Coland Holdings Limited

Transcription

Stock Code：4144
2013 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 6
M a y
2 0 1 4
1.
Name, Title, Telephone No. and E-mail Address 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
CEO
CFO
E-Mail
[email protected]
[email protected]
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) Subsidiaries:
Name of BVI Subsidiary: Central Chief Limited
Address: P.O. Box 957, Offshore Incorporations Centre, Road Town,Tortola,
British Virgin Islands
Name of Seychelles Subsidiaries: Exquisite Creation Limited 精創有限公司
Address: 2F, Capital City, Independence Avenue, P.O. Box 1008, Victoria,
Mahe, Seychelles
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 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
Name of China Subsidiary: Hefei City Guozhen Pharmaceutical Sales Limited
合肥市國禎醫藥銷售有限公司
Address: No.25 Jincui Road, Shuangfeng Economic Development Zone, Heifei
City, China
Tel: 86-551-6639-6027
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 Taiwan Subsidiary: Shechen Pharmaceutical Ltd. 勝群藥業股份有限
公司
Address: 2 of 9F., No.42, Sec.1, Fuxing South Road, Taipei
Tel: 886-22546-9288
3. Name, Title, Telephone No, and E-mail Address of litigious or non-litigious agent in the
R.O.C.:
4.
5.
6.
Name: Lee Hsin
Title: Director and CEO of Coland Holdings Limited
Tel: 886-2-2546-9288
Email: [email protected]
Stock Transfer Agent
Name: Chinatrust Bank Transfer Agency
Address: 5F, No. 83, Sec 1, Chongqing South Rd, Zhongzheng District, Taipei, 100
Website: http://ecorp.chinatrust.com.tw/cts/index.jsp
Tel: 886-2- 2181-1911
Names of Auditors, Accounting Firm, Address, Website and Telephone No. 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
Company website: http://www.colandpharma.com
7.
List of Board of Directors：
Title
Name
Nationality
Chairman
William Robert
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
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
4
III.
CORPORATE GOVERNANCE REPORT
8
1. Organizational System
8
2. Information of Directors, general manager, deputy general manager, 11
assistant general manager, heads of each departments and branches
3. Status of corporate governance
23
4. Information on fees charged by auditors
43
5. Change of Auditors
43
6. Disclosure on whether the Chairman, the general manager or managers 44
of the Company responsible for financial or accounting affairs, served
within the latest year at the auditors’ firm or related affiliates
7. Disclosure of the change of transfer or pledge of shares by directors, 44
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
8. Information on the relation among top 10 shareholders as related parties 46
referred to in No. 6 Publication of the Financial and Accounting
Principles
9. Number of shares and shareholding percentage in an invested company 47
jointly by the Company, the directors, the managers, or any company
directly or indirectly controlled by the Company
IV.
STATUS OF FUNDING
48
1. Capital and shares
48
2. Status of bonds
52
3. Status of special shares
52
4. Status of overseas depository receipts
52
5. Status of employees share option
52
6. Status on the issue of employees restricted new shares
54
7. Status on mergers, acquisitions and spin off
54
8
54
Status on use of proceeds
V.
OPERATION STATUS
55
1. Business content
55
2. Market and sales status
69
3. Number of employees for the past 2 years and up to the date of printing 75
of the annual report
VI.
4. Environmental protection expenditure
76
5. Labor relationship
76
6. Material contracts
78
FINANCIAL HIGHLIGHTS
81
1. Condensed financial information in recent five years
81
2. Financial analysis in recent five years
84
3. Audit committee’s review report on 2013’s financial reports
87
4. Individual financial report of current year
87
5. Audited consolidated financial statements of Year 2013
87
6. Any financial impact to the Company and its affiliated resulting from 87
financial or cash flow difficulties in 2013 and as of the date of this annual
report
VII.
REVIEW AND ANALYSIS OF FINANCIAL STATUS, FINANCIAL 88
PERFORMANCE AND RISK MANAGEMENT
1. Financial highlights
88
2. Operating results
88
3. Cash flow
90
4. Any financial or business impact arising from major capital expenditure 90
in the latest year
5. Investment policy, reasons for gain/loss of investment and plan for 91
improvement in the latest year and investment plan for the next year
6. Risk Management and Evaluation
VIII. PARTICULAR MATTERS TO NOTE
1. Information on related companies
92
101
101
2. Status of conducting any private placing for the latest year and up to the 105
date of printing of this annual report
3. Status on subsidiaries holding or disposing shares of the Company in the 105
latest year and up to the date of printing of this annual report
4. Other supplement information
105
5. Any matters as set out in Article 36(2)(ii) of the Securities Trading Law 105
occurred which had material impact on the shareholders’ right in the
latest year and up to the date of printing of this annual report
6. Reasons for any material diference between the regulations for the 105
protection of shareholders right of the Company and those in Taiwan
I.
REPORT TO SHAREHOLDERS
Dear Shareholders of Coland:
The Company is rooted in China's medical market and committed to create the best medical
platform between China and Taiwan, so as to be the best partners of those companies engaging in
the fields of pharmaceuticals, medical devices and IVD reagents who are going to enter into these
markets.
1. The Result of 2013 Business Operation
The Operation Result:
(1)
In 2013, all our energies are gathered together and we achieved the following operating
results:
(2)
(a)
Extended Pharmaceutical Product Lines: Through increasing the number of product
agents, in pharmaceutical sector, we introduced anti-rhinitis MometasoneFuroate-Yi
Qing, and Le Zhiping – product in cardiovascular field and Detrusitol – product in
urology field, both from Pfizer, a top European pharmaceutical company; in new
product development sector, we signed a cooperation agreement with ScinoPharm
Taiwan to jointly develop anti-tumor product - Bortezomib.
(b)
Medical Devices: by strategic investment in HC Bio-S Taiwan and Microclear
Suzhou, we set up our product lines in the fields of dentistry and ophthalmology
respectively.
(c)
IVD Reagents: by strategic investment in Rendu Shanghai, we entered into the field
of molecular testing reagent.
(d)
Expansion of the Sales Network: subsequent to the acquisition of Heilongjiang
Tongze Pharmaceutical in July 2012, we completed the acquisition of Hefei Guozhen
Pharmaceutical Company in September 2013 to further deepen our coverage of sales
channels.
Through merger and acquisition of secondary distribution channels, we
continued to expand our business network and increase our scale of operation.
Profitability Analysis
We maintained stable operation and profit growth in 2013 and achieved consolidated
net sales revenue of NTD1,856,764,000, which increased by 8% as compared to last
year, net profit of NTD392,504,000, after deducting the minority interest of NTD
37,314,000, net profit attributable to the Company’s shareholders was NTD355,190,000,
which was increased by 17% as compared to last year. Earnings per share were
NTD5.06, according to the calculation of net income divided by the weighted average
of the number of circulated ordinary shares.
(3)
Research and Development Status
1
We continued to develop new products, paid close attention to therapeutic areas,
including hepatology, respiration, oncology, medical devices and etc.. Our product
development expenses in 2013 was NTD22,106,000, accounting for about 1.19% of
total revenue. At present, there are about 20 products under development by us
together with our business partners. We expected to obtain drug certificate for these
products in between 2014 and 2019. Our target is to have one to two new products
listed every year.
2. 2014 Business Plan and Development Strategy
(1) We would incorporate the strong points of our numerous business partners and spare no
efforts to develop the following three sectors: pharmaceutical product, medical devices
and IVD reagents in 2014.
3.
(a)
In pharmaceutical product sector: continued to increase product portfolios. We
obtained the distribution right in 10 provinces of China for the sale
of ursodeoxycholic acid soft capsule – Wulusa produced by Daewoong
Pharmaceutical Co., Ltd.. We also set up the joint development project for
oncology product - Azacitidine with ScinoPharm Taiwan.
(b)
In medical devices sector: cooperated with Mathys, a Swiss company specializing in
the development and manufacture of joint products by being its distribution agent in
the north area of China.
(c)
In the IVD reagents sector: continued to develop new molecular diagnostic reagents
and equipment together with Rendu Shanghai and introduce the products to the
market effectively.
(2)
We would continue to expand our sales network, scale of operation and business
network through merger and acquisition of our secondary distributors.
(3)
We established our Taiwan business sector in order to set up joint ventures with our
business partners in Taiwan for the joint development of specialty pharmaceutical
products as well as new medical devices for the Taiwan market, which will also be the
base for us to enter into the markets in South East Asia, Europe and USA.
The Impact under Competitive External Environment, Regulatory Environment, and Overall
Operation Environment
(1) Pharmaceutical Market:
Over 80% of our sales revenue came from pharmaceutical products, among which, 60%
from drugs for the treatment of Hepatitis, 9% from drugs in the cardiovascular field, 3%
from drugs in the respiratory field and the remaining from drugs for other fields. We
have actively built up our new products in recent years so as to enrich the structure of our
products. Last year, although sales revenue from our main product decreased due to the
impact from the adjustment of drug price by China's National Development and Reform
Commission, fortunately the spur of our new products and the merger and acquisition of
our regional partners, made up for the price impact and made our revenue growth
sustained.
2
(2) Medical Devices Market:
Medical devices market in China is developing rapidly. In the past 10 years, the
growth rate averagely exceeded 20% every year. At present, the market is still driven
by foreign products. The orthopedic spine products distributed by us are researched and
developed and manufactured by Medtronic, a top brand worldwide. The artificial joint
replacements newly introduced by us are also a Swiss brand imported. China's
medical device industry in the past was dominated by manufacture, the capability for
research and development and innovation of products fell behind those of the overseas.
In recent years, with the growth of local companies and the introduction and
encouragement to follow the example of the international by the Chinese government,
the innovative capability has been strengthened. We expected to introduce high
quality and competitive products to the market through our strategic equity investment
in those companies with international research and development capabilities in IVD
reagents and ophthalmic devices, so that our product line for medical devices can be
enriched.
We are grateful for all shareholders’ support. By joint development with our excellent business
partners, we rooted in China’s market and wish to set up Asian markets and overlook the
international markets in future. We expect to build up the most valuable bio-tech medical
integrated platform, to give full play to our value in the industrial chain, so as to bring the greatest
rewards to our employees, shareholders and the whole society by continuous and stable growth.
Chairman: William
Keller
President: Lee
Hsin
3
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. It engages in the development of professional medical products and brand
marketing, involving in hepatitis, respiratory, oncology, cardiovascular, medical equipment,
dental materials, orthopedic implants, IVD reagents and 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 medical devices and medicines in
respiratory field respectively. 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 (“Tongze”), we stepped into cardiovascular field in
2012. In 2013, we further acquired Anhui Guozhen. We enlarged our sales cover by the
aforesaid acquisition. Over the past 10 years since our establishment, the Company
developed a unique business model that intergrates scientific research institutions,
professional medical product manufacturers and medical markets, consolidates technology
resources, develops high-efficent, safe and high quality medical products, provides
professional services to numerous doctors and patients and creates the greatest value in
every segment of medical industry.
4
(3) Group Structure:
2014.3.31
COLAND HOLDINGS LIMITED
康联控股有限公司（Cayman）
100%
CENTRAL CHIEF LIMITED (BVI)
60%
100%
100%
Coland Development Company
Limited (Taiwan)
Coland Pharmaceutical
Company Limited (HK)
50%
Exquisite Creation Limited
精創有限公司
Shechen Pharmaceutical
Ltd. (Taiwan)
100%
100%
Shanghai Guochuang Pahrmaceutical Company
Limited (China)
Hefei City Guozhen Pharmaceutical Sales
Limited (China)
51%
Heilongjiang Province Tongze Pharmaceutical Company Limited
(China)
2. Company History:
April 2003
Established R&D Institution – Hangzhou Sheng You Medical Technology
Development Company Limited, cooperated with Tianjin Institute of
Pharmaceutical Research to develop medicines for the treatment of hepatitis
January 2005
Established Hainan Coland Pharmaceutical Company Limited
July 2005
Hepatitis medicine was approved as China’s class one new drug and
successfully launched to the market
August 2006
Established Hainan Kang He Pharmaceutical Company Limited
August 2008
Sales of hepatitis medicine reached approximately 50 million pills
July 2009
Central Chief Limited as 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
5
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
With the approval from Shanghai Administration for Industry and
Commerce for change of business license, Coland Group officially acquired
100% equity interest in Shanghai Guochuang Pharmaceutical Company
Limited
March 2010
Coland Holdings Limited was established as the applicant for IPO in
Taiwan
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 increase of capital by 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 increase of capital by cash injection by the Company
September 2011
Conducted IPO
October 2011
Stocks listed on the Taiwan Stock Exchange (stock code: 4144)
Established the subsidiary, Coland Development Stock Company Limited
February 2012
Obtained exclusive distribution right for GSK’s antibiotic Li Bai Ding and
Zhejiang Xianju Pharmaceutical Company’s mometasone furoate in China
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 right
(lipid-lowering drugs) in China
6
for
Pfizer’s
Le
Zhi Ping
March 2013
Obtained the exclusive distribution right in China for Pfizer’s Detrol, for
the treatment of overactive bladder (OBA)
September 2013
Our 100% owned subsidiary Central Chief Limited acquired 60% of
Exquisite Creation Limited 精創有限公司, which owned 100% of Hefei
City Guozhen Pharmaceutical Sales Limited
October 2013
Obtained the distribution right of joint devices from Mattys Swiss in
northern China
Obtained the distribution right of Wulusa-a medicine for the treatment of
liver desease casused by Cholestasis in 10 provinces in China from
Daewoong Pharmaceutical Co., Ltd.
March 2014
Establish Shechen Pharmaceutical Ltd. jointly with Pharmadax Inc for the
development and sale of medicines
3. Risks: please refer to Chapter VII, Financial Status and Review and Analysis of Operating
Results and Risk Management
7
III.
1.
CORPORATE GOVERNANCE REPORT
Organizational System
(1)
Organization Chart
Shareholders
Audit Committee
Board of Directors
Remuneration Committee
CEO
Internal Audit
Sles and
Medical
Product
Medical
Finance,
External
Taiwan
Marketing
Registration
Development
Devices
Logistics,
Affairs
Business
(2)DeptOperations of
main departments
Dept
Development
HR &
Dept
Dept
Dept
Our Company emphasizes the importance of division of labor, and the coordination and
Dept
Business
cooperation between different departments. Below is a description of the main function of the
Dept
main departments of our Company.
(2) Functions of Major Department
We emphasize the diversification of job functions as well as the cooperation and
coordinantion among different departments.
The functions fo
the major
departments as set
out
below:Deptartment
Major Function
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 matters.
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.
Board of Directors
8
The functions fo
the major
departments as set
out
below:Deptartment
Major Function
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
Company’s affairs.
CEO
2. Lead the team to achieve the Company's goals.
3. Train up staff and set up an excellent leading team.
1. Based on the Company's annual overall marketing plan, fix the
regional annual work plan, the budget plans the sales plan and
sales target by year, quarter and month.
2. Establish and lead the sales team to achieve sales targets. Analyze
Sales & Marketing
sales productivity and develop and enhance the productivity of
Dept
the development plan.
3. Formulate the strategy and goal for market development. Analyse
market for the products and their competitive edge. Organize
regional promotion and academic activities.
1. Participate in the formulation of, and execute the Company's
annual sales plan and strategic target for medical devices.
2. Introduce new products in accordance with the market demand
and the Company’s plan in due course.
Medical Devices
3. Review and select sales agents, effectively organise the product
Dept
information to assist the establishment and development of
marketing activities by the agents.
4. Manage and organize the ongoing support to the agents.
5. Coordinate local annual bidding activities for medical devices.
1. control law compliance in selection, projection and research of
products and collect the latest domestic and oversea development
for registration products.
Medical
2. Apply for product registration, registration for clinical trials and
Registration Dept
support registration related matters.
3. Compile the information for imported products and apply for the
registration.
(a) Select, project and research of the products; collect the latest
domestic and overseas research development of the products the
Product
Company is paying attention to.
Development Dept
(b) Assess the markets forecast the sales and prepare the pre-listing
of products in research and development, Negotiate and sign
9
The functions fo
the major
departments as set
out
below:Deptartment
Major Function
contracts for products to be licensed and prepare the listing
thereof.
(c) Maintain business relationship with exited business partners and
introduce new business partners.
(d) Ensure the production and quality of listed products.
1. Manage finance, accounting and logistic operation.
Finance, Logistics, 2. Maintain relationship with shareholders and investors and
promote capital market related plans.
HR & Business
Dept
3. In charge of HR and organization development and improve and
plan operation flow and management system.
Grasp the latest policies 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 such policies.
1. Serve as the window for investors, media and supervisory
Taiwan Business
organization in Taiwan, and maintain good external
Development Dept
communication on a timely basis.
2. Search, evaluate, and implement strategic investment and assist
in specific cooperation projects.
10
2.
Information of Directors, CEO, Deputy General Manager, Assistant General Manager, Heads of Each Departments and Branches
(1)
(a)
Directors
Information of Directors
2 May 2014
Title
Name
Chairman
William
Robert
Keller
Director
Lee Hsin
Executive positions, Board of
Current shareholding by
Shares held in other’s
Shares held when
Directors, Supervisors held by
Date of
Current shareholding
spouse and minor
Term First selected
Other positions held in the Company
names
appointed
spouse or relatives of the
Education and Experiences
Appointment
children
and other companies
Date
second degree
(Note 1)
# of Shares
%
# of Shares
%
# of Shares
%
# of Shares
%
Title
Name Relation
2010.12.5 3yrs 2010.12.5 115,000
1.00 612,572
0.79  Vice President of
 Supervisor of TaiGen
None
None None
(Note 2)
Roche Brazil Ltd.
Biotechnology Co.,Ltd
 Deputy General
 Director of Alexion
Manager of Roche
Pharmaceutical Inc.
Colombia Ltd.
 General Manager of
Roche China Ltd.
2010.3.23 3yrs 2010.3.23
650
65.00 24,270,141 31.18  Feng-Chia University,  Director of Business
None
None None
(Note 3)
Dept of Urban
Enterprise Investments
Planning
Group Limited
 Guanghua School of
 Director of Central Chief
Management, Beijing
Limited
University, EMBA
 Chairman of Exquisite
 Chief Sales Officer of
Creation Limited 精創有限
Johnson&Johnson
公司
 Director of
 Legal representative,
Schering-Plough
executive director and GM
of Shanghai Guochuang
 Vice President of
Pahrmaceutical Company
Roche China Ltd.
Limited
 Chairman of Heilongjiang
Province Tongze
Pharmaceutical Company
Limited
 Chiarman of Hefei City
Guozhen Pharmaceutical
Sales Limited
 Legal representative and
executive director of
Hangzhou Sheng You
Medical Technology
Development Company
Limited
 Director of Shanghai Rendu
Bio-Tech Company Limited
11
Title
Name
Date of
Term
Appointment
(Note 1)
Shares held when
appointed
First selected
Date
# of Shares
Director
Ye Xiao
Ping
2010.12.5 3yrs
2010.12.5
Tang Li
Da
2010.12.5. 3yrs
2010.12.5
Independent Shen Jen 2010.12.5 3yrs
Director
Lin
2010.12.5
Director
-
%
-
-
-
-
-
spouse and minor
names
children
and other companies
second degree
# of Shares
%
# of Shares
%
# of Shares
%
Title
Name Relation
 Director of Suzhou
Microclear Medical
Instruments Co., Ltd
 Director of Coland
Limited
 Chairman of Coland
Development Co., Ltd.
 Chairman of Shechen
Pharmaceutical Ltd.
 Chairman of Zan Ho Biotech
Inc.
7,137,871
9.17  Univerisity of Oxford,  Chairman, Tigermed
None
None None
(Note 4)
PhD in Immunology  Supervisor, Heilongjiang
Province Tongze
 Chief Medical Officer,
Roche China Ltd
Limited
 Supervisor, Hefei City
Sales Limited
 Supervisor, Hangzhou Sheng
You Medical Technology
Development Company
Limited
 Tianjin Institute of
 President, Tianjin Institute of
None
None None
Pharmaceutical
Pharmaceutical Research
Research Researcher
in Pharmacology,
Doctor of Science
 Visiting Scholar, UC
Berkeley
 Editor of Chinese
Traditional and Herbal
Drugs Journal
 Master, Economics,
 Independent Director, GIO
None
None None
National Chung Hsin
Optoelectronics
University
 Independent Director, Parade
 Deputy Manager &
Technologies, LTD.
Manager, International (Cayman)
Dept, YFY
 CFO, TSMC
 Director, CFO and
SVP, Systex
 CFO, Motech
12
spouse and minor
First selected
names
Title
Name
children
Date
and other companies
second degree
# of Shares
%
# of Shares
%
# of Shares
%
# of Shares
%
Title
Name Relation
Independent Chang Li 2010.12.5 3yrs 2010.12.5  University of
 CEO and Director, Grand
None
None None
Director Yen
Wisconsin, PhD in
Cathay Venture Capital III
Bacteriology
Co., Ltd
 Applied Microbiology  CEO and Director, China
Investment & Development
Inc, Head of R&D
Co.
 Researcher, Cold
 CEO, Maxigen Biotech Inc.
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
Independent Han Feng 2010.12.5. 3yrs 2010.12.5  Beijing Capital
 EVP, China Health
None
None None
Director
Medical University
Insurance Research
(Formely known as
Association
Beijing Second
Medical College)
 Medical
Director,Hebei
People’s Hospital
 Director, Beijing
China-Japan
Friendship Hospital
Medical Service and
Biomedical
Engineering
 Director, Department
of Rehabilitation,
China Disabled
Persons’ Foundation
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, which is extended to 30 June 2014 (being the date of the 2014 annual
general meeting).
Note 2: William Robert 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.
Date of
Term
Appointment
(Note 1)
Shares held when
appointed
13
(b) No directors are corporate shareholders.
(c) The directors 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:
31 March 2014
Whether having over 5 years’ working
experience and the following professional
Conform to independence requirement (Note)
qualification
a lecturer or
Judge, District
working
above
Attorneys,
experience
in
position of
lawyers,
commerce,
accountants or commerce,
law, finance, professional or
law,
Condition
accounting or
finance or
technical
Name
the related personnel passed experience
1 2 3 4 5
6 7
8 9 10
required by
subjects as
the national
the
required by examination and
the business obtained related business of
the
of the
certificates as
Company
Company in required by the
private or
business of the
public college
Company
William Robert
Keller
Lee Hsin
Ye Xiao Ping
Tang Li Da
Shen Jen Lin
Chang Li Yen
Han Feng








































 
 
 


















No. of listed
issuers
serving in as
an
independent
director
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 types of 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.
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.
14
（2） CEO, Vice President, Assistant General Manager, Heads of Each Departments and Branches
2 May 2014
No. of Shares Held
Title
CEO
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
No. of Shares
%
No. of
Shares
%
No. of
Shares
24,270,141
shares
(Note 1)
31.18
-
-
-
%
-
15
Feng Chia University,
Department of Urban
Planning and Spatial
Information
 Guanghua School of
Management Peking
University EMBA
 Director of Sales of Johnson
& Johnson
 Director of
Schering-Plough
 Vice President of Roche
China Ltd.

Director of Business
Enterprise Investments
Group Limited
 Director of Central Chief
Limited
 Chairman of Exquisite
Creation Limited 精
創有限公司
 Legal representative,
executive director and GM
of Shanghai Guochuang
Limited
 Chairman of Heilongjiang
Province Tongze
Limited
 Chiarman of Hefei City
Sales Limited
 Legal representative and
executive director of
Hangzhou Sheng You
Medical Technology
Development Company
Limited
 Director of Shanghai
Rendu Bio-Tech Company
Limited
 Director of Suzhou
Microclear Medical
 Director of Coland
Limited
 Chairman of Coland

Managers that are either spouse
or 2nd degree related family
Title
Name
Relation
None
None
None
spouse and minor
children
No. of Shares Held
Title
Name
Date of
Appointment
No. of Shares
%
No. of
Shares
%
Shares held in
other’s names
companies
No. of
Shares
%
Title
Name
Relation
Chairman of Shechen
Pharmaceutical Ltd.
 Chairman of Zan Ho
Biotech Inc.

