 1,676.55 1,676.55 Joint and
2010.11.22-2013.2.22
Pharmaceutical （HKD2,016） （HKD2,016） 3,236 several
2010.11.22 Guangzhou Branch of
Factory under 1,703.02 （USD500） liability
0 Societe Generale
Livzon Group （HKD2,016） guaranty
Total guaranty amount to its controlling
subcompanies in the report period 10,484.04
Total balance of guaranty amount to its
controlling subcompanies in the report period 4,221.41
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 104.8404 million Yuan. By June 30, 2011, the balance is RMB
42.2141 million Yuan, accounting for 1.56% of the net asset of the Company at the
middle of 2011.
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 26th
meeting of the 6th Board of Directors and the 2010 annual 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.
24
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
X 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 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.
XI. 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 (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
25
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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).
(II) Commitments of shareholders holding over 5% of total shares of the company
The controlling shareholder Joincare of the Company makes the following commitments
at the time of handling the release of trading restriction: 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 first 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. Issuing of short-term financing bonds
On July 30, 2010, the 2010 second temporary shareholders’ meeting examined and approved the
Proposal of the Company on Applying for the Issuing of the Short-Tem Financing Bonds. In February
2011, the company received the Notice about Registration Acceptance (Zhong Shi Xie Zhu [2011] No.
CP15) from the National Association of Financial Market Institutional Investors, and the association
determined to accept the registration of short-term financing bonds with the total registered amount
of no more than RMB 800 million Yuan; the validity period of registration is two years from the issuing
of notice. The agricultural bank of China Limited will act as the principal underwriter.
The company successfully issued two installments of short-term financing bonds with
the financing amount of RMB 400 million Yuan on March 3, 2011 and June 29, 2011
respectively.
XIII. The 2011 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
26
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 Reception Objects Discussion topics and provided
place mode materials
Office building Local
January 18, 2011 of the investigati CLSA Asia-Pacific Markets Operation status of the Company
Company on
Office building Local Operation status of the Company
Franklin Templeton Sealand
January 18, 2011 of the investigati
Fund Management Co., Ltd
Company on
Office building Local Operation status of the Company
UBS SDIC Fund Management
January 18, 2011 of the investigati
Co., Ltd
Company on
Network
Quanjing Network forum about 2010
March 22, 2011 communic All investors
website annual report
ation
Office building Local Operation status of the Company
May 25, 2011 of the investigati Guosen Securities Co., Ltd
Company on
May 25, 2011 Office building Local Operation status of the Company
of the investigati Wanlian Securities Co., Ltd
Company on
May 25, 2011 Office building Local Operation status of the Company
Huatai United Securities Co.,
of the investigati
Ltd
Company on
Office building Local Operation status of the Company
June 8, 2011 of the investigati Guangfa Securities Co., Ltd
Company on
Office building Local Operation status of the Company
Bosera Funds Management Co.,
June 8, 2011 of the investigati
Ltd
Company on
Interactive
Network
platform of Forum about the performance of
June 16, 2011 communic All investors
investor 2010 annual report
ation
relationship
XVI. Indexes of temporary announcement disclosure during the report period
No.
Announcement name Newspaper name Disclosure
date
Announcement about obtaining the approval of issuing the Securities Times and
1 short-term financing bonds China Securities 2011.02.15
Journal
Announcement about relevant news report of the company The same as above
2 controlling its subcompanies issued by the website of Shanghai 2011.02.18
Health Bureau
th
Announcement about the resolution passed at the 12 meeting The same as above
3 th 2011.02.26
of the 6 Board of Directors
4 Notice about convening the 2010 annual shareholders’ meeting The same as above 2011.02.26
27
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
th
Announcement about the resolution passed at the 12 meeting The same as above
5 th 2011.02.26
of the 6 Board of Supervisors
Announcement about the company issuing the first installment of The same as above
6 2011.02.26
short-term financing bonds in 2011
Announcement about providing the financing guaranty to The same as above
7 2011.02.26
controlled subcompanies
8 Announcement about routine associated transactions in 2011 The same as above 2011.02.26
Announcement about the details of issuing the first installment of The same as above
9 2011.03.08
short-term financing bonds in 2011
Announcement about convening the on-line forum about 2010 The same as above
10 2011.03.19
annual report and communication meeting of investors
Announcement about the resolution passed at the 2010 annual The same as above
11 2011.03.26
shareholders’ meeting
12 Announcement about implementing the dividend distribution The same as above 2011.05.20
13 Announcement about external investments The same as above 2011.05.31
th
Announcement about the resolution passed at the 28 meeting The same as above
14 th 2011.05.31
of the 6 Board of Directors
15 Announcement about amendment The same as above 2011.06.01
th
Announcement about the resolution passed at the 14 meeting The same as above
16 th 2011.06.14
of the 6 Board of Supervisors
th
Announcement about the resolution passed at the 29 meeting The same as above
17 th 2011.06.14
of the 6 Board of Directors
Notice about Convening the First Temporary Shareholders’ The same as above
18 2011.06.14
Meeting in 2011
Announcement about the company issuing the second The same as above
19 2011.06.25
installment of short-term financing bonds in 2011
th
Announcement about electing the staff supervisors of the 7 The same as above
20 2011.07.01
Board of Supervisors
st
Announcement about the resolution passed at the 1 meeting of The same as above
21 th 2011.07.01
the 7 Board of Supervisors
st
Announcement about the resolution passed at the 1 meeting of The same as above
22 th 2011.07.01
the 7 Board of Directors
Announcement about the resolution passed at the 2011 first The same as above
23 2011.07.01
temporary shareholders’ meeting
All above information is disclosed in Juchao website (http://www.cninfo.com.cn/).
28
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Section 7 Financial Report
(This report has not been audited.)
Consolidated Balance Sheet
2011年6月30日
Kuai He Statement No. 01
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
Balance at the end of Balance at the Balance at the end Balance at the
Liabilities and shareholders' equities Note
Assets Note period beginning of period of period beginning of period
Current assets: Current liabilities:
Currency capital V.1 1,272,470,125.35 863,931,857.59 Short-term loans V.21 208,064,202.03 207,460,286.80
Tradable financial assets V.2 56,611,074.14 57,865,790.18 Tradable financial liability
Notes receivable V.3 217,196,133.04 232,945,814.77 Notes payable
Accounts receivable V.4 516,641,668.76 438,763,726.58 Accounts payable V.22 180,249,368.13 164,677,954.49
Advance money V.5 92,973,071.03 67,922,719.62 Advance accounts V.23 18,033,101.84 21,127,228.70
Interests receivable Payroll payable V.24 47,754,336.74 51,323,701.39
Dividend receivable Tax payable V.25 76,279,216.36 83,837,811.52
Other receivables V.6 44,890,195.55 44,079,280.01 Interests payable
Inventory V.7 428,331,735.09 450,214,441.42 Dividend payable V.26 2,531,984.46 2,531,984.46
Non-current assets due within
V.27 373,096,460.16 323,855,124.01
one year Other accounts payable
Other current assets Non-current liabilities due within one year V.28 400,000.00 70,400,000.00
Total of current assets 2,629,114,002.96 2,155,723,630.17 Other current liabilities V.29 400,000,000.00
Non-current assets: Total of current liabilities 1,306,408,669.72 925,214,091.37
Saleable financial assets V.8 9,868,289.81 10,572,886.89 Non-current liabilities
Investment heldto the maturity
V.30 1,200,000.00 66,796,116.23
date Long-term loan
Long-term accounts receivable Bonds payable
Long-term equity investment V.10 44,447,887.04 45,920,620.54 Long-term accounts payable
Real estate for Investment Special accounts payable
Fixed assets V.11 1,019,256,445.22 803,942,036.05 Deferred profit V.31 33,740,035.07 28,556,183.49
construction V.12 156,828,333.66 317,906,371.50 Anticipation liability
Engineering goods V.13 3,869,110.89 25,195,844.94 Liabilities with the deferred income taxes V.32 2,103,306.41 2,274,648.21
Liquidation of fixed assets Other non-current liabilities
Production biology assets Subtotal of non-current liabilities 37,043,341.48 97,626,947.93
Oil and gas assets Total of liabilities 1,343,452,011.20 1,022,841,039.30
Intangible assets V.14 170,744,466.71 163,772,276.26 Shareholders’ equities:
Development expenses V.15 4,332,137.81 4,332,137.81 Share capital V.33 295,721,852.00 295,721,852.00
Goodwill V.16 103,040,497.85 103,040,497.85 Capital reserve V.34 347,837,742.21 348,436,179.34
Long-term deferred and
V.17 8,465,921.27 8,640,218.34
prepaid expenses Minus: treasury share
Assets with deferred income
V.18 25,663,210.21 22,945,107.60 V.35 443,274,429.10 443,274,429.10
taxes Surplus reserve
Other non-current assets Undistributed profit V.36 1,638,074,671.34 1,446,714,876.09
Subtotal of non-current 1,546,516,300.47 1,506,267,997.78 Conversion difference of foreign -18,728,607.46 -16,709,226.29
assets currency financial statements
Subtotal of equities attributable to the
2,706,180,087.19 2,517,438,110.24
shareholders of parent company
V.37 125,998,205.04 121,712,478.41
Equities of the minority of shareholders
Subtotal of shareholders’ equities 2,832,178,292.23 2,639,150,588.65
Total of liabilities and shareholders ’
Total of assets 4,175,630,303.43 3,661,991,627.95 4,175,630,303.43 3,661,991,627.95
equities
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
29
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Consolidate Profit Statement
January to June 2011
Kuai He 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
V.38 1,471,437,500.63 1,322,769,589.74
I. Total operating income
V.38 1,471,437,500.63 1,322,769,589.74
Including: operating income
II. Total operating cost 1,209,582,539.66 1,030,891,476.80
V.38 677,093,407.27 635,764,128.75
Including: operating cost
V.39 18,332,023.55 3,027,629.54
Operating tax and surtax
383,909,416.26 285,200,131.05
Sales expense
129,567,315.75 99,189,243.03
M anagement expense
V.40 -5,259,139.19 769,520.60
Financial expense
Loss from asset depreciation V.41 5,939,516.02 6,940,823.83
Plus: returns from the changes of fair values (the
V.42 43,870.70 -2,151,436.68
loss is listed beginning with “-”).
Investment returns (the loss is listed beginning
with “-”). V.43 -654,572.56 -384,976.08
Including: the investment returns from the
-1,472,733.50 -2,007,910.04
associated enterprises and joint enterprises
III. Operating profit (the loss is listed beginning
261,244,259.11 289,341,700.18
with “-”)
Plus : non-operating income V.44 22,250,983.03 10,547,638.43
V.45 254,085.94 1,485,565.96
M inus: non-operating payments
60,007.09 498,732.12
Including: loss in the disposal of non-current assets
IV. Total profit (the loss is listed beginning with
“-”) 283,241,156.20 298,403,772.65
V.46 47,000,861.44 40,603,599.80
M inus: income tax expense
V. Net profit (the loss is listed beginning with “-
236,240,294.76 257,800,172.85
”)
Net profit attributable to the owners of parent
220,861,695.59 241,480,232.98
company
15,378,599.17 16,319,939.87
Profit and loss of the minority of shareholders
VI. Profit per share:
(I) Basic profit per share 0.75 0.82
0.75 0.82
(II) Diluted profit per share
V.47 -2,618,288.69 -3,501,761.40
VII. Other comprehensive profit
233,622,006.07 254,298,411.45
VIII. Total amount of comprehensive profit
Subtotal of comprehensive profits attributable to
218,243,406.90 237,978,471.58
the owners of parent company
Subtotal of comprehensive profits attributable to
15,378,599.17 16,319,939.87
the minority of shareholders
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
30
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Consolidated Cash Flow Sta tement
Janua ry to Jun e 2011
Kua i He S ta te ment No. 03
P r epa re d b y: Livzo n P ha rm ac eutic al Group I nc. Unit: RM B Y uan
It em N ote Amou nt in this pe riod Amou nt in same pe riod of pre vious year
I. Cash flow s f rom op er ating ac tivities
Ca sh r ec eive d f rom sa les of goods or re nde ring of servic es 1,450,643,478.21 1,353,947,866 .59
T ax re funding 5,144,588.34 3,693,777 .53
Ca sh r ec eive d r ela te d to othe r ope ra ting ac tivitie s V .4 8 52,955,778.77 36,710,341 .97
Subtota l of c ash inflow fr om the ope ra ting a ctivities 1,508,743,845.32 1,394,351,986 .09
Ca sh p aid for pur cha se of goods or re ce iving of se rvic es 466,400,482.54 473,282,374 .99
Ca sh p aid to a nd on b eha lf o f e mployee s 131,372,853.32 127,975,843 .40
T ax paymen ts 232,994,965.21 187,495,967 .26
O ther c ashe s pa id to ope ra ting a ctivities V .4 9 385,321,063.48 303,662,047 .31
Subtota l of c ash outflow fr om ope rating ac tivitie s 1,216,089,364.55 1,092,416,232 .96
N et c ash flow f rom ope rat ing ac tivities 292,654,480.77 301,935,753 .13
II. C ash flow f rom inve stme nt ac tivitie s:
Ca sh r ec eive d f rom d isp osal of in vestments -
Ca sh r ec eive d f rom inve stment retur ns 805,602.61 691,866 .86
N et c ash r ece ived f rom disposa l o f fixed a ssets, in ta ngible
516,000.00 2,715,506 .00
a ssets and othe r long-te rm a ssets
N et ca sh r ec eive d in disposa l of the subc ompanie s a nd
-
o th er ope ra tin g un its
Ca sh r ec eive d r ela te d to othe r investmen t ac tivitie s
Subtota l of c ash inflow fr om the inve stme nt a ctivities 1,321,602.61 3,407,372 .86
Ca sh paid to a cq uire a nd c onstruc t fixed a ssets, in ta ngible 108,535,578.28 189,719,682 .37
a ssets and othe r long-te rm a ssets
Ca sh p aid to a cquir e investments - 810,099 .00
N et ca sh pa id to a cquir e the subc omp anie s a nd o th er
-
o per ating units
Ca sh p aid rela ted to o ther inve stm e nt a ctivitie s -
Subtota l of c ash outflow fr om inve stme nt a ctivities 108,535,578.28 190,529,781 .37
N et amoun t of c ash flow r ec eive d fr om th e invest men t
-1 07,213,975.67 -18 7,12 2,40 8.5 1
ac tivitie s
III. C ash flow f rom financ ing act ivities:
Ca sh r ec eive d f rom inve stors 11,270,000.00 9,800,000 .00
Ca sh f rom lo ans 69,254,604.00 230,434,284 .17
Ca sh f rom th e issuing of shor t-ter m fina ncing bon ds 400,000,000.00
Ca sh r ec eive d r ela te d to othe r fina ncing ac tiv itie s V .5 0 6,200,000.00 1,186,821 .82
Subtota l of c ash inflow fr om the fina nc in g a ctivitie s 486,724,604.00 241,421,105 .99
Re paymen ts of loan s 199,758,400.34 173,711,714 .81
Ca sh pa id for distribution o f divide nds, prof its and
54,832,030.36 49,565,891 .72
r epa yment of intere sts
I nclud ing: the divide nds and pro fits pa id to the m inority
22,359,672.00
o f sh are holde rs by the sub compa nies
Ca sh p ayments re la ted to other fina nc in g a ctivitie s V .5 1 1,600,000.00 1,345,000 .00
Sub- total of ca sh ou tf low f rom th e finan cing ac tivities 256,190,430.70 224,622,606 .53
N et ca sh f lo w f rom financ ing activities 230,534,173.30 16,798,499 .46
IV . Ef fe ct of fo reign exc hange f lu ct uat ion on cash and
- 1,236,410.64 -84 9,97 8.3 8
c ash e qu ivale nt s
V . Ne t inc re ase of c ash and c ash equ iva lents 414,738,267.76 130,761,865 .70
Plus: Ba lanc e of c ash and c ash equ iva lents at the
844,481,857.59 558,262,596 .74
b eginning of the pe riod
V I B alan ce of c ash and c ash eq uivale nt s at t he en d of
1,259,220,125.35 689,024,462 .44
t he p e riod
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
31
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Consolidated Change Statement of Shareholders’ Equities
January to June 2011
Kuai He Statement No. 04
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
January to June 2010
Equities attributable to shareholders of parent company Equities of the
Item Total of Shareholders’
Conversion Minority of
Minus: treasury Equities
Share capital Capital reserve Surplus Reserve Undistributed Profit difference of foreign Shareholders
shares
currency
I. Balance at the end of p reviou s year 295,721,852.00 348 ,436,179 .34 44 3,27 4,429.10 1,446,714,876.09 -16,709,2 26.2 9 12 1,712,47 8.41 2,639,150,588.65
Plus: changes of accou nting policies
Correction of errors in the early stage
II. Balance at the beginning of this year 295,721,852.00 348 ,436,179 .34 44 3,27 4,429.10 1,446,714,876.09 -16,709,2 26.2 9 12 1,712,47 8.41 2,639,150,588.65
III. Increase or decrease of change amount -598,437 .13 191,359,795.25 -2,019,3 81.1 7 4,285,726.63 193,027,703.58
(I)Net profit 220,861,695.59 1 5,378,599.17 236,240,294.76
(II) Other comprehensive gains -598,437 .13 -2,019,3 81.1 7 -2,617,818.30
1．Net change of fair values of saleab le financial assets -704,597 .08 -704,597.08
2．Effect of changes of other shareholders' equities of
invested units u nder the equity metho d
3．Effect of income tax related to the items that are accrued to
105,689 .56 105,689.56
shareholder equity
4．Others
Subtotal of (I) and (II) -598,437 .13 220,861,695.59 -2,019,3 81.1 7 1 5,378,599.17 233,622,476.46
(III) Increase and decrease of capitals by the shareho lders 1 1,270,000.00 11,270,000.00
1.Cap ital investment by owners 1 1,270,000.00 11,270,000.00
2. Repurchase of treasury shares in the year
3．Others
(IV) Profit distribution -29,501,900.34 -2 2,362,872.54 -51,864,772.88
1．Withdrawal of surplus reserve
2. Withdrawal of general risk reserve
3．Distribution to shareholders -29,501,900.34 -2 2,362,872.54 -51,864,772.88
4．Others
(V) Internal settlement and transfer of owners’ equities
1. Transfer o f cap ital reserve to share capital
2. Transfer o f surplus reserve to share capital
3. Surplus reserve makes up for the loss
4．Others
IV. Others 470 .39 470.39
V. Balance at the end of this year 295,721,852.00 347 ,837,742 .21 44 3,27 4,429.10 1,638,074,671.34 -18,728,6 07.4 6 12 5,998,20 5.04 2,832,178,292.23
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
32
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Consolidated Change Statement of Shareholders’ Equities
2010
Kuai He Statement No. 04
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
2010
Item Equities attributable to shareholders of parent company
Conversion difference of the Minority of Shaal of Shareholders’ Equi
Share capital Capital reserve Minus: treasury shar Surplus Reserve Undistributed Profit
of foreign currency
I. Balance at the end of p reviou s year 295,721,852.00 350 ,946,175 .64 - 40 1,45 6,345.99 1,114,710,405.94 -13,749,9 43.5 4 7 6,373,707.00 2,225,458,543.03
Plus: changes of accou nting policies
Correction of errors in the early stage
II. Balance at the beginning of this year 295,721,852.00 350 ,946,175 .64 - 40 1,45 6,345.99 1,114,710,405.94 -13,749,9 43.5 4 7 6,373,707.00 2,225,458,543.03
III. Increase or decrease of change amount - -2 ,671,811 .30 - 4 1,81 8,083.11 332,004,470.15 -2,959,2 82.7 5 4 5,338,771.41 413,530,230.62
(I)Net profit 418,180,831.06 3 4,309,210.41 452,490,041.47
(II) Other comprehensive gains -2 ,671,811 .30 -2,959,2 82.7 5 -5,631,094.05
4．其他 -
Subtotal of (I) and (II) -2 ,671,811 .30 418,180,831.06 -2,959,2 82.7 5 3 4,309,210.41 446,858,947.42
(III) Increase and decrease of capitals by the owners - - - 2 0,328,185.00 20,328,185.00
1.Cap ital investment by shareholders 2 0,328,185.00 20,328,185.00
2. Repurchase of treasury shares in the year -
3．Others -
(IV) Profit distribution 4 1,81 8,083.11 -86,176,360.91 -9,298,62 4.00 -53,656,901.80
1．Withdrawal of surplus reserve 4 1,81 8,083.11 -41,818,083.11
2. Withdrawal of general risk reserve
3．Distribution to shareholders -44,358,277.80 -9,298,62 4.00 -53,656,901.80
4．Others
(V) Internal settlement and transfer of owners’ equities
1. Transfer o f cap ital reserve to share capital
2. Transfer o f surplus reserve to share capital
3. Surplus reserve makes up for the loss
4．Others
IV. Others 161,815 .00 161,815.00
V. Balance at the end of this year 295,721,852.00 348 ,436,179 .34 - 44 3,27 4,429.10 1,446,714,876.09 -16,709,2 26.2 9 12 1,712,47 8.41 2,639,150,588.65
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
33
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Balance Sheet
June 30 , 2011
Kuai Qi Statemen t No. 01
Prepared b y: Livzo n Pharmaceutical Group Inc. Unit: RMB Yuan
Balance at the Balance at the
Balance at the end Balance at the end
Assets Note beginning of Liabilities and shareholders' equitie N ote beginning of
of perio d of period
period period
Current assets: Curren t liabilities:
Currency capital 1,148,705,774.07 6 81,8 78,7 97.62 Short-term loan s 8 4,85 1,3 82.8 3 101,583,700.00
T rad able financial assets Tradable financial liability
Notes receivable 53,738,835.82 36,9 43,0 41.55 N otes payable
Accounts receivable V I.1 202,509,321.01 1 78,7 46,5 80.44 Acco unts payable 27 1,59 5,7 26.3 5 200,455,422.69
Advance money 10,244,393.04 4,1 11,9 99.69 Ad vance accou nts 7,44 7,4 82.8 9 8,250,583.82
Interests receivable Payroll payable 1 9,03 0,2 09.7 6 15,430,849.29
Dividend receivable Tax p ayab le 1 7,06 6,6 91.6 0 9,358,777.21
Other accounts receivable V I.2 295,544,733.42 3 85,7 77,1 56.54 Interests payable
Inventory 98,444,654.26 71,3 49,2 71.13 D ividend payable 2 0,1 74.4 6 20,174.46
Non-curren t assets due within one
O th er acco unts p ayab le 85 0,16 4,2 06.7 8 781,235,594.73
year
N on-current liabilities du e with in
Other current assets - 70,000,000.00
on e year
Total of current assets 1,809,187,711.62 1,3 58,8 06,8 46.97 O th er current liabilities 40 0,00 0,0 00.0 0
Non-curren t assets: Total of current liabilities 1 ,65 0,17 5,8 74.6 7 1,186,335,102.20
Saleab le financial assets 9,868,289.81 10,5 72,8 86.89 N on-current liabilities
Investment held to the maturity date Lo ng-term loan - 20,000,000.00
L ong-term accounts receivable Bond s payable
L ong-term equity investment V I.3 1,235,270,412.59 1,1 31,2 59,2 64.48 Lo ng-term accounts p ayab le
Real estate for Investment Special accou nts payable
Fixed assets 88,447,251.19 88,3 79,9 27.98 D eferred pro fit 1 3,12 2,1 91.0 7 10,453,489.34
E ngineering under con struction An ticipation liability
Liabilities with the deferred income
E ngineering goods 1,10 6,7 38.8 4 1,212,428.40
taxes
L iq uidation of fixed assets O th er non -cu rrent liabilities
Productio n biology assets Subto tal of non-current liabilities 1 4,22 8,9 29.9 1 31,665,917.74
Oil and gas assets Total of liabilities 1 ,66 4,40 4,8 04.5 8 1,218,001,019.94
Intang ib le assets 32,550,417.40 32,6 57,2 47.08 Shareh olders’ equities:
Development expenses 1,289,662.78 1,2 89,6 62.78 Share capital 29 5,72 1,8 52.0 0 295,721,852.00
Goodwill Capital reserve 33 8,48 6,2 60.1 4 339,085,167.66
L ong-term d eferred and prepaid
Minu s: treasury share
expenses
Assets w ith deferred income taxes 11,892,876.00 11,5 50,3 35.20 Surplus reserve 26 0,71 2,6 90.1 1 260,712,690.11
Other no n-current assets U ndistributed profit 62 9,18 1,0 14.5 6 520,995,441.67
Subtotal of non-current assets 1,379,318,909.77 1,2 75,7 09,3 24.41 Subto tal of shareholders’ equities 1 ,52 4,10 1,8 16.8 1 1,416,515,151.44
Total of liabilities and
To tal of assets 3,188,506,621.39 2,6 34,5 16,1 71.38 3 ,18 8,50 6,6 21.3 9 2,634,516,171.38
shareholders’ equities
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
34
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Profit Statement
January to Ju ne 2011
Kuai Qi Statement No. 02
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
Amount in same period of
Item Note Amount in this period
previous year
I. Operating income VI.4 595,079,834.80 481,964,296.84
M in us: operating cost VI.4 361,595,561.74 230,333,698.66
Operating tax and surtax VI.5 4,213,110.4 3 75,000.00
Sales expense 146,279,281.99 158,641,758.26
M anagement expense 43,761,660.42 40,170,611.01
Financial expense -8,559,937.8 1 184,650.88
Loss from asset depreciation 2,323,249.4 1 1,316,441.24
Plus: returns from the changes of fair values (the loss is listed
beginning with “-”).
