Livzon Pharmaceutical Group Inc.
2012 Semi-Annual Report
August 2012
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Content
Section 1 Important Notice............................................................................. 2
Section 2 Brief Introduction of the Company.................................................. 3
Section 3 Financial Highlights.........................................................................4
Section 4 Change of Share Capitals and Particulars of Shareholders...........8
Section 5 Particulars of Directors, Supervisors and Senior Executives....... 14
Section 6 Report of Board of Directors.........................................................19
Section 7 Important Events...........................................................................35
Section 8 Financial Reports..........................................................................57
Section 9 Catalog of Files for Reference....................................................180
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 1 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.
All directors of the company have attended the meeting of Board of Directors
examining this semi-annual report.
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.
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 2 Brief Introduction of the Company
(I) Information about the company
A-share code 000513 B-share code 200513
A-share abbreviation Livzon Group B-share abbreviation Livzon B
Stock exchange for listing
Shenzhen Stock Exchange
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
Registered address No. 132, Guihua North Road, Gongbei, Zhuhai, Guangdong Province
Post code of registered 519020
address
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
(II) Contact persons and contact details
Representative of stock
Secretary of BOD
affairs
Name Li Rucai Wang Shuguang
Contact address Livzon Building, No. 132, Guihua North Livzon Building, No. 132, Guihua North
Road, Gongbei, Zhuhai, Guangdong Road, Gongbei, Zhuhai, Guangdong
Province Province
Telephone (0756)8135888 (0756)8135888
Fax (0756)8886002 (0756)8886002
Email lirucai2008@livzon.com.cn wangshuguang2008@livzon.com.cn
(III) Information disclosure and location for filing the report
Papers for information disclosure Securities Times, China Securities Journal and Hongko
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
ng Wen Hui Daily (English version)
Website appointed by China http://www.cninfo.com.cn
Securities Regulatory
Commission for publishing the
semi-annual report
Location for filing the report Secretary’s Office of BOD of Livzon Group
Section 3 Financial Highlights
(I). Main financial data in the report period
Are there any retrospective adjustments in the financial statements for previous reporting periods?
□ Yes √ No
Main financial data
Increase or decrease
Report period Same period of
Main financial data compared with the same
(January to June) previous year
period of previous year (%)
Total operating income(RMB Yuan) 28.11%
1,884,997,175.44 1,471,437,500.63
Operating profit(RMB Yuan) 7.97%
282,068,231.88 261,244,259.11
Total profit(RMB Yuan) 3.94%
294,403,930.28 283,241,156.20
Net profit attributable to the shareholders of
3.55%
listed companies 228,705,016.39 220,861,695.59
Net profit attributable to the shareholders of
listed companies after deduction of non-recurring 7.85%
217,680,844.35 201,827,805.96
profit and loss
Net cash flows from operating activities (RMB
14.61%
Yuan) 335,416,385.94 292,654,480.77
Increase or decrease
End of the current End of the previous
compared with the end of
period year
previous year (%)
Total assets (RMB Yuan) 1.23%
4,659,333,083.63 4,602,908,981.74
Owners’ equity attributable to the shareholders
2.87%
of listed companies (RMB Yuan) 2,924,778,257.57 2,843,169,706.20
Share capitals (share) 295,721,852 295,721,852 --
Main financial indexes
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Increase or decrease
Report period Same period of
Main financial index compared with the same
(January to June) previous year
period of previous year (%)
Basic profit per share (RMB Yuan per share) 0.77 0.75 2.67%
Diluted profit per share (RMB Yuan per share) 0.77 0.75 2.67%
Basic profit per share after deduction of non-
0.74 0.68
recurring profit and loss (RMB Yuan per share) 8.82%
Fully diluted yield rate of net assets (%) 7.82% 8.16% Down 0.34 percentage points
Weighted average yield rate of net assets (%) 7.86% 8.42% Down 0.56 percentage points
Fully diluted yield rate of net assets after deduction
of non-recurring profit and loss (%) 7.44% 7.46% Down 0.02 percentage points
Weighted average yield rate of net assets after
7.48% 7.70% Down 0.22 percentage points
deduction of non-recurring profit and loss(%)
Net cash flows per share from operating activities
1.13 0.99 14.14%
(RMB Yuan per share)
Increase or decrease
End of the current End of the
compared with the end of
period previous year
previous year (%)
Net asset per share attributable to the shareholders
9.89 9.61 2.91%
of listed companies (RMB Yuan per share)
Assets/liabilities ratio(%) 33.64% 34.57% Down 0.93 percentage points
(II) Accounting Data Difference between Domestic and Overseas Accounting
Standards
□ Applicable √ Inapplicable
Remarks about Accounting Data 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 overseas auditing, and we have not found any
accounting data differences between domestic and overseas accounting standards.
(III) Deducted non-recurring profit and loss items and amounts:
√ Applicable □ Inapplicable
Item Amount (RMB Yuan) Remarks
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Profit and loss in disposal of non-current assets 14,164.54
Tax rebate and exemption due to the approval without
the appropriate authority or the formal approval
documents
Governmental allowance accrued to the current profit
and loss (except those that are closely related to the
11,882,340.48
businesses of company, and are continuously granted
based on the certain standard quota or certain quantity)
Capital occupancy expense from the non-financial
enterprises that is accrued to the current profit and
loss
The investment costs of enterprises to obtain the
subcompanies, associated enterprises and joint
enterprises are less than the returns from the fair
values of identifiable net assets of invested units that
should be available at the time of investment
Profit and loss of non-currency assets exchange
Profit and loss of investment or management of
entrusted assets
The various withdrawn reserves for assets
depreciation due to the force majeures such as the
natural calamities
Profit and loss of liabilities restructuring
Enterprise restructuring expenses, such as the
payments for staffing and integration expense, etc.
Profit and loss from the amount exceeding the fair
values in the transactions in which the transaction
prices are obviously unfair.
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
The profit and loss caused by the contingent events
that are not related to the normal operation business of
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 tradable 3,704,038.57
financial liabilities as well as the investment returns in
disposal of tradable financial assets, tradable financial
liabilities and saleable financial assets
Reversion of depreciation reserves for accounts
receivable whose depreciation testing have been
individually made.
Profit and loss from the externally entrusted loans
Profit and loss caused by the changes of fair values of
invested real estates in the subsequent calculation by
utilizing fair value mode
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
Custody income due to the entrusted custody
Other net non-operating income and payment except
439,193.38
the above items
Other profit and loss items that comply with the
definition for non-operating profit and loss
Effect of the minority of shareholders’ equities -2,610,225.29
Effect of income tax -2,405,339.64
Total 11,024,172.04 --
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 4 Change of Share Capitals and Particulars of
Shareholders
(I) Particulars of Share Capital Changes
1. Particulars of Share Capital Changes
√ Applicable □ Inapplicable
Beginning balance Increase (+) or decrease (-) Closing balance
Bonu Shares
Newly s transferred Subt Percenta
Others Quantity
Percentag issued share from public otal ge (%)
Quantity e (%) shares s reserve fund
I. Shares with trading
6,059,428 2.05% 6,059,428 2.05%
restriction
1.Shares held by the
state
2.Shares held by state-
6,059,428 2.05% 6,059,428 2.05%
owned legal 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
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
overseas natural
persons
5. Shares held by senior
executives
II. Shares without 289,662,42
97.95% 289,662,424 97.95%
trading restriction 4
1.Renminbi ordinary 177,669,07
60.08% 177,669,070 60.08%
shares 0
2.Domestically-listed
111,993,35
Shares for Overseas 37.87% 111,993,354 37.87%
4
Investors
3.Overseas-listed
shares for overseas
investors
4.Others
295,721,85
III. Total of shares 100% 295,721,852 100%
2
2. Changes of shares with trading restriction
√ Applicable □ Inapplicable
Quantity of Increase
Quantity of Quantity of
shares with of shares
shares with shares with
trading with
Shareholder trading trading
restriction trading Reason for trading restriction Release date
name restriction at restriction at
that are restriction
the beginning the end of
released in in this
of period period
this period period
In the process of equity reform of
the company, Joincare paid the
payable consideration shares of
equity reform on behalf of Begol;
Guangzhou
when the trading restriction
Begol Trading 6,059,428 - - 6,059,428 Uncertain
period expires, Begol will repay
Corporation
such consideration shares to
Joincare or their trading
restriction cannot be released
without the approval of Joincare.
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(II) Securities issuance and listing particulars
1. Issuance particulars of securities in the past three years
□ Applicable √ Inapplicable
2．Total quantity and structural changes of company shares as well as the consequent changes
of assets/liabilities structures of the company
□ Applicable √ Inapplicable
3. Existing internal staff shares
□ Applicable √ Inapplicable
(III) Particulars about shareholders and actual controllers
1. Total quantity of shareholders at the end of report period
At the end of report period, the shareholder quantity amounted to 25,267 (including: 16,988
A-share holders and 8,279 B-share holders).
2. Shares held by top ten shareholders
Shares held by top ten shareholders
Total Shares for the
quantity mortgage or
Sharehol freezing
Total of shares
Shareholder name (full Shareholder ding
quantity of with
name) nature percenta
shares trading
ge (%) Status Quantity
restrictio
n
Domestic non-
Joincare pharmaceutical
state-owned 26.21% 77,510,167
Group Industry Co., Ltd
legal person
Foreign legal
Tiancheng Industry Co., Ltd 17.13% 50,660,052
person
First Shanghai Securities Co., Foreign legal
3.48% 10,295,547
Ltd person
Foreign legal
GAOLING FUND,L.P. 3.47% 10,258,112
person
Agricultural Bank of China – L Others 2.1% 6,200,000
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
OF
Guangzhou Begol Trading Pledge and
Others 2.05% 6,059,428 6,059,428 6,059,428
Corporation freeze
Domestic non-
Shenzhen Haibin
state-owned 1.99% 5,892,943
Pharmaceutical Co., Ltd
legal person
Agricultural Bank of China-
Greatwall Anxin Return Mixed Others 1.97% 5,835,352
Securities Investment Fund
Bank of Communications -
Great Wall Jiufu Core Growth
Others 1.63% 4,830,286
Stock-type Securities
Investment Fund (LOF)
China Construction Bank －
Greatwall Consumption Value-
Others 0.97% 2,878,296
added Stock-type Securities
Investment Fund
Remarks about shareholders
Shareholding particulars of top ten shareholders without trading restriction
√ Applicable □ Inapplicable
Quantity of shares Share type and quantity
without trading
Shareholder name restriction at the
Type Quantity
end of report
period
Joincare pharmaceutical Group Industry Co., Ltd 77,510,167 A-share 77,510,167
Tiancheng Industry Co., Ltd 50,660,052 B-share 50,660,052
First Shanghai Securities Co., Ltd 10,295,547 B-share 10,295,547
GAOLING FUND,L.P. 10,258,112 B-share 10,258,112
Agricultural Bank of China – LOF 6,200,000 A-share 6,200,000
Shenzhen Haibin Pharmaceutical Co., Ltd 5,892,943 A-share 5,892,943
Agricultural Bank of China- Greatwall Anxin Return
5,835,352 A-share 5,835,352
Mixed Securities Investment Fund
Bank of Communications - Great Wall Jiufu Core
4,830,286 A-share 4,830,286
Growth Stock-type Securities Investment Fund (LOF)
China Construction Bank － Greatwall Consumption
2,878,296 A-share 2,878,296
Value-added Stock-type Securities Investment Fund
Industrial and Commercial Bank of China－Jiashi Strate 2,728,892 A-share 2,728,892
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
gic Growth and Mixed Securities Investment Fund
Description of relationship or concerted action of above shareholders
① On 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, Bank of Communications - Great Wall Jiufu Core Growth Stock-type Securities
Investment Fund (LOF) and China Construction Bank－Greatwall Consumption Value-added Stock-type Securities
Investment Fund 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.
The strategic investors or general legal persons become the top 10 shareholders due to the rationing and sales of new
shares.
□ Applicable √ Inapplicable
3. Particulars about controlling shareholders and actual controllers
(1) Changes of controlling shareholders and actual controllers
□ Applicable √ Inapplicable
(2) Introduction about controlling shareholders and actual controllers
Are there any new actual controllers?
□ Yes √ No.
Name of actual controller Zhu Baoguo
Type of actual controller Individual
Remarks:
The controlling shareholder of company: Joincare pharmaceutical Group Industry Co., Ltd
was established on December 18, 1992 with the registered capital of RMB 1.3174488
billion Yuan, and the legal representative is Mr. Zhu Baoguo. The operation scopes are as
follows:
Development (not including the development of Chinese medicine, traditional Chinese
medicine formula products listed as the national protection resources), wholesale, import &
export and relevant auxiliary service (not including the products administered by the state-
owned trades; the products administrated with quota license or special regulations shall be
subject to the relevant national rules) of traditional Chinese medicine, chemical raw material
medicine, chemical preparations, antibiotic raw material medicine, antibiotic preparations,
food, health-care food and cosmetics (The Sanitation License will expire on January 13,
2012; the Pharmaceutical Trade License will expire on November 29, 2014); general cargo
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
transportation (The Road Transportation License will expire on August 20, 2013).
Mr. Zhu Baoguo is the actual controller of the company and has the Chinese nationality
with no right of abode in other countries and areas.
(3) Scheme of property right and controlling relationships between the Company
and actual controllers
Liu Guangxia Zhu Baoguo Liu Miao
100%
10% 90% Taitai Pharmaceutical Industry Group
Limited
0.1%
99.90%
Shenzhen Baiyeyuan Investment Co., Ltd Hongxinhang Co., Ltd
48.03% 16.46%
Joincare Pharmaceutical Group Industry Co., Ltd
100% Hold: 26.21% 100%
Mortgage and custody: 2.05%
Shenzhen Haibin Pharmaceutical Co., Ltd Tiancheng Industry Co., Ltd
1.99% 17.13%
Livzon Pharmaceutical Co., Ltd
Note: Liu Miao is the mother of Zhu Baoguo, and Liu Guangxia is the wife of Zhu Baoguo.
(4) The actual controllers control the company through the trust or other asset management
modes
□ Applicable √ Inapplicable
4. Other legal person shareholders holding over 10% of total shares
□ Applicable √ Inapplicable
(IV) Convertible company bonds
□ Applicable √ Inapplicable
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 5 Particulars of Directors, Supervisors and Senior Executives
(I). Shareholding changes of directors, supervisors and senior executives
□ Applicable √ Inapplicable
Quantit
Quantity
y of Quantity
Decreas of Including: Whether they are
shares Increase of share
Ge e of shares quantity of Caus given the rewards
Ag at the of shares equity at
Starting date Ending date shares at the shares with es of by the
Name Position nd beginni in this the end of
e of term of term in this end of trading chan shareholder units
er ng of period report
period report restriction ges or other
report (share) period
(share) period (share) associated units
period (share)
(share)
(share)
Zhu M
presiden 49 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None Yes
Baoguo ale
Liu Fe
Guangx Director m 42 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None Yes
ia ale
Director;
M
An Ning vice 39 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
ale
president
Tao Director;
Deshen vice 47 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
g president
Qiu
M
Qingfen Director 40 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None Yes
ale
g
14
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Zhong M
Director 40 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None Yes
Shan ale
Luo
Independe M
Xiaoson 36 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
nt Director ale
g
Wang Independe M
42 2011-06-30 2013-04-16 0.00 0.00 0.00 0.00 0.00 0.00 None No
Junyan nt Director ale
Yang Independe M
39 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
Bin nt Director ale
Cao M
Supervisor 52 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None Yes
Pingwei ale
Wang M
Supervisor 45 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
Maolin ale
Pang M
Supervisor 66 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
Datong ale
Yang
Vice M
Daihon 45 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
president ale
g
Lu Vice M
44. 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
Wenqi president ale
Xu
Vice M
Guoxia 49 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
president ale
ng
Secretary M
Li Rucai 41 2011-06-30 2014-06-30 0.00 0.00 0.00 0.00 0.00 0.00 None No
of BOD ale
Total -- -- -- -- -- -- --
Note: 1. the periods of office term of above directors, supervisors and senior executives are respectively the expiry dates of the 7th Board of Directors and 7th Board of
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Supervisors.
During the report period, the directors, supervisors and senior executives of company did not hold any company equity, so there were no changes about share-holding quantity.
Equity stimulus that are granted to the directors, supervisors and senior executives of company during the report period
□ Applicable √ Inapplicable
During the report period, no equity stimulus were granted to the directors, supervisors and senior executives of company.
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(II) Positions
Positions in shareholder units
√ Applicable □ Inapplicable
Whether
he/she
gets
rewards or
Name Shareholder unit Position Starting date Ending date
allowances
from
shareholde
r unit
Joincare pharmaceutical Group
Zhu Baoguo Chairman August 28, 2009 August 28, 2012 Yes
Industry Co., Ltd
Joincare pharmaceutical Group
Liu Guangxia Vice Chairman August 28, 2009 August 28, 2012 Yes
Industry Co., Ltd
Director, vice
Joincare pharmaceutical Group general
Qiu Qingfeng manager and August 28, 2009 August 28, 2012 Yes
Industry Co., Ltd
secretary of
BOD
Joincare pharmaceutical Group Vice general
Zhong Shan August 28, 2009 August 28, 2012 Yes
Industry Co., Ltd manager
Director, vice
general
Joincare pharmaceutical Group manager and
Cao Pingwei August 28, 2009 August 28, 2012 Yes
Industry Co., Ltd principal of
financial
department
Remarks
about
The office terms of above personnel are those of directors and senior executives of fourth Board of
positions in
Directors of Joincare.
shareholder
units
Positions in other units
√ Applicable □ Inapplicable
Whether he/she
Ending gets rewards or
Name Other unit Position Starting date
date allowances from
other unit
Shenzhen Great Wall Certified Public Departmenta
Luo Xiaosong August 2007 -- Yes
Accountants Co., Ltd l manager
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
May
China Alpha Investment Management Director/chai
2001/January -- Yes
Limited rman
2007
Independent
China Aerospace International Holdings and non-
March 2007 -- Yes
Limited execution
director
Execution
China New Economy Fund Limited February 2010 -- No
director
Director,
Wang Junyan general
CITIC Securities International Investment manager
August 2008 -- Yes
Management (HK)Limited and asset
management
director
CSI RMB Fund Ltd Director April 2011 -- No
Dragon Origin Limited Director April 2011 -- No
Independent
and non-
Wumart Store,Inc. June 2011 -- Yes
execution
director
Secretary of
Shenzhen Cau Technology Co., Ltd March 2010 -- Yes
BOD
Yang Bin
Independent
Centre Testing International January 2010 -- Yes
director
Remarks
about
positions in
other units
(III) Rewards of directors, supervisors and senior executives
Regarding the rewards of directors and supervisors, the shareholders’ meeting of company
Policy-making
examined and approved that, the compensation and assessment commission under the Board
procedures of rewards
of Directors will, in accordance with the compensation management system and based on the
of directors, supervisors
operation performances, determine the reward standards of senior executives, then submit
and senior executives
them to the Board of Directors for approval.
Determination basis of Based on the industry and regional income levels and considering the operation performance
rewards of directors, and personal contributions, the company will determine the annual rewards of directors,
supervisors and senior supervisors and senior executives. At the same tine, the company implements the
executives performance assessment and personal performance assessment system and determines the
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
distribution of performance bonus and year-end double salaries based on the assessment
results.
Actually paid rewards of
During the report period, the total rewards paid by the company to directors, supervisors and
directors, supervisors
senior executives amounted to about RMB 1.9940 million Yuan (including the tax).
and senior executives
(IV) Changes of directors, supervisors and senior executives
□ Applicable √ Inapplicable
During the report period, there were no changes of directors, supervisors and senior executives
(V) Company staffs
Quantity of existing staffs 5305
Quantity of the retired staffs whose expenses will be borne
537
by the company
Profession composition
Profession composition type Profession composition quantity
Workers 2066
Salesman 1609
Technician 917
Financial staff 113
Execution staffs 600
Educational level
Educational level type Quantity (person)
PHD 9
Master 157
Bachelor 1060
College 1352
Senior Middle school or below 2727
Remarks about company staffs: the retired staffs whose expenses will be borne by the company only takes a small
amount of allowance from the company
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 6 Report of Board of Directors
(I) Discussion and anaylisis of management
During the report period, while facing many unfavorable factors such as the slump of increase rate of macro-economy
and adjustment of industry policies, etc, the company has strengthened the internal management, and by taking the
sales as the engine, the quality as the roots and the development as the power, implemented the fine marketing
management, and enhanced the marketing assessment; promoted the excellent management of production and
emphasized the quality and cost control; the series of measures, including the improvement in the optimized
management of development, and continuous strengthening of the development investment, etc have made the
operation performance of company keep growing, and maintained the good development tendency.
During the report period, the marketing management work of company mainly focuses on the construction of sales teams
and strengthening of terminal assessment. By taking the measures such as the talent recruitment, team division, find
assessment system and perfection of assessment management plans, etc, the company further implemented the fine
marketing management, effectively improved the controlling capacity about terminals. At the same time, by holding the
multiple market activities such as the seminars and expert visits, the company enhanced the reputation and product
impacts to promote the growth of sales performance. Within half a year, the company held over 700 small city seminars
or hospital meetings, and participated in or held 7 state-level seminars.
During the report period, the company further integrated the development resources, strengthened the internal
management optimization of development departments, and ensured the smooth development of all projects; the
company also achieved the results about patent application and project submission. In terms of development, Dankang
project: the experiment work of AT132 product before clinical use has been completed, and the clinical experiment
application has been submitted to SFDA and has been accepted; in terms of the vaccines, the company has internally
determined the production process and quality control standards, worked out the registration standards, perfected and
regulated the process operation, and negotiated with technical party about three-bach production plan for purpose of
applying for the production document No.; in terms of other development projects, the clinical experiment of Ilaprazole
injection has been accepted by SFDA; the supplementary data about voriconazole for injection process improvement
project have been submitted, and other projects are being smoothly pushed as scheduled. In terms of patent and project
application, the company has obtained 2 patent authorization, newly applied for 5 innovation patents, and completed two
applications about projects with governmental support.
During the report period, with respect of production management, the company emphasized the quality control and cost
control, requested all production enterprises under it to implement all kinds of quality control management, and by
continuously pushing the fine production, strived to reduce the production cost, and reduced the cost pressures brought
by the increase of prices of raw materials and energies. In terms of quality control, the company utilized the opportunity
of implementing the new edition of GMP certification, and made good use of the new reforming to improve the equipment,
ensure the quality level, and establish the quality risk management system. In the first half of year, after the event of
“capsule with excessive 铬” is disclosed, all production enterprises have received the supervision inspection and
sampling inspection of local medical supervision department, and found no unacceptable products, which embodied the
controlling capacity about drug quality and maintained the good reputation about excellent product quality. In terms of the
cost control, the company continuously pushed the fine production projects, realized the visible production control and
standardized site management, and by carrying out the process improvement activities, the company effectively realized
the energy-saving and consumption reduction and controlled the production costs.
20
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
By carrying out the above work, during the report period, the company operated very well and achieved the main
operation results and financial status:
During the report period, the operating income of the company amounted to RMB 1.8849972
billion Yuan, up RMB 413.5597 million Yuan at the same period of previous year with the
increase rate of 28.11%. The main causes are that, by further adjusting the marketing
policies, the company enhanced the assessment strength, and pushed the fast growth of
the incomes of key preparation products (mainly including Chinese traditional drug
preparation, Gonadotropic hormone and Digestive tract products).
During the report period, the company has made the operating profit of RMB 282.0682 million
Yuan, up RMB 20.8240 million Yuan over the previous year with the decrease rate of 7.97%;
the main cause is that, even if the main business income of company increases, the
increase rate of sales expenses and management expenses is much faster.
At the end of report period, the net assets attributable to the shareholders of parent
company amounted to RMB 228.7050 million Yuan, up RMB 7.8433 million Yuan with the
increase rate of 3.55%. The cause is that, even if the operating profits have increased, the non-operating incomes
have decreased. The Net profit attributable to the shareholders of listed companies after deduction of non-recurring profit
with the increase rate of 7.85%
and loss amounts to RMB 217.6808 million Yuan, up 15.8530 million RMB
over the beginning of year. The increase rate of operating profits is kept basically the same.
At the end of report period, the sales expenses of company amounted to RMB 674.0235
million Yuan, up RMB 290.1140 million Yuan with the increase rate of 75.57%. The cause is
that, (1) due to the continuous changes of sales structures, the percentage of sales volume
of preparation-type drugs has further increased; (2) due to the adjustment of sales policies,
the expenses have also increased. The management expense amounts to RMB 157.6367
million Yuan, up RMB 28.0694 million Yuan with the increase rate of 21.66% over the
beginning of year. The main cause is that, during the report period, the company has
enhanced the development strength, and the development expense has greatly increased;
the financial expense amounts to RMB -11.0594 million Yuan, down RMB 5.8003 million
RMB from RMB -5.2591 million RMB with the decrease rate of 110.29% over the beginning
of year. The main cause is that, the cash flow status of company is kept good, and the
interest incomes of bank deposits have increased.
During the report period, the net amount of cash flow from the operating activities totaled
RMB 335.4164 million Yuan, up RMB 42.7619 million Yuan. The main cause is that, during
the report period, due to the increase of sales incomes, the cash received from commodity
sales and all kinds of deposits received due to the adjustment of sales policies have
increased; The net amount of cash flow from the investment activities in this period reached
RMB -413.0864 million Yuan, down RMB 305.8724 million Yuan compared with the same
period of previous year. The main cause is that, during the report period, the payments for
acquiring and constructing the fixed assets of the relocation project of new Livzon
Pharmaceutical Factory under Livzon Group and Ningxia Livzon Pharmaceutical Industry
Park project have increased. The net amount of cash flow from the investment activities in
this period reached RMB -470.1148 million Yuan, down RMB 700.6489 million Yuan
compared with the same period of previous year. The main cause is that, during the report
period, the company did not issue the short-term financing bonds but paid the principals
and interests of RMB-400-million-Yuan short-term financing bonds issued in the same
21
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
period of previous year.