Director, Hu Tong
Sales &
Marketing
Dept
2013.03
-
-
-
-
-
-
 East China Normal
None
University, Department of
Biochemistry
 Sales Manager, Roche China
Ltd.
 Regional Manager, Novartis
 Regional Manager,
Sanofi-Aventis
None
None
None
Director,
Sales Dept
Wang
Feng
(note 2)
2013.03
-
-
-
-
-
-
 Xi'an Medical University,
None
Faculty of Clinical Medicine
 Doctor in Xi'an Tuberculosis
Hospital
 Sales Executive, Roche
Shanghai
 Regional manager,
ShaanxiDong Sheng
Pharmaceuticals
None
None
None
CFO
Tsao
Johua
2008.7
538,723
0.77
-
-
-
-
 National Taiwan University,
Dept of Economics
 Finance & Accounting MBA,
University of Chicago
 Financial Analyst Manager,
P&G Taiwan
 Finance Head, Dairy Farm
North Asia
None
None
None
16
 Director of Exquisite
Creation Limited 精創有
限公司
 Director of Heilongjiang
Province Tongze
Limited
 Director of Hefei City
Sales Limited
 Supervisor, Suzhou
Microclear Medical
 Supervisor, Hung Chun
BIO-S Co., Ltd.
spouse and minor
children
No. of Shares Held
Title
Name
Date of
Appointment
No. of Shares
%
No. of
Shares
%
Shares held in
other’s names
No. of
Shares
companies
%
Title
Name
Relation
None
None
None
None
None
None
 Director of Coland
Chief
Investment
Officer
Cheng
Ching
Chi
2012.2
-
-
-
-
-
-
 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
 Manager/Assistant Vice
President of Global Strategic
Investment Fund
Director,
Medical
Device
Dept
Jiang
Yan Fei
2012.11
-
-
-
-
-
-
 Shanghai Second Medical
None
University, Faculty of
Clinical Medicine
 Bristol-Myers Squibb Manager of China Medical
Devices
 Regional Manager,
Bristol-Myers Squibb
Medical Devices China
 Sales Manager,
Orthopedics Devision, China
Representative Office of
Centerpulse Ltd.
 Manager, Pharmacia &
Upjohn (China) Ltd.
17
 Director
of
Suzhou
Microclear
Medical
 Director
and
Chief
Investment Officer of
Coland Development Co.,
Ltd.
 Director of Hung Chun
BIO-S Co., Ltd.
 Director
of
Shechen
Pharmaceutical Ltd.
spouse and minor
children
No. of Shares Held
Title
Name
Date of
Appointment
Shares held in
other’s names
No. of Shares
%
No. of
Shares
%
No. of
Shares
%
companies
Title
Name
Relation
Director, Lou Jin
Product
Fang
Developme
nt Dept
2013.03
-
-
-
-
-
-
 Master of Pharmacy,
None
Zhejiang University
 New Product R&D manager,
Guangdong Tailing Medical
Company
 Head of Hangzhou Saili Drug
Research Institute
 R&D Manager, Hainan Puli
None
None
None
Director, Han Wen
Medical
Ge
Registration
Dept
2013.03
-
-
-
-
-
-
 Beijing Medical University, None
medical chemistry
 R&D Clinical Trials
Registration Manager,
Sanofi-Aventis China
 Head of registration affairs,
Servier (Tianjin)
Pharmaceutical Co., Ltd.
 Senior Analyst, Beijing
Novartis Pharmaceutical Co.,
Ltd.
None
None
None
2008.5
-
-
-
-
-
-
 Shanghai Second Medical
University, Faculty of
Clinical Medicine
 Anesthesiology Residency,
Shanghai First People’s
Hospital
 Sales Executive,
Schering-Plough
None
None
None
External
Affairs
Officer
Guo Zhi
Min
 National Government Affairs
Manager, Roche China Ltd.
 National Government Affairs
Manager, GENZYME
(Shanghai)
Note 1: These shares are held by Lee Hsin through his 100% owned Business Enterprise Investment Groups Limited.
Note 2: Wang Feng resigned and left on 31 December 2013.
18
None
(3) Remuneration paid to directors, CEO and vice President in 2013
(a)
Remuneration paid to directors (including independent directors)
Unit:NTD’000
Director’sRemuneration
Unit: NTD’000
SeverancePayment
&Pension
(B)
Salary(A)
Title
Remuneration obtainedasanemployeeoftheConsolidatedEntities
Remunerationfrom
ProfitDistribution(C)
TheAggregateof
Ato
D as a ％tothe
2012Net Income
Allowance
(D)
Salary,Bonus&
Allowance
(E)
SeverancePayment
&Pension
(F)
BonusfromProfitDistribution
(G)
Name
Chairman
Director &
GM
Director
Director
Independent
Director
Independent
Director
Independent
Director
Consoli
dated
Entities
The
Comp
any
Consoli
dated
Entities
The
Comp
any
Consoli
dated
Entities
The
Comp
any
Consoli
dated
Entities
-
-
-
-
-
-
The
Comp
any
Consoli
dated
Entities
The
Comp
any
Consoli
dated
Entities
The
Comp
any
Consoli
dated
Entities
-
-
-
-
Bo
nus
in
Cas
h
No.of Employees’
RestrictedShares
(I)
TheAggregateof
AtoGasa%tothe
2012NetIncome
Remunerat
ionfrom
Non-conso
lidated
Entities
Consolidated
Entities
The
Company
The
Comp
any
No.ofShares
exercisableunder
Employees’Share
Option
(H)
Bo
nus
in
Sha
res
Bo
nus
in
Cas
h
Bo
nus
in
Sha
res
The
Comp
any
Consoli
dated
Entities
The
Comp
any
Consoli
dated
Entities
-
-
-
-
The
Comp
any
Consoli
dated
Entities
William
Robert
Keller
LeeHsin
YeXiaoPing
TangLiDa
9,421
9,421
2.65
2.6
ShenJenLin
ChangLi-yen
HanFeng
19
-
-
-
-
2.65
2.65
-
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 NTD5,000,000
NTD5,000,000 to NTD10,000,000
NTD10,000,000 to NTD15,000,000
NTD15,000,000 to NTD30,000,000
NTD30,000,000 to NTD50,000,000
NTD50,000,000 to NTD100,000,000
NTD100,000,000 and above
Total
20
All Consolidated Entities
The Company
All Consolidated Entities
William Robert Keller, Lee
Hsin, Ye Xiao Ping, Tang
Li Da, Shen Jen Lin,
Chang Li Yen, Han Feng
William Robert Keller, Lee Hsin,
Ye Xiao Ping, Tang Li Da, Shen
Jen Lin, Chang Li Yen, Han
Feng
7 Persons
7 Persons
(b). CEO’s and Vice President’s Remuneration
Unit: NTD’000, ’000 shares
Salary(unit” ‘000)
(A)
Title
CEO
LeeHsin
Director,
Marketing &
SalesDept
HuTong
Driector, Sales
Dept
Wang
Feng
(Note)
CFO
Head
of
External Affairs
Dept.
Head
of
Medical
DevicesDept.
Chief
Investment
Officer
Bonus，Allowance etc.
Salary (unit” ‘000)
BonusfromProfitDistribution Salary
(unit” ‘000)
(B)
(C)
（D)
Name
The
Company
The
Company
Director,
Medical
Registration
Dept
Director,
Product
Development
Dept
SeverancePayment&
Pension Salary (unit” ‘000)
Consolidated
Entities
The
Company
Consolidated
Entities
The
Company
Consolidated
Entities
40,562
-
-
-
-
TheAggregateof Ato
D as a ％ tothe2012Net
Income
No. of Sharesexercisable
underEmployees’Share
Option
(unit: ’ 000)
No. of Employees’
RestrictedShares
(Unit: ’000)
Remunerationfrom
Non-consolidated
Entities
Consolidated
Entities
Bonus
in
Cash
Bonus
in
Shares
Bonus
in
Cash
Bonus
in
Shares
-
-
-
-
The
Company
Consolidated
Entities
The
Company
Consolidated
Entities
The
Company
6.0
11.4
425
425
-
Consolidated
Entities
Han
Wen-ge
Lou
Jin-fang
21,327
Tsao
Johua
Guo
Zhi-min
Jiang
Yan-fei
Cheng
Ching-chi
Note：Wang Feng resigned and left on 31 December 2013.
21
-
-
Table of Remuneration Range
Range of remuneration paid to each CEO／VP
Name of the general manager and vice general manager
The Company
Below NTD 2,000,000
Consolidated Entities
Han Wen-ge, Lou Jin-fang
NTD2,000,000 to NTD5,000,000
Hu Tong, Guo Zhi-min, Jiang Yan-fei, Wang Feng
NTD5,000,000 to NTD10,000,000
Lee Hsin, Tsao Johua
NTD10,000,000 to NTD15,000,000
NTD15,000,000 to NTD30,000,000
NTD30,000,000 to NTD50,000,000
NTD50,000,000 to NTD100,000,000
NTD100,000,000 and above
Cheng Ching Chi
Total
9 persons
22
(c) The Company did not pay any bonus from profit to any employees.
(4) 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 among the aforesaid, the operation result and futune risk.
(a) Analysis of total remuneration paid to the directors, CEO, and VP to the company's net income：
Unit：NTD’000
2012
2013
Item
The Company
The Company
Amount
%
Amount
%
Amount
%
Amount
%
Directors
8,970
2.96%
8,970
2.96%
9,421 2.65%
9,421 2.65%
CEO and VP
4,517
1.49%
23,788
7.85%
21,327 6.00%
40,562 11.42%
Total
13,487
4.45%
32,758 10.81%
30,748 8.65%
49,983 14.07%
Note：The remuneration of the CEO, 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 CEO’s and VP’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 13 【A】meetings held by the board of directors of the Company in 2013, the attendance status of the
directors and independent directors is set out below:
Title
Chairman
Director
Director
Director
Independent
Director
Independent
Director
Independent
Director
No. of
No. of Attendance
Attendance by
in Person【B】
Proxy
Robert
12
0
Name
Actual Attendance Rate
(%)【B/A】
William
Keller
Ye Xiao Ping
Tang Li Da
Lee Hsin
Shen Jen Lin
9
10
13
13
1
0
0
0
69.23%
76.92%
100%
100%
Chang Li Yen
9
0
69.23%
Han Feng
13
0
100%
Other Matters:
23
92.3%
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.
Director’s abstaining from voting due to conflict of interests:
(a) In the meeting held on 24 January 2013, Mr Lee Hsin abstained from voting on the 2012 bonus
proposal for CEO. Such proposal was unanimously approved by the board of directors with Mr.
Lee Hsin abstaing from voting.
(b) In the meeting held on 15 March 2013, Mr Lee Hsin abstained from voting on the 2013
remuneration plan and KPI for CEO. Such proposals were 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 2010
to 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 December 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.
(7) To comply with the relevant laws and regulations, taking into consideration of our group’s
operation needs, the “Regulation Governing Meetings of the Board of Directors” and the articles
of associations of the Company were revised and approved at the 2013 annual general meeting by
special resolutions.
Note: Director Ye Xiaoping appointed Director Lee Hsin as his proxy to attend and vote for all
matters to be resovled in accordance with his instruction and authorised Mr Lee to vote
for any extraordinary motion at Mr Lee’s discretion at the meeting of board of directors
held on 9 December 2013.
(2)
The operation of the Audit Committee
There were 11【A】meetings held in 2013 by the Audit Committee of the Company, the attendance status of the
members is set out below:
24
Title
Name
Independent Director
Shen Jen Lin
Han Feng
Chang Li Yen
No. of Attendance
in Person【B】
11
11
8
No. of
Attendance by
Proxy
0
0
0
(%)
【B/A】
100%
100%
72.73%
Other Matters:
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 directors 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 status:
（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.
25
(3)
Status of Corporate Governance, Deviation from the Corporate Governance Practice
Principles for Listed Issuers and the Reason for the Deviation (if any)
Item
Status
Deviation from the Corporate
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
to
handle handle and respond shareholders’ suggestion and complaints
shareholders’ suggestion as well as coordinates the relevant departments of the
or complaints
Company for execution.
(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
their respective ultimate controlling shareholders at all times.
(3)
Method for the Company （3）The assets and financial management are independent
to establish the mechanism among each affiliates. The Company performs and executes No material deviation.
for risk control and its mechanism of risk control and management and fire wall
management and fire wall in accordance with our internal management measures,
including “The Handling Procedure for Acquiring and
with its affiliates
Disposing Assets” and “ the Internal Audit System ”.
Composition and duty of the
board of directors
2.
（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）Assessment of the
independency of the
auditors periodically
（ 2 ） Since 2013, the Board of Directors received our No material deviation.
financial statement quarterly, and the auditors would issue a
document named “matters to be communicated with the
Corporate Governance Unit and the Management”
(“Communication Matters”) based on their review and
audit, The Company assessed the independency of the
auditors based on the Communication Matters. Also, in the
review report by the auditors, they stated their independency.
The directors noted the Communication Matters quarterly
issued by the auditors.
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 have related
have related interests in the interest in the Company. Thus the Company may have the
Company
updated information and protect the legal and reasonable
rights for both parties.
26
Item
4.
Status
Deviation from the Corporate
Governance Practice
Principles for Listed Issuers
and the Reason thereof
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
information
accordance with the relevant regulations.
(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 established Audit Committee and Remuneration No material deviation.
other functional committee Committee.
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. The number of meetings held every
year complied with the relevant regulation requirement.
6.
Corporate Governance Practice Rules:
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.
7.
Other important information enabling a better understanding of the Company’s corporate governance:
(1)
(2)
(3)
(4)
Please refer to the table below for the status of the continuing education taken by the directors and the management in
2013.
There are regulations set out in our articles of association to limit and require those directors who have conflict of interest
in the matter to be resolved to abstain from voting.
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. The status and the report of the internal audit would be reviewed by a member
designated by the Audit Committee. Please refer to Chapter VII, sub-section 6 of this annual report regarding our Policy
for Risk Management and the implementationn thereof.
Status of insurance purchased for directors: We purchased 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 2013 Directors’ and CEO’s Continuing Education:
27
Title
Name
Date of
Attendance
Chairman
William
Robert
Keller
2013.10.22
China Corporate
Governance
Association
Director
and
GM
Lee
Hsin
2013.10.21
China Corporate
Governance
Association
Director
Ye Xiao
Ping
2013.10.21
Director
Tang Li
Da
2013.10.21
Independent
Director
Shen Jen
Lin
2013.10.21
2013.3.20
Independent
Director
Chang
Li Yen
2013.8.1
Independent
Director
Han
Feng
2013.10.21
Organising Agent
Subject
Corporate Governance Insiders’ Obligation
and Information Disclosing
Duration
(Hours)
3
China Corporate
Governance
Association
China Corporate
Governance
Association
China Corporate
Governance
Association
the ROC Accounting
Research and
Development
Foundation (ARDF)
the ROC Accounting
Research and
Development
Foundation (ARDF)
China Corporate
Governance
Association
3
3
3
3
3
Corporate Governance & Securities
Regulations
3
Corporate Governance & Securities
Regulations
3
(4) The composition, duty and operation status of the Remuneration Committee
(a)
Information of the members of the Remuneration Committee
condition
Title
Name
Whether having over 5 years’ working
experience and the following
professional qualification
a lecturer or
judge, district
working
above
attorneys,
experience
position of
lawyers,
in
commerce,
accountants or
commerce,
law, finance,
professional or
law, finance
accounting
technical
or
or the related personnel
experience
subjects as
passed the
required by
required by
national
the business
the business
examination and of the
of the
obtained related Company
Company in
certificates as
private or
required by the
Conform to independence requirement
（Note 1）
No. of
listed
issuers
serving
in as a
member
of the
remuner
ation
committ
ee
Remarks
（Note 2）
1
2
3
4
5
6
7
8









2










0

public college business of the
Company
Indep Shen Jen
endent
Lin
Direct
or
Indep Chang Li
endent Yen
Direct
or
28

Indep Han Feng
endent
Direct
or









0

Note 1： Two years prior to and during his/her term of appointment, each member is ：
（1）
（2）
（3）
（4）
（5）
（6）
（7）
（8）
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 the 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 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 the entire issued
share capital 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”.
(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 3【A】meetings held by the Remuneration Committee of the
Company, status of the attendance of the members is set out below:
Title
Name
Convenor Shen Jen Lin
Member
Chang Li Yen
Member
Han Feng
Other Matters:
1.
2.
No. of
Attendance in
Person【B】
No. of
Attendance in
Person
3
3
3
0
0
0
(%)
【B/A】
100%
100%
100%
There were no recommendations made by the Remuneration Committee but not accepted by the
board of directors.
There were no resolutions passed by the Remuneration Committee with member(s) opposing or
expressing qualified opinions on record or in writing.
29
(5)
Fulfilment of corporate social responsibility: System and measures adopted by the
Company in relation to environmental protection, community participation, social
consumers’ right, human safety, hygiene and other activities and execution thereof.
Item
1.
Implementing
Governance
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
Practice Principles for
Listed Issuers” and the
reasons thereof
Corporate
No material deviation.
（1）The policy or system adopted by （1）
the
Company
regarding
Mr. Lee Hsin and Mr. Ye Xiao Ping, both are
corporate social responsibility directors of the Company initiated the establishment of
and the review of the Beijing Century Charity Foundation on 21 January 2010
performance thereof
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.
30
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 No material deviation.
charge of the promotion of by us are as follows:
corporate social responsibility
（a) In 2008, the employees and business partners
of the Company donated 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”.
(g) On 19 April 2013, we donated RMB 1.2 million
to the “New Bio-Tech Agriculture Demonstration
Project” in Yunnan Province, with an aim to help the
local development of agriculture.
31
Item
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
(3) Provide regular training and (3)
No material deviation.
promotion on corporate ethics to
「Sincere
,
and Righteous」,
directors and employees and （a)「Diligent and Simple」
associate the aforesaid with
「 Proper and Just」and 「programmatic yet
employees’
performance
Innovative」are our most important corporate
appraisal, and effective reward
culture. We ask all Coland’s people to be
or disciplinary system
simple, environment-friendly, energy -saving in
both living and working life and to make the best
use of resources without wasting. We 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 (1) We are a service provider with specialty of No material deviation.
use of available resources
pharmaceutical development and sales, without
and renewables to minimize
engaging in any manufacture or production
the impact to the
activities.
In order to comply with the
environment
environmental trend of energy and carbon
saving, we continue to promote paperless culture
to become a green corporate so as to fulfill our
social responsibility.
(2)
Establishment of
environment management
system
(3)
Establishment of designated (3) Given we do not have any factory, we do not No material deviation.
have any production activities which may cause
personnel or department in
charge of environmental
impact to the environment.
We do have
protection
part-time personnel responsible for the cleaning
work so as to maintain the cleaness of the
working environment.
(4)
Awareness of impact on the (4) With the principle of environmental protection, No material deviation.
operation by climate change
we use electricity saving bulbs and restrict the
and the strategy for energy
time for use of air-conditioner so as to serve the
saving and carbon reduction
purpose of energy/carbon saving/reduction.
(2) This requirement is not applicable to us as we do No material deviation.
not have any factory and production activity.
32
Item
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
3. Maintain Public Welfare
(1) Comply with labour laws,
(1) We procure social insurance for the employees No material deviation.
respect the internationally
in accordance with the regulation of our
recognized basic labour rights,
respective operating location, such as retirement,
protect employees’ legal rights,
medical, loss of job, birth giving, working injury,
public housing fund and so on. We also have
establish fair employment
policy and proper management
performance appraisal system as the basis for
method and the status of
bonus. Our employees enjoy the welfare for
implementation thereof
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) Provide safe and healthy
(2) In addition to the internal and external training No material deviation.
working environment and safe
courses provided in relation to the work need, we
and healthy education on
also regularly provide training in relation to
regular basis
those GSP related national policies.
(3) Provide mechanism for regular (3) The department heads communicate with their No material deviation.
communication with
respective subordinates on the review,
employees and reasonable
communication of their work performance and
method to notify any material
the work target. We have the “Coland People’s
impact on our operation
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 (4) For the protection of consumers’ right, our No material deviation.
its policy on consumers’ right
related business departments are responsible to
and provide transparent and
handle their consumers’ complaints and collect
effective channel for receiving
the relevant information for the Company to
consumers’ complaints
respond to and improve on the relevant
complaints.
(5) Cooperate with suppliers to
jointly promote corporate
social responsibility
(5) From time to time, we invite our suppliers to No material deviation.
take part in the activities for the promotion of
social responsibilities together, such as
charitable auction, charity foundation and etc..
(6) Participate in community
(6) We reciprocate the society through setting up No material deviation.
development and charitable
charity foundation, holding charitable auctions
public welfare groups through
and making charity donation and etc from time
to time.
commercial activities, donation
of materials, volumteers or
other free professional services
33
Item
4.
Strengthen
Disclosure
Operating Status
Deviation from the
“Corporate Social
Responsibility Best
reasons thereof
Information
(1) Measure for the disclosure of (1) We disclose all amaterail and reliable corporate No material deviation.
material and reliable corporate
social responsibility on our corporate website
social responsibility
(www.colandpharma.com) any time when such
information is available.
(2) Disclosure of the promotion of (2)
by the Company in its
report
5.
We did not prepare any corporate social No material deviation.
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.
We did not enact our own “Codes of Corporate Social Responsibility” in accordance with “Codes of Practice
by Listed Issuances of Corporate Social Responsibility”
34
(6) Corporate Conduct and Ethics Implementation:
Item
Status of Implementation
Deviation from the Codes
of Corporate Conduct and
Ethics of the Listed Issuers
1. Establishment of Corporate Conduct (1) (a) We adopt our own “Corporate Governance Codes” in
and
Ethics
Policy
and
accordance with the “Codes of Corporate Conduct and
Implementation Measures
Ethics of the Listed Issuers”, aiming to regulate the
protection of investors’ interest, the relationship between
(1) Policy on corporate conduct and
the Company and its related interested parties, the No material deviation.
ethics
provided
in
internal
strength of the function of the board of directors, the right
regulation and disclosed publicly.
of the related interested parties and the transparency of
information disclosure. There contain specific codes to
Status for the board of directors’
require the Company to treat the corresponding banks,
and the management team’s
creditors, employees, customers, suppliers, communities
demonstration on their commitment
or other party with related interest in the Company based
to implement such policy.
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 reviews such projects
on regular basis and submits 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)
conduct and the implementation of
the relevant procedures, guidelines
and training mechanism provided
for such policy.
When employees first reported to their duty, they No material deviation.
would sign a confidentiality agreement and perform
their business related confidentiality duty in
accordance with our regulation and system, including
not to disclose our 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. In addition, we held 4 training activities,
including 2 compliance training with the aim to
strengthen and regulate ethical negotiation snd
business development in their daily work.
(3)
When setting up our policy for prevention of unethical No material deviation.
conducts, we assessed operational activities with
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.
Measures for preventing bribery (3)
and illegal political contribution for
higher potential unethical conduct
in the relevant policy for those
activities with higher risk of ethics.
35
Item
2.
Compliance with corporate conduct
and ethics
(1) Avoid to do business with whom (1)
has unethical records and include
terms regarding business conduct
and ethics in the business contracts
In addition to regulate our employees not to engaging No material deviation.
in unethical conduct, including any deception, asking
for rebate, accepting bribery and etc., we also stipulate
not to accept bribery and other unethical conduct in
the contact with our business partners.
(2) Execution and promotion of the (2)
corporate conduct and ethics
by
designated unit and the supervision of
such unit by the board of directors
We authorize senior management of the respective No material deviation.
departments as the main person for the promotion,
supervision and the execution of, the corporate
conduct 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 (3) (a) According to our Procedural Rules Governing No material deviation.
of
interest
and
provision
of
Meetings of the Board of Directors, for any proposals
communication channel
in 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 express their opinion and file any
complaints.
(4) Effective accounting and internal (4)
control systems for the implementation
of corporate conduct and and the status
of the internal auditor’s review
In 2013, we improved the allocation of duty and No material deviation.
function of internal audit department, including a
department head, an internal audit officer and an
assistant. According to our internal audit system, the
internal audit department would periodically conduct
review and assessment based on all operation manual.
If any deviation found, they would report to the audit
committee and the board of directors their review
result, including the progress of improvement.
36
3. 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 together with HR Department will
determine the punishment in accordance with relevant
punishment policy set out in the employees’ manual.
4. Information Disclosure
Item
(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「Diligent and Simple and
website
Diligent」, 「Sincere and Righteous」, 「Sincere and
Righteous Proper and Just 」 and 「 programmatic yet
Innovative 」 as well as disclose our regulations and
handling procedure in relation to corporate governance.
(2) Other cannels for information
disclosure
5.
(2) We set up our English corporate website for the No material deviation.
disclosure of material financial and business related
information. We 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.
We did not adopt our own “code of corporate conduct and ethico” based on the “Codes of Corporate Conduct and Ethics of
Listed Issuances”
(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) 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:
37
(a) Statement of Internal Control System
(English translation of a statement originally issued in Chinese)
Statement of Internal Control System
Date: 12 March 2014
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 2013:
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
2013, 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. This Statement forms an integral part of the Company’s Annual Report for the year 2013 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 Trading Law.
38
7. This Statement was passed by the Board of Directors in their meeting held on 12 March 2014.
None of the 7 attending directors expressed dissenting opinions and all the attending directors
affirmed the content of this Statement.
Chairman：Wiliam Robert Keller
General Manager：Lee Hsin
(b)
We did not appoint any auditors specifically to review our internal control system
39
(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.
(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 16 meetings of the board of directors in 2013 and
up to the date of printing of this annual report, significant resolutions passed were as follows:
Type of Date
Meeting
Meeting
of
24 January,
2013
Meeting
of Board
of
Directors
15 March,
2013
Contents of Resolutions passed in the Meeting
1. Noted the Internal Audit Report for the 4th Quarter of 2012;
2. Approved 2012 Year-End Bonus for Managers and Director’s
remunerations; and
3. Approved Investment in Rendu.
1. Approved and acknowledged the new organization structure of
the Company;
2. Approved and acknowledged the 2012 audited consolidated
financial statements and the operation report and
recommendation of the same to the shareholders for their
acknowledgement at the 2013 annual general meeting of the
Company;
3. Approved the 2012 Profit Distribution Plan and
acknowledgement at the 2013 annual general meeting of the
Company;
4. Approved Revised Approval Authority;
5. 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;
6. Approved Revised Procedural Rules of Board of Directors
Meeting and recommendation of the same to the shareholders
for their approval by a special resolution at the 2013 annual
general meeting of the Company;
7. Approved Revised Articles of Association of the Company and
approval at the 2013 annual general meeting of the Company;
8. Approved Revised Operation Procedures for the Provision of
Guarantee and recommendation of the same to the shareholders
for their approval at the 2013 annual general meeting of the
Company;
9. Approved Revised Operation Procedures for the Provision of
Loan and recommendation of the same to the shareholders for
their approval at the 2013 annual general meeting of the
Company;
40
Type of Date
Meeting
Meeting
of
10. the 2013 Directors’, CEO’s and senior
Remuneration Plan; and
11. Approved 2013 KPI of the senior management.
29 March,
2013
15 April, 2013
managers’
Approved Date and time, venue and matters of convening the 2013
annual general meeting
Approved the investment in Suzhou Microclear
Noted the Internal Audit Report for the 1st Quarter of 2013;
Noted the progress of the IFRS Conversion Plan (the last IFRS
Conversion Report);
3. Approved and acknowledged the consolidate financial
statement and the operation report for the 1st quarter of 2013;
and
4. Coland Development Company Limited does purchase a
company car.
Determination the ex dividend and payment dates for the 2012
Final Dividend
1. Noted the Internal Audit Report for the 2nd Quarter of 2013;
statement and the operation report for the 2nd Quarter of 2013;
and
3. Approved the audit fee schedule for 2013.
1.
2.
10 May, 2013
25 June, 2013
8 August,
2013
30 August,
2013
14 October,
2013
1.
2.
Approved the investment in Heifei Guozhen; and
Approved the application of renewal and increase of the credit
facility from Chinatrust Bank.
Approved the investment in Pharmadax Inc
1.
21 October,
2013
11 November,
2013
Noted report for the investment progress of the Group and
cash flow forecast of 2013;
2. Approved Increase of Capital in Cash by Way of New Issue of
Shares; and
3. Approved the proposal for purchasing a company car by
Shanghai Guochuang.
1. Noted the Internal Audit Report for the 3rd Quarter of 2013；
statement and the operation report for the 3rd Quarter of 2013;
and
3. Approved the plan for the employees to subscribe new shares
to be issued under the proposed SPO of 2013.
41
Type of Date
Meeting
Meeting
of
1.
2.
3.
4.
Annual
General
Meeting
Approved the Internal Audit Plan for 2014;
Approved the investment in Shechen Pharmaceutical Ltd.;
Approved the investment in Revlis Biotech;
Approved acquire the office unit, the office unit is 1,321square
9 December,
meters and located at Fenglin life science park, Level 2 of
2013
Building B of Phase I Shanghai Clinical Research Centre in
Xuhui District by Shanghai Guochuang;
5. Approved the 2014 Salary Proposal; and
6. Approved the list of the employees to subscribe new shares to
be issued under the SPO.
26 December, 1. Approved the investment in Zan Ho Biotech Inc.; and
2013
2. Approved the investment in Taitong Fund.
i. Matters reported:
1. 2012 Operation Report; and
2. Report by the Audit Committee on the review of the 2012
audited consolidated financial statements and operation
report
ii. Matters acknowledged:
1. 2012 Audited Consolidated Financial Statements and
Operation Report; and
25 June, 2013
2. 2012 Profit Distribution Plan
iii. Matters resolved:
1. Amendments of Procedural Rules Governing Meetings of
Board of Directors;
2. Amendments of Articles of Association;
3. Amendments of Operation Procedures for the Provision
of Guarantee;
4. Amendments of Operation Procedures for the Provision
of Loan.
1. Approved the 2013 Incentive Bonus Plan for Manager;
14 January,
2. Approved 2014 Employees Share Option Plan; and
2014
3. Approved the investment in Yushan Holding at cost of NTD
100 million.
Approved
the investment in Bora Pharmaceuticals at cost of NTD
24 January,
99 million.
2014
1.
2.
3.
Meeting
of Board
of
Directors
12 March,
2014
4.
5.
Noted the Internal Audit Report for the 4th Quarter of 2013；
Noted the 2013 Q4 Operation Result;
Noted and acknowledged the 2013 Operation Report and
recommended to the same be submitted to the shareholders
for their acknowledgement at the 2014 annual general
meeting of the Company;
Acknowledged and Approved the 2013 Financial Statement
and recommended to the same be submitted to the
shareholders for their acknowledgement at the 2014 annual
general meeting of the Company;
Acknowledged and Approved the Profit Distribution Plan and
recommended to the same be submitted to the shareholders
for their acknowledgement at the 2014 annual general
meeting of the Company;
42
Type of Date
Meeting
Meeting
of
6.
7.
8.
Approved the form and substance of the Internal Control
Statement;
Approved the 2014 remuneration plan for the senior
managers; and
Approved the 2014 KPI for the senior management.
(12) In the latest year and up to the date of pringting of this annual report, no directors
expressing dissenting opinion with record on written statement 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, CEO, head of accounting,
internal auditors and head of R&D department) 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
Number of Persons
Title of Certificate/Qualification
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
-
4
1
4
1
-
1
2
-
4.
Information on Fees charged by auditors
Name of CPA firm
Ernst & Young, Certified
Public Accountant
Name of Accountant
Wang Yan Jun
Lin Li Huang
43
Audited Period
1 Jan. 2013
2013
to
31 Dec.
Items
Fee Range
1
2
3
4
5
6
Non-audit
Fees
Audit Fees
Total