Investment returns (the loss is listed beginning with “-”). VI.6 98,841,956.11 -1,323,857.59
Including: the investment returns from the associated enterprises and
-1,035,051.8 9 -1,474,087.06
joint enterprises
II. Operating profit (the loss is listed beginning with “-”) 144,308,864.73 49,918,279.20
Plus : non-operating income 258,629.31 7,012,509.26
M in us: non-operating payments 25,408.59 837,939.92
Including: loss in the disposal of non-current assets 5,592.48 4,434.98
III. Total profit (the loss is listed beginning with “-”) 144,542,085.45 56,092,848.54
M in us: income tax expense 6,854,612.2 2 8,517,316.61
IV. Net profit (the loss is listed beginning with “-”) 137,687,473.23 47,575,531.93
V. Profit per share:
(I) Basic profit per share
(II) Diluted profit per share
VI. Other comprehensive profit -598,907.5 2 -2,757,468.30
VII. Total amount of comprehensive profit 137,088,565.71 44,818,063.63
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
35
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Cash Flow Statement
Jan uary to June 2011
Kuai Qi Statemen t No . 03
P repare d by: Livzon Pharma ceutic al Gro up Inc. Unit: RMB Y uan
Item Note Amount in thi s p eriod Amou nt in same pe riod of pre vious year
I. Cash flows from operating activities
Cash received from sales of goods or rendering of services 5 92,5 24,1 44.64 483,377 ,830 .24
Tax refunding
Cash received related to other operating activities 79,2 02,7 32.34 19,050 ,518 .26
Subtotal of cash inflow from the operating activities 6 71,7 26,8 76.98 502,428 ,348 .50
Cash p aid for purchase of goods or receiving of services 3 44,0 05,5 45.77 220,135 ,607 .83
Cash p aid to and on behalf o f employees 33,5 59,5 85.19 40,344 ,502 .42
Tax paymen ts 41,5 66,4 17.55 48,016 ,813 .96
Other cashes paid to operating activities 2 16,6 45,4 20.12 164,119 ,350 .53
Subtotal of cash outflow from op erating activities 6 35,7 76,9 68.63 472,616 ,274 .74
Net cash flow from operating activities 35,9 49,9 08.35 29,812 ,073 .76
II. Cash flow from investment activities:
Cash received from disp osal of in vestments
Cash received from investment returns 150 ,229 .47
Net cash received from disposal of fixed assets, intangible assets and
1 87,095.00
o th er long-term assets
Net cash received in disposal of the subcompanies and other op erating
u nits
Cash received related to other investmen t activities 99,8 77,0 08.00
Subtotal of cash inflow from the investment activities 1 00,0 64,1 03.00 150 ,229 .47
Cash paid to acq uire an d co nstruct fixed assets, intangible assets and
10,2 15,0 57.50 18,621 ,078 .94
o th er long-term assets
Cash p aid to acquire investments 810 ,099 .00
Net cash paid to acquire the subcomp anies and o th er operatin g un its 1 05,7 30,0 00.00 10,200 ,000 .00
Cash p aid related to other investment activities 70,499.95
Subtotal of cash outflow from investment activities 1 16,0 15,5 57.45 29,631 ,177 .94
Net amount of cash flow received from the investment activities -15,9 51,4 54.45 -29,480 ,948 .47
III. Cash flow from financing activities:
Cash received from investors
L oans f rom su bcompan ies 1 96,5 40,3 33.08 149,273 ,100 .57
C ash fr om loa ns 26,9 85,7 44.00 127,396 ,650 .00
C ash fr om the issuin g of s hort-t erm fi nancing bonds 4 00,0 00,0 00.00
Cash received related to other financing activities 1,187 ,447 .18
Subtotal of cash inflow from the financin g activities 6 23,5 26,0 77.08 277,857 ,197 .75
Repayments of loan s 1 31,9 42,6 00.11 109,836 ,600 .00
Cash paid fo r distrib utio n of dividends, profits and repayment of
36,9 44,8 58.54 47,825 ,998 .43
interests
L oans p aid to subcom panies
Cash p ayments related to other financing activities 1,6 00,0 00.00 1,345 ,000 .00
Sub-total of cash ou tflow from the financing activities 1 70,4 87,4 58.65 159,007 ,598 .43
Net cash flow from financing activities 4 53,0 38,6 18.43 118,849 ,599 .32
IV. Effect of foreign exchange fluctuation on cash and cash
-10,0 95.88 -118 ,503 .68
equivalents
V. Net increase of cash and cash equivalents 4 73,0 26,9 76.45 119,062 ,220 .93
Plus: Balance of cash and cash equiv alents at the beg inning of the
6 62,4 28,7 97.62 418,389 ,049 .61
period
VI Balance of cash and cash equiv alents at the end of the period 1,1 35,4 55,774.07 537,451 ,270 .54
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Change Statement of Shareholders’ Equities
January to June 2011
Kuai Q i Statement No. 04
Prepared by: Livzon Pharmaceuti cal Group Inc. Unit: RMB Yuan
January to June 2011
Item N ote Minus: treasury Total of Shareholders’
Share capital Capital reserve Surplus Reserve U ndistributed P rofit
shares Equities
I. Balance at the end of previous year 29 5,7 21,8 52.0 0 339,085,167.66 260,712,690.11 520,995,441.67 1,416,515 ,151 .44
Plus: changes of accou ntin g policies
Correction of errors in the early stage
II. Balance at the beginning of this year 29 5,7 21,8 52.0 0 339,085,167.66 260,712,690.11 520,995,441.67 1,416,515 ,151 .44
III. Increase or decrease of change amount(the loss
-598,907.52 108,185,572.89 107,586 ,665 .37
is listed beg inning with “-”)
(I)Net profit in th is year 137,687,473.23 137,687 ,473 .23
(II) Other comprehensive gains -598,907.52 -598 ,907 .52
Subtotal of (I) and (II) -598,907.52 137,687,473.23 137,088 ,565 .71
(III) Increase and decrease of capitals by the
shareholders
1 .Cap ital investment by shareholders in this period
2 . Repurchase of treasury shares in the year
3 . Sh are amount th at is accrued to th e sh areholders'
equities
(IV) Profit distribution -29,501,900.34 -29,501 ,900 .34
1 . Withdrawal of surplus reserve
2 . Distribution to shareholders -29,501,900.34 -29,501 ,900 .34
3 . Others
(V) Internal settlement and transfer o f shareholders
’ equities
1 . Transfer o f cap ital reserve to share capital
2 . Transfer o f su rplus reserve to share capital
3 . Su rplus reserve makes up for the loss
4 ．Others
IV . Balance at the end of this year 29 5,7 21,8 52.0 0 338,486,260.14 260,712,690.11 629,181,014.56 1,524,101 ,816 .81
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Change Statement of Shareholders’ Equities
2010
Kuai Qi Statement No. 04
Prepared by: Livzon Pharmaceutical Group Inc. Unit: RMB Yuan
2,010.00
Item Note Kuai Qi Statement No.
Share capital Capital reserve Minus: treasury share Surplus Reserve Undistributed Profit
04
I. Balance at the end of previous year 29 5,7 21,8 52.0 0 341,756,978.96 250,810,202.23 476,231,328.56 1,364,520,361 .75
Plus: 1. changes of accounting policies
2. Correction of errors in the early stage
II. Balance at the beginning of this year 29 5,7 21,8 52.0 0 341,756,978.96 250,810,202.23 476,231,328.56 1,364,520,361 .75
III. Increase or decrease of change amount(the loss is listed
-2,671,811.30 9,902,487.88 44,764,113.11 51,994 ,789 .69
beginning with “-”)
(I)Net profit in th is year 99,024,878.79 99,024 ,878 .79
(II) Other comprehensive gains -2,671,811.30 -2,671,811 .30
Subtotal of (I) and (II) -2,671,811.30 99,024,878.79 96,353 ,067 .49
(III) Increase and decrease of capitals by the shareholders
1.Capital investment by shareholders in this period
2. Repurchase of treasury shares in the year
3 . Sh are amount th at is accrued to th e sh areholders'
equities
(IV) Profit distribution 9,902,487.88 -54,260,765.68 -44,358 ,277 .80
1 . Withdrawal of surplus reserve 9,902,487.88 -9,902,487.88
2 . Distribution to shareholders -44,358,277.80 -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
IV. Balance at the end of this year 29 5,7 21,8 52.0 0 339,085,167.66 260,712,690.11 520,995,441.67 1,416,515,151 .44
Legal representative:Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Livzon Pharmaceutical Group Inc.
Notes to Financial Statement
June 30, 2011
(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, Livzon Pharmaceutical Group Inc. (hereinafter referred to as “This Company”
or “Company”) is a limited company raising funds from targeted sources that has been sponsored by
Macau Nanyue (Group) Co., Ltd, Zhuhai Credit Cooperative, Guangdong Medicine Group Co., Ltd,
Zhuhai Medicine Company, Guangdong Medicines & Health Products IMP.& EXP. CORP, Zhuhai
branch of Bank of China, Zhuhai Guihua Staff Mutual Help Association, contributed with the net
assets of the original joint venture Co., Ltd as the shares, and raised other funds from the domestic
legal persons and internal staffs.
In 1993, approved by Yue Zheng Jian Fa Zi［1993］No. 001 document issued by Guangdong
Securities Regulatory Commission, Shen Ren Yin Fu Zi [1993］No. 239 document issued by
Shenzhen Special Economic Zone branch of the People’s Bank of China and Zheng Jian Fa Shen Zi
[1993］No. 19 document issued by China Securities Regulatory Commission, the company was listed
in Shenzhen Stock Exchange.
In 1998, the sponsoring shareholders of company including Zhuhai Credit Cooperative, Guangdong
Pharmaceutical Industry Company, Zhuhai Guihua Staff Mutual Help Association and Zhuhai branch
of Bank of China signed the Equity Transfer Agreement with China Everbright Bank (Group) Co., Ltd
and transferred all their equities to China Everbright Bank (Group) Co., Ltd. After the transfer, China
Everbright Bank (Group) Co., Ltd held 38,917,518 domestic legal person shares of the company.
The foreign-owned sponsor Macau Nanyue (Group) Co., Ltd signed the Equity Transfer Agreement
with China Everbright Medicine Co., Ltd and completely transferred 18,893,448 foreign legal person
shares to China Everbright Medicine Co., Ltd.
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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 legal person 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 the company to Joincare and handled the formalities for equity
transfer on August 3, 2006.
By June 30, 2010, Joincare Group and its holding subcompanies has owned 135,231,608 shares of
the company through the agreement transfer and direct purchase from the secondary markets,
accounting for 45.7293% 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.
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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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. Main Accounting 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, the No. 4
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 Enterprise Accounting Standards
The financial statement prepared by the company meets the requirements of the enterprise
accounting standards, and exactly and completely reflects the financial status, operation result and
cash flow, etc of the company.
(III) Accounting Period
The company employs the period of the calendar days from the January 1 to December 31 each
41
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
year as the accounting year.
(IV) Currency Used in Book-keeping
The Company takes the RMB as the currency in book-keeping.
(V) Book-keeping Basis and Pricing Principles
The accounting calculation of this company takes the accrual system as the book-keeping basis.
While making the calculation about accounting factors, in general, this company employs the
historical cost. If the accounting factor amount to be determined may be obtained and reliably
calculated, with respect to the individual accounting factors, the company employs the replacement
costs, net realizable values, present values and fair values for calculation.
(1) Calculation nature employed in this report period
In the historical cost calculation, the assets are calculated based on the amounts of cash or cash
equivalents paid for purchase or fair values of considerations paid for asset purchase; the liabilities
are calculated based on the actually received incomes or asset amounts in performing the current
obligations, or contract amounts to perform such current obligations, or the amounts of cash or cash
equivalents that are expected to be needed for repaying the liabilities in the routine activities.
Except that the financial assets and saleable financial assets employ the fair values for calculation,
the items in this statement employ the historical costs for calculation.
(2) Statement items whose calculation natures have been changed during the report period
During the report period, no calculation natures have been changed.
(VI) 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.
All direct expenses occurring for enterprise merger, including the auditing expenses, evaluation
expenses, legal service expenses paid for enterprise merger, are accrued to the current profit and
loss at the time of occurrence.
(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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 current
profit and loss (except the issuing expenses of bonds and equity instruments). 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 the consolidated
balance sheet; 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.
(VII) 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 by the Ministry of Finance in February 2006.
The combination scope of the consolidated financial statement will be determined on the basis of the
control; this financial statement consolidates the 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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 in the subcompanies exceeds the shares of owners’
equities at the beginning of the subcompanies, the balance will be offset by the minority of
shareholder equities.
(VIII) 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.
(IX) 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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
will be deemed as the change of fair values and be accrued to the current profits and losses.
(X) 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.
(XI) Confirmation and Calculation of Financial Instruments
1. Classification. The financial instruments may be classified to five categories based on the
investment purpose and economic essence:
①The financial assets or financial liabilities that are calculated in the fair values and whose changes
are accrued to the current profit and loss, including the tradable financial assets or financial liabilities;
the financial assets or financial liabilities that are designated to be calculated in the fair values and
whose changes will be accrued to the current profit and loss;
② The investments that are held to the 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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 book-keeping amount. The company employs the actual interest method, and makes the
subsequent calculation based on the amortized cost. The profits and losses after termination of
confirmation, depreciation or amortization will be accrued to the current profit and loss.
④Saleable financial assets: the sum of fair values and relevant expenses to get them will be
deemed as the initial confirmation amount. The cash dividends or bond interests in the payments
that have been declared to be distributed will be separately confirmed as the receivable items. The
interests and cash dividends generated during the holding period will be accrued to the investment
gains. At the end of the period, the saleable financial assets will be calculated in the fair values and
the changes of fair values will be accrued to the capital reserves (other capital reserves).
⑤Other 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. The profits and losses after termination of confirmation or amortization will be accrued to
the current profit and loss.
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 (including the accounts receivable and other accounts receivable)
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Confirmation standard and withdrawal method of the bad debt reserve for accounts receivable with
large individual amount:
Judgment basis or amount standard of Accounts accounting for over 10% of book values of accounts
large individual amount receivable
If the company makes the depreciation test and there are
enough evidences proving that they have been
depreciated, the bad debt reserve will be withdrawn based
Withdrawal method of bad debt reserve for on the difference between the expected cash flow values in
large individual amount the future and the book values. If the company makes the
depreciation test and finds that they have not been
depreciated, the bad debt reserve will be withdrawn in the
age analysis method in line with the credit risk combination.
Accounts receivable whose bad debt reserves are withdrawn based on the combination
Basis for combination determination The age is taken the confirmation basis of credit risk combination
Withdrawal method to withdraw the bad Age analysis method
debt reserve based on combination
Withdrawal method to withdraw the bad debt reserve for accounts receivable with the age as the
credit risk combination:
Age Withdrawal p Withdrawal
ercentage of Percentage
accounts rec
eivable
Less than one year (including one year) 5% 5%
One to two years (including two years) 6% 6%
Two to three years (including three years) 20% 20%
Three to four years (including four years) 70% 70%
Four to five years (including five years) 90% 90%
Over five years 100% 100%
For the fund transfer between the companies within the consolidation scope, no bad debt reserve
will be withdrawn.
While making the combination test, if there are the signs indicating that the recovery of some
accounts receivable are obviously different from other accounts receivable at this age and
otherwise this cannot truly reflect the recovered amount if the bad debt reserve are withdrawn,
the individual confirmation method will be employed for withdrawing the bad debt reserve.
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Accounts receivable whose individual amount is not large but whose individual bad debt reserve is
withdrawn
The confirmation basis is that the individual amount is not large
Basis for combination confirmation
but the age is over 3 years.
