Coland Holdings Limited

Transcription

Stock Code：4144
2012 Annual Report
Website for this annual report: http://mops.twse.com.tw
Company Website：http://www.colandpharma.com
P r i n t e d
o n
1 0
M a y
2 0 1 3
1.
Name, Title, Telephone and E-mail of the Company’s Spokesperson and Deputy Spokesperson
Spokesperson
Deputy Spokesperson
Name
Lee Hsin
Tsao Johua
Telephone
86-21-5137-1880
86-21-5137-1880
Title
President
CFO
E-Mail
colandpharma@colandpharma.com
colandpharma@colandpharma.com
2. Address and Telephone No for Headquarter, Branches, and Factories
(1) Company:
Name: Coland Holdings Limited 康聯控股有限公司
Address: Cricket Square, Hutchins Drive, P.O. Box 2681, Grand
Cayman KY1-1111, Cayman Islands
Tel: 86-21-5137-1880
(2) Operation Headquarter：
Name：Shanghai Guochuang Pharmaceutical Company Limited上海國
創醫藥有限公司
Address：1F, No. 866, Halei Road, Pudong Zhangjiang Hi-Tech Park,
Shanghai
Tel：86-21-5137-1880
(3) Branches and Subsidiaries:
Name of BVI Subsidiary: Central Chief Limited
Address: P.O. Box 957, Offshore Incorporations Centre, Road Town,Tortola,
British Virgin Islands
Tel: 86-21-5137-1880
Name of HK Subsidiary：Coland Pharmaceutical Company Limited 康聯藥業有
限公司
Address: 19F, Cameron Commercial Centre 468 Hennessy Rd, Causeway
Bay , Hong Kong
Tel：86-21-5137-1880
Name of China Subsidiary: Shanghai Guochuang Pharmaceutical Company
Limited 上海國創醫藥有限公司
Address: 1F, No. 866, Halei Road, Pudong Zhangjiang Hi-Tech Park, Shanghai
Tel: 86-21-5137-1880
Name of Taiwan Subsidiary: Coland Development Company Limited 康聯發展
股份有限公司
Address: Rm. D, 10F., No. 170, Dunhua N. Rd., Songshan Dist., Taipei
Tel: 886-2-2546-9288
Name of China Subsidiary: Heilongjiang Province Tongze Pharmaceutical
Company Limited 黑龍江省同澤醫藥有限公司
Address: No.4 28F1., Huangjin Apartment, Nangang District, Harbin City,
China
Tel: 86-451-8586-8008
3. Name, Title, Telephone No, and E-mail of litigious or non-litigious agent in the R.O.C.:
4.
Name: Lee Hsin
Title: Director and CEO of Coland Holdings Limited
Tel: 886-2-2546-9288
Email: colandpharma@colandpharma.com
Stock Transfer Agent
Name: Chinatrust Bank Transfer Agency
Address: 5F, No. 83, Sec 3, Chongqing South Rd, Zhongzheng District, Taipei, 100
Website: http://ecorp.chinatrust.com.tw/cts/index.jsp
5.
Tel: 886-2- 2181-1911
Names of Auditors, Accounting Firm, Address, Website and Telephone for the audit of the
latest financial statements
Name of accountants: Accountants Wang Yan Jun and Lin Li Huang
Name of accounting firm: Ernst & Young
Address: 9F, No. 333, Sec 1, Keelung Road, Taipei
Website: http://www.ey.com/
Tel: 886-2-2757-8888
6.
Company website:
http://www.colandpharma.com
8.
List of Board of Directors：
Title
Name
Nationality
Chairman
William Keller
Switzerland
Director
Lee Hsin
Taiwan
Director
Ye Xiao Ping
China
Director
Tang Li Da
China
Independent
Director
Shen Jen-Lin
Taiwan
Independent
Director
Chang Li-Yen
Taiwan
Independent
Director
Han Feng
China
Education and Experience
Vice President of Roche Brazil Ltd.
General Manager of Roche Colombia Ltd.
General Manager of Roche China Ltd.
Feng-Chia University; Major: Urban Planning
Peking University’s Guanghua School of Management: EMBA
Sales Director of Johnson&Johnson
Director of Schering-Plough
Vice President of Roche China Ltd.
Univerisity of Oxford, PhD in Immunology
Chief Medical Officer, Roche China Ltd.
Tianjin Institute of Pharmaceutical Research, Researcher in
Pharmacology
Doctor of Science, Visiting Scholar, UC Berkeley
Editor of Chinese Traditional and Herbal Drugs Journal
Masters in Economics, National Chung Hsin University
Deputy Manager & Manager, International Dept, YFY
CFO, TSMC
Board of Director, CFO and SVP, Systex
CFO, Motech
University of Wisconsin, PhD in Bacteriology
Applied Microbiology Inc, Head of R&D
Researcher, Cold Spring Harbor Laboratory
Researcher & Deputy Executive officer, DCB
COO, ScinoPharm
President, Da-Hwa Venture Capital Company
President, Hui-Hwa Venture Capital Company
Director, Cheng-Yu Venture Capital Company
Beijing Capital Medical University (Formerly known as Beijing
Second Medical College)
Director, Hebei People’s Hospital
Director, Beijing China-Japan Friendship Hospital Medical Service
and Biomedical Engineering Department
Director of Department of Rehabilitation, China Disabled Persons’
Foundation
Table of Contents
I.
REPORT TO SHAREHOLDERS
1
II.
COMPANY INTRODUCTION
5
III.
CORPORATE GOVERNANCE REPORT
9
1. Organizational system
9
2. Information of Directors, Supervisors, General Manager, Deputy General 12
Manager, Assistant General Manager, Heads of Each Departments and
Branches
3. Status of Corporate Governance
29
4. Information on Fees charged by auditors
50
5. Disclosure on whether the Chairman, nor the general manager, managers 51
of the Company responsible for financial or accounting affairs, served
within the latest year at the auditors’ firm or related affiliates
6. Disclosure of the change of transfer or pledge of shares by directors, 51
managers and shareholders holding 10% or more of the Company’s
shares in the latest year and up to the date of printing of this annual
report
7. Information on the relation among top 10 shareholders as related parties 52
referred to in No. 6 Publication of the Financial and Accounting
Principles
8. Number of shares and shareholding percentage in an invested company 53
jointly by the Company, the directors, the managers, or any company
directly or indirectly controlled by the Company
IV.
V.
STATUS OF FUNDING
55
1. Capital and shares
55
2. Status of bonds, special shares or overseas depository receipts
59
3. Status of Employees Share Option
59
4. Status on the issue of employees restricted new shares
62
5. Status on mergers, acquisitions and spin off
62
6. Status on Use of Proceeds
62
OPERATION STATUS
63
1. Business content
63
2. Market and Sales Status
76
3. Number of employees for the past 2 years and up to the date of printing 85
of the annual report
VI.
4. Environmental Protection Expenditure
85
5. Labor Relationship
85
6. Material Contracts
87
FINANCIAL HIGHLIGHTS
91
1. Condensed financial information in recent five years
91
2. Financial analysis
94
3. Audit Committee’s Report on 2012’s financial reports
98
4. Financial Report of Current Year
98
5. Audited consolidated financial statements of Year 2012
98
6. The Company should disclose the financial impact to the Company if the 98
Company and its affiliated companies have incurred any financial or cash
flow difficulties in 2012 and as of the date of this annual report
VII.
REVIEW AND ANALYSIS OF FINANCIAL STATUS AND 99
FINANCIAL PERFORMANCE AS WELL AS RISK MANAGEMENT
1. Financial Highlights
99
2. Operating Results
99
3. Cash Flow
100
4. Major Capital Expenditure
101
5. Gain/Loss of investment from last year and plan for improvement as well 102
as investment plan for the next year
6. Risk Management and Evaluation
102
VIII. PARTICULAR MATTERS TO NOTE
1. Information on related companies
111
111
2. Status of conducting any private placing for the latest year and up to the 115
date of printing of this annual report
3. Status on subsidiaries of the Company holding or disposing shares of the 115
Company in the latest year and up to the date of printing of this annual
report
4. No matters as set out in Article 36(2)(ii) of the Securities Trading Law 115
occurred which had material impact on the shareholders’ right
5. There existed no material diference between the regulations for the 115
protection of shareholders right of the Company and those in Taiwan
I.
REPORT TO SHAREHOLDERS
Dear Shareholders of Coland:
1. Introduction
Thank you all for the trust and support given to Coland. Since our establishment in 2003,
we have stepped into our 10th year. With all the joint efforts from the employees and business
partners, we continue to maintain our revenue as well as profit in a stable level. Below are our
2012 operating results.
2. Operating Results for 2012
In 2012, Coland’s new products were continuously growing: sales of the respiratory
product Tiotropium Bromide Powder (Bi Duo Yi) increased by 256% as compared to 2011.
Sales of newly introduced Lamivudine (Yin Ding) and Augmentin (Li Bai Ding) also
commenced in 2012. In addition, we successfully acquired 51% equity interests in
Heilongjiang Province Tongze Pharmaceutical Co., Ltd., which strengthened our coverage in
the Northeast region of China and enlarged our product portfolio.

Operating Results：
In 2012, net sales revenue amounted to NTD1,721,749,000, with gross profit of NTD
1,016,046,000 and gross margin of 59%. Compared to 2011, the sales revenue increased by
14.6%, while the gross margin remained flat. The revenue growth was mainly due to the
increase of the product portfolio. Newly acquired Heilongjiang Province Tongze
Pharmaceutical Co., Ltd. contributed NTD157,090,000, accounting for 9.1% of the
Company’s net revenue. The new product Bi Duo Yi, Yin Ding and Li Bai Ding
collectively contributed NTD36,482,000, accounting for 2.1% of the Company’s net
revenue.
Due the effect brought from the introduction of the new products, revenue from Dai Ding
decreased from 82% of 2011 to 74% this year. Net profit after tax for this year was
NTD318,729,000, among which, NTD 15,785,000 was attributed to the minority interests
and NTD302,944,000 was attributed to the shareholders of the parent company. The net
profit decreased by 3.5% as compared to that of NTD313,962,000 in 2011 as shown in the
financial statements. Such decrease was mainly due to the increase of the marketing
expenses for the new products and expenses for acquisition. Based on dividing net
income by the weighted average of the number of circulated ordinary shares, earnings per
share is NTD4.32.

Profitability Analysis :
The Company's net profit after tax in 2012 was NTD 302,944,000; net cash inflow from
operating activities was NTD 200,595,000; net cash outflow from investment activities
was NTD 342,873,000; net cash outflow from financing activities was 280,000,000. At
the end of this financial period, cash and cash equivalents amounted to NTD929,923,000.
‐ 1 ‐ For the yearend of 2012, total assets amounted to NTD2,044,375,000; while liabilities
totaled NTD259,719,000. Our finance structure and ability to repay are steady and
sound.
Year
Financial
Structure
Solvency
Debt to total assets ratio (%)
Current Ratio (%)
Return on assets (%)
Profitability Return on shareholders’ equity
Net Income Ratio (%)

2012
2011
12.7
5.9
1062
16.6
18.0
18.5
1588
25.9
28.6
20.9
R & D Status :
Our Company continues to develop new products, focusing in the areas of hepatitis,
respiratory, oncology and medical devices. We expect to release a new nasal spray
product in 2013 (Mometasone furoate) which was cooperated with Zhejiang Xianju.
In addition, the Company has 15 contracted new products that were submitted for approval
or in clinical application. Coland continues to develop and search for new potential
products with the goal to at least have 1-2 new products introduced to the market every
year.
3. Operating Plan for 2013:
(1)
Expand our sales network through acquiring our regional sub-distributers
(2)
Bring in European and American registered products
In 2013, Coland successfully obtained the exclusive sales and marketing right for two
products in China from Pfizer, an international well known medical company: (1) For
lipid-lowering drugs Acipimox capsules: Le Zhi Ping; and (2) Tolterodine tartrate extended
release capsules: Detrol, for the treatment of overactive bladder
(3)
Bring in product strategy. In addition to national distributors, we will also actively seek for
provincial agency in all regions
(4)
Enhance the depth and breadth of the field of orthopedics and infiltrate into the field of
dental instrument and implants
(5)
Infiltrate into the field of IVD (in vito diagnosis)
‐ 2 ‐ 4.
Mid and long-Term Development Strategy and Plan
In view of the influence by external competitive environment, legal environment and
overall operating environment, we will:
(1)
continue to increase product portfolio from hepatitis to respiratory, cardio/oncology and
other niche treatment areas. Aim to be leading player in hepatitis and respiratory; cut into
oncology market to be a leading Specialty Pharma company in China.
(2)
continuously develop new products, with at least 1 new product introduced to the market
every year, 1 to 2 domestic category one drugs and 3-5 first generic products to be
developed. In the long run, we plan to develop and introduce to the market one new drug
of international level.
(3)
bring new dental implants to China for registration so that we can establish our position in
this market. We will also locate high value-added and quality medical devices from
China and Taiwan, and sell them in China, Taiwan and Southeast Asia.
(4)
locate proper IVD products to develop our market in China.
(5)
through merger and acquisition to enlarge and extend our operation: through merger and
acquisition of secondary distribution channels to expand our business network and
increase our scale of operation.
(6)
through joint venture, equity investment, or other strategic investments to form alliance
with cooperative partners to bring in quality products for China, Taiwan and South East
Asia market.
Looking around the external environment, the 2013 central and local draft budget by the
Ministry of Finance of China, expenditure for medical treatment and sanitation estimated to be
RMB260.253 billion, with an increase of 27.1% as compared to last year, which was the largest
increase among expenditures for all people's livelihood items. In the field of medical devices, it
is expectedthat during the 12th five-years period, the production value of medical equipment in
China will be increased to RMB200billion, 8-10 large-scale medical equipment Group with
production value over RMB5 billion will be formed and the export amount to the international
market would be increased by more than 5%. It is expected that the next five years will be the
critical period for the development of China’s bio-medical industry, this will also be a golden
opportunity for Coland to catch the rising period of this industry. We will actively grasp the
market opportunities and strive to become the best chosen partners for the medical trade in both
China and Taiwan and build the best medicine platform.
Looking back and into the future, Coland appreciates the support and encouragement from its
shareholders. With the spirits of simple and diligent; sincere and righteous; proper and just;
‐ 3 ‐ pragmatic yet innovative, we will continuously develop new products from medicine, medical
device to IVD reagents, infiltrate to new medical related industry and consolidate the medical
resources between China and Taiwan, so as to create a great future for all our employees and
investors.
Chairman: William
Keller
President: Lee
Hsin
‐ 4 ‐ CFO: Tsao Johua
II.
COMPANY INTRODUCTION
1. Company and Group Introduction
(1)
Date of Incorporation: March 23, 2010
(2)
Group Introduction：
Coland is the only bio-pharmaceutical company in Taiwan focusing in the China medical
market, the development of professional medical products and brand marketing, involving in
hepatitis, respiratory, oncology, cardiovascular, medical equipment, dental materials,
orthopedic implants, IVD reagents and many other therapeutical areas. In 2003, we
cooperated with Tianjing Institute of Pharmaceutical Research for the development of Dai
Ding, the treatment for HBV, which obtained China’s class one new drug certificate in 2005,
through professional marketing and brand building, Dai Ding became the front-line brand to
treat HBV in China. In recent years, Coland has been actively exploring new therapeutic
areas. In 2010 and 2011, Coland launched the medical devices and medicines in
respiratory field. In 2012, we became the agent for the sale of products originally developed
by foreign medical company. Also through the acquisition of Heilongjiang Province Tongze
Pharma, we stepped into cardiovascular field in 2012. Over the past 10 years since our
establishment, the Company developed a unique business model that consolidates scientific
research institutions, professional medical product manufacturers and medical markets,
integrates technology resources, develop high-efficent, safe and high quality medical
products, provides professional services to numerous doctors and patients and create the
greatest value in every segment of medical industry.
‐ 5 ‐ (3) Group Structure:
COLAND HOLDINGS LIMITED (Cayman)
100% CENTRAL CHIEF LIMITED (BVI)
100%
Coland Pharmaceutical Company
Limited (HK)
100%
Coland Development Company
Limited (Taiwan)
100%
Shanghai Guochuang Pahrmaceutical
Company Limited
51%
2. Company History:
Heilongjiang Province Tongze
Pharmaceutical Company Limited
April 2003
Established R&D Institution – Hangzhou Sheng You Medical Technology
Development Company Limited, cooperated with Tianjin Institute of
Pharmaceutical Research to develop hepatitis medicine
January 2005
Established Hainan Coland Pharmaceutical Company Limited
July 2005
Hepatitis medicine approved as China’s class one new drug, which were
successfully launched to the market
August 2006
Established Hainan Kang He Pharmaceutical Company Limited
August 2008
Sales of hepatitis medicine reached near 50 million pills
July 2009
Central Chief Limited established as the group’s investment holding
company
September 2009
Central Chief Limited resolved to establish Coland Pharmaceutical
Company Limited in Hong Kong as the window and bridge among China,
Hong Kong and Taiwan
December 2009
Shanghai Municipal Chamber of Commerce approved the acquisition of
100% equity interest in Shanghai Guochuang Pharmaceutical Company
Limited by Coland Pharmaceutical Company Limited
January 2010
Approval from Shanghai Administration for Industry and Commerce for
change of business license and Coland Group officially acquired 100%
equity rights of Shanghai Guochuang Pharmaceutical Company Limited
March 2010
Coland Holdings Limited established as the applicant for IPO in Taiwan
‐ 6 ‐ March 2010
Business of Hainan Coland, Hainan Kang He and Hangzhou Sheng You
reorganized into Shanghai Guochuang Pharmaceutical Company Limited
April 2010
Share swap between Coland Holdings Limited and shareholders of Central
Chief Limited so that Central Chief Limited become the Company’s 100%
owned subsidiary
May 2010
Conducted cash injection by the Company
July 2010
Obtained China’s exclusive distribution right for the tiotropium bromide
spray from Zhejiang Xianju Pharmaceutical Company Limited
September 2010
Obtained distribution right of orthopedic implants in certain designated
hospitals in Shanghai from Medtronics
January 2011
Obtained distribution right of Aspartate injection of ornithine in certain
districts of China from Merz’s
February 2011
Obtained China’s exclusive distribution right of Taiwan Biotech
Company’s Compound ipratropium bromide inhalation solution
February 2011
Conducted cash injection by the Company
September 2011
Conducted IPO
October 2011
Stocks listed on the Taiwan Stock Exchange (stock code: 4144)
October 2011
Established the subsidiary, Coland Development Company Limited
February 2012
Obtained exclusive distribution right for GSK’s antibiotic Li Bai Ding and
Zhejiang Xianju Pharmaceutical Company’s Mometasone furoate
March 2012
Obtained exclusive distribution rights of Anhui Biochem United
Pharmaceutical Co’s Lamivudine – Yin Ding in Shanghai, Jiangsu,
Guangdong and Shaanxi provinces
July 2012
wholly owned subsidiary Shanghai Guochuang Pharmaceutical Company
Limited acquired 51% equity interest of Heilongjiang Province Tongze
Pharmaceutical Company Limited by cash
December 2012
Obtained exclusive distribution
(lipid-lowering drugs) in China
March 2013
Obtained the exclusive distribution right in China for Pfizer’s Detrol, for
the treatment of overactive bladder (OBA)
April 2013
Obtained non-exclusive distribution right of Kanghui Medical Device’s
Spine Balloon (PKP)
‐ 7 ‐ right for
Pfizer’s
Le
Zhi Ping
3. Risks: please refer to item Chapter VII, Financial Condition and Review and Analysis of
Operating Results and Risk Management
‐ 8 ‐ III.
1.
CORPORATE GOVERNANCE REPORT
Organizational System
(1)
Organization Chart
Shareholders
Audit Committee
Board of Directors
Remuneration Committee
President
Marketing
Sales
Dept
Internal Audit
Medical
Product
Medical
Finance,
External
Taiwan
Registration
Development
Devices
Logistics,
Affairs
Subsidiary
Dept
(2) Operations of main
departmentsDept
Dept
Dept
HR &
Dept
Our Company emphasizes the importance of division of labor, and the coordination and
Business
cooperation between different departments. Below is a description of the main function of the
Dept
main departments of our Company.
Deptartment
Major Function
Board of
Directors
Establish the Company’s business operation policies and objectives
and appoint key managers for the execution of such policies
1. Assist the Board of Directors to review the financial statements
and significant accounting policies.
2. Audit the Company’s internal control.
Audit Committee 3. Procure accountants and other external experts for the audit and
non-audit related services.
4. Meet regularly to monitor and listen to the internal auditor’s and
accountants' reports.
1. Fix and regularly review the performance evaluation, and the
remuneration policy, system, standard and structure of the
Remuneration
directors and managers.
Committee
2. On a regular basis, assess and fix the salary and compensation of
directors and managers.
1. Assess the potential risk on the financial and business activities
and prepare the annual internal audit plan based on the result of the
aforementioned assessment.
Internal Audit 2. Assist the Board of Directors to audit and trace improvement on
irregularities and operational risk, and periodically report to the
Audit Committee on the internal audit matters and financial
condition.
1. Execute resolution of the Board of Directors, manage all the
President
9 Deptartment
Major Function
2.
3.
1.
2.
Marketing Dept
3.
1.
Sales Dept
2.
3.
1.
2.
Medical Devices
3.
Dept
4.
5.
1.
Medical
Registration
Dept.
2.
3.
(a)
Product
Development
Dept.
(b)
(c)
(d)
Company’s affairs.
Lead the staff to achieve the Company's goals.
Train up staff and set up an excellent leading team.
Based on the Company's annual overall marketing plan, fix the
regional annual work plan, the budget plan and the sales plan and
sales target by year, quarter and month.
Establish and lead the sales team to achieve sales targets. Analyze
sales productivity and develop and enhance the productivity of the
development plan.
Formulate the strategy and goal for market development. Analyse
market for the products and their competitive edge. Organize
regional promotion and academic activities.
Participate in the formulation of the Company's annual strategic
target, and execute such target.
Recruit sub-distributors at different locations for new products,
select excellent commercial customers.
Negotiate and sign annual agreement with commercial customers
and maintain good customer relationship.
Participate in the formulation of, and execute the Company's
annual sales plan and strategic target for medical devices.
Introduce new products in accordance with the market demand and
the Company’s plan in due course.
Review and select sales agents, effectively organise the product
information to assist the establishment and development of
marketing activities by the agents.
Manage and organize the ongoing support to the agents.
Coordinate local annual bidding activities for medical devices.
Select products, comply with the law requirement in registration
process and collect the latest domestic and oversea development
for registration products.
Apply for product registration, registration for clinical trials and
support registration related matters.
Compile the information for imported products and apply for the
registration.
Select, determine and research of the products; collect the latest
domestic and overseas research development of the products the
Company is paying attention to.
Assess the markets forecast the sales and prepare the pre-listing of
products in research and development.
Negotiate and sign contracts for products to be licensed and
prepare the listing thereof.
Assume the production and quality of listed products.
Finance,
1. Provide financial and accounting services, manage taxation affairs,
Logistics, HR &
manage logistic and warehouse, manage investment, plan finance
Business Dept.
10 Deptartment
Major Function
and strategy.
2. Maintain relationship with shareholders and investors and promote
capital market related plans.
3. In charge of HR and organization development and improve and
plan operation flow and management system.
Grasp the latest policy of the organizations in charge of medical
External Affairs industry (State Food and Drug Administration, Dept of Health,
National Development and Reform Commission, and Ministry of
Dept.
Human Resources and Social Security), and have an insight into the
development trend of policies.
1. Serves as the window for investors, media and supervisory
Taiwan
organization in Taiwan, and maintain good external
Subsidiary
communication on a timely basis.
2. Search, evaluate, and implement strategic investment and assist in
specific cooperation projects.
11 2.
Information of Directors, Supervisors, General Manager, Deputy General Manager, Assistant General Manager, Heads of Each Departments and
Branches
(1)
Directors and Supervisors
(a) Directors and Supervisors
April 27, 2013
Title
Chairman
Name
William
Keller
Date of Term
Appointme (Note
1)
nt
2010.12.5 3yrs
First
selected
Date
2010.12.5
Shares held when
appointed
Current shareholding Shares held
Current shareholding by spouse and minor in other’s
names
children
# of
Shares
# of Shares
%
115,000 1.00%
590,724
(Note 2)
%
0.84%
# of Shares
-
%
-
# of
Shar %
es
-
Education and
Experiences

Vice President of
Executive positions,
Board of Directors,
Supervisors held by
spouse or relatives of the
Other positions held in the
second degree
Company and other companies

Roche Brazil Ltd.

Deputy General
Manager of Roche
Colombia Ltd.

General Manager of
Roche China Ltd.
12 Supervisor of TaiGen
Biotechnology Co.,Ltd

Director of Alexion
Pharmaceutical Inc.
Title
Name
Relatio
n
None
None
None
Title
Name
Director
Lee Hsin
Date of Term
Appointme (Note
1)
nt
2010.3.23
3yrs
First
selected
Date
2010.3.23
Shares held when
appointed
650
65.00%
names
children
23,771,141 33.96% (Note 3)
-
-
-
Education and
Experiences


Feng-Chia University,
Board of Directors,
Supervisors held by
second degree

Dept of Urban
Enterprise Investments
Planning
Group Limited
Guanghua School of

Management, Beijing
University, EMBA



Director of Sunyou Group
Holdings Limited

Director of
Schering-Plough
Director of Sunyou Holdings
Limited (Cayman Island)
Chief Sales Officer of
Johnson&Johnson

Director of Business
Director of Sunyou Holdings
Limited (BVI)

Vice President of
Roche China Ltd.
Director of Shanghai Teresa
Healthcare Sci-Tech,

Legal representative and
executive director of
Hangzhou Sheng You
Medical Technology
Development Company
Limited

Director of Central Chief
Limited
Director of Coland
Pharmaceutical Company
Limited
 Director and general
manager of Shanghai
Guochuang Pharmaceutical
Company Limited
 Director of Weigao
Bio-Tech Company Limited

13 None
None
None
Title
Name
Director
Ye Xiao
Ping
Date of Term
Appointme (Note
1)
nt
2010.12.5 3yrs
First
selected
Date
2010.12.5
names
children
Shares held when
appointed
-
-
-
-
10,478,871
(Note 4)
14.96% -
-
Education and
Experiences


Director
Tang Li
Da
2010.12.5. 3yrs
2010.12.5
-
-
-
-
-
-
-
-

Univerisity of Oxford,

Chairman, Tigermed
PhD in Immunology

Chairman, Shanghai Xinping
Chief Medical Officer,
Roche China Ltd
Tianjin Institute of
Pharmaceutical
Research
Researcher in
Pharmacology

Doctor of Science
Visiting Scholar, UC
Berkeley

14 Executive positions,
Board of Directors,
Supervisors held by
second degree
Editor of Chinese
Traditional and Herbal
Drugs Journal
None
None
None
None
None
None
Investment
Supervisor, Hangzhou Sheng
You Medical Technology
Development Company
Limited
 President, Tianjin Institute of
Pharmaceutical Research

Title
Name
Independent
Director
Shen
Jen-lin
Date of Term
Appointme (Note
1)
nt
2010.12.5 3yrs
First
selected
Date
2010.12.5
names
children
Shares held when
appointed
-
-
-
-
-
-
-
-
Education and
Experiences

Master, Economics,
Board of Directors,
Supervisors held by
second degree

National Chung Hsin
University

Deputy Manager &
Manager, International
Dept, YFY

CFO, TSMC

Director, CFO and
SVP, Systex

15 CFO, Motech
Independent Director, GIO
Optoelectronics

Independent Director, Parade
Tech (Cayman)
None
None
None
Title
Name
Independent Chang
Director Liyen
Date of Term
Appointme (Note
1)
nt
2010.12.5 3yrs
First
selected
Date
2010.12.5
names
children
Shares held when
appointed
-
-
-
-
-
-
-
-
Education and
Experiences


University of
Board of Directors,
Supervisors held by
second degree

Wisconsin, PhD in
China Investment &
Bacteriology
Development
Applied Microbiology

Inc, Head of R&D

Researcher, Cold
Laboratory


COO, ScinoPharm

President, Da-Hwa
Venture Capital
Company
President, Hui-Hwa
Venture Capital
Company
 Director, Cheng-Yu
Venture Capital
Company

16 Director, Cheng-Yu Venture
Capital Company

DCB

Chairman and President,
ACTS Biotech
Researcher & Deputy
Executive officer,
Chairman, Maxigen Biotech
Inc
Spring Harbor

Director and President,
Director, Da-Hwa Venture
Capital Company

Director, Hui-Hwa Venture
Capital Company
None
None
None
Title
Name
Date of Term
Appointme (Note
1)
nt
Independent Han Feng 2010.12.5. 3yrs
Director
First
selected
Date
2010.12.5
names
children
Shares held when
appointed
-
-
-
-
-
-
-
-
Education and
Experiences

Beijing Capital
Medical University
(Formely known as
Beijing Second
Medical College)

Medical
Director,Hebei
People’s Hospital

Director, Beijing
China-Japan
Friendship Hospital
Medical Service and
Biomedical
Engineering

Note 1: According to articles of association approved by the shareholders on April 7, 2011, the term is from April 7, 2011 to April 6, 2014.
Note 2: William Keller holds these shares through Golden Hexagon Investments Limited, which is 100% owned by him.
Note 3: Lee Hsin holds these shares through Business Enterprise Investments Group Limited, which is 100% owned by him.
Note 4: Ye Xiaoping’s spouse holds these shares through Xin Ping Holdings Ltd, which is 100% owned by her.
17 Director, Department
of Rehabilitation,
China Disabled
Persons’ Foundation
Board of Directors,
Supervisors held by
second degree
 EVP, China Health
None
None None
Insurance Research
Association
(b) Directors or supervisors who are main shareholders of corporate shareholders: None
(c) The main shareholders of the directors, supervisors or corporate shareholders are corporate
shareholders: None
(d) Whether directors or supervisors have over 5 years working experience in commerce, law,
finance or experience required by the business of the Company and conform to the items set
out below:
March 31 2013
Whether having over 5 years’ working
No. of listed
experience and the following professional
Conform to independence requirement
issuers
qualification
serving in as
an
a lecturer or
working
Judge, District
independent
above
experience
Attorneys,
director
position of
in
lawyers,
commerce,
accountants or commerce,
law, finance, professional or
law,
Condition
accounting or
finance or
technical
Name
10
2 3 4 5 6 7 8 9
the related personnel passed experience 1
(not
subjects as
required by (not (not (not (not (not (not (not (not (not
the national
e
e 1) e 2) e 3) e 4) e 5) e 6) e 7) e 8) e 9)
required by examination and
the
10)
the business obtained related business of
of the
certificates as
the
Company in
required by the
Company
private or
business of the
Company
public college
William Keller
Lee Hsin
Ye Xiao Ping
Tang Li Da
Shen Jen Lin
Chang Li Yen
Han Feng
































