Whether the actual operating performance of company is over 20% lower or higher than the profitability forecast and
operation plan publically disclosed by the company:
□ Yes √ No
Operation status and performance analysis about main subcompanies and companies whose equity is participated by the
company
Operati
Net
Total ng Net
Registe profit
assets income assets
during
No. Company name Main products or services red at the s during at the
the
capital end of the end of
report
period report period
period
period
Be mainly engaged in the
production and sales of the
Livzon Pharmaceutical
products such as the chemical
1 Factory under Livzon drugs, biochemical drugs, micro- 44,210.93 127,653.39 93,847.99 45,063.66 8,324.72
Group ecological preparations, antibiotics,
etc that are produced by the
company.
Be mainly engaged in the
development, production and sales
Sichuan Guangda
of traditional Chinese medicines,
2 Pharmaceutical Co., 14,900.00 45,331.99 37,192.51 13,526.02 3,071.30
and the main products include the
Ltd
antivirus granules and Kouyanning
infusion, etc.
Be mainly engaged in the
production and operation of Chinese
Limin Pharmaceutical traditional medicine preparations,
3 Co., Ltd under Livzon medical raw materials and so on. 6,156.00 36,448.91 17,105.86 5,217.40
18,063.25
Group The main products are
Shenqifuzheng injection solution,
Xueshuantong and so on.
Be mainly engaged in the
production of biochemical and
polypeptide raw-material drugs. The
Shanghai Livzon main products are the bio-chemical
4 Pharmaceutical Co., raw material medicines such as 8,732.89 13,980.89 10,442.50 8,837.37 571.05
Ltd Menotrophin and Chorionic
Gonadotrophin for Injection, etc as
well as the Leuprorelin Acetate
Microspheres for Injection.
Be mainly engaged in the
production and operation of Bismuth
Livzon Syntpharm Co.,
Potassium Citrate Granules series,
5 Ltd in Zhuhai Bonded 12,828.00 38,980.25 24,456.42 12,240.31 -368.37
Live Bifidobacterium Preparation
Area
and Cefoperazone Sodium and
Sulbactam Sodium for Injection.
Xinbeijiang Be mainly engaged in the
6 13,492.52 33,107.04 19,161.11 14,683.73 2,005.71
Pharmaceutical Limite production of raw material medicine
22
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
s and intermediate products as well
as the export business of relevant
d Liability Company
technologies. The main products
under Livzon Group
are Pravachol, Mevastatin, and
Salinomycin, etc.
Be mainly engaged in the
production of the raw materials of
Fuzhou Fuxing antibiotics, intermediates,
Pharmaceutical Co., preparations and chemical raw USD4,170
7 43,501.73 38,811.06 18,935.91 1,586.17
Ltd under Livzon materials for medicine production 万元
Group and so on. The main products are
Colistin Sulfate, vancomycin and
Kanamycin Monosulf.
Be mainly engaged in the sales
(including the import and export
Zhuhai Livzon
businesses) of traditional Chinese
8 Medicine Trade Co., 6,000.00 28,891.63 6,865.82 27,266.99 102.12
medicine and western medicine
Ltd
preparations, medical intermediates
and so on
Be mainly engaged in the
production and sales of diagnostic
Zhuhai Livzon reagents. The main products are
9 4,645.00 18,467.78 16,333.12 15,238.30 2,626.74
Reagents Co., Ltd Chlamydia trachomatis antigen
diagnostic reagent kit and HIV
antibody diagnostic regent kits.
During the report period, all subcompanies of company have operated well. Influenced by
clinic application management policies of antibiotics medicines, Livzon Syntpharm Co., Ltd
suffered from the loss. However, compared with the same period of previous year, the loss
is reduced. The company will take the measures such as the adjustment of product
structures and strive to get rid of loss as soon as possible.
All risk factors that may have the unfavorable influence on the achievement of future development strategy and operation
objective of the company
In 2012, the unfavorable influences on pharmaceutical industry are, apart from the slump of increase rate of macro-
economy, adjustment of industry policies, such as the decrease of drug prices. Secondly, there are the influences of
increase of production cost brought by the increase of raw materials and energy prices and labor cost.
1. Main business and operation status of company
(1) The main business income is classified according to the profession and product:
Unit: RMB 10 thousand Yuan
Increase or Increase or Increase or
decrease of decrease of decrease of
operating operating operating profit
Operating
Profession or Operating Operating income cost margin
profit
product income cost compared compared compared with
margin
with the with the the same
previous previous period of
year (%) year (%) previous year (
23
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
%)
Profession
Up 1.26 percentage
Digestive tract 86.58% 20.56% 10.17%
14,850.65 1,992.22 points
Cardiac and
cerebral blood 7,211.21 76.60% 33.45% 12.65%
We 1,687.21 Up 4.32 percentage
vessel
ster points
n
Antimicrobial
me 67.00% -15.50% -22.79% Up 3.12 percentage
drugs 14,121.64 4,660.20
dici points
ne
Gonadotropic
pre 64.40% 54.19% 67.09% Down 2.75 percent
hormone 21,911.94 7,800.37
par age points
atio
Blood and
n Down 21.68
hemopoietic 4.59% -15.85% 8.89%
1,228.41 1,171.99 percentage points
system drugs
Up 2.60 percentage
Others 74.49% 44.48% 31.14%
6,930.76 1,768.38 points
Down 2.77
Raw material drugs 40,290.45 15.30% 0.52% 3.92%
34,127.19 percentage points
Chinese traditional
65,480.96 78.90% 73.96% 22.24% Up 8.93 percentage
drug preparation 13,813.77
points
Diagnostic
reagents and 15,237.05 54.41% 21.89% 16.02%
6,946.46 Up 2.31 percentage
equipments
points
Up 1.93 percentage
Imported drugs 242.46 42.36 82.53% -46.45% -51.77%
points
Product
Shenqifuzheng Down 6.44
47,345.67 6,409.41 86.46% 104.21% 38.33%
injection percentage points
Note: remarks about main business according to the industry and product: list the operating income according to the
industry and product or main industry and products with over 10% operating profits.
Remarks about huge increase and decrease of operating profit margin compared with same period of
previous year
The operating profit margin of blood and hemopoietic system drugs decreases by 21.68%. the main cause is that,
the raw material price of Urokinase product for injection increases, which causes the cost increase.
24
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(2)The main business is classified according to the regions
Unit: RMB 10 thousand Yuan
Increase or decrease of main business
Region business income income compared with the previous
year (%)
Northeast China 11.37%
14,912.59
North China 12.47%
27,858.46
Central China 44.78%
21,474.67
East China 28.19%
38,414.82
South China 17.40%
30,475.90
Southwest China 41.97%
24,465.29
Northwest China 54.10%
11,285.90
18,617.89
Export 36.71%
Remarks about main business according to regions: the company products are mainly sold domestically, and a small
quantity of products are exported to the nations and areas such as Hongkong, Veitnam, Parkistan, Japan and India, etc.
Remarks about main business composition: The company specializes in the development, production and marketing of
medicine products. The main products are Bismuth Potassium Citrate Granules series, Shenqifuzheng injection, antivirus
granules, Urofollitropin for Injection (follicle stimulating), Kanglineng(Cefodizime Sodium for Injection), Lifukang
(voriconazole), Lizhuwei (Valaciclovir Hydrochloride Tablets), Qianliean Suppository, New Liaolilong (Divitamins
Notonginseng and Cinarizine), Factive film-coated tablets (Gemifloxacin), Yili’an(Ilaprazole), Beiyi (Leuprorelin Acetate
Microspheres for Injection), mouse nerve growth factor for injection and other medical preparations, as well as Mevastatin,
Pravachol, Mycophenolic acid, Ceftriaxone, Cefuroxime, Cefodizime, Phenylalanine, vancomycin 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.
(3) Remarks about main business and reasons for key changes of its structures
□ Applicable √ Inapplicable
During the report period, there are no key changes of main business and its structures
(4) Remarks about reasons for key changes of main business profitability (operating profit
margin)
□ Applicable √ Inapplicable
25
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
During the report period, there are no key changes of main business profitability (operating profit margin)
(5) Analysis about reasons for key changes of profits compared with last year
□ Applicable √ Inapplicable
During the report period, there are no key changes of profit composition compared with last year.
2. Internal control system related to the fair value Calculation
√ Applicable □Inapplicable
The items that are calculated in fair value by company are mainly about “The financial assets that are calculated in the fair
values” and “controllably sold financial assets”. The company has formulated the external investment management system t
o regulate the procedures of acquisition, disposal and risk control of above assets, and detailedly specify the feasibility rese
arch, approval authority and policy-making procedures about acquisition and disposal of above assets as well as the routine
management and accounting disposal of above assets, etc. At the same time, the company specifies the determination met
hod of fair values of relevant assets calculated in fair values as well as initial confirmation and sequent calculation method: (
1) The financial assets 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 t
he 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 d
uring the holding period will be confirmed as the investment gains. On the preparation date of financial statement, the cha
nges of fair values will be accrued to the current profit and loss. (2) Saleable financial assets: the sum of fair values and re
levant 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 an
d cash dividends generated during the holding period will be accrued to the interest gains. At the end of the period, the sal
eable financial assets will be calculated in the fair values and the changes of fair values will be accrued to the capital reser
ves (other capital reserves).
Items related to fair value calculation
Unit: RMB Yuan
Amount at the Profit and loss in Accumulated Withdrawn Amount at the
Item
depreciation in this end of period
beginning of the changes of changes of fair
period
period fair values in this values that are
period accrued to the
equities
Financial assets
Including: 1. Financial
assets that are calculated
in the fair values and
44,343.01 941.33 45,284.34
whose changes are
accrued to the current
profit and loss
including: the derivative fi
26
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
nancial assets
2. Saleable financial
9,238.79 418.87 9,657.66
assets
Subtotal of financial
assets 53,581.80 941.33 418.87 54,942.00
Financial liabilities
Real estate for
investment
Production biological
asset
Others
Total 53,581.80 941.33 418.87 54,942.00
In the past two years, the company employs the evaluation technique to determine the fair value of same or similar items,
and is there any key difference about evaluation results? If so, please specify.
□ Yes √ No.
3. Foreign currency financial assets and foreign currency financial liabilities
√ Applicable □ Inapplicable
Unit: RMB Yuan
Amount at the Profit and loss Accumulated Withdrawn Amount at the
Item
depreciation in end of period
beginning of in the changes changes of fair
this period
period of fair values in values that are
this period accrued to the
equities
Financial assets
Including: 1. Financial assets that
are calculated in the fair values
43,819.54 917.42 44,736.96
and whose changes are accrued
to the current profit and loss
Including: the derivative financial
assets
2. Loans and accounts receivable 61,544.97 570.88 70,375.13
3. Saleable financial assets
4. Investments that are held to the
27
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
maturity dates
Subtotal of financial assets 105,364.51 917.42 0.00 570.88 115,112.09
Financial liabilities 251,449.80 329,514.72
(II) Company investment
1. General use of raised funds
□ Applicable √ Inapplicable
2. Commitment items of raised funds
□ Applicable √ Inapplicable
3. Change items of raised funds
□ Applicable √ Inapplicable
4. Key and non-raised fund investment projects
√ Applicable □ Inapplicable
Unit: RMB 10 thousand Yuan
First
Project
Project name announcement Project progress Project returns
amount
disclosure date
By the end of report period, this project has completed
two building of packaging material plants, P10 and
P08 preparation plant building, four single staff
dormitories, one dinning hall, one boiler plant and
wastewater disposal, etc. The production lines of
hormone freeze-dried plant and non-hormone freeze-
Relocation Disclosure date of
dried plant in P10 and P08 preparation plants have
project of new Phase I of project:
passed the GMP certification, and have been put into Be unable to
Livzon July 1, 2005
88,723 use. P07 preparation building has been roughly separately
Pharmaceutical Disclosure date of
completed, and is scheduled to complete the calculate.
Factory under Phase II of project:
structural acceptance this August and start the
Livzon Group April 3, 2007
machine installation; P09 cephalosporins injection
building and W02 automatic high rack warehouse is
under construction; the company will complete the
main structures of other executive and development
buildings, animal room, Chinese medicine experiment
building in June 2013 and complete the decoration
28
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
and put it to use by the end of 2013.
The Phase I of this industry park project covers 600
mu to establish “Ningxia Xinbeijiang Pharmaceutical
Co., Ltd under Livzon Group” and “Ningxia Fuxing
Pharmaceutical Co., Ltd under Livzon Group. The
fermentation plants constructed by Ningxia Xinbeijiang
Pharmaceutical Co., Ltd has been roughly completed,
and the equipment will be installed; the main part of
Ningxia
boiler room and power plant have been completed and
Livzon
the equipment will be installed; the auxiliary
Pharmaceuti May 31, 2011 30,000 Not completed.
equipment such as the warehouse has been partially
cal Industry
completed. The fermentation and refinery plants
Park project
constructed by Ningxia Fuxing Pharmaceutical Co.,
Ltd has been fully completed, the auxiliary equipment
such as the boiler room, power and warehouse has
been partially completed. The company plans to
complete the equipment installation and auxiliary
equipment construction, and put it to trial production
by the end of year.
Total 118,723 -- --
Remarks about Key and non-raised fund investment projects
By the end of report period, the actual expense of Relocation project of new Livzon Pharmaceutical Factory under
Livzon Group amounts to RMB 457.8869 million Yuan, and the actual expense of Ningxia Livzon Pharmaceutical
Industry Park project amounts to RMB 328.4795 million Yuan
(III) Revision plan of Board of Directors about operation plan in the second half of
this year
□ Applicable √ Inapplicable
(IV) Forecast about operation performance from January to September 2012
Warning that forecasts the accumulated net profit from the beginning of year to the end of next report period may suffer
from loss or have the huge changes compared with same period of previous year and reason remarks
□ Applicable √ Inapplicable
(V) Remarks of Board of Directors about “non-standard auditing report” of public
accountants firm during this report period
□ Applicable √ Inapplicables
29
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(VI) Remarks of Board of Directors about changes and disposal of events involved
in “non-standard auditing report” of public accountants firm in previous year
□ Applicable √ Inapplicable
(VII) Description about discussion results of Board of Directors about the reasons
and influences of Accounting Policies, Accounting Evaluation changes and key
accounting Error correction of the Company
□ Applicable √ Inapplicable
(VIII) Formulation and implementation of cash bonus policies
On July 6, 2012, the company convened the 2012 first temporary shareholders’ meeting, and examined and passed the
Proposal on Revising the Articles of Association, revised the profit distribution system, and specified the conditions for
cash bonus distribution and bonus percentage. The revised profit distribution system of company is as follows:
” the article 155 of Articles of Association the profit distribution system is:
(I) The profit distribution of company should emphasize both the reasonable investment returns to shareholds and
sustainable development of company, and try to maintain the continuity and steadiness of distribution policies.
(II) The company may distribute the profits by employing the cash, stock, and combination of cash and stock or
other modes permitted by the laws and regulations
(III) In principle, the company distributes the profits each year, but if the conditions permit, the company may
distribute the cash bonus in the middle of year.
(IV) On the condition that the cash flow meets the normal operation and long-term development, the company will
actively take the cash bonus, and ensure that the profits accumulatively distributed in cash in the past three years will not
be less than 30% of annually average distributable profits achieved in the past three years; the annual cash bonus
percentage will be proposed by the Board of Directors in accordance with relevant regulations and current operation
status of company and then be determined by the shareholders’ meeting.
(V) the implementation of cash bonus distributed by the company should meet the following conditions:
1. The distributable profits (the taxation-after profits after the company makes up for the loss and withdraws the
reserves) achieved by the company in the current year is positive;
2. The auditing agency has issued qualified opinions about current financial reports.
(VI) Policy-making procedures of profit distribution policies
To prepare the profit distribution plan, the company management and Board of Directors will put forward the bonus
distribution suggestions and plans by combining the profit status, capital demand and shareholder return. After the
examination of Board of Directors, such plans will be submitted to the shareholders’ meeting for approval. The
independent directors should express the opinions about profit distribution plan.
While examing the cash bonus distribution plans, the shareholders’ meeting should learn the opinions and
requirements of social public shareholders, and the Board of Directors, independent directors and shareholders who have
meet some conditions may collect the voting rights in the shareholders’ meeting from company shareholders.
When the company makes profits in a year but does not put forward the cash bonus distribution plan, the
management should submit the detailed explanation to the Board of Directors, including the reasons for failure to
distribute the cash bonus, the purpose and use plan of undistributed bonus, and the independent directors shall express
30
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
the independent opinions about profit distribution plan and publicly disclose it. After the examination of Board of Directors,
such plans will be submitted to the shareholders’ meeting for approval. While convening the shareholders’ meeting, the
company should, apart from the on-site meeting, establish the voting platform for the shareholders in the mode of network.
(VII) The company should disclose the implementation status of profit distribution plan and cash bonus policies in the
annual report and semi-annual report in accordance with relevant regulations. When the company makes profits in a year
but does not put forward the cash bonus distribution plan, the company should detailedly specify the reasons for failure to
distribute the cash bonus,and the purpose and use plan of undistributed bonus in the annual report. The Board of
Supervisors should supervise the implementation status of profit distribution plan and shareholder return plan and policy-
making procedures by the Board of Directors and the management.
(VIII) If the company must adjust or change the profit distribution policies due to the key changes of external operation
environments or operation status, after the detailed demonstration, the Board of Directors will make a resolution, and the
independent directors will express the independent opinions and publicly disclose it, and submite to the shareholders’
meeting for voting in the mode of special resolution.
(IX) If the shareholders illegally use the company capitals, the company should deduct the cash dividend of these
shareholders to repay the used capitals.”
The company has always strictly implemented the profit distribution policies, and employed the cash bonus
distribution mode in the past three years. The implementation status of cash bonus distribution complies with the
regulations of artices of association and requirements of resolutions passed in the shareholders’ meeting. This profit
distribution policy of the company has been examined and passed by the shareholders’ meeting, and the policy-making
procedures are legal; the independent directors of the company have expressed the independent opinions about the
revision of this profit distribution system, performed their responsibilities and play their roles. Through the revision of this
profit distribution system, the company has specified the conditions of cash bonus distribution as well as the cash bonus
standards and percentages. The revised profit distribution policy regulates that, while convening the shareholders’
meeting that examines profit distribution or adjust the profit distribution policies, the Board of Directors, independent
directors and the shareholders complying with some conditions may shareholders who have meet some conditions may
collect the voting rights in the shareholders’ meeting from company shareholders or establish the internet voting platform
to provide the opportunity for the middle and small-sized shareholders to fully express their opinions and requirements
and effectively maintain their legal interests.
(IX) Profit distribution plan or capital reserve transfer plan
□ Applicable √ Inapplicable
In the middle of 2012, the company will not make the profit distribution nor implement the transfer from the reserve to
share capitals.
(X) The accumulately undistributed profits of company was positive, but did not
put forward the cash bonus distribution plan
□ Applicable √ Inapplicable
(XI) Establishement and implementation of the system for registration and
management of people in possession of inside information
To further regulate the management of inside information, strengthen the confidentiality work of inside information, and m
31
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
aintain the openness, fairness and equity principles of information disclosure, in accordance with relevant regulations of th
e Company Law, Securities Law, And Regulation About Listed Companies Establishing The System About The Registratio
n And Administration Of People In Possession Of Inside Information, Management Method Of Information Disclosure Of L
isted Companies, Listing Rules Of Shenzhen Stock Exchange, And The Articles Of Association Of Livzon Pharmaceutical
Group Inc., on November 29, 2011, after the examination of the 5th meeting of the 7th Board of Directors, the company for
mulated and implemented the system about the Registration and Administration of People in Possession of Inside Informa
tion.
During the report period, the company strictly implemented the system about the Registration and Administration of P
eople in Possession of Inside Information, and completely recorded the list of all insiders in the process of reporting, subm
ission, preparation, approval and disclosure before public disclosure, and timely submit it to the stock exchange and secur
ities regulatory department. During the report period, the company and relevant personnel have not received the supervisi
on measures and executive penalty from the regulatory department due to the implementation of the system about the Re
gistration and Administration of People in Possession of Inside Information or being suspected to participate in the inside t
rading.
Self inspection and responsibility penalty about the people in possession of inside information buying or selling the stocks
of this company or their derivative products
□ Yes √ No.
The listed company and relevant personnel received the supervision measures and executive penalty from the regulatory
department due to the implementation of the system about the Registration and Administration of People in Possession of
Inside Information or being suspected to participate in the inside trading
□ Yes √ No
(XII) Other Disclosure Events
The independent directors of Company issued the special explanations and gave their
independent opinions about the capital use and external guaranty of controlling shareholde
rs and associated parties:
In accordance with the laws and regulations such as the Direction Opinions about Esta
blishing the Independent Director Systems and the Articles of Association, as the independ
ent director of Livzon Group, we take the principle of being practical and realistic, and comp
ly with the laws and regulations such as Notice of Relevant Problems about the Standardiz
ation of Fund Transfer Between the Listed Companies and Associated Parties and the Exter
nal Guaranty of Listed Companies and the Notice of Standardizing the External Guaranty of
Listed Company issued by China Securities Regulatory Commission, we closely audit the
capital use and external guaranty of associated parties in the first half of 2012.We will expla
in as follows:
Particulars about capital use of associated parties and independent opinions:
1. By June 30, 2012, the capital use of controlling shareholders and other associated p
arties is listed as follows:
The balance of capital use of controlling shareholders and other associated parties am
ounted to RMB 311.2859 million Yuan. The balance of capital use of controlling shareholder
s and affiliated enterprise is RMB 0.1761 million Yuan; the capital use amount of joint comp
any Guangdong Blue Treasure Pharmaceutical Co. Ltd is RMB 7.1162 million Yuan (the ac
32
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
counts payable to Guangdong Blue Treasure Pharmaceutical Co. Ltd is RMB 1.0853 million
Yuan); The balance of capital use of subcompanies is RMB 303.9936 million Yuan.
Therefore, we conclude that, the capital use of controlling shareholders and other asso
ciated parties has not violated the Notice of Relevant Problems about the Standardization o
f Fund Transfer Between the Listed Companies and Associated Parties and the External Gu
aranty of Listed Companies, and has not damaged the interests of medium and small sized
shareholders.
2. Remarks and independent opinions about external guaranty of company
(1) External guaranty of company (not including the guaranty to the controlled subc
ompanies):
During the report period, the company has not provided any external guaranty to any p
arties except the controlled subcompanies.
(2) During the report period, the guaranties provided by the company to the controll
ed subcompanies are listed as follows:
Unit: RMB 10,000 Yuan
Occurrence Date Balance at Actual Guarantee Guaranty Period
Name of Guarantee (Signing date of the end of guarantee limit type
agreement) period amount
Zhuhai Livzon Reagents Co., Credit
2012.3.12 0.00 0.00 2,000.00 2012.3.12-2015.3.21
Ltd guaranty
Zhuhai Livzon Reagents Co., Credit
2012.3.22 0.00 0.00 1,264.98 2012.3.22-2015.3.21
Ltd guaranty
Zhuhai Livzon Medicine Credit
2009.7.20 0.00 0.00 1,000.00 2009.7.20-2012.7.20
Trade Co., Ltd guaranty
Limin Pharmaceutical Co., 15,000.0 Credit
2012.4.17 0.00 0.00 2012.4.17-2015.4.16
Ltd under Livzon Group 0 guaranty
Livzon Syntpharm Co., Ltd in Credit
2012.6.7 2,445.60 2,445.60 3,000.00 2012.6.7-2015.6.7
Zhuhai Bonded Area guaranty
Livzon Pharmaceutical 16,000.0 Credit
2012.5.17 0.00 0.00 2012.5.17-2015.5.16
Factory under Livzon Group 0 guaranty
Livzon Pharmaceutical Credit
2012.6.7 0.00 0.00 9,000.00 2012.6.7-2015.6.7
Factory under Livzon Group guaranty
Livzon Pharmaceutical Credit
2009.8.21 0.00 0.00 5,000.00 2009.8.21-2012.8.21
Factory under Livzon Group guaranty
Livzon Pharmaceutical 32,000.0 Credit 2010.12.14-
2010.12.23 50.00 50.00
Factory under Livzon Group 0 guaranty 2018.12.14
Livzon Pharmaceutical Credit 2009.11.27-
2009.11.27 0.00 0.00 5,000.00
Factory under Livzon Group guaranty 2012.11.27
Livzon Pharmaceutical Credit
2009.9.10 0.00 0.00 6,000.00 2009.9.10-2012.9.10
Factory under Livzon Group guaranty
Livzon Pharmaceutical 12,000.0 Credit
2009.10.15 0.00 0.00 2010.6.12-2018.6.3
Factory under Livzon Group 0 guaranty
Livzon Pharmaceutical 10,000.0 Credit
2012.6.21 0.00 0.00 2012.6.21-2015.6.21
Factory under Livzon Group 0 guaranty
Livzon Pharmaceutical Credit
2010.5.13 0.00 0.00 8,316.20 2010.7.20-2013.7.20
Factory under Livzon Group guaranty
33
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Occurrence Date Balance at Actual Guarantee Guaranty Period
Name of Guarantee (Signing date of the end of guarantee limit type
agreement) period amount
Livzon Pharmaceutical 4,095.58 Credit
2011.9.27 1,222.80 1,222.80 2011.9.27-2014.9.27
Factory under Livzon Group 5 guaranty
Livzon Pharmaceutical Credit
2011.8.4 4,483.60 4,483. 60 4,458.85 2011.8.4-2014.8.4
Factory under Livzon Group guaranty
Total guaranty amount to its controlling subcompanies in the report
period 8,202.00
Total balance of guaranty amount to its controlling subcompanies in
the report period 8,202.00
During the report period, the company has not provided any external guaranty to any p
arties except the controlled subcompanies the actual guaranty amount provided to the contr
olled subcompanies is RMB 82.0200 million Yuan. By June 30, 2012, he total loan amount of
its controlled subcompanies is RMB 82.0200 million Yuan, accounting for 2.65% of the unaudit
ed net assets of the Company at the first half of 2012.