The company makes the single depreciation test, and the
bad debt reserve will be withdrawn based on the difference
between the expected cash flow values in the future and
Withdrawal method of bad debt reserve the book values. If the company cannot accurately forecast
the present value of cash flow in the future, the bad debt
reserve will be withdrawn in the age analysis method in line
with the credit risk combination.
For other accounts receivable (including the notes receivable, prepaid accounts, interests receivable
and long-term accounts receivable, etc), the bad debt reserve will be withdrawn based on the
difference between the expected cash flow values in the future and the book values.
For the accounts that cannot finally be recovered, report them 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 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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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.
(XII) Inventory Calculation Method
1. Inventory Classification
Inventory classification: the inventories of the company mainly include the raw materials, packaging
materials, products under production, products at stock, processing materials and low-value
consumable products, etc.
2. The company employs the perpetual inventory method.
3. Pricing method in purchasing and delivery: The purchased inventories shall be accrued at the
actual cost. The purchase and warehousing of various inventories in the company are priced based
on the actual cost; The delivery of stock commodities shall be calculated by the weighted average
method; whiling the low-value consumable products and packaging materials are taken, they will be
accrued to the cost at one time.
4. Confirmation standard and withdrawal method of inventory depreciation reserve
After the complete check about the inventories at the end of the period, the inventory depreciation
reserve will be withdrawn or adjusted based on the lower between the inventory cost and
discountable net value. The discountable net value will be determined after the deduction of the
possible cost, marketing expense and relevant taxes from the current evaluation of inventories in the
normal production and operation period. Normally, the inventory depreciation reserve will be
withdrawn in accordance with the individual inventory item, but for the large quantity of low-unit-price
inventories, the inventory depreciation reserve will be withdrawn in accordance with the inventory
type; for the inventories that are related to the product series produced and sold in the same area,
have the same or similar final usage and purposes and are hard to be separately calculated from
other items, their depreciation reserves will be consolidated.
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 1inventory depreciation reserve; the transferred amount will be accrued to the
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current profit and loss.
(XIII) 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 the controlling merger is employed and
the enterprise merger cost is more than the identifiable net asset values of such enterprises in the
merger, the difference between them will be confirmed as the goodwill in the consolidated balance
sheet. In case the enterprise merger cost is less than the identifiable net asset values of such
enterprises in the merger, the difference between them will be accrued to the current profit and loss.
All direct expenses related to the enterprise merger will be accrued to the enterprise merger cost
(except the issuing expenses of bonds and equity instruments).
(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
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expenses related to the long-term equity investment, taxes and other necessary expenses.
②In case the long-term equity investment is made by issuing the equity securities, the fair values of
issued equity securities will be deemed as the initial investment cost.
③For the long-term equity investment made by the investors, the values agreed in the investment
contracts or agreements will be deemed as the initial investment cost, except that the contracts or
agreements provide that the values are not fair.
④In case the long-term equity investment is made by exchanging the non-currency assets, and this
exchange has the commercial substance and the fair values of said assets can be reliably calculated,
the fair values of the assets and relevant taxes will be deemed as the initial investment cost; the
difference between the fair values of the assets and book values will be accrued to the current profit
and loss; in case the non-currency asset exchange does not have the above two conditions, the
book values of the assets and relevant taxes will be deemed as the initial investment cost.
⑤In case the long-term equity investment is made by the mode of liability restructure, the fair values
of the obtained equities will be deemed as the initial investment cost; the difference between the
initial investment cost and book values of liabilities will be accrued to the current profit and loss.
2. Subsequent Calculation
(1) The cost method is employed to calculate the long-term equity investment 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-term equity investment. The current investment gains are only limited to
the distributed amount of accumulative net profit generated by the investment in the invested units
since the investment completion. The profits or cash dividends exceeding the above amount that are
declared to be distributed by the invested units will be deemed as the return of initial investment cost,
deducting the book values of investments.
(3) The equity method is used to calculate the long-term equity investments in the invested units,
which are under the common control or of important impact. In employing the cost method, in line
with the net profit and loss share of invested units to be distributed or borne, confirm the profit and
loss of investments and adjust the book values of long-term equity investments. The profit and loss
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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 equity investment is less than their book values,
the difference will be confirmed as the asset depreciation losses. Once the depreciation loss of
long-term equity investment is confirmed, they will not be reversed.
(XIV) 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
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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.
(XV) Fixed Asset Pricing and Depreciation Method
1. Confirmation condition for fixed assets
The fixed assets refer to the tangible assets with the usage life of over one accounting year that are
held for commodity production, labor provision, renting or operational management The fixed assets
will be confirmed if they meet the following conditions:
(1) The economic benefits related to this fixed asset probably flow to the enterprise;
(2) The cost of this fixed asset may be reliably calculated.
2. Classification of Fixed Assets
The fixed assets may be classified into the following items: houses and buildings, machine
equipments, transportation equipments, electronic equipment and others.
3. Calculation of fixed assets
The actual costs of fixed assets will be deemed as the initial calculation amount.
(1) In case the prices to purchase the fixed assets exceed the normal credit conditions and cause
the payment deferment and are characteristic of the financing nature, the costs of fixed assets will
be determined based on the current values of purchase prices.
(2) In case the fixed assets are obtained by the liability restructure to write off the liabilities of debtors,
their book values will be determined based on the fair values of this fixed asset. The difference
between the book values of restructuring liabilities and the fair values of this fixed asset will be
accrued to the current profit and loss. In case the non-currency asset exchange is characteristic of
commercial substance and the fair values of received or delivered assets can be reliably calculated,
the book values of received fixed assets in the non-currency asset exchange will normally be
determined based on the fair values of delivered assets, except that the accurate evidences indicate
that the fair values of received assets are more reliable. In case any non-currency asset exchange
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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 Annual depreciation Assessed residual
(years) rate value rate
Houses and buildings 20 4.5%-4.75% 5%-10%
Machine equipments 10 9%-9.5% 5%-10%
Transportation 5 18%-19% 5%-10%
equipments
Electronic equipment 5 18%-19% 5%-10%
and others
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
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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.
(XVI) Calculation Method of Projects under Construction
1. Classification of projects under construction
The projects under construction will be calculated based on the classification of proposed projects.
2. Transfer time of projects under construction to fixed assets
For the projects under construction, all expenses occurring before they are ready for the use will be
the book values as the fixed assets. In case the projects under construction has been ready for use
but the final accounts for completion have not been handled, from the date when such projects has
been ready for use, the company will evaluate the values and determine the costs based on the
project budgets, prices or actual costs of projects, etc and the depreciation amount will also be
withdrawn; when the final accounts for completion are handled, the company will adjust the originally
evaluated values subject to the actual costs, but will not adjust the withdrawn depreciation amount.
3. Depreciation of projects under construction: at the end of the period, the company will judge if the
depreciation reserves are withdrawn based on the depreciation signs of such projects. In case the
projects that have been stopped for a long time and will not be rebuilt within three years are
expected to be depreciated, the depreciation reserves for such projects will be withdrawn for the
difference amount between the receivable amount and the book values. Once the depreciation
reserves for such projects are withdrawn, they will not be reversed.
(XVII) 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,
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transferred non-currency assets or borne liabilities with the interests to construct or produce the
assets complying with the capitalization conditions;
(2) The loan expenses have occurred;
(3) The necessary construction or production activities to make the assets ready for use or sales
have been launched.
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 the 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.
(XVIII) Calculation Method of Intangible Assets
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1. Confirmation condition of intangible assets
The intangible assets mean the identifiable non-currency assets without the actual substance status
that are owned or controlled by the enterprises. Only the intangible assets meeting the following
conditions will be confirmed:
(1) The economic benefits related to this intangible asset probably flow to the enterprise;
(2) The cost of this fixed asset may be reliably calculated.
2. Pricing of intangible assets
The intangible assets will be originally calculated based on the actual costs.
(1)In case the prices to purchase the intangible assets exceed the normal credit conditions and
cause the payment deferment and are characteristic of the financing nature, the costs of intangible
assets will be determined based on the current values of purchase prices
(2) In case the intangible assets are obtained by the liability restructure to write off the liabilities of
debtors, their book values will be determined based on the fair values of this intangible asset. The
difference between the book values of restructuring liabilities and the fair values of this intangible
asset will be accrued to the current profit and loss. In case the non-currency asset exchange is
characteristic of commercial substance and the fair values of received or delivered assets can be
reliably calculated, the book values of received intangible assets in the non-currency asset
exchange will normally be determined based on the fair values of delivered assets, except that the
accurate evidences indicate that the fair values of received assets are more reliable. In case any
non-currency asset exchange does not meet the above conditions, the book values of delivered
assets and the payable taxes will be deemed as the costs of received intangible assets. No profit
and loss will be confirmed.
(3) The book values of intangible assets to be obtained by the absorption merger from the
enterprises which are under the same control will be determined based on the book values of
merging party; the book values of intangible assets to be obtained by the absorption merger from the
enterprises which are not under the same control will be determined based on their fair values.
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
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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.
(XIX) Research and Development Expenses
The expenses for the research and development of projects in the company include the expenses
for the research stage and development stage.
The expense for the research stage means the expense occurring for the planned investigations of
the company about the innovative exploration in order to obtain and understand the latest science
and technical knowledge, which are the preparations made for the further development activities;
whether the already done research activities will be transferred to the development or the
development will turn to the intangible assets has a lot of uncertainty.
The expense for the development stage means the expense occurring to apply the research results
or other knowledge to a certain plan or design and produce the new or substantially improved
materials, equipments and products, etc before the launch of commercial production and use.
Compared with the research stage, the development stage comes on the basic condition that the
research stage work is completed and has greatly turned to a 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
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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.
(XX) Amortization Method of Long-term Amortization Expenses
The overhaul payment of fixed assets in the company will be averagely amortized during the
overhaul interval; other long-term amortization expenses will be averagely amortized during the
benefiting period.
(XXI) Asset Depreciation
1. Definition of asset depreciation
The asset depreciation means that the receivable amount of assets is less than their book values.
On the preparation date of balance sheet, the company will judge if relevant assets have any signs
of possible depreciation. If so, the company will evaluate the receivable amount. In case the
receivable amount of assets is less than their book values, such book values will be deducted to the
receivable amount and the deducted amount is confirmed as the depreciation loss of assets and
accrued to the current profit and loss; at the same time, the relevant depreciation reserves of assets
will be withdrawn. Once the depreciation losses of assets are confirmed, they will not be reversed in
the future accounting period. After the confirmation of depreciation losses of assets, the depreciation
or amortization expenses of assets will be adjusted in the future period so that in the remaining
usage life of this asset, the company will systemically amortize the adjusted book values of assets.
The following 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
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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 tests 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
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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.
(XXII) Confirmation Principle of Expected Liabilities
1. Confirmation Principle of Expected Liabilities
The obligations related to contingent events that meet the following conditions at the same time will
be confirmed as the liabilities:
(1) This obligation is the current obligation of the company;
(2) The performance of this obligation will probably cause the economic benefits to flow out of the
company;
(3) The amount of this obligation can be reliably calculated.
In case the loss contracts and restructuring obligations of the company meet the above conditions,
they will be confirmed as the expected liabilities.
2. Determination method about optimum evaluation amount of expected liabilities
In case the necessary payments have a amount scope, the optimum evaluation amount will be
determined based on the average amount between the upper and lower limits of amounts; in case
the necessary payments do not have such a amount scope, the optimum evaluation amount will be
determined in the following method:
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(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.
(XXIII) 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.
(XXIV) 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
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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 from 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.
(XXV) 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.
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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.
(XXVI) 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 be 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,
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
the reduced amounts may be reversed.
(XXVII) 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;
(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
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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.
(XXVIII) 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
Sales income of products and
Value-added tax 17%
materials
Sales tax Taxable sales income 5%
Urban maintenance and
Payable circulating tax amount 5%, 7%
construction tax
Educational surtax Payable circulating tax amount 3%
Enterprise income tax Payable income tax amount Note
Note: the enterprise income tax rates will be subject to the following regulations:
Company Name Actual Note
Tax Rate
Sichuan Guangda Pharmaceutical Co., Ltd*1 15% The preferential policies about enterprise income
tax for the Grand Development of Western Regions
in accordance with the Notice of Preferential
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 by
the end of 2010.
Livzon (Hongkong) Co., Ltd and Hongkong 16.5% The policies about enterprise income taxes in
Antao Development Limited Hongkong area will be applied.
Fuzhou Fuxing Pharmaceutical Co., Ltd 25%
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, Zhuhai Livzon
Dankang Biotechnology Co., Ltd and Livzon
Group Vaccine Engineering Co., Ltd
Livzon Pharmaceutical Group Inc., Limin 15% Xinbeijiang Pharmaceutical Co., Ltd under Livzon
Pharmaceutical Co., Ltd under Livzon Group was granted as the hi-tech enterprises in
Group, Livzon Pharmaceutical Factory under 2010, and other companies were granted as the
Livzon Group, Livzon Syntpharm Co., Ltd in hi-tech enterprises in 2008; the validity period is 3
Zhuhai Bonded Area, Shanghai Livzon years.
Pharmaceutical Co., Ltd 、 Lida
Pharmaceutical Co., Ltd in Zhuhai Bonded
Area and Xinbeijiang Pharmaceutical Co.,
Ltd under Livzon Group*2
Other subcompanies 24% In accordance with the Notice of Preferential
Policies about Enterprise Income Tax in the
Transitional Period (Guo Fa [2007] No. 39) issued
st
by the State Council, from the date of January 1 ,
2008, the legal tax rate will, within 5 years after the
implementation of new laws, be gradually applied
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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 24% in
2011.
*1Sichuan Guangda Pharmaceutical Co., Ltd enjoyed the preferential policies about enterprise
income tax for the Grand Development of Western Regions by the end of 2010 and implemented the
tax rate of 15%. After the beginning of 2011, the nation has not issued any new files, so the
company will still report the enterprise income tax to the competent taxation authorities at the tax
rate of 15%.
*2Livzon 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 Co., Ltd and Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area
were granted as the hi-tech enterprises in 2008; the validity period is 3 years and the tax rate is 15%.
At present, these enterprises are applying for the qualification of next generation of hi-tech
enterprises, and they will temporarily report the enterprise income tax to competent taxation
authorities at the tax rate of 15%.
IV. Enterprise Merger and Consolidated Financial Statements
(I) Subcompanies that are obtained by the establishment or investment, etc
Registered Business Registered capital
Subcompany Name Subcompany type Operation scope
place nature
Antao Development Limited Wholly-owned Hongkong Investment HKD 0.5 million
subcompany
Livzon (Hongkong) Co., Ltd Wholly-owned Hongkong Investment HKD 61 million
subcompany
Zhuhai Modern Chinese Wholly-owned Zhuhai City Service industry RMB 6 million Yuan Research and development of Chinese
Medicine Hi-tech Co., Ltd subcompany medicines and Chinese medicine
technologies and equipments;
technical service and consultancy
Livzon Pharmaceutical Factory Wholly-owned Zhuhai City Pharmaceutical RMB 442.10930913 Production and sales of Chinese and
under Livzon Group subcompany production million Yuan western medicines, medical
instruments and sanitation materials
Livzon Medicine Marketing Co., Wholly-owned Zhuhai City RMB20 million Yuan Sales of products from the company
Commodity sales
Ltd under Livzon Group subcompany and all medical subcompanies
Zhuhai Livzon Medicine Trade Wholly-owned Zhuhai City RMB 60 million Yuan Import and export of Chinese and
Commodity sales
Co., Ltd subcompany western medicine preparations and
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
materials and medical intermediates,
etc. Chinese and western medicine
preparations and materials, medical
intermediates, chemical materials,
sanitation materials, sanitation
products, healthcare foodstuffs,
invigorant, biological products,
bio-chemical preparations, medical
cosmetics and medical instruments
Shanghai Livzon Pharmaceutical Wholly-owned Shanghai City Pharmaceutical RMB 87.33 million Y Production and sales of water injection,
Co., Ltd subcompany production uan capsules, power, tablets, lyophilized
preparation, bio-chemical and peptide
material medicines
Livzon Syntpharm Co., Ltd in Wholly-owned Zhuhai City Pharmaceutical RMB 102.28 million Production and sales of chemical
Zhuhai Bonded Area subcompany production Yuan material medicine, medical
preparations, medical intermediates
and chemical products
Zhuhai Livzon Reagent Co., Ltd Controlling Zhuhai City Pharmaceutical RMB 46.45 million Production and sales of bio-chemical,
subcompany production Yuan immune and chemical reagents,
biological products, sanitation products
and medical analyzer equipments
Lida Pharmaceutical Co., Ltd in Wholly-owned Zhuhai City Pharmaceutical RMB 26 million Yua Production, processing and sales of
Zhuhai Bonded Area subcompany production n chemical material medicines, medical
preparations, medical intermediates,
chemical products; warehousing.
Shanxi Datong Livzon Qiyuan Subcompany under Hunyuan RMB 4 million Yuan Plantation and processing of
Medicine Co., Ltd controlling subcompany County astragalus membranaceus; purchase
Plantation
and sales of Chinese medicines
industry
(except those that are restricted by the
nation)
Longxi Livzon Shenyuan Subcompany under Longxi County RMB 4 million Yuan Purchase, plantation, processing and
Plantation
Medicine Co., Ltd controlling subcompany industry storage of Chinese medicines allowed by
the nation
Zhuhai Livzon Advertising Co., Wholly-owned Zhuhai City Service industry RMB 1 million Yuan Design, production, agency and
Ltd subcompany publication of various advertisements
at home and abroad
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Zhuhai Livzon – Bai A Meng Controlling Zhuhai City Pharmaceutical RMB 12 million Yua Production and sales of Hydroxyapatite
n
Biological Materials Co., Ltd subcompany production materials, plasma spraying HA-Ti
artificial tooth and artificial hip, HA
porous ceramic grains, and porous
hydroxyapatite ceramic products.
Zhuhai Livzon Meidaxin Wholly-owned Zhuhai City Service industry RMB 1 million Yuan Technical research and development of
Technology Development Co., subcompany information and products related to
medicines and health-care products;
Ltd
technical consultancy and service
Jiaozuo Livzon Syntpharm Co., Wholly-owned Jiaozuo City Pharmaceutical RMB70 million Yuan Production and sales of medical
intermediates, chemical products (the
Ltd subcompany production
above products do not include the
dangerous chemical products and
chemical products used for
drugs-making) (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 Controlling Zhuhai City Service industry RMB 100 million Yuan Technical research and development of biological
Biotechnology Co., Ltd*1 subcompany medicine products and antibody medicines
Livzon Group Vaccine Controlling Zhuhai City Service industry RMB 65 million Yua Technical research and development of
Engineering Co., Ltd subcompany n bio-medicine products and vaccines
Wenshan Livzon Panax Controlling Wenshan City Plantation RMB 3 million Yuan Plantation and sales of Panax Notoginseng
Notoginseng Plantation Co., Ltd subcompany industry and sales of agricultural side products (not
*2 including the grains purchase)
Subcompanies that are obtained by the establishment or investment, etc (continued)
Actual investment Other item balances
that become the net Shareholding Voting percentage
Subcompany Name amount at the end
investment to percentage % %
of period subcompanies
Antao Development Limited HKD 0.5 million 119,761,335..92 100% 100%
Livzon (Hongkong) Co., Ltd HKD61 million 19,639,866.43 100% 100%
Zhuhai Modern Chinese Medicine RMB 6 million Yuan
Hi-tech Co., Ltd 0.00 100% 100%
Livzon Pharmaceutical Factory under RMB 423.25 million
Yuan
Livzon Group 0.00 100% 100%
Livzon Medicine Marketing Co., Ltd RMB 20 million Yuan 0.00 100% 100%
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
under Livzon Group
Zhuhai Livzon Medicine Trade Co., Ltd RMB 60 million Yuan 0.00 100% 100%
Shanghai Livzon Pharmaceutical Co., RMB 87.33 million Yua
n
Ltd 0.00 100% 100%
Livzon Syntpharm Co., Ltd in Zhuhai RMB 102.28 million Yu
an
Bonded Area 0.00 100% 100%
Zhuhai Livzon Reagent Co., Ltd RMB 23.69 million Yua
n 0.00 51% 51%
Lida Pharmaceutical Co., Ltd in Zhuhai RMB 26 million Yuan
Bonded Area 0.00 100% 100%
Shanxi Datong Livzon Qiyuan Medicine RMB 3.7 million Yuan
Co., Ltd 0.00 81.48% 92.50%
Longxi Livzon Shenyuan Medicine Co., RMB 3.6 million Yuan
Ltd 0.00 79.28% 90%
Zhuhai Livzon Advertising Co., Ltd RMB 1 million Yuan 0.00 100% 100%
RMB 9.84 million Yuan
Zhuhai Livzon – Bai A Meng Biological
Materials Co., Ltd 0.00 82% 82%
RMB 1 million Yuan
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd 0.00 100% 100%
RMB 52.5 million Yuan
Jiaozuo Livzon Syntpharm Co., Ltd
HKD 19.8685 million 0.00 100% 100%
Zhuhai Livzon Dankang Biotechnology RMB20.40 million Yuan
Co., Ltd*1 0.00 51% 51%
Livzon Group Vaccine Engineering Co., RMB54.50 million RMB
Ltd 0.00 83.85% 83.85%
Wenshan Livzon Panax notoginseng RMB1.53 million Yuan
Plantation Co., Ltd*2 0.00 51% 51%
Subcompanies that are obtained by the establishment or investment, etc (continued)
Whether they
are included in Equities of the Amounts that are used for offsetting
Subcompany name the minority of against the equities of the minority of
consolidated shareholders shareholders
statements?