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
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.
There were no change of auditors.
6.
Neither the Chairman, nor the CEO, managers of the Company responsible for financial or
accounting affairs served within the latest year at the auditors’ firm or related affiliates.
7.
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 for 2013 and up to the date of printing of this annual report:
2013
Increase/
Increase/
(decrease) of
(decrease) of
Number of Shares Number Shares
Held
Pledged
As at 2 May 2014
Increase/
Increase/
(decrease) of
(decrease) of
Number of
Number Shares
Shares Held
Pledged
Title
Name
Chairman
William Robert Keller
0
0
0
0
Director and
CEO
Lee Hsin
0
0
0
0
Director
Ye Xiao Ping
0
0
0
0
Director
Tang Li Da
0
0
0
0
Independent
Director
Shen Jen Lin
0
0
0
0
Independent
Director
Chang Li Yen
0
0
0
0
Independent
Director
Han Feng
0
0
0
0
44
2013
As at 2 May 2014
Increase/
(decrease) of
Number of Shares
Held
Increase/
(decrease) of
Number Shares
Pledged
Increase/
(decrease) of
Number of
Shares Held
Increase/
(decrease) of
Number Shares
Pledged
Tsao Johua
21,948
0
(34,000)
0
Chief Investment
Officer
Cheng Ching Chi
0
0
0
0
Director,
External Affairs
Officer
Guo Zhi-min
0
0
0
0
Director, Medical
Device Dept
Jiang Yan-fei
0
0
0
0
Director, Sales &
Marketing Dept
Hu Tong
(2013/3/1 appointment)
0
0
0
0
Director, Product
Development
Dept
Lou Jin-fang
0
0
0
0
Director,
Medical
Registration Dept
Han Wen-ge
0
0
0
0
Director, Sales
Dept
Wang Feng
(2013/3/1 appointment，
2013/12/31 resignation)
0
0
0
0
Holding Over
10% shares
Business Enterprise
Investments Group Limited
(2,158,000)
0
(234,000)
4,100,000
Holding Over
10% shares
Xin Ping Holdings Ltd.
(2013/11/22resignation)
(4,097,000)
(1,070,000)
0
0
Title
Name
CFO
(2) No Directors, supervisors, managers and shareholders with more than 10 percent of
shareholders transferred their shares to related parties.
(3) No Pledgee was a related party.
45
8.
Information on the relation among top 10 shareholders as related parties referred to in No.
6 Publication of the Financial and Accounting Principles
2 May 2014
Shares held by
spouse and
minor children
Shares held
Name
31.18
No of
shares
0
0
0
0
0
0
7,137,871
9.17
0
0
0
0
0
0
Morgan Stanley
Internaitonal
Company Limited
Cheerful Gold
Limited
Representative:
Zhu Xiao-qing
2,741,354
3.52
0
2,407,031
3.09
0
Fidelity Fund
1,811,454
0
0
0
Cheerful
Gold
Limited
0
0
0
None
0
0
0
0
0
0
0
Xin Ping
Holdings
Ltd.
2.33
0
0
0
0
None
Shareholders of
the relevant
companies are
mother and
daughter
None
0
0
0
0
None
None
0
0
0
0
None
None
%
Business Enterprise
Investments Group
Limited
Representative:
Lee Hsin
Xin Ping Holdings
Ltd.
Representative:
Zhu Xiao-qing
24,270,141
Hong-tai Life
Insurance Stock
Company Limited
Representative:Wei
Bo-tao
Yuan-ta Polaris
Duo-fu Fund
Golden Hexagon
Investments
Limited
Representative:
William Robert
Keller
Customous’
Investment
Account
Yong-feng
Securities (Asia)
Custodians
Company Limited
1,343,820
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
No of
shares
0
No of shares
Hong-Ding
Venture Capital
Stock Company
Limited
Representative:
Hung Jia-cong
Aggregate
shares held in
other’s name
%
%
Shareholders of
the relevant
companies are
mother and
daughter
None
1.73%
1,120,000
1.44%
650,645
0.84%
0
0
0
0
None
None
612,572
0.79%
0
0
0
0
None
None
0
0
0
0
600,000
0.77%
0
0
0
0
None
None
46
9.
Number of shares and shareholding percentage in an invested company jointly
invested by the Company, the directors, the managers, or any company directly or
indirectly controlled by the Company:
31 March 2014
Invested Company
（Note）
Investment by
company
Investment by the directors,
managers, and companies directly or
indirectly controlled by the
Company
Aggregate Investment
No. of
Shares
%
No. of Shares
%
No. of Shares
%
100
100%
-
-
100
100%
-
-
1
100%
1
100%
-
-
Not applicable
100%
Not applicable
100%
-
-
4,000,000
100%
4,000,000
100%
-
-
Not applicable
51%
Not applicable
51%
-
-
4,800,000
24%
4,800,000
24%
-
-
Not applicable
60%
Not applicable
60%
-
-
Not applicable
60%
Not applicable
60%
-
-
5,000,000
50%
5,000,000
50%
-
-
248,800
21%
248,800
21%
Zan Ho Biotech Inc.
-
-
1,000,000
40%
1,000,000
40%
Suzhou Microclear
Medical Instruments
Co., Ltd
-
-
Not applicable
25%
Not applicable
25%
Central Chief Limited
Coland
Pharmaceutical
Company
Limited
(Hong Kong)
Shanghai Guochuang
Pharmaceutical
Company Limited
Coland Development
Company Limited
Heilongjiang
Province Tongze
Pharmaceutical
Company Limited
Hung Chun BIO-S
Co., Ltd.
Exquisite Creation
Limited 精創
Hefei City Guozhen
Pharmaceutical Sales
Limited
Shechen
Pharmaceutical Ltd.
Taiwan Tigermed
Consulting Co. Ltd.
Note：The company’s long term investment
47
IV.
1.
STATUS OF FUNDING
Capital and shares
(1)
Source of capital
(a)
Formation of capital
Unit: share, NTD 1
Authorised Capital
Issue
Year/Month
Price
2010／3
(Note)
2010／4
(Note)
2010／5
2011／2
2011／4
2011／4
2011／10
2013/10
2013/12
1
No. of
Shares
1,500,000
Amount
1,500,000
Issued Capital
No. of
Shares
Consideration
other than Others
Cash
1,000 Establishment
None
Amount
1,000
Remarks
Source of Capital
Share swap with shareholders
of Central Chief Limited
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
NTD 6,129,560
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
Exercise of share
10 200,000,000 2,000,000,000 70,347,000 703,470,000 option of NTD
None
3,470,000
Cash injection of
72 200,000,000 2,000,000,000 77,847,000 778,470,000
None
NTD 75,000,000
1
1,500,000
1,500,000
2,000
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
shareholders.
(b)
Class of shares
31 March 2014
Authorised Share Capital
Class
Ordinary
No. of Shares circulated
No. of unissued shares
77,847,000
122,153,000
48
Total Number of
Authorised Shares
200,000,000
(2)
Types of Shareholders
2 May 2014
Type
Governmental Financial
Organisation Organisation
Quantity
Number of
Shareholders
Number of Shares
Held
％ of Shareholding
Other Legal Individual Foreign Entity
Person
and Foreigner
Total
0
5
38
6,142
31
6,216
0
2,319,568
3,682399
30,575,839
41,269,194
77,847,000
0.00%
2.98%
4.73%
39.28%
53.01%
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
2 May 2014
Share Range Held
1-999
1,000-5,000
5,001-10,000
10,001-15,000
15,001-20,000
20,001-30,000
30,001-40,000
40,001-50,000
50,001-100,000
100,001-200,000
200,001-400,000
400,001-600,000
600,001-800,000
800,001-1,000,000
1,000,001or above
Total
No. of Shareholders
No. of Shares Held (Note)
% of Shareholding
479
4,470
656
211
117
105
57
37
37
28
5
5
2
0
7
6,216
97,289
8,819,078
5,103,789
2,630,003
2,085,412
2,630,137
1,988,845
1,731,344
2,505,629
3,968,792
1,531,984
2,659,810
1,263,217
0
40,831,671
77,847,000
0.12%
11.33%
6.56%
3.38%
2.68%
3.38%
2.55%
2.22%
3.22%
5.10%
1.97%
3.42%
1.62%
0.00%
52.45%
100.00%
Note: Nominal value of NTD 10/per share
(b)
(4)
The Company did not issue any special shares.
List of main shareholders
2 May 2014
Shares
Name of Main Shareholders
Business Enterprise Investments Group Limited
Xin Ping Holdings Ltd.
Morgan Stanley Internaitonal Company Limited
Cheerful Gold Limited
Fidelity Fund
Hong-Ding Venture Capital Stock Company Limited
49
No of Shares
24,270,141
7,137,871
2,741,354
2,407,031
1,811,454
1,343,820
%
31.18%
9.17%
3.52%
3.09%
2.33%
1.73%
Shares
Name of Main Shareholders
Hong-tai Life Insurance Stock Company Limited
Yuan-ta Polaris Duo-fu Fund
Golden Hexagon Investments Limited
Customers’ Investment Account Yong-feng Securities
(Asia) Custodians Company Limited
No of Shares
%
1,120,000
650,645
612,572
1.44%
0.84%
0.79%
600,000
0.77%
(5) Market price, net value and earnings per share, dividend and the related information
for the latest 2 years (note 8)
Highest
110
Unit：NTD;’000 shares
As at 31 March
2013
2014
94.7
92.1
Lowest
58.5
67.8
78.2
Average
77.99
80.94
86.47
Before Distribution
After Distribution
24.91
34.43
39.20
21.71
*
-
No. of Weighted
Average Shares
Earnings per Share
（Note 3）
Cash Dividend
70,000
70,237
77,847
4.33
5.06
1.72
3.2
3.6*
-
-
-
-
-
Year
Item
Market Price per
Share（Note 1）
Net valu e per
Share（Note 2）
Earnigns per
Share
Dividend per
Share
2012
Dividend Payable（Note
4）
Price/Earnings Ratio
18
16
（Note 5）
R e t u r n o n Price／Dividend
24
22
Investment
Ratio（Note 6）
Cash Dividend Yield
4.10%
4.45%
（Note 7）
*The dividend was recommended by the board of directors and subject to the shareholders’
approval at the 2014 annual gereral meeting to be held on 30 June 2014.
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.
50
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 2014 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 25
June 2013, dividend distribution may be recommended by the board of directors to the
shareholders for approval by an ordinary resolution, provided scrip dividend shall be
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)
(ii)
Up to 10% as bonus to employees, including employees of an affiliate of the
Company;
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 2013 （Note）
Year
Item
Cash Dividend （NTD)
Capitalisation of Profit
Total
（NTD)
Amount per Share
Total
2013
(to be distributed in 2014)
3.6
280,249,200
Amount per Share
－
Total
－
Amount per Share
3.6
Total
280,249,200
Note: The dividend was recommended by the board of directors and subject to the
shareholders’ approval at the 2014 annual gereral meeting to be held on 30 June 2014.
51
(7)
No bonus shares were proposed to the 2014 general meeting.
(8)
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 2013 and 2012.
(9)
We did not repurchase any of our shares during 2012.
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 2014
Share options
granted
2010 First Grant
Approval Date 100/08/23
2012 First Grant
2012 Second Grant
101/06/13
101/06/13
Grant Date
99/12/10
101/06/20
101/11/01
No. of Units
238,220 unit
315 unit
440 unit
No. of shares
under
Exercisable
1.59
0.45
0.6285
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
Type B：
shares
5 years from the listing date:
100%
No. of Shares
347,000
Exercised
0
0
Total
Consideration
for the
3,470,000
Exercised
Option
0
0
52
No. of Shares
under Options
293,000
not yet
Exercised
Subscription
Price per Share
for Options not NTD 10
yet Exercised
No. of shares
under Options
not yet
Exercised/
0.38
Total Issued
Shares
(%)
Impact on
Shareholders’
Equity
210,000
270,000
NTD 60.87
NTD
0.27
0.35
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 2014
Exercised
MANAGERS
Title
No. of
No. of
Shares
Shares
No. of
No. of Shares underthe
under
Shares
Name
Subscripti
underthe
Options No. of
Total
Total
Option
under
（Note 1）
Subscripti
No. of Shares on Price
Options
／Total Shares
Considerat Exercised
Consideration Grantedbut
on Price
per Share
Issued
(NTD‘000) Not Yet
ion
Option/T
（NTD）
Shares
Exercised/T
otal Issued
otal Issued
Shares
Shares
Director of
Sales
Department
Hu Tong
CIO
Cheng
Ching
Chi
Medical
Device
Director
External
Affairs
Officer
National
Sales
Director
Product
Development
Director
Medical
Registration
Director
Not Yet Exercised
Jiang
Yan Fei
Guo Zhi
Min
425,000
(Among
which
20,000
lapsed)
(Note 1)
0.55% 97,000
(Note
2)
10
Wang
Feng
Lou Jin
Fang
Han
Wen Ge
53
970
0.12%
78,000
100,000
130,000
10.0
60.87
3.68
16,445
0.40%
(Note 2)
Exercised
EMPLOYEES
Title
Sales &
Marketing
Director
Chief
Investment
Officer
Medical
Device
Director
External
Affairs
Officer
Financial
Manager
No. of
No. of
Shares
Shares
No. of
No. of Shares underthe
under
Shares
Name
Subscripti
underthe
Options No. of
Total
Total
Option
under
（Note 1）
Subscripti
No. of Shares on Price
Options
／Total Shares
Considerat Exercised
Consideration Grantedbut
on Price
per Share
Issued
(NTD‘000) Not Yet
ion
Option/T
（NTD）
Shares
Exercised/T
otal Issued
otal Issued
Shares
Shares
Hu Tong
Cheng
Ching
Chi
Jiang
Yan Fei
Guo Zhi
Min
Wang
Ting
Marketing
Dirctor
Gu Song
Wei
HR Manager
Gu Yan
Fei
Commerical
Director
National
Sales
Director
Sales
Director
Not Yet Exercised
590,000
(Among
which
70,000
lapsed)
(Note 1)
0.76% 110,00
0
(Note
2)
10
1,100 0.15%
90,000
130,000
190,000
10
60.87
73.68
22,812
0.53%
(Note 2)
Dong
Lei
Wang
Feng
Yang
Jun
Note1: Wang Feng, Sales Director and Gu Song-wei, Marketing Director resigned and left the
Company and their option not yet exercised was lapsed.
Note 2: The percentage is calculated base on 77,847,000 shares issued.
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, 2011 and 2013 were used up in
accordance with the relevant plans.
54
V.
1.
OPERATION STATUS
Business Content
(1) Scope of Business
(a) The main content of the Company’s business
We are a bio-pharmaceutical company specialised in the development and sale of medical
products, which cover the therapeutics of various areas, including hepatology, respiratory
system, oncology, cardiovascular, medical devices dental materials, orthopedic equipment 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
2012
Sales Income
Product
Medicines
Unit: NTD’000; %
2013
Sales Income
%
%
1,433,257
83.24%
1,610,798
86.75%
Medical Devices
203,518
11.82%
225,146
12.13%
Others (Note)
84,974
4.94%
20,820
1.12%
1,721,749
100.00%
1,856,764
100.00%
Total
Note: Income of service fees
(c) Existing Products
The Company’s existing products cover the therapeutics of various areas, including hepatology,
respiratory system, cardiovascular, spine suregery and antibiotics:
Therapeutic Area
Listing
Year
2005
Product
name
Generic name
Dai Ding
Adefovir
Indications
Anti-HBV
Hepatology
2012
Yin Ding
Lamivudine
55
Anti-HBV
Supplier
Tianjin Institute
of
Pharmaceutical
Research
Anhui Biochem
United
Pharmaceutical
Co
chole
cystolithiasis,
cholestalic
liver desease,
bile-regurgitatronal gastritis
Daewoong
Pharmaceutical
Co., Ltd.
2014
Wulusa
Ursodeoxycholic
acid
2011
Bi Duo Yi
Tiotropium
Bromide
COPD
Zhejiang Xianju
Pharmaceutical
2013
Yi Qing
Mometasone
Furoate Aqueous
Nasal Spray
Rhinitis
Zhejiang Xianju
Pharmaceutical
Cardiovascular
2013
Lezhiping
Olbetam
Treatment of
Hyperlipidem
ia
Pfizer
Immuno-suppressant
2008
Shun You
Mycophenolate
Mofetil
Organ
Transplant
Rejection
Zhejiang
Jianfeng
Pharmaceutical
Urology
2013
Detrol
Tolterodine
Tartrate
Urinary
Incontinence
Pfizer
Spine Implants
Fracture or
deformation
of bone pillar
Medtronic
Hip and Knee Joint Substitution
Treatment of
vertebral
compression
fracture
Mathys
RNA Test Reagent
Sexually
Transmitted
Diseases
Screening,
Test of
Chlamydia
Trachomatis
, gonococci,
ureaplasma,
Tuberculosis
Shanghai Rendu
Bio-Tech
Company
Limited
Respiratory
2010
Medical Device
2013
IDV
2014
(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
medication.
(ii) Respiratory medication, including the therapeutics for chronic obstructive pulmonary
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.
56
(iv) Medical devices, including orthopedics, dental instrument and implants, ophthalmic
equipment.
(v) IVD reagents, including eugenic screening, immunodeficiency virus/hepatitis B
virus/hepatitis C virus screening and oncology screening.
(2) Industry Overview
(a)
Current Status and development of pharmaceutical industry
China’s market for the sale of pharmaceutical products: maintaining rapid growth
According to the information published by China’s National Development and Reform
Commission, the main business income of pharmaceutical industry was RMB 2,168 billion
in 2013, representing an increase of 17.9% as compared to the same period last year.
Among which, income for material for chemical medicines was RMB382 billion, chemical
medicines was RMB 573 billion, Chinese medicines decoction pieces was RMB125.9
billion，Chinese patent drug was RMB 506.5 billion and medical devices was RMB188.9
billion，representing an increase of 13.7%, 15.8%, 26.9%, 21.1% and 17.2% respectively
as compared to the same period last year.
Following the acceleration of aging, the incident of chronic diseases will increase. The
increase of the population of the middle and rich classes will drive the demand for
upgrading the medical treatment. Despite of the future growth rate will be lower than that
of 20% increase in between 2008 to 2011, the speed of development is still very
impressive.
(i)
Status of market for medicines
Following the acceleration of aging and the increase of aging population, the demand for
medicines showed an uptrend. The global pharmaceutical market grew rapidly in the
recent years. According to the statistic from IMS, an international medical consultation
organization, in 2010 and 2011, growth of global medical sales exceeded that of global
GPD. In between 2010 to 2014, it was estimated that new emerging medical market
would grow by 14-17%, while the growth rate in the developed medical market would only
be 3-6%. China is the largest new emerging medical market in the world, which will
become the second largest global pharmaceutical market, only next to the USA market.
Under a stable macro economy circumstance, following China’s continuing promotion of
medical reform as well as the continuous publication of new policies and standard of the
57
management of this industry, pharmaceutical circulation industry will maintain stable
growth and the reform will be accelerated.
(ii)
Status of market for medical devices
Sales of medical devices in developed countries represented 42% of the total sales in
pharmaceutical industry, while sales of medical devices in China were less than 20% of the
sales of medicines. In the USA, the average amount of consumption of medical devices
per person is US$329 every year, while that in China is US$13. China’s medical devices
industry is booming under the lead of national policy and the demand for renewal of
equipment in medical and health organisations. Its position in the whole medical industry
becomes more and more important.
(iii) Status of market for IVD
According to the market research report by Frost & Sullivan, the scale of China’s market
for IVD in 2011 exceeded RMB 14 billion. The market scale for 2012 would be around
RMB 16.7 billion, representing an increase of 18.6% as compared to 2011. China’s
population was about 20% of that of the world, while its market for IVD only was about
5% of that of the world. In 2012, the average expenses for IVD per person in China was
US$2, while that of the European countries and USA was US$30.
There remains a large
growth space of China’s market for IVD.
(iv) Status of the overall terminal market
Status of the overall terminal market based on China’s Health Statistic Yearbook is as
follows:
(aa) the growth of city hospitals would be about 50% of the total market growth in
between 2011 and 2020. City hospitals will remain to be the main battle field for
pharmaceutical manufacturers.
(bb) The importance of county hospitals will grow gradually. The Government
encourages enlargement of basic equipment and facilities and training doctors in order to
promote county hospital’s professionalism so that county hospitals can take up its role to
58
treat serious diseases.
(cc) Basic medicines will remain its role in the widely spread basic health institutes, such
as community health service center and town hospitals.
Scale of hospitals and health institution in all levels
Unit: RMB billion
2008~2011 年
Annual Average
Compound Growth
Rate (%)
2011~2020 年
Annual Average
Compound Growth
Rate (%)
2011~2020 年
Contribution to the Market
Growth
Unit: RMB billion
City Hospital
21
13
660
Community Health
Service Center
County Hospital
Town Health Clinic
Retail Channel
Total
26
12
54
24
10
19
20
16
9
11
13
352
69
215
1349
(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 sales 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
59
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.
( c ) Development trends for all Products
The key licensed products under the development by the Company for distribution are
mainly in the areas of hepatology, respiratory system, oncology, cardiovascular, antibiotic,
orthopaedics equipment and IVD. Below is a description of each markets for the
products.
(i) Market for Hepatology Related Products
(aa) The China market for Hepatitis
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, cholestatic or severe hepatitis.
It is easy to develop into chronic hepatitis and cirrhosis 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 which 20 million are infected with chronic hepatitis.
Among all kinds of anti-hepatitis drugs in China, the largest use is nucleoside, which
is about 76%. Interferon is the second, about 20%. In the market of oral nucleoside
analoguefor HBV in China, there are mainly 5 components, namely, Lamivudine,
Adefovir, Entecavir, Telbivudine and Tenofovir. In 2012, among oral nucelside
analogue market in China, Entecavir had the highest use rate of 42%, the second was
Adefovir of 27.5%, Lamivudine of 21.4%, Telbivudine of 9.1% and Tenofovir of
0.3%. Our products include 3 of them, namely Entecavir, Adefovir and Lamivudine.
60
China’s Anti-HBV Drug Market (Unit: RMB Million)
■Others ■Interferon ■Oral nucleoside
Chinese HBV oral nucleoside therapy proportion
■Telbivudine ■Entecavir ■Adefovir ■Lamivudine
Source: IMS Health Inc.
(bb)
Hepatobiliary Adjuvant
Bile-therapy and cholagogue are the first class hepatobiliary adjuvant and
components of the market for the treatment of generalized liver diseases. The clinical
targeted departments include hepatic department, digestive system department and
liver and gall surgical department. Ursodesoxycholic acid is a medicine for
bile-therapy, which is also applicable to cholesterol gallstone, cholestasis liver
diseases (such as: primary biliary cirrhosis) and bile reflux gastritis.
In China, the incidence of cholelithiasis reaches 7-10%. It is a common
disease and most of which is cholesterol gallstone. Following the improvement of
life and nutrition conditions, the incidence of cholelithiasis is increasing.
According to Digestive Disease Direction of US NIH and China’s relevant direction,
UDCA is the most effective oral taken treatment. Cholestasis liver diseases are the
61
most common clinical diseases (including primary biliary cirrhosis) and they have
higher incidence in China. According to the common view of China’s specialists,
UDCA is the most effective treatment and it is the only medicine approved by the US
FDA to be applied for primary biliary cirrhosis. Bile reflux gastritis is bile reverse
flow into the stomach resulting Chronic inflammation of gastric mucosa due to
chronic dyspepsia or surgical operation and etc.. According to the report by
Digestive Disease Branch Association of Chinese Medical Association, in China,
about 16.4% of the patients of chronic dyspepsia have bile reflux. Medicines for
improving gastric motility and UDCA are the main medicines for the treatment of
bile reflux gastritis.
According to the information from IMS Health Inc., in between 2008 and
2012, CAGR for the market of chologogue was 12%. The market grew rapidly from
RMB 290 million to 660 million, 58% of which was ursodesoxycholic acid.
Ursodesoxycholic acid is the leading component of chologogue.
In 2013, the ursodesoxycholic acid capsules distributed by us were
manufactured by Daewoong Pharmaceutical Co., Ltd., which is the only soft capsule
in the China market. The main competitor fo ursodesoxycholic acid in the China
market is Youfosi from Phileas Fogg and Youdishe from Keruide in Sichuan.
Market of Bile-therapy and Cholagogue in China Market (Unit: RMB million)
(ii)
Market for Respiratory Products
(aa) 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
62
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 was not obvious due to the low popularity rate of the
overall medical treatment at first. Later, Spiriva, and following the increase of the
popularity rate of medical treatment, sales of Spiriva leaped. In 2011 and 2012,
sales of Spiriva reached RMB 140 million and RMB 200 million respectively.
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 2012
Death Rate
2011
2012
up/down
Major causes
of death from
diseases for
rural dwellers
in 2012
Death Rate
2011
2012
Up/down
Malignant
Tumors
Cerebrovascular
Disease
23.62%
22.96%
-0.66%
21.72%
20.61%
-1.11%
1
Malignant
Tumors
27.79%
26.81%
-0.98%
2
Heart Disease
21.30%
21.45%
0.15%
3
Cerebrovascular
Disease
Respiratory
Diseases
Injury and
Poisoning
20.22%
19.61%
-0.61%
Heart Disease
19.37%
18.11%
-1.26%
10.56%
12.32%
1.76%
13.31%
15.75%
2.44%
5.47%
5.67%
0.20%
Respiratory
Diseases
Injury and
Poisoning
8.85%
10.29%
1.44%
4
5
Source: China Health Statistics Yearbook 2013
(bb) 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 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
63
announced the current incidence of allergic rhinitis reached about 10% in Shanghai.
In another survey, the incidence 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, incidence of 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 only 3 branded nasal inhalers, namely
Flixonase from GSK, Rhinocort from ASZ, and Nasonex from MSD already
exceeded RMB 500 million and reached RMB516 million in 2012.（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 is 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.
(iii)
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 kinds 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% is
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% is hyperlipidemia.
In 2013, the overall market for lipid lowering drugs in China exceeded RMB
650 million, among which， 91.8% was contributed by statins. Acipimox was
ranked number 8 among all lipid lowering drugs, representing about 1.3% of the
market share. According to information from IMS, sales of acipimox in between
2007 and 2013 grew slowly. At present, the overall market is about RMB 83
million and the leading product is Yiping (from Nonan Bate) our licensed product –
Lezhiping (from Pfizer).
(iv)
Market for Urination Products
64
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 the 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. The current leading competing
products include Tolterodine from Nanjing Meirui and Suolinaxin from Ansitailai.
(v)
Market for Orthopedic 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 scale 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 69.4 million people aged
over 50 with osteoporosis which causes 687,000 hip fractures annually. The relevant
health care spending is estimated to exceed USD 12.5 billion in 2020 and grow 20
times by 2050.
Due to the limitation on research and development and production capability,
China’s orthopedic device market is dominated by multinational companies. In 2009,
multinational companies occupied 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. In 2013, we cooperated
with Mattys – manufacturer of artificial joint from Switzerland for the distribution of
artificial joint/hip replacement.
Since then, our orthopedic products from spine
extended to joint.
(vi)
Ballon（Vertebroplasty minimally invasive medical device PKP & PVP）
In 2010, the global market scale for IVD exceeded US$ 40 billion and China’s
market for IVD was about RMB 15 billion. It is estimated that the global market
65
scale for IVD may reach US$ 50 billion in 2014 and China’s market for IVD may
grow to RMB 25 billion, showing a rapid growth trend.
At present, the average annual use amount of IVD product in China is only
US$2, while that of the developed countries already reached US$25.3.
Both
“China’s “Regulation and Outline for the Mid and Long Term Development of
Science and Technology 2006-2020” and the plan of “Expediting of Training and
Developing Strategic New Arising Industries by the State Council” issued in
September 2010 included bio IDV technology in the major strategic developing
industry. It is clear that the IVD is treated more and more important gradually.
In all IVD projects, the development of global molecular diagnosis grows the
fastest, from 2% in 1995 to 10% in 2009. The annual grow rate of which reached
over 10% and even 20% in China. Products for mecular diagnosis are mainly
applied in various departments, such as cancer, affection, genetic and etc.. The
proportion of application reaches 74%. Shanghai Rendu, our cooperative business
partner, is the only company developed the 2nd generation RNA amplification.
None of its international competitors (such as Gen-Probe(TMA),
Biomerieux(NASBA) has entered into China market and its domestic competitors are
all traditional PCR companies, such as Daan, Kehua, Shengxiang and so on.
(d) Competition
Drug Market
Over 80% of our income is from drugs, among which, 60% is from drugs for the
treatment of hepatitis. The second is drugs for the treatment of cardiovascular
diseases for 9% and the rest is drugs for the treatment of other departments. In the
recent year, we aggressively build up our new products so as to enrich the structure
of products. In the past year, although we suffered from the drug price adjustment
by China’s National Reform and Development Commission, luckily with the lead of
new product and the acquisition of our regional business partners, the impact was
lowered and the income maintained growing.
Medical Device Market
China’s market for medical device grows rapidly with 20%’s growth in the past
10 years. At present, the market is still driven by international products. Over
70% of high-end products is international brand. Our licensed orthopedic spine
products is developed and manufactured by Medtronic the international top brand.
The newly introduced artificial joint is also imported from Switzerland. In the past,
market for medical device in China was driven by production, while the capability of
66
research and development of products was behind that of foreign countries. In the
recent years, following the growth of the local enterprises and the introduction and
encouragement by the State to keep up with the international standard, the creativity
is strengthened. Through strategic investment in Shanghai Rendu – an IVD
company with international R&D capability and Suzhou Weiqing Ophthalmology
Equipment Company, we wish to introduce products with high quality and
competitive edge as early as possible so as to enrich our product line for medical
devices.
(3) Technology and R&D Status
(a) Product Development Fees
Expenses for product development were $22,106,000 in 2013 and $1,086,000 for the
1st quarter of 2014, representing about 1.19% and 0.21% of total revenues
respectively.
(b) Products in development
At present, main products jointly developed with business partners and their repective
expected time for the obtaining of the drug permit are set out below:
(i) Pharma products:
Indications
Medicine Name
Hepatitis
Entecavir dispersible tablets
Tenofovir
Respiratory
Compound ipratropium bromide
2015
Irinotecan Injection
Temozolomide capsule
Vorinostat
Capecitabine
Imatinib
Bortezomib
Azacitidine
Alvimopan
Metoprolol succinate sustained-release tablets
Eparestat
2015
2016
2018
2018
2018
2017
2020
2016
2018
2019
Oncology
G.I.
Cardiovascular
Endocrine
67
Expected time
to obtain drug
permit
2016
2019
(ii) Medical device:
Indications
Products Name
Dental
Dental Implant
Scanning Laser Ophthalmoscope
Fluorescence Scanning Laser Ophthalmoscope
Handheld-Fundus Camera
HIV/HBV/HCVDiagnosisIVD reagents
Ophthalmology
RNA Diagnosis
Expected
time to
obtain
permission
2015
2015
2015
2015
2014
(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 and step 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 ahead
of the others
(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
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
68

(ii)
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
For Medical Devices：

(iii)
Continue to introduce dental related products lines, expandingmarket share in China
of dentistry so as to lay a foundation in dental devices
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
2012
Amount
1,721,749
1,721,749
%
100%
100%
Unit：NTD’000
2013
Amount
%
1,856,764
100%
1,856,764
100%
(b) Market Share
According to 2013 IMS statistics, market share of Adefovir in China’s HBV oral
nucleoside therapy was 37% and the collective sales from GSK, Jiangsu Zheng Da Tianqing
and our Company had a market share of approximately 80%.
69
(c) Market’s Future Demand and Supply and Growth
Our drugs are mainly sold in China, covering the therapeutics of hepatitis, respiratory,
cardiovascular and etc.. Our medical devices are mainly orthopedic products.
In addition, we dedicate ourselves in establish new products and 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). In addition, we
introduced lipid lowering product Lezhiping from Pfizer as well as Detrol for the treatment
of OAB and Wulusa from Daewoong Pharmaceutical Co., Ltd. in 2013. Accordingly, the
market development for the new therapeutic areas and the speed of growth are closely
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 and IVD reagents through investment in 2013.
(d)
Competitive Edge
The company’s competitive niche:
(e)

Experienced management team,capabilities of professional brand development and
marketing and familiarity with the relevant laws and regulations for the
pharmaceutical industry in China