Except the above guaranties, the Company has not provided any guaranty to any shar
eholders, actual controllers or associated parties, nor directly or indirectly provides the guar
anty to any guarantees whose assets/liabilities ratio exceeds 70%. There are no overdue g
uaranties. The approval procedures about above guaranties have been completed.
Therefore, based on the above facts, the independent directors of the Company think t
hat, the guaranty behaviors of the Company fully comply with the relevant laws and regulati
ons and will not influence the sustainable operation capacity of the Company nor damage t
he interests of medium and small shareholders, so the guaranty behaviors meet the deman
ds of company operation.
(XIII) The liabilities, credit changes and cash arrangement of the company for
repayment in next years (this sheet is only applicable to the listed companies
issuing the convertible bonds)
□ Yes √ No
34
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 7 Important Events
(I). Company Governance
During the report period, in accordance with the requirements of the Company Law of
People’s Republic of China, Securities Law of People’s Republic of China, Governance R
Ules Of Listed Companies, Guidance Of Standardized Operation Of Mainboard Listed
Company of Shenzhen Stock Exchange, and normative documents related to listed
companies issued by China Securities Regulatory Commission and Shenzhen Stock
Exchange, the Company has strengthened the system construction, perfected the
governance structure, regulated the company operation, further pushed the deepening of
company governance, and enhanced the governance level of Company.
During the report period, the shareholders’ meeting, Board of Directors and Board of Supervisors of the company
strictly performed the management policy-making and supervision in accordance with the normative operation rules and
internal systems, and the three agencies operate effectively. All special commissions under Board of Directors have
performed their own responsibilities, and strengthen the policy-making capacity of Board of Directors in all fields. The
operation management has established the efficient and compliant policy-making system, fully embodied the operation
management function, and effectively ensure the achievement of operation objectives.
During the report period, in accordance with the notice of relevant events for further implementing the cash bonus
distribution of listed companies (Zheng Jian Fa [2012] No. 37 document) issued by Guangdong Supervision Bureau of
China Securities Regulatory Commission, the company revised the profit distribution in the article of association,
specified the implementation conditions and percentages of cash bonus, and perfected the policy-making system about
profit distribution. In accordance with the requirements of the notice of improving the implementation of internal control
regulations for the mainboard listed companies (Guangdong Zheng Jian [2012] No. 27 document), the company further
launched the construction work of internal control system, perfected the organization structure of internal control items,
and expanded the internal control scope based on original foundation, and further strengthened the risk control capacity.
During the report period, the actual situation of company governance complies with the requirements of normative
documents about governance of listed companies.
(II) Implementation of profit distribution plan, plan about reserve transferring to
share capitals or issuing plan of new shares that were proposed in previous period
and were implemented in the report period,
√ Applicable □ Inapplicable
In the 2011 annual Shareholders’ Meeting held on April 13, 2012, the company
examined and passed the 2010 Profit Distribution Plan: 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 5.00 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 June 1, 2012, the Company issued the bonus distribution announcement and
completed the distribution of dividends of A-shares and B-shares on June 8 and 12, 2012.
The 2010 profit distribution plan has been completely implemented.
35
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(III). Key lawsuits and arbitrations
□ Applicable √ Inapplicable
There were no major lawsuits and arbitrations about the Company during the report period.
(IV) Relevant affairs about bankruptcy and restructuring
□ Applicable √ Inapplicable
There were no bankruptcy and restructuring about the Company during the report period
(IV) Security investment in other listed companies or participation in financial
enterprises during the report period
1. Security investment
√ Applicable □ Inapplicable
Percentage of
Initial total Profit and
Holding Book Values
Security Security Security investment investment in loss during
No. quantity at the end of
Type Code abbreviation amount this security at the report
(Share) period
(RMB Yuan) the end of period
period (%)
Kunlun
1 Stock 00135 6,551,190.32 1,500,000 15,089,352.00 33.32% 1,828,774.92
Energy
China
National
2 Stock 00883 2,671,210.68 560,000 7,030,284.80 15.52% 943,103.83
Offshore Oil
Corporation
Shenzhen
3 Stock 00152 9,402,939.97 17,000,000 6,582,740.00 14.54% -28,228.23
International
Phoenix
4 Stock 02007 19,435,054.58 2,570,317 6,348,826.93 14.02% 534,954.19
Island
Baili
5 Stock 01880 2,185,041.55 428,000 4,577,641.47 10.11% -112,049.58
International
Rainbow
6 Stock 00438 5,827,348.89 5,016,000 1,390,274.69 3.07% -387,386.93
group
China
Railway
7 Stock 00390 1,494,451.17 314,000 824,232.42 1.82% 201,660.38
Engineering
Group Co.
36
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
China
Railway
8 Stock 01186 1,004,414.26 114,000 595,699.25 1.32% 197,400.52
Construction
Corporation
Sinotrans
9 Stock 00368 1,754,628.88 260,500 384,370.88 0.85% -8,521.75
Shipping
Penghua
10 Stock 206001 150,000.00 619,573 547,392.71 1.21% 23,915.52
Fund
Other securities investment at the end of
681,913.04 -- 1,913,532.81 4.23%
this period
Profit and loss of sold Securities investment
-- -- -- -- 358,596.80
during the report period
Total 51,158,193.34 -- 100%
45,284,347.96 3,552,219.67
Remarks about securities investment: in the above securities, the relevant amount of H-share market investment has
been converted to RMB for calculation at the exchange rate at the end of report period.
2. Shareholding particulars of other listed companies
√ Applicable □ Inapplicable
Securities Securities Initial Percentage of Book value at Profit and loss Change of owners’ Accounting
Sourc
code abbreviati investment total shares of the end of this during the equity during the calculation
e
on capital this Company period report period report period subject
Bank of
Saleable Share
Communic
601328 2,450,179.00 0.00245% 6,892,578.06 151,818.90 91,091.34 financial partici
ations
assets pation
Huadong
Saleable Share
Medicine
000963 39,851.86 0.0211% 2,765,081.80 -- 327,781.22 financial partici
Co., Ltd
assets pation
Total 2,490,030.86 -- 9,657,659.86 151,818.90 418,872.56 -- --
Remarks about shareholding particulars of other listed companies
3． Shareholding particulars of non-listed financial enterprises
√ Applicable □ Inapplicable
Object name Initial Shareholding Percentage of Book value at Profit and Change of Accountin Sour
37
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
investment quantity total shares of the end of this loss during owners’ equity g
capital this Company period the report during the calculatio ce
period report period n subject
Shar
e
China Resources Long-term
Bank of Zhuhai 95,325,760.00 84,936,000 1.5065% 95,325,760.00 0 0 equity inv partic
Co., Ltd estment
ipatio
n
Shar
Guangdong e
Long-term
Development 177,348.84 68,854 0.0004% 177,348.84 0 0 equity inv partic
estment
Bank Co., Ltd ipatio
n
Total 95,503,108.84 85,004,854.00 95,503,108.84 0 0
Remarks about shareholding particulars of non-listed financial enterprises
4 Particulars about buying or selling the shares of other listed companies
√ Applicable □ Inapplicable
Share quantity at Quantity of shares Share quantity at Amount of used
Investment returns
Securities name the beginning of bought/sold at the the end of capitals (RMB
(RMB Yuan)
period(share) report period(share) period(share) Yuan)
Little sheep 212000 -212000 0 0 566,701.27
Alibaba 78000 -78000 0 0 -8,779.62
During the report period, the total investment returns brought by newly purchased shares is RMB 0 Yuan.
Particulars about buying or selling the shares of other listed companies: during the report period, the company only sold
the shares and did not buy any shares.
(VI) Asset transaction events
1. Purchase of assets
□ Applicable √ Inapplicable
2. Selling of of assets
□ Applicable √ Inapplicable
3 Asset replacement
□ Applicable √ Inapplicable
38
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
4. Enterprise merger
√ Applicable □ Inapplicable
On October 31, 2011, in accordance with the resolutions of the Board of Directors of Livzon Syntpharm Co., Ltd in
Zhuhai Bonded Area, the company absorbed and merged with Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area and
completed the merger on June 21, 2012. the registration of Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area with the
administration of industry and commerce was legally canceled.
5 The influence of the development of this event on the operation results and financial status
during the report period after the publishing of asset restructuring report or announcement
about buying or selling assets
□ Applicable √ Inapplicable
(VII) Remarks about big shareholders and persons acting in concert putting or
implementing the share increase plan
√ Applicable □ Inapplicable
During the report period, the fully-owned subcompany of Joincare - Tiancheng Industry Co.,
Ltd increased 4,651,970 tradable B-shares through trading system of Shenzhen Securities E
xchange, accounting for 1.57% of total shares. By the end of report period, the total quantity
of company shares that are directly or indirectly held or controlled by Joincare amounted to
140,122,590 shares, accounting for47.38% of total shares.
Remarks about sequent increase of shares: Tiancheng Industry Co., Ltd may, based on t
he market situation, randomly increase the B-shares through trading system of Shenzhen S
ecurities Exchange, but the accumulative increase percentage within 12 months from this fi
rst increase date will not exceed 2% of total shares issued by the company. (including this fi
rst increase of shares)
(VIII) Implementation and influence of equity stimulus of company
□ Applicable √ Inapplicable
(IX) Key associated transaction (the original statistics is mistaken, and the
accounting department is revising and will supplement to it)
1. Routine operating associated transactions
√ Applicable □ Inapplicable
（1）Sales of Commodities
39
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
January to June 2012 January to June 2011
Name of Associated Parties
Percentage in Similar Percentage in Similar
Amount Amount
Transaction Amount (%) Transaction Amount (%)
Zhuhai Joincare
Pharmaceutical Group
Industry Co., Ltd 10,077.94 0.00% 7,083.49 0.00%
Jiaozuo Joincare
Pharmaceutical Group
Industry Co., Ltd 3,076.92 0.00% 0.00 0.00%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd 4,836,505.58 0.26% 0.00 0.00%
Total 4,849,660.44 0.26% 7,083.49 0.00%
（2）Provision of labors (water, electricity and power)
January to June 2012 January to June 2011
Name of Associated
Parties Percentage in Similar Percentage in Similar
Amount Amount
Transaction Amount (%) Transaction Amount (%)
Guangdong Blue
Treasure 3,033,195.13 71.38% 5,003,733.63 66.47%
Pharmaceutical Co. Ltd
（3）Purchase of commodities
January to June 2012 January to June 2011
Percentage in
Name of Associated Parties
Percentage in Similar
Amount Similar Transaction Amount
Transaction Amount (%)
Amount (%)
Guangdong Blue Treasure
4,186,303.80 0.40% 184,089.42 0.04%
Pharmaceutical Co. Ltd
Shenzhen Haibin
22,649.57 0.00% 7,351,495.73 1.49%
Pharmaceutical Co., Ltd
Health Pharmaceutical
10,089.60 0.00% 0.00 0.00%
(China) Co., Ltd
Joincare pharmaceutical
102,564.10 0.01% 53,914.53 0.01%
Group Industry Co., Ltd
40
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Jiaozuo Joincare
Pharmaceutical Group 29,478,803.42 2.82% 52,180,106.84 10.61%
Industry Co., Ltd
Total 33,800,410.49 3.23% 59,769,606.52 12.15%
（4）Receiving of labors
January to June 2012 January to June 2011
Name of Associated Parties
Percentage in Similar Percentage in Similar
Amount Amount
Transaction Amount (%) Transaction Amount (%)
Shenzhen Taitai
Pharmaceutical Company 170,000.00 0.01% 0.00 0.00%
Limited
5）Leasing of Assets
January to June 2012 January to June 2011
Name of Associated Parties
Percentage in Similar Percentage in Similar
Amount Amount
Transaction Amount (%) Transaction Amount (%)
Zhuhai Joincare
Pharmaceutical Group 85,343.60 5.36% 54,146.88 3.58%
Industry Co., Ltd
Health Pharmaceutical (China)
49,974.00 3.14% 49,974.00 3.31%
Co., Ltd
Total 135,317.60 8.50% 104,120.88 6.89%
（6）Payments for renting
January to June 2012 January to June 2011
Name of Associated Parties
Percentage in Similar Percentage in Similar
Amount Amount
Transaction Amount (%) Transaction Amount (%)
Joincare pharmaceutical
Group Industry Co., Ltd -- -- 453,287.80
Associated transaction related to routine operation
Sales of commodities and provisions of Purchase of commodities and receiving of
Associated parties
labors to associated parties labors from associated parties
41
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Amount (unit: Amount(unit:
Percentage of Similar Percentage of Similar
RMB 10,000 RMB 10,000
Transaction Amount (%) Transaction Amount (%)
Yuan) Yuan)
Zhuhai Joincare
Pharmaceutical Group Industry 1.01 0.00%
Co., Ltd
Jiaozuo Joincare
Pharmaceutical Group Industry 0.31 0.00%
Co., Ltd
Guangdong Blue Treasure
483.65 0.26%
Pharmaceutical Co. Ltd
Guangdong Blue Treasure
303.32 71.38%
Pharmaceutical Co. Ltd
Guangdong Blue Treasure
418.63 0.40%
Pharmaceutical Co. Ltd
Shenzhen Haibin
2.26 0.00%
Pharmaceutical Co., Ltd
Health Pharmaceutical (China)
1.01 0.00%
Co., Ltd
Joincare pharmaceutical Group
10.26 0.01%
Industry Co., Ltd
Jiaozuo Joincare
Pharmaceutical Group Industry 2,947.88 2.82%
Co., Ltd
Shenzhen Taitai
Pharmaceutical Company 17.00 0.01%
Limited
Total 788.29 3,397.04
During the report period, the associated transaction amount about Sales of commodities and provisions of labors to
controlling shareholders and their subcompanies is RMB 13200 Yuan.
above-mentioned associated transaction came
Remarks about routine associated transaction: The
from the operation and production demand of the company. 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.
The company has forecast the total amount (RMB 110.4475 Yuan) of routine associated
42
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
transactions in this year, performed relevant approval procedure. During the report period,
the completed associated transactions have not exceeded the approved amount.
2. Associated transaction about asset purchase and sales
□ Applicable √ Inapplicable
Remarks about associated transaction about asset purchase and sales: there are no associated transactions about asset
purchase and sales during the report period.
3. Key associated transactions about joint external investment
□ Applicable √ Inapplicable
Remarks about key associated transactions about joint external investment: during the report period, there are no key
associated transactions about joint external investment
3. Transfer of associated claims and debts (to be supplemented)
√ Applicable □ Inapplicable
Funds that the
Provision of funds to
associated party paid to
associated party (unit:
listed company (unit:
RMB 10,000 Yuan)
RMB 10,000 Yuan)
In
Bala Bala
Bala Bala Int te
Associated nce nce
Associated party nce Int Int nce er re
relationship at Repa at
Occur at ere ere Occurr Repay at es st
the ymen the
ring the sts sts ing ment the ts s
begi t begi
amou end inc pa amoun amoun end in p
nnin amou nnin
nt of om ym t t of co ay
g of nt g of
peri es ent perio m m
perio perio
od d es e
d d
nt
Jiaozuo Joincare Suubcompany of
Pharmaceutical Group controlled 0 4.15 0 4.15 0 0 -- -- -- -- -- --
Industry Co., Ltd shareholders
Suubcompany of
Health Pharmaceutical
controlled 0 6.01 6.01 0 0 0 -- -- -- -- -- --
(China) Co., Ltd
shareholders
Jiaozuo Joincare Suubcompany of
Pharmaceutical Group controlled -- -- -- -- -- -- 501.04 508.21 7.17 0 0
0.01
Industry Co., Ltd shareholders
Guangdong Blue Treasure Ph 286.5 318.29 235. 369. 0 0
43
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
armaceutical Co. Ltd. 1 61 19
286.5 241.6 373.
Total 328.45 0 0 0.01 501.04 508.21 7.17 0 0
1 2 34
During the report period, the capital
amount that the listed companies
provided to the controlling
10.16
shareholders and their
subcompanies (unit: RMB 10,000
Yuan
The capital amount that the listed
companies provided to the
controlling shareholders and their 4.15
subcompanies (unit: RMB 10,000
Yuan
Reasons for associated claims and debts Sales of commodities or provisions of labors
Settle the goods expense and labor expense in accordance with
Settlement of associated claims and debts
agreements
Commitments about associated claims and
None
debts
Influence of associated claims and debts on
No key influence
operation results and financial status
During the report period, the capital use amount provided by listed companies to controlling shareholders and their
subcompanies is RMB 101600Yuan, and the balance is RMB 41500 Yuan.
During the report period, capital use and settlement development
□ Applicable √ Inapplicable
By the end of report period, the listed companies did not complete the settlement of non-operating capital use, and the
Board of Direcotrs put forward the responsibility penalty plan.
□ Applicable √ Inapplicable
5. Other key associated transactions
(X) Key contracts and their performance status
1. Custody, contracting and leasing of the assets that have brought the company
interest and accounted for over 10% (including 10%) of total profits in the current period
(1)Custody
□ Applicable √ Inapplicable
Remarks about custody: The Company has no key events about custody, contracting and leasing of the assets that have
brought the company profits and accounted for over 10% (including 10%) of total profits in the current period.
44
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(2)Contracting
□ Applicable √ Inapplicable
Remarks about contracting: The Company has no key contracting events that have brought the company profits and
accounted for over 10% (including 10%) of total profits in the current period.
(3)Leasing
□ Applicable √ Inapplicable
Remarks about contracting: The Company has no key leasing events that have brought the company profits and
accounted for over 10% (including 10%) of total profits in the current period.
2. Guaranty
√ Applicable □ Inapplicable
Unit: RMB 10 thousand Yuan
External guaranties provided by the company (not including the guaranties provided to
the subcompany
Guaranty type Period Whether
the
Disclosure
Whether guaranty
date of
the is the
relevant Occurrence Date Actual
Guaranty guaranty guaranty
Name of Guarantee announce (Signing date of guarantee
amount has been to
ment of agreement) amount
complete associat
guaranty
d e parties?
amount
(Yes or
No)
-- -- -- -- -- -- -- -- --
Total external guaranty amount Total actual external
approved during the report 0 guaranty amount during the 0
period(A1) report period (A2)
Total actual external
Total external guaranty amount
guaranty amount by the
that has been approved by the 0 0
end of report period
end of report period (A3)
Total(A4)
Guaranties provided to subcompanies
Disclosure Guaranty type Period Whether Whether
date of the the
Occurrence Date Actual
relevant Guaranty guaranty guaranty
Name of Guarantee (Signing date of guarantee
announce amount has been is the
agreement) amount
ment of complete guaranty
guaranty a d to associ
45
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
ate
parties?
mount
(Yes or
No)
Zhuhai Livzon 2012.3.12-
2012.3.24 2,000.00 2012.3.12 0 Warranty No No
Reagents Co., Ltd 2015.3.21
Zhuhai Livzon 2012.3.22-
2012.3.24 1,264.98 2012.3.22 0 Warranty No No
Reagents Co., Ltd 2015.3.21
Zhuhai Livzon
2009.7.20-
Medicine Trade 2012.3.24 1,000.00 2009.7.20 0 Warranty No No
2012.7.20
Co., Ltd
Limin
Pharmaceutical
2012.3.24 15,000.00 2012.4.17 0 Warranty No No
Co., Ltd under 2012.4.17-
Livzon Group 2015.4.16
Livzon Syntpharm
Co., Ltd in Zhuhai 2012.3.24 3,000.00 2012.6.7 2,445.60 Warranty 2012.6.7- No No
Bonded Area 2015.6.7
Livzon
Pharmaceutical
2012.3.24 16,000.00 2012.5.17 0 Warranty No No
Factory under 2012.5.17-
Livzon Group 2015.5.16
Livzon
Pharmaceutical
2012.3.24 9,000.00 2012.6.7 0 Warranty No No
Factory under 2012.6.7-
Livzon Group 2015.6.7
Livzon
Pharmaceutical
2012.3.24 5,000.00 2009.8.21 0 Warranty No No
Factory under 2009.8.21-
Livzon Group 2012.8.21
Livzon
Pharmaceutical 2010.12.14
2012.3.24 32,000.00 2010.12.23 50.00 Warranty No No
Factory under -
Livzon Group 2018.12.14
Livzon
Pharmaceutical
2012.3.24 5,000.00 2009.11.27 0 Warranty No No
Factory under 2009.11.27-
Livzon Group 2012.11.27
Livzon
Pharmaceutical 2012.3.24 6,000.00 2009.9.10 0 Warranty 2009.9.10- No No
Factory under Livz 2012.9.10
46
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
on Group
Livzon
Pharmaceutical
2012.3.24 12,000.00 2009.10.15 0 Warranty No No
Factory under 2010.6.12-
Livzon Group 2018.6.3
Livzon
Pharmaceutical
2012.3.24 10,000.00 2012.6.21 0 Warranty No No
Factory under 2012.6.21-
Livzon Group 2015.6.21
Livzon
Pharmaceutical
2012.3.24 8,316.20 2010.5.13 0 Warranty No No
Factory under 2010.7.20-
Livzon Group 2013.7.20
Livzon
Pharmaceutical
2012.3.24 4,095.585 2011.9.27 1,222.80 Warranty No No
Factory under 2011.9.27-
Livzon Group 2014.9.27
Livzon
Pharmaceutical
2012.3.24 4,458.85 2011.8.4 4,483.60 Warranty No No
Factory under 2011.8.4-
Livzon Group 2014.8.4
Total guaranty amount Total actual guaranty
provided to the subcompanies amount provided to the
191,408.00 8202.00
approved during the report subcompanies during the
period (B1) report period (B2)
Total guaranty amount Total actual guaranty
provided to the subcompanies amount provided to the
191,408.00 8202.00
that has been approved by the subcompanies by the end
end of report period (B3) of report period (B4)
Total guaranty amount of company (Total of first two items)
Total guaranty amount Total actual guaranty
approved during the report 191,408.00 amount during the report 8202.00
period (A1+B1) period (A2+B2)
Total guaranty amount that has Total actual guaranty
been approved by the end of 191,408.00 amount by the end of report 8202.00
report period (A3+B3) period (A4+B4)
Percentage of actual guaranty amount (A4+B4) in net
2.65%
assets of company
Including:
Guaranty amount provided to shareholders, actual 0
47
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
controllers and their associated parties (C)
Debt guaranty amount directly or indirectly
provided to to the guarantees whose 0
assets/liabilities ratio exceeds 70% (D)
Amount of the part whose total guaranty amount exceeds
0
50% of net assets (E)
Total of above three guaranty amounts (C+D+E) 0
Remarks about possibly bearing the joint and several
settlement responsibilities for the undue guaranties
Remarks about external guaranty which violates relevant No external guaranty which violates relevant regulations and
regulations and procedures procedures
3. Entrusted wealth management
□ Applicable √ Inapplicable
4. Performance of key contracts about routine operation
□ Applicable √ Inapplicable
During the report period, there are no key operation contracts that should be disclosed.
Note: the listed companies should continuously disclosed the performance status of key contracts about routine operation,
including but not limited to the progress of contract performace, confirmed sales incomes and receiving of accounts
receivable, etc.
5. Other key contracts
□ Applicable √ Inapplicable
(XI) Remarks about issuing the company bonds
√ Applicable □ Inapplicable
On April 13, 2012, the 2011 annual shareholders’ meeting examined and approved the Proposal Of The Company
Complying With The Conditions For Issuing The Company Bonds, The Proposal Of The Company Issuing The Company
Bonds, The Proposal Of Requesting The Shareholders’ Meeting To Authorize The Board Of Directors To Fully Handle
The Issuing Of The Company Bonds and agreed that the company would issue the company bonds with the total amount
of no more than RMB 1 billion Yuan and also agreed about relevant authorization affairs(for more details, please see the
announcements passed at the 2011 annual shareholders’ meeting). At present, the company has the good cash flow,
and has not launched the issuing of company bonds, and has not submitted the issuing application to China Securities
Regulatory Commission.
48
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(XII) Performance of commitment events
1. Commitment events of the company or shareholders holding over 5% of total shares during
the report period or that continued to the report period
√ Applicable □ Inapplicable
Performa
Commitme Commitme
Commitment events Promiser Commitment content nce
nt time nt period
status
Commitment about equity
/ / / / /
reform
Commitments made in
purchase report or equity / / / / /
change report
Commitments made in asset
/ / / / /
splitting
Commitments in the process
/ / / / /
of issuing
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 During
released, it will strictly comply with the the
relevant regulations of the Guiding report
Joincare Opinions on the Listed Companies’ period,
pharmaceuti Transfer of Original Shares Released Joincare
Other commitments to medium 2008-12- Not
cal Group from Trading Restrictions ([2008] No. 15 has not
and small sized shareholders 18 specified
Industry Co., announcement) issued by China decrease
Ltd Securities Regulatory Commission. 2. d the
Joincare plans to reduce its tradable shares of
shares of Livzon Group whose trading the
restriction has been released through company.
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 tradi
49
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
ng days before the first reduction.