0
0
0
0
2
0
0
Note: Two years prior to, and during the term of his/her appointment, the director is:
1. not hired by the Company or its related companies.
2. not a director or supervisor of the Company or its related companies (excluding being an independent director of
Company, its parent company, subsidiaries directly or indirectly owned by the Company of over 50%).
3. not holding over 1% of the entire issued shares or being a top 10 of individual shareholders of the Company by
himself /herself , his/her spouse, children under the age of 20 or his/her nominee.
4. not the spouse, 2nd degree relatives or 3rd degree directly related relative of the 3 persons listed above.
5. not a director, supervisor or employee of a corporate shareholder holding 5% or more of the entire issued shares
of the Company or a top 5 corporate shareholder of the Company.
6. not a director, supervisor, manager, shareholder owning over 5% of company having financial or business
relation with the Company.
7. not a professional person, sole proprietor, partner, or the owner, a partner, a director, a supervisor, a manager or
their respective spouse of a Company or organization providing commercial, legal, financial, accounting and etc
services to the Company, excluding members of the Remuneration Committee who exercise his/her duty in
accordance with article 7 of the Regulations Governing the Appointment and Exercise of Powers by the
Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the
Counter.
18 8. not a spouse or 2nd degree family member with other directors.
9. not have any condition set out in article 30 of the Companies Law.
10. not elected as government, legal person or their respective representatives as set out in article 27 of the
Companies Law.
19 （2） General Manager, Deputy General Manager, Assistant General Manager, Heads of Each Departments and Branches
April 27 2013
No. of Shares Held
Title
General
Manager
Name
Lee Hsin
Date of
Appointment
2010.12.16
Current
shareholding of
spouse and minor
children
Shares held in
other’s names
Positions held in other
companies
Education and Experiences
No. of Shares
%
No. of
Shares
%
No. of
Shares
23,771,141
shares
(Note)
33.96%
-
-
-
%
-

Feng Chia University,
Enterprise Investments
Planning and Spatial
Group Limited

Holdings Limited
Management
(Cayman Island)
Peking

Director of Sales of Johnson
& Johnson

Director of Sunyou
Guanghua School of
University EMBA

Director of Business
Department of Urban
Information


Holdings Limited

Director of
Schering-Plough
Director of Sunyou Group
Director of Sunyou
Holdings Limited (BVI)

 Vice President of Roche
China Ltd.
Director of Shanghai
Teresa Healthcare
Sci-Tech,

Legal representative and
executive director of
Hangzhou Sheng You
Medical Technology
Development Company
20 Managers that are either
spouse or 2nd degree
related family
Title
Name
Relation
None
None
None
No. of Shares Held
Title
Name
Date of
Appointment
No. of Shares
%
Current
shareholding of
spouse and minor
children
No. of
Shares
%
Shares held in
other’s names
companies
No. of
Shares
%
Managers that are either
related family
Title
Name
Relation
None
None
None
None
None
None
Limited

Director of Central Chief
Limited
Director of Coland
Limited
 Director and general
manager of Shanghai
Guochuang
Limited
 Director of Weigao
Bio-Tech Company
Limited

National Hu Tong
Sales &
Marketing
Director
National
Sales
Director
Wang
Feng
2013.03
-
-
-
-
-
-
2013.03
-
-
-
-
-
-
21  East China Normal
University, Department of
Biochemistry
 Sales Manager, Roche China
Ltd.
 Region Manager, Novartis
 Region Manager,
Sanofi-Aventis
 Xi'an Medical University,
Faculty of Clinical Medicine
 Doctor in Xi'an City
Tuberculosis Hospital
 Sales Executive, Roche
Shanghai
No. of Shares Held
Title
Name
Date of
Appointment
No. of Shares
%
Current
shareholding of
spouse and minor
children
No. of
Shares
%
Shares held in
other’s names
No. of
Shares
companies
%
related family
Title
Name
Relation
None
None
None
None
None
None
 Region manager, ShaanxiTon
Sheng Pharmaceuticals
CFO
Tsao
Johua
2008.7
538,723
0.77%
-
-
-
-
 National Taiwan University,
Dept of Economics
 Finance & Accounting MBA,
University of Chicago
 Financial Analyst Manager,
 Supervisor, HUNG CHUN
BIO-S Co., Ltd.
P&G Taiwan
Cheng
Chief
Investment Qing Qi
Officer
2012.2
-
-
-
-
-
22 -
 Finance Head, Dairy Farm
North Asia
 Taipei Medical University,
School of Nutrition and
Health Sciences
 National Yang Ming
University, Institute of
Biochemistry and Molecular
Biology
 Assistant Researcher of
Development Biotechnology
Center
 Assistant Manager of IBT
Research Center
 Manager of Boston
Bioventure , IBT group
 Manager of YFY Bio venture
Fund group
 Assistant Vice President of
Global Strategic Investment
 Supervisor, Weigao
Bio-Tech Company
Limited
 Director, HUNG CHUN
BIO-S Co., Ltd.
No. of Shares Held
Title
Name
Date of
Appointment
Current
shareholding of
spouse and minor
children
Shares held in
other’s names
No. of Shares
%
No. of
Shares
%
No. of
Shares
%
Jiang
Yan Fei
2012.11
-
-
-
-
-
-
Lou Jin
Product
Developme Fang
nt director
2013.03
-
-
-
-
-
-
Medical Han Wen
Ge
Registration
Director
2013.03
-
-
-
-
-
-
Medical
Device
Director
23 Fund
 Shanghai Second Medical
University, Faculty of
Clinical Medicine
 Bristol-Myers Squibb Manager of China Medical
Devices
 Region Manager,
Bristol-Myers Squibb
Medical Devices China
 Sales Manager,
Orthopedics Devision, China
Representative Office of
Centerpulse Ltd.
 Manager, Pharmacia &
Upjohn (China) Ltd.
 Master of Pharmacy,
Zhejiang University
 New Product R&D manager,
Guangdong Tailing Medical
Company
 Head of Hangzhou Saili Drug
Research Institute
 R&D Manager, Hainan Puli
Pharmaceutical company
 Beijing Medical University, ‐
Bachelor's degree in medical
chemistry
 R&D Clinical Trials
Registration Manager,
Sanofi-Aventis China
companies
related family
Title
Name
Relation
None
None
None
None
None
None
None
None
None
No. of Shares Held
Title
Name
Date of
Appointment
No. of Shares
%
Current
shareholding of
spouse and minor
children
No. of
Shares
%
Shares held in
other’s names
No. of
Shares
companies
%
related family
Title
Name
Relation
None
None
None
 Head of registration affairs,
Servier (Tianjin)
Pharmaceutical Co., Ltd.
 Senior Analyst, Beijing
Novartis Pharmaceutical Co.,
Ltd.
External
Affairs
Officer
Guo Zhi
Min
2008.5
-
-
-
-
-
-
 Shanghai Second Medical
University, Faculty of
Clinical Medicine
 Anesthesiology Residency,
Shanghai First People’s
Hospital
-
 Sales Executive,
Schering-Plough
 National Government Affairs
Manager, Roche China Ltd.
 National Government Affairs
Manager, GENZYME
Note: These 23,771,141 shares, representing 33.96% of the entire issued share capital are held by Lee Hsin through his 100% owned Business Enterprise Investment Groups Limited.
24 (3) Remuneration paid to directors, supervisors, general manager and vice general manager in 2012
(a)
Remuneration paid to directors (including independent directors)
Director’sRemuneration
Remuneration obtainedasanemployeeoftheConsolidatedEntities
Unit: NTD’000
TheAggregateof Ato
Salary(A)
Title
SeverancePayment&Pension
RemunerationfromProfit
Allowance
(B)
Distribution(C)
(D)
TheAggregateof AtoGasa%tothe
D as a％tothe2012Net Income
Salary,Bonus&Allowance
SeverancePayment&Pension
BonusfromProfitDistribution
(E)
(F)
(G)
Name
The
No.ofSharesexercisableunder
No.of Employees’Restricted
Employees’ShareOption
Shares
(H)
(I)
2012NetIncome
Remuneration
from
Non-consolidated
ConsolidatedEntities
Entities
Company
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
Company
Entities
Company
Entities
Company
Entities
Company
Entities
Company
Entities
Company
Entities
Company
Entities
Bonus
Bonus
inCash
Chairman
Director &GM
Bonus
Bonus
in
Consolidated
The
Consolidated
The
Consolidated
Company
Entities
Company
Entities
Company
Entities
in
inCash
Shares
The
Shares
WiliamKeller
LeeHsin
Director
YeXiaoPing
Director
TangLiDa
IndependentDirector
ShenJen-lin
IndependentDirector
ChangLi-yen
IndependentDirector
HanFeng
8,970
8,970
-
-
-
-
-
-
2.96
2.96
-
25
-
-
-
-
-
-
-
-
-
-
-
2.96
2.96
-
Table of Remuneration Range
Name of Director
Total Amount of the aggregate of A to D
Total Amount of the aggregate of A to G
Range of remuneration paid to each directors
The Company
Below NTD2,000,000
NTD2,000,000 to NTD4,999,999
NTD5,000,000 to NTD9,999,999
NTD10,000,000 to NTD14,999,999
NTD15,000,000 to NTD29,999,999
NTD30,000,000 to NTD49,999,999
NTD50,000,000 to NTD99,999,999
NTD100,000,000 and above
Total
All Consolidated Entities
All Consolidated Entities
William Keller, Lee
Hsin, Ye Xiao Ping,
Tang Li Da, Shen
Jen-lin, Chang Li-yen,
Han Feng
William Keller, Lee Hsin,
Ye Xiao Ping, Tang Li Da,
Shen Jen-lin, Chang Li-yen,
Han Feng
7 Persons
7 Persons
(b) Supervisors’ Remuneration：N/A （There were no supervisors in the Company.).
26
The Company
(c). General Manager’s and Vice General Manager’s Remuneration
SeverancePayment&Pension Salary (unit”
Bonus，Allowance etc. Salary (unit”
‘000)
‘000)
Salary(unit” ‘000)
BonusfromProfitDistribution Salary(unit” ‘000)
(A)
(B)
Title
No. of Employees’RestrictedShares
ShareOption
D as a％tothe2012Net Income
（D)
(C)
No. of SharesexercisableunderEmployees’
TheAggregateof Ato
(Unit: ’000)
(unit: ’ 000)
Remuneration
from
Name
Non-consolidate
The
Company
President
Lee Hsin
VPofSalesDept.
Lee
Company
The
The
The
Company
Company
dEntities
The
BonusinCash
BonusinShares
BonusinCash
-
-
-
BonusinShares
Company
The
Company
The
Company
Wan-jun
(Note)
VPofBusiness
Cai Xin
Development&
(Note)
MarketingDept.
CFO
Tsao Jo-hua
HeadofExternal
Guo
AffairsDept.
Zhi-min
HeadofMedical
Jiang
DevicesDept.
Yan-fei
Chief
Cheng
InvestmentOfficer
Ching=chi
4,517
23,788
-
-
-
-
Note：Mr. Li Wan-jun and Ms Cai Xin resigned and no longer worked for the Company.
27
-
1.49
7.85
260
260
-
-
-
Table of Remuneration Range
Range of remuneration paid to each general／vice general
managers
Name of the general manager and vice general manager
The Company
NTD2,000,000 to NTD4,999,999
Consolidated Entities
Jiang Yan-fei
NTD5,000,000 to NTD9,999,999
Cai Xin, Guo Zhi-min, Cheng Ching－chi
NTD10,000,000 to NTD14,999,999
NTD15,000,000 to NTD29,999,999
NTD30,000,000 to NTD49,999,999
NTD50,000,000 to NTD99,999,999
NTD100,000,000 and above
Li Wan-jun, Tsao Jo-hua
Total
6 persons
28
(d) the Company did not pay any bonus from profit sharing to any employees.
(3) An explanation on remuneration paid to directors, supervisors, president, and vice presidents in the
past two years, the remuneration policy, standard and combination, the formula to determine the
remuneration and the connection between the aforesaid and operation result.
(a) Analysis of total remuneration paid to the directors, supervisors, general manager and deputy general
manager to the company's net income：
Unit：NTD’000
Item
2011
The Company
Amount
%
Amount
%
9,378
2.99%
15,850
5.05%
2012
The Company
Amount
%
Amount
%
8,970 2.96%
8,970 2.96%
Directors
General Managers
and Vice General
2,897
0.92%
21,478
6.84%
4,517 1.49%
23,788 7.85%
Manager
Total
12,275
3.91%
37,328 11.89%
13,487 4.45%
32,758 10.81%
Note：The remuneration of the General Manager, Mr. Lee Hsin was included in the remuneration paid to the
directors.
(b) The remuneration policy, standard and combination, the formula to determine the remuneration and
the connection between the aforesaid and operation result:
(i) The Directors’ remuneration is determined in accordance with the position and his/her degree of
involvement in, and value of contribution to the Company’s operation.
(ii) The general managers’ and deputy general manager’s remuneration are determined in accordance
with his/her position held with and contribution made to the Company as set out in our HR
regulations, taking into account of the standard of the same industry.
3.
(1)
Status of Corporate Governance
The operation of the board of directors
There were 12 【A】meetings held by the board of directors of the Company, the attendance status of the directors
and independent directors is set out below:
Title
Chairman
Director
Director
Director
Independent
Director
Independent
Director
Independent
Name
William Keller
Ye Xiao Ping
Tang Li Da
Lee Hsin
Shen Jen-lin
No. of
Actual Attendance
No. of Attendance
Attendance by
Rate
Remarks
in Person【B】
Proxy
(%)【B/A】
12
0
100%
10
0
83.3%
9
0
75%
12
0
100%
12
0
100%
-
Chang Li-yen
12
0
100%
-
Han Feng
10
0
83.3%
-
29
Director
Other items to be recorded:
1.
there were no resolutions passed regarding those matters set out in Article 14-3 of the Securities
and Exchange Act or any other resolutions passed but with independent directors opposing or
expressing qualified opinions on the record or in writing.
2.
In the meeting held on 18 January 2012, Mr Lee Hsin abstained from voting on the remuneration
proposal for general manager. Such proposal was unanimously approved by the board of
directors with Mr. Lee Hsin abstaing from voting.
3.
Measures undertaken during the current year and past year in order to strengthen the functions of
the board and assessment of their implementation:
(1) We believe a sound and effective board of directors is the base for good corporate
governance. Under such belief, we established audit committee and remuneration committee
to assist the board of directors to fulfill its duty.
(2) In order to strengthen our corporate governance and in accordance with the Securities Dealing
Law, we established the audit committee with members of all independent directors in year
2011to further strengthen the operating effectiveness of the board of directors.
(3) In compliance with the regulations of the Taiwan Stock Exchange, the board of directors
adopted our “Organisational Regulation for Audit Committee” in June 2010.
(4 In compliance with the regulations of the Taiwan Stock Exchange, the board of directors
adopted our “Organisational Regulation for Remuneration Committee” on 5 September 2011.
(5) To ensure the accurate execution of the operation of the Remuneration Committee and the
compliance with related laws and regulation, the board of directors adopted the “Management
Measure for the Operation of the Remuneration Committee” on 9 March 2012.
(6) To avoid the non-compliance or the intentional violation of the regulations regarding insider
dealing by the Company or the insiders including the directors, managers and shareholders
holding 10% or more of the Company’s shares and etc. and to prevent insider dealings so that
the investors can be protected and the Company’s interest can be preserved, the board of
directors adopted “The Management and Control Regulation for the Prevention of Insider
Dealing” on 9 March 2012.
(2)
The operation of the Audit Committee
There were 8【A】meetings held by the Audit Committee of the Company, the attendance status of the members is
set out below:
Title
Independent
Director
Name
Shen Jen-lin
No. of
Attendance in
Person【B】
8
No. of
Attendance by
Proxy
0
30
Actual Attendance
Rate (%)
【B/A】
100%
Remarks
－
Independent
Director
Independent
Director
Han Feng
8
0
100%
－
Chang Li-yen
8
0
100%
－
1.
There were no resolutions passed regarding those matters set out in Article 14-5 of the Securities
and Exchange Act and no resolutions not passed by the Audit Committee but receiving the consent
of two thirds of the board of directors.
2.
There were no independent director abstained himself/herself from voting due to conflict of
interest.
3.
Communication between independent directors and internal auditing officers as well as CPAs on
the Company finance and business situation:
（1）
Depending on the contents of the matters to be discussed and where necessary, the
internal auditing officer and the auditors attended meetings of the Audit Committee
from time to time.
（2）
The internal auditing officer would report to the Audit Committee on regular basis
after she finished her audit projects.
（3）
The auditors would report to the Audit Committee of their review of our internal
control system.
31
(3) Status of Corporate Governance, Deviation from the Corporate Governance Practice
Principles for Listed Issuers and the Reason for the Deviation
Deviation from the Corporate
Item
Status
Governance Practice
Principles for Listed Issuers
and the Reason thereof
1. Shareholding Structure and
Shareholders’ Right
(1)
Measures take by the （1）The spokesperson of the Company is responsible to No material deviation.
Company
handle handle and respond shareholders’ suggestion and complaints
to
shareholders’
suggestion as well as coordinates the relevant departments of the
Company.
or complaints
(2)
Information of the list of （2）The Company designates a personnel specifically in No material deviation.
major shareholders as well charge of the relevant information thus, the Company may
as their respective ultimate have the updated list of its major shareholders and as well as
controlling shareholders
(3)
their respective ultimate controlling shareholders at all times.
Method for the Company （3）The assets and financial management are independent
to establish the mechanism among each affiliates. The Company perform its mechanism No material deviation.
for
risk
control
and of risk control and management and fire wall in accordance
management and fire wall with “The Handling Procedure for Acquiring and Disposing
with its affiliates
2.
Assets”
Composition and duty of
the board of directors
（1）Independent Directors
（1）There are 3 independent directors in the Company: Mr. No material deviation.
Shen Jen-lin, Mr. Chang Li-yen and Madam Han Feng. Mr
Shen has specialty in accounting and both Mr. Chang and
Madam Han have the specialty in bio-pharmaceutical field.
Mr. Shen and Mr. Chang are R.O.C. nationality.
（2）Assess the independency of （2）The board of directors assesses the independency of the No material deviation.
the auditors periodically
auditors periodically every year.
32 Deviation from the Corporate
Item
Governance Practice
Status
3.
Establish
communication The Company designates a department specifically in charge No material deviation.
channel to persons who of the communication channel with those who haverelated
have related interests in the interest in the Company.
Company
Thus the Company may have the
updated information and protect the legal and reasonable
rights for both parties.
4.
Publication of Information
（ 1 ） Website set up and （ 1 ） We disclose financial
and corporate governance No material deviation.
disclosure of financial and information on our corporate website as well as on the
corporate
governance Market Observation Post System in due course and in
accordance with the relevant regulations.
information
（ 2 ） Other
method
information disclosure
for （2）We set up our corporate websites in both Chinese and No material deviation.
English and disclose financial and corporate governance
information as well as the tape recorded files of road shows
held. We designate a personnel specifically in charge of
information collection and disclosure. We also carry out the
system that the spokesperson is acting as the bridge for our
external communication.
5.
Operation of nomination or We
other functional committee
established
Committee.
Audit
Committee
and
Remuneration No material deviation.
Since their respective establishment, they
operated in accordance with their respective organizational
regulation and operational rules and review matters in
relation to financial statements, internal control and
remuneration proposals.
6. The board of directors adopted our Corporate Governance Practice Rules on 5 September 2011, which were posted on our
website. The purposes of the adoption of such rules are to have effective corporate governance structure, protect shareholders’
right, strengthen the function of the board of directors, respect the right of those persons who have interest in the Company and
to promote information transparency.
There is no material deviation from the adopted rules.
33
Deviation from the Corporate
Item
Governance Practice
Status
7. Other important information enabling a better understanding of the Company’s corporate governance:
(1) Please refer to the table below for the status of the continuing education taken by the directors in 2012.
(2)
There are regulations set out in our articles of association to limit and require those directors who has conflict of interest in
the matter to be resolved to abstain from voting.
(3)
The status of implementation of the policy for risk management and the standard for evaluation of risk: Prior to the
convening of the meeting of the board of directors, the management would submit financial information and the execution
of the budget plan for the board of directors to evaluate risk exposure and to provide professional opinion. Our internal
audit department would submit its annual internal audit plan based on the risk assessment opinion from the board of
directors and submit the same for the approval by the board of directors. Thereafter the internal audit department would
execute such approved plan accordingly.
designated by the Audit Committee.
The status and the report of the internal audit would be reviewed by a member
Please refer to Chapter VII, sub-section 6 of this annual report regarding our Policy
for Risk Management and the implementationn thereof.
(4) Status of insurance purchased for directors: We purchase insurance for directors’ liabilities.
8.
there is no a corporate governance self-assessment report from the Company or corporate governance assessment report
from other professional organization.
Status of 2012 Directors’ and General Manager’s Continuing Education:
Title
Name
Date of
Attenda
nce
Chairman
William
Keller
2012.09
.21
China Corporate
Governance Association
2012.09
.21
China Corporate
2012.10
.25
Finance Supervision and
Management Committee
Organising Agent
Director
and
GM
Lee
Hsin
Director
Ye Xiao
Ping
2012.09
.21
China Corporate
Director
Tang Li
Da
2012.09
.21
China Corporate
Independent
Director
Shen
Jen-lin
2012.12
.05
China Securities and
Futures Market
Development Fund
Independent
Director
Chang
Li-yen
2012.12
.04
China Corporate
Independent
Director
Han
Feng
2012.09
.21
China Corporate
34
Subject
Regulation and Practice on How to Avoid
Insider Dealings by Directors
Durat
ion
(Hour
s)
3
3
Taipei’s 8th Forum for Corporate
Governance
3
3
Corporate Merger and Acquisitions under
Taiwan Laws with Case Illustrations
3
3
Corporate Governance & Securities
Regulations
3
3
(4) The composition,duty and operation status of the Remuneration Committee
(a)
Information of the members of the Remuneration Committee
condition
Title
Whether having over 5 years’ working
experience and the following
professional qualification
a lecturer or
judge, district
above position
attorneys, lawyers, experience in
of commerce,
accountants or
commerce,
law, finance,
professional or
law, finance
Conform to independence requirement
（Note 1）
working
accounting or technical
or experience
the related
personnel passed
required by
subjects as
the national
the business
(Note (Note (Note (Note (Note (Note (Note (Note
required by the
examination and
of the
1(1))
1(2))
1(3))
1(4))
1(5))
1(6))
1(7))
1(8))
business of the
obtained related
Company
Company in
certificates as
1
2
3
4
5
6
7
8
No. of
listed
issuers
serving
in as a
member
of the
remuner
ation
committ
ee
Remarks
private or public required by the
Name
college
business of the
Company
Indep
endent
Direct
or
Indep
endent
Direct
or
Indep
endent
Direct
or
Shen
Jen-lin