Integrated 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
Advantageous and disadvantageous factors on our future development and
70
corresponding strategies
(i) Advantageous Factors
The following factors enable the trend of China’s health care market maintains fast
growth:
(aa) Fast growing aging population increases the potential demand for medicine
The aging of Chinese population is accelerating its growth. At the end of 2012, people
aged over 60 years old accounted for 14.3% of the total population; it is projected that in
2033, aged people will rise to 25.4% of total population. It will further rise to one third in
2050. At the same time, incidence of chronic diseases will also increase. It is estimated that in
2020, about one third of adults will have hypertension and one tenth of adults will have
diabetes. The aging of population expedites the demand for healthcare. In addition, population
of the mid-level and rich level will increase substantially and the number of middle and small
sized city will also accelerate，which will lead the demand for promotion of medical treatment.
At present, almost all Chinese people are covered by medical insurance. Expenses for medical
treatment in China’s GPD will increase from 5.1% in 2011 to 7% in 2020. During the aforesaid
period, the average annual grow rate of pharmaceutical market is expected to reach 13-15%.
(bb) 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
Health Organization), in the next 10 years, the economic losses due to early deaths from cardio
and diabetic diseases will be USD 558 billion. In China, the direct medical spending on chronic
diseases will over USD 500 billion by 2015.
(cc) 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 RMB 200 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.
(dd) 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
71
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.
(ee) 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.
(ii) Disadvantageous Factors and Corresponding Strategies
(aa) The medical reform reshaped the market structure
2013 was the year continuing the reform of the medical and health system in depth.
Following the set up of the basic structure of universal health system, the basic drug system and
the new operation mechanism of basic health institutes, the basic health institutes in countries
and towns further improved. The trial spot of the public hospitals and the structure of the
medical market is experiencing great change. Under the new medical reform, the List of
Basic Drugs is expanded continuously, which leads to the use of basic drugs. Price for the
drugs included in the List is continuously decreasing, which encourages local pharmaceutical
companies to research and create patent new drugs or generic drugs with otherness.
Corresponding strategy：
First of all, our R&D strategy would gradually move from branded generic drugs toward
new generic drugs and new drugs, the prices of which can be protected by the government, so
that our products can be differentiated from the general generic drugs. We also would expand
our market penetration and coverage by expediting the acquisition strategy and emphasizing on
the middle and small cities and hospitals. By the lead of promotion of branded products, we
would expand our coverage of sales network so as to increase revenue and profits with rapid
growth.
(bb) The characteristic of low profit operation of the industry would be more highlighted
In 2012, profits for the part of pharmaceutical circulation were reduced due to many
factors. The first one was price reduction of drugs, mainly in the areas of digestive, antitumor,
immunity and blood products. The average reduction range was about 17%. The second one
is the cash flow problem in the corporates. The repayment term of hospitals in all levels was
worsened continuously. In 2012, account receivables reported by the drug circulation
enterprises increased by 29.2% as compared to 2011. In addition, in a typical investigation by
the Chinese Commercial Medical Association, the average account receivable days for drugs
wholesalers was 142 days, which was 11 more days as compared to last year. Payment in
arrears by medical institutions to drug wholesalers further worsened and the corporate’s
survival and development were seriously affected.
The market change arising from the
72
change of policies in the use, supervision and bidding also brought more pressure to the
enterprises.
Corresponding strategy：
As for product development, we introduced differentiated products with new and creativity
nature so as to obtain the protection of price, competitive edge and room for profits. As for
cash flow, we maintain our principle of stable and health operation keep normal relationship
with banks and cautiously review our customer’s credit.
(2) Use of major products
Products of the Company cover the therapeutical areas of hepatology, respiratory,
cardiovascular, antibiotic, and spinal fixation.
(a)
Use of Main Products:
Therapeutic
Area
Product
Generic name
Indications
Adefovir
Anti-HBV
Lamivudine
Anti-HBV
Wulusa
Ursodexycholic acid
chole cystolithiasis,
cholestalic liver desease,
bile-regurgita-tronal
gastritis
Bi Duo Yi
Tiotropium
Bromide
COPD
Yi Qing
MometasoneFuroate Aqueous
Nasal Spray
Rhinitis
Cardiovascul
ar
Lezhiping
Olbetam
Treatment of
Hyperlipidemia
Immuno-sup
pressant
Shun You
Mycophenolate
Mofetil
Organ Transplant
Urology
Detrol
Tolterodine
Tartrate
Treatment of OAB
Dai Ding
Hepatology
Yin Ding
Respiratory
Medical
Device
IVD
Reagents
Spine Implants
Spine Surgery
Artificial Knee/hip joints replacement
replacement of knee/hip
joint
RNAtest reagents
Sexually transmitted
diseases screening, test
of Chlamydia
Trachomatis, gonococci,
ureaphasma,
tuberculosis
73
(3) Raw Material Supply
We did not engage in any production activity and the products supplied to us are all end
products. Hence we do not have any material suppliers.
(4) List of Major Customers and Suppliers
(a) Names of, and purchase amount and percentage from, the suppliers with purchase amount
accounted for 10% or more of the total purchase in the past 2 years:
Unit：NTD’000
2012
Project
Name
1
TIPR
D
Company
(Note 2)
Other
Net
Purchase
2
2013
%
Relationship
ofAnnual
Amount
with the
Total Net
Company
Purchase
447,821
63.46
Note 1
146,999
20.83
Note 2
110,883
15.71
705,703
100.00
Name
Up to 31 March 2014
%
ofAnnual Relationship
Amount Total Net with the
Purchase Company
t
386,632 45.00
Note 1
TIPR
D
Company 141,267
(Note 2)
Other
331,273
Net
859,172
Purchases
16.44
None
38.56
100.00
Name
% of net
purchase Relationship
Amount in the
with the
previous Company
quarter
104,554 41.26
Note 1
TIPR
D
Company 20,923
(Note 2)
Other
127,937
Net
253,414
Purchases
8.26
Note 2
50.48
100.00
Note: 1. Tianjin Institute of Pharmaceutical Research, 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.
2. Due to confidentiality term in the relevant agreement, we cannot disclose the name of the
supplier, Therefore the name of the supplier is disclosed by code.
Our suppliers are based on our operation strategy and category of products. In the recent 2
years, the suppliers with purchase amount accounted for 10% or more remained the same.
( 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:
Unit:NTD’000
2012
Item
1
Name
Amount
2013
%
Relationship Name
ofAnnual with the
Total Net Company
Sales
Amount
31 March 2014
% of Relationship Name
Annual with the
Total Company
Net
Sales〕
SM
203,518 11.82
Company
(Note 1)
Other 1,518,231 88.18
SM
159,984 8.62
Company
(Note 1)
Other 1,696,780 91.38
Net Sales 1,721,749 100.00
Net Sales 1,856,764 100.00
None
Amount
% of Relationship
Total
with the
Net
Company
Sales for
the
Previous
Quarter
None
SM
Company
(Note 1)
Other 506,175 100.00
Net Sales 506,175 100.00
Note 1: Due to confidentiality term in the relevant agreement, we cannot disclose the name of
the customer, Therefore the name of the customer is disclosed by code.
74
Our customers are quite diversified. The only individual customer with sales amount over
10% was SM Company.
Following our successful development of other customers, there
was no customer with sales amount over 10% in 2013 and the 1st quarter of 2014.
(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
Unit:NTD’000
2012
Year
DomesticSales(Note 1)
Quantity
and
Value
Main
Products
（Or by
depts）
Medical Drugs
Medical
Devices
Other(Note 3)
Total
Amount
(Note 2)
Value
2013
Overseas Sales
Amount
(unit:’00
0 pcs)
Domestic Sales(Note 1)
Value
Amount
(Note 2)
Value
Overseas Sales
Amount
(Note 2)
Value
-
1,433,257
-
0
-
1,610,798
-
0
-
203,518
-
0
-
225,146
-
0
-
74,448
1,711,223
-
10,526
10,526
-
16,114
1,852,059
-
4,705
4,705
Note 1: Domestic refers to China.
Note 2: Due to 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 for change analysis:
The sales value for drugs and medical devices grew with the expansion of our product lines.
Income for the provision of promotion services mainly increases or decreases due to the
yearly special projects.
3.
Number of employees for the past 2 years and up to the date of printing of the annual
report
Unit：Person；%
Year
Management
Staff
Total
Average Age
Average year of service
Education
Ph. D
No. of
Employees
2012
the date of printing
of this annual repor
2013
76
96
229
268
305
364
91
256
347
32.86
2.54
33.5
33.91
1.95
2.46
0.65%
0.3%
0.3%
75
Year
range
4.
2012
2013
the date of printing
of this annual repor
Masters
5.2%
3.78%
3.4%
Bachelors
82.7%
84.75%
84.4%
High school
11.2%
4.26%
11.2%
Below high
0.6%
6.56%
0.8%
school
Note：The above numbers include employees of Tongze and overseas subsidiaries.
Environmental Protection Expenditure
No losses or fines incurred by the Company due to environmental pollution for 2013 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 employees benifits.
(a)The protection of employees’ right:
( i) Measures for employees’ welfare
(aa) 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.
(bb) On traditional festivals, we provide free gift vouchers as well as gifts to our
employees.
(cc) 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.
(dd) We organize annual conference on regular basis and family day and other
activities from time to time.
( i i) Training and education
Project
New
employee
orientation
External
Training
Internal
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
Select potential employees to attend external training for the
improvement of business skills
Engage qualified teachers for internal training by departments and
76
Project
Training
Implementation
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 department by marketing
Professional department in sales skills and product knowledge.
Training
GSP
To cope with regulations of GSP (Good Supply Practice) learning and
Compliance training the related state’s policies quarterly and conduct examinations
Training
for the aforesaid learning
( i i i) The retirement system and the implementation status
Our subsidiaries in Taiwan comply with the Basic Labour Law. Payment of the
retirement fund is deducted from 6% of the monthly salary, which is deposited in the
individual designated account of labour retirement fund.
( iv ) Working environment and protection measures for the safety of the employees