Whether the commitments
√ Yes □ No
have timely performed
Reasons for failure of perform
the commitments and next /
plans
Whether the commitments
have been made regarding the
□Yes √ No
same industry competition and
associated transactions
Resolution period of
/
commitments
Resolution mode /
Performance status of
/
commitments
2. When the company assets and projects have the profit forecast and the report period is in the
profit forecast time, remarks of the company regarding the original profit forecast of assets or
projects and the reasons
□ Applicable √ Inapplicable
(XIII) List of other comprehensive returns
Unit: RMB Yuan
Item January to June 2012 January to June 2011
1. Profit (loss) caused by the saleable financial assets 418,872.56 -704,597.08
Minus: Income tax effect of saleable financial assets 62,830.89 -105,689.56
Net amount that was accrued to other comprehensive gains in
the previous periods and is transferred to the current profit and 0.00 0.00
loss
Subtotal 356,041.67 -598,907.52
2. Shares in the other comprehensive gains of invested units
0.00 0.00
calculated by Equity Method
Minus: Income tax effect of the shares in the other
comprehensive gains of invested units calculated by Equity 0.00 0.00
Method
Net amount that was accrued to other comprehensive gains in
the previous periods and is transferred to the current profit and 0.00 0.00
loss
50
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 0.00 0.00
loss
Adjusted amount that was transferred as the initial confirmation
amount of hedged item 0.00 0.00
Total 0.00 0.00
4．Conversion difference of foreign currency financial statements 408,419.30 -2,019,381.17
Minus: Net amount that is transferred to the current profit and
loss due to disposal of overseas operation 0.00 0.00
Subtotal 408,419.30 -2,019,381.17
5. Others 0.00 0.00
Minus: Effect of income tax that is accrued to the other
comprehensive gains 0.00 0.00
Net amount that was accrued to other comprehensive gains in
the previous periods and is transferred to the current profit and
loss 0.00 0.00
Subtotal 0.00 0.00
Total 764,460.97 -2,618,288.69
(XIV). Activities that the Company receives the investigation, communication and
interview, etc. during the report period
Reception date Reception place Receptio Object Objects Discussion topics and
n mode type provided materials
Local Production and
Agenc Shanghai Fuxi Assets
March 30, 2012 Headquarters investigat operation management
y Management Co., Ltd
ion status of company
Local Production and
Agenc Shanghai Choas Asset
March 30, 2012 Headquarters investigat operation management
y Management Co., Ltd
ion status of company
Local Production and
Agenc Shanghai Securities Co.,
April 23, 2012 Headquarters investigat operation management
y Ltd
ion status of company
51
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Local Production and
Agenc Bosera Funds Management
May 9, 2012 Headquarters investigat operation management
y Co., Ltd
ion status of company
Local Production and
Agenc Harvest Fund Management
May 9, 2012 Headquarters investigat operation management
y Co., Ltd
ion status of company
Local Shenzhen Jinzhonghe Production and
Agenc
May 9, 2012 Headquarters investigat Investment Management operation management
y
ion Co., Ltd status of company
Local Production and
Agenc Huachuang Securities Co.
May 9, 2012 Headquarters investigat operation management
y Ltd
ion status of company
Local Shenzhen Dingnuo Production and
Agenc
May 9, 2012 Headquarters investigat Investment Management operation management
y
ion Co., Ltd status of company
Local Production and
Agenc Greatwall Fund
May 9, 2012 Headquarters investigat operation management
y Management Co., Ltd
ion status of company
Local Production and
Agenc First State Cinda Fund
May 17, 2012 Headquarters investigat operation management
y Management Co.,Ltd
ion status of company
Local Production and
Agenc Guolian Securities Equity
May 17, 2012 Headquarters investigat operation management
y Co.,Ltd
ion status of company
Local Production and
Agenc
May 18, 2012 Headquarters investigat Industrial Securities Co.,Ltd operation management
y
ion status of company
Local Production and
Agenc China Galary Securities
May 18, 2012 Headquarters investigat operation management
y Co.,Ltd
ion status of company
Local Production and
Agenc Guangfa Fund Management
May 18, 2012 Headquarters investigat operation management
y Co.,Ltd
ion status of company
Local Production and
Agenc Baoying Fund Management
May 18, 2012 Headquarters investigat operation management
y Co.,Ltd
ion status of company
Local Production and
Agenc China International Capital
May 18, 2012 Headquarters investigat operation management
y Corporation Limited
ion status of company
May 23, 2012 Headquarters Local Agenc Hwabao Trust Co., Ltd Production and
52
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
investigat operation management
y
ion status of company
Local Production and
Agenc Pingan Dahua Fund
May 23, 2012 Headquarters investigat operation management
y Management Co., Ltd
ion status of company
Local Production and
Agenc Rongtong Fund
May 23, 2012 Headquarters investigat operation management
y Management Co., Ltd
ion status of company
Local Production and
Agenc China International Fund
May 23, 2012 Headquarters investigat operation management
y Management Co., Ltd
ion status of company
Local Production and
Agenc
June 28, 2012 Headquarters investigat Industrial Securities Co.,Ltd operation management
y
ion status of company
(XV) Engagement and disengagement of public accountants firm
Whether the semi-annaul report has been audited.
□ Yes √ No
XVI) Penalty and correction of listed companies and their directors, supervisors,
senior executives, company shareholders, actual controllers and purchasers
□ Applicable √ Inapplicable
(XVII) Remarks about other key events
√ Applicable □ Inapplicable
Remarks about the establishment and perfection of internal control system: during the report period, based on the
successful experience in constructing the internal control system in the previous year, the company continues to perfect
and improve the internal control system. In accordance with the requirements and work arrangement of the Notice Of
Improving The Implementation Of Internal Control Regulations For The Mainboard Listed Companies (Guangdong Zheng
Jian [2012] No. 27 document) issued by Guangdong Supervision Bureau of China Securities Regulatory Commission,
the company further launched the construction work of internal control system, formulated the detailed internal control
implementation plan, determined the objective and milestones of implementing the work; perfected the organization
structure of internal control items, established the leadership team with the Chairman as the first principal as well as
implementation team and business team responsible for project management and actual implementation, and effectively
ensured the smooth implementation; and expanded the internal control scope and included in the internal control scope
the key and fully owned or controlled subcompanies such as Sichuan Guangda, Limin Pharmaceutical Factory, Shanghai
Livzon, Xinbeijiang company and Fuxing company, etc. by now,the construction work of internal control system has been
smoothly implemented, and the company has completed the compilation of business procedures of all subcompanies
within the internal control scope, prepare the risk list, and throught recognizing the key control activities in the recognition
procedures, prepared the internal control documents such as the procedure description and risk control matrix, etc, and
53
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
recorded the control activities and control points. Through the suttling test, sampling and comparative analysis, etc, the
company may effectively evaluate the validity of business procedure design, and find the defects.
During the report period, the internal control of company is regulated and effective. In the future, the company will
continue to perfect the internal control system, optimize the business procedures, strengthen the control capacity of
secondary enterprises, improve the operation efficiency and results of company operation and ensure the steady and
effective operation of company.
(XVIII) Key changes about profitability capacity, asset status and credit status of
guarantors
(this sheet is only applicable to the listed companies issuing the convertible bonds)
□ Applicable √ Inapplicable
(XVI). Indexes of announcement disclosure during the report period
Internet website
Item Newspaper name Disclosure date
and searching route
Announcement about China Securities
Regulatory Commission approving of
Securities Times and
exemption of offer and purchase obligations
China Securities January 16, 2012
while the controlling shareholders and the
Journal
persons acting in concert increase the
company shares
Announcement about the persons acting in Securities Times and
concert of controlling shareholders China Securities February 28, 2012
increasing the company shares Journal
2012 discounting announcement of first Securities Times and
installment of short-term financing bonds China Securities February 29, 2012
issued in 2011 Journal
Juchao
Securities Times and website(http://www.
Notice about convening the 2011 annual
China Securities March 24, 2012 cninfo.com.cn/)
shareholders’ meeting
Journal
Annoucement about the company providing Securities Times and
the financing guaranty to controlled China Securities March 24, 2012
subcompanies Journal
Securities Times and
Announcement about routine associated
China Securities March 24, 2012
transactions in 2012
Journal
Special explanation about capital use of
controlling shareholders and other March 24, 2012
associated parties
Announcement about the resolution passed Securities Times and C March 24, 2012
54
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
at the 4th meeting of the 7th Board of
hina Securities Journal
Supervisors
internal control self-appraisal report of the
March 24, 2012
company in 2011
Independent opinions of independent
directors about the company providing the
March 24, 2012
financing guaranty to controlled
subcompanies
Independent opinions of independent
directors about routine associated March 24, 2012
transactions in 2012
Special explanation and independent
opinions of independent directors about
capital use and external guaranty of March 24, 2012
controlling shareholders and other
associated parties
Independent opinions of independent
directors about internal control self-appraisal March 24, 2012
report in 2011
Announcement about the resolution passed Securities Times and
at the 6th meeting of the 7th Board of China Securities March 24, 2012
Directors Journal
2011 working report of independent directors March 24, 2012
Securities Times and
China Securities
Summary of 2011 annual report Journal, Hongkong March 24, 2012
Wenhui Daily(English
version)
2011 annual auditing report March 24, 2012
2011 annual report March 24, 2012
Announcement about the resolution passed Securities Times and
at the 7th meeting of the 7th Board of China Securities March 31, 2012
Directors Journal
Working plan about implementing internal
March 31, 2012
control regulations
Reminder announcement about convening
April 10, 2012
2011 annual shareholders’ meeting
Securities Times and
Announcement about the resolution passed
China Securities April 14, 2012
at 2011 annual shareholders’ meeting
Journal
55
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Legal opinions about 2011 annual
April 14, 2012
shareholders’ meeting
Full text of 2012 first quarterly report April 21, 2012
Securities Times and
China Securities
Main body of 2012 first quarterly report Journal, Hongkong April 21, 2012
Wenhui Daily(English
version)
Securities Times and
Announcement about implementing the
China Securities June 1, 2012
dividend distribution
Journal
Announcement about the resolution passed Securities Times and
at the 9h meeting of the 7th Board of China Securities June 15, 2012
Directors Journal
Shareholder return plan in the next three
June 15, 2012
years (2012 -2014)
Securities Times and
Notice about Convening the 2012 first
China Securities June 15, 2012
Temporary Shareholders’ Meeting
Journal
Independent opinions of independent
directors about the company revising the
dividend distribution policies and June 15, 2012
shareholder return plan in the next three
years (2012 -2014)
2012 discounting announcement of second Securities Times and
installment of short-term financing bonds China Securities June 25, 2012
issued in 2011 Journal
Announcement about issuing the first Securities Times and
installment of short-term financing bonds in China Securities July 4, 2012
2012 Journal
Announcement about the resolution passed Securities Times and
at the 2012 first Temporary Shareholders’ China Securities July 7, 2012
Meeting Journal
Legal opinions about the 2012 first
July 7, 2012
Temporary Shareholders’ Meeting
Article of association(revised on July 6, 2012) July 7, 2012
56
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 8 Financial Reports
(I) Auditing report
Whether the semi-annual report is audited.
□ Yes √ No
(II) Financial statements
Whether the statements need to be consolidated.
√ Yes □ No
Unless otherwise specified, the unit of financial statements in the financial reports is RMB Yuan.
Unless otherwise specified, the unit of financial statements in the notes is RMB Yuan
57
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
1.Consolidated Balance sheet
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning
Principal of the Accounting Department: Si Yanxia
2. Balance sheet of parent company
58
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning
Principal of the Accounting Department: Si Yanxia
3. Consolidated profit statement
59
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning
Principal of the Accounting Department: Si Yanxia
4. Profit statement of parent company
60
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning
Principal of the Accounting Department: Si Yanxia
5. Consolidated cash flow statement
61
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning
Principal of the Accounting Department: Si Yanxia
62
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
6. Cash flow statement of parent company
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning
Principal of the Accounting Department: Si Yanxia
63
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
7. Consolidated Change statement of owners’ equities
Amount in this period
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
64
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Amount in previous year
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
65
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
8. Change Statement of Owners’ Equities of Parent Company
Amount in this period
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
66
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Amount in previous year
Principal of the Company: Zhu Baoguo Principal of the Financial Department: An Ning Principal of the Accounting Department: Si Yanxia
67
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Livzon Pharmaceutical Group Inc.
Notes to Financial Statement
June 30, 2012
(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.
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
68
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 December 31, 2011, Joincare Group and its holding subcompanies has owned 135,470,620 shares of the company
through the agreement transfer and direct purchase from the secondary markets, accounting for 45.8101% 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 cosmetics, Chinese and western finished medicines, bio-chemical
reagents, and also handles the chemical industry, food 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.
69
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 issued by the Ministry of Finance in February 15, 2006, 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 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
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(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 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
71
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
subcompanies that are obtained in the merger of enterprises which are under the same control, the operation results and
cash flow from the beginning of current merger period to the merger date have been included in the consolidated profit
statement and consolidated cash flow statement, and are separately listed; the comparison data of consolidated financial
statements have also been adjusted.
For the long-term equity investment that is formed by purchasing the minority of company equities, in preparing the
consolidated financial statements, the difference between the long-term equity investment for purchasing the minority of
equities and amounts of net assets of company in the subcompanies that are continuously calculated at the newly added
share-holding percentage from the purchase date (or merger date) will be adjusted as the owners’ equities (capital
reserve); if the capital reserve is not enough, the remaining gains will be adjusted.
(3) In case the accounting policies and accounting periods of subcompanies differ from those of parent company, the
financial statements of subcompanies will be adjusted.
In case the accounting policies of subcompanies differ from those of the company, in preparing the consolidated financial
statements, the company has made the appropriate adjustments about the financial statements of subcompanies in
accordance with the accounting policies of this company; for the subcompanies that are obtained in the merger of
enterprises which are not under the same control, the company has made the appropriate adjustments about the financial
statements of subcompanies based on their identifiable assets, liabilities and fair values of contingent securities on the
purchasing date.
(4) Consolidation methods
In preparing the consolidated financial statements, all key accounts and transactions between the
company and subcompanies, subcompanies and subcompanies will be offset.
The net assets of merged subcompanies that are attributable to the minority of shareholder equities will be separately
listed in the shareholder equities of consolidated financial statements. If the loss that is borne by the minority of
shareholders 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
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in accordance with the spot exchange rate. The difference of spot exchange rates between the preparation date of the
balance sheet and the initial confirmation on the previous date of the balance sheet will be accrued to the current profits
and losses. The foreign currency non-monetary Items calculated with the historical cost method will be converted at the
spot exchange rate on the transaction day and the amount of currency used in book-keeping will not be changed. The
foreign currency non-monetary Items calculated at the fair values will be converted at the spot exchange rate on the
transaction day, and the difference between the amount of currency used in book-keeping after the conversion and the
amount of original currency used in book-keeping will be deemed as the change of fair values and be accrued to the
current profits and losses.
(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
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the payments that have been declared to be distributed will be separately confirmed as the receivable Items. The interests
or cash dividends obtained during the holding period will be confirmed as the investment gains. On the preparation date of
financial statement, the changes of fair values will be accrued to the current profit and loss.
② The investments that are held to the maturity dates: the sum of fair values and relevant expenses to get them will be
deemed as the initial confirmation amount. The cash dividends or bond interests in the payments that have been declared
to be distributed will be separately confirmed as the receivable Items. The interest incomes confirmed in accordance with
the effective interest rate method during the holding period will be accrued to the investment gains.
③ Accounts receivable: the prices in the contracts and agreements with the purchasers will be the initial 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
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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)
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 on the difference between the
Withdrawal method of bad debt reserve for
expected cash flow values in the future and the book values. If the
large individual amount
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 percentage of a Withdrawal Percentage of
ccounts receivable other accounts receivable
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
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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.
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 the book values. If the
Withdrawal method of bad debt reserve
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 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.
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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 and the first-in first-out method; while 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 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
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 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
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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 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
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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 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.
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3. Calculation of fixed assets
The actual costs of fixed assets will be deemed as the initial calculation amount.
(1) In case the prices to purchase the fixed assets exceed the normal credit conditions and cause the payment deferment
and are characteristic of the financing nature, the costs of fixed assets will be determined based on the current values of
purchase prices.
(2) In case the fixed assets are obtained by the liability restructure to write off the liabilities of debtors, their book values
will be determined based on the fair values of this fixed asset. The difference between the book values of restructuring
liabilities and the fair values of this fixed asset will be accrued to the current profit and loss. In case the non-currency asset
exchange is characteristic of commercial substance and the fair values of received or delivered assets can be reliably
calculated, the book values of received fixed assets in the non-currency asset exchange will normally be determined
based on the fair values of delivered assets, except that the accurate evidences indicate that the fair values of received
assets are more reliable. In case any non-currency asset exchange does not meet the above conditions, the book values
of delivered assets and the payable taxes will be deemed as the costs of received fixed assets. No profit and loss will be
confirmed.
(3) The book values of fixed assets to be obtained by the absorption merger from the enterprises which are under the
same control will be determined based on the book values of merging party; the book values of fixed assets to be obtained
by the absorption merger from the enterprises which are not under the same control will be determined based on their fair
values.
The rejection expenses of fixed assets will be calculated and accrued to the book values of fixed assets based on the
current values.
In case the subsequent payments related to the fixed assets make the economic benefits generated by the inflow of this
fixed asset to the enterprise exceed the original evaluations, the exceeding part will be accrued to the book values of fixed
assets. The increased amount will not exceed the receivable amount of this fixed asset.
4. The depreciation method of fixed assets: the average life method is used to calculate the depreciation of fixed assets in
the company from the next month after such fixed assets meet the expected usable conditions. The depreciation life,
annual depreciation rate and assessed residual value rate of various fixed assets are listed as follows:
Fixed Asset category Depreciation life (years) Annual depreciation rate Assessed residual value
rate
Houses and buildings 20 4.5%-4.75% 5%-10%
Machine equipments 10 9%-9.5% 5%-10%
Transportation equipment 5 18%-19% 5%-10%
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s
Electronic equipment and 5 18%-19% 5%-10%
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 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
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1. In case the loan expenses occurring in the company may directly be attributable to the construction and productions of
assets complying with the capitalization conditions , they will be capitalized and accrued to the relevant capital costs; other
loan expenses will be confirmed as the expenses based on the actual amount in the time of occurrence and accrued to the
current profit and loss. The assets complying with the capitalization conditions mean the assets such as fixed assets, real
estates for investment and inventory, etc that need a long time of construction and production activities before being ready
for use or for sales. The loan expenses begin to be capitalized under the following circumstances:
(1) The asset payments that have been made include the payments such as the paid cashes, transferred 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
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accrued to the current profit and loss.
(XVIII) Biological assets
1. Confirmation standard and classification of biological assets
The biological assets of company are the consumable biological assets such as the Chinese traditional medicines, etc.
The biological assets of company will be initially calculated based on the cost. The costs of purchased biological assets
include the purchase prices, relevant taxes, insurance expenses and other expenses which may be directly attributable to
the purchase of such assets. For the biological assets of investors, the values specified by the investment contracts or
agreements plus the payable taxes will be the book-keeping values of biological assets. However, if the values specified
by contracts or agreements are not fair, the actual costs will be determined based on the fair values. The self-made
consumable biological assets, including the necessary expenses such as the forest expenses before coverage, alimony,
operational equipment expenses, testing expense of good species, investigation and design expenses, capitalized
interests and amortized indirect expenses. The subsequent expenses for the management and protection or for the
breeding of a biological asset after coverage or after the accomplishment of the expected objective of production and
operation will be included in the current profit and loss.
For the consumable biological assets, the company will calculate the costs based on the book values at the time of cutting,
and the method for calculating the cost will employ the weighed average method.
2. Testing method of biological assets depreciation and withdrawal method of depreciation reserve
The company will check the consumable biological assets at least at the end of each year. If obvious evidences indicate
that the net realizable value of consumable biological assets or receivable amounts of production biological assets is less
than their book values for the reasons of natural calamities, disease and insect pest, infection of animal diseases or
changes about market demands, etc, and the depreciation reserve of biological assets will be withdrawn based on the
difference between the net realizable values or receivable amounts and book values, and be accrued to the current profit
and loss.
If the impact factors of consumable biological asset depreciation disappear, the deducted amounts will be recovered, and
the originally withdrawn depreciation reserve amounts will be reversed and the reversed amounts will be accrued to the
current profit and loss.
(XIX) Calculation Method of Intangible Assets
1. Confirmation condition of intangible assets
The intangible assets mean the identifiable non-currency assets without the actual substance status that are owned or
controlled by the enterprises. Only the intangible assets meeting the following conditions will be confirmed:
(1) The economic benefits related to this intangible asset probably flow to the enterprise;
(2) The cost of this fixed asset may be reliably calculated.
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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 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.
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(XX) 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 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.
(XXI) 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.
(XXII) 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.
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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 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
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goodwill attributable to the equity for the minority of shareholders; the company will adjust the book values of asset groups
and compare the adjusted book values of asset groups with their receivable amounts to determine if the asset groups
(including the goodwill) are depreciated. If so, the company will deduct the equity share of the minority of shareholders
from the above losses to determine the depreciation losses of goodwill attributable to the parent company. Once the
depreciation losses of assets such as the long-term equity investment, the real estates for investment calculated by the
cost mode, fixed assets, intangible assets and goodwill are confirmed, they will not be reversed in the future accounting
periods.
3. Calculation method of asset group
(1) Generally, the company will evaluate the receivable amount subject to the individual asset. In case the receivable
amount of individual asset cannot be evaluated, the receivable amount of asset groups will be determined based on the
asset groups containing this asset. The determination of asset groups will be based on whether the main cash inflow
generated by the asset groups are independent from other assets or cash inflow of asset groups; at the same time, it’s
necessary to consider the production and operation management mode of the company and the policy-deciding mode
about the continuous use or disposal of assets, etc. Once the asset groups are determined, they will not be changed in
each accounting period.
(2) The receivable amount of asset groups will be determined based on the larger one between the net amount after the
deduction of disposal expenses from the fair values of this asset group and the current values of expected cash flow in the
future.
(3) If the receivable amount of the asset group or asset group combination is less than the book values, the relevant
depreciation loss will be confirmed. The depreciation loss amount will at first write off the book values of goodwill that are
amortized to the asset groups or asset group combinations, then based on the percentage of book values of various other
assets except the goodwill in the asset groups or asset group combination, write off the book values of various other
assets in the above proportion.
(XXIII) 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;
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(3) The amount of this obligation can be reliably calculated.
In case the loss contracts and restructuring obligations of the company meet the above conditions, they will be confirmed
as the expected liabilities.
2. Determination method about optimum evaluation amount of expected liabilities
In case the necessary payments have a amount scope, the optimum evaluation amount will be determined based on the
average amount between the upper and lower limits of amounts; in case the necessary payments do not have such a
amount scope, the optimum evaluation amount will be determined in the following method:
(1) If the contingent events involve the individual project, the optimum evaluation amount will be determined based on the
possible amount;
(2) If the contingent events involve many projects, the optimum evaluation amount will be determined based on the
possible amount and occurrence probability. In case all or parts of payments about the confirmed liquidation liabilities are
expected to be compensated by the third parties or other parties and the compensation amount are surely received, such
amounts will be separately confirmed. The confirmed compensation amounts will not exceed the book values of confirmed
liabilities.
(XXIV) 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.
(XXV) Confirmation Principle of Income
1. Commodity sales
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The company has transferred the main risks and rewards about commodity ownership to the purchasers; the company
does not reserve any continuous management rights normally related to the ownership nor performs any effective control
about the sold commodities; the income amounts will be reliably calculated; the relevant economic benefit will probably
flow into the enterprise; in case the relevant costs that have occurred or will occur may be reliably calculated, the
achievement of operating incomes will be confirmed.
2. Provision of labors
In case on the preparation date of balance sheet the results about labor provision transaction can be reliably evaluated,
the labor income will be confirmed by the completion percentage method. Based on the actual situation, the completion
progress of labor provision will be determined in the following methods:
(1) Measurement about the work that has already been completed.
(2) The percentage of the provided labors in the total labor capacity.
(3) The percentage of the occurring costs in the total costs.
The company will determine the total amount of labor provision based on the prices in contracts and agreements that have
been received or will be receivable, except that such prices are not fair. On the preparation date, the current labor incomes
will be determined based on the amount after the total labor income amount multiplied by the completion progress deducts
the accumulated labors in the past accounting periods.
In case the labor transaction results on the preparation date of balance sheet cannot be reliably evaluated, they will be
handled by the following means:
(1) In case the labor costs that have occurred can be compensated, the labor income will be confirmed based on such
labor costs and the same amounts will be settled as the labor costs.
(2) In case the labor costs that have occurred cannot be compensated, such labor costs will be accrued to the current
profit and loss and will not be confirmed as the labor costs.
3. Use right of transferred assets
In case the economic benefits related to the transaction will probably flow into the enterprise and the income amounts can
be reliably calculated, the company will determine the income amount about use right of transferred assets by the
following means:
(1) The interest income amount will be calculated and determined based on the use time of currency capital 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.
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(XXVI) Governmental allowance
1. Confirmation principle: only the governmental allowance meeting the following conditions will be confirmed:
(1) The enterprises can meet the relevant conditions required by the governmental allowance;
(2) The enterprises can receive the governmental allowance.
2. Calculation: If the governmental allowances are the monetary assets, they will be calculated at the received or
receivable amounts. If the governmental allowances are the non-monetary assets, they will be calculated at the fair values;
if the fair values are not reliably given, they will be calculated at the nominal amounts.
3. Accounting processing: the governmental allowances related to assets will be confirmed as the deferred gains, be
averagely distributed in the usage life of relevant assets, and be accrued to the current profit and loss. The governmental
allowances calculated in the nominal amounts will be directly accrued to the current profit and loss.