2
（Note 2）
Chang
Li-yen









0
（Note 2）









0
（Note 2）
Han Feng
Note 1：
（1）
（2）
（3）
（4）
（5）
（6）
（7）
（8）

Two years prior to and during his/her term of appointment, each member is ：
not hired by the Company or its related companies.
not a director or supervisor of the Company or its related companies (excluding being
an independent director of Company, its parent company, subsidiaries directly or
indirectly owned by the Company of over 50%).
not holding over 1% of the entire issued shares or being a top 10 of individual
shareholders of the Company by himself /herself , his/her spouse, children under the age
of 20 or his/her nominee.
not the spouse, 2nd degree relatives or 3rd degree directly related relatives of the 3
persons
listed above.
not a director, supervisor or employee of a corporate shareholder holding 5% or more of
the entire issued shares of the Company or a top 5 corporate shareholder of the
Company.
not a director, supervisor, manager, shareholder owning over 5% of a company having
financial or business relation with the Company.
not a professional person, sole proprietor, partner, or the owner, a partner, a director, a
supervisor, a manager or their respective spouse of a company or organization providing
commercial, legal, financial, accounting and etc. services to the Company.
not having any condition set out in article 30 of the Companies Law.
Note 2：The member complies with the requirement under Article 6(5) of the “Regulations
Governing the Appointment and Exercise of Powers by the Remuneration Committee of a
Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter”.
35
(b) The operation of the Remuneration Committee
(i) The Remuneration Committee comprises 3 members.
(ii) Term of the members of the Remuneration Committee：From 5 September 2011 to 6
April 2014. There were 4【A】meetings held by the Remuneration Committee of the
Company, the attendance of the members is set out below:
Title
Name
Convenor
No. of
Attendance in
Person【B】
Shen
Jen-lin
Member
Chang
Li-yen
Member
Han
Feng
No. of
Attendance in
Person
Actual Attendance
Rate (%)
【B/A】
Remarks
4
0
100%
-
4
0
100%
-
3
0
75%
-
1.
There were no recommendations made by the Remuneration Committee but not accepted by the
board of directors.
2.
There were no resolutions passed by the Remuneration Committee with member(s) opposing or
expressing qualified opinions on the record or in writing.
(5)
Fulfilment of corporate social responsibility:
Item
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
Practice Principles for
Listed Issuers” and the
reasons thereof
1. Implementing Corporate Governance
（1）The policy or system adopted by the
Company regarding corporate
social responsibility and the
review of the performance thereof
（1）As a corporate, our development depends on the society.
Therefore we use our best efforts to return to the society. No material deviation.
Charity activities are the main way for us to return to the
society and help other people. Activities taken by us
include holding charitable auctions and charitable
receptions andsetting up charitable foundation, etc..
Mr. Lee Hsin and Mr. Ye Xiao Ping, both are directors of
the Company initiated the establishment of Beijing Century
Charity Foundation on 21 January 2010 with an initial capital
of RMB2.1million, which was all donated by our subsidiary,
Shanghai Guochuang Pharmaceutical Company Limited.
The objective of the foundation is to help the poor and the
disadvantaged minority to get rid of poverty and illness,
receive basic education and improve living environment
through the provision of funding support and social
propogation.
36
Item
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
（2） The status of designated unit in （2）From 2008 till now, the charitable activities held by us are No material deviation.
charge of corporate social as below:
responsibility
（a) In 2008, the employees and business partners of the
Company raised RMB700,000 to build an educational
buildling at Yu Long Elementary School at East Town,
Dongfang City, Hainan Province, and raised over RMB
600,000 and other goods and materials through charitable
auctions to improve the students’ living.
(b) In 2009, the Company donated RMB 2.1 million to
set up Beijing Century Charity Foundation, a
non-profitable organisation.
(c) In 2010, a charitable reception was held by the
Company in Hainan Province and over RMB 680,000 was
raised therein, which were used in the projects of
“Passing of Loving Care”, “Sunshine to Love Autism”,
“Caring for Hepatitis Patients”, Caring for Epilepsy
Patients”, “Legal-aid Hotline” and “Charity for Schooling”.
At the end of 2010, about 4,548 people were benefitted.
(d) In 2011, a charitable reception was held and over
RMB 1.6 million was raised, which was used in the
projects of “Caring for Autistic Children”, “Xinjiang
Shihezi Children’s Drawing Competition”, “Caring for
COPD Patients”, “Children of Qinghai Yushu” and
“Charity for Schooling”.
(e) In October 2011, Beijing Century Charity Foundation
represented by its honor Director, Mr. Lee Hsin, donated
NTD1 million to Hualian Bethesda Home For Challenged
Children and Adults.
(f) On 10 February 2012, a charitable reception was held
and a total of RMB 788,580 was raised, which was used in
the projects of “Passing of Loving Care”,“Recovery
Education for Autistic Children”, “Help for Orphan and
Disabled Children”, “Love in Winter – Help the Old”,
“Help Children Burned”, “Charity for Schooling”,“Century
Legal Aid Channel” “Century Legal-aid Hotline” and
“Sunshine to Love Autism”.
37
Item
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
No material deviation.
（ 3 ） Provide regular training and (3)
promotion on corporate ethics to
directors and employees and （a)「Simple and Diligent」and 「Sincere and Righteous」
are our most important corporate culture. We ask all
associate the aforesaid with
Coland’s people to be simple, environment-friendly,
employees’
performance
energy -saving in both living and working life and to
appraisal, and effective reward or
make the best use of resources without wasting. We
disciplinary system
also ask them to treat colleagues, family members and
business partners in sincere and righteous manner. In
order to promote our corporate ethics, we provide
employees’ manual containing conduct codes and the
related educational courses from time to time. Our
internal audit officer also regularly audits the Company,
its employees, customers and suppliers on whether the
relevant regulations are complied with.
(b)
We arrange our directors to attend their continuing
training course in accordance with the Principles of
Promoting the Continuing Education for Directors and
Supervisors of the Listed Issuers.
2. Foster Sustainable Environment
（1）Commitment to the efficient use of
available
resources
and
renewables to minimize the
impact to the environment
（ 1 ） We are a service provider with specialty of No material deviation.
pharmaceutical development and sales, without engaging in
any manufacture or production activities. In order to
comply with the environmental trend of energy and carbon
saving, we continue to promote paperless culture and to
become a green corporate so as to fulfill our social
responsibility.
（ 2 ） Establishment of environment
management system
（2）This requirement is not applicable to us as we do not
have any factory and production activity.
（ 3 ） Establishment of designated
personnel or department in （3）Given we do not have any factory, we do not have any
charge
of
environmental production activities which may cause impact to the
environment. We do have part-time personnel responsible
protection
for the cleaning work so as to maintain the cleaness of the
working environment.
（ 4 ） Awareness of impact on the
operation by climate change and （4）With the principle of environmental protection, we use
the strategy for energy saving and electricity saving bulbs and restrict the time for use of
air-conditioner so as to serve the purpose of energy/carbon
carbon reduction
saving/reduction.
38
Item
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
3. Maintain Public Welfare
（1）Comply with labour laws, respect
the internationally recognized
basic labour rights, protect
employees’ legal rights, establish
fair employment policy and
proper management method and
the status of implementation
thereof
（1）We procure social insurance for the employees in No material deviation.
accordance with the regulation of our respective operating
location, such as retirement, medical, loss of job, birth
giving, working injury, public housing fund and so on.
We also have performance appraisal system as the basis for
bonus. Our employees enjoy the welfare for the gift or
bonus on celebration of traditional festivals, employees’
birthday, wedding and so on. In addition, w provide free
annual health examination to those employees working
with the Company for one year or above.
（2）In addition to the internal and external training courses No material deviation.
（2）Provide safe and healthy working provided in relation to the work need, we also regularly
environment and safe and provide training in relation to those GSP related national
health education on regular policies.
basis
（3）Provide mechanism for regular
communication with employees
and reasonable method to notify
any material impact on our
operation
(3) The department heads communicate with their No material deviation.
respective subordinates on the review, communication of
their work performance and the work target. We have the
“Coland People’s Mail Box” managed by our HR
department, through which we notify our employees all
material events, news and charity activities through email
and receive feedback from employees.
（4）Set up and make open publicly its
policy on consumers’ right and
provide
transparent
and
effective channel for receiving
consumers’ complaints
（4）For the protection of consumers’ right, our related
business departments are responsible to handle their
consumers’ complaints and collect the relevant information
for the Company to respond to and improve on the relevant
complaints.
（5）From time to time, we invite our suppliers to take part No material deviation.
（5）Cooperate with suppliers to jointly in the activities for the promotion of social responsibilities
promote
corporate
social together, such as charitable auction, charity foundation and
etc..
responsibility
(6) We reciprocate the society through setting up charity No material deviation.
(6)
Participate in community foundation, holding charitable auctions and making charity
development and charitable public donation and etc from time to time.
welfare
groups
through
commercial activities, donation of
materials or other free professional
services
39
Item
4.
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
Strengthen Information Disclosure
（ 1 ） Measure for the disclosure of （1）We disclose all amaterail and reliable corporate social No material deviation.
material and reliable corporate responsibility
on
our
corporate
website
social responsibility
(www.colandpharma.com) any time when such information
is available.
（2）Disclosure of the promotion of
corporate social responsibility by
the Company in its corporate
social responsibility report
（2）We did not prepare any corporate social responsibility
report. However, we set out all details for our promotion
of corporate social responsibility in the annual report. In
future, we will decide whether or not to prepare our
corporate social responsibility report depending on the
circumstances.
(6) Corporate Conduct and Ethics Implementation:
Item
Status of Implementation
40
Deviation from the Codes
of Corporate Conduct and
Ethics of the Listed Issuers
Item
1. Establishment of Corporate Conduct
and Ethics Policy and Implementation
Measures
(1)
Policy on corporate conduct and （1)(a) We adopt our own “Corporate Governance Codes” in No material deviation.
ethics
provided
in
internal accordance with the “Codes of Corporate Conduct and Ethics
regulation and disclosed publicly. of the Listed Issuers”, aiming to regulate the protection of
investors’ interest, the relationship between the Company and
Status for the board of directors’ its related interested parties, the strength of the function of the
and the management team’s board of directors, the right of the related interested parties
demonstration on their commitment
and the transparency of information disclosure. There
to implement such policy.
contain specific codes to require the Company to treat the
corresponding banks, creditors, employees, customers,
suppliers, communities or other party with related interest in
the Company based on ethics and provide sufficient
information to the parties with related interest in the Company
for them to form their view on the operation and finance
condition of the Company. We also adopted internal control
system as the principles for the all the departments to perform
their respective duties.
(b) All the departments proceed their respective internal
control project in accordance with our internal control system.
The internal audit officer review such projects on regular
basis and submit his/her review result to the board of
directors. In addition to the provision of the employees’
manual at the time when the employee first reported to his
duty, we strictly follow our corporate culture, inter alia,
“simple and diligent” and “sincere and righteous” in our daily
work. The HR department would arrange educational
training for the employees on the importance of corporate
conduct and ethics from time to time.
(2)
Policy for preventing unethical
（2）When employees first reported to their duty, they No material deviation.
conduct and the implementation of
would sign a confidentiality agreement and perform their
the relevant procedures, guidelines
and training mechanism provided business related confidentiality duty in accordance with
our regulation and system, including not to disclose our
in such policy.
business partners’ confidential, technological and
commercial information . In our employees’ manual, it is
clearly stated that the employee shall not have any
unethical conducts (such as deception, bribery, asking for
rebate and etc.).
Every employee shall sign the
undertaking to be bound by the regulations set out in the
employees’ manual.
(3) Measures for preventing bribery and
illegal political contribution for
（
3
）
When
setting
up
our
policy
for
prevention
of
higher potential unethical conduct
in the relevant policy for those unethical conducts, we assessed operational activities with
activities with higher risk of ethics. higher risk of unethical conducts from all aspects and
carried out such policy strictly in accordance with our
internal control system, employees’ manual and related
internal regulations.
41
Item
unethical conducts.
2.
Compliance with corporate conduct
and ethics
（1) Avoid to do business with whom （ 1) In addition to regulate our employees not to No material deviation.
has unethical records and include engaging in unethical conduct, including any deception,
clauses regarding business conduct and asking for rebate, accepting bribery and etc., we also
ethics in the business contracts
stipulate not to accept bribery and other unethical conduct
in the contact with our business partners.
（2) Execution and promotion of the
corporate conduct and ethics by (2) We authorize senior management of the respective No material deviation.
dedicated unit and the supervision departments as the main person for the promotion
of such unit by the board of supervision and the execution of, the corporate conduct
directors
and ethics policy. A hearing by the general manager
together with senior management from different
departments would be held for any unethical conduct.
Serious unethical conduct would be reported to the Audit
Committee and the board of directors in accordance with
the relevant regulation.
（ 3)
Policy for the prevention of
conflict
of
interest
and (3) (a) According to our Procedural Rules Governing
provision of communication Meeting of the Board of Directors, for any proposals in
channel
which a director has a personal interest conflicting with the
Company’s interest, such director shall abstain from
voting and there should be no inappropriate support given
by other directors.
(b) An employee shall report to his direct chief for any
unethical conduct found. Where the chief is involved in
such unethical conduct, the employee may directly report
to the superintendent of his chief or the head of the HR
department. A hearing by the general manager together
with senior management from different departments would
be held for any unethical conduct. Serious unethical
conduct would be reported to the Audit Committee and the
board of directors in accordance with the relevant
regulation.
(c) We have the “Coland People’s Mail Box” managed by
our HR department, through which our employees may
(4) Effective accounting and internal express their opinion and file any complaints.
control
systems
for
the
implementation
of
corporate (4) In accordance with our internal control system, our
conduct and and the status of the internal auditors would on regular basis conduct their
internal auditors review
auditing and evaluation pursuant to the relevant operating
measures and plans.
42
System of establishment of the 3. The employees may through “Coland People’s Mail No material deviation.
channels for reporting ethical Box” express their opinion and file any complaints.
irregularities and punishment for Depending on the seriousness of the violation, the
violation
department heads and HR will determine the punishment
in accordance with relevant punishment policy set out in
the employees’ manual.
Item
3.
4. Information Disclosure
(1) Status of disclosure of corporate (1) Through our corporate website, we deliver the No material deviation.
conduct and ethics on the corporate corporate culture and spirit of “simple and diligent” and
website
“sincere and righteous” as well as disclose our regulations
and handling procedure in relation to corporate
governance.
(2) Other cannels for information
disclosure
(2) We set up our English corporate website for the
disclosure of material financial and business related
information. We also designated a personnel especially
responsible for the information collection and disclosure of
the same on the website. We also disclose material
matters when happened on our website as well as on the
Market Observation Post System.
(7) We adopted our own Codes of Corporate Governance. For enquires, please go to our
website:
www.colandpharma.com under the heading “Information of Investors/Corporate Governance”.
(8) Other information for further understanding our status of corporate governance:
Our “Measures for the Prevention of Insider Dealing” were passed by the board of directors on
29 March 2012, as the mechanism for the handling procedure and disclosure of material
information. For every meeting of the board of directors, we would draw the directors’
attention to the relevant regulation for insider dealing and notify all insiders from time to time
of such regulation so as to comply with the requirement of the relevant law.
(9)The Status of the implementation of the internal control system:
43
(a) Statement of Internal Control System
(English translation of a statement originally issued in Chinese)
COLAND HOLDINGS LIMITED
Statement of Internal Control System
Date: 15 March 2013
Based on the findings of a self-assessment, Coland Holdings Limited (“Company”) states the
following with regard to its internal control system for the year of 2012:
1. We understand it is the board of directors’ and the managers’ responsibility for the
establishment, implementation and maintenance of the internal control system. The purpose
of such system is to provide reasonable assurance over the effectiveness and efficiency of our
operation (including profitability, performance, and safeguarding of assets), reliability of our
financial reporting and compliance with applicable laws and regulations.
2. An internal control system has inherent limitations. No matter how perfectly designed, an
effective internal control system can provide only reasonable assurance of accomplishing its
stated objectives. Moreover, the effectiveness of an internal control system may be subject to
changes due to change of extenuating circumstances. Nevertheless, our internal control system
contains self-monitoring mechanism and the Company takes immediate remedial actions in
response to any identified deficiencies.
3. The Company evaluates the effectiveness on the design and implementation of its internal
control system, based on those criteria for the evaluation of an effective internal control system
provided in the Regulations Governing the Establishment of Internal Control Systems by Public
Companies (“Regulations”). The criteria set for the evaluation of the effectiveness of an
internal control system in the Regulations divides the internal control system into 5 key
components pursuant to the management and control procedure, they are: (1) environment
control, (2) risk assessment, (3) operation control act, (4) information and communication and
(5) monitor. Please refer to the Regulations for the aforesaid criteria.
4. The Company evaluated the effectiveness of the design and implementation of its internal
control system according to the aforesaid criteria set in the Regulations.
5. Based on the findings of such evaluation, the Company considered that as at 31 December
2012, our internal control system (including the supervision and management of the
subsidiaries), including the degree of awareness of the efficiency and effectiveness of the
operation, the reliability and the compliance with the relevant laws and regulations, are
effective and may reasonably assure the achievement of the aforesaid targets.
6. For the requirement under Measures for the Management of Foreign Issuers after Listing
issued by the Taiwan Stock Exchange, the Company appointed auditors to review our internal
control system relating to the reliability of the financial statements and the protection of the
assets (so that the assets will not be acquired, used or disposed without authorisation) for the
period of year 2012 in accordance with Article 24 of the Regulations. As stated above, the
44
design and implementation of such system are effective. There are neither material deficiency
which may impact the recording, handling and consolidating the financial information and
reliability of the financial statement, nor material deficiency which may impact of the safety of
the assets resulting the acquisition, use or disposition of the assets without authorisation.
7. This Statement forms an integral part of the Company’s Annual Report for the year 2012 and
Prospectus and is open to the public. Any falsehood, concealment or other illegality in the
content made public will entail legal liability under Articles 20, 32, 171, and 174 of the
Securities and Exchange Law.
8. This Statement was passed by the Board of Directors in their meeting held on 15 March 2013.
None of the 7 attending directors expressed dissenting opinions and all the attending directors
affirmed the content of this Statement.
Chairman：[seal]
General Manager：[seal]
45
(b)
Auditors report on their review of the internal control system:
(English Translation of a Report Originally Issued in Chinese)
COLAND HOLDINGS LIMITED
Report of Independent Auditors on Internal Control System
We have audited the accompanying Coland Holdings Limited Internal Control System
Statement as of December 31, 2012 dated March 25. Coland Holdings Limited’s management
is responsible for maintaining effective internal control, and for its assessment of the
effectiveness of internal control over financial reporting and safe guard of asset. Our
responsibility is to express an opinion on the company’s internal control over financial
reporting and safe guard of asset based on our audit.
We conducted our audit in accordance with the Regulations Governing the Establishment of
Internal Control Systems by Public Companies and auditing standards generally accepted in the
Republic of China. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting and safe
guard of asset was maintained in all material respects. Our audit included obtaining an
understanding of internal control system, assessing the management’s process to evaluate the
effectiveness of internal control system, testing and evaluating the design and operating
effectiveness of internal control system, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements or fraud. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Coland Holdings Limited Internal Control System Statement refer above
maintained, in all material respects, effective internal control over financial reporting and safe
guard of asset as of December 31, 2012, in conformity with requirements of the Regulations
Governing the Establishment of Internal Control Systems by Public Companies and auditing
standards generally accepted in the Republic of China.
ERNST & YOUNG
CERTIFIED PUBLIC ACCOUNTS
Taipei, Taiwan Republic of China
March 25, 2013
46
(10) In the latest year and up to the date of printing of this annual report, no punishment was
imposed against the Company and its employees in accordance with the laws. No employees
was punished for the violation of our internal control system. No difficiency found in internal
audit.
(11) The significant resolutions passed at general meeting and meetings of the board of
directors in the latest year and up to the date of printing of this annual report:
The Company held one general meeting and seventeen meetings of board of directors in 2012
and up to the date of printing of this annual report, significant resolutions passed were as
follows:
Type of
Meeting
Date of
Meeting
18 January,
2012
Contents of Resolutions passed in the Meeting
1.
2.
3.
4.
5.
1.
2.
Meeting
of Board
of
Directors
3.
4.
9 March, 2012
5.
6.
7.
8.
9.
Approved 2011 year end incentive bonus for managers
Approved directors’ 2011 bonus plan
Approved 2012 remuneration plan for the general manager
Approved 2012 senior managers’ remuneration plan
Approved the proposal for appointment of Mr. Cheng
Ching-chi as the chief investment officer
Approved and acknowledged the 2011 audited consolidated
financial statements and the operation report and
recommendation of the same to the shareholders for their
acknowledgement at the 2012 annual general meeting of the
Company
Approved the 2011 Profit Distribution Plan and
Company
Approved the Revised Handling Procedures of Acquisition and
Disposal of Assets and the submission of the same to the 2012
annual general meeting for approval
Approved the form and substance of the Internal Control
Statement and the authorisation of the Chairman and the
general manager to sign and/or seal on the same for and on
behalf of the Company
Approved the adoption of the Regulations on the Applicable
International Financial Reporting Standard
Approved the adoption of the Regulations on the Operation of
the Remuneration Committee
Approved the adoption of the Regulations of Management and
Control on the Prevention of Insider Dealing
Approved the adoption of the 2012 Employees Share Option
Plan
Approved the adoption of the 2012 Employees Share Option
Plan Grantee List and the authorization of Mr. Lee Hsin to sign
the offer letters to the relevant employees for and on behalf of
the Company
47
Type of
Meeting
Date of
Meeting
10. Approved the convening of the 2012 annual general meeting
16 April, 2012
22 May, 2012
5 June, 2012
20 June, 2012
19 July, 2012
10 August,
2012
23 October,
2012
11 November,
2012
13 December,
2012
28 December,
2012
Approved the amended Articles of Association and submission of
the same to the 2012 annual general meeting for approval
Approved the Company to apply credit line with financial
institution
Determination the ex dividend and payment dates for the 2011
Final Dividend
Approved the acquisition of 51% equity interest in Heilongjiang
Province Tongze Medical Company Limited
Noted the Internal Audit Report for the 1st Quarter of 2012
Noted the progress of the IFRS Conversion Plan (1st Quarter
of 2012)
3. Approved the investment in PHAMADEX
1. Noted the Internal Audit Report for the 2nd Quarter of 2012
2. Noted the progress of the IFRS Conversion Plan (2nd Quarter
of 2012)
3. Approved and acknowledged the first half of 2012’s
consolidated financial statement and the operation report
1. Noted the Internal Audit Report for the 3rd Quarter of 2012
2. Noted the progress of the IFRS Conversion Plan (3rd Quarter
of 2012)
3. Approved the 2012 2nd batch employees share option plan
grantee list
4. Approved the engagement letter including the fees to Ernest &
Young
5. Approved the investment in TWI
Approved and acknowledged the unaudited consolidate financial
statement and the operation report for the 3rd quarter of 2012
1. Approved the Internal Audit Plan for 2013
2. Approved the 2013 Operation and Budget Plan
3. Approved the 2013 Remuneration Proposal
4. Approved the application of credit lines from financial
institution
5. Approved the investment in Lotus Pharmaceutical
1.
2.
Approved the investment in Hung-Chun
i.
Annual
General
Meeting
5 June, 2012
Matters reported:
1. 2011 Operation Report; and
2. Report by the Audit Committee on the review of the 2011
audited consolidated financial statements and operation
report
48
Type of
Meeting
Date of
Meeting
ii.
iii.
24 January,
2013
Meeting
of Board
of
Directors
15 March,
2013
29 March,
2013
Matters acknowledged:
1. 2011 Audited Consolidated Financial Statements and
Operation Report; and
2. 2011 Profit Distribution Plan
Matters resolved:
1. Amendments of Articles of Association
2. Amendments of the Handling Procedures of Acquisition
or Disposal of Assets
1. Noted the Internal Audit Report for the 4th Quarter of 2012
2. Approved 2012 year-end bonus/remuneration for managers
and directors
3. Approved the investment in Shanghai Rendu
4. Noted the progress of the IFRS Conversion Plan (4th Quarter
of 2012)
1. Approved and acknowledged the 2012 audited consolidated
financial statements and the operation report and the
Company
2. Approved the 2012 Profit Distribution Plan and the the
Company
3. Approved the form and substance of the Internal Control
Statement and the authorisation of the Chairman and general
manager to sign and/or seal on the same for and on behalf of
the Company
4. Approved the Revised Procedural Rules of Board of Directors
Meeting and the submission of the same to the shareholders in
2013 Annual General Meeting for approval
5. Approved the Amendment of Articles of Association and the
same be submitted to the shareholders in 2013 Annual General
Meeting for approval
6. Approved the Revised Operation Procedures for the Provision
of Loan and the submission of the same to the shareholders in
2013 Annual General Meeting for approval
7. Approved the Revised Operation Procedures for the Provision
of Guarantee and the submission of the same to the
shareholders in 2013 Annual General Meeting for approval
8. Approved the 2013 Remuneration Plan for the
Directors/CEO/Senior Management
Approved the convening of 2013 Annual General Meeting
15 April, 2013
Approved the investment in Suzhou Microclear
10 May, 2013
1.
2.
3.
Noted the Internal Audit Report for the 1st Quarter of 2013
Noted the progress of the IFRS Conversion Plan (the last IFRS
Conversion Report)
Approved and acknowledged the consolidate financial
49
Type of
Meeting
Date of
Meeting
statement and the operation report for the 1st quarter of 2013
(12) In the latest year and up to the date of pringting of this annual report, no directors
expressing dissenting opinion on significant resolutions passed at the meetings of the board of
directors.
(13) In the latest year and up to the date of printing of this annual report, no persons involving
in the preparation of the financial statement (including the Chairman, general manager, head of
accounting and internal auditors) resigned from their respective position held with the
Company.
(14) Certificates and qualification obtained from the relvant authority in charge by our
employees relating to the transparent disclosure of financial information
Title of Certificate/Qualification
Number of Persons
Finance/Accounting
Internal Auditor
US CPA
1
-
US CMA
China Junior Accountant
Certificate
China Middle-level Accountant
Certificate
International Internal Auditor
held by Internal Audit
Association CIA
Professional Ability Test of
Stock Personnel
1
-
2
1
1
1
-
1
2
-
4.
Information on Fees charged by auditors
Name of CPA firm
Ernst & Young, Certified
Public Accountant
Name of Accountant
Wang
Yanjun
Lin Lifeng
Audited Period
1 Jan. 2012
Dec. 2012
Items
Fee Range
1
2
3
4
5
Audit Fees
Less than NTD2,000,000
From NTD2,000,000 to NTD4,000,000
From NTD4,000,000 to NTD6,000,000
Form NTD6,000,000 to NTD8,000,000
From NTD8,000,000 to
to
Non-audit
Fees
Remarks
31
-
Total