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.
(v) 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 is 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
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:
(aa)
follow the regulations and keep the highest professional integrity to ensure his
personal behavior complies with professional ethics and industrial regulations.
(bb)
keep to be honest, righteous, including be honest to the Company , the colleagues ,
the business partner and cutomers.
(cc)
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 .
(dd)
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
77
We execute employment contracts with our employees in accordance with the
relevant laws and perform our duties in accordance with such contracts. 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.
(2) Disclosure of any losses incurred due to disputes with employees in the past 2 years and up
to the date of printing of this annual report and the estimated amount at present and in
future as well as the corresponding measures
We maintain good relationship with our employees without suffering any loss due to
disputes with our employees. We do not expect any loss to be incurred in the future
year for any disputes with the employees.
6.
Material Contracts
Nature of
Contract
Exclusive
Distribution
Agreement
Other Party
Company A
Exclusive
Distribution
Agreement
Company B
Exclusive
Distribution
Agreement
Company B
Exclusive
Distribution
Agreement
Company C
Exclusive
Distribution
Agreement
Company D
Restriction
Clauses
Nov. 2002 to Nov. Obtained the exclusive selling products
2022
distribution right in
with the same
China for hepatitis
chemical
drugs
ingredients
(Adefovir
dipivoxil) is
forbidden
20 years, starting Obtained the exclusive None
from the date
company B gets China, HK, Macau, and
the Production
Taiwan for
Approval
Capecitabine Bin
tablets
20 years, starting Obtained the exclusive None
from the date
company B gets China, HK, Macau, and
Taiwan for Imatinib
the Production
Approval
Nepalese tablets
Jan. 1, 2012 to
Obtained the exclusive Without
Dec. 31, 2016
permission may
China for certain
not sell
antibiotics
competing
products
10 years, starting Obtained the exclusive Without
from the date of distribution right in
permission may
getting the Import China for Irinotecan
not sell
Production
Hydrochloride
competing
Approval
products
Term of Contract
78
Main Content
Nature of
Contract
Registration and
distribution
agreement
Other Party
Term of Contract
Company F
10 years after
registration of the
product
Product agent
framework
agreement
Company G
Exclusive
Distribution
Agreement
Company H
From 26 June
2012 to 10 years
after registration
of the product
Jan 1 2013 to Dec
31 2017, if agreed
to extended for 3
years
Cooperation
Project
agreement
Company I
Import Service
Agreement
Company J
Distribution
Agreement
Cooperation
Project
agreement
Cooperation
Project
agreement
Logistic Services
Agreement
10 years, starting
from the date of
getting the
Production
Approval
Mar 15 2013 to
Mar 14 2018, if
agreed to
extended for 3
years
May 1 2014 to
April 30 2015
Restriction
Clauses
Being the agent for the Confidentiality
production registration
and Obtained the
Not allowed to
exclusive distribution sell competing
right in China for
products within
TemozolomideCapsules one year after
termination
Obtained the exclusive Confidentiality
China for metoprolol
succinate
Obtained the exclusive Confidentiality
Not allowed to
China for
sell competing
lipid-lowering drugs
Acipimox capsules
products
Cooperation in R & D, Confidentiality
registration,
manufacture and sale of
bortezomib
Main Content
Obtained the exclusive
China for Tolterodine
tartrate extended
release capsules
Obtained the
certain regions for
spine implants products
Confidentiality
Not allowed to
sell competing
products
Company K
Distribution
area is in certain
designated
hospitals in
Shanghai
Company L The agreement
Cooperation in R & D, Confidentiality
survives 10 years registration,
from the date of manufacture and sale of
the product
Tenofovir
launching
Company M Execution date: Cooperation in
Confidentiality
July 26 2013
injection for cancer
Not allowed to
sell competing
products
Company N August 1 2013 to Obtained the
Confidentiality
July 31 2016
certain regions for
import medical devices
and provide the logistic
services
79
Nature of
Contract
Production
Distribution
Agreement
Other Party
Term of Contract
Company O
Commissioned
R&D contract
Company P
Company Q
Cooperation
Project
agreement
Company R
Termination date: Obtained the
Dec 31 2018
certain regions for
Ursodeoxycholic acid
Effective date: Jan Engagement of
Confidentiality
17 2014
Company Q to R&D
and assist to the
relevant registration of
Azacitidine
From Jan 21 2014 Cooperation in R & D, Confidentiality
to the agreement registration,
survives 25 years manufacture and sale of
from and on the Vorinostat
date of the
products approval
80
Main Content
Restriction
Clauses
Confidentiality
VI.
1.
FINANCIAL HIGHLIGHTS
Condensed financial information in recent five years
(1)
Condensed balance sheet and consolidated income statements-IFRS
(a) Condensed balance sheet in recent five years
Unit: NTD’000
Financial information in recent five years（Note）
Item
2009
2010
2011
2012
Current Assets
1,490,706
Property, plant and equipment
8,602
Intangible asset
382,853
Other assets
14,578
Total assets
2,337,404
Before Distribution 141,767
Current
liabilities
After Distribution 365,767
Non-current liabilities
142,651
Total
liabilities
Equity attributable to the parent
1,936,705
company
Common stock
700,000
Additional paid-in capital
613,007
Retained
earnings
Other components equity
198,859
Treasury stock
Non-controlling interests
116,281
Before Distribution 2,052,986
Total equity
After Distribution 1,828,986
Year
2013
1,882,693
12,536
615,390
26,717
3,685,892
256,901
*
160,990
417,891
*
2014/3/31
1,870,523
12,417
604,425
27,172
3,703,623
222,073
160,999
383,072
-
3,049,992
3,051,443
778,470
1,083,825
556,029
*
631,668
778,470
1,095,791
690,267
486,915
269,108
3,320,551
-
218,009
3,268,001
*
*Pending shareholder’s approval
Note：The Company’s 2012 to 2014 First Quarter financial information was audited on
reviewed by auditors.
81
( b)
Condensed balance sheet in recent five years
Unit: NTD’000
Year
Financial information in recent five years（Note）
Item
Net sales
Gross profit
Operating income
Non-operating income and
expenses
Profit before income tax
Continuing Operations'
Income
Income (Loss) from
discountinuedoperations
Net income
Total other comprehensive
income, net of tax
Total comprehensive income
Net income attributable to
stokholders of the parent
Net income attributable to
non-controlling interests
Comprehensive income
attributable to stokholders of
the parent
Comprehensive income
attributable to
non-controlling interests
Earnings per share (NTD)
2012
1,721,749
1,016,046
378,338
2014/1/1~2014/3/31
2009
-
2010
-
2011
-
-
-
-
53,816
2013
1,856,764
997,592
230,886
251,340
-
-
-
432,154
482,226
-
-
-
314,770
392,504
-
-
-
-
-
-
-
-
314,770
392,504
147,670
-
-
-
142,382
439,143
(139,561)
-
-
-
457,152
831,647
8,109
-
-
-
302,944
355,190
134,238
-
-
-
11,826
37,314
13,432
-
-
-
445,326
787,999
(10,515)
-
-
-
11,826
43,648
18,624
-
-
-
4.33
5.06
1.72
506,175
252,761
76,928
93,742
170,670
147,670
Note: The Company’s financial information for 2012, 2013 and up to first quarter of 2014 was
reviewed by auditors.
(2)
Condensed balance sheet and income statements - ROC GAAP
(a)
Condensed balance sheet in recent five years
Unit: NTD’000
Year
Item
Current Assets
Funds & Investments
Fixed Assets
Intangible Assets
Other Assets
Total Assets
Before
Distribution
Current
Liabilities
After
Distribution
Long Term Liabilities
Other Liabilities
Before
Distribution
Total
Liabilities
After
Distribution
Financial information in recent five years（note）
2009
2010
2011
2012
698,591
443,577
1,748,488
1,505,284
3,613
59,303
85,147
247,173
3,758
9,390
8,580
8,602
9,398
34,261
34,307
283,316
0
0
211
0
715,360
546,531
1,876,733
2,044,375
2013
-
219,616
114,861
110,077
141,767
-
629,859
114,861
390,077
365,767
-
0
0
0
0
0
0
91,988
25,964
-
219,616
114,861
110,077
259,719
-
629,859
114,861
390,077
483,719
-
82
Year
Item
Capital Stock
Capital Surplus
Before
Retained
Distribution
Earnings
After
Distribution
Unrealized
gain
on
financial instruments
Cumulative
translation
adjustments
Net Loss Not Recognized As
Pension Cost
Minority Interest
Before
Total
Distribution
Shareholders’
After
Equity
Distribution
2009
Financial information in recent five years（note）
2010
2011
2012
0
115,002
700,000
700,000
0
11,837
608,284
613,007
2013
-
(91)
326,517
401,895
424,839
-
0
178,558
121,895
188,890
-
0
0
0
3,960
-
0
(21,686)
56,477
2,072
-
0
0
0
0
-
-
-
-
40,778
-
495,744
431,670
1,766,656
1,784,656
-
85,501
431,670
1,486,656
1,560,656
-
Note：The Company’s financial information from 2009-2012 was all audited, provided that the
information for 2009-2010 was from consolidated pro forma financial statements.
(b)
Condensed consolidated income statement in recent five years
Unit: NTD’000
Year
Item
Net Sales
Gross Profit
Income From Operation
Non Operating
Income/Gains
Non Operating
Expenses/Losses
Before Tax income from
continuing operation
Net Income from
continuing operation
Net Income from
Discontinued Operation
Extraordinary Gain/Loss
Cumulative Impact due
to changes in Accounting
Principal
Net Income (Attributable
to Parent Company)
Earnings per Share
(NTD)
Financial Information in recent five years (note）
2009
2010
2011
2012
1,573,350
1,508,993
1,502,992
1,721,749
1,136,180
988,768
890,866
1,016,046
571,247
460,835
352,309
383,617
2013
-
23,048
51,822
72,258
69,443
-
10,657
6,482
1,883
15,627
-
583,638
506,175
422,684
437,433
-
459,054
369,129
313,962
318,729
-
0
0
0
0
-
0
0
0
0
-
0
0
0
0
-
459,054
369,129
313,962
302,944
-
39.92
6.25
4.94
4.32
-
Note: The financial information for 2009 to 2012 was audited, provided that the information for
2009-2010 was from consolidated proforma financial statement.
(3) Auditors’ Name and audit opinions in recent five years
Year
2009
CPA
Wang Yan Jun, Cheng Wu Shui
Name of the Firm
Ernst & Young
2010
Wang Yan Jun, Cheng Wu Shui
Ernst & Young
83
Audit Opinion
Modified unqualified
opinion(note 1)
opinion(note 1)
2011
opinion(note 2)
2012 Wa n g Y a n J u n, Lin Li Huang Ernst & Young
Unqualified Opinion
2013 Wa n g Y a n J u n, Lin Li Huang Ernst & Young
Unqualified Opinion
Note 1: The explanatory paragraph on the audit report is emphasis that the pro-forma financial
statements were prepared for Coland Holdings Limited and its subsidiaries IPO
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 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.
2.
Wa n g Y a n J u n, Lin Li Huang
Ernst & Young
Financial analysis in recent five years
(1)
Financial analysis in recent five years-IFRS
Year
Analysis Item
Capital
Structure
Analysis
Liquidity
Analysis
Debt Ratio(%)
Property, plant and
equipment to Fixed Assets
Ratio (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest
Earned(times)
Average Accounts
Receiva ble Turnover
(times)
Da ys Sales Outstanding
Average Inventor y
Turnover(times)
Operating
Performance
Average Paym ent
Analysis
Turnover(times)
Average Inventor y
turnover days
Property, plant and
equipmentturnover(times)
Total assets turnover
(times)
Return on Total Assets
(%)
Return on Equity (%)
Profitabilit y
Profit before income tax to
Analysis
Common Stock(%)
Net Margin(%)
Earnings per share (NTD)
Cash Flow Ratio (%)
Cash Flow Adequacy
Cash
Ratio (%)
Flow
Cash Flow Reinvestment
Ratio (%)
Operating Leverage
Leverage
Financial Leverage
Financial Analysis in recent five years
2009 2010 2011
2012
2013
12.17
11.34
10.34
-
-
-
-
-
-
1,051.52
932.93
732.85
562.92
842.3
701.3
-
-
-
5,972.99 2,776.90
3,390.34
-
-
-
5.35
4.48
4.3
-
-
-
68
81
85
-
-
-
9.4
6.25
4.57
-
-
-
387.11
276.66
258.26
-
-
-
39
58
80
-
-
-
200.41
175.68
162.28
-
-
-
0.82
0.62
0.55
-
-
-
15.15
13.45
4.1
-
-
-
16.48
14.75
4.48
-
-
-
61.74
61.95
21.92
-
-
-
18.28
4.33
134.97
21.14
5.06
(Note3)
29.17
1.72
45.94
-
-
-
(Note 2)
(Note 2)
(Note2)
-
-
-
(Note 3)
(Note 3)
3.56
-
-
-
1.00
1.00
1.00
1.08
1.00
1.07
84
25,524.73 27,353.15
2014/3/31
28,038.58
Explanations for variations of financial ratios in recent two years:
1.
The current ration and the quick ratio increased mainly due to the increase of accounts payables
arising from the acquisition of Helongjian Province Tongze and Hefei Guozhen and Hefei
Guozhen’s current liabilities arising from its accounts payables.
2.
The times interest earned (times) increased mainly due to interest expense associated with the
acquisition.
3.
The inventory turnover (times) and the average inventory turnover days increased mainly due to
the launch of new products and the acquisition of Hefei Guozhen.
4.
The average payment turnover (times) increased mainly due to the increase of accounts payables.
5. The total asset turnover (times) increased mainly due to the increase of capital by the Company
and the increase of the amount of total asset arising from acquisition.
Note 1: The Company’s financial information for 2012, 2013 and the 1st quarter of 2014 was all
audited/reviewed by auditors.
Note 2: The cash flow ration is not available due to lack of information of net cash from
operating activities for the recent five years.
Note 3: We do not express the cash flow reinvestment ratio as it is negative due to there was
only net cash flow out from activities.
Note 4: Formula for financial ratios
1. Capital structure analysis
(1) Debts ratio = Total liabilities / Total assets
(2) Long-term funds to Property, plant and equipment, net = (Shareholders’ equity + long-term
liabilities) / Net Property, plant and equipment
2. Liquidity analysis
(1) Current ratio = Current assets / Current liabilities
(2) Quick ratio = (Current assets - inventories - prepayment) / Current liabilities
(3) Times interest earned = Earnings before interest and taxes / Interest expenses
3. Operating performance analysis
(1) Average collection turnover (including account receivables and notes receivables from
operation) = Net sales / Average trade receivables (including accounts receivables and notes
receivables from operation)
(2) Days sales outstanding = 365 / Average collection turnover
(3) Average inventory turnover = Cost of sales / Average inventory
(4) Average payment turnover (including account payables and notes payables from operation)
= Cost of sales / Average trade payables (including account payables and notes payables from
operation)
(5) Average inventory turnover days = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Net sales / Property, plant and equipment net.
(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) Net margin = Net income / Net sales
(4) Earnings per share = (Net income - preferred stock dividends) / Weighted average number
of shares outstanding
5. Cash flow
(1) Cash flow ratio = Net cash from operating activities / Current liabilities
(2) Cash flow adequacy ratio = Five-year sum of cash from operation / Five-year sum of capital
expenditures, inventory additions, and cash dividends
85
(3) Cash flow reinvestment ratio = (Cash from operating activities - cash dividends) / ( Property,
plant and equipment, Gross + long-term investment + other assets + working capital)
6. Leverage
(1) Operating leverage = (Net sales – variable costs + expenses) / Operating income
(2) Financial leverage = Operating income / (Operating income - interest expenses)
( 2 ) Financial analysis in recent five years – ROC GAAP
year
Analysis Item
Debt Ratio (%)
Capital
Structure
Long-term Fund to
Analysis Fixed Assets Ratio (%)
Current Ratio (%)
Liquidity
Quick Ratio (%)
Analysis
Times Interest
Earned(times)
Average Accounts
Receiva ble Turnover
(times)
Da ys Sales Outstanding
Average Inventor y
Turnover(times)
Operating
Performan
Average Paym ent
ce
Turnover(times)
Analysis
Average Inventor y
turnover days
Fixed Assets
Turnover(times)
Total assets
turnover(times)
Return on Total Assets
(%)
Return on Equity (%)
Operating
Profitabili Paid-in
Income
ty
Capital
Pre- tax
Analysis
(%)
Income
Net Margin (%)
Earnings per
share(NTD)
Cash Flow Ratio (%)
2009
30.70
Financial analysis for Recent 5 years
2010
2011
2012
21.02
5.87
12.7
13,191.70 4,597.12
318.10
290.46
-
386.19
301.10
-
2013
-
20,589.62
22,118.21
-
1,588.42
1,492.69
1,061.80
943.22
-
130,961.92
5,742.84
-
11.97
11.86
7.07
5.35
-
31
31
52
68
-
13.10
8.14
7.80
9.40
-
165.88
669.53
0
387.11
-
28
45
47
39
-
442.57
229.54
167.28
200.41
-
2.56
2.39
1.24
0.88
-
74.75
58.50
25.91
16.55
-
115.75
-
79.60
28.56
17.95
-
400.66
50.33
54.80
-
440.14
60.38
62.49
-
29.18
24.46
20.89
18.51
-
39.92
32.10
4.94
4.32
-
190.81
186.52
189.24
141.50
-
-
Cash Flow Adequacy
(Note2) (Note2)
(Note2)
Ratio (%)
Cash Flow
35.32 (Note 3)
11.98
Reinvestment Ratio (%)
Operating Leverage
1.00
1.00
1.00
Leverage
Financial Leverage
1.00
1.00
1.00
Reasons for variations of financial ratios in recent two years: Not applicable
Cash
Flow
(Note2)
-
(Note3)
-
1.00
1.00
-
Note 1: The financial information from 2009 to 2012 was audited, provided that information
from 2009-2010 was from consolidated proforma financial statements.
Note 2: The cash flow ration is not available due to lack of information of net cash from
operating activities for the recent five years.
Note 3: We do not express the cash flow reinvestment ratio as it is negative due to there was
only net cash flow out from activities.
Note 4: Formula of financial ratios:
1. Capital structure analysis
86
(1) Debts ratio = Total liabilities / Total assets
(2) Long-term funds to Property, plant and equipment, net = (Shareholders’ equity + long-term
liabilities) / Net Property, plant and equipment
2. Liquidity analysis
(1) Current ratio = Current assets / Current liabilities
(2) Quick ratio = (Current assets - inventories - prepayment) / Current liabilities
(3) Times interest earned = Earnings before interest and taxes / Interest expenses
3. Operating performance analysis
(1) Average collection turnover (including account receivables and notes receivables from
operation) = Net sales / Average trade receivables (including accounts receivables and notes
receivables from operation)
(2) Days sales outstanding = 365 / Average collection turnover
(3) Average inventory turnover = Cost of sales / Average inventory
(4) Average payment turnover (including account payables and notes payables from operation)
= Cost of sales / Average trade payables (including account payables and notes payables from
operation)
(5) Average inventory turnover days = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Net sales / Property, plant and equipment net.
(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) Net margin = Net income / Net sales
(4) Earnings per share = (Net income - preferred stock dividends) / Weighted average number
of shares outstanding
5. Cash flow
(1) Cash flow ratio = Net cash from operating activities / Current liabilities
(2) Cash flow adequacy ratio = Five-year sum of cash from operation / Five-year sum of capital
expenditures, inventory additions, and cash dividends
(3) Cash flow reinvestment ratio = (Cash from operating activities - cash dividends) / (Gross
fixed assets + long-term investment + other assets + working capital)
6. Leverage
(1) Operating leverage = (Net sales – variable costs + expenses) / Operating income
(2) Financial leverage = Operating income / (Operating income - interest expenses)
3.
Audit Committee’s Report on 2013’s financial reports:
4.
Individual Financial Report of Current Year: Not applicable
5.
Audited consolidated financial statements of Year 2013: please refer to pages 108-188.
6.
The Company and its affiliated companies did not incure any financial or cash flow
difficulties in 2013 and as of the date of printing of this annual report.
87
Please refer to page 107.
VII.
1.
REVIEW AND ANALYSIS OF FINANCIAL STATUS AND
FINANCIAL PERFORMANCE AS WELL AS RISK
MANAGEMENT
Financial Highlights
Unit: NTD’000
Year
Item
2012
2013
Difference
1,490,706
1,882,693
Amount
391,987
Non-current Assets
846,698
1,803,199
956,501
112.97%
Current Liabilities
141,767
256,901
115,134
81.21%
Non-current Liabilities
142,651
160,990
18,339
12.86%
2,052,986
3,268,001
1,215,015
59.18%
Current Assets
Total Stock holders’ Equity
%
26.30%
Explanation for major variation (for change over 10% or account for 1% of total
asset):
2.
1.
The current asset increased mainly due to the increase of inventory and
pre-payment arising from the increase of purchase amount and the
increase of accounts receivable the longer term of receivables for new
products.
2.
The non-current asset increased mainly due to the increase of strategic
investment in 2013.
3.
The current liability increased mainly due to acquisition and the increase of
accounts payables and other current liability.
4.
The increase of the total stockholders’ equity was mainly due to the
increase of share capital in 2013 and the increase o reserved profit arising
from the growth of profitability.
Operating Results
(1)
Analysis of Operating Results of last two years
88
Unit: NTD’000
Year
Item
Net Sales
2012
2013
1,721,749 1,856,764
Cost of goods sales
Difference
Amount
%
135,015
7.84
705,703
859,172
153,469
21.75
1,016,046
997,592
(18,454)
(1.82)
Operating expenses
637,708
766,706
128,998
20.23
Operating income
378,338
230,886
(147,452)
(38.97)
Non-operating income and expenses
53,816
251,340
197,524
367.04
432,154
482,226
50,072
11.59
Gross profit
Explanation for major variation (for change over 10% or account for 1% of total
assets
1.
The increase of cost of good sales was mainly due to the increase of sales as
well as the higher cost of goods sales of the acquired subsidiaries.
2.
The increase of operating expenses was mainly due to the expansion of the
sales team as well as the increase of marketing expenses arising from
increased promotion activities.
3.
The decrease of operating income was mainly due to the lower gross profit
rate of the acquired subsidiaries and the increase of operating expenses.
4.
The increase of non-operating income was mainly due to the increase of
profits arising from the disposal our financial assets in 2013.
5.
The increase on profit before income tax was mainly due to the increase of
profits arising from the disposal our financial assets in 2013.
(2)
Sales Forecast and its basis 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 2014 as compared to 2013
which is mainly due to the overall market growth and the new product introductions in
both drugs and medical devices. For additional information of market analysis, industry
and its development, please refer to Chapter V: 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.
89
3.
Cash Flow
(1)
Cash flow Analysis of last two years
Unit: NTD’000
Year
Item
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
2012
2013
Difference
Amount
Difference
Percentage (%)
191,349
(95,682)
(287,031)
(150)%
(334,292)
(332,768)
1,524
(0.46)%
(280,000)
306,171
586,171
(209.35)%
1.
Cash flow from operating activities: mainly due to the increase of inventory
and payment for stocks in corresponding to the operation need.
2.
Cash flow from investment activities: mainly due to the increase of outflow
arising from investment in other entities.
3.
Cash flows from financing activities:
capital in cash in 2013.
mainly due to the increase of share
(2) Analysis of the cash flow in the future year
We estimated that in 2014, various investment projects will be carried out with fund from
the net cash flow in arising from the growth of operation and profitability in 2014. We do
not anticipate to encounter any problems in our cash flow.
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
2014.12.31
2014.12.31
Actual or expected utilization status
Total fund
required
Year 2012
Year 2013
Year 2014
209,146
968,522
4,995
336,722
7,928
405,103
196,223
226,697
(2) Expected Future Benefits
(a)
Among the capital expenditures of fixed assets, it mainly included the office
located in the Clinical R&D Centre located in Fenglin Life and Science Park, Xuhui
District Shanghai, company car and computers due to our business requirement.
They are purchased as the tools for our business development, which may expedite
the development of new products and increase our employees’ work efficiency.
(b)
Strategic investments are mainly for the investments related to our business model.
90
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 with various partners. The purposes are to diversify our operation, leverage
the medical resources of both Taiwan and China, uplift our core competiveness and
expanding our operating scale.
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
Unit: NTD’000
Company Name of investment
2013 investment
gains and losses
189,751
Coland Pharmaceutical Company
Limited
197,025
Coland Development Co., Ltd.
HUNG CHUN BIO-S Co., Ltd.
(14,021)
(4,794)
EXQUISITE CREATION
LIMITED精創有限公司
6,517
Shechen Pharmaceutical Ltd.
Taiwan Tigermed Consulting Co.
Ltd.
Weigao Bio-Tech Company
Limited
Shanghai Guochuang
Limited
Heilongjiang Province Tongze
Limited
Suzhou Microclear Medical
Hefei City Guozhen
Pharmaceutical Sales Limited
(484)
(2,164)
Losses, principally for reasons of profit and
improvement plans
The main source of profit was due to the
recognition of the loss and profit from Coland
Pharmaceutical Company Limited, Exquisite
Creation Limited, Coland Development and
Shenchen Pharmaceutical.
recognition of the loss and profit from Shanghai
Guochuang and Heilongjiang Tongze.
Under development.
Under development.
recognition of the loss and profit from
HeifeiGuozhen.
In the stage of R&D.
The scale of operation is expanding.
Operation not yet started.
-
Operation scale is maintained stably.
188,148
34,316
In the stage of R&D.
(4,842)
6,698
91
(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
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)
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
92
(iv)
(v)
(vi)
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.
(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
93
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.
(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 1.54% and 1.19% 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
94
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 and Hefei City Guozhen Pharmaceutical Sales
Limited have all 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
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.
95
( 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:
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
96
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. In September 2013, we, through Exquisite Creation Limited,
indirectly acquired 60% equity interest in Hefei Guozhen. These acquisitions
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 22% of
the total sales of the Company in 2013, and Guozhen accounted for 5% of the total
sale of the Company in 2013.
(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 63% and 45% in 2012 and 2013 respectively.
Actions taken：
97
（ i ） Continue to increase product portfolio from hepotology 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. The largest one
customer accounted for more than 10% in 2012 and 2013, being 11.82% and 8.62%
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
There is no such risk up to 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,
98
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.
(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
99
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.
100
VIII.
1.
PARTICULAR MATTERS TO NOTE
Information of related companies
(1) Group structure of related companies
2013.12.31
康联控股有限公司（CAYMAN）
100%
CENTRAL CHIEF LIMITED (BVI)
60%
100%
100%
Company Limited (HK)
Coland Development Company
Limited (Taiwan)
100%
EXQUISITE CREATION
LIMITED 精創有限公司
Ltd. (Taiwan)
100%
100%
Shanghai Guochuang Pahrmaceutical Company
Limited (China)
Hefei City Guozhen Pharmaceutical Sales
Limited (China)
51%
Heilongjiang Province Tongze Pharmaceutical Company Limited
(China)
(2) Basic information of related companies
Record date as at 31 December 2013
Unit:US$/NTD’000/RMB’000
Name
Date of
Incorporation
Central Chief
Limited
2009.7
Coland
Pharmaceutical
Company
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
101
Capital Paid
Main Operation Scope
USD
13,846,768
Investment Holding
USD
5,967,517
Investment Holding
Name
Shanghai
Guochuang
Pharmaceutical
Company
Li
it d
Coland
Development
Company
Limited
Heilongjiang
Tongze
Pharmaceutical
Company
EXQUISITE
CREATION
LIMITED 精創
有限公司
Hefei City
Guozhen
Pharmaceutical
Sales Limited
Shechen
Pharmaceutical
Ltd.
Date of
Incorporation
Address
Capital Paid
Main Operation Scope
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 40,000
Research and
development of
generic medicine
2004.03
No. 4, 28th Fl., Huashan
Road, Nangang District,
Hairbin, China
RMB 12,000
Trading of generic
medicine
USD
4,084,000
Investment Holding
2013.03
2006.09
2010.04
2F, Capital City,
Independence Avenue, P.O.
Box 1008, Victoria, Mahe,
Seychelles
No.25 Jincui Road,
Shuangfeng Economic
Development Zone, Heifei
City, China
2 of 9F., No.42, Sec.1,
Fuxing South Road, Taipei
RMB 8,000
NTD 25,000
Chemical preparation
of proprietary Chinese
medicine, Chinese
herbal medicine
Western medicine,
medical equipment,
cosmetics and other
retail and wholesale,
(3) There is no control and subordinate relationship among the related companies who has the
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 the 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
Company Name
Title
CENTRAL CHIEF
LIMITED (CCF)
Company Limited
Shanghai Guochuang
Director
Record Date：31 December 2013
Shares
ratio
Name/Representive
holding
Lee Hsin
0
0%
Director
Lee Hsin
CEO
Lee Hsin
102
0
0%
0
0%
Company Name
Title
Name/Representive
Limited
Supervisor
Ye Xiao-ping
Chairman
Representative of
CCF：Lee Hsin
Representative of
CCF：Tsao Johua
Representative of
CCF：Cheng
Ching-chi
Representative of
CCF：Cai Wei-yang
Wei Jiang-min
Director
Coland Development Co.,
Ltd.
Director
Supervisor
Heilongjiang Province
Tongze Pharmaceutical
Company Limited
EXQUISITE CREATION
LIMITED 精創有限公司
CEO
Director
Director
Supervisor
Director
Director
Hefei City Guozhen
Pharmaceutical Sales
Limited
Supervisor
Director
Director
Ltd.
Director
Supervisor
Lee Hsin
Tsao Johua
Ye Xiao-ping
Representative of
EXQUISITE
CREATION
LIMITED：Lee Hsin
Representative of
EXQUISITE
CREATION
LIMITED：Tsao
Johua
Representative of
EXQUISITE
CREATION
LIMITED：Ye
Xiao-ping
Representative of
CCF：Lee Hsin
Representative of
CCF：Tsao Johua
Representative of
CCF：Cheng
Ching-chi
Representative of
CCF：Karen Chang
103
Shares
holding
0
ratio
0%
4,000
100%
4,000
100%
4,000
100%
4,000
100%
0
0%
0
0
0
0%
0%
0%
Not
100%
applicable
Not
100%
applicable
Not
100%
applicable
2,500
100%
2,500
100%
2,500
100%
2,500
100%
(6) Operation status of the related companies for 2013
Date：31 December 2013
Unit：NTD’000
Company Name
CENTRAL
CHIEF LIMITED
Coland
Pharmaceutical
Company Limited
(HK)
Shanghai
Guochuang
Pahrmaceutical
Company Limited
Amount of
paid
capital
(Note 1)
Total
Assets
(Note 1)
402,117 1,095,696
173,311
263,565
162,624 1,435,607
Total
Liabilities
(Note 1)
Net Asset
Value
(Note 1)
0 1,095,696
Sales
Profit
(Note 2)
Sales
Income
(Note 2)
Profit/(Lo
ss) after
tax
(Note 2)
Earnings
per share
（after
tax)
(NTD)
0
(954)
189,751 (Note 3)
256,975
113,851
63,358
197,025 (Note 3)
72,609 1,363,003
1,396,904
244,249
178,809 (Note 3)
(14,021)
6,591
Coland
Development Co.,
Ltd.
40,000
22,534
71
22,463
3,000
(14,021)
Heilongjiang
Province Tongze
Pharmaceutical
Company Limited
180,075
354,030
62,423
291,607
412,965
89,788
67,287 (Note 3)
EXQUISITE
CREATION
LIMITED 精創有
限公司
118,599
88,272
0
88,272
0
(786)
10,860 (Note 3)
Hefei City
Guozhen
Pharmaceutical
Sales Limited
39,232
275,271
87,468
187,808
92,362
14,885
11,164 (Note 3)
Shechen
Pharmaceutical
Ltd.
25,000
3,020
25
2,995
5,223
(4,763)
(4,763)
(3.5)
(1.9)
Note 1: Not a company incorporated in Taiwan. The net asset value was calculated by the
translation of foreign currency into NT dollars based on the exchange rate on 31
December 2013. 1US$=NTD29.040; 1RMB=NTD4.904.
Note 2: Not a company incorporated in Taiwan. The net asset value was calculated by the
translation of foreign currency into NT dollars based on the average exchange rate in
2013. 1US$=NTD29.5676; 1RMB=NTD4.8203.
Note 3: Not a joint stock company limited, not being able to calculate earnings per share.
104
(7)
For the consolidated financial statements of affiliated companies and the relationship
report, please refer to page 106 of this annual report.
2.
The Compan did not conduct any private placing in 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.
There is no other supplemental explanation.
5.
In the latest year and up to the printing of this annual report, the matter set out blow
fell within the scope of Article 36(3)(ii) of the Securities Trading Law, which might
have material impact on the shareholders’ right:
(a)
Reason:
We strategically cooperate with Pharmadex Inc. for the joint
development of Asia medical market (including Taiwan, South Eastern Asia Japan and
etc.) , with the long control dosage form under Pharmadex’ R&D and Coland rich
experience in the promotion and sales of international branded products.
(b) Impact on finance and business: The business cooperation does not cause any
impact on our financial position, but will have positive influence on our business in the
long run.
6.
There existed no material diference between the regulations for the protection of
shareholders right of the Company and those in Taiwan.
105
(7) Statement regarding consolidated financial statements of related companies
(English translation of a statement originally issued in Chinese)
Statement
We declare that the companies which should be included in the consolidated financial report of related
companies of the Company for year 2013 (from 1 January 2013 to 31 December 2013), were the same
as those which should be included in the parent and subsidiaries consolidated financial statement
pursuant to the "Principles for the Preparation of Combined Operation Report and Financial Statements
with Related Companies and the Report on Relationship" are the same as those required to be included
in the consolidated financial statements of parent company and subsidiaries pursuant to No. 27 of
IFFRS. 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 required.
Chairman：William Keller
Date: 12 March 2014
106
Report by the Audit Committee on Their Review of the 2013 Audited
Consolidated Financial Statements and Operation Report
To:
2014 Annual General Meeting of Coland Holdings Limited
The Board of Directors prepared the Company’s 2013 Consolidated
Financial Statements which were audited by Mr. WANG Yan-Jun and Ms. LIN
Li-Feng in the capacity of 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:12 March, 2014
107
108
109
110
111
112
English Translation of Financial Statements Originally Issued in Chinese
COLAND HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
(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 reorganized as a holding company which was registered under Taiwan Stock
Exchange (“TWSE”). Guochuang Pharmaceutical Co., Ltd. (“Guochuang”), Tongze Pharmaceutical
Co., Ltd. (“Tongze”) and Hefei Guozhen Pharmaceutical Co., Ltd., (“Guozhen”) are the main
operating entities of the Group to engage in research and development, innovation and sales of
generic medicine, traditional Chinese patent medicine, biochemical drugs and medical equipment.
The Company’s common shares were publicly listed on the TWSE on October 5, 2011. The
registered office is located in Cricket Square, Hutchins Drive P.O. Box 2681, Grand Cayman
KY1-1111 Cayman Islands and the primary operations office is located in Room 103, No. 866, Halei
Road, Zhangjiang High Technology Park, PuDong, Shanghai, China.
2. Date and procedures of authorization of financial statements for issuance
The consolidated financial statements of the Company and its subsidiaries (“the Group”) for the years
ended December 31, 2013 and 2012 were authorized for issue by the Board of Directors on March
12, 2014.
3. Newly issued or revised standards and interpretations
(1) Standards or interpretations issued, revised or amended, which are recognized by Financial
Supervisory Commission (“FSC”), but not yet adopted by the Group at the date of issuance of
the Group’s financial statements are listed below.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments which is divided in three distinct phases is designed by the
International Accounting Standards Board (“IASB”) to eventually replace IAS 39 Financial
Instruments: Recognition and Measurement in its entirety. The first phase relates to the
classification and measurement of financial assets and liabilities that must be applied for annual
periods beginning on or after January 1, 2015. The IASB will work on the remaining phases
relate to impairment methodology and hedge accounting. However companies adopting
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 “TIFRS”) may not early adopt IFRS 9. FSC will announce the local effective date for IFRS 9
in the future. Adopting the first phase of IFRS 9 will have an impact on the classification and
measurement of financial assets. The impact of adopting the remaining two phases of IFRS 9
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on the Group could not be determined at this stage.
(2) Standards issued by IASB but not yet recognized by FSC at the date of issuance of the Group’s
financial statements are listed below.
(a) Improvements to International Financial Reporting Standards (issued in 2010):
IFRS 1 “First-time Adoption of International Financial Reporting Standards”
The annual improvements to International Financial Reporting Standards (“IFRS”) issued
in 2010 made the following amendments to IFRS 1: If a first-time adopter changes its
accounting policies or its use of the exemptions in IFRS 1 after it has published an interim
financial report, it needs to explain those changes and update the reconciliations between
previous GAAP and IFRS in accordance with paragraph 23 of IFRS 1.
Furthermore, the amendment allows first-time adopters to use an event-driven fair value as
deemed cost, even if the event occurs after the date of transition, but before the first IFRS
financial statements are issued. The amendment also expands the scope of ‘deemed cost’
for property, plant and equipment or intangible assets to include items used subject to rate
regulated activities. The exemption will be applied on an item-by-item basis. All such
assets will also need to be tested for impairment at the date of transition. The amendment
allows entities with rate-regulated activities to use the carrying amount of their property,
plant and equipment and intangible balances from their previous GAAP as its deemed cost
upon transition to IFRS. These amendments became effective for annual periods beginning
on or after January 1, 2011.
IFRS 3 “Business Combinations”
Under the amendment, IFRS 3 (as revised in 2008) do not apply to contingent
consideration that arose from business combinations whose acquisition dates precede the
application of IFRS 3 (as revised in 2008). Furthermore, the amendment limits the scope of
the measurement choices for non-controlling interest. Only the components of
non-controlling interests that are present ownership interests that entitle their holders to a
proportionate share of the entity’s net assets, in the event of liquidation could be measured
at either fair value or at the present ownership instruments’ proportionate share of the
acquiree’s identifiable net assets. Other components of non-controlling interest are
measured at their acquisition date fair value.
The amendment also requires an entity in a business combination to account for the
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replacement of the acquiree’s share-based payment transactions (when the acquirer is not
obliged to do so) as new share-based payment awards in the post-combination financial
statements.
Outstanding share-based payment transactions that the acquirer does not exchange for its
share-based payment transactions: if vested — they are part of non-controlling interest; if
unvested — they are measured at market based value as if granted at acquisition date, and
allocated between NCI and post-combination expense.
These amendments became effective for annual periods beginning on or after July 1, 2010.
IFRS 7 “Financial Instruments: Disclosures”
The amendment emphasizes the interaction between quantitative and qualitative disclosures
and the nature and extent of risks associated with financial instruments. The amendment
became effective for annual periods beginning on or after January 1, 2011.
IAS 1 “Presentation of Financial Statements”
The amendment clarifies that an entity will present an analysis of other comprehensive
income for each component of equity, either in the statement of changes in equity or in the
notes to the financial statements. The amendment became effective for annual periods
beginning on or after January 1, 2011.
IAS 34 “Interim Financial Reporting”
The amendment clarifies that if a user of an entity's interim financial report have access to
the most recent annual financial report of that entity, it is unnecessary for the notes to an
interim financial report to provide relatively insignificant updates to the information that
was reported in the notes in the most recent annual financial report. Furthermore the
amendment adds disclosure requirements around disclosures of financial instruments and
contingent liabilities/assets. The amendment is effective for annual periods beginning on or
after January 1, 2011.
IFRIC 13 “Customer Loyalty Programmes”
The amendment clarifies that when the fair value of award credits is measured based on the
value of the awards for which they could be redeemed, the amount of discounts or
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incentives otherwise granted to customers not participating in the award credit scheme is to
be taken into account. The amendment is effective for annual periods beginning on or after
January 1, 2011.
(b) IFRS 1 “First-time Adoption of International Financial Reporting Standards” — Limited
Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
IFRS 1 has been amended to allow first-time adopters to utilize the transitional provisions
of IFRS 7 Financial Instruments: Disclosures. These provisions give relief from providing
comparative information in the disclosures required by amendments to IFRS 1 in the first
year of application. The amendment is effective for annual periods beginning on or after
July 1, 2010.
(c) IFRS 1 “First-time Adoption of International Financial Reporting Standards” — Severe
Hyperinflation and Removal of Fixed Dates for First-time Adopters
The amendment has provided guidance on how an entity should resume presenting IFRS
financial statements when its functional currency ceases to be subject to severe
hyperinflation. The amendment also removes the legacy fixed dates in IFRS 1 relating to
derecognition and day one gain or loss transactions. The amended standard has these dates
coinciding with the date of transition to IFRS. The amendment is effective for annual