The governmental allowances related to gains will be separately processed in the following cases:
(1) The governmental allowances that are used to compensate the relevant expenses and losses of enterprises in the
future periods will be confirmed as the deferred gains, and be accrued to the current profit and loss in the confirmed
periods of relevant expenses.
(2) The governmental allowances that are used to compensate the relevant expenses and losses of enterprises that have
occurred will be accrued to the current profit and loss.
(XXVII) 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
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enough taxable income amounts, the reduced amounts may be reversed.
(XXVIII) 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 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:
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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.
(XXIX) 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
The value-added tax rate for selling
Sales income of products and the biological preparations is 6%, and
Value-added tax
materials the value-added tax rate for selling
the other products is 17%.
Sales tax Taxable sales income 5%
Urban maintenance and construction
Payable circulating tax amount 5%、7%
tax
Educational surtax Payable circulating tax amount 3%
Local educational surtax Payable circulating tax amount Note 1
Enterprise income tax Payable income tax amount Note 2
Note 1: the company and subcompanies that are registered in Zhuhai will pay the local educational surtax at 2% of
payable circulating tax amount; the other subcompanies will pay the local educational surtax at the payable circulating tax
amount in accordance with the regulations of its registration place.
Note 2: the enterprise income tax rates will be subject to the following regulations:
Company Name Actual Tax Note
Rate
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Livzon (Hongkong) Co., Ltd and Hongkong Antao 16.5% The policies about enterprise income taxes in
Development Limited Hongkong area will be applied.
Livzon Pharmaceutical Group Inc., Limin 15% Xinbeijiang Pharmaceutical Co., Ltd under Livzon Group 、
Pharmaceutical Co., Ltd under Livzon Group, Livzon Zhuhai Livzon Reagent Co., Ltd was granted as the hi-
Pharmaceutical Factory under Livzon Group, Livzon tech enterprises in 2010, and other companies
Syntpharm Co., Ltd in Zhuhai Bonded Area, Shanghai were granted as the hi-tech enterprises in 2011; the
Livzon Pharmaceutical Co., Ltd, Lida Pharmaceutical validity period is 3 years.
Co., Ltd in Zhuhai Bonded Area, Xinbeijiang
Pharmaceutical Co., Ltd under Livzon Group, Sichuan
Guangda Pharmaceutical Co., Ltd, Zhuhai Livzon
Reagent Co., Ltd and Fuzhou Fuxing Pharmaceutical
Co., Ltd under Livzon Group
Other subcompanies 25%
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 Medicine Wholly-owned Zhuhai City Service RMB 6 million Yuan Research and development of
Hi-tech Co., Ltd subcompany industry Chinese 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., Ltd Wholly-owned Zhuhai City Commodity RMB20 million Yuan Sales of products from the company
under Livzon Group subcompany sales and all medical subcompanies
Zhuhai Livzon Medicine Trade Co., Wholly-owned subco Zhuhai City Commodity sal RMB 60 million Yuan Import and export of Chinese and wes
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Registered Business Registered capital
Subcompany Name Subcompany type Operation scope
place nature
Ltd mpany tern medicine preparations and
materials and medical intermediates,
etc. Chinese and western medicine
preparations and materials, medical
intermediates, chemical materials,
es
sanitation materials, sanitation
products, healthcare foodstuffs,
invigorant, biological products, bio-
chemical preparations, medical
cosmetics and medical instruments
Shanghai Livzon Pharmaceutical Wholly-owned Shanghai Pharmaceutical RMB 87.33 million Yuan Production and sales of water
Co., Ltd subcompany City production injection, 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 Yua Production and sales of chemical
Zhuhai Bonded Area subcompany production n material medicine, medical
preparations, medical intermediates
and chemical products
Zhuhai Livzon Reagent Co., Ltd Controlling Zhuhai City Pharmaceutical RMB 46.45 million Yuan Production and sales of bio-chemical,
subcompany production immune and chemical reagents,
biological products, sanitation
products and medical analyzer
equipments
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 Medicine Subcompany under Longxi RMB 4 million Yuan Purchase, plantation, processing and
Plantation
Co., Ltd controlling subcompany County storage of Chinese medicines allowed by
industry
the nation
Zhuhai Livzon Advertising Co., Ltd Wholly-owned Zhuhai City Service RMB 1 million Yuan Design, production, agency and
publication of various advertisements
subcompany industry
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Registered Business Registered capital
Subcompany Name Subcompany type Operation scope
place nature
at home and abroad
Zhuhai Livzon – Bai A Meng Controlling Zhuhai City Pharmaceutical RMB 12 million Yuan Production and sales of
Hydroxyapatite materials, plasma
Biological Materials Co., Ltd subcompany production
spraying HA-Ti artificial tooth and
artificial hip, HA porous ceramic grains,
and porous hydroxyapatite ceramic
products.
Zhuhai Livzon Meidaxin Technology Wholly-owned Zhuhai City Service RMB 1 million Yuan Technical research and development
of information and products related to
Development Co., Ltd subcompany industry
medicines and health-care products;
technical consultancy and service
Livzon Medicine Institute under Wholly-owned Zhuhai City Service RMB 10 million Yuan Research and development of Chinese and
Livzon Group subcompany industry western finished medicines, raw materials
for medicines, medicine intermediate,
Chinese medicine materials, tablet of
Chinese medicines, healthcare and nutrition
products, medical cosmetics, sanitation
materials, bio-chemical reagents, medical
instruments, as well as the technical inquiry
and transfer.
Jiaozuo Livzon Syntpharm Co., Ltd Wholly-owned Jiaozuo Pharmaceutical RMB70 million Yuan Production and sales of medical
intermediates, chemical products (the
subcompany City 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 RMB 100 million Yuan Technical research and development of biological
Biotechnology Co., Ltd*1 subcompany industry medicine products and antibody medicines
Livzon Group Vaccine Engineering Controlling Zhuhai City Service RMB 65 million Yuan Technical research and development of bio-
Co., Ltd subcompany industry medicine products and vaccines
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Registered Business Registered capital
Subcompany Name Subcompany type Operation scope
place nature
Wenshan Livzon Panax Controlling Wenshan Plantation RMB 3 million Yuan Plantation and sales of Panax Notoginseng
Notoginseng Plantation Co., Ltd *2 subcompany City industry and sales of agricultural side products (not
including the grains purchase)
Ningxia Xinbeijiang Pharmaceutical Wholly-owned Pingluo Pharmaceutical RMB 100 million Yuan
Co., Ltd under Livzon Group subcompany County production
Ningxia Fuxing Pharmaceutical Co., Wholly-owned Pingluo Pharmaceutical RMB 100 million Yuan
Ltd under Livzon Group subcompany County production
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
Livzon Group Yuan 0.00 100% 100%
Livzon Medicine Marketing Co., Ltd RMB 20 million Yuan
under Livzon Group 0.00 100% 100%
Zhuhai Livzon Medicine Trade Co., Ltd RMB 60 million Yuan 0.00 100% 100%
Shanghai Livzon Pharmaceutical Co., RMB 87.33 million Yuan
Ltd 0.00 100% 100%
Livzon Syntpharm Co., Ltd in Zhuhai RMB 102.28 million Yua
Bonded Area n 0.00 100% 100%
Zhuhai Livzon Reagent Co., Ltd RMB 23.69 million Yuan 0.00 51% 51%
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 0.00 79.28% 90%
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Actual investment Other Item balances
that become the net Shareholding Voting percentage
Subcompany Name amount at the end
investment to percentage % %
of period subcompanies
Ltd
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%
Livzon Medicine Institute under Livzon RMB 10 million Yuan
Group 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 RMB 51 million Yuan
Co., Ltd 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%
Ningxia Xinbeijiang Pharmaceutical Co., RMB 100 MILLION
Ltd under Livzon Group YUAN 0.00 100% 100%
Ningxia Fuxing Pharmaceutical Co., Ltd RMB 100 MILLION
under Livzon Group YUAN 0.00 100% 100%
Subcompanies that are obtained by the establishment or investment, etc (continued)
Whether they are
Equities of the Amounts that are used for offsetting
included in the
Subcompany name minority of against the equities of the minority of
consolidated
shareholders shareholders
statements?
Antao Development Limited Yes 0.00 0.00
Livzon (Hongkong) Co., Ltd Yes 0.00 0.00
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Whether they are
Equities of the Amounts that are used for offsetting
included in the
Subcompany name minority of against the equities of the minority of
consolidated
shareholders shareholders
statements?
Zhuhai Modern Chinese Medicine Hi- Yes
tech Co., Ltd 0.00 0.00
Livzon Pharmaceutical Factory under Livzon Yes
Group 0.00 0.00
Livzon Medicine Marketing Co., Ltd under
Livzon Group Yes 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 80,032,274.78 0.00
Shanxi Datong Livzon Qiyuan Medicine Co., Yes
Ltd 164,205.99 0.00
Longxi Livzon Shenyuan Medicine Co., Ltd Yes 302,065.98 0.00
Zhuhai Livzon Advertising Co., Ltd Yes 0.00 0.00
Zhuhai Livzon – Bai A Meng Biological Yes
Materials Co., Ltd 1,111,467.95 0.00
Zhuhai Livzon Meidaxin Technology
Development Co., Ltd Yes 0.00 0.00
Jiaozuo Livzon Syntpharm Co., Ltd Yes 0.00 0.00
Zhuhai Livzon Dankang Biotechnology Co., Yes 0.00
Ltd*1 40,531,890.33
Livzon Group Vaccine Engineering Co., Ltd Yes 7,675,801.37 0.00
Wenshan Livzon Panax notoginseng Yes 0.00
Plantation Co., Ltd*2 898,522.43
On October 31, 2011, in accordance with the resolutions of the Board of Directors of Livzon Syntpharm Co., Ltd in Zhuhai
99
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Bonded Area, the company absorbed and merged with Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area and
completed the merger on June 21, 2012. the registration of Lida Pharmaceutical Co., Ltd in Zhuhai Bonded Area with the
administration of industry and commerce was legally canceled.
(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 RMB14,900 万元 Research, development, production and
Pharmaceutical
Co., Ltd subcompany sales of Chinese and western medicines
production
and finished medicines
Xinbeijiang Pharmaceutical Co., Controlling Qingyuan City Pharmaceutical RMB 134.93 million Export and production of its
Ltd under Livzon Group subcompany production Yuan products and relevant technologies
Limin Pharmaceutical Co., Ltd Controlling Shaoguan City RMB 61.56 million Production and sales of various medical
Pharmaceutical Yuan preparations, medical materials, various
under Livzon Group subcompany
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
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 0.00
100
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Xinbeijiang Pharmaceutical Co., Ltd RMB 124.32 million Yua 92.14% 92.14%
under Livzon Group n 0.00
Limin Pharmaceutical Co., Ltd under RMB 56.18 million Yuan 88.09% 88.09%
Livzon Group 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 Equities of the Amounts that are used for
Subcompany name included in the minority of offsetting against the equities of
consolidated statements? shareholders the minority of shareholders
Sichuan Guangda Pharmaceutical Co., Ltd Yes 0.00 0.00
Xinbeijiang Pharmaceutical Co., Ltd under
Livzon Group Yes 15,060,630.86 0.00
Limin Pharmaceutical Co., Ltd under Livzon
Group Yes 21,514,456.65 0.00
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group Yes 0.00 0.00
(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: None.
V. Notes to Main Items in the Consolidated Financials Statements
1. Currency Capital
2012.6.30 2011.12.31
Item Original Exchange Book-keeping Original Exchange Book-keeping
Currency rate Currency Currency rate Currency
Cash at stock 185,221.13 232,609.61
Including:
RMB 110,775.32 157,310.55
Euro 9,225.00 7.871 72,609.98 9,225.00 8.1625 75,299.06
101
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Singapore
Dollar 0.00 4.8679 0.00
Hongkon
g Dollar 2,252.00 0.8152 1,835.83
Deposits in 1,442,741,276.3
banks 894,544,548.86 7
Including: 1,395,390,891.8
RMB 835,263,837.44 8
Hongkong
Dollar 50,951,209.52 0.8152 41,535,426.00 38,498,172.86 0.81070 31,210,468.74
USD 2,605,089.77 6.3249 16,476,932.29 2,371,030.00 6.3009 14,939,622.93
Japanese
Yuan 10,335,305.00 0.079648 823,186.37 8,263,260.00 0.081103 670,175.18
Euro 56,557.84 7.871 445,166.76 64,945.50 8.1625 530,117.64
Other
Currency
Capital 5,047,912.74 4,769,669.72
Including:
RMB 384,636.16 2,549,998.85
Hongkong
Dollar 5,720,407.97 0.8152 4,663,276.58 2,737,968.26 0.81070 2,219,670.87
1,447,743,555.7
Total
899,777,682.73 0
(1) Other currency capitals at the end of this period mainly include the investment amounts and L/C deposits.
(2) RMB 13.25 million Yuan of deposits in banks that has been mortgaged for the short-term loans and the L/C deposits of
RMB 1,065,474.05 Yuan in other currency capitals 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 decrease of 37.85% over the beginning of period is the repayment to short-term financing
bonds of RMB 400 million Yuan in this period.
2. Tradable financial assets
102
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
2012.6.30 2011.12.31
Item Changes of Fair Fair Values Changes of Fair Fair Values
Cost Cost
Values Values
Stock 51,008,193.34 -6,271,238.09 44,736,955.25 52,140,958.83 -8,321,422.37 43,819,536.46
Fund 150,000.00 397,392.71 547,392.71 150,000.00 373,477.19 523,477.19
Total 51,158,193.34 -5,873,845.38 45,284,347.96 52,290,958.83 -7,947,945.18 44,343,013.65
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 2012.6.30 2011.12.31
Bank Acceptance Drafts 78,683,228.59 171,033,783.72
(2) At the end of period, the company has no receivable bills that have been mortgaged.
(3) By June 30, 2012, the bills that have been endorsed but have not been due are listed as follows:
Bill Type Due Time Amount
Bank Acceptance Drafts 2012-12-31 112,485,361.78
(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
2012.6.30 2011.12.31
Item Amount Percent Reserves for B Net Value Amount Percent Reserves for B Net Value
age ad Debts age ad 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
whose individual
bad debt reserve is
103
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
withdrawn
Accounts receivable
whose bad debt
reserve is
withdrawn based on
765,573,428.
the combination 30 99.38% 39,005,049.09 726,568,379.21 591,699,098.32 99.03% 30,108,482.57 561,590,615.75
Accounts receivable
whose individual
amount is not large
but whose individual
bad debt reserve is
withdrawn 4,767,753.11 0.62% 4,391,134.28 376,618.83 5,817,326.81 0.97% 5,261,929.38 555,397.43
Total 100.00
770,341,181. 100.00
41 % 43,396,183.37 726,944,998.04 597,516,425.13 % 35,370,411.95 562,146,013.18
(2) At the end of this period, for the accounts receivable totaling RMB 523,861.41 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 3-4 years amounts to RMB 5,000.00 Yuan; the reserve for 4-5 years amounts to RMB 4,706.17
Yuan; the reserve for over 5 years amounts to RMB 514,155.24 Yuan.
(3) Accounts receivable whose bad debt reserves are withdrawn based on the age combination
2012.6.30 2011.12.31
Age Amount Percenta Reserves for Ba Net Value Amount Percent Reserves for Net Value
ge d Debts age Bad Debts
Within 1 28,971,794.6
year 746,461,854.39 96.90% 37,323,092.71 709,138,761.68 579,435,893.16 96.97% 6 550,464,098.50
1-2
years 15,288,274.30 1.98% 917,296.46 14,370,977.84 9,399,665.32 1.57% 563,979.93 8,835,685.39
2-3
years 3,823,299.61 0.50% 764,659.92 3,058,639.69 2,863,539.84 0.48% 572,707.98 2,290,831.86
Over 3
years 4,767,753.11 0.62% 4,391,134.28 376,618.83 5,817,326.81 0.98% 5,261,929.38 555,397.43
104
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Total 100.00 35,370,411.9
770,341,181.41 100.00% 43,396,183.37 726,944,998.04 597,516,425.13 % 5 562,146,013.18
(4) In 2012, the accounts receivable with the non-associated parties that have been actually written off amount to RMB
446,191.00 Yuan.
(5) By June 30, 2012, the top 5 accounts receivable are listed as follows:
Relationship Percentage
Nature or
Debtor Name with this Debt Amount Debt Time in Total
Content
company Amount
Non-associated
BIOCON LIMITED party 28,284,446.81 Loan Within 1 year 3.67%
North China Pharmaceutical Non-associated
co.,Ltd party 15,751,773.84 Loan Within 1 year 2.04%
Hebei Huamin Pharmaceutical Non-associated
Co.,Ltd under North China party
Pharmaceutical 13,102,792.20 Loan Within 1 year 1.70%
Sichuan Provincial Non-associated
Pharmaceutical co.,Ltd party 11,491,696.80 Loan Within 1 year 1.49%
Sichuan Provincial Non-associated
Pharmaceutical Controlling party
Co.,Ltd 10,431,841.20 Loan Within 1 year 1.35%
Total 79,062,550.85 10.25%
(6) By June 30, 2012, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
5. Prepaid Accounts
(1) Age analysis
Age 2012.6.30 Percentage 2011.12.31 Percentage
Within 1 year 157,264,270.30 90.93% 187,411,846.41 87.65%
1-2 years 1,219,368.80 0.71% 20,119,685.37 9.41%
2-3 years 14,458,430.50 8.36% 5,716,219.50 2.67%
Over 3 years 0.00 0.00% 570,000.00 0.27%
Total 172,942,069.60 100.00% 213,817,751.28 100.00%
105
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(2) The prepaid accounts with the age of over 1 year are mainly the lands accounts that have not been settled.
(3) By June 30, 2012, the top 5 prepaid accounts are listed as follows:
Relationship Percentage
Nature or
Debtor Name with this Debt Amount Debt Time in Total
Content
company Amount
Management Commission of Non-
Sichuan Pengzhou Industrial associated 20,425,185.0 Land Within 1 year, 2-
Development Zone party 0 expense 3 years 11.81%
Public Resources Trade Non-
Administration of Ningxia Hui associated 11,267,200.0 Land
Autonomous Region party 0 expense Within 1 year 6.52%
Non-
Siemens Healthcare Diagnostics associated 10,030,506.9
Products (Shanghai) Co., Ltd party 5 Loan Within 1 year 5.80%
Non-
Leshan Forui Pharmaceutical Co., associated 10,000,000.0
Ltd party 0 Loan Within 1 year 5.78%
Non-
Sichuan Leshan Health associated
Pharmaceutical Co., Ltd party 9,986,292.00 Loan Within 1 year 5.77%
61,709,183.9
Total 5 35.68%
(4) By June 30, 2012, 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
2012.6.30 2011.12.31
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
106
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
whose individual bad debt reserve
is withdrawn
Accounts receivable whose bad
debt reserve is withdrawn based 47,258,176.0 2,835,718.8
on the combination 59,029,106.94 97.10% 3,454,595.55 55,574,511.39 6 96.28% 0 44,422,457.26
Accounts receivable whose
individual amount is not large but
whose individual bad debt reserve 1,758,891.0
is withdrawn 1,765,171.14 2.90% 1,700,315.49 64,855.65 1,824,486.63 3.72% 3 65,595.60
Total 49,082,662.6 100.00 4,594,609.8
100.00
60,794,278.08 % 5,154,911.04 55,639,367.04 9 % 3 44,488,052.86
(2) At the end of this period, for the other accounts receivable totaling RMB 250,000.00 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 less than 1 year amounts to RMB 250,000.00 Yuan.
(3) Other accounts receivable whose bad debt reserves are withdrawn based on the age combination
2012.6.30 2011.12.31
Age Amount Percent Reserves for Bad Net Value Amount Percenta Reserves for Bad Net Value
age Debts ge Debts
Within 1
year 48,884,406.21 80.41% 2,681,720.29 46,202,685.92 38,327,573.20 78.09% 1,965,149.77 36,362,423.43
1-2 years 8,971,892.02 14.76% 538,313.52 8,433,578.50 8,218,708.78 16.74% 728,190.21 7,490,518.57
2-3 years 1,172,808.71 1.93% 234,561.74 938,246.97 711,894.08 1.45% 142,378.82 569,515.26
Over 3
years 1,765,171.14 2.90% 1,700,315.49 64,855.65 1,824,486.63 3.72% 1,758,891.03 65,595.60
100.00
Total
60,794,278.08 % 5,154,911.04 55,639,367.04 49,082,662.69 100.00% 4,594,609.83 44,488,052.86
(4) In 2012, there are no other accounts receivable with the non-associated parties that have been actually written off.
(5) By June 30, 2012, the top 5 other accounts receivable are listed as follows:
Nature or Percentage in
Debtor Name Debt Amount Debt Time
Content Total Amount
107
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Guangzhou Yinheyangguang
Pharmaceutical Group Industry
Co., Ltd 5,000,000.00 Loans 1－2 years 8.22%
Guangdong Blue Treasure Receivable power Within 1
Pharmaceutical Co. Ltd. 3,691,904.74 expenses year 6.07%
Within 1
Yuan Zhenjie 3,568,098.00 Loans for equipment year 5.87%
Payable Export tax Within 1
Payable Export tax rebate fund 2,501,815.89 rebate fund year 4.12%
Within 2
Ding Gongcai 2,302,000.00 Loans for projects years 3.79%
Total 17,063,818.63 28.07%
(6) By June 30, 2012, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
7. Inventory
(1) Inventory classification
2012.6.30 2011.12.31
Item Amount Depreciation Net Value Amount Depreciation Net Value
Reserve Reserve
Raw materials 199,834,872.43 1,526,887.87 198,307,984.56 202,423,005.91 1,861,885.09 200,561,120.82
Packages 25,348,358.06 50,152.67 25,298,205.39 22,461,455.53 106,644.99 22,354,810.54
Products 92,599,952.11 340,833.20 92,259,118.91 62,881,651.61 230,499.98 62,651,151.63
Inventory
commodities 138,673,837.59 9,606,765.34 129,067,072.25 124,204,642.82 6,942,721.66 117,261,921.16
Entrusted
materials for
processing 729,412.19 0.00 729,412.19 332,203.60 0.00 332,203.60
Low-value
consumables 1,047,949.65 0.00 1,047,949.65 123,902.99 0.00 123,902.99
108
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Delivered
commodities 377.81 0.00 377.81 98,691.41 0.00 98,691.41
Consumable
biological assets 20,180,075.12 0.00 20,180,075.12 3,623,758.25 0.00 3,623,758.25
Self-made semi-
finished products 16,623,218.68 856,129.92 15,767,088.76 18,439,392.00 1,024,111.05 17,415,280.95
Total 495,038,053.64 12,380,769.00 482,657,284.64 434,588,704.12 10,165,862.77 424,422,841.35
(2) Depreciation reserve for inventory
Decrease in this period
Reversion in Writing-off in
Withdrawal in
Inventory type 2011.12.31 this period this period this period 2012.6.30
Raw materials 1,861,885.09 -213,826.12 0.00 121,171.10 1,526,887.87
Packages 106,644.99 -1,248.65 0.00 55,243.67 50,152.67
Products 230,499.98 110,333.22 0.00 0.00 340,833.20
Inventory
commodities 6,942,721.66 4,372,122.14 0.00 1,708,078.46 9,606,765.34
Self-made semi-
finished products 1,024,111.05 -167,981.13 0.00 0.00 856,129.92
Total 10,165,862.77 4,099,399.46 0.00 1,884,493.23 12,380,769.00
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, 2012. 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 2012.6.30 2011.12.31
Saleable equity instruments 9,657,659.86 9,238,787.30
Including: stocks 9,657,659.86 9,238,787.30
109
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 Treasure Qingyuan An Ning Production USD 7.53 35.91% 35.91%
Pharmaceutical Co. Ltd.
City and sales million
Limited
liability (joint of material
venture) medicines
Livzon Medical Electronic It has been RMB 3.62 28% 28%
Limited Zhuhai City Xu Xiaoxian
closed.
Equipment (Factory) Co., Ltd million Yuan
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. 99,016,593.28 16,334,163.69 82,682,429.59 44,651,991.24 3,284,132.47
Livzon Medical Electronic Equipment
(Factory) Co., Ltd —— —— —— —— ——
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 14,927,230.42 2,046,146.76 12,881,083.66 6,153,914.59 -2,963,994.52
Total 113,943,823.70 18,380,310.45 95,563,513.25 50,805,905.83 320,137.95
10. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
110
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
2012.6.30 2011.12.31
Item Depreciation Depreciation
Book Balance Book Values Book Balance Book Values
Reserve Reserve
Calculation
by Cost
102,853,108.8
Method 4 20,600,000.00 82,253,108.84 102,853,108.84 20,600,000.00 82,253,108.84
Calculation
by Equity
Method 37,617,832.96 1,200,000.00 36,417,832.96 37,475,899.07 1,200,000.00 36,275,899.07
Total 140,470,941.8 118,670,941.8
0 21,800,000.00 0 140,329,007.91 21,800,000.00 118,529,007.91
(2) Long-term equity investment calculated by cost method
Name of Invested Units Initial 2011.12.31 Increase in Decrease 2012.6.30 Sharehol Cash
Amount this period in this ding dividend
period percenta
ge
Guangdong Development Bank
0.0004%
Co.Ltd 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
China Resources Bank of
1.5065%
Zhuhai Co., Ltd* 95,325,760.00 95,325,760.00 0.00 0.00 95,325,760.00 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
102,853,108.8
Total 4 102,853,108.84 0.00 0.00 102,853,108.84 0.00
111
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(3) Long-term equity investment calculated by the equity method
Name of Invested Units Investment cost 2011.12.31 Increase in Decrease in 2012.6.30 Shareholdi Cash
this period this period ng dividend
percentag
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 1,179,331.9
Pharmaceutical Co. Ltd. 11,227,540.45 30,446,697.36 7 0.00 31,626,029.33 35.91% 0.00
Tongyikangshimei Chain (Shenzhen)
Co., Ltd 35,000,000.00 5,829,201.71 0.00 1,037,398.08 4,791,803.63 35% 0.00
1,179,331.9
Total 47,427,540.45 37,475,899.07 7 1,037,398.08 37,617,832.96 0.00
(4) Depreciation reserve for long-term equity investment
Withdrawal Withdrawal
Transfer in
Investment Projects 2011.12.31 2012.6.30 Cause
in this
this period
period
The net
Doumen Sanzhou Industry City Co.,
500,000.00 500,000.00 assets are
Ltd
0.00 0.00 less than zero.