Antao Development Limited Yes 0.00 0.00
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Livzon (Hongkong) Co., Ltd Yes 0.00 0.00
Zhuhai Modern Chinese Medicine Yes
Hi-tech Co., Ltd 0.00 0.00
Livzon Pharmaceutical Factory under
Livzon Group Yes 0.00 0.00
Livzon Medicine Marketing Co., Ltd under Yes
Livzon Group 0.00 0.00
Zhuhai Livzon Medicine Trade Co., Ltd Yes 0.00 0.00
Shanghai Livzon Pharmaceutical Co., Ltd Yes 0.00 0.00
Livzon Syntpharm Co., Ltd in Zhuhai
Bonded Area Yes 0.00 0.00
Zhuhai Livzon Reagent Co., Ltd Yes 64,608,288.56 0.00
Lida Pharmaceutical Co., Ltd in Zhuhai
Bonded Area Yes 0.00 0.00
Shanxi Datong Livzon Qiyuan Medicine Yes
Co., Ltd 216,561.73 0.00
Longxi Livzon Shenyuan Medicine Co.,
Ltd Yes 362,517.53 0.00
Zhuhai Livzon Advertising Co., Ltd Yes 0.00 0.00
Zhuhai Livzon – Bai A Meng Biological
Materials Co., Ltd Yes 1,111,467.95 0.00
Zhuhai Livzon Meidaxin Technology Yes
Development Co., Ltd 0.00 0.00
Jiaozuo Livzon Syntpharm Co., Ltd Yes 0.00 0.00
Zhuhai Livzon Dankang Biotechnology Yes 0.00
Co., Ltd*1 16,275,593.34
Livzon Group Vaccine Engineering Co., 0.00
Ltd Yes 9,394,406.32
Wenshan Livzon Panax notoginseng 0.00
Plantation Co., Ltd*2 Yes 1,443,650.66
*1 The 21st meeting of the 6th Board of Directors of the company resolved that, on June 8, 2010,
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
the company and Joincare Pharmaceutical Group Industry Co., Ltd jointly contributed 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, 2011, the paid-up capitals
amounted to RMB 40 million Yuan, and such contribution has been verified by the Li An Dan Yan Zi
[2011] No. B-1002 capital verification report issued by Reanda Certified Public Accountants.
*2 On May 17, 2011, the company and Chen Gaoze jointly contributed in currency to establish
Wenshan Livzon Panax notoginseng Plantation Co., Ltd, accounting for 51% and 49% of the
registered capital of RMB 3 million Yuan respectively. By June 30, 2011, the paid-up capitals
amounted to RMB 3 million Yuan, and such contribution has been verified by the Wen An Kuai Shi
Yan Zi [2011] No. 113 capital verification report issued by Wenshan Anxin Certified Public
Accountants Firm.
(II) Subcompanies that are obtained by the merger of enterprises which are not under the
same control
Subcompany Registered Business Registered
Full name of subcompany Operation scope
type place nature capital
Sichuan Guangda Pharmaceutical Wholly-owned Pengzhou City RMB 95 million Research, development, production and
Pharmaceutical
Co., Ltd*1 subcompany production Yuan sales of Chinese and western medicines
and finished medicines
Xinbeijiang Pharmaceutical Co., Controlling Qingyuan City Pharmaceutical RMB 134.93 million Export and production of its
production
Ltd under Livzon Group subcompany Yuan products and relevant technologies
Limin Pharmaceutical Co., Ltd Controlling Shaoguan City RMB 61.56 millio Production and sales of various medical
under Livzon Group subcompany Pharmaceutical n Yuan preparations, medical materials, various
production
foodstuff additives, feedstuff additives and
nutrition health-care products
Fuzhou Fuxing Pharmaceutical Wholly-owned Fuzhou City Pharmaceutical USD 41.70 million Production of material medicines such as
Co., Ltd under Livzon Group subcompany production 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., Wholly-owned Gutian County Pharmaceutical RMB 26.7 million Manufacturing and sales of material
Ltd subcompany production Yuan medicines (Kanamycin sulfate,
Tetracycline Hydrochloride and
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Chlortetraccline Hydrochloride)
Subcompanies that are obtained by the merger of enterprises which are not under the same
control (continued)
Actual investment Other item balances
that become the net Shareholding
Subcompany name amount at the end Voting percentage %
investment to percentage %
of period subcompanies
Sichuan Guangda Pharmaceutical RMB 149 million Yuan 100% 100%
Co., Ltd*1 0.00
Xinbeijiang Pharmaceutical Co., Ltd RMB 124.32 million Yu 92.14% 92.14%
under Livzon Group an 0.00
Limin Pharmaceutical Co., Ltd RMB 56.18 million Yua 88.09% 88.09%
under Livzon Group n 0.00
Fuzhou Fuxing Pharmaceutical Co., USD 41.7 million 100% 100%
Ltd under Livzon Group 0.00
Gutian Fuxing Pharmaceutical Co., RMB 26.7 million Yuan 100% 100%
Ltd 0.00
Subcompanies that are obtained by the merger of enterprises which are not under the same
control (continued)
Whether they
are included Equities of the
Subcompany name Amounts that are used for offsetting against the
in the minority of
equities of the minority of shareholders
consolidated shareholders
statements?
Sichuan Guangda Pharmaceutical
0.00
Co., Ltd*1 Yes 0.00
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group Yes 12,599,734.18 0.00
Limin Pharmaceutical Co., Ltd
under Livzon Group Yes 19,985,984.77 0.00
Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group Yes 0.00 0.00
Gutian Fuxing Pharmaceutical Co.,
Ltd Yes 0.00 0.00
On January 17, 2011, in accordance with the resolutions passed at the 7th meeting of the 3rd Board
of Directors of Sichuan Guangda Pharmaceutical Co., Ltd and Chapter V of amended articles of
association of Sichuan Guangda Pharmaceutical Co., Ltd, the registered capital increased from
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
RMB 95 million Yuan to RMB 149 million Yuan, and the company increased the registered capital
by RMB 54 million Yuan. After the capital increase, the contribution percentage of the company in
the total registered capitals increased from 33.2% to 57.41%; the contribution percentage of
foreign shareholder – Britain Weiming Investment Co., Ltd in the total registered capitals
decreased from 66.8% to 42.59%. Such contribution has been verified by the Li An Dan Yan Zi
[2011] No. B-2005 capital verification report issued by Reanda Certified Public Accountants.
In accordance with the reply of Min Wai Jing Mao Wai Zi [2011] No. 99 file issued by Fujian
Provincial Department of Foreign Trade and Economic Cooperation, the resolutions passed at the
12th meeting of the 3rd Board of Directors of Fuzhou Fuxing Pharmaceutical Co., Ltd under Livzon
Group and the amended contracts and articles of association, Fuzhou Fuxing Pharmaceutical Co.,
Ltd under Livzon Group will apply to increase its registered capitals by USD 8 million. The company
contributed USD 6 million, accounting for 75% of newly increased registered capitals; the company
paid RMB at the foreign exchange rate issued by the nation on the same day, and the contribution
mode is the currency capital; Antao Development Limited contributed USD 2 million, accounting for
25% of newly increased registered capitals; the contribution mode is the currency capital。 The
changed registered capitals is USD 41.70 million; the company contributed USD 31.275 million,
accounting for 75% of changed registered capitals; Antao Development Limited contributed USD
10.425 million, accounting for 25% of changed registered capitals. Such contribution has been
verified by the Li An Dan Yan Zi [2011] No. B-2004 capital verification report issued by Reanda
Certified Public Accountants.
(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
Name Net assets at the end of period Net profits in the current period
Wenshan Livzon Panax notoginseng
Plantation Co., Ltd 2,946,225.83 -53,774.17
V. Notes to Main Items in the Consolidated Financials Statements
1. Currency Capital
2011.6.30 2010.12.31
Item Original Exchange Book-keeping Original Exchange Book-keeping
Currency rate Currency Currency rate Currency
Cash at stock 184,838.01
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
150,354.63
Including:
RMB 136,627.83 96,979.53
Hongkong
Dollar 0.00 0.83162 0.00 0.00 0.85093 0.00
USD
0.00 6.4716 0.00 0.00 6.6227 0.00
Euro
5,150.00 9.3612 48,210.18 5,150.00 8.8065 45,353.47
Singapore
Dollar 0.00 5.2218 0.00 1,567.00 5.1191 8,021.63
Deposits in
banks 1,269,067,285.59 862,999,246.37
Including:
RMB 1,215,731,877.82 794,955,764.71
Hongkong
Dollar 41,030,559.39 0.83162 34,121,833.79 62,761,209.94 0.85093 53,405,396.37
USD 2,852,314.44 6.4716 18,459,038.13 2,156,678.66 6.6227 14,283,035.76
Japanese
Yuan 4,781,241.00 0.080243 383,661.12 77,119.00 0.08126 6,266.69
Euro 39,618.29 9.3612 370,874.73 39,605.16 8.8065 348,782.84
Other
Currency
Capital 3,218,001.75 782,256.59
Including:
RMB 1,520,850.91 275,006.10
Hongkong
Dollar 2,040,776.84 0.83162 1,697,150.84 596,113.07 0.85093 507,250.49
Total
1,272,470,125.35 863,931,857.59
(1) Other currency capitals at the end of this period mainly include the investment amounts.
(2) RMB 13.25 million Yuan of deposits in banks has been mortgaged for the short-term loans and
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will be deducted from the cash and cash equivalents of cash flow statement. Besides, 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.
(3) The main cause of the increase of 47.29% over the beginning of period is that the sales incomes
in this period have increased.
2. Tradable financial assets
2011.6.30 2010.12.31
Item Changes of Fair Fair Values Changes of Fair Fair Values
Cost Cost
Values Values
Stock 53,486,448.97 2,477,543.17 55,963,992.14 54,728,390.39 2,457,245.02 57,185,635.41
Fund 150,000.00 497,082.00 647,082.00 150,000.00 530,154.77 680,154.77
Total 53,636,448.97 2,974,625.17 56,611,074.14 54,878,390.39 2,987,399.79 57,865,790.18
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
Item 2011.6.30 2010.12.31
Bank Acceptance Drafts 217,196,133.04 232,945,814.77
(2) At the end of period, the company has no receivable bills that have been mortgaged.
(3) By June 30, 2011, the bills that have been endorsed but have not been due are listed as follows:
Bill Type Due Time Amount
Bank Acceptance Drafts 2011-12-31 242,113,640.32
(4) 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
2011.6.30 2010.12.31
Item Amount Percent Reserves for Net Value Amount Percent Reserves for Net Value
age Bad Debts age Bad Debts
Accounts receivable 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
whose individual
amount is large and
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whose individual
bad debt reserve is
withdrawn
Accounts receivable
whose bad debt
544,142,181.
reserve is 99.15% 27,800,469.91 516,341,711.42
33
withdrawn based on
the combination 461,893,591.12 99.04% 23,514,255.68 438,379,335.44
Accounts receivable
whose individual
amount is not large
but whose individual
bad debt reserve is
withdrawn 4,666,381.22 0.85% 4,366,423.88 299,957.34 4,470,833.40 0.96% 4,086,442.26 384,391.14
Total 548,808,562. 100.00
55 % 32,166,893.79 516,641,668.76 466,364,424.52 100% 27,600,697.94 438,763,726.58
(2) At the end of this period, for the accounts receivable totaling RMB 1,058,105.37 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 3-5 years amounts to
RMB 1,058,105.37 Yuan.
(3) Accounts receivable whose bad debt reserves are withdrawn based on the age combination
2011.6.30 2010.12.31
Age Amount Percenta Reserves for Ba Net Value Amount Perce Reserves for Net Value
ge d Debts ntage Bad Debts
Within 1 96.78
year 533,209,070.33 97.16% 26,660,453.62 506,548,616.71 451,367,593.85 % 22,568,379.78 428,799,214.07
1-2
years 7,475,756.59 1.36% 448,545.40 7,027,211.19 8,387,980.29 1.80% 514,272.50 7,873,707.79
2-3
years 3,457,354.41 0.63% 691,470.89 2,765,883.52 2,138,016.98 0.46% 431,603.40 1,706,413.58
Over 3
years 4,666,381.22 0.85% 4,366,423.88 299,957.34 4,470,833.40 0.96% 4,086,442.26 384,391.14
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Total 548,808,562.55 100.00% 32,166,893.79 516,641,668.76 466,364,424.52 100% 27,600,697.94 438,763,726.58
(4) In 2011, the accounts receivable with the non-associated parties that have been actually written
off amount to RMB 40,707.46 Yuan.
(5) By June 30, 2011, 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 56,223,970.80 Yuan, accounting for
10.24% of the receivable balance.
2011.6.30 2010.12.31
Age
Amount Percentage Amount Percentage
Within 1 year 56,223,970.80 10.24% 52,285,050.92 11.21%
5. Prepaid Accounts
(1) Age analysis
Age 2011.6.30 Percentage 2010.12.31 Percentage
Within 1 year 79,471,199.53 85.48% 60,549,846.12 89.15%
1-2 years 13,493,051.50 14.51% 6,799,403.50 10.01%
2-3 years 6,100.00 0.01% 573,470.00 0.84%
Over 3 years 2,720.00 0.00% 0.00 0.00%
Total 92,973,071.03 100.00% 67,922,719.62 100.00%
(2) The prepaid accounts with the age of over 1 year are mainly the prepaid accounts for goods that
have not been settled.
(3) The top 5 prepaid accounts total RMB 41,336,989.69 Yuan, accounting for 44.46% of prepaid
account balance.
(4) By June 30, 2011, 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
2011.6.30 2010.12.31
Item Amount Percent Reserves for Net Value Amount Percent Reserves for Net Value
age Bad Debts age Bad Debts
Accounts receivable whose
individual amount is large and 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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whose individual bad debt reserve
is withdrawn
Accounts receivable whose bad
debt reserve is withdrawn based 47,082,981.52 93.70% 2,669,166.60 44,413,814.92 46,191,520.9 2,617,495.5
on the combination 3 93.30% 0 43,574,025.43
Accounts receivable whose
individual amount is not large but
whose individual bad debt reserve 2,809,303.8
is withdrawn 3,168,241.77 6.30% 2,691,861.14 476,380.63 3,314,558.45 6.70% 7 505,254.58
Total 49,506,079.3 100.00 5,426,799.3
100.00
50,251,223.29 % 5,361,027.74 44,890,195.55 8 % 7 44,079,280.01
(2) At the end of this period, for the accounts receivable totaling RMB 297,831.01 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 250,000.00 Yuan; the reserve for 3-5 years amounts to RMB 47,831.01Yuan.
(3) Accounts receivable whose bad debt reserves are withdrawn based on the age combination
2011.6.30 2010.12.31
Age Amount Percent Reserves for Ba Net Value Amount Percenta Reserves for Ba Net Value
age d Debts ge d Debts
Within 1
year 44,835,983.07 89.23% 2,479,299.14 42,356,683.93 43,799,098.37 88.47% 2,427,454.92 41,371,643.45
1-2 years 1,853,801.59 3.69% 111,228.09 1,742,573.50 2,060,313.69 4.16% 123,618.81 1,936,694.88
2-3 years 393,196.86 0.78% 78,639.37 314,557.49 332,108.87 0.67% 66,421.77 265,687.10
Over 3
years 3,168,241.77 6.30% 2,691,861.14 476,380.63 3,314,558.45 6.70% 2,809,303.87 505,254.58
100.00
Total 50,251,223.29 % 5,361,027.74 44,890,195.55 49,506,079.38 100.00% 5,426,799.37 44,079,280.01
(4) In 2011, the other accounts receivable with the non-associated parties that have been actually
written off amount to RMB 6,129.80 Yuan.
(5) By June 30, 2011, there are no debts with the shareholder units holding over 5% (including 5%)
voting rights.
(6) The top 5 other accounts receivable total RMB 19,825,311.09 Yuan, accounting for 39.45% of
other accounts receivable balance and are listed as follows:
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Percentage in
Debtor Name Debt Amount Nature or Content Debt Time
Total Amount
Within 1
Guangdong Blue Treasure 14.99%
Pharmaceutical Co. Ltd. 7,531,606.09 Power expenses year
Guangzhou Yinheyangguang Within 1
Pharmaceutical Group Industry 9.95%
Co., Ltd 5,000,000.00 Loans year
Within 1
7.30%
Li Gang 3,670,311.00 Loans for equipment year
Within 2
4.00%
Ding Gongcai 2,010,000.00 Loans for projects years
Within 1
3.21%
Chen Tao 1,613,394.00 Loans for business year
Total 19,825,311.09 39.45%
7. Inventory
(1) Inventory classification
2011.6.30 2010.12.31
Item Amount Depreciation Net Value Amount Depreciation Net Value
Reserve Reserve
Raw
86,811,017.64
materials 87,216,492.59 405,474.95 173,827,402.38 525,090.95 173,302,311.43
Packages 22,613,820.17 21,815.68 22,592,004.49 18,071,271.33 34,756.43 18,036,514.90
Products 75,350,098.71 44,281.57 75,305,817.14 60,137,749.61 28,818.42 60,108,931.19
Inventory
231,736,038.27
commodities 233,723,872.98 1,987,834.71 200,361,514.59 2,439,441.65 197,922,072.94
Entrusted
materials for 1,566,145.99
processing 1,566,145.99 0.00 783,213.31 0.00 783,213.31
Low-value
397,402.90
consumables 397,402.90 0.00 61,397.65 0.00 61,397.65
Delivered
185,564.11
commodities 185,564.11 0.00 0.00 0.00 0.00
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Self-made
semi-finished 9,737,744.55
products 9,737,744.55 0.00 0.00 0.00 0.00
Total 430,791,142.00 2,459,406.91 428,331,735.09 453,242,548.87 3,028,107.45 450,214,441.42
(2) Depreciation reserve for inventory
Decrease in this period
Withdrawal in Reversion in Writing-off in
Inventory type 2010.12.31 this period this period this period 2011.6.30
Raw materials 525,090.95 39,016.42 140,137.85 18,494.57 405,474.95
Packages 34,756.43 8,370.50 5329.95 15,981.30 21,815.68
Products 28,818.42 22,980.41 0.00 7,517.26 44,281.57
Inventory
commodities 2,439,441.65 1,804,796.58 336,735.51 1,919,668.01 1,987,834.71
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
semi-finished
products 0.00 0.00 0.00 0.00 0.00
Total 3,028,107.45 1,875,163.91 482,203.31 1,961,661.14 2,459,406.91
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, 2011. 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 Financial Assets
(1) Classification
Item 2011.6.30 2010.12.31
Saleable equity instruments 9,868,289.81 10,572,886.89
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Including: stocks 9,868,289.81 10,572,886.89
(2) At the end of period, the main cause of the decrease of 6.66% over the beginning of period is the
changes in fair values.
9. Investments to the associated enterprises
Percentage
of voting
Share-holding rights of
Name of Invested Enterprise Registered Legal Business Registered percentage of this
Units type place representative nature capital this enterprise
enterprise(%) in the
invested
units(%)
Guangdong Blue Qingyuan An Ning Production USD 7.53 35.91% 35.91%
Treasure Pharmaceutical
City and sales million
Limited
Co. Ltd.
liability (joint of material
venture) medicines
Livzon Medical Electronic It has been RMB 3.62 28% 28%
Zhuhai City Xu Xiaoxian
closed.