periods beginning on or after July 1, 2011.
(d) IFRS 7 “Financial Instruments: Disclosures” (Amendment)
The amendment requires additional quantitative and qualitative disclosures relating to
transfers of financial assets, when financial assets are derecognised in their entirety, but the
entity has a continuing involvement in them, or financial assets are not derecognised in
their entirety. The amendment is effective for annual periods beginning on or after July 1,
2011.
(e) IAS 12 “Income Taxes” — Deferred Taxes: Recovery of Underlying Assets
The amendment to IAS 12 introduce a rebuttable presumption that deferred tax on
investment properties measured at fair value will be recognized on a sale basis, unless an
entity has a business model that would indicate the investment property will be consumed
in the business. The amendment also introduces the requirement that deferred tax on
non-depreciable assets measured using the revaluation model in IAS 16 should always be
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measured on a sale basis. As a result of this amendment, SIC 21 Income Taxes — Recovery
of Revalued Non-Depreciable Assets has been withdrawn. The amendment is effective for
annual periods beginning on or after January 1, 2012.
(f) IFRS 10 “Consolidated Financial Statements”
IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidated
financial statements and SIC-12. The changes introduced by IFRS 10 primarily relate to the
elimination of the perceived inconsistency between IAS 27 and SIC-12 by introducing a
new integrated control model. That is, IFRS 10 primarily relates to whether to consolidate
another entity, but does not change how an entity is consolidated. The standard is effective
for annual periods beginning on or after January 1, 2013.
(g) IFRS 11 “Joint Arrangements”
IFRS 11 replaces IAS 31 and SIC-13. The changes introduced by IFRS 11 primarily relate
to increase comparability within IFRS by removing the choice for jointly controlled entities
to use proportionate consolidation, so that the structure of the arrangement is no longer the
most important factor when determining the classification as a joint operation or a joint
venture, which then determines the accounting. The standard is effective for annual periods
(h) IFRS 12 “Disclosures of Interests in Other Entities”
IFRS 12 primarily integrates and makes consistent the disclosure requirements for
subsidiaries, joint arrangements, associates and unconsolidated structured entities and
present those requirements in a single IFRS. The standard is effective for annual periods
(i) IFRS 13“Fair Value Measurement”
IFRS 13 primarily relates to defining fair value, setting out in a single IFRS a framework
for measuring fair value and requiring disclosures about fair value measurements to reduce
complexity and improve consistency in application when measuring fair value. However,
IFRS 13 does not change existing requirements in other IFRS as to when the fair value
measurement or related disclosure is required. The standard is effective for annual periods
(j) IAS 1 “Presentation of Financial Statements” — Presentation of Items of Other
Comprehensive Income
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The amendments to IAS 1 change the grouping of items presented in Other Comprehensive
Income. Items that would be reclassified (or recycled) to profit or loss in the future would
be presented separately from items that will never be reclassified. The amendment is
effective for annual periods beginning on or after July 1, 2012.
(k) IAS 19 “Employee Benefits” (Revised)
The revision includes: (1) For defined benefit plans, the ability to defer recognition of
actuarial gains and losses (i.e., the corridor approach) has been removed. Actuarial gains
and losses are now recognized in Other Comprehensive Income. (2) Amounts recorded in
profit or loss are limited to current and past service costs, gains or losses on settlements,
and net interest income (expense). (3) New disclosures include quantitative information
about the sensitivity of the defined benefit obligation to a reasonably possible change in
each significant actuarial assumption. (4) Termination benefits will be recognized at the
earlier of when the offer of termination cannot be withdrawn, or when the related
restructuring costs are recognised under IAS 37 Provisions, Contingent Liabilities and
Contingent Assets, etc.. The revised standard is effective for annual periods beginning on or
after January 1, 2013.
(l) IFRS 1 “First-time Adoption of International Financial Reporting Standards” —
Government Loans
The IASB has added an exception to the retrospective application of IFRS 9 (or IAS 39)
and IAS 20. These amendments require first-time adopters to apply the requirements of
IAS 20 prospectively to government loans existing at the date of transition to IFRS.
However, entities may choose to apply the requirements of IFRS 9 (or IAS 39, as
applicable) and IAS 20 to government loans retrospectively if the information needed to do
so had been obtained at the time of initially accounting for those loans. The amendment is
effective for annual periods beginning on or after January 1, 2013.
(m) IFRS 7 “Financial Instruments: Disclosures” — Disclosures — Offsetting Financial Assets
and Financial Liabilities
These amendments require an entity to disclose information about rights of set-off and
related arrangements. The disclosures would provide users with information that is useful
in evaluating the effect of netting arrangements on an entity’s financial position. The new
disclosures are required for all recognized financial instruments that are set off in
accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to
recognized financial instruments that are subject to an enforceable master netting
arrangement or ‘similar agreement’. The amendment is effective for annual periods
(n) IAS 32 “Financial Instruments: Presentation” — Offsetting Financial Assets and Financial
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Liabilities
The amendment clarifies the meaning of “currently has a legally enforceable right to
set-off” in IAS 32. The amendment is effective for annual periods beginning on or after
January 1, 2014.
(o) IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”
This Interpretation applies to waste removal (stripping) costs incurred in surface mining
activity, during the production phase of the mine. If the benefit from the stripping activity
will be realized in the current period, an entity is required to account for the stripping
activity costs as part of the cost of inventory. When the benefit is the improved access to
ore, the entity recognizes these costs as a non-current asset (“stripping activity asset”), only
if certain criteria are met. The stripping activity asset is accounted for as an addition to, or
as an enhancement of, an existing asset. The interpretation is effective for annual periods
(p) Improvements to International Financial Reporting Standards (2009-2011 cycle):
The amendment clarifies that an entity that has stopped applying IFRS may choose to
either: Re-apply IFRS 1, even if the entity applied IFRS 1 in a previous reporting period; or
Apply IFRS retrospectively in accordance with IAS 8 (i.e., as if it had never stopped
applying IFRS) in order to resume reporting under IFRS. The amendment is effective for
annual periods beginning on or after January 1, 2013.
IAS 1 “Presentation of Financial Statements”
The amendment clarifies the difference between voluntary additional comparative
information and the minimum required comparative information. Generally, the minimum
required comparative period is the previous period. An entity must include comparative
information in the related notes to the financial statements when it voluntarily provides
comparative information beyond the minimum required comparative period. The additional
comparative period does not need to contain a complete set of financial statements. The
opening statement of financial position (known as ’the third balance sheet’) must be
presented when an entity changes its accounting policies (making retrospective
restatements or reclassifications) and those changes have a material effect on the statement
of financial position. The opening statement would be at the beginning of the preceding
period. However, unlike the voluntary comparative information, the related notes are not
required to include comparatives as of the date of the third balance sheet. The amendment
is effective for annual periods beginning on or after January 1, 2013.
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IAS 16 “Property, Plant and Equipment” (Amendment)
The amendment clarifies that major spare parts and servicing equipment that meet the
definition of property, plant and equipment are not inventory. The amendment is effective
for annual periods beginning on or after January 1, 2013.
IAS 32 “Financial Instruments: Presentation” (Amendment)
The amendment removes existing income tax requirements from IAS 32 and requires
entities to apply the requirements in IAS 12 to any income tax arising from distributions to
equity holders. The amendment is effective for annual periods beginning on or after
January 1, 2013.
IAS 34 “Interim Financial Reporting” (Amendment)
The amendment clarifies the requirements in IAS 34 relating to segment information for
total assets and liabilities for each reportable segment to enhance consistency with the
requirements in IFRS 8 Operating Segments. Besides, total assets and liabilities for a
particular reportable segment need to be disclosed only when the amounts are regularly
provided to the chief operating decision maker and there has been a material change in the
total amount disclosed in the entity’s previous annual financial statements for that
reportable segment. The amendment is effective for annual periods beginning on or after
January 1, 2013.
(q) IFRS 10 “Consolidated Financial Statements” (Amendment)
The Investment Entities amendments provide an exception to the consolidation
requirements in IFRS 10 and require investment entities to measure particular subsidiaries
at fair value through profit or loss, rather than consolidate them. The amendments also set
out disclosure requirements for investment entities. The amendment is effective for annual
periods beginning on or after January 1, 2014.
(r) IAS 36 “Impairment of Assets” (Amendment)
This amendment relates to the amendment issued in May 2011 and requires entities to
disclose the recoverable amount of an asset (including goodwill) or a cash-generating unit
when an impairment loss has been recognized or reversed during the period. The
amendment also requires detailed disclosure of how the fair value less costs of disposal has
been measured when an impairment loss has been recognized or reversed, including
valuation techniques used, level of fair value hierarchy of assets and key assumptions used
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in measurement. The amendment is effective for annual periods beginning on or after
January 1, 2014.
(s) IFRIC 21 “Levies”
This interpretation provides guidance on when to recognize a liability for a levy imposed
by a government (both for levies that are accounted for in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets and those where the timing and
amount of the levy is certain). The interpretation is effective for annual periods beginning
on or after January 1, 2014.
(t) IAS 39 “Financial Instruments: Recognition and Measurement” (Amendment)
Under the amendment, there would be no need to discontinue hedge accounting if a
hedging derivative was novated, provided certain criteria are met. The interpretation is
effective for annual periods beginning on or after January 1, 2014.
(u) IFRS 9 “Financial Instruments” (Hedge accounting and amendments to IFRS 9, IFRS 7
and IAS 39)
The IASB announced amendments to the accounting requirements for financial
instruments, which include: (1) bring into effect a substantial overhaul of hedge accounting
that will allow entities to better reflect their risk management activities in the financial
statements; (2) allow the changes to address the ‘own credit’ not to be recognized in profit
or loss that were already included in IFRS 9 Financial Instruments to be applied in isolation
without the need to change any other accounting for financial instruments; and (3) remove
the January 1, 2015 mandatory effective date of IFRS 9.
(v) IAS 19 “Employee Benefits” (Defined benefit plans: employee contributions)
The amendments apply to contributions from employees or third parties to defined benefit
plans. The objective of the amendments is to provide a policy choice for a simplified
accounting for contributions that are independent of the number of years of employee
service, for example, employee contributions that are calculated according to a fixed
percentage of salary. The amendment is effective for annual periods beginning on or after
July 1, 2014.
(w) Improvements to International Financial Reporting Standards (2010-2012 cycle):
IFRS 2 “Share-based Payment”
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The annual improvements amend the definitions of 'vesting condition' and 'market
condition' and adds definitions for 'performance condition' and 'service condition' (which
were previously part of the definition of 'vesting condition'). The amendment prospectively
applies to share-based payment transactions for which the grant date is on or after July 1,
2014.
The amendments include: (1) deleting the reference to "other applicable IFRSs" in the
classification requirements; (2) deleting the reference to "IAS 37 Provisions, Contingent
Liabilities and Contingent Assets or other IFRSs as appropriate", other contingent
consideration that is not within the scope of IFRS 9 shall be measured at fair value at each
reporting date and changes in fair value shall be recognised in profit or loss; (3) amending
the classification requirements of IFRS 9 Financial Instruments to clarify that contingent
consideration that is a financial asset or financial liability can only be measured at fair
value, with changes in fair value being presented in profit or loss depending on the
requirements of IFRS 9. The amendments apply prospectively to business combinations for
which the acquisition date is on or after July 1, 2014.
IFRS 8 “Operating Segments”
The amendments require an entity to disclose the judgments made by management in
applying the aggregation criteria to operating segments. The amendments also clarify that
an entity shall only provide reconciliations of the total of the reportable segments' assets to
the entity's assets if the segment assets are reported regularly. The amendment is effective
for annual periods beginning on or after July 1, 2014.
IFRS 13 “Fair Value Measurement”
The amendment to the Basis for Conclusions of IFRS 13 clarifies that when deleting
paragraph B5.4.12 of IFRS 9 Financial Instruments and paragraph AG79 of IAS 39
Financial Instruments: Recognition and Measurement as consequential amendments from
IFRS 13 Fair Value Measurement, the IASB did not intend to change the measurement
requirements for short-term receivables and payables.
IAS 16 “Property, Plant and Equipment”
The amendment clarifies that when an item of property, plant and equipment is revalued,
the accumulated depreciation at the date of revaluation is adjusted to equal the difference
between the gross carrying amount and the carrying amount of the asset. The amendment is
effective for annual periods beginning on or after July 1, 2014.
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IAS 24 “Related Party Disclosures”
The amendment clarifies that an entity providing key management personnel services to the
reporting entity or to the parent of the reporting entity is a related party of the reporting
entity. The amendment is effective for annual periods beginning on or after July 1, 2014.
IAS 38 “Intangible Assets”
The amendment clarifies that when an intangible asset is revalued, the accumulated
amortization at the date of revaluation is adjusted to equal the difference between the gross
carrying amount and the carrying amount of the asset. The amendment is effective for
annual periods beginning on or after July 1, 2014.
(x) Improvements to International Financial Reporting Standards (2011-2013 cycle):
The amendment clarifies that an entity, in its first IFRS financial statements, has the choice
between applying an existing and currently effective IFRS or applying early a new or
revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS
permits early application.
This amendment clarifies that paragraph 2(a) of IFRS 3 Business Combinations excludes
the formation of all types of joint arrangements as defined in IFRS 11 Joint Arrangements
from the scope of IFRS 3; and the scope exception only applies to the financial statements
of the joint venture or the joint operation itself. The amendment is effective for annual
periods beginning on or after July 1, 2014.
IFRS 13 “Fair Value Measurement”
The amendment clarifies that paragraph 52 of IFRS 13 includes a scope exception for
measuring the fair value of a group of financial assets and financial liabilities on a net
basis. The objective of this amendment is to clarify that this portfolio exception applies to
all contracts within the scope of IAS 39 Financial Instruments: Recognition and
Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the
definitions of financial assets or financial liabilities as defined in IAS 32 Financial
Instruments: Presentation. The amendment is effective for annual periods beginning on or
after July 1, 2014.
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IAS 40 “Investment Property”
The amendment clarifies the interrelationship of IFRS 3 and IAS 40 when classifying
property as investment property or owner-occupied property; in determining whether a
specific transaction meets the definition of both a business combination as defined in IFRS
3 Business Combinations and investment property as defined in IAS 40 Investment
Property, separate application of both standards independently of each other is required.
The amendment is effective for annual periods beginning on or after July 1, 2014.
(y) IFRS 14 “Regulatory Deferral Accounts”
IFRS 14 permits first-time adopters to continue to recognise amounts related to rate
regulation in accordance with their previous GAAP requirements when they adopt IFRS.
However, to enhance comparability with entities that already apply IFRS and do not
recognise such amounts, the Standard requires that the effect of rate regulation must be
presented separately from other items. IFRS 14 is effective for annual periods beginning on
or after January 1, 2016.
The abovementioned standards and interpretations issued by IASB have not yet recognized by
FSC at the date of issuance of the Group’s financial statements, the local effective dates are to
be determined by FSC. As the Group is still currently determining the potential impact of the
standards and interpretations listed under (a), (b), (d)~(n) and (p)~(x), it is not practicable to
estimate their impact on the Group at this point in time. All other standards and interpretations
have no material impact on the Group.
4. Summary of significant accounting policies
(1) Statement of compliance
The consolidated financial statements of the Group for the years ended December 31, 2013 and
2012 have been prepared in accordance with the Regulations Governing the Preparation of
Financial Reports by Securities Issuers (“the Regulations”) and TIFRS as endorsed by the FSC.
(2) Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for
financial instruments that have been measured at fair value. The consolidated financial
statements are expressed in thousands of New Taiwan Dollars (“NTD$”) unless otherwise stated.
(3) Basis of consolidation
Preparation principle of consolidated financial statements
Subsidiaries are fully consolidated from the acquisition date, being the date on which the Group
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obtains control, and continue to be consolidated until the date that such control ceases. The
financial statements of the subsidiaries are prepared for the same reporting period as the parent
company, using uniform accounting policies. All intra-group balances, income and expenses,
unrealized gains and losses and dividends resulting from intra-group transactions are eliminated
in full.
A change in the ownership interest of a subsidiary, without a change of control, is accounted for
as an equity transaction.
Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to
the non-controlling interests even if this results in the non-controlling interests having a deficit
balance.
If the Group loses control of a subsidiary, it:
(a)
(b)
(c)
(d)
(e)
(f)
derecognizes the assets (including goodwill) and liabilities of the subsidiary;
derecognizes the carrying amount of any non-controlling interest;
recognizes the fair value of the consideration received;
recognizes the fair value of any investment retained;
recognizes any surplus or deficit in profit or loss; and
reclassifies the parent’s share of components previously recognized in other comprehensive
income to profit or loss.
The consolidated entities are listed as follows:
Percentage of ownership (%)
Investor
Subsidiary
Main businesses
December
December
January 1,
31, 2013
31, 2012
2012
The Company
Investment holding
100%
100%
100%
Central Chief
Investment holding and
100%
100%
100%
100%
100%
100%
60%
-%
-%
100%
-%
-%
100%
100%
100%
Trading of generic medicine
51%
51%
-%
Trading of generic medicine
100%
-%
-%
Limited
Central Chief
Limited
Central Chief
Company (Coland HK)
trading of generic medicine
Coland Development Co., Research and development of
Ltd.
generic medicine
Exquisite Creation Limited Investment holding
Limited (Note 2) (Exquisite)
Central Chief
Shengqun Pharmaceutical Trading of generic medicine
Limited (Note 1) Co., Ltd. (Shengqun)
Coland HK
and others
Guochuang Pharmaceutical Trading, research and
Co., Ltd. (Guochuang)
development of generic
medicine
Guochuang
(Note 3)
Exquisite
Tongze Pharmaceutical
Co., Ltd. (Tongze)
Hefei Guozhen
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Pharmaceutical (Guozhen)
Co., Ltd.
Note 1: Acquired 100% ownership of Shengqun by its subsidiary, Central Chief Limited. Since
December 5, 2013, Shengqun has been included in consolidated financial statements of
the Group.
Note 2: On August 30, 2013, the Board of Directors approved to acquire 60% ownership of
Exquisite by its subsidiary, Central Chief Limited. Since August 30, 2013, Exquisite
has been included in consolidated financial statements of the Group.
Note 3: On June 20, 2012, the Board of Directors approved to acquire 51% ownership of
Tongze by its China subsidiary Guochuang.
Since July 4, 2012, Tongze has been
included in consolidated financial statements of the Group.
(4) Foreign currency transactions
The functional currency of each consolidated entity in the Group is RMB, but the Group’s
consolidated financial statements are presented in NTD, which is the reporting currency.
Transactions in foreign currencies are initially recorded by the Group entities at their respective
functional currency rates prevailing at the date of the transaction.
Monetary assets and
liabilities denominated in foreign currencies are retranslated at the functional currency closing
rate of exchange ruling at the reporting date.
Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value is
determined.
Non-monetary items that are measured at historical cost in a foreign currency are
translated using the exchange rates as at the dates of the initial transactions.
All exchange differences arising on the settlement of monetary items or on translating monetary
items are taken to profit or loss in the period in which they arise except for the following:
(a) Exchange differences arising from foreign currency borrowings for an acquisition of a
qualifying asset to the extent that they are regarded as an adjustment to interest costs are
included in the borrowing costs that are eligible for capitalization.
(b) Foreign currency items within the scope of IAS 39 Financial Instruments: Recognition and
Measurement are accounted for based on the accounting policy for financial instruments.
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(c) Exchange differences arising on a monetary item that forms part of a reporting entity’s net
investment in a foreign operation is recognized initially in other comprehensive income and
reclassified from equity to profit or loss on disposal of the net investment.
When a gain or loss on a non-monetary item is recognized in other comprehensive income, any
exchange component of that gain or loss is recognized in other comprehensive income. When a
gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of
that gain or loss is recognized in profit or loss.
(5) Translation of financial statements in foreign currency
The assets and liabilities of foreign operations are translated into NTD$ at the closing rate of
exchange prevailing at the reporting date and their income and expenses are translated at an
average rate for the period. The exchange differences arising on the translation are recognized
in other comprehensive income. On the disposal of a foreign operation, the cumulative amount
of the exchange differences relating to that foreign operation, recognized in other comprehensive
income and accumulated in the separate component of equity, is reclassified from equity to profit
or loss when the gain or loss on disposal is recognized. The following are accounted for as
disposals even if an interest in the foreign operation is retained by the Group: the loss of control
over a foreign operation, the loss of significant influence over a foreign operation, or the loss of
joint control over a foreign operation.
On the partial disposal of a subsidiary that includes a foreign operation that does not result in a
loss of control, the proportionate share of the cumulative amount of the exchange differences
recognized in other comprehensive income is re-attributed to the non-controlling interests in that
foreign operation. In partial disposal of an associate or jointly controlled entity that includes a
foreign operation that does not result in a loss of significant influence or joint control, only the
proportionate share of the cumulative amount of the exchange differences recognized in other
comprehensive income is reclassified to profit or loss.
Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities
arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign
operation and expressed in its functional currency.
(6) Current and non-current distinction
An asset is classified as current when:
(a) The Group expects to realize the asset, or intends to sell or consume it, in its normal
operating cycle.
(b) The Group holds the asset primarily for the purpose of trading.
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(c) The Group expects to realize the asset within twelve months after the reporting period.
(d) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or
used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
(a) The Group expects to settle the liability in its normal operating cycle.
(b) The Group holds the liability primarily for the purpose of trading.
(c) The liability is due to be settled within twelve months after the reporting period.
(d) The Group does not have an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period. Terms of a liability that could, at the option
of the counterparty, result in its settlement by the issue of equity instruments do not affect
its classification.
All other liabilities are classified as non-current.
(7) Cash and cash equivalents
Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly
liquid investments that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value (include fixed-term deposits that have matures of one
month from the date of acquisition).
(8) Financial instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities within the scope of IAS 39 Financial Instruments:
Recognition and Measurement are recognized initially at fair value plus or minus, in the case of
investments not at fair value through profit or loss, directly attributable transaction costs.
(a) Financial assets
The Group accounts for regular way purchase or sales of financial assets on the trade date.
Financial assets of the Group are classified as financial assets at fair value through profit or
loss, held-to-maturity investments, available-for-sale financial assets and loans and
receivables.
The Group determines the classification of its financial assets at initial
recognition.
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Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading
and financial assets designated upon initial recognition at fair value through profit or loss.
A financial asset is classified as held for trading if:
i.
it is acquired or incurred principally for the purpose of selling or repurchasing it in the
near term;
ii. on initial recognition it is part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking; or
iii. it is a derivative (except for a derivative that is a financial guarantee contract or a
designated and effective hedging instrument).
If a contract contains one or more embedded derivatives, the entire hybrid (combined)
contract may be designated as a financial asset at fair value through profit or loss; or a
financial asset may be designated as at fair value through profit or loss when doing so
results in more relevant information, because either:
i.
it eliminates or significantly reduces a measurement or recognition inconsistency; or
ii. a group of financial assets, financial liabilities or both is managed and its performance
is evaluated on a fair value basis, in accordance with a documented risk management or
investment strategy, and information about the group is provided internally on that
basis to the key management personnel.
Financial assets at fair value through profit or loss are measured at fair value with changes
in fair value recognized in profit or loss. Dividends or interests on financial assets at fair
value through profit or loss are recognized in profit or loss (including those received during
the period of initial investment). If financial assets do not have quoted prices in an active
market and their far value cannot be reliably measured, then they are classified as financial
assets measured at cost on balance sheet and carried at cost net of accumulated impairment
losses, if any, as at the reporting date.
Available-for-sale financial assets
Available-for-sale investments are non-derivative financial assets that are designated as
available-for-sale or those not classified as financial assets at fair value through profit or
loss, held-to-maturity financial assets, or loans and receivables.
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Foreign exchange gains and losses and interest calculated using the effective interest
method relating to monetary available-for-sale financial assets, or dividends on an
available-for-sale equity instrument, are recognized in profit or loss. Subsequent
measurement of available-for-sale financial assets at fair value is recognized in equity until
the investment is derecognized, at which time the cumulative gain or loss is recognized in
profit or loss.
If equity instrument investments do not have quoted prices in an active market and their far
value cannot be reliably measured, then they are classified as financial assets measured at
cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at
the reporting date.
Held-to-maturity financial assets
Non-derivative financial assets with fixed or determinable payments and fixed maturities
are classified as held-to-maturity when the Group has the positive intention and ability to
hold it to maturity, other than those that are designated as available-for-sale, classified as
financial assets at fair value through profit or loss, or meet the definition of loans and
receivables.
After initial measurement held-to-maturity financial assets are measured at amortized cost
using the effective interest method, less impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fee or transaction costs.
The effective interest method amortization is recognized in profit or loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market other than those that the Group upon
initial recognition designates as available for sale, classified as at fair value through profit
or loss, or those for which the holder may not recover substantially all of its initial
investment.
Loans and receivables are separately presented on the balance sheet as receivables or bond
investments for which no active market exists. After initial measurement, such financial
assets are subsequently measured at amortized cost using the effective interest rate method,
less impairment. Amortized cost is calculated by taking into account any discount or
premium on acquisition and fee or transaction costs. The effective interest method
amortization is recognized in profit or loss.
Impairment of financial assets
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The Group assesses at each reporting date whether there is any objective evidence that a
financial asset other than the financial assets at fair value through profit or loss is impaired.
A financial asset is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more loss events that has occurred after the initial
recognition of the asset and that loss event has an impact on the estimated future cash flows
of the financial asset. The carrying amount of the financial asset impaired, other than
receivables impaired which are reduced through the use of an allowance account, is
reduced directly and the amount of the loss is recognized in profit or loss.
A significant or prolonged decline in the fair value of an available-for-sale equity
instrument below its cost is considered a loss event.
Other loss events include:
i significant financial difficulty of the issuer or obligor; or
ii. a breach of contract, such as a default or delinquency in interest or principal payments;
or
iii. it becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
iv. the disappearance of an active market for that financial asset because of financial
difficulties.
For held-to-maturity financial assets and loans and receivables measured at amortized cost,
the Group first assesses individually whether objective evidence of impairment exists
individually for financial asset that are individually significant, or collectively for financial
assets that are not individually significant. If the Group determines that no objective
evidence of impairment exits for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment. If there is objective
evidence that an impairment loss has been incurred, the amount of the loss is measured as
the difference between the assets carrying amount and the present value of estimated future
cash flows. The present value of the estimated future cash flows is discounted at the
financial assets original effective interest rate. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate.
Interest income is accrued based on the reduced carrying amount of the asset, using the rate
of interest used to discount the future cash flows for the purpose of measuring the
impairment loss. Receivables together with the associated allowance are written off when
there is no realistic prospect of future recovery. If, in a subsequent year, the amount of
the estimated impairment loss increases or decreases because of an event occurring after
the impairment was recognized, the previously recognized impairment loss is increased or
reduced by adjusting the allowance account. If a future write-off is later recovered, the
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recovery is credited to profit or loss.
In the case of equity investments classified as available-for-sale, where there is evidence of
impairment, the cumulative loss - measured as the difference between the acquisition cost
and the current fair value, less any impairment loss on that investment previously
recognized in profit or loss - is removed from other comprehensive income and recognized
in profit or loss. Impairment losses on equity investments are not reversed through profit
or loss; increases in their fair value after impairment are recognized directly in other
comprehensive income.
In the case of debt instruments classified as available-for-sale, the amount recorded for
impairment is the cumulative loss measured as the difference between the amortized cost
and the current fair value, less any impairment loss on that investment previously
recognized in profit or loss. Future interest income continues to be accrued based on the
reduced carrying amount of the asset, using the rate of interest used to discount the future
cash flows for the purpose of measuring the impairment loss. The interest income is
recognized in profit or loss. If, in a subsequent year, the fair value of a debt instrument
increases and the increase can be objectively related to an event occurring after the
impairment loss was recognized in profit or loss, the impairment loss is reversed through
profit or loss.
Derecognition of financial assets
A financial asset is derecognized when:
i. The rights to receive cash flows from the asset have expired.
ii. The Group has transferred the asset and substantially all the risks and rewards of the
asset have been transferred.
iii. The Group has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the difference between the carrying
amount and the consideration received or receivable including any cumulative gain or loss
that had been recognized in other comprehensive income is recognized in profit or loss.
(b) Financial liabilities and equity
Classification between liabilities or equity
The Group classifies the instrument issued as a financial liability or an equity instrument in
accordance with the substance of the contractual arrangement and the definitions of a
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financial liability, and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. The transaction costs of an equity transaction are
accounted for as a deduction from equity (net of any related income tax benefit) to the extent
they are incremental costs directly attributable to the equity transaction that otherwise would
have been avoided.
Financial liabilities
Financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and
Measurement are classified as financial liabilities at fair value through profit or loss or
financial liabilities measured at amortized cost upon initial recognition.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss. A financial liability is classified as held for trading if:
i.
it is acquired or incurred principally for the purpose of selling or repurchasing it in the
near term;
ii. on initial recognition it is part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking; or
iii. it is a derivative (except for a derivative that is a financial guarantee contract or a
designated and effective hedging instrument).
If a contract contains one or more embedded derivatives, the entire hybrid (combined)
contract may be designated as a financial liability at fair value through profit or loss; or a
financial liability may be designated as at fair value through profit or loss when doing so
results in more relevant information, because either:
i. it eliminates or significantly reduces a measurement or recognition inconsistency; or
ii. a group of financial assets, financial liabilities or both is managed and its performance
is evaluated on a fair value basis, in accordance with a documented risk management or
investment strategy, and information about the group is provided internally on that
basis to the key management personnel.
Gains or losses on the subsequent measurement of liabilities at fair value through profit or
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loss including interest paid is recognized in profit or loss.
If the financial liabilities at fair value through profit or loss do not have quoted prices in an
active market and their far value cannot be reliably measured, then they are classified as
financial liabilities measured at cost on balance sheet and carried at cost as at the reporting
date.
Financial liabilities at amortized cost
Financial liabilities measured at amortized cost include interest bearing loans and
borrowings that are subsequently measured using the effective interest rate method after
initial recognition. Gains and losses are recognized in profit or loss when the liabilities are
derecognized as well as through the effective interest rate method amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition
and fees or transaction costs.
Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expires.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified
(whether or not attributable to the financial difficulty of the debtor), such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit
or loss.
(c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the balance
sheet if, and only if, there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis, or to realize the assets and settle the
liabilities simultaneously.
(d) Fair value of financial instruments
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The fair value of financial instruments that are traded in active markets at each reporting
date is determined by reference to quoted market prices, without any deduction for
transaction costs.
For financial instruments not traded in an active market, the fair value is determined using
appropriate valuation techniques.
Such techniques may include using recent arm’s length
market transactions; reference to the current fair value of another instrument that is
substantially the same; a discounted cash flow analysis or other valuation models.
(9) Derivative financial instrument
The Group uses derivative financial instruments to hedge its foreign currency risks and interest
rate risks. A derivative is classified in the balance sheet as financial assets or liabilities at fair
value through profit or loss (held for trading) except for derivatives that are designated effective
hedging instruments which are classified as derivative financial assets or liabilities for hedging.
Derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives
are carried as financial assets when the fair value is positive and as financial liabilities when the
fair value is negative. Any gains or losses arising from changes in the fair value of derivatives
are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is
recognized in equity.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at
fair value if their economic characteristics and risks are not closely related to those of the host
contracts and the host contracts are not held for trading or designated at fair value though profit
or loss. These embedded derivatives are measured at fair value with changes in fair value
recognized in profit or loss.
(10) 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
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.
(11) Investments accounted for using the equity method