China Resources Bank of Zhuhai 20,000,000.0
20,000,000.00 Loss
Co., Ltd* 0.00 0.00 0
The net
Livzon Medical Electronic
assets are
Equipment (Factory) Co., Ltd
1,200,000.00 0.00 0.00 1,200,000.00 less than zero.
The business
license has
Beijing Medical Goods Joint
been
Operation Company
cancelled by
100,000.00 0.00 0.00 100,000.00 the local admi
112
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
nistration of
industry and
commerce
21,800,000.0
Total
21,800,000.00 0.00 0.00 0
11. Fixed Assets and Accumulated Depreciation
(1) Particulars
Item Increase in this Decrease in this
2011.12.31 2012.6.30
period period
Original values of fixed
assets:
1,103,268,001.7
Houses and buildings
1,046,340,406.36 56,927,595.37 0.00 3
1,079,808,596.4
Machine equipments
1,054,042,266.72 31,843,206.13 6,076,876.45 0
Transportation equipments 34,222,234.14 1,575,326.83 448,181.25 35,349,379.72
Electronic equipments and
others 162,678,868.93 6,328,341.12 858,598.18 168,148,611.87
2,386,574,589.7
Total
2,297,283,776.15 96,674,469.45 7,383,655.88 2
Accumulated depreciation:
Houses and buildings 405,522,355.40 20,683,941.13 0.00 426,206,296.53
Machine equipments 581,999,010.91 36,970,717.24 4,188,026.98 614,781,701.17
Transportation equipments 17,209,050.92 1,663,930.29 421,227.84 18,451,753.37
Electronic equipments and
122,432,705.18 5,787,230.20 704,779.74 127,515,155.64
others
1,186,954,906.7
Total
1,127,163,122.41 65,105,818.86 5,314,034.56 1
1,199,619,683.0
Net value of fixed assets:
1,170,120,653.74 1
Depreciation reserve for
fixed assets
113
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Houses and buildings
37,555,224.19 0.00 426,486.57 37,128,737.62
Machine equipments 40,986,153.40 13,983.23 417,002.02 40,583,134.61
Transportation equipments
95,560.44 0.00 5,012.23 90,548.21
Electronic equipments and
others
916,835.49 0.00 26,417.22 890,418.27
Total 79,553,773.52 13,983.23 874,918.04 78,692,838.71
1,120,926,844.3
Net values of fixed assets:
1,090,566,880.22 0
(2) The projects under construction in this period that have been transferred to the fixed assets amount to RMB
33,993,631.90 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 7,116,041.13 3,335,185.52 0.00 3,780,855.61 2012
Machine
equipments 5,610,454.62 4,424,478.41 0.00 1,185,976.21 2012
Office
equipments and
others 40,112.85 37,397.56 0.00 2,715.29 2012
Total 12,766,608.60 7,797,061.49 0.00 4,969,547.11
(4) The company has no fixed assets that are proposed to be disposed of.
(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
buildings 4,706,459.65 2,805,017.88 26,479.77 1,874,962.00
114
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Office equipments
and others 22,800.00 18,908.58 0.00 3,891.42
Total 4,729,259.65 2,823,926.46 26,479.77 1,878,853.42
(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 25,153,210.0 286,242,151. projects and the handling of
buildings 311,395,361.49 6 0.00 43 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
2012.6.30 2011.12.31
Project Original Book- Original Book-
Depreciation Depreciation
name keeping Net Value keeping Net Value
Reserve Reserve
Amount Amount
Newly 434,074,283.7 434,074,283.7
built plants 8 0.00 8 57,274,311.70 0.00 57,274,311.70
Equipment
installation 23,608,685.55 0.00 23,608,685.55 18,546,510.54 0.00 18,546,510.54
Technical
improvem
ent 3,370,934.20 0.00 3,370,934.20 2,413,856.54 0.00 2,413,856.54
Plant
improvem
ent 32,902,654.67 0.00 32,902,654.67 26,320,944.15 0.00 26,320,944.15
115
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Others 85,218,594.74 0.00 85,218,594.74 44,286,005.23 0.00 44,286,005.23
Total 148,841,628.1 148,841,628.1
579,175,152.9 579,175,152.9
4 0.00 4 6 0.00 6
(2) Particulars
Percenta
ge of
Fixed Assets
Project Increase in this Other Project
Budget Amount 2011.12.31 Transferred in 2012.6.30 Capital Source
Name period Decrease Investme
this Period
nt to
Budget
Newly built Loans and available
plants 1,296,529,000. capitals owned by the
00 57,274,311.70 384,232,734.23 7,432,762.15 0.00 434,074,283.78 company 52.72%
Equipment Available
installation capitals owned
158,053,865.49 18,546,510.54 28,898,821.82 23,836,646.81 0.00 23,608,685.55 by the company 96.562%
Technical Available
improveme capitals owned
nt 132,813,422.83 2,413,856.54 42,331,622.17 441,955.00 0.00 44,303,523.71 by the company 38.07%
Plant Available
improveme capitals owned
nt 77,141,976.41 26,320,944.15 8,863,978.46 2,282,267.94 0.00 32,902,654.67 by the company 52.36%
Others Available
capitals owned
77,020,214.88 44,286,005.23 0.00 0.00 0.00 44,286,005.23 by the company 70.60%
Total 1,741,558,479.
61 148,841,628.16 464,327,156.68 33,993,631.90 0.00 579,175,152.94
(3) At the end of period, the increase of projects under construction by 289.12% over the beginning of period is mainly
because of the increase of investments in newly built plants.
(4) By June 30, 2012, the capitalization amounts of interests for the projects under construction are listed as follows:
Project Name 2011.12.31 Increase in this Fixed Assets Other 2012.6.30
116
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Transferred in this
period Decrease
Period
Newly built
plants 3,239,673.65 6,340,332.30 0.00 0.00 9,580,005.95
The capitalization of projects under construction will apply the interest rates for special loans of banks.
13. Project Goods
Goods name 2012.6.30 2011.12.31
Special materials 0.00 0.00
Special equipments 1,785,250.00 2,536,926.00
Total 1,785,250.00 2,536,926.00
At the end of period, the decrease of projects under construction by 29.63% 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
2011.12.31 2012.6.30
Item period period
① Original price
Use rights of lands 156,246,944.89 37,415,587.11 0.00 193,662,532.00
Special techniques 131,493,340.02 6,000,000.00 0.00 137,493,340.02
Software 13,689,374.24 3,555,633.58 0.00 17,245,007.82
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 301,453,659.15 46,971,220.69 0.00 348,424,879.84
②Accumulated amortization
Use rights of lands 46,039,021.58 1,505,317.14 0.00 47,544,338.72
Special techniques 74,768,659.44 6,392,570.68 0.00 81,161,230.12
Software 7,874,600.72 1,610,170.54 0.00 9,484,771.26
Trademark rights 24,000.00 0.00 0.00 24,000.00
Total 128,706,281.74 9,508,058.36 0.00 138,214,340.10
117
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
③Depreciation reserve for
intangible assets
Use rights of lands 981,826.94 0.00 0.00 981,826.94
Special techniques 1,379,999.89 0.00 0.00 1,379,999.89
Software 0.00 0.00 0.00 0.00
Trademark rights 0.00 0.00 0.00 0.00
Total 2,361,826.83 0.00 0.00 2,361,826.83
Increase in this Decrease in this
2011.12.31 2012.6.30
Item period period
④ Total of book values of
intangible assets
Use rights of lands 109,226,096.37 145,136,366.34
Special techniques 55,344,680.69 54,952,110.01
Software 5,814,773.52 7,760,236.56
Trademark rights 0.00 0.00
Total 170,385,550.58 207,848,712.91
Particulars about intangible assets whose property certificates have not been handled:
Item Original Book Accumulated Depreciation Cause
Net Amount
Values Depreciation Reserve
The handling of
Use right of certificates is still
lands 39,792,313.68 4,694,351.69 0.00 35,097,961.99 under way.
15. Development payment
Decrease in this period
Accrued to the Confirmed as
Item
Increase in this current profit and intangible assets
2011.12.31 period loss 2012.6.30
118
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Capitalization
payment 1,510,153.51 0.00 0.00 0.00 1,510,153.51
Expense payment 0.00 26,925,382.60 26,925,382.60 0.00 0.00
Total
1,510,153.51 26,925,382.60 26,925,382.60 0.00 1,510,153.51
16 Goodwill
2012.6.30 2011.12.31
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 2011.12.31 2012.6.30 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
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 Co., Cost-book value
Ltd 2,045,990.12 0.00 0.00 2,045,990.12 differentials
119
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Increase in this Decrease in
Name of Invested Units 2011.12.31 2012.6.30 Formation Source
period this period
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 2011.12.31 2012.6.30
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 2011.12.31 Increase in Transfer Amortization 2012.6.30 Accumulated Remaining
Amount this period in this in this Period Amortization Amortization
period Period
Overhaul expense
of fixed assets 8,814,166.08 4,047,968.11 995,350.00 0.00 679,063.77 4,364,254.34 4,449,911.74 1-56 months
Decoration expense
of offices 2,452,231.41 1,305,384.35 0.00 0.00 191,250.30 1,114,134.05 1,338,097.36 6-39 months
Decoration expense
of plants 7,585,250.96 5,222,858.46 813,501.42 0.00 1,154,972.32 4,881,387.56 2,703,863.40 1-47 months
Publicly amortized 32-40
expense of public 2,871,256.54 209,170.63 2,279,468.40 0.00 834,363.64 1,654,275.39 1,216,981.15 months
120
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
utilities
Resin 6,223,704.33 1,104,819.82 1,095,143.04 0.00 524,307.31 1,675,655.55 4,548,048.78 1-35 months
12-47
Others 4,187,390.22 2,380,224.89 0.00 0.00 854,802.14 1,525,422.75 2,661,967.47 months
Total 32,133,999.54 14,270,426.26 5,183,462.86 0.00 4,238,759.48 15,215,129.64 16,918,869.90
18 Deferred Income Tax Asset
Type 2012.6.30 2011.12.31
Withdrawal of the deductible temporary difference
caused by the asset depreciation reserve 21,885,271.70 20,031,422.32
The deductible temporary difference caused by the
long-term equity investment out of the scope of
consolidation statement 3,846,389.60 3,754,298.60
The deductible temporary difference caused by the
amortization of intangible assets 276,547.80 322,098.26
The deductible temporary difference caused by the
withdrawal expense 5,296,933.96 4,304,719.21
The deductible temporary difference caused by the
deductible loss 7,847,876.66 7,145,831.32
The deductible temporary difference caused by the
deferred gains 420,742.50 435,742.50
Total 39,573,762.22 35,994,112.21
19 Asset Depreciation Reserve
Increase in this Decrease in this period
Item 2011.12.31 2012.6.30
period Reversion Writing-off
Reserves for Bad debts 39,965,021.78 9,032,263.63 0.00 446,191.00 48,551,094.41
Depreciation Reserve
for inventory 10,165,862.77 4,099,399.46 0.00 1,884,493.23 12,380,769.00
121
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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 79,553,773.52 13,983.23 0.00 874,918.04 78,692,838.71
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 172,605,548.05 13,145,646.32 0.00 3,205,602.27 182,545,592.10
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 and the depreciation reserve of fixed assets means the rejection, disposal transfer or writing-off.
20 Assets whose ownership rights are restricted
Increase in this Decrease in this
Item 2011.12.31 2012.6.30
period period
Assets used for
pledgement:
L/C deposits 2,317,760.92 0.00 1,252,286.87 1,065,474.05
Deposits in banks 13,250,000.00 0.00 0.00 13,250,000.00
Assets used for
mortgage:
Houses and
buildings 20,778,351.53 0.00 1,674,180.24 19,104,171.29
Use rights of lands 0.00 0.00 0.00 0.00
Total 36,346,112.45 0.00 2,926,467.11 33,419,645.34
The reasons for the restriction of asset ownership rights are listed as follows:
(1) The subcompany Livzon Syntpharm Co., Ltd in Zhuhai Bonded Area pledged the certificate of 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 9, 2011 to December 9, 2012.
(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
122
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
67,207,407.31 Yuan and net value of RMB 19,104,171.29 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 2012.6.30 2011.12.31
Credit loan 283,072,653.06 183,225,943.01
Guaranty loan 81,521,400.00 56,749,000.00
Pledgement loan 11,412,800.00 11,349,800.00
Total 376,006,853.06 251,324,743.01
(2) By June 30, 2012, 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 55 million
from Macau Branch of Wing Lung Bank) and a loan of HKD 15 million from Guangzhou Branch of Societe Generale; The
Company provides the guaranty to Livzon Syntpharm Co., Ltd in Zhuhai Bonded Area for a loan of HKD 30 million from
China Resources Bank of Zhuhai.
(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 2012.6.30 2011.12.31
Accounts payable 306,820,855.90 207,941,294.31
(1) By June 30,2012, there are no debts with the shareholder units holding over 5% (including 5%) voting rights. The
accounts payable with the age of over 1 year amount to RMB 7,517,687.21 Yuan, accounting for 2.45% of the balance at
the end of period.
(2) The main cause of the increase of 47.55% over the beginning of year is the increase of purchase in this period.
(3) Please see the note VII for the details about the payments of associated parties.
23. Advance accounts
Item 2012.6.30 2011.12.31
123
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Advance accounts 31,032,089.79 39,028,703.01
(1) By June 30,2012, 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 1,242,566.43 Yuan, accounting for 4.00% of the
balance at the end of period.
24 Rewards paid to the staffs
Item 2011.12.31 Increase in this Payment in this 2012.6.30
period period
Salary, bonus and
48,815,691.11 128,011,112.83 129,089,699.73 47,737,104.21
allowance
Welfare expense for staffs 0.00 5,932,641.67 5,932,641.67 0.00
Social insurance fees 281,745.85 19,205,881.39 19,049,858.15 437,769.09
Including: medical
72,860.78 5,543,267.79 5,422,086.47 194,042.10
insurance fees
Endowment Insurance 171,240.33 11,349,492.74 11,338,523.20 182,209.87
Unemployment insurance
24,286.93 1,380,441.41 1,373,742.05 30,986.29
fees
Occupational Injury
4,857.39 529,510.37 514,608.57 19,759.19
Insurance
Childbirth insurance 8,500.42 403,169.08 400,897.86 10,771.64
Reserves for houses 574,682.32 5,008,120.79 4,991,129.62 591,673.49
Trade union expense and
171,725.53 837,249.23 706,142.67 302,832.09
staff education expense
Compensation for the
cancellation of work 0.00 476,974.33 476,974.33 0.00
relationship
Equity stimulation bonus of
2,144,013.86 758,618.48 0.00 2,902,632.34
subcompanies
Others 341,025.15 20,823.08 20,823.08 341,025.15
Total 52,328,883.82 160,251,421.80 160,267,269.25 52,313,036.37
At the end of period, there are no cases about failure to pay the rewards of staffs.
124
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
25. Payable Taxes
Tax type 2012.6.30 2011.12.31
Value-added tax 28,010,897.60 26,548,565.90
Operating tax 4,135.23 4,559.53
City construction tax 2,707,466.36 2,885,653.83
Enterprise income tax 31,427,943.38 50,742,436.32
Real estate tax 2,428,592.88 108,360.22
Utilization tax of lands 782,943.13 265,000.00
Personal income tax 11,292,546.18 6,182,013.00
Stamp tax 824,573.39 923,517.20
Education surtax 2,077,748.35 2,195,414.50
Embankment protection 225,709.21
cost 176,657.98
Others 57,464.85 120,470.63
Total 79,790,969.33 90,201,700.34
26 Payable dividends
Investor name 2012.6.30 2011.12.31 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
125
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Total 2,531,984.46 2,531,984.46
27 Other accounts payable
Item 2012.6.30 2011.12.31
Other accounts payable 569,133,645.78 460,447,555.37
(1) At the end of period, the advance withdrawn expenses from the balance amounts to RMB 311,830,539.27 Yuan,
accounting for 54.79% of the balance and are listed as follows:
Item 2012.6.30 2011.12.31 Cause for balance at the
end of period
Water and electricity Not paid.
expense 3,623,208.68 1,974,340.58
Research expense 993,750.11 1,865,945.99 Not paid.
Business promotion Not paid.
expense 279,076,769.61 213,634,812.50
Leasing expense 576,660.16 185,652.13 Not paid.
Advertisement expense 212,180.29 1,681,539.29 Not paid.
Meeting expense 9,249,639.91 12,864,714.05 Not paid.
Auditing and information Not paid.
disclosure expenses 1,045,526.78 1,503,067.22
Risk fund for medicine Not paid.
research 0.00 0.00
Operating expense of Not paid.
branches 4,516,253.84 5,938,650.50
Drainage expense 244,959.00 148,959.00 Not paid.
Traveling expense 626,411.54 0.00 Not paid.
Transportation Not paid.
expense 3,921,159.65 0.00
Others 7,744,019.70 9,181,281.46 Not paid.
Total 311,830,539.27 248,978,962.72
(2) Other accounts payable with the age of over 1 year amount to RMB 37,975,114.97 Yuan, accounting for 6.67% of the
126
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
balance at the end of period.
(3) By June 30, 2012, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
(4) Please see the note VII for more details about the payments of associated parties.
28. Non-current Liabilities Due within 1 Year
Borrowing Unit 2012.6.30 2011.12.31 Interest Loan Period Condition
Rate
Fujian Huaqiao Trust & Interest- Not specified Credit
Investment Company
400,000.00 400,000.00 free
Total 400,000.00 400,000.00
29. Other current liabilities
Type 2012.6.30 2011.12.31
Short-term
0.00 400,000,000.00
financing bonds
30. Long-term Loans
(1) Types of Long-term Loans
Type 2012.6.30 2011.12.31
Credit loans 700,000.00 700,000.00
Mortgage and guaranty loans 500,000.00 500,000.00
Total 1,200,000.00 1,200,000.00
(2) List of loan units
2012.6.30 Annual
Loan unit Principal Payable Total Interest Loan Period Loan Conditions
Interests Rate
Loans from banks:
Zhuhai Branch of Bank of 2010.12.23 to Mortgage and
Communications* 500,000.00 0.00 500,000.00 5.530% 2016.12.23 guaranty
127
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Subtotal 500,000.00 0.00 500,000.00
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, 2012, there are no due long-term loans which have not been repaid.
31 Deferred Gains
Total Allowance Increase in Writing-off in
Item Amount 2011.12.31 this period this period 2012.6.30
Development and industrialization of
Ilaprazole series of Innovation
medicines 49,900,000.00 25,733,167.90 0.00 1,374,064.92 24,359,102.98
I-type Humanized Anti-Human TNF
monoclonal antibody for the purpose
of treatment 10,000,000.00 10,000,000.00 0.00 7,888,077.82 2,111,922.18
Demonstration project of solar
energy photoelectric structure
application 7,010,000.00 7,010,000.00 0.00 0.00 7,010,000.00
Allowance PVC soft packages of
technical reform and bid-invitation
project supported by the provincial
finance 4,100,000.00 3,304,217.60 0.00 145,774.35 3,158,443.25
Famciclovir Sustained Release
Capsules 0302 project 4,100,000.00 2,994,863.03 0.00 0.00 2,994,863.03
Demonstration project of
managing the high-
concentration organic
wastewater 4,000,000.00 1,971,983.00 0.00 197,202.00 1,774,781.00
Shenqifuzheng injection 3,535,000.00 2,435,000.00 0.00 200,000.00 2,235,000.00
Leuprorelin Acetate Microspheres
and injection preparation 2,300,000.00 1,000,000.00 0.00 400,000.00 600,000.00
Three-pollen for injection 1,800,000.00 685,041.39 0.00 0.00 685,041.39
Development and industrialization of
new antidepressant drug Fluvoxoxa 1,500,000.00 1,500,000.00 0.00 0.00 1,500,000.00
128
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Total Allowance Increase in Writing-off in
Item Amount 2011.12.31 this period this period 2012.6.30
mine
Little Giant Cultivation Enterprise 1,400,000.00 1,400,000.00 0.00 1,100,000.00 300,000.00
Expense for the cooperating
enterprise to make the production,
study and research granted by the
provincial department in 2010 1,370,000.00 0.00 0.00 0.00 0.00
First batch of scientific research &
development expense granted by
District Scientific Industrial & Trade D
epartment in 2010 1,250,000.00 1,250,000.00 0.00 0.00 1,250,000.00
Sterilization and kidney-quieting
capsule 2,040,000.00 808,855.64 0.00 35,000.00 773,855.64
5- 4-aminosalicylic acid (0001
project) 1,200,000.00 537,938.10 0.00 0.00 537,938.10
Industry research of potassium
citrate sustained release pellets 1,120,000.00 450,622.12 0.00 0.00 450,622.12
Enzymatic technology
innovation project 1,042,631.00 944,812.90 0.00 0.00 944,812.90
Absorption purified inactivated
Japanese encephalitis virus vaccine 1,000,000.00 1,000,000.00 0.00 1,000,000.00 0.00
Enterprise innovation fund
granted by the provincial
financial department in 2009 700,000.00 700,000.00 0.00 0.00 700,000.00
Bifidoboigen preparations 600,000.00 466,205.15 0.00 0.00 466,205.15
Development of new
Xueshuantong preparation RX 600,000.00 31,710.50 208,289.50 240,000.00 0.00
Expense for the production, study
and research guideline projects
granted by the provincial department
in 2011 500,000.00 500,000.00 0.00 100,000.00 400,000.00
Modern Chinese medicine hi-tech
innovation industrialization base
construction 500,000.00 400,000.00 0.00 58,331.00 341,669.00
Special award fund for Fuzhou
municipal-level enterprise technical
center 100,000.00 0.00 0.00 0.00 0.00
Energy-saving project fund for
“fermentation refinery production
system energy optimization
improvement project” in 2010 300,000.00 0.00 0.00 0.00 0.00
Electricity-saving of lighting water
pump fan and air-conditioner system 350,000.00 280,000.00 0.00 40,831.00 239,169.00
129
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Total Allowance Increase in Writing-off in
Item Amount 2011.12.31 this period this period 2012.6.30
Research, development and
production transfer of
Jimishaxing pellets 300,000.00 212,527.55 0.00 0.00 212,527.55
Salvianolic acid B 300,000.00 140,757.40 0.00 0.00 140,757.40
Project expense for Zhuhai
municipal-level enterprise technical
center 300,000.00 300,000.00 0.00 0.00 300,000.00
Project expense for development of
virginiamycin industrialization in
China 300,000.00 0.00 0.00 0.00 0.00
Project expense for three rapid
testing technologies of illegal
additives Melamine in food 200,000.00 188,600.00 0.00 0.00 188,600.00
Process improvement of
ValaciclovirHydrochloride 200,000.00 171,806.50 0.00 0.00 171,806.50
Special fund for Zhuhai City strategic
new industry in 2011 200,000.00 0.00 0.00 0.00 0.00
Project expense for accurate and
rapid testing technology and
equipment of important harmful
substance in food 150,000.00 141,450.00 0.00 0.00 141,450.00
Industrialization demonstration of
immunity testing technical results
about prohibited animal growth-
promoting agent 150,000.00 0.00 0.00 0.00 0.00
Experiments and research
about the anti-Avian influenza
of antivirus granules 110,000.00 58,829.14 0.00 0.00 58,829.14
Development and industrialization of
Urofollitropin for injection 100,000.00 0.00 0.00 0.00 0.00
Depth development of Mesylate
Jimishaxing series 80,000.00 0.00 0.00 0.00 0.00
Development fund for small and
medium enterprises in international
market in 2010 71,436.00 0.00 0.00 0.00 0.00
Leadership prize for strategic new
industry 50,000.00 0.00 0.00 0.00 0.00
Award for advantageous enterprise
for intellectual property 50,000.00 0.00 0.00 0.00 0.00
Supporting fund for technical award
granted by the nation and
Guangdong Province in 2009 40,000.00 0.00 0.00 0.00 0.00
130
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Total Allowance Increase in Writing-off in
Item Amount 2011.12.31 this period this period 2012.6.30
Allowance for patent application
expense in Zhuhai city 37,950.00 0.00 0.00 0.00 0.00
Special fund for “Going out” in
Zhuhai City 37,700.00 0.00 0.00 0.00 0.00
Special fund for small and medium
enterprises to develop the domestic
market granted by the industry and
trade bureau in 2011 33,900.00 33,900.00 0.00 0.00 33,900.00
Study and application about super
fine crushing technology 20,000.00 0.00 0.00 0.00 0.00
Provincial third prize for ultrasonic
wave 20,000.00 0.00 0.00 0.00 0.00
Award for working injury granted by
Zhuhai City Social Insurance Fund
Management Center 10,000.00 0.00 0.00 0.00 0.00
Allowance for patent application
expense in Zhuhai city in 2011 1,000.00 1,000.00 0.00 0.00 1,000.00
Financial allowance for Shenqi
quality control technologies 5,000,000.00 0.00 5,000,000.00 1,585,575.89 3,414,424.11
Guangdong Provincial Public Service
Platform Construction 1,225,300.00 0.00 1,225,300.00 1,225,300.00 0.00
Others 731,500.00 490,000.00 0.00 0.00 490,000.00
Total 112,036,417.00 67,143,287.92 6,433,589.50 15,590,156.98 57,986,720.44
32. Deferred Income Tax Liabilities
Type 2012.6.30 2011.12.31
Temporary difference of payable taxes caused by the
saleable financial assets 1,075,144.36 1,012,313.47
Temporary difference of payable taxes caused by the
calculation of long-term equity investment with the equity
method 1,026,780.13 889,191.40
Total 2,101,924.49 1,901,504.87
33 Share Capital
Increase or Decrease (+ or －) Unit: share
131
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Item 2011.12.31
Shares 2012.6.30
Share- Gift Others Subtotal
transferred
rationing share from public
Amount amount reserve fund
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
shares
Increase or Decrease (+ or －) Unit: share
Item 2011.12.31
Shares 2012.6.30
Share- Gift Others Subtotal
transferred
rationing share from public
Amount amount reserve fund
③ Internal staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
④ Preference shares or
others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
⑤Circulation share with
trading restriction 6,059,428.00 0.00 0.00 0.00 0.00 0.00 6,059,428.00
Total of non-circulation
shares 6,059,428.00 0.00 0.00 0.00 0.00 0.00 6,059,428.00
II.Shares without trading
restriction
①Domestically-listed
Renminbi ordinary shares 177,669,070.00 0.00 0.00 0.00 0.00 0.00 177,669,070.00
132
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Including: Management
shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
②Domestically-listed
shares for overseas
investors 111,993,354.00 0.00 0.00 0.00 0.00 0.00 111,993,354.00
Total of circulation shares 289,662,424.00 0.00 0.00 0.00 0.00 0.00 289,662,424.00
III. Total shares 295,721,852.00 0.00 0.00 0.00 0.00 0.00 295,721,852.00
34 Capital Reserve
Increase in this Decrease in this
Type 2011.12.31 2012.6.30
period period
Share Premium 320,792,441.78 0.00 0.00 320,792,441.78
Other Capital
Reserve 27,300,694.63 356,041.67 0.00 27,656,736.30
Total 348,093,136.41 356,041.67 0.00 348,449,178.08
The cause of increase in this period is the change of fair vales of saleable financial assets.