50

Items
Fee Range
6
Audit Fees
Non-audit
Fees
Total
NTD10,000,000
$10,000,000 and above
(1)
Th non-audit fees paid to the auditors, their firm and their related affiliates were less
than 1/4 of the audit fees paid.
(2)
There were no change of auditors’ firm during the audited period.
(3)
No reduction of 15% or more of the audit fees paid for the latest year as compared to
those paid a year before the latest year.
5.
Neither the Chairman, nor the general manager, managers of the Company responsible for
financial or accounting affairs served within the latest year at the auditors’ firm or related
affiliates.
6.
Transfer or pledge of shares by directors, managers and shareholders holding 10% or more
of the Company’s shares in the latest year and up to the date of printing of this annual
report:
(1) Change of shareholding by directors, managers and shareholders holding 10% or more of
the Company’s shares:
51
Name
Title
Shareholders
holding 10% or
more
Shareholders
holding 10% or
more
Xin Ping Holdings
Ltd.
Business Enterprise
Investments Group
Limited
2012
Increase/
Increase/ (decrease)
(decrease)
of
of Number Number
of Shares
Shares
Held
Pledged
As at 27 April 2013
Increase/
Increase/
(decrease) (decrease) of
of Number Number
of Shares
Shares
Held
Pledged
(477,000) 1,070,000
(3,138,000)
(639,000)
0
0 (3,091,000)
4,500,000
(2) No Directors, supervisors, managers and shareholders with more than 10 percent of
shareholders transferred their shares to related parties.
(3) No Pledgee is a related party.
7.
Information on the relation among top 10 shareholders as related parties referred to in No.
6 Publication of the Financial and Accounting Principles
27 April 2013
Shares held
by spouse
and minor
children
Shares held
Name
Business
enterprise
investments
group limited
Representative:
lee hsin
Xin ping
holdings ltd.
Representative:
zhu
xiao-qing
Morgan
stanley
internaitonal
company
limited
Cheerful gold
limited
Representative:
zhu
xiao-qing
No of
shares
23,771,141
shares
10,478,871
4,705,000
%
33.96%
14.97%
6.72%
No of
shares
0
0
0
%
0
0
0
Aggregate
shares held in
other’s name
No of
shares
0
0
0
%
0
0
0
Name of the related party as
referred to in no. 6
publication of the financial
and accounting principles or
being the spouse or second
degree family of the top 10
shareholders
Title
Relationship
(or name)
Peak crown Shareholders
holdings
of the
limited
relevant
companies
are brothers
Cheerful
gold
limited
None
Shareholders
of the
relevant
companies
are mother
and daughter
None
Remark
-
-
-
3,532,238
5.05%
0
0
0
52
0
Xin ping
holdings
ltd.
Shareholders
of the
relevant
companies
are mother
and daughter
-
Shares held
by spouse
and minor
children
Shares held
Name
Qiming
venture
partners ii,l.p.
Representative:
kwang zi ping
Chang
chao-hsiung
Peak crown
holdings
limited
Representative:
lee zhen
Hsin sheng ii
venture capital
company
limitd
Representative:
Kenneth Yen
Golden
hexagon
investments
limited
Representative:
William Keller
Tsao johua
8.
No of
shares
1,756,100
%
2.51%
No of
shares
0
%
0
Aggregate
shares held in
other’s name
No of
shares
0
%
0
Name of the related party as
referred to in no. 6
publication of the financial
and accounting principles or
being the spouse or second
degree family of the top 10
shareholders
Title
Relationship
(or name)
None
None
Remark
-
844,000
1.21%
0
0
0
0
None
None
691,100
0.99%
0
0
0
0
Business
enterprise
investments
group
limited
None
Shareholders
of the
relevant
companies
are brothers
None
677,113
0.97%
0
0
0
0
-
-
-
590,724
0.84%
0
0
0
0
None
None
-
538,723
0.77%
0
0
0
0
None
None
-
Number of shares and shareholding percentage in an invested company jointly by the
Company, the directors, the managers, or any company directly or indirectly
controlled by the Company:
March 31 2013
Invested Company
（Note）
Central Chief
Limited
Coland
Pharmaceutical
Company Limited
(Hong Kong)
Shanghai
Guochuang
Pharmaceutical
Company Limited
Investment by
company
Investment by the directors,
managers, and companies
Aggregate Investment
directly or indirectly
controlled by the Company
No. of
No. of
%
%
Shares
Shares
No. of
Shares
%
100
100%
-
-
100
100%
-
-
1
100%
1
100%
-
-
-
100%
-
100%
53
Invested Company
（Note）
Coland
Development
Company Limited
Heilongjiang
Province Tongze
Pharmaceutical
Company Limited
No. of
Shares
%
Investment by the directors,
managers, and companies Aggregate Investment
directly or indirectly
controlled by the Company
No. of
No. of
%
%
Shares
Shares
-
-
2,000,000
100%
2,000,000
100%
-
-
-
51%
-
51%
Investment by
company
Note：The company’s long term investment
54
IV.
1.
STATUS OF FUNDING
Capital and shares
(1)
Source of capital
(a)
Formation of capital
Authorised Capital
Issue
Year/Month
Price
2010／3
(Note)
1
2010／4
(Note)
2011／2
2011／4
2011／4
2011／10
Amount
1,500,000
No. of
Shares
1,500,000
1,000
Remarks
Consideration
Source of Capital o t h e r t h a n Others
C a s h
1,000 Establishment
None
Amount
Share swap
2,000 withshareholdersofCentral
Chief Limited, NTD1,000
Cash Injection of
10 200,000,000 2,000,000,000 11,500,200 115,002,000
None
NTD115,000,000
Cash Injection of
440 200,000,000 2,000,000,000 12,113,156 121,131,560
None
NTD6,129,560
Capitalisation of
10 200,000,000 2,000,000,000 26,909,042 269,090,420
profit of
None
NTD147,958,860
Capitalisation of
10 200,000,000 2,000,000,000 62,222,000 622,220,000 share premium of
None
NTD353,129,580
Cash Injection of
87 200,000,000 2,000,000,000 70,000,000 700,000,000
None
NTD77,780,000
1
2010／5
No. of
Shares
Issued Capital
1,500,000
1,500,000
-
2,000
-
-
-
Note：At the date of incorporation, the nominal value per share of the Company is NTD1. On
26 April 2010, the nominal value per share was increased to NTD10 and the authorized
share capital was increased to NTD2,000,000,000 by a resolution passed by the board of
directors.
(b)
Class of shares
27 April 2013
Class
Authorised Share Capital
No. of Shares circulated No. of unissued shares
Ordinary
(2)
70,000,000
130,000,000
Total Number of
Authorised Shares
200,000,000
Remarks
-
Types of Shareholders
27 April 2013
Type
Quantity
Governmental Financial
Organisation Organisation
Other Legal Individual Foreign Entity
Person
and Foreigner
55
Total
Number of
Shareholders
Number of Shares
Held
％ of Shareholding
0
3
35
3,331
0
403,000
4,010,493
0.00%
0.58%
5.73%
27
3,396
18,761,807 46,824,700
26.80%
66.89%
70,000,000
100.00%
Note：To the best of our knowledge, the Company does not investors from Mainland China.
(3)
Status of spread of shares
(a)
Ordinary shares
27 April 2013
Share Range Held
1 to 999
1,000 to 5,000
5,001 to 10,000
10,001 to 15,000
15,001 to 20,000
20,001 to 30,000
30,001 to 50,000
50,001 to 100,000
100,001 to 200,000
200,001 to 400,000
400,001 to 600,000
600,001 to 800,000
800,0011 to,000,000
1,000,001 or above
Total
(b)
(4)
No. of Shareholders
No. of Shares Held
% of Shareholding
13,218
5,219,855
2,979,653
1,373,856
1,109,001
1,444,756
1,773,463
2,046,712
2,673,398
2,398,210
2,512,285
1,368,213
844,000
44,243,350
70,000,000
0.02%
7,46%
4.26%
1.96%
1.58%
2.06%
2.53%
2.92%
3.82%
3.43%
3.59%
1.95%
1.21%
63.21%
100%
87
2,612
364
106
59
56
43
29
19
8
5
2
1
5
3,396
The Company did not issue any special shares.
List of main shareholders
27 April 2013
Name of Main Shareholders
Business Enterprise Investments Group Limited
Xin Ping Holdings Ltd.
Morgan Stanley Internaitonal Company Limited
Cheerful Gold Limited
Qiming Venture Partners II,L.P.
Chang Chao-Hsiung
Peak Crown Holdings Limited
Hsin Sheng II Venture Capital Company Limitd
Golden Hexagon Investments Limited
Tsao Johua
Shares
No of Shares
23,771,141
10,478,871
4,705,000
3,532,238
1,756,100
844,000
691,100
677,113
590,724
538,723
%
33.96%
14.97%
6.72%
5.05%
2.51%
1.21%
0.99%
0.97%
0.84%
0.77%
(5) Market price, net value and earnings per share, dividend and the related information
for the latest 2 years
Unit： NTD， thousand shares
56
Year
2011
2012
Highest
89
110
As at 31 March
2013
84.5
Lowest
61.1
58.5
74.5
Average
78.61
77.99
78.49
Before Distribution
After Distribution
25.24
24.91
31.84
21.24
*
-
No. of Weighted
Average Shares
Earnings per Share
（Note 3）
Cash Dividend
63,558
70,000
70,000
4.94
4.32
1.82
4
3.2*
-
Scrip Dividend
-
-
-
Item
Market Price per
Share（Note 1）
Net value per
Share（Note 2）
Earnigns per
Share
Dividend per
Share
Capitalisation Issue
Dividend Payable（Note
4）
Price/Earnings Ratio
16
18
（Note 5）
R e t u r n o n Price／Dividend
20
24
Investment
Ratio（Note 6）
Cash Dividend Yield
5%
4%
（Note 7）
*The dividend was recommended by the board of directors and subject to the shareholders’
approval at the 2013 annual gereral meeting to be held on 25 June 2013.
Note 1：These are the highest and lowest market price in the relevant years and the average
market price are calculated based on the transation value and transaction quantity of
the relevant years.
Note 2：These are based on the number of issued shares at the end of the year and the resolution
passed by the shareholders at the next year’s annual general meeting.
Note 3：No adjustment is required to be made, as we do not issue shares at nil consideration.
Note 4：We did not issue any shares with right on the condition that the dividend payable of the
relevant year may be accumulated and distributed at a later year with prifits.
Note 5：Price/Earnings Ratio＝The average closing price per share at the relevant year／
Earnings per share.
Note 6：Price／Dividend Ratio＝The average closing price per share at the relevant year／
Cash dividend per share
Note 7：Cash Dividend Yield＝Cash Dividend per share／the average closing price per shareat
the relevant year.
Note 8：The net value per share and earnings per share were the same as those set out in our
Cosolidated Financial Statements for the first quarter of 2013 reviewed by our auditors.
The rest figures are for the latest year.
(6)
Dividend policy and the implementation thereof
(a)
Dividend policy set out in the articles of association
According to the Articles of Association (“Articles”) adopted by the Company on 7
April 2011, dividend distribution may be recommended by the board of directors to the
shareholders for approval by an ordinary resolution, provided scrip dividend shall be
57
approved by a special resolution. The following shall be firstly set aside from the profit for
the relevant year before dividend distribution: (i) a reserve for tax payment for the relevant
year, (ii) an amount to off set losses incurred in previous year(s). Before the board of
directors recommends any dividend payment, 10% of the profits after deduction of the
aforesaid items set out in (i) and (ii) shall be set aside as prifit reserve or other reserve the
diectors consider beneficial for the Company. Thereafter, the board of directors may, after
approval by the shareholders, distribute the profit in accordance with the relevant laws and
in the following priority and measure:
(i)
Up to 10% as bonus to employees, including employees of an affiliate of the
Company;
(ii)
Up to 5% as remuneration for the Directors; and
(iii) No less than 30% of any part of the remaining profits after tax for the relevant
financial year to the Members as dividends (by way of cash or stock or a
combination of both) after taking into consideration the Company’s then
operational conditions, working capital requirement and long term financial plan,
provided to the extent that the Company has sufficient available funds. Cash
dividends shall not be less than 10% of the total amount of dividends proposed
to be distributed.
(b)
Dividend recommended for 2012 （Note）
Year
Item
Cash Dividend （NTD)
Capitalisation of Profit （NTD)
Total
Amount per Share
Total
2012
(to be distributed in 2012)
3.2
224,000,000
Amount per Share
－
Total
－
Amount per Share
3.2
Total
224,000,000
Note: The dividend was recommended by the board of directors and subject to the
shareholders’ approval at the 2013 annual gereral meeting to be held on 25 June 2013.
(7)
Bonus for employees and renumeration for directors：
(a) It is set out in the Articles that, after deduction of the aforesaid 10% reserve, up
to 10% of the net profit may be for employees’ bonus and up to 5% for
remuneration to the directors.
(b) We did not recommend any bonus for the employees and remuneration to the
directors for 2012 and made any bonus payment to the employees and remuneration
to the directors in 2011.
(8)
We did not repurchase any of our shares during 2012.
58
2.
We did not issue any bonds, special shares or overseas depository receipts.
3.
Employees Share Option：
(1)
Share Option Schemes not yet expired
31 March 2013
Share options
granted
Approval Date
Grant Date
No. of Units
2010 First Grant
2012 First Grant
2012 Second Grant
23 August 2011
101/06/13
101/06/13
10 Decembere 2010
20 Jun 2012
1 November 2012
238,220
315
440
No. of shares 1.59
0.45
0.6285
under
Exercisable
Option/Total
Issued Shares
(%)
5 years from 5 October
5years from the grant date
5years from the grant date
Option Period
2011(being the listing date of the
Company)
Execution
Issue of new shares
Issue of new shares
Issue of new shares
Measure
Type A：
2 years after the listing date：50%
Limitation on 3 years after the listing date：75%
the Exercise
4 years after the listing date：
2 years after the grant date：50%
Period and % 100%
of option
shares
Type A：
5 years from the listing date:
100%
0
0
0
No. of Shares
Exercised
Total
0
Consideration
for the
Exercised
Option
No. of Shares 725,000
under Options
not yet
Exercised
Subscription NTD10
Price per Share
for Options not
yet Exercised
0
0
225,000
320,000
NTD68.4
NTD77.10
No. of shares 1.04
under Options
not yet
Exercised/
Total Issued
0.32
0.46
59
Shares
(%)
Impact on
Shareholders’
Equity
No material impact
No material impact
No material impact
(2) Names of and number of option shares granted to the managers and top 10
employees and status of exercise thereof as at the date of the printing of this annual report
31 March 2013
Title
MANAGERS
Vice
president
of Sales
Departmen
t
National
Sales &
Marketing
Director
No. of
Shares
Name
under
（Not
the
e 1）
Option
s
Exercised
No. of
Shares
under
No. of
the No.
Shares
Optio of
No. of
under
Total
Subscripti
ns／ Share
Considerati Exercised Shares
on Price
Total
Option/Tot
on
s
Issued
al Issued
Shares
Shares
Not Yet Exercised
No. of
Shares under
Subscripti
Option
Total
on Price Considerati Granted but
Not Yet
on
per Share
（NTD） (NTD‘000) Exercised/To
tal Issued
Shares
Li
Wan
Jun
705,00 1%
Hu
(Note
0
Tong
(Amon 2)
g
Chen
Chief
which
g
Investment
Qing 280,00
Officer
0
Qi
lapsed
Vice
)
president
of Business
Developme Cai
Xin
nt and
Marketing
Departmen
t
Jiang
Medical
Yan
Device
Fei
Director
Guo
External
Zhi
Affairs
Min
Officer
National
Wang
Sales
Feng
Director
Lou
Product
Developme Jin
nt Director Fang
He
Medical
Registratio Wen
n Director Ge
-
-
-
60
-
195,00
0
100,00
0
130,00
0
10.0
68.4
77.1
18,343
(Note 3)
0.61%
(Note 2)
Title
EMPLOYEES
Vice
president
of Sales
Departmen
t
National
Sales &
Marketing
Director
No. of
Shares
Name
under
（Not
the
e 1）
Option
s
Exercised
No. of
Shares
under
No. of
the No.
Shares
Optio of
No. of
under
Total
Subscripti
ns／ Share
Considerati Exercised Shares
on Price
Total
Option/Tot
on
s
Issued
al Issued
Shares
Shares
Not Yet Exercised
No. of
Shares under
Subscripti
Option
Total
on Price Considerati Granted but
Not Yet
on
per Share
（NTD） (NTD‘000) Exercised/To
tal Issued
Shares
Li
Wan
Jun
Hu
Tong
Chen
Chief
g
Investment
Qing
Officer
Qi
Vice
president
of Business
Developme Cai
Xin
nt and
Marketing
Departmen
t
Jiang
Medical
Yan
Device
Fei
Director
Guo
External
Zhi
Affairs
Min
Officer
Financial Wang
Manager Ting
Gong
Marketing
Guo
Director
Bo
Gu
Marketing
Song
Dirctor
Wei
Gu
HR
Yan
Manager
Fei
Commeric Dong
al Director Lei
National
Wang
Sales
Feng
Director
Sales
Yang
Director
Jun
870,00 0.74%
0
(Amon
g
which
330,00
0
lapsed
)
-
-
-
-
220,00
0
130,00
0
190,00
0
10
68.4
77.1
40,699
0.74%
Note1: Li Wan Jun, Vice president of Sales Department and Cai Xin, Vice president of
Business Development and Marketing Department and Gong GuoBo, Marketing
Director resigned and left the Company and their option not yet exercised was lapsed.
61
Note 2: The percentage is calculated base on 70,000,000 shares issued. If the share capital of
our ordinary shares changed, number of shares under exercisable options may be
adjusted acordingly.
Note 3: The total consideration is calculated based on the retrospective adjustment of the price
adjustd after the payment of cash dividend.
4.
We did not issue any employees restricted new shares.
5.
We did not conduct any mergers, acquisitions and spin off.
6.
Use of Proceeds
The proceeds from the capital injection in 2010 and 2011 were used up in accordance with
the relevant plans.
62
V.
OPERATION STATUS
1. Business Content
1) Scope of Business
(a) The main content of the Company’s business
We are a company specialised in the development and sale of bio-tech medicines, which
cover the therapeutics of various areas, including hepatitis, respiratory system, oncology,
cardiovascular, medical devices and IVD reagents. We cooperate with overseas and domestic
research organizations as well as bio-tech pharmaceutical companies for the development of
medical products with high efficiency, safety and high quality so as to provide the doctors and
patients with professional pharmaceutical services.
(b) Sales Proportion
2011
Sales Income
Product
Medicines
%
Unit: NTD’000; %
2012
Sales Income
%
1,273,370
84.72%
1,433,257
83.24%
Medical Devices
209,632
13.95%
203,518
11.82%
Others (Note)
19,990
1.33%
84,974
4.94%
1,502,992
100.00%
1,721,749
100.00%
Total
Note: Income of service fees
(c) Existing Products
The Company’s existing products cover the therapeutics of various areas, including hepatitis,
respiratory system, cardiovascular, spine suregery and antibiotics:
Therapeutic Area
Listing
Year
2005
Product
name
Dai Ding
Generic name
Indications
Adefovir
Anti-HBV
Lamivudine
Anti-HBV
Hepatitis
2012
Yin Ding
63
Supplier
Tianjin Institute
of
Pharmaceutical
Research
Anhui Biochem
United
Pharmaceutical
Co
2012
Wei LiQing
2011
Bi Duo Yi
Entecavir
Anti-HBV
Jiangxi
QingFengPharma
COPD
Zhejiang Xianju
Pharmaceutical
Rhinitis
Zhejiang Xianju
Pharmaceutical
Tiotropium
Bromide
Respiratory
2013
Cardiovascular
2013
Yi Qing
Lezhiping
Mometasone
Furoate Aqueous
Nasal Spray
Olbetam
Mycophenolate
Immuno-suppressa
nt
2008
Antibiotics
2012
Shun You
Mofetil
Amoxicillinand
Augmentin
Clavulanate
Tolterodine
Overactive Bladder
2013
Detrol
Tartrate
2010
Medical Device
2013
Spine Implants
Spine Balloon (PKP)
Treatment of
Hyperlipidem
ia
Pfizer
Organ
Transplant
Zhejiang
Jianfeng
Pharmaceutical
Bacteria
Infection
GSK
Treatment of
OAB
Pfizer
Spine
Surgery
Medtronic
The
treatment of
vertebral
compression
fracture
Kanghui
(d) New Product Development Plans
Current and future new product development plans are as follows:
(i) Theraputics for hepatitis, including anti-hepatitis virus and liver supplementary
medicines.
(ii) Respiratory medication, including the therapeutics for chronic obstructive pulmonary
64
disease (COPD), asthma, rhinisis and etc..
(iii)Therapeutics for cancers, with special attention to medicines for target therapy,
indications focused on leukemia, prostate cancer, liver cancer, breast cancer, multiple
myeloma and other cancers.
(iv) Medical devices, including orthopedics (trauma and joint), dental instrument and
implants, ophthalmic instruments.
(v) IVD reagents.
(2) Industry Overview
(a)
Current Status and development of pharmaceutical industry
China’s market for the sale of pharmaceutical products
In 2012, sales of medical commodity were estimated to reach RMB1,074.6 billion and
RMB1,270 billion for 2013, with an annual growth rate of +18.5%. (Source: Shanghai
Pharmaceutical Industry Business Association)
In “The 12th 5-year National Strategic Plan for the Development of the New Arising
Industries” (“Plan”), it is said that they will use best efforts to have the annual growth rate
for biology production industry increased by 20% or more during the 12th 5-year period
and the production value will be reached RMB4,000 billion, among which RMB 3,600
billion will be attributed to the total production value of bio-medical industry. It is also
said in the Plan that in 2015, a platform for the development of new drugs with
international standard, including generic engineering drugs, new types of vaccine, anti
body drugs, chemical new drugs and modern Chinese medicines will be formed, and the
technology for manufacture of drugs and the production of equipment will be substantially
improved.
With a leap of China’s economy, its medicines market grows fast. According to KPMG’s
report, in between 2011 and 2012 there recorded 132 megers and acquisitions in China’s
pharmaceutical industry, among which 94 transactions made public involving US$5.2
billion. Such record made China overtook German and Japan, become the second largest
global pharmaceutical market, only next to the USA. China will become a key player in
life sciences and medical and health care industry and in the next 10 years, China will
become the leader for the development and creation of new drugs. As said in KPMG’s
report, the challenges faced by the life sciences and medical and health care industries,
including drugs, medical devices and sales network, are the highly diversified structure of
industry as well as the flooded cheap and poor qualify products in the multi-level market.
65
Having said so, the existing market is experiencing substantial change to become more
mature gradually. There are 2 factors to drive such change: 1. The new regulating
system makes the coprporates emphasis more on the quality and safety of the products; and
2. The operation mode of the corporates themselves became more mature. These
factors laid a good foundation for the development of life sciences and medical and
healthcare industries. (Source: KPMG)
(b)
Connection among the Upstream, Middle Stream and Downstream of the Industry
We are the only bio-tech pharmaceutical company, specializing in the development and
marketing of branded medical products, which is listed in Taiwan and focused in China’s
medical market.
The pharmaceutical market links drug manufacturers, companies providing marketing
services for medical products (“Service Providers”), distributors and retailers. The
Service Providers provide services for the sales and promotion of the licensed products.
The main promotion service includes promoting product image, offering professional
education in the therapeutical areas of products, assist the doctors’ understanding in the
clinical use of , effects and side effects of, and other clinical matters relating to, the
products, sponsoring the industry related conferences and other promotion activities and
the holding of medical research and discussion seminars. The distributors rapidly and
efficiently deliver thousands of different products from numerous suppliers to sales
location spreading all over China with an aim to reduce the distribution expenses in the
supply chain.
Retailers include the hospital dispensary, chain drug stores and
independent community pharmacies, community clinics and other retail terminals.
Retailers treating distributors as their suppliers may make the product supply more stable
and save the transaction costs and management expenses. The following figure show the
sales supply chain and the market scale of China’s pharmaceudical market:
2011 Scale (hundred million)
2019 Forecast(hundred million)
CAGR
Hospitals
5,040
22,507
20%
Drug Stores
1,540
6,914
21%
Third Terminal＊
1,510
10,766
28%
Total
8,090
40,188
22%
＊：The third terminal includes rural medicine outlets, township hospitals and community service centers.
Source：PICO
66
2011sales for the 3 largest
drug terminals
the 3rd
termin
al
19.0%
2019 sales forecast for the 3
largest drug terminals
the 3rd
termin
al
26.8%
hospit
als
62.0%
drugs
stores
17.2%
drugs
stores
19.0%
hospit
als
56.0%
( c ) Development trends for all Products
The key products developed by the Company for distribution are in the areas of
anti-hepatitis, respiratory system, oncology, cardiovascular, spinal fixation products,
antibiotics and spine balloon (PKP). Below is a description of each markets for the
products.
(i)
The China market for Hepatitis B
Hepatitis B, caused by the Hepatitis B Virus (HBV) and transmitted through blood or
other fluid of infected patients, is an infectious disease with chronic nature. It has
various clinical performance, including chronic, acute or serious hepatitis. It is easy
to develop into chronic hepatitis and cirrhosis of liver and in few cases, into
hepatocellular carcinoma (HCC).
According to the report by WHO, there were about 2 billion people infected with
HBV and 350 million among which infected with chronic hepatitis. Every year,
about 1 million people die from liver failure, cirrhosis and hepatocellular carcinoma
(HCC) caused by HBV.
According to the research on China’s hepatitis epidemiology in 2006, the carrying
rate of HBS Ag by general people aged from 1 to 59 was 7.18%. Based on the
aforesaid figure, it is estimated that there are 93 million people in China infected
with chronic hepatitis.
Among all kinds of anti-hepatitis drugs in China, the largest use is nucleoside class,
which is about 76%.
Interferon is the second, about 20%. In the market of oral
nucleoside class for HBV in China, there are mainly 4 components, namely,
Lamivudine, Adefovir, Entecavir and Telbivudine.
In 2012, among oral nucelside
class market in China, Entecavir has the highest use rate of 42%, the second is
Adefovir of 27.5%, Lamivudine of 21.4% and Telbivudine of 9.1%. Our products
include 3 of them, namely Entecavir, Adefovir and Lamivudine.
67
China’s Anti-HBV Drug market (Unit: RMB Millions)
(Blue)Others
(Red) Interferon (Green) Oral nucleoside
Chinese HBV oral nucleoside therapy proportion
(Blue) Telbivudine (Red) Entecavir (Green) Adefovir (Purple) Lamivudine
Source: IMS Health Inc.
(ii)
Market for Respiratory Products
68
Chronic obstructive pulmonary disease (COPD)
COPD is a common disease that is most harmful to human health, and is one of
the major chronic diseases worldwide. Symptons of COPD are chronic bronchitis
and emphysema. In the long run, it will narrow the respiratory passages.
Although asthma may also narrow the respiratory passages, the unreverseable and
time extensive of COPD will become more and more serios as time goes by. COPD
is caused by inhaling of toxic paticles and smokong is one of the main causes.
Machanism for the infection of COPD is not clear. Inhaling of toxic particles or gas
may cause pulmonary infection and smoking may cause infection and directly harm
the lungs. The various risk factors of COPD may cause similar infection which
then leads to COPD. COPD is the fourth cause of death worldwide. According to
the report from WHO, the number of patients of COPD worldwide in 2004 was 64
million and over 3 million COPD patients died in 2005. The rate of death for
COPD is around 5%. The morbidity of COPD grows fast in the recent years. The
high threathen of death leads to the related market reaching USD27 billion.
Worldwide sales for one of the drugs treating COPD, SPIRIVA (originated from
Boehringer Ingelheim) from 2010 to 2012 were US$3.799 billion, US$4.399 billion
and US$4.58 billion respectively, which already became the top 10 popular drugs
worldwide. (Source: 1. Therapeutic Directory for Chronic Obstructive Pulmonary
Disease 2007 Revision; and 2. EvaluatePharma)
In China, COPD is also an important chronic respiratory disease seriously
endangers people’s health. According to the Therapeutic Directory for Chronic
Obstructive Pulmonary Disease, they have investigated a total of 20,245 audlts in 7
districts, the rate of incidence of COPD was 8.2% for people of 40 years old or above.
SPIRIVA originated from Boehringer Ingelheim was included in China’s List of
Medical Insurance in 2009，due to the low rate of universal medical services, its sales
were only 2% of those of the worldwide. (Source: 1. Therapeutic Directory for
Chronic Obstructive Pulmonary Disease 2007 Revision; and 2. RDPAC, R&D
Based Pharmaceutical Assocation Committee)
Our Tiotropium Bromide was firstly sold in China in 2011 as a generic drug.
The main competitors are Boehringer Ingelheim and Chia Tai Tianqing. Following
the recognition of and attention to, COPD by the vast patients in China, the product
has immence potentical in China market.
Rank
Major causes of
death from diseases
for urban dwellers in 2011
Death
Rate
69
Major causes of
death from diseases
for rural dwellers in 2010
Death
Rate
1
Malignant Tumors
27.79%
Malignant Tumors
23.62%
2
Heart Disease
21.30%
Cerebrovascular disease
21.72%
3
Cerebrovascular Disease
20.22%
Heart Disease
19.37%
4
Respiratory Diseases
10.56%
Respiratory Diseases
13.31%
5
Injury and Poisoning
Injury and Poisoning
5.47%
Source: China Health Statistics Yearbook 2012
8.85%
Allergic rhinitis
Allergic rhinitis is an upper respiratory disease. The patient has the symptoms
of running nose, nasal congestion, and for serious case, nasosinusitis and asthma.
According to the survey by the 31 members (excluding China) of the World Medical
International Foundation in 1996, the incidence rate of allergic rhinitis is in between
10% and 40%, and there is a rising trend by years.
In 2005, China’s EENT Hospital of Fudan University first launched a nasal
disease awareness day "Love Nose Day" on the second Saturday of April every
year. On the 6th “Love Nose Day” in 2009, EENT Hospital of Fudan University
announced the current incidence rate of allergic rhinitis reached about 10% in
Shanghai. In another survey, the incidence rate of allergic rhinitis was 8.0% ~
21.4% in 11 cities including Beijing, Shanghai and Guangzhou.（Source: Life Times,
April 19, 2013, 21st Edition, Prevention from Allergic Rhinitis in the Spring）
In China, allergic rhinitis is in a rising trend, but only a small portion received
proper treatment in the hospitals. China has a large market capacity for anti-allergic
rhinitis drug, sales of one nasal inhaler exceed RMB500 million. If calculated by
the ratio of population, potential market for allergic rhinitis drug will be as high as
RMB6 billion. The global sales of Nasonex originated from MSD for 2009 to 2011
were: US$1.198 billion, US$1.238 billion and US$1.299 billion. According to data
from IMS, sales of Nasonex from MSD for 2009 to 2011 were: RMB28.8 million,
RMB43.01 million and RMB65.81 million, there is tremendous room for growth in
the future.（Sources: 1. IMS; 2. RDPAC, R&D Based Pharmaceutical Association
Committee）
Our licensed Mometasone Furoate Nasal Spray is the front-line drug for the
treatment of allergic rhinitis.
It was already included in the List of Medical
Insurance in China and it is the only inhaled glucocorticosteroi applicable for
children of 3 years old and above and the newest generation with best effect.
Currently, our competitor is Nasonex originated from Schering. Our licensed
Mometasone Furoate Nasal Spray is manufactured by Zhijiang Xianju Pharmacetical
Company and is the first domestic listed product after the listing of Nasonex
originated from Schering.
70
(iii)
Market for Antibiotics
China’s market scale for antibiotics in 2011 was about RMB67.9 billion, with a
growth rate of -1.9%. The largest portion in the market for antibiotics is
cephalosporin, the sales of which was RMB33.8 billion, with a market share about
57.1%, and growth rate of -1.3%. Sales for other Beta-lactam antibiotic is RMB5.8
billion, with a market share about 8.6% and growth rate of 8.4%. Sales of
Amoxicillin and Clavulanate in the market for other Beta-lactam antibiotic is
RMB1.44 billion, with a market share about 24.9% and growth rate of 33.44%.
(Source: IMS Health Inc.)
Our licensed antibiotic product: Amoicillin and Clavulanate for injection
firstly became one of the top 50 worldwide popular prescribed drugs in 1987.
Thereafter, it continued to be the worldwide popular drug. Its worldwide sales in
2010 was US$966 million, ranking No. 3 of the worldwide sales of antibiotics.
Amoicillin and Clavulanate in China is catagorised as antibiotics with non-restricted
use. Benefitted from the new policy of control of antibiotics, its sales in 2012
reached RMB160 million, among which RMB105 million for sales of Amoicillin and
Clavulanatefor injection ， bucking the trend with a fast growth. (Source:
EvaluatePharma and IMS Health Inc.)
(iv). Market for Lipid Lowering Products
Hyperlipidemia means the increase of the index number of the cholesterol or
triglyceride (TG) in plasma. It represents the increase of one or some of the
lipoprotein. It is also known as dyslipidemia. Acipimoxis primarily applied to
hyperlipidemia with the character of elevated TG index number or mixed
dyslipidemia.
Global incidence rate is about 5 to 6 ten thousand. There are approximately
940,000 cases of new incidence per year and 500,000 cases of death. The incidence
rate of dyslipidemia for American audlts is about 69%, among which 33% for
hyperlipidemia. According to the information from China’s Ministry of Health, the
incidence rate of dyslipidemia for people over 18 years old is 18.6%. Number of
patients in China reaches 160 million, among which 11.9% for hyperlipidemia.
In 2001, the overall market for lipid lowering drugs in China reached nearly
RMB13 billion, of which statins contributed more than 80% of the market share,
Acipimox was ranked No. 7 out of all lipid-lowering drugs, with a market share of
approximately 3.5%. According to IMS data, growth for China’s sales of Acipimox
slowed down from 2007 to 2010. The overall market is currently about RMB80
million, of which the leading brands were Yiping (Originated from Lunan Bet) and
our licensed lipid-lowering product, Le Zhi Ping (Originated from Pfizer).
71
(v)
Market for Urination Products
Tolterodinel-tartrate extended release capsules are for the treatment of
overactive bladder OAB, urgent urination, frequent urinationry, urgent incontinence
and etc.. The incidence rate of OAB for people over 40 years old was 11.30% in
China and there are at least 2 million of potential targets. In 2011, China’s OAB
market scale was about RMB45 million. After Astellas, GSK, and Pfizer entering
into the market, in the next five years and compound annual growth rate may reach
25%.（Source：IMS Health Inc.）
Coland’s licensed tolterodine tartrate extended release capsules , since its listing
in 1998, have been used by over 15 million patients. At present, it still remains to be
the No. 1 prescribed drugs for OAB worldwide. At present, the leading competing
products include Tolterodine from Nanjing Meirui.
(vi)
The market for spinal implant
In the past few years, China’s orthopedic implant market has enjoyed the
compound annual growth rate of 22.1%. It should maintain the high growth rate in
the future as a result of aging population, higher income and expansion of hospital
coverage. According to Frost & Sullivan, China’s orthopedic market will maintain an
annual growth of 18-20% up to year 2015. China’s orthopedic market has divided
into spine/joint/trama. The market size in 2009 is around RMB 6 billion. It is
estimated the growth of joint and spine will outpace the growth of trama.
There are nearly 40 million patients for joint diseases in China. With the lifting
of people’s living standard and health care coverage, it is estimated China’s demand
for joint replacement will grow at 25% annually. There are 69.4million people aged
over 50 with osteoporosis which cause 687,000 hip fractures. The health care
spending is estimated to be USD12.5 billion in 2020 and grow 20 times by 2050.
Due to the limitation on research and development and production capability,
China’s orthopedic market is dominated by multinational companies. In 2009,
multinational companies have 56% of total market share, mainly by J&J, Medtronic,
Syntex, Stryker etc. Sofamor, the Company’s licensed product from Medtronic, is the
leading brand in China’s spinal implant.
(vii)
Ballon（Vertebroplasty minimally invasive medical device PKP & PVP）
Vertebroplasty minimally invasive surgery has been examined by developed
countries as an effective surgery to treat vertebral compression fractures. In western
countries, this kind of surgery is commonly used while in China, it is just starting to
use it. In view of the incident rate in China and the development trend in other
developed countries, this treatment surgery should have very good growth potential
72
in China. The driving forces are from rising aging population, increased osteoporosis
and the resultant vertebral compression fractures; improve social health care system,
to help the penetration of this vertebroplasty minimally invasive surgery. Beijing has
already included the PKP surgery in insurance coverage for II A hospitals and above.
With the continuous improvement of the surgery, it is expected to have more districts
to include PKP under insurance coverage for reimbursement, hence to help the
patients to select PKP and increase the growth of the industry.
There were around 14,600 surgery cases in China in 2010, roughly the same
number as US in 2001-2001. From the prior US experience and the vast patient base
and gradually improving healthcare system, it is projected that the PKP surgery will
continue to grow at 30-35% annually. By 2015, it will be around 80,000 surgery
cases a year, accounting for 50-60% of total number for vertebroplasty minimally
invasive surgery. The surgery cases for PKP and PVP combined are estimated to be
140,000-160,000 cases, around the same number for US in 2006. (source : The
research report of China’s spinal invasive devices market by China Business
Consultant Network)
(d) Competition
Our Company’s main product is Adefovir for anti-HBV, with over 70% of the
total revenue for 2012. In China’s market for therapeutic drugs for Hepatitis B ,
main competitors with Adefovir products are GSK and Jiangsu Chia TaiTianqing.
GSK is a globally well-known pharmaceutical company, whose main products are
prescribed drugs, non-prescribed drugs, vaccines and health care products, among
which, Telbivudine and Adefovir are for the treatment of hepatitis B. Jiangsu Chia
TaiTianqing is a Sino-foreign joint venture pharmaceutical company, whose drugs for
the treatment of hepatitis B are Adefovir and enteavir. We have 3 products for the
treatment of hepatitis B: Lamivudine, Adefovir and Entecavir, among which
Adefovir was manufactured by Tianjin Institute of Pharmaceutical Research and
launched by the Company in 2005. We have the third place of the market share.
In 2012, among China’s HBV oral nucleoside therapy, the market share of Adefovir
was 37%. Adefovir from the Company together with GSK and Jiangsu Chia Tai
Tianqinghad nearly 80% of the market share.
In the "Prevention and Treatment Directory for Chronic Hepatitis B (2010 edition)
(“Directory”) announced by the Chinese Medical Association andHepatology&
Infectious Disease on 31 December 2010, it is said that the joint use of Adefovir and
Lamivudine can effectively inhibit HBV DNA for patient who is resistant to
Lamivudinehad, promoting the normalization of alanine aminotransferase (ALT).
The joint use of these 2 drugs may lower the occurance of resistence to Adefovir and
based on various research, for those compensated and decompensated hepatocirrhosis
patients with resistence to Lamivudine, the joint use of Adefovir is effective. For
73
those who do not use any other nucleoside drugs, Entecavir may used. As the
Directory is the reference for the prevention and treatment of HBV to the doctors in
China, in its new edition, the effect of joint use of Adefoviris particlularly
emphasized, which would help the lay the market position of Adefovir for the
treatment of HBV. At present, our products include Adefovir, Lamivudine and
Enteavir
(3) Technology and R&D Status
(a) Product Development Fees
Expenses for product development were $28,000 in 2011and $27,000 in 2012 and up
to the date of printing of this annual report, representing about 2% of total revenues.
(b) Products in development
In the latest year and up to the date of printing of this annual report, main products
jointly developed with business partners and their repective expected time for the
obtaining of the drug permit:
(i) Pharma products:
Indications
Hepatitis
Respiratory
Oncology
G.I.
Medicine Name
Expected
time to
obtain drug
permit
Entecavir dispersible tablets
2015
Recom. HSA-Interferon α2b fusion
2017
Tenofovir
2017
Compound ipratropium bromide
2014
Ciclesonide aerosol
2015
Beclomethasonedipropionate Aerosol
2016
Irinotecan Injection
2014
Temozolomide capsule
2016
Vorinostat
2017
Capecitabine
2017
Imatinib
2017
Bortezomib
2017
Alvimopan
2016
74
C.V.
Metoprolol succinate sustained-release tablets
2017
(ii) Non-Pharma Products:
Indications
Products Name
Expected
time to
obtain
permission
Dental
Dental Implant
2014
Scanning Laser Ophthalmoscope
2014
Fluorescence Scanning Laser Ophthalmoscope
2014
Handheld-Fundus Camera
2015
HIV/HBV/HCVDiagnosisIVD reagents
2014
Ophthalmology
RNA Diagnosis
(4) Long term and Short Term Development Strategy and Plan
(a) Short Term Development Strategy and Plan
(i) For drug products：

Continuously to expand sales network through the acquisition of our regional
sub-distributers

Bring in European, American foreign registered products to accelerate growth

Bring in product strategy, in addition to the national license, to actively seek the
opportunity for regional and provincial license
(ii) For medical devices：

Strengthen the depth of orthopedic devices andstep into the field of dental implants

Continue to explore colaboration with high value added medical device suppliers
(such as ophthalmology)
(iii) For IVD regeants：
Invest in world leading IVD reagents and bring in the same to China’s market

(b)
Mid Term Development Stretegy and Plan
(i)
For Drug Products：

Increase product mix, fromstrong to large: hepatitis and respiratory / mental /
neurological and other niche markets, becoming China's leading specialty
75
pharmaceutical companies (Specialty Pharma).