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The Group’s investment in its associate is accounted for using the equity method other than those
that meet the criteria to be classified as held for sale. An associate is an entity over which the
Group has significant influence.
Under the equity method, the investment in the associate is carried in the balance sheet at cost
and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the
associate.
After the interest in the associate is reduced to zero, additional losses are provided
for, and a liability is recognized, only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate.
Unrealized gains and
losses resulting from transactions between the Group and the associate are eliminated to the
extent of the Group’s related interest in the associate.
When changes in the net assets of an associate occur and not those that are recognized in profit
or loss or other comprehensive income and do not affects the Group’s percentage of ownership
interests in the associate, the Group recognizes such changes in equity based on its percentage of
ownership interests.
The resulting capital surplus recognized will be reclassified to profit or
loss at the time of disposing the associate on a pro rata basis.
When the associate issues new stock, and the Group’s interest in an associate is reduced or
increased as the Group fails to acquire shares newly issued in the associate proportionately to its
original ownership interest, the increase or decrease in the interest in the associate is recognized
in Additional Paid in Capital and Investment in associate.
When the interest in the associate is
reduced, the cumulative amounts previously recognized in other comprehensive income are
reclassified to profit or loss or other appropriate items.
The aforementioned capital surplus
recognized is reclassified to profit or loss on a pro rata basis when the Group disposes the
associate.
The financial statements of the associate are prepared for the same reporting period as the Group.
Where necessary, adjustments are made to bring the accounting policies in line with those of the
Group.
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired in accordance with IAS 39 Financial Instruments:
Recognition and Measurement.
If this is the case the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate and its carrying
value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of
comprehensive income in accordance with IAS 36 Impairment of Assets.
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In determining the
value in use of the investment, the Group estimates:
(a) Its share of the present value of the estimated future cash flows expected to be generated by
the associate, including the cash flows from the operations of the associate and the proceeds
on the ultimate disposal of the investment; or
(b) The present value of the estimated future cash flows expected to arise from dividends to be
received from the investment and from its ultimate disposal.
Because goodwill that forms part of the carrying amount of an investment in an associate is not
separately recognized, it is not tested for impairment separately by applying the requirements for
impairment testing goodwill in IAS 36 Impairment of Assets.
Upon loss of significant influence over the associate, the Group measures and recognizes any
retaining investment at its fair value.
Any difference between the carrying amount of the
associate upon loss of significant influence and the fair value of the retaining investment and
proceeds from disposal is recognized in profit or loss.
The Group recognizes its interest in the jointly controlled entities using the equity method other
than those that meet the criteria to be classified as held for sale.
A jointly controlled entity is a
joint venture that involves the establishment of a corporation, partnership or other entity.
(12) Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any.
Such cost includes the cost of dismantling and
removing the item and restoring the site on which it is located and borrowing costs for
construction in progress if the recognition criteria are met.
Each part of an item of property,
plant and equipment with a cost that is significant in relation to the total cost of the item is
depreciated separately.
When significant parts of property, plant and equipment are required to
be replaced in intervals, the Group recognized such parts as individual assets with specific
useful lives and depreciation, respectively.
The carrying amount of those parts that are
replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property,
plant and equipment.
When a major inspection is performed, its cost is recognized in the
carrying amount of the plant and equipment as a replacement if the recognition criteria are
satisfied.
All other repair and maintenance costs are recognized in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over the estimated economic lives of the
following assets:
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Office equipment
3~5 years
Transportation equipment
4~10 years
Leasehold improvements
3 years
An item of property, plant and equipment and any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected from its use or
disposal.
Any gain or loss arising on derecognition of the asset is recognized in profit or loss.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each
financial year end and adjusted prospectively, if appropriate.
(13) Leases
Group as a lessee
Finance leases which transfer to the Group substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the commencement of the lease at the fair value
of the leased property or, if lower, at the present value of the minimum lease payments.
Lease
payments are apportioned between finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability.
Finance charges
are recognized in profit or loss.
A leased asset is depreciated over the useful life of the asset.
However, if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset
is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense on a straight-line basis over the lease
term.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and benefits of ownership
of the asset are classified as operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased asset and recognized over the
lease term on the same basis as rental income. Rental revenue generated from operating lease
is recognized over the lease term using the straight line method. Contingent rents are
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recognized as revenue in the period in which they are earned.
(14) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is its fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses, if any. Internally generated intangible
assets, excluding capitalized development costs, are not capitalized and expenditure is reflected
in profit or loss for the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
amortization period and the amortization method for an intangible asset with a finite useful life
is reviewed at least at the end of each financial year. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset is accounted
for by changing the amortization period or method, as appropriate, and are treated as changes in
accounting estimates.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment
annually, either individually or at the cash-generating unit level. The assessment of indefinite
life is reviewed annually to determine whether the indefinite life continues to be supportable.
If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognized in
profit or loss when the asset is derecognized.
Licences
Licences for the use of intellectual property are granted for periods ranging between 5 and 10
years depending on the specific licence. The licences provided the option for renewal based on
whether the Group meets the conditions of the licence and may be renewed at little or no cost to
the Group. As a result, those licences are assessed as having an indefinite useful life.
Computer software
The cost of computer software is amortized on a straight-line basis over the estimated useful life
(3 to 5 years).
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Exclusive distribution right
The cost of exclusive distribution right is amortized on a straight-line basis over the estimated
useful life (3 to 5 years).
A summary of the policies applied to the Group’s intangible assets is as follows:
Licences
Computer software
Exclusive distribution
right
Useful lives
Indefinite
Finite
Finite
Amortization method used
No amortization
Internally generated or
Acquired
Amortized on a
straight-line basis over
the estimated useful life
Acquired
Amortized on a
straight-line basis over
the estimated useful life
Acquired
acquired
(15) Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is any indication that an
asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required, the Group estimates the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or
cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. Where the carrying amount
of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s
recoverable amount. A previously recognized impairment loss is reversed only if there has
been an increase in the estimated service potential of an asset which in turn increases the
recoverable amount. However, the reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognized for the asset in prior
years.
A cash generating unit, or groups of cash-generating units, to which goodwill has been allocated
is tested for impairment annually at the same time, irrespective of whether there is any
indication of impairment. If an impairment loss is to be recognized, it is first allocated to
reduce the carrying amount of any goodwill allocated to the cash generating unit (group of
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units), then to the other assets of the unit (group of units) pro rata on the basis of the carrying
amount of each asset in the unit (group of units). Impairment losses relating to goodwill
cannot be reversed in future periods for any reason.
An impairment loss of continuing operations or a reversal of such impairment loss is recognized
in profit or loss.
(16) Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probably that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be reimbursed, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually
certain. If the effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognized as a finance cost.
(17) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable. The following specific recognition criteria must also be
met before revenue is recognized:
Sale of goods
Revenue from the sale of goods is recognized when all the following conditions have been
satisfied:
(a) the significant risks and rewards of ownership of the goods have passed to the buyer;
(b) neither continuing managerial involvement nor effective control over the goods sold have
been retained;
(c) the amount of revenue can be measured reliably;
(d) it is probable that the economic benefits associated with the transaction will flow to the
entity; and
(e) the costs incurred in respect of the transaction can be measured reliably.
Interest income
For all financial assets measured at amortized cost (including loans and receivables and
held-to-maturity financial assets) and available-for-sale financial assets, interest income is
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recorded using the effective interest rate method and recognized in profit or loss.
Dividends
Revenue is recognized when the Group’s right to receive the payment is established.
(18) Government grants
Government grants are recognized where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. Where the grant relates to an asset,
it is recognized as deferred income and released to income in equal amounts over the expected
useful life of the related asset. When the grant relates to an expense item, it is recognized as
income over the period necessary to match the grant on a systematic basis to the costs that it is
intended to compensate.
Where the Group receives non-monetary grants, the asset and the grant are recorded gross at
nominal amounts and released to the statement of comprehensive income over the expected
useful life and pattern of consumption of the benefit of the underlying asset by equal annual
installments. Where loans or similar assistance are provided by governments or related
institutions with an interest rate below the current applicable market rate, the effect of this
favorable interest is regarded as additional government grant.
(19) Employment benefits
According to the local regulation, the employees of the Group are required to participate in a
central pension scheme and various government-sponsored housing funds of People’s Republic
of China. The Group contributes on a monthly basis at the given rates, and is charged to the
income statements as operation expenses.
(20) Share-based payment transactions
The cost of equity-settled transactions between the Group and its subsidiaries is recognized
based on the fair value of the equity instruments granted. The fair value of the equity
instruments is determined by using an appropriate pricing model.
The cost of equity-settled transactions is recognized, together with a corresponding increase in
other capital reserves in equity, over the period in which the performance and/or service
conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at
each reporting date until the vesting date reflects the extent to which the vesting period has
expired and the Group’s best estimate of the number of equity instruments that will ultimately
vest. The income statement expense or credit for a period represents the movement in
cumulative expense recognized as at the beginning and end of that period.
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No expense is recognized for awards that do not ultimately vest, except for equity-settled
transactions where vesting is conditional upon a market or non-vesting condition, which are
treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the minimum expense
recognized is the expense as if the terms had not been modified, if the original terms of the
award are met. An additional expense is recognized for any modification that increases the
total fair value of the share-based payment transaction, or is otherwise beneficial to the
employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it vested on the date of
cancellation, and any expense not yet recognized for the award is recognized immediately.
This includes any award where non-vesting conditions within the control of either the entity or
the employee are not met. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new awards
are treated as if they were a modification of the original award, as described in the previous
paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in the
computation of diluted earnings per share
The cost of restricted stocks issued is recognized as salary expense based on the fair value of the
equity instruments on the grant date, together with a corresponding increase in other capital
reserves in equity, over the vesting period. The Group recognized unearned employee salary
which is a transitional contra equity account; the balance in the account will be recognized as
salary expense over the passage of vesting period.
(21) Income tax
Income tax expense (income) is the aggregate amount included in the determination of profit or
loss for the period in respect of current tax and deferred tax.
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities, using the tax rates and
tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current income tax relating to items recognized in other comprehensive income or directly in
equity is recognized in other comprehensive income or equity and not in profit or loss.
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Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
(a) Where the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
(b) In respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilized, except:
(a) Where the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss;
(b) In respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognized only to the
extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realized or the liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted at the reporting date. The measurement of deferred tax
assets and deferred tax liabilities reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or
loss. Deferred tax items are recognized in correlation to the underlying transaction either in
other comprehensive income or directly in equity. Deferred tax assets are reassessed at each
reporting date and are recognized accordingly.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to
set off current income tax assets against current income tax liabilities and the deferred taxes
144
relate to the same taxable entity and the same taxation authority.
(22) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The consideration
transferred, the identifiable assets acquired and liabilities assumed are measured at acquisition
date fair value. For each business combination, the acquirer measures 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. Acquisition-related costs are accounted for as
expenses in the periods in which the costs are incurred and are classified under administrative
expenses.
When the Group acquires a business, it assesses the assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
This includes the separation
of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date
through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognized at the
acquisition-date fair value.
Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability, will be recognized in accordance with
IAS 39 Financial Instruments: Recognition and Measurement either in profit or loss or as a
change to other comprehensive income.
However, if the contingent consideration is classified
as equity, it should not be remeasured until it is finally settled within equity.
Goodwill is initially measured as the amount of the excess of the aggregate of the consideration
transferred and the non-controlling interest over the net fair value of the identifiable assets
acquired and the liabilities assumed.
If this aggregate is lower than the fair value of the net
assets acquired, the difference is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Group’s cash-generating units that are expected to benefit from the combination, irrespective
of whether other assets or liabilities of the acquiree are assigned to those units.
Each unit or
group of units to which the goodwill is so allocated represents the lowest level within the Group
at which the goodwill is monitored for internal management purpose and is not larger than an
145
operating segment before aggregation.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation.
Goodwill disposed of in this circumstance is measured based on the
relative recoverable amounts of the operation disposed of and the portion of the cash-generating
unit retained.
5. Significant accounting judgments, estimates and assumptions
The preparation of the Group’s consolidated financial statements require management to make
judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period.
However, uncertainty about these assumption and estimate could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
(1) Fair value of financial instruments
Where the fair value of financial assets and financial liabilities recorded in the balance sheet
cannot be derived from active markets, they are determined using valuation techniques
including the income approach (for example the discounted cash flows model) or market
approach. Changes in assumptions about these factors could affect the reported fair value of
the financial instruments. Please refer to Note 12 for more details.
(2) Fair value measurement of contingent consideration
Contingent consideration, resulting from business combinations, is valued at the
acquisition-date fair value as part of the business combination. Where the contingent
consideration meets the definition of a derivative and thus financial liability, it is subsequently
remeasured to fair value at each reporting date. The determination of the fair value is based on
discounted cash flows. The key assumptions take into consideration the probability of meeting
each performance target and the discount factor.
As part of the consideration transferred in the acquisition of Tongze pharmaceutical Co., Ltd.
and Exquisite Creation Limited, a contingent consideration has been recognized. As at the
146
acquisition date, the fair value of the contingent considerations were estimated at NTD$84,623
thousand and NTD$80,747 thousand, respectively. The contingent consideration at the
reporting date has been remeasured to NTD$64,936 thousand and NTD$85,706 thousand,
respectively, and classified under other financial liabilities. Please refer to Note 6(23) for more
details.
(3) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the
fair value of the equity instruments at the date at which they are granted. Estimating fair value
for share-based payment transactions requires determining the most appropriate valuation model,
which is dependent on the terms and conditions of the grant. This estimate also requires
determining the most appropriate inputs to the valuation model including the expected life of the
share option, volatility and dividend yield and making assumptions about them. The
assumptions and models used for estimating fair value for share-based payment transactions are
disclosed in Note 6(15).
(4) Revenue recognition - sales returns and allowance
The Group estimates sales returns and allowance based on historical experience and other
known factors at the time of sale, which reduces the operating revenue. Please refer to Note
6(16) for more details.
(5) Income tax
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount
and timing of future taxable income. Given the wide range of international business
relationships and the long-term nature and complexity of existing contractual agreements,
differences arising between the actual results and the assumptions made, or future changes to
such assumptions, could necessitate future adjustments to tax income and expense already
recorded. The Group establishes provisions, based on reasonable estimates, for possible
consequences of audits by the tax authorities of the respective counties in which it operates.
The amount of such provisions is based on various factors, such as experience of previous tax
audits and differing interpretations of tax regulations by the taxable entity and the responsible
tax authority. Such differences of interpretation may arise on a wide variety of issues
depending on the conditions prevailing in the respective Group company's domicile.
Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax
credits and deductible temporary differences to the extent that it is probable that taxable profit
will be available or there are sufficient taxable temporary differences against which the unused
tax losses, unused tax credits or deductible temporary differences can be utilized. The amount
of deferred tax assets determined to be recognized is based upon the likely timing and the level
of future taxable profits and taxable temporary differences together with future tax planning
147
strategies.
Please refer to Note 6 for more details on unrecognized deferred tax assets.
6. Contents of significant accounts
(1) Cash and cash equivalents
Cash on hand
Checking and saving accounts
Time deposits
Cash equivalents
Total
December
31, 2013
$629
659,755
122,600
147,120
$930,104
As at
December
31, 2012
$301
244,602
288,920
396,100
$929,923
January 1,
2012
$207
1,081,960
264,385
$1,346,552
December
31, 2013
$312,294
530,963
$843,257
As at
December
31, 2012
$143,584
197,451
$341,035
January 1,
2012
$$-
December
31, 2013
$843,257
$843,257
As at
December
31, 2012
$341,035
$341,035
January 1,
2012
$$-
December
31, 2013
As at
December
31, 2012
January 1,
2012
$168,174
$99,630
$51,771
(2) Available-for-sale financial assets
Stocks
Valuation adjustment
Total
Current
Non-current
Total
Available-for-sale financial assets were not pledged.
(3) Financial assets measured at cost
Stocks
As at
148
December
December
January 1,
31, 2013
31, 2012
2012
Current
Non-current
Total
$-
$-
$-
168,174
99,630
51,771
$168,174
$99,630
$51,771
The above investments do not have quoted price in an active market, and their fair value cannot
be measurable as the variability in the range of reasonableness in fair value measurements is
significant for the investment and the probabilities of the various estimates within the reasonable
range cannot be assessed and used in measuring fair value.
Therefore these investments are
measured at cost.
PharmaDax Co., Ltd., held by the Group, listed in Emerging Stock Market in July 2013.
The
fair value can be reasonably assessed, and therefore, it reclassified from financial assets
measured at cost to available-for-sale financial assets.
The Group has not sold the financial assets measured at cost for the years ended December 31,
2013 and 2012.
Financial assets measured at cost were not pledged.
(4) Notes receivables, net
As at
December
December
January 1,
31, 2013
31, 2012
2012
Notes receivables arising from operating
activities
Less: allowance for doubtful debts
Total
$34,433
$48,691
$16,289
-
-
-
$34,433
$48,691
$16,289
December
As at
December
January 1,
Notes receivables were not pledged.
(5) Accounts receivable, net
149
31, 2013
$429,790
(194)
$429,596
Trade receivables
Less: allowance for doubtful debts
Total
31, 2012
$316,457
(53)
$316,404
2012
$262,774
(667)
$262,107
Trade receivables were not pledged.
Trade receivables are generally on 7-270 day terms. The movements in the provision for
impairment of trade receivables are as follows (please refer to Note 12 for credit risk disclosure):
Individually Collectively
impaired
impaired
$53
$844
(720)
17
$194
$-
As at January 1, 2013
Charge/reversal for the current period
Write off
Exchange differences
As at December 31, 2013
Charge/reversal for the current period
Write off
$667
211
(804)
(21)
$53
$$-
Total
$53
844
(720)
17
$194
$667
211
(804)
(21)
$53
Aging analysis of trade receivables indicate past due as at the end of the reporting period which
has not impaired as follows:
Past due but not impaired
Neither
past due
nor
impaired
<=30 days
December 31, 2013 $396,997
December 31, 2012 314,643
January 1, 2012
254,094
$21,658
881
3,870
As at
31~60
days
91~120
days
91~120
days
>=121
days
$5,648
417
1,884
$3,751
65
1,423
$546
388
322
$996
10
514
Total
$429,596
316,404
262,107
(6) Inventories, net
As at
Finished goods
December
December
January 1,
31, 2013
31, 2012
2012
$193,965
150
$81,065
$69,081
Less: allowance for inventory valuation losses
Net amount
-
-
-
$193,965
$81,065
$69,081
The cost of inventories recognized in expenses amounts to NTD$859,172 and NTD$705,703 for
the year ended December 31, 2013 and December 31, 2012, respectively, including the reversal
of write-down of inventories to NTD$0.
No inventories were pledged.
(7) Investments accounted for using the equity method
The following table lists the investments accounted for using the equity method of the Group:
As at
December 31, 2013
December 31, 2012
Percentage
January 1, 2012
Percentage
Percentage
Carrying of ownership Carrying of ownership Carrying of ownership
Investees
amount
(%)
amount
(%)
amount
(%)
24%
Investments in associates:
Eminent Global Limited
Hung-Chun Bio-s Co., Ltd.
Tiger Medicals (Taiwan) Ltd.
Wei-Gao Co., Ltd.
$-
-
$-
-
$33,376
100,710
24%
-
-
-
-
258
21%
-
-
-
-
1,021
33%
-
-
-
-
35,136
25%
-
-
-
-
Suzhou Microclear Medical
Instruments Co., Ltd.
Total
$137,125
$-
$33,376
No investment in associates were pledged.
The following table illustrates summarized financial information of the Group’s investment in
the associate:
As at
December 31, December 31,
2013
Total assets (100%)
Total liabilities (100%)
151
2012
January 1,
2012
$290,018
$-
$407,103
$37,467
-
-
For the years ended December
31,
2013
Revenue (100%)
Profit (loss) (100%)
2012
$34,366
$-
$(34,436)
$-
(8) Property, plant and equipment
Transportation
equipment
Leasehold
Office equipment
improvements
Total
Cost:
Additions
Disposals
$10,505
$4,617
$3,212
$18,334
5,614
1,815
499
7,928
(96)
(69)
-
(165)
201
483
-
684
584
270
177
1,031
$16,808
$7,116
$3,888
$27,812
$9,647
$2,108
$2,907
$14,662
Additions
2,044
2,554
397
4,995
Disposals
(1,167)
-
-
281
35
-
(300)
(80)
Acquisitions through
business combinations
(1,167)
$10,505
$4,617
Transportation
equipment
Office equipment
(92)
$3,212
Leasehold
improvements
316
(472)
$18,334
Total
Depreciation and
impairment:
Depreciation
Disposals
$6,146
3,307
(89)
368
$9,732
$1,280
1,077
(35)
82
$2,404
$2,306
700
134
$3,140
$9,732
5,084
(124)
584
$15,276
Depreciation
Disposals
$4,227
2,383
(323)
$521
789
-
$1,334
1,019
-
$6,082
4,191
(323)
152
(141)
$6,146
(30)
$1,280
(47)
$2,306
(218)
$9,732
Net carrying amount as at:
December 31, 2013
$7,076
$4,712
$748
$12,536
December 31, 2012
$4,359
$3,337
$906
$8,602
January 1, 2012
$5,420
$1,587
$1,573
$8,580
No property, plant and equipment were pledged.
(9) Intangible assets
Cost:
Addition
Addition
Goodwill
Distribution
right
Licences
Computer
software
$147,956
-
$217,253
-
$29,880
-
$1,535
1,252
$396,624
1,252
120,087
9,685
$277,728
113,598
13,619
$344,470
1,565
$31,445
103
$2,890
233,685
24,972
$656,533
$-
$14,039
-
$30,823
-
$911
671
$45,773
671
214,361
(11,147)
$217,253
(943)
$29,880
(47)
$1,535
362,317
(12,137)
$396,624
147,956
$147,956
Distribution
Goodwill
right
Total
Computer
Licences
software
Total
Amortization and
impairment:
$-
$13,611
$-
$160
$13,771
Amortization
-
25,969
-
229
26,198
-
1,164
-
10
1,174
$-
$40,744
$-
$399
$41,143
$-
$11,466
$-
$-
$11,466
Amortization
-
13,247
-
160
13,407
-
(11,102)
-
-
$-
$13,611
$-
$160
153
(11,102)
$13,771
Net carrying amount as at:
December 31, 2013
$277,728
$303,726
$31,445
$2,491
$615,390
December 31, 2012
$147,956
$203,642
$29,880
$1,375
$382,853
$-
$2,573
$30,823
$911
$34,307
January 1, 2012
Amortization expense of intangible assets under the statement of comprehensive income:
For the years ended
December 31,
2013
Operating expenses
2012
$26,198
$13,407
(10) Impairment testing of goodwill and intangible assets with indefinite lives
Goodwill acquired through business combinations and licences with indefinite lives have been
allocated to four cash-generating units for impairment testing as follows:
(a) Tongze cash-generating unit;
(b) Guozhen cash-generating unit;
(c) Taiwan cash-generating unit; and
(d) Guochuang cash-generating unit.
Carrying amount of goodwill and licences allocated to each of the cash-generating units:
Tongze unit
As at
Goodwill
December December
January December December
January
31, 2013
31, 2012
1, 2012
31, 2013
31, 2012
1, 2012
157,641
147,956
-
98,117
-
-
-
-
-
-
-
-
Licences with indefinite lives
Taiwan unit
As at
Goodwill
Licences with
Guozhen unit
Guochuang unit
Total
December December
January
31, 2013
31, 2012
1, 2012
31, 2013
31, 2012
1, 2012
31, 2013
31, 2012
1, 2012
21,970
-
-
-
-
-
277,728
147,956
-
-
-
-
31,445
29,880
30,823
31,445
29,880
30,823
indefinite
lives
Tongze cash-generating unit
154
The recoverable amount of the Tongze cash-generating unit has been determined based on a
value in calculation using cash flow projections from financial budgets approved by the
management covering a five-year period. The projected cash flows have been updated to
reflect the change in demand for products and services. The pre-tax discount rate applied to
cash flow projections is 18.3% and cash flows beyond the five-year period are extrapolated using
a 2.0% growth rate that is the same as the long-term average growth rate for the same industry.
As a result of the analysis, management did not identify impairment for goodwill of
NTD$157,641 thousand which is allocated to this cash-generating unit.
Additionally, the goodwill of the Tongze cash generating unit acquired through business
combinations on July 4, 2012 were based on an assessment from an independent valuer. There is
no impairment loss recognized as of December 31, 2012, because it is still under measurement
period, the recoverable amount approximates the acquisition amount.
Gouzhen cash-generating unit
The goodwill of the Guozhen cash-generating unit acquired through business combinations on
30 August 2013 were based on an assessment from an independent valuer. There is no
impairment loss recognized as of December 31, 2013, because still under measurement period
the recoverable amount approximates the acquisition amount.
Taiwan cash-generating unit
The goodwill of the Taiwan cash-generating unit acquired through business combinations on 4
December 2013 were based on an assessment from an independent valuer. There is no
impairment loss recognized as of December 31, 2013, because it is still under measurement
period, the recoverable amount approximates the acquisition amount.
Key assumptions used in value-in-use calculations
The calculation of value-in-use for Tongze unit is most sensitive to the following assumptions:
(a)
(b)
(c)
(d)
Gross margin
Discount rates
Sales growth rate during the budget period; and
Growth rate used to extrapolate cash flows beyond the budget period.
Gross margins - Gross margins are based on average values achieved in the prior year of the
budget period and refer to the gross margin of the general sales level of the same industry.
These are increased over the budget period for anticipated efficiency improvements. The gross
margins of 37% to 39% were applied for the Tongze unit, and the level was equivalent to the
same industry and prior year.
155
Discount rates - Discount rates reflect the current market assessment of the risks specific to each
cash generating unit (including the time value of money and the risks specific to the asset for
which the future cash flow estimates have not been adjusted). The discount rate was estimated
based on the weighted average cost of capital (WACC) for the Group, taking into account the
particular situations of the Group and its operating segments. The WACC includes both the
cost of liabilities and cost of equities. The cost of equities is derived from the expected returns
of the Group’s investors on capital, where the cost of liabilities is measured by the interest
bearing loans that the Group has obligation to settle. Specific risk relating to the operating
segments is accounted for by considering the individual beta factor which is evaluated annually
and based on publicly available market information.
Sales growth rate assumptions - These assumptions are important because, as well as using
industry data and the historical growth experience for estimating growth rates, management
would assess how the change in the unit’s position, relative to its competitors, might take place
over the budget period. It is the relative growth the management expects to generate from
Tongze cash-generating unit’s introduction of new products and it’s expansion in the market of
the existing product.
Growth rate estimates - Rates are based on published industry research.
For the explanation
stated or set forth above, a conservative method of the long-term average growth rate was used to
extrapolate the budget for the Tongze unit.
Sensitivity to changes in assumptions
With regard to the assessment of value-in-use of the Tongze unit, the management believes that
no reasonably possible change in any of the above key assumptions would cause the carrying
value of the unit to materially exceed its recoverable amount.
(11) Accrued expenses
As at
Salary payable
December
December
January 1,
31, 2013
31, 2012
2012
$30,062
$28,747
$12,432
Other payable-related parties
48,594
-
-
Accrued marketing expenses
17,146
39,379
38,655
Other taxes payable
26,730
21,405
14,044
Others
38,250
12,372
15,230
$160,782
$101,903
$80,361
Total
156
(12) Post-employment benefits
Defined contribution plan
Subsidiaries located in the People’s Republic of China will contribute social welfare benefits
based on a certain percentage of employees’ salaries or wages to the employees’ individual
pension accounts.
Pension benefits for employees of overseas subsidiaries and branches are provided in accordance
with the local regulations.
Expenses under the defined contribution plan for the years ended December 31, 2013 and 2012
are NTD$37,297 and NTD$32,055, respectively.
(13) Other liabilities
Other liabilities are the contingent consideration from business combination.
Acquisitions during the period
Payment during the period
Discount rate adjustment and unwinding of discount from the
passage of time
Other financial liabilities
$91,740
80,474
(45,019)
16,762
6,685
$150,642
Current-December 31, 2013
Non-current-December 31, 2013
$65,584
85,058
Current-December 31, 2012
Non-current-December 31, 2012
$91,740
$91,740
Current-January 1, 2012
Non-current-January 1, 2012
$-
$-
(14) Equities
157
(a) Common stock
The Company’s authorized capital was NTD$2,000,000 thousand and issued capital was
NTD$778,470 thousand, NTD$700,000 thousand and NTD$700,000 thousand as at
December 31, 2013, December 31, 2012, and January 1, 2012, respectively, each at a par
value of NTD$10. Each share has one voting right and a right to receive dividends.
On October 21, 2013, the Board of Directors approved to issue 7,500 thousand common
shares for cash, and 750 thousand shares reserved for subscription by employees. The
issuance processes had been approved by the authority and share registry has been updated
correspondingly on December 23, 2013.
As at December 31, 2013, the employee stock option issued in December 2010 have been
converted into 347 thousand shares and exercised by issuing additional shares. The
issuance processes had been approved by the authority and the share registry has been
updated correspondingly.
(b) Capital surplus
As at
Employee stock option
Total
December
December
January 1,
31, 2013
31, 2012
2012
$1,075,177
$603,490
$603,490
8,648
9,517
4,794
$1,083,825
$613,007
$608,284
According to the Company Act, the capital reserve shall not be used except for offset the
deficit of the company.
When a company incurs no loss, it may distribute the capital
surplus generated from the excess of the issuance price over the par value of capital and
donations.
The distribution could be made in cash or in the form of dividend shares to its
shareholders in proportion to the number of shares being held by each of them.
(c) 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:
158
i. Payment of all taxes and dues;
ii. Offset prior years’ operation losses;
iii. Set aside 10% of the remaining amount after deducting items (a) and (b) as reserve;
iv. After deducting items (a), (b) and (c) above from the current year’s earnings, less 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 are also eligible for the employee bonuses.
v. The distribution of the remaining portion, if any, will be recommended by the Board of
Directors and resolved in the shareholders’ meeting.
The policy of 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 the
earnings distribute to shareholders, if any, could be paid in the form of share or cash
dividends, and at least 10% of the dividends must be paid in the form of cash.
When distributing distributable earnings for the years ended 2012 and 2013, the Company
has to set aside special reserve, for other net deductions from shareholders’ equity of the
period.
The Company estimated the amounts of the employee bonuses and remuneration to
directors and supervisors for the years ended December 31, 2013 and 2012 are both to be
NTD$0.
The estimates were based on post-tax net income of the period and the
Company’s Articles of Incorporation, and considered factors such as appropriation to legal
reserve etc.
The estimated employee bonuses and remuneration to directors and
supervisors are recognized as operating costs or operating expense for the period.
If the
Board modified the estimates significantly in the subsequent periods, the Company will
recognize the change as an adjustment to current income.
The difference between the
estimation and the resolution of shareholders’ meeting will be recognized in profit or loss
of the subsequent year.
Details of the 2013 and 2012 earnings distribution and dividends per share as approved by
the board of directors’ meeting on March 12, 2014 and approved by the shareholder’s
meeting on June 15, 2013, respectively, are as follows:
Appropriation of earnings
159
Dividend per share (NTD$)
Legal reserve
2013
2012
$35,519
$30,294
280,249
224,000
$315,768
$254,294
2013
2012
Common stock –cash
dividend
Total
3.60
3.20
There is no significant difference between the actual employee bonuses and remuneration
to directors and supervisors distributed from the 2012’s earnings and the estimated amount
in the financial statements for the year ended 2012.
Information on the Board of Directors’ recommendations and shareholders’ approval
regarding the employee bonuses and remuneration to directors and supervisors can be
obtained from the “Market Observation Post System” on the website of the TWSE.
(d) Non-controlling interests
Beginning balance
Profit attributable to non-controlling interests
Other comprehensive income, attributable to
non-controlling interests, net of tax:
Exchange differences resulting from translating the
financial statements of a foreign operation
Changes in non-controlling interests
Cash dividend distributed by a subsidiary
Acquisition of a subsidiary
Ending balance
For the years ended
December 31,
2013
2012
$116,281
$37,314
11,826
6,334
(11,948)
70,028
$218,009
104,455
$116,281
(15) Share-based payment plans
Certain employees of the Group are entitled to share-based payment as part of their
remunerations; services are provided by the employees in return for the equity instruments
granted. These plans are accounted for us equity-settled share-based payment transactions.
Share-based payment plan for employee of the Group
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 schedule as
160
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.
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 (Plan C); 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.
Due to the earnings distribution of this year, according to the exercise price adjustment formula,
which was stipulated with employees for share-based payment agreement of the Plan C, the
exercise price has been adjusted.
After the assessment, there is no incremental fair value
granted.
There are no cash settlement alternatives.
The Company does not have a past practice of cash
settlement for these employee share options.
Detailed information relevant to the employee stock options is disclosed as follows:
Total numbers
of
Total numbers
Shares available to
Date of share
options granted
of options
option holders
Exercise price
granted
(unit)
outstanding (unit)
(in thousand)
(NTD)
December 10, 2010
231,651
53,395
290
$10.00
December 10, 2010
6,569
493
3
$10.00
June 20, 2012
315
210
210
$60.87
November 2, 2012
440
270
270
$73.68
(a) The summary of the Company’s stock options plan, and related information for the years