35 Surplus Reserve
Increase in this Decrease in this
Type 2011.12.31 2012.6.30
period period
Legal Surplus
Reserve 311,623,096.79 0.00 0.00 311,623,096.79
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 479,211,417.19 0.00 0.00 479,211,417.19
133
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
36 Undistributed Profit
Item 2012.6.30 2011.12.31
Undistributed profit at the beginning of period 1,740,645,868.60 1,446,714,876.09
Plus: profit transfer in the current period 228,705,016.39 359,369,880.94
Other transfers 0.00 0.00
Minus：Withdrawal of Legal Surplus Reserve 0.00 35,936,988.09
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 147,860,926.00 29,501,900.34
Dividends for ordinary shares that are
transferred to capitals 0.00 0.00
Undistributed profit at the end of period 1,821,489,958.99 1,740,645,868.60
37 Equities of the minority of shareholders
2011.12.31 Increase or decrease from January to June 2012 2012.6.30
Shareholding
Equities of the percentage of the Profit and loss of Equities of the
minority of Net profits of minority of the minority of Other change minority of
Company name shareholders subcompanies shareholders shareholders s shareholders
Zhuhai Livzon Reagent Co., Ltd 76,961,241.09 26,267,415.69 49% 12,871,033.69 -9,800,000.00 80,032,274.78
Xinbeijiang Pharmaceutical Co., Ltd
under Livzon Group 13,484,145.17 20,057,069.81 7.86% 1,576,485.69 0.00 15,060,630.86
Limin Pharmaceutical Co., Ltd
under Livzon Group 24,684,262.85 52,137,374.19 11.91% 6,213,925.01 -9,383,731.21 21,514,456.65
134
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
2011.12.31 Increase or decrease from January to June 2012 2012.6.30
Shareholding
Equities of the percentage of the Profit and loss of Equities of the
minority of Net profits of minority of the minority of Other change minority of
Company name shareholders subcompanies shareholders shareholders s shareholders
Shanxi Datong Livzon Qiyuan
Medicine Co., Ltd 168,836.36 -61,738.30 18.52% -4,630.37 0.00 164,205.99
Longxi Livzon Shenyuan Medicine
Co., Ltd 334,074.90 -320,089.19 20.72% -32,008.92 0.00 302,065.98
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 41,922,056.58 -2,837,073.97 49% -1,390,166.25 0.00 40,531,890.33
Livzon Group Vaccine Engineering
Co., Ltd 8,491,508.80 -5,050,819.97 16.15% -815,707.43 0.00 7,675,801.37
Wenshan Livzon 1,290,532.05 -800,019.63 49% -392,009.62 0.00 898,522.43
-
Total 168,448,125.75 89,392,118.63 18,026,921.80 19,183,731.21 167,291,316.34
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
January to June 2012 January to June 2011
Item Gross operating Operating Gross operating
Operating Income Operating Cost Operating Cost
Profit Income Profit
Main Business 1,875,055,548.88 740,101,590.20 1,134,953,958.68 1,455,789,741.43 666,506,492.27 789,283,249.16
Other
Business 9,941,626.56 8,650,846.08 1,290,780.48 15,647,759.20 10,586,915.00 5,060,844.20
Total 1,884,997,175.44 748,752,436.28 1,136,244,739.16 1,471,437,500.63 677,093,407.27 794,344,093.36
135
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(2) The main businesses are listed as follows as per the region:
January to June 2012 January to June 2011
Item Income from Main Gross profit from Income from Main Cost of Main Gross profit from
Cost of Main Business
Business Main Business Business Business Main Business
Guangdong 993,259,928.92 666,740,588.74
Province 2,164,735,567.25 1,188,924,480.34 975,811,086.91 1,660,000,517.66
Sichuan 53,135,159.25 53,165,362.72
Province 135,242,416.99 54,485,114.08 80,757,302.91 106,300,521.97
Fujian 162,827,432.63 45,425,378.05
Province 198,701,839.64 161,010,517.63 37,691,322.01 208,252,810.68
Others 88,373,089.59 52,522,466.42 35,850,623.17 40,827,894.69 21,284,281.37 19,543,613.32
Subtotal 2,587,052,913.47 1,456,942,578.47 1,130,110,335.00 2,015,381,745.00 1,230,506,802.17 784,874,942.83
Internal
Writing-off in
the Company 711,997,364.59 716,840,988.27 -4,843,623.68 559,592,003.57 564,000,309.90 -4,408,306.33
Total 1,875,055,548.88 740,101,590.20 1,134,953,958.68 1,455,789,741.43 666,506,492.27 789,283,249.16
(3) Incomes and costs from main businesses are listed as follows as per the business:
Item January to June 2012 January to June 2011
Income from Main Income from Main
Cost of Main Business Cost of Main Business
Business Business
Sales of
Commodities 1,875,055,548.88 740,101,590.20 1,455,789,741.43 666,506,492.27
Total 1,875,055,548.88 740,101,590.20 1,455,789,741.43 666,506,492.27
(4) Sales volume of top 5 clients
January to June 2012 January to June 2011
Client Name Percentage of Total Percentage of Total
Sales Volume Sales Volume
Sales Volume (%) Sales Volume (%)
Total sales volume of top 5
clients 163,182,152.06 8.71% 173,320,404.05 11.91%
136
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(5) Incomes and costs from other businesses are listed as follows as per other business:
January to June 2012 January to June 2011
Item Incomes from Other Costs of Other Incomes from Other Costs of Other
Businesses Businesses Businesses Businesses
Sales of raw materials 3,600,657.54 3,432,149.01 5,829,703.80 3,541,636.56
Processing expense 90,611.17 87,140.18 198,836.09 157,630.19
Royalty expense 1,590,915.64 88,683.35 1,511,695.64 62,435.92
Leasing expense 116,281.71 33,364.06 64,475.56 38,342.89
Inspection expense 4,249,274.50 4,371,258.97 7,527,285.44 6,704,305.13
Power expenses 293,886.00 638,250.51 515,762.67 82,564.31
Others 9,941,626.56 8,650,846.08 15,647,759.20 10,586,915.00
39 Business Tax and Surtax
Item January to June 2012 January to June 2011
City construction tax 14,078,788.16 10,115,122.54
Education surtax 8,864,444.08 7,379,675.39
Embankment protection cost 1,230,758.77 702,751.79
Business Tax 20,900.57 27,116.28
Others 81,144.92 107,357.55
Total 24,276,036.50 18,332,023.55
(1) The main cause of the increase of business tax and surtax by 32.42% over the same period of previous year is the
increase of sales incomes.
(2) Please see the note III for the withdrawal standard of taxes
40 Financial Expense
Item January to June 2012 January to June 2011
Interest payment 13,292,714.08 7,984,040.10
Minus: Interest income 26,014,646.03 13,919,949.29
Profit and loss in the exchange -83,894.56 -1,746,589.87
137
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Formality expense charged by banks 1,746,455.22 2,423,359.87
Total -11,059,371.29 -5,259,139.19
In this period, the main causes of the huge decrease of financial expense over the same period of previous year is the
increase of interest incomes.
41. Loss of asset depreciation
Item January to June 2012 January to June 2011
Reserves for Bad Accounts 9,032,263.63 4,546,555.42
Depreciation Reserve for inventory 4,099,399.46 1,392,960.60
Depreciation reserve for long-term equity
investment 0.00 0.00
Depreciation Reserve for fixed assets 13,983.23 0.00
Total 13,145,646.32 5,939,516.02
In this period, the main causes of the increase of loss of asset depreciation by 121.33% over the same period of previous
year is the increase of loss of bad accounts and depreciation reserve for inventory.
42 Gains from changes of fair values
Sources of profits caused by the
January to June 2012 January to June 2011
changes of fair values
Tradable financial assets 2,114,503.89 43,870.70
Including: shares 2,090,588.37 76,943.47
Fund 23,915.52 -33,072.77
In this period, the main causes of the huge increase of gains from changes of fair values over the same period of previous
year is the increase of market values of stocks held by this company.
43 Investment returns
Item January to June 2012 January to June 2011
1. Returns in the holding period: 1,173,769.79 -654,572.56
① profits distributed by the associated or joint
companies 0.00 0.00
②Tradable financial assets 880,017.00 814,960.40
138
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
③Saleable financial assets 151,818.90 0.00
④ Net increase or decrease of adjusted
shareholders’ equities of invested company at the
end of year 141,933.89 -1,472,733.50
Including: Guangdong Blue Treasure Pharmaceutical
Co. Ltd. 1,179,331.97 -562,733.50
Tongyikangshimei Chain (Shenzhen) Co.,
Ltd -1,037,398.08 -910,000.00
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., Ltd 0.00 0.00
○ Others 0.00 3,200.54
2. Returns from transfers: 557,698.78 0.00
Including: Sales of tradable financial assets 557,698.78 0.00
Total 1,731,468.57 -654,572.56
44 Non-operating Income
(1) List about non-operating incomes
Item January to June 2012 January to June 2011
Total profit of non-current asset
disposal 90,772.51 480,954.95
Including: Profit of fixed asset
disposal 90,772.51 480,954.95
Penalty income 19,650.00 1,100.00
Waste income 129,382.45 99,172.73
Governmental allowance 11,882,340.48 20,110,733.72
Compensation income 0.00 15,300.00
Payments that will not be paid 0.00 1,323,658.41
Others 437,948.35 220,063.22
Total 12,560,093.79 22,250,983.03
In this period, the main causes of the decrease of financial expense by 43.55% over the same period of previous year are
the decrease of governmental allowances.
139
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(2) Governmental allowance
Type January to June Source unit Approval document
2012
Yue Fa Gai Gao [2008] No.
1282
Ilaprazole project of development and Fa Gai Ban Gao Ji [2008]
1,374,064.92 Zhuhai Finance Bureau
reform commission No. 2223
Yue Cai Gong [2010] No.
445
Industrialization project of Leuprorelin Acetate Shanghai Science & Technology
Microspheres for Injection 400,000.00 Commission ——
Demonstration project of managing
the high-concentration organic Zhuhai Environmental Protection
wastewater 197,202.00 Bureau ——
Fujian Branch of China Export &
Export credit insurance allowance 61,497.00 Credit Insurance Corporation ——
Zhuhai Science and Technology
Yue Ke Ji Zi [2007] No. 172
Sterilization and kidney-quieting capsule 35,000.00 Department
Special expense for intellectual property
protection in Qingyuan City 50,000.00 Qingyuan Finance Bureau Qing Cai Jiao [2010] No. 90
None(Allowance for
Management Commission of temporary power-off
Energy consumption allowance 8,976.00 Zhuhai Bonded area projects)
Transfer-in from deferred
returns, and it is compliant
Little Giant Cultivation Enterprise 1,100,000.00 Little Giant Cultivation Center in the check
Guangdong Provincial Public Service Platform
Construction 1,017,010.50 Zhuhai Finance Bureau Cai Qi [2011] No. 88
Guangdong Provincial Patent Prize 100,000.00 Zhuhai Finance Bureau Yue Cai Jiao [2011] No. 522
Granting expense for hi-tech enterprise from
Fuzhou Finance Bureau 100,000.00 Fuzhou Finance Bureau
National Development and Reform
Non-PVC bag improvement project 330,512.24 Commission Yue Ke Ji Zi [2007] No. 172
Three researches of new medicines of I-type Zhuhai Science, Industry, Trade Yue Ke Gui Hua Zi [2011]
Humanized Anti-Human TNF monoclonal antib 6,088,077.82 and Information Department No. 167
140
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Type January to June Source unit Approval document
2012
ody for the purpose of treatment in Guangdong
Strategic new industry core technology
breakthrough (2011)
Absorption purified inactivated Japanese
encephalitis virus vaccine – Zhuhai Hi-tech
field technology breakthrough and hi-tech Zhuhai Science, Industry, Trade Ke Gong Mao Xin Ji [2011]
industry 1,000,000.00 and Information Department No. 16
Others 20,000.00 —— ——
Total 11,882,340.48
45 Non-operating Expense
Item January to June 2012 January to June 2011
Total of loss for disposal
of the non-current assets 77,746.47 60,007.09
Including: Loss for
disposal of fixed assets 77,746.47 60,007.09
Rejection of fixed assets 122,299.06 2,373.50
Penalty payments 0.00 189,603.55
Public welfare donations 0.00 500.00
Others 24,349.86 1,601.80
Total 224,395.39 254,085.94
46 Income Taxes
Item January to June 2012 January to June 2011
Current income tax 51,114,053.37 49,866,259.29
Deferred income tax -3,442,061.28 -2,865,397.85
Total 47,671,992.09 47,000,861.44
47 Other comprehensive gains
141
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
January to
Item January to June 2011
June 2012
1. Profit (loss) caused by the saleable financial assets 418,872.56 -704,597.08
Minus: Income tax effect of saleable financial assets 62,830.89 -105,689.56
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 356,041.67 -598,907.52
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
Subtotal 0.00 0.00
4．Conversion difference of foreign currency financial statements 408,419.30 -2,019,381.17
Minus: Net amount that is transferred to the current profit and loss due
to disposal of overseas operation 0.00 0.00
Total 408,419.30 -2,019,381.17
5. Others 0.00 0.00
Minus: Effect of income tax that is accrued to the other comprehensive 0.00 0.00
142
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
gains
Net amount that was accrued to other comprehensive gains in the
previous periods and is transferred to the current profit and loss 0.00 0.00
Subtotal 0.00 0.00
Total 764,460.97 -2,618,288.69
48 Other Cashes Received Related to the Operating Activities
Item January to June 2012 January to June 2011
Deposit 18,787,523.84 4,084,887.78
Fund transfer 36,872,284.67 4,826,320.36
Governmental allowance 6,793,339.10 26,412,105.20
Interest income 26,014,646.03 13,919,949.29
Penalty income 5,260.00 12,200.85
Deposit 0.00 343,462.65
Loans to staffs 3,622,479.95 2,270,634.01
Special expense 59,151.70 0.00
Allowance income 75,944.04 0.00
Others 1,929,814.17 1,086,218.63
Total 94,160,443.50 52,955,778.77
49. Other Cashes Paid Related to the Operating Activities
Item January to June 2012 January to June 2011
Office expense 5,989,122.55 5,524,729.35
Traveling expense 9,665,747.24 6,516,473.90
Communication expense 6,722,786.41 6,268,981.15
Water and electricity
expenses 4,497,413.15 1,365,375.65
Transportation expense 18,386,249.74 14,588,504.42
Advertising expense 3,781,934.50 1,971,400.00
Meeting expense 8,254,796.75 9,070,941.54
Lease expense 3,486,116.44 3,637,108.89
Maintenance expense 2,029,292.74 7,286,023.03
143
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Environment Protection
Cost 48,518.00 200,413.59
Auditing expense and
information disclosure
expense 1,287,532.44 1,570,938.60
Insurance 373,020.36 1,306,363.12
Meeting expense of
Board of Directors 500,640.48 63,703.34
Consultancy expense of
consultants 543,764.77 1,609,628.49
Research and
development expense 17,828,284.09 22,235,435.24
Lawsuit expense 175,246.00 63,535.25
Bid-invitation expense 242,800.00 399,190.00
Testing and inspection
expenses 148,928.22 434,829.60
Formality expenses
charged by banks 1,746,455.22 2,423,359.87
Penalty payment 0.00 21,998.94
Reserve fund 0.00 11,356,057.27
Deposit 29,529,694.41 7,488,313.09
Fund transfer 81,341,391.84 8,126,558.24
Business promotion
expense 518,509,635.41 251,788,111.64
L/C deposits 0.00 0.00
Transfer royalty of
technologies 4,475,000.00 1,726,717.36
Training expense 1,033,982.16 0.00
Plantation and
environmental protection
expense 308,658.88 0.00
Special expense about
quality 1,588,754.93 0.00
Personal transfer 26,996,161.21 0.00
Commission (agency
expense) 1,376,671.91 0.00
Deposits 292,246.00 0.00
Insurance expense 987,628.57 0.00
Design expense 597,282.29 0.00
Labor insurance
expense 47,514.46 0.00
Refunding of deposits 400,000.00 0.00
Others 6,409,714.92 18,276,371.91
Total 759,602,986.09 385,321,063.48
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
50 Other Cashes Received Related to the Financing activities
Item January to June 2012 January to June 2011
Release of pledged deposits 0.00 6,200,000.00
Deducted personal income tax
in the dividend distribution 0.00 0.00
Total 0.00 6,200,000.00
51 Other Cashes Paid Related to the Financing Activities
Item January to June 2012 January to June 2011
Formality fees of issuing the
bonds 0.00 1,600,000.00
Mortgaged deposits 0.00 0.00
Total 0.00 1,600,000.00
52 Supplementary Data of Consolidated Cash Flow Statement
(1) Supplementary data of cash flow statement
January to June January to June
Item 2012 2011
1. Reconciliation of net profit to cash flow from operating activities:
Net profits
246,731,938.19 236,240,294.76
Plus: Reserve for asset depreciation
13,145,646.32 5,939,516.02
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 65,105,818.86 69,364,763.96
Amortization of intangible assets
9,508,058.36 7,751,157.71
Amortization of long-term amortization expense and long-term assets
4,238,759.48 1,581,621.71
Loss in disposal of fixed assets, intangible assets and other long-term -
assets (the profits will be listed beginning with "-") -179,462.02 420,947.86
Loss in the rejection of fixed assets (the profits will be listed beginning
with "-") 0.00 0.00
Loss in the changes of fair values (the profits will be listed beginning -2,114,503.89
145
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
with "-") -43,870.70
Financial expense (the profits will be listed beginning with "-")
12,221,496.07 7,984,040.10
Investment loss (the profits will be listed beginning with "-")
-1,731,468.57 654,572.56
Decrease of deferred income tax assets (the increase will be listed -
beginning with "-") -3,579,650.01 2,718,102.61
Increase of deferred income tax liabilities (the decrease will be listed -
beginning with "-") 137,588.73 171,341.80
Decrease of inventory (the increase will be listed beginning with "-")
-83,216,519.03 20,231,222.72
Decrease of receivable operating items (the increase will be listed -
beginning with "-") -138,374,517.32 109,512,960.50
Increase of payable operating items (the decrease will be listed
beginning with "-") 213,523,200.77 55,774,514.70
Others 0.00 0.00
Net amount of cash flow from the operating activities
335,416,385.94 292,654,480.77
2.Key investment and financing activities not involving the cash income
and payment
Transfer from liabilities to share capital 0.00 0.00
Convertible company bonds due within one year 0.00 0.00
Financing leasing of fixed assets 0.00 0.00
3.Change of cash and cash equivalents:
Cash balance at the end of period
885,462,208.68 1,259,220,125.35
Minus: cash balance at the beginning of period
1,432,175,794.78 844,481,857.59
Plus: cash equivalent balance at the end of period 0.00 0.00
Minus: cash equivalent balance at the beginning of period 0.00 0.00
Net increase of cash and cash equivalent
-546,713,586.10 414,738,267.76
(2) Cash and Cash Equivalents
Item 2012.6.30 2011.6.30
I. Cash 885,462,208.68 1,259,220,125.35
Including: Cash at stock 185,221.13 184,838.01
Deposits in banks that may be used for
payment randomly 881,294,548.86 1,255,817,285.59
Other Currency Capitals that may be used 3,982,438.69 3,218,001.75
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
for payment randomly
II. Cash equivalents 0.00 0.00
Including: Bond investment due within 3 0.00
months 0.00
III. Cash and cash equivalent balances at
the end of period 885,462,208.68 1,259,220,125.35
VI. Notes to the Relevant Items in the Financial Statements of Parent company
1. Accounts Receivable
(1) Composition of accounts receivable
2012.6.30 2011.12.31
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
individual amount is large and
whose individual bad debt
reserve is withdrawn
Accounts receivable whose
bad debt reserve is withdrawn 13,605,448. 255,312,371.2
based on the combination 338,037,044.89 99.57% 17,086,473.26 320,950,571.63 268,917,819.50 99.42% 22 8
Accounts receivable whose
individual amount is not large
but whose individual bad debt 1,389,094.4
reserve is withdrawn 1,446,875.74 0.43% 1,322,347.87 124,527.87 1,558,849.22 0.58% 2 169,754.80
Total 14,994,542. 255,482,126.0
339,483,920.63 100.00% 18,408,821.13 321,075,099.50 270,476,668.72 100.00% 64 8
(2) Accounts receivable whose bad debt reserves are withdrawn based on the age combination
Age 2012.6.30 2011.12.31
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Amount Percenta Reserves for Bad Net Value Amount Percenta Reserves for Bad Net Value
ge debts ge debts
Within 1
year 333,082,953.31 98.11% 16,654,147.67 316,428,805.64 266,388,981.02 98.49% 13,319,449.05 253,069,531.97
1-2
years 3,989,233.69 1.18% 239,354.02 3,749,879.67 1,569,775.19 0.58% 94,186.51 1,475,588.68
2-3
years 964,857.89 0.28% 192,971.58 771,886.31 959,063.29 0.35% 191,812.66 767,250.63
Over 3
years 1,446,875.74 0.43% 1,322,347.86 124,527.88 1,558,849.22 0.58% 1,389,094.42 169,754.80
Total
339,483,920.63 100.00% 18,408,821.13 321,075,099.50 270,476,668.72 100.00% 14,994,542.64 255,482,126.08
(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, 2012, the top 5 accounts receivable are listed as follows:
Relationship Percentage
Nature or
Debtor Name with this Debt Amount Debt Time in Total
Content
company Amount
Chongqing Pharmaceutical Xinte Non-associated
Medical Co., Ltd party 10,157,049.00 Loan Within 1 year 2.99%
Sichuan Provincial Non-associated
Pharmaceutical Controlling party
Co.,Ltd 8,745,378.40 Loan Within 1 year 2.58%
Yunnan Provincial Non-associated
Pharmaceutical Co., Ltd party 7,358,813.30 Loan Within 1 year 2.17%
Sichuan Provincial Non-associated
Pharmaceutical co.,Ltd party 7,179,456.80 Loan Within 1 year 2.11%
Hefei Yifan Pharmaceutical Co., Non-associated
Ltd party 6,627,140.00 Loan Within 1 year 1.95%
Total 40,067,837.50 11.80%
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(5) By June 30, 2012, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
2 Other accounts receivable
(1) Composition of other accounts receivable
2012.6.30 2011.12.31
Item Amount Percenta Reserves for Net Value Amount Percenta Reserves for Net Value
ge Bad debts ge Bad debts
Accounts receivable whose
individual amount is large and
whose individual bad debt
reserve is withdrawn 283,092,908.94 82.88% 0.00 283,092,908.94 262,215,870.16 94.69% 0.00 262,215,870.16
Accounts receivable whose bad
debt reserve is withdrawn based
on the combination 58,304,969.47 17.07% 837,473.72 57,467,495.75 14,457,624.32 5.22% 835,815.49 13,621,808.83
Accounts receivable whose
individual amount is not large
but whose individual bad debt
reserve is withdrawn 185,794.96 0.05% 130,952.58 54,842.38 246,514.29 0.09% 193,157.41 53,356.88
Total
341,583,673.37 100.00% 968,426.30 340,615,247.07 276,920,008.77 100.00% 1,028,972.90 275,891,035.87
(2) Other accounts receivable with the large individual amount
Debtor Name Debt Amount Withdrawal Cause
Percentage
The debtor is the subcompany controlled by
Hongkong Antao Development the company and there are no risks in
Limited 123,757,335.92 0.00 receiving the debts.