Continue to invest in new product development; it is expected at least one product
launched per year and 3 to 5 first generic products developed. Continue to expand
the scale of revenue and increase the synergy of maketing and sales

Continue to be devoted in the development of high value-added products, and
gradually from the development of branded generic drug to innovative new drug and
tintroduce foreign originated products and products from Taiwan to China’s market
(ii)
For Medical Devices：

Continue to introduce dental related products lines, expandingmarket share in China
of dentistry so as to lay a foundation in dental devices
(iii) For IVD Regeants:

Develop high-end technology IVD reagents, enter into Taiwan and Southeast Asia
markets
(c) Long Term Development Strategy and Plan:
(i) For Drug Products：

Continueto invest in new product development, development of a 1 ~ 2 Chinese class
one new drugs and self-developed international class new drugs
(ii) For Medical Devices：

Continueto expand the field of medical devicesthrough investment, acquisition and
joint venture

continue to search for high value addedmedical devices from Taiwan and China and
sell the same in China, Taiwan and Southeast Asia
(iii) For IVD Regeants:

2.
Strengthen the relationship with business partners and expand the introduction of
high quality produce pipeline through joint ventures and investment
Market and Sales Status
1) Market Analysis
(a) Markets for main products
Market Location
China
Taiwan
Total
2011
Amount
1,502,992
1,502,992
76
%
100
100
Unit：NTD’000
2012
Amount
%
1,721,749
100
1,721,749
100
(b) Market Share
According to 2012’s IMS statistics, market share of Adefovir for in China’s HBV oral
nucleoside therapy was 37% and the collective sales from GSK, Jiangsu Chia Tai Tianqing
and our Company had a market share of approximately 80%.
(c) Market’s Future Demand and Supply and Growth
Our products are mainly sold in China, over 70% of the sale revenue for 2012 was from
products for the treatment of Hepotitis B. In 2012, we obtained exclusive distribution right
for Lamiudine-Yin Ding from Anhui Biochem United Pharmaeutical Company in China’s
major market (Shanghai, Jiangsu, Guangdong and Shaaxi). Lamivudine is the first
antiviral nucleoside analogue listed in mainland China and was already included in the
national basic drugs list and national medical insurance catalog. Itis the front-line drug for
the treatment of hepatitis B. In addition, we started to sell Entecavir (the fast growing anti
HBV oral nucleoside therapy in China for the recent years) in Heilongjiang Province
through the acquisition of Heilongjiang Province Tongze Pharmaceutical Company Limited.
In addition, we dedicate ourselves in establish new products, enrich our products
pipeline, such as respiratory products. Although at present, they only have a small maket
scale, yet they are one of the fast growing drugs in the recent years. Mometasone Furoate
Aqueous Nasal Spray lauched in 2013 is the front-line drug for the treatment of allegic
rhinitis. It was already included in the NRDL. It is the only inhaled corticosteroids
applicable for children over 3 years old and the newest generation with best effect. Currently,
the only competitor is the original drug maker Schering-Plough(Nasonex). Coland has the
exclusive sales rights of Zhejiang Xianju Pharmaceutical’s product mometasonefuroate nasal
spray, which is the first listed product in China subsequent after the originated manufacturer.
In addition, we introduced new antibiotic from GSK, the internationally well-known
pharmaceutical manufactures in 2012 and lipid lowering product Lezhiping from Pfizer as
well as Detrol for the treatment of OAB in 2013. Accordingly, the market development for
the new therapeutic areas and the speed of growth are closed related to our progress of
development in the future.
In addition to the pharmaceuticals market, we also have a positive view on the
development of medical devices. The propotion of the sales of medical devices as of total
sales of drugs in China is much lower than those in countries in Europe and the USA. In
the past few years, growth rate of medical devices was higher than that of drugs. We
stepped into the field of medical devices in 2010. In addition to spine implants, we also
stepped into the field of dental implants through investment in 2013 and we obtained the
distribution right for spine balloon in Shanghai.
77
Chinamedicaldevicemarket
(inHundredMillionRMB)
1400
1200
1000
800
600
400
200
0
19% 20% 19% 20%
17%
14% 14%
17%
23% 23% 23% 23%
14% 15%
25% 24%
19%
17% 18% 17%
medicaldevicesmarketsize
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
medicaldevicesmarketgrowthrate
pharmaceuticalmarketgrowthrate
(d).
Competitiveness
78
30%
25%
20%
15%
10%
5%
0%
The company’s competitive niche:
Experienced management team,capabilities of professional brand development and
marketing and familiarity with the relevant laws and regulations for the
pharmaceutical industry in China


One-stop service management – complete services management from product
development / registration / clinical / health insurance / drug prices / bidding/
marketing / channel / brand

Focus on the development and marketing of highvalue-added products, maintain
good partner relationship with top research institutions

A sales-oriented biopharmaceutical company

Based on market characteristics in different regions of China, using different
strategies and different characteristics according to regional needs and develop
appropriate pipeline network
(e). Advantageous and Disadvantageous Factors on our future development and corresponding
strategies
(i) Advantageous Factors
The trend of China’s health care market maintains fast growth and it is attributed by the
following reasons:
① Fast growing aging population increases the potential demand for medicine
As the most populated country among the developing countries, the aging of Chinese
population is accelerating its growth. Dai Xiang-Long, the Secretary to the Party Organization
of Council of China Social Security Fund, said China has entered into aging society since Year
1999 when it’s the beginning stage. Until the end of 2012, people aged over 60 years old have
accounted for 14.3% of total population; it is projected that in 20 years, the Year 2033, aged
people will rise to 25.4% of total population; it will further rise to one third in 2050, close to
the level of developed countries. The finding of scientific research has found out each person
spends almost three quarters of healthcare spending at old age. One aged person will have
about 12-17 times prescriptions and each prescription will take average 4.5 different
prescription drugs and 2.1 types of non prescription drugs. The consumption of health care
resources of aged people is 1.9 times of average people. The aging of population expedites the
demand for healthcare and bring opportunities to the development of healthcare industry.
② The life style and worsening of living environment increases the incidents of chronic
diseases
According to statistics, Chinese patients diagnosed with chronic diseases are over 300
million people. Chronic diseases account for 70% of total burden of diseases. Deaths due to
chronic diseases account for 85% of total deaths. According to the prediction of WHO (World
79
Health Organization), in the next 10 years, the economic losses due to early deaths from cardio
and diabetic diseases will be USD 558 billion. The direct medical spending on chronic diseases
will over USD 500 billion by 2015.
③ Government spending on healthcare boosts the growth of the industry
According to the central and local government budget proposal by Chinese Ministry of
Finance in 2013, the total health spending will be RMB 260.253 billion, an increase of 27.1%
versus last year. It is the highest increase among all spending segments in people’s livelihood.
In the field of medical devices, it is projected that the total output of medical device will
increase to RMB200 billion during the period of Twelfth’s five-Year Plan, and form 8-10 output
over 5 billion RMB conglomerate group and the total export amount will account for over 5%
of total international market.
④ The new health care reform package stimulates the continuous innovation of the
healthcare industry
With the deepening of new health care reform, the focus areas of China’s healthcare
industry include: enhance the autonomous innovation capability; lift up generic drug
development; consolidate the industry by promoting merger and acquisition. In the past 10
years, Chinese companies have grown quickly by making generic and cutting into high end
specialty segments with certain competitive barriers and higher profitability and further enter
into new drug development. High end specialty pharmaceutical companies have accumulated
techniques, capital, sales and pipelines and have gradually replaced imported medicines. Under
the expense control of health care system, the basic demand and price advantage will further
enlarge the market share.
⑤ Industry Upgrades
During 2009-2014, many key drugs with sales nearly USD 250 billion and are the core for
many global big pharmaceutical companies will lose their patents. At western countries, generic
drugs are already 60% of total drug sales. It is estimated many countries will continue to
encourage generic drug policy and the market for generic will grow swiftly. At present, global
pharmaceutical industry is undergoing big scale adjustments. Globalization and financial crisis
expedites the process of outsourcing by international players. The outsourcing models range
from non-core function to core function and China and India are on the top selection list. The
outsourcing market for India and China is small but average growth at over 40% per year with
vast market growth potential.
(ii) Disadvantageous Factors and Corresponding Strategies
① Government Policy of Chinese Health Industry
China’s healthcare industry is under comprehensive supervision by the government,
mainly under law of “Drug administration law” and “Drug registration management
procedures”. In recent years, the Chinese government has established and implemented many
more measures and announced that it may install other policies and rules to manage the
industry. These measures may result in tremendous changes to the industry and cause our
80
customers to reduce the purchase of our products and services.
Corresponding strategy：
It is not in our control about China’s supervision policy and its future direction toward
health care industry. However, from all the announced measures by the government, the trend is
definitely to improve the overall people’s sanitary environment. The Company has dedicated
personnel to overlook the policy and government’s direction and to react accordingly in our
business plan. Hence it won’t cause significant negative impact to our Company
② Central public bidding of drug purchase
Drug purchase in China is conducted by centralized public bidding held periodically on
provincially level. Each provincial and city public hospital can purchase the drug from
collective bidding process. If our company fails to win the bids during these centralized
bidding, then our company will lose the qualification to sell the drugs to hospitals and other
non-profit health institutions.
The Company works closely with the manufacturers, and based on the professional
knowledge, market information, and bidding support, to raise the rate of winning the bids.
③ Declining drug price
Drug’s market retail price continues to decline along with the continuous adjustments of
the guiding price nationwide and the relaxation of price control on some districts and some
products as well as the resultant decline in drug bidding price.
In the first place, the strategy is to differentiate from general generic by developing me
better generic and innovative drugs in order to obtain price protection from the government.
In the meantime, the Company’s strategy is to expand sales network and penetrate into smaller
cities and hospitals as well as to increase sales revenue and maintain profitability by executing
brand promotion and increased sales network.
(2) Use of major products
Products of the Company cover the therapeutical areas of anti-hepatitis, respiratory,
cardiovascular, antibiotic, and spinal fixation.
(a)
Use of Main Products:
Therapeuti
c Area
Product
Hepatitis
Dai Ding
Yin Ding
Generic name
Indications
Adefovir
Anti-HBV
Lamivudine
Anti-HBV
81
Wei Li
Qing
Entecavir
Tiotropium
Bi Duo Yi
Immuno-su
ppressant
Antibiotics
Overactive
Bladder
Medical
Device
COPD
Bromide
Respiratory
Cardiovasc
ular
Anti-HBV
Yi Qing
MometasoneFuroate Aqueous
Nasal Spray
Rhinitis
Lezhiping
Olbetam
Treatment of
Hyperlipidemia
Mycophenolate
Shun You
Amoxicillinand
Augmentin
Detrol
Organ Transplant
Mofetil
Bacteria Infection
Clavulanate
Tolterodine
Treatment of OAB
Tartrate
Spine Implants
Spine Surgery
Spine Balloon(PKP)
Treatment of vertebral
compression fracture
(b) Production Procedure
The Company outsources the manufacturing of our products.
(3) Raw Material Supply
Main Raw Materials
Adefovirdipivoxil
Lamivudine
Entecavir
Tiotropium
Bromide
Supplier
Tianjin Institute of
Pharmaceutical Research
Anhui Biochem United
Pharmaceuticals
Qingfeng Medical Investment
Group
Zhejiang Xianju
Pharmaceuticals
Supply Situation
Good, stable quality
82
Mometasonefuroate
nasal spray
Mycophenolatemofetil
Amoxicillin
clavulanate
Olbetam
Tolterodine tartrate
extended release
capsules
SpineSurgery
Spine Balloon
Zhejiang Xianju
Pharmaceuticals
Jianfeng Pharmaceutical
GSK
Pfizer
Pfizer
Medtronic
Kanghui Medical
(4) List of Major Customers and Suppliers
(a) Names of, and purchase amount from the suppliers with purchase amount accounted for
10% or more of the total purchase in the past 2 years and explanation of reasons for
changes:
Unit：NTD’000
2011
2012
Project
Name
%
Relationship
ofAnnual
with the
Amount
Total Net
Company
Purchase
1
TIPR
425,817
2
D
151,513
Company
Other
34,796
Net
612,126
Purchase
69.56
24.75
5.69
100.00
Note
Up to 31 March 2013
Name
%
ofAnnual Relationship
Amount Total Net with the
Purchase Company
t
TIPR
447,821
D
146,999
Company
Other
110,883
Net
705,703
Purchases
63.46
20.83
15.71
100.00
Note 1
Note 2
Name
TIPR
% of net
purchase Relationship
with the
in the
Amount
previous Company
quarter
109,580
D
31,429
Company
Other
72,332
Net
213,341
Purchases
51.36
Note
14.73
33.91
100.00
Note: Tianjin Institute of Pharmaceutical Research Pharmaceutical Co., Ltd., is an independent legal
person 100% owned by Tianjin Institute of Pharmaceutical Research Institute. On December
5, 2010 the head of Tianjin Institute of Pharmaceutical Research Institutewas appointed as a
director of the Company.
(b)
Names of, and the Sales Amount to, the Customers with Sales Amount over 10% of the
total sales in any one of the past 2 years and explanation easons for changes:
83
Unit:NTD’000
2011
Item
1
Name
Amount
2012
Name
Relationship
%
ofAnnual with the
Total Net Company
Sales
Amount
March 31 2013
% of Relationship
Annual with the
Total Company
Net
Sales〕
SM
209,632
Company
Other 1,293,360
13.95
86.05
SM
203,518 11.82
Company
Other 1,518,231 88.18
Net Sales 1,502,992
100.00
Net Sales 1,721,749 100.00
Note
Name
% of Relationship
with the
Total
Company
Net
Sales for
the
Previous
Quarter
43,550
9.54
Amount
SM
Company
Other 413,132
90.46
Net Sales 456,682
100
(5) Production Capacity for the past 2 years
The Company has no production operation. Products were purchased from the domestic and
foreign drug manufacturers and then sold to hospitals or drug stores and etc.. Accordingly
production capacity is not applicable to our Company.
(6) Sales quantity and value for the past 2 years
Year
2011
2012
DomesticSales(Note 1)
Overseas Sales
Domestic Sales(Note 1)
Overseas Sales
Quantity
and
Value Amount
Value
Value
Amount
Value
Amount
Amount
Value
(unit:’00
(unit:NTD’00
(unit:NTD’00
(unit:’00
(unit:NTD’00
(unit:’00
(unit:’00
(unit:NTD’00
Main
0 pcs)
0)
0)
0 pcs)
0)
0 pcs)
0 pcs)
0)
Products
（Or by
depts）
Medical
1,273,370
0
1,433,257
0
Drugs
(Note 2)
(Note 2)
Medical
209,632
0
203,518
0
Devices
Other(Note
14,867
5,123
74,448
10,526
3)
Total
1,497,869
5,123
1,711,223
10,526
Note 1: Domestic refers to China.
Note 2: Since the specifications for different types of drugs are different, no quantity is
provided.
Note 3: Since this refers to service income, thus no quantity.
Reasons to change analysis:
The increase of sales of drugs in 2012 was mainly due to acquisition of Heilongjiang Tongze
and the introduction of new products in the areas of hapetitis and antibiotics. Other item
was income from the provision of marketing and technological services. Following the
84
expansion of our pipeline, services department received fees and technical services fee
income, year 2012 with the expansion of product lines, income from the provision of
marketing services was higher than that of 2011.
3.
Number of employees for the past 2 years and up to the date of printing of the annual
report
Unit：Person；%
Year
2011
2012
As of March 31 2013
Management
46
76
75
Staff
148
229
221
Total
194
305
296
Average Age
32.86
33.5
33.45
Average year of service
2.54
1.95
2.16
Ph. D
4.10% 4.43%
4.73%
Bachelors &
87.70% 84.75%
84.46%
Masters
Education
range
High school
2.50% 4.26%
4.39%
Below high
5.70% 6.56%
6.42%
school
Note：The above numbers include employees of Tongze and overseas subsidiaries.
No. of
Employees
4.
Environmental Protection Expenditure
No losses or fines incurred by the Company due to environmental pollution for 2012 and
up to the date of printing of this annual report.
5. Labor Relationship
(1) The Company’s benefits, training, education, retirement system and the implementation
thaereof, and agreements made between the Company and its employees and the protection
measures for all employees’ right:
Employees are the foundation of the Company. On the basis for the protection of
conditons of the employees life, we use our best efforts to creat a platform for the
employees to perform his self value. We provide all basic protection in accordance with
the relvant laws and a special plan for the care of employeesbenifits.
(a) The protection of employees’ right:
Measures for employees’ welfare
(i) Our group provides all legally required social insurance, such as retirement,
medical, unemployment, birth, and work-related injuries and public housing fund
and pays education added fees and subsidy for disabled persons in accordance
with the relevant regulations.
(ii) On traditional festivals, we provide free gift vouchers as well as gifts to our
employees.
85
(iii) Other than providing health check upon joining the company as required by law,
we provide employees working with the Company for 1 full year with free health
check every year.
(iv) We organize annual conference on regular basis and FAMILY DAY and other
activities from time to time.
(b) Training and education
Implementation
Provision of induction training to new staff in
the workplace for new staff by their titles, at
least once a year focused on orientation,
including corporate culture, "Employee
Manual", labor regulations, business skill
training, professional ethics and conduct
examination for the aforesaid training
External
Select potential employees to attend external
Training
training for the improvement of business skills
Internal
Engage qualified teachers for internal training
Training
by departments and specialties, including
corporate culture, sales skills, teamwork,
business skills, professional ethics and
conduct examinations relating to the training.
Marketing
Monthly training of employees in sales
Professional department by marketing department in sales
Training
skills and product knowledge.
GSP
To cope with regulations of GSP (Good
Compliance Supply Practice) learning and training the
Training
related state’s policies quarterly and conduct
examinations for the aforesaid learning
Project
New
employee
orientation
Fees
Training by internal staff,
basically no expenses
incurred.
Around RMB100,000
Around RMB800,000
Marketing
staff
as
trainers, basically no
expenses incurred
Internal quality manager
as trainer, combined with
employees’ self learning,
basically no expenses
incurred
(c) The retirement system and the implementation status
The Company implements the employees’ retirement system in accordance with the
relevant law and pay premium for post retirement insurance in accordance with the
relevant policy.
(d)
Working environment and protection measures for the safety of the employees