ended December 31, 2013 and 2012 are as follows:
161
For the years ended December 31,
2013
2012
Shares available
Shares available
to option
to option
WeightedWeightedholder’s
holder’s
average exercise
average exercise
(in thousands)
price (NTD)
(in thousands)
price (NTD)
Outstanding at beginning of year
Granted
Expired
Exercised
Forfeited
1,540
(420)
(347)
-
$35.63
$$39.26
$10.00
$-
1,095
755
(310)
$10.00
$73.47
$$$10.00
Outstanding at end of year
773
$46.06
1,540
$41.12
Exercisable at end of year
8
$10.00
40
$10.00
Weighted-average fair value of options
granted during the period (NTD)
$-
$12.82
(b) The information on outstanding share options as of December 31, 2013, December 31,
2012, January 1, 2012 is as follows:
Outstanding Stock Options
Exercisable Stock Options
Range of
Shares
Weighted-average
Shares
exercise
available to
expected
Authorization
price
option holder’s
remaining life
date
(NTD)
(in thousands)
(years)
2010.12.10
$10.00
290
2.76
$10.00
5
$10.00
2010.12.10
$10.00
3
2.76
$10.00
3
$10.00
2012.06.20
$61.00
210
3.50
$60.87
-
$-
2012.11.02
$74.00
270
3.83
$73.68
-
$-
Weighted-average
available to
Weighted-average
exercise price per option holder’s exercise price per
share(NTD)
773
(in thousands)
share(NTD)
8
Range of
Shares
Weighted-average
exercise
available to
expected
Authorization
price
option holder’s
remaining life
date
(NTD)
(in thousands)
(years)
2010.12.10
$10.00
835
3.76
2010.12.10
$10.00
40
2012.06.20
$68.00
2012.11.02
$77.00
Shares
Weighted-average
available to
Weighted-average
exercise price per option holder’s exercise price per
share(NTD)
(in thousands)
share(NTD)
$10.00
-
$-
3.76
$10.00
40
440
4.50
$68.40
-
$-
77
4.83
$77.10
-
$-
1,540
$10.00
40
Authorization
Range of
Shares
Weighted-average Weighted-average
162
Shares
Weighted-average
date
exercise
available to
expected
exercise price per
available to
exercise price per
price
option holder’s
remaining life
share(NTD)
option holder’s
share(NTD)
(NTD)
(in thousands)
(years)
(in thousands)
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
The expense recognized for employee services received during the years ended December
31, 2013 and 2012, is shown in the following table:
For the years ended
December 31,
2013
Total expense arising from equity-settled share-based
payment transactions
$6,292
2012
$4,723
(16) Operating revenue
For the years ended
December 31,
2013
2012
Sale of goods
Service revenue
Less: Sales returns, discounts and allowances
$1,791,665
129,963
(64,864)
$1,671,910
109,075
(59,236)
Total
$1,856,764
$1,721,749
(17) Operating leases
Operating lease commitments - Group as lessee
The Group has entered into commercial leases on office and employee dormitory. These
leases have an average life of one to three years with no renewal option included in the
contracts. There are no restrictions placed upon the Group by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at December 31,
2013, December 31, 2012, and January 1, 2012 are as follows:
As at
December
163
December
January 1,
31, 2013
No later than one year
2012
$18,098
$8,075
$11,311
2,622
5,817
1,208
$20,720
$13,892
$12,519
Later than one year and no later than five years
Total
31, 2012
(18) Summary statement of employee benefits, depreciation and amortization expense by function
during the years ended December 31, 2013 and 2012:
For the year ended December 31,
2013
2012
$173,223
$158,222
37,297
32,055
-
-
4,509
2,147
Depreciation
5,084
4,180
Amortization
26,198
13,407
Personnel expenses
Salaries
Labor and health insurance
Pension
Other personnel expenses
(19) Non-operating income and expenses
(a) Other income
For the years ended
December 31,
Interest income
Dividend income
Government grant income
Total
2013
2012
$33,605
$23,064
1,923
1,590
36,837
40,728
$72,365
$65,382
(b) Other gains and losses
For the years ended
December 31,
2013
Gains on disposal of investments
$215,050
Foreign exchange (gains) losses, net
(7,193)
Gains (losses) on disposal of property, plant and
164
2012
$2,834
equipment
Other (losses) gains
Total
57
(67)
(574)
354
$207,340
$3,121
(c) Finance costs
For the years ended
December 31,
2013
Unwinding of discount on provisions
2012
$16,762
$7,752
(20) Components of other comprehensive income
For the year ended December 31, 2013
Income tax
relating to
Other
components of
Other
Reclassification
comprehensive
other
comprehensive
Arising during
adjustments
income, before
comprehensive
income, net of
the period
during the period
tax
income
tax
Exchange differences resulting from
translating the financial statements of a
foreign operation
$105,631
$-
$105,631
$-
$105,631
Unrealized gains (losses) from
available-for-sale financial assets
552,274
(218,762)
333,512
-
333,512
Total of other comprehensive income
$657,905
$(218,762)
$439,143
$-
$439,143
Income tax
relating to
Other
components of
Other
Reclassification
comprehensive
other
comprehensive
Arising during
adjustments
income, before
comprehensive
income, net of
the period
during the period
tax
income
tax
Exchange differences resulting from
translating the financial statements of a
165
foreign operation
$(55,069)
$-
$(55,069)
$-
$(55,069)
197,451
-
197,451
-
197,451
Total of other comprehensive income
$142,382
$-
$142,382
$-
$142,382
Unrealized gains (losses) from
(21) Income tax
The major components of income tax expense (income) are as follows:
Income tax expense (income) recognized in profit or loss
For the years ended
December 31,
2013
2012
Current income tax expense (income):
Current income tax charge
Adjustments in respect of current income tax of prior
$104,502
$126,951
1,898
-
(16,678)
(9,567)
$89,722
$117,384
periods
Deferred tax expense (income):
Deferred tax expense (income) relating to origination and
reversal of temporary differences
Total income tax expense
The reconciliation between tax expense and accounting profit of the product multiplied by
applicable tax rates illustrated as follows:
For the years ended
December 31,
2013
Accounting profit before tax from continuing operations
Tax at the domestic rates applicable to profits in the country of
main operation entity concerned
Tax effect of revenues exempt from taxation (25%)
Tax effect of expenses not deductible for tax purposes
Adjustments in respect of current income tax of prior periods
Tax effect of different domestic rates between entities
166
$482,226
120,557
(44,424)
10,803
1,898
888
2012
$432,154
108,039
4,026
4,289
1,030
Total income tax expense recognized in profit
$89,722
$117,384
Deferred tax assets (liabilities) relate to the following:
Deferred tax
Deferred tax
assets
income
(liabilities)
Ending
Beginning
(expense)
acquired in
balance as at
balance as at
recognized in
business
Exchange
December 31,
combinations
differences
2013
January 1, 2013 profit or loss
Temporary differences
Unrealized expenses
Unrealized sales allowances
Unrealized bad debts expenses
$10,762
$9,856
$-
$735
$21,353
3,803
296
-
204
4,303
13
34
-
1
48
Unrealized amortization of
(50,911)
Deferred tax income/(expense)
Net deferred tax assets/(liabilities)
6,492
(28,400)
(3,113)
$16,678
$(28,400)
$(2,173)
(75,932)
$(36,333)
$(50,228)
Deferred tax assets
$14,578
$25,704
Deferred tax liabilities
$50,911
$75,932
Reflected in balance sheet as
follows:
Deferred tax
Deferred tax
assets
Beginning
income
(liabilities)
Ending
balance as at
(expense)
acquired in
balance as at
January 1,
recognized in
business
Exchange
December 31,
2012
profit or loss
combinations
differences
2012
$4,691
$6,246
$-
$(175)
$10,762
3,125
777
-
(99)
3,803
(149)
-
(5)
13
Temporary differences
Unrealized expenses
Unrealized sales allowances
Unrealized bad debts expenses
167
Unrealized amortization of
-
Deferred tax income/(expense)
167
2,693
(52,250)
(1,354)
$9,567
$(52,250)
$(1,633)
(50,911)
Net deferred tax assets/(liabilities)
$7,983
$(36,333)
$7,983
$14,578
$-
$50,911
Reflected in balance sheet as
follows:
Deferred tax assets
Unrecognized deferred tax assets
As of December 31, 2013, December 31, 2012, and January 1, 2012, deferred tax assets that
have not been recognized in offsetting taxable profits to the amount of NTD$4,478 thousand,
NTD$757 thousand, and NTD$0 thousand, respectively.
Unrecognized deferred tax liabilities relating to the investment in subsidiaries
The Group did not recognize any deferred tax liability for taxes that would be withheld on the
unremitted earnings of the Group’s China’s subsidiaries, as the Group has determined that
undistributed profits of its subsidiaries will not be distributed in the foreseeable future.
(22) Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to
ordinary equity holders of the parent entity by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to
ordinary equity holders of the parent entity by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that would be
issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
For the years ended
December 31,
2013
2012
(a) Basic earnings per share
Profit attributable to ordinary equity holders of the
Company (in thousand NTD$)
$355,190
$302,944
70,237
70,000
$5.06
$4.33
Weighted average number of ordinary shares outstanding
for basic earnings per share (in thousands)
Basic earnings per share (NTD$)
168
(b) Diluted earnings per share
Company (in thousand NTD$)
$355,190
$302,944
$355,190
$302,944
70,237
70,000
595
422
70,832
70,422
$5.01
$4.30
Company after dilution (in thousand NTD$)
for basic earnings per share (in thousands)
Effect of dilution:
Employee stock options (in thousands)
after dilution (in thousands)
Diluted earnings per share (NTD$)
There have been no other transactions involving ordinary shares or potential ordinary shares
between the reporting date and the date of completion of the financial statements.
(23) Business combinations
(a) Acquisition of Exquisite Creation Limited.
On August 30, 2013, the Group acquired 60% of the voting shares of Exquiste Creation
Limited, an investment holding company. Hefei Guozhen Pharmaceutical Co., Ltd. is the
main operating entity of the Exquisite Creation Limited. Guozhen, located in Hefei, China,
its the major operation is engage in sales and distribution of generic medicine in Hefei.
Guozhen has exclusive distribution rights for Hepatitis products in China and also the
market leader for Hepatitis and immunosuppressant products in Anhui and Hebei region,
and excelled with a number of exclusive distribution rights in medicine which allows
improvement of the Group’s business performance and competitiveness.
The fair value of the identifiable assets and liabilities of Exquiste Creation Limited as at the
date of acquisition were:
Fair value recognized
on the acquisition date
Assets
Cash and cash equivalents
Accounts receivables
$50,026
32,664
169
Inventories
Other current assets and non-current assets
Liabilities
Accounts payables
Receipt in advance
Total identifiable net assets at fair value
Goodwill of Exquiste Creation Limited is as follows:
Purchase consideration
Add: non-controlling interests (40% of identifiable net assets
at fair value)
Less: identifiable net assets at fair value
Goodwill
24,898
4,440
113,598
255,626
(24,365)
(288)
(28,400)
(53,053)
$172,573
$201,661
69,029
(172,573)
$98,117
The fair value and the total contractual amount of the trade receivables is NTD$13,041
thousand. None of the trade receivables have been impaired and it is expected that the full
contractual amount can be collected.
The net assets recognized in the financial statements ended December 31, 2013 were based
on the independent valuation assessment.
The goodwill of NTD$98,117 thousand comprises the value of expected synergies arising
from the acquisition and Human resources team. The customer list is not separable and
therefore does not meet the criteria for recognition as an intangible asset under IAS 38
Intangible Assets. The goodwill recognized is not deductible for income tax purposes.
From the acquisition date, Exquiste Creation Limited, has contributed NTD$92,998
thousand of revenue and NTD$14,582 thousand to the net profit before tax of the Group. If
the combination had taken place at the beginning of the year, revenue from the continuing
operations would have been NTD$2,042,761 thousand and the profit from continuing
operations for the Group would have been NTD$511,282 thousand.
Acquisition consideration
Cash paid
Contingent consideration liability
Total consideration
$121,187
80,474
$201,661
Analysis of cash flows on acquisition:
170
Cash paid
Net cash acquired with the subsidiary
Net cash flow on acquisition
$(121,187)
50,026
$(71,161)
The transaction costs comprise attorney expense and expenses arising from the acquisition,
and are included in the general and administrative expenses.
Contingent considerations
According to the share purchase agreement, the acquisition price is no more than
RMB$48,000 thousand and the Company should made a payment of RMB$25,200
thousand within seven working days after the approval of the Investment Commission,
MOEA. The rest should be paid by installments within three years based on the specified
future earning achieved of Exquisite Creation Limited.
As at the acquisition date, the fair value of the contingent consideration was estimated at
NTD$80,474 thousand.
The contingent consideration as at December 31, 2013, has been increased to NTD$85,706
thousand due to changes in the underlying assumptions which reflects the fair value of the
discounted cash payment (see Note 5).
(b) Acquisition of Company Shengqun Pharmaceutical Co., Ltd.
On December 5, 2013, the Group acquired 100% of the voting shares of Shengqun
Pharmaceutical Co., Ltd., a company based in Taiwan, the major operations are research
and development of medical and trading of medicine. Shengqun Pharmaceutical Co., Ltd.
has acquired numerous medicine exclusive distribution rights in Taiwan to improve the
Group’s competitiveness in Taiwan.
The fair value of the identifiable assets and liabilities of Shengqun Pharmaceutical Co.,
Ltd. as at the date of acquisition were:
Fair value recognized
on acquisition
$2,225
Current assets
812
Current liabilities
(7)
171
$3,030
Goodwill of Shengqun Pharmaceutical Co., Ltd. is as
follows:
Cash consideration
$25,000
(3,030)
Goodwill
$21,970
The net assets recognized in the financial statements as at December 31, 2013, were based
on the independent valuation assessment.
The goodwill of NTD$21,970 thousand comprises the fair value of expected synergies
arising from acquisition and the customer list.
The goodwill recognized is not deductible
for income tax purposes.
Shengqun Pharmaceutical Co., Ltd. contributed NTD$5,223 thousand from the date of
acquisition and NTD$(4,763) thousand to the net profit before tax of the Group. If the
combination had taken place at the beginning of that year, revenue from continuing
operations would have been NTD$1,914,212 thousand and the profit for the year from
continuing operations for the Group for 2013 would have been NTD$429,837 thousand.
Cash paid
$25,000
-
Total consideration
$25,000
$(25,000)
Cash paid
2,225
$(22,775)
(c) Acquisition of Company Tongze Pharmaceutical Co., Ltd.
On July 4, 2012, the Group acquired 51% of the voting shares of Tongze Pharmaceutical
Co., Ltd., a company based in China, engage in sales and distribution of genetic drugs in
172
Heilongjiang. Tongze Pharmaceutical Co., Ltd. has acquired numerous cardiovascular
medicine exclusive distribution rights in China and also the market leader for Hepatitis and
immunosuppressant products in the province of Heilongjiang through this combination to
improve the Group’s business performance and competitiveness.
The Group has elected to measure the non-controlling interest in Tongze Pharmaceutical
Co., Ltd. at the non-controlling interest’s proportionate share of the acquiree’s identifiable
net assets.
The fair value of the identifiable assets and liabilities of Tongze Pharmaceutical Co., Ltd.
as at the date of acquisition were:
Fair value recognized on
acquisition date
Current assets
Property, Plant and equipment
$57,839
318
214,361
272,518
Current liabilities
Long-term and other liabilities
(7,590)
(53,590)
(61,180)
$211,338
Goodwill of Tongze Pharmaceutical Co., Ltd. is as follows:
Cash consideration
Add: non-controlling interests (49% of identifiable net
assets at fair value)
$255,738
Goodwill
$147,956
103,556
(211,338)
The net assets recognized in the financial statements as at July 4, 2012, were based on the
independent valuation assessment.
The goodwill of NTD$147,956 thousand comprises the fair value of expected synergies
arising from acquisition.
173
Tongze Pharmaceutical Co., Ltd. contributed NTD$158,117 thousand from the date of
acquisition to December 31, 2012 to the profit for the year and NTD$32,236 thousand to
the net profit before tax of the Group. If the combination had taken place at the beginning
of that year, revenue from continuing operations would have been NTD$1,879,866
thousand and the profit for the year from continuing operations for the Group for 2012
would have been NTD$469,669 thousand.
Cash paid
$171,115
84,623
Total consideration
$255,738
Cash paid
$(171,115)
55,253
$(115,862)
Contingent considerations
According to the share purchase agreement, the acquisition price is no more than
RMB$61,200 thousand and the Company should made a payment of RMB$36,720
thousand before the acquisition date. The rest should be paid by installments within three
years based on the specified future earning achieved of Tongze Pharmaceutical Co., Ltd.
As at the acquisition date, the fair value of the contingent consideration was estimated at
NTD$84,623 thousand.
The contingent consideration as at December 31, 2013, has been decreased to NTD$64,936
thousand due to changes in the underlying assumptions which reflects the fair value of the
discounted cash payment (see Note 5) and the installment paid.
7. Related party transactions
(1) Other payables
As at
174
2013
Other related party
2012
$48,594
January 1,
2012
$-
$-
(2) The compensation of key management personnel
31,
2013
2012
$49,983
$38,847
Short-term employee benefits
8. Assets pledged as collateral
None.
9. Commitments and contingencies
None.
10. Loss due to major disasters
None.
11. Significant subsequent events
None.
12. Others
(1) Categories of financial instruments
Financial assets
December
31, 2013
As at
December
31, 2012
January 1,
2012
$843,257
$341,035
$-
168,174
99,630
51,771
1,011,431
440,665
51,771
Cash and cash equivalents (exclude cash
on hand)
929,475
929,622
1,346,345
Notes receivable
Accounts receivables
34,433
429,596
48,691
316,404
16,289
262,107
51,974
27,572
10,180
1,445,478
1,322,289
1,634,921
Held for trading :
Measured at fair value
Measured at cost (noncurrent)
Loans and receivables:
Other receivables
Subtotal
175
Total
$2,456,909
$1,762,954
$1,686,692
As at
Financial liabilities at amortized cost:
Accounts payables
Other payables
Other current liabilities
Long-term payables
Total
December
December
January 1,
31, 2013
31, 2012
2012
$2,565
$3,646
$-
160,782
65,584
101,903
-
80,361
-
85,058
91,740
-
$313,989
$197,289
$80,361
(2) Financial risk management objectives and policies
The Group’s principal financial risk management objective is to manage the market risk, credit
risk and liquidity risk related to its operating activates. The Group identifies measures and
manages the aforementioned risks based on the Group’s policy and risk appetite.
The Group has established appropriate policies, procedures and internal controls for financial
risk management. Before entering into significant transactions, due approval process by the
Board of Directors and Audit Committee must be carried out based on related protocols and
internal control procedures. The Group complies with its financial risk management policies at
all times.
(3) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of the changes in market prices. Market prices comprise currency risk,
interest rate risk and other price risk (such as equity risk).
In practice, it is rarely the case that a single risk variable will change independently from other
risk variable, there is usually interdependencies between risk variables. However the
sensitivity analysis disclosed below does not take into account the interdependencies between
risk variables.
Foreign currency risk
The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the
Group’s operating activities (when revenue or expense are denominated in a different currency
from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.
The amount of foreign currency receivables and payable of the Group is insignificant, and some
of the foreign currency receivables are denominated in the same foreign currency with certain
176
foreign currency payables, therefore natural hedge is received. The Group also uses forward
contracts to hedge the foreign currency risk on certain items denominated in foreign currencies.
Hedge accounting is not applied as they did not qualify for hedge accounting criteria.
The dysfunctional monetary items held by the Group is insignificant, therefore, the appreciation
and the depreciation of the foreign currency only show minimum influence on the Group’s
profit and loss and the Group’s equity.
When NTD strengthens/weakens against RMB by 1%, it would only impact the Group’s equity,
but would not have an effect on profit or loss.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Group’s exposure to the risk of
changes in market interest rates relates primarily to the Group’s loans and receivables at
variable interest rates, bank borrowings with fixed interest rates and variable interest rates.
The Group manages its interest rate risk by having a balanced portfolio of fixed and variable
loans and borrowings and entering into interest rate swaps. Hedge accounting does not apply
to these swaps as they do not qualify for it.
The interest rate sensitivity analysis is performed on items exposed to interest rate risk as at the
end of the reporting period, including investments and borrowings with variable interest rates
and interest rate swaps. At the reporting date, a change of 10 basis points of interest rate in a
reporting period could cause the profit for the years ended December 31, 2013 and 2012 to
decrease by NTD$9,295 thousand and NTD$9,296 thousand, respectively.
Equity price risk
The Group’s listed and unlisted equity securities are susceptible to market price risk arising
from uncertainties about future values of the investment securities. The Group’s listed equity
securities are classified under held for trading financial assets or available-for-sale financial
assets, while unlisted equity securities are classified as available-for-sale. The Group manages
the equity price risk through diversification and placing limits on individual and total equity
instruments. Reports on the equity portfolio are submitted to the Group’s senior management
on a regular basis. The Group’s Board of Directors reviews and approves all equity investment
decisions.
For the unlisted equity securities classified under available-for-sale, due to the fact that the
securities lack quoted market price of the active market and no reliable measurement of fair
value, the fluctuation of the earnings of the investees would not have an effect on the Group’s
profit or loss.
177
At December 31, 2013 and 2012, a decrease of 5% in the price of the listed equity securities
classified as available-for-sale could have an impact of NTD$42,163 thousand and NTD$0 on
the income or equity attributable to the Group. An increase of 5% in the value of the listed
securities would only impact on equity but would not have an effect on profit or loss.
(4) Credit risk management
Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading
to a financial loss.
The Group is exposed to credit risk from operating activities (primarily for
accounts receivables and notes receivables) and from its financing activities, including bank
deposits and other financial instruments.
Customer credit risk is managed by each business unit subject to the Group’s established policy,
procedures and control relating to customer credit risk management.
Credit limits are
established for all customers based on their financial position, rating from credit rating agencies,
historical experience, prevailing economic condition and the Group’s internal rating criteria etc.
Certain customer’s credit risk will also be managed by taking credit enhancing procedures, such
as requesting for prepayment or insurance.
As of December 31, 2013, December 31, 2012, and January 1, 2012, amounts receivables from
top ten customers represent 78%, 85% and 78% of the total accounts receivables of the Group,
respectively.
The credit concentration risk of other accounts receivables is insignificant.
Credit risk from balances with banks, fixed income securities and other financial instruments is
managed by the Group’s treasury in accordance with the Group’s policy.
The Group only
transacts with counterparties approved by the internal control procedures, which are banks and
financial institutions, companies and government entities with good credit rating and with no
significant default risk.
Consequently, there is no significant credit risk for these counter
parties.
(5) Liquidity risk management
The Group’s objective is to maintain a balance between continuity of funding and flexibility
through the use of cash and cash equivalents and highly liquid equity investments. The table
below summarizes the maturity profile of the Group’s financial liabilities based on the
contractual undiscounted payments and contractual maturity. The payment amount includes
the contractual interest. The undiscounted payment relating to borrowings with variable
interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the
reporting period.
178
Non-derivative financial instruments
Less than 1
year
2 to 3 years 4 to 5 years
> 5 years
Total
Accounts payables
Other payables
Other current liabilities
Long-term payables
$2,565
160,782
65,584
-
$108,177
$-
$-
$2,565
160,782
65,584
108,177
Accounts payables
Other payables
Long-term payables
$3,646
101,903
-
$86,301
$28,767
$-
$3,646
101,903
115,068
Other payables
$80,361
$-
$-
$-
$80,361
(6) Fair values of financial instruments
(a) The methods and assumptions applied in determining the fair value of financial
instruments:
The fair value of the financial assets and liabilities are included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The following methods and assumptions were used to
estimate the fair values:
i. The carrying amount of cash and cash equivalents, accounts receivables and accounts
payable approximate their fair value.
ii. For financial assets and liabilities traded in an active market with standard terms and
conditions, their fair value is determined based on market quotation price (including
listed equity securities and bonds) at the reporting date.
iii. Fair value of equity instruments without market quotations (including unquoted public
company and private company equity securities) are estimated using the market method
valuation techniques based on parameters such as recent fund raising activities,
valuation of similar companies, individual company’s development, market conditions
and other economic indicators.
iv. The fair value of other financial assets and liabilities is determined using discounted
cash flow analysis, the interest rate and discount rate are selected with reference to those
179
of similar financial instruments.
(b) Assets measured at fair value
The following table contains the fair value of financial instruments after initial recognition
and the details of the three levels of fair value hierarchy:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the
recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair
value that are not based on observable market data
Financial assets:
Stock
Financial liabilities:
Financial liabilities at fair value through
profit or loss
Contingent consideration arising in
business combination
Level 1
Level 2
Level 3
Total
$843,257
$-
$-
$843,257
-
-
150,642
150,642
Level 1
Level 2
Level 3
Total
$341,035
$-
$-
$341,035
-
-
91,740
91,740
Financial assets:
Stock
Financial liabilities:
Financial liabilities at fair value through
profit or loss
Contingent consideration arising in
business combination
During the years ending December 31, 2013 and 2012, there were no transfers between
Level 1 and Level 2 fair value measurements.
Reconciliation for fair value measurements in Level 3 of the fair value hierarchy is as
180
follows:
Beginning balances as at January 1, 2013
Total gains and losses recognized for the year ended
December 31, 2013:
Amount recognized in profit or loss
(presented in “other profit or loss”)
Acquisition for the year ended December 31, 2013
Settlements for the year ended December 31, 2013
Ending balances as at December 31, 2013
Beginning balances as at January 1, 2012
Total gains and losses recognized for the year ended
December 31, 2012:
Amount recognized in profit or loss
(presented in “other profit or loss”)
Acquisition for the year ended December 31, 2012
Settlements for the year ended December 31, 2012
Ending balances as at December 31, 2012
Contingent Consideration
for Business Combination
$91,740
16,762
80,474
(45,019)
6,685
$150,642
Contingent Consideration
for Business Combination
$-
7,116
84,624
$91,740
(7) Significant assets and liabilities denominated in foreign currencies
Information regarding the significant assets and liabilities denominated in foreign currencies is
listed below:
December 31, 2013
Foreign currencies Foreign exchange rate
Financial assets
Monetary items:
RMB
Non-monetary items:
RMB
Monetary items:
RMB
NTD
$294,755
4.9040
$1,445,478
206,246
4.9040
1,011,431
64,027
4.9040
313,989
December 31, 2012
181
Financial assets
Monetary items:
RMB
Non-monetary items:
RMB
Monetary items:
RMB
$283,753
4.6600
$1,322,289
94,563
4.6600
440,665
42,337
4.6600
197,289
January 1, 2012
Financial assets
Monetary items:
RMB
Non-monetary items:
RMB
Monetary items:
RMB
NTD
NTD
$340,113
4.8070
$163,921
10,770
4.8070
51,771
16,718
4.8070
80,361
(8) Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximize
shareholder value. The Group manages its capital structure and makes adjustments to it, in
light of changes in economic conditions. To maintain or adjust the capital structure, the
Group may adjust dividend payment to shareholders, return capital to shareholders or issue new
shares.
13. Segment information
(1) For management purposes, the Group is a single industry segment, thus it is not necessary to
disclose the industry segment information. The accounting policies are identical to that of the
Group’s.
(2) Geographical information
Revenue from external customers:
31,
2013
2012
182
$1,856,764
China
$1,721,749
The revenue information above is based on the location of the customer.
Non-current assets:
As at
2013
2012
$1,779,879
23,320
$1,803,199
China
Taiwan
Total
$846,698
$846,698
January 1,
2012
$1,362,228
$1,362,228
(3) Information about major customers
31,
2013
2012
$164,426
$152,087
A customer
B customer
$201,912
$161,190
14. First-time adoption of TIFRS
For all periods up to and including the year ended December 31, 2012, the Group prepared its
financial statements in accordance with generally accepted accounting principles in R.O.C. (R.O.C.
GAAP). The consolidated financial statements for the year ended December 31, 2013 are the first
the Group has prepared in accordance with TIFRS.
Accordingly, the Group has prepared financial statements which comply with TIFRS and the
Regulations Governing the Preparation of Financial Reports by Securities Issuers for periods
beginning January 1, 2013, as described in the accounting policies under Note 4. Furthermore the
first interim financial statements prepared under TIFRS also comply with the requirements under
IFRS 1 First-time Adoption of International Financial Reporting Standards. The Group’s opening
balance sheet was prepared as of January 1, 2012, the Group’s date of transition to TIFRS.
Exemptions applied in accordance with IFRS 1 First-time Adoption of International Financial
Reporting Standards
IFRS 1 First-time Adoption of International Financial Reporting Standards allows first-time adopters
certain exemptions from the retrospective application of certain IFRS. The Group has applied the
following exemptions:
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. By applying this exemption,
immediately after the business combination, the carrying amount in accordance with R.O.C. GAAP
183
of assets acquired and liabilities assumed in that business combination, shall be their deemed costs in
accordance with TIFRS at that date. The subsequent measurement of these assets and liabilities
will be in accordance with TIFRS. Under IFRS 1 First-time Adoption of International Financial
Reporting Standards, the carrying amount of goodwill in the opening balance sheet shall be its
carrying amount in accordance with R.O.C. GAAP at December 31, 2011, after testing for
impairment and reclassifying amounts to intangible assets that are required to be recognized. The
Group has performed goodwill impairment testing as of the date of transition to TIFRS and no
impairment loss has been recognized as of that date.
Impacts of transitioning to TIFRS
The following tables contain reconciliation of balance sheets as of January 1, 2012 (the date of
transition to TIFRS) and December 31, 2012 and statements of comprehensive income for the year
ended December 31, 2012:
Reconciliation of consolidated balance sheet items as of January 1, 2012
R.O.C. GAAP
Items
Current assets
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayments
Deferred income tax assets, current
Total current assets
Funds and investments
Financial assets measured at cost,
noncurrent
Long-term investments accounted
for under the equity method
Total funds and investments
Property, plant and equipment, net
Intangible assets
Other assets
Deferred income tax assets,
non-current
Deferred charges
Total assets
Current liabilities
Income tax payable
Other payables
Advanced receipts
Total liabilities
Impact of transitioning to TIFRS
Remeasurements Presentation
Amounts
$(7,983)
TIFRS
Amounts
$1,346,552
16,289
262,107
10,180
69,081
36,296
7,983
1,748,488
$-
51,771
-
-
51,771
33,376
-
-
33,376
85,147
$1,346,552
16,289
262,107
10,180
69,081
36,290
1,740,505
Items
Notes
Current assets
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayments
Non-current assets
noncurrent
Investments accounted for under
the equity method
85,147
-
8,580
-
-
8,580
34,307
-
-
34,307
Intangible assets
-
-
7,983
7,983
Deferred tax assets
211
128,245
$1,876,733
-
-
211
136,228
$1,876,733
Other noncurrent assets
Total non-current assets
Total assets
$29,025
80,361
691
110,077
-
-
$29,025
80,361
691
110,077
Current liabilities
Income tax payable
Other payables
Receipt in advance
Total liabilities
184
3
3
Share capital
Common stock
Retained earnings
Unappropriated earnings
Adjusting items in stockholders’
equity
Cumulative translation
adjustments
Total stockholders' equity
Total liabilities and stockholders' equity
700,000
608,284
-
-
700,000
608,284
401,895
-
-
401,895
56,477
-
-
56,477
1,766,656
$1,876,733
1,766,656
$1,876,733
Share capital
Common stock
Retained earnings
Exchange differences resulting
from translating the financial
statements of foreign operations
Total equity
Total liabilities and equity
Reconciliation of consolidated balance sheet items as of December 31, 2012
R.O.C. GAAP
Items
Current assets
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayment
Deferred income tax assets, current
Funds and investments
Available-for-sale financial assets,
noncurrent
noncurrent
Total funds and investments
Property, plant and equipment, net
Intangible assets
Other assets
Deferred income tax assets,
non-current
Total other assets
Total assets
Current liabilities
Notes payable
Accounts payable
Other payables
Advanced receipts
Long-term liabilities
Long-term payable
Other liabilities
Deferred income tax liabilities
Total liabilities
Share capital
Common stock
Retained earnings
Legal reserve
Adjusting items in stockholders'
Amounts
$929,923
48,691
316,404
27,572
81,065
87,051
14,578
1,505,284
$-
8,235
332,800
-
341,035
(139,308)
-
99,630
238,938
$(14,578)
TIFRS
Amounts
247,173
$929,923
48,691
316,404
27,572
81,065
87,051
1,490,706
Items
Current assets
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayment
440,665
Non-current assets
Available-for-sale financial assets,
noncurrent
noncurrent
-
Notes
3
1
1
8,602
-
-
8,602
283,316
99,537
-
382,853
Intangible assets
4
-
-
14,578
14,578
Deferred tax assets
3
846,698
$2,337,404
Total non-current assets
Total assets
-
$3,646
36,079
101,903
139
Current liabilities
Notes payable
Accounts payable
Other payables
Receipt in advance
-
91,740
Non-current liabilities
Long-term payable
539,091
$2,044,375
$3,646
36,079
101,903
139
91,988
-
(248)
25,964
259,719
24,947
-
50,911
284,418
700,000
613,007
-
-
700,000
613,007
31,396
393,443
-
-
31,396
393,443
185
Total liabilities
Share capital
Common stock
Retained earnings
Legal reserve
4
4
equity
Unrealized gain on a financial
instruments
Cumulative translation
adjustments
Minority interests
Total stockholders' equity
Total liabilities and stockholders' equity
3,960
2,072
40,778
1,784,656
$2,044,375
193,492
(655)
75,503
-
197,452
-
1,407
-
116,281
2,052,986
$2,337,404
Unrealized gains on
Exchange differences resulting
from translating the financial
statements of foreign operations
Non-controlling interests
Total equity
Total liabilities and equity
1
4
4
Reconciliation of statement of comprehensive income items for the year ended December 31, 2012
R.O.C. GAAP
Items
Operating revenue, net
Operating costs
Gross profit
Amounts
$1,721,749
(705,703)
$-
$-
-
-
1,016,046
TIFRS
Amounts
Items
$1,721,749
(705,703)
1,016,046
Operating expenses
Research and development
Notes
Operating revenue, net
Operating costs
Gross profit
Operating expenses
(26,600)
-
-
(26,600)
Research and development
-
(152,276)
General and administrative
-
(458,832)
Sales and marketing expense
expense
expense
Administrative expense
(146,997)
Selling expense
(458,832)
(5,279)
4
expense
Total
Operating income
-
(632,429)
(637,708)
383,617
378,338
Non-operating income
Operating income
Non-operating income and
expenses
Interest income
23,064
-
42,318
Dividend income
1,590
-
(1,590)
Gain on disposal of investment
1,227
-
1,894
Foreign exchange gain
2,834
-
(2,834)
40,728
-
(40,728)
Other income
Total
65,382
Other income
1
-
-
1
3,121
Other gains and losses
1
-
-
1
-
-
1
-
-
1
69,443
Non-operating expenses
Loss on disposal of investments
(67)
-
67
Interest expense
(7,752)
-
-
(7,752)
Finance costs
Investment loss accounted for
(6,935)
-
-
(6,935)
Share of profit or loss of
(390)
-
390
(483)
-
483
under equity method
Financial expense
Other losses
Total
Income before tax
associates and joint ventures
(15,627)
437,433
Income tax expense
(118,704)
Consolidated net income
$318,729
-
-
1
-
-
1
53,816
-
-
432,154
1,320
-
(117,384)
314,770
-
-
-
-
-
193,492
(55,069)
(55,069)
3,960
197,451
Income tax expense
4
Net income
Exchange differences on
4
translation of foreign operations
Unrealized gain on
186
1
-
-
142,382
Other comprehensive income, net
$457,152
Total comprehensive income
2
of tax
Material adjustments to the consolidated statement of cash flows for the year ended December 31,
2012
The transition from R.O.C. GAAP to TIFRS has not had a material impact on the statement of cash
flows. The statement of cash flow prepared under R.O.C. GAAP was reported using the indirect
method. Furthermore, cash flows from interest and dividends received and interest paid were
classified as cash flows from operating activities and interest and dividends received were not
disclosed separately. However, in accordance with the requirements under IAS 7 Statement of Cash
Flows, the interest received and dividends received for the year ended December 31, 2012, are
separately disclosed in the statement of cash flow in the amount of NTD$23,604 thousand and
NTD$1,590 thousand, respectively. Interest and dividends received are classified as cash flows
from investing activities while interest paid is classified as cash flows from financing activities.
Apart from the aforementioned differences, there were no material differences between the
statements of cash flows prepared under R.O.C. GAAP and TIFRS.
(1) Reconciliations of consolidated statement of comprehensive income
The consolidated income statement prepared under R.O.C. GAAP and the Regulations
Governing the Preparation of Financial Reports by Securities Issuers before revision only
presented the following components of operating profit or loss: operating revenue, operating
costs and operating expenses. Upon transitioning to TIFRS, in order to comply with the
presentation of financial statements under TIFRS and the revised Regulations Governing the
Preparation of Financial Reports by Securities Issuers, certain items on the statement of
comprehensive income have been reclassified. All other impact on the statement of
comprehensive income as results of adjustments upon transitioning to TIFRS has been described
previously.
(2) Income tax
Classification and valuation of deferred tax
Under the requirements of R.O.C. GAAP, the current and non-current deferred tax liabilities
and assets of the same taxable entity should be offset against each other and presented as a net
amount. However under the requirements of IAS 12 Income Taxes, an entity shall offset
deferred tax assets and deferred tax liabilities if, and only if, the entity has a legally enforceable
right to set off current tax assets against current tax liabilities; and if the deferred tax assets and
the deferred tax liabilities relate to income taxes levied by the same taxation authority on the
same taxable entity.
Under the requirements of R.O.C. GAAP, a deferred tax asset or liability should, according to
187
the classification of its related asset or liability, be classified as current or non-current. 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 non-current according to the expected reversal date of the
temporary difference. However under the requirements of IAS 1 Presentation of Financial
Statements, deferred tax assets or liabilities are classified as non-current. Therefore as of
January 1, 2012 and December 31, 2012, deferred tax assets reclassified to non-current assets
were NTD$7,983 thousand and NTD$14,578 thousand, respectively.
Under the requirements of R.O.C. 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.
(3) Business Combination
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 at fair value proportionate
share of the acquiree’s identifiable net assets. The difference cause intangible assets to increase
NTD$99,785 thousand, deferred income tax liabilities to increase NTD$24,947 thousand,
cumulative translation adjustments to decrease NTD$665 thousand and minor interest to
increase NTD$75,503 thousand as at December 31, 2012.
Additionally, 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 continent 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 fate
value. The difference cause both long-term liabilities and intangible assets to decrease
NTD$248 thousand.
(4) Others
Certain items in the financial statements prepared based on R.O.C. GAAP have been
reclassified for comparison purposes.
188
康聯控股有限公司
董事長：William Keller
總經理：李欣
189

Coland Holdings Limited

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