Equipment (Factory) Co., Limited
million Yuan
Ltd liability
Tongyikangshimei Chain Limited Huang Qianli Commodity RMB 100
Shenzhen 35% 35%
(Shenzhen) Co., Ltd liability sales million Yuan
Total
Continued:
Name of Invested Units Total assets Total liabilities Total net Total operating Net profits in
at the end of at the end of assets at the income in this this year
period period end of period year
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 100,532,659.27 18,527,261.86 82,005,397.41 7,276,533.99 -1,471,198.70
Livzon Medical Electronic
Equipment (Factory) Co., Ltd —— —— —— —— ——
Tongyikangshimei Chain
(Shenzhen) Co., Ltd 24,091,388.72 6,484,325.60 17,607,063.12 6,887,368.94 -2,574,294.63
Total 124,624,047.99 25,011,587.46 99,612,460.53 14,163,902.93 -4,045,493.33
10. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
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2011.6.30 2010.12.31
Item Depreciation Depreciation
Book Balance Book Values Book Balance Book Values
Reserve Reserve
Calculation
by Cost
Method 27,527,348.84 20,600,000.00 6,927,348.84 27,527,348.84 20,600,000.00 6,927,348.84
Calculation
by Equity
Method 38,720,538.20 1,200,000.00 37,520,538.20 40,193,271.70 1,200,000.00 38,993,271.70
Total 66,247,887.04 21,800,000.00 44,447,887.04 67,720,620.54 21,800,000.00 45,920,620.54
(2) Long-term equity investment calculated by cost method
Name of Invested Units Initial Amount 2010.12.31 Increase Decrease 2011.6.30 Sharehol Cash
in this in this ding dividend
period period percenta
ge
Zhuhai Branch of Guangdong
0.0004%
Development Bank 177,348.84 177,348.84 0.00 0.00 177,348.84 0.00
Beijing Medical Goods Joint
0.821%
Operation Company 100,000.00 100,000.00 0.00 0.00 100,000.00 0.00
Doumen Sanzhou Industry City
1.6%
Co., Ltd 500,000.00 500,000.00 0.00 0.00 500,000.00 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
5.681%
Technology Investment Co., Ltd 6,250,000.00 6,250,000.00 0.00 0.00 6,250,000.00 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 27,527,348.84 27,527,348.84 0.00 0.00 27,527,348.84 0.00
(3) Long-term equity investment calculated by the equity method
Name of Invested Units Investment cost 2010.12.31 Increase in Decrease in 2011.6.30 Shareholdi Cash
this period this period ng dividend
percentag
84
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e
Livzon Medical Electronic
Equipment (Factory) Co., Ltd 1,200,000.00 1,200,000.00 0.00 0.00 1,200,000.00 28% 0.00
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 11,227,540.45 31,929,798.01 0.00 562,733.5 31,367,064.51 35.91% 0.00
Tongyikangshimei Chain
(Shenzhen) Co., Ltd 35,000,000.00 7,063,473.69 0.00 910,000.00 6,153,473.69 35% 0.00
Total 47,427,540.45 40,193,271.70 0.00 1,472,733.50 38,720,538.20 0.00
(4) Depreciation reserve for long-term equity investment
Withdrawal Withdrawal
Transfer in
Investment Projects 2010.12.31 in this 2011.6.30 Cause
this period
period
The net
Doumen Sanzhou Industry City Co., assets are
500,000.00 500,000.00
Ltd less than
0.00 0.00 zero.
20,000,000.0
Zhuhai City Commercial Bank 20,000,000.00 Loss
0.00 0.00 0
The net
Livzon Medical Electronic assets are
Equipment (Factory) Co., Ltd less than
1,200,000.00 0.00 0.00 1,200,000.00 zero.
The business
license has
been
cancelled by
Beijing Medical Goods Joint
the local
Operation Company
administration
of industry
and
100,000.00 0.00 0.00 100,000.00 commerce
21,800,000.0
Total
21,800,000.00 0.00 0.00 0
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
* With the approval of China Banking Regulatory Commission and Zhuhai Administration of Industry
and Commerce, on April 11, 2011, the former “Zhuhai City Commercial Bank” was formally renamed
as “China Resources Bank of Zhuhai Co., Ltd”.
11. Fixed Assets and Accumulated Depreciation
(1) Particulars
Item Increase in this Decrease in this
2010.12.31 2011.6.30
period period
Original values of
fixed assets:
Houses and
buildings 795,755,863.49 132,348,422.00 0.00 928,104,285.49
Machine equipments 917,087,987.65 156,404,761.43 31,879,451.35 1,041,613,297.73
Transportation
equipments 28,543,915.65 3,943,756.79 1,040,764.00 31,446,908.44
Electronic 151,611,376.00 6,499,534.53 1,458,986.54 156,651,923.99
equipments and
others
Total 1,892,999,142.79 299,196,474.75 34,379,201.89 2,157,816,415.65
Accumulated
depreciation:
Houses and
buildings 365,448,549.79 19,530,138.68 0.00 384,978,688.47
Machine equipments 525,195,199.90 42,977,228.82 14,071,382.94 554,101,045.78
Transportation
equipments 16,743,065.39 1,151,338.43 949,390.00 16,945,013.82
Electronic 113,834,691.88 5,706,058.03 1,063,957.19 118,476,792.72
equipments and
others
Total 1,021,221,506.96 69,364,763.96 16,084,730.13 1,074,501,540.79
Net value of fixed
assets: 871,777,635.83 1,083,314,874.86
Depreciation reserve
for fixed assets
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Houses and
buildings 24,767,677.70 0.00 0.00 24,767,677.70
Machine equipments 42,166,061.16 0.00 3,349,362.81 38,816,698.35
Transportation
equipments 115,253.04 0.00 19,692.60 95,560.44
Electronic 786,607.88 0.00 408,114.73 378,493.15
equipments and
others
Total 67,835,599.78 0.00 3,777,170.14 64,058,429.64
Net values of fixed
assets: 803,942,036.05 1,019,256,445.22
(2) The projects under construction in this period that have been transferred to the fixed assets
amount to RMB 251,448,467.32 Yuan.
(3) The fixed assets that are temporarily unused are listed as follows:
Original Book Accumulated Depreciation Estimated Time to put
Item Net Amount
Values Depreciation Reserve it into use
Houses and
buildings 22,468,179.62 6,608,566.87 2,749,935.67 13,109,677.08 2011
Machine
equipments 46,362,006.70 25,484,520.99 8,582,791.93 12,294,693.78 2011
Transportation
equipments 0.00 0.00 0.00 0.00 2011
Office
equipments and
others 718,981.96 659,562.39 21,787.48 37,632.09 2011
Total 69,549,168.28 32,752,650.25 11,354,515.08 25,442,002.95
(4) The fixed assets that are proposed to be disposed of are listed as follows:
Original Book Accumulated Depreciation Estimated Time to be
Item Net Amount
Values Depreciation Reserve disposed of
Houses and
buildings 558,088.93 408,034.03 0.00 150,054.90 2011
Machine 1,169,145.42 1,068,708.84 0.00 100,436.58 2011
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equipments
Total 1,727,234.35 1,476,742.87 0.00 250,491.48
(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:
Item Original Book Accumulated Depreciation
Net Amount
Values Depreciation Reserve
Houses and
2,112,462.60
buildings 4,706,459.65 2,567,517.28 26,479.77
Office equipments
8,223.42
and others 22,800.00 14,576.58 0.00
Total 4,729,259.65 2,582,093.86 26,479.77 2,120,686.02
(7) Particulars about fixed assets whose property certificates have not been handled:
Item Depreciati Cause
Original Book Accumulated
on Net Amount
Values Depreciation
Reserve
They are the newly built
Houses and 27,333,154.0 55,737,398.7 projects and the handling of
buildings 83,070,552.78 4 0.00 4 certificates is still under way.
(8) Please see the article 20 of V in the notes to the financial statement for more details about the
mortgage of fixed assets.
12. Projects under Construction
(1) Projects under Construction
2011.6.30 2010.12.31
Project Original Original
Depreciation Depreciation
name Book-keeping Net Value Book-keeping Net Value
Reserve Reserve
Amount Amount
Newly 229,360,063.7 229,360,063.7
built plants 95,553,496.76 0.00 95,553,496.76 0 0.00 0
Equipme
nt
installati
on 2,434,387.77 0.00 2,434,387.77 63,002,300.98 0.00 63,002,300.98
88
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Technical
improvem
ent 5,989,368.50 0.00 5,989,368.50 6,310,762.47 0.00 6,310,762.47
Plant
improvem
ent 22,652,755.70 0.00 22,652,755.70 14,849,030.38 0.00 14,849,030.38
Others 30,198,324.93 0.00 30,198,324.93 4,384,213.97 0.00 4,384,213.97
Total 156,828,333.6 156,828,333.6 317,906,371.5 317,906,371.5
6 0.00 6 0 0.00 0
(2) Particulars
Percentage
Fixed Assets
Project Budget Increase in this Other Capital of Project
2010.12.31 Transferred in 2011.6.30
Name Amount period Decrease Source Investment
this Period
to Budget
Newly Loans and
built available
plants 418,613,910. 229,360,063.7 131,632,198.4 11,492,873.4 capitals owned
07 0 9,318,504.93 7 0 95,553,496.76 by the company 57.02%
Equipme Available
nt capitals
installati owned by
on 141,042,646. 112,810,954.8 the
17 63,002,300.98 52,243,041.67 8 0.00 2,434,387.77 company 81.71%
Available
Technica
capitals
l
owned by
improve
48,425,379.0 the
ment
8 6,310,762.47 1,704,062.82 1,826,765.79 198,691.00 5,989,368.50 company 16.55%
Available
Plant
capitals
improve
owned by
ment
80,536,705.4 the
1 14,849,030.38 9,437,748.38 1,618,823.06 15,200.00 22,652,755.70 company 30.16%
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Available
Others
capitals
owned by
77,599,214.8 the
8 4,384,213.97 30,366,862.08 3,559,725.12 993,026.00 30,198,324.93 company 44.78%
Total 766,217,855. 317,906,371.5 103,070,219.8 251,448,467.3 12,699,790.4
61 0 8 2 0 156,828,333.66
(3) At the end of period, the decrease of projects under construction by 50.67% over the beginning
of period is mainly because of the transfer into the fixed assets.
(4) By June 30, 2011, the capitalization amounts of interests for the projects under construction are
listed as follows:
Fixed Assets
Increase in this Other
Project Name 2010.12.31 Transferred in this 2011.6.30
period Decrease
Period
Newly built
plants 12,246,325.28 645,118.50 0.00 0.00 12,891,443.78
The capitalization of projects under construction will apply the interest rates for special loans of
banks.
13. Project Goods
Goods name 2011.6.30 2010.12.31
Special materials 398,200.00 398,200.00
Special equipments 3,470,910.89 24,797,644.94
Total 3,869,110.89 25,195,844.94
At the end of period, the decrease of projects under construction by 84.64% over the beginning of
period is mainly because of the transfer of special equipments into the projects under construction.
14. Intangible Assets and Accumulated Amortization
Increase in this Decrease in this
2010.12.31 2011.6.30
Item period period
① Original price
Use rights of lands 156,246,944.89 66,800.04 0.00 156,313,744.93
Special techniques 115,920,685.58 13,250,000.00 0.00 129,170,685.58
Software 7,640,205.78 1,406,548.12 0.00 9,046,753.90
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Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 279,831,836.25 14,723,348.16 0.00 294,555,184.41
②Accumulated
amortization
Use rights of lands 43,076,125.94 1,548,246.84 0.00 44,624,372.78
Special techniques 63,821,561.89 5,842,729.44 0.00 69,664,291.33
Software 6,776,045.33 360,181.43 0.00 7,136,226.76
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 113,697,733.16 7,751,157.71 0.00 121,448,890.87
③Depreciation reserve
for intangible assets
0.00
Use rights of lands 981,826.94 0.00 981,826.94
0.00
Special techniques 1,379,999.89 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 112,188,992.01 66,800.04 1,548,246.84 110,707,545.21
Special techniques 50,719,123.80 13,250,000.00 5,842,729.44 58,126,394.36
Software 864,160.45 1,406,548.12 360,181.43 1,910,527.14
Trademark rights 0.00 0.00 0.00 0.00
Total 163,772,276.26 14,723,348.16 7,751,157.71 170,744,466.71
1. Some intangible assets are bought, but the others may be developed by the
company. The causes of increase of special techniques are that: ① the
subcompany Livzon Group Vaccine Engineering Co., Ltd purchased the special
technique Anti-TNF at the price of RMB 10 million Yuan; ② the Blonanserin
material technique are transferred from prepaid accounts, and the amount is RMB
2 million Yuan.
2. Particulars about intangible assets whose property certificates have not been
handled:
Item Original Book Accumulated Depreciation Net Amount Cause
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Values Depreciation Reserve
The handling of
Use right of certificates is still
lands 18,486,365.20 1,663,772.79 0.00 16,822,592.41 under way.
15. Development payment
Decrease in this period
Accrued to the Confirmed as
Item
Increase in this current profit and intangible assets
2010.12.31 period loss 2011.6.30
Capitalization 4,332,137.8
payment 1 732,076.79 0.00 732,076.79 4,332,137.81
Expense payment 0.00 2,433,060.68 2,433,060.68 0.00 0.00
4,332,137.8
Total
1 3,165,137.47 2,433,060.68 732,076.79 4,332,137.81
16 Goodwill
2011.6.30 2010.12.31
Item Depreciation Depreciation
Book balance Book Values Book balance Book Values
Reserve Reserve
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
The book balances of goodwill are listed as follows:
Increase in this Decrease in
Name of Invested Units 2010.12.31 2011.6.30 Formation Source
period this period
Livzon Pharmaceutical Factory Cost-book value
under Livzon Group 47,912,269.66 0.00 0.00 47,912,269.66 differentials
Sichuan Guangda Pharmaceutical Cost-book value
Co., Ltd 13,863,330.24 0.00 0.00 13,863,330.24 differentials
Fuzhou Fuxing Pharmaceutical Co., Cost-book value
Ltd under Livzon Group 46,926,155.25 0.00 0.00 46,926,155.25 differentials
92
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Xinbeijiang Pharmaceutical Co., Ltd Cost-book value
under Livzon Group 7,271,307.03 0.00 0.00 7,271,307.03 differentials
Zhuhai Livzon Meidaxin Technology Cost-book value
Development Co., Ltd 287,756.12 0.00 0.00 287,756.12 differentials
Shanghai Livzon Pharmaceutical Cost-book value
Co., Ltd 2,045,990.12 0.00 0.00 2,045,990.12 differentials
Livzon Syntpharm Co., Ltd in Zhuhai Cost-book value
Bonded Area 3,414,752.58 0.00 0.00 3,414,752.58 differentials
Lida Pharmaceutical Co., Ltd in Cost-book value
Zhuhai Bonded Area 78,000.00 0.00 0.00 78,000.00 differentials
Total 121,799,561.0
0 0.00 0.00 121,799,561.00
The goodwill depreciations are listed as follows:
Increase in this Decrease in
Name of Invested Units 2010.12.31 2011.6.30
period this period
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
17 Long-term Amortization Expense
Project Name Original 2010.12.31 Increase in Transfer Amortization 2011.6.30 Accumulated Remaining
Amount this period in this in this Period Amortization Amortization
period Period
Overhaul expense of
fixed assets 13-67 个月
5,618,273.70 2,867,756.25 856,173.64 278,128.96 3,445,800.93 2,172,472.77
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Decoration expense
of offices 6-51 个月
2,454,069.02 1,868,112.72 1,837.61 0.00 307,999.06 1,561,951.27 892,117.75
Decoration expense
of plants 3-31 个月
1,214,807.96 298,391.35 70,470.30 0.00 127,708.66 241,152.99 973,654.97
Publicly amortized
expense of public
utilities 5-52 个月
539,141.31 128,542.95 103,133.00 0.00 45,333.38 186,342.57 352,798.74
Resin 4,491,677.60 1,229,392.27 303,125.89 0.00 372,432.44 1,160,085.72 3,331,591.88 28 个月
500,000.0
Others 4,137,113.50 2,248,022.80 572,584.20 0 450,019.21 1,870,587.79 1,766,525.71 2-50 个月
500,000.0
Total 18,455,083.09 8,640,218.34 1,907,324.64 0 1,581,621.71 8,465,921.27 9,489,161.82
18 Deferred Income Tax Asset
Type 2011.6.30 2010.12.31
Withdrawal of the deductible temporary difference 15,890,839.11
caused by the asset depreciation reserve 15,548,647.51
The deductible temporary difference caused by the
long-term equity investment out of the scope of
consolidation statement 3,632,448.39 3,477,190.61
The deductible temporary difference caused by the 181,634.49 383,207.81
amortization of intangible assets
The deductible temporary difference caused by the 0.00 0.00
operating expense
The deductible temporary difference caused by the 3,626,250.18 3,253,760.11
withdrawal expense
The deductible temporary difference caused by the 2,116,688.31 81,643.00
deductible loss
The deductible temporary difference caused by the 215,349.73 200,658.56
deferred gains
Total 25,663,210.21 22,945,107.60
19 Asset Depreciation Reserve
Increase in this Decrease in this period
Item 2010.12.31 2011.6.30
period Reversion Writing-off
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Reserves for Bad debts 33,027,497.31 4,546,555.42 0.00 46,131.20 37,527,921.53
Depreciation Reserve
for inventory 3,028,107.45 1,875,163.91 482,203.31 1,961,661.14 2,459,406.91
Depreciation reserve for
long-term equity
investment 21,800,000.00 0.00 0.00 0.00 21,800,000.00
Depreciation Reserve
for fixed assets 67,835,599.78 0.00 0.00 3,777,170.14 64,058,429.64
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 146,812,094.52 6,421,719.33 482,203.31 5,784,962.48 146,966,648.06
The writing-off of the reserves for bad debts means the writing-off of the bad debts; the writing-off of
depreciation reserve for inventory, depreciation reserve of fixed assets and depreciation reserve for
long-term equity investment means the rejection, disposal transfer or writing-off.
20 Assets whose ownership rights are restricted
Increase in this Decrease in this
Item 2010.12.31 2011.6.30
period period
Assets used for
pledgement
Deposits in banks 19,450,000.00 0.00 6,200,000.00 13,250,000.00
Assets used for
mortgage:
Houses and
buildings 98,184,342.33 0.00 37,520,232.17 60,664,110.16
Use rights of lands 0.00 0.00 0.00 0.00
Total 117,634,342.33 0.00 43,720,232.17 73,914,110.16
The reasons for the restriction of asset ownership rights are listed as follows:
(1) The subcompany Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area pledged the certificate of
95
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
time deposit of RMB 13,250,000.00 Yuan of the company to Pingan Bank for a loan of HKD
14,000,000.00, and the mortgage period is from December 19, 2010 to December 8, 2011.
(2) Livzon Pharmaceutical Factory under Livzon Group mortgaged the houses and buildings located
at Guihua North Road, Gongbei, Zhuhai, with original book value of RMB 86,311,578.60 Yuan,
accumulated depreciation of RMB 25,647,468.44 Yuan and net value of RMB 60,664,110.16 Yuan to
Zhuhai Branch of Bank of Communications for a loan of RMB 500,000.00 Yuan, and the mortgage
period is from December 23, 2010 to December 23, 2016.
21 Short-time Loan
(1) Types of short-term loans
Type 2011.6.30 2010.12.31
Credit loan 154,707,462.83 147,533,920.00
Guaranty loan 41,714,059.20 42,682,648.80
Mortgage loan 0.00 0.00
Pledgement loan 11,642,680.00 17,243,718.00
Other loans 0.00 0.00
Total 208,064,202.03 207,460,286.80
(2) By June 30, 2011, 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 a
loan of HKD 30 million from Shenzhen Branch of Nanyang Commercial Bank and a loan of HKD
20.16 million from Guangzhou Branch of Societe Generale.
(4) Please see the article 20 of V in the notes to the financial statement for more details about the
mortgage.
22 Accounts payable
Item 2011.6.30 2010.12.31
Accounts payable 180,249,368.13 164,677,954.49
(1) By June 30,2011, 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 10,133,383.90 Yuan,
accounting for 5.62% 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
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Item 2011.6.30 2010.12.31
Advance accounts 18,033,101.84 21,127,228.70
(1) By June 30,2011, 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 5,325,901.75 Yuan,
accounting for 29.53% of the balance at the end of period.