(e)
Conduct safety and fire equipment inspection on regular basis, and actively
cooperate with the property management to participate in fire drills and training.
Provide protection equipment for employees in special department in order to
ensure their safety.
Designated personnel in charge of the safety of the working environment, and
hygene protection. Regularly check and remind employees to maintain the
safety and hygene of the working environment.
Codes for Employees’ conduct or ethics
We adhere to the operating belief of the Company:「Simple & Diligent; Sincere
&Righteous; Proper & Just; Pragmatic Yet Innovative」, which are also the principles for
the employees’ behavior for working as well as for interperson relationship. For the
continuing growth of the Company, the HR department revised our Employees Manual
and dispatch the same to each employees as their principles for their behavior in daily
86
work. The Employees’ Manual clearly set out regulations for the employees’ duties and
measures for the employees to be abound by such regulations. Employees shall follow
the following codes of ethics:
(i)
follow the regulations and keep the highest professional integrity to ensure his
personal behavior complies with professional ethics and industrial regulations.
(ii)
keep to be honest, righteous, including be honest to the Company , the colleagues ,
the business partner and cutomers.
(iii)
use best efforts to complete his work, increase the result of work, learn new
knowledge and skill and be prepared for the necessary abilities for the promotion .
(iv)
not to engage in any behavior which may harm the credit of he Company, other
employees or the customers.
(f) Agreements between the Company and the employees and the implementation of the
prection of employees right
We always pay special attention to the employees’ right, the harmony of the
relationship between the Company and its employees. We also value the employees’
opinion.
Employees may communicate with HR department or proper senior
management openly so as to maintain a good relationship. Therefore, we did not
experience any material disputs with our employees.
6. Material Contracts
Nature of Contract
Exclusive
Distribution
Agreement
Distribution
Agreement
Exclusive
Distribution
Agreement
Other Party
Term of Contract
Company A
Obtained the
exclusive
Nov. 2002 to Nov. distribution
right in
2022
China for hepatitis
drugs
Company D
Company E
May. 1, 2012 to
April. 30, 2013
Main Content
selling products
with the same
chemical
ingredients
(Adefovir
dipivoxil) is
forbidden
Obtained the
Distribution area
distribution right in
is in certain
certain regions for
designated
spine implants
hospitals in
products
Shanghai
Obtained the
20 years, starting
exclusive
from the date
company E gets the China, HK, Macau,
and Taiwan for
Production
Capecitabine Bin
Approval
tablets
87
Restriction
Clauses
None
Nature of Contract
Exclusive
Distribution
Agreement
Other Party
Company E
Beijing Qiming
venture
investment center Beijing Qiming
venture
L.P.
investment
center L.P.
Limited
Partnership
Agreement
Exclusive
Distribution
Agreement
& others L.P.
Company K
Distribution
Agreement
Company L
Domestic
Transportation
Contract
Shanghai
ChenSu
Logistics
Company
Term of Contract
Main Content
Obtained the
20 years, starting
exclusive
from the date
company E gets the China, HK, Macau,
and Taiwan for
Production
Imatinib Nepalese
Approval
tablets
7 years from the
date that L.P.
completed
fundraising,
renewable twice
and each
Directly or
indirectly invest in
new innovative
technologies
enterprises
involving in
biotech, pharma
areas at the early
stage or growth
stage, which have
good development
prospects and exit
channels
Restriction
Clauses
None
None
Jan. 1, 2012 to
Dec. 31, 2016
Obtained the
Without
exclusive
permission may
not sell
competing
China for certain
products
antibiotics
Jan. 1, 2012 to
Dec .31, 2014
Distribution
areas are
Obtained the
Shanghai
City,
Jiangsu,
certain region for
Guangdong,
Lamivudine
Shaanxi
Provinces.
Jan. 1, 2012 to
Dec. 31, 2012
Shanghai ChenSu
to provide
transportation
services for
Shanghai
Guochuang
None
Domestic Cargo PICC Property
Reservation system
Transportation
and Casualty
for Shanghai
Feb. 11, 2012 to Guochuang
Reservation
Company,
to have
Feb. 10, 2013
Insurance
Shanghai Luwan
transported good
Agreement
Branch
insured
None
PICC Property
and Casualty
Feb. 11, 2012 to
Company,
Insurance Policy
Feb. 10, 2013
Shanghai Luwan
Branch
None
88
All Property
Insurance
Nature of Contract
Share Purchase
Agreement
Product agent
framework
agreement
Exclusive
Distribution
Agreement
Exclusive
Distribution
Agreement
Other Party
Term of Contract
Main Content
Shanghai
Heilongjiang
Guochuang
Province Tongze
acquired 51%
Pharmaceutical Executed on Jun. equity
interest in
18, 2012
Company
the
target
company
Limited Original
after
completion
of
shareholders
the acquisition
Restriction
Clauses
None
Company M
Obtained the
exclusive
10 years after the distribution right in Confidentiality
product launch
China for
metoprolol
succinate
Company P
Obtained the
Confidentiality
exclusive
right in
Jan 1 2013 to Dec distribution
China
for
31 2017
Not allowed to
lipid-lowering
sell competing
drugs Acipimox
products
capsules
Company P
Obtained the
Confidentiality
exclusive
China for
Tolterodine tartrate Not allowed to
sell competing
extended release
products
capsules
Mar 15 2013 to
Mar 14 2018
Confidentiality
Distribution
Agreement
Distribution
Agreement
Share Purchase
Agreement
Company Q
Obtained the
Apr 1 2013 to Dec distribution right in The distributor
31 2013
Shanghai City for shall obey the
PKP & PVP
related
anti-corruption
policy
Obtained the
Distribution area
is in certain
certain regions for
designated
spine implants
hospitals in
products
Shanghai
Company D
May. 1, 2013 to
April. 30, 2014
Suzhou
Microclear
Original
shareholders
Shanghai
Guochuang
acquired 25%
Executed date on equity
interest in
Apr. 22, 2013
the target company
after completion of
the acquisition
89
None
Nature of Contract
Cooperation
Project agreement
Distribution
Agreement
Other Party
Company R
Company S
Term of Contract
Main Content
Restriction
Clauses
The agreement
in R &
survives 10 years Cooperation
D,
registration,
Confidentiality
from and on the
manufacture and
date of the products sale
of Tenofovir
launching
May. 1, 2013 to
Dec. 31, 2015
90
Obtained the
Guangdong
Province for
decocted turtle
shell pills
None
VI.
1.
FINANCIAL HIGHLIGHTS
Condensed financial information in recent five years
(1)
Condensed balance sheet and consolidated income statements
(a) Condensed balance sheet in recent five years
Year
Item
Unit: NTD’000
Financial information in recent five years（note
1）
2008
2009
2010
2011
2012
Current Assets
492,472
698,591
443,577
1,748,488
1,505,284
Funds & Investments
3,708
3,613
59,303
85,147
247,173
Fixed Assets
3,352
3,758
9,390
8,580
8,602
Intangible Assets
13,142
9,398
34,261
34,307
283,316
Other Assets
173
0
0
211
0
Total Assets
512,847
715,360
546,531
1,876,733
2,044,375
Before
215,420
219,616
114,861
110,077
141,767
Distribution
Current
Liabilities
After
462,067
629,859
114,861
390,077
*
Distribution
Long Term Liabilities
0
0
0
0
91,988
Other Liabilities
0
0
0
0
25,964
Before
215,420
219,616
114,861
110,077
259,719
Distribution
Total
Liabilities
After
462,067
629,859
114,861
390,077
*
Distribution
Capital Stock
0
0
115,002
700,000
700,000
Capital Surplus
0
0
11,837
608,284
613,007
Before
0
-91
326,517
401,895
424,839
Distribution
Retained
Earnings
After
0
0
178,558
121,895
*
Distribution
Unrealized gain on
0
0
0
0
3,960
financial instruments
Cumulative translation
0
0
-21,686
56,477
2,072
adjustments
Net Loss Not Recognized
0
0
0
0
0
As Pension Cost
Minority Interest
40,778
Total
Before
297,427
495,744
431,670
1,766,656
1,784,656
Shareholders’ Distribution
Equity
After
50,780
85,501
431,670
1,486,656
*
Distribution
*Pending shareholder’s approval
Note 1：The Company’s financial information from 2008-2012 was all audited, and the
information for 2008-2010 were from consolidated pro forma financial statements.
91
Note 2：The Company’s 2013 First Quarter financial information was prepared in accordance
with IFRS and reviewed by auditor as tabled below.
( b ) Condensed balance sheet for the first quarter of Year 2013
Unit: NTD’000
Year
Item
Current Year Financial Information up to
March 31 2013（note）
Current Assets
1,551,357
Property, plant and Equipment
7,708
Intangible Assets
389,027
Other Assets
680,830
Total Assets
2,628,922
Before Distribution
166,025
Current Liabilities
After Distribution
Non Liquid Liabilities
107,619
Before Distribution
273,644
Total Liabilities
After Distribution
Shareholders’ equity attributable to shareholders
2,228,884
of parent company
Capital Stock
700,000
Additional Paid-In Capital
614,616
Before Distribution
551,976
Retained Earnings
After Distribution
Other Equity
362,292
Treasury Stock
Non Controlled Interest
126,394
Total Shareholders’
Before Distribution
2,355,278
Equity
After Distribution
2,355,278
Note: The Company’s financial information for Year2013 up to first quarter were prepared in
accordance with IFR and reviewed by auditor.
(c)
Condensed income statements in recent five years
Unit: NTD’000
Year
Items
Net Sales
Gross Profit
Income From
Operation
Non Operating
Income/Gains
Non Operating
Expenses/Losses
Financial Information in recent five years (note 1）
2008
1,671,076
1,204,965
2009
1,573,350
1,136,180
2010
1,508,993
988,768
2011
1,502,992
890,866
2012
1,721,749
1,016,046
511,682
571,247
460,835
352,309
383,617
14,413
23,048
51,822
72,258
69,443
15,851
10,657
6,482
1,883
15,627
92
Before Tax income
from continuing
510,244
583,638
506,175
422,684
437,433
operation
Net Income from
390,316
459,054
369,129
313,962
318,729
continuing operation
Net Income from
Discontinued
0
0
0
0
0
Operation
Extraordinary
0
0
0
0
0
Gain/Loss
Cumulative Impact
due to changes in
0
0
0
0
0
Accounting
Principal
Net Income
(Attributable to
390,316
459,054
369,129
313,962
302,944
Parent Company)
Earnings per Share
33.94
39.92
6.25
4.94
4.32
(NTD)
Note 1：The Company’s financial information from 2008-2012 was all audited and the
information for 2008-2010 was from consolidated pro forma financial statements.
Note 2：The Company’s 2013 First Quarter financial information was prepared in accordance
(d) Condensed consolidated income statement for the first quarter of Year 2013
Unit: NTD’000
Year
Financial Information for first quarter of
2013 (Note)
Items
Net Sales
456,682
Gross profit
243,341
Operating income
85,611
Non-operating income & expenses
72,674
Income before income tax
158,285
Net income from continuing operations
134,564
Loss from discontinued operations
Net income (loss)
134,564
Other comprehensive income (net of tax)
166,119
Total comprehensive income
300,683
Net profit attributable to Shareholders of the
127,137
parent company
Net profit attributable to Minority interests
7,427
Total comprehensive income attributable to
290,570
shareholders of parent company
Total comprehensive income attributable to
10,113
Minority interests
Earnings per share (NTD)
1.82
Note: The first quarter financial information of 2013 was prepared based on IFRS and reviewed
by auditor.
93
(2) Auditors’ Name and audit opinions in recent five years
Year
2008
CPA
Name of the Firm
Wang
Ernst & Young
yanjun、Cheng
Wu Shui
Audit Opinion
Modified unqualified
opinion(note 1)
2009
Wang
Ernst & Young
yanjun、Cheng
Wu Shui
opinion(note 1)
2010
Wang
Ernst & Young
yanjun、Cheng
Wu Shui
opinion(note 1)
Wang yanjun, Ernst & Young
Lin Li huang
opinion(note 2)
Ernst
&
Young
2012
Wang yanjun,
An Unqualified Opinion
Lin li-huang
Note 1: The explanatory paragraph on the audit report is emphasis that the pro-forma financial
statements are prepared for Coland Holdings Limited and subsidiaries publicly listed
application on the Taiwan Stock Exchange.
Note 2: The explanatory paragraph on the audit report is related to change in accounting
principle in 2011. Effective from January 1, 2011, the Group has adopted the third
version of the Statement of Financial Accounting Standard No. 34 “Financial
Instruments Recognition and Measurement”, and newly issued Statement of Financial
Accounting Standard No. 41, “Operating Segments” of the Republic of China.
2011
2.
(1)
Financial Analysis
Financial analysis in recent five years
Year(Note 1)
Analysis Item(Note 2)
Capital
Structure
Analysis
Liquidity
Analysis
Debt Ratio (%)
Long-term Fund to Fixed Assets
Ratio (%)
Financial Analysis
2008
2009
42.00
2010
2011
2012
30.70
21.02
5.87
12.7
8,873.1 13,191.7
2
0
4,597.12
20,590.40
22,118.21
Current Ratio (%)
228.61
318.10
386.19
1,588.42
1,061.80
Quick Ratio (%)
209.81
290.46
301.10
1,492.69
943.22
0
0
0 130,961.92
5,742.84
10.38
11.97
11.86
7.07
5.35
35
31
31
52
68
Times Interest Earned(times)
Operating Average Accounts Receivable
Performance Turnover (times)
Analysis
Days Sales Outstanding
94
Average Inventory Turnover(times)
22.67
13.10
8.14
7.80
9.40
Average Payment Turnover(times)
190.64
165.88
669.53
0
387.11
16
28
45
47
39
608.88
442.57
229.54
167.28
200.41
3.91
2.56
2.39
1.24
0.88
91.37
74.75
58.50
25.91
16.55
177.52
115.75
79.60
28.56
17.95
-
-
400.66
50.33
54.80
-
-
440.14
60.38
62.49
Net Margin (%)
23.36
29.18
24.46
20.89
18.51
Earnings per share(NTD)
33.94
39.92
6.25
4.94
4.32
202.61
190.81
186.52
189.24
141.50
153.74
156.81
103.71
126.21
77.93
63.43
35.32
-49.03
11.98
-4.87
Operating Leverage
1.00
1.00
1.00
1.00
1.00
Financial Leverage
1.00
1.00
1.00
1.00
1.00
Average Inventory turnover days
Fixed Assets Turnover(times)
Total assets turnover(times)
Return on Total Assets (%)
Return on Equity (%)
Operating Income
Profitability
Analysis
Cash
Flow
Paid-in
Capital
Pre- tax Income
(%)
Cash Flow Ratio (%)
Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Leverage
95
Explanations for variations of financial ratios of 2012 vs. 2011 (for those variation over 20%:)
1. The debt ratio increased was mainly due to increase in the long-term payables caused by the acquisition.
2. The current ratio and quick ratio decreased as a result of NTD 160 million investments more than last year.
3. The times interest earned (times) increased mainly due to interest expense associated with the acquisition.
4. The accounts receivable turnover (times) decreased because of new products introduction; relaxation of credit
policy which result in increased proportion of credit sales.
5. The inventory turnover (times) increased primarily due to new product introduction.
6.
7.
8.
9.
10.
11.
The payment turnover (times) increased mainly due to the payable associated with the purchase of newly
licensed imported products.
The total assets turnover (times) and return on total assets decreased mainly due to increase in intangible assets
due to acquisition of Tongze.
The return on equity decreased primarily due to increase in minority interests which caused by the acquisition
of Tong- Ze and the new capital shares issued in 2011.
The cash flow ratio decreased primarily due to increase in product purchase and accrued expenses.
The cash flow adequacy ratio decreased mainly due to increased capital expenditure for acquisition and the
cash dividend payout.
The cash flow reinvestment ratio decreased mainly due to the cash dividends was greater than the amount of
net cash flows from operating activities.
Note 1: The Company’s financial information from 2008-2012 was all audited and the
information for 2008-2010 was from consolidated pro forma financial statements.
Note 2: The Company’s 2013 First Quarter financial information was prepared in accordance
Note 3: Formula for financial ratios
1. Capital Structure Analysis
(1)Debt Ratio=Total Liabilities / Total Assets
(2)Long-term Fund to Fixed Assets Ratio = (Shareholders’ Equity + Long-term Liabilities) /
Net Fixed Assets
2. Liquidity Analysis
(1)Current Ratio= Current Assets / Current Liabilities
(2)Quick Ratio=(Current Assets - Inventories - Prepaid Expenses) / Current
(3) Times Interest Earned= Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Accounts Receivable Turnover (times) = Net Sales / Average Trade Receivables
(2)Days Sales Outstanding = 365 / Average Collection Turnover
(3) Average Inventory Turnover = Cost of Sales / Average Inventory
(4) Average Payment Turnover= Cost of Sales / Average Trade Payables
(5) Average Inventory turnover days = 365 / Average Inventory Turnover
(6)Fixed Assets Turnover= Net Sales / Net Fixed Assets
(7)Total Assets Turnover= Net Sales / Total Assets
4. Profitability Analysis
(1)Return on Total Assets= (Net Income + Interest Expenses * (1 - Effective Tax Rate))/
Average Total Assets
(2)Return on Equity= Net Income / Average Shareholders’ Equity
(3) Operating Income to Paid-in Capital Ratio= Operating Income / Paid-in Capital
(4)Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
96
(5)Net Margin = Net Income / Net Sales
(6)Earnings Per Share = (Net Income - Preferred Stock Dividend) / Weighted Average Number
of Shares Outstanding
5. Cash Flow
(1)Cash Flow Ratio= Net Cash Provided by Operating Activities /Current Liabilities
(2)Cash Flow Adequacy Ratio= Five-year Sum of Cash from Operations / Five-year Sum of
Capital Expenditures, Inventory Additions, and Cash Dividend
(3)Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)
/ (Gross Fixed Assets + Investments + Other Assets +Liabilities)
6. Leverage
(1)Operating Leverage= (Net Sales - Variable Cost) / Income from Operations
(2)Financial Leverage= Income from Operations / (Income from Operations -Interest Expenses)
( 2 ) Financial analysis as of March 31, 2013
Year
As of March 31, 2013(Note 1)
Analysis Item (Note 2)
Capital
Structure
Analysis
Debt Ratio (%)
Long-term Capital to Property, Plant and
Equipment ratio (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned(times)
Accounts Receivable Turnover(times)
Days Sales Outstanding
Operating Average Inventory Turnover(times)
Performance Average Payment Turnover(times)
Analysis Average inventory turnover days
Property, Plant and Equipment Turnover(times)
Liquidity
Analysis
10.41
31,952.48
934.41
842.21
4,332.21
5.30
69
10.26
275.68
36
Total assets turnover(times)
Return on Total Assets (%)
Return on Equity (%)
Paid-in Capital Operating Income
Profitability
(%)
Analysis
Pre- tax Income
Net Margin (%)
Earnings Per Share(NTD)
Cash Flow Ratio (%)
Cash flow Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Leverage
Financial Leverage
Note1: The first quarter financial information of 2013 was prepared based on IFRS and
reviewed by auditor.
97
224
0.74
22.13
6.11
12.23
22.61
29.47
1.82
59.53
74.32
4.78
1.00
1.05
Note2: Formula of financial ratios:
1. Capital Structure Analysis
(1)Debt Ratio=Total Liabilities / Total Assets
(2) Long-term Capital to Property, Plant and Equipment ratio = (Shareholders’ Equity +
Long-term Liabilities) / net (Property +Plant +Equipment)
2. Liquidity Analysis
(1)Current Ratio= Current Assets / Current Liabilities
(2)Quick Ratio=(Current Assets - Inventories - Prepaid Expenses) / Current
(3) Times Interest Earned= Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Accounts Receivable Turnover (times) = Net Sales / Average Trade Receivables
(2)Days Sales Outstanding = 365 / Average Collection Turnover
(3) Inventory Turnover = Cost of Sales / Average Inventory
(4) Payment Turnover= Cost of Sales / Average Trade Payables
(5) Average Inventory turnover days = 365 / Average Inventory Turnover
(6) Property, Plant and Equipment Turnover = Net Sales / net (Property +Plant +Equipment)
(7)Total Assets Turnover= Net Sales / Total Assets
4. Profitability Analysis
(1)Return on Total Assets= (Net Income + Interest Expenses * (1 - Effective Tax Rate))/
Average Total Assets
(2)Return on Equity= Net Income / Average Shareholders’ Equity
(3) Operating Income to Paid-in Capital Ratio= Operating Income / Paid-in Capital
(4)Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5)Net Margin = Net Income / Net Sales
(6)Earnings Per Share = (Net Income - Preferred Stock Dividend) / Weighted Average Number
of Shares Outstanding
5. Cash Flow
(1)Cash Flow Ratio= Net Cash Provided by Operating Activities /Current Liabilities
(2)Cash Flow Adequacy Ratio= Five-year Sum of Cash from Operations / Five-year Sum of
Capital Expenditures, Inventory Additions, and Cash Dividend
(3)Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)
/ (Gross Fixed Assets + Investments + Other Assets +Liabilities)
6. Leverage Working Capital
(1)Operating Leverage= (Net Sales - Variable Cost) / Income from Operations
(2)Financial Leverage= Income from Operations / (Income from Operations -Interest Expenses)
3.
Audit Committee’s Report on 2012’s financial reports: Please refer to page 116.
4.
Financial Report of Current Year: Not applicable
5.
Audited consolidated financial statements of Year 2012: please refer to page 117~179.
6.
The Company should disclose the financial impact to the Company if the Company and its
affiliated companies have incurred any financial or cash flow difficulties in 2012 and as of
the date of this annual report: None
98
VII. REVIEW AND ANALYSIS OF FINANCIAL STATUS AND
FINANCIAL PERFORMANCE AS WELL AS RISK
MANAGEMENT
1.
Financial Highlights
Item
Year
2011
2012
Unit: NTD’000
Difference
Amount
%
(243,204)
(13.91)
162,026
190.29
22
0.26
249,009
725.83
(211)
(100.00)
167,642
8.93
31,690
28.79
91,988
100
25,964
100
149,642
135.94
Current assets
1,748,488
1,505,284
Funds and investments
85,147
247,173
Fixed assets
8,580
8,602
Intangible assets
34,307
283,316
Other assets
211
Total assets
1,876,733
2,044,375
Current liabilities
110,077
141,767
Long-term liabilities
91,988
Other liabilities
25,964
Total liabilities
110,077
259,719
Capital
700,000
700,000
Additional paid-in capital
608,284
613,007
4,723
0.78
Retained Earnings
401,895
424,839
22,944
5.71
Adjusting items in stockholders'
equity
56,477
2,072
(54,405)
(96.33)
40,778
40,778
100
Minority interests
Total stockholders' equity
1,766,656
1,784,656
18,000
1.02
Explanation for major variation (for change over 10% or account for 1% of total assets)
1. The current assets decreased mainly due to decrease in cash as utilized for investments.
2. The funds and investments increased primarily due to increase in strategic investments
3. The Intangible assets increased as a result of increase in goodwill due to acquisition.
4. The current liabilities increased mainly due to increase in accrued expenses.
5. The long-term liabilities increased mainly due to increase in long-term payables associated
with acquisition.
6. The other liabilities increased due to increase in deferred income tax liabilities associated
with the acquisition.
7. The adjusting items in stockholders' equity decreased mainly due to the impact of exchange
rate changes.
8. The increase in minority interests was a result of acquisition of Tongze.
2.
Operating Results
(1)
Analysis of Operating Results of last two years
99
Unit: NTD’000
Difference
Amount
％
218,757
14.55
93,577
15.29
125,180
14.05
93,872
17.43
31,308
8.89
(2,815)
(3.90)
13,744
729.90
Year
2011
2012
Item
Net Sales
1,502,992
1,721,749
Cost of sales
612,126
705,703
Gross profit
890,866
1,016,046
Operating expenses
538,557
632,429
Operating income
352,309
383,617
Non-operating income
72,258
69,443
Non-operating expenses
1,883
15,627
Income before income
tax
422,684
437,433
14,749
3.49
Less : Income tax
expense
108,722
118,704
9,982
9.18
Net income
313,962
302,944
(11,018)
(3.51)
Explanation for major variation (for change over 10% or account for 1% of total assets)
1. The net sales increased mainly due to increase in new products sales as well as the impact
from acquisition.
2. The cost of sales increased correspondingly as a result of increase in sales
3. The gross profit increased proportionally as a result of increase in sales
4. The operating expenses increased due to the expansion of the sales team and increased
expenses in product promotion.
(2)
Sales Forecast and the basis for forecast as well as potential impact to the Company’s
financial and operation result and future plans responding to the impacts
We expect sales of the Company will continue to grow in 2013 which is mainly
due to the overall market growth and the new product introductions in both drugs and
devices. For additional information of market analysis, industry and its development,
please refer to Chapter Five: Operation Status of this annual report for further details.
The Company’s future plans to respond to any potential impacts to its financial and
operation results include strengthening our product pipelines, taking into account the
market analysis, and government’s policy and setup annual business goals by balancing
new product introduction and existing product growth. By closely monitoring the market
development, the Company aims to introduce new products, grow market share of our
products and improve profitability。
3. Cash Flow
(1) Cash flow Analysis of 2012
Cash and cash
equivalents at
beginning of
year
1,346,552
Net cash
provided by
operating
activities
200,595
Unit: NTD’000
Remedy for Cash
Cash and cash
Shortfall
equivalents at
Investment Financial
end of year
Plan
plan
Cash
Outflows
416,629
100
929,923
-
-
1. Net inflows from operating activities: NTD 201 million, due to increase in net income.
2. Net outflows from investing activities: NTD 342 million, due to increase in investment.
3. Net outflows from financing activities: NTD 280million, due to the cash dividends.
(2) Improvement plan of illiquidity: Not applicable.
(3) Cash flow analysis for the next year:
Unit: NTD’000
Cash and cash Estimated annual net
equivalents at cash flow from
beginning of yea operating activities
Estimated Cash
Outflows
The amount of
expected cash
surplus
Estimated Remedy for
Cash Shortfall
Investment
Plan
Financial
plan
929,923
200,050
678,360
451,613
1. Net inflows from operating activities: NTD 200 million, due to increase in net sales of next
year.
2. Net outflows from investing activities: NTD 454 million, due to increase in investment of
next year.
3. Net outflows from financing activities: NTD 224million, due to the cash dividends in 2013.
4.
Major Capital Expenditure
(1) Utilization status of major capital expenditure and the source of fund
Unit: NTD’000
Project
Fixed assets
Strategic
Investments
Actual or
expected
source of
fund
Owned
fund
Owned
fund
Actual or
expected
completion
date
Actual or expected utilization status
Total fund
required
Year
2011
Year 2012
Year
2013
12.31.2013
15,718
1,908
4,989
8,821
12.31.2013
864,548
19,641
336,722
508,185
(2) Expected Future Benefits
(a) Fixed assets are mainly for vehicles, desktop/notebook and IT software. They will
be used mainly for newly recruited staff and to facilitate communication and improve
the work efficiency.
(b) Strategic investments are mainly for the investments related to our business model.
Such as acquisition in order to expand our sales network or participate in good new
product development via equity investment or joint venture to form strategic alliance
101
with various partners. The goal is to leverage resources and strengths of Coland and our
partners across the strait and to enhance our competitiveness and grow our business
scope in the long run.
5.
Gain/Loss of investment from last year and plan for improvement as well as investment
plan for the next year
(1)Investment policy of last year
The Company’s investments focus on strategic investment in bio industry that is
related to our business. We do not invest in non-related industry. All the investments are
conducted by relevant departments in accordance with the Company’s procedures for
“investment” and “acquisition and disposition of asset”. The above mentioned procedures
have been approved by board/shareholder’s meeting.
(2) Gain/loss of investment from last year and improvement plan
In 2012, the Company has transferred all the holdings in Eminent Global Limited to
the share holdings in TWI Inc and recognized losses of NTD6,935,000, mainly for the
management fee paid to Eminent Global Limited. As the Company has no share holding in
Eminent Global, there will not be such expenses incurred in 2013.
(3) Investment plan for the next year
In the following year, the Company will continue to look for new products with high
market potential as well as keep on focusing on investment targets related to our business
goals. All the investments will be evaluated and executed by relevant department and in
accordance with internal control procedures for “investment” and “acquisition and
disposition of asset”.
6.
Risk Management and Evaluation
Risk Management for the year 2012 and up to the date of printing of the annual report and
the evaluation of the results：
(1) Organization Chart of Risk Management
The Company establishes its risk management program based on its social
responsibility, its long term sustainability, and the responsibility to its shareholders and other
stakeholders. The Company is committed to developing a proper risk management
mechanism to minimize the potential risks/threats in a cost effective manner.
The Company’s risk management program is based on the responsibilities of each
function to monitor, evaluate, control of each function’s risk management. Each function
reports to the general manager and Chairman of the Company from time to time and report
102
to the board of directors, depending on the seriousness of the matter. The organization
structure of risk management is structured as below:
Audit Committee
Board of directors
Remuneration
Committee
General Manager
Internal Audit
Risk Control Cabinet
Responsibility of each function：
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Board：Establish the Company’s risk management policy and authorization level.
Audit Committee：Monitor and review work done by internal audit
Remuneration committee：Review regularly the compensation and performance of
the board members and managers to effectively retain talents
General Manager：Implement and monitor the risk management program in
accordance with the plans approved by the board. Review and monitor the result
on a regular basis.
Internal Audit：Evaluate potential risks from the Company’s operational/financial
activities. Make annual audit plan based on risk assessment and help the board to
track and monitor the Company’s improvement as well as report the internal audit
results as well as financial status to the Audit Committee on a regular basis.
Risk Management Cabinet：In charged by the department head of each function,
the risk management cabinet is responsible for the implementation of risk
management and communication across departments. It includes the following
functions：
 Finance/Accounting：Is responsible to provide transparent and credible financial
information/reports. Provide risk assessment and good risk control based on
sound financial planning/treasury/tax planning.
 Legal：In charge of legal risk management, review of contracts, legal advice and
taking care of legal disputes if any.
 IT: In charge of designing a safe and sound information management system;
implement risk control and protection from network safety risk
 Human Resource：Responsible of human resource planning, training and
retention of people
 Marketing： Responsible for product planning, market study, customer service
management.
 Investor Relation management：Responsible to establish management system of
shareholders’ affairs as well as communication with investors to ensure the
disclosure of information is updated, and accurate.
103
(2) The impact of changes in interest rate, exchange rate and inflation to the Company’s
profit and loss as well as correspondent measure in the future
(a) Interest rate
The Company does not have loans owed to financial institutes. Besides, the
Company always maintains good relationship with banks as well as stable financial
conditions, good standing credits and the interest rate available to the Company is
relatively low. It is expected that the changes of interest rates will not have significant
impact to the company.
(b) Exchange rate
As the Company’s accounts are recorded in RMB and the sales are all for China
market and most of the operational expenditure are paid in RMB, the change in RMB
exchange rate will not have uncertain impact to the Company’s cash flow as well as
financial conditions.。
(c) Inflation
There was no significant impact of inflation to the profit and loss of the Company
in the past. In addition, the Company pays attention to the fluctuation of market price
and keeps good relationship with suppliers. Therefore, the inflation dose not necessary
result in significant impact to the company
( 3 ) The policies of engaging in high risks, high leverage investments, lending others,
endorsement/guarantee and derivative instruments, reasons for gain/loss and future
plans
The company has established “procedures governing acquisition or disposition
of assets”, “procedures governing fund lending to others”, “procedures for providing
endorsement/guarantee” and such measures are available for the compliance/adoption
by the Company and its subsidiaries as engaging in related activities. As of the date
of printing of the annual report, the Company did not involve in any high risk, high
leverage investment, fund lending to others and derivative instruments. The
Company engaged in one derivative transaction last year which was to mitigate the
exchange rate risk of the assets. It was executed in accordance with the procedures
governing acquisition or disposition of assets and helped to minimize the impact of
exchange rate changes to profit and loss.
The company always focuses on principal businesses without engaging in other
high risk industries. In addition, our financial policies always adopt the principles of
stability and conservation without involvement of high leverage investment.
Therefore, the risks are limited.
104
(4) Future product development plans and estimated costs contributed to development
The main function of our product development department is to seek for potential
pharmaceutical as well as medical device products in domestic and foreign markets or
to find strategic partners to jointly develop the market in China. The main focus
therapeutic areas are hepatitis, respiratory system, medical devices, and oncology.
The RD expenses in the last two years accounted for 1.89% and 1.54% of sales
respectively. The Company will continuously increase the development resources.
In addition to seeking for potential products in China, we will also reach out to Taiwan
and other countries for quality products suitable for China market. The Company will
continue to bring in new products to the market to fulfill the medical needs of the vast
residences in China.
(5) The impacts from important changes of domestic and foreign policies and laws to the
finance and businesses of the company and corresponding actions
(a) The relevant monitoring policies in China’s healthcare industry
The Company was incorporated under the laws of Cayman Islands, while the
principal office is in China and engages in product development and sales of
marketing of healthcare products. The healthcare industry in China is a chartered
business that is under strict monitor of China’s Food And Drug Supervisory
Administration and other related authorities. All businesses in China including
production, distribution and retail sales are required to obtain the permit issued by
China authorities, which include Good Manufacturing Practice for manufacturing
and Good Supply Practice for sales. These regulations and laws may be changed
anytime and the Company needs to understand the latest regulations of monitoring
agencies to meet state requirements. The Company’s main operational unit:
Shanghai Guochuang Pharmaceutical Co. Ltd as well as its subsidiary Heilongjiang
Province Tongze Pharmaceutical Co. Ltd have both obtained the licenses and permits
to sell medicine and devices. In China, pharmaceutical companies need to renew its
license/permit periodically and to receive the government’s irregular inspection and
examination.
(b) China’s health care reform policies and guidelines of the 12th Five-Year Plan
The health care industry is regulated and monitored by the government. The main
regulation and law governing the industry are “Drug Administration Law” and “Drug
Registration Management Procedure. In recent years, China government continues to
establish and implement various control measures for the health care industry.
In 2011, China government announced the goal of “deepen health care reform,
establishment of sound and basic health system, speeding the development of
healthcare businesses and prioritizing to meeting basic healthcare needs of the public”
in the 12th Five-Year plan. It demonstrates that social welfare improvement and
105
healthcare industry development continue to be the important policy direction for the
next five years. The state’s medical reform program in 2012 pronounced that China
government will speed up the national health insurance system; consolidate and
improve the system for using basic drugs and the new operating mechanisms of
community-level medical and health care institutions, speed up the reform of public
hospitals, promote the separation of prescribing and dispensing; renovate the
production and logistics operation; reform drug formation mechanism. To facilitate the
understanding and grasp of the essences of medical reform policies, the Company
establishes public affair department keeping track of latest development of
government policies to ensure the Company’s strategic development direction is in
line with the macro industry’s development.
(6) The impact from changes of technology and industry to the finance and business of the
Company and corresponding actions
The Company keeps abreast of the latest trend and development of the biotech
industry and review changes which may have any impact to the Company’s business
direction. However, up to the date of printing of the annual report, there is no
financial or business impact to the Company due to technology or industrial changes.
( 7 ) Change of corporate image and impact on Company’s crisis management
The Company’s management principles are “Simple and Diligent, Sincere and
Righteous, Proper and Just, Pragmatic yet Innovative”. These words encourage our
employees to work diligently, treat our partners sincerely, while the Company holds
impartial and righteous way in running our business. In the same time, we need to be
innovative to take advantage in the market place. The Company maintains good
corporate image and continues to strengthen the management capability by recruiting
more talents. We return the operation results back to our shareholders. As a corporate
citizen, we also devote ourselves to social welfare to fulfill our social responsibilities
whenever we are capable to do so. There is no business crisis arising from change of
business image by now.
(8) Expected benefits from acquisition, its potential risk and actions taken to mitigate the
risk
The Company has established various growth plans to achieve the long term
business goal. Apart from innovative business models and forming strategic alliances,
we also grow our business from acquisition. We will continue to look for suitable
target and execute the acquisition by thorough review and evaluation to ensure the
realization of acquisition benefit and the prevention of potential risks. Detailed
explanation below:
(a)
Expected benefits:
106
Expand the territory of the business, compliment with the Company in the area of
different market, clientele, product, core competency. By collaborating with each other’s
strengths and resources, the acquisition can help increase of the Company’s overall
sales.
(b)
Potential Risk:
(i) Lack of information, and professional experiences, resulting in incorrect
evaluation.
(ii) Loss of talent due to difference in corporate culture gap.
(iii) The operating performance is below expectation.
(c)
Actions taken:
(i) Risk due to lack of information and professional experiences resulting in
incorrect evaluation:
The Company has setup M&A task force internally and has built up strong
external professional resources (such as financial advisor, accountant, legal advisor
etc). In addition to select target carefully, during the due diligence stage, the task
force will thoroughly evaluate the information collected as well as conduct various
investment return and risk assessment analysis. At the same time, the Company will
engage external professional parties to conduct financial and legal review. The
Company has setup standard operating procedure for evaluation and approval of
investment project. The investment project will be conducted under sound review and
evaluation procedure as well as legal review to minimize the investment risk.
(ii) Risk in talent loss due to corporate culture gap:
It is essential for the Company to embrace newly acquired company, new business
and new coworkers from acquisition. The Company mitigates the corporate cultural
gap by adopting standard operation procedure and management policies as well as
holding various training program.
(iii) Risk due to operation performance below expectation:
The Company will request the acquired target company to provide operation and
financial review periodically in order to monitor the operation status. The Company
also works with the target company to setup annual business goals in order to achieve
the benefits of acquisition and minimize the risk of under performance by the target.
In June 2012, the Company’s subsidiary in China, Shanghai Guochuang
Pharmaceutical Co. Ltd acquired 51% of Heilongjiang Province Tongze
Pharmaceutical Co. Ltd. This acquisition combined each company’s strengths and
complimented each other in sales model, distribution network as well as product
portfolio. Since the acquisition, Tongze has helped in growing the Company’s sales
as expected. Tongze accounted for 9% of the total sales of the Company in 2012, and
21% of total sales in the first quarter of 2013.
107
(9) The expected effects, potential risks of plant expansion and actions to be taken
The Company has no plan to build a plant up to the date of printing of the annual
report. In addition, the Company has established “procedures governing acquisition
or disposition of assets” which has been approved by the board of directors and
shareholders as a basis to carry out such related transactions.
(10) The risk of concentration in product supply and sales and corresponding actions
(a) Concentration in product supply:
Previously the Company’s sales were concentrated on HBV product –Daiding,
which used to account for more than 80% of the total supply. However, as the
Company worked rigorously to expand our product lines, Daiding’s supply to total
supply went down to 69.56% and 63.46% in 2011 and 2012 respectively.
Actions taken：
（ i ） Continue to increase product portfolio from hepatitis to respiratory,