The debtor is the subcompany controlled by
Xinbeijiang Pharmaceutical Co., the company and there are no risks in
Ltd under Livzon Group 85,768,144.24 0.00 receiving the debts.
Ningxia Fuxing Pharmaceutical The debtor is the subcompany controlled by
Co., Ltd under Livzon Group 39,294,104.54 0.00 the company and there are no risks in
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
receiving the debts.
Xinbeijiang Fuxing The debtor is the subcompany controlled by
Pharmaceutical Co., Ltd under the company and there are no risks in
Livzon Group 34,273,324.24 0.00 receiving the debts.
Total 283,092,908.94
(2) Other accounts receivable whose bad debt reserves are withdrawn based on the age combination
2012.6.30 2011.12.31
Age Amount Percenta Reserves for Net Value Amount Percenta Reserves for Net Value
ge Bad debts ge Bad debts
Within 1 year 212,997,857.32 62.36% 193,365.72 212,804,491.60 270,756,117.33 97.77% 413,432.33 270,342,685.00
1-2 years 127,501,543.30 37.33% 464,412.44 127,037,130.86 5,436,373.37 1.96% 326,182.40 5,110,190.97
2-3 years 898,477.79 0.26% 179,695.56 718,782.23 481,003.78 0.18% 96,200.76 384,803.02
Over 3 years 185,794.96 0.05% 130,952.58 54,842.38 246,514.29 0.09% 193,157.41 53,356.88
Total 341,583,673.37 100.00% 968,426.30 340,615,247.07 276,920,008.77 100.00% 1,028,972.90 275,891,035.87
(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, 2012, the top 5 other accounts receivable are listed as follows:
Relationship
Nature or Percentage in
Debtor Name with this Debt Amount Debt Time
Content Total Amount
company
Subcompany Within 2
Hongkong Antao Development 36.23%
Limited 123,757,335.92 Fund transfer years
Subcompany Within 1
Xinbeijiang Pharmaceutical Co., 25.11%
Ltd under Livzon Group 85,768,144.24 Fund transfer year
Subcompany Within 1
Ningxia Fuxing Pharmaceutical Co., 11.50%
Ltd under Livzon Group 39,294,104.54 Fund transfer year
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Subcompany Within 1
Xinbeijiang Fuxing Pharmaceutical 10.03%
Co., Ltd under Livzon Group 34,273,324.24 Fund transfer year
Subcompany Within 1
7.21%
Livzon (Hongkong) Co., Ltd 24,618,600.86 Fund transfer year
Total 307,711,509.80 90.08%
(5) By June 30, 2012, there are no debts with the shareholder units holding over 5% (including 5%) voting rights.
3. Long-term Equity Investment
(1) Long-term equity investment and depreciation reserve
2012.6.30 2011.12.31
Item Depreciation Depreciation
Book Balance Book Values Book Balance Book Values
Reserve Reserve
Calculation by
Cost Method 1,553,147,547.15 39,071,307.03 1,514,076,240.12 1,553,147,547.15 39,071,307.03 1,514,076,240.12
Calculation by
Equity Method 13,019,810.15 1,200,000.00 11,819,810.15 13,795,134.46 1,200,000.00 12,595,134.46
Total
1,566,167,357.30 40,271,307.03 1,525,896,050.27 1,566,942,681.61 40,271,307.03 1,526,671,374.58
(2) Long-term equity investment calculated by cost method
Name of Invested Units Initial Amount 2011.12.31 Increase in this Decrease in this 2012.6.30
period period
Guangdong Development Bank Co.Ltd 177,348.84 177,348.84 0.00 0.00 177,348.84
Beijing Medical Goods Joint Operation 0.00 0.00
Company 100,000.00 100,000.00 100,000.00
Doumen Sanzhou Industry City Co., Ltd 500,000.00 500,000.00 0.00 0.00 500,000.00
China Resources Bank of Zhuhai Co., 0.00 0.00
Ltd* 95,325,760.00 95,325,760.00 95,325,760.00
Ruiheng Pharmaceutical Technology 0.00 0.00
Investment Co., Ltd 6,250,000.00 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 800,000.00 800,000.00 0.00 0.00 800,000.00
151
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Name of Invested Units Initial Amount 2011.12.31 Increase in this Decrease in this 2012.6.30
period period
Development Co., Ltd
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., 0.00
Ltd 170,872,457.35 170,872,457.35 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 Hi- 0.00 0.00
tech Co., Ltd 4,539,975.00 4,539,975.00 4,539,975.00
Livzon Medicine Institute under Livzon 0.00 0.00
Group 6,004,000.00 6,004,000.00 6,004,000.00
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
0.00
Limin Pharmaceutical Co., Ltd under
Livzon Group 32,768,622.72 32,768,622.72 0.00 32,768,622.72
0.00 0.00
Zhuhai Livzon Medicine Trade Co., Ltd 40,020,000.00 40,020,000.00 40,020,000.00
0.00 0.00
Fuzhou Fuxing Pharmaceutical Co., Ltd
under Livzon Group 190,075,938.00 280,769,410.50 280,769,410.50
Zhuhai Livzon Dankang Biotechnology
Co., Lt
51,000,000.00 51,000,000.00 0.00 0.00 51,000,000.00
Livzon Group Vaccine Engineering Co.,
Ltd
54,500,000.00 54,500,000.00 0.00 0.00 54,500,000.00
0.00
Ningxia Fuxing Pharmaceutical Co., Ltd
under Livzon Group 90,000,000.00 90,000,000.00 0.00 90,000,000.00
0.00
Xinbeijiang Fuxing Pharmaceutical Co.,
Ltd under Livzon Group 90,000,000.00 90,000,000.00 0.00 90,000,000.00
Wenshan Livzon Panax notoginseng
Plantation Co., Ltd
1,530,000.00 1,530,000.00 0.00 0.00 1,530,000.00
Total
1,461,578,653.32 1,553,147,547.15 0.00 0.00 1,553,147,547.15
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
(3) Long-term equity investment calculated by equity method
Investment Increase in Decrease in Cash
Name of Invested Units 2011.12.31 2012.6.30
Cost this period this period dividend
Livzon Medical Electronic
Equipment (Factory) Co., Ltd 1,200,000.00 1,200,000.00 0.00 0.00 1,200,000.00 0.00
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 2,462,407.50 6,765,932.75 262,073.77 0.00 7,028,006.52 0.00
Tongyikangshimei Chain
(Shenzhen) Co., Ltd 35,000,000.00 5,829,201.71 0.00 1,037,398.08 4,791,803.63 0.00
Total
38,662,407.50 13,795,134.46 262,073.77 1,037,398.08 13,019,810.15 0.00
(4) Depreciation Reserve for long-term equity investment
Transfer
Withdrawal in Withdrawal
Investment Projects 2011.12.31 in this 2012.6.30
this period Cause
period
The net assets
Doumen Sanzhou Industry City
are less than
Co., Ltd
500,000.00 0.00 0.00 500,000.00 zero.
China Resources Bank of Zhuhai 20,000,000.0
Co., Ltd 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.
The
Fuzhou Fuxing Pharmaceutical depreciations
Co., Ltd under Livzon Group 11,200,000.00 0.00 0.00 11,200,000.00 have occurred.
The business
Beijing Medical Goods Joint license has
Operation Company 100,000.00 0.00 0.00 100,000.00 been
153
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
cancelled by
the local
administration
of industry and
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 2012 January to June 2011
Item Operating Gross operating Operating Gross operating
Operating Cost Operating Cost
Income Profit Income Profit
Main Business857,818,013.06 409,034,502.19 448,783,510.87 593,932,264.16 361,533,125.82 232,399,138.34
Other
Business 1,139,790.64 65,431.16 1,074,359.48 1,147,570.64 62,435.92 1,085,134.72
Total 858,957,803.70 409,099,933.35 449,857,870.35 595,079,834.80 361,595,561.74 233,484,273.06
The main cause of the increase of operating incomes over the same period of previous year is the increase of sales
volume of products in this period.
(3) Incomes and costs from main businesses are listed as follows as per the business:
January to June 2012 January to June 2011
Item Operating Gross operating Operating Gross operating
Operating Cost Operating Cost
Income Profit Income Profit
Sales of
Commodit
ies 857,818,013.06 409,034,502.19 448,783,510.87 593,932,264.16 361,533,125.82 232,399,138.34
(4) Sales volume of top 5 clients
154
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
January to June 2012 January to June 2011
Client Name Percentage of Total Percentage of Total
Sales Volume Sales Volume
Sales Volume (%) Sales Volume (%)
Total sales volume of top 5
clients 108,717,417.33 12.67% 47,705,742.01 8.03%
5 Business Tax and Surtax
Item Tax rate January to June 2012 January to June 2011
Business tax 5% 0.00 0.00
City construction tax 7% 6,105,518.33 2,396,397.75
Education surtax 5% 2,578,914.64 1,711,712.68
Embankment protection cost 0.07% 599,412.63 105,000.00
Total 9,283,845.60 4,213,110.43
The main cause of the huge increase of business tax and surtax over the same period of previous year is the increase of
incomes.
6 Investment returns
Item January to June 2012 January to June 2011
1. Returns in the holding period: 51,492,091.39 98,841,956.11
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 151,818.90 0.00
④Profits distributed by other equity investments 0.00 0.00
Including: Guangdong Development Bank Co.Ltd 0.00 0.00
⑤Net increase or decrease of adjusted shareholders’
equities of invested company at the end of year -775,324.31 -1,035,051.89
Including: Guangdong Blue Treasure Pharmaceutical
Co. Ltd. 262,073.77 -125,051.89
Tongyikangshimei Chain (Shenzhen) Co., Ltd -1,037,398.08 -910,000.00
155
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Item January to June 2012 January to June 2011
⑥Investment return of subcompanies 52,115,596.80 99,877,008.00
Including:Livzon Pharmaceutical Factory under Livzon
0.00
Group 0.00
Sichuan Guangda Pharmaceutical Co., Ltd 0.00 0.00
Livzon Medicine Marketing Co., Ltd under
0.00
Livzon Group 0.00
Limin Pharmaceutical Co., Ltd under Livzon Group 41,915,596.80 99,877,008.00
Zhuhai Livzon Advertising Co., Ltd 0.00 0.00
Zhuhai Livzon Medicine Trade Co., Ltd 0.00 0.00
Zhuhai Livzon Reagent Co., Ltd 10,200,000.00 0.00
⑦Others 0.00 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 51,492,091.39 98,841,956.11
7. Supplementary Data of Cash Flow Statement of Parent Company
January to June January to June
Item 2012 2011
1. Reconciliation of net profit to cash flow from operating activities:
Net profit 70,599,090.54 137,687,473.23
Plus: Reserve for asset depreciation
9,612,273.16 2,323,249.41
Fixed asset depreciation, consumption of oil and gas assets and
production biology asset depreciation 6,137,147.07 5,555,284.05
Amortization of intangible assets
4,927,098.94 3,287,283.53
Amortization of long-term amortization expense and long-term assets 0.00 0.00
Loss in disposal of fixed assets, intangible assets and other long-term
assets (the profits will be listed beginning with "-") -14,052.50 -119,845.95
156
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
January to June January to June
Item 2012 2011
Loss in the rejection of fixed assets (the profits will be listed beginning with
"-") 0.00 1,623.50
Loss in the changes of fair values (the profits will be listed beginning with
"-") 0.00 0.00
Financial expense (the profits will be listed beginning with "-")
9,785,520.15 14,715,052.53
-
Investment loss (the profits will be listed beginning with "-")
-51,492,091.39 98,841,956.11
Decrease of deferred income tax assets (the increase will be listed
beginning with "-") -1,387,143.91 -342,540.80
Increase of deferred income tax liabilities (the decrease will be listed
beginning with "-") 0.00 -105,689.56
-
Decrease of inventory (the increase will be listed beginning with "-")
8,453,151.97 27,008,380.48
Decrease of receivable operating items (the increase will be listed -
beginning with "-") -69,154,890.93 48,205,938.83
Increase of payable operating items (the decrease will be listed beginning
with "-") -77,803,217.12 47,004,293.83
Others 0.00 0.00
Net amount of cash flow from the operating activities
-90,337,114.02 35,949,908.35
2.Key investment and financing activities not involving the cash income
and payment
Transfer from liabilities to share capital 0.00 0.00
Convertible company bonds due within one year 0.00 0.00
Financing leasing of fixed assets 0.00 0.00
3.Change of cash and cash equivalents:
Cash balance at the end of period
797,819,129.62 1,135,455,774.07
Minus: cash balance at the beginning of period
1,306,877,982.24 662,428,797.62
Plus: cash equivalent balance at the end of period 0.00 0.00
Minus: cash equivalent balance at the beginning of period 0.00 0.00
Net increase of cash and cash equivalent -509,058,852.62 473,
157
2012 semi-annual report of Livzon Pharmaceutical Group Inc.
January to June January to June
Item 2012 2011
026,976.45
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
Pharmaceutical Shenzhe sales of oral liquids, Parent Limited Zhu
61887436-7
Group Industry n medicines and company (Listed Baoguo
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 2011.12.31 Increase in this Decrease in this 2012.6.30
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 2011.12.31 Percenta Increase in Decrease in 2012.6.30 Percenta
ge (%) this period this period ge (%)
Joincare Pharmaceutical Group Industry C 135,470,620 45.7293 239,012.00 0.00 135,470,620 45.8101
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o., Ltd and its subcompanies % %
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
61885517-4 Company controlled by parent company
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 77512952-0 Company controlled by parent company
Zhuhai Joincare Pharmaceutical Group
Industry Co., Ltd 75788087-1 Company controlled by parent company
Health Pharmaceutical (China) Co., Ltd
61749891-0 Company controlled by parent company
Shenzhen Taitai Pharmaceutical Company
Limited 74121715-1 Company controlled by parent company
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
Name of Associated Parties January to June 2012 January to June 2011
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Percentage in Similar
Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Zhuhai Joincare Pharmaceutical
Group Industry Co., Ltd 0.00 0.00% 7,083.49 0.00%
Jiaozuo Joincare
Pharmaceutical Group Industry
Co., Ltd 3,076.92 0.00% 0.00 0.00%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 4,836,505.58 0.26% 0.00 0.00%
Total 4,839,582.50 0.26% 7,083.49 0.00%
② Provision of labors (water, electricity and power)
January to June 2012 January to June 2011
Name of Associated Percentage in Similar
Percentage in Similar
Parties Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 3,033,195.13 71.38% 5,003,733.63 66.47%
Total 3,033,195.13 71.38% 5,003,733.63 66.47%
③ Purchase of commodities
January to June 2012 January to June 2011
Percentage in Similar
Name of Associated Parties Percentage in Similar
Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 4,028,612.26 0.39% 184,089.42 0.04%
Shenzhen Haibin
Pharmaceutical Co., Ltd 18,358.96 0.00% 7,351,495.73 1.49%
Joincare Pharmaceutical Group
Industry Co., Ltd 102,564.10 0.01% 53,914.53 0.01%
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Jiaozuo Joincare
Pharmaceutical Group Industry
Co., Ltd 29,478,803.42 2.82% 52,180,106.84 10.61%
Total 33,628,338.74 3.22% 59,769,606.52 12.15%
④ Receiving of labors
January to June 2012 January to June 2011
Name of Associated Percentage in Similar
Percentage in Similar
Parties Amount Amount Transaction Amount
Transaction Amount (%)
(%)
Shenzhen Taitai Pharmaceutical
Company Limited 170,000.00 0.01% 0.00 0.00%
Total 170,000.00 0.01% 00.00 0.00%
⑥ Receivable and payable balances with associated parties
2012.6.30 2011.12.31
Enterprise Name
Amount Percentage Amount Percentage
Accounts receivable:
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 3,600.00 0.00% 0.00 0.00%
Guangdong Blue Treasure
Pharmaceutical Co. Ltd. 3,424,286.53 0.45% 0.00 0.00%
Total 3,427,886.53 0.45% 0.00 0.00%
Accounts payable:
Shenzhen Haibin Pharmaceutical Co., 150,000.00 0.07%
Ltd 131,000.09 0.08%
Total 131,000.09 0.08% 150,000.00 0.07%
Other accounts receivable:
Guangdong Blue Treasure 2,865,078.12 5.84%
Pharmaceutical Co. Ltd. 3,691,904.74 6.07%
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 41,535.60 0.07% 0.00 0.00%
Total 3,733,440.34 6.14% 2,865,078.12 5.84%
Accounts payable:
Guangdong Blue Treasure 300,195.00 0.14%
Pharmaceutical Co. Ltd. 1,085,288.84 0.35%
Jiaozuo Joincare Pharmaceutical Group 22,301,104.02 10.72%
Industry Co., Ltd 32,527,179.03 10.60%
Total 33,612,467.87 10.95% 22,601,299.02 10.86%
Other accounts payable:
Jiaozuo Joincare Pharmaceutical Group
Industry Co., Ltd 71,720.22 0.00% 0.00 0.00
Total
71,720.22 0.00% 0.00 0.00
VIII. Contingent Events
By June 30, 2012, 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 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
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
taxation at one time within two months after the company has submitted the net sales volume certificate. At the same time,
during the validity period of the agreement (by the end of 2015), the company should pay a royalty of 1.5% of net sales
volume after the taxation to LG Company during 30 days after each quarter. The company has begun the selling activities
in 2008 and paid the royalties in accordance with the agreements.
Within the first five years from the validity date of the agreement, the company will pay a royalty of 10% of net sales
volume after the taxation about injection products to LG Company within 30 days after each quarter. The company will pay
a royalty of 6% of net sales volume after the taxation about injection products to LG Company within 30 days after each
quarter from the sixth business year to the expiry date of agreement (by the end of 2019).
X Non-adjusting Events occurring after the Balance Sheet Date
By the reporting date, the company has no non-adjusting events occurring after the balance sheet date that need to be
disclosed.
XIII. Other Key Events
1. Bank loan guaranties that the company provides to the controlling subcompanies during the report period are listed as
follows: (RMB 10 thousand Yuan)
Occurrence Balance at Guarantee Guaranty Period
Actual
Date the end of Amount type
Name of Guarantee guarantee
period
(Signing date
amount
of agreement)
Zhuhai Livzon Reagent Credit
Co., Ltd 2012.3.12 0.00 0.00 2,000.00 guaranty 2012.3.12-2015.3.21
Zhuhai Livzon Reagent Credit
Co., Ltd 2012.3.22 0.00 0.00 1,264.98 guaranty 2012.3.22-2015.3.21
Zhuhai Livzon Medicine Credit
Trade Co., Ltd 2009.7.20 0.00 0.00 1,000.00 guaranty 2009.7.20-2012.7.20
Limin Pharmaceutical
Co., Ltd under Livzon Credit
Group 2012.4.17 0.00 0.00 15,000.00 guaranty 2012.4.17-2015.4.16
Zhuhai Livzon Dankang Credit
Biotechnology Co., Ltd 2012.6.21 0.00 0.00 6,000.00 guaranty 2012.6.21-2014.6.21
Livzon Syntpharm Co.,
Ltd in Zhuhai Bonded Credit
Area 2012.6.7 2445.60 2445.66 3,000.00 guaranty 2012.6.7-2015.6.7
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Occurrence Balance at Guarantee Guaranty Period
Actual
Date the end of Amount type
Name of Guarantee guarantee
period
(Signing date
amount
of agreement)
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2012.5.17 0.00 0.00 16,000.00 guaranty 2012.5.17-2015.5.16
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2012.6.7 0.00 0.00 9,000.00 guaranty 2012.6.7-2015.6.7
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2009.8.21 0.00 0.00 5,000.00 guaranty 2009.8.21-2012.8.21
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2010.12.23 50 50 32,000.00 guaranty 2010.12.14-2018.12.14
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2009.11.27 0.00 0.00 5,000.00 guaranty 2009.11.27-2012.11.27
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2009.9.10 0.00 0.00 6,000.00 guaranty 2009.9.10-2012.9.10
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2009.10.15 0.00 0.00 12,000.00 guaranty 2010.6.12-2018.6.3
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2012.6.21 0.00 0.00 10,000.00 guaranty 2012.6.21-2015.6.21
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2010.5.13 0.00 0.00 8,316.20 guaranty 2010.7.20-2013.7.20
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2011.9.27 0.00 1244.61 4,095.585 guaranty 2011.9-27-2014.9.27
Livzon Pharmaceutical
Factory under Livzon Credit
Group 2011.9.27 1222.80 1222.83 0.00 guaranty 2011.9-27-2014.9.27
Livzon Pharmaceutical Credit
Factory under Livzon G 2011.8.4 4483.60 4483.71 4,458.85 guaranty 2011.8.4-2014.8.4
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Occurrence Balance at Guarantee Guaranty Period
Actual
Date the end of Amount type
Name of Guarantee guarantee
period
(Signing date
amount
of agreement)
roup
Total guaranty amount to its controlling subcompanies in the
report period 9,447.00
Total balance of guaranty amount to its controlling
subcompanies in the report period 8,202.00
3. Assets and Liabilities calculated at the fair values
Unit: RMB 1000 Yuan
Amount at Profit and Accumulated Withdrawn Amount at
Item
depreciation the end of
the loss in the changes of
in this period period
beginning changes of fair values
of period fair values that are
in this accrued to
period the equities
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) 44,343.01 941.33 0.00 0.00 45,284.34
2. Derivative financial assets 0.00 0.00 0.00 0.00 0.00
3. Saleable financial assets 9,238.79 0.00 418.87 0.00 9,657.66
Subtotal of financial assets 53,581.80 941.33 418.87 0.00 54,942.00
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 53,581.80 941.33 418.87 0.00 54,942.00
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
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
Amount at Profit and Accumulated Withdrawn Amount at
Item
depreciation the end of
the loss in the changes of
in this period
beginning changes of fair values
period
of period fair values that are
in this accrued to
period the equities
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) 43,819.54 917.42 0.00 0.00 44,736.96
2. Derivative financial assets 0.00 0.00 0.00 0.00 0.00
3. Loans and accounts receivable 61,544.97 0.00 0.00 570.88 70,375.13
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 105,364.51 917.42 0.00 570.88 115,112.09
Financial liabilities 251,449.80 0.00 0.00 0.00 329,514.72
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 2011
2012
Profit and loss in disposal of non-current assets, including the written-off 301,761.08 420,947.86
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
part of already withdrawn depreciation reserves
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 11,882,340.48 20,110,733.72
Capital occupancy expense from the non-financial enterprises that is
accrued to the current profit and loss 0.00 0.00
The investment costs of enterprises to obtain the subcompanies,
associated enterprises and joint enterprises are less than the returns
from the fair values of identifiable net assets of invested units that
should be available at the time of investment 0.00 0.00
Profit and loss of non-currency assets exchange 0.00 0.00
Profit and loss of investment or management of entrusted assets 0.00 0.00
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 tradab 3,704,038.57 858,831.10
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
le financial assets, tradable financial liabilities and saleable financial
assets
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 151,596.84 1,465,215.51
Other profit and loss items that comply with the definition for non-
operating profit and loss 0.00 0.00
Subtotal 16,039,736.97 22,855,728.19
Minus: effect of income tax 2,638,984.95 3,349,687.44
Effect of the minority of shareholders’ equities 2,405,339.64 472,151.12
Total 10,995,412.38 19,033,889.63
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 after
rate of net asset
Basic profit per share dilution
Net profit attributable to the
ordinary shareholders 7.86% 0.77 0.77
Net profit attributable to the ordinary
shareholders after deduction of non-
recurring profit and loss 7.48% 0.74 0.74
Calculation Steps:
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
1. Basic profit per share
After deduction of
Item Calculation Steps Amount non-recurring profit
and loss
Current net profit attributable to the ordinary 228,705,016.3
P 217,709,604.01
shareholders 9
Total quantity of shares in the beginning of 295,721,852.0
S0
period 0 295,721,852.00
Increase of shares in the current period Si 0.00 0.00
Length from the next month after share increase
Mi
to the end of report period (unit: month) 0.00 0.00
Length of report period (unit: month) M0 6.00 6.00
The weighted average number of ordinary 295,721,852.0
S=S0＋Si×Mi÷M0
shares which are issued to the public 0 295,721,852.00
Basic profit per share P÷S 0.77 0.74
2. Diluted profit per share:
After deduction of
Item Calculation Steps Amount non-recurring profit
and loss
Current net profit attributable to ordinary 228,705,016.3
P 217,709,604.01
9
shareholders
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
295,721,852.0
S0
period 0 295,721,852.00
Increase of shares in the current period Si 0.00 0.00
Length from the next month after share increase Mi 0.00 0.00
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
to the end of report period (unit: month)
Length of report period (unit: month) M0 6.00 6.00
The weighted average number of ordinary
295,721,852.0
S=S0＋Si×Mi÷M0
shares which are issued to the public 0 295,721,852.00
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) 0.77 0.74
XIII. Approval of Financial Statement
This financial statement is passed and issued by the Board of Direction on August 17 , 2012.
Zhu Baoguo
Company Name: Livzon Pharmaceutical Group Inc.
Principal of the Company: Zhu Principal of the Financial Principal of the Accounting
Baoguo Department: An Ning Department: Si Yanxia
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2012 semi-annual report of Livzon Pharmaceutical Group Inc.
Section 9 Catalog of Files for Reference
Catalog of Files for Reference
1 The 2012 semi-annual reports with the signature of Chairman.
2 The financial reports with signatures of legal representative, principal of Financial Department
and principal of Accounting Department.
3 All original files and announcement manuscript that have been published in Securities Times,
China Securities Journal and Hongkong Wen Hui Daily (English version) during the report period.
Chairman: Zhu Baoguo
Submission date approved by the Board of Directors: August 17, 2012
171