24．Rewards paid to the staffs
Item 2010.12.31 Increase in this Payment in this 2011.6.30
period period
Salary, bonus and
allowance 37,294,867.81 100,553,761.63 102,874,381.05 34,974,248.39
Welfare expense for staffs 0.00 8,298,472.71 8,298,472.71 0.00
Social insurance fees 223,323.77 15,259,999.16 15,212,834.44 270,488.49
Including: medical
insurance fees 65,115.59 4,193,810.82 4,186,036.46 72,889.95
Endowment Insurance 124,565.12 9,402,365.21 9,366,991.60 159,938.73
Unemployment insurance
fees 21,705.20 922,230.40 919,638.94 24,296.66
Occupational Injury
Insurance 4,341.04 448,741.02 448,222.73 4,859.33
Childbirth insurance 7,596.82 292,851.71 291,944.71 8,503.82
Reserves for houses 544,027.32 5,328,810.56 5,314,370.56 558,467.32
Trade union expense and
staff education expense 1,467.45 697,181.02 622,592.11 76,056.36
Compensation for the
cancellation of work
relationship 0.00 443,190.00 467,496.00 -24,306.00
Equity stimulation bonus of
subcompanies 12,890,618.51 884,500.00 2,245,777.54 11,529,340.97
Others 369,396.53 449,532.68 448,888.00 370,041.21
Total 51,323,701.39 131,915,447.76 135,484,812.41 47,754,336.74
At the end of period, there are no cases about failure to pay the rewards of staffs.
25. Payable Taxes
Tax 2011.6.30 2010.12.31
Value-added tax 29,830,060.95 17,655,992.44
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Operating tax 4,201.33 4,033.83
City construction tax 2,535,359.79 1,970,388.42
Enterprise income tax 34,895,907.89 58,799,226.42
Real estate tax 1,177,314.40 545,415.34
Utilization tax of lands 745,135.64 1,084,368.36
Personal income tax 4,317,879.77 2,246,210.65
Stamp tax 962,080.78 499,948.01
Education surtax 1,456,970.01 890,011.63
Embankment protection 98,313.49
cost 237,088.14
Others 117,217.66 43,902.93
Total 76,279,216.36 83,837,811.52
26 Payable dividends
Investor name 2011.6.30 2010.12.31 Cause for Debts
Dividends for common
shares 20,174.46 20,174.46 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 paid
Total 2,531,984.46 2,531,984.46
27 Other accounts payable
Item 2011.6.30 2010.12.31
Other accounts payable 373,096,460.16 323,855,124.01
(1) At the end of period, the advance withdrawn expenses from the balance amounts to RMB
232,157,281.62 Yuan, accounting for 62.22% of the balance and are listed as follows:
Item 2011.6.30 2010.12.31 Cause for balance at the
98
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end of period
Interests 4,941,768.62 943,224.90 Not paid
Water and electricity Not paid
expense 2,614,253.13 2,012,794.27
Research expense 3,046,435.72 1,674,630.19 Not paid
Business promotion Not paid
expense 195,556,909.51 166,459,275.68
Leasing expense 86,642.13 128,642.13 Not paid
Advertisement Not paid
expense 946,234.49 2,788,738.30
Meeting expense 10,133,392.12 10,083,733.37 Not paid
Auditing and Not paid
information disclosure
expenses 1,103,059.56 1,424,168.67
Risk fund for medicine Not paid
research 319,946.95 547,946.95
Operating expense of Not paid
branches 5,252,360.65 5,031,364.15
Drainage expense 51,307.00 57,700.00 Not paid
Others 8,104,971.74 6,661,767.98 Not paid
Total 232,157,281.62 197,813,986.59
(2) The main cause of the increase of 15.20% over the beginning of year is the increase of advance
withdrawn expense in this period.
(3) Other accounts payable with the age of over 1 year amount to RMB 46,089,961.35 Yuan,
accounting for 12.35% of the balance at the end of period.
(4) By June 30, 2011, there are no debts with the shareholder units holding over 5% (including 5%)
voting rights.
(5) Please see the note XII for more details about the payments of associated parties.
28. Non-current Liabilities Due within 1 Year
Borrowing Unit 2011.6.30 2010.12.31 Interest Loan Period Condition
Rate
Fujian Huaqiao Trust & 400,000.00 400,000.00 Interest-fr Not specified Credit
99
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Investment Company ee
Zhuhai Branch of Agricultural 2008.11.24 to Credit
0.00 20,000,000.00
Bank of China 4.860% 2011.11.24
Zhuhai Branch of Agricultural 2008.11.24 to Credit
0.00 20,000,000.00
Bank of China 4.860% 2011.11.24
Zhuhai Branch of Bank of 2009.09.22 to Credit
0.00 20,000,000.00
Communications 4.860% 2011.09.22
Zhuhai Branch of Bank of 2009.11.06 to Credit
0.00 10,000,000.00
Communications 4.860% 2011.11.06
Total 400,000.00 70,400,000.00
29. Other current liabilities
Type 2011.6.30 2010.12.31
Short-term
400,000,000.00 0.00
financing bonds
In the first half of 2011, with the approval, the company issued two installments of short-term
financing bonds to the institutional investors (except the buyers whom are prohibited to buy by the
national laws and regulations) of national inter-bank bond market, and the issuance amount is RMB
400 million Yuan.
30. Long-term Loans
(1) Types of Long-term Loans
Type 2011.6.30 2010.12.31
Credit loans 700,000.00 20,700,000.00
Mortgage and
500,000.00 46,096,116.23
guaranty loans
Total 1,200,000.00 66,796,116.23
(2) List of loan units
2011.6.30 Annual
Loan
Loan unit Principal Payable Total Interest Loan Period
Conditions
Interests Rate
Loans from banks:
100
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Mortgage
Zhuhai Branch of Bank of and
Communications* 500,000.00 0.00 500,000.00 5.530% 2010.12.23 to 2016.12.23 guaranty
Subtotal 500,000.00 0.00 500000.00
Loans from non-bank
financial institutions:
Interest- Not specified Credit
Fuzhou Finance Bureau 700,000.00 0.00 700,000.00 free
Subtotal 700,000.00 0.00 700,000.00
Total 1,200,000.00 0.00 1,200,000.00
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, 2011, there are no due long-term loans which have not been repaid.
31 Deferred Gains
Total
Writing-off
Increase in
Allowance in this
this period
period
Item Amount 2010.12.31 2011.6.30
10,900,000.0 17,595,465.2
Ilaprazole project 30,900,000.00 0 20,000,000.00 5 13,304,534.75
Non-PVC bag improvement project 4,100,000.00 3,548,583.40 0 97,182.90 3,451,400.50
Demonstration project of managing the
high-concentration organic wastewater 4,000,000.00 2,366,387.00 0 197,202.00 2,169,185.00
Three-pollen for injection 1,800,000.00 1,233,989.97 0 0 1,233,989.97
Enzymatic technology innovation project 1,042,631.00 944,812.90 0 0 944,812.90
Enterprise innovation fund granted by the
provincial financial department in 2009 700,000.00 700,000.00 0 0 700,000.00
Industry research of potassium citrate
sustained release pellets 1,120,000.00 514,105.36 0 22,420.54 491,684.82
5- 4-aminosalicylic acid (0001 project) 1,200,000.00 537,938.10 0 0 537,938.10
Bifidoboigen preparations 600,000.00 466,205.15 0 0 466,205.15
Sterilization and kidney-quieting capsule project 2,040,000.00 878,653.82 0 113,000.00 765,653.82
Development of new Xueshuantong
preparation RX 600,000.00 138,773.96 0 79,492.67 59,281.29
101
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Research, development and production
transfer of Jimishaxing pellets 300,000.00 228,265.13 0 0 228,265.13
Process improvement of
ValaciclovirHydrochloride 200,000.00 171,806.50 0 0 171,806.50
Salvianolic acid B 300,000.00 140,757.40 0 0 140,757.40
Depth development of Mesylate Jimishaxing
series (pellet) 80,000.00 80,000.00 0 0 80,000.00
Experiments and research about the
anti-Avian influenza of antivirus granules 710,000.00 0 110,000.00 0 110,000.00
Famciclovir Sustained Release Capsules 0302
project 4,100,000.00 3,018,181.05 0 6,385.06 3,011,795.99
Leuprorelin Microspheres project 1,400,000.00 0 1,300,000.00 830,000.00 470,000.00
Quick testing reagent project of Enrofloxacin and
Nitrofuran 300,000.00 0 0 0 0
Special fund for environmental protection 300,000.00 0 0 0 0
Shenqifuzheng injection 2,335,000.00 1,000,000.00 1,135,000.00 300,000.00 1,835,000.00
Expense for the cooperating enterprise to make
the production, study and research granted by the
provincial department in 2010 400,000.00 400,000.00 0 0 400,000.00
Project expense for Zhuhai municipal-level
enterprise technical center in 2010 300,000.00 300,000.00 0 0 300,000.00
First batch of scientific research & development
expense granted by District Scientific Industrial
& Trade Department in 2010 250,000.00 250,000.00 0 0 250,000.00
Industrialization demonstration of immunity testing
technical results about prohibited animal
growth-promoting agent 150,000.00 141,600.00 0 0 141,600.00
Development and industrialization of new
antidepressant drug Fluvoxoxamine 1,500,000.00 0 1,500,000.00 0 1,500,000.00
Development and industrialization of Urofollitropin
for injection 100,000.00 0 100,000.00 0 100,000.00
Study and application about super fine crushing
technology 100,000.00 0 20,000.00 0 20,000.00
Special fund for two-new products in 2010 170,000.00 0 170,000.00 0 170,000.00
Provincial third prize for ultrasonic wave 20,000.00 0 20,000.00 20,000.00 0
Leadership prize for strategic new industry 845,000.00 0 50,000.00 0 50,000.00
102
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Supporting fund for technical award granted by
the nation and Guangdong Province in 2009 40,000.00 0 40,000.00 0 40,000.00
Fuzhou Finance Bureau 400,000.00 0 400,000.00 400,000.00 0
Others 1,924,354.00 596,123.75 0 0 596,123.75
28,556,183.4 19,661,148.4
Total 63,726,985.00 9 24,845,000.00 2 33,740,035.07
32. Deferred Income Tax Liabilities
Type 2011.6.30 2010.12.31
Temporary difference of payable taxes caused by the
saleable financial assets 1,106,738.84 1,212,428.40
Temporary difference of payable taxes caused by the
calculation of long-term equity investment with the equity
method 996,567.57 1,062,219.81
Total 2,103,306.41 2,274,648.21
33 Share Capital
Increase or Decrease (+ or － ) Unit: share
Shares
Item 2010.12.31 Share-r Gift transferred Others Subtotal 2011.6.30
from public
ationing share reserve fund
Amount amount
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 0.00 0.00 0.00 0.00 0.00 0.00 0.00
legal persons
Shares held by foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00
legal persons
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
② Raising legal person 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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shares
③ Internal staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
④ Preference shares or 0.00 0.00 0.00 0.00 0.00 0.00 0.00
others
⑤Circulation share with 0.00 0.00 0.00 0.00 0.00
trading restriction 6,059,428 6,059,428
Total of non-circulation 0.00 0.00 0.00 0.00 0.00
shares 6,059,428 6,059,428
II.Shares without trading
restriction
①Domestically-listed 0.00 0.00 0.00 0.00 0.00
Renminbi ordinary
shares 177,669,070 177,669,070
Including: Management 0.00 0.00 0.00 0.00 0.00
shares 0.00 0.00
②Domestically-listed 0.00 0.00 0.00 0.00 0.00
shares for overseas
investors 111,993,354 111,993,354
Total of circulation 0.00 0.00 0.00 0.00 0.00
shares 289,662,424 289,662,424
III. Total shares 295,721,852 0.00 0.00 0.00 0.00 0.00 295,721,852
34 Capital Reserve
Increase in this Decrease in this
Type 2010.12.31 2011.6.30
period period
Share Premium 320,792,441.78 0.00 0.00 320,792,441.78
Other Capital
Reserve 27,643,737.56 470.39 598,907.52 27,045,300.43
Total 348,436,179.34 470.39 598,907.52 347,837,742.21
The cause of decrease in this period is the change of fair vales of saleable financial assets.
35 Surplus Reserve
Increase in this Decrease in this
Type 2010.12.31 2011.6.30
period period
104
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Legal Surplus
Reserve 275,686,108.70 0.00 0.00 275,686,108.70
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 443,274,429.10 0.00 0.00 443,274,429.10
36 Undistributed Profit
Item 2011.6.30 2010.12.31
Undistributed profit at the
beginning of period 1,446,714,876.09 1,114,710,405.94
Plus: profit transfer in the current
period 220,861,695.59 418,180,831.06
Other transfers 0.00 0.00
Minus：Withdrawal of Legal Surplus
Reserve 0.00 41,818,083.11
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 29,501,900.34 44,358,277.80
105
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Dividends for ordinary shares that
are transferred to capitals 0.00 0.00
Undistributed profit at the end of
period 1,638,074,671.34 1,446,714,876.09
37 Equities of the minority of shareholders
2010.12.31 Increase or decrease from January to June 2011 2011.6.30
Shareholding Equities of
Equities of the percentage of the Profit and loss of the minority
minority of Net profits of minority of the minority of Other change of
Company name shareholders subcompanies shareholders shareholders s shareholders
Zhuhai Livzon Reagent Co., Ltd 53,317,928.21 23,041,551.73 49% 11,290,360.35 0.00 64,608,288.56
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 11,126,121.12 18,748,257.75 7.86% 1,473,613.06 0.00 12,599,734.18
Limin Pharmaceutical Co., Ltd -22,362,872.5
under Livzon Group 36,795,726.90 46,590,121.85 11.91% 5,553,130.41 4 19,985,984.77
Shanxi Datong Livzon Qiyuan
Medicine Co., Ltd 238,163.77 -288,027.17 18.52% -21,602.04 0.00 216,561.73
Longxi Livzon Shenyuan Medicine
Co., Ltd 376,573.78 -140,562.48 20.72% -14,056.25 0.00 362,517.53
Zhuhai Livzon – Bai A Meng
Biological Materials Co., Ltd 1,111,467.95 0.00 18% 0.00 0.00 1,111,467.95
Zhuhai Livzon Dankang
Biotechnology Co., Ltd 8,844,995.62 -4,835,514.85 49% -2,369,402.28 9,800,000.00 16,275,593.34
Livzon Group Vaccine Engineering
Co., Ltd 9,901,501.06 -3,139,905.54 16.15% -507,094.74 0.00 9,394,406.32
Wenshan Livzon 0.00 -53,774.17 49% -26,349.34 1,470,000.00 1,443,650.66
-11,092,872.5
125,998,205.0
Total 121,712,478.41 79,922,147.12 15,378,599.17 4 4
Other changes are about the capitals invested by the minority of shareholders, and the decrease
amount is the profit distribution to the minority of shareholders..
38 Operating Income and Cost
(1) Item list
106
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
January to June 2011 January to June 2010
Item Gross operating Operating Gross operating
Operating Income Operating Cost Operating Cost
Profit Income Profit
Main Busine 1,455,789,741.43 666,506,492.27 789,283,249.16 1,302,631,607.06 627,566,218.33 675,065,388.73
Other
Business 15,647,759.20 10,586,915.00 5,060,844.20 20,137,982.68 8,197,910.42 11,940,072.26
Total 1,471,437,500.63 677,093,407.27 794,344,093.36 1,322,769,589.74 635,764,128.75 687,005,460.99
(2) The main businesses are listed as follows as per the region:
January to June 2011 January to June 2010
Item Income from Cost of Main Gross profit from Income from Main Cost of Main Gross profit from
Main Business Business Main Business Business Business Main Business
Guangdong 993,259,928.92 666,740,588.74
Province 1,660,000,517.66 1,475,624,784.86 886,937,861.00 588,686,923.86
Sichuan 53,135,159.25 53,165,362.72
Province 106,300,521.97 56,793,401.75 26,834,280.38 29,959,121.37
Fujian 162,827,432.63 45,425,378.05
Province 208,252,810.68 178,477,920.72 139,990,468.26 38,487,452.46
Others 40,827,894.69 21,284,281.37 19,543,613.32 62,101,334.50 44,132,832.92 17,968,501.58
Subtotal 2,015,381,745.00 1,230,506,802.17 784,874,942.83 1,772,997,441.83 1,097,895,442.56 675,101,999.27
Internal
Writing-off in
the Company 559,592,003.57 564,000,309.90 -4,408,306.33 470,365,834.77 470,329,224.23 36,610.54
Total 1,455,789,741.43 666,506,492.27 789,283,249.16 1,302,631,607.06 627,566,218.33 675,065,388.73
(3) Incomes and costs from main businesses are listed as follows as per the business:
Item January to June 2011 January to June 2010
Income from Main Income from Main
Cost of Main Business Cost of Main Business
Business Business
Sales of
Commodities 1,455,789,741.43 666,506,492.27 1,302,631,607.06 627,566,218.33
Total 1,455,789,741.43 666,506,492.27 1,302,631,607.06 627,566,218.33
(4) Sales volume of top 5 clients
Client Name January to June 2011 January to June 2010
107
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Percentage of Total Percentage of Total
Sales Volume Sales Volume
Sales Volume (%) Sales Volume (%)
Total sales volume of top 5
clients 173,320,404.05 11.91% 164,802,970.86 12.46%
(5) Incomes and costs from other businesses are listed as follows as per other business:
January to June 2011 January to June 2010
Item Incomes from Other Costs of Other Incomes from Other Costs of Other
Businesses Businesses Businesses Businesses
Sales of raw
materials 5,829,703.80 3,541,636.56 11,778,588.24 1,164,801.64
Processing
expense 198,836.09 157,630.19 597,256.05 658,116.88
Royalty expense 0.00 0.00 0.00 0.00
Leasing expense 1,511,695.64 62,435.92 755,647.57 15,103.33
Inspection
expense 64,475.56 38,342.89 27,795.72 10,215.14
Power expenses 7,527,285.44 6,704,305.13 6,399,010.23 6,242,164.80
Others 515,762.67 82,564.31 579,684.87 107,508.63
Total 15,647,759.20 10,586,915.00 20,137,982.68 8,197,910.42
39 Business Tax and Surtax
Item January to June 2011 January to June 2010
City construction tax 10,115,122.54 21,936.55
Education surtax 7,379,675.39 1,482,633.16
Embankment protection cost 702,751.79 809,106.60
Business Tax 27,116.28 621,340.51
Others 107,357.55 92,612.72
Total 18,332,023.55 3,027,629.54
Please see the note III for the withdrawal standard of taxes
40 Financial Expense
Item January to June 2011 January to June 2010
108
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Interest payment 7,984,040.10 4,282,258.84
Minus: Interest income 13,919,949.29 3,454,946.99
Profit and loss in the exchange -1,746,589.87 -581,401.52
Formality expense charged by banks 2,423,359.87 523,610.27
Total -5,259,139.19 769,520.60
In this period, the main causes of the decrease of financial expense by 783.43% over the same
period of previous year are that, 1) the increase of currency capitals has caused the increase of
interest incomes and 2) the changes of foreign exchange have caused the changes of exchange
profit and loss.
41. Loss of asset depreciation
Item January to June 2011 January to June 2010
Reserves for Bad Accounts 4,546,555.42 4,875,389.17
Depreciation Reserve for inventory 1,392,960.60 2,065,434.66
Depreciation reserve for long-term equity
investment 0.00 0.00
Depreciation loss of other investments 0.00 0.00
Depreciation Reserve for fixed assets 0.00 0.00
Depreciation Reserve for projects under
construction 0.00 0.00
Depreciation Reserve for intangible
assets 0.00 0.00
Depreciation Reserve for goodwill 0.00 0.00
Total 5,939,516.02 6,940,823.83
42 Gains from changes of fair values
Sources of profits caused by the
January to June 2011 January to June 2010
changes of fair values
Tradable financial assets 43,870.70 -2,151,436.68
Including: shares 76,943.47 -2,056,818.88
Fund -33,072.77 -94,617.80
43 Investment returns
109
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Item January to June 2011 January to June 2010
1. Returns in the holding period: -654,572.56 -384,976.08
① profits distributed by the associated or joint
companies 0.00 0.00
②Tradable financial assets 814,960.40 544,151.89
③Saleable financial assets 0.00 150,229.47
④ Net increase or decrease of adjusted
shareholders’ equities of invested company at
the end of year -1,472,733.50 -2,007,910.04
Including: Guangdong Blue Treasure
Pharmaceutical Co. Ltd. -562,733.50 -686,343.82
Tongyikangshimei Chain (Shenzhen)
Co., Ltd -910,000.00 -1,321,566.22
⑤Profits from the distributions of other equity
0.00
investments 0.00
Including: Zhuhai Branch of Guangdong
0.00
Development Bank 0.00
Shanghai Haixin Pharmaceutical Co.,
0.00
Ltd 0.00
928,552.60
○6 Others 3,200.54
2. Returns from transfers: 0.00 0.00
Including: Sales of tradable financial assets 0.00 0.00
Total -654,572.56 -384,976.08
44. Non-operating Income
(1) List about non-operating incomes
Item January to June 2011 January to June 2010
Total profit of non-current asset
disposal 480,954.95 2,309,399.58
Including: Profit of fixed asset
disposal 480,954.95 2,309,399.58
Penalty income 1,100.00 29,450.00
110
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Waste income 99,172.73 196,225.23
Governmental allowance 20,110,733.72 7,225,572.95
Compensation income 15,300.00 717,246.00
Payments that will not be paid 1,323,658.41 0.00
Others 220,063.22 69,744.67
Total 22,250,983.03 10,547,638.43
In this period, the main causes of the increase of financial expense by 110.96% over the same
period of previous year are the increase of governmental allowances and profit of fixed asset
disposal.