cardio/oncology and other niche treatment areas. Aim to be leading player in
hepatitis and respiratory; cut into oncology market to be a leading Specialty Pharma
company in China.
（ii）Deepen the depth of medical device product. In addition to the spinal implant;
target to introduce more orthopedic products as well as bring in quality dental
implants into the market.
（iii）Seek for quality IVD reagent product to develop China market。
（iv）Through joint venture, equity investment, or other strategic investments to form
alliance with cooperative partners to bring in quality products for China, Taiwan and
South East Asia market.
From the above, the sales of Company will continue to grow and the concentration in
product supply will be reduced.
(b) Sales Concentration
The Company’s customer base widely spreads across China. There is no
customer accounting for more than 10% sales during 2008 - 2010, and only one
customer accounted for more than 10% in 2011 and 2012, being 13.95% and 11.82%
respectively. Hence the risk of sales concentration is low.
(11) Impacts and Risks from Changes in Directors and Shareholders with more than 10%
Shareholding or Their Selling/Transfer of a Large Number of Shares and the
corresponding actions:
As at the date of printing of this annual report, the directors and major shareholders
remained to own majority of the Company. The ownership of the Company is
stable.
(12) The risk of changes in management right, the impact and actions
108
There is no such risk at the date of printing of this annual report.
(13) Legal Risks
(a) In recent two years up to date of the annual report, no material impact to
shareholder’s equity or share price from a final or pending result of litigation or
non-litigation or administrative dispute of the Company, should disclose the fact in
dispute, amount of subject, commencement date of litigation, major parties involved
and current status.
(b) In recent two years up to the date of the annual report, no material impact to
shareholder’s equity or share price arising from a final or pending result of litigious or
non-litigious or administrative dispute of the directors, general managers, shareholders
holding more than 10% of the Company and its subsidiaries.
(c) In recent two years and up to the date of printing of the annual report, no directors,
managers, and shareholders holding more than 10% of the Company, violated Article
157 of the Securities Dealing Law.
(14) Other Material Risks
(a)
Central public bidding for the purchase of drug
Drug purchase in China is conducted by centralized public bidding held
periodically on provincial level. Each provincial and city public hospital can
purchase the drug from collective bidding process. If our Company fails to win the
bids for these centralized bidding, we will lose the qualification to sell the drugs to
hospitals and other non-profit health institutions.
The Company works closely with the manufacturers, and based on the
professional knowledge, market information, and bidding support, to raise the rate of
winning the bids.
(b) Drug Price Control
The Chinese Government may implement more price control measure to curb the
drug price and the competition may intensify due to public bidding rules which may
result in price reduction. The Company continues to expand sales network and
introduce new product lines to increase sales as well as cost control to maintain
profitability.
(c) Loss of product licenses
Among the sales and distribution agreements signed with suppliers, there may
be clauses/conditions for sales target, and we may lose the rights of sales and
marketing if we did not achieve the target. The Company agrees with the suppliers
on the sales target after thorough review and evaluation of the market and work hard
toward achieving the target to avoid the risk of losing the sales right.
109
(d) Intellectual Property Protection
The Company values intellectual property. We consult with patent lawyers to
provide patent review before signing new product for development to ensure no
infringement risk for products sold.
(e) New drug development/drug registration
The Company’s business model is to seek those new products with market
potential and fewer registrations. We collaborate with partners from filing with
CFDA and obtain exclusive sales right upon approval. However, the timing is hard to
predict due to various review and certification process and it is possible that other
competitor obtains the approval prior to ours and we may lose the market timing.
The Company has medical registration department, which is mainly in charge of
product filing and registration related affairs. We monitor and trace the status of
each of our filing and seek advice from experts at the drug examination center to
ensure the data we sent in are complete and satisfy the requirement to obtain approval
at the least time.
(f) Risk of personnel loss
People are the most valuable assets of the Company. It’s the contribution from
all the people working for the Company to achieve the business development of the
Company. The Company is devoted to improving work environment, designing
effective performance reward program and implementing employee stock option to
retain our talent.
110
VIII. PARTICULAR MATTERS TO NOTE
1.
Information of related companies
(1) Group structure of related companies
COLAND HOLDINGS LIMITED(Cayman)
100% CENTRAL CHIEF LIMITED(BVI)
100%
Coland Pharmaceutical Company Limited (HK)
100%
Coland Development Company Limited
(TW)
100%
Shanghai Guochuang Pharmaceutical
Company Limited
51%
Heilongjiang Tongze Pharmaceutical
(2) Basic information of related
companies
Company
Limited
Record date as at 31 March 2013
Unit:US$/NTD’000/RMB’000
Name
Central Chief
Limited
Coland
Pharmaceutical
Company
Shanghai
Guochuang
Pharmaceutical
Company
Li
it d
Coland
Development
Company
Limited
Heilongjiang
Tongze
Pharmaceutical
Company
Date of
Incorporation
2009.7
2009.9
Address
P.O. Box 957, Offshore
Incorporations Centre,
Road Town,Tortola, British
19F, Cameron Commercial
Centre 468 Hennessy Rd,
Causeway Bay, Hong Kong
Capital Paid
Main Operation Scope
USD
13,846,768
Investment Holding
USD
5,967,517
Investment Holding
2003.3
1st Fl.,No. 866 Halei Road,
Zhangjiang HiTech Park,
Pudong, Shanghai
USD
5,600,000
Trading and research
and development of
generic medicine
2011.10
Room D No. 170 Dunhua
North Road, Taipei
NTD 20,000
Research and
development of
generic medicine
2004.3.25
No. 4, 28th Fl., Huashan
Road, Nangang District,
Hairbin, China
RMB 12,000
Trading of generic
medicine
(3) There is no control and subordinate relationship among the related companies who has the
111
same shareholders.
(4) The business scope of our related companies covers the development, distribution , sale of
medicines, medical device and IVD reagents with high added value and the strategic
investment in the medical related industries. Shanghai Guochuang is th main body for the
national sale and distribution of Hepatitis and medicines for the treatment of Hepatitis,
respiratory illness and medical device. Heilongjiang Tongze is resbonsible for the sale
and distribution of medicines in Heilongjiang Province. It is alos responsible for the
national sale and distribution of Cardiovascular products.
(5) Information on the directors, supervisors and general manager manager of the related
companies
Record Date：31 March 2013
CompanyName
Title
Name
CENTRAL CHIEF LIMITED
Coland Pharmaceutical Company
Limited (incorporated in HK)
Shanghai Guochuang
Limited
Director
Director
Lee Hsin
Lee Hsin
General
Manager
Supervisor
Chairman
Director
Director
Supervisor
General
Manager
Lee Hsin
Coland Development Company
Limited
Heilongjiang Tongze
Limited
Number of Shares
Held
0
0%
Ye Xiao Ping
Lee Hsin
Tsao Johua
Cheng Ching-chi
Tsai Yang-wei
Wei Jian-min
0
0%
0
0%
0
0
0
0
0
0%
0%
0%
0%
0%
0
0%
(6) Operation status of the related companies for 2012
Date：31 March 2013
Unit：US$/NTD’000/RMB’000
Company
Name
CENTRAL
CHIEF
LIMITED
Coland
Pharmaceutical
Company
Limited
Shanghai
Guochuang
Pharmaceutical
Company
Sales Profit
Profit/(Loss)
after tax
Earnings
per
share
（after
tax)
-
-
NTD56,773
-
RMB42,185
RMB976
RMB909
NTD58,972
-
RMB251,867
RMB77,173
RMB14,782
NTD53,769
-
Net Asset
Value
Amount of
paid capital
Total Assets
Total
Liabilities
USD13,846
RMB89,514
-
RMB89,514
USD5,967
RMB42,717
RMB532
USD5,600
RMB274,243
RMB22,376
112
Sales
Income
Company
Name
Amount of
paid capital
Total Assets
Total
Liabilities
Net Asset
Value
Sales
Income
Sales Profit
Profit/(Loss)
after tax
Earnings
per
share
（after
tax)
-
Limited
Coland
Development
Company
Limtied
Heilongjiang
Tongze
Pharmaceutical
Company
Limited
NTD20,000
NTD14,594
NTD46
NTD14,548
-
NTD
(1,936)
NTD
(2,407)
RMB12,000
RMB67,124
RMB13,419
RMB53,705
RMB20,094
RMB4,294
NTD 15,157
113
(7) Statement regarding consolidated financial statements of related companies
(English translation of a statement originally issued in Chinese)
Statement
Date:
15 March 2013
We declare that the companies which should be included in the consolidated financial report of related
companies of the Company for year 2012 (from 1 January 2012 ro 31 December 2012), were the same
as those which should be included in the parent and subsidiaries consolidated financial statement
pursuant to No. 7 Pubication of the Financial and Accounting Principles. The information which
should be disclosed in the financial statements of related companies was all included in the aforesaid
parent-subsidiary consolidated financial statements. Hence, no separate consolidated financial
statements of related companies were prepared.
Chairman：William Keller
114
2.
The Company did not conduct any private placing for the latest year and up to the date of
printing of this annual report.
3.
No subsidiaries of the Company held or disposed shares of the Company in the latest year
and up to the date of printing of this annual report.
4.
No matters as set out in Article 36(2)(ii) of the Securities Trading Law occurred which had
material impact on the shareholders’ right.
5. There existed no material diference between the regulations for the protection of
shareholders right of the Company and those in Taiwan.
115
Report by the Audit Committee on Their Review of the 2012 Audited
Consolidated Financial Statements and Operation Report
To: 2013Annual General Meeting of Coland Holdings Limited
The Board of Directors prepared the Company’s 2012 Consolidated
Financial Statements which were audited by Mr. WANG Yan-Jun and Ms. LIN
Li-Feng who are in the capacity of the independent auditors from Ernest
&Young. The aforesaid Financial Statements together with the Operation
Report and the Profit Distribution Plan were reviewed and considered to be
correct and accurate by members of the Audit Committee of the Company.
According to Article 219 of the Company Law, we submit this report.
Convener of the Audit Committee: Norman Shen
Date:15 March, 2013
116
117
118 119 120 121 English Translation of Financial Statements Originally Issued in Chinese
COLAND HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
English Translation of Financial Statements Originally Issued in Chinese
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)
1. HISTORY AND ORGANIZATION
Coland Holdings Limited (the “Company”) was incorporated on March 23, 2010, in Cayman Islands.
The Company was reorganization as a holding Company to be registered under Taiwan Stock
Exchange (“TSE”). The Company’s common shares were publicly listed on the TSE in October
2011. Guochuang Pharmaceutical Co., Ltd. (“Guochuang”) and Tongze Pharmaceutical Co., Ltd.
(Tongze”) are the main operation entities of the group to engage in research and development,
innovation and sales of generic medicine, traditional Chinese patent medicine, biochemical drugs and
medical equipments.
As of December 31, 2012 and 2011, the Company and its subsidiaries (the “Group”) had 305 and 193
employees, respectively.
2. ORGANIZATIONAL RESTRUCTURING
In prior to reorganization, the Company’s subsidiaries and the below companies (known as
non-transferrable entities) were under common control of Mr. Leo Lee and Mr. Xiao-Ping Yeh.
Company name
Nature of business
122
Hainan Coland Pharmaceutical Co., Ltd.
Trading of generic medicine, traditional Chinese
patent medicine and biochemical drugs
Hainan Cohand Pharmaceutical Co., Ltd.
Trading of generic medicine, traditional Chinese
patent medicine and biochemical drugs
Hangzhou Sunyou Pharma-Tech. Co., Ltd. Research development of medical and health
products
For the preparation to be publicly listed on TSE, the organization was restructured as follows:
(1) Mr. Leo Lee and Mr. Xiao-Ping Yeh established Central Chief Limited on July 16, 2009, and
Coland Pharmaceutical Company (“Coland HK”) was invested as 100% ownership by Central
Chief Limited.
(2) On January 4, 2010, Coland HK acquired 100% ownership of Guochuang.
(3) On March 31, 2010, the business of non-transferrable entities were reorganized and succeed to
Guochuang. From March 31, 2010, non-transferrable entities ceased its operation and business.
(4) On April 22, 2010, the Company acquired all shares issued by Central Chief Limited through
shares exchange and became the holding Company of the Goup.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements were prepared in conformity with requirements of the
Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting
principles generally accepted in the Republic of China (R.O.C.).
123
Summary of significant accounting policies is as follows:
(1) Consolidated entities
The consolidated entities are as follows:
Percentage of
ownership
As of December 31,
Investor
Subsidiary
Nature of Business
2012
2011
The Company
Central Chief Limited
Investment holding
100%
100%
Central Chief
Limited
Coland Pharmaceutical
Company (Coland HK)
Investment holding
100%
100%
Central Chief
Limited
Coland Development
Co., Ltd.
Research and
development of
generic medicine
100%
100%
Coland HK
Guochuang
Pharmaceutical Co.,
Ltd. (Guochuang)
Trading and research
and development of
generic medicine
100%
100%
Guochuang
Tongze Pharmaceutical
Co., Ltd. (Tongze)
Trading of generic
medicine
51%
-%
(Note1)
Note 1: On June 20, 2012, the Board of Directors approved to acquired 51% ownership of
Tongze by its China subsidiary Guochuang. Since July 4, 2012, Tongze has been
included in consolidated financial statements of the Group.
124
(2) Principles for consolidation
Consolidated financial statements were prepared in accordance with the R.O.C. Statement of
Financial Accounting Standards (“SFAS”) No.7. Transactions between consolidated entities are
eliminated in the consolidated financial statements.
Investees in which the Company, directly or indirectly, holds more than 50% of voting rights or
less than 50% of voting rights but has de facto control, are accounted for under the equity
method and consolidated into the Company’s financial statements. Consolidation shall also be
implemented if any of the following circumstances exists:
i. the total amount of voting rights held in the investee exceeds 50% due to agreement with
other investors
ii. as permitted by law, or by contract agreements, the Group controls an entity’s finances,
operations and personnel affairs
iii. the Group has authority to appoint or discharge more than half members of board of
directors (or equivalents), by whom the investee is controlled
iv. the Group leads and controls more than half of the members of the board of directors (or
equivalents), by whom the investee is controlled
v. other indications of control interest.
(3) Foreign currency transactions
The functional currency of the Group is RMB. Transactions denominated in foreign currencies
are initially recorded in the functional currencies based on the exchange rates prevailing at the
transaction dates. When the transaction is settled within the same accounting period as that in
125
which it occurred, exchange differences arising on the settlement of monetary assets and
liabilities are included in profit or loss of that period. When the transaction is settled in a
subsequent accounting period, monetary assets and liabilities denominated in foreign currencies
are remeasured on the balance sheet date using the exchange rates prevailing as at that date, with
the resulting exchange gains or losses included in the profit loss. Exchange gains or losses
arising on investments in foreign entities are recognized as cumulative translation adjustment in
consolidated stockholders’ equity.
(4) Translation of financial statements in foreign currency
The financial statements of foreign subsidiaries are translated into New Taiwan Dollars
(“NTD”) using the spot rates at the balance sheet date for asset and liability accounts, historical
exchange rates for equity accounts other than retain earnings at the beginning of the year which
is carrying forward from the prior year, spot rate at the declaration date for dividends accounts,
and weighted average exchange rates for profit and loss accounts. The cumulative translation
effects from the subsidiaries using functional currencies other than NTD are included in the
cumulative translation adjustment in consolidated stockholders’ equity.
(5) Cash equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash, and so close to their maturity that they present insignificant risk from changes
in interest rates. Commercial paper and repurchase agreements collateralized by corporate
notes with original maturity of three months or less are considered to be cash equivalents.
(6) Financial assets and financial liabilities
Based on the R.O.C. SFAS No. 34, “Accounting for Financial Instruments”, and the
“Guidelines Governing the Preparation of Financial Reports by Securities Issuers”, financial
assets are classified as financial assets at fair value through profit or loss, available-for-sale
126
financial assets, held-to-maturity financial assets, and financial assets measured at cost.
Financial liabilities are classified as fair value through profit or loss. When financial assets or
liabilities are recognized initially, they are measured at fair value, plus transaction cost for all
financial assets or liabilities not carried at fair value through profit or loss.
The Group’s purchases and sales of financial assets and liabilities are recognized on the trade
date, the date that the Group commits to purchasing or selling the asset and liability.
a. Financial assets and financial liabilities at fair value through profit or loss
This category has two sub-categories: financial assets or liabilities held for trading and those
designated at fair value through profit or loss at inception. Financial assets or liabilities at
fair value through profit or loss are subsequently measured at fair value and changes in fair
value are recognized in profit and loss.
b. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets neither classified as
financial assets at fair value through profit or loss, nor held-to-maturity financial assets and
loans and receivables. Subsequent measurement is measured at fair value.
The gain or
loss arising from the change in fair value, excluding impairment loss and exchange gain or
loss, is recognized as an adjustment to stockholders’ equity until such investment is
reclassified or disposed of, upon which the cumulative gain or loss previously charged to
stockholders’ equity will be recorded in the income statement.
c. Financial assets measured at cost
127
Unlisted stocks and others without reliable market prices are measured at cost.
Where
objective evidence of impairment exists, the Group shall recognize impairment loss, which
shall not be reversed in subsequent periods.
d. Derivative financial assets and liabilities for hedging
Derivative financial assets and liabilities for hedging that have been designated in hedge
accounting relationships and are effective hedging instruments and reported at fair value.
The fair value is determined by reference to the closing price on the balance sheet date for listed
equity securities and close-end mutual funds or the net asset value per unit for open-end mutual
funds.
(7) Assessment of impairment for account receivables
The Group first assesses as of balance sheet date whether objective evidence of impairment
exists for notes, accounts and other receivables that are individually significant. If there is
objective evidence that an impairment loss has occurred, the amount of impairment loss is
assessed individually. For notes, accounts and other receivables other than those mentioned
above, the Group groups those assets with similar credit risk characteristics and collectively
assess them for impairment.
(8) Inventories
Inventories are recorded at cost when acquired and cost is determined using the weight-average
method. Inventories are stated at the lower of cost or net realizable value on an item by item
basis except in some circumstances, where it may be appropriate to group similar or related
128
items. Net realizable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make the sale. An allowance
for loss on decline in market value or obsolescence is provided, when necessary.
(9) Long-term investments accounted for under the equity method
Investment in which the Group owns more than 20% of the investee company’s outstanding
shares and has significant influence over operational decisions of the investee company, is
accounted for under the equity method. The difference of the acquisition cost and the
underlying equity are analyzed and accounted for in the manner similar to the allocation of
acquisition cost as provided in the R.O.C. SFAS No. 25, “Business Combinations – Accounting
Treatment under Purchase Method”, where goodwill is not subject to amortization.
The change in the Group’s proportionate share in the net assets of its investee resulting from its
subscription to additional stock, issued by such investee, at a rate not proportionate to its
existing equity ownership in such investee, is charged to the additional paid-in capital and
long-term investments account.
(10) Property, plant and equipment
Property, plant and equipment are stated at cost. Significant additions, renewals and
improvements are capitalized and depreciated over their estimated useful lives while ordinary
repairs and maintenance are expensed as incurred. Gain or loss on disposal of property, plant
and equipment are recorded as non-operating income or expenses.
Depreciation is provided with straight-line basis over the following useful lives:
Machinery and equipment
5 years
129
Transportation equipment
5 years
Leasehold improvements
3 years
(11) Intangible assets
The difference of the acquisition cost and the fair value of assets acquired through business
combination is analyzed and accounted for under the R.O.C. SFAS 25 “Business
combinations-Accounting Treatment under purchase Method,” in which goodwill is not subject
to amortization.
The intangible assets of the Group are computer software, licenses from acquisition of
Guochuang, Goodwill and exclusive distribution right from acquisition of Tongze. The Group
adopted the R.O.C. SFAS No. 37 “Accounting for Intangible Assets”. Intangible assets are
initially recognized at cost. After the initial recognition, the intangible assets shall be carried at
the costs plus statutory revaluation increment less accumulated amortization and accumulated
impairment losses.
Other than licenses and goodwill, the intangible assets are assessed as finite useful life.
Licenses and goodwill are tested for impairment annually in accordance to the R.O.C. SFAS
No.35.
The amortization amounts of the intangible assets with finite useful lives are allocated on a
systematic basis over their useful lives. Impairment testing is performed when there are
indications of impairment on intangible assets. The Group revaluates the amortization periods
and amortization methods of the intangible assets with finite useful lives at each balance sheet
date and the changes are treated as changes in accounting estimates.
(12) Derecognization of financial assets and liabilities
130
a. Financial assets
The Group derecognizes its financial assets or part of the assets when the Group loses
control of the contractual rights from the financial assets or part of the assets. When the
Group transfers all or part of its financial assets and relinquishes control of the financial
assets, this transaction is considered a sale within the range of exchange with reward.
When a transfer of a financial asset does not satisfy conditions required to be considered as
lose of control, the Group treats the transfer as a guaranteed borrowing. The financial asset
is not considered financial derivatives.
b. Financial liabilities
The Group derecognizes its financial liabilities or part of the liabilities when it is
extinguished by discharge, cancellation, or expiration of its contractual obligation.
When there has been an exchange of an existing financial liabilities between the Group and
the creditor with substantially different terms, or there has been a substantial modification of
the terms of the existing financial liabilities, and a simultaneous assumption of obligation
from new financial liabilities, this transaction is accounted for as an extinguishment of the
original financial liabilities and the recognition of new financial liabilities. A gain or loss
from extinguishment of the original financial liability is recognized in the income statement.
(13) Impairment of financial assets
The Group assesses at each balance sheet date whether a financial asset or a group of financial
assets is impaired.
131
a. Financial assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument, or
on a derivative asset that is linked to and must be settled by delivery of such an unquoted
equity instrument has been incurred, the amount of the loss is recorded as the difference
between the asset's carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset. The impairment
loss can not be reversed.
b. Available-for-sale financial assets
If an available-for-sale asset is impaired, an amount comprising the difference between its
cost (net of any principal payment and amortization) and its current fair value, less any
impairment loss previously recognized in profit or loss, is transferred from equity to the
income statement. Reversals in respect of equity instruments classified as available-for-sale
are not recognized in profit. Reversals of impairment losses on debt instruments are
reversed through profit or loss if the increase in fair value of the instrument can be
objectively related to an event occurring after the impairment loss was recognized in profit or
loss.
(14) Accounting for derivative financial instruments and hedge activities
The Company and subsidiaries recognized derivative as either assets (when the fair value is
positive) or liabilities (when the fair value is negative) on the balance sheet and measured those
instruments at fair value. Derivatives that are not qualified for hedge accounting criteria are
accounted for as financial assets or liabilities held for trading with changes in fair value
recognized in profit or loss. However if derivatives satisfy the hedge accounting criteria, they
are accounted for using hedge accounting.
132
The ineffective portion of derivative financial assets and liabilities for hedging is also
categorized as held for trading and the gain or loss is reported in earning immediately.
Hedges which meet the strict criteria for hedge accounting are categorized in three sections as
follows:
a. Fair value hedges
Fair value hedges are hedges of the Company's exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, or an identified portion of
such an asset, liability or firm commitment, that is attributable to a particular risk and could
affect profit or loss. For fair value hedges, the carrying amount of the hedged item is adjusted
for gains and losses attributable to the risk being hedged, the derivative is remeasured at fair
value and gains and losses from both are taken to profit or loss.
b. Cash flow hedges
Cash flow hedges are a hedge of the exposure to variability in cash flows that is attributable
to a particular risk associated with a recognized asset or liability or a highly probable
forecast transaction and could affect profit or loss. The effective portion of the gain or loss
on the hedging instrument is recognized directly in equity, while the ineffective portion is
recognized in profit or loss immediately.
Amounts taken to equity are transferred to the statement of operations when the hedged
transaction affects profit or loss, such as when hedged financial income or financial expense
is recognized or when a forecast sale or purchase occurs. Where the hedged item is the cost
of a non-financial asset or liability, the amounts taken to equity are transferred to the initial
carrying amount of the non-financial asset or liability.
133
c. Hedge of a net investment in a foreign operation
Hedge of a net investment in a foreign operation is a hedge of the exposure to changes in
foreign currency of a net investment in a foreign operation.
The Company formally documents at inception all relationships between hedging
instruments and hedged items, as well as its risk management objectives and strategies for
undertaking various accounting hedges. The documentation includes identification of the
hedging instrument, the hedged item or transaction, the nature of the risk being hedged and
how the entity will assess the hedging instrument's effectiveness in offsetting the exposure to
changes in the hedged item's fair value and cash flow attributable to the hedged risk. Such
hedges are expected to be highly effective in offsetting changes in fair value and cash flow of
the hedged items. The Company assesses on an ongoing basis to determine that they actually
have been highly effective throughout the financial reporting periods for which they were
designated.
(15) Asset impairment
Pursuant to the R.O.C. SFAS No. 35, “Accounting for Asset Impairment”, the Group assesses
indicators of impairment for all its assets, except for goodwill, within the scope of the standard
at each balance sheet date. If impairment is indicated, the Group compares the carrying
amount with the recoverable amount of the assets or the cash-generating unit (CGU) and writes
down the carrying amount to the recoverable amount where applicable. The recoverable
amount is defined as the higher of fair values less the costs to sell and the values in use.
For previously recognized losses, the Group assesses, at the balance sheet date, whether there is
any indication that the impairment loss may no longer exist or may have diminished. If there is
any such indication, the Group recalculates the recoverable amount of the asset. If the
recoverable amount increases as a result of the increase in the estimated service potential of the
assets, the Group reverses the impairment loss such that the resulting carrying amount of the
asset shall not exceed the amount (net of amortization or depreciation), that would otherwise
result had no impairment loss been recognized for the assets in prior years.
134
In addition, a goodwill-allocated CGU or group of CGUs is tested for impairment each year,
regardless of whether impairment is indicated. If an impairment test reveals that the carrying
amount, including goodwill, of CGU or group of CGUs is greater than its recoverable amount, it
results in an impairment loss. The loss is first recorded against the CGU’s goodwill, with any
remaining loss allocated to other assets on a pro rata basis proportionate to their carrying
amounts. The write-down of goodwill cannot be reversed in subsequent periods under any
circumstances.
Impairment loss (reversal) is classified as non-operating loss/ (income).
(16) Revenue recognition
The Company recognizes revenue when the earnings process is complete, as evidenced by an
agreement with the customer, transfer of title and acceptance, if applicable, as well as fixed or
determinable pricing and reasonably assured collectability.
(17) Employee benefit
According local regulation, the employees of the Group are required to participate in a central
pension scheme and various government-sponsored housing funds in mainland China. The
Group contribute on a monthly basis at the given rates, and are charged to the income statements
as operation expenses.
(18) Government grant
Government grants are recognized at their fair value where there is reasonable assurance that the
grant will be received and all attaching conditions will be complied with. When the grant relates
to an expense item, it is recognized as income over the periods necessary to match the grant on a
systematic basis to the costs that it is intended to compensate. Where the grant relates to at asset,
the fair value of the grant is deducted from the carrying amount of the asset and released to the
income statement by way of a reduced depreciation charge.
135
(19) Employee bonuses and remunerations paid to directors and supervisors
In accordance with Accounting Research and Development Foundation interpretation
No.96-052 effective January 1, 2008, employee bonuses and remunerations paid to directors and
supervisors are charged to expense at fair value and are no longer accounted for as an
appropriation of earnings.
(20) Income tax
In compliance with the R.O.C. SFAS No.22, “Accounting for Income Taxes”, tax consequences
are caused by taxable temporary differences are recognized as deferred income tax liabilities.
Tax consequences caused by deductible temporary differences, net operating loss carryforwards,
and tax credits are recognized as deferred income tax assets. Valuation allowance associated
with the underlying tax assets is then determined based on the realizability of deferred tax
assets.
According to R.O.C. SFAS No.12, “Accounting for Income Tax Credits”, the Company
recognizes the tax credits arising from purchases of machinery, equipment and technology,
research and development expenditures, employee training, and certain equity investment in the
period when such purchases, expenditures and training occur.
(21) Earnings per share
Earnings per share are computed according to the R.O.C. SFAS No.24. Basic earnings per share
are computed by dividing net income (loss) by weighted average number of shares outstanding
during the year. Diluted earnings per share is computed by taking basic earnings per share into
consideration plus additional common shares that would have been outstanding if the dilutive
share equivalents had been used. The income (loss) would also be adjusted for the interest and
other income or expenses derived from any underlying dilutive share equivalents.
136
(22) Employee stock option plan
The Company enters into equity-settled share-based payment transaction with its employees.
The Company is adopted R.O.C. SFAS No.39 “Accounting for Share-Based Payment”,
share-based payment transaction is measured by reference to the fair value of the equity
instruments at the grant date and the fair value is determined by an external expert using an
appropriate pricing model.
Pursuant to R.O.C. SFAS No. 39, the goods or services received under such transaction, and the
corresponding increase in equity, shall be measured by reference to the fair value of the equity
instruments granted. If there is no vesting condition attached, then the equity instrument is
vested immediately, with the employee compensation costs recognized as at the grant date, with
a corresponding increase in equity. If the equity instrument is vested over a certain period,
then the employee compensation costs are recognized over the period, with a corresponding
increase in equity.
In valuing the fair value of the equity instrument granted, no account is taken of any vesting
conditions other than market conditions. Instead, non-market vesting conditions shall be taken
into account by adjusting the number of equity instruments included in the measurement of the
transaction amount, so that, ultimately, the amount recognized for goods or service received as
consideration for the equity instruments granted shall be based on actual number of equity
instruments that eventually vest. For grants of equity instruments with market conditions, the
Company shall recognize the goods or service received from a counterparty that satisfies all
other vesting conditions, irrespective of whether the market condition is satisfied.
(23) Operating segment information
An operating segment is a component of an entity that has the following characteristics:
a. engaging in business activities from which it may earn revenues and incur expenses;
137
b. whose operating results are regularly reviewed by the entity’s chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its performance;
and
c. for which discrete financial information is available.
3. CHANGES IN ACCOUNTING PRINCIPLES
(1) Effective from January 1, 2011, the Company adopted R.O.C. SFAS No. 41, “Operating
Segments” (R.O.C. SFAS41), to present operating segment information. The newly issued
R.O.C. SFAS 41 replaced SFAS No.20, “Segment Reporting”, the change in accounting
principles had no effect on the comparative operating segment information.
(2) Effective from January 1, 2011, the Company adopted the third revision of R.O.C. SFAS No.34
“Financial Instruments: Recognition and Measurement”. This change in accounting principles
had no significant effect on the net loss or loss per share for the year ended December 31, 2011.
4. CONTENTS OF SIGNIFICANT ACCOUNTS
(1) Cash and cash equivalents
As of December 31,
2012
Cash on hand
2011
$301
$207
Checking and saving accounts
244,602
1,081,960
Time deposits
288,920
264,385
138
Cash equivalents
Total
396,100
-
$929,923
$1,346,552
(2) Accounts receivable, net
As of December 31,
2012
2011
Notes receivable
$48,691
$16,289
Accounts receivable
316,457
262,774
Less: Allowance for doubtful accounts
(53)
Net
$365,095
(667)
$278,396
(3) Inventories, net
As of December 31,
2012
Merchandise inventories
Less: Allowance for loss on decline in market value and
obsolescence
Net
2011
$81,065
$69,081
-
-
$81,065
$69,081
(4) Long-term investments accounted for under the equity method
a. Details of long-term investments accounted for under the equity method are as following:
139
As of December 31,
2012
Investee Company
Amount
Eminent Global Limited
$-
2011
% of
Ownershi
p
-%
Amount
$33,376
% of
Ownershi
p
23.78%
b. The Company has exchanged all its ownership of Eminent Global Limited to TWi
Pharmaceuticals Inc. Since the Company doesn’t has significant influence of TWi
Pharmaceuticals Inc., the Company accounted for under cost method.
c. The Company acquired 16.84% ownership of Eminent Global Limited in 2011, and owns
more than 20% of outstanding shares. Therefore, the Company determined it should apply
the equity method.
d. Total loss and gain arising from investments accounted for under equity method were a loss
of $6,935 thousand and a gain of $30,800 thousand for the year ended December 31, 2012
and 2011, respectively.
(5) Available-for-sale financial assets, noncurrent
As of December 31,
2012
Common stocks
$8,235
(6) Financial assets measured at cost, noncurrent
a. Non-current financial assets measured at cost consisted of the following:
140
2011
$-
As of December 31,
2012
Tianjin Taipu Pharmaceutical Science &
2011
$3,588
$3,701
46,600
48,070
139,308
-
49,442
-
$238,938
$51,771
Technology Development Co., Ltd.
Beijing Qiming Venture Capital Center
TWi Pharmaceuticals Inc.
PnarmaDax Limited
Total
b. As the stocks were not traded in the open market and fair value of the above stocks could not
be reliably measured, these stock investments were carried at cost.
c. The Group’s dividend income from Tianjin Taipu Pharmaceutical Science & Technology
Development Co., Ltd. and Beijing Qiming Venture Capital Center were $1,590 thousand
and $1,499 thousand for the year ended December 31, 2012 and 2011 respectively.
(7) Property, plant and equipment
a.
As of December 31, 2012
Cost
Transportation and equipment
$10,505
141
Accumulated
depreciation
$6,146
Book value
$4,359
Furniture and fixtures
4,617
1,280
3,337
Leaseholds improvements
3,212
2,306
906
$18,334
$9,732
$8,602
Total
Cost
Transportation and equipment
Accumulated
depreciation
Book value
$9,647
$4,227
$5,420
Furniture and fixtures
2,108
521
1,587
Leaseholds improvements
2,907
1,334
1,573
$14,662
$6,082
$8,580
Total
b. There was no interest capitalization for the years ended December 31, 2012 and 2011.
c. There was no property, plant and equipment pledged as collateral as of December 31, 2012
and 2011.
(8) Intangible assets
a. Licenses
As of December 31,
2012
Licenses
$29,880
142
2011
$30,823
Licenses are nutraceutical licenses through acquisition of Guochuang with infinite useful
life. The Company performs impairment testing annually in accordance to R.O.C. SFAS
No.35.
b. Other intangible assets
For the year ended December 31, 2012
Beginning
balance
Translation
Additions Amortization
effect
Ending
balance
Computer software
$911
$671
$(176)
$(31)
$1,375
Selling rights
2,573
-
(2,508)
(65)
-
-
109,324
(5,494)
27
103,857
$3,484
$109,995
$(8,178)
$(69)
$105,232
Exclusive distribution rights
Total
Beginning
balance
Translation
Additions Amortization
effect
Ending
balance
Computer software
$968
$-
$(134)
$77
$911
Selling rights
4,949
-
(2,670)
294
2,573
$5,917
$-
$(2,804)
$371
$3,484
Total
The selling rights represents the selling right for Mycophenolate Mofetil amounting to RMB
3,000,000 which originally purchased from Shanghai Leo Medical Consulting Co., Ltd. and
transferred the right to Guochuang through reorganization as of April 22, 2010. It has an
estimated remaining life of three years.
The exclusive distribution rights represent the exclusive distribution rights through business
combination with Tongze. The Group identified these intangible assets according to R.O.C.
SFAS No.37 “Accounting for Intangible assets”. The fair value of the exclusive distribution
143
rights amounting to RMB 23,460 thousand, and its an estimation useful life of ten years.
Please refer to Note 10.c for detail.
(9) Accrued expenses
As of December 31,
2012
Salary payable
2011
$28,747
$12,432
Accrued marketing expenses
39,379
38,655
Other taxes payable
21,405
14,044
Others
12,372
15,230
$101,903
$80,361
Total
(10) Capital stock
a. As of January 1, 2011, the authorized and issued capital of the Company were $2,000,000
thousand and $115,002 thousand, each at a par value of $10, and divided into 200,000
thousand shares and 11,500 thousand shares respectively.
b. On January 19, 2011, the Board Directors meeting approved to issue 612,956 new shares for
cash, the authorized and issued capital of the Company were $2,000,000 thousand and
$121,132 thousand, divided into 200,000 thousand shares and 12,113 thousand shares
respectively.
c. On April 7, 2011, the shareholders approved to issue $147,959 thousand new shares from
stock dividend and $353,129 thousand new shares transfer from shares premiums. The
144
authorized and issued capital of the Company were $2,000,000 thousand and $622,220
thousand, divided into 200,000 thousand shares and 62,222 thousand shares respectively.
d. On Apirl 7, 2011, the shareholders’ meeting approved the Board of Directors’ proposal to
issue 7,778 thousand new shares for cash offerred to the public for subscription, and 778
thousand shares be reserved for subscription by the employees. All shareholders of the
Company agreed to waive their respective pre-emptive rights in those shares. The transaction
completed on October 5, 2011, and the issued capital of the Company were $700,000
thousand with 70,000 thousand shares.
e. As of December 31, 2012, the authorized and issued capital of the Company were $2,000,000
thousand and $700,000 thousand, each at a par value of $10, and divided into 200,000
thousand shares and 70,000 thousand shares respectively.
(11) Retained earnings and dividend policies
According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be
distributed in the following order:
a. Payment of all taxes and dues;
b. Offset prior years’ operation losses;
c. Set aside 10% of the remaining amount after deducting items (a) and (b) as a legal reserve;
d. After deducting items (a), (b), and (c) above from the current year’s earnings, no more than
10% of the remaining amount is to be allocated as employee bonuses and no more than 5% is
to be allocated as directors’ remuneration. Employees of the Company’s subsidiaries,
145
meeting certain requirements determined by the board of directors, are also eligible for the
employee bonuses.
e. The distribution of the remaining portion, if any, will be recommended by the board of
directors and resolved in the shareholders’ meeting. The policy for dividend distribution
should reflect factors such as the current and future investment environment, fund
requirements, domestic and international competition, capital budgets, and etc. The
Company’s Articles of Incorporation further provide that no less than 30% of earnings
distribute to shareholders, if any, could be paid in the form of stock or cash dividends.
Accordingly, at least 10% of the dividends must be paid in the form of cash.
146
The distribution of cash dividends for 2012 and 2011 were approved through the board of
directors meeting and the shareholders’ meeting on March 15, 2013 and June 5, 2012,
respectively.
The detail of distribution are as follows:
Dividend per share ($)
2012
Cash dividend
3.20
2011
4.00
The Company estimated the amounts of the employee bonuses and remuneration to directors
for 2012 and 2011 are both to be $0. The estimates amount was by taking into
consideration of the Company’s Articles of Incorporation and related regulations. Estimated
amount of employee bonus and remunerations paid to directors are charged to current
income. If the board modified the estimates significantly in the subsequent periods, the
Company will recognize the change as an adjustment to current income. Moreover, if the
amounts were modified by the stockholders’ meeting in the following year, the adjustment
will be regarded as a change in accounting estimate and will be reflected in the consolidated
statement of income in the following year. Information about appropriations of the bonus to
employees and directors can be obtained from the “Market Observation Post System” on the
website of the TSE.
(12) Employee stock options
On December 4, 2010, the Board of Directors’ meeting approved to issue employee stock
options with 231,651 units (Plan A) and 6,569 units (Plan B); each unit entitles an optionee to
subscribe for one share of the Company’s common stock. If there is any increase or decrease on
the common shares, the shares of the common stock could be subscribed by optionee will be
adjusted according the change ratios. The exercise price is based on the face value of the
common stocks. The Plan A options may exercise in accordance with certain schedyle as
prescribed by the plan after 2 years from the date that the Company listed in TSE. The Plan B
options exercise as soon as the date that the Company listed in TSE, and the contractual life of
the options is five years from the date that the Company listed in TSE.
147
On June 13, 2012, the Company was authorized by the Securities and Futures Bureau of the
Financial Supervisory Commission, Executive Yuan, to issue employee stock options with a
total number of 1,000 units; each unit entitles an optionee to subscribe for 1,000 share of the
Company’s common stock settlement upon the exercise of the options will be made through the
issuance of new shares by the Company. The exercise price of the options was set at the closing
price of the Company’s common stock on the date of grant. The contractual life of the options is
five years and an optionee may exercise the options in accordance with certain schedules as
prescribed by the plan starting two years from the date of grant.
The compensation costs for employee stock options for the years ended December 31, 2012 and
2011 were $4,723 thousand and $4,540 thousand respectively. As of December 31, 2012, there
had been no cancellations or amendments to the stock option plan.
Detailed information relevant to the employee stock options is disclosed as follows:
Total numbers
of
options granted
Total numbers
Shares available to
option holders
(in thousand
shares)
Exercise price
Date of grant
(unit)
of options
outstanding (unit)
December 10, 2010
231,651
137,185
835
$10.00
December 10, 2010
6,569
6,569
40
$10.00
June 20, 2012
315
225
225
$68.40
November 2, 2012
440
440
440
$77.10
(NTD)
a. A summary of the Company’s stock options plan, and related information for the years ended
December 31, 2012 and 2011 are as follows:
148
For the years ended December 31,
2012
2011
Shares
Shares
WeightedWeightedavailable to
available to
option
average
option
average
holder’s (in exercise price holder’s (in exercise price
thousands)
(NTD)
thousands)
(NTD)
Outstanding at
beginning of year
1,095
$10.00
1,450
Granted
755
73.47
-
-
Expired
-
-
-
-
Exercised
-
-
-
-
Forfeited
(310)
10.00
(355)
$10.00
10.00
Outstanding at end of
year
1,540
41.12
1,095
10.00
Exercisable at end of
year
40
10.00
40
10.00
Weighted-average fair value of
options granted during the
period (NTD)
$12.82
b. The information of the Company’s outstanding stock options as of December 31, 2012 is as
follows:
149
Outstanding Stock Options
Exercisable Stock Options
Shares
Shares
available to
available to
option
Weighted-average
Weighted-average
option
Weighted-average
Authorization Range of exercise holder’s (in expected remaining exercise price per holder’s (in exercise price per
date
price (NTD)
thousands)
life (years)
share(NTD)
thousands)
share(NTD)
2010.12.10
$10.00
835
3.76
$10.00
-
$-
2010.12.10
$10.00
40
3.76
$10.00
40
$10
2012.06.20
$68.00
225
4.50
$68.40
-
$-
2012.11.02
$77.00
440
4.83
$77.10
-
$-
1,540
40
The information of the Company’s outstanding stock options as of December 31, 2011 is as
follows:
Outstanding Stock Options
Exercisable Stock Options
Shares
Shares
available to
available to
option
Weighted-average
Weighted-average
option
Weighted-average
Authorization Range of exercise holder’s (in expected remaining exercise price per holder’s (in exercise price per
date
price (NTD)
thousands)
life (years)
share(NTD)
thousands)
share(NTD)
2010.12.10
$10.00
1,055
4.76
$10.00
-
$-
2010.12.10
$10.00
40
4.76
$10.00
40
$10
1,095
40
c. The fair value of these options granted was determined at the date of grant using the
following assumptions for the year ended December 31, 2012:
150
2012.06.20
2012.11.02
5
5
Volatility factors of the expected
market price (%)
34.49
35.08
Risk-free interest rate (%)
0.93
0.87
Exercise price ($)
68.40
77.10
Black-scholes
Black-scholes
15
15
Expected dividend yields (%)
Option pricing model
Expected future forfeiture (%)
(13) Operating costs and expenses
For the year ended December 31,
2012
2011
$158,22
$131,216
32,055
25,786
-
-
2,147
1,548
Depreciation
4,180
3,364
Amortization
8,178
2,804
Personnel expenses
Salaries
Labor and health insurance
Pension
Other personnel expenses
(14) Income tax
a. Deferred income tax assets and liabilities are as follows:
151
As of December 31,
2012
2011
A. Deferred income tax assets
$14,578
$7,893
B. Deferred income tax liabilities
$25,964
$-
$-
$-
$14,578
$7,893
-
-
Net deferred income tax assets-current
14,578
7,893
Deferred income tax liabilities-current
-
-
$14,578
$7,893
C. Valuation allowance for deferred income tax assets
D. Deferred income tax assets-current
Valuation allowance
Net
As of December 31,
2012
E. Deferred income tax assets - noncurrent
2011
$-
$-
Valuation allowance
-
-
Net deferred income tax assets-noncurrent
-
-
Deferred income tax liabilities-noncurrent
25,964
-
$25,964
$-
Net
152
F. Significant components of deferred income tax assets and liabilities are as follows:
As of December 31,
2012
Unrealized expenses
Unrealized sales discounts
Amount
Income
tax effect
Amount
Income
tax effect
$43,047
$10,762
$18,763
$4,691
15,211
3,803
12,501
3,125
53
13
667
167
-
-
Allowance for bad debts
Unrealized consolidated amortization
2011
(103,857)
(25,964)
b. Reconciliation between the income tax expense and the income tax calculated on pre-tax
income based on the statutory tax rate is as follows:
For the years ended
December 31,
2012
2011
$117,547
$104,665
8,209
8,052
Changes in deferred tax assets and liabilities
(5,500)
(4,372)
Other
(1,552)
Income tax on pre-tax income at statutory tax rate
Permanent and temporary differences
Income tax expense
$118,704
377
$108,722
(15) Earnings per share
Amounts
153
Number of
Earnings per
share (NTD)
Shares
Pre-tax
income
(in
Net income Thousands)
Pre-tax
Net
income income
Earnings per share-basic:
Net income
Deduct: Minority interests
Income attributable to shareholders of
parent company
$437,433
(21,057)
$318,729
70,000
(15,785)
$416,376
$302,944
$-
$-
$437,433
$318,729
$6.25
$4.55
(0.30)
(0.23)
$5.95
$4.32
$6.18
$4.50
(0.30)
(0.22)
$5.88
$4.28
Effect of dilution
Employee stock options
795
Earnings per share-diluted:
Net income
parent company
(21,057)
$416,376
(15,785)
70,795
$302,944
Earnings per share
Amounts
Number of
(NTD)
Shares
(in
Pre-tax
Net income Thousands)
income
Pre-tax
Net
income income
Earnings per share-basic:
Net income
$422,684
$313,962
-
-
154
63,558
$6.65
$4.94
-
-
parent company
$422,684
$313,962
$-
$-
850
$422,684
$313,962
64,408
-
-
$6.65
$4.94
$6.56
$4.87
-
-
$6.56
$4.87
Effect of dilution
Employee stock options
Earnings per share-diluted:
Net income
parent company
$422,684
$313,962
(16) Segment financial information
The Group is operated under single business operating segment, thus the Company is not
required to disclose segment financial information.
5. RELATED PARTY TRANSACTIONS
(1) Name and relationship of related parties
Name of related parties
All members of director and key
Relationship with the Company
The Group’s key management personnel
managers
Eminent Global Limited (Note 1)
Investee accounted for under the equity method
155
Note 1: The Company does not hold any ownership of Eminent Global Limited as of December
31, 2012.
(2) Significant related party transactions
a. Key management compensation
For the years ended
December 31,
Items
2012
Salaries, compensation, and allowances
$32,758
2011
$34,312
b. The Company acquired 648,190 shares of TWi Pharmaceuticals Inc. through exchanged with
Eminent Global Limited’s ownership during 2012. The Company also purchased 339,751
shares of TWi Pharmaceuticals Inc. from Eminent Global with total consideration $32,561
thousand.
6. ASSETS PLEDGED AS COLLATERAL
None.
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company entered into several operating lease contracts for offices. Future minimum lease
payments under those leases are as follows:
156
Year
Amount
2013.01.01~2013.12.31
$8,075
2014.01.01~2014.12.31
4,840
2015.01.01~2015.12.31
977
Total
$13,892
8. SIGNIFICANT DISASTER LOSS
None.
9. SIGNIFICANT SUBSEQUENT EVENTS
None.
10. OTHERS
(1) Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprises cash and cash
equivalents and common stock. The main purpose of these financial instruments is to manage
financing for the Company and subsidaries’ operations. The Group also holds various other
financial assets and liabilities such as accounts receivable and accounts payable, which arise
directly from its operations.
157
The Group also enters into derivative transactions, including forward currency exchange
contracts. The purpose of these derivative transactions is to mitigate foreign currency
exchange risks arising from the Group’s operations activities. The Group’s policy is not
enter into trading purpose derivative transactions.
The main risks arising from the Group’s financial instruments includes foreign currency risk,
credit risk, and liquidity risk. Financial risk management policies are as follows:
a. Foreign currency risk
The Company has foreign currency risk arising from purchases and sales denominated in
foreign currencies. The Company uses the principle of natural hedge to mitigate the risk.
Furthermore the Company also utilizes spot or forward contracts to hedge foreign currency.
The notional amounts of the foreign currency contracts are the same as the amounts of the
hedged items.
b. Credit risk
The Group trades only with established and creditworthy third parties. It is the Group’s
policy that all customers who wish to trade on credit terms are subject to credit verification
procedures. In addition, receivable balances are monitored on an ongoing basis, which
consequently minimizes the Company's exposure to bad debts.
With respect to credit risk arising from the other financial assets of the Group, which
comprise cash and cash equivalents and other receivables, the Group’s exposure to credit risk
arising from the default of counter-parties is limited to the carrying amount of these
instruments.
c. Liquidity risk
158
The Group’s objective is to maintain a balance of funding continuity and flexibility through
the use of financial instruments such as cash and cash equivalents and bank loans.
(2) Information of financial instruments
a. Fair value of financial instruments:
As of December 31,
Non-derivative Financial
Instruments
2012
2011
Book value Fair value Book value Fair value
Assets:
Cash and cash equivalents
$929,923
Accounts receivable
Other receivables
Available-for-sale financial assets,
$929,923 $1,346,552 $1,346,552
365,095
365,095
278,396
278,396
27,572
27,572
10,180
10,180
8,235
8,235
-
-
238,938
-
51,771
-
3,646
3,646
-
-
101,903
101,903
80,361
80,361
91,988
91,988
-
-
non-current
Financial assets measured at cost,
non-current
Liabilities:
Payables
Accrued expenses
Other long-term payables
159
b. The methods and assumptions used to measure the fair value of financial instruments are as
follows:
i. The book values of short-term financial instruments approximate to the fair values due to
their short maturities.
Short-term financial instruments include cash and cash
equivalents, notes and accounts receivable, other receivables, payables and accrued
expenses.
ii. Available-for-sale financial assets are based on the quoted market prices.
iii. The fair value of financial assets measured at cost are unable to be estimated since there is
no active market in trading those unlisted investments.
iv. The fair value of other long-term payables is determined using discounted cash flow
analysis.
c. The fair value of the Group’s financial instruments is determined by the quoted prices in
active markets, or if the market for a financial instrument is not active, the Group establishes
fair value by using a valuation technique:
Active Market
Valuation Technique
Quotation
Non-derivative Financial Instruments
2012.12.31 2011.12.31 2012.12.31 2011.12.31
Assets:
Cash and cash equivalents
$929,923 $1,346,552
$-
$-
Receivables
-
-
365,095
278,396
Other receivables
-
-
27,572
10,180
160
Available-for-sale financial assets,
8,235
-
-
-
Payables
-
-
3,646
-
Accrued expenses
-
-
101,903
80,361
-
-
91,988
-
non-current
Liabilities:
d. For the years ended December 31, 2012 and 2011, total interest revenues for financial assets
or liabilities that are not at fair value through profit or loss were $23,064 thousand and
$8,181 thousand, respectively, while total interest expenses for the years ended December 31,
2012 and 2011 were $7,694 thousand and $323 thousand, respectively.
e. For the year ended December 31, 2012, the adjustment to the stockholders’ equity due to
changes in fair value of available-for sale assets were $3,960 thousand.
f. Financial risk information:
i. Market risk
Derivates held for trading are intended for hedging proposes. Gains or losses arising
from the fluctuations in exchange rate are likely to be offset against the gains or losses
arising from the hedge of items. As a result, no significant exposure to market risk is
anticipated.
ii. Credit risk
161
Financial assets are influenced by potential effects of transaction counterparties’
non-fulfillment of contract. Effects include the concentration of credit risk of the
Company’s and its subsidiaries’ financial instruments, components, amount of contracts,
and other receivables. There is no significant credit risk exposure.
iii. Liquidity risk
No significant cash flow risk is anticipated since the working capital is sufficient to meet
the cash flow requirements.
The Company and its subsidiaries entered into foreign exchange forward contracts, since
the forward rate has been fixed, no significant cash flow risk is anticipated. In addition,
the Company and its subsidiaries invest unlisted stocks. The significant liquidity risk is
expected.
(3) Business combination
In order to enhance the operating performance and competitiveness, the Group acquired 51%
shares of Tongze Pharmaceutical Co., Ltd. in cash. The effective date of business combination
was set on July 4, 2012 and Tongze became 51%-owned by the Group. The business
combination was resolved by Board of Director’s meeting on June, 20 2012. In accordance with
the R.O.C. SFAS No. 25, “Business Combinations – Accounting Treatment under Purchased
Method”, the Company discloses the following information:
a. Background of the acquired company:
Tongze was incorporated on March 25, 2004, the major operation is to trading generic
medicine in Heilongjiang. Tongue has exclusive distribution rights for cardiovascular
products in China. Tongze is also the market leader for Hepatitis and immunosuppressant
products in Heilongjiang province.
162
b. The acquisition date, the percentage of ownership acquired and adoption of purchase method
of accounting:
The effective date of business combination was set on July 4, 2012, the Group acquired 51%
of Tongze’s ownership in cash. The acquisition was accounted for in accordance with the
R.O.C. SFAS No. 25, “Business Combinations - Accounting Treatment under Purchased
Method”. The acquisition information is as follows:
Items
Amount
Acquisition cost
$255,986
Current assets
29,498
Property, plant and equipment
162
Exclusive distribution rights
109,324
Current liabilities
(3,871)
Other long-term liabilities
(27,331)
Acquired assets under fair value
(107,782)
Goodwill
$148,204
c. Acquisition cost and the type, number of shares and amount of stock issued as a result of the
acquisition: None.
d. Contingent payments, options or commitments included in the acquisition agreement and the
proposed accounting treatment:
According the purchase agreement of business combination with Tongze, the total
consideration will not exceed RMB61,200 thousand. The Company made payment on the
acquisition date amounted to RMB36,720 thousand, and the rest will be divided into several
163
payments in the next three years based on the specified future earning level Tongze
achieved. It is reasonable certain that the event is likely to occur and the amount can be
reasonably estimated. The contingent consideration is included in the acquisition cost.
According the purchase agreement, the Group has the right to re-purchase the rest 49%
ownership of Tongze after three years from the effective date of business combination. The
purchase price will be in accordance of the purchase agreement. The Group has evaluated
this re-purchased right, and concluded there is no value to be recognized in the financial
statements.
e. Significant asset disposal decisions resulting from the business acquisition: None.
f. Supplemental pro forma information:
The operation result of Tongze have been consolidated into the Company’s income statement
from July 4, 2012. The consolidated income statement information from respective
acquisition date (January 1, 2011) were as follows:
For the years ended
December 31,
2012
Sales revenue
Earnings attribute to shareholders of parent company
Earnings per share – basic (NTD)
$1,721,749
$1,515,228
302,944
318,269
4.32
5.01
(4) The information of foreign currency financial assets / liabilities is as follows
164
2011
Foreign
Exchange
Currency
Rate
NTD
Foreign
Exchange
Currency
Rate
NTD
Financial assets
Cash and cash equivalent
RMB
$199,554
4.6600
$929,923
$280,123
4.8070 $1,346,552
Accounts receivable
RMB
78,347
4.6600
365,095
57,914
4.8070
278,396
Other receivables
RMB
5,917
4.6600
27,572
2,118
4.8070
10,180
Long-term investments accounted RMB
-
4.6600
-
6,943
4.8070
33,376
1,767
4.6600
8,235
-
4.8070
-
RMB
51,274
4.6600
238,938
10,770
4.8070
51,771
Payables
RMB
782
4.6600
3,646
-
4.8070
-
Accrued expenses
RMB
21,868
4.6600
101,903
16,718
4.8070
80,361
RMB
19,740
4.6600
91,988
-
4.8070
-
for under the equity method
Available-for-sale financial assets RMB
Financial assets measured at cost
Financial liabilities
(5) Certain reclassifications have been made in 2011 financial statements to comform to the
presentation in the current year.
(6) The FSC requires companies with shares listed on the TSE or traded on the Taiwan GreTai
Securities Market or Emerging Stock Market to prepare their financial statements in accordance
with the International Financial Reporting Standards, International Accounting Standards, and
Interpretations developed by the International Financial Reporting Interpretations Committee or
the former Standing Interpretations Committee as recognized by the FSC (collectively referred
to as “IFRSs”), and the Guidelines Governing the Preparation of Financial Reports by Securities
Issuers, starting 2013. Under Rule No. 0990004943 issued by the FSC on February 2, 2010, the
Company makes the following pre-disclosures on the adoption of IFRSs as follows:
a. The main contents of the plan to adopt IFRSs and the current status:
The Company has set up a project team and made a plan to adopt IFRSs.
The main
contents of the plan, estimated completion schedule and status of execution are as follows:
165
Contents of Plan
Responsible Department
Status of
or Personnel
Execution
1. Establish a project team
Chief financial officer
Completed
2. Make a plan to adopt IFRSs
Accounting department
Completed
3. Identify differences between the existing accounting Accounting department
policies and IFRSs
4. Identify consolidated entities under IFRSs
Completed
Completed
Completed
5. Select voluntary exemptions under IFRS 1
“First-time Adoption of International Financial
Reporting Standards” and assess the impact of these
exemptions
Accounting department and
6. Assess the changes required in IT system
IT department
Completed
7. Assess the changes required in internal controls
Internal Audit department
Completed
8. Finalize the accounting policies under IFRSs
Completed
Completed
Completed
In progress
9. Finalize the selection of voluntary exemptions under
IFRS 1 “First-time Adoption of International
Financial Reporting Standards”
10. Prepare opening IFRS statement of financial
position
11. Prepare IFRSs comparative information for 2012
12. Finalize the changes to the internal control
(including financial statements process and the
associated IT system)
166
Internal Audit department
and Accounting department
In progress
b. The major differences between the existing accounting policies and the accounting policies to
be adopted under IFRSs and the Guidelines Governing the Preparation of Financial Reports
by Securities Issuers are summarized as below.
167
The Company assesses the major differences in accounting polices based on the IFRSs as
recognized by the FSC and the Guidelines Governing the Preparation of Financial Reports
by Securities Issuers expected to become effective in 2013. However these assessments may
be changed as the FSC may recognize different versions of IFRSs or amend the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers in the future.
Furthermore, the Company has decided the accounting policies to be adopted under IFRSs
based on the current circumstances, should circumstances change in the future, the
accounting policies to be adopted may change accordingly. The major differences in
accounting policies summarized in the table below may not result in any adjustment on the
date of transition to IFRSs, due to the voluntary exemptions selected under IFRS 1
“First-time Adoption of International Financial Reporting Standards”.
Accounting Issues
Financial assets
measured at cost
Description of differences
Under the requirements of the existing Guidelines Governing the
Preparation of Financial Reports by Securities Issuer, equity
investments in unlisted entities or entities traded on Emerging
Stock market should be measured at cost. However under the
requirements of IAS 39, only investments in equity instruments that
do not have a quoted market price in an active market and whose
fair value cannot be reliably measured could be measured at cost.
The fair value of investments in equity instruments that do not have
a quoted market price in an active market is reliably measurable if
(a) the variability in the range of reasonable fair value estimates is
not significant for that instrument or (b) the probabilities of the
various estimates within the range can be reasonably assessed and
used in estimating fair value.
Under the requirements of ROC GAAP, the investor company’s
share of an investee company’s losses shall be limited to the extent
that reduces the book value of such long-term investment and
advances to zero. But if the investor company intends to continue
Investments
its support for the investee company, or expects the investee
accounted for under company to return to profitability in the short run so as not to give
the equity method up the investee company, then an investor company shall continue
to recognize investment losses in proportion to its stock ownership
percentage. However under the requirements of IAS 28
“Investments in Associates”, if an investor’s share of losses of an
associate equals or exceeds its interest in the associate, the investor
168
Accounting Issues
discontinues recognizing its share of further losses. After the
investor’s interest is reduced to zero, additional losses are provided
for, and a liability is recognized, only to the extent that the investor
has incurred legal or constructive obligations or made payments on
behalf of the associate.
ROC GAAP does not require an associate’s financial statements to
be prepared using accounting policies that confirm with those of the
investor. Under the requirements of IAS 28, if an associate uses
accounting policies other than those of the investor for like
transactions and events in similar circumstances, adjustments shall
be made to conform the associate’s accounting policies to those of
the investor when the associate’s financial statements are used by
the investor in applying the equity method.
Investments
Under the requirements of ROC GAAP, if an investee company
accounted for under issues new shares and original shareholders do not purchase or
the equity method acquire new shares proportionately, and consequently the
investment percentage, and therefore the equity in net assets for the
investment that an investor company has invested have changed,
the resulting difference shall be accounted for as an equity
transaction. However under IFRSs, if the investment percentage has
decreased under the transaction described above, it should be
accounted for as a disposal of interests in associate; if the
investment percentage has increased, then it is accounted for as an
acquisition of the investment in an associate.
Business
combinations
Under the requirements of ROC GAAP, if the equity stock issued in
a business combination is traded in an open market, the market
price fluctuations for a reasonable period of time before and after
the announcement of the combination agreement should be
considered (along with other factors) to determine the acquisition
cost. If the quoted market price of the equity stock issued in a
business combination mentioned above cannot represent its fair
value, the fair value of the net assets acquired (including goodwill)
should be calculated (after adjusting for other factors) to determine
the acquisition cost. However under the requirements of IFRS 3
169
Accounting Issues
“Business Combinations”, the acquisition-date fair value of the
equity interests issued in a business combination shall be used to
determine the acquisition cost. If the acquisition-date fair value of
the acquiree’s equity interests is more reliably measurable than the
acquisition-date fair value of the acquirer’s equity interest, then the
acquirer shall determine the acquisition cost by using the
acquisition-date fair value of the acquiree’s equity interests.
Under the requirements of ROC GAAP, the purchase cost of the
acquiring corporation in a business combination includes all direct
costs of an acquisition, except for the costs of issuing securities,
indirect costs and general administrative expenses.
However under the requirements of IFRS 3, the acquirer shall
account for acquisition-related costs as expenses in the periods in
which the cots are incurred and the services are received, with one
exception. The costs to issue debt or equity securities shall be
recognized in accordance with IAS 32 “Financial Instruments:
Presentation” and IAS 39 “Financial Instruments: Recognition and
Measurement”.
Business
combinations
Under the requirements of ROC GAAP, the minority interests
should be measured based on the book value of the acquired
corporation. However under the requirements of IFRS 3, the
acquirer shall measure any non-controlling interest in the acquiree
either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s identifiable net assets.
Under the requirements of ROC GAAP, when the fair value of
identifiable net assets acquired exceeds the acquisition cost, the
difference should be assigned to non-current assets acquired
proportionate to their respective fair values. If the book values of
those non-current assets are reduced to zero, the remaining excess
should be recorded as extraordinary gains. Prior to 1 January, 2006,
the excess was accounted for as the deferred credit, and continued
to be amortized over the remaining amortization period. However
under the requirements of IFRS 3, the acquire shall first reassess
whether it has correctly identified all of the assets acquired and all
of the liabilities assumed and review the procedures used to
measure the amounts recognized. If that excess remains, the
acquirer shall recognize the resulting gain in profit or loss on the
170
Accounting Issues
acquisition date. The above difference also exists for acquisitions of
associate.
Under the requirements of ROC GAAP, where the distribution of
additional consideration may be contingent on maintaining or
achieving specified future earnings level for the acquired
corporation and it is reasonably certain that the event is likely to
occur and the amount can be reasonably estimated, then such
contingent consideration should be included in the acquisition cost.
Additional consideration contingent on the market price of a
particular stock issued as a result of a business combination will not
affect the acquisition costs. However under the requirements of
IFRS 3, contingent consideration is recognized at the
acquisition-date fair value.
Business
combinations
Income taxes
Under the requirements of ROC GAAP, goodwill is separately
calculated on each portion of investment acquired, the previously
held equity interest in the acquiree is not required to be remeasured.
However under the requirements of IFRS 3, in a business
combination achieved in stages, the acquirer shall remeasure its
previously held equity interests in the acquiree at its
acquisition-date fair value and recognize the resulting gain or loss,
if any, in profit or loss.
Under the requirements of ROC GAAP, deferred tax assets are
recognized in full, however, if there is over 50% possibility that the
economic benefits of a deferred tax asset become unrealizable, a
valuation allowance account should be established to reduce the
carrying amount of the deferred tax asset. However under the
requirements of IAS 12 “Income Taxes”, a deferred tax asset shall
be recognized to the extent that it is probable that it would be
utilized.
Under the requirements of ROC GAAP, a deferred tax asset or
liability should, according to the classification of its related asset or
liability, be classified as current or noncurrent. If a deferred tax
asset or liability is not related to an asset or liability for financial
reporting, it should be classified as current or noncurrent according
to the expected reversal date of the temporary difference. However
under the requirements of IAS 1 “Presentation of Financial
171
Accounting Issues
Statements”, deferred tax assets or liabilities are classified as
noncurrent.
There is no guidance under ROC GAAP that deals with the
applicable tax rates for related deferred tax assets or liabilities
arising from unrealized intragroup profits and losses. Under the
Company’s existing accounting policy, the Company’s tax rate is
used to calculate deferred tax assets or liabilities arising from
unrealized profits and losses of upstream intragroup transactions.
For downstream or side stream intragroup transactions, the
Company’s tax rate is also used to recognize deferred tax assets or
liabilities by adjusting investment gains or losses. However under
the requirements of IAS 12, temporary differences are determined
by comparing the carrying amounts of assets and liabilities in the
consolidated financial statements with the appropriate tax base.
Therefore buyer’s tax rate should be used to calculate the deferred
tax assets or liabilities arising from unrealized intragroup profits
and losses.
The preliminary assessment on the quantitative impacts of the major differences between the
existing accounting policies and the accounting policies to be adopted under IFRSs and
Guidelines Governing the Preparation of Financial Reports by Securities Issuers is as
follows:
i. Reconciliation of the balance sheet at January 1, 2012:
Unit: NT$K
ROC GAAP Adjustments
Deferred income tax assets, current (Note)
Deferred income tax assets, noncurrent
172
$7,983
-
$(7,983)
7,983
IFRSs
$7,983
(Note)
Total assets
1,876,733
-
1,876,733
Current liabilities
110,077
-
110,077
Total liabilities
110,077
-
110,077
Capital
700,000
-
700,000
608,284
-
608,284
Retained earnings
401,895
-
401,895
56,477
-
56,477
1,766,656
-
1,766,656
Cumulative translation adjustments
Total stockholders’ equity
Note: Under the requirements of IAS 1, “Presentation of Financial Statements”, deferred
income tax assets or liabilities are classified as non-current. Therefore, deferred
income tax assets or liabilities, current are reclassified as non-current. After
reclassification, deferred income tax assets, current was decreased by $7,983
thousand and deferred income tax assets, non-current was increased by $7,983
thousand as of January 1, 2012.
173
ii. Reconciliation of the balance sheet at December 31, 2012:
Unit: NT$K
Current assets (Note 1)
$1,505,284
Funds and investments (Note 4)
Property, plant and equipment
Intangible assets (Note 2 and 3)
Other assets (Note 1)
Total assets
Current liabilities
$(14,578)
IFRSs
$1,490,706
247,173
193,492
440,665
8,602
-
8,602
283,316
99,537
382,853
-
14,578
14,578
2,044,375
293,029
2,337,404
141,767
-
141,767
Other long-term payables (Note 3)
91,988
Deferred income tax liabilities, noncurrent
(Note 2)
25,964
24,947
50,911
259,719
24,699
284,418
Capital
700,000
-
700,000
613,007
-
613,007
Retained earnings
424,839
-
424,839
Total liabilities
(248)
Cumulative translation adjustments (Note
2)
2,072
Unrealized gain on financial instruments
(Note 4)
3,960
193,492
197,452
40,778
75,503
116,281
1,784,656
268,330
2,052,986
Non-controlling interest (Note 2)
Total stockholders’ equity
174
(665)
91,740
1,407
Note 1: Under the requirements of IAS 1, “Presentation of Financial Statements”,
deferred income tax assets or liabilities are classified as non-current. Therefore,
deferred income tax assets or liabilities, current are reclassified as non-current.
After reclassification, deferred income tax assets, current was decreased by
$14,578 thousand and deferred income tax assets, non-current was increased by
$14,578 thousand as of December 31, 2012.
Note 2: Under IFRS 3, “Business Combination”, the non-controlling interest shall be
measured based on the proportionate share of the acquiree’s identifiable net
assets, not based on the book value of acquired corporation. As a result, this
change in accounting principles would increase intangible assets by $99,785
thousand, increase deferred income tax liabilities, noncurrent by $24,947
thousand, decrease cumulative translation adjustments by $665 thousand, and
increase minority interest by $75,503 thousand as of December 31, 2012.
Note 3: The Company acquired Tongze in accordance to IFRS 3, “Business
Combination”. If the additional consideration may be contingent on achieving
specified future earnings level of acquired corporation, contingent consideration
is recognized at the fair value of acquisition-date. This change in accounting
principles would decrease other long-term payables and intangible assets by
$248 thousand as of December 31, 2012.
Note 4: The Company’s financial assets measured at cost are reclassified to
available-for-sale financial assets-non-current and carried at fair value at each
reporting date in accordance with the requirements of IFRSs. Consequently, as
at December 31, 2012, the financial assets measured at cost-non-current is
decreased by 139,308 thousand, available-for-sale financial assets-non-current is
increased by 332,800 thousand, and the unrealized gain or loss of
available-for-sale financial assets is increased by 193,492 thousand.
ii. Reconciliation of the income statement for the year ended December 31, 2012:
175
Unit: NT$K
Net sales
IFRSs
$1,721,749
-
$1,721,749
705,703
-
705,703
1,016,046
-
1,016,046
Operating expenses (Note)
632,429
5,279
637,708
Operating income
383,617
(5,279)
378,338
Cost of sales
Gross profit
Non-operating income and expenses
53,816
-
53,816
Income before income tax
437,433
(5,279)
432,154
Income tax expense (Note)
(118,704)
1,320
(117,384)
318,729
(3,959)
314,770
15,785
(3,959)
11,826
Net income
Minority interests (Note)
Note: Under IFRS 3, “Business Combination”, the non-controlling interest should be
measured based on the proportionate share of the accquiree’s identifiable net
assets. This change in accounting principles would increase operating expenses
by $5,279 thousand, decrease income tax expense by $1,320 thousand, and
decrease minority interests by $3,959 thousand.
c. According to the requirements under IFRS 1, “First-time Adoption of International
Financial Reporting Standards”, the Company prepares its first IFRS financial statements
based on the effective IFRS standards and makes adjustments retrospectively, except for the
optional exemptions provided and mandatory exceptions required under IFRS 1. The
optional exemptions selected by the Company are as follows:
176
i. IFRS 3 “Business Combinations” has not been applied to acquisitions of subsidiaries or
of interests in associates and joint ventures, that occurred before January 1, 2012.
Applying this exemption would result in the carrying amount of assets acquired and
liabilities assumed in the business combination in accordance with previous GAAP,
which are required to be recognized under IFRS, to be their deemed costs in accordance
with IFRSs as at the date of acquisition. Subsequent to the date of acquisition, the assets
and liabilities would be measured in accordance with IFRSs. The carrying amount of
goodwill in the opening IFRS Balance Sheet is its carrying amount in accordance with
previous GAAP at January 1, 2012, after testing for impairments and adjusting for
recognition or de-recognition of intangibles under IFRS 1.
ii. In accordance with the Order No. Financial - Supervisory - Securities - Corporate 1010012865 issued by Financial Supervisory Securities Corporation on April 6, 2012,
on a company’s first-time adoption of the IFRS, for any unrealized revaluation gains and
cumulative translation adjustments (gains) recorded to shareholders’ equity that the
company elects to transfer to retained earnings by application of the exemption under
IFRS 1, the Company shall set aside a corresponded amount of special reserve. If the
amount increasing in retained earnings due to first time adoption is less than the
corresponded amount of special reserve, the Company could set aside a special reserve
based on the amount increasing in retained earnings only. Furthermore, the amount set
aside to special reserve was adjusted when the Company used, disposed of, or
reclassified related assets in the future. The Company elects not to transfer cumulative
translation adjustments gain to retain earnings by application of exemption under IFRS
1. Therefore, the Company didn’t set aside a special reserve according this Order.
11. Segment financial information
(1) Industry segment information
The Group is single operating business unit, this no disclosure is required.
(2) Location segment information
177
The Company and subsidiaries’ main operating location is Mainland China, thus no operating
segment exists in other countries.
(3) Sales information
The Company and subsidiaries did not have sales revenue from other countries for more than 10
percent for the years ended 2012 and 2011, thus no disclosure is required.
(4) Main customer information
The Group does not have one single customer that covers more than 10% of total sales revenue,
thus no disclosure is required.
178
康聯控股有限公司
董事長：William Keller
總經理：李欣
179

Coland Holdings Limited

Transcription

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