(2) Governmental allowance
Type January to Source unit Approval document
June 2010
IY81149 anti-gastrointestinal ulcer medicine Yue Jing Mao Chuang Xin [2008] No.
(Ilaprazole) 17,595,465.25 Zhuhai Finance Bureau 778
Development of new Xueshuantong
preparation RX 79,492.67 Zhuhai Finance Bureau Yue Ke Gui Hua Zi [2009] No. 159
Sterilization and kidney-quieting capsule Guangdong Science and
project 105,000.00 Technology Department Yue Ke Ji Zi [2007] No. 172
Demonstration project of managing
the high-concentration organic Zhuhai Environmental
wastewater 197,202.00 Protection Bureau ——
Chengdu Bureau of Labor
Allowance for positions in difficult enterprises 618,618.00 and Social Security Cheng Lao She Fa〔2009〕No. 178
Science prize for independent innovation 20,000.00
products of mycophenlate mofetil Qingyuan Finance Bureau ——
Special expense for intellectual property 50,000.00
protection in Qingyuan City Qingyuan Finance Bureau ——
Technical prize for hi-tech enterprise granted 100,000.00
by Zhuhai Science and Technology Bureau Qingyuan Finance Bureau ——
Prize for independent innovation products 30,000.00
granted by Zhuhai Science and Technology
Bureau Qingyuan Finance Bureau ——
111
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Supporting fund from Guangdong export
credit insurance in fourth quarter 3,886.00 Zhuhai Finance Bureau ——
Industrialization project of Leuprorelin Acetate
Microspheres for Injection 700,000.00 —— ——
Famciclovir Sustained Release Capsules
(0302 project) 6,385.06 Zhuhai Finance Bureau ——
Notice About Publicly Announcing The
Key Industry Technique Innovation
Projects For Enterprise Innovation
Industry research of potassium citrate Funds Granted By Guangdong Province
sustained release pellets 22,420.54 Zhuhai Finance Bureau In 2007
National Development and
Non-PVC bag improvement project 97,182.90 Reform Commission Yue Ke Ji Zi [2007] No. 172
Special award fund for Fuzhou municipal-level
enterprise technical center 100,000.00 Fuzhou Finance Bureau ——
Allowance expense for energy measurement Fuzhou Bureau of Quality
data collection 13,800.00 and Technical Supervision ——
Energy-saving project fund for “fermentation
refinery production system energy
optimization improvement project” in 2010 300,000.00 Fuzhou Finance Bureau ——
First prize for Fuzhou excellent new products
in 2010 8,000.00 Fuzhou Finance Bureau ——
Yue Ke Chan Xue Yan Zi
[2009]No. 197 and Zhu Ke Gong Mao
Sterilization and kidney-quieting capsule 8,000.00 Zhuhai Finance Bureau Xin Ji Zi [2010] No. 5
Unemployment Insurance
Fund Management Special
Use in Fuzhou Labor and
Export credit insurance allowance for October Employment Management
to November 2010 24,654.00 Center Rong Lao She Bao（2010）No. 80
Unemployment Insurance
Fund Management Special
Use in Fuzhou Labor and
Social insurance allowance for October to Employment Management
December 2010 11,379.30 Center Rong Lao She Bao（2010）No. 80
112
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Unemployment Insurance
Fund Management Special
Use in Fuzhou Labor and
Export credit insurance allowance for Employment Management
December 2010 19,248.00 Center Rong Lao She Bao（2009）No. 88
Total 20,110,733.72
45 Non-operating Expense
Item January to June 2011 January to June 2010
Total of loss for disposal
of the non-current assets 60,007.09 498,732.12
Including: Loss for
disposal of fixed assets 60,007.09 498,732.12
Rejection of fixed assets 2,373.50 0.00
Loss of fixed assets 0.00 0.00
Penalty payments 189,603.55 85,226.27
Penalty for breach 0.00 38,770.94
Public welfare donations 500.00 855,565.94
Extraordinary loss 0.00 0.00
Others 1,601.80 7,270.69
Total 254,085.94 1,485,565.96
46 Income Taxes
Item January to June 2011 January to June 2010
Current income
49,866,259.29 33,183,228.45
tax
Deferred income
-2,865,397.85 7,420,371.35
tax
Total 47,000,861.44 40,603,599.80
47 Other comprehensive gains
113
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
January to
Item January to June 2010
June 2011
1. Profit (loss) caused by the saleable financial assets -704,597.08 -3,244,080.36
Minus: Income tax effect of saleable financial assets -106,159.95 -486,612.06
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 -598,437.13 -2,757,468.30
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 0.00
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
Adjusted amount that was transferred as the initial confirmation
amount of hedged item 0.00 0.00
Total 0.00 0.00
-2,019,381.1
4．Conversion difference of foreign currency financial statements
7 -744,293.10
Minus: Net amount that is transferred to the current profit and loss due
to disposal of overseas operation 0.00 0.00
Subtotal -2,019,381.17 -744,293.10
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 0.00 0.00
114
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previous periods and is transferred to the current profit and loss
Subtotal 0.00 0.00
-2,617,818.3
Total
0 -3,501,761.40
48. Other Cashes Received Related to the Operating Activities
Item January to June 2011 January to June 2010
Deposit 4,084,887.78 15,290,721.18
Fund transfer 4,826,320.36 4,960,107.39
Governmental
allowance 26,412,105.20 8,293,353.00
Interest
income 13,919,949.29 3,454,946.99
Penalty
income 12,200.85 29,450.00
Deposit 343,462.65 333,136.28
Loans to
staffs 2,270,634.01 2,511,806.14
Special
expense 0.00 0.00
Allowance
income 0.00 0.00
Others 1,086,218.63 1,836,820.99
Total 52,955,778.77 36,710,341.97
49. Other Cashes Paid Related to the Operating Activities
Item January to June 2011 January to June 2010
Office expense 5,524,729.35 7,279,538.92
Traveling expense 6,516,473.90 8,259,786.25
Communication expense 6,268,981.15 5,727,368.08
Water and electricity expenses 1,365,375.65 1,229,092.22
115
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Transportation expense 14,588,504.42 9,151,716.26
Advertising expense 1,971,400.00 5,047,042.62
Meeting expense 9,070,941.54 11,883,274.97
Lease expense 3,637,108.89 2,993,730.32
Maintenance expense 7,286,023.03 4,790,211.10
Environment Protection Cost 200,413.59 294,182.00
Auditing expense and information
disclosure expense 1,570,938.60 1,313,610.81
Insurance 1,306,363.12 1,153,324.23
Meeting expense of Board of
Directors 63,703.34 94,622.04
Consultancy expense of
consultants 1,609,628.49 590,896.31
Research and development
expense 22,235,435.24 12,532,133.24
Lawsuit expense 63,535.25 546,856.22
Bid-invitation expense 399,190.00 403,597.47
Testing and inspection expenses 434,829.60 106,890.00
Formality expenses charged by
banks 2,423,359.87 523,610.27
Penalty payment 21,998.94 199,922.82
Reserve fund 11,356,057.27 4,965,123.27
Deposit 7,488,313.09 13,854,223.74
Fund transfer 8,126,558.24 3,668,877.38
Business promotion expense 251,788,111.64 191,423,729.74
Transfer royalty of technologies 1,726,717.36 5,990,023.05
Others 18,276,371.91 9,638,663.98
Total 385,321,063.48 303,662,047.31
50 Other Cashes Received Related to the Financing activities
116
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Item January to June 2011 January to June 2010
Release of pledged deposits 6,200,000.00 0.00
Deducted personal income tax
in the dividend distribution 0.00 1,186,821.82
Total 6,200,000.00 1,186,821.82
51 Other Cashes Paid Related to the Financing Activities
Item January to June 2011 January to June 2010
Formality fees of issuing the
bonds 1,600,000.00 125,000.00
Mortgaged deposits 0.00 1,220,000.00
Total 1,600,000.00 1,345,000.00
52 Supplementary Data of Consolidated Cash Flow Statement
(1) Supplementary data of cash flow statement
January to June January to June
Item 2011 2010
1. Reconciliation of net profit to cash flow from operating
activities:
Net profits
236,240,294.76 257,800,172.85
Plus: Reserve for asset depreciation
5,939,516.02 6,940,823.83
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 69,364,763.96 53,122,065.22
Amortization of intangible assets
7,751,157.71 6,265,090.92
Amortization of long-term amortization expense and long-term
assets 1,581,621.71 1,274,266.72
Loss in disposal of fixed assets, intangible assets and other -
long-term assets (the profits will be listed beginning with "-") 420,947.86 -1,810,667.46
Loss in the rejection of fixed assets (the profits will be listed
beginning with "-") - 0
Loss in the changes of fair values (the profits will be listed beginning -
with "-") 43,870.70 2,151,436.68
Financial expense (the profits will be listed beginning with "-")
7,984,040.10 4,282,258.84
Investment loss (the profits will be listed beginning with "-")
654,572.56 384,976.08
Decrease of deferred income tax assets (the increase will be listed -
beginning with "-") 2,718,102.61 7,553,827.10
Increase of deferred income tax liabilities (the decrease will be listed -
beginning with "-") 171,341.80 -133,455.75
Decrease of inventory (the increase will be listed beginning with "-")
20,231,222.72 -114,620,432.08
Decrease of receivable operating items (the increase will be listed -
beginning with "-") 109,512,960.50 102,446,025.95
Increase of payable operating items (the decrease will be listed -23,720,635.77
117
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
beginning with "-") 55,774,514.70
Others 0
Net amount of cash flow from the operating activities
292,654,480.77 301,935,753.13
2.Key investment and financing activities not involving the cash
income and payment
Transfer from liabilities to share capital 0
Convertible company bonds due within one year 0
Financing leasing of fixed assets 0
3.Change of cash and cash equivalents:
Cash balance at the end of period
1,259,220,125.35 689,024,462.44
Minus: cash balance at the beginning of period
844,481,857.59 558,262,596.74
Plus: cash equivalent balance at the end of period 0
Minus: cash equivalent balance at the beginning of period 0
Net increase of cash and cash equivalent
414,738,267.76 130,761,865.70
(2) Cash and Cash Equivalents
Item 2011.6.30 2010.6.30
I. Cash 1,259,220,125.35 689,024,462.44
Including: Cash at stock 184,838.01 102,120.08
Deposits in banks that may be used for
payment randomly 1,255,817,285.59 658,064,184.21
Other Currency Capitals that may be used
for payment randomly 3,218,001.75 30,858,158.15
II. Cash equivalents 0.00 0.00
Including: Bond investment due within 3 0.00 0.00
months
III. Cash and cash equivalent balances at
the end of period 1,259,220,125.35 689,024,462.44
VI. Notes to the Relevant Items in the Financial Statements of Parent company
1. Accounts Receivable
(1) Composition of accounts receivable
2011.6.30 2010.12.31
Item Amount Percenta Reserves for Net Value Amount Percenta Reserves for Net Value
ge Bad debts ge Bad debts
Accounts receivable whose 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
118
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individual amount is large and
whose individual bad debt
reserve is withdrawn
Accounts receivable whose
bad debt reserve is withdrawn 9,561,042.0 178,583,636.7
based on the combination 213,272,941.08 99.37% 10,881,151.98 202,391,789.10 188,144,678.78 99.33% 1 7
Accounts receivable whose
individual amount is not large
but whose individual bad debt 1,106,496.6
reserve is withdrawn 1,361,045.25 0.63% 1,243,513.34 117,531.91 1,269,440.31 0.67% 4 162,943.67
Total 10,667,538. 178,746,580.4
214,633,986.33 100.00% 12,124,665.32 202,509,321.01 189,414,119.09 100.00% 65 4
(2) Accounts receivable whose bad debt reserves are withdrawn based on the age combination
2011.6.30 2010.12.31
Age Amount Percenta Reserves for Bad Net Value Amount Percent Reserves for Bad Net Value
ge debts age debts
Within 1 199,604,958.3 183,212,547.0 174,051,919.6
year 210,110,482.51 97.90% 10,505,524.16 5 9 96.73% 9,160,627.43 6
1-2
years 1,834,742.13 0.85% 110,084.53 1,724,657.60 4,185,798.30 2.21% 251,147.90 3,934,650.40
2-3
years 1,327,716.44 0.62% 265,543.29 1,062,173.15 746,333.39 0.39% 149,266.68 597,066.71
Over 3
years 1,361,045.25 0.63% 1,243,513.34 117,531.91 1,269,440.31 0.67% 1,106,496.64 162,943.67
Total 202,509,321.0 100.00 178,746,580.4
214,633,986.33 100.00% 12,124,665.32 1 189,414,119.09 % 10,667,538.65 4
(3) At the end of period, for the accounts receivable whose amounts are large, or whose amounts
are not large but whose depreciation tests have been separately made, the bad debt reserve
balances have not been fully withdrawn.
(4) By June 30, 2011, there are no debts with the shareholder units holding over 5% (including 5%)
voting rights.
(5) The total amount of top 5 accounts receivable is RMB 23,544,854.06 Yuan, accounting for
119
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
10.97% of the receivable balance.
2011.6.30 2010.12.31
Age
Amount Percentage Amount Percentage
Within 1 year 23,544,854.06 10.97% 15,897,297.57 8.39%
2 Other accounts receivable
(1) Composition of other accounts receivable
2011.6.30 2010.12.31
Item Amount Percent Reserves for Net Value Amount Percent Reserves for Net Value
age Bad debts age Bad debts
Accounts receivable whose
individual amount is large
and whose individual bad 281,036,727.2 281,036,727.2 314,062,928.7 314,062,928.7
debt reserve is withdrawn 1 94.48% 0.00 1 9 80.98% 0.00 9
Accounts receivable whose
bad debt reserve is
withdrawn based on the
combination 14,820,657.63 4.98% 786,409.31 14,034,248.32 72,008,999.89 18.57% 791,925.01 71,217,074.88
Accounts receivable whose
individual amount is not
large but whose individual
bad debt reserve is 1,124,593.1 1,240,647.9
withdrawn 1,598,350.99 0.54% 0 473,757.89 1,737,800.84 0.45% 7 497,152.87
Total 297,455,735.8 295,544,733.4 387,809,729.5 2,032,572.9 385,777,156.5
3 100.00% 1,911,002.41 2 2 100.00% 8 4
(2) Other accounts receivable with the large individual amount
Debtor Name Debt Amount Withdrawa Cause
l
Percentag
e
The debtor is the subcompany
Hongkong Antao Development 119,761,335.9 controlled by the company and there are
Limited 2 0.00 no risks in receiving the debts.
120
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The debtor is the subcompany
Livzon Syntpharm Co., Ltd in controlled by the company and there are
Zhuhai Bonded Area 81,794,028.67 0.00 no risks in receiving the debts.
The debtor is the subcompany
controlled by the company and there are
Livzon (Hongkong) Co., Ltd 26,943,557.11 0.00 no risks in receiving the debts.
The debtor is the subcompany
Xinbeijiang Pharmaceutical Co., Ltd controlled by the company and there are
under Livzon Group 26,544,547.96 0.00 no risks in receiving the debts.
The debtor is the subcompany
Fuzhou Fuxing Pharmaceutical Co., controlled by the company and there are
Ltd under Livzon Group 25,993,257.55 0.00 no risks in receiving the debts.
281,036,727.2
Total 1
(2) Other accounts receivable whose bad debt reserves are withdrawn based on the age
combination
2011.6.30 2010.12.31
Age Amount Percenta Reserves for Net Value Amount Percenta Reserves for Net Value
ge Bad debts ge Bad debts
Within 1 year 294,660,104.54 99.06% 681,168.87 293,978,935.67 384,434,671.09 99.13% 653,541.87 383,781,129.22
1-2 years 958,683.00 0.32% 57,520.98 901,162.02 1,350,488.32 0.35% 81,029.29 1,269,459.03
2-3 years 238,597.30 0.08% 47,719.46 190,877.84 286,769.27 0.07% 57,353.85 229,415.42
Over 3 years 1,598,350.99 0.54% 1,124,593.10 473,757.89 1,737,800.84 0.45% 1,240,647.97 497,152.87
Total 297,455,735.83 100.00% 1,911,002.41 295,544,733.42 387,809,729.52 100.00% 2,032,572.98 385,777,156.54
(3) At the end of period, for the other accounts receivable whose amounts are large, or whose
amounts are not large but whose depreciation tests have been separately made, the bad debt
reserve balances have not been fully withdrawn.
(4) By June 30, 2011, there are no debts with the shareholder units holding over 5% (including 5%)
voting rights.
(5) The total amount of top 5 other accounts receivable is RMB 281,036,727.21 Yuan, accounting for
94.48% of the total other receivable balance, and are listed as follows:
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Percentage in
Debtor Name Debt Amount Nature or Content Debt Time
Total Amount
Hongkong Antao Development Within 1
Limited 119,761,335.92 Fund transfer year 40.26%
Livzon Syntpharm Co., Ltd in Zhuhai Within 1
Bonded Area 81,794,028.67 Fund transfer year 27.50%
Within 1
Livzon (Hongkong) Co., Ltd 26,943,557.11 Fund transfer year 9.06%
Xinbeijiang Pharmaceutical Co., Ltd Within 1
under Livzon Group 26,544,547.96 Fund transfer year 8.92%
Fuzhou Fuxing Pharmaceutical Co., Within 1
Ltd under Livzon Group 25,993,257.55 Fund transfer year 8.74%
Total 281,036,727.21 94.48%
3. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
2011.6.30 2010.12.31
Item Depreciation Depreciation
Book Balance Book Values Book Balance Book Values
Reserve Reserve
Calculation
by Cost
Method 1,261,217,787.15 39,071,307.03 1,222,146,480.12 1,156,171,587.15 39,071,307.03 1,117,100,280.12
Calculation
by Equity
Method 14,323,932.47 1,200,000.00 13,123,932.47 15,358,984.36 1,200,000.00 14,158,984.36
Total 1,275,541,719.62 40,271,307.03 1,235,270,412.59 1,171,530,571.51 40,271,307.03 1,131,259,264.48
(2) Long-term equity investment calculated by cost method
Name of Invested Units Initial Amount 2010.12.31 Increase in this Decrease in this 2011.6.30
period period
122
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Zhuhai Branch of Guangdong 0.00
Development Bank 177,348.84 177,348.84 0.00 177,348.84
Beijing Medical Goods Joint Operation 0.00 0.00
100,000.00
Company 100,000.00 100,000.00
Doumen Sanzhou Industry City Co., 0.00 0.00
500,000.00
Ltd 500,000.00 500,000.00
Zhuhai City Commercial Bank 20,000,000.00 20,000,000.00 0.00 0.00 20,000,000.00
Ruiheng Pharmaceutical Technology 6,250,000.00 0.00 0.00
Investment Co., Ltd 6,250,000.00 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., 54,000,000.00
Ltd 170,872,457.35 116,872,457.35 0.00 170,872,457.35
Shanghai Livzon Pharmaceutical Co., 0.00 0.00
Ltd 74,229,565.00 74,229,565.00 74,229,565.00
Zhuhai Modern Chinese Medicine 0.00 0.00
Hi-tech Co., Ltd 4,539,975.00 4,539,975.00 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 0.00 0.00
under Livzon Group 116,446,982.80 116,446,982.80 116,446,982.80
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 0.00
under Livzon Group 12,008,000.00 12,008,000.00 0.00 12,008,000.00
Limin Pharmaceutical Co., Ltd under 0.00
Livzon Group 32,768,622.72 32,768,622.72 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., 39,316,200.00 0.00
Ltd under Livzon Group 190,075,938.00 241,453,210.50 280,769,410.50
Zhuhai Livzon Dankang Biotechnology 20,400,000.00 10,200,000.00 10,200,000.00 0.00 20,400,000.00
123
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Co., Ltd
Livzon Group Vaccine Engineering
Co., Ltd 54,500,000.00 54,500,000.00 0.00 0.00 54,500,000.00
Wenshan Livzon Panax notoginseng
Plantation Co., Ltd 1,530,000.00 0.00 1,530,000.00 0.00 1,530,000.00
Total 1,169,648,893.32 1,156,171,587.15 105,046,200.00 0.00 1,261,217,787.15
(3) Long-term equity investment calculated by equity method
Name of Invested Units Investment 2010.12.31 Increase in Decrease 2011.6.30 Cash
Cost this period in this dividend
period
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 7,095,510.67 0.00 125,051.89 6,970,458.78 0.00
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 35,000,000.00 7,063,473.69 0.00 910,000.00 6,153,473.69 0.00
Total 38,662,407.50 15,358,984.36 0.00 1,035,051.89 14,323,932.47 0.00
(4) Depreciation Reserve for long-term equity investment
Transfer
Investment Projects Withdrawal in in this Withdrawal
2010.12.31 this period period 2011.6.30 Cause
The net assets
Doumen Sanzhou Industry City
are less than
Co., Ltd
500,000.00 0.00 0.00 500,000.00 zero.
20,000,000.0
Zhuhai City Commercial Bank
0 0.00 0.00 20,000,000.00 Loss
The net assets
Livzon Medical Electronic
are less than
Equipment (Factory) Co., Ltd
1,200,000.00 0.00 0.00 1,200,000.00 zero.
Fuzhou Fuxing Pharmaceutical The
Co., Ltd under Livzon Group 11,200,000.00 0.00 0.00 11,200,000.00 depreciations
124
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have
occurred.
The business
license has
been
cancelled by
the local
administration
Beijing Medical Goods Joint of industry and
Operation Company 100,000.00 0.00 0.00 100,000.00 commerce
Xinbeijiang Pharmaceutical Co.,
Ltd under Livzon Group 7,271,307.03 0.00 0.00 7,271,307.03 Operation loss
40,271,307.0
Total 3 0.00 0.00 40,271,307.03
4. Operating Income and Operating Cost
(1) Item lists
January to June 2011 January to June 2010
Item Operating Gross operating Operating Gross operating
Operating Cost Operating Cost
Income Profit Income Profit
Main
Business 593,932,264.16 361,533,125.82 232,399,138.34 481,565,169.27 230,318,595.33 251,246,573.94
Other
Business 1,147,570.64 62,435.92 1,085,134.72 399,127.57 15,103.33 384,024.24
Total 595,079,834.80 361,595,561.74 233,484,273.06 481,964,296.84 230,333,698.66 251,630,598.18
(2) Incomes and costs of main business are listed as follows as per the business types:
January to June 2011 January to June 2010
Gross Profit Gross Profit
Item Income from Cost of Main Income from Cost of Main
from Main from Main
Main Business Business Main Business Business
Business Business
Sales of
Commodities 593,932,264.16 361,533,125.82 232,399,138.34 481,565,169.27 230,318,595.33 251,246,573.94
125
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(3) Sales volume of top 5 clients
January to June 2011 January to June 2010
Client Name Percentage in Total Percentage in Total
Sales Volume Sales Volume
Sales Volume (%) Sales Volume (%)
Total sales volume of top 5
clients 47,705,742.01 8.03% 34,718,462.24 7.20%
5. Business Tax and surtax
Item Tax rate January to June 2011 January to June 2010
Business tax 5% 0.00 0.00
City construction tax 7% 2,396,397.75 0.00
Education surtax 3% 1,711,712.68 0.00
Embankment protection cost 0.07% 105,000.00 75,000.00
Total 4,213,110.43 75,000.00
Please see the note V. 38 for the main cause of the huge increase of business tax and surtax over
the same period of previous year.
6 Investment returns
Item January to June 2011 January to June 2010
1. Returns during the holding period: 98,841,956.11 -1,323,857.59
① Profits distributed by the associated or joint
companies 0.00 0.00
Including: Changzhou Kangli Pharmaceutical Co.,
Ltd under Livzon Group 0.00 0.00
②Tradable financial assets 0.00 0.00
③Bonus returns of saleable financial assets 0.00 150,229.47
④Profits distributed by other equity investments 0.00 0.00
Including: Zhuhai Branch of Guangdong
Development Bank 0.00 0.00
⑤Net increase or decrease of adjusted
shareholders’ equities of invested company at the
end of year -1,035,051.89 -1,474,087.06
126
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Including: Guangdong Blue Treasure
Pharmaceutical Co. Ltd. -125,051.89 -152,520.84
Tongyikangshimei Chain (Shenzhen) Co., Ltd -910,000.00 -1,321,566.22
⑥Investment return of subcompanies 99,877,008.00 0.00
Including: Livzon Pharmaceutical Factory under 0.00
0.00
Livzon Group
Sichuan Guangda Pharmaceutical Co., Ltd 0.00 0.00
Livzon Medicine Marketing Co., Ltd under Livzon 0.00
0.00
Group
Limin Pharmaceutical Co., Ltd under Livzon Group 99,877,008.00 0.00
Zhuhai Livzon Advertising Co., Ltd 0.00 0.00
Zhuhai Livzon Medicine Trade Co., Ltd 0.00 0.00
Zhuhai Livzon Reagent Co., Ltd 0.00 0.00
⑦Others 0.00
2. Transfer returns: 0.00 0.00
Including: Sales of tradable financial assets 0.00 0.00
Sales of saleable financial assets 0.00 0.00
Investment returns from equity transfer 0.00 0.00
Total 98,841,956.11 -1,323,857.59
In this period, the main cause of the huge increase of investment returns over the previous period is
the increase of dividends from subcompanies in this period.
7. Supplementary Data of Cash Flow Statement of Parent Company
January to June January to June
Item 2011 2010
1. Reconciliation of net profit to cash flow from operating activities:
Net profit
137,687,473.23 47,575,531.93
Plus: Reserve for asset depreciation
2,323,249.41 1,316,441.24
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 5,555,284.05 5,787,733.29
Amortization of intangible assets
3,287,283.53 3,711,736.59
Amortization of long-term amortization expense and long-term assets
Loss in disposal of fixed assets, intangible assets and other long-term -
assets (the profits will be listed beginning with "-") -119,845.95 2,302,189.33
Loss in the rejection of fixed assets (the profits will be listed beginning
with "-") 1,623.50
Loss in the changes of fair values (the profits will be listed beginning
with "-") -
Financial expense (the profits will be listed beginning with "-") 12,896,957.88
127
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
14,715,052.53
-
Investment loss (the profits will be listed beginning with "-")
-98,841,956.11 1,323,857.59
Decrease of deferred income tax assets (the increase will be listed -
beginning with "-") -342,540.80 6,662,997.23
Increase of deferred income tax liabilities (the decrease will be listed
-
beginning with "-") -105,689.56
Decrease of inventory (the increase will be listed beginning with "-")
-27,008,380.48 -11,856,420.46
Decrease of receivable operating items (the increase will be listed
beginning with "-") -48,205,938.83 -71,748,508.60
Increase of payable operating items (the decrease will be listed
beginning with "-") 47,004,293.83 31,839,557.74
Others
Net amount of cash flow from the operating activities
35,949,908.35 29,812,073.76
2.Key investment and financing activities not involving the cash income
and payment
Transfer from liabilities to share capital
Convertible company bonds due within one year
Financing leasing of fixed assets
3.Change of cash and cash equivalents:
Cash balance at the end of period
1,135,455,774.07 537,451,270.54
Minus: cash balance at the beginning of period
662,428,797.62 418,389,049.61
Plus: cash equivalent balance at the end of period
Minus: cash equivalent balance at the beginning of period
Net increase of cash and cash equivalent
473,026,976.45 119,062,220.93
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
Relationship Legal
Register Organization Economic
Enterprise Name Main Business with the Represent
ed Place Code Nature
Company ative
Joincare Production and Company
Shenzhe Parent Zhu
Pharmaceutical sales of oral liquids, 61887436-7 Limited
n company Baoguo
Group Industry medicines and (Listed
128
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Co., Ltd health-care food company)
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
Enterprise Name 2010.12.31 Increase in this Decrease in this 2011.6.30
period period
Joincare Pharmaceutical Group
1,317,448,800 0.00 0.00 1,317,448,800
Industry Co., Ltd
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
Enterprise Name 2010.12.31 Percenta Increase in Decrease in 2011.6.30 比例(%)
ge (%) this period this period
Joincare Pharmaceutical Group Industry 45.7293 45.7293
Co., Ltd and its subcompanies 135,231,608 % 0.00 0.00 135,231,608 %
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
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 Company controlled by parent
61885517-4 company
Jiaozuo Joincare Pharmaceutical Group Company controlled by parent
Industry Co., Ltd 77512952-0 company
Zhuhai Joincare Pharmaceutical Group Company controlled by parent
Industry Co., Ltd 75788087-1 company
Health Pharmaceutical (China) Co., Ltd Company controlled by parent
61749891-0 company
129
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Shenzhen Taitai Pharmaceutical Company Company controlled by parent
Limited 74121715-1 company
3. Transactions between associated parties
(1) The pricing principle of transactions between the company and associated parties: the
transactions will be settled at the prices of similar products in the market
(2) Transaction of associated parties
① Sales of Commodities
January to June 2011 January to June 2010
Percentage in Similar
Name of Associated Parties Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Zhuhai Joincare
Pharmaceutical Group
Industry Co., Ltd 7,083.49 0.00 968.11 0.00
Shenzhen Taitai
Pharmaceutical Company
Limited 0.00 0.00 16,683.76 0.00
Total 7,083.49 0.00 17,651.87 0.00
② Provision of labors (water, electricity and power)
January to June 2011 January to June 2010
Percentage in Similar
Name of Associated Parties Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 5,003,733.63 66.47% 3,401,805.22 53.16%
③ Purchase of commodities
January to June 2011 January to June 2010
Percentage in Similar
Name of Associated Parties Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 184,089.42 0.04% 3,413.33 0.00
130
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Shenzhen Haibin
Pharmaceutical Co., Ltd 7,351,495.73 1.49% 3,365,226.50 0.51%
Shenzhen Taitai
Pharmaceutical Company
Limited 0.00 0.00% 153,384.00 0.02%
Joincare Pharmaceutical
Group Industry Co., Ltd 53,914.53 0.01% 14,974.36 0.00
Jiaozuo Joincare
Pharmaceutical Group
Industry Co., Ltd 52,180,106.84 10.61% 133,243,850.27 20.08%
Total 59,769,606.52 12.15% 136,780,848.46 20.61%
④ Leasing of assets
January to June 2011 January to June 2010
Percentage in Similar
Name of Associated Parties Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Zhuhai Joincare
Pharmaceutical Group 6.85%
Industry Co., Ltd 54,146.88 3.58% 51,714.00
Health Pharmaceutical
6.61%
(China) Co., Ltd 49,974.00 3.31% 49,974.00
Total 104,120.88 6.89% 101,688.00 13.46%
⑤ Renting of assets
January to June 2011 January to June 2010
Percentage in Similar
Name of Associated Parties Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Joincare Pharmaceutical
0.00
Group Industry Co., Ltd 453,287.80 0.00
⑥ Receivable and payable balances with associated parties
2011.6.30 2010.12.31
Enterprise Name
Amount Percentage Amount Percentage
Other accounts receivable:
Guangdong Blue Treasure 7,531,606.09 14.99% 4,157,957.24 8.40%
131
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Pharmaceutical Co. Ltd.
Total 7,531,606.09 14.99% 4,157,957.24 8.40%
Accounts payable:
Shenzhen Haibin Pharmaceutical
Co., Ltd 8,601,250.00 4.77% 0.00 0.00
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 215,384.62 0.12% 0.00 0.00
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 2,343,819.68 1.30% 37,523,400.46 22.79%
Total 11,160,454.30 6.19% 37,523,400.46 22.79%
Other accounts payable:
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 0.00 0.00 44,741.25 0.01%
Total 0.00 0.00 44,741.25 0.01%
VIII. Contingent Events
By June 30, 2011, 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 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
132
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
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.
XI. 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)
Name of Guarantee Occurrence Balance at Guarantee Guaranty Period
Date the end of Actual Amount type
(Signing period guarantee
date of amount
agreement)
0 Joint and
Livzon Syntpharm Co., Ltd in several
2008.1.8 0 4,100
Zhuhai Bonded Area liability 2008.1.8-2011.1.8(Zhuhai
guaranty Branch of Bank of China)
133
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
0 Joint and
Lida Pharmaceutical Co., Ltd in several
2008.1.8 0 1,900
Zhuhai Bonded Area liability 2008.1.8-2011.1.8(Zhuhai
guaranty Branch of Bank of China)
0 Joint and
several
Zhuhai Livzon Reagent Co., Ltd 2010.3.28 0 2,000
liability 2011.3.28-2014.3.28(Zhuhai
guaranty Branch of Bank of China)
Joint and
2009.7.15-2012.7.15
662 several
Zhuhai Livzon Reagent Co., Ltd 2009.7.15 0 0 (Zhuhai Branch of Standard
（USD100） liability
Chartered Bank)
guaranty
0 Joint and
Zhuhai Livzon Medicine Trade several
2008.1.8 0 400
Co., Ltd liability 2008.1.8-2011.1.8(Zhuhai
guaranty Branch of Bank of China)
0 Joint and
Zhuhai Livzon Medicine Trade several 2009.7.20-2012.7.20(Zhuhai
2009.7.20 0 1,000
Co., Ltd liability Branch of Bank of
guaranty Communications)
Joint and
Livzon Pharmaceutical Factory several 2009.11.27-2012.11.27
2009.11.27 0 0 6,000
under Livzon Group liability (Zhuhai Branch of Agricultural
guaranty Bank of China)
Joint and
Livzon Pharmaceutical Factory several 2009.9.10-2012.9.10
2009.9.10 0 0 6,000
under Livzon Group liability (Zhuhai Branch of Shenzhen
guaranty Development Bank)
Joint and
2011.5.17-2014.5.17
Livzon Pharmaceutical Factory several
2011.05.13 0 0 16,000 (Zhuhai Branch of Xiamen
under Livzon Group liability
International Bank)
guaranty
134
Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
Joint and
2009.8.21-2012.8.21
Livzon Pharmaceutical Factory several
2009.8.21 0 0 5,000 (Zhuhai Branch of Bank of
under Livzon Group liability
Communications)
guaranty
Joint and
2010.12.14-2018.12.14
Livzon Pharmaceutical Factory several
2010.12.23 50 50 32,000 (Zhuhai Branch of Bank of
under Livzon Group liability
Communications)
guaranty
Joint and
Livzon Pharmaceutical Factory several 2010.6.12-2018.6.03
2009.10.15 0 4,559.61 12,000
under Livzon Group liability (Zhuhai Branch of Bank of
guaranty China)
Joint and
8,316
Livzon Pharmaceutical Factory 2,494.86 2,494.86 several 2010.5.13-2013.5.13
2010.05.13 （HKD
under Livzon Group （HKD3,000） （HKD3,000） liability (Shenzhen Branch of Nanyang
10,000）
guaranty Commercial Bank)
1,676.55 1,676.55 Joint and
2010.11.22-2013.2.22
Livzon Pharmaceutical Factory （HKD2,016） （HKD2,016） 3,236 several
2010.11.22 Guangzhou Branch of Societe
under Livzon Group 1,703.02 （USD500） liability
0 Generale
（HKD2,016） guaranty
Total guaranty amount to its controlling subcompanies in the report
period 10,484.04
Total balance of guaranty amount to its controlling subcompanies
in the report period 4,221.41
2. On July 30, 2010, the 2010 second temporary shareholders’ meeting examined and approved the
Proposal of the Company on Applying for the Issuing of the Short-Tem Financing Bonds and agreed
that, the company would apply the National Association of Financial Market Institutional Investors for
the short-term financing bonds with the total registered amount of no more than RMB 800 million
Yuan; the validity period of registration is two years, and the bonds will be issued for three times.
The agricultural bank of China Limited will act as the principal underwriter.
On January 28, 2011, in accordance with the Zhong Shi Xie Zhu [2011] No. CP15 Notice about
registration acceptance issued by the national inter-bank bond market, the company agreed that, the
company would issue the short-tem financing bonds with the registration capital of RMB 800 million
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Yuan. The registered amount will be valid within 2 years from the issuing date of notice, and the
agricultural bank of China Limited will act as the principal underwriter. The company may issue the
short-term financing bonds in installments within the validity period of registration, and the first
installment of issuance will be completed within 2 months after the registration.
3. Assets and Liabilities calculated at the fair values
Unit: RMB 1000 Yuan
Withdrawn Amount
Item Amount Profit and Accumulated depreciation at the end
in this period of period
at the loss in the changes of
beginning changes fair values
of period of fair that are
values in accrued to
this the equities
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) 57,865.79 43.87 0.00 0.00 56,611.07
2. Derivative financial assets 0.00 0.00 0.00 0.00 0.00
3. Saleable financial assets 10,572.89 0.00 -3,847.90 0.00 9,868.29
Subtotal of financial assets 68,438.68 43.87 -3,847.90 0.00 66,479.36
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 68,438.68 43.87 -3,847.90 0.00 66,479.36
Financial liabilities 0.00 0.00 0.00 0.00 0.00
4. Foreign currency financial assets and foreign currency financial liabilities
Unit price: RMB 1000 Yuan
Withdrawn Amount
Item Amount Profit and Accumulated depreciation at the end
in this period of period
at the loss in the changes of
beginning changes fair values
of period of fair that are
values in accrued to
this the equities
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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) 57,185.64 76.94 0.00 0.00 55,963.99
2. Derivative financial assets 0.00 0.00 0.00 0.00 0.00
3. Loans and accounts receivable 36,764.94 0.00 0.00 300.52 42,775.29
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 93,950.58 76.94 0.00 300.52 98,739.28
Financial liabilities 184,368.60 0.00 0.00 0.00 210,679.08
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:
January to June
Item January to June 2010
2011
Profit and loss in disposal of non-current assets, including the
written-off part of already withdrawn depreciation reserves 420,947.86 1,815,102.44
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 20,110,733.72 7,225,572.95
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 0.00 0.00
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should be available at the time of investment
Profit and loss of non-currency assets exchange 0.00 0.00
Profit and loss of investment or management of entrusted assets 0.00 0.00
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 858,831.10 -1,457,055.32
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 1,465,215.51 21,397.08
Other profit and loss items that comply with the definition for
non-operating profit and loss 0.00 0.00
Subtotal 22,855,728.19 7,605,017.15
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Minus: effect of income tax 3,349,687.44 1,225,654.73
Effect of the minority of shareholders’ equities 472,151.12 492,548.82
Total 19,033,889.63 5,886,813.60
2. Yield Rate of Net Assets and Profit Per Share
Profit per share (Yuan/share)
Weighted average yield
Profit in the report period Profit per share
rate of net asset
Basic profit per share after dilution
Net profit attributable to the
ordinary shareholders 8,42% 0.75 0.75
Net profit attributable to the
ordinary shareholders after
deduction of non-recurring profit
and loss 7.70% 0.68 0.68
Calculation Steps:
1. Basic profit per share
After deduction of
Item Calculation Steps Amount non-recurring profit
and loss
Current net profit attributable to the ordinary 220,861,695.5
P
shareholders 9 201,827,805.96
Total quantity of shares in the beginning of
S0
period 295,721,852 295,721,852
Increase of shares in the current period Si 0 0
Length from the next month after share increase
Mi
to the end of report period (unit: month) 0 0
Length of report period (unit: month) M0 6 6
The weighted average number of ordinary
S=S0＋Si×Mi÷M0
shares which are issued to the public 295,721,852 295,721,852
Basic profit per share P÷S 0.75 0.68
2. Diluted profit per share:
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Livzon Pharmaceutical Group Inc. Full text of 2011 Semin-annual Report
After deduction of
Item Calculation Steps Amount non-recurring profit
and loss
Current net profit attributable to ordinary 220,861,695.5
P
shareholders 9 201,827,805.96
Dividends and interests related to the diluted
A1
potential ordinary shares 0.00 0.00
Returns or expenses caused by the dilution of
A2
the conversion of potential ordinary shares 0.00 0.00
Total quantity of shares in the beginning of
S0
period 295,721,852 295,721,852
Increase of shares in the current period Si 0 0
Length from the next month after share increase
Mi
to the end of report period (unit: month) 0 0
Length of report period (unit: month) M0 6 6
The weighted average number of ordinary
S=S0＋Si×Mi÷M0
shares which are issued to the public 295,721,852 295,721,852
Weighed average number in the conversion from
diluted potential ordinary shares to ordinary X
shares 0.00 0.00
Diluted profit per share (P＋A1±A2)÷(S＋X) 0.75 0.68
XIII. Approval of Financial Statement
This financial statement is passed and issued by the Board of Direction on July 9 , 2011.
Company Name: Livzon Pharmaceutical Group Inc.
Principal of the Company: Principal of the Financial Principal of the Accounting
Department: Department:
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Section 8: Catalog of Files for Reference
1 The 2011semi-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 10, 2011